Rebuilding SKY Perfect JSAT
My biggest mission is to rebuild the SKY Perfect JSAT Group’s business model into a sustainable one. Our founding business model, centered on satellite communications, has been forced to undergo a drastic change due to drastic changes in the external environment. Looking to the future, fortunately, the use of satellite communications has expanded significantly, and I believe the value of the assets we have built up so far is actually increasing.
Unlike in the past, it will be important for our Space Business, as the only private satellite communications operator in Japan, to demonstrate its know-how in the utilization of space by focusing on areas other than satellite communications, such as earth observation. Meanwhile, in the Media Business, while broadcasting services are not a growth driver, I do not believe they will disappear as infrastructure. The number of subscribers is gradually declining due to an influx of competitors, but we are still supported by 2.8 million subscribers, and I believe that stable revenue can be secured through cost control and diversification of revenue sources. Synergies with the Media Business also contribute to satellite communications revenues, and we will promote efforts to transform the business into a broadcasting and distribution platform that can be operated at low cost.
Last year, we announced our vision for 2030 and decided to invest more than ¥200 billion in growth. As part of its long-term vision, SKY Perfect JSAT has established a new management strategy, Value Creation by “Change.” In both the Space Business and the Media Business, we have decided to focus on strengthening human capital and enhancing our management foundation in order to explore new business domains and improve profitability in existing business. We will maximize the value of our physical and human capital and “Change” ourselves into a company that can generate sustainable profits while serving society.
Progress towards 2030
Net income for fiscal 2022 increased 8% over the previous year, exceeding expectations. The Space Business is driving growth, but the Media Business, despite a continuing decline in the number of subscribers, also achieved an increase in profit on a consolidated basis through cost controls. Against this backdrop, looking towards fiscal 2030, we are gradually implementing growth investments of more than ¥150 billion in the Space Business and more than ¥50 billion in the Media Business in the form of investments in new domains.
In fiscal 2022, the Space Business accelerated the development of information services using data obtained from satellites as an initiative in the field of business intelligence. In addition, Space Compass Co., Ltd. (“Space Compass”), which was established with NTT, initiated activities to realize its “Space Integrated Computing Network” initiative. The Media Business is focusing on B-to-B business development while reviewing its cost structure, and we are starting to see positive results from this activity. In fiscal 2022, I believe we were able to demonstrate, in some small way, that our vision for 2030 is more than just talk.
Management strategy
Space Business
The space-based business market, including the fields of communication, positioning, and remote sensing (earth observation), is expected to grow significantly in the future. In such a future society, it will also be important to solve economic development and social issues through systems that tightly integrate physical and cyberspace.
Leveraging our more than 30 years of experience in the space and satellite business, we will invest aggressively in fields such as Universal NTN (nonterrestrial network), optical data relays, and business intelligence, with the goal of achieving segment profit (net profit) of ¥21 billion in 2030.
Improving profitability in existing business
In our existing satellite communications business, we will continue to respond flexibly to the diverse needs of customers by proactively incorporating new technologies for the launch of successor satellites, such as the use of digital payloads with variable beams and bandwidths. In addition, while proposing value-added services, such as services utilizing ground station equipment, we will encourage the extension of existing contracts to make our customer base more stable.
To handle growing markets such as internet access on aircraft and ships, we will expand the provision of high-speed, large-capacity communications services by using our fully digital satellite(Superbird-9), which is scheduled to go into operation in the first half of 2027, to supplement our two high throughput satellites already in operation (Horizons 3e and JCSAT-1C). In August 2023, we successfully launched Horizons-4 (the successor to Horizons-1), our fifth satellite jointly owned with U.S.-based Intelsat. Through alliances with global players, we will expand satellite coverage and capacity and further strengthen our overseas business development.
Exploring new business domains
The “Space Integrated Computing Network” initiative has two major objectives. The first is to build a communications network that combines HAPS and geostationary and nongeostationary satellites to meet the communication requirements of the future society. The second is to build a data center in space using optical communications and computing technology to maximize the use of global data collected from space. Space Compass is working toward the launch of the space data center business in fiscal 2024 and the space RAN business service in fiscal 2025. To make the space data center business a reality, Space Compass has already signed a joint venture agreement with U.S.-based Skyloom Global Corp. for the launch of an optical data relay satellite. In addition, through investment in and collaboration with the Institute for Q-shu Pioneers of Space, Inc. (iQPS Inc.), we are focusing on business development utilizing a constellation of small SAR*1 satellites in low earth orbit, and as a unique initiative of SKY Perfect JSAT, we are developing a series of information services using a variety of types of data, such as images and location information obtained from satellites, starting with the LIANA*2. Through these efforts, we will enhance both economic and social value as a space infrastructure company and, at the same time, greatly expand the potential of business in new domains.
In addition, as the importance of space utilization in the security field increases in response to changes in the international situation, it is important to strengthen our cooperative framework with the public sector and leverage the knowledge and track record we have cultivated in the space business for application to the security field. In addition to satellite communications and business intelligence, we will actively propose services such as Space Situation Awareness (SSA). Together with Space Compass, SKY Perfect JSAT participated in The Japan-U.S. Comprehensive Dialogue on Space held in March 2023. Having built relationships with the U.S. government and U.S. companies, over the years, I believe SKY Perfect JSAT can play a useful role in the security field, for example in the joint utilization of space assets by the U.S. and Japan.
