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SES TAKES FULL CONTROL OF O3B
Friday, April 29, 2016

Source: Thales Alenia Space

LUXEMBOURG - SES SA has agreed to take a controlling share in O3b Networks by increasing its interest in the medium Earth orbit (MEO) satellite operator to 50.5 percent. The transaction is subject to regulatory approvals which are expected to be completed during H2 2016.

SES will pay $20 million to increase its fully diluted ownership of O3b from 49.1 percent to 50.5 percent. By $20 million for 1.4 percent of O3b, SES is valuing the company at $1.43 billion. In total, SES has invested $323 million in O3b. Along with O3b's assets, SES will consolidate O3b's $1.2 billion in net debt.

O3b currently operates 12 high throughput satellites (HTS) in MEO. Each satellite can deliver up to 1.6 Gigabits per second (Gbps) of throughput. Since satellites in MEO orbit at 8,000 km, they are much closer to Earth, reducing latency compared to satellites orbiting in geosynchronous Earth orbit (GEO). O3b also has eight new satellites under contract, which are expected to be delivered in 2018 and 2019. Some of those satellites may also operate in elliptical orbits, which will increase O3b's capacity over polar regions.

The $1.43 billion is a high valuation, especially for a company that is expected to generate only $100 million in 2016. However, O3b is experiencing rapid growth. That $100 million figure will be double the revenue generated in 2015. In addition, the company expects to generate between $32 million and $36 million per satellite per year by 2020 (or between $640 million and $720 million for a fleet of 20 satellites).

The outcome of the remaining 49.5 percent of O3b remains in flux. Starting on April 29, the day of the announcement, SES has an option to purchase the remaining shares of O3b for $710 million. And starting on October 1, 2017, O3b has the option to sell the remaining shares for the same amount. If O3b exercises its option, SES would be obligated to purchase the shares. However, O3b's board is also free to evaluate conducting an initial public offering (IPO) for the shares. If they decide to conduct an IPO, that would override both options.

At one point, GEO operators and LEO operators were distinct companies. However, more recently, GEO operators have begun to invest in satellites in different orbits. SES has invested in O3b, while Intelsat has made investments into OneWeb. Telesat, on the other hand, is purchasing its own LEO satellites to test networks in that orbit.

Source:  SES
Associated URL: http://www.ses.com/4233325/news/2016/22223665
Source Date: April 29, 2016
Author: B. Ostrove, Analyst 
Posted: 04/29/2016
 

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