Avanti wins EE deal to provide satellite capacity for cellular backhaul

Contract is believed to be driven by EE’s need to boost coverage, capacity, availability and resilience of its 4G LTE network to meet the requirements of its UK Government Emergency Services Network obligation

Avanti wins EE deal to provide satellite capacity for cellular backhaul

UK mobile operator EE has signed a deal with Avanti Communications Group to provide satellite capacity for cellular backhaul, it was announced today (9 May 2016). Avanti will connect a number of cellular sites across the UK to EE’s network using the HYLAS 1 and 2 Ka band satellites to provide communications in remote areas and for additional network resilience.

The first phase of this multiyear contract has an initial value of US$29 million (£20 million), plus options to double the capacity. The deal is believed to be the largest of its kind in the world and certainly Avanti’s largest ever win. It is said to have been won against competition from all the major European satellite players including Eutelsat, Inmarsat, Intelsat, etc.

The impetus behind the deal is almost certainly driven by EE’s contract (awarded in December 2015) to provide the main 4G LTE network for the UK Government’s £1 billion Emergency Service Network, which will see 300,000 emergency services and other users move off the existing Airwave TETRA two-way radio communications network and onto EE’s 4G LTE network beginning in September 2017.

EE has to considerably boost its consumer-grade network to make it suitable for mission critical communications, which have much higher and tougher tolerances when it comes to specifications for coverage, robustness, availability and resilience. Naturally, having satellite support for backhaul will also enable EE to ease bottlenecks in its network as demand for 4G services from consumers increases in the future.

David Williams, chief executive officer of Avanti, said: “We have designed the HYLAS satellite fleet to offer the highest levels of network quality and flexibility, beyond the levels that have been previously available via satellite. This contract win demonstrates those qualities and affirms our ability to deliver at the highest level.”

Mansoor Hanif, director of Radio Access Networks at EE, said: “We are delivering a highly resilient, truly nationwide 4G network and Avanti will play a key part in providing resilience and extending this network into rural areas.”

Several brokers have referenced the contract today not just as a big win in itself ($29m would be more than a third of forecast 2015 revenues for Avanti) but a significant breakthrough for cellular backhaul.

A comment from Jefferies, the broker and global investment banking firm, issued today, noted: ‘An important contract win announcement out this morning, not only in financial terms but also as a lead indicator for future commercial momentum. Avanti has won a contract to provide EE in the UK with cellular backhaul services - without being explicit in the release, we'd presume this is to support EE in December 2015 win to provide UK emergency services users a dedicated 4G network.’

The Jefferies note continued: ‘Speaking to the company this morning we understand that:
1. The number of sites is well into the high single digit 100s, with a mix of primary and redundant sites
2. This was a competitive tender with Avanti able to face off competition with its cheaper "per bit" pricing inherent in its high throughput capacity
3. Indeed, the contract has also "met" the long running $2,000 MHz/month price point and
4. The contract starts immediately.’

Another broker, Cenkos, commented: “Avanti’s telco exposure prior to this announcement was less than 3% of revenues and major agreements such as this will see carrier services rise materially as a percentage of sales.

“Avanti already supplies these services to major carriers such as Vodafone but there are acute shortages in mobile backhaul capacity across EMEA. We believe there is considerable growth potential for Avanti in this sector as 3G and 4G networks are rolled out, leading to an exponential increase in backhaul requirements.”

Avanti is a pioneer in the application of Ka-band satellite technology. Its first satellite, HYLAS 1, was launched in November 2010 and provides two-way coverage across Europe. HYLAS 2 was launched in August 2012 and extends coverage to the Middle East and Africa.

HYLAS 3 will be live for commercial service in 2017. The entire HYLAS 3 payload is steerable anywhere in EMEA, so a customer may purchase the entire service and choose to move it. HYLAS 4 will launch in 2017 to serve new markets in Africa, and also to provide expansion capacity for existing customers in areas of Europe and Africa covered by HYLAS 1 & 2.

Avanti also owns a multiband satellite called ARTEMIS. The company argues its ‘technology has fundamentally changed the economics of providing high speed data communications in high growth markets. Our Ka-band satellites carry eight times more data than lower frequency satellites and allow connectivity to even the most remote and hard-to-reach regions’.

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