ViaSat Spends Big to Double Exede Subscriber Base
By Jeffrey Hill | May 21, 2012
[Satellite TODAY Insider 05-21-12] ViaSat’s fourth-quarter earnings dropped from profit to loss due to increased operating costs associated with the launch of its Ka-band-powered Exede broadband service, according to its latest financial results issued May 18.
The satellite and wireless communications provider reported a net loss of $7.4 million in its 2012 fourth-quarter, compared with a net income of $12.1 million in the same period last year. ViaSat did break analysts’ fourth-quarter revenue projection of $229 million by $11 million, reaching $240.4 million in revenue during the period.
While ViaSat spent more money on its ViaSat-1 broadband platform, the company also surprised analysts by adding 49,000 Exede subscribers during the quarter, which effectively doubled the size of the company’s subscriber base from the previous quarter.
ViaSat CEO Mark Dankberg said his company would have been able to sign up even more Exede subscribers if not for delays in installations and rollout. “The demand we saw upon the introduction of the Exede service was really strong,” said Dankberg. “It ramped quickly, and the fulfillment issues we had were based on the ability to schedule install appointments after orders.”
Exede customers typically cost about $700 initially to acquire. Dankberg said he expects to continue to face higher expenses to sign up Exede customers during the next several quarters.
Though ViaSat began rolling out Exede in early January, the service was introduced in stages and wasn’t fully available for the entire quarter. The service, powered by the ViaSat-1 high-throughput satellite launched in October, reached its full coverage area in early March.
ViaSat’s long-term goal is to add 1 million Exede subscribers on ViaSat-1. It currently has approximately 385,000 subscribers from its WildBlue Communications subsidiary, which uses two older satellites in ViaSat’s fleet.
In a May 18 research report, B. Riley & Co. Analyst Mike Crawford said satellite Internet skeptics are wrong to argue that only rural households with no other option would sign up for Exede.
“About one-third of ViaSat’s Exede customers in the quarter had other broadband alternatives to choose from, such as 3G/4G wireless or DSL,” Crawford wrote in the report. “ViaSat said demand orders far exceeded installs, and they’re looking to double the rate of installs. What that would mean is that in a couple of quarters, they would be adding 100,000 subscribers a quarter, or 30,000 a month.”
ViaSat posted 2012 full-year sales of $864 million and earnings of $32.1 million.