Telesat Poised To Order Telstar 12 Replacement

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KOUROU, French Guiana — Satellite fleet operator Telesat on May 2 said it expects to sign a contract for a satellite to replace the Telstar 12 spacecraft at 15 degrees west by August, a decision that suggests the company has found a way around a frequency dispute with a Russian satellite operator.

In a conference call with in investors, Ottawa, Canada-based Telesat also said that while it has not yet sold the C- and Ku-band capacity available for Latin America on its just-launched Anik G1 satellite, it believes the market there continues to be robust.

Launched on April 15, Anik G1 is expected to enter commercial service the week of May 8 at 107.3 degrees west in geostationary orbit. Most of its Ku-band payload has been sold, for the satellite’s full 15-year life, to Canadian satellite-television provider Shaw Direct.

Anik G1’s X-band payload has been sold, also for 15 years, to Astrium Services in Europe to extend to North America and the Pacific that company’s X-band reach for military customers.

Telesat Chief Executive Daniel S. Goldberg declined to speculate on prospects for the remaining C- and Ku-band capacity on Anik G1 beyond saying that “the pipeline looks good,” and that Telesat’s other capacity over Latin America is nearly sold out. Anik G1 doubles the amount of capacity available from that orbital slot, where Anik F1 is also stationed and will remain.

Latin America has been perhaps the world’s most dynamic regional market for satellite bandwidth in the past couple of years.

With Anik G1’s entry into service, Telesat, which is the world’s fourth-largest commercial satellite fleet operator by revenue, has 13 satellites in orbit plus the Canadian Ka-band payload on the ViaSat 1 broadband satellite owned by ViaSat Inc. of Carlsbad, Calif.

The company has long said it expected to replace Telstar 12 at 15 degrees west but that it was negotiating with Russian Satellite Communications Co. (RSCC) of Moscow over frequency rights.

RSCC has priority rights to some of the Ku-band frequencies in that neighborhood and the company’s Express-AM8 satellite is scheduled for launch in 2014 into an orbital slot just one degree away at 14 degrees west. AM8 has beams directed to South America, and separate beams for Europe, the Middle East and Africa, and Europe and the Middle East.

During the conference call, Goldberg said the replacement for Telstar 12 will not provide much additional capacity beyond the current satellite, which was launched in 2009 and has 38 54-megahertz Ku-band transponders.

Goldberg said the coverage area of the new Telstar 12 would be different, however. He declined to elaborate.

The Telstar 12 replacement satellite order will be the first for Telesat since its majority owner, Loral Space and Communications of New York, sold its Space Systems/Loral satellite manufacturing division to MDA Corp. of Canada. Telesat has been a loyal buyer of Space Systems/Loral satellites under the former shared ownership.

For the three months ending March 31, Telesat said revenue was up 12 percent, to 219 million Canadian dollars ($216 million), with EBITDA, or earnings before interest, taxes, depreciation and amortization, also up 12 percent and equivalent to 78 percent of revenue. The growth in revenue was mainly due to the Nimiq 6 satellite’s entry into commercial service in mid-2012.

Telesat said its North American fleet, which accounted for 82 percent of the company’s business in the quarter, was 91 percent full. The international fleet was 84 percent full. Backlog at March 31 stood at 5 billion Canadian dollars.

Telesat Chief Financial Officer Michel Cayouette said the company’s recent purchase, for about 231 million Canadian dollars, of bonds paying 12.5 percent annual interest will result in about 40 million Canadian dollars in annual interest payments.

Telesat expects to pay about 206 million Canadian dollars in debt service in 2013.

Telesat’s two owners, Canadian pension fund PSP Investments and Loral, have made it clear they would like to sell Telesat. They tried to do so in 2011, were unable to secure their minimum acceptable price and subsequently elected to pay themselves a special dividend valued at some 656 million Canadian dollars.

In 2012, PSP sought to float Telesat on the stock market, a move that Loral opposed for tax reasons. PSP agreed to abandon the effort.

Industry officials have speculated that with Nimiq 6 and Anik G1 now in orbit, and no near-term capital spending requirements, PSP and Loral may renew their search for a strategic transaction.