Telesat Q3 2026 Earnings Call Transcript
Telesat (NASDAQ:TSAT) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Telesat reported Q3 2026 consolidated revenue of $81 million, adjusted EBITDA of $12 million, and a net loss of $157 million, with a significant portion of the loss attributed to the increase in the fair value of Telesat Lightspeed financing warrants.
The company announced a $2.7 billion agreement with Canada’s Defence Investment Agency under the ESCAPE program, focusing on the Lightspeed network for secure communication services, with potential for additional contracts with Canada’s allies.
The launch schedule for the Lightspeed satellites has been adjusted, with full global service now expected by the end of Q2 2028, though initial services in higher latitudes will commence by Q1 2028 to support the ESCAPE program.
GEO segment revenue declined due to structural changes, contract renewals, and satellite retirements, with the company reiterating its 2026 GEO revenue and adjusted EBITDA guidance.
Telesat is focused on refinancing its GEO debt with ongoing discussions with debt holders, but specific details of the refinancing strategy remain undisclosed.
Full Transcript
Kate (Conference Operator)
Thank you for standing by. My name is Kate and I will be your conference operator today. At this time I would like to welcome everyone to the Telesat third quarter 2026 financial results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to James Radcliffe, Vice President, Investor Relations. Please go ahead.
James Radcliffe (Vice President, Investor Relations)
Thank you, Kate. And good morning everyone. Thank you for joining us today. Earlier this morning we filed our quarterly report for the period ending September 30, 2026 on Form 6-K with the SEC and on SEDAR. Also, our remarks today may contain forward-looking statements. There are risks that Telesat’s actual results may differ materially from the known and unknown risks and uncertainties. For a discussion of known risks, please see Telesat’s annual report and updates filed with the SEC. Telesat assumes no responsibility to update or revise these forward-looking statements. I would now like to turn the call over to Dan Goldberg, Telesat’s President and Chief Executive Officer.
Dan Goldberg (President and Chief Executive Officer)
Okay, thank you, James. And thank you all for joining us this morning. I’ll start with a few words about the business and then hand over to Donald to speak to the numbers in more detail and we’ll then open the call up to questions. We made good progress last quarter and in the first nine months of the year to advance our core strategic objectives and position the company for significant growth and value creation. Certainly the agreement we announced in August with Canada’s Defence Investment Agency is a major validation of the essential and differentiated capabilities of the Lightspeed network and of what we believe the magnitude of the opportunities in the defense vertical to be. The agreement, including option periods, is valued at $2.7 billion and will provide high performance secure communication services using military Ka-band frequencies to the Canadian Armed Forces in the Arctic.
And as we emphasized when we announced the agreement, this is Telesat’s first contract under the ESCAPE program. There are more to come under ESCAPE for satellite communications in the Arctic. And we see meaningful additional opportunities above and beyond ESCAPE with the Canadian Armed Forces for services outside of the Arctic, namely the rest of Canada and other geographic areas of interest. We’re also seeing very significant concrete opportunities with Canada’s allies for defense and sovereignty requirements. The hostilities in Ukraine in particular have governments and their militaries all over the world focused on having assured access to an advanced LEO capability like the one we’re building to protect their citizens and their territorial sovereignty. We’re very focused on supporting those needs. And of course there’s strong demand for advanced LEO services in other market verticals including rural broadband connectivity, broadband for planes and ships, and other enterprise applications.
Customers increasingly recognize the value of a resilient, secure, high performance network designed for demanding mission critical applications. On the implementation side of things, the Lightspeed program continues to advance across the satellites, ground infrastructure, user terminals and software systems that make up the end-to-end network. It’s a significant undertaking and I’m very pleased with the progress my colleagues are making across the technical, operational, regulatory and commercial domains. With regards to schedule, MDA is progressing the first two initial satellites which we need in orbit so that we can validate performance of the spacecraft and end-to-end network.
We’ve been exploring the best solution to launch these satellites and given the very tight launch vehicle market, we’re loath to use one of our valuable Falcon 9 launch slots to launch just two satellites. We believe we found a solution that will allow us to launch the satellites at a reasonable cost by piggybacking on a third-party Falcon 9 rocket which we expect will launch in mid-2027. We plan to test those initial satellites in the network for roughly two months and once we’re satisfied, we’ll be able to start our full launch cadence launching 15 satellites on each of the Falcon 9 rockets we’ve secured.
