Overhauled business plan bearing fruit, Avanti says

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SANTA BARBARA, Calif. — British satellite operator Avanti, whose revenues have declined since 2015, said it has rewritten its business plan to make consumer broadband a smaller portion of overall revenues.

Selling capacity to other satellite operators is now one of Avanti’s main priorities, followed by selling to the U.S. Defense Department, Avanti CEO Kyle Whitehill said in a June 10 financial report.

Avanti reported $53.5 million in revenue for 2018, down $3.1 million from its previous fiscal year. Despite the decline, Avanti said it gained financial momentum in the last six months of 2018 by executing on its revised strategy, which in turn increased backlog by more than $100 million. The company tallied $166.4 million in contracted backlog as of Dec. 31.

Avanti signed a $10 million contract with fleet operator Viasat of Carlsbad, California, in June 2018 for capacity on its newest satellite, Hylas-4. This May, Avanti leased capacity to Turkish fleet operator Turksat on its Hylas-2 satellite.

To address the U.S. military market, Avanti said it has established an office in Washington, and has a seven-year contract with Defense Department contractor Comsat that gives the operator immediate access to new military customers.

Whitehill said Hylas-4, which launched in April 2018, is well positioned to support cellular backhaul in Africa. 

Avanti forecasts overall revenues to increase 67 percent this year, and an additional 30 percent in 2020, largely through new government customers on Hylas-4 and the upcoming Hylas-3 hosted payload. The company’s satellites have coverage over Africa, the Middle East and Europe. 

Battling obsolescence

Avanti recorded additional impairment charges against one of its satellites and a leased payload, blaming falling capacity pricing for making those assets less competitive. Geostationary communications satellites typically last 15 years — and in some cases longer — but Avanti is finding its satellites struggling to compete well before their expected end of life.

Avanti’s six-year-old Hylas-2 satellite failed to match early growth forecasts and “by today’s standards has a relatively high cost” per megahertz, Avanti said. The company said it was reporting a $67.1 million impairment charge on the satellite due to its lessened utilization.

Hylas-2B, a payload Avanti leases on SES’s Astra 5B satellite, is also less competitive with lower priced capacity from competing satellites, Avanti said, leading to an impairment charge of $12.5 million.

Avanti said it has migrated all but two customers off its oldest satellite, the nine-year-old Hylas-1. Those customers are using the satellite for a few more months, after which the full capacity will be utilized by a single customer under a seven-year, $84 million contract announced in September. The undisclosed customer, described as a “major international satellite service provider,” will start using the satellite in the fourth quarter of this year, Avanti said. That customer will use a significantly higher amount of Hylas-1’s capacity, providing enough revenue to support the satellite’s carrying value, Avanti said. 

Avanti’s long-awaited Hylas-3 hosted payload is now scheduled to launch in late July aboard Airbus and the European Space Agency’s European Data Relay Satellite C. Originally expected to launch in 2015, the payload has eight beams that Avanti described as more marketable because of their steerable design. Hylas-3 is Avanti’s last major investment “for the foreseeable future,” Chairman Paul Walsh said. The payload and host satellite are launching on an Ariane 5 rocket.