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5G networks

China's largest satellite operator feels heat from 5G competition

Threat to TV pushes China Satcom toward maritime Wi-Fi and 'smart shipping'

HONG KONG -- China's largest civilian satellite operator is bracing for a serious blow from the arrival of 5G mobile networks, which are expected to eat into demand for lucrative broadcasting services.

Even though widespread deployment of the next-generation networks may be years away, Beijing-based China Satellite Communications Corp. is already stepping up efforts to explore maritime services as an alternative revenue source. Its latest plan involves connecting fishing vessels with onshore buyers through satellite-enabled live-streaming, a move aimed at cultivating markets that ground-based 5G networks cannot access.

"The arrival of 5G is bad news for satellite companies. We have no choice but to diversify our business," said an executive who works for China Satcom and who asked to not be identified as he is not authorized to speak with media.

The executive said that at least 60% of his company's revenue comes from television broadcasting, a sector that has been under pressure from streaming platforms such as Netflix. The upcoming 5G rollout will only make things worse. 

"Millennials prefer watching TV online, and the only thing that has held them back is a slow internet connection," the executive said. "But that problem will be solved once 5G networks are in place. As a result, demand for our satellite television service will peak, if not wind down," he said.

The 5G era is no longer a distant future. In April, U.S.-based telecom company Verizon and three companies in South Korea separately kicked off the world's first 5G services almost simultaneously, with both claiming the title of first.

Telecom companies in China have been more cautious about the introduction of 5G, due to concerns over the huge investment associated with upgrading infrastructure, but the executive of China Satcom said that its arrival is inevitable as the network is expected to pave the way for autonomous driving and other cutting-edge technologies.

"Our goal is to figure out a new growth model before the 5G completely takes off," he said.

One such growth opportunity lies in using satellites to connect devices to the internet, a market worth $750 million last year, according to global consultancy Counterpoint Research.

"With the world turning to 5G, I think satellites will play a role as part of a hybrid network with 5G to connect offices, factories, robots, internet of things sensor devices, as well as aircraft, vehicles and ships," said Gareth Owen, a space expert at Counterpoint Research.

China Satcom currently serves more than 5,000 ships, including the fleet of Hong Kong-listed logistics giant China Ocean Shipping Company, the executive said. Boat operators have long made use of satellite communications, and Chinese companies are no exception. Where they once purchased satellite-based phone services for their fleets, they now buy satellite-based Wifi services in hopes of reducing turnover rates among the crew members and to tap into new revenue generators, such as onboard entertainment for cruise passengers.

There is also an opportunity in so-called smart shipping. Last month, China Satcom inked a deal with two fishing vessels that aim to sell their goods while they are still at sea. It works this way: As fishermen are hauling in their catches, buyers on land watch the process in real-time with the help of onboard cameras and satellites. With one click, buyers can place their orders and have their purchases locked in dedicated containers on the ship.

While the collaboration is still in its infancy -- the two fishing vessels pay roughly 6,000 yuan ($890) per month testing out onboard Wifi -- the executive painted a rosy picture of its market outlook.

"China's middle class is willing to pay more for high-quality food, but the question is how to prove the origin of your supply," he said, adding that live-streaming, combined with smart containers that can be monitored by buyers via a mobile app, is expected to help ease the country's persistent worries over food safety.

"We believe the use of satellites and internet-connected devices will become the next big thing in the shipping industry," he said.

Shipping companies are also embracing a satellite-empowered future. Maersk, a leading Danish logistics company, launched a monitoring program in 2015 to track pharmaceuticals and other high-value refrigerated goods by fitting them with sensors that communicate by satellite. South Korean shipbuilder Samsung Heavy Industries, for its part, has teamed up with British satellite operator Inmarsat to install sensors on board for remote machinery diagnostics and equipment monitoring.

Inmarsat last year logged about $553 million, or 42% of its total revenue, from maritime services.

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