The satellite industry is going through unprecedented times and this is being reflected in the risks that the investment community are prepared to take on new services and constellations. On Monday’s panel session “Financing HTS Growth – GEOs, LEOs and MEOs,” this was further explored. The panel agreed that it is a rather confusing time for investors.

“From a research perspective, the emergence of High Throughput Satellites (HTS) is pretty transformative. The fact is that space technology is moving very fast and the industry is still trying to figure out which technology to invest in,” said Chris Quilty, president of Quilty Analytics. “There is a lot of caution and confusion in the market but no-one can doubt that this technology has taken hold.”

This inevitably manifests itself in the CAPEX cycle. But it doesn’t seem that there is problem with demand. Grant Barber, CFO of Hughes, pointed out that the demand and appetite from customers is growing exponentially and is largely based upon the demand for video downloads. The challenge is to correctly assess how much more capacity is required.

Hughes sees capacity being taken up very quickly in the U.S., but what about other markets where incomes are lower?

“We see the exact same trends with most people taking lower plans but then moving to higher end plans,” said Barber. Barber continued. Hughes is already providing HTS services across Brazil and Colombia and is looking to move into Panama and Costa Rica later in 2018.”

Joshua Marks, CEO of Global Eagle Entertainment, said the market is at the peak of individual data consumption but there is a lot of unintentional usage as there is a great deal of application refreshing going on. He predicts that people generally will accelerate in their smartphone usage as more and more people connect. However, he emphasized the fact that airlines, for example, will want to deliver services at the price point that people are prepared to pay. This is why business models are going to be so important moving forward with HTS. There must be the right combination of adoption rate and price point.

In terms of the enterprise market, HTS constellations such as LeoSat are going for the premium segment of the market, delivering enterprise-grade connectivity to those that require high security and low latency to deliver mission-critical services to those in more remote areas. This is a premium service.

So, how far away is the market from hitting terrestrial price points? Barber believes that Hughes’ HTS offering competes quite well with terrestrial since the company does not attempt to compete in urban areas.

So where is investment coming from? Securing investment is difficult for any start-up satellite company, especially the LEO constellations that have no precedent. “It needs to be broken up into milestones,” said Mark Rigolle, CEO, Leosat. “Initially, the first round is the most difficult to find, and as a company moves through the process of B, C and D rounds the process gets easier,” Mark Rigolle, CEO, Leosat explained.

Investment in the initial rounds is often required from venture capitalists. However, after this stage, funding comes from other sources;, some large infrastructure companies, and even pension funds are looking into the satellite industry as an alternative place to put their cash. Rigolle sees a change in the mix of investors.

Quilty highlighted that the fact that high-profile entrepreneurs, such as Elon Musk, have shone a light onto the industry will encourage investors to follow. “Success begets success,” he said. “Once you have your first successful exit of a LEO constellation, it will make it easier for everyone else.”

So, perhaps the point is that these HTS constellations need more time to evolve and develop and to gain the confidence of the investors. However, it’s still too early. Plus, different systems will be suited to different applications. What is good for enterprise will not be good for the consumer and investors will need to fully understand the nuances of each so that they know exactly where their investment is going.

The post The Trials and Tribulations of HTS Finance appeared first on Via Satellite.

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