2013 CSUF Boeing Case Competition ( Titan Consulting Proposal )

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The following proposal will be a strategic plan for Boeing to purchase a block buy of satellites that addresses the anticipated current and future conditions the company will face in the satellite …

The following proposal will be a strategic plan for Boeing to purchase a block buy of satellites that addresses the anticipated current and future conditions the company will face in the satellite communications market. This high level business strategy will also ensure the company remains the premier leader in the satellite industry.

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  • 1. “Making a difference, one transponder at a time” - Titan Consulting 2013 Boeing Case Study Competition SAGAR PATEL - GARY AU - TRINH PHAM - BAO LUONG ROHULLAH LATIF
  • 2. SataLink Proposal Table of Content I. Market Research Report:…………………………………………Page 4 1. 2. 3. 4. 5. 6. 7. 8. II. Satellite Regulation The Satellite Industry In Context 2012 Satellite Industry Revenue Satellite Industry Segments Surveyed Swot Analysis Competitors Current/ State of SataLink Demand Factors Possible Strategies:.................................................Page 10 1. Business Strategies: a. Option 1: Short-term (2013-2022) b. Option 2: Mid-term (2013-2025) c. Option 3: Long-term (2013-2030) 2. Long-Term Debt Financing 3. Comparing The Options 4. Solution ( Option 3: Long-term ) 5. Block Buy Schedule 6. Old Debt and New Debt 7. Insurance Satellite 8. The Net Present Value III. Risk Management:...................................................Page 17 1. 2. 3. 4. IV. Operation Insurance Technology Space Debris and Solar Storm Merger Proposal:…………………………….……………………..Page 19 2
  • 3. SataLink Proposal Objective: The following proposal will be a strategic plan for SataLink to purchase a block buy of satellites that addresses the anticipated current and future conditions the company will face in the satellite communications market. This high level business strategy will also ensure SataLink remains the premier leader in the satellite industry. 3
  • 4. SataLink Proposal I. Market Research Report 1. Satellite Regulation The Satellite Industry Association (SIA) was formed in 1995 by several major US satellite companies as a forum to discuss issues and develop industry-wide positions on shared business, regulatory and policy interests SIA has established active working groups involved with a host of policy issues including:  Regulatory issues (satellite and regulatory policy);  Government services, public safety, export control policy, International Trade issues. licensing, spectrum allocation SIA is now a recognized focal point for the U.S. satellite industry in Washington, D.C., representing and advocating industry positions with key policy makers on Capitol Hill and with the White House, Federal Communication Commission and most Executive Branch departments and agencies. 2. The Satellite Industry in Context: The satellite industry is a subset of both the telecommunications and space industries. Satellite industry revenues represent 61% of space industry revenues. Satellite Industry $177.3 Billion Space Industry $289.8 Billion Overall Global T l e c o mm u n ic a t i on s e I nd u s t r y $4. 23 Tr i lli o n 4
  • 5. SataLink Proposal 3. 2012 Satellite Industry Trend Summary 4. Satellite Industry Segments Surveyed Satellite Services Satellite Television Satellite Radio Satellite Broadband Fixed Satellite Services • Transponder agreements • Managed Network services Mobile Satellite Services • Mobile Data • Mobile Voice Remote Sensing/Imaging Services 5
  • 6. SataLink Proposal Spaceflight Management Services Satellite Manufacturing • Satellite Manufacturing • Parts, Components, and Subsystems Launch Industry • Launch Services • Launch Vehicles Ground Equipment • Network Equipment Gateways Control Stations Very Small Aperture Terminals (VSATs) • Consumer Equipment Direct Broadcast Satellite (DBS) Dishes Mobile satellite terminals (including satellite phones) Digital Audio Radio Service (DARS) Equipment Global Positioning System (GPS) Stand-alone Hardware 6