With all that said, we now plan to have full global service around the end of Q2 2028 as opposed to the end of Q1 2028, which was our previous target. To mitigate that slight delay, we’ve altered our satellite deployment strategy so that we can still support service in the higher latitudes by the end of Q1 2028, which means we’ll be able to start the services for the Canadian military in the Arctic under the ESCAPE program, as well as our other northern rural broadband services as previously planned.
The three-month delay in the global service date is reflected in our updated LEO capex guidance for the year. Turning to GEO, the business performed largely as expected through the first nine months of the year. The revenue reductions reflect the continuing structural changes in the video distribution and broadband markets we’ve discussed in the past, the impact of specific contract renewals and expirations, and the retirement of certain of our GEO satellites over the past 12 months. Against that backdrop, we remain laser-focused on providing outstanding customer service and in maintaining our strict opex and capex cost discipline.
We’re reiterating our 2026 GEO revenue and adjusted EBITDA guidance. Lastly, we remain focused on refinancing the Telesat GEO debt, which begins to mature later this year. Our advisors continue to seek good faith engagement with the Telesat GEO debt holders and we’re evaluating other alternatives as well, with the goal of reaching an outcome that’s fair to all stakeholders. And while I have no doubt that investors have questions on where things stand and the likely path forward, I hope folks appreciate that when it comes to the Q&A part of today’s call, we’re pretty constrained in terms of what we can say at this time.
And so with that, I’ll hand the call over to Donald who will take you through the financial results in more detail.
Donald (Chief Financial Officer)
Thank you, Dan, and good morning everyone. My prepared remarks today will focus on highlights from this morning’s press release and filing. In the third quarter of 2026 we delivered results in line with our plan and expectations with consolidated revenue of $81 million, adjusted EBITDA of $12 million and a net loss of $157 million. For the first nine months of 2026, consolidated revenue was $247 million, adjusted EBITDA totaled $69 million and net loss was $867 million.
Adjusted EBITDA and net loss include expense relating to our debt refinancing of $25 million during the quarter and $46 million for the year, up from $16 million and $26 million for the same period last year. The net loss for the quarter and year to date also include loss caused by the increase in the fair value of Telesat Lightspeed financing warrants of $90 million in the quarter and $577 million for the first nine months of 2026. This increase in the valuation of the warrants reflects the growing value of Telesat Lightspeed following the ESCAPE contract and the other progress we are making on the program.
Interest expense totaled $55 million for the quarter and $155 million for the first nine months of the year. Interest incurred on the Telesat Lightspeed financing of $28 million for the quarter and $60 million for the year has been capitalized to the project. Our GEO segment results were consistent with our expectations during the third quarter and for the year to date. We generated $79 million in revenue, down 21% or $22 million compared to the same period last year. For the first nine months, GEO segment revenue was $243 million, down 24% or $79 million. The decline was driven primarily by the non-renewal of a broadcast contract in 2025 and a reduction in contractual capacity for a broadcast customer in 2026, together with reduced service to a North American fixed broadband customer and the removal from service of certain geostationary satellites.
GEO satellite utilization was approximately 59% at September 30, 2026 and GEO backlog was approximately $800 million. Adjusted EBITDA of our GEO segment was $36 million for the third quarter, down 43% or $27 million from the comparable period in 2025. For the first nine months, GEO adjusted EBITDA was $135 million. Operating expense, excluding costs attributable to our refinancing effort, was down 12% for the first nine months of the year compared to the same period last year.
Excluding costs relating to our refinancing, GEO EBITDA for the third quarter would have been $61 million with an adjusted EBITDA margin of 78% compared with 79% in the same period last year. For the first nine months, GEO adjusted EBITDA excluding the refinancing expense would have been $180 million with an adjusted EBITDA margin of 74%. On the LEO front, we invested $360 million in the Telesat Lightspeed program during the third quarter of 2026, comprising $344 million in capital expenditure and $24 million in operating expense. For the first nine months, total investment was $705 million including $641 million in capital expenditure and $64 million in operating expense. We ended the quarter with backlog of approximately $5.6 billion in our LEO business segment.
