The Israeli government is renewing and expanding its ties with Spacecom Satellite Communications Ltd. (TASE:SCC), in a $26 million (NIS 84 million)service agreement. The new agreement extends the period of service to be received by the state on the Amos 3, Amos 4, and Amos 7 satellites, and adds satellite capacity on Amos 4 for the coming years.
Spacecom says that the services that the government receives via three transponders on the Amos 3 satellite in the Ku frequency band will be extended for various periods, ending on August 31, 2024, for a cumulative payment of $13 million (NIS 42 million). These services are in addition to services that the government receives via the Amos 3 satellite under another agreement covering the life of the satellite.
With regard to Amos 4, Spacecom says that it will provide services to the government via an additional transponder in the Ku frequency band for three years for a cumulative payment of $9 million (NIS 29 million) over three years. This is in addition to payments under existing agreements in relation to Amos 4.
The services that the government receives via one transponder on the Amos 7 satellite will be extended by a year, yielding revenue of $4 million (NIS 13 million). The new agreements with the Israeli government are on top of an orders backlog of $325 million (NIS 1.05 billion) reported by Spacecom on October 1, 2020.
Amos 7 is a satellite leased by Spacecom until February 26, 2022. The veteran Amos 3 satellite is expected to function until the end of January 2026, according to the manufacturer's estimate. Spacecom is currently examining the possibility of buying a new satellite to operate at 4 degrees West, despite the fact that Israel Aerospace Industries is meant to produce a new satellite for the government of Israel to operate at this longitude.
Spacecom has yet to release its financials for 2020 as a whole. In the first nine months of the year it had revenue of $65.9 million, 7% more than in the corresponding period of 2019.
The government of Israel is Spacecom's largest customer. In 2019, the company recorded revenue of $29 million from the sale of services to the government, representing 35.1% of its total revenue. The company's second largest customer is Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) satellite broadcasting unit Yes, which accounted for 26.2% of total revenue on 2019 ($21.6 million). The agreement with Yes will end in early 2026, when Amos 3 comes to the end of its life. Yes has decided to switch to providing television services via the Internet.
Spacecom has four series of bonds totaling $1.54 billion. At the end of this month, the company will make early redemption of its 6 Series bond, paying principal and interest of NIS 135.5 million.
Spacecom is controlled by the receiver of the Eurocom group, which was formerly controlled by Shaul Elovitch. It is traded at a market cap of NIS 125 million, after a 23% drop in its share price over the past year. In addition to its contracts with the Israeli government, Spacecom continues to expand its services for other governments seeking to facilitate broadband services in remote and isolated areas.
The company is in talks with several countries on implementing the Digital Community Platform (DCP) launched recently, and on carrying out further pilot programs following the start of activity in countries in Africa. DCP facilitates the construction of communications and local cloud services infrastructure in a community, linked via advanced and efficient satellite communications, enabling vital government services to be provided to outlying areas.
Published by Globes, Israel business news - en.globes.co.il - on February 16, 2021
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