Going public gives ‘more optionality’ for funding LEOS, Telesat CEO says

A corporate restructuring that will see Telesat Holdings Inc. go public and have its shares listed on the Nasdaq Global Select Market will give Telesat access to much more funding from investors and lenders in the American stock market for bigger capital projects like its low-earth orbit satellite constellation, according to the company’s CEO. The changes announced Tuesday will see Telesat's primary owner, Loral Space & Communications Inc., and the existing Telesat Canada, become subsidiaries of a new publicly traded entity, Telesat Corporation. In a phone interview with The Wire Report, CEO Dan Goldberg said that the deal "rationalizes our ownership structure" and gives the company access to public equity markets, explaining that Loral currently owns 64 per cent of Telesat, and for the last several years has been little more than a holding company. He said “it's just a whole lot more efficient for Loral to more or less, disappear and get folded into Telesat.” Goldberg said that the company is starting a very capital intensive project, its low-earth orbit satellite (LEOS) constellation, and that access to the public equity markets "gives us more optionality in terms of how we fund that." Earlier this month, the federal government formalized a $600 million deal -- previewed in a memorandum of understanding in 2019 -- with Telesat, which will see the company launch LEOS to sell capacity to internet service providers in the most rural areas like the North. "This LEOS constellation, I think, will be a compelling growth opportunity for investors once we're public," Goldberg said Tuesday. "Having the government of Canada make this kind of long term commitment is positive." Goldberg also said that access to funding from public equity markets will give the company a "public currency" that will allow Telesat to grow "inorganically" through the acquisition of other companies. "Today, if we wanted to do that, we would have to come up with lots of cash. Some sellers don't want cash, some sellers would rather have equity so they could participate in the value creation that comes from an acquisition," Goldberg said, adding that the "lion's share" of growth for the company will come from outside of the country. In July, a reported Telesat bid for competitor OneWeb was unsuccessful, as a consortium including the U.K. government and Indian mobile network operator Bharti Global Limited acquired a combined 90 per cent stake in the company. Last week, both Telesat and Space Exploration Technologies Corp. told the House of Commons industry committee that they plan to beat the government's 2030 target date for universal connectivity by about seven years. Goldberg told the committee that his company plans to have the full constellation of about 300 LEOS launched within two years. Telesat has also put forward a proposal to Innovation, Science, and Economic Development Canada (ISED) to privately auction off part of the 3800 MHz spectrum in return for investing in LEOS, which Goldberg said will work in conjunction with the planned public offering to fund the constellation. Telesat plans to fund the constellation with roughly one third equity, and two thirds debt, Goldberg said. "So we need to raise a lot of equity. Having access to the public markets can address that in part, and we're hopeful that the government of Canada, ISED, will follow through on this proposal that we made in the 3800 MHz consultation, and allow us to realize some proceeds for clearing that spectrum.” Several regional telecom companies objected to Telesat's private spectrum auction proposal, primarily out of concern about a private entity auctioning spectrum assets rather than the government which more typically handles spectrum auction. “Eastlink is concerned that implementing their proposal will grant Telesat the ability to dictate the terms, conditions and opening prices for this spectrum, compromising the ability of smaller, regional providers to gain access to this spectrum,” Bragg Communications Inc.'s Eastlink wrote in its consultation submission earlier this month. Goldberg said that Telesat is open to the idea of ISED carving out a set-aside for regional carriers, and will say so in its upcoming reply submission in the consultation. "Certainly that should go quite some ways to assuring the regional operators that they would have access to a meaningful amount of spectrum," he said. In a press release, Telesat said the deal is subject to a number of regulatory approvals, which Goldberg listed in an interview as needing to come from ISED and the Competition Bureau in Canada, and in the United States, the Federal Communication Commission, and Team Telecom, formally known as the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector. The committee is an interagency group comprising officials from across the executive branch of the American government, including the Department of Defense and the Department of Homeland Security. Goldberg said the reviews should all be pro forma. "We're not really changing our ownership," he said. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Going public gives ‘more optionality’ for funding LEOS, Telesat CEO says

News | November 24, 2020

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Going public gives ‘more optionality’ for funding LEOS, Telesat CEO says

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