Market Conditions, Regulatory Issues Crimp AsiaSat Sales

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PARIS—Satellite fleet operator AsiaSat on Aug. 27 blamed rough Asian market conditions in general, and slower-than-expected licensing approvals for its two newest satellites in particular, for an 8 percent drop in revenue for the six months ending June 30.

Hong Kong-based AsiaSat advised investors to expect no material market improvement in the coming months despite the fact that the company’s contract backlog was up 3.7 percent as of June 30 compared to where it stood on Jan. 1.

“[E]xcess capacity and flattening demand in certain markets put downward pressure on pricing that will likely persist into the near future until that capacity is absorbed,” AsiaSat said, echoing statements made by other fleet operators in the Asia-Pacific, where profit-minded companies like AsiaSat compete with companies that are de facto flag carriers for governments viewing satellites as strategic, rather than financial, assets.

The strategic or political dimension of satellite ownership in the region has prevented a consolidation of the region’s operators, although AsiaSat said it continues to weigh opportunities for acquisitions in addition to the expansion of its existing fleet.

AsiaSat operates six satellites. Earlier this year, its AsiaSat 7 replaced the aging AsiaSat 3S at 120 degrees east longitude, freeing Asiasat 3S for a short-term lease to an unnamed third party. The satellite is now at 150.5 degrees east, an Indonesian-registered orbital position.

The company’s two newest satellites, AsiaSat 8 and AsiaSat 6, were launched in August and September 2014, respectively. Fleet operator Thaicom of Thailand has leased half of AsiaSat 6’s 28 C-band transponders, with AsiaSat planning to use the remaining 14 transponders for customers in mainland China. The satellite is located at 120 degrees east.

AsiaSat 8, at 105.3 degrees east, has a 24-transponder Ku-band payload targeting China, India, the Middle East and Southeast Asia, plus a Ka-band regional beam.

AsiaSat did not detail which of the two satellites’ intended markets had yet to provide landing rights.

“[N]egotiations were still under way to provide new high-value applications in key Asian markets on both AsiaSat 6 and 8, pending licensing approvals,” AsiaSat said in a financial statement. “We will announce further developments with regard to these satellites in due course.”

The company said that, to date, it conducts only a small portion of its business in Chinese currency, which has recently been devalued by the Chinese government. Accordingly, it foresees only minimal effects of the devaluation in the short term.

AsiaSat 9, under construction by Space Systems/Loral of Palo Alto, California, is now scheduled for delivery in late 2016, a slight delay from earlier estimates. The launch is planned aboard a Russian Proton rocket in a contract managed by by International Launch Services of Reston, Virginia. AsiaSat 9 will replace AsiaSat 4 at 122 degrees east.

For the six months ending June 30, AsiaSat reported revenue of 641 million Hong Kong dollars — $82.7 million at June 30 exchange rates — which is an 8 percent decline from the same period a year ago. Operating profit was down 11.8 percent, to 312.6 million Hong Kong dollars. But backlog, at 3.65 billion Hong Kong dollars, was up 3.7 percent compared to the beginning of the year.

The company said the fill rate on its AsiaSat 4, 5 and 7 satellites averaged 72 percent for the six-month period.