SAS 0.00% 1.6¢ sky and space company ltd

Much of the focus so far has been on the technical success of...

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    Much of the focus so far has been on the technical success of the Three Diamonds and the regulatory approvals that have been obtained. There has been far less focus on the commercial barriers, both those that have been overcome and those that remain. It is the latter that make it very difficult to know what commercial success can be achieved, and possibly also has an effect on the options for raising capital.
    First though, the technical successes. It is regularly stated, both by posts on Hot Copper, and by the management of Space and Science Global that SAS technology is highly disruptive to existing technology
    e.g. (from Sky and Space Global Presentation 27/03/2017)
    Targets the global satellite/telcoms market through the use of very sophisticated and lower cost nano-satellite technology “highly disruptive to the existing conventional satellite platforms.

    Up to 80% savings vs conventional satellites via a network of low cost, nano-satellites with reduced capital expenditure, launch and operating costs

    Set to provide affordable communication solutions -affordable data, voice and instant messaging services to over 4 billion people (Equatorial region).

    The obvious question that arises is the relevance of the lower capital costs of SAS nano-satellites. Surely it is CAPITAL COST PER UNIT OF OUTPUT that is relevant. The latest Iridium satellites, of which 40 of the constellation of 66 that will provide global coverage in polar orbits, will have been launched by the end of 2017, costing US$ 3 billion including 9 in-orbit spares, launch costs and upgrade of 5 ground stations. The Pearl Equatorial system of 200 satellites will cost US$ 150 million. To equate on capital cost per unit of output, the Iridium System would have to have 20 times the output of the Pearls. I am not aware of any figures enabling this comparison, but given that the latest Iridium provides data as well as speech and is doing so globally, this seems highly likely.

    If this is the case, then Iridium should be able to segment their market, so that they offer a small part of their capacity to the markets targeted by SAS at a competitive cost.


    Leaving aside the question of 'destructive competition' by Iridium, it is far from clear how SAS will achieve the sales that they (and we) hope for. The equatorial belt that they are targeting, far from having 4 billion inhabitants, has more like 1.7 billion, made up of sub-Saharan Africa 950 million, Southern part of Central America and Northern part of South America 300 million, South India / Indonesia / Philippines 470 million. In the case of Africa, 40% of the 950 million are under working age, and of those of working age, 73% earn less than US$ 2 per day and 50% less than US$ 1.25 per day. If we exclude children and those earning less that $2 per day, we have 154 million potential customers. However, the mobile phone market in Africa has been growing very fast : https://www.theguardian.com/world/2016/aug/08/africa-calling-mobile-phone-broadband-revolution-transform-democracies
    Apparently there are more mobile phones than adults in most African Countries. For example in Kenya there are 38 million in a country of population 45 million.
    This may go some way to explain why the revenue figures estimated by Sat-Space Africa (which has pan African operations) are relatively low - up to US$ 35 million per annum once the full SAS constellation is operational: See https://hotcopper.com.au/posts/26719122/single maxi9181 maxi1981 (from press release issued by Space and Science Global 24/08/2017). Of this presumably not more than half (i.e. US$ 17.5 million) would accrue to SAS. Compare this figure to the US$ 131 million for SAS 2020 used in the APP securities model published recently.

    My overall concern is that the market defined by SAS is diffuse, small and difficult to reach or estimate.

    Personally, I would have thought that SAS should be providing global coverage using polar orbits. The cost (apparently) would not be much different, and the equatorial market would still be covered. The great difference is that so would the European, American, South East Asian and Australasian Markets. In relatively hilly countries, a mobile phone that could connect with the SAS system would be a boon, not only for those living in them, but also for those visiting them. For more extreme holiday environments, a commercial link up with Garmin would be great. These markets would not require low income consumers.
 
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