Intelsat Satellite Failure Cuts into Q2 Revenues
Intelsat reported total revenue of $509.4 million and net loss attributable to Intelsat S.A. of $529.7 million — compared to a net loss of $46.8 million for the same period in 2018 — for the three months ended June 30. The net loss reflects a $381.6 million asset impairment charge incurred in the Second Quarter (Q2) 2019 for an in-period satellite failure. The Intelsat 29e propulsion system experienced damage that caused a leak of the propellant on board the satellite resulting in a service disruption to customers on the satellite. While working to recover the satellite, a second anomaly occurred, after which all efforts to recover the satellite were unsuccessful.
On June 30, Intelsat’s contracted backlog — representing expected future revenue under existing contracts with customers — was $7.5 billion after adjusting for known reductions to backlog related to the Intelsat 29e satellite failure, as compared to $7.9 billion on March 31.
Revenues in all three of Intelsat’s segments declined quarter over quarter. Network Services revenue (or 36 percent of Intelsat’s total revenue) was $185.2 million for the three months ended June 30, a decrease of 7 percent compared to the three months ended June 30, 2018.
“We see continued pressure in our wide-beam network services business, in some cases due to customers transitioning to our high-throughput services, which are more efficient, and in other cases moving to fiber,” Intelsat CEO Stephen Spengler said in the company’s quarterly statement. “The volume from these non-renewing services is sometimes replaced by new services on our network. These include higher volume, but lower priced services on high-throughput capacity in certain regions and applications, as well as our managed maritime services, our highest growth application.”
Media revenue (or 44 percent of Intelsat’s total revenue) was $223.5 million for the three months ended June 30, a decrease of 5 percent compared to the three months ended June 30, 2018. Additionally, Government revenue (or 18 percent of Intelsat’s total revenue) was $93.3 million for the three months ended June 30, a decrease of 5 percent compared to the three months ended June 30, 2018.
“Reflecting our emphasis on the wireless sector, we ramped up services on our enhanced point-to-point solutions and on our new satellites,” said Spengler. “In particular, we signed new business on the Horizons 3e high-throughput satellite, which provides infrastructure for several of the largest wireless operators in Asia, as well as Intelsat 38, which is providing new services for government applications.”
Intelsat conducted no satellite launches in Q2 2019. The Intelsat 39 satellite, which will provide services from Europe and Africa to the Asia-Pacific region, is expected to launch in the third quarter of 2019, and enter service in the fourth quarter of 2019.
Spengler listed five priorities for the operator moving forward: Intelsat will leverage assets within its global network for maximum returns; scale its managed services across enterprise, maritime, business jet commercial, and aeronautical government markets; lead a seamless implementation of satellite-based telecommunications solutions with the global telecommunications infrastructure; maintain a disciplined cash flow; and optimize spectrum rights.
“Over the past two months, we significantly increased the public details of our C-Band Alliance (CBA) proposal under the U.S. Federal Communications Commission (FCC) C-band proceeding,” Spengler added. “We added to the record a committed plan for protecting incumbent users, expanded the detail of our plan for rapid implementation, and submitted additional technical analyses supporting interference mitigation. We will continue to enhance our plan, with a goal of demonstrating that the CBA plan represents the fastest path to cleared spectrum for 5G in the U.S., while maintaining the reliability of the U.S. television and radio ecosystem.”