With Broadband Market Surging, ViaSat Increases Shipments

PARIS — ViaSat Inc., citing improvements in the market for satellite-delivered broadband Internet to consumers, said it expects to ship more than 30,000 two-way terminals per month for WildBlue Communications Inc.’s U.S. service by the end of the year.

ViaSat
also forecasts that it will ship 40,000-50,000 terminals to Europe in the next two years as part of Eutelsat‘sTooway service, which is using limited capacity on existing satellites before launching its own large Ka-band broadband satellite in 2010.

“The outlook for consumer Ka-band broadband has improved relative to a quarter ago,” ViaSat Chief Executive Mark Dankberg said in an Aug. 5 conference call on the Carlsbad, Calif.-based company’s financial results.

ViaSat
provides consumer broadband terminals for Denver-based WildBlue’s service. Frustration with WildBlue’s indecisiveness in ordering a second dedicated Ka-band satellite to meet surging demand was a principal reason why ViaSat ordered its own satellite, called ViaSat-1, which is under construction at Space Systems/Loral of Palo Alto, Calif., and scheduled for launch in 2011.

Dankberg
said ViaSat-1 construction is on track, as are the costs of the system, which ViaSat has estimated at $350 million including the launch of the satellite. Dankberg said his company continues to hold talks with prospective ViaSat-1 co-investors, and that one or two strategic partners should be on board by the end of this year.

More immediately, ViaSat is working with WildBlue to squeeze extra capacity from WildBlue’s existing system. WildBlue announced in July that hardware and software upgrades have expanded the current system’s capacity by more than 150,000 subscribers, taking it to around 640,000 subscribers.

The capacity increase was achieved through improved transmission links that permit 50 percent more information to be sent through the same radio link.

Because of the upgrade, WildBlue has reopened satellite beams that had been closed to new subscribers.

For ViaSat, that means WildBlue is likely to increase its consumer terminal orders. Dankberg said deliveries likely will exceed 30,000 per month toward the end of the year.

Paris-based Eutelsat expects to launch its Ka-Sat spacecraft, under construction by Astrium Satellites of Europe, in 2010. Its Tooway consumer-broadband service already has been introduced using the limited Ka-band capacity on a Eutelsat Hot Bird satellite as well as spare Ku-band capacity.

ViaSat
is Eutelsat’s principal partner for Ka-Sat, and the two companies have been discussing how to deepen their relationship through a joint venture that would give Eutelsat a bigger presence in the United States. Eutelsat is the world’s third-largest commercial satellite fleet operator by revenue but has only marginal coverage of North America.

Dankberg
said that judging from the WildBlue experience, Eutelsat likely will order up to 50,000 two-way consumer broadband satellite terminals in the next two years as it develops the Tooway market in preparation for Ka-Sat’s arrival.

ViaSat
expects to secure debt financing to help pay for ViaSat-1, and Wall Street analysts remain leery of the project because it promises to be a drag on ViaSat’s financial performance for the next two years. Dankberg said he remains optimistic about finding co-investors.

ViaSat’s
existing business is more than 50 percent military related. The company provides gear for tactical data networks for the U.S. Defense Department and is a partner with Lockheed Martin of Bethesda, Md., for the multiyear, multi-spacecraft Transformational Satellite (T-Sat) communications system contract expected to be awarded this year by the U.S. Defense Department. Lockheed is competing against a team led by Boeing Co. of Chicago for the contract, whose first satellite would be launched around 2016.

A Lockheed Martin T-Sat win would generate more than $100 million in revenue for ViaSat, Dankberg said.

For the three months ending June 27, ViaSat reported $153 million in revenue, an increase of 19 percent over the previous year. Pretax earnings were $9.8 million, up 66 percent from the same period a year earlier.