In Business Model, Internet Access, Mobile

The fact that SES, an investor in O3b, might become majority owner of MEO constellation provider O3b in 2016, reflects a couple developments, both of which are positive for O3b, and might be indicative of the potential future opportunity for emerging LEO constellations.

Satellite fleet operator SES has noted that demand for capacity from the O3b Networks constellation of medium Earth orbit Ka-band broadband satellites is accelerating “faster than expected.

That, in turn, would lead SES to become a majority shareholder before the end of 2016.

SES CEO Karim Michel Sabbagh said ownership of more than 50 percent of O3b always has been contingent on O3b’s early success. In that regard, O3b apparently is booking customer orders at a faster clip than expected.

O3b has more than 40 customers, mostly telecom companies that use O3b for trunking or backhaul.

SES earlier in 2015 indicated that O3b’s backlog stands at $530 million, including  the maritime segment, which represents perhaps 30 percent of backlog, energy customers represent about five percent of backlog while government customers represent perhaps one percent of backlog.

Trunking accounts for 60 percent of backlog and backhaul comprises four percent of backlog.

At present revenue growth rates, O3b should reach breakeven no later than the first quarter of 2016.

It is clear O3b primarily sees itself, and is seen by many mobile operators, as a supplier of long haul trunking, functionally equivalent to use of subsea fibers for backhaul or trunking.

O3b emphasizes that its earth terminals support 4G, 3G, 2G and Wi-Fi end user devices and networks, for example. That indicates the role O3b transport now plays, backhauling traffic to and from mobile data centers and switching offices and cell towers.

Separately, O3b competitor OneWeb has raised $500 million of funding from Airbus Group, Bharti Enterprises, Hughes Network Systems, a subsidiary of EchoStar Corp., Intelsat, Qualcomm Incorporated, The Coca-Cola Company, the Virgin Group, and Totalplay, a Grupo Salinas Company, owned by Ricardo B. Salinas.

The OneWeb user terminals are optionally solar powered, and support Long Term Evolution 4G, 3G, 2G and Wi-Fi access, suggesting the business model for OneWeb’s new fleet of low earth orbit satellites, namely trunking to mobile operator cell towers, with end user access using either Wi-Fi or mobile network protocols.

The network will also provide service to ships, planes, trains and oil platforms and interoperability with Intelsat’s fleet of Ku-band satellites.

Sunil Bharti Mittal, Founder and Chairman of Bharti Enterprises and Tom Enders, CEO of Airbus Group will be joining Sir Richard Branson, founder of the Virgin Group, Dr. Paul Jacobs, Executive Chairman of Qualcomm Incorporated, and Greg Wyler, founder of OneWeb, on the Board of Directors.

Each of the other founding shareholders also be board observers, will continue to advise the company and support OneWeb by providing  technical and manufacturing expertise, launch capabilities, and enabling access to potential customers.

OneWeb also said it has placed an order for more than 65 rockets including 21 Soyuz launch orders from Arianespace and 39 launches from Virgin Galactic’s LauncherOne.

The funding and equipment deals to follow are an important milestone towards actual launch of the constellation.

The new satellite constellations matter because, by 2050, Asia will account for 53 percent of global GDP, with China and India accounting for a substantial part of that weight. That will be accompanied by growth in use of the Internet and more demand for Internet access, backhaul and trunking, across the region.



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