Regulatory Reform Opens Telesat to non-Canadian Ownership

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PONTE VEDRA, Fla. — Satellite fleet operator Telesat on Aug. 5 said the recent change in Canada’s regulations governing telecommunications providers means Telesat is now eligible for purchase by a non-Canadian entity.

In a conference call with investors, Telesat Chief Executive Daniel S. Goldberg said the regulatory reform that took effect in July requires no further modification. Ottawa-based Telesat, he said, may now be purchased by any non-Canadian entity so long as the acquisition meets the “net benefit” criteria established by Industry Canada, the nation’s regulatory authority.

Goldberg said the law appears similar to rules established in the United States and applied by the Federal Communications Commission.

Telesat is the world’s fourth-largest fixed satellite services fleet operator. Canada’s PSP Investments, a pension fund, has a minority economic interest in the company but majority voting rights. New York-based Loral Space and Communications owns a 64 percent economic interest but only a 33.3 percent voting stake in the company, in keeping with former limits on foreign ownership of Canadian satellite operators.

With the regulatory restrictions now removed, Telesat is an eligible acquisition target. Satellite fleet operator SES of Luxembourg has suggested it may be interested, and industry officials have said Paris-based Eutelsat is also a potential buyer. SES and Eutelsat, both cash rich and with little debt, are respectively the world’s second- and third-largest fleet operators when measured by revenue.


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Goldberg declined to speculate on whether PSP, Loral or both would like to cash in their Telesat stakes in the near term.

For the three months ending June 30, Telesat reported revenue of 205 million Canadian dollars ($200 million), a 2 percent increase that would be 8 percent if the decline in the value of the U.S. dollar is removed from the equation.

Telesat Chief Financial Officer Michel Cayouette said that between March 31 and June 30, the Canadian dollar rose 13 percent against its U.S. counterpart. Telesat derives much of its revenue, and incurs a large portion of its expenses, in U.S. dollars.

Telesat reported that its EBITDA, or earnings before interest, taxes, depreciation and amortization, rose to 77 percent of revenue for the three months ending June 30, compared with 71 percent in the same period a year earlier. After one-time revenue gains are eliminated, EBITDA was 75 percent of revenue. Backlog stood at 5.8 billion Canadian dollars as of June 30.

Telesat operates 12 satellites, with three more under construction. The company said its North American fleet was 87 percent full as of June 30, while its international satellites were 77 percent booked. The Telstar 11N satellite, which entered service in mid-2009 and operates at 37.5 degrees west, was 59 percent full as of June 30, up from 55 percent at March 31, Goldberg said.

Telesat does more than 80 percent of its business in North America, with Europe, the Middle East and Africa accounting for a combined 9 percent of revenue and Latin America, 6 percent. Asia is responsible for the remaining 2 percent.

Telesat has big ambitions in Latin America, where demand for satellite capacity in the past year has been growing faster than the company’s ability to satisfy it. Two of the three satellites Telesat has under construction, the Telstar 14R and the Nimiq G1, are intended to boost the company’s Latin American presence.