Gains for service providers like Speedcast, Hughes, and Gogo have been overshadowed by the Big 4 operators stagnant revenues.
There has been a 6% industry growth in 2018-2019, on the back of strong IFC contracts and broadband subscriptions, with several integrated operators posting large double-digit growth, according to NSRs Satellite Industry Financial Analysis, 9th Edition (SIFA9) report, released today. While EBITDA margins improved and cash flows increased, top-line growth remains a big concern for SES, Intelsat, Eutelsat, and Telesat. A prolonged decline in media revenues is met with modest gains for data networks, with flat to declining revenues the norm. Decline in Return on Capital Employed also denotes a transition phase from FSS to HTS until 2020, after which growth is expected to take off again.
For three years in a row, service providers posted large top-line gains with Speedcast, Hughes, and Gogo leading the way. EBITDA margins have improved but are still far away from generating positive cash flow. Finally, 2018-19 has been a breakthrough for M&A, with Hispasat, Asiasat, and Inmarsat going private on the back of strong performances towards cash generation, backlog, and debt reduction.
The industry is set to witness a higher diversification in fleet strategy going forward with options from FSS Hybrid (high EBITDA) to VHTS (efficiency) to small GEOs (regional/mission specific) to non-GEOs (ubiquitous) from various stand-alone and integrated operators, notes Gagan Agrawal, NSR Senior Analyst and report author. While operators pursue growth, it is key that each creates its own captive regional markets, with highest fleet efficiency for wholesale revenue and the best-in-class fleet synergies in a managed services role, Agrawal noted further.