Avanti Chief Executive David Williams told investors that the previously promised 35 percent annual growth in revenue faced headwinds following Avanti's 2016 restructuring and softer-than-expected market conditions in Africa. Credit: Sky News via Youtube. Avanti Chief Executive David Williams told investors that the previously promised 35 percent annual growth in revenue faced headwinds following Avanti’s 2016 restructuring and softer-than-expected market conditions in Africa. Credit: Sky News via Youtube.

 

WASHINGTON — Satellite fleet operator Avanti Communications is reporting continued declines in average bandwidth prices in Africa for the six months ending Dec. 31 as well as headwinds related to the company’s mid-2016 strategic review.

The review, during which London-based Avanti considered selling itself, was concluded instead with a new debt offering and an agreement by Avanti bondholders to forgo interest payments in return for additional Avanti bonds.

The refinancing, concluded in late January, gave Avanti $242 million — sufficient to cover its immediate costs and the launch of two satellites in 2017-2018 — and followed a similar transaction in October 2016, for $40 million.

Avanti operates Ka-band payloads on four satellites to provide broadband access to Europe, the Middle East and Africa, with Africa being its principal focus. Its Hylas-1 has 3 GHz of Ka-band capacity. Hylas 2 has 11 GHz and the Hylas-2B — a Ka-band payload leased by Avanti on Luxembourg-based SES’s Astra-5B over Europe, has 3 GHz.

The company also owns the Artemis multi-band satellite, a former European Space Agency data-relay spacecraft that in late 2016 was moved to 123 degrees east, over East Asia, following an agreement with the Indonesian government.

Indonesian authorities needed to place a satellite at that slot to preserve their rights to L-band spectrum. The transaction gave Avanti a much-needed injection of cash.

18% drop in Ka-band bandwidth prices in two years

Avanti said that in the 12 months ending June 30, 2015, its Ka-band capacity was selling for between $1,800 and $2,000 per megahertz per month. For the year ending June 30, 2016, that had fallen to between $1,600 and $1,800 per MHz/month.

In its financial report for the six months ending Dec. 31, 2016, Avanti said prices averaged $1,500-$1,600 per MHz/month.

All major satellite fleet operators with footprints in Africa have reported a deteriorating market in the past three years following fiber deployment and foreign-exchange effects, although in recent months some of them have claimed to see a stabilization there.

More than any of them, Avanti has tethered its future to an African turnaround.

For the six months ending Dec. 31, Avanti reported $32.3 million in revenue, up 4 percent from a year ago, far short of the 35 percent growth that Avanti had been promising shareholders.

Avanti Chief Executive David Williams, in a statement accompanying the six-month financial statement issued Feb. 28, conceded that revenue growth “was slower than expected, mainly as a result of the strategic review started in 2016.”

Williams also cited “lower than normal” conversion of prospective customers into paying customers, and that contracts were taking longer to finalize than previously.

Avanti fleet is 30-35% filled, waiting for 2 new payloads to launch

Avanti said its fleet was 30-35 percent filled as of Dec. 31, compared to 25-30 percent as of last June 30. It was not clear whether these figures represented current fleet utilization or included future contracted capacity as well.

The company has two Ka-band payloads on order. The larger of the two its the Avanti-owned Hylas 4, under construction by Orbital ATK of the United States, which carries 28 GHz of throughput capacity and will more than double Avanti’s current bandwidth portfolio.

Avanti said the satellite has encountered “some delays in the factory” and should be ready for launch by mid-year aboard a European Ariane 5 rocket. The exact launch date will depending on the satellite’s actual delivery date and how quickly launch service provider Arianespace can find a suitable, heavier co-passenger to share the ride with Hylas-4.

The Hylas-3 Ka-band payload, with 4 GHz of throughput, is being launched aboard the EDRS-C satellite owned and operated by Airbus Defence and Space as part of an optical data-relay service partnership with the European Space Agency (ESA) and the European Commission.

EDRS-C/Hylas-3 is under construction by OHB SE of Germany and will be the second of OHB’s ESA-backed SmallGEO satellites. The inaugural SmallGEO satellite, the Hispasat 36W owned by Hispasat of Spain, was launched on Jan. 28 aboard an Ariane 5. It was more than two years late.

Avanti said ESA is hoping for “a late-2017 launch, which could slip further. We are disappointed in the manufacturer of this system.” Airbus said recently that the launch could be in late 2017 but may not occur before early 2018.

 

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Peter B. de Selding
Peter B. de Selding
Peter de Selding is a Co-Founder and editor for SpaceIntelReport.com. He started SpaceIntelReport in 2017 after 26 years as the Paris Bureau Chief for SpaceNews where he covered the commercial satellite, launch and the international space businesses. He is widely considered the preeimenent reporter in the space industry and is a must read for space executives. Follow Peter @pbdes