SES Proceeding Cautiously on Canadian Orbital Slots

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  Space News Business

SES Proceeding Cautiously on Canadian Orbital Slots

By PETER B. de SELDING
Space News Staff Writer
posted: 21 August 2007
03:26 pm ET





PARIS —


SES has not committed to developing any of the seven orbital slots it won from Canadian regulatory authorities and will only do so after the company’s 70 percent-owned Canadian affiliate, Ciel Satellite Group, analyzes each position and its assigned frequencies to determine its




business prospects, SES Chairman Romain Bausch said Aug. 6.



In conference calls with investors and journalists to report




the company’s financial results for the first six months of 2007, Bausch and SES Chief Financial Officer Mark Rigolle also discussed a possible SES bid for Mexican satellite operator Satmex and the unexpected demand spike from television programmers increasing their bandwidth for standard-definition digital programming.

Luxembourg-based SES said its satellite fill rate, average new-contract pricing and near-term prospects all remain strong, and provide




sufficient cash flow to permit a substantial increase in the stock dividend while keeping cash and stock available for possible acquisitions.

Through Ciel, SES has won the rights to seven Canadian orbital slots with different broadcast frequencies. Competitor Telesat Canada won five other slots. Both companies must invest in satellites for these positions within certain time limits or risk having their access to the slots revoked by Industry Canada.



Bausch said SES has not included any new Canada-related capital expense into its spending forecasts because it has not concluded a slot-by-slot market assessment with Ciel.

“Once Ciel has defined its priorities, the timeline would be discussed with Industry Canada to agree on a schedule,” Bausch said. “We will then try to find market opportunities. You might not see all seven orbital positions being used at the end of the day.”



Bausch said the Canadian slots are nonetheless SES’s principal means of growing its business in North America, which is done mainly through its U.S. subsidiary, SES Americom.

But Canada is not the only North American growth possibility for SES. The company is also active in Mexico, where it remains a possible buyer of satellite-fleet operator Satmex and where its QuetzSat partnership with U.S. satellite-television broadcaster EchoStar is about to expand.

SES did not bid for Satmex




earlier this year when there was a failed attempt to auction it, but is interested in buying Satmex if Satmex’s owners and the Mexican government lower their price objectives.

An auction organized by investment bank Morgan Stanley was scrapped when neither of the two bids submitted reached Satmex’s minimum requirement of $500 million.

“We did not make a bid because the expectations of the sellers were too high,” Bausch said. “We did not want to offend them by submitting a bid they perceived to be too low. If the Mexican government were to launch a new [Satmex sale] process, you could expect SES to take a fresh look.”



SES and EchoStar have jointly established a Mexican company, called QuetzSat, to develop a Mexican-registered orbital slot for transmissions in that country and in the United States. The SES-EchoStar negotiations over QuetzSat have proceeded more slowly than anticipated, but Bausch said he expects QuetzSat to order a satellite later this year. He said the QuetzSat developments are unrelated to the Satmex situation.

SES’s Astra subsidiary in Europe currently broadcasts 27 high-definition channels and expects that will increase to 100 by 2010. High-definition broadcasts use more bandwidth than standard-definition and is thus considered by satellite operators worldwide as key to their future growth.



But Bausch said German public-television broadcasters ZDF and ARD have decided to increase the bandwidth they use for standard-definition programming as well, booking capacity equivalent to 6 megabits per second rather than 4.5 megabits.




Such decisions




have helped keep SES Astra’s fill rate at near the 87 percent level through June 30, the company




reported.



The company said its Americom division had a fill rate of 74 percent. The SES New Skies division, responsible for regions outside North America, Europe and the Middle East, reported a 64 percent fill rate, giving the total SES group a




blended fill rate of 75 percent. Rigolle said average transponder prices were holding firm.

SES reported that its revenue for the six months ending June 30 increased by 6.8 percent, to 785 million euros ($1.08 billion) after accounting for one-time items and investments that make year-on-year comparisons difficult. The EBITDA – earnings before interest, taxes, depreciation and amortization – was 82.2 percent of revenue for its core satellite capacity leasing business. Rigolle said this EBITDA margin is the highest among the major satellite-fleet operators.



When SES’s other businesses are included, the EBITDA margin was 69.5 percent of revenue.