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AsiaSat’s Appetite for Acquisitions Stimulated by a No-growth 2013
Updated at 2:52 p.m. EDT
TURIN, Italy — Satellite fleet operator AsiaSat of Hong Kong on March 20 reported flat revenue for 2013 after one-off expenses and said that in addition to launching two new satellites in 2014, the company is hunting for acquisition targets.
“Acquiring new business in 2014 will remain a top priority,” AsiaSat Chairman Sherwood P. Dodge said in a statement.
The zero-growth revenue year, which the company had warned investors about in mid-2013, follows several years of revenue expansion for AsiaSat. But the company operates in a highly competitive market with multiple operators, most of them smaller than AsiaSat, that occasionally resort to pricing policies that AsiaSat has resisted.
In 2013, the company said a key customer insisted on renewing its transponder lease contract at a lower rate. That decision, plus the ongoing competitive pressures of operating in a crowded Asian field, prevented any growth in 2013.
This year should be different. AsiaSat 6 and AsiaSat 8 are scheduled for launch in mid-2014, both on Falcon 9 rockets built and operated by Space Exploration Technologies Corp. of Hawthorne, Calif. AsiaSat, as an early customer for SpaceX, procured the two launches at a price of $52.2 million per satellite, an exceptionally low price relative to competing commercial launch services.
Both satellites are under construction by Space Systems/Loral of Palo Alto, Calif. The satellite and launch contracts are covered by a direct loan, valued at $345.5 million, from the U.S. Export-Import Bank.
SpaceX has a crowded manifest this year but the two AsiaSat satellites’ place in the queue appears solid. AsiaSat 6 will operate at 120 degrees east, and AsiaSat 8 will be placed at the company’s well-established 105.5 degrees east slot. Both satellites have room to allow AsiaSat to seek new customers in addition to renewing existing contracts. AsiaSat concluded an agreement with fleet operator Thaicom of Thailand under which Thaicom will be using one-half the AsiaSat 6 capacity for the satellite’s full 15-year design life in return for payments totaling $171 million.
AsiaSat 7, which will also operate at 105.5 degrees east, is in orbit and is expected to replace the aging AsiaSat 3S by June, AsiaSat said. AsiaSat 9 was ordered earlier this year with a planned launch in 2017, and its preliminary design review was started in January. This satellite had been a possible host for a meteorological instrument to be operated on a commercial basis by GeoMetWatch of the United States, but it now appears that the project’s financing will not be completed in time to make the AsiaSat 9 deadline.
AsiaSat Chief Executive William Wade said the company hopes to be able to secure renewed access to the Chinese domestic market by demonstrating that its future satellites are better able to resist jamming and signal piracy. Concerns about intentional jamming were the ostensible cause of the Chinese government’s decision to consolidate its satellite television and telecommunications requirements in its national satellite operator, Chinasat.
Wade said he is confident that protectionism was not the issue, and that once AsiaSat can prove that its new satellites are more resistant to jamming or signal piracy, the company will again have access to China.
AsiaSat reported 2013 revenue of 1.5 billion Hong Kong dollars ($193.3 million), down 16 percent from 2012 but flat after accounting for a one-time revenue gain relating to AsiaSat’s complicated tax situation — an ongoing issue for several satellite fleet operators doing business in India’s high-growth direct-to-home satellite television market.
Operating profit, at 748 million Hong Kong dollars, was down 4 percent, mainly due to a one-time revenue gain in 2012 from the sale of a subsidiary.
AsiaSat said new contracts and contract renewals in 2013 totaled 1.28 billion Hong Kong dollars, down more than 50 percent from 2012. The reduction was attributed to the major contract renewal in 2012 that was concluded at substantially lower prices.
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