After LightSquared’s tumble, satellite firms still investing in growth

March 11, 2012

Local satellite firms are expecting growth and launching new technology even as Reston-based LightSquared watches its business prospects dim after failing to hold onto needed federal approval.

The satellite business is an inherently rocky one; historically, it’s not unusual for companies to go bankrupt because of the high costs of launching and maintaining satellites, said Brian Ruttenbur, an analyst with investment banking firm Morgan Keegan.

But Ruttenbur said he still sees growth, particularly for companies that specialize in satellite broadband, or Internet provided by satellites as opposed to Earth-bound networks. “I think the long-term story is very good for this,” he said.

Amy Yong, an analyst with Macquarie Securities, said limited broadband penetration in many rural areas — and the likelihood that oceans and remote areas will never have physical broadband infrastructure — gives satellite broadband “a natural market.”

LightSquared was trying to build a wireless network that teamed ground-based broadband with satellites, but the company’s plans were called into question after federal and industry officials said their signals would disrupt global positioning technology.


LightSquared’s booth at the Satellite Convention in Washington. (Jeffrey MacMillan/Capital Business)

The chief executive of the company resigned last month after the Federal Communications Commission said it would revoke its approval of LightSquared’s wireless network.

Among the local satellite companies still banking on growth is Germantown-based Hughes Communications, purchased last year by EchoStar. The company is preparing to launch a new satellite this summer that Mike Cook, senior vice president of Hughes’s North American division, said will provide 13 to 14 times the capacity of a satellite the company brought into service in 2008.

“It enables us to give more data — more bits, in our world — to the customer and ... also supports higher speeds,” Cook said, adding that the satellite costs about $400 million to bring into service.

The company is in competition with ViaSat, which is headquartered in Carlsbad, Calif., but has offices in Arlington and Germantown, and launched a new satellite of its own last fall.

Mark D. Dankberg, chairman, chief executive and a co-founder of ViaSat, said the investment required makes it rare to see new entrants in the satellite business.

“It’s a big capital project,” he said. “The time, money and regulatory barriers ... make it hard.”

McLean-based Iridium Communications, which specializes in mobile satellite services, acknowledged LightSquared’s plans when discussing potential competition in a recent filing with the Securities and Exchange Commission.

Though Iridium declined to comment, it too is investing in growth. The company in late 2010 closed a $1.8 billion financing facility for its $3 billion next-generation satellite constellation, known as Iridium Next. The project is to include 72 satellites, creating a network in space.

Ruttenbur acknowledged that the failure of one company can generate doubt about the industry among investors, but said the existing companies have their business models worked out.

“It’s a different story than a new guy trying to come in and failing,” he said.

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