Telesat expects its advanced satellite program to generate $1.2 billion over the next decade as part of a new partnership – just the first of many revenue streams the company hopes the cutting-edge technology will launch, officials said Thursday.
CEO Dan Goldberg told analysts on a conference call to discuss the Ottawa-based firm’s second-quarter results that the company plans to invest “multiple billions” in developing and building hundreds of low-Earth-orbit satellites.
The federal government announced last week it is pouring $85 million into Telesat’s new satellite technology, which is designed to provide much faster, more responsive digital services than existing high-orbit satellites.
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Under the new agreement, the feds will also pay the company $600 million over the next 10 years to provide bandwidth aimed at providing high-speed internet service to rural customers.
Telesat said it expects to generate an additional $600 million by selling bandwidth to telecommunications firms and internet service providers at below-market prices with the caveat that the new capacity be used to serve Canadians in rural and remote areas.
“We’ll price that pool of capacity at a very attractive rate,” Goldberg said. “We fully expect that telcos, ISPs, maybe even some municipal governments and others will take that capacity up we think pretty quickly.”
The veteran tech executive said even after a good chunk of the new bandwidth is earmarked to provide services to rural subscribers, there will still be plenty of “incremental capacity” left over to sell to other customers.
“That $1.2 billion in our minds is in no way a cap on the kind of revenue that we expect to receive from the Canadian market,” Goldberg told analysts
Under the new deal with the feds, Telesat will support around 500 jobs in Canada, invest $215 million into research and development over the next five years and promote education in the field of science and technology.
Telesat launched its first low-Earth-orbit satellite last year and said the full group of co-ordinated satellites – known as a constellation – will eventually include 298 satellites. It says its plan will involve launching highly advanced satellites into low Earth orbit, which is about 1,000 kilometres from the surface of the planet – much closer than traditional satellites.
Asked if the company expects to bring on additional partners to help finance the multibillion-dollar project, Goldberg said he wouldn’t rule it out. He said he believes the technology will be an attractive solution for customers looking at “solving the conundrum of rural broadband connectivity” and expects the products to sell well.
“I think that the constellation that we’ve designed is extraordinarily advanced and compelling,” he added. “We’ve been doing this for 50 years now. We know the markets. We know the customers. We’re pretty confident of our ability to commercialize this constellation.”
Telesat said its revenues for the quarter ending June 30 were $231 million, up nine per cent over the same period in 2018. When adjusting for foreign exchange rates, revenues grew $16 million, or eight per cent. The company attributed the jump in revenues to sales of its new Telstar 18 and 19 Vantage satellites, which entered the market in the second half of 2018.
Telesat posted a net income of $135 million in the second quarter, compared with a net loss of $6 million a year ago. The company said the turnaround was the result of gains from translating its U.S. dollar-denominated debt into Canadian dollars, gains on financial instruments and higher operating income in the second quarter of 2019.
Telesat said its order backlog stood at $3.5 billion as of the end of June.
