[Satellite News 08-30-11] What do MSS and Asian regional operators have in common with Hughes Network Systems? The answer could be that all three parties produced surprisingly strong results in market segments that provided the most difficult growth environments. Analysts’ eyes have been focused on the MSS sector during its transition period to next generation offerings and satellite systems, as well as on cost-conscious consumer and enterprise markets still adjusting to the unstable global economy.

            In part two of this two-part segment, Satellite News highlights the performances that provided analysts with a sigh of relief, and in some cases, new items on a list of long-term concerns.

 

MSS operator Iridium Communications undoubtedly enjoyed significant momentum going into the second half of 2011, reporting $11.7 million in 2011 second quarter earnings — a considerable leap from the $3.2 million generated in the same period last year. The results marked the second consecutive quarter that Iridium has exceeded analysts’ forecasts.

Iridium recoded a 14 percent second-quarter total revenue increase at $95.9 million, which consisted of $30.8 million of equipment, engineering and support revenue and a 10 percent increase in service revenues at $65.1 million. Service revenues constituted 68 percent of the mobile satellite operator’s total revenue for the second quarter of 2011.

   Raymond James Analyst Chris Quilty said Iridium’s performance during the quarter suggests that the company is on track to meet or exceed its full-year forecast. “The most noteworthy driver was the company’s commercial voice business with satellite phones, which posted year-over-year revenue growth of 8 percent and was 3 percent higher than our estimate,” Quilty told Satellite News. “This provides further evidence that Iridium can continue to grow its voice business despite increasing competition from VSAT providers and [Inmarsat’s] IsatPhone. Iridium’s commercial machine-to-machine (M2M) also was excellent and exhibited revenue and net addition growth of 18.8 percent and 82 percent respectively, driven by the company’s high speed 9602 modem.”

   Iridium achieved double-digit subscriber and operational EBITDA growth in the fiscal period, ending the quarter with 478,000 total billable subscribers — a 25 percent increase from Iridium’s 383,000-subscriber mark in the 2010 second quarter. Iridium ended the second quarter with cash and equivalents balance of $103.8 million and gross debt of $265.3 million. The operator’s net debt stands at $147.9 million.

   Iridium reported success in the government market, with sector revenues up 14 percent, reflecting 12 percent growth in voice revenues and a two-fold increase in government M2M revenues. Iridium CEO Matt Desch said his company has focused on strengthening its revenue profile in new markets, while affirming Iridium’s 2011 financial guidance, including subscriber growth, revenue growth and operational EBITDA. “Approximately 40 percent of our total service revenue now comes from data products and services. Showcasing our strength in the data market, we grew commercial M2M data revenue more than 18 percent in the second quarter.”

   Ultra-competitive MSS operator Inmarsat saw its 2011 second quarter earnings increase 32 percent from the same period last year to $222.7 million. Though its performance was generally considered healthy, analysts expressed concern over the company’s slight decline in maritime revenues — from $181.7 million in 2010 to $181.3 million in 2011.

   Inmarsat expected its maritime business to grow between 2 percent and 4 percent during the 2011 first quarter. The maritime business unit accounts for approximately 40 percent of Inmarsat’s overall revenues. The company’s total revenues increased 28.5 percent to $472.6 million, which included a $110 million payment Inmarsat received from LightSquared for access to a portion of its MSS radio spectrum. LightSquared will use that spectrum to help separate its signal from GPS signals and prevent interference.

   Inmarsat CEO Andrew Sukawaty said the company would likely lower its five-year revenue growth projection, which is currently set between 5 percent and 7 percent. “While we believe that a return to more normalized revenue growth in our maritime business is only a matter of time, we expect near-term factors will constrain growth for longer than previously anticipated,” said Sukawaty. “Shipping customers have been spending less on satellite communications as crew members shift to e-mailing rather than voice calls. Military operations in Afghanistan also are scaling back. We will return to growth next year but we are being cautious.”

