RRSat Currently Targeting U.S. Businesses for Acquisition

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  Space News Business

RRSat Currently Targeting U.S. Businesses for Acquisition

By PETER B. de SELDING
Space News Staff Writer
posted: 14 August 2007
03:51 pm ET





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RRSat
Global Communications Network Ltd., which leases satellite capacity from more than a dozen operators worldwide and then resells it to broadcasters, reported record revenues and backlog for the six months ending June 30 and said it is reviewing possible acquisition targets in the United States.

The Omer, Israel-based company, which listed on the U.S. Nasdaq stock exchange in late 2006, said the acquisition, which could be a teleport operator, is likely to be valued at between $5 million and $15 million.

“We are in negotiations right now with a few targets and we believe we will be able to conclude these transactions by the end of this year,” RRSat Chief Executive David Rivel said in a July 31 conference call with investors. “We are not new in the United States. We know exactly what we are looking for and what the costs should be.”

RRSat
purchases capacity, usually in the form of multi-year leases, from satellite operators and owners of fiber-optic transmissions lines and then sells it, megahertz by megahertz, to broadcasters and other users. The company also provides value-added services to broadcasters through program packaging at its Israeli teleport.

RRSat’s
business model depends on their being sufficient excess satellite capacity to permit the company to purchase lower-cost preemptible capacity without a high risk of being removed from the satellite in favor of a non-preemptible customer.

RRSat
said that 29 percent of its current satellite capacity is leased on a preemptible basis.

For the past several years, the strategy has worked, but the expected consolidation among the major satellite-fleet operators, and their stated intentions to reduce excess capacity, has posed a threat to RRSat. In addition, the advent of bandwidth-hungry high-definition television could reduce the amount of excess capacity.



Rivel said that he foresees no near-term problem, especially since even satellites launched by operators for the sole purpose of replacing




aging satellites usually have more transponders and higher power than the satellites they replace.

In addition, he said, the motivation of national governments to have their own satellites is undiminished in some areas of the world.



“More and more countries believe they have to have their own satellites,” Rivel said. “Look at Israel, Greece, Turkey and Pakistan just in our area –




all want to have their own satellites. This prevents there being any lack of capacity.”

RRSat
reported revenues of $27.9 million for the six months ending June 30, a 42 percent increase over the first six months of 2006. Net income, at $5.3 million, was up 46 percent from the previous year.

Rivel
said that for the full year, RRSat forecasts that revenues will be $57 million to $57.5 million.

Backlog at June 30 stood at $132.1 million, a company record that includes contracts stretching to 2016. Some $25.5 million of the backlog is for contracts set to expire by the end of 2007, with $42.8 million in contracts to expire in 2008, RRSat Chief Financial Officer Gil Efron said during the conference call.