Telesat CEO Dan Goldberg sits beside a model of a Ariane 5 rocket that launched the Anik F2 satellite in 2004, at the company's headquarters in downtown Ottawa, on Sept. 4, 2020.Justin Tang/The Globe and Mail
Ottawa-based Telesat Canada is going public on the Nasdaq Stock Exchange as it looks to raise funds for a multibillion-dollar project to beam high-speed internet to remote areas from a constellation of 300 low-Earth orbit satellites.
The satellite company – which is owned by the Canadian pension fund Public Sector Pension Investment Board (PSP Investments) and Loral Space & Communications Inc. – is also considering listing on a Canadian stock exchange. Telesat opted to go public on the Nasdaq initially because that’s where Loral, a holding company that owns 62.7 per cent of the Ottawa-based satellite operator, currently trades, Telesat’s president and chief executive Dan Goldberg said.
The deal, announced Tuesday, will see Telesat Canada and Loral become subsidiaries of Telesat Corp., a new, publicly traded company. No new shares will be issued as part of the transaction. Telesat’s current shareholders will own all the equity in the new company in roughly the same proportions they do now.
“This creates a much more rational, coherent structure among our shareholders and gives Telesat just a whole lot more flexibility in terms of how we fund our growth plans,” Mr. Goldberg said in an interview.
Telesat will consider issuing new equity when the deal closes, which is expected to occur in the second or third quarter of 2021, subject to approval by Loral’s shareholders. Telesat is looking to raise capital to fund the construction and launch of its planned LEO constellation.
“Telesat’s been a very active participant in the debt markets. Our current business generates a meaningful amount of free cash flow,” Mr. Goldberg said. “But certainly it’s a multibillion-dollar initiative, and so the more paths that we have to different financing sources, the better.”
The Globe and Mail first reported in August that the transaction would be announced when PSP Investments and Loral reached an agreement about how Telesat would be governed after going public. The deal includes provisions that will ensure Telesat remains Canadian-controlled – an important consideration for a company operating in an industry that relies heavily on government support, Mr. Goldberg said.
Telesat has received $85-million in research and development funding from Ottawa and has secured an additional $600-million from the federal government to support the delivery of broadband over the next decade.
“Maintaining our Canadian identity is important,” Mr. Goldberg said. “The government of Canada probably doesn’t love to see strong Canadian companies move offshore.”
Telesat faces tough competition in the race to deliver high-speed broadband from space to hard-to-reach areas. Elon Musk’s Space Exploration Technologies Corp. (SpaceX) has launched more than 800 satellites and got the green light from Ottawa this month to start beaming broadband to Canadian customers. It plans to deploy a total of 12,000 satellites to provide global coverage.
Tech giant Amazon.com Inc. has its own 3,236-satellite constellation, called Project Kuiper, in the works, and British-based OneWeb recently emerged from bankruptcy proceedings with US$1-billion in fresh capital to resume its project.
Telesat’s planned LEO constellation is much smaller, but the company says the 300 satellites it’s planning to use are more advanced, so fewer of them are needed. The constellation drew top marks for efficiency in a 2018 study by researchers at the Massachusetts Institute of Technology.
However, Telesat is lagging behind SpaceX in terms of timing. The Ottawa-based operator has yet to announce a manufacturer for its new constellation. Mr. Goldberg said during an Oct. 29 earnings call that such an announcement would be made in the coming weeks.
Telesat’s former owner, BCE Inc., filed paperwork to take the satellite operator public in 2006, but opted instead to sell the company to Loral and PSP Investments for $3.25-billion. Telesat already provides connectivity – including voice, data and video services – to clients such as cruise ships, airlines, governments and telecom providers via its fleet of geostationary satellites roughly 36,000 kilometres above Earth.
Geostationary satellites follow an orbit that parallels the planet’s rotation, keeping them in a fixed position relative to the Earth. LEO satellites orbit the globe several times a day from about 1,000 kilometres above, allowing for faster internet connections by reducing the amount of lag time, referred to in the industry as latency.
Unlike SpaceX, which plans to beam broadband directly to consumers, Telesat is focused on the enterprise market. That includes providing what is referred to as “backhaul” connectivity to telecom providers, who will then distribute broadband to individual homes.
Loral also declared it will pay a special dividend of US$1.50 a share, for an aggregate dividend of US$46.4-million, on Dec. 17.
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