Turning to liquidity, at September 30, 2026 we had consolidated cash and cash equivalents of approximately $814 million. We received $510 million of milestone payments during the quarter under the ESCAPE agreement with a further approximately $1.5 billion in milestone payments due as we reach development and deployment benchmarks. In addition, we had approximately $1.5 billion available to draw under the Telesat Lightspeed financing at the end of September.
Based on our performance through the first nine months of 2026, we are reiterating our GEO segment guidance for the year with revenue of $300 to $320 million and adjusted EBITDA of $210 million to $230 million excluding non-recurring debt refinancing costs. Given our actual capex and opex spending in the first nine months and our forecast for the fourth quarter, we now expect full-year Lightspeed spending to be between $1.1 billion and $1.3 billion, below our previous guidance of $1.3 to $1.5 billion.
Before I conclude my prepared remarks, I would like to confirm that as of the date of our filing, we are in compliance with the financial covenants of our Telesat GEO financing and Telesat Lightspeed financing. I’ll now turn the call back to the operator for the Q&A. Thank you.
Kate (Conference Operator)
At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We request you limit yourselves to one question and one follow up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Drew McReynolds with RBC Capital Markets. Your line is open.
Drew McReynolds (Analyst at RBC Capital Markets)
Yeah, thanks very much and good morning. Dan, I know you’re constrained, obviously, with respect to the debt refinancing process. Just wondering if you can comment on, you know, when you think about fair value and a fair outcome here, you know, does that include potential equity issuance among, obviously, the other alternatives and options you’re looking at? And then the second question on the LEO backlog build, obviously you’re pretty optimistic on kind of future government and defense contract pipelines.
Any updated comments on maybe the timing of some additional contracts either by the end of this year or certainly through 2027? Thank you.
Dan Goldberg (President and Chief Executive Officer)
Yeah, okay. Good morning and thanks for the questions on the first one. You know, you’re right, and I noted it in my affirmative remarks. There’s just not a whole lot we can say at this point on the refi. You asked a question, I think, about equity issuance. And all I’d say is, yeah, it’s just premature to speculate on that right now. You know, we’ve said that getting the refi addressed is a key priority of ours. We’re, through our advisors, engaged with the lender group, and there are a range of alternatives that we’ve got under consideration.
But beyond that, there’s just not anything more we can say at this time. On LEO backlog, obviously we’ve grown it very meaningfully this year with the Escape contract and other smaller opportunities throughout the course of the year. And the pipeline, particularly on the sovereign opportunities, is compelling. As far as timing, these sovereign opportunities just sort of by definition involve government, so it’s always hard to handicap exactly when things will close. If I were to speculate, I think over the course of mostly next year, I could envision some meaningful opportunities getting closed.
And that’s just sort of what it feels like right now, again with all the caveats that it ain’t done until it’s done. And working with government customers is harder still to handicap the timing of those things. But the reality, though, is there’s a growing recognition of what we’re building. There is a growing and heightened need around the world to have a capability like the one that we’re building. And so all of those things suggest to us that, yeah, we’re very well positioned to close some meaningful opportunities.
Thank you.
OPERATOR
Your next question comes from the line of Edison Yu with Deutsche Bank. Your line is open.
Edison Yu (Analyst at Deutsche Bank)
Hey, good morning. Thanks for taking our questions. First, I want to ask about the LEO side, and I’m sure you kind of alluded to this earlier on the Starlink/Starship situation. Can you maybe help us understand what are the, I guess for you, what kind of— Is it terms of service or priority? How do you envision scenarios like that playing out in the future in respect to Lightspeed?
Dan Goldberg (President and Chief Executive Officer)
Edison, thanks for the question. Just if you could be a little bit more specific. What do you mean?
Edison Yu (Analyst at Deutsche Bank)
As in, I think, at least from what’s been reported, right, it was turned off, but obviously Ukraine did not want that. And I think there was a terms of service violation. And you have, I think, many parties kind of saying things. So I guess if you think about Lightspeed and its sovereign use, is it a terms of service thing? Is that different? Is it who has ultimate say in what you can do and stuff like that?
