AsiaSat is considering a new High Throughput Satellite (HTS), and may issue an RFP later this year, CEO Roger Tong told Via Satellite. While the company has been on a capital expenditure break, things could click into gear later this year with possible new investment plans crystalizing. In this interview, Tong talks candidly about AsiaSat’s capital expenditure plans, managing the company during the pandemic, and how it looks to grow the business under changing market conditions.
VIA SATELLITE: What are AsiaSat’s plans for this year? Are you planning any investment in new satellites?
Tong: If you look at satellite operators, we have been operating in what I call the “real estate” mode. We occupy an orbital location and lease capacity out. For the past 30 years, that has been a fairly good business model. However, things are changing. There are now more ways for video to be distributed. AsiaSat cannot remain only as a capacity provider. How do we re-position ourselves to grow, maintain what we have, but expand into new areas that leverage on our core competencies? We must expand into different verticals and provide services that customers need, instead of just doing what we have been good at.
I don’t think video is going to go away. The question is how the content is going to be distributed, and what is the most economical way to distribute content. If 1 billion people in India want to watch cricket through streaming, no terrestrial system can support it. What we need to do is to look at what [areas] satellites are efficient in. So, don’t try and distribute data through a FSS [Fixed Satellite Service] satellite. But, also don’t try to distribute media through a High Throughput Satellite. We need the right mix of different mechanisms to distribute the content to the markets that our customers want to reach. Sometimes, it might be LEO [Low-Earth Orbit], sometimes GEO [Geostationary Orbit]. AsiaSat needs to position ourselves not merely as a capacity provider, but a service provider that meets the needs of our customers, both in video and data.
My view is ultimately everything will be data, even broadcast. It will be broadcast data versus network data. If you look at Disney, they want to go into streaming. But, you see Netflix wanting to promote a linear TV channel in France. I think the industry is still trying to find its way where they can balance the technological capability with customer needs and the changing customer requirements.
VIA SATELLITE: Will you be investing in a new GEO satellite this year?
Tong: We are enjoying a little bit of a capital expenditure break right now. We launched AsiaSat 9 in 2017. We were supposed to start AsiaSat 10 in 2018. I put a hold on it, because I wasn’t sure where the market was going and whether the technology is the right fit. I felt the price per gigabit was too expensive for the technology. [Also,] I wasn’t convinced that the business case was sustainable to satisfy a 100 Gbps satellite over the Asia-Pacific region, where regulatory constraints are significant. There isn’t a single country aside from India, China, or Indonesia that can absorb all of the capacity of an HTS. The business case didn’t pull together as the technology was not ready.
When I look at HTS, it is very similar to portable computers, when it went from desktop, to portable, to laptop in just three years. The HTS satellite in 2018 was like the portable computer. It was not the right time to put major capital expenditure on GEO satellites in 2018 or 2019. I believe 2021 might be the right time. We are seeing the technology stabilizing, the product performance improve, and the price point drop. I think the technology is ready now. But, I am not sure the business case is ready because of COVID-19. With all of these government stimulus programs going to the economy, they are putting money into people rather than companies. Airlines and cruise companies are good examples. Even though the technology is ready, the price points are there, the business case might not be there yet. So, we are studying it right now. I would say the end of 2021 is when we are looking to close the business case. We could issue the RFP at that time.
VIA SATELLITE: Can you imagine AsiaSat having any non-GEO satellite plans?
Tong: We want to focus on how we can meet the customers’ needs in terms of video and data. For video distribution, GEO is still the most efficient way of providing video distribution. For LEO, it is more about data connectivity. For AsiaSat, we want to be focused on both areas — video and data. We want to expand into data services. I don’t think AsiaSat itself is big enough to be a LEO player, but it is likely that we will be involved in someone else’s LEO network. I would not rule out the possibility that we could partner with some of the LEO players and provide service in our region.
VIA SATELLITE: Have you had any early discussions on this?
