ViaSat: Subscribers down, ARPU up and ViaSat-2 launches April 25
February 10, 2017
PARIS — Satellite broadband hardware and services provider ViaSat Inc. on Feb. 9 reported a 1.7% drop in subscribers to its U.S. consumer service but an 11% increase in monthly revenue per subscriber and record revenue and operating profit for its services division.
ViaSat said the figures confirm its thesis that, in consumer broadband, giving more bandwidth to fewer people is a good business.
Key takeaways from the Feb. 9 conference call:
— ViaSat-2 ready to go, launch set for April 25 on European Ariane 5 rocket but won’t enter service until autumn.
— Current subscriber moves to higher-speed service validates investment thesis.
— Government/military division continues record growth.
— $503 million equity raise to accelerate 3rd ViaSat-3 over Asia-Pacific.
— Overture to Earth observation satellite operators: Relay your data through ViaSat-3 for faster links to customers.
— Joint venture with Eutelsat: Phase 1 to be signed this month, with Phase 2 ViaSat-3 deal signed by end of year. Few details on structure.
In a conference call with investors, ViaSat said it is moving at full speed with its ViaSat-3 terabit-per-second satellites. While no flight hardware has been built yet, the preliminary design review, recently completed, uncovered no issues that would slow the project or reduce its expected performance.
Two satellites are being built by Boeing Satellite Systems and ViaSat, the first to launch in 2019 over the Americas and the second, around 2020, to operate over Europe, the Middle East and Africa as part of a joint venture with European satellite fleet operator Eutelsat.
A third ViaSat-3 is intended over the Asia-Pacific to provide customers a seamless coverage. Construction on the third has not begun. But ViaSat said its recent equity offer, which raised a net $503 million, would be used to accelerate the start of the Asian satellite.
The fresh cash, of which $225 million will go to reducing debt, “is an important factor in being able to complete the global constellation, with an Asia-Pacific satellite sooner than we otherwise would have been able to do,” ViaSat Chief Executive Mark D. Dankberg said.
Dankberg specifically pointed to ViaSat’s military customers, who want global broadband coverage, as a driver for the Asia-Pacific ViaSat-3.
ViaSat’s U.S. Exede consumer service, like the competing HughesNet service operated by EchoStar Corp.-owned Hughes, has little choice but to live with just about zero subscriber growth for the moment. Both companies are operating satellites that are full to capacity on many of their beams, limiting subscriber growth.
New satellites are coming to the rescue. EchoStar Corp.-owned Hughes’s EchoStar 19, in orbit since December, is scheduled to begin commercial service in March or April.
ViaSat’s ViaSat-2 recently completed testing and is awaiting an April 25 launch aboard a European Ariane 5 rocket but will need some six months of testing before entering service, ViaSat Chief Executive Mark D. Dankberg said in a conference call with investors.
In the meantime, ViaSat is pushing hard into the aeronautical-connectivity market and posted a big win with American Airlines, which agreed to install the ViaSat service on the airliner’s new 737 MAX aircraft and to retrofit 500 airplanes in its domestic fleet with ViaSat’s Exede in the Air.
As of Dec. 31, ViaSat’s in-flight-connectivity was serving 555 commercial aircraft, with 750 additional planes scheduled to be outfitted by 2019.
ViaSat reported 675,000 residential subscribers as of Dec. 31, down from 687,000 a year earlier. But monthly per-subscriber revenue was $63.11 against $56.74 a year ago.
The satellite services division posted record revenue of nearly $469 million, up 13%, with operating profit up 64% to $98.3 million, for the nine months ending Dec. 31.
Double-digit growth in military business, and no competition in sight
ViaSat’s government division, on the strength of demand for satcom modems and data links for intelligence, surveillance and reconnaissance missions, reported record revenue of $489 million for the nine months ending Dec. 31, as well as record EBITDA and record new orders, totaling $669 million.
Notwithstanding the strength of ViaSat’s business with the U.S. military in recent years, the U.S. Defense Department has given no indication of wanting to launch its own broadband program.
Instead, ViaSat picks tip business on a service-by-service, application-by-application basis, with the overall demand hidden in the military’s annual purchases of commercial satellite bandwidth.
Dankberg said ViaSat expects to continue to fill that gap, especially since ViaSat-3 “probably has more resilience against accidental and intentional attacks, and has a lower cost” than the military’s own fleet of communications satellites.
What the U.S. military’s Advanced EHF, Wideband Satcom (military Ka-band) or Mobile User Objective System (MUOS) in UHF band can’t provide, the military supplements with ViaSat-provided broadband.
“On imagery, intelligence or battle management, overall we don’t see on the horizon any written requirements for or alternatives to the featuresthey have been buying from us,” Dankberg said..
Peter B. de Selding