Lease Consolidation Erodes Telenor’s Quarterly Revenue

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PARIS — Satellite fleet operator Telenor Satellite Broadcasting of Norway on May 5 reported a sharp drop in revenue for three months ending March 31 as its principal direct-broadcast television customer, Norway’s Canal Digital, consolidated its bandwidth leases into a single contract and won volume-discount concessions.

Partly offsetting the reduced revenue from Canal Digital was increased business from customers in Central and Eastern Europe, a region which Telenor has made a special focus in recent years, offering satellite-lease prices that are often lower than those offered by SES of Luxembourg and Eutelsat of Paris.

In a May 6 statement in response to Space News inquiries, Telenor said Canal Digital previously had multiple fixed-price contracts, some of them signed before high-definition television was introduced. Combining these into a single lease agreement, and agreeing to volume discounts, will reduce Canal Digital revenue for the foreseeable future, Telenor said. Canal Digital has increased its satellite bandwidth demand over the years, from seven in 2002 to more than 20 transponders now, Telenor said.

The effect on revenue for the first three months of 2011 was dramatic. Telenor reported revenue of 239 million Norwegian Kroner ($42.7 million), down 12 percent from the previous three-month period and down 8 percent from a year ago.

EBITDA, or earnings before interest, taxes, depreciation and amortization, was 67.8 percent of revenue, down from 70 percent in the previous quarter and 74 percent from a year ago.

“We expect growth at the current level,” Telenor said in its May 6 statement. “In the near future, growth will be limited as capacity is reserved and we are closing some of the Middle East capacity to re-point for the northern European maritime market.”

Telenor recently won approval from its parent company, mobile network operator Telenor ASA of Oslo, to order a Thor 7 satellite before July. Thor 7, to be launched in early 2014, will carry a mixed Ku- and Ka-band payload to serve Telenor’s existing markets and, for the Ka-band, to provide broadband links to maritime customers in Telenor’s home Nordic region.

Telenor moved its aging Telenor 3 satellite to a new orbital slot, at 4 degrees west, where it is operated in inclined orbit — meaning it is no longer stabilized on its north-south axis — to save fuel. Telenor estimates that, operated in this way, Thor 3 has another six to 10 years of service life.

“We have had an incredibly good response in the market for 4 degrees west,” Telenor said. “We now have three transponders left on Thor 3, with a number of prospects for this remaining capacity.” The company said the revenue benefit from Thor 3’s new location will not be felt until later this year.