Luxembourg- and Washington-based Intelsat reported a 3 percent increase in revenue for the three months ending March 31 and reaffirmed that spending on fleet replenishment and expansion likely will peak this year and then fall sharply in the two coming years.

Intelsat has launched two new satellites since late 2010 and has another seven on order. Capital spending on the new spacecraft is expected to be between $725 million and $800 million in 2011 before falling to between $575 million and $600 million in 2012, and then to $175 million and $250 million in 2013.

Launch delays may result in some expected charges being transferred from 2011 to 2012, but the trend is clear: After the current satellites are safely in orbit, Intelsat will divert more of its cash flow to debt repayment.

Intelsat has shown itself capable of building new satellites without incurring the full up-front charge, notably in its joint venture with Convergence Partners in South Africa for the Intelsat New Dawn satellite, and with the IS-22 satellite being built with a UHF-band payload financed by the Australian Defence Force.

If the company can continue to create such opportunities, the planned sharp reduction in capital expenditure may not translate into a one-to-one reduction in Intelsat’s fleet size. Intelsat has been among the most active satellite fleet operators in promoting the idea of hosted payloads, especially payloads owned by the U.S. government.

In Intelsat’s view, every one of its satellites should carry at least one such payload.

Intelsat in the past has said that in the coming years it may trim the size of its fleet to around 45 satellites. With an average service life of 15 years per satellite, that would imply launching three satellites per year at a total cost of around $600 million.



Like its slightly larger Luxembourg neighbor, Intelsat, SES is at the peak of a capital spending cycle. But SES’s fleet renewal and expansion is even more extensive than Intelsat’s — a fact that SES managers often say will propel their company to growth rates beyond what the overall market, and Intelsat, can expect in the coming years.

In SES’s case, the expansion includes 12 satellites to be launched by the end of 2014, which will add 23 percent to the company’s in-orbit transponder supply as it stood at Jan. 1, 2011.

Much of this new capacity, especially the satellites that will expand SES’s reach and not just replace existing bandwidth, is over what are still called the emerging markets of South America, Africa and, especially, South Asia.

SES is one of several non-Indian operators counting on the enormous demand for television in India to overwhelm India’s still-high regulatory barriers for foreign satellite service providers.

In the Middle East, where SES has never had the wealth of orbital slots that its principal European competitor, Eutelsat, has been able to develop, SES’s joint venture with startup operator YahSat of the United Arab Emirates is debuting this year with 23 transponders on the YahSat 1A satellite now in orbit.

While SES’s current leverage is not a concern, the company is nonetheless promising its investors that the current go-go cycle of spending will slow dramatically once the dozen satellites now on order are launched.

Capital investment is expected to peak in 2011 at 920 million euros ($1.22 billion). Delayed satellite launches could still move some of this spending to 2012, but for now the company says spending next year will be 660 million euros. It will fall to 440 million euros in 2013 and then settle at about 250 million euros a year through 2016.

The grand spending total between 2010 and 2016: 3.5 billion euros, all of it meeting SES’s threshold of an internal rate of return of 10-15 percent.



Paris-based Eutelsat in the past has always described itself as a company that sticks to its knitting.

Its competitors are expanding onto new continents? Eutelsat is fine in its home territory of Europe, the Middle East and Africa.

Ground hardware manufacturers and service providers as acquisition targets? Eutelsat would pass on that, thank you.

Mega-satellites are the fashion? Eutelsat would remain with tested versions of spacecraft built mainly by European manufacturers.

Because Eutelsat shares a near-duopoly with SES of Luxembourg in the provision of satellite television in Western Europe — whose broadcasters buy satellite bandwidth at a far higher cost than their equivalents in Asia and the Americas — the lack of adventure never hindered Eutelsat’s growth.

That was especially true as the Middle East became a place where satellite bandwidth could be sold at a premium, especially to the U.S. Department of Defense, whose buying policy up to now has forced it to purchase capacity on the spot market, which is generally more expensive than securing it via long-term contracts.

Eutelsat may be the single biggest beneficiary among the major satellite fleet operators of this unexpected demand. Whether it continues is a subject of debate, but for now the drawdown of coalition forces in Iraq appears to have had minimal effect.

For the nine months ending March 31, Eutelsat reported a 29.3 percent increase in what it calls its “Multi-usage” revenue, which is mainly government customers interested in coverage in the Middle East. Once again, it was Eutelsat’s fastest-growing division, even if it remains only 10 percent of the company’s total revenue.

In the midst of this straightforward growth story, Eutelsat three years ago announced that, alone among the major satellite fleet operators, it would invest in what are now called high-throughput satellites in the form of the all-Ka-band Ka-Sat, which began commercial operations in May.

