NourSat, the New Satellite in the East
By Chris Forrester, TBS Contributing Editor

Omar Shoter

There's a new satellite beaming towards the Middle East: "NourSat" (meaning "Light" Sat) is part-owned (30 percent) by the giant Mawared Group, the same company that has financed Orbit this past 10 years. NourSat is the name given to a handful of beams on a new Intelsat satellite operating from 1 degree West, just a few degrees of arc away from NileSat at 7 degrees West. NourSat is managed by Omar Shoter, well-known for his long history with ArabSat.

"We have exclusive rights for a DTH service from the Intelsat satellite over the Mideast and we have committed to lease eight 36 MHz transponders in the Mideast beam and six in the European beam on the same satellite," Shoter says.

According to Shoter, NourSat is "about to finalise an agreement for the follow-on satellite with Intelsat. We have the right to access Intelsat available capacities in the region and globally to sub-lease it to the regional TV and Telecom operators and customers." He stresses that discussions are currently on going with "other satellite operators" to provide satellite communication services, other than DTH services, which are planned to be launched "from other orbital slots." Additionally, Intelsat and NourSat are looking together for interim solutions to "augment the (currently) available capacity at 1 degree W. in order to meet the expected demand in preparations for the follow-on satellite."

Orbit says it is using NourSat for a duplication of its existing ArabSat services, although it has no plans to quit ArabSat as yet. Orbit are also using frequencies on the same Intelsat satellite for its two-way Internet-via satellite service, which beams all the wonders of the World Wide Web into the Middle East without a need for a telephone link. Orbit's TV service went "live" back in September and the Internet system has been operational since mid-summer.

NourSat's Shoter says what the operation wants is for the Middle East's three pay-TV operators to come together onto the same satellite: Orbit's. Which is why, Shoter says, Orbit has only taken 30 percent of NourSat's equity. The rest is open to the Kipco/Viacom Showtime and Sheikh Saleh Kamel's Arab Radio & Television. So far, there has been no rush to join the club.

Michael Johnston, Orbit's former CFO and now business development director, explains the overall strategy, saying that everyone recognises the need for greater co-operation and perhaps consolidation within the pay-TV industry.

"In the past few years the need to achieve greater harmony has come about because of the free-to-airs," Johnston says. "They have a different commercial agenda, usually fighting one another for a decreasing share of the ad-sales pie. They put huge pressures on content costs, especially in terms of sports. In comparison the pay-platforms have been much more sensible about their programming costs, and are behaving much more rationally. Broadcasters from Beirut or Dubai can have a huge hit show, like Star Academy or Millionaire, which will give them good ratings and better revenues for the spots in that particular show. But an hour later or earlier and they're earning next to nothing. There is no commercial model for new free-to-air entrants. They are all eating one another alive, and there are few-if any-European investors present."

Johnston says that all of these free-to-air companies are totally governed by what makes sense commercially and strategically. "They'll want to see us deliver an audience, and what sort of control can we give them over their own destiny? Can a Hot Spot for all broadcasters make sense? Our view is that it can. But it is difficult to predict a time line."

NileSat building

The Middle East dilemma is wrapped up in some 240 digital TV channels on NileSat alone, the bulk of them free-to-air. They provide enough viewer interest to stymie any real progress in the three rival pay-platforms, with the possible exception of top-rated sports coverage. Orbit's theory is that NourSat provides a unique opportunity for the rival pay-platforms to come together, probably keeping their own branding and sales efforts, but to at least provide the viewer with a one-stop shop to buy as many of the pay-channels that they want. Arab Radio & Television (ART) and Showtime already operate a single card system (using Irdeto encryption) and viewers can pick and choose from one another's line-up. ART and Showtime both use NileSat.

"We might all agree that sanity needs to be brought to the industry by some restructuring method or other," Johnston says. "And this need for restructuring goes way beyond the pay platforms themselves, important as they are. Having everyone in one location would be a massive step forward."

Not so, implies Saleh Hamza, chief engineer at NileSat. Hamza is right, at least about one fact. All of the channels are on NileSat, except those belonging to Orbit. Indeed, there's little doubt that NileSat is the operational 'hot spot' for the region. Hamza knows that his capacity is tight. In essence, he has just four transponders free - and they are only available because of some basic housekeeping where non-essential (that is non-Direct-to-home) broadcasters have been shifted out of the way. Hamza wants NileSat 103, a third satellite, to be up and broadcasting within a year from now. The problem is one of finance: raising the $150m-$200m to build and launch a large satellite. NileSat is considering joint-venture partnerships, so-called "soft loans," indeed, any mechanism to get the craft built and into operation.

