What new initiatives is Thaicom currently involved in?
SUTHUMPUN: Thaicom has two satellites in operation, Thaicom 4 (IPSTAR) and Thaicom 5. The new initiatives that we have right now start with the new bird. We are going to have 2 more satellites coming online. The first is going to be launched at the end of this year and that will be Thaicom 6, and we have Thaicom 7 that will be in service by the first half of next year. So that is actually the first initiative that we have.
The second one is that we have changed our strategy a bit to focus on end-to-end or turn-key solutions. So we work with a few partners to bring those kinds of solutions to our customers. Let me give a few examples of those solutions. We work with a few partners in the US to provide mobility solutions; we just signed an MoU with Global Eagle Entertainment to provide WiFi on planes using satellite systems and we engage customers here on airlines in Asia. Another solution that we provide is a content delivery network. We deliver movies through our satellite network as opposed to using hard discs.
So these are the new initiatives that we have embarked on since the beginning of the year and we seem to have good attention from the customers. We are also going to be moving into other territories. We have traditionally been focusing here in Asia, and we have a few customers in Australia and New Zealand. Next year, when we have Thaicom 6 available, we are going to cover Central and Eastern Africa as well.
What kinds of investments does Thaicom make in its satellites?
SUTHUMPUN: With regard to capital expenditures, each satellite has a different design and different size. A normal sized satellite will cost from $180m to about $200m. For larger satellites like our number 4, called IPSTAR, a broadband satellite and the first broadband satellite that was built in the world, this one cost us a little bit more than $400m. To build each satellite it typically takes between 2 and 3 years depending on how sophisticated and complicated that satellite is. That is the whole of the capital expenditure that we need for each satellite. For the operations, it is not much that is needed because the majority of the cost is taken up by the investment in the satellite itself. That cost I mentioned, includes the build of the satellite itself, and also the launch service to bring the satellite into orbit.
How do the technological capabilities of your satellites differ?
SUTHUMPUN: IPSTAR is unique as I mentioned. It was actually the first broadband satellite built in the world. It uses the spot beam design. So this satellite is quite powerful and quite cost effective for customers to use for broadband connection or IP connectivity. The other satellites, Thaicom 6 and Thaicom 7 are considered conventional satellites and are much smaller. If you compare the sizes, IPSTAR has about 880 transponders whereas Thaicom 6 has about 33 and Thaicom 7 has 28. So that is actually the comparison. The conventional satellites can also be used for communications, but not in as much of a cost effective way as the broadband satellite. So people mainly use these for other types of solutions such as broadcasting content through the network or DTH, direct to home, and satellite TV. So there are different uses and purposes for the different satellites.
How do satellite broadband services compliment terrestrial services?
SUTHUMPUN: The terrestrial service is actually quite efficient right now, so the speed is quite good. There are some limitations to coverage because it is probably not available throughout the area services are needed. Satellite can be a substitute in these kinds of areas. With the current ground technology that we have, the upload and download speed is almost equivalent to terrestrial and in some cases it is equal. We can provide about 12mbps download and this can be developed to further this speed as well.
How much of your satellite capacity is currently being used?
SUTHUMPUN: Currently, we actually have two satellite services. Thaicom 5 provides broadcast applications and solutions. This satellite is actually fully utilized and that is why we are building another satellite to be complimentary to satellite 5 and this is going to be Thaicom 6, which is going to be available by the end of the year. Thaicom 6 is going to create more capacity and help provide capacity for customers who still have demand in this region. It is also going to provide service to Africa, which is an area we are going to penetrate. With regards to Thaicom 6, the beam that we have, or the footprint we have, is already sold out even before we launched it. For Africa, we already have a few clients signed up. So this satellite has about 66% capacity already taken and by the time that we launch we could have more customers sign up. So it is actually quite a good position to have for the new satellite.
Thaicom 7 will be in a different location. Thaicom 5 and Thaicom 6 will be collocated at the same orbital slot which is 78.5Â° East whereby Thaicom 7 is going to be launched and used at 120Â° East. We are going to use Thaicom 7 as the satellite that optimizes the workload between Thaicom 5 and Thaicom 6 because right now there are some telecom workloads that customers have signed up for. We would like to transfer this to Thaicom 7 and therefore open up the space on Thaicom 5 and Thaicom 6 that is in demand for broadcasting because the dish has to point to the same location. Thaicom 7 will cover Asia Pacific, Australia, and New Zealand. Aside from being the satellite that optimizes the traffic of the other satellites, it can also provide other turn-key solutions such as content delivery networks, mobility, WiFi on the plane, we can also use this satellite for that. So this will be the additional capacity we will have in less than 12 months.
What kinds of customers and potential clients are you focusing on?
SUTHUMPUN: With regard to Thaicomâ€™s customer focus, we need to separate it into 2 areas. For the broadcasting side of the business, we will continue to focus on broadcasters, content providers, and also the government to support them on the digital TV that is going to be launched by the end of this year. So that would be the focus segment that we will work on. With regards to the broadband satellite, in this segment the customers are split into three different areas.
First is the enterprise or corporate segment. Customers would be, for example, mobile operators that we work with. We are trying to replicate the success that we have in some other countries. Iâ€™ll give you an example, in Japan, we work with SoftBank Mobile to develop solutions that they can use as a back-haul for 3G. So they use our solutions to expand their coverage in Japan. We have installed almost 5,000 sites using our solutions, so that is where we would target. We then replicate this model to the other providers in Japan such as KDDI and Docomo who have signed up for similar solutions. We use a similar solution for our customers outside of Japan. For example, China Telecom use our satellite solution, the broadband solution, for the CDMA back-haul to provide the extension of coverage in some areas such as Xinjiang. So this is actually the first segment that we target and this is actually a re-positioning for us a bit. Instead of trying to compete with terrestrial or mobile operators, we work as complementary to them using our solutions.
