WASHINGTON — Commercial satellite operators will probably order half as many geosynchronous satellites this year than usual, deepening a drought that has affected satellite manufacturers for the past two years, MDA Corp. President and CEO Howard Lance said July 28.
What at first appeared as a hesitation by industry in the wake of larger, more powerful high-throughput satellites and emerging low-Earth orbit constellations now appears to be ossifying into an average demand that falls consistently below the 20-plus orders satellite manufacturers had grown accustomed to, he said.
“We expect the industry to only award between 10 and 12 satellites this year, as compared to 14 industry awards in 2016,” Lance told investors during MDA’s second quarter 2017 earnings call. “Of course, the majority will now be in the second half of 2017.”
Lance said bidding activity rose in recent months, though the Vancouver, Canada, company reported similar activity in late 2016 that did not materialize into an abundance of signed contracts.
MDA counted just three commercially awarded satellite orders for the first half of this year, none of which went to Space Systems Loral, the satellite manufacturer MDA owns in Palo Alto, California. He did not say how many of the forecasted 10 to 12 he anticipates SSL will win.
Boeing Satellite Systems International won Kacific-1/JCSAT-18, a “condosat,” or two distinct satellite operator payloads sharing the same orbiting platform, for Singaporean startup Kacific and Japanese fleet operator Sky Perfect Jsat in February. China Great Wall Industry Corp., whose presence as an internationally competitive satellite builder is just now being meaningfully felt, landed a contract for Palapa-N1 for Palapa Satelit Nusantara Sejahtera, a joint venture between Indonesian satellite operators Indosat Ooredoo and Pasifik Satelit Nusantara, in May. A month later, Thales Alenia Space nabbed an Inmarsat contract to build the operator’s fifth Global Xpress satellite.
Last year by comparison had seven industry awards by mid-year, of which SSL won two, Lance said.
A smaller pool with bigger gems
Possibly offsetting this trend to lower volume is an increase in the value of new high-throughput satellites. Operators are ordering such spacecraft to tap into growing demand for internet connectivity around the world, be it for households, governments or mobile platforms such as planes and ships.
As evidence of this countervailing shift, Lance said MDA has been selected by an undisclosed commercial operator for an HTS satellite with more than 500 Gbps of total capacity — more than any other single satellite in orbit today — for a price tag north of 500 million Canadian dollars ($401.9 million). He said SSL completed the design of the satellite and expects to be under contract to build it in the coming months.
A CA$500 million satellite is akin to “booking about three of the average satellite,” Lance said. “The quantity probably becomes less important; the capacity on orbit is what’s going to be important.”
Lance said 2018 only looks incrementally better than this year. Demand for replacements, including simpler video broadcast-focused satellites from 2018 to 2020 “are absolutely going to be awarded and built,” he said, but pinpointing the timing is an unknown art.
“I don’t know that it will ever get back to 22 satellites a year,” Lance said, “but … the question is less around numbers and, from our standpoint, more around dollars.”
MDA reported a CA$29 million drop in its communications segment for the three months ended June 30, generating CA$332.4 million in revenue. The company’s Surveillance and Intelligence segment balanced the loss from fewer geostationary satellite orders, pulling in CA$171.3 million for the quarter, up CA$30.1 million. SSL also laid off some of its workforce in June to compensate for the paucity of communications satellite orders.
Total revenue for the quarter was CA$503.7 million, about flat with last year’s CA$502.5 million. MDA’s net income was CA$25.8 million, up CA$500,000.
MDA’s order backlog was CA$2 billion, down CA$500 million year over year. Lance said expected SSL orders — the 500 Gbps HTS satellite, NASA’s Psyche asteroid mission, Space Infrastructure Services’ satellite servicing vehicle and DigitalGlobe’s WorldView Legion constellation — are collectively worth CA$1.2 billion.
DigitalGlobe purchase closing soon
Lance dismissed concerns that MDA’s refiling of acquisition paperwork to CFIUS, the Committee on Foreign Investment in the United States, earlier this month was making any problems for the purchase of Earth observation satellite operator DigitalGlobe. MDA withdrew and refiled July 12 to give the agency, which assesses the national security impact of foreign acquisitions, extra time to review. Lance said the submission initiated a new 30-day review period that closes Aug. 14.
“At this point we don’t see any issues, it’s just a question of completing the remaining work,” he said. “We think that once CFIUS is approved the closing will occur relatively swiftly.”
Englewood, Colorado-based DigitalGlobe reported $225.7 million in revenue for the three months ended June 30, up 28.6 percent year over year, and net income of $2.7 million.
Lance said MDA, which is transforming itself into an American company, will begin listing on the New York Stock Exchange concurrent with the closing of the $2.4 billion acquisition.
He added that the U.S. Geospatial Intelligence Agency’s recent contract with small satellite operator Planet “was expected,” and is not a threat to DigitalGlobe’s business there. Planet won a $14 million contract based on its ability to provide frequent revisits at 3- to 7-meter resolution. DigitalGlobe specializes in submeter resolution going down to 30 centimeters.
“[Planet is] serving other missions where the low resolution imaging can meet the need,” Lance said. “If it’s a requirement for high resolution imagery, DigitalGlobe is the only one that is able to provide that.”