Intelsat: Initial Epic Customers Have Booked $500 Million in Capacity

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IBIZA, Spain — Satellite fleet operator Intelsat said Aug. 1 that the three inaugural customers for its Epic line of high-throughput mobile communications satellites have booked a combined $500 million in capacity over 10 years.

The three customers, Panasonic Avionics, Harris CapRock and MTN Satellite Communications, are the three anchor customers for Epic, whose first two satellites are expected to be in service in 2015 and 2016.

All three customers have contracted for Ku-band capacity for their respective core markets, which include commercial airlines, oil and gas exploration platforms and passenger cruise ships.

In a conference call with investors, Luxembourg- and Washington-based Intelsat said the Epic satellites, which in principle will include C- and Ku-band capacity with multi-gigabit-per-second throughput, will help increase its revenue in network services in addition to the mobile markets Intelsat is now targeting.

In addition to the two Epic satellites, which have not yet been ordered, Intelsat has 10 mobile beams on seven satellites to be launched in the next two years as the company tries to capture applications for mobile data links.

Not everyone is wowed by Epic. Romain Bausch, chief executive of competitor SES of Luxembourg, said July 27 that using Ku-band satellites to provide high-bandwidth links via spot beams is not new. SES, he said, has been doing it for some time.

Intelsat Chief Executive David McGlade said Intelsat has heard grumbling from some customers of L-band mobile satellite services provider Inmarsat of London following that company’s recent price increases, and that this has only helped make the case for Epic and, more broadly, Intelsat’s push into mobile applications.

Including the two Epic satellites and the Intelsat 19 spacecraft launched in June, Intelsat plans to launch 10 satellites through 2015. While much of the capacity on these new satellites will replace retiring Intelsat spacecraft, most include incremental increases in transponder capacity to capture growing markets in South America, Africa and Asia.

To support the construction and launch of these satellites, Intelsat is devoting between $775 million and $850 million this year to capital investment, a figure that will decline to a maximum of $625 million in 2013 and no more than $600 million in 2014, assuming the current launch schedule holds.

Intelsat officials declined during the call to address the company’s proposed $1.75 billion initial public offering (IPO) of stock, which was filed in May with the U.S. Securities and Exchange Commission.

Whether Intelsat will proceed with the IPO is the subject of much speculation in the industry. Aside from its capital investment plan, the company is using its cash flow to pay down some of its debt and reduce the interest on other parts of it, but the $15.9 billion total debt as of June 30 will complicate a stock offering without an offsetting growth story, industry officials have said.

Intelsat hopes Epic, and the push to mobile markets, will help tell that story.

For the three months ending June 30, Intelsat reported revenue of $638.7 million, down 1 percent from the same period a year ago. EBITDA, or earnings before interest, taxes, depreciation and amortization, was 77 percent of revenue, also slightly down from a year ago.

The backlog of orders for Intelsat capacity stood at $10.6 billion as of June 30, virtually unchanged from where it was March 31.

For the three months ending June 30, 46 percent of Intelsat’s revenue came from its Network Services business, which was down 5 percent from a year ago as delivering bandwidth to Africa moves from satellite to fiber links.

McGlade said the schedule of upcoming satellite launches is such that revenue will pick up, but only modestly, in the second half of 2012 before accelerating in 2013 as the new spacecraft enter service.

The recently launched Intelsat 19 spacecraft has completed testing and is heading toward its operating location at 166 degrees east longitude. Three more Intelsat satellites are scheduled for launch in August.

 

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