KOUROU, French Guiana – Satellite broadband provider Avanti Communications’ stock soared on Jan. 27 after months of declines, apparently on the strength of a largely favorable report by Moody’s Investor Service.
Moody’s mainly looked past London-based Avanti’s high debt load to focus on what its analysts said will be much higher revenue and gross profit. “Avanti’s credit metrics are likely to remain weak, albeit improving,” said Moody’s, which is a credit-rating agency.
Avanti, which is still in a growth phase, with two satellites to launch in 2017, has reported far lower-than-average earnings before interest, taxes, depreciation and amortization (EBITDA) margins compared to the established satellite fleet operators — less than 20 percent, versus 70-80 percent for its larger competitors.
But Moody’s, in a Jan. 26 report assessing the near-term prospects for Eutelsat of Paris, SES of Luxembourg and Inmarsat of London in addition to Avanti, said Avanti was entering a high-growth phase.
The company “will exhibit significantly higher organic revenue growth – recurring core customer growth – of at least 50 percent over the near term owing to its focus on the higher-growth mobile broadband segment and emerging markets,” Moody’s said.
Moody’s said it was optimistic that all four operators would return to higher growth in 2016 after a lackluster 2015 partly caused by launch delays that grounded satellites expected to boost revenue.
Adding to the good news is that once these launches occur, the operators are expected to reduce their capital spending to below 30 percent of revenue in 2017 compared to a long-term average of 34 percent.
Moody’s referenced forecasts by Euroconsult of increased demand for satellite bandwidth, especially for broadband, but the report did not appear to set these demand profiles against the coming supply increase.
Avanti is active in Africa, Europe and the Middle East, and specializes in Ka-band capacity for broadband uses. The company has reported recent fleet fill rates of 25 percent, which would be a disastrous figure for a larger operator. But here too, Moody’s cast this as reason for optimism that Avanti was about to enter a growth phase.
Avanti’s stock, traded on London’s AIM market, rose 16.3 percent Jan. 27 on higher-than-average volume.