WASHINGTON — Maxar Technologies said this week it has received a contract to build multiple geostationary communications satellites for an undisclosed customer. The announcement was made in tandem with an earnings report showing that the coronavirus pandemic roiling the global economy put a crimp in Maxar’s satellite manufacturing revenue even as its satellite imagery division saw sales rise.
Maxar said the satellite order, which industry analysts say is likely driven by a U.S. effort to clear satellite C-band spectrum to make way for 5G wireless networks, is a “multi-hundred million dollar contract.”
“We’re not commenting on who the customer is or what the nature of the satellites are other than that they are GEO communications satellites, 1300 class, and of a type we’ve built before,” Maxar CEO Dan Jablonsky said during a May 11 call with analyst to discuss the Westminster, Colorado-based company’s financial results for the first three months of 2020.
“It’s probably Intelsat or SES,” Armand Musey, president of the research firm Summit Ridge Group, told SpaceNews. “I can’t see who else would be ordering multiple [GEO satellites].”
Intelsat and SES, which operate the world’s largest GEO comsat fleets, have told the U.S. Federal Communications Commission that they will need multiple replacement satellites after the agency auctions off a large portion of C-band spectrum they currently use mainly for television broadcast customers. Intelsat and SES also said at one point that C-band replacement satellites would be ordered from U.S. manufacturers. Currently, only Maxar, Boeing, Lockheed Martin and Northrop Grumman build large GEO comsats in the United States.
“I would think the awards are for C-band replacements, given the recent timing of the FCC’s order and the fact that multiple satellites are involved, although Maxar hasn’t commented on that,” Thanos Moschopoulos, an analyst at BMO Capital Markets, said by email.
Intelsat and SES, working together with Eutelsat and Telesat in 2018 as the C-Band Alliance, said they would need eight new satellites combined to continue existing telecommunications services while ceding 200 megahertz of spectrum to 5G network operators. Intelsat and SES planned to order the satellites and share capacity with Eutelsat and Telesat, which have less C-band coverage over the United States.
Several things have changed since then, driving the number of desired replacement satellites up. Eutelsat and Intelsat left the C-Band Alliance, the amount of spectrum to be transferred for 5G increased from 200 megahertz to 300 megahertz, and the FCC decided to hold a public auction instead of allowing the C-Band Alliance to run a private spectrum sale.
As a result of these changes, Intelsat now says it needs up to seven replacement satellites and SES claims it needs six. Eutelsat has not given a number, and Telesat says it can continue its U.S. C-band services without new satellites.
Eutelsat is not the customer for the multi-satellite order Maxar announced this week, Eutelsat spokeswoman Joanna Darlington told SpaceNews.
SES spokeswoman Suzanne Ong said SES satellite orders are “announced as soon they are made.” No such announcement had been issued by SES as of May 13, two days after Maxar’s announcement.
Intelsat spokeswoman Meghan Macdonald declined to say if Intelsat placed the multi-satellite order.
“Intelsat and Maxar have collaborated on a number of satellite builds, including the recently announced Intelsat 40e,” she said by email. “We look forward to continuing our longstanding partnership with Maxar, but have no formal announcements to make at this time.”
Intelsat skipped a bond payment last month, a move some analysts and shareholders see as a sign that the heavily leveraged satellite operator is preparing to file for Chapter 11 bankruptcy protection. If Intelsat does not make the past-due payment by May 15, it will be in default, likely setting a bankruptcy filing in motion.
One analyst said a satellite order could survive a bankruptcy filing intact provided Intelsat — assuming it’s Maxar’s unnamed customer — could convince its creditors that the contract is essential to obtaining $4.86 billion in accelerated clearing payments the company stands to receive from the FCC for rapidly exiting C-band with spectrum-optimized replacement satellites.The FCC has given Intelsat and SES until the end of May to confirm their intent to participate in the incentive plan.
Jablonsky said Maxar’s fresh GEO contract includes “protections related to COVID-type impacts” should the coronavirus pandemic complicate spacecraft completion.
The multi-satellite order grew bookings for Maxar’s Space Infrastructure division to $700 million for the year. Maxar’s total backlog, which includes satellite imagery contracts awarded to its Earth Intelligence division, stood at $1.68 billion when the quarter ended March 31. That total, which doesn’t include unfunded contract options, was up $47 million from the previous quarter, which ended Dec. 31.
Coronavirus weighs on first quarter results
Despite the new GEO order, Maxar’s Space Infrastructure division continued to struggle during the first three months of 2020. Revenue fell to $132 million, a 37% decline that Maxar’s Earth Intelligence division only partially offset by bringing in $271 million for the quarter, a 7% increase over 2019’s first quarter results.
Overall, Maxar reported a $48 million net loss on $381 million in total revenue.
Maxar attributed most of Space Infrastructure’s $78 million drop in revenue to the lingering effects of a sluggish GEO manufacturing market. But productivity losses from the coronavirus pandemic didn’t help the division’s numbers.
Supplier delays and lost productivity attributed to the pandemic added $18 million in unexpected costs to the tail end of the first quarter, Jablonsky said. Two suppliers were late on delivering parts for a satellite program, but now appear on track for a return to normal delivery schedules, he said.
Maxar disclosed during its earnings call that a problem surfaced in late April during testing on a nearly completed satellite program for an unnamed customer. Jablonsky said the problem will require $14 million worth of rework but should not impact any satellites Maxar is building for other customers.
Maxar also disclosed that the company will defer $33 million in Social Security and pension obligations until at least 2021. Those temporary savings are allowed under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, legislation enacted March 27 to blunt the pandemic’s financial impacts.
Maxar warned shareholders and customers in March that the pandemic could impact the company’s ability to deliver spacecraft on time and on budget. The warning was issued the same week that Maxar facilities in California were closed but soon reopened as aerospace companies were largely exempted from nationwide closure orders.
While Maxar’s manufacturing and testing facilities remain open, Maxar personnel are mostly working from home, Jablonsky said. Staff that must report to the company’s facilities are social distancing, receiving temperature checks, and working staggered shifts to avoid the risk of coronavirus infections, Jablonsky said.
Those measures are expected to continue until at least June, Jablonsky said. Regardless, in-house production of Maxar’s six Earth-observation WorldView Legion satellites remains on schedule for 2021 launches on SpaceX Falcon 9 rockets, he said.