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Telesat CEO Dan Goldberg at the company's headquarters in Ottawa on Sept. 4, 2020.Justin Tang/The Globe and Mail

Satellite operator Telesat Corp.’s TSAT-T stock price soared on Friday after it announced that it is switching to MDA Ltd. as the key supplier for its Lightspeed constellation, allowing the Ottawa-based company to shave US$2-billion from its planned capital expenditures.

The project, which will beam internet to remote areas from a constellation of 198 low-Earth-orbit satellites, was initially forecast to cost US$5-billion. But the effort hit a snag when inflation and pandemic-related supply chain issues increased the expected cost to US$5.5-billion. Telesat was forced to seek out additional funding.

“Candidly, that was not a lot of fun,” Telesat chief executive officer Dan Goldberg said in an interview. “Ever since, we’ve been working hard to get the program back on track.”

The company had originally intended to have the satellites built by French-Italian aerospace manufacturer Thales Alenia Space. At the time, the plan was for the constellation to consist of 298 of them, but Telesat announced last year that it was reducing that number by 100.

MDA, a Brampton, Ont.-based space equipment company that created the iconic Canadarm, was to manufacture what are known as phased array antennas for the project. It will now be building the entire constellation, including improved digital antennas.

Formerly known as MacDonald, Dettwiler and Associates, MDA has been investing heavily in digital beamforming, a technology that improves signal quality. Last year, the company announced it had become the prime contractor for the design, manufacture, assembly and testing of 17 new low-Earth-orbit satellites for U.S. satellite communications company Globalstar Inc.

“They’ve now got this digital beamformer,” Mr. Goldberg said. “It’s ready for primetime and it’s massively more efficient and capable than the other antenna.” MDA has also designed an onboard processor for its satellites that integrates with the digital beamformer, he added. “Suffice to say, that has been transformative for the project.”

MDA’s chief executive, Mike Greenley, said the new technology will allow Telesat to reconfigure in real time where each satellite’s beams are pointing, as well as the beams’ size and capacity. Earlier satellites did contain some computing technologies, but they were “more static,” Mr. Greenley said.

“Now we have onboard computing with software ... which allows the operator – in this case, Telesat – to optimize the performance for their customers, to give them the communication capacity that they want, where they need it, when they need it, and to the volume that they need it. And so it results in a much more efficient communication satellite,” he said.

The price of Telesat’s stock, which has been in decline since its initial public offering in late 2021, rose more than 53 per cent to close at $17.48 on the Toronto Stock Exchange on Friday, while MDA’s stock rose more than 23 per cent to $10.42.

Lightspeed is now fully funded for its first 156 satellites, which will allow Telesat to deliver global service, Mr. Goldberg said. The remaining 42 satellites will be paid for out of the company’s cash flows once its constellation is in service, he added. Lightspeed’s satellite launches are scheduled to start in 2026, and Mr. Goldberg said global service will begin by the end of 2027.

Unlike SpaceX’s Starlink, which is offering satellite internet directly to consumers, Telesat is focusing on the enterprise segment of the market, such as governments, telecoms and the airline and maritime industries. The company already has relationships with enterprise customers, which it currently serves through its fleet of geostationary satellites, each of which stays in a fixed spot some 36,000 kilometres above the Earth’s surface.

The new low-Earth-orbit constellation, which will be positioned just 1,000 kilometres above the surface, will cut down on latency, an industry term for lag time.

The project’s total cost is now expected to be in the realm of US$3.5-billion, Mr. Goldberg said. That means Telesat’s financing costs are also lower, while the return on investment will be higher, he noted.

“COVID set us back, but perversely I think we’ve ended up in a better place here,” Mr. Goldberg said.

Telesat has funding commitments of up to US$2-billion from its federal and provincial government partners, although they are contingent upon the company meeting several conditions, including the completion of due diligence, Telesat said in a statement. Mr. Goldberg said Telesat will not incur any financial penalties for switching suppliers.

For MDA, the $2.1-billion contract is the largest order in its history. The company will be expanding its team and its production facilities in Montreal, Mr. Greenley said.

“It’s a big day for the Canadian technology industry and the space industry in Canada,” he added.

Follow Alexandra Posadzki on Twitter: @alexposadzkiOpens in a new window

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