SataLink Fleet Proposal- SpaceCom (FEB28) (1)

!  Our$company$

•  Operates$commercial$satellites$

•  Sells$bandwidth$to$communica6ons$companies$

•  Faces$demand$growth$at$about$5%$per$year$

!  Situa6on:$

•  10$satellites$will$re6re$between$2017@2021$

!  Objec6ve:$

•  Develop$a$replacement$plan$ 3$

SataLink’s$priori6es$

!  Maximize$net$present$value$

!  Supply$all$forecasted$demand $$

!  Plan$for$the$unexpected$$

•  Launch$failure$

•  Low$market$growth$

!  Generate$posi6ve$cash$flow$

!  Improve$company$credit$ra6ng$

SataLink’s$business!$

Low@risk$contracts$

Strong$earnings$

Meanwhile,*Boeing*wants..*

Figure 1

4$

! Made$assump6ons$for$our$first$aSempt$

•  No$launch$failures$

•  Market$grows$at$expected$rate$

•  Constant$market$share$

!  Itera6vely$adjusted$plan$to$meet$real@world$condi6ons$

•  Added$resilience$to$launch$failure$$

•  Added$resilience$to$low$market$growth$

•  Op6mized$cash$flow$and$debt$

!  Researched$addi6onal$opportuni6es$ 5$

2017 2018 2019 2020 2021

Americas 418 439 461 484 508

Europe 315 329 344 359 375

Middle East & Africa 51 54 57 60 64

Asia & Australia 272 286 300 315 331

Figure 2 6$

!  Looked$at$the$problem$from$a$customer$point$of$view$•  Projected$transponder$demand$in$each$region$

2017 2018 2019 2020 2021

Americas -108 -129 -221 -244 -318

Europe -55 -139 -154 -169 -185

Middle East & Africa -1 -4 -7 -60 -64

Asia & Australia 8 -66 -130 -145 -241

Figure 3 7$

!  Looked$at$the$problem$from$a$customer$point$of$view$•  Projected$transponder$demand$in$each$region$•  Calculated$deficiencies$in$supply$

2017 2018 2019 2020 2021

Americas 800M 1000L 1000L

Europe 1000L 800M

Middle East & Africa 800M

Asia & Australia 800M 1000L

Figure 4 8$

!  Looked$at$the$problem$from$a$customer$point$of$view$•  Projected$transponder$demand$in$each$region$•  Calculated$deficiencies$in$supply$•  Selected$satellite$models$that$best$meet$demand$

9$

Checkpoints,1.4:,Itera4ons,for,sensi4vity,analysis.,

Posi6ve$Cash$Flow$Through$2025$

Resilience$to$Plausible$Launch$Failure$

Resilience$to$Low$Market$Growth$

Debt$Reduc6ons$

!  Chances$that$launches$will$fail$•  43%$that$no$launch$failures$will$occur$•  96%$that$two$or$fewer$failures$will$occur$

" We$can$make$our$plan$96%$resistant$to$launch$failure!$$

!  Worst$reasonable$scenario:$two$launch$failures$•  NPV:$$2.71$Billion$•  Nega6ve$cash$flow$$

!  Explored$3$alterna6ves$to$mi6gate$nega6ve$impacts$of$a$launch$failure$•  Use$smaller$satellites$•  Order$backup$satellites$•  Launch$the$satellites$early$for$extra$capacity$ 10$

Starting with our preliminary plan…

2017 2018 2019 2020 2021


Europe 1000L 800M



Figure 5 Expected NPV: $5.22 Worst-case NPV: $2.71 [In billions] 11$

Our first alternative deploys more small satellites.

2017 2018 2019 2020 2021

Americas 800M 1000L 3 x 600S

Europe 2 x 600S 600S 800M



Expected NPV: $5.03 Worst-case NPV: $4.14 [In billions]

Figure 6

12$

Our second alternative orders backup satellites.

2017 2018 2019 2020 2021


Europe 1000L 800M



1000L 1000L Figure 7

Expected NPV: $4.42 Worst-case NPV: $2.84 [In billions] 13$

Our third alternative launches extra capacity early.

