The Canadian government is to remove the existing foreign ownership restrictions on Canadian satellite communication companies.
The announcement was first made in the government’s Throne Speech which stated that the country would allow more foreign…
The Canadian government is to remove the existing foreign ownership restrictions on Canadian satellite communication companies.
The announcement was first made in the government’s Throne Speech which stated that the country would allow more foreign investment in key sectors, including the satellite and telecommunications industries. The following day, the Canadian Finance Minister announced in his budget address that the first steps towards this liberalisation would be to remove foreign ownership restrictions on the Canadian satellite industry. The broader liberalisation of the telecommunications sector would take place over a longer time frame.
For the past decade, the Canadian satellite communications market has been fully open to foreign operators but they are subject to a number of ownership restrictions, including not being allowed to hold majority voting control.
The country’s largest satellite operator, Telesat, expressed support for move, commenting: “By providing Canadian operators with access to new sources of capital and the ability to diversify their shareholder base, the policy will foster investment and innovation in this important industry.”
In late 2007, Loral Space & Communications, along with its Canadian pension fund partner PSP, acquired Telesat via a C$3.25bn LBO. Due to the foreign ownership restrictions, the transaction saw Loral take a 64% majority economic holding in the company but only 33.33% of the voting rights with PSP owning the remaining rights.
Telesat’s president and CEO Dan Goldberg added: “Although Telesat has invested billions of dollars in its satellite fleet to date, we need to continue to increase our scale in an industry where size confers key competitive advantages. By removing the investment restrictions, Telesat will be a more effective global competitor and able to invest in new and advanced technologies for the benefit of all Canadians.”
One SatelliteFinance source suggested that the removal of the current restrictions could pave the way for Loral to take greater control of Telesat or indeed open the door to potential IPO of the company further down the line.
Telesat recently announced its FY 2009 results, reporting an 11% year-on-year increase in consolidated revenues to C$787m and a 25% rise in adjusted EBITDA to C$560m. As such, the company had a margin of 71%, compared to 63% for 2008.
Telesat stated that the increased revenues were primarily from Telesat’s three new satellites, with Nimiq 4 launched in late 2008 and Telstar 11N and Nimiq 5 launched in 2009, as well as foreign exchange rate movements. This was partially offset by the sale of Telesat’s interest in Telstar 10, the removal of Nimiq 3 from service and lower North American enterprise revenues. Operating expenses were also down, falling by approximately C$37m or 14% year-on-year.
