Drop in WildBlue Terminal Orders Slows ViaSat’s Growth

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PARIS — Satellite ground terminal provider ViaSat Inc., which is making a large investment in satellite consumer broadband in the United States, on Nov. 5 reported further declines in its consumer broadband business as its current partner and future subsidiary, WildBlue, slowed its purchases of ViaSat consumer terminals.

The decline in the consumer business limited ViaSat’s overall revenue increase to 2.2 percent, at $319 million, for the six months ending Sept. 30. The company nonetheless reported higher operating profit in both its government and commercial divisions as it reduced operating and administrative costs.

In a conference call with investors, Carlsbad, Calif.-based ViaSat said its purchase of Denver-based WildBlue Communications and construction of its large ViaSat-1 Ka-band broadband satellite are both on track and within the financial reach of ViaSat given the company’s recent $275 million bond issue and an increase in its bank credit line to $210 million.

ViaSat has made some $155 million in ViaSat-1 payments to the satellite’s manufacturer, Space Systems/Loral of Palo Alto, Calif., and to the launch service provider, International Launch Services of Reston, Va. Both are on track for a launch in the first quarter of 2011. The project’s total cost — satellite construction, launch, insurance and several gateway Earth stations — is estimated at $400 million.

ViaSat believes the slowdown in terminal orders from WildBlue is due to the fact that WildBlue has run out of capacity in  some of its satellite beams covering high-demand areas. ViaSat elected to build ViaSat-1 when WildBlue hesitated in building a second satellite to meet growing demand. ViaSat then opted to purchase WildBlue outright instead of creating, from scratch, a consumer broadband sales and distribution network.

For the six months ending Sept. 30, ViaSat’s commercial networks division reported revenue of $117.7 million, down 3.7 percent from the same period a year earlier. But operating profit at the division was sharply higher.

ViaSat Chief Financial Officer Ronald G. Wangerin said during the call that ViaSat has cut its overhead costs at the division, resulting in higher profitability despite the lower sales volume.

ViaSat is involved in a variety of U.S. military satellite communications programs, including the Wideband Global Satcom system that provides X- and Ka-band links. Two of a planned six Wideband Global satellites have been launched. ViaSat is also a major contributor to the U.S. Navy’s Mobile User Objective System satellite system, whose first launch is scheduled for early 2011. ViaSat’s government division reported a 5 percent increase in revenue, to $195.4 million, for the six months ending Sept. 30.

ViaSat Chief Executive Mark Dankberg said the company continues to evaluate how its government and commercial Ka-band satellite work could be used to maximum advantage. In addition to its ViaSat-1 program, ViaSat has partnered with satellite fleet operator Eutelsat of Paris to provide ground gear for Eutelsat’s Ka-Sat spacecraft, scheduled for launch in late 2010.

Through its WildBlue link, ViaSat is a major provider to Canada’s satellite broadband market, and also is a supplier to BBSat, a U.S. company licensed to provide consumer satellite broadband in Japan.

BBSat remains at the development stage but is looking for support from Japan’s broadband-stimulus financial package, and is also talking with strategic partners to finance a full rollout of satellite broadband in Japan. EchoStar Corp. of Englewood, Colo., which has invested in satellite broadband in South Korea and China, is one potential backer of BBSat, according to industry officials. EchoStar spokesman Marc Lumpkin declined to comment Nov. 5 on whether EchoStar is investing in BBSat.