Telesat expects to boost its workforce by nearly 50 per cent in 2024 as the Ottawa-based satellite communications firm ramps up production of its next-generation low-Earth-orbit constellation, its CEO said Thursday.
Dan Goldberg told analysts the company, which had almost 500 employees at the end of 2023, plans to hire more than 240 additional workers by the end of this year.
Nearly two-thirds of Telesat’s workforce will be dedicated to building the company’s multibillion-dollar Lightspeed satellite constellation. The firm expects to invest between $1 billion and $1.4 billion in capital expenditures in the program this year, with the goal of launching the first LEO satellite in 2026 and achieving full global coverage by the end of 2027, Goldberg said.
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“The reality is that enterprise customers want affordable, low-latency broadband connectivity, which we’ve been talking about for quite some time,” he said on a conference call to announce the firm’s fourth-quarter and full-year 2023 financial results. “If anything, the transition to LEO is happening a little faster than even we expected.”
The total capital cost of Lightspeed, which consists of 198 LEO satellites, is 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 a cost-cutting move last year.
In addition to the estimated US$2 billion in capital cost savings from changing suppliers for Lightspeed, Telesat said Thursday it expects to save up to US$750 million in financing costs over the life of the project.
The company previously 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.
On Thursday, Goldberg said Telesat has “reached an understanding” on a financing agreement with the federal government. The firm was expected to release a summary of the terms later in the day after markets closed.
“We’re confident we’ve got the financing in place that we need to move our project forward, which is why we’re hiring all these people and spending all this money and entering into all these contracts,” Goldberg said.
Telesat’s 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.
Projected drop in revenues
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.
During Thursday’s call, Goldberg acknowledged that Starlink is already “cannibalizing” some of Telesat’s enterprise customers, particularly in the cruise ship space.
That’s a major reason why Telesat is projecting a significant drop in revenues this year.
The firm said Thursday it expects fiscal 2023 sales in the range of $545 million and $565 million, down from $704 million in 2023.
Goldberg said about half of the projected decline is due to falling sales to direct-to-home satellite customers as more consumers ditch traditional satellite and cable connections in favour of streaming services.
Declining revenues from enterprise customers such as cruise ship lines account for most of the rest, he explained. As Telesat’s contracts with cruise ships and their service providers come up for renewal, some of those customers are signing with Starlink.
Still, the CEO told analysts he’s optimistic that Telesat will win back much of that business once Lightspeed comes online, adding that the customer exodus to Starlink is a “strong validation of the market embrace of LEO” satellites.
“We fully anticipated the transition to LEO, and it’s precisely why we’re building Lightspeed and why we’re so bullish on it,” Goldberg said, later adding that clients who’ve jumped to Starlink are “well aware” of Lightspeed’s capabilities and could return.
“The big enterprise customers are sophisticated about what’s happening out there in the market,” he said. “They have quite a bit of flexibility to add networks, drop networks. They like what we can offer and the flexibility that we offer and our ability to concentrate capacity at ports and on key shipping lines.”
Goldberg said Lightspeed is generating “great interest” from customers in a range of verticals, including governments and airlines as well as maritime clients such as cruise lines.
“As good as SpaceX is and as fast as they’re moving, no one is going to own this entire market,” he said. “The market is huge; it’s growing fast. I’d say particularly for enterprise customers, they never want to put all of their eggs in any one basket.”
Telesat’s revenues fell seven per cent last year compared with 2022. The company attributed the decline to rate reduction in the renewal of a long-term agreement with a North American direct-to-home customer combined with a reduction of capacity and rate by another one of its North American direct-to-home customers, as well as an equipment sale in 2022 that was not repeated last year and lower revenue from certain Latin American customers.
Telesat turned a profit of $583 million in 2023, compared with a net loss of $82 million the previous year.
The company said the turnaround was mainly due to C-band clearing proceeds recognized in the second quarter of 2023 as well as lower foreign exchange losses on the conversion of its U.S.-dollar-denominated debt into Canadian dollars and a higher gain on the repurchase of debt.
Telesat’s shares were down 61 cents to $11.63 in late-afternoon trading on the Toronto Stock Exchange.
