Sky says it has renegotiated its contract with satellite provider Optus in a deal that adds flexible capacity to save costs and includes new features.
The pay-TV broadcaster would not put a number on possible cost-savings, but satellite capacity is one of the company's larger cap-ex items. In late 2018, when it reached a deal with Optus for capacity from 2021 through to 2031, it said the contract was worth more than $200m.
The new contract hinges on the new Optus 11 satellite, now due to be launched in 2023.
The software-defined Ku-band 'Optus 11' satellite is fully configurable in space, meaning its coverage, bandwidth and capacity can be changed in orbit as customer demands evolve – where traditional satellites, like the current Optus D3, are limited by on-ground configurations that cannot be altered after launch.
When Sky signed its 2021 to 2031 deal with Optus in 2018, there was a clause - noted in an investor presentation for Sky's recent $157m raise - making the agreement conditional on Optus taking sufficient steps to procure the successful launch of a new satellite to replace the existing primary satellite within an "acceptable timeframe".
The revised contract provides additional commitments and assurances for Sky on the success of the replacement,
Sky external affairs director Chris Major said: "The terms of the deal are commercially sensitive and confidential [but] a key feature of the deal is the greater flexibility for Sky: as we reduce the transponder capacity we take, there will be corresponding cost savings. We have also reduced our overall cost base with this revised contract."
Is a new satellite deal relevant, in the age when content is increasingly delivered over the internet, and Sky will soon launch its own broadband service?
Sky CEO Martin Stewart said: "While Sky is embracing a streaming future, we remain committed to the hundreds of thousands of New Zealanders who currently rely on our satellite services to receive their sport and entertainment."
In the build-up to the 2019 Rugby World Cup, a parliamentary committee was told at least 50,000 rural households did not have good enough broadband for video streaming, while others were on low data cap plans that made it uneconomic.
"The Optus satellite remains a cost-effective way to deliver Sky's service to our DTH [direct-to-home] base, and satellite households continue to be our most valuable and loyal customers," Stewart said.
"It is therefore very pleasing to be able to confirm this revised contract with Optus which provides for increased flexibility as Sky and New Zealanders move towards a more IP [internet protocol]-focused future."
Sky will share capacity on Optus 11 with Freeview, as it does on the D3 today, which it says is a cost-effective arrangement.
The revised contract maintains the benefits of the existing arrangement including the ability to sub-licence capacity, particularly to free-to-air channels, and to access the D3 satellite to provide redundancy during the remainder of its service life. The D3 is due to reach end-of-life in 2025, and the backup D1 in 2024.
The Optus 11, which will sit in a geostationary orbit 36,000 above the Earth, has the ability to greatly enhance the accuracy and precision of existing GPS and positioning systems across Australia and New Zealand and pinpoint a location to within a decimetre, without the need for mobile or internet coverage, Optus says.
Raft of other benefits
Independent telecommunications consultant Jonathan Brewer told the Herald, "Sky's contract with Optus for broadcast satellite capacity is just business as usual, but the satellite itself is pretty neat. Manufacturer Airbus calls their new design "OneSat".
"With it. Optus will be able to reconfigure the services, frequencies, and coverage areas of the satellite after it's in space.
"I expect the same satellite will be used for connecting remote cell sites in the Australian outback, providing broadband in the Southern Ocean, and providing the super-accurate GPS augmentation needed by self-driving farming and mining equipment throughout the region."
Sky shares closed at 15c yesterday. The stock is down 76 per cent for the year.