OTTAWA – Telesat announced last week it has contracted Brampton, Ont.-headquartered MDA as the prime satellite manufacturer for Telesat’s Lightspeed low earth orbit (LEO) constellation, and in doing so expects to save approximately US$2 billion in capital costs compared to its prior capital estimate, according to a press release.
Telesat’s original plan for Lightspeed was a network of 298 LEO satellites, with France-based Thales Alenia Space previously chosen as the prime manufacturer for the satellite constellation in February 2021.
In May 2022, Telesat said it was reducing the number of satellites planned for the Lightspeed LEO network to 198 satellites — a decision that was necessary due to pandemic-related supply chain issues that caused delays and inflationary pressures on the Lightspeed program, the company said at the time.
Last Friday, Telesat announced Canadian space technology company MDA will build the 198 satellites for the Lightspeed program, having already been contracted in 2021 to manufacture the phased array antennas that were to be used in the original Lightspeed satellite design.
Speaking during an Aug. 11 teleconference with analysts to discuss Telesat’s Q2 2023 financial results, company president and CEO Dan Goldberg addressed Telesat’s pivot to MDA as its prime satellite manufacturer.
Calling MDA’s approach “so much more capital efficient,” Goldberg said: “The game-changing development here is the digital beamforming antenna that MDA has developed. We considered a digital beamformer some years ago when we first evaluated technology options for Lightspeed but our engineers felt that it wasn’t ready for prime time, that the technology development risk at the time was too great.
“Over the past few years, MDA has continued to invest in the digital beamformer and late last year as we were working hard to close our business case funding, which in part entailed looking to optimize the overall Lightspeed design…we took another look at the digital beamformer and came to the conclusion that it was now sufficiently mature and that not only could we leverage it but we had to, given the massive efficiencies it delivers,” Goldberg said.
The digital beamforming antenna can create roughly triple the number of beams compared to the previous analogue antenna design, “which means we can serve our customers and cover the globe vastly more efficiently,” Goldberg explained. “So for example, while the old satellite design required each satellite to have two pairs of analogue beamforming antennas to deliver the capacity in the way that we want, we only need a single pair of digital beamforming antennas.
“This allows each satellite to be somewhat smaller and still have the same effective capacity as the larger ones. And smaller satellites almost always mean less costly satellites, and that’s certainly the case here,” Goldberg said. “In the case of Lightspeed, the MDA satellites are roughly 75 per cent of the size of the earlier versions we were considering.”
The digital beamformer also creates a better link between the satellite and the user terminal, further improving the performance and efficiency of the overall network, Goldberg said. Furthermore, in addition to the digital beamformer, MDA has also been investing heavily in a digital processor that is tightly integrated with the digital beamformer, he added.
“MDA has been doing all this because they see a big opportunity to build LEO satellites as the industry transitions in that direction, and to their credit they’ve already been quite successful, winning last year a highly competitive process to be the prime contractor for the Globalstar LEO constellation that Apple is funding and using,” Goldberg noted.
MDA will build the Telesat Lightspeed satellites in its high-volume satellite manufacturing facilities in Montreal, according to the press release.
“The work with MDA and many of our other suppliers has already started. We expect the first launch to take place in mid-2026, and that will enter global service in late 2027. The total capex for Lightspeed is approximately US$3.5 billion, and if we meet our plan, we expect to grow our revenue and adjusted EBITDA by several multiples and achieve an IRR (internal rate of return) on the project of roughly 30 per cent,” Goldberg said.
“It would be hard to overstate how pleased we are with the arrangements we’ve put in place for Lightspeed and how keen we are to get out there with customers, investors and others,” Goldberg added. “It’s been a long road, much longer than we anticipated, certainly much longer than I anticipated, with Covid and the supply chain constraints and inflation that Covid brought representing real obstacles.”
Telesat says in its release the Lightspeed program “is now fully funded through global service delivery taking into account the company’s own equity contribution, certain vendor financing, and aggregate funding commitments from its Canadian federal and provincial government partners.”
During the conference call, Goldberg clarified that the first 156 satellites of the constellation, which will provide full global coverage once they are in orbit, are now fully funded. Telesat has made an approximate $1.6 billion equity contribution, while the government contributions are about US$2 billion, or about $2.7 billion in Canadian dollars at the current exchange rate, Goldberg said. Plus there has been some vendor financing as well, the amount of which he was not at liberty to disclose, he said.
In August 2021, the federal government announced a $1.44-billion investment in Telesat’s Lightspeed program, which followed an earlier announcement in February 2021 of a Quebec government investment of $400 million in Lightspeed.
Goldberg said Telesat has been “in advanced discussions with our government partners” about an additional $900 million in government funding for the first 156 satellites of the Lightspeed program.
He added that this funding is separate money from the $600-million agreement finalized in November 2020 between Telesat and the Canadian government that will see the federal government buy broadband capacity on the Lightspeed satellite constellation over a 10-year period, and the $109-million agreement Telesat signed in August 2021 with the Ontario government to provide satellite bandwidth over a five-year term.
Goldberg said Telesat will need about another US$800 million to fully fund the additional 42 satellites needed to complete its 198-satellite constellation. Telesat has a commitment from MDA to build the additional 42 satellites, he said.
Turning to Telesat’s financial results for the second quarter that ended June 30, the company reported consolidated revenue of $180 million, representing a 4 per cent decrease compared to the same quarter of 2022.
“The decrease was mainly due to a termination of service by a South American customer combined with reduction of revenue from one of its North American DTH customers. This was partially offset by increased revenue from the work the company is performing for NASA relating to satellite-to-satellite communications in Low Earth Orbit (LEO),” a press release says.
Telesat’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for Q2 2023 was $139 million, a decrease of 5 per cent compared to Q2 2022. Its adjusted EBITDA margin was 77.1 per cent, compared to 78.4 per cent in the same period in 2022.
The company’s net income was $520 million in the second quarter of 2023, compared to a net loss of $4 million for the same period in 2022. “The positive variation for the three months ended June 30, 2023, was principally due to C-band clearing proceeds recognized in the quarter combined with a positive variation in foreign exchange gain (loss) on the conversion of U.S. dollar debt into Canadian dollars and a higher gain on the repurchase of debt. This was partially offset by higher interest expense and higher tax expense,” the release reads.
