Eutelsat Eyes Leasing Ka-Band Capacity for Tooway System

Satellite-fleet operator Eutelsat is looking for gap-filler Ka-band capacity over Europe to meet the expected demand for consumer broadband services starting this year as it waits for its large Ka-Sat satellite to be completed and launched in 2010, company officials said.

In a measure of its confidence that Europe, like North America, will prove fertile ground for satellite-delivered consumer broadband, Paris-based Eutelsat said rollout of its Tooway broadband service using ViaSat Inc.-built customer terminals is likely to be too popular to be accommodated on an existing satellite.

Eutelsat is beginning Ka-band consumer broadband service this year using the limited Ka-band capacity on its Hot Bird 6 satellite. It also is debuting the service using Ku-band capacity to get an initial feel for the market.

Eutelsat has ordered a large, all-Ka-band satellite from Astrium Satellites of Europe for delivery in late 2010. But to protect against the possibility of having frustrated customers between now and then, Eutelsat wants to lease what little Ka-band capacity exists among its competitors.

Presenting the company's half-year financial results here Feb. 14, Eutelsat Chief Executive Giuliano Berretta repeated his earlier forecast that the Ka-Sat program would generate 100 million euros ($145 million) in annual revenue starting in 2012.

Berretta said Ka-Sat would be able to deliver a gigabyte of data for one-eighth the cost of the company's current broadband service to businesses, which uses ViaSat-built terminals and Eutelsat's conventional Ku-band satellites

Eutelsat's D-Star broadband service features terminals that cost up to 800 euros, while the Ka-Sat-ViaSat system will feature terminals whose wholesale cost will be less than 300 euros, Berretta said.

Eutelsat Deputy Chief Executive Jean-Paul Brillaud said Eutelsat has not ruled out investing in ViaSat's ViaSat-1 satellite program, a larger version of Ka-Sat that is planned for the North American market starting in 2011. ViaSat-1 is under construction by Space Systems/Loral in Palo Alto, Calif.

Carlsbad, Calif.-based ViaSat has said it has no intention of becoming a satellite operator, but has ordered ViaSat-1 only because no one else in North America was moving fast enough to meet consumer demand. ViaSat is looking for strategic partners, and Eutelsat has long said North America is one of the few major satellite markets it has not yet entered.

Meanwhile, Eutelsat is accelerating its fleet expansion beyond Ka-Sat. Berretta said the company has decided to order a large Ku- and Ka-band satellite in the coming weeks to reinforce its capacity at the 7 degrees east orbital slot. Eutelsat's existing satellite there, W3A, is 90 percent full and growth prospects in eastern Europe and southern Africa remain strong, Berretta said.

The new satellite, to carry 53 Ku-band and three Ka-band transponders, will be called W3B and will be co-located with W3A.

W3B, to be launched in 2010, will force Eutelsat to increase its planned capital spending between 2007 and 2010.

Eutelsat now expects to spend 450 million euros per year for that period, compared to 420 million euros previously expected.

The difference in capital spending of 90 million euros over three years is not enough to pay for W3B and its launch. But Berretta said Eutelsat in recent months has determined that other satellites it expected to order between now and 2010 can be delayed because Eutelsat's existing fleet is holding up better than expected.

In addition, he said, the Ka-Sat contract signed with Astrium in December is less expensive than Eutelsat had expected.

Once ordered in the coming weeks, W3B will bring to seven the number of spacecraft Eutelsat has under construction. Two are scheduled for launch this year, three in 2009 and two in 2010. Berretta said never before has Eutelsat had so many satellites in production at the same time.

For the six months ending Dec. 31, Eutelsat reported revenue of 429.4 million euros, up 3.4 percent from the same period a year ago. But EBITDA — earnings before interest, taxes, depreciation and amortization, an often-used measure of profitability — was 81.3 percent of revenue.

Eutelsat is "far and away the most profitable of the major fixed satellite services operators," said Eutelsat Chief Financial Officer Catherine Guillouard.