Telesat Sees Improved Profitability into 2012

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PARIS — Satellite fleet operator Telesat of Canada reported Nov. 4 flat revenue but improved gross profit for the nine months ending Sept. 30 compared with the previous year, and said fully booked satellites scheduled for launch in 2012 will boost the company’s performance.

Ottawa-based Telesat also said it has filed a $125 million insurance claim following the failure of its Telstar-14R/Estrela do Sul-2 satellite to fully deploy one of its two solar panels. The defect will cut the satellite’s in-orbit life to 12 years from an expected 15 years and will also reduce its broadcast capacity.

In a conference call with investors, Telesat Chief Executive Daniel S. Goldberg said the company, which earlier this year abandoned efforts to auction itself because of unsatisfactory bids, has recently decided not to take on new debt to give its owners a large one-time dividend payment.

Goldberg said it was not so much current market volatility or interest rates that governed the decision, but rather the complexity of undertaking what is known as a dividend recapitalization in a way that would be tax efficient for Telesat’s two owners. Loral Space and Communications of New York and Canada’s PSP Investments pension fund own Telesat.

“Neither one of our shareholders is in need of cash, and both are very bullish” on Telesat’s prospects, Goldberg said, adding that taking on substantial new debt could limit the company’s ability to make strategic moves in the coming months.

For the nine months ending Sept. 30, Telesat reported revenue of 604 million Canadian dollars ($585 million), down 2 percent from the same period a year ago. After removing the effects of foreign-exchange fluctuations, the revenue represents a 1 percent increase from last year.

Telesat Chief Financial Officer Michel Cayouette said the U.S. dollar’s value against the Canadian dollar dropped by 8 percent between September 2010 and September 2011.

EBITDA, or earnings before interest, taxes, depreciation and amortization, was 77 percent of revenue for the first nine months of 2011, compared with 75 percent a year ago.

One contributor to the revenue decline was a scheduled rate reduction accorded to a Telesat broadcast customer with a long-term lease, Cayouette said.

Telesat has two of its own satellites — Nimiq 6 and Anik G1 — scheduled for launch in 2012. Both have been booked by Canadian television broadcasters Bell TV and Shaw Direct, for the satellites’ full 15-year service lives. In addition, Paradigm Services of Europe has leased the full capacity of an X-band payload on Anik G1, also for 15 years, to provide links to military customers.

Telesat has purchased the Canadian beams on the ViaSat-1 Ka-band broadband satellite launched in October and scheduled to enter service by the end of the year. Canada’s Xplorenet Communications Inc., a provider of consumer broadband service, has leased the Telesat-owned capacity for 15 years.

Being fully leased or nearly so from the day they enter operations, these satellites will provide an immediate boost to Telesat’s revenue line in 2012.