Antenna Glitch Dents Intelsat Revenue

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PARIS — Satellite fleet operator Intelsat said Aug. 4 it stands to lose up to $310 million in revenue already under contract because of the deployment failure of its New Dawn satellite’s C-band reflector antenna.

The revenue loss from customers that had already committed to using New Dawn’s C-band payload, coupled with delays in the launch of the Intelsat 18 satellite, likely will keep Intelsat’s 2011 sales just about at 2010 levels, company officials said.

Intelsat New Dawn was launched in April with a mixed C- and Ku-band payload. After abandoning initial efforts to shake free the stuck C-band antenna, ground control teams deployed — with difficulty — the Ku-band antenna, which is now in full operation, Intelsat said.

But a large part of the satellite’s revenue-generating potential has been definitively lost. Intelsat said in its financial statements released Aug. 4 that the company had already placed into its firm backlog $310.2 million from customers that had committed to using the C-band capacity.

In a conference call with investors, Intelsat Chief Executive David McGlade said Intelsat will try to line up other C-band capacity for its customers, which would at least retain these customers on Intelsat’s books, even if at much lower profit margins for Intelsat.

But with C-band capacity in sub-Saharan Africa still in short supply, and satellites over the region running at C-band fill rates of 90 percent or more, McGlade said the likelihood of placing all these New Dawn customers on competitors’ satellites is remote.

Intelsat’s total contracted backlog at June 30 stood at $9.8 billion. Removing all the New Dawn C-band customers would reduce that figure by just 3.2 percent. But New Dawn and the Intelsat 18 satellite, now scheduled for launch no sooner than October, had been seen as key drivers for 2011 revenue growth.

Intelsat 18 has been delayed because of difficulties in securing a rocket. Sea Launch Co. of Bern, Switzerland, will now be performing the launch from Russia’s Baikonur Cosmodrome aboard a Zenit-3SLB vehicle. An October launch will mean Intelsat 18 will contribute only marginally to Intelsat’s 2011 revenue.

In addition to Intelsat 18, Intelsat has six other satellites under construction and scheduled for launch by mid-2013. Much of this capacity will replace Intelsat spacecraft being readied for retirement, but the new spacecraft will also add a net 81 transponders to Intelsat’s in-orbit fleet, for nearly a 4 percent increase. This will drive revenue growth in the next few years, McGlade said.

Luxembourg-based Intelsat reported Aug. 4 revenue of $642.4 million for the three months ending June 30, up 1 percent from the same period a year ago. EBITDA, or earnings before interest, taxes, depreciation and amortization, was stable at 78 percent of revenue.

The company’s fleet, which totaled 2,125 fully operational transponders — meaning excluding those on satellites nearing retirement that have been put in fuel-saving inclined orbit — was 77 percent full at June 30.

Network services revenue was down 3 percent for the three-month period compared with last year. McGlade said increased business from the robust Latin American market was offset by lower sales in North America, which is generally viewed by satellite operators as offering only low growth rates in the coming years.

In addition, McGlade said, Intelsat saw an erosion of business providing point-to-point links in Africa and Asia as fiber lines in those regions continued to take business from what Intelsat has long said is a declining sector.

One revenue standout in the quarter was Intelsat General, an Intelsat subsidiary based in Washington that focuses on providing satellite bandwidth and end-to-end services for government customers. The profit margin for this business varies depending on whether Intelsat General uses Intelsat’s satellites or must relies on third-party capacity to fulfill its contract obligations. For example, some contracts call for military X-band or mobile satellite capacity, and Intelsat does not own satellites providing those services.

McGlade said revenue from government contracts totaled $126 million in the three months ending June 30, a 9 percent increase from last year.

 

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