   Despite the long list of challenges awaiting MSS operator Globalstar in the near-term, the company posted increased 2011 second-quarter revenues of $18.9 million compared with $17.6 million in the same period last year. Globalstar’s service revenues grew from $12.9 million in the second quarter of 2010 to $13.3 million in its most recent quarter. Equipment revenues also grew from $4.7 million last year to $5.6 million. Globalstar activated more than 19,500 Spot product family units during the quarter. Globalstar also soothed fears of a possible default on its Coface loan by securing French Space Ministry authorization Aug. 30 to operate its second-generation constellation.

   “Our revenue increased primarily due to the increased number of Spot and Simplex data subscribers and related service revenue and equipment sales,” Globalstar Chairman Jay Monroe said during a conference call. “Activating a record number of Spot units during the quarter continues to demonstrate that we have established our leadership position in the consumer retail MSS marketplace.”

   The second quarter’s most surprising performances, however, came from Asian regional operators and new EchoStar subsidiary Hughes Network Systems, which provided noteworthy boosts to their market segments.

   After struggling to capitalize early on its new broadband services, Thaicom generated $28.32 million in Ipstar service revenues during its 2011 fiscal second quarter, which represents an increase of more than 35 percent compared with the same period last year.

   Bualang Securities Satellite Equity Analyst Prasit Suijiravorakul highlighted that Ipstar’s improved results puts Thaicom on track to break even in the fourth quarter of this year. “Ipstar reported its first gross profit [of $2.86 million] since the third quarter in 2004 on increased bandwidth and UT sales to India, Japan, Australia and New Zealand. The conventional satellite business improved both year-on-year and quarter-on-quarter. Its gross profit rose 49 percent year-on-year and 16 percent quarter-on-quarter thanks to the higher bandwidth sales to TV operators and lower transponder rental costs. The Internet unit’s gross profit rose by 314 percent year-on-year and 12 percent quarter-on-quarter on higher DTV dish sales in Cambodia.”

   Asia Satellite Telecommunications’ (AsiaSat) core market segments produced double-digit revenue and operating profit percentage increases in the first half of 2011 and are on track for an even faster pace of growth in the second half of the year. The operator’s 2011 first-half revenue grew 16 percent from its 2010 midway mark to $103 million, backed on 30 percent operating profit growth during the same period. AsiaSat’s incoming Chairman Sherwood Dodge, who replaced retiring Chairman Peter Jackson Aug. 1, said the company remained debt free throughout the period. Dodge added that the company held $307.8 million in cash and equivalents at the end of June — a considerable improvement from its position in December, when AsiaSat VSAT subsidiary SpeedCast CEO Pierre-Jean Beylier told Satellite News that its parent company expected stronger results in 2011. “We see key contributors continuing to be maritime and growth in value-added-service sales, as well as Middle East and Africa regions,” he said.

   AsiaSat reported that its three satellites were 80 percent full at the end of June compared with 73 percent full during the same period last year, as the operator had sold or leased 105 transponders on its current fleet. SpeedCast also grew its 2011 first-half revenues by 24 percent compared with the same period last year.

In the United States, Hughes Network Systems helped expand its parent company’s U.S. national consumer subscriber base by 2 percent, which offset subscriber losses from EchoStar’s sister company Dish Network. Hughes brought EchoStar’s total consumer connections to 626,000, backed by a U.S. government subsidy package of $551 per new sign-up. Approximately 464,000 of those subscribers were being carried by Hughes’ Spaceway 3 Ka-Band satellite.

   Hughes’ Jupiter satellite was designed to handle 10 to 12 times the flow of current transmissions to between 1.5 million and 2 million subscribers. Spaceway 3 will host about 600,000 subscribers after Jupiter is launched next year. Hughes recorded a large order in the second quarter from Boeing for its Mexsat project. The subsidiary’s order activity resulted in a non-consumer order backlog of more than $1.1 billion. EchoStar hopes its new Echo-16 satellite also will drive new business when it is launched next year.

   “Echo-16 is set for next year and Jupiter is hopefully set for the first quarter of next year, but, as you know, there has been some shifts in some of the launch windows, but the satellite production construction is on schedule. In terms of Echo-16 financing, we have about $111 million in financing remaining as of June 30. On Jupiter, we have about $135 million remaining and both of those are inclusive of launch agreements,” EchoStar CEO Michael Dugan said during a press conference.