Intelsat is banking on its Epic Ku-band HTS satellites to open new markets with lower per-megahertz prices. But it’s taking longer than expected for the new demand to compensate for revenue declines in its ongoing business. Credit: Intelsat

PARIS — Satellite fleet operator Intelsat on June 16 trimmed its revenue and EBITDA forecast for 2017 and reduced is planned capex following slower-than-expected sales of its Epic Ku-band high-throughput-satellite (HTS) capacity.

The downward revenue forecast was small. Adjusted EBITDA for 2017 was reduced by $23 million at the midpoint of the forecast, to $1.655 billion.

Capital spending for 2017 was cut by $138 million, to $525 million. Spending in 2018 is expected to be $437.5 million, down $38 million.

The company said capex in 2019 would be around $450 million. It had not provided a 2019 forecast previously.

Five Intelsat Epic HTS satellites are scheduled to enter service between 2017 and 2019, providing the company with a 10% compound annual growth in the number of equivalent transponders as of December 2019, net of capacity retired from service or moved to lower-revenue-producing inclined-orbit status.

Network Services lagging

In addition to the slow demand for Epic HTS, Intelsat has witnessed lower contract renewals in its Network Services division. The company has not been able to sell the vacated capacity quickly enough to mitigate the revenue drop in time to affect 2017’s performance.

Intelsat nonetheless said global pricing trends “remain generally stable, and with our expectations for 2017, for both new business and renewals.”

Certain Intelsat bondholders had been negotiating with SofBank of Japan on a debt swap that included a cash and stock option. The debt holders massively rejected the deal and it has now been removed from consideration.

The transaction would be reduced Intelsat’s leverage and made the remaining debt maturities more manageable.

Intelsat has said that its HTS offer would result in lower prices per megahertz of bandwidth sold, but ultimately higher demand as new applications including connected cars, cellular backhaul and aeronautical and maritime connectivity made up the shortfall.

Given its debt level, the question for Intelsat is how long the period between a revenue hit and a demand uptick will be.

Whether SoftBank is of a mind to try again with a more attractive offer to bondholders is uncertain. Industry officials have said other fixed satellite services companies have approached SoftBank to work out an alternative arrangement on the assumption that SoftBank, already invested in OneWeb, a startup business building a constellation of low-orbiting satellites for broadband service worldwide, is still interested in teaming with an FSS GEO satellite fleet operator.

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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 preeminent reporter in the space industry and is a must read for space executives. Follow Peter @pbdes


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