BRUSSELS — Satellite fleet operator Intelsat has renegotiated its two-satellite Horizons joint venture with Sky Perfect JSat Corp. of Japan to put it more firmly under Intelsat’s control and permit a Horizons spacecraft to be moved from a slot covering North America to one serving the faster-growing Russian market, Intelsat said Nov. 8.
Launched in December 2007 into position at 74 degrees west longitude, the Horizons-2 satellite will be drifted to a slot at 85 degrees east in the coming weeks as Intelsat debuts a new business from that location. The anchor customer for the new location is Orion Express LLC of Russia, which has signed a multiyear, multitransponder lease of Horizons-2 capacity with |Intelsat.
Luxembourg- and Washington-based Intelsat said that in the three months ending Sept. 30 it added $88.8 million to its contract backlog following the Orion contract and the decision to consolidate the Horizons joint venture into its financial |accounts.
The North American market is stable for satellite fleet operators such as Intelsat but it is forecasted to grow very little in the coming years. Emerging markets, including Latin America, Africa, the Middle East and South and Central Asia, are now the fastest-growing markets.
As they look to capitalize on this growth, satellite operators with large fleets have at least some ability to move existing spacecraft into orbital slots in the higher-growth areas. This is what Intelsat is doing with Horizons-2.
In a Nov. 8 conference call with investors, Intelsat Chief Executive David McGlade said the company’s current North American fleet does not have much more spare capacity that can be relocated. Its growth must come mainly from its Intelsat General division, which serves mostly government customers, and from new satellites on |order.
Intelsat’s current global fleet of more than 50 satellites was 78 percent full as of Sept. 30, not including leases of satellites placed into inclined orbit to save fuel toward the end of their service lives. The company has eight new satellites under construction and scheduled for launch between 2012 and 2015, with a ninth — a replacement for the Intelsat 12 satellite — to be ordered within the next 24 months.
Intelsat 12, launched in 2000, is located at 45 degrees east.
To finance these satellites, Intelsat plans capital spending of between $725 million and $800 million in 2011, and between $875 million and $950 million in 2012. Spending will drop sharply in 2013, to between $375 million and $450 million, as the current fleet replenishment and expansion cycle winds down.
Intelsat said that as of Sept. 30 it had a backlog of firm contracts valued at $10.7 billion. The figure includes a contract with satellite-television broadcaster DirecTV of El Segundo, Calif., to lease all the Ku-band capacity on two large Intelsat satellites to be launched in 2014 and 2015. The DirecTV transaction is Intelsat’s largest-ever transponder lease contract.
For the three months ending Sept. 30, Intelsat reported revenue of $653 million, up 1.3 percent during the same period a year ago. McGlade said the increase would have been 2.8 percent were it not for a decline in revenue from mobile satellite services, a business that includes Intelsat sales |of capacity on other companies’ |satellites.
Intelsat General, McGlade said, grew its government business by 19 percent year on year. Intelsat General often bundles its capacity with satellite bandwidth offered by other companies when it assembles contract bids for the U.S. government. The non-Intelsat bandwidth generates much lower profit margins than sales of Intelsat’s own capacity.
McGlade said Intelsat had little choice but to accept that newly laid fiber-optic cables connecting Africa and parts of Asia will mean a long-term decline in Intelsat revenue for intercontinental communications links.
But these same fiber lines, he said, will help stimulate demand in Africa and Asia and provide growth opportunities for Intelsat in the coming years. McGlade compared today’s Africa to the Latin America of some years ago, where the arrival of massive fiber capacity put downward pressure on satellite demand until Latin American economic growth reversed the situation. Latin America is now one of the world’s hottest satellite markets.
The Intelsat 22 satellite scheduled for launch in early 2012 into the 72 degrees east orbital slot carries a UHF-band military communications payload for the Australian military. But the satellite also will give Intelsat a large new reservoir of C- and Ku-band capacity for the Indian Ocean region.
The market’s reaction to the additional 48 C-band and 24 Ku-band transponders provided by Intelsat 22 has been “decent … not strong demand at this point because it’s a transitional slot where we are re-establishing ourselves,” McGlade said. The established presence of fiber capacity in the region means “we’ll need to be creative with the C-band capacity.”
Intelsat remains confident that its move to position seven beams on four of its Ku-band satellites to attract maritime and aeronautical broadband customers will be able to secure business before mobile satellite operator Inmarsat’s new Ka-band satellites are in place. The Intelsat capacity will be in place by late 2013.
“We think we’re going to be ahead of Inmarsat launching its Ka-band capability, which will be significantly later than ours coming on line,” McGlade said. London-based Inmarsat’s three Global Xpress satellites, which represent a departure from the company’s traditional L-band services, are scheduled for launch in 2013 and 2014.
