Communications satellites in Geostationary orbits have been used to fill this void but they come with their challenges, in recent times, several companies have tried to put communications satellites in Low Earth Orbit to solve some of these challenges. The idea first came into the market about 20 years ago, it failed; however, in recent times, it has found its way back into the market.
OneWeb and Sky & Space Global are some of the companies that considered the use of nanosatellites to provide global connectivity. In March, OneWeb filed for bankruptcy, and earlier this month, Sky & Space Global entered voluntary administration, both largely due to their inability to raise further investment. Both companies wanted to power global communications by a constellation of low-Earth-orbit satellites while providing connectivity to people and businesses everywhere around the world. In achieving this, OneWeb raised about USD 3.4 billion while Sky & Space raised about USD 60 million (early investment from angel investors, VCs, and IPO) out of the USD 160 million needed for their constellation. It was a great promise for improving connectivity in Africa, which explains why Africa was one of their leading markets.
Africa has major connectivity problem, making it challenging for individuals and businesses to always stay connected. The problem ranges from lack of coverage to the fact that accessibility is expensive and lack of infrastructure. Africa has always been a major customer base for every satellite-powered communications company since it has one of the biggest needs. In 2016, Sky and Space Global signed its first service contract with Sat-Space Africa and since then, they have gone to sign up to 50 service agreements with various companies across the world for the distribution of their services to end-users. In 2019, OneWeb signed a major agreement with Talia to deliver broadband connectivity to Africa and the Middle East.
Unfortunately, their failure is affecting Africa. African-based customers like Sat-Space Africa, BeepTool, MTN, and others that were looking forward to Sky & Space Global and OneWeb services being commercially available by 2020/2021 are now disappointed, causing a ripple effect on their performance and they are now exploring other options. For example, Sat-Space Africa was expecting a potential annual revenue of USD 500,000 from their agreement with Sky and Space Global (with a potential to grow to over USD 10 million per annum).
Aside from the purchase of services from these companies, the Government of Rwanda participated in OneWeb’s USD 1.25 billion investment round in 2018, alongside SoftBank Group Corp., Grupo Salinas and Qualcomm Technologies Inc. The Rwandan government was going to capitalize on OneWeb’s constellation to improve connectivity in rural areas, one of the earlier satellites launched was already dedicated for this purpose. Experts have argued that even if both companies were able to raise further investment to complete their constellations, it was only a matter of time before they eventually reach a dead-end.
According to the 2019 edition of the African Space Industry Annual Report, satellite communications currently generates about USD 6.54 billion in Africa annually with the majority of it coming from BSS, other contributors include FSS and MSS. Leading Africa-based communications satellite companies includes NileSat, NigComSat and AlComSat, while the foreign players include Eutelsat, Intelsat, SES, Telesat, Avanti, etc; all mostly operating GEO satellites.
Companies operating in this space have raised several billions of dollars in the past few years, with the promise of faster and cheaper connectivity. However, while most are focused on bringing down the cost of accessibility, not much progress has been done in reducing the cost of infrastructure. The current challenge with GEO connectivity in Africa includes cost, speed, and accessibility, challenges LEO connectivity promises to solve. A full set up of GEO user terminal cost about USD 400 – USD 2,000 providing a speed up to 20Mbps. For example, one of the leading GEO broadband sellers on the continent promises upload speed of 2mbps and download speed of 6mbps at a monthly subscription of USD 1,000. Expensive alternative like this will unfortunately not solve connectivity problems in Africa.
For LEO connectivity to work, companies need to focus on building affordable user terminals. While LEO broadband services companies are looking at improving connectivity speed, it is very important to also focus on largely reducing the overall cost of the infrastructure and subscription. Whichever company is going to solve connectivity problem in Africa must be ready to sell terminals for less than USD 100 with considerable subscription rate that could compete with what other internet service companies which depend on fibre connectivity are selling across the continent.
Africa has a young population and is seeing the fastest growth rate of internet penetration. Between 2017 and 2018 for example, internet users grew by 20% in Africa. According to the GSMA report, the average affordability of 1GB of data is about 8.6% of monthly income in 2017 and 6.8% of monthly income in 2018 and according to consumers, affordability is the leading barrier to mobile internet adoption.
Communications need is growing in Africa, for Satellite Television services, including Mobile and Fixed Satellite Services, and satellite communications can contribute immensely to solving some of these needs. However, understanding the African market is very key to the success of any satellite communications company on the continent.