Shin Satellite Public Company Limited (SSPCL), Thailand's only satellite operator, plans to fund the cost of construction of a new broadband satellite IPStar-1 via a combination of 15% equity stake and 85% export financing.
The project will be carried out through an initially wholly-owned vehicle, but SSPCL intends to sell up to 49% of the company to national service operations (NSOs), and other strategic investors. Passive financial investors such as banks will not be able to take a stake in that company, says Richard Jones, director of investor relations.
US-based Loral Space & Communications will be constructing the satellite, and the Export Import Bank of the United States is to provide the export finance. How the debt will be secured has not yet been revealed. SSPCL expects to repay 15% equity within three years based on projections of its earnings before cash. Jones says that this financing structure was only one of "many alternatives", but admits that having Loral on board gave the company credibility when approaching US ExIm.
Costs away
Other costs associated with the project such as gateways that will allow consumers to use broadband, and launch costs, will be funded equally through pre-sales of bandwidth, and equity. The entire IPStar-1 project (satellite plus associated costs) is expected to amount to $350 million. Jones says that, so far, eight large Asian telecommunications companies have signed memoranda of understanding (MOUs), and within the next year and a half, SSPCL intends to turn the MOUs into contracts. Jones says that even if only 15% of the total bandwidth capacity of the satellite was sold, this would pay for about 50% of the cost of the entire project. SSPCL is unable to reveal the MOU partners.
SSPCL intends to reduce the debt to equity ratio of the whole project to 1:1 within 3 years. Dr Dumrong Kasemset, chairman of SSPCL has said that the worst case scenario for the satellite is a debt to equity ratio of 1.8 to 1 within the same time frame.
IPStar-1 will be the first of SSPCL's four satellites to offer a broadband service, which will increase the transmission speed of the internet, video, television and two-way communications between users.
In the fourth quarter of this year, the satellite operator will begin manufacturing a proprietary satellite terminal that is claimed to double the capacity of existing satellite bandwidth. SSPCL has spent almost $2 million developing the technology for the terminal with an expected cost of approximately $1,000 per terminal in volume production. SSPCL will announce its second quarter earnings tomorrow August 9, in an analyst briefing when more details regading the finacing of its build-out will be forthcoming.
