By Blaine Curcio

China Satellite Communications Company Limited—better known as ChinaSat—is by far the largest satellite operator in China. As the primary operator in what has been an effectively closed, monopolistic Chinese satcom market, ChinaSat can have a tendency to fly under the radar in the west, though this has started to change. With new satellites being launched in late 2019 and into the early 2020s, and with an increasing amount of capacity outside of China, ChinaSat is likely to start having a bigger impact on international markets in the coming years, for several reasons.

International Push due to Limited Domestic Market

ChinaSat’s international expansion has primarily been motivated by a domestic market that is not well-suited for satellite—particularly for backhaul and video.

Despite being geographically large, China has a very high rate of fiber penetration, and many rural areas already have 3G or 4G coverage. From a satellite perspective, this challenge is amplified by the fact that the Chinese mobile network operators—all of which are state-owned—tend to not see satellite as an area of strong emphasis, though all do have satellite teams. Ultimately, though, with 3G and 4G backhaul being one of the biggest expected growth drivers for satellite globally moving forward, China is unlikely to see very much uptake, even despite ChinaSat launching Ka-band HTS capacity and running 3G/4G tests.

The limited backhaul growth in the domestic market may, however, be the least of ChinaSat’s worries. A far bigger piece of the company’s revenues—up to 60% according to a recent company interview—come from video broadcast. As more consumers in China are watching most video content on their phones—implicitly over the Internet—ChinaSat is seeing significant pressure from its video business within China. This pressure is likely to be exacerbated by the fact that many of its channels are provincial TV channels, reliant in some instances on provincial funding. While some provincial TV channels—notably Hunan TV—are highly successful commercial ventures, others are badly loss-making, and thus may face significant revenue pressure in the event of an economic slowdown.

Finally, ChinaSat faces the uncertainty of market opening within China. While full market opening to other satellite operators (i.e. “Open Skies Policy” or similar) is laughably implausible, ChinaSat’s domestic monopoly is unquestionably eroding. On the whole, ChinaSat is facing a difficult market in China, making international expansion seem relatively more attractive.

The Move Abroad

ChinaSat’s international expansion has been underway for some time, in a variety of ways. This has included, among other things:

1. Launching its own capacity abroad (usually on a satellite that also has coverage of China)
2. Using capacity on its subsidiary, APT Satellite (Hong Kong)
3. Leasing capacity from other satellite operators for re-sale (for instance, Sinosat is known to lease maritime capacity from Intelsat in the central Atlantic Ocean)
4. Most recently, buying a sort of “condosat” on Chinese-built foreign satellites. One example of this is the Belintersat satellite, built by CAST for Belarus and launched in 2016. Of the satellite’s 38 transponders, a handful have been sold to ChinaSat and marketed as Zhongxing-15, primarily being sold in Central/Eastern Europe and Africa.

To now, this has yielded relatively limited results. While some of ChinaSat’s international capacity—including much of the capacity on Belintersat-1/Zhongxing-15—is known to be sold, much of it is being sold at relatively low prices for commoditized capacity. What limited capacity is sold for more specialized purposes would tend to be sold to Chinese companies operating abroad (i.e. natural resource companies). These challenges have come in part because ChinaSat is in its early stages of international expansion, and in part because to now, the company’s international capacity has been, to some extent, a hodge-podge of other countries’/companies’ satellites.

Today, ChinaSat’s revenues are estimated to be between US$250-300m per year. Of this, perhaps ~10% or less comes from abroad, however moving forward, this number is likely to increase. The company has an increasing amount of capacity being launched outside of China, and it is finding the Chinese market to be increasingly saturated. At the end of the day, the expanded push by ChinaSat abroad will prove to be a short-term detriment to existing operators, as it simply means another internationally-oriented operator in Asia-Pacific and increasingly, EMEA. In the medium-long-term, though, an increased emphasis by China on “going global”, and a successful international push by ChinaSat, could lead to some opportunities for foreign companies, in particular in the M&A space, whereby it might be plausible for a regional operator, service provider, etc., to become an attractive M&A target.

On the whole, ChinaSat’s international expansion will be good for some, and will likely spell challenges for others, but one thing is certain—the international expansion is happening, and it is, if anything, accelerating.