PARIS — Satellite fleet operator Telesat Canada’s third-quarter results constitute a mixed bag of positive and negative, with revenue and EBITDA down but both backlog and fleet fill rates up.
The highlight the quarter was the lease by Bell Canada, of the entire Canadian Ka-band payload on the Telstar 19 Vantage satellite to launch in 2018.
Telesat is likely to see a revenue bump in the fourth quarter from the lease of the Telstar 12 satellite in a transaction involving Global Eagle Entertainment and fleet operator SES:
Telesat Chief Executive Daniel S. Goldberg, in a Nov. 2 investor call, did not mention GEE or Telstar 12 but said the lease of a Telesat satellite was expected in the coming weeks.
As a percent of total revenue, Ottawa-based Telesat has probably been more successful than any other big fleet owner in monetizing aging satellites by leasing them to operators that, for regulatory or business reasons, need a satellite in place immediately.
For the three months ending Sept. 30, Telesat reported revenue of 214 million Canadian dollars ($172 million), down 3 percent from a year ago after adjusting for changes in Canadian dollar’s value compared to the U.S. dollar.
Goldberg did not point to any specific reasons for the decline aside from reduced enterprise business in Latin America, and specifically a customer in that region that had lost one of its own major clients and thus did not renew with Telesat.
EBITDA down, but still 81.3%
Telesat typically reports one of the highest EBITDA margins in the business, and while EBITDA was down 5% in the three months ending Sept. 30 compared to a year ago, it was still 81.3% of revenue.
Eighty-three percent of Telesat’s Q3 revenue was from North America. Latin America was 8%, Europe, the Middle East and Asia, 6% and the rest of the world, 3%. Broadcast customers were 54% of total business, enterprise was 43% and consulting and other revenue was 3%.
Goldberg said that while pricing pressures continue just about everywhere, demand for satellite bandwidth is increasing. “Capacity is getting taken up and demand continues to grow,” he said.
Both conditions — prices eroding, demand improving — showed up in Telesat’s fleet fill rate: 95% for the North American fleet, and 67% for the international fleet, both up slightly from a year ago.
HNS, Bell Canada Ka-band leases of Telstar 19V
Backlog was 4 billion Canadian dollars, up 2.6% year on year, or around 100 million Canadian dollars. The major contributor here was the Bell Canada lease of the Canadian Ka-band capacity on Telstar 19V, for the satellite’s full 15-year life.
Telesat previously leased the Latin American Ka-band capacity to Hughes Network Systems (HNS), which is expanding its Ka-band consumer satellite business from the United States and Brazil further into Central and South America.
Hughes elected to make a pre-launch payment to Telesat as part of its agreement. Bell Canada chose the more-traditional straight-line lease over a 15-year period.
Goldberg did not dispute an estimate that the Bell Canada contract would be generating “mid-teens” millions of Canadian dollars per year once Telstar 19 is launched in 2018.
Telstar 19V, under construction at SSL and scheduled for launch by SpaceX, will operate alongside the Telstar 14R at 63 degrees west. It has a mixed Ka-/Ku-band payload, making fill-rate estimates complicated.
Goldberg said 19V might be considered as one-third filled by the Hughes and Bell contracts, which he said was more than satisfactory given that the satellite has not yet launched. The satellite also carries Ka-band beams over the Caribbean and the North Atlantic for maritime and aeronautical connectivity uses.
Telesat has one other satellite, the Telstar 18 Vantage, under construction and scheduled for launch in 2018, with the same SSL/SpaceX construction and launch team.
Telstar 18V is co-owned with APT Satellite Holdings of Hong Kong, a longstanding Telesat partner, and will carry a C-band Asia beam and a high-throughput, or HTS, Ku-band beam over Asia. The C-band is replacement capacity, the Ku-HTS is new.
Capacity consolidation without M&A
Goldberg said the current overcapacity in some segments of global satellite bandwidth supply has occurred before in the industry, and as was the case the last time, this time is unlikely to result in any major industry consolidation.
Instead, he said, consolidation is occurring in the form of the collapse of satellite orders in the past two years. When the effect of the lack of new orders ripples through the industry starting in two years, it will perform much of the same function as industry M&A, but without the Wall Street deal fees.