SES Americom maintains rare, positive business outlook

SES could see cutbacks in government-sponsored and -owned platforms that continue to be delayed and over-budgeted, Kisilywicz added. As part of additional efforts to enhance cost management within SES, the company created SES Engineering to consolidate group procurement activities from buying to operating satellites, Kisilywicz said. He expects this consolidation to deliver almost $10 million (7.5 million Euros) in cost savings entering 2009. Along with the July formation of a new operating segment through the merger of SES Americom and SES New Skies, this will drive its cost-saving initiatives.

Because SES is far removed from the end user base its customers serve, the cost of satellite capacity to its customers is typically a very small part of its overall costs. If its carrier customers’ revenues drop, Kisilywicz said it will take a long time for that to feed through and potentially affect SES. Likewise, he doesn’t se e over-the-top video providers as a threat because 40% to 50% of households will never be served by a high enough quality terrestrial line to enable multiple channels of HD video to enter the household through Internet connections, he said.

“While certainly there is a role for online video to play, for a large number of households we are a long way off, if ever, from having an Internet-based feed that will feed multiple 60-inch plasma sets in a TV household with a quality video signal,” Kisilywicz said. “In talking to our customers that operate platforms and study the online video trends of consumers, we understand that the bulk of the audience still is tuning in to or recording that weekly program or live sporting event, and they value that high-definition experience and use the online experience to supplement their viewing. The online viewing then feeds back into growth of the traditional linear mode, in which most consumers continue to ingest video.”

On the acquisition front, although SES has traditionally grown organically in the past, Kisilywicz said it does see acquisition possibilities going forward. The top four content aggregators, dominated by SES and Intelsat, account for 70% of the overall market. The remaining 30%, or the long tail of about 30-plus operators with one or two satellites either sponsored by government agencies or small regional networks, is what Kisilywicz said SES will continue to speak to about possible acquisitions.