PARIS — Satellite broadband hardware and services provider Gilat Satellite Networks on May 16 said positioning its technology to the fastest-growing satcom markets — broadband mobility, cellular network backhaul and China — has begun to show results.
The company is especially bullish about its near-term prospects in China, where it has established a relationship with major satellite and high-speed-rail system operators to link Chinese high-throughput satellites (HTS) to users with Gilat technology.
Like many other technology companies that find China’s market size irresistible, Gilat conceded that protecting intellectual property will be an issue.
Bolstering its case that it is a company on the rebound, Gilat reported revenue of $63.9 million for the three months ending March 30, up 21 percent from a year ago. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, was 6.6% of revenue, compared to 1.4% a year ago.
In a conference call with investors, Gilat Chief Executive Yona Ovadia and Chief Financial Officer Add Sfasia said the company is sticking with it earlier forecast that full-year 2017 revenue would be $280 million to $300 million, with a 7.5% adjusted EBITDA margin at the forecast’s midpoint. hat compares to a 6.9% margin for 2016.
Margin improvement is being helped by a cost-cutting program that Ovadia said recently caused the company to replace one of its manufacturers.
Successful Gogo flight trial, and 1,600 planes to go
The most recent validation of a revenue driver for 2017 was in-flight-connectivity provider Gogo Inc.’s demonstration of Gogo’s new 2Ku service for commercial airlines. Gilat is providing the 2Ku modem and said the trials, on a specially fitted Gogo test flight, demonstrated the 400 Mbps capacity to the aircraft.
“To the best of our knowledge, these test results are the highest-performance results ever achieved on board a commercial aircraft,” Ovadia said. “Gilat’s modem delivers uninterrupted service across multiple satellites and multiple beams, which to our best knowledge is unique in the industry.”
Gogo has booked orders to install 2Ku on 1,600 aircraft owned by 13 different airlines. Ovadia said the Gogo business has already begun contributing to Gilat’s financial results.
Gilat has designed a dual Ku-/Ka-band antenna for broadband mobility so that customers wanting to move from one to another frequency, especially useful during long-haul flights, are able to do so to maximize performance.
Gilat’s sales argument is that unlike competitors ViaSat Inc. and EchoStar Corp.’s Hughes Network Systems, the Gilat gear does not require purchasing satellite capacity from the hardware provider’s satellites. Gilat has partnered with Hughes on developing the Ku-/Ka-band aero connectivity antenna.
Satellite cellular backhaul has long been viewed as tomorrow’s big satcom market, and Gilat believes its time is coming as today’s 4G/LTE networks and especially tomorrow’s 5G will need to rely on satellites to deliver connectivity from remote terrestrial mobile cell sites to the telecommunications grid.
SoftBank of Japan, (SoftBank majority-owned) Sprint of the United States, Britain’s EE (Everything Everywhere) and Australia’s Optus are among the cellular network operators that have hired Gilat for network ground infrastructure to deploy LTE networks.
China’s HTS opportunity: air, rail, maritime, enterprise….
Gilat’s move in China includes a relationship with China Satcom, whose recently launched ChinaSat-16 satellite is equipped with a 20-Gbps Ka-band payload, to be divided among 26 user beams covering China and offshore areas.
Ovadia said that once ChinaSat has completed in-orbit tests of ChinaSat-16, Gilat should receive a large order for sales of VSAT and other ground equipment for aeronautical broadband, maritime and enterprise use.
China’s other partner is China Railway Rolling Stock Corp. (CRRC), the world’s largest manufacturer of high-speed trains. Ovadia said CRRC will begin passenger trials using Gilat antenna technology on two commercial trains later this year.
Gilat earlier this year concluded a strategic partnership with Air Media Group’s Air Esurfing to provide in-flight connectivity over China’s domestic air routes.
‘We’ll protect our IP in China at all costs’
As Gilat’s future business becomes more tied to China, the company faces the same IP protection issues as every other technology company.
“We have a balance to maintain here,” Ovadia said. “If we want to make a breakthrough in the Chinese market, we have to reduce our prices. We need to run a balancing act between the fact that we want to protect our IP and the fact that we want to capture as much as possible from the market.
“We are managing a very strict policy of protecting our IP…, which we will defend at all cost. We will not be manufacturing in China. We may be assembling in China at some point if volumes pick up. But we’re not going to transfer IP into China and we’re not going to transfer key components of our products into China.”