"We have spoken to many people," Hamza says. "It is still at this stage in discussions. We have met with Intelsat, and have another meeting scheduled. We have met with SES in Luxembourg, and we have frequent meetings with Eutelsat. We've even had friendly meetings with New Skies, but nothing beyond that. We are hopeful that something might emerge, but it is too early to be more specific than this. However, we see real progress being made within the next year. It has to happen because we are running out of capacity."

As Hamza explains, "We could have a relaxed payment scheme from the satellite manufacturer, and to have part-finance from the banking sector that's guaranteed by one of our export/import banks. These are all options, but to be frank the way NileSat has developed is well beyond our own forecasts and all the initial feasibility studies. The reason is that any loan we enter into has a fixed repayment period, of around 7 years. Consequently to enter into another loan needs careful study as to how the market is going to develop."

Hamza's main rival is ArabSat, itself on an expansion drive. Over the next 18 months or so, ArabSat will take delivery of two giant satellites. The Riyadh-based operator has already commenced an aggressive marketing campaign to the industry in readiness for the first new craft, ArabSat 4A, which is scheduled to arrive later in 2005. Craig Moll, formerly of PanAmSat, is a consultant to ArabSat, and admits the satellite operator was "too sleepy." "The new look, and marketing effort, is but the first step, and we have to translate this into effort on fresh customer focus. We want to see a huge leap forward in terms of our commercial appeal. The only way we can succeed in this to prove it via improved customer service and action."

Moll reminds us of ArabSat's claimed strengths: "We have more customers, more eyeballs viewing us, and we are the only full-service company operating in the region. We have a good story to tell. We're waking up; we know we are in a fight. We were born in a more gentle time as a means to share resources and costs amongst our member states. Today's game is very different and we need to respond to today's conditions."

Hamza politely disagrees: "We are not worried about ArabSat. We know ArabSat has two leased satellites today to help cover for their own problems. The first task, we expect, will be to use the new satellite to replace those temporary craft. We also know that our clients are coming to NileSat because of our mass-market coverage. Most NileSat viewers also have access to ArabSat, but it seems they watch us most of the time."

Hamza is right, and 240 channels prove it. Not only the 240 already on the existing pair of satellites but the 10 million homes estimated by Dubai's PARC (Pan Arab Research Centre) to be viewing. And the long waiting-list of would be broadcasters wanting to get on air.

"In January we start the first-ever private TV channel from Tunisia," says Hamza. "We started the first private Kuwaiti TV channel in October, and this is a new trend. We are investing more cash here in Cairo in playout, and building new offices and facilities here to accommodate these new ideas."

But there's a glittering prize awaiting the winner of this satellite battlefield: high-definition television. America has it, as does Australia, Japan, South Korea and Brazil. China will make a massive HDTV introduction starting in 2006, and climaxing in the Beijing Olympics. And now Europe has caught the HDTV bug, starting with Germany and France later in 2005, and the UK in early 2006. Scandinavia and some Belgian and Dutch cable viewers, and European satellite viewers, can already watch HDTV transmissions. And few doubt the Middle East will be next.

Hamza points out, "As we saw at this year's IBC there are many tests and trials taking place with the aim to reduce bandwidth for HDTV, and these might also have a greater impact by 2008, so much so that by 2008 I am sure there will be more than one [Middle East] HDTV channel on air. One of our clients today has doubled the bandwidth, using MPEG2, so that the ordinary broadcast images are better. This is the thinking, and I see this switching to higher bandwidths to be commonplace for most of our major clients over time. The new satellite should easily be filled, from this trend alone. Add in the growth from these new private TV channels and I think we will fill it. The drivers in HDTV will be sport, and new and restored films."

"Public broadcasters will be busy with two developments, and top of their list is converting to digital terrestrial TV, then HDTV. They might mix both technologies at the same time, and each country will be searching for the right formula. Most Middle East countries have yet to create a digital terrestrial system, so they might ask why bother with today's MPEG2 when MPEG4 is just around the corner? Public broadcasters have to meet this challenge," Hamza added.

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