Intelsat still searching for cause of IS-29e loss, replacement satellite TBD

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WASHINGTON — Intelsat estimates the in-orbit failure of its first high-throughput satellite will cost the company between $45 million and $50 million in revenue for the year.

Luxembourg and Virginia-based Intelsat said it is still working with Boeing on understanding why the uninsured, three-year-old Intelsat-29e satellite it built sprung a fuel leak three weeks ago and stopped communicating shortly after.

The investigation has so far indicated that Intelsat-29e’s failure is unrelated to the propulsion issues with Intelsat-33e, a Boeing-built satellite that launched in 2016, Steve Spengler, Intelsat’s chief executive, said April 30.

Because of the total loss of Intelsat-29e, the low end of Intelsat’s revenue projection for 2019 is now its most optimistic assessment. Rather than generating between $2.06 billion and $2.12 billion for the year, Intelsat now forecasts revenue of $2 billion to $2.06 billion, the company said in an earnings release. Unexpected customer losses in government and media sectors weighed down Intelsat’s projection by $10 million to $15 million in addition to the satellite loss.

Intelsat Chief Financial Officer Jacques Kerrest said the company is still calculating the full financial impact of losing Intelsat-29e. He said that impact includes the loss of satellite revenue, the cost of accommodating customers by moving them to competitor satellites, and repurposing sellable capacity on other Intelsat satellites for customers that were using Intelsat-29e.

Intelsat-29e had coverage of the Americas and adjacent waters using a mix of C-, Ku- and Ka-band capacity. Spengler said Intelsat is “assessing all the options” to replace that capacity, including a new satellite or hosted payloads, expanding use of other operator’s spacecraft, or stationing one of Intelsat’s 53 geostationary satellites at the now-vacant 310-degrees east orbital slot.

In a financial document accompanying Intelsat’s earnings release, the company said it is using capacity on two other Epic-series high-throughput satellites — Intelsat-32e and Intelsat-37e — to fill the void, plus capacity from competitor SES through a “pre-existing reciprocal agreement.”

Intelsat has six Epic-series high-throughput satellites designed with 10 or more times the capacity of its traditional spacecraft. Boeing built five of the satellites and supplied the payload for one that used a chassis from Airbus Defense and Space.

Spengler said there is no indication the issues with Intelsat-29e will result in problems with the other Epic satellites, but cautioned that it’s too early to tell. A failure review board of Intelsat staff, Boeing staff and independent experts will take “several months” to complete its assessment, Intelsat said.

Intelsat said it expects to record a $400 million impairment charge for Intelsat-29e. Kerrest said Intelsat will reassess its decision not to insure the majority of its fleet following the satellite’s failure.

Only four Intelsat satellites have in-orbit insurance coverage — a decision that until now appeared justified by the rarity of unexpected satellite failures. Kerrest said only three Intelsat satellites have failed in orbit out of 92 launched, including Intelsat-29e, since 1992.

Expansion plans

Spengler said Intelsat is very interested in bleeding edge software-defined satellite designs that are not yet on the market. Several manufacturers are working on such spacecraft, he said, and should be ready to start commercial sales soon.

Software-defined satellites can change the size, shape and power of their beams, allowing operators to move capacity around in response to customer demand.

“The design of these satellites are such that we can get sizeable capacity in space at a lower capex cost per [mega]bit,” Spengler said. “It’s a lower capex investment for each individual unit of capacity, and it allows us to stay competitive from a cost basis as well for the delivery of services. We are working with manufacturers now and if all continues as we expect, we hope to be able to embark on that later in the year.”

Intelsat’s capital expenditure plans through 2021 includes five satellites, two of which are already under construction — Intelsat-39 by Maxar Technologies and Galaxy-30 by Northrop Grumman. The remaining three have not yet been ordered.

Intelsat’s capital expenditure plans don’t include the four satellites it said it will buy if the U.S. Federal Communications Commission accepts the C-Band Alliance’s plan for selling up to 180 megahertz of C-band spectrum to future 5G network operators. Spengler said Intelsat doesn’t know when the FCC will decide on how to repurpose satellite C-band for 5G, but will be ready to execute the C-Band Alliance’s plan fully within 36 months of an FCC decree.

Intelsat reported $528.4 million in revenue for its first quarter, which ended March 31, and a net loss of $120.6 million. The company’s backlog stood at $7.9 billion, down $200 million from the end of 2018.