Recent Financial Strength Paves Way for Gilat’s Ka-band Market Strategy

[Satellite News 11-15-11] International satellite broadband and VSAT specialist Gilat Satellite Networks has generated the strong financial growth spurt it needs to execute a long-term push into the Ka-band arena, Gilat Chairman and CEO Amiram Levinberg told investors during a Nov. 15 conference call following the release of its 2011 third quarter financial results.

    Levinberg has led Gilat on an initiative to build financial momentum through acquisitions designed to explore new markets in government and enterprise verticals. Now, after signing recent contracts with new customers to provide high-throughput bandwidth and related services, the company turns to Ka-band opportunities in remote regions. “Specifically of note is the progress we have made in our strategy to become a strong contender in the Ka-band arena, securing another major Ka-band win, this time in Russia with RTComm and local government agency NIIR [FSUE],” he said.

    RTComm is the satellite service arm of Russia’s national telecommunications operator Rostelecom. NIIR FSUE is an institute for technology advancement that serves as part of the Ministry for Telecommunications and Mass Communications of the Russian Federation. Just yesterday, Gilat announced a cooperation agreement between the parties that will include the supply of network equipment and Ka-band end-user terminals, transfer of technology required for local manufacturing in Russia and research and development. The end goal of the agreement, according to the new partners, is to provide high-speed broadband capabilities that aim to help bridge the digital divide across the Russian Federation.

   RTComm General Manager Valeriy Lokhin said his company identified Gilat as the best possible long-term technology partner for bringing Ka-band to Russia. “We rigorously evaluated a number of satellite broadband solutions, and we are confident that the technological level of Gilat’s solution, as well as positive experience of Ku-band projects implementation, will enable fast and effective rollout of this nationwide project approved by the Government of the Russian Federation,” Lokhin said in a statement.

   But even more importantly for Gilat, solid fiscal power remains an essential element to drive its future-oriented strategy, and after reporting a strong 2011 third quarter, the company seems to be a healthy position to hit its targets. Gilat reported a third-quarter revenue jump of 45 percent in 2011 to $83.9 million compared to the same period last year. Operating income leaped from from a $700,000 loss last year to a $1.9 million gain and EBITDA nearly doubled from $4.4 million in the 2010 third quarter to $8.1 million in its most recent fiscal quarter ending Sept. 30.

   Gilat’s net income did slide in the third quarter of 2011 from $36.2 million last year to $4.3 million, but Levinberg noted that the net income for both the third quarter of 2011 and 2010 included a one-time income from the sale of an investment and settlement agreement in the amount of $4.4 million in 2010 and $37.3 million 2011.

“In the [2011] third quarter, we saw a year-over-year improvement across all financial parameters as we increased our revenues, gross margin, EBITDA and operating income. We maintained strong performance in our bookings this quarter, with several significant contract wins from new as well as existing customers," Levinberg said.

   The Israeli company has had a tremendously busy summer and early fall, especially in Russia. In July, Gilat was selected by the Russian Yakutia Ministry of Finance to provide a full turnkey SkyEdge 2 broadband satellite network to serve new Ministry of Finance locations across one of the country’s largest federal districts in the Sakha (Yakutia) Republic. The company also was contracted by Russia’s national communications carrier Synterra to provide satellite communications equipment for the extension of a broadband network throughout Siberia and the Russian Far East.

    Gilat made its first big splash in the Ka-band one month later in August, when it announced it had signed an agreement to deliver of network equipment and Ka-band end-user terminals for SES satellite-based Internet service Astra2Connect. The project, including deals with SES and related nominees, holds a potential value of up to $70 million over the next five years.

   The company spent the rest of August and September establishing a series of lucrative SkyEdge 2 deals in the United States and Latin America, as well as other VSAT contracts in South East Asia. Earlier in October, new Israeli financial regulations forced Gilat’s board of directors to appoint Erez Antebi as CEO of the company, effective January 1, 2012 and move long-time CEO and co-founder Levinberg to serve in his position as chairman of the board. Levinberg said he would continue to reinforce Gilat’s Ka-band ambitions from his adjusted role. “We see Ka-band technology expanding to more regions in the world, and offering new opportunities with much higher capacities and at lower prices to the subscribers.”