SES loses 12 transponders on NSS-806 satellite, says impact is temporary

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WASHINGTON — A 19-year old SES satellite lost nearly a third of its transponders in an anomaly this month, marking the second major satellite malfunction in the SES fleet this year.

NSS-806, a C- and Ku-band telecommunications satellite from Lockheed Martin, is still serving customers despite being seven years past its intended design life. However, 12 transponders ceased functioning this month, SES said July 28, without specifying which frequencies.

In the company’s half year earnings results for 2017, SES estimated the impact on revenue would be between 7 and 9 million euros ($8.3 and $10.4 million).

Near-term solution

Luxembourg-based SES, which operates more than 50 satellites, lost control of another satellite, AMC-9, in June. The company switched off the spacecraft’s 48-transponder payload to prevent interference with other operators’ signals while SES and manufacturer Thales Alenia Space try to restore normal functions. On July 2, SES said it had reestablished contact with AMC-9, but had also identified debris in its vicinity.

In the company’s July 28 statement, SES said the impact from both anomalies “is expected to be temporary as SES’s fleet planning and new capacity from satellites expected to be launched within the next nine months will mitigate the short-term reduction in marketable capacity.”

SES-14, a C- and Ku-band satellite from Airbus Defence and Space, is scheduled to launch during the first quarter of 2018 on a SpaceX Falcon 9 to replace NSS-806. The new satellite covers the Americas and has a high-throughput Ku-band beam that arcs across the North Atlantic between North America, Europe and Northwest Africa, covering high-traffic flight routes. NSS-806 covered the Americas and Europe, while AMC-9 covered just North America.

SES Chief Financial Officer Padraig McCarthy said July 28 on a conference call with investors that changes in fleet health and launch delays would impact 2017 total revenue by an estimated 37 to 47 million euros, mostly in the second half of the year. Approximately 15 to 18 million euros of that total comes from AMC-9, and 13 to 20 million euros comes from changes in launch timing compared to what SES forecasted at the beginning of the year.

Revenue changes

The anomalies on AMC-9 and NSS-806 caused SES to shift its financial outlook on video broadcasting, which comprised 67 percent of revenues for the six months ended June 30, from stable to slightly declining. SES predicts fixed data as returning to growth, government sales as showing stable to slight growth, and mobility as having strong growth. The operator collectively refers to those three verticals as SES Networks, comprising the other 33 percent of revenues, and reported a 7.5 percent increase in revenue compared to the first half of 2016. SES Video revenue was down 3.1 percent by comparison.

When factoring in currency fluctuations, and treating SES’s acquisitions of medium Earth orbit (MEO) operator O3b Networks and Israeli media services provider RR Media as consolidated from the start of 2016, SES total revenues decreased by 1.5 percent year-over-year for the first six months of 2017 to 1.049 billion euros.

SES’s net profit increased by 21.2 percent to 275.5 million euros, thanks in part to “the recognition of a tax asset in relation to withholding tax in Latin America,” resulting in a 40.1 million euro contribution from changes in income taxes. The company’s operating profit was 306 million euros, down 8.1 percent year over year.

SES’s backlog stood at 7.5 billion euros.

Still guarding the war chest

SES remains tight-lipped on its plans for what is now $1.69 billion in uncommitted capital expenditures, or capex. The operator has been sitting on this capital for nearly a year. McCarthy said SES now expects 2017 spending on new assets to be 120 million euros lower than previous estimates, along with reductions for the following three years. In a presentation to investors, SES charted 60 million euros in uncommitted capex this year, followed by 150 million euros in 2018, 280 million euros in 2019, 320 million euros in 2020 and 620 million euros in 2021.

McCarthy said SES does “see more flexibility in terms of the allocation between GEO and MEO,” and that the company has ideas for future satellite programs, but has not solidified them yet.

In the company’s earnings report, SES said it signed a development agreement July 28 with Boeing “to develop innovative technology improvements aimed at delivering next generation technology that will form the basis for SES’s future satellite fleet.”

Karim Sabbagh, SES president and CEO, said that today’s investments are resulting in higher-performing satellite systems than before, prompting “a rescaling of the capex and how [it] is going to be spread over the years.” He said some geostationary capacity will shift to MEO as older satellites are replaced.

O3b Networks has 12 MEO Ka-band satellites in orbit today, and another eight under construction by Thales Alenia Space. Sabbagh estimated that about 20 percent of data applications are latency sensitive — and would hence favor O3b’s lower orbit — while the rest today are not. That number will grow however, he said, particularly for customers that encrypt their networks for greater security. Encryption can add additional latency, prompting a search for other ways to increase broadband speeds.