Last week it emerged that the Bank of New York Mellon was just one of many investors which had raised their holdings in Intelsat, which – if its share price is any guide – is seeing a degree of optimistic buoyancy that has been absent for some time. The optimism is a new feeling, given that for the earlier part of the year Intelsat had been expecting (and perhaps hoping) that a merger deal with OneWeb engineered by Japanese media giant SoftBank would solve many of the operator’s problems.
The deal collapsed. And perhaps now investors are seeing that Intelsat is re-focussed on ‘business in hand’ and not a merger. Certainly, in the 10 days since July 26 its share price has risen from $3 a share to $3.61 (as at close of business on August 4). This is good news for investors who might have bought into the satellite operator this Spring or Summer. But less good news for those who bought in February (27th) when Intelsat’s share price hit $5.87, or even worse in the period from 2013 to April last year when it price ranged from the dizzy heights of $63 a share to $9.82. In other words, the stock is – at best – “highly volatile”.
So, one may ask, why the interest recently? A number of equity analysts and investor research businesses have issued favourable commentaries on Intelsat lately. Last week Zacks Investment Research upgraded Intelsat from ‘Hold’ to a ‘Strong Buy’, and others have done much the same.
Intelsat is seen by many as having turned a corner. It has refinanced some of its debt, pushing out the repayment periods in some cases, and in mid-July appointed some highly-motivated executives to take charge of its three key divisions (Broadband, Mobility and Media) and echoing a similar set of moves earlier this year at rival SES.
Intelsat also seems to be making headway in its aircraft mobility activity in particular expansion at its IntelsatOne Flex Maritime and Aeronautic managed services segment, under Mark Rasmussen. He is also charged with boosting preparedness for Internet of Things and ‘connected car’ services, both expected to be significant growth elements over the next few years.
The company had a reasonable Q2 despite a glitch in a recently-launched satellite (I-33e) which meant it was slower to reach its orbit than planned. CEO Steve Spengler, speaking July 17, said I-33e is taking longer to fill than hoped. “We view this as not an indication of demand, because we feel that demand is strong and the performance of the satellite is proving itself out quite well,” he said. “But we do find that in dealing with those types of service providers in that part of the world, it’s a more complicated process in terms of building that customer business case and moving forward with the project. Having said that, the pipeline is very active; we are engaged with a number of mobile operators as well as enterprise network service providers.”
In other words, I-33e should really start earning its place in the fleet this quarter-year, and be much busier by Q4. Its in-service predecessor, I-29e, launched in January 2016 is hard at work fulfilling capacity agreements for the likes of Panasonic Avionics and Gogo for in-flight connectivity over the Americas and Atlantic.
This is all good news, but Intelsat is far from out of the woods just yet. It will need to prove over the next few quarter-years that it is on the mend, that it can build on these important successes and deliver revenues alongside profit.