APT Expects Financial Boost With Apstar 5, 6 in Orbit

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APT Satellite Holdings reported an 8 percent decline in sales in 2004, but also recorded narrower losses, as the oversupply of satellite transponders in East Asia continued to take its toll.

However, the Hong Kong-based company said it expects to improve its financial performance now that its two large new satellites, Apstar 5 and Apstar 6, are in orbit.

APT, whose Apstar 6 satellite was successfully launched April 12 aboard a Chinese Long March 3B rocket, reported April 11 that it lost 57.8 million Hong Kong dollars in 2004 on sales of 277.26 million Hong Kong dollars ($35.55 million).

Losses in 2003 were more than 300 million Hong Kong dollars following a write-down of the company’s satellite assets. Including the Apstar 6, APT operates four telecommunications satellites. The aging Apstar 1A will be taken out of service in 2007.

Apstar 6, built by Alcatel Space of Paris, is the first Western-built telecommunications satellite to carry almost no U.S.-made components. It is also the first commercial Chinese satellite to be equipped with anti-jamming software.

Alcatel Space was forced to replace its usual U.S. subcontractors because APT had insisted on booking a launch with China Great Wall Industry Corp.’s Long March vehicle, which is operated from the Xichang Satellite Launch Center in China’s Sichuan Province.

Apstar 6 is an Alcatel Spacebus 4000 C1 platform. It carries 38 C-band transponders and 12 Ku-band transponders. The C-band payload will be used for broadcasts to a broad swath of the Asian market that includes India, China and the Pacific islands as far east as Hawaii. The Ku-band payload will be devoted mainly to Chinese domestic telecommunications.

Chinese dissident groups are believed responsible for several instances of satellite-signal piracy in the past two years, which is one reason why APT asked Alcatel Space to include an anti-jam feature.

Apstar 6 is the first Alcatel Space product that contains no U.S. parts that are subject to U.S. State Department export controls. The U.S. government has refused to grant export licenses for satellite components destined for launch in China.

Alcatel Space officials said they would maintain relations with their habitual U.S. subcontractors for financial reasons. The U.S. dollar’s weakness against the euro and other currencies, plus the economies of scale production that U.S. suppliers are able to offer, continue to make it attractive for companies like Alcatel Space to shop in the United States. However, once Apstar 6 has completed its in-orbit checkout, Alcatel Space will have flight-qualified a product that does not need U.S. government approval.

Satellite operators in several regions, and government agencies in Europe, have said this is a goal they have set for the long term as part of a drive for autonomy to break their dependence on the United States.

In part because Apstar 6 is a new product, APT had difficulty finding sufficient insurance to cover the full $225 million cost of the Apstar 6 mission costs. These costs include the insurance premium, for which APT also had sought coverage.

The company had to settle for a $175 million policy because of what it termed unacceptably high premiums demanded for the final $50 million in coverage.

To soften the potential loss in the event of an Apstar 6 launch failure, APT contracted with China Great Wall Industry Corp. for the construction and launch of a replacement Apstar 6B satellite. APT agreed to pay China Great Wall $120 million for the construction and launch of an Apstar 6B, which would have been slightly smaller than the Alcatel-built Apstar 6.

With Apstar 6 in orbit, APT said it will attack a still-difficult Asia-Pacific satellite market with a reinforced product line that will enable the company to survive the current market downturn.

“The year 2005 will still be a challenging year,” APT said in a filing with the Hong Kong Stock Exchange, where the company’s stock is listed. “It is forecasted that the broadcasting and telecommunications businesses will continue to grow slowly … [M]arket competition will still be fierce.”

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