We have all seen how several high profile satellite ventures have proven to be very risky business. This hasled the global investment community to ask many of us in the telecom industry, ' Why are investments in newsatellite systems inherently so risky?'The answer lies in the many types of risk that satellite operators need to overcome to successfully introduce anew system. These risks often include: technical, regulatory, financial, competition, market access, and thechallenge of effectively marketing and selling sometimes new and untried technologies. Perhaps the mostsignificant risk involves the fact that implementation of a new satellite system inevitably takes many years,and much can change between the time the initial service concept is approved and the time the service isactually introduced.This paper examines the major factors that decision-makers need to address to improve their likelihood ofcommercial success in launching new satellite communications services. We will focus, in particular, onmobile satellite communications since recent events in this area can be very instructive for planning satelliteinvestments. The focus on mobile satellites also allows us to draw on our years of experience in the field, andshare observations on pitfalls to avoid and ways to minimize risk.All decision-makers planning new satellite systems recognize the problem of 'long lead time' at a very earlystage. The most commonly accepted approach for dealing with this risk is to conduct extensive marketresearch. This has become the primary means for identifying the core target markets for a given service, andquantifying the expected volumes that each of these targets will contribute to the overall business. Despite thevalue of market research, it does not provide assurance that the main target markets identified as supportingthe business case will, in fact, exist when the new satellite system is deployed. Nor can there be assurancethat they will remain in place over the project’s life.No reasonable decision-maker disputes the merits of market research - it must be done. Nevertheless, mosteveryone agrees that the results of this research - no matter how thorough - must also be treated with cautionand tempered by careful business judgment. This is because the research typically covers a 10-15 yearforecast, and during this time frame significant changes in technology and consumer habits will occur.Moreover, the research results can be subject to favorable interpretations to attract investors or to structurethe program in ways supported by management.Most of the business cases for new satellite systems recognize these varying levels of risk, and try to addressthem in some way. Nevertheless, many projects that are approved, funded and implemented fail to achievetheir expectations, as we have seen. Some of the main reasons for this are:1. Massive Scale -- New, global satellite projects require billions of dollars in investment just toreach the market. This level of expenditure requires complex financing arrangements, along withthe need to attract large numbers of subscribers who will generate high system utilization veryquickly. If there is heavy reliance on debt financing, the lenders can place restrictions andobligations on the operator to achieve specified subscriber levels by a given date, or othermilestones that can limit the operator’s flexibility.2. Changes in the Target Markets -- Once the service concept is agreed upon and the systemdesign is approved, all efforts are focused on delivering the approved system. During this multi-
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