Ottawa-based Telesat Canada is preparing to go public next year to raise cash for its constellation of nearly 300 low-Earth orbit satellites, a multibillion-dollar project to beam high-speed internet to remote areas from space.
The satellite company is expected to announce its plans for the initial public offering in the fall, according to sources. The Globe and Mail is not identifying the sources because they are not authorized to speak publicly on the matter.
The announcement will come once negotiations between Telesat’s two shareholders – the Canadian pension fund Public Sector Pension Investment Board (PSP Investments) and Loral Space & Communications Inc. – are concluded, according to one of the sources.
Spokespeople for Telesat, PSP Investments, Loral and MHR Fund Management LLC, Loral’s top shareholder, declined to comment.
The anticipated IPO comes as some big competitors are accelerating their push in the low-Earth orbit, or LEO, industry. Tesla founder Elon Musk’s SpaceX has already launched 655 satellites into orbit for its Starlink constellation and applied to Canada’s telecom regulator for a Basic International Telecommunications Services (BITS) licence. SpaceX has said its LEO project will cost at least US$10-billion and is aiming to start offering service to Canada and the northern United States by the end of the year.
Amazon.com Inc., meanwhile, got the green light last month from the U.S. Federal Communications Commission to launch its US$10-billion constellation of 3,236 satellites, dubbed Project Kuiper. London-based satellite firm OneWeb filed for bankruptcy in late March but has since secured US$1-billion in new funding from the British government and Indian mobile network operator Bharti Global Ltd.
Telesat has not yet spelled out how much it will spend to construct and launch its constellation, saying only that the project will cost billions. The company has previously said it plans to use a combination of equity and debt, such as from export credit agencies looking to bolster their domestic export industries, to fund the endeavour.
Loral, which trades publicly on the Nasdaq Stock Exchange, has hinted at the possibility of a public offering in its regulatory filings but has been noncommittal, citing continuing talks with co-owner PSP Investments. In April, Loral said it was in “advanced discussions” with PSP about combining Loral and Telesat into one company.
According to a source familiar with the matter, the plan is for Telesat to go public as part of that process, likely through a dual listing on Canadian and U.S. stock exchanges.
In an Aug. 7 filing with the U.S. Securities and Exchange Commission, Loral said it has not yet reached an agreement on how Telesat would be governed after an IPO. “If a Telesat IPO is expected to proceed under unfavorable terms or at an unfavorable price, we may withdraw our demand for a Telesat IPO,” the filing states. Although Loral owns 62.7 per cent of Telesat, it controls just one-third of the company’s voting shares. PSP Investments holds the majority of the voting power over the satellite company.
Telesat’s former owner, BCE Inc., filed paperwork to take the satellite operator public back in 2006. However, BCE opted instead to sell the company to Loral and PSP Investments for $3.25-billion. The 2006 IPO would have seen Telesat offered to investors around the world, and was led by two U.S. investment dealers – Goldman Sachs Group Inc. and Citigroup Inc. – and the capital markets arm of Royal Bank of Canada.
Now, bankers working on the planned Telesat IPO say the company plans to pitch investors on the potential for growth in satellite communications, a sector that is largely immune to the impact of the COVID-19 pandemic. The IPO is once again expected to feature an international marketing campaign, with heavy emphasis on U.S. investors and virtual meetings with Telesat management. The selling group is expected to include U.S. and Canadian banks with strong ties to Loral, such as lenders to the company.
Financiers said Telesat is one of several private technology companies trying to take advantage of the continuing rally in tech stocks. Public market debuts are also coming from data miner Palantir Technologies Inc., project management firm Asana Inc., cloud storage company Snowflake Inc. and gaming company Unity Software Inc.
Last year, Telesat announced it has secured $85-million in funding from the federal government for its LEO project, as well as a commitment for an additional $600-million over the next decade to support delivery of broadband.
The company already provides connectivity to clients such as airlines, cruise ships, governments and telecom providers through a fleet of geostationary satellites situated roughly 36,000 kilometres above Earth. Geostationary satellites follow an orbit that is parallel to the planet’s rotation, keeping them in a fixed position relative to the Earth.
LEO satellites, in contrast, orbit the globe several times a day from about 1,000 kilometres above. Their closer proximity to the planet allows for faster internet connections by reducing the amount of lag time, referred to in the industry as latency, as signals are beamed between Earth and space.
Unlike its competitor SpaceX, which plans to beam broadband directly to consumers, Telesat is focused on the enterprise market – for instance, providing what is referred to as “backhaul” connectivity to telecom providers, who will then distribute it to individual homes. (Amazon’s plan is to serve both customers and carriers.)
Telesat has yet to announce a manufacturer for its LEO constellation, but during a conference call on July 30 to discuss the company’s second-quarter results, chief executive Dan Goldberg said that an announcement is expected in the coming months.
Telesat reported $208-million in revenue for the three-month period ended June 30, down 10 per cent from a year ago. Its second-quarter profit was $162-million, up from $135-million during the same period last year.
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