Avanti Finances Improve in Spite of Tardy Satellite

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PARIS — Satellite broadband service provider Avanti Communications of Britain reported a pretax profit for the year ending June 30, compared to a loss the previous year, and said its satellite builder, Astrium, has already paid more than $2 million in late-delivery penalties, with more to come.

In a Sept. 22 report to the London Stock Exchange, Avanti said it now expects its Hylas Ka-/Ku-band satellite to be launched by next June. The satellite was 13 percent booked as of June 30 and is likely to be 20 percent booked by the time it is launched.

Avanti is using rented capacity on other operators’ satellites to provide broadband links to rural and other underserved areas. Its Hylas satellite, whose new-generation flexible payload was financed in part by the European Space Agency (ESA), is scheduled for launch by Europe’s Arianespace launch consortium on either a heavy-lift Ariane 5 that will also carry a co-passenger, or as the main passenger on the European version of Russia’s Soyuz rocket. Soyuz operations from Europe’s Guiana Space Center in French Guiana are scheduled to begin with an inaugural launch in the spring of 2010.

Hylas had been scheduled for launch aboard a Space Exploration Technologies’ Falcon 9 rocket, but the Hawthorne, Calif.-based company is behind schedule on Falcon 9, whose maiden flight has slipped to an undetermined date late this year or early in 2010.

Avanti in July announced it had switched rocket suppliers to secure an early in-service date. But despite the fact that the Hylas launch likely would have slipped to 2010 even if the satellite had been ready, Avanti has received late-delivery penalty payments from Astrium.

The payments, called liquidated damages, totaled 1.37 million British pounds ($2.23 million) as of June 30. “These damages accrue daily and will continue until November 2009,” Avanti said in its report to the stock market.

Astrium Satellites officials had conceded in June that delivery of what they described as a highly innovative flexible payload has taken longer than expected, and would force a year’s delay, to mid-2010, in the launch of Hylas.

Astrium is building the Hylas satellite in partnership with the Indian Space Research Organisation’s commercial arm, Antrix, which is providing the satellite’s skeletal structure, or bus.

Arianespace officials have agreed to find a launch slot for Hylas as soon as practicable once the satellite is ready for shipment.

Hylas’ Ka-band payload is designed to provide broadband access to between 200,000 and 300,000 customers, depending on the mix of subscription types. Hylas service will be purchased through telecommunications service providers selling subscriptions based on transmission speeds of 500 kilobits and 10 megabits per second.

Hylas will be the first dedicated broadband satellite launched over Europe, but it will be followed later in 2010 by the large Ka-Sat spacecraft being built by Astrium Satellites for satellite fleet operator Eutelsat of Paris.

Avanti said that the combination of Hylas and Ka-Sat will fall far short of meeting demand for broadband in Europe, and that more capacity will be needed in short order.

“We are highly confident that Hylas will sell out quickly, and are therefore busy working on two projects to increase our capacity,” Avanti said. “An investment bank has been retained to help us to close financing, which has been offered by government sponsors. The success of this effort is not yet definitive but we hope to report positively on this soon.”

Several European governments have announced broadband-stimulus programs that provide various types of financial incentives.

Avanti said it has signed distribution agreements with telecommunications service companies in 12 nations in Europe. These service providers are “obligated to make minimum initial commitment to service volumes,” Avanti said. The service providers’ commitments vary in value from 100,000 pounds to 9 million pounds, and cover periods from three years to the full 15-year service life of the Hylas satellite, Avanti said.

Consumer broadband, while still the core of Avanti’s service offering, is not the only application Avanti is finding for Hylas, Avanti Chief Executive David Williams said in the financial report.

“We currently have services running to provide backhaul for mobile phone base stations, i.e. carrying user traffic from a rural base station back to the network center; providing telemetry for wind farms and providing outside broadcasting transmissions for television companies,” Williams said. “It’s all broadband to Avanti, but the applications which customers find … are definitely growing.”

For the 12 months ending June 30, Avanti reported revenue of 8 million pounds, up from 5.9 million pounds the previous year. The operating loss was 1.4 million pounds, compared to 1.9 million pounds, while pretax profit, at 1.8 million pounds, compared to a loss of 1.4 million pounds a year ago.