After Strong Year, APT Warns of Challenging Times Ahead

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PARIS — Hong Kong satellite fleet operator APT Satellite Holdings on March 24 reported sharp increases in revenue and profit for 2013 but said its newest satellite lost business late in the year and that East Asia, the Middle East and Africa faced an oversupply of bandwidth that will force down transponder lease prices.

Investors appeared to focus on future problems rather than past performance and drove APT’s stock price down more than 13 percent March 25 in trading on the Hong Kong Stock Exchange.

“The supply of transponders will increase rapidly in the Asia-Pacific, the Middle East and Africa regions,” APT said in a presentation to investors. “Market competition will become very fierce, with price pressure.”

APT said it nonetheless expected to ride out the coming market turbulence with little effect on revenue or profit.

While the future may see tougher going for APT, 2013 was a banner year. Revenue jumped 26.4 percent, to 1.14 billion Hong Kong dollars ($146.8 million). Operating profit was up 46 percent, to 641 million Hong Kong dollars.

EBITDA, or earnings before interest, taxes, depreciation and amortization, was 78 percent of revenue, down from 80 percent of 2012’s lower revenue figure.

APT operates three satellites in three orbital slots, and has leased capacity on two other satellites as part of its arrangement with China Satcom.

The newest APT-owned spacecraft, Apstar 7, entered commercial service in mid-2012 and at the end of 2012 was reported to be nearly 75 percent full. The satellite, built by Thales Alenia Space of France and Italy, is stationed at 76.5 degrees east and carries 28 C-band and 28 Ku-band transponders.

But by the end of 2013, the satellite’s fill rate had slipped to 70.4 percent. APT offered no explanation for the drop-off in usage, but Apstar 7 is the satellite on which the U.S. Defense Department, through a U.S. intermediary, had leased capacity in 2013. U.S. military officials, after facing congressional criticism for leasing bandwidth from a company that was partly owned by the Chinese government, have said they would be ending the lease.

Despite the occupancy rate decline, Apstar 7’s arrival was credited with fueling much of APT’s revenue increase in 2013. The satellite was launched in March 2012 aboard a Chinese Long March rocket and is expected to operate for 18 years.

APT reported higher fill rates for its other two satellites. APT’s share of Apstar 5, which is operated both by APT and by Telesat of Canada under the name of Telstar 18, was 85.5 percent full at the end of 2013, compared with 74 percent at the end of 2012. APT has access to 29 transponders on this satellite.

Apstar 6 was 90 percent full as of Dec. 31, compared with 80 percent a year earlier.

Apstar 7B, which APT had ordered as a backup in the event Apstar 7 failed or was destroyed at launch, has been leased to China Satcom, China’s national telecommunications satellite fleet operator, and renamed Chinasat 12. It operates at 87.5 degrees east. In late 2013, APT and China Satcom reached an agreement under which APT would lease back a portion of this satellite’s capacity.

Also in 2013, APT and China Satcom struck an agreement under which APT would lease the Chinasat 5A satellite and move it to 142 degrees east, where it has been renamed Apstar 9A.

Apstar 9A’s role is to prepare the market for the arrival of Apstar 9, which is under construction by China Aerospace and Technology Corp., a major equity stakeholder in APT. APT is paying $3.02 million to China Satcom for the use of Apstar 9A/Chinasat 5A for two years, while waiting for Apstar 9 to take its place at 142 degrees east.

Apstar 9 is scheduled for a late-2015 launch aboard a Chinese Long March rocket. The Apstar 9 contract, covering the satellite’s construction and launch, is valued at $211.2 million.