[SatNews] Fill Rates have been a tried and tested metric in the widebeam satellite world; a look at fill rate and EBITDA margins reflects the financial health of a satellite operator.
Yet, this performance indicator falls short when it comes to High Throughput Satellites (HTS) and is of almost no meaning in the non-GEO, HTS world of the future.
First, spot beam architectures carry an inherent inefficiency in terms of total vs. usable bandwidth. Most HTS operators are uncomfortable disclosing usable bandwidth because it could reveal weakness against competition. As a result, any fill rate figure is questionable as to whether it applies to total or usable bandwidth. Furthermore, many HTS operators offer managed services (not raw capacity) thus making utilization irrelevant. Until, of course, it actually saturates individual beams and one must stop adding customers to avoid contention issues.
Revenues are King…until Margins attack
As of the end of 2014, the Big 3 (Intelsat, SES and Eutelsat) reported combined revenues of about $6.8 billion against, roughly, 3,600 leased TPEs. Considering a 2:1 Bits/Hz ratio, this puts their Revenues per Bit leased between $20 and $30, reflective of the premium that widebeam transponder leasing commands. If we consider 3:1 Bits/Hz, that figure comes down to $15-$20 of Revenue per Bit leased. All this against a fill rate of 70 percent or higher for the fleets.
Avanti and Yahsat, on the other hand, together have approx. 40 Gbps of HTS bandwidth in orbit. Their revenue figures of about $70 million and $285 million respectively, as reported by SpaceNews, place them in almost the same range; i.e., $20 to $25 of Revenue per Bit leased. And this considering that Avanti last spoke of fill rates of a “measly” 20 percent, while Yahsat may be somewhat higher. Seems a bit strange that on a Revenue per Bit leased basis, Yahsat and Avanti seem to be at par with the likes of Intelsat and SES, even if it is at a much smaller revenue base.
If one were to judge these relatively young, largely HTS-only satellite operators by the fill rate metric, they would be considered as having a long way to go, and in many ways they do. Yet Yahsat is now number 7 of the Top 26 FSS operators globally, with a grand total of two satellites in orbit. Sustaining this Revenue per Bit leased and building on the topline is the challenge, and that is where the expectation is that the market demand will hold up. That expectation is universal, though, and applies to both an Al Yah 3 as much as it does to an EpicNG.
Bottom Line
Fill rates are important when an operator only has to sell raw bandwidth in MHz. Operators have graduated to selling contended (or dedicated) services with packages in Mbps and download caps. Here, the more inventory one has available, the better your control on quality of service and user experience. What matters is that you have customers, that they buy premium packages and pay their bills on time. In other words, the race is to build revenues at a high, or healthy, Revenue per Bit leased. If they start dropping prices, eventually poor margins will catch up. However, if investors have faith in the business and the management can grow customers smartly, the returns are promising. Clearly the relevance of fill rates reduces as you build bigger HTS satellites and more so with LEO-HTS constellations. What matters is keeping the Revenue per Bit leased at a level such that about half way into the lifetime of your satellite, an operator has enough cash flow to pay for the next one.
Story by Prashant Butan, Analyst, NSR