Tong: No, not yet. I don’t think the market is stable enough just yet. We are watching [SpaceX] Starlink. We would like to see how efficient it is and how receptive consumers are to them. But, my view is still the same — LEOs should not be used for real-time communications unless there are specific business verticals. It is an awful waste of capacity to use LEOs to provide 24/7 data connectivity. I see LEO as more suitable for asset tracking, IoT [Internet of Things] devices, where a delay of a few hours for data transmission is acceptable.
VIA SATELLITE: How have AsiaSat’s operations been impacted by COVID-19?
Tong: Hong Kong did not get hit too hard compared to other places. From an operational standpoint, we got lucky in that we have not been impacted badly by the COVID situation. We have moved our head office to our own teleport facility in September 2019. We are fortunate in that we are able to control the environment much better than if we had been in Wanchai sharing a busy downtown office building with a lot of other people.
Our teleport is classified as critical infrastructure by the government. It is allowed to continue operating in this environment. We are able to manage the situation operationally such as arranging separate or bigger shuttle buses for our employees to allow people to maintain social distancing. We have also organized essential staff into several teams with fixed schedules to help prevent the spread of the virus.
The issue is the morale of people. With this pandemic, people have to maintain social distancing, and in a crowded place like Hong Kong, it is very challenging for families. Some people feel lonely and isolated due to the lockdown. That can cause a lot of stress for everyone. It reminds us that we need to manage people, and not just the business. We have a good and committed team that is willing to work hard during COVID times.
VIA SATELLITE: Could you tell us about the difficulties/challenges in being the CEO of a satellite operator during this global crisis? Has it changed your approach in terms of managing the company?
Tong: I don’t think it has been all about COVID-19 for AsiaSat. If you look at the satellite operator industry, we have been significantly challenged already. High Throughput Satellites, such as the ones that Viasat brought in, disrupted the whole data business. The impact of 5G helped terrestrial networks to expand quickly and target C-band frequencies. The new LEO satellite networks are coming in, and many changes over the last few years, which are more disruptive to the satellite industry than COVID.
The way I see it, the impact from COVID is only temporary, but the other changes I mentioned will have significant long-term implications. From a purely business standpoint, managing the company through this pandemic is much easier than managing the company through these massive changes affecting the industry.
VIA SATELLITE: What is your overall view of the satellite market this year? What future do you see for LEO constellations after what we have seen with LeoSat and OneWeb?
Tong: I think the GEO market is relatively resilient. As a market we have not been hit as hard as airlines and cruise ships. In today’s economy, if you see a low reduction in revenue in the single digit percentages, you are not doing too badly. But, for the LEO companies, such as LeoSat and OneWeb, these are the industry pioneers, who are very similar to Iridium and Skybridge back in the 1990s. Without them, we would not be where we are today. I believe they will come back and serve other parts of the industry and other verticals. But, LEO is not going to go away now. It is here. It is real, and they are searching for a profitable market vertical that will allow them to flourish.
VIA SATELLITE: What do you see as the growth markets for AsiaSat, and the mix going forward between broadcasting and data for the company?
Tong: For AsiaSat, we have focused on the Asia-Pacific, and the beauty of this region is its high population density. There is also a lot of diversity in infrastructure development. Some areas are better developed, well connected, whereas other areas are still trying to play catch-up. We have very diverse needs. We also have very diverse GDPs from country to country. Therefore, you need a service that can support a lot of different requirements in the region. I think satellite is an excellent means to achieve that. However, making money in areas where the infrastructure is underdeveloped is more challenging.
There are specific geographical markets developing in large metros like Hong Kong, Tokyo, Seoul, Jakarta, that demand more than just satellite. The key is how we can address the wider market as well as the individual, specific markets at the same time. If we allow the specific markets to be served by others, eventually, they will be able to serve the macro market, and take our customers away. Conversely, we have the macro market already, but how do we support our customers in those niche markets to ensure they stay with us, rather than the other way around. It comes down to who can transform faster.