APT Bucks Consolidation Trend in Asia

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PARIS — It seems like only yesterday that the common wisdom on Wall Street was that the smaller East Asian satellite fleet operators would need to agree to be acquired by bigger companies better able to handle the huge cash requirements of replacing in-orbit satellites.

Somebody forgot to tell APT Satellite Holdings of Hong Kong. Instead of merging with or selling itself to another operator, APT has not only remained in business but appears to be thriving. Revenue in 2009, at 578.1 million Hong Kong dollars ($74.5 million), was up 43 percent from 2008.

Operating profit more than doubled year-on-year, and EBITDA — earnings before interest, taxes, depreciation and amortization — was 76 percent of revenue, compared with 63 percent in 2008.

The fill rate on the company’s satellites held steady at 71 percent for Apstar 6 and 81 percent for APT’s share of the Apstar 5 satellite. For Apstar 2R, the fill rate was 81 percent for 2009, APT told investors in its annual report.

In July, APT purchased from Telesat of Canada the Telesat-owned portion of Apstar 2R in a cash transaction valued at $69 million.

The company appears healthy at a time when it is no longer able to count on the Chinese mainland as a big revenue source. China-based customers have declined, in revenue terms, in importance at APT in the last couple of years, in part because of China’s consolidation of its satellite-television business under the China Direct Broadcast Satellite Co. Ltd.

China-based customers, not including Hong Kong, accounted for 49 percent of APT’s revenue in 2006. By 2009 that figure had dropped to 26 percent, APT said.

Relations between China’s state-owned satellite and launch sector and APT are complicated. China Aerospace Science and Technology Corp. (CASC) owns 57.14 percent of APT International, which owns 51.82 percent of APT Satellite Holdings.

CASC also owns China Satcom, which has agreed to purchase APT’s Apstar 7B satellite if the Apstar 7 satellite is successfully launched in mid-2012.

APT has contracted with Thales Alenia Space of France to build both Apstar 7 and Apstar 7B. China Great Wall Industry Corp. — which is 100 percent owned by CASC — is under contract to launch both satellites on separate Long March rockets.

Despite the interlocking ownership between the parties, APT insisted in its launch contract that China Great Wall lower the price if another commercial launch customer gets a lower price for a Long March mission. APT has agreed to pay $68 million to launch the 4,000-kilogram Apstar 7B aboard the Chinese rocket, a price that appears well within the range of recent commercial launch contracts China Great Wall has won.

APT told shareholders the launch contract was negotiated “on an arm’s-length basis, having regard to the value of similar assets on the market.”

Apstar 7 is scheduled to replace Apstar 2R, which was launched in 1997, at 76.5 degrees east.

Apstar said it is optimistic about the near-term market for C-band for Apstar 2R and the future Apstar 7, which will carry Ku- and C-band capacity.

As its business in China has declined, APT has more than made up for it by expanding beyond its core markets of Hong Kong, Indonesia and Singapore into the rest of Asia, Africa, Australia and parts of Europe, all of which are covered by the Apstar 2R satellite.

APT officials said that while competition remains intense in its home neighborhood, it is optimistic that an improving regional economy will help APT’s business as well.