PONTE VEDRA, Fla. — ViaSat Inc. has doubled its line of credit to help finance its large all-Ka-band ViaSat-1 broadband satellite and may have to continue solo with the project until its launch in early 2011. The company nonetheless is more confident than ever about the project’s market potential, particularly with military users in the United States, Europe and the Middle East, ViaSat officials said Aug. 5.
In a conference call with investors, the Carlsbad, Calif.-based company sought to portray the doubling of its credit line, to $170 million, as a prudent gesture to prove to prospective investors that ViaSat-1 will be launched no matter what, and not as a sign that the project has failed to attract potential partners.
Securing the additional bank funds “does not necessarily mean we intend to do everything on our own, but it does establish that we are capable of it,” ViaSat Chief Executive Mark Dankberg said. While he said “meaningful discussions” continue with potential financial and strategic partners, “it is conceivable that nothing would happen until the satellite launches. We believe we have the staying power to see these things through.”
ViaSat-1 is under construction at Space Systems/Loral in Palo Alto, Calif. ViaSat has spent about $130 million on the project so far and expects to spend an additional $100 million in the next nine months.
ViaSat officials originally spoke of ViaSat-1 as a way of meeting consumer demand for satellite broadband in the United States that was not being satisfied by WildBlue Inc. of Denver or Hughes Network Systems of Germantown, Md. That remains a key market, but in recent months Dankberg has stressed ViaSat-1’s military potential, especially when the satellite’s coverage area is combined with that of the Ka-Sat system under development by Eutelsat of Paris.
Ka-Sat, under construction by Astrium Satellites of Europe, will use ViaSat’s ground terminal technology. Dankberg said U.S., European and other military forces will be attracted to the idea of an unbroken ViaSat-1 and Ka-Sat coverage area permitting high-throughput fixed and mobile communications links.
“The U.S. and Europe alone make up a lot of military satellite use, for testing systems before deployment, for training and for homeland defense,” Dankberg said. “You can deliver a capability, prove it out [in the United States or Europe] and then outfit forces.”
ViaSat-1 faces increased competition in the commercial market in the United States with Hughes Network Systems’ decision to boost its current Spaceway 3 Ka-band capacity with the addition of a large spot-beam satellite that will resemble ViaSat-1.
Also on the commercial side, ViaSat’s commercial-broadband partner, WildBlue, has secured fresh Ka-band capacity from EchoStar of Littleton, Colo., and will attempt to use that bandwidth, limited though it is, to add customers in areas where the WildBlue-1 satellite is fully booked.
Dankberg said WildBlue has been attempting to stimulate sales in lower-demand regions, where WildBlue-1 capacity is still available. But it has met with only limited success, he said. The EchoStar satellite capacity, he said, could add “several tens of thousands” of subscribers in areas where WildBlue-1’s capacity is sold out.
When WildBlue has problems expanding its customer base, ViaSat has problems selling its commercial Ka-band terminals. That continues to weigh on the company’s financial results and was one reason ViaSat elected to build its own satellite.
Hughes’ decision to build a satellite that appears nearly identical to ViaSat-1 could complicate the supply landscape in the United States, Dankberg conceded. But he said up to now Hughes and ViaSat are focusing on different customer sets. He also said the U.S. government’s economic-stimulus financing for broadband communications appears centered on local terrestrial projects, with little room for satellites, but that in any event the stimulus package will not diminish the future market for satellite broadband.
The U.S. Defense Department’s recent decision to cancel the multibillion-dollar Transformational Satellite (T-Sat) program is not necessarily bad news for ViaSat insofar as many of T-Sat’s planned features will now be taken up by the Advanced EHF spacecraft, Dankbergsaid.ViaSat was on the industrial team led by Lockheed Martin Space Systems of Sunnyvale, Calif., that was competing for the T-Sat prime contract.
ViaSat is also seeing what Dankberg described as substantial new interest at the Pentagon for Ku-band mobile broadband links, similar to what ViaSat already sells to business aviation and maritime customers.
These mobile users, he said, are migrating from L-band provided by Inmarsat of London because using commercial Ku-band satellites provides more throughput at lower cost per kilobit.
Dankberg said intelligence, surveillance and reconnaissance applications are leading the drive toward adapting this commercial technology for U.S. special forces in Afghanistan, for example.
ViaSat reported revenue of $154.8 million for the three months ending June 30, which was the company’s fiscal-year second quarter. Revenue from military and other government customers was up 4.6 percent compared to the same period a year ago and accounted for 60 percent of company’s total revenue. Commercial revenue, held back in part by the WildBlue-1 capacity constraints, was up 1 percent.
