Telesat Margins Grow; So Might Its Next Satellite

by

PARIS — Satellite fleet operator Telesat on May 6 reported lower revenue but higher profitability for the three months ending March 31 compared to the same period a year ago, saying both lines would have shown better numbers but for the U.S. dollar’s drop in value against the Canadian dollar.

The Ottawa-based company also said it would contract for the construction of an Anik G1 satellite by the end of May. What was originally envisioned as a relatively small spacecraft to provide 16 direct-broadcast television transponders for Canada’s Shaw Direct broadcaster may be enlarged to meet growing demand for satellite bandwidth in Latin America, Telesat Chief Executive Daniel S. Goldberg said.

“Our Latin American capacity is pretty much maxed out on all our satellites,” Goldberg said in a conference call with investors, referring to Latin America-directed beams on Telesat’s existing Anik F1, Telstar 12 and Telstar 14 satellites. “And yet we’re seeing more demand.”

Goldberg said the company is still undecided on how big Anik-G1 should be. The bigger a satellite is, the more expensive it is not only to purchase, but also to launch and insure. Industry officials have been watching Telesat’s decision-making process in order to assess whether the Canadian company is capable of purchasing a satellite that is not built by Space Systems/Loral of Palo Alto, Calif. Space Systems/Loral is owned by Telesat majority shareholder Loral Space and Communications of New York.

Space Systems/Loral specializes in large, high-power satellites and would be hard-pressed to compete with Orbital Sciences Corp. of Dulles, Va., a builder of smaller telecommunications spacecraft, if Anik G1 were limited only to the capacity required by Shaw Direct.


Related Articles:

Sanswire, Global Telesat Forge UAV Joint Venture

Telesat To Select Anik G1 Contractor by June

ILS To Launch Nimiq 6 for Telesat in Mid-2012


Telesat Chief Financial Officer Michel Cayouette said whatever the size of Anik G1, Telesat’s capital spending in 2010 will not exceed 290 million Canadian dollars ($282.1 million). Telesat already has two satellites under construction, the Telstar 14R set for launch in late 2011, and the Nimiq-6 scheduled for launch in mid-2012. Assuming it is ordered in the coming weeks, Anik G1 will be launched in late 2012, according to Telesat.

Telesat, which is the world’s fourth-largest provider of fixed satellite services when ranked by revenue, reported 199 million Canadian dollars in sales for the three months ending March 31, a 2 percent decline from a year earlier. When the effects of the decline in the value of the U.S. dollar are stripped out, however, revenue increased by 5 percent. Cayouette said that between early 2009 and early 2010, the dollar fell 15 percent against the Canadian currency.

Telesat’s EBITDA — earnings before interest, taxes, depreciation and amortization — increased even before removing the foreign-exchange effects and amounted to 75 percent of the company’s revenue, up from 70 percent a year ago. Fixed satellite services fleet operators often post EBITDA margins of more than 70 percent, with the most-profitable among them reaching margins of 80 percent. Cayouette said the gross-profit margin was helped by Telesat’s continued reduction in operating costs.