Satmex Looks To Buy New Satellite as Finances Improve
PARIS — Struggling satellite fleet operator Satmex of Mexico reported increased revenue for the three months ending Sept. 30 and also added to its cash balance as it continued to look for a way to finance a new satellite without violating its debt covenants.
Satmex, which like other satellite operators in North America is facing a decline in business from satellite broadband provider Hughes Network Systems, said backlog dropped by 7 percent, to $240.3 million as of Sept. 30, compared where it stood June 30.
Germantown, Md.-based Hughes is gradually migrating its customers away from Ku-band capacity leased on other satellite operators’ fleets and toward the Hughes-owned Spaceway 3 Ka-band satellite. Hughes remains Satmex’s biggest customer, accounting for 20 percent of the company’s revenue for the nine months ending Sept. 30. Satmex’s second-largest customer, accounting for 15 percent of revenue, was Telmex.
Satmex said 45 percent of its backlog is for service to be provided in 2009 and 2010. Company managers in the past have said they need a new satellite given the high fill rates on the current fleet but are prohibited from entering into a construction contract without the approval of Satmex bondholders. Satmex, which emerged from Mexican and U.S. bankruptcy proceedings in 2006, reported total debt of $417 million as of Sept. 30.
In a Nov. 13 filing with the U.S. Securities and Exchange Commission (SEC), Satmex reported that revenue for the three months ending Sept. 30 was $30.9 million, a 7.3 percent increase over the same period a year earlier. The company said its core fixed satellite services business of leasing transponder capacity was up 10 percent during the period, but that its broadband satellite service sales were down.
Satmex operates three satellites. The Solidaridad 2 spacecraft launched in 1994 continues to provide marginal revenue but since mid-2008 has been in inclined orbit, meaning that to save its remaining fuel it is no longer stabilized on its north-south axis.
Satmex 5, launched in 1999, is operating at nearly full capacity but has lost the use of one of its two xenon-ion propulsion systems. Satmex has continued to insure Satmex 5 under a $90 million policy that expires in December, but the insurance coverage excludes the xenon propulsion system. Satmex said that, as of Oct. 1, Satmex 5 would be able to operate for 2.7 years on its conventional fuel reserve if the xenon propulsion unit failed.
Satmex 6, which Satmex has said is also nearly full, was launched in 2006 and is reported healthy. Satmex 6 is insured for $288 million under an annual policy that expires in December.
The company said its three satellites have a combined 156 C- and Ku-band transponders, including 10 transponders provided free of charge to the Mexican government as a condition of the Satmex operation concession.
Satmex in 2008 spent nearly $4 million on advance payments to satellite builder of Palo Alto, Calif., for a Satmex 7 satellite and has created a subsidiary, Alterna TV Corp., to manage the Satmex 7 contract. But almost no further payments have been made in 2009 because of spending restrictions inside Satmex’s debt covenants.
Satmex said it had nearly $95 million in cash and cash equivalents as of Sept. 30, up from $58.2 million at the beginning of the year.