[Satellite News 07-20-11] ViaSat’s $400 million ViaSat-1 satellite saw another setback when ViaSat CEO Mark Dankberg confirmed July 19 that its manufacturer Space Systems/Loral (SS/L) discovered and reviewed a malfunction in a previous satellite that will push ViaSat-1’s scheduled launch back by a few weeks.

   SS/L discovered a solar panel problem on the Telstar 14R satellite launched in May. The discovery had prompted SS/L to conduct a failure review analysis of ViaSat-1 as it uses similar components. The Ka-band satellite, expected to launch on an ILS Proton rocket this month, will now have to wait until August or September. The satellite will then enter commercial service approximately two months later.

    This is the second ViaSat-1 delay caused by SS/L. In January, damage sustained to the ViaSat-1 satellite at its manufacturing facility forced ViaSat to push the launch back from spring to summer. ViaSat said an incident occurred while manufacturer Space Systems/Loral (SS/L) was transporting the Ka-band satellite for testing. ViaSat has not yet taken ownership of the satellite, and SS/L has agreed to cover the cost of the repairs. “The delay provides additional time for repair and testing after the satellite was damaged while being moved during the testing process,” ViaSat said in a statement.

   Analysts believed the setback impact the company’s 2012 full-year revenues and EBITDA. “Although management did not disclose the nature of the damage, the relatively short launch delay would seem to suggest that the damage was fairly minor. Loral will undoubtedly perform thorough repairs and quality testing in order to certify the satellite, but ViaSat might still be forced to pay a higher insurance premium due to a presumed greater risk of satellite anomalies,” Raymond James Analyst Chris Quilty told Satellite News.

   Quilty projects that ViaSat-1 will enter service during the 2011 fourth-quarter as opposed to the intended second-quarter launch, as the satellite now will likely require an additional 60 to 90 days to reach its intended orbital slot, perform testing and enter service. “This will likely result in a corresponding drop in net additions from 211,000 to 58,000. We are likewise lowering our full-year 2012 revenue estimates by 3 percent and our EBITDA forecast by 13 percent to $191.8 million”

   Despite the news of the recent delay, ViaSat’s stock has not suffered. The company maintains a potential upside of 7 percent based on an average consensus analyst price target of $44.

   ViaSat invested approximately $1 billion in the past three years hoping the satellite would make it into orbit in early August. Morgan Keegan Analyst Brian Ruttenbur said the launch itself is not without risks and that it is understandable why SS/L and ViaSat are taking no chances. “[ViaSat-1’s] insurance alone costs more than $40 million. While the probability is low, an unsuccessful launch or deployment of ViaSat-1 would be catastrophic for the company even with insurance on the satellite,” said Ruttenbur.

   ViaSat-1, designed with more than 130 gigabits-per-second of total throughput, would be one of the largest Internet satellites in the world when launched. The satellite is a crucial element of the operator’s future growth strategy. Positioned in geosynchronous orbit at 115 degrees West, ViaSat-1 will serve the U.S. market with nearly double the capacity offered by Eutelsat’s Ka-Sat satellite launched in December 2010. Loral Space and Communications is part owner of ViaSat-1 and has purchased pre-sold capacity on the satellite dedicated to Canadian consumer broadband providers. ViaSat-1 also is crucial to developing its valuable in-flight connectivity partnership with JetBlue Airways. “We are aiming to be in service probably in the last quarter of 2012. If it gets the level of traction as in-flight videos, then its a billion-dollar market in five to seven years,” Dankberg said.

   Quilty, however, warned that if the repairs take longer than expected, ViaSat could miss its launch window and encounter an even longer delay. “The crowded Proton launch manifest leaves little room for maneuvering. Even without these delays, however, the stock appears fairly valued trading at 11 times our full-year 2011 EBITDA and we are maintaining our market perform rating,” he said.

   ViaSat plans to begin work on its ViaSat-2 satellite by the end of this year. ViaSat-2 is expected to launch in early 2015.