  • 7. SataLink Proposal 5. Swot Analysis Strength •Trustful and Superior Partner with Boeing •Positive cash flow •Rapidly decreasing financial risks •Top 5 company in the satellites services Weakness •Segment limited ( fix satellites services) •Can not issue a new stock •$3.25B debt •Huge capital investment Opportunities •Extra orbital slots that lead to us have more room to grow •Renting satellites •Strategic alliance, partnership •Increase market demand •Innovation in technology Threats •Competitive Market •Need of a Global Network for Customer Attraction •Volatility in long-term Demand 6. Competitors Europe: Intelsat S.A. (Luxembourg) Eutelsat (France) GlobeCast (France) Hispasat (Spain) Arqiva Broadcast & Media (UK) Americas: Telesat (Canada) Harris CapRock (USA) EchoStar Satellite Services (USA) Asia SingTel Satellite (Singapore) 7
  • 8. SataLink Proposal 7. Current/ Future of Satalink 8. Demand Factors: Worldwide Satellite Services revenue expanded at 6% in 2011, slightly slower than the 9% growth experienced in 2010 . Consumer Satellite Television services (DBS/DTH), are comprised of more than 80% of all Satellite Services revenues with a posted growth of 7%. Globally, 7.3 million satellite paying TV subscribers were added in 2010—mainly in emerging Asian markets—bringing the world total to about 154 million. The number of U.S. satellite paying TV subscribers grew 5%,(37 million) maintaining their one-quarter share of the global subscriber base. Satellite Radio (DARS) revenues also grew by 7% in 2011, exceeding 3 billion for the first time. Nearly 1.7 million subscribers were added, an 8% increase. Satellite Radio remains primarily a North American market. 8
  • 9. SataLink Proposal Satellite Broadband service revenues increased from $1.1 billion in 2010 to$1.2 billion in 2011. The U.S. continues to account for about 70% of global satellite broadband revenues Global Transponder Agreement revenues increased from $11.1 billion in 2010 to $11.3 billion in 2011, a 2% growth rate. Revenue growth was evident across companies serving different regions . Managed Services revenues grew 9%, from $3.9 billion to $4.3 billion. Between 2006 and 2011, Managed Services revenues nearly doubled. Mobile Satellite Services revenues grew by 4%, from $2.3 billion in 2010 to $2.4 billion in 2011 Revenues from remote sensing imagery products and services grew about 10%, from $1 billion in 2010 to $1.1 billion in 2011 Demand Reference Source: Futron Product Cycle • America, Europe, Asia: Developed Market • Africa/Middle East: Developing Market • Africa/Middle East Growth: 6 -7 % 9
  • 10. SataLink Proposal II. Business Strategies: 1. Three proposed plans  Short-Term (2013-2022)  Medium-Term (2013-2025)  Long-Term (2013-2030) • How we analyzed:  Region 1, Region 2, Region 3 Option 1: Short Term (2013-2022) • 7 Satellites – Replacing 10 Satellites  800M: 5  1000L: 2 10
  • 11. SataLink Proposal • • • •  3 Spare Orbit Slots Average Transponder Fill Rate: 87.32%  71.54%-100.00% NPV: $2345.3 M Pays off Old Debt in 10 years (2013 -2022)  $325M/year Positive Cash Flow after Debt Retirement Option 2: Medium Term (2013-2025) • • • • • 6 Satellites – Replacing 10 Satellites  800M: 2  1000L: 4  +1 1000L – Spare satellite  4 Spare Orbital Slots Average Transponder Fill Rate: 85.39%  64.97%-100.00%  NPV: $3963 M Pays off old debt in 10 years (2013 -2022)  New Debt: $680 M  40%from 2014-2017 – paid off during 2019-2022 Positive Cash Flow after Debt Retirement Additional Expense: Spare satellite + storage Option 3: Long Term (2013-2030) • 11 Satellites – Replacing 15 Satellites  800M: 4  1000L: 7  +1 1000L – Spare satellite  4 Spare Orbital Slots • Average Transponder Fill Rate: 81.65%  51.67%-99.80%  NPV: $6323 M • Pays off debt in 10 years (2013 -2022)  New Debt: $575 M  40% from 2014-2017 – paid off during 2019-2022 • Positive Cash Flow after Debt Retirement • Additional Expense: Spare satellite + storage 11
  • 12. SataLink Proposal 2. Long-term Debt Financing Debt-to-Interest 14.00% 12.00% $3,000,000,000.00 10.00% Interest Rate $3,500,000,000.00 $2,500,000,000.00 8.00% $2,000,000,000.00 6.00% $1,500,000,000.00 4.00% $1,000,000,000.00 2.00% $500,000,000.00 0.00% $Debt Value Year US Prime Rate Total Interest Total Debt Outstanding 12
  • 13. SataLink Proposal 2. Comparing the Options Net Present Value Comparison $7,000.0 $6,323.0 Dollars ( Millions) $6,000.0 $5,000.0 $3,965.0 $4,000.0 $3,000.0 $2,345.3 $2,000.0 $1,000.0 $234.5 $304.8 $351.3 Option 1 (2013-2022) Option 2 (2013-2025) Option 3 (2013-2030) $Options Options Fill Rate 120.00% 100.00% 80.00% Fill Rate 60.00% Average 40.00% 20.00% 0.00% Option 1 Option 2 Option 3 Options Available 13
