Connect with us

International Circuit

Telesat downsizing Lightspeed satellite project as supply chain woes, inflation mount

Telesat is scaling back its multibillion-dollar low-Earth-orbit satellite network in the wake of supply chain disruptions and soaring inflation, the company says.

Dan Goldberg, the chief executive of the Ottawa-based firm, told analysts on a conference call Friday that Telesat now plans to deliver 188 LEO satellites plus 10 backups aimed at delivering high-speed internet service to customers not well-served by existing infrastructure – down from the company’s previous target of 298 satellites.

Telesat’s longtime CEO said the company has been “bitten” by supply chain bottlenecks that have delayed construction and driven up the cost of the state-of-the-art system, which is designed to orbit about 1,300 kilometres above the Earth – far closer than traditional satellites – and provide internet connectivity to remote areas as well as non-terrestrial customers such as cruise ships and airliners.

While the company’s first LEO satellites were originally expected to make their way into orbit in 2024, Goldberg told analysts in March the constellation likely wouldn’t launch until the following year.

Telesat said production delays had hampered its bid to finalize deals with a pair of export credit agencies, Export Development Canada and Bpifrance, to provide critical financing for the project, which was previously priced at about $6.5 billion.

Goldberg said Friday talks with both agencies resumed in mid-April, adding he expects the framework for a potential funding agreement to be hammered out by the end of Telesat’s second quarter on June 30.

“We think there’s an awesome market here, and we want to get at it,” he said.

But Goldberg said Telesat is reducing the budget for the project to around $5 billion, forcing it to cut the number of satellites it will produce.

“We remain enthusiastic about the prospects for Telesat Lightspeed,” he told analysts Friday during a conference call to announce the firm’s first-quarter earnings. “We obviously didn’t love the inflationary pressures we’re seeing out there, but even with them, we think that what we’re bringing to market is going to be disruptive in terms of the quality of service level we can deliver and the price at which we can deliver it.”

Goldberg had previously hinted at the possibility that the project, dubbed Telesat Lightspeed, could be downsized, telling analysts in March the company could deliver “a very capable global constellation” even with 100 fewer satellites.

Telesat began trading on the Nasdaq and Toronto Stock Exchange in November in a bid to raise additional capital as it goes toe-to-toe against big-name competitors in the LEO space such as Elon Musk’s SpaceX and Jeff Bezos’s Amazon-backed Project Kuiper.

Business case ‘fundamentally intact’
When an analyst suggested Friday that Telesat had lost its head start over Project Kuiper due to production delays, Goldberg downplayed the idea that Bezos’s project is gaining ground on Lightspeed.

Goldberg pointed out that the two providers are targeting different customer bases. While Amazon’s LEO satellites are being aimed at the direct-to-consumer market, Telesat is designing its network to provide backhaul coverage to internet service providers, meaning its satellites will send signals from remote sites to central hubs run by the likes of Rogers and Verizon.

“Our business case is fundamentally intact,” Goldberg said. “It’s a big, big market. We know this market well. We know the customers well.”

Goldberg noted that Lightspeed has already secured hundreds of millions of dollars worth of advance orders and is seeing strong interest from the cruise ship and airline operators as COVID restrictions ease and people resume travelling.

He said a recent analysis of the cruise line industry showed that while only 70 per cent of ships have returned to ferrying passengers, demand for wireless bandwidth on the vessels has already exceeded pre-pandemic levels.

“Everyone just wants a whole lot more bandwidth, and the pandemic certainly accelerated that,” he said, adding that more and more cruise ship passengers are now looking to access platforms like Zoom while they’re at sea. “We believe that’s the future of broadband connectivity demand. That’s why we’re building Telesat Lightspeed, and that’s why we’re so bullish about it.”

Telesat reported revenues of $186 million for the three-month period ending March 30, down about three per cent from a year earlier. It posted net income of $61 million, up from $41 million in the first quarter of 2021, due mainly to changes in the fair value of financial instruments.

Goldberg said Telesat remains on track to hit its revenue projections of between $720 million and $740 million for fiscal 2022.

While longstanding direct-to-home customer Dish Network recently inked a new deal that will see it use just half its previous satellite capacity for at least the next two years, Goldberg said the company landed a new cruise ship customer that’s agreed to pick up most of Telesat’s remaining available capacity in that part of the spectrum.

“We feel good about where we sit,” he told analysts.

After debuting at $54 on the TSX in late November, Telesat’s stock has been in a free fall, shedding nearly 70 per cent of its value to sit at $16.30 at the close of Monday’s trading.

Goldberg suggested Friday the company hasn’t done a good enough job at selling potential investors on the merits of its future LEO network. He said Telesat plans to attend two upcoming investor conferences in the U.S. later this month in an effort to create more buzz about the project.

“We look at where the stock is trading right now and our market cap and just shake our heads,” Goldberg said. “Shame on us. We’ve got to get out there and share a whole lot more information on Lightspeed.” Ottawa Business Journal

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2021.Broadcast and Cablesat

error: Content is protected !!