Telesat Canada, a global satellite operator, today announced that it will receive a $1.44bn Canadian dollar ($1.15bn USD) investment from the Government of Canada to support the financing of Telesat Lightspeed, the company’s Low Earth Orbit (LEO) satellite constellation. Indeed, this closely follows similar investments from Canada’s Provincial Governments, namely the Government of Ontario, which is investing $109m Canadian dollars ($87m USD) and the Government of Québec which is investing $400m Canadian dollars ($320m USD).

Telesat’s key shareholders are Loral Space & Communications (NASDAQ: LORL), which holds a 62.6% economic interest in the company and PSP Investments, a Canadian pension fund, which is a minority investor.

Telesat – GEO and LEO Satellite Networks

Presently, Telesat provides its satellite and communication services from a fleet of 15 satellites in geosynchronous (GEO) orbit, ~22k miles above the earth. These satellites occupy orbital locations in Canada, with a concentration over the Americas. The company serves 400+ customers with video distribution and direct-to-home (DTH) video, as well as communications services using this GEO satellite network.

Telesat Lightspeed

Telesat Canada is also developing a global constellation of low earth orbit (LEO) satellites known as Telesat Lightspeed. Notably, LEO satellites operate in a circular orbit around the earth with an altitude between 500 and 870 miles.

Telesat Lightspeed will consist of 298 interconnected LEO satellites which will offer consumers and businesses broadband Internet services, as well as support 4G/LTE and 5G connectivity services. Specifically, the LEO network’s goal is to deliver multi-gigabit per second Internet speeds everywhere in Canada, and across the globe.

Telesat Lightspeed Latency Throughput Chart

Ultimately, the LEO network expects to connect ~40k households in rural and remote regions. Additionally, Telesat Lightspeed will serve businesses in industries such as air transport and shipping. Telesat Lightspeed expects that commercial services will commence in 2024.

Investment Structure – Government of Canada and Telesat Lightspeed

The Government of Canada’s $1.44bn Canadian dollar ($1.15bn USD) investment is structured through two forms of capital. Firstly, the Government of Canada will provide a loan of $790m Canadian dollars (~$630m USD), on a 20-year term. Secondly, it will make a $650m Canadian dollar (~$520m USD) payment-in-kind (PIK) preferred equity investment on an average term of ~14 years.

Additionally, the Government of Canada will receive warrants that can be exchanged into common shares in Telesat Corporation. Notably, Telesat Corporation is a newly formed company that intends to be publicly-listed on the Nasdaq market in late 2021.

Funding To-Date – Telesat Lightspeed

Following the Government of Canada’s investment, Telesat Lightspeed now has commitments for ~$4bn Canadian dollars ($3.2bn USD) in funding. Furthermore, Telesat expects to secure, in the near-term, the remaining financial commitments required to fully finance Telesat Lightspeed. Indeed, the balance of funding for Telesat Lightspeed will come primarily from debt financing from export credit agencies.

In total, Telesat Lightspeed requires $6.5bn Canadian dollars ($5.2bn USD) of funding to deploy its Low Earth Orbit (LEO) constellation.

Use of Proceeds – Telesat Lightspeed Fulfills Government of Canada Initiatives

As part of the Government of Canada’s investment, Telesat will commit to invest $1bn Canadian dollars ($800m USD) of capital expenditures, in Canada, for its initial Lightspeed satellite constellation. Moreover, Telesat will spend the lesser of $2.6bn Canadian dollars ($2.1bn USD) or 50% of certain capital expenditures for its subsequent constellation. Overall, this equates to spending by Telesat of $3.6bn Canadian dollars ($2.9bn USD) in capital expenditures in Canada.

Thales Alenia Space – Order

To deploy its Low Earth Orbit (LEO) satellite constellation, Telesat Lightspeed has chosen the supplier Thales Alenia Space. Indeed, Thales has reportedly secured a ~$3.75bn Canadian dollars ($3bn USD) contract from Telesat to deploy its 298 LEO satellites.

Canada’s Connectivity Strategy

The Government of Canada’s investment into Telesat forms part of Canada’s Connectivity Strategy. Specifically, this initiative seeks to provide all Canadians with access to the following Internet speeds:

  • Download: 50+ megabits per second
  • Upload: 10+ megabits per second

Low Earth Orbit (LEO) Satellite – Competitors

Overall, Telesat Lightspeed will compete with other planned LEO satellite constellations, which include Kuiper from Amazon, OneWeb, and Starlink by SpaceX.

Jonathan Kim covers Fiber for Dgtl Infra, including Zayo Group (private), Cogent Communications (NASDAQ: CCOI), Uniti Group (NASDAQ: UNIT), and Lumen Technologies (NYSE: LUMN). Within Fiber, Jonathan focuses on the sub-sectors of wholesale / dark fiber, enterprise fiber, fiber-to-the-home (FTTH), and subsea cables.

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