2017 2018 2019 2020 2021

Americas 1000L 1000L 800M

Europe 1000L 800M


Asia & Australia 1000L 800M

Figure 8 Expected NPV: $5.14 Worst-case NPV: $5.10 [In billions] 14$

15$

2017 2018 2019 2020 2021

Americas

1000L 1000L

Europe

800M

Middle East & Africa

Asia & Australia

Figure 9: An animation to develop the final plan.

800M

1000L

1000L

1000L

800M

1000L

800M

!  Launching$replacements$as$soon$as$possible$helps$reduce$risks.$

!  Average$transponder$fill$rate$(75%)$remains$compe66ve$with$other$compe6tors.$

$

!  Purchasing$our$satellites$early$ensures$bandwidth$service.$

15$

16$





Debt$Reduc6ons$

!  Several$forces$impact$the$growth$rates$in$each$region:$

!  We$need$a$plan$that$works$well$in$any$market$ 17$

Americas* Opportuni4es, Threats,

•  Corporate$globaliza6on$•  4k$HDTVs$•  Broadband$growth$(La6n$America)$

•  Streaming$services$•  Fiber$op6cs$

Europe* Opportuni4es, Threats,

•  4k$HDTVs$ •  Streaming$services$•  Fiber$op6cs$

Middle*East*&*Africa* Opportuni4es, Threats,

•  Growth$of$TV$market$•  Cellular$phone$adop6on$

•  West$Africa$Cable$System$

Asia*&*Australia* Opportuni4es, Threats,

•  Corporate$globaliza6on$•  Cellular$phone$adop6on$•  New$TV$content$•  4k$HDTVs$

•  Streaming$services$•  Fiber$op6cs$

Figure 10

Our$NPV$is$sensi6ve$to$market$growth$rates,$$but$adequate$in$all$probable$scenarios.$

!  Case:$Market$Growth$increases$by$7%/year$through$2025.$•  NPV:$$7.27$Billion$•  Generates$Posi6ve$Cash$Flow$

!  Case:$Market$Growth$increases$by$3%/year$through$2025.$•  NPV:$$3.40$Billion$•  Generates$Posi6ve$Cash$Flow$

18$

!  We$can$change$the$launch$plan$over$6me:$•  Move$satellites$later$

×  Exposes$SataLink$to$launch$failure$risks$•  Cancel$satellite$in$2020$if$necessary$

×  Fails$to$account$for$market$changes$ajer$2017$

!  We$can$improve$our$corporate$strategy:$•  Maintain$geographically$diverse$customer$base$

"  Ensures$that$SataLink$will$grow$even$if$one$market$fails$

•  Invest$in$fiber$op6cs$"  Guarantees$SataLink$will$serve$exis6ng$

customers$in$an$unpredictable$market$19$

20$





Debt$Reduc6ons$

2014 2015 2016 2017 2018 2019 2020 2021

Operating Cash Flow $851 $930 $1012 $1089 $1179 $1283 $1380 $1495

Purchase Expenses (368) (535) (603) (670) (370) (203) (135) (68)

Interest Expenses (293) (293) (293) (293) (293) (293) (293) (293)

Net Cash Flow $191 $102 $117 $126 $517 $788 $953 $1135

Our$CF$outlook$is$strong$even$if$we$choose$not$to$pay$off$our$debt.$"  Model$assumes$debt$level$remains$at$$3.25$billion$through$2021$"  Generates$posi6ve$cash$flow$every$year$"  Don’t$need$to$borrow$money$to$finance$the$new$satellite$purchase$plan$

