Telesat making ‘strong progress’ on LEO network after switching suppliers, company says

Dan Goldberg Telesat
Dan Goldberg is CEO of Ottawa-based Telesat. File photo

Telesat says it is making “strong progress” in getting its massive low-Earth-orbit satellite network off the ground after switching to a cheaper supplier a few months ago.

The Ottawa-based satellite telecommunications firm said Monday it is “ramping up staff” and engaging with suppliers as it pushes ahead with the multibillion-dollar constellation, dubbed Lightspeed.

“We firmly believe that Telesat Lightspeed will revolutionize broadband connectivity for enterprise and government users and represents a highly compelling growth and value creation opportunity for Telesat and its stakeholders,” CEO Dan Goldberg said in a statement.

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Telesat says the first Lightspeed satellites are expected to be deployed in 2026, with global service commencing in 2027. The network was originally expected to launch next year but was delayed after supply-chain disruptions and rising material costs ratcheted up the estimated price tag to US$5.5 billion, forcing the Ottawa-based company to delay production as it sought additional financing.

The project got back on track after Telesat reached a deal with a new manufacturer this past summer. The total capital cost of Lightspeed, which consists of 198 LEO satellites, is now expected to be in the range of US$3.5 billion.

Canadian aerospace firm MDA, which was already contracted to provide phased array antennas for Lightspeed, has agreed to build the entire constellation. The Brampton-based company, which was formerly known as MacDonald, Dettwiler and Associates and is best-known for creating the Canadarm, replaced European aerospace giant Thales Alenia Space as the lead supplier.

In September, Telesat announced it will partner with Elon Musk’s SpaceX to get the devices into orbit.

The Ottawa firm has contracted 14 launches on Space X’s Falcon 9 orbital rocket. Each launch will see the Falcon 9 deliver up to 18 of Telesat’s next-generation satellites into space.

Monday’s update came as Telesat reported that its revenues for the third quarter ending Sept. 30 were $175 million, down three per cent from a year earlier. The company said the decrease was primarily due to lower revenue from certain South American customers.

Telesat posted a net loss of $3 million, compared with a loss of $229 million in the same period in 2022. The firm attributed the improvement to a positive variation in foreign exchange gain on the conversion of U.S. dollar debt into Canadian dollars and a gain on its repurchase of debt.

Telesat reiterated its 2023 revenue projection of between $690 million and $710 million. 

“We remain on track to meet our guidance and, as a result of our continued disciplined execution, delivered industry-leading Adjusted EBITDA margins, high capacity utilization, a substantial contractual backlog of $1.5 billion, and a cash balance of $1.8 billion,” Goldberg said. 

“In addition, in the third quarter and subsequent period we strengthened our financial position by repurchasing debt with a cumulative face value of US$195 million, received the remaining C-band proceeds from our U.S. spectrum clearing efforts, and successfully completed in-orbit testing of our LEO 3 demonstration satellite.”

In addition to the estimated US$2 billion in capital cost savings from changing suppliers for Lightspeed, Telesat said it also expects “substantial savings due to significantly reduced financing costs relative to the company’s prior plan.”

Telesat said it has lined up about US$2 billion in funding from its federal and provincial government partners, financing that is contingent on conditions such as completion of due diligence and the conclusion of definitive agreements.

The LEO satellites will be located about 1,000 kilometres above the Earth’s surface, much closer than traditional satellites. 

That will allow for lower latency, or lag time, which is expected to translate into better wireless service for customers in remote areas and mobile locations such as airliners and cruise ships.

While Lightspeed will compete indirectly with SpaceX’s global Starlink communications network, which is already well-established, Telesat says it is going after enterprise customers such as airlines, cruise ship operators, governments and telecom companies rather than the direct-to-consumer market targeted by Starlink and other competitors like Amazon’s Kuiper.

Telesat stock, which got a substantial lift when the change of suppliers was announced, has since fallen back to Earth.

The company’s shares were down $1.12, or nearly seven per cent, to $15.25 in mid-afternoon trading on the Toronto Stock Exchange. They were selling at more than $30 in late August.

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