Scotland has been pinpointed as a key target growth market for Satellite Solutions Worldwide, the UK’s biggest satellite broadband provider, says founder and chief executive, Andrew Walwyn. Not altogether surprising for the fast-growing AIM-listed company that trades in the UK under the brand Europasat, given Scotland’s high proportion of rural, hilly and remote areas where fibre broadband is never going to make it to every house.
Walwyn’s group already has a satellite broadband market share in Scotland and the wider UK of comfortably more than 70 per cent. But he is eyeing the 120,000 or so (5 per cent) of Scottish households that will miss out on Holyrood’s Digital Scotland Superfast Broadband (DSSB) project.
According to the Office for National Statistics, internet access in Scotland was at 87 per cent of households in 2016, and the DSSB project aspires to deliver superfast fibre-based broadband to 95 per cent of Scottish premises by March 2018.
“Especially in Scotland, outside the cities it is impossible to do fibre to the home. And anyway, do people really want their pavements dug up and all the disruption,” Walwyn says. “And yet those 100,000 or so homes in Scotland have very poor internet speeds.
“Currently it costs £300 to £500 to connect a house to satellite broadband. And it is getting cheaper because the introduction of government grants in many countries is increasing take-up rates. This can only help in areas like the Highlands and Islands where average income is not that high.”
Walwyn, who is proud that he was in on the ground floor of the major telecoms success story that was (now Sir) Charles Dunstone’s Carphone Warehouse, founded Satellite Solutions Worldwide in 2008. The germ of the idea for the business came when after living and working in the mobile phones industry in Glasgow for five years until he was 30 years old, he moved to Oxfordshire, “where I could not get broadband and a friend of mine was investigating satellite broadband”.
Walwyn said he found he had a flair for marketing and, cutting a long story short, Satellite Solutions floated on AIM in May 2015 at a share price of 4.5p. It is currently trading up two-thirds on that at 7p.
Armed with AIM-raised funds (about £24 million raised in three tranches including flotation), the past two years have been a step‑change for the company. It had been the second biggest player in satellite broadband in the UK, but became number one when it bought its bigger rival Avonline last year.
Walwyn also swooped in 2016 for Breiband in Norway and Skymesh in Australia, countries sharing with Scotland the characteristics of extensive isolated areas and with strong potential for subscriber growth.
Satellite Solutions followed that in July this year with the acquisition of Quickline Communications in the UK, which broke new ground for the group in this country by extending its product range here beyond satellite broadband into fixed wireless broadband.
It already offers fixed wireless broadband services in Australia and Norway, and while renting space on satellites owned by other companies and bringing fast internet to homeowners remains its core business, it is clear the boss sees the diversification as ensuring the business does not become a one-trick pony in a fast-moving world. It means that in some small UK hamlets, a mast can replace an eye-in-the-sky for residential broadband. “We are not tied to any one product,” Walwyn says.
Another thing he certainly does not want to be tied to is owning the satellites themselves. He says the expense and gamble on the technology is prohibitive.
“It costs an awful lot of money to put a satellite up. If you get it wrong it can be very expensive. Two satellites the Australians have put up [for broadband] have cost them AU$1 billion. It takes about three years to put up a satellite. They have to guess what technology will be like in three years’ time. That’s very difficult,” Walwyn says. Private billionaires are getting in on the act, he says, wanting to put up their own satellites for the possible commercial potential, but he says “some will succeed, some won’t”.
But what may be risky for the billionaires and public money in some cases is definitely positive for Satellite Solutions and its growth ambitions, he says. “The data will be cheaper. It means we can offer the end-user more. It is a win-win for us and the customer.”
While not currently envisaging any further strategic acquisitions after the recent burst of activity, Walwyn is open to bolt-ons that add, say, 1,000 customers when they live in an area where Satellite Solutions has an existing hub. The business currently bills customers in 30 countries, including the UK, the Republic of Ireland, France and Poland. But the boss has identified obvious gaps in its footprint, notably including Germany, Italy and Spain.
However, while he says he would not be averse to coming back to AIM to raise more financial firepower if the right strategic acquisition opportunity presented itself, “I don’t see anything happening of any real scale in the short term”.
Just as well, then, that Satellite Solutions has plenty to be getting on with. Walwyn says the Australian government is targeting 250,000 households on satellite broadband and 600,000 on fixed wireless broadband by 2022. “That is a massive opportunity for us,” he says.
Meanwhile, although the Norwegian government has awarded £500,000 in grants to date for fixed wireless communities deployment, Walwyn believes that internet transmission and satellite broadband will both go ahead together in that country. “Fixed wireless does not work in hilly areas. You try to put up a tower and the sheer topography is against it,” he says.
On the positive side, Satellite Solutions is benefiting from what it calls an “exponential increase” in the efficiency of satellite and ground technology, which means a significant improvement in speed.
The company has download speeds of up to 30 mbps, which falls into the superfast category. It has 4,000 private and business customers using its satellite broadband services in Scotland, but the wider prize is those 1.4 million UK households who have speeds of less than 10mbps.
A less well known fact is the sort of commercial yet quasi-public service work that Satellite Solutions does. One example was the Scottish independence referendum. “The eyes of the world were on Scotland,” Walwyn said. “All the news channels were sending reporters to remote places they would not normally go. They did not have enough vans and dishes, but we have a small portable kit they can use.”
Or there are the police anti-terrorism groups, who have their own private broadband network, that Satellite Solutions helps out, or windfarms where all the monitoring is done by satellite broadband. The company also provides banks with internet connections so that they can pitch up with vans “in the middle of nowhere”, often after physical branch closures.
Walwyn believes the company is going in the right direction, with underlying earnings in its most recent interim results to May 2017 of £2m – compared with a loss of about £500,000 in the same period of 2016. Profit margins at that level are 35 per cent. By comparison, headline losses in the latest period were £3.9m, up from a loss of £1.9m a year previous.
And the future? Bright, says Walwyn. “Everyone nowadays is using the internet to do everything. It is driving growth as everyone has to have fast connections.”