Recovery Year Behind Us With a Solid Book of Business Ahead
considers that virtually all of the cable contracted for in 2004 was for a single project, the 20,000-kilometer SEA-ME-WE-4.
By John Manock
The total for 2005 is even more impressive when compared with 2002 and 2003. The total of route-kilometers contracted for in 2005 is about three times the amount contracted for in 2002 and 2003, combined.
The Year 2005 may be remembered as the year in which the submarine cable industry turned around. Following three long and dreadful years, 2005 proved to be a solid year in terms of submarine cable construction activities and supply contracts awarded. Although activity levels are not up to the same levels as the boom years in the late 1990s – nor are they likely to get there any time soon – investment and new construction appears to be entering a period of stable growth.
Broad-based recovery ahead The activity in 2005 is more significant considering that it does not appear to be an aberration. The recovery appears to be broadly based. The 14 contracts awarded ranged from 34 route-kilometers to 15,000 routekilometers and included consortium and privately financed systems, repeatered and unrepeatered systems, activity in every region of the world, extensions to existing systems, and both large market and small market systems.
The results of T Soja & Associates, Inc.’s (TSA) most recent comprehensive look at the state of the industry provide at least reasonable cause for cautious optimism. The industry is witnessing a growing number of contract awards and actively developing new projects. Existing cables are being upgraded. And broadband Internet demand and deployments are skyrocketing. To analyze the activity levels in the submarine cable industry, TSA has used a four-step rating system. The new rating system categorizes projects as follows: Rating 1: Systems under contract in 2005 Rating 2: Systems for which supply contracts are expected to be awarded in 2006 Rating 3: Future projects that experienced positive movement in 2005 and may result in future supply contracts Rating 4: Potential long-term projects, including projects under discussion as well as those for which TSA anticipates a need within a five-year timeframe TSA’s tracking indicates that supply contracts awarded during 2005 amounted to 30,484 route-kilometers. This is an increase of nearly 30% over the amount of cable contracted for in 2004. The increase is more significant when one
Several of the projects in 2005 are the first phase of broader projects that could continue for the next several years. On many routes, older cables are nearing full capacity utilization and are too expensive to maintain or upgrade. New markets are opening and regulations are easing. All of these developments bode well for greater submarine cable activity in the coming years. TSA expects that 2006 will be a solid year as well. TSA anticipates that roughly 28,000 route-kilometers of cable contracts will be awarded, only slightly less than in 2005. An annual awarding of approximately 30,000 route-kilometers of submarine cable may continue for the next several years thereafter. And although the annual total of 30,000 route-kilometers is far less than what was being awarded during the boom years, it signals a recovery and, perhaps, a period of stability for the industry. Projects totaling more than 52,073 route-kilometers of submarine cable were under contract in 2005, representing Rating 1. There were 30,484 routekilometers contracted for in 2005. The rest consisted of projects contracted in 2004 but completed in 2005. 12