- The pending merger with Intelsat would create the largest geostationary Earth orbit (GEO) satellite operator in the world.
- SES needs the deal to compete against the likes of Elon Musk's Starlink and Amazon's Project Kuiper.
- The company is figuring out what role it can play in the direct-to-device (D2D) market.
Satellite operator SES has a lot going on.
SES is in the middle of securing regulatory approvals for its $3.1 billion acquisition of Intelsat, which will create the largest geostationary Earth orbit (GEO) satellite operator on the planet. SES needs the deal to bulk up so it can compete against Elon Musk’s Starlink and Amazon’s Project Kuiper.
Earlier this month, the North Atlantic Treaty Organization (NATO) awarded SES a $200 million contract to deliver secure, high-performance, low-latency satellite services via its medium earth orbit (MEO) O3b mPOWER constellation. SES is focused on the broader mission of providing satellite service to five key verticals: media, government, maritime, aviation and cloud/telecom.
But SES is currently not pursuing a direct-to-device (D2D) strategy. D2D players are seemingly everywhere these days. By some accounts, at least 20 major market players are involved in some way, shape or form, although some of them fell by the wayside or moved to the sidelines just in the past year.
“We’re trying to decide what role we can play,” SES CEO Adel Al-Saleh told Fierce in a recent interview. That involves talking to many of the D2D players, including about how SES’s MEO constellation might make their low Earth orbit (LEO)-based efforts more robust.
While SES has MEO and geostationary (GEO) satellites, it doesn’t have a LEO component. When it needs a LEO solution to satisfy customers, it turns to other companies with LEO constellations and strikes deals on a resale basis. The same goes for Intelsat.
The LEO space isn’t one Al-Saleh is eager to join anytime soon.
“I think the LEO space is getting very crowded,” he said, noting the sensational growth of Starlink and its 5,000 LEO satellites, as well as efforts at the emerging Project Kuiper and the combination of OneWeb and Eutelsat.
“For us, we don’t think economically it makes sense today for us to keep adding another LEO player to the fray,” he said.
That strategy makes a lot of sense, according to TMF Associates analyst Tim Farrar.
“It wouldn’t make sense for SES to go build a whole new LEO system,” he told Fierce. “It’s hard enough for people like Amazon to catch up with all the resources that they have and they plan to spend the better part of $20 billion on the Kuiper system. SES doesn’t have anything like that level of resources, so their best bet is to look to other people to pay for those networks and resell them.”
SES and Intelsat already are reselling Starlink in some verticals, such as cruise ships. “The fact is both SES and Intelsat have a bunch of direct customers, particularly in government but other segments as well, and they can put together the services that those end customers need based on their appropriate mix of capacity,” Farrar said.
SES's 5 key verticals
That brings us back to what SES is doing. Currently, SES, which operates 26 MEO satellites, is focused on is making sure it delivers top-tier solutions in five verticals: media, government, maritime, aviation and cloud/telecom.
“We are squarely positioned in satellite communications,” Al-Saleh said. “Our strategy is to be a leader in the top tier around providing solutions for customers in these five industries.”
Besides providing overall scale, the merger with Intelsat will give it a stronger position in the aviation/airline and government sectors.
Backhaul and 1 missing U.S. carrier
Al-Saleh is well acquainted with terrestrial networks, having worked as CEO at T-Systems International, the integrated IT services provider and subsidiary of Deutsche Telekom (DT). Having that experience helps as SES sells solutions to mobile operators for backhaul and establishing private 5G in remote areas.
“From a satellite operator point of view, we don’t see that we’re replacing the terrestrial network,” he said. “We see ourselves as complementing it, adding resilience to it, plugging the gaps that they have that are difficult to fill with their terrestrial investments.”
For wireless operators, the economics are often much better to use terrestrial-based equipment rather than satellites. However, in hard-to-reach areas where a terrestrial network is just too costly to build, that’s where a satellite component becomes very important.
In the U.S., SES works with AT&T and Verizon, providing satellite backhaul when floods or hurricanes wipe out their terrestrial equipment. T-Mobile, however, is not among those customers, a situation he would like to change, particularly in light of his former employment with T-Mobile parent DT.
Perhaps someday they will engage with T-Mobile, “but not today,” he said.
Transformation underway
For now, SES sees the merger with Intelsat as a way to give it scale in a highly dynamic sector where huge competitors are moving fast and smaller startups even faster.
“For us established players, we need to transform. We need to really change and focus and be more innovative and be faster,” he said. “What this transaction does is it allows us to build scale.”
And by the way — because many people remember SES from the days when it was clearing the C-band for terrestrial 5G — there are no immediate plans to let go of more C-band spectrum. SES and other satellite companies had to move out of the lower C-band spectrum and that meant cramming their services into a smaller swath of spectrum.
“We don’t have any immediate plans to do it,” he said, noting that it depends what the FCC wants to do in the future and how it wants to use the spectrum going forward.
In other words, never say never.