Ka-Sat is the first of what is expected to be at least a half-dozen high-throughput satellites offering broadband service to consumers and businesses that are now either under construction or under active consideration around the world.

Just as surprising, Eutelsat decided to jump into the consumer broadband market in partnership with a U.S. provider of ground terminals — ViaSat of California. The French government is investing in competing technologies in the hope of unseating ViaSat for future satellite broadband systems. But for now Eutelsat and ViaSat are looking at how to combine their two Ka-band networks to offer an unbroken Ka-band coverage area stretching from California to the Middle East.



What Telesat’s owners, Loral Space and Communications of New York and Canada’s PSP Investments pension fund, elect to do with the world’s fourth-largest satellite fleet operator in the coming months may be one of the more interesting developments in the satellite communications sector in 2011.

For months the two owners have been entertaining bids from prospective buyers, and sales prices of up to $6 billion have been evoked. Whether Telesat actually fetches this price or concludes any transaction at all remains an open question.

Loral officials have said there may be no deal, or perhaps a stock-market introduction instead of an outright sale of the company.

Negotiations with potential buyers must have been complicated in recent weeks by the failure of the solar array aboard the large Telstar 14R/Estrela do Sul-2 satellite to fully deploy. Telesat and manufacturer Space Systems/Loral continue to work the problem, but preliminary indications are that the satellite will lose about half its capacity if the solar panels remain stuck in half-deployed position.

That will enable Telesat to serve all the customers on the Telstar 14/Estrela do Sul satellite that the new spacecraft was intended to replace — especially since, in what industry officials say is an uncanny development, the original satellite suffered a similar defect when it was launched a decade ago.

The new satellite would have given Telesat a jump on the competition in appealing to the Latin American market, whose appetite for bandwidth is growing faster than most other regions of the world, and substantially faster than demand in North America.

Even without this big new satellite, Telesat has been modestly increasing its revenue and sharply boosting its gross profit margin. EBITDA, or earnings before interest, taxes, depreciation and amortization, was 77 percent of revenue for the three months ending March 31, compared to 74 percent a year earlier. The company’s North American fleet was 89 percent full, while its other satellites were, on average 77 percent full.

Telesat earlier this year finally agreed to take over the Canadian Ka-band payload aboard the large ViaSat-1 Ka-band satellite scheduled for launch this summer. The Canadian payload has been all but sold out by a Canadian broadband provider.

In a more risky move, Telesat’s decision to put an X-band payload on its Anik G1 satellite, set for launch in late 2012, has paid off early. The entire X-band capacity has been leased, for the satellite’s full 15-year life, by Astrium Services of Europe, which provides X-band satellite services to the British Ministry of Defence, NATO and other governments.


SkyPerfect JSat Corp.

In an industry that is sometimes referred to as “the Big Four and the rest,” SkyPerfect JSat is the fifth-ranked fixed satellite services operator by revenue and has been for several years. It is more likely to lose its position to fast-growing smaller companies such as Star One of Brazil and perhaps Hispasat than it is to climb into fourth place ahead of Telesat.

For the moment, Tokyo-based SkyPerfect JSat is thinking less of growth than of improving its profitability to approach the 75 percent-plus gross-profit margins of some of its fellow operators.

In a May presentation to investors, the company suggested that its in-orbit fleet would be shrinking, not growing, as it focused on improving performance rather than maintaining a satellite infrastructure as big as Telesat’s. The company referred to a “drastic reform” of its satellite operating business cost structure to bring its in-orbit infrastructure into line with its current business demand.

Aside from playing a role in post-earthquake Japan’s disaster recovery effort, the company said its ambition is to expand in Asia and Oceania before other growing satellite operators begin to nibble on SkyPerfect JSat’s home market. The company said “increasing the ratio of overseas business considerably” is a top priority.

At the same time, the company will “achieve a cost structure comparable to world-class operators by streamlining [our] satellite fleet and reducing operating costs, and fortify a system for global competition.”

Japan’s new Basic Law for Space, which is helping liberate Japan’s satellite manufacturing industry by focusing on commercial applications in addition to research, will also help Japan’s premier satellite operator, SkyPerfect JSat says. Mobile communications for the maritime and aeronautical industries  — an area that several fixed satellite services operators are targeting — will also be a part of the company’s focus.

SkyPerfect JSat’s misfortune is to be in the part of the world with the most heated competition for provision of satellite bandwidth. South Korea, Thailand, Indonesia, Singapore, Vietnam, and most recently Laos all have invested in national telecommunications satellite systems. Added to these are the two Hong Kong operators, APT and AsiaSat, and China’s national operator. Growing in the region will not be easy.