ViaSat May Use Debt for Satellite

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  Space News Business

ViaSat May Use Debt for Satellite

By PETER B. de SELDING
Space News Staff Writer
posted: 12 November 2008
12:46 pm ET





PARIS — Satellite ground-infrastructure and terminal supplier ViaSat Inc. said it may need to take on debt to finance its $350 million ViaSat-1 Ka-band consumer-broadband satellite, which is under construction, and that the tough economic environment could force prospective strategic partners in the program to stay on the sidelines.

In a Nov. 6 conference call with investors, ViaSat officials said the company will be spending around $125 million this year on ViaSat-1, being built by Space Systems/Loral of Palo Alto, Calif., and intended for launch in 2011.

ViaSat
Chief Executive Mark Dankberg said the current sour economic climate in the United States “may delay some partnership opportunities” for ViaSat-1, but that ViaSat remains confident that the project is well-timed for a market that needs the capacity.

Carlsbad, Calif.-based ViaSat, which derives some 60 percent of its revenue from sales of communications gear to the U.S. Defense Department, is habitually debt-free but is inclined to make an exception for the ViaSat-1 investment, Dankberg said.

“It would make sense to use debt as a component in financing an asset such as a broadband satellite that has substantial intrinsic value,” Dankberg said. “The idea that it’s just impossible to get financing doesn’t really apply” in ViaSat’s case, he said.

While refusing to say so directly, Dankberg implied that the amount of debt financing ViaSat will seek depends in part on whether partners are found to invest in the project.

Dankberg
said ViaSat’s sales of terminals to WildBlue Communications of Denver, which serves the same consumer broadband market that ViaSat-1 is targeting, have leveled off as WildBlue works off inventory.

ViaSat
has an exclusive agreement to provide Eutelsat of Paris with network infrastructure and consumer terminals for that satellite-fleet operator’s Tooway consumer broadband service. Eutelsat initially is rolling out that service using its existing satellites but will accelerate the process with the launch, in 2010, of the company’s all-Ka-band Ka-Sat.

ViaSat
booked a $50 million order for Tooway ground infrastructure earlier this year, a contract Dankberg said could portend future sales of $500 million.

“In the past, the value of customer premises equipment has been about an order of magnitude greater than the infrastructure orders over about a four- or five-year period following launch,” Dankberg said.

Future sales to WildBlue and to a similar service in Canada, combined with future Tooway business in Europe, will give ViaSat economies of scale that will make it more difficult for competitors, Dankberg said. He said WildBlue is in negotiations with an unnamed partner for another Ka-band broadband project that should materialize in 2009. He did not provide details.

Meanwhile, propelled mainly by equipment sales to the U.S. military, ViaSat reported revenue of $312.2 million for the six months ending Sept. 30, an increase of 13.4 percent over the same period a year ago. Net income, at $15.5 million, was up 21 percent.

New orders were up sharply, totaling $461.4 million for the six months ending Sept. 30, a 42 percent increase from the same period a year earlier.

Commercial network revenue for the six months was flat over a year earlier, while government systems revenue was up nearly 24 percent.

Dankberg
said the delay, and possible cancellation, of U.S. military programs, including the $15 billion Transformational Satellite secure communications constellation, will not have a major impact on the company. ViaSat provides ground gear for current-generation systems.