PARIS — Satellite broadband services and hardware provider ViaSat Inc. on Nov. 6 said it would sign a contract for a ViaSat-2 satellite by December to expand its reach despite slower-than-expected growth in subscribers to its on-orbit ViaSat-1 spacecraft.
In a conference call with investors, ViaSat Chief Executive Mark D. Dankberg brushed aside a suggestion that the company wait for more ViaSat-1 results before buying another satellite that is likely to cost $400 million or more.
Industry officials have said ViaSat has been negotiating with Lockheed Martin Space Systems of Sunnyvale, Calif., on ViaSat-2 and is weighing whether to order one large Ka-band satellite or two smaller ones.
Dankberg said ViaSat is evaluating two options for ViaSat-2. He did not disclose what they are, but said both should enable ViaSat’s Exede consumer broadband service to squeeze more bandwidth out of a given capital investment while also expanding the service’s reach so that it covers the entire United States and neighboring geographies.
ViaSat-2, he said, “will be under contract this quarter. We’ve barely scratched the surface of what’s possible with ViaSat-1.”
ViaSat-1 entered service early this year and its entire coverage area was activated last spring. Unlike ViaSat’s older WildBlue satellite broadband service, ViaSat-1 and Exede offer much higher transmission speeds that appeal to markets already within DSL coverage areas.
ViaSat said that as of Sept. 30, it had 429,000 subscribers on its combined WildBlue and Exede services. Some 149,000 of these were Exede customers who pay higher average monthly fees.
ViaSat in August reported that it had a total of 404,000 subscribers as of June 30.
For the three months ending Sept. 30, average per-subscriber revenue was $47.96, up from $46.44 as of June 30.
ViaSat said the rate of churn — the percentage of subscribers quitting the service — was about 2.5 percent per month, which was heavily weighted to those on the lower-speed WildBlue service. The company said 16,400 WildBlue subscribers migrated toward Exede in the three months ending Sept. 30.
ViaSat earlier this year had evoked figures of 90,000 to 100,000 gross subscriber additions per quarter. Dankberg said this growth rate will not occur immediately, and he gave the impression that ViaSat would prefer to understand how to win and keep disappointed former DSL customers than to load ViaSat-1, which can handle around 1 million subscribers, with people who have no broadband alternatives.
Dankberg said Exede is doing fine and that the company is not so much in a race to fill the satellite as it is on a long-term path to making satellite broadband a viable competitor to dial-up and DSL Internet access.
ViaSat Chief Operating Officer Richard Baldridge urged investors to look past the subscriber count to the emerging economics of ViaSat-1.
“To cover all our fixed costs and become cash-flow generating within a year after launch is very successful,” Baldridge said.
Dankberg said it would not be clear at least for a few months how the entry into service of Hughes’ EchoStar 17 satellite — a near-duplicate of ViaSat-1 — would affect Exede subscriber additions. EchoStar 17 began commercial operations in October.
Englewood, Colo.-based EchoStar, which owns Hughes and the HughesNet consumer broadband service, is a sister company to satellite television provider Dish Network, which has contracted with ViaSat to distribute Exede services to Dish Network customers.
Dankberg said he expected Dish Network to continue its relations with ViaSat despite the entry into service of EchoStar 17, which is also known as Jupiter. ViaSat has also signed a contract with DirecTV Group of Los Angeles, the other major satellite television provider in the United States.
Dankberg referred to the similarities between EchoStar 17 and ViaSat-1 as “a funny situation.” ViaSat is suing ViaSat-1 manufacturer Space Systems/Loral for patent infringement in a California District Court, alleging that the satellite builder took ViaSat technology and used it to help EchoStar/Hughes build EchoStar 17. Space Systems/Loral has denied the allegation.
Starting in 2013 and following certification by the U.S. Federal Aviation Administration, the Exede service will be extended to commercial aircraft customers aboard some JetBlue and United Airlines flights.
Meanwhile, during the three months ending Sept. 30, ViaSat booked an order for 10,000 of its SurfBeam-2 consumer broadband terminals to be shipped to an unnamed Eastern European government election agency whose territory is covered by the Ka-Sat satellite owned by Eutelsat of Paris.
Eutelsat has struggled with its Ka-Sat Tooway commercial service.
ViaSat said it had signed a wholesale-distribution agreement with an unnamed customer to provide Ka-band consumer broadband to northern Mexico. The company also signed a large contract with NBN Co. of Australia to provide ground gear for Australia’s ambitious satellite broadband program, which will use two Ka-band satellites built by Space Systems/Loral.
