Market minnows: Satellite Solutions Worldwide
For those facing an evening watching the “buffering” symbol on Netflix or Amazon tonight, shifting broadband supplier to satellite might be a decent option.
The biggest supplier in Europe, Satellite Solutions Worldwide, resells satellite capacity from big operators like Avanti, ViaSat and Eutelsat to provide fast broadband for those in remote areas who don’t get decent speeds.
This column was alerted to the business by smallcap investor Paul Mumford, whose fund manager Cavendish took a stake in a recent fundraiser.
Mumford praises the “stickiness” of Satellite Solutions’ business model — meaning that, once customers get a taste for decent broadband, they tend to stay with the same supplier, especially if there’s no alternative.
Mumford also likes how the firm operates in a business that’s often government-subsidised, as internet access has become deemed a human right by electorates.
So far, it serves 100,000 households in rural areas in the UK, Europe and Australia, building rapidly through acquisitions. The potential market is vast, with 20 million across Europe getting speeds of less than two Mbps.
The business was set up in 2008 by chief executive Andrew Walwyn, one of the team that built and sold DX and Tiny Computers, and chief technology officer Simon Clifton, a telecoms industry veteran who helped build Phones International with Peter Jones of Dragons’ Den.
They retain big stakes. The beauty of the business model is, as a reseller, it doesn’t have to invest huge amounts building satellites and sending them up to space.
The flipside is that rivals can set up without investing much either. Other companies do similar stuff but they’re smaller, and the risk they pose to Satellite Solutions diminishes as it gets bigger, increasing its attractiveness to satellite owners and bringing it greater economies of scale.
Its size also lowers another risk: that the satellite firms will one day crimp the capacity they supply through Satellite Solutions.
If you don’t believe BT and the rest will bring in broadband coverage as fast as the nation needs it, Satellite Solutions could be the stock for you.
