Abu Dhabi’s satellite company is entering another exciting phase as it prepares to launch its third orbital craft. As the firm cements its place among global leaders in the fast-growing space sector, a new era looks set to dawn.
Star shines ever brighter for Abu Dhabi’s Yahsat
If all goes to plan Masood Mahmood will be in French Guiana approximately a year from now for the launch of what he calls “one-third of our fleet”.
The chief executive of Yahsat will be in Latin America to watch the communications company’s third satellite Al Yah 3 blast off on a rocket and put into orbit.
“We are gearing up from now. It is a big deal for the company,” he says in an interview with The National at Yahsat’s compound in the deserts of Abu Dhabi.
“We are getting butterflies from now.”
Security checks at the gates of the company’s facilities are a reminder of its work with its anchor tenant, the UAE Armed Forces.
Its business is split between defence and commercial operations.
“One part of the business is providing secure satellite communications for the UAE Government,” he says.
From the outside the HQ is base-like. Massive satellites stand proudly in front of the building. Security is tight. Passes are given only for specific buildings and visitors are asked to sign documents agreeing to their good conduct while on campus.
Inside, however, it is as bright, airy and white-washed as any corporate offices in the technology sector. This is in many ways an analogy of Yahsat itself – it serves its government and defence clients while also tending to its commercial ambitions that include expanding consumer services.
By 2019, Mr Mahmood targets a balance between the two, without committing to a specific ratio.
“It’s cyclical. One is up, one is down. You have to have a balanced approach,” he says.
“We cannot forget and neglect that government business is a very important backer and enabler of innovation.”
Each part of the business is managed by separate teams, he says, listing Yahservice for government-related clients, Yahlive and YahClick for commercial.
“Sometimes it almost feels like separate structures,” he says.
A “close analogy” for the company, he says, can be found in the telecoms sector; operators have both enterprise and consumer customers with the associated difference in margins, scale and levels of service.
The new satellite – Al Yah 3 – is purely for commercial purposes however and is expected to offer a step change for the business as it seeks out new markets and customers in Brazil and Africa.
“Al Yah 3 is a big extension of the vision of Yahsat. Today it takes a proven formula, a proven business and builds more on that success,” says Mr Mahmood.
Al Yah 3, which follows Y1 A and B in 2011 and 2012, respectively, is scheduled for service launch in early 2017. The addition to the fleet will extend the company’s YahClick satellite broadband services to a further 19 countries and 600 million users across Brazil and Africa as the company looks to meet rising demand for broadband internet access in emerging markets.
The new satellite will cover more than 95 per cent of Brazil’s population and 60 per cent of Africa’s population.
“This growth is inevitable,” says Mr Mahmood. “We are seeing that everything is moving to IP based services.”
He says that there is a “continuous and growing appetite for broadband and data consumption” as demonstrated by consumer behaviour.
People “are becoming more and more accustomed to a higher level of connectivity in terms of speed, bandwidth and the functionalities – basically everything is available everywhere”.
This last point of availability everywhere is the key to the growth of the satellite business. Consumers, no matter how far they live from major city centres, now expect a minimum level of connectivity. However, infrastructure costs in smaller populated rural areas are prohibitive for most operators. Satellite can fill the gap in a more efficient way and “will be playing an important role to enable this in under-served communities”, says Mr Mahmood.
With emerging markets suffering of late amid lower oil prices, a slowing Chinese growth story and a tightening of monetary policy in the United States, investment commitments in all sectors will be under pressure. Brazil, in particular, is expected to have its worst 12 months in about 100 years in 2016.
“Today, recession or not, communication requirements are essential,” says Mr Mahmood. “By nature it is defensive. Of course, you will be impacted by the spending capabilities and it’s important for the satellite industry to have a long-term outlook.”
Typically a satellite is up in space for between 15 to 20 years depending on how well it is operated, he explains.
“You need to be thinking of an idea that will work six years down the road,” he says of a typical satellite timeline from planning to launch, adding that the company’s move into Brazil is based on long-term fundamentals.
The industry prefers to target a geography or a country or region that is handicapped when it comes to basic infrastructure, but with a growing middle class, a leadership with ambition and an abundance of natural resources.
Brazil is the “perfect sweet spot for us”, says Mr Mahmood.
There is a “hunger for connectivity beyond the major cities. There will always be demand” there, he says.
The long-term outlook is one of the unique aspects of the industry. It means that Yahsat is also at a relatively early stage of its life cycle.
“In human terms we are 25 years old, one third of the way. So far so good. We are in the prime of our youth,” says Mr Mahmood.
