Telesat suffers from declining DTH
April 2, 2024
By Chris Forrester
Ottawa-based satellite operator Telesat has reported it is under further pressure from its declining DTH video business but maintained its formal guidance for this year’s revenue and profit targets. However, the disappointing results sent its share price tumbling 11 per cent despite some optimism for the company’s transition to a LEO operator.
April 1st brought good news in the form of confirmation that Canada would invest C$3 million (€2.06m) in the Lightspeed project.
CEO Dan Goldberg said that revenue for the full year to December 31st 2023 was C$704.2 million (down 7.2 per cent on 2022) although net income rose to C$157.1 million (up from a loss of C$23.4 million in 2022). Telesat expects its full-year revenues to be between C$545 million and C$565 million.
Looking ahead, revenue is forecast to grow 8.5 per cent p.a. on average during the next 3 years, but Goldberg declined to give more detailed guidance beyond this year.
Goldberg explained the video dilemma, saying: “The expected decline comes primarily from the full run rate impact of the lower rate on Nimiq 4 from the renewal we secured last October with Bell, as well as a renewal we have with EchoStar on Nimiq 5 coming up in early Q4 this year. Over the past few years, we’ve talked about the headwinds we’re facing in our DTH business, really driven by cord-cutting in the Ryzen OTT video platforms, and the reductions we’re expecting this year are very much a continuation of that trend.”
Goldberg told analysts that this year marks the first full year where Telesat starts to make that transition to LEO in earnest and to help understand what we’re doing. “Starting this year, we’re breaking down our financials between GEO and LEO and showing consolidated numbers as well.”
But the operator is also facing lost business (“erosion”) in its maritime sector. “The biggest driver on the lost revenue in the enterprise segment is the migration of customer requirements from GEO to LEO, namely Starlink, as they’re the first in the market with a disruptive LEO network. The reality is that enterprise customers want affordable, low-latency broadband connectivity, which we’ve been talking about for quite some time.”
“If anything, the transition to LEO is happening a little faster than even we expected. And although we don’t love seeing Starlink cannibalize some of our GEO customer requirements, it’s a strong validation of the market embrace of LEO and the compelling path that we’re on with the Telesat Lightspeed. We fully anticipated the transition to LEO and it’s precisely why we’re building Lightspeed and why we’re so bullish on it,” stated Goldberg. “In short, we’re moving out fast on all the key work streams necessary to bring Lightspeed into service. The customer community is enthusiastic with the approach we’re taking and the services we’ll be offering. And there’s great interest also with potential strategic partners and governments around the world to leverage Lightspeed for their needs.”
Goldberg added: “I’d say as good as SpaceX is and as fast as they’re moving like no one’s going to own this entire market. The market’s huge. It’s growing fast. I’d say, particularly for enterprise customers, they never want to put all of their hedges in any one basket. And so, in any event, we’re excited to get moving and get out there as fast as we can. As you probably picked us we’re just super focused on making big investments to get there as fast as we can.”