A satellite could be developed for a new Hughes Network Systems and Yahsat joint venture to provide broadband over Africa, the Middle East and southwest Asia.

Pradman Kaul, president of US-based Hughes, said at World Satellite Business Week in Paris that the company will spend US$100m to own 20% of the JV to help build out a “global presence” in broadband.

The company last year signed a US$190m contract with LEO internet startup OneWeb to provide a ground network in support of its upcoming constellation. The startup has regulatory approval for a 720-strong network and is exploring the possibility of another 2,000 satellites, though others are exploring similarly large constellations.

UAE-based Yahsat has similarly big ambitions, as the company wants to achieve “market dominance,” CEO Masood Mahmood said. He called the JV a “no-brainer,” adding that the partnership is an offensive action, not defensive. The company is currently the sixth-largest FSS operator worldwide.

Pictured (from left) are Charlie Ergen, Pradman Kaul, Masood Mahmood and Mounir Barakat.

Yahsat has had topline growth since it launched internet services in unserved and underserved communities in five countries, Mahmood said. With the JV, the plan is to expand service to 19 countries to cover markets that include consumer, individual, enterprise and government.

Yahsat is positioning itself as a provider of satellite services to developing regions, as the company has announced that it is testing residential broadband services in Brazil, the world’s ninth-largest economy by GDP.

The JV will provide coverage via the Al-Yah 2 (AY2) and Al-Yah 3 (AY3) Ka-band birds, which currently cover more than one billion people, while leveraging the capabilities of Hughes’ high throughput Jupiter System. It was designed for large scale high-throughput satellites.

Notably, an insurance claim, rumoured to be around US$106m for the Al Yah-3 spacecraft that was put into the wrong orbit, has been “fully mitigated”, Mahmood said, adding that the “case is closed” without elaborating.

“Yahsat has been a valued customer for many years, incorporating our Jupiter System and operating expertise into their services,” Kaul added.

The venture will initially focus on direct-to-premise services for homes, small- and medium-sized enterprises, community centres and schools that are served under local government programmes across these regions. In addition, there will be an increased focus on community hotspots to make satellite-enabled broadband accessible to more users across the AY2 and AY3 footprint.

The JV will also aim to capitalise on the accelerating transition towards Ka-band based backhaul and carrier solutions from mobile network operators. Kaul said the Ka-band is the best for mobile backhaul via satellite in part because it involves the lowest cost. He added that the mobile backhaul market is a “driving factor” behind the venture.

As SatelliteFinance recently reported, citing Northern Sky Research, three of the most prominent markets for mobile backhaul via satellite are Asia, Africa and Latin America. Worldwide there are about 50,000 in-service units, with the number of users expected to double by 2023 to 100,000 strong.

The fourth edition of Northern Star Research’s Satellite Capacity Pricing Index, which was released in March, found satellite capacity prices fell for a third straight year as operators seek out strategies to arrest the decline. On average, capacity price declines for the period 2016-2018 ranged from 32-57% across various applications and regions, and the road ahead appears bumpy.

The Thuraya business will not be part of the JV, Mahmood said. In May Yahsat purchased an undisclosed majority stake in UAE-based Thuraya.

Completion of the transaction, which is expected later this year, is subject to customary approvals and closing conditions.

“Yahsat’s remarkable track record and experience in operating [broadband service] YahClick, combined with Hughes technology leadership and experience, are a winning proposition to unlock the mass market potential of satellite broadband services across the region,” Mahmmod said.

Benefits of 5G

On the sidelines, Charlie Ergen, chair of Hughes parent Echostar Corp. (NASDAQ:SATS), told SatelliteFinance how the company is seeking to build a 5G network that can be scaled and “sliced”. 

He said there is a parallel to suggest a virtualised 5G network could cut capex.

The capex savings when moving from analog to digital was about 20%, he said. That is “a good proxy” for building a virtualised 5G network as a step above 4G.

EchoStar bought spectrum to build on it, Ergen said in response to speculation that it could be looking to sell the frequencies, noting that narrow band IoT is an “opportunity.”

The FCC wants to build a “best in class” 5G network. Standards should emerge by 2020, when EchoStar will be able “to tell more of the story and show more progress.”

EchoStar and DTH operator and sister company Dish Network (NASDAQ:DISH) have complementary S-band spectrum.

On EchoStar’s Q2 2018 earnings call in mid-August, CEO Mike Dugan said “there are things creatively you can do to build an ecosystem around S-band that’s maybe not there today”.

EchoStar, which in July made a £3.2bn (US$4.3bn) offer to acquire UK rival Inmarsat (LSE:ISAT), also operates in S-band. The company has said EchoStar’s bid was undervalued. EchoStar is banned from making another bid for six months under UK takeover rules, unless it gets permission from the satellite broadband company’s board or certain other circumstances take place.

Middle East dreams

Middle East-based satellite operators, including Arabsat, Es’hailSat as well as Yahsat, are aggressively expanding against the backdrop of deepening international ties in the region and a thriving tech sector.

Half the world’s population is not connected to the internet, a market that represents 472 million households, according to a Northern Sky Research report on emerging markets. Satellite operators attempting to crack these markets have in some occasions had lacklustre results. At the same time there is a massive opportunity for satellite-delivered consumer broadband, it said.