Gilat CEO Expects Strong Payoffs from Ka-band Investments in 2013

Gilat Satellite Network CEO Erez Antebi expects the company will grow its financial strength considerably in 2013, as Gilat continues to invest back into its business segments and its Ka-band and satellite-on-the-move initiatives. Though Gilat’s revenue have beaten analysts’ projections throughout 2012, stock-based compensation, acquisition-related costs and other expenses have impacted profits. Despite this, Gilat’s stock has been trading up 21 percent higher than it was a year ago, driven by the potential in its future offerings. “As we continue to execute on our growth strategy, we remain confident about the future prospects at Gilat,” said Antebi.
   Gilat received its first Ka-band order from a larger European ISP after the late September launch of SES’ Astra 2F satellite, which will enable SES Broadband Services (SBBS) to deliver commercial Ka-band satellite broadband in Europe. The service is expected to commence in early December. As part of the SBBS consumer rollout, we received our first order from a larger European ISP. The initial order is for several thousand self-installed customer premise equipment based on Gilat’s SkyEdge 2 Aries VSAT. The service aims to allow European households to access satellite Internet, video and Voice-over-IP services.
   “In addition to the initial ISP order, we have received another ISP order with additional orders expected,” said Antebi. “While we continue to execute on current contracts like NBN and SES, we also have been active in securing new commercial projects in various parts of the world. For example, in Asia we closed a large cellular backhaul project at a Tier 1 mobile operator; we closed various deals in Latin America, including one to provide satellite communication and support of a national presidential election, and another with a large service provider.”
   Gilat also won a significant portion of an ATM banking project in India. The company recruited Stephane Palomba, an industry veteran as its regional vice president in Asia to help enhance its operations. Gilat also hired Michael Barthlow during the quarter as its general manager for its business in North America, which includes all of Gilat’s Wavestream product line. “We believe that these moves strengthen our operation in those key regions,” said Antebi. “We have been continuing efforts to consolidate the sales and marketing teams within our defense division. While the macro defense industry remains challenging, our pipeline continues to grow and we continue to sell ground equipment to various government contractors and system integrators in United States and the international markets. We continue to close deals on the Satellite-on-the-Move market. For example, we closed during the quarter business with an additional airborne system integrator in the United States as well as deals to provide On-the-Move equipment for our railway system in Africa, and security forces in Eurasia.”
   Antebi also provided an update on Gilat’s services division, lauding subsidiary Spacenet’s continued success in closing new contracts and expanding existing services. “During the quarter, based on expanded, the managed network and VSAT service agreement were Valero Energy to include new contract and refresh technology in over 500 locations,” said Antebi. “We renewed the contract with Sunoco that includes new managed services for over 4000 company-owned and dealer location. In addition, Spacenet expanded their partnership with Centerpoint Energy, one of America’s leading energy delivery company. Centerpoint is expected to bring Spacenet new customers in the oil and gas pipeline and drilling industry.”
    Another region that has provided reliable growth for Gilat is South America. The company’s subsidiary in Colombia just signed a six-month extension of its contract with the Compartel education project, which is worth approximately $10 million through March 2013. While Antebi said he was pleased with the extension of this project, he noted that Gilat has not placed a proposal for the rebid of the continuation of the project. “This is due to economic conditions and the terms of the rebid, which we considered unfavorable, we are currently evaluating several alternative to continue to providing services to some of these sites,” he said.
   Gilat Peru also successfully completed the installation phase of FITEL 10 and has progressed to ongoing operation of the project, which is scheduled to continue into 2015.
   “We have closed several local government and rural banking deals during the quarter,” said Antebi. “As mentioned previously, we follow the solid second quarter in 2012 with a stronger third quarter. We expect the fourth quarter will be stronger than the third.”