The company was started 10 years ago and began operations five years ago. Today it is a top 10 global service provider with coverage in more than 140 countries, operations on the ground directly and indirectly in 40 countries. TV services reach up to 25 million viewers and provide 200 channels including an exclusive bundle in North Africa.
It provides connectivity services to schools in Pakistan, healthcare providers and ATMs in Africa, the Afghan central bank, oil and gas companies including Enoc, and polling stations in Afghanistan and Pakistan. New clients include the Bahrain armed forces.
Yahsat is number seven in the world by revenues, which were US$280 million in 2014. It had 34,000 subscribers for its satellite broadband service YahClick at the end of 2014 compared with about 20,000 at the end of 2013.
“There continues to be good growth for the company [even though] it’s been a challenging year [for everyone] globally,” says Mr Mahmood, declining to provide figures for 2015 because its parent Mubadala is yet to report.
Yahsat has offices in Abu Dhabi, Cape Town and Rio De Janeiro and plans to add to its 240 employees this year.
“We will add headcount. To grow the team,” he says, to be able to meet its expected growth, without revealing any numbers.
Mr Mahmood says that while this has all been achieved during a five-year period that Yahsat’s story actually began long before then because the government had for some time already identified the strategic need for a secure and reliable ICT infrastructure.
“The country needed a sovereign secure communication capability to serve the Government and Armed Forces,” he says, “and had an ambition to have a global satellite operator coupled with that.”
The beginnings of a sea change in the satellite industry more than 10 years ago “opened a door” to Yahsat’s origins.
New technologies began to offer the possibility of innovation for the first time in an industry that was focused on providing capacity via a wholesale model and encumbered by the fact that any investments were usually very large in their size.
“Space is typically an industry that you pay a premium for heritage designs and you put a discount on innovation,” says Mr Mahmood. “Why? The stakes are so high and you want to minimise risk.
“The result of this is the industry did not aggressively innovate to reduce costs, to find efficiencies, in terms of cost reduction of producing or launching a satellite. In terms of longevity of the fleet, it lives 15 years but why can’t it live 30 years after refurbishment?”
In the past decade attitudes have started to change, most recently demonstrated by the SpaceX and other projects’ efforts to successfully operate reusable rockets for space launches.
As barriers of entry were lowered, the Yahsat project began to take shape and the first ever customer was commercial, followed by an anchor customer – the UAE Armed Forces.
Its newcomer status allowed Yahsat to be more innovative and it was an early adopter of Ka-band technology, which offers faster and higher-quality services compared with the legacy Ku-band systems.
This commitment to innovation remains and Yahsat is already working on what many expect to be the big opportunity in the coming decade; in-flight connectivity.
Last year Yahsat and Etihad Airways successfully trialled Ka-band connectivity on an Airbus A320.
“In terms of the satellite mobility market the aviation segment was one of the few last year that saw growth. It is an untapped market,” says Mr Mahmood.
“Consumers are getting used to a certain level of customer experience and more and more they are getting impatient to have that on board [planes]. It has a ripple effect,” he says.
The Etihad test is a “major breakthrough”, he says, that moves Yahsat a step closer towards providing in-flight services on a commercial basis. Partnering other entities in the UAE such as Etihad demonstrates Yahsat’s broader role in the development of the country, says Mr Mahmood.
“It is natural [the role we play]. The satellite sector is so new within the country. We will play a larger-than-life, a social role,” he says.
As part of its efforts to develop the industry and the talent needed to make it a success, Yahsat last September launched a Masters Degree programme with Masdar Institute for students offering real-life experience of working in the space sector.
“We are going for a grassroots approach. A sustainable model that will help us build capabilities,” says Mr Mahmood.
“A large part – almost 50 per cent – of the Masters programme is the lab experiment. Students will be designing, fabricating, testing and launching a cube satellite every three years.”
The initiative will take a “realistic long-term approach” over a 15-year horizon with three years per cube sat. “[So] five generations. Generation 1, let’s start realistic, source the hardware from outside, testing within the UAE and outside at [Al Yah 3 partner the US-based] Orbital Science and then launch it. Just hear a blip from it, [that is] success.”
This kind of work with cube satellites is demonstrative of the tectonic shift right now in the sector.
“You have cube sat teams opening up all over the industry. Within the UAE itself we have three teams if not four. Within the US in every university – energy levels are good,” he says.
There is a commercial mindset as well, he says, with the fourth-generation expected to add a commercial component to the cube sat backed by a contract from a UAE entity for some kind of application such as for the weather or oil and gas sector.
Yahsat is also a partner in The National’s Genes in Space contest inviting UAE school students to design experiments that will solve real-life space exploration problems through DNA analysis.
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