Dan Goldberg (President and Chief Executive Officer)
Okay, I got it. Maybe a couple things about that. And for us, we have no privileged insight into what unfolded with Ukraine and SpaceX and the like. But for us, you know, Telesat’s been around for almost 60 years now, and working with allied governments—Canada, U.S., other allies—is something that we’ve done for decades. Lightspeed for sure has great interest for sovereign users. And we added the military K‑band frequency specifically for allied governments to make use of to support their defense and their sovereignty requirements.
In terms of terms of use, just a couple things. One, not surprisingly, we require our customers to comply with the law and all the applicable regulatory frameworks. So that’s always there. We ourselves are subject to, certainly, the jurisdiction of the Government of Canada. And then when we get market access all around the world, we’re subject to the licensing terms of the various countries that grant us permission to serve their markets. And that’s something that we take seriously.
And the system is built to comply with—whether that’s lawful intercept or the ability to turn off service, things like that. The system’s built to support that. And so that’s kind of the framework that we operate in. And then for sure, when it comes to how the Government of Canada could use the Lightspeed constellation—and again, they’re a big anchor customer with the deal that we did with Escape—and maybe other sovereign governments that we enter into arrangements with, in terms of how Lightspeed is used there, we would be in close coordination with the Government of Canada in particular to make sure that we’re on side in terms of the use of the network.
And the Government of Canada, of course, would have its own relationships and understandings with the allies who would make use of the constellation. So that’s a lot of words, but that’s how we would approach it.
Edison Yu (Analyst at Deutsche Bank)
Gotcha, gotcha. Appreciate the color. Follow-up: actually on the launch side, you have a very detailed roadmap on how you plan to do that. I’m curious in terms of going forward, I know you have the launch secured, but I think everyone sees what’s going on in the market and feels it’s very tight, I guess. How do you think about just the capability of launch after Lightspeed in case you want to add more satellites, in case you wanted, you know, you’re involved in a different type of constellation?
Is that going to be kind of super handicapped because capacity is so tight or and/or pricing is so high? How do you think about that?
Dan Goldberg (President and Chief Executive Officer)
Yeah, no, and it’s something that we’re certainly focused on, to the point you made. We have the arrangements in place already with SpaceX for the current Falcon 9s. And there’s one more—so we’re under contract for 14 Falcon 9 rockets. We need a 15th. We’ve got an agreement in place with SpaceX for the 15th, although it’s still in the process of being finalized. So we feel good about having made provision for the 225 satellites that we’re launching.
I feel like we have the right rockets to deploy that. But your question was, okay, what comes next? SpaceX talks a lot about the development of Starship, and they’re optimistic that they’ll have Starship launching in a regular cadence early next year—from what I recall they said on their last call and our own discussions with them. From what I understand about the availability of Starship for companies like Telesat—third parties—it’s my understanding, first and foremost, they’ll focus on the deployment of their own satellites and their own requirements.
I’d say, secondarily or right alongside that, the U.S. government will be a priority customer for them, and maybe other governments as well. It’s certainly going to be up to them. I do believe that so long as our next‑gen satellites are configured in a way that can go into their dispenser—the same dispenser that they’ll be using to deploy their own satellites—I believe at this time we’ve got some expectation that Starship would be available to Telesat to support future missions.
So that’s how we think about our future with SpaceX. And then there are other providers on the market today. Not where I think the industry would like them to be right now, but they’re all sort of ramping their capacity and capability. And then there are some new entrants that are coming onto the market as well. Some of those options are quite promising. And so it’s something that we pay a lot of attention to. But I think that as we grow the constellation—and it is our plan to grow the constellation, so long as the demand is there—I think that through those different platforms we’ll have a path to get our satellites deployed.
Thank you.
OPERATOR
Your next question comes from the line of Erin Kyle with CIBC. Your line is open.
Erin Kyle (Analyst at CIBC)
Hi, good morning and thanks for taking the questions. Just wanted to follow up on the launch schedule that you provided and the timeline shift for global service into Q2. I just want to clarify there that that shift is predominantly related to the timing of when the Pathfinders are going up now and the period of time you need to wait before you can progress the launches. And there’s not any other scheduling issues on the manufacturing side. As it stands, MDA is on track?
