TBY talks to Rashad Nabiyev, Chairman & CEO of Azercosmos, on the country’s space program, the profitability of Azerspace-1, and plans for future ventures.
THE BUSINESS YEAR What did 2013 mean for Azercosmos and Azerbaijan’s space program in general?
RASHAD NABIYEV As the government of Azerbaijan attaches great importance to the development of ICT, this sector of the economy has gained considerable influence in socio-economic life in recent years. Therefore, it is not surprising that His Excellency President Ilham Aliyev declared 2013 as the “Year of ICT.” In 2013, we were able to launch Azerbaijan’s first ever satellite, which constitutes an important accomplishment not only for Azercosmos, but for the country as a whole. This was one of the strategic projects carried out by the government as part of a wider plan of economic diversification and development of the non-oil economy. Azerspace-1 undoubtedly represents an investment in our future and it will be a source of pride for the whole nation for many years to come.
What was the cost of the Azerspace-1 project?
The total cost of the project, along with insurance, was around $230 million. However, 85% of this project was financed by foreign banks, such as Ex-Im Bank of the US and France’s Coface. The fact that these banks were willing to fund the project proves that it looked promising and profitable from the very beginning. The government only funded 15% of its cost. It is noteworthy that Azercosmos was able to secure a highly competitive premium insurance rate for the launch plus one-year cover. This was the lowest rate in the satellite insurance market since 1999. The reason Azercosmos was able to obtain a very competitive premium rate for the insurance, despite being the first satellite operator of its kind in Azerbaijan and the whole Caucasus region, is attributable to a number of factors. Firstly, its close partnership with highly credible companies in manufacturing and the launching of its satellite gave the insurers confidence in the hardware being used. Secondly, various relationship-building measures were implemented with key satellite insurers and senior members of the Azercosmos management, allowing the insurers to better understand the business of Azercosmos, thus increasing their desire to support the program. Finally, with the assistance of its international partners in its short lifetime since its incorporation in 2010, Azercosmos was able to overcome a number of technical, commercial, and managerial challenges that ensure Azercosmos has robust insurance cover provided by a small group of the most financially sound and secure insurance capacity providers in the world.
How have the financial returns been since the launch of the satellite?
The international satellite services market is highly competitive due to the large number of well-established global and regional players, but we are not afraid of competition as we have a well-developed business strategy and we know where we want to be at least 10 years from now. Once you develop the right techniques, models, and strategies, there is a major chance that you will be successful. As we were developing our business model, instead of spending our valuable time on market research we decided to talk to our perspective costumers, listen to their feedback, and ultimately reshape our ideas and products to fit what they actually wanted. And today, we can certainly say that the launch of Azerspace-1 was a great commercial success for us. In the first six months after the launch, we were able to generate $10 million in revenues, which is astonishing—even for established satellite operators.
What markets can the satellite service target?
Azerspace-1 has a hybrid payload including both C-band and Ku-band antennas. With the Ku-band antenna, we cover the markets in Europe, Central Asia, the Middle East, the European part of Russia, and, of course, the Caucasus. With the C-band, which has 24 transponders, we cover one of the most promising markets in the world, Africa. One thing I would like to point out is that the C-band transponders are switchable, so we can divert the focus of attention to fully cover, for example, Europe or Central Asia easily. Our main goal with the satellite has always been to cover an extensive market that has a bilingual heritage, such as Central Asia, and offer them much required TV services. We offer both Russian and Turkish language TV channels there. When it comes to the Middle East market, we try to accommodate their needs in terms of both Arabic and English language channels. We plan to take important steps in the next two to three years, especially in Africa, where we are working hard to build up our customer base.
What strategies are being employed to develop Azerbaijan’s space program in the future?
For the years to come, Azercosmos has two projects to foster Azerbaijan’s space program. The first is to launch the communication satellite Azerspace-2 in near future. We have recently been awarded an important grant by the US Trade and Development Agency, and we are attracting world-class consultancy services for feasibility studies on Azerspace-2. All in all, we plan to launch the second telecommunications satellite by the end of 2017. Secondly, Azercosmos supports the national development goals by implementing a strong and up-to-date national geo-information system infrastructure designed to meet the needs of the country, and the region as well. For this purpose, Azercosmos is implementing a plan to acquire an Earth observation and remote-sensing satellite system. The satellite-based Earth observation system will be an enabler to achieve many core objectives, such as the production of imagery data useful for the national GIS infrastructure, the support of agricultural activities, environmental monitoring, ecological and natural resources research, and support for disaster and emergency management activities.
How is Azercosmos looking to upgrade its workforce to meet its future expansion plans?
A large part of our success can be attributed to our people and their capacity and skills. It all goes back to the moment when we started recruiting people; apart from the technical skills, our priorities were professionalism, devotion, and the willingness to push boundaries and work within a team. After identifying our priorities, we started searching for the right people to join us through a variety of channels. In this regard, we provid opportunities for people to reach the top positions. When we started there were less than a dozen people, and now there are over 100. We are still in the search of people for two upcoming projects, and we also want to strengthen our collaboration with local universities.
How would you assess Azerbaijan’s developments in the space industry compared to its regional counterparts?
Compared to other countries in this region and newcomers, Azerbaijan’s space project was not dictated by a national imperative or political aspiration. Our priorities are commercially driven and are an example of how we can assure the sustainability of our national economy for the future and identify potential investment areas to meet the real potential of our country. That’s why it has been successful so far, and for us it is a question of economic wealth. On the other hand, with a population of over 9 million and a terrain of mountains and plateaus, Azerbaijan has its own specific challenges in bringing connectivity to its people, especially to those residing in remote and hard-to-reach mountainous areas. Satellite networks can be rolled out quickly and inexpensively to hundreds or thousands of locations, connecting cities or remote locations across a large landmass, where the cost of fiber is prohibitive. It will also eliminate the dependence of the country on other satellite networks and will provide the population with high-quality TV and radio broadcasting.
What are the main events that will impact Azercosmos’ activities in 2014?
In the first half of the year, we announced a tender and hopefully will sign a contract for the manufacturing of a remote sensing satellite. We plan to increase our presence in the Middle East and Central Asia markets, and also in Turkey and the CIS region. By mid-2014, we should have a better idea of where our next communications satellite will be placed. Additionally, there are other projects that we will push and that will see Azercosmos grow organically.
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© The Business Year – March 2014