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NEWS ANALYSIS
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PARIS — T elling separate stories and pursuing different business models, three satellite communications companies concluded U.S. stock-market introductions the week of Nov. 3 — all three hoping investors have grown comfortable with the idea of satellite technology as a vector for profitable growth.
A closer look at the three companies — RRSat Global Communications, Globalstar Inc. and Orbcomm Inc. — turns up more differences than similarities. But investment banks tracking these companies often refer to the satellite sector as a whole, even when individual companies try to be judged on their own merits.
RRSat of Israel leases capacity on some two-dozen satellites over the Americas, Europe, the Middle East and Asia and offers television programmers a one-stop shop for global program distribution. In presentations to prospective investors, RRSat has insisted on the advantages of leasing space on others’ satellites rather than owning its own orbital assets.
Globalstar and Orbcomm both own and operate low-orbiting satellite constellations and both intend to use their stock-market proceeds to finance replacement capacity in orbit.
But Milpatis, Calif.-based Globalstar offers voice and data communications and a possible future business in high-speed two-way transmissions for television and emergency services. Orbcomm is a two-way messaging service designed mainly to keep track of mobile assets and to communicate with distant electric meters, energy-transmission or storage facilities and other installations.
To replace its current constellation of satellites, Globalstar will need $1.2 billion. For a new generation of its satellites, Ft. Lee, N.J.-based Orbcomm says it will need less than $150 million.
Globalstar raised $127.5 million with its IPO, while Orbcomm raised $101.2 million.
Reem, Israel-based RRSat provides television programmers with global market access through its leased satellite capacity and the network of teleports it either owns or leases. The company’s founder and chief executive, David Rivel — who owns 21 percent of RRSat — said the growth in ethnic
and regional television programming worldwide plays to the company’s strengths.
“What we offer is a global network for TV channels,” Rivel said in a presentation to investors. “Content providers bring us the programming, we add the subtitles or the dubbing needed, and then through our satellite or fiber network we do the distribution.”
Since 2001, RRSat has grown from distributing 10 television channels to 250 today, and from a single radio station to about 80 radio stations now, the company said in its presentation and in filings with the U.S. Securities and Exchange Commission (SEC).
During that same period it has increased its satellite distribution from capacity on three satellites to capacity on about two-dozen satellites.
RRS at’s revenue for the nine months ending Sept. 30 was about $31 million, compared to $22.1 million for the same period a year ago. Gross profit margins, according to RRSat, are between 32 percent and 37 percent.
Revel said that its location in Israel, where its main teleport also is located, permits RRSat to distribute programming anywhere in the world with only one signal hop, avoiding the need for multiple satellite links to reach the intended market.
RRSat Chief Financial Officer Gil Efron said the company typically signs its customers to contracts lasting between three and five years. Backlog at Sept. 30 stood at $101.7 million. About 20 percent of the backlog could be cancel ed by customers if they give between one- and four months’ notice.
RRSat’s most visible direct competitor is Globecast of France, a subsidiary of France Telecom. But it also competes with teleport operators such as Telespazio of Italy and BT Broadcast Services of Britain.
Leasing satellite capacity instead of launching its own satellites offers obvious savings in capital expenditure but also means RRSat is vulnerable to regional price increases for that capacity. In recent years there has been a surplus of capacity in many regions, meaning RRSat could book space at relatively low prices.
Whether that pricing environment will continue as the fixed satellite services operators consolidate is unclear. At least one of the major operators, SES Global of Luxembourg, has moved to purchase teleport operators to steer business toward its satellite fleet. If other satellite owners do likewise, their view of RRSat may change.
Rivel said RRSat has struck partnerships with several satellite-fleet operators and is not viewed as a competitor by these companies. He said that four operators — Eutelsat of Paris, Intelsat of Bermuda and Washington, Gascom of Moscow and Thaicom of Bangkok — have established strategic partnerships with RRSat on a revenue-sharing basis.
“It would not be easy for satellite operators to create a network like ours,” Rivel said. “We have a global reach; operators are joining forces with us.”
Tapping the Nasdaq
PRIVATE colorchange:<c”Black”> Three satellite communications companies conducted initial public offerings of stock on the U.S. Nasdaq market Nov. 1-3. RRSat leases satellite capacity worldwide to distribute television programming, while Globalstar and Orbcomm operate low-orbiting satellite constellations for messaging and, in the case of Globalstar, voice communications as well. RRSat will use the proceeds to expand its operations in the United States. Globalstar and Orbcomm will invest in second-generation satellite systems.
Company Shares issued Gross proceeds
RRSat Global 3.8 million $47.5 million
Globalstar 7.5 million $127.5 million
Orbcomm 9.2 million $101.2 million