- Synthetic aperture radar (SAR) obtains ground surface information by irradiating the surface of the earth with microwaves and analyzing the reflected signals. It enables observation night and day and is even able to penetrate clouds and smoke.
- Land-deformation and Infrastructure ANAlysis: a service that uses SAR image analysis to monitor changes in ground sloping and infrastructure
Media Business
Looking at the environment surrounding the Media Business, the battle for content and customers with well-funded video distribution service companies has become extremely fierce, and the trend toward mergers and acquisitions is gaining momentum. Under these circumstances, it is difficult to foresee when the number of subscribers in the broadcasting business will bottom out. However, what we are aiming for is a platform for broadcasting and distribution, and with that in mind, we will control costs, slim down, and invest in what is essential for business transformation with the goal of segment profit (net profit) of ¥5 billion in 2030.
Improving profitability in existing business
In the broadcasting and distribution business, continuing from last year, we hosted the German Bundesliga Japan Tour as a “real” event and combined it with our free distribution service for SKY PerfecTV! subscribers as a way to improve subscriber satisfaction. Our call center has already started accepting outsourced work from B-to-C companies such as mail-order companies. Similarly, our SKY PerfecTV! Tokyo Media Center will not be closed internally, but will open its assets to external parties as a media solutions business to diversify its revenue sources and change its profit structure to one that is commensurate with its costs. In addition, we closely scrutinize which costs are necessary and which are not with an eye to profitability and carefully decide on an individual basis which spigots to shut off.
Meanwhile, the optical fiber-based retransmission service (FTTH) is on the rise, and the number of connected households will continue to increase as the service area is expanded. We have also received many inquiries about the new collaborative service we launched to solve the problems of cable TV operators, and we will continue to expand this service as well.
Expansion of business in new domains
A new domain for the media business is the in-house development of dongles that connect to Connected TVs. This will create an advertising distribution platform that can provide a variety of VOD services, from free and ad-supported video distribution to flat-rate and rental services.
In this way, the Media Business, in parallel with drastic cost structure reform, is evolving into a hybrid platform that combines broadcast and distribution. Our investments in it are designed to make it attractive not only to the people who watch the content, but also to those who deliver the content.
Strengthening human capital
Today, we find ourselves in the “game change” era, in which AI and other technological innovations are making conventional wisdom obsolete in the blink of an eye. In times like these, what we need most is people who can think flexibly about what will happen in the future and actually take action. Our future depends on cultivating such talent.
SKY Perfect JSAT’s goal is Value Creation by “Change,” but this cannot be achieved without revitalizing the people and organizations that drive “Change.” Therefore, seeking to break away from the way things had been done in the past, we changed the personnel system to recruit more and more young employees. To accelerate change, we will identify high performers who take responsibility for their output and promote them early. At the same time, we raised starting salaries and wages with the expectation that young employees who will create the future of our company will be motivated to lead the change. We are also planning to offer a full range of training programs that can be taken on a voluntary basis. Of course, we also emphasize diversity and promote the participation of women and mid-career hires.
I personally try to spend time talking to employees at the team leader level to learn first-hand what they are thinking and what they envision for the future. In fact, I realized that talented people are often hidden from view. I believe it is very important to elevate such hidden talent to strengthen our human capital.
Enhancing of management foundation
To enhance our management foundation, we have newly appointed Ms. Aoki, an expert on space law, and Mr. Toyota, an expert on security strategy from the Ministry of Defense, as outside directors. Just as navigators help keep a ship on course, I am counting on the two of them to guide, supervise, and advise us from an objective standpoint, especially in the Space Business.
In addition, we will focus on cybersecurity measures, digital transformation (DX), and sustainability initiatives. In June 2023, we were included in the ESG index “FTSE Blossom Japan Sector Relative Index” for the first time. We will continue to expand our management foundation with ESG in mind, including, with regard to the environment, in particular, efforts to reduce greenhouse gas emissions.
To our stakeholders
At present, SKY Perfect JSAT’s P/B ratio is below 1x. To break out of this situation and sustainably improve our stock price, my first priority is to deepen constructive dialog with our shareholders and investors to help them understand our growth strategy. To that end, we will tangible form to our 2030 Vision, including the execution status of our planned capital allocation, and explain it to stakeholders.
In line with the policy announced last year of returning ¥40 billion to shareholders over five years, we increased the annual dividend to ¥20 in fiscal 2022 and are maintaining the same dividend level in fiscal 2023. We will also implement share buybacks on a flexible basis.
When all is said and done, the goal of SKY Perfect JSAT’s “Change” in preparation for 2030 is to ensure that a business that invests about ¥20-40 billion in a single satellite can respond to major changes in competition, technological innovation, and other developments and continue to generate a decent profit. The management team must, therefore, never settle for the status quo, but always look 5 to 10 years into the future and consider what steps to take now. We, the management team, are fully aware of our responsibility for the future of SKY Perfect JSAT and are approaching its “Change” with a sense of urgency and nervous excitement. We have also raised the allocation ratio of the compensation paid in shares to executive officers of the operating companies to align their perspective with that of shareholders and raise their awareness of the need to enhance corporate value.
We are currently in the process of investing in growth, and although our results for fiscal 2023 are expected to remain at the level of fiscal 2022, I would like to achieve a net profit of over ¥25 billion by 2030 by implementing the “Change” I have been discussing here. In fiscal 2023, we will realize this “Change” with an even greater sense of urgency. To our stakeholders, I truly appreciate your valuable opinions, even if they are sometimes tough to hear, and I look forward to your continued support in these endeavors.