Figure 11

Strong Cash Flow

21$

22$





Debt$Reduc6ons$

!  Goal:$Improve$SataLink’s$credit$ra6ng$

•  BeSer$in$the$eyes$of$stockholders,$suppliers,$and$customers.$

•  Higher$company$valua6on.$

•  In$the$future,$less$risk$means$that$we$can$borrow$at$lower$

interest$rates$(if$we$need$to).$

!  Op6on$to$reduce$debt$to$zero$by$2021$

•  Not$necessary,$but$shows$power$of$plan$

•  Targeted$coverage$ra6o*$of$FCF/Total$Debt$≥$5%$

23$*FCF$is$conserva6ve$(Opera6ng$cash$flow$minus$capital$expenditures).$

2013 2014 2015 2016 2017 2018 2019 2020 2021 NPV

Option A

2850 2721 2667 2591 2498 1998 1298 498 0 5149

Option B

2750 2050 1250 0 5038

Debt Level and associated NPV (in millions)$

!  Reduce$the$debt$level$sooner$rather$than$later,$for$less$interest$payments.$•  Surprisingly$improves$the$Net$Present$Value$(NPV).$•  Why$were$we$paying$so$much$in$interest?$•  Might$be$due$to$poor$credit.$We’ll$improve$credit$and$refinance.$

Figure 12

24$

25$





Debt$Reduc6ons$

Our$final$plan,$as$shown$on$slide$15,$meets$all$high@level$priori6es.$

!  SataLink$will$have$$4$billion$in$cash$by$2021$!  Maximize$“Space$Real$Estate”$

•  Beneficial$due$to$high$profit$margins$in$industry$

•  Op6on$1:$Acquire$smaller$compe6tors$

"  SataLink$will$aSain$valuable$orbital$slots$•  Our$recommenda6on:$Space$Com$(TASE:$SCC)$

•  Market$cap:$$1.3$billion$

•  Allows$expansion$in$African$market$

•  Op6on$2:$Engage$in$price$war$to$capture$customers$

� Might$lose$to$compe6tors$with$larger$market$shares$26$

!  Enter$fiber$op6cs$market$

•  Allows$SataLink$to$take$advantage$of$exis6ng$rela6onship$

with$communica6ons$companies$

•  Op6on$1:$Acquire$Ciena$Corpora6on$(CIEN)$


•  Provides$fiber$op6c$bandwidth$to$similar$customers$

•  Op6on$2:$Acquire$Infinera$Corpora6on$(INFN)$


•  Provides$fiber$op6c$systems$to$similar$customers$

27$

!  The$As,Soon,As,Possible,launch$plan:$

$

$

$!  Addi6onal$strategic$recommenda6ons:$

•  Maintain$geographically$diverse$customer$base$•  Pay$back$debt$early$•  Acquire$a$smaller$satellite$provider$such$as$Space$Com$•  Acquire$a$fiber$op6cs$provider$such$as$Ciena$Corpora6on$ 28$

2017 2018 2019 2020 2021

Americas 1000L 1000L 800M

Europe 1000L 800M


Asia & Australia 1000L 800M

Figure 13

Labrador,*Virgil.*“Trends*to*Watch*(2014).”*Satellite'Markets'and''Research.*SpaceconnecIon,*Jan.*2014.*Web.*25*Jan.*2014.**Discusses$poli6cal$and$economic$forces$in$today’s$satellite$$industry.$

McClure,*Ben.*“Cash:*Can*a*Company*Have*Too*Much?”**Investopedia.*2010.*N.*pag.*Print.*Explains$good$and$bad$$reasons$for$firms$to$hold$extra$cash.$The$appropriate$amount$$depends$on$the$industry.$

“Satellite*Telecom*Companies.”*Bloomberg'Markets.*Businessweek,**n.d.*Web.*25*Jan.*2014.$An$online$lis6ng$of$SataLink’s$real@$world$counterparts.$Includes$financials$of$Echostar,$Eutelsat,$$Loral$Comm.,$Globalstar,$etc.$

“2012*Annual*Report*–*Intelstat.”**Intelstat'Investor'Rela9ons.,,28$$Feb.$2013.$$Web$25$Jan.$2014.$$Details$opportuni6es$and$$threats$for$satellite$industry,$as$well$as$customer$$segmenta6on.$ 29$

Spencer$Graham@Thille$@[email protected]$

Jennifer$Sheriff$@[email protected]$

Bach$Dang$@[email protected]$

Yousif$Kurdi$@[email protected]$$

30$

Acknowledgements: Jose Arche (Team mentor) Steve Pierce (First Audience)

Documents

SataLink Fleet Proposal- SpaceCom (FEB28) (1)