Telesat Lightspeed constellation. Photo: Telesat and VIa Satellite illustration

Telesat confirmed plans to downsize its Lightspeed Low-Earth Orbit (LEO) constellation from the planned 298 satellites to 188 with 10 in-orbit spares. CEO Dan Goldberg gave an update on the constellation as part of the operator’s first quarter 2022 financial results on May 6. 

Goldberg previously mentioned Telesat was looking into downsizing the constellation during the last quarterly investor call, due to inflation and supply chain concerns.

Goldberg said Friday this constellation size keeps Telesat in the same CapEx envelope as the previous constellation, $5 billion U.S. dollars, despite the “supply chain shortages and other inflationary pressures.” That price tag accounts for the full program including satellites, ground facilities, launch vehicles, and software platforms.

Telesat is in discussion with export credit agencies for final funding for the constellation. The operator has already secured CA$4.2 billion ($3.3 billion) in funding between its own cash contributions and commitments from the government of Canada and the government of Quebec. Goldberg expects to provide an update on discussion with the export credit agencies at the end of June. 

“We didn’t love the inflationary pressures that we’re seeing,” Goldberg said. “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 and the price at which we can deliver it, still achieving the kinds of returns that that we need to achieve.”

First Quarter Financials 

Telesat revenue took a slight dip in the first quarter of 2021 with a reduction of service for one of the operator’s North American direct to-home customers. Telesat released its first quarter 2022 financial results on Thursday, reporting $186 million Canadian dollars ($144 million) in revenue, a 3% decrease compared to the same period in 2021. 

Telesat said the revenue decrease was primarily due to the DTH reduction, termination and reductions on contract reneal of certain services, and a decrease in equipment sales to Canadian government customers. This was partially offset by increased services to mobility customers as the market recovers from the pandemic. 

Net income for the quarter was CA$61 million ($47 million) — up 49% from the same time last year. The increase was principally due to a positive variation on changes in fair value of financial instruments combined with the gain on extinguishment of debt. 

Contractual backlog stands at CA$2 billion, excluding CA$750 million of backlog for Telesat Lightspeed, the operator’s Low-Earth Orbit (LEO) constellation in development. 

Goldberg highlighted an important contract renewal with Dish Network that took place during the quarter. Dish renewed more than half of its capacity on the Anik F3 satellite for a two-year contract, at a lower rate. A separate longtime customer purchased almost all of the capacity that Dish did not renew to use for broadband connectivity for the cruise market, Goldberg said.

“With the Dish renewal and the separate agreement for cruise services, we’re well positioned to deliver on our guidance for the year,” he said. The operator expects full year 2022 revenues to be between CA$720 million and $740 million ($559 million to 575 million). 

Goldberg said demand is picking up for satellite services. Telesat has 84% capacity utilization rate and one of its challenges is to find available capacity to satisfy opportunities. 

“Looking at the market for satellite services more broadly, it appears that the level of activity and the demand for services is so much stronger than what we saw at this time last year, with the pricing environment that we describe as ‘broadly stable,’” Goldberg said. “With COVID restrictions easing, we’ve seen more demand in aero and maritime markets, and it appears also the higher energy prices may be leading to a bit of an uptick in activity in that market as well.”