Telesat to announce satellite, launch contracts by year’s end

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SAN FRANCISCO – Canadian satellite fleet operator Telesat is in advanced discussions with vendors seeking to build and launch satellites for its multibillion dollar, 298-satellite Telesat LEO constellation.

“My expectation is that we’d be in a position to make some announcements about who those vendors are by the end of this year,” Telesat CEO Dan Goldberg said during an Oct. 29 earnings call.

Telesat already signed some of its launch contracts, selecting Blue Origin’s New Glenn rocket to fly 30 to 35 Telesat LEO satellites at a time and Relativity Space’s Terran 1 vehicle to loft a single 800-kilogram Telesat LEO satellite into orbit per launch.

In terms of financing Telesat LEO, the company expects to invest cash from ongoing operations plus C-band clearing payments and to obtain financing from “export credit agencies in North America and Europe, where most of the content for the LEO project would be produced,” Goldberg said.

Telesat is in line to receive $344 million to clear C-band spectrum in the United States. Additional C-band clearing payments may be coming from the Canadian government.

The Canadian government is considering a plan proposed by Telesat to clear 400 megahertz for 5G services.

“We don’t know what the government of Canada will do,” Goldberg said. “We’ve committed to take any proceeds that we receive from that process and invest them in Telesat LEO. But it’s a bit early to speculate as to where that process will land and what the magnitude of those proceeds will be.”

During the earnings call, Goldberg was asked about rumors Telesat is considering an initial public offering to raise money for Telesat LEO.

Goldberg did not answer the question directly, but said, “Certainly if Telesat were to go public, and if Telesat were to issue equity as part of that process, the proceeds of an offering could be used to invest in LEO.”

At a time when the industry faces challenges including cord-cutting in the video market and some excess capacity in the enterprise market, Telesat executives are “bullish” about the opportunity to satisfy “ubiquitous demand for broadband connectivity” with Telesat LEO, Goldberg said. Companies have different approaches but all are “trying to orient themselves towards being able to capture that explosive growth in broadband demand,” Goldberg added.

Earlier this month, Telesat announced an $18.3 million Defense Advanced Research Projects Agency contract to provide two satellites for the Blackjack low-Earth orbit constellation. Since Telesat has not yet selected a satellite manufacturer for Telesat LEO, the fleet operator plans to supply DARPA with modified two Airbus Arrow spacecraft.

Telesat also is supporting Lockheed Martin’s campaign to build 10 satellites for the Pentagon’s Space Development Agency using small buses from Tyvak Nano-Satellite Systems. Telesat is providing technical advice on the satellites’ optical links.

For the quarter that ended Sept. 30, Telesat reported revenues of $202 million, down nearly 15% from the $237 million reported for the same period in 2019.

Telesat executives attributed the decline to short-term service contracts that ended, reduced demand for direct-to-home service in North America and the completion of prepaid service contracts.

“In addition, the restructuring of certain customer contracts related to the COVID 19 pandemic negatively impacted revenue,” according to Telesat’s Oct. 29 news release.

Goldberg said the COVID-19 pandemic was responsible for about 10% of the drop in revenues. COVID has decreased demand for aeronautical and maritime customers but has produced “some countervailing benefits on providing broadband connectivity into rural communities for instance, which Telesat does a lot of,” Goldberg said.

For the first three quarters of 2020, Telesat reported revenue of $619 million, down from $691 a year earlier, a decline of about 10%. Meanwhile, expenses rose due partly to increased compensation related to Telesat LEO, Goldberg said.