  • 14. SataLink Proposal 4. Solution: Option 3 (2013-2030) • • • • • 11 Satellites – Replacing 15 Satellites  800M: 4  1000L: 7  +1 1000L – Spare satellite  4 Spare Orbital Slots Average Transponder Fill Rate: 81.65%  51.67%-99.80%  NPV: $6323 M Pays off debt in 10 years (2013-2022)  New Debt: $575 M  40% from 2014-2017 – paid off during 2019-2022 Positive Cash Flow after Debt Retirement Additional Expense: Spare satellite + storage 5.Block Buy Schedule Fill Rate Overview 14
  • 15. SataLink Proposal 6. Old and New Debt • • • Old Debt: $3.25 Billion  10 year payment plan: $325 M/Y Problem  2014-2017: Negative Cash Flow after Debt Retirement Solution: New Debt - $575 M  Financing 40% of SC/LV  Creates positive flow after debt retirement  Can be paid off in 4 years (2019-2022)  $143.75 M/Y 7. Insurance Satellite 10% Launch Failure Risk and Operational Risk  1000L in Europe ($2.2M/TS) = Decrease of $201.2 M Operating Cash Flow per year  Fail without Insurance Satellite: $603.6 + $120 = $723.6 M  Fail with Insurance Satellite: $201.2 +$120 = $321.2M 15
  • 16. SataLink Proposal Additional In-Orbit Insurance  18-22% of satellite costs (Source: Satellite Evolution Group)  1st Bulk Buy= $1,850 M  Insurance cost: $370 M per year 8. Net Present Value III. RISKS MANAGEMENT 16
  • 17. SataLink Proposal 4 Risks:     Operation Technology Insurance Space debris and solar storms 1. Operation risks: 17
  • 18. SataLink Proposal 2. Insurance: Issue • Costs of insurance is more than benefits Solution • Purchase extra satellites instead of insurance  Shorten the lead time to 1 year  Decrease customer dissatisfaction  Cost  Resell Opportunity  In house > Outsourcing 3. Technology • Technological homogeny of satellites. • Rapid development  Longer development cycles, total systems costs increase.  When the technological advances take place, they can not be pursued because design is completed long before mission is scheduled for launch. 4. Space debris and solar storms • Increase in heavy satellites ( 3.4 tons ) , lightsats, minisats that weight few hundred kilograms on the other => They cause danger with respects debris.  Increase in transmission capacity . • Impact probabilities for satellites to problem of space • Assessment of damage cause by impact from space debris.  ( 8 Impacts from LEO since 1991) • Average risk of collision at GEO is 1 in every 135 years. • Active satellites risk is reported is 1 in every 155 years. 18
  • 19. SataLink Proposal MERGER PROPOSAL Several Space firms have merged in order to gain a competitive advantage and provide not just communication services but also satellite hardware, launch services, and financial services. (E.G. Intelsat and Eutelsat) 19
  • 20. SataLink Proposal REFERENCES 1. Satellite Industry Association, State of the Industry Report(prepared by Corporation)(Washington, D.C., June 2011). Satellite Futron 2. GAO, Telecommunication : Market Development in the Global Satellite Services Industry and the Implementation of the ORBIT Act, GAO -05-550T( Washington, D.C. Apr.14,2005). 3. FCC, Second Annual Report & Analysis of Competitive Market Conditions with respect to Domestic and International Satellites Communication Services (Washington, D.C. October 2008). 4. Federal Aviation Administration, 2011 Commercial Space Transportation Forecast (Washington, D.C. May 2011). 5. Chartrand, Mark R (2003) Satellite Communications for nonspecialist. Bellingham, WA: SPIERress.p.31.ISBN978 0-8194-7185-9. 6. Corporation, F.. N.p.. Web. 2 Oct 2013.<http://www.sia.org>. 7. "SATELLITE SENTINEL PROJECT" Harvard University . 5 Oct 2013 <http://hhi.harvard.edu/programs-andresearch/crisis-mapping-and-early-warning/satellitesentinel-project>. 8. Magan, Veronica . "Newsat to Sign $5 M of New Teleport Contracts in Early 2014" (October 16, 2013) October , 16 2013 <http://www.satellitetoday.com/telecom/2013/07/29/airforce-report-outlines-threats-to-satellite-and-aerospaceindustries/>. 20
  • 21. SataLink Proposal 9. "Covering Satellite Risks" Allianz Global Corporate . <http://www.agcs.allianz.com/insights/expert -riskarticles/covering-space-risks/>. 10.STEPHEN CLARK. "Covering Satellite Risks" <http://www.spaceflightnow.com/news/n1109/09uarsentry/>. 11. "Space Environment and Satellite Systems " Standford Univeristy. http://sess.stanford.edu 21
  • 22. SataLink Proposal If there are an y questions ,please contact the Titan Consulting Team: Rohullah Latif Rohullahlatif@gmail.com Gary Au Garyau@csu.fullerton.edu Trinh pham Spham0168@csu.fullerton.edu Bao Luong Baoluong2011@csu.fullerton.edu Sagar Patel Sagarcpatel@cs u.fullerton.edu Thank You! 22