“Over the last twelve months, the
global satellite industry has shown strong growth and produced outstanding returns,” states Thomas Watts, Vice President, Merrill Lynch U.S. Fundamental Equity Research, who projects industry revenues will grow over the next decade at an annual rate of 17%. “The challenge for 1998/99 will be to continue to meet investors’ current expectations while fulfilling the industry’s dreams of meeting mass market demands.”
In a newly released in-depth report on the Global Satellite Industry,
Mr. Watts analyzes how this transformation should take place. The report
informs investors that in the coming year, at least four new services will be
initiated: global satellite telephony (Big LEOs), global satellite data
(Little LEOs), satellite radio, and 1-meter satellite imaging. In addition,
existing companies should either reach their cash flow breakeven points or
start the transition from non-profit agencies into profit-motivated public
companies.
Current industry projections continue to show rapid growth for the
satellite industry. Merrill Lynch forecasts revenues to climb from an
estimated $38 billion in 1997 to $171 billion in 2007. This steady growth is
expected to be driven by the dramatic expansion of satellite television (DTH),
mobile satellite telephony (MSS) and multimedia
In his report, Mr. Watts outlines for investors, ten key satellite
developments that are expected to take place in the next year. He believes
these developments will be signposts to the industry’s near-term prosperity.
They include:
- Increased usage of Direct Satellite Television after three years of
disappointing linear growth. - Launch of new mass market satellite telephony services such as Iridium
and Globalstar. Their early success … or slow start … could become
a bellwether for other satellite ventures and their financing. - Emergence of other mass market services such as Internet access and
broadcast radio. - Finding the right product formulas for multimedia usage.
- Development of many smaller niche opportunities such as satellite
mobile data, and satellite imaging. While these areas require
investments of only a few hundred million dollars vs. the
multi-billion dollar systems which have captured the headlines, they
offer exciting investment potential. - Transformation of at least parts of Intelsat, Inmarsat and Eutelsat
from treaty-based non-governmental organizations to for-profit
companies. - Economic downturn in Asia weakening many local partners and creating
opportunities for consolidation. - Award of major contracts that could re-align the satellite
manufacturing industry. - Decrease in space access costs due to new low cost launch vehicles.
- Consolidation of satellites into an investment sector. The sector,
with 21 companies, is currently worth a total of $80 billion. It
should expand beyond 30 companies within the next three years
The report also contains a detailed industry outlook, which evaluates the
prospects of eleven industry segments. Complete investment summaries of many
of the satellite companies that Merrill Lynch follows can be found in the
book’s appendices. Top stock selections are also discussed.
Copies of “Global Satellite Marketplace 98” are available upon request from Merrill Lynch.
