Telesat’s proposed constellation of low-orbiting satellites would operate in two orbits. The polar orbit is shown here. Credit: Telesat

LONDON — Satellite fleet operator Telesat on July 26 declined to provide cost estimates for its planned constellation of at least 117 operating satellites plus spares but said it would only pursue the effort if profit — and not a dream of global internet connectivity — were not the end result.

Telesat’s constellation of low-orbiting satellites is one of nearly a dozen proposals before the U.S. Federal Communications Commission (FCC) in view of a U.S. operating license.

Telesat’s proposal is to launch at least 117 satellites, plus in-orbit spares, into several orbits, both polar — inclined 99.5 degrees relative to the equator at an altitude of 1,000 kilometers — and a 1,248-kilometer orbit with a 37.4-degree inclination.

Each satellite will carry on-board processing and a laser terminal to provide optical inter-satellite links between the spacecraft to provide higher-frequency coverage worldwide.

Telesat is currently battling its low-orbit-constellation competitors at the FCC, arguing that some of their plans would cause signal interference with Telesat’s constellation.

Telesat wants to start commercial service in 2021 but Chief Executive Daniel S. Goldberg told investors that the company still has a long way to go before the design is frozen and serious capital investment begins.

What does it cost? ‘Stay tuned’

In remarks intended to reassure Telesat’s bondholders and its two owners — New York-based Loral Space and Communications and Canada’s PSP Investments pension fund — Goldberg said return on invested capital remains the company’s motivation, for the constellation as for its fleet of 15 geostationary-orbit telecommunications satellites.

“We’re hard-headed business people who have  done a pretty good job achieving attractive returns on  the capital investments we make,” Goldberg said in a conference call with investors. “We’re certainly not going to depart from that philosophy” for the low-orbiting constellation.

The inclined-orbit portion of Telesat’s LEO constellation would operate at a higher altitude than the polar-orbit component. Credit: Telesat

Telesat’s operating expenses have increased this year as the company adds engineering staff — led by Erwin Hudson, formerly of satellite-broadband provider ViaSat Inc.— to work on the constellation project.

The constellation effort within Telesat, he said, is consuming “an enormous amount of energy and a huge amount of focus” on the technical and regulatory ends.

The company said it added 7.2 million Canadian dollars to its intangible assets in the six months ending June 30, mainly because of the two prototype Ka-band low-orbiting satellites under construction and scheduled for launch late this year. The big spending has yet to start.

It is unclear whether Telesat’s two shareholders, who have bickered in the past over terms for selling the company and whether to proceed with a stock-market introduction, have lined up behind the constellation initiative. The Canadian government, whose interest in coverage of Canada’s northernmost territory remains strong, is a likely investor but has not committed yet:

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Asked for a cost estimate, Goldberg said only: “Stay tuned.”

Revenue and EBITDA declines softened by FX

For its existing business, Telesat reported a 3% decline in revenue for the three months ending June 30 compared to the same period a year ago, to 225.9 million Canadian dollars. The decline would have been 5% were it not for assistance from the U.S. dollar’s increase in value relative to the Canadian dollar.

The foreign-exchange factor accounted for 5 million Canadian dollars in EBITDA, or earnings before interest, taxes, depreciation and amortization.

About 4 million Canadian dollars of the drop was due to the end of a short-term lease of a Telesat satellite to another operator. Most of the evenue from transactions like this goes straight into EBITDA, or earnings before interest, taxes, depreciation and amortization.

Telesat’s EBITDA dropped 4%, but the company still has one of the highest EBITDA margins in the industry, at 81.3% compared to 82.5% a year ago.

Telesat backlog at June 30 stood at 3.9 billion, down 5% from March 31.

The company’s total long-term debt was 3.65 billion Canadian dollars, for a total debt-to-EBITDA ratio of 4.76:1.

Telesat Chief Financial Officer Michel Cayouette said the company is sticking with its earlier forecast that capital spending would be between $165 million and $185 million in 2017, including the two large geostationary-orbit satellites under construction and the two small low-orbit prototypes.

Cayouette said Telesat had 355 million Canadian dollars in cash as of June 30, plus a $200-million revolving credit line.

Telesat operates 15 satellites of its own and also operates the Canadian Ka-band payload of the ViaSat-1 consumer broadband satellite.

Goldberg said the pricing environment for data-service provision to enterprise customers, which accounts for 44% of Telesat’s revenue, is broadly stable in North America — where 80% of Telesat’s revenue is sourced — with pockets of decline, none of them dramatic, in Latin America, Africa and Asia.

Goldberg said the two geostationary-orbit satellites, one half-owned with APT Satellite Holdings of Hong Kong, are currently scheduled for mid-2018 launches on SpaceX Falcon 9 rockets.

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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