On Thaicom 5, we have 500 channels and only 10% of the channels, or 10% of the content, that we have are in high-definition. So there are a lot more that need to be transformed and that is actually a trend in the market. Each channel that is high-definition requires 3 to 4 times the bandwidth as a standard definition channel. So that is actually the key driver [for growth].
The second segment we focus on for broadband satellite is the government segment. You are probably aware that in this region, there is a USO fund, universal service obligation, where the regulator in each country will ask the operators to put aside a percentage of their revenue to be used for the USO fund. This fund will be used to extend the coverage in rural or underpenetrated areas for broadband internet activities. So we use this fund and we work with the government to utilize this fund with our solutions. An example of the customers that we work with, in my home country of Thailand, we work with TOT to provide school net that connects the schools that are outside the city area. This enables them to connect to their city or central area. In Australia, we work with NBN, the National Broadband Network, to provide broadband internet connections for the people of Australia throughout the country. We are the only operator that works with them over there. So this is actually where we believe there is an opportunity for us to work with other governments. Right now, we are engaging the government of India to provide village connectivity for them and also in China, where we similarly provide village connectivity for them as well. So this is actually the second segment for broadband we focus ourselves on.
The third area is retail. We believe that retail will have more reach and more return to our business model. So we will focus on this area, but not by ourselves like we did in the past. We actually are going with our business partners to ask them to help focus on penetrating the consumer retail market. We provide marketing funds and the second level technical support to them and other kinds of materials to help train them up in order for them to help us to penetrate into those areas.
What are the underlying reasons Thaicom has become so financially successful over the past year?
SUTHUMPUN: This is actually the 8th consecutive quarter that we have delivered a positive financial result. I have to step back a bit. In the past we did not do well, we had a loss in our books for 5 or 6 years. So when I joined we had to do quite a lot of transformation and change in order for us to have a solid performance. So it is not just one thing that we have done and then we had a profit, we have changed quite a few things. First, we reorganized ourselves to be more focused on customers, to be a more customer-centric organization. In the past, we have been focused very internally on products, so each member of sales, or engineering, or marketing would focus on their own product where some of the customers may need a product or a service that is an integrated solution. So we reshaped our organization to focus more on the customers and their needs.
We also now focus on territories. For example in India, one group or team focuses on selling any kind of service or product depending on the customer requirement. To do that, we also needed to change the organization at the back end to support them, the engineering people, the marketing people, and also our back office people. We reshaped our organization to be focused on function instead of product. That is the first thing that we did.Â We have also done a lot on operational efficiency to make sure that we have optimized our teams and lined up people to the right kinds of skills and solutions to be able to serve the customer. So we have improved a lot on operational efficiency, using technology and other things to help improve the process within the teams.
We also looked to reorganize our portfolio. Those that do not provide profit or have been making a loss for a long time have been cut. At first we try to improve and change, but if we have tried for 6 months or 1 year, then I exit from that market, which I have done in some instances. So the portfolio that we have today is quite healthy. For those that do not perform, the assets that do not perform, we close them down. For assets that are good, we invest more into them.
We also apply incentives toÂ our sales. In the past, everyone, whether they make sales or not, got the same kind of bonus, which was actually very low because our profit was not there. This time around we have incentivized our people based on performance.Â Of course, I also try to reshape our culture a bit and our core values. Every employee would understand that this is the direction that we want to go so everyone has committed to the same thing.
What is your outlook for Thailandâ€™s aerospace industry?
SUTHUMPUN: We at Thaicom are in a very unique position in Asia because we have both broadcasting capabilities and broadband capabilities. The world is actually moving towards integration of these two technologies so we are in a very unique position to provide total integrated solutions to customers.Â If you look only into the broadcasting, particularly in Indochina, I see there is a lot more growth coming in and there are a lot of drivers. The first would be high-definition. In this region, in ASEAN, there is not much penetration in high-definition. For example, on Thaicom 5, we have 500 channels and only 10% of the channels, or 10% of the content, that we have are in high-definition. So there are a lot more that need to be transformed and that is actually a trend in the market. Each channel that is high-definition requires 3 to 4 times the bandwidth as a standard definition channel. So that is actually the key driver.
The second trend that I see is pay TV. In this region, there are not many players in pay TV and in Thailand, there was only one many years ago, which was True Vision. There are many people that want to get into the pay TV market, such as GMM Grammy, who has already started, and RS, who is trying to penetrate into pay TV by having some magnet programs. So you will see many more players coming into pay TV and the most economical way for them to do that is to go satellite because digital TV in Thailand is all going to be free to air. So that is a driver that we see.
Going back to high definition a bit. It is not only going to be high definition that is going to be the ultimate technology, you have probably heard of ultra-high def, 4K and 8K. That would demand even more bandwidth. You can see the result of this trend. Our Thaicom 6, which is going to be launched by the end of this year is already sold out of capacity even before we have launched it.
On broadband, I also see quite a lot more demand coming because there is an increasing use of data. Because we re-positioned ourselves to be complimentary to mobile operators and terrestrial infrastructure, we can help expand coverage and offload some of the traffic of the data requirements of their users to be on our network. This can free up their network to serve whatever they consider high yield or premium yield for those operators.