Feds pump $1.44 billion into Telesat's Lightspeed satellite network

Telesat image

The federal government is contributing $1.44 billion to Telesat’s push to deliver high-speed internet service to remote and rural areas across Canada – the “big piece” of funding that was needed to bring the project home, the Ottawa-based satellite company says.

“Telesat has just taken a major, and we think decisive, step forward in getting this ambitious project fully financed,” CEO Dan Goldberg told OBJ after the feds announced the funding on Thursday.

Telesat’s new network, dubbed Lightspeed, will include 298 satellites operating much closer to Earth than traditional satellites – between 1,000 and 1,300 kilometres above the ground as opposed to 36,000 kilometres.

The multibillion-dollar constellation is designed to deliver broadband internet speeds comparable to those offered by fibre-optic networks to parts of the planet that currently can’t access such service.

The company expects Lightspeed to start operating in 2024, and says it will ultimately connect 40,000 Canadian households in rural and remote regions to high-speed LTE and 5G networks. 

The ambitious project has a total price tag of about $6.5 billion, of which Telesat says it has now secured about $4 billion. The new federal funding is split between a $790-million loan repayable over 20 years and $650 million worth of preferred shares from which the feds will receive dividends.

On track for IPO

The government will also receive warrants that can be converted into common shares of Telesat, which plans to go public on the Nasdaq later this year. Goldberg told OBJ the firm is “on track” for an IPO late in the third quarter or early in the fourth quarter after getting the green light from the U.S. Federal Communications Commission last week.

Goldberg said the new federal cash will “unlock” commitments from a pair of export credit agencies, Export Development Canada and Bpifrance, that are negotiating with the company to provide the remaining financing.

“Those export credit agencies wanted to know that we had all of the other financing lined up before they would commit to providing support for the project,” he said. “Now, with this announcement … we’ve got all that.”

The news comes on the heels of major pledges from the provinces of Ontario and Quebec to help fund the project.

In February, the Quebec government said it would provide Telesat with a $200-million loan and take a $200-million equity stake in Lightspeed as part of a plan that will see the company establish the network’s operations centre in Gatineau.

'A great day for Ottawa'

Last week, Telesat signed a $109-million deal with the Ontario government to provide dedicated broadband internet bandwidth and 5G networking capacity at reduced rates to service providers, including Indigneous-owned companies, as well as mobile network operators in remote areas of the province.

The company says it expects to double its total Canadian workforce to about 700 people as it prepares to launch Lightspeed. Telesat says it also plans to create about 100 co-op positions for students and spend $800,000 on scholarships focusing on women in STEM programs.

Goldberg said most of those jobs will be located in the National Capital Region.

“It’s a great day for Ottawa,” he said.

On Friday, Telesat reported second-quarter revenues of $188 million, down 10 per cent from a year earlier. The company attributed the drop to a “slight reduction of service” from one of its North American direct-to-home satellite customers as well as non-renewals of certain contracts and lower consulting revenues.

Telesat posted a net income of $61 million, compared with $162 million in the same period last year. The company said the smaller profit resulted from lower non-cash foreign exchange gains and a rise in items related to share-based compensation.