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Avanti Communications (LON:AVN) report: New contract adds 10% presold; launch delayed to Sep

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- Avanti announces that it has signed a contract for 320Mb of HYLAS 1 capacity serving Eastern Europe, some 10% of HYLAS 1 total. Avanti had (DSCE) previously sold 14% of HYLAS 1 total throughput.

- Avanti notes that the 320Mb sold (over 5 years) is potentially worth ?21.9m in revenues, adding that the same customer has also signed options for further HYLAS 1 bandwidth and also on HYLAS 2. This is Avanti’s first potential contract on its second satellite.

- Avanti notes that its client is “one of the most experienced satellite broadband operators” in the region; however its contract “is conditional upon completion of some asset financing by the customer”. Avanti has also signed VNO contracts with three new customers based in the UK but serving various territories in Europe, taking its total VNO customer list to 58. The company states that it “is now confident that it will comfortably exceed its target for pre-sales in [HYLAS 1] launch year of 25%. It reports that “trading for the current period is in line with expectations”.

- Launch delay. Astrium UK, manufacturer of HYLAS 1, has advised Avanti that the satellite will now be delivered to the launch site in July 2010. Also, launch provider Arianespace has confirmed that it will be ready to launch HYLAS 1 in August. Avanti reports that it had the contractual option of launch on either a shared Ariane-5 vehicle or on a dedicated Soyuz vehicle; it will utilise the Soyuz vehicle option. Therefore, “with some contingency included, Avanti is confident that the program will deliver HYLAS 1 into operation successfully by September 2010”.

- The net effect of these updates is positive and underpins our outlook, notably the level of presold HYLAS 1 capacity. Our rating remains “Buy”.