Telesat Reports Q3 Revenue Decline, Expects to Name LEO Contractors by End of Year
Telesat reported a 15% decrease in revenue for the Third Quarter (Q3) compared to the same period 2019. On Thursday, the satellite operator reported revenue of $202 million Canadian dollars ($151 million), compared to CA $237 million ($178 million) in Q3 2019.
Telesat attributed the decrease in revenue to short-term services provided to another satellite operator in Q3 2019 that did not recur in 2020, a reduction of service for one of Telesat’s North American Direct-to-Home (DTH) customers, and lower revenue due to completing a term for prepaid services in a customer agreement with Wildblue on the Anik F2 satellite.
In a call with investors on Thursday, CEO Dan Goldberg said about 10% of the decline in revenue was due to COVID, which has impacted Telesat’s customers providing broadband to the aeronautical and maritime markets.
Net income was CA $107 million ($80 million), compared to net loss of CA $123 million ($92 million) in 3Q 2019. Telesat attributed this to non-cash gains on the fair value of financial instruments in 2020, non-cash foreign exchange gains in 2020 from translating Telesat’s U.S. dollar denominated debt into Canadian dollars, and lower interest expense.
Telesat’s backlog is $CA 2.8 billion ($2.1 billion), and fleet utilization is at 81%.
Broadcast made up 51% of Telesat’s revenue; enterprise services 46%; and consulting/other 3%. On a geographic basis, North America accounted for 82% of revenue; Latin America 8%; Europe, the Middle East and Africa 5%; and Asia 5%.
Goldberg said Telesat is in “very advanced” discussions with prospective manufacturing and launch vendors for its Low-Earth Orbit (LEO) project, and he expects to make some announcements by the end of the year. Telesat is focused on building out its LEO constellation to provide internet which will serve backhaul needs for Mobile Network Operators (MNOs), telcos and Internet Service Providers (ISPs), along with aero, maritime and government services.
Goldberg did provide an update on the possibility that Telesat could combine with major shareholder Loral Space & Communications Inc. into one public company in order to finance its LEO constellation. In April, Loral said it was in advanced discussions with its co‑owner in Telesat, Canada’s Public Sector Pension Investment Board about the combination.
“We expect [Telesat LEO to require] multiple billions of dollars of CapEx. We expect it would be financed roughly a third equity, two-thirds debt,” Goldberg said. “If Telesat were to go public, and if Telesat were to issue equity as part of that process, certainly the proceeds of an offering could be used to invest in LEO.”
On the overall state of the satellite services industry, Goldberg said he expects to see both consolidation and new entrants as SpaceX and Amazon are new entrants into satellite services and other players adjust to that.
“I expect that there will be some consolidation of other players, some of that horizontal, some of that vertical as the existing players reposition themselves to be successful in the market,” Goldberg said. “We’ve worked really hard, laying the foundations for our growth plans and positioning ourselves to be really effective to capture that undeniably strong demand for global broadband connectivity in those verticals that we’re focused on.”