Satellite Communications in the Arab Middle East: Status and Future Forecast

1) Summary:

In the decades before the Arab Spring, the satellite communications market in the Middle East experienced robust growth, driven mainly by the demand for Direct to Home TV programs but also by corporate VSAT networks, Internet and Wireless trunking, and other data communications applications such as Government use. Several satellite operators provided service in the region, starting with Arabsat which was founded in 1976, then Thuraya,  Nilesat, and most recently Yahsat. Prior to the Arab Spring and the decline of oil prices in the past few years there were initiatives by several other Arab countries to acquire satellites that did not materialize. For example Qatar, Bahrain, and Morocco all considered launching their own satellites. Libya also invested in a pan-African satellite operated under the umbrella of the Regional African Satellite Communications Organization (RASCOM).

Demand grew steadily and the future looked very promising. The region was consuming a lot of Ku-band capacity from Global operators such as Intelsat, Eutelsat and SES as well. The growth of operator capacity over the region in both Ku and Ka bands is expected to continue in the next few years as Arabsat launches two satellites it contracted with Lockheed Martin to build, and as various global operators deploy High Throughput Satellite (HTS) capacity.

Two events disrupted the market though, one was the Arab Spring and the subsequent destabilization of several Arab countries which led to loss of demand. The second was the decline in Oil prices which led to significant reductions in revenues of Persian (Arab) Gulf countries and the cancellation of several projects.

In this analysis we try to examine the status of satellite communications markets in the Arab Middle East today and to forecast its future behavior over the next five years.

2) Drivers of Demand:

2.a) Direct to Home TV Broadcasting:
      The Arab countries, with an estimated total population of over 350 millions, have a great hunger for TV programming. The restrictions imposed by many Arab governments on local products created an ideal market for satellite TV where channels are received from outside the country. News, soap operas, and religious programming are among the most popular, but foreign language programs are also in high demand.
      While there are variations among Arab populations, for example from the French speaking North Africa, to the liberal Lebanon, to the highly conservative Saudi Arabia and the less liberal Gulf countries, many of the Arab people like programs that are common across the region in addition to some local programming. Turkish and Syrian soaps for example were very popular until politics complicated matters.  Egyptian movies and soaps tend to be popular and are understood by most Arabs. High quality movies from Algeria, Tunisia or Morocco and great soaps from Gulf countries are not as wide spread on satellite TV across the region. 

2.b) Corporate VSAT Services:
      There many industries operating in remote locations in Arab countries that rely on satellite communications, such as the Oil and Gas industry. Foreign-based corporations also prefer to have satellite connections to their HQ in he Gulf, Europe, or the USA. The use of VSAT networks among domestic Arab corporate users is probably not as wide spread and is a potential growth area.

      Some Arab countries have geographies that make the use of VSATs necessary, such as mountainous Algeria and Morocco. Others have flat geography that is more suitable for terrestrial microwave or fiber optic cables.

2.c) Broadband Internet:
      This has been a growth market in several Arab countries recently.  Saudi Arabia pioneered in this field with a contract with Intelsat back in 2004. This pilot project was perhaps ahead of its time as the technology and the economics of satellite broadband internet were not ready for prime time. Now, however, with advances in ground technology and satellite capabilities, including the deployment of High Throughput Satellites and the use of Ka-band, the market is ready for rapid growth in the use of satellites for broadband services in Arab countries.

2.d) Wireless Trunking:
      Some Arab countries, such as Egypt, Saudi Arabia, Libya, or Jordan, have flat geographies that make the use of terrestrial microwave links attractive for wireless trunking. Others, like Morocco and Algeria have mountains that make satellites more attractive for wireless backhaul. There has been tremendous growth in the use of cellular phone and smart devices in Arab countries. Most countries moved from 2G to 3G technologies and are now in the process of moving to 4G technologies. This suggests that the need for satellites in wireless trunking in Arab countries will continue but the use of this service will change in nature.

3) The Competitive Scene:

3.a) Regional Players:
3.a.1) Arabsat:
      Arabsat is the main regional player. It's headquarters are in Saudi Arabia but it has offices in many Arab countries. It is a consortium owned by Arab governments, with Saudi Arabia having the largest share (36%), followed by Kuwait (14%). Arabsat owns and operates six satellites from 3 orbital positions. Its satellites have high-power Ku-band coverage of the Middle East and North Africa (MENA) and some parts of Southern Europe. They also have C-band coverage of all of Africa.
      While Arabsat started back in 1976 as an Arab version of the International Satellite Communications Organization (Intelsat) with similar bureaucracy, it has demonstrated in recent years that it can make nimble moves to advance its business, such as the acquisition of HellasSat and the partnership with ABS. Arabsat have had also a partnership with Eutelsat to supplement its Ku-band capacity.

3.a.2) Yahsat:

3.a.3) Nilesat:

3.a.4) Thuraya:

3.a.5) Rascom:

3.a.6) Spacecom:

3.b) Global Operators:

3.b.1) INTELSAT:

3.b.2) Eutelsat:

3.b.3) SES:

3.b.4) ABS:

4) Demand and Supply in 2002-2012

5) Disruption - Oil, the Arab Spring, and the Islamic State

6) Forecast for 2017-2022.

7) Conclusions
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