Dan Goldberg (President and Chief Executive Officer)
Hi Erin, thanks for the question. So on the launch—so as we said, we are zeroing in on having the ability to piggyback on this other Falcon 9 launch vehicle that we’re expecting will launch mid next year, so sort of June kind of timeframe. MDA is progressing the first two satellites—we’ve called them in the past Pathfinder satellites—that will go on that launch vehicle. Those satellites aren’t complete yet. We expect them to be complete in time for the June launch.
And we expect that the production‑level satellites—so our first launch of our full suite of 15 satellites on our first Falcon 9 launch opportunity—we’re expecting that to be in sort of the September timeframe. So a little bit less than a year from now, we expect that those satellites, based on what we’re hearing from MDA and what we’re seeing, will be available in that timeframe. So that’s… but yeah, 100% though, it’s tied to two things: one, MDA having the satellites and the software that’s required available to support those launch timeframes; and then that first launch vehicle being available to us in June, and then we’ll go from there.
Erin Kyle (Analyst at CIBC)
Okay, thank you. That’s helpful detail. And then maybe just for my follow‑up: and you touched on this in the prepared remarks, but I did notice the fair value of the warrants were increased again this quarter. Just wondering if you could provide any extra color on what’s driving that value increase. I know last quarter’s adjustment reflected the Escape contract.
Dan Goldberg (President and Chief Executive Officer)
Yeah. Donald, do you want to handle that?
Donald (Chief Financial Officer)
The program is advancing, and as we progress, risk is coming down a little bit. That is basically helping increase the value when we’re doing the work on the project valuation.
Erin Kyle (Analyst at CIBC)
Okay. So tied to progress in the risk profile. Helpful. Thank you.
OPERATOR
Your next question comes from the line of David McFedjean with ATB Cormark. Your line is open.
David McFedjean (Analyst at ATB Cormark)
Yeah, great. So a couple of questions. So the timing now for you being fully up and running and generating revenue for Lightspeed would be Q2 ’28, not Q3 ’28?
Dan Goldberg (President and Chief Executive Officer)
So the words fully up and running and generate revenue, David, for me, they’re two different things. So what the plan is, we’ll launch our first satellites. We’ll start in September next year. And then the plan is to go, you know, launching about every three weeks or so. We believe that, you know, with that schedule, by the end of Q1 2028, which was, you know, when we last updated the market, we wanted to have global coverage by the end of Q1 2028 because of, you know, the update that we gave today, that’s sliding back about three months.
But still, by the end of Q1 2028, we’re expecting to have enough satellites in orbit that we can start commercial service in the northern—I should say the higher—latitudes. That will allow us to start the ESCAPE services under that first contract that we have with the government of Canada. It will allow us to start providing broadband connectivity to some of the communities in the far north. And we think that the constellation at that time could support other services too.
So we’re working, for instance, for broadband on planes. Right. Certainly the planes that are flying in those higher latitudes, we could potentially already start connecting them to Lightspeed. So we’re evaluating what other use cases we could start by the end of Q1 2028, which means that we expect to start recognizing revenue in that timeframe. Now by the end of Q2 2028, that’s when we expect to have global service. And then again we’ll have global service. But then we’ll continue to launch more satellites until we deploy all 225.
David McFedjean (Analyst at ATB Cormark)
And the expectation to have all 225 up in space is when exactly?
Dan Goldberg (President and Chief Executive Officer)
I think they’ll all be in orbit under our plan by the end of 2028. Although some of them might still be doing some orbit raising and we might still be, you know, inserting them into the constellation. The original 156 before we added the other 69 with ESCAPE will be in place providing service, we expect probably in, call it, you know, Q4 2028, and then the other 69 will come online.
David McFedjean (Analyst at ATB Cormark)
Okay, and if you’re not able to provide the government with service for ESCAPE by the end of Q1 2028, are there any financial implications from not being ready at that point in time?
Dan Goldberg (President and Chief Executive Officer)
No, no. It just means, you know, we’ll have to wait a little bit longer before we can light up the service and start recognizing revenue. But no, no.
David McFedjean (Analyst at ATB Cormark)
Okay. So no financial penalties or anything. Okay. And then I’m sorry,
Dan Goldberg (President and Chief Executive Officer)
I’m sorry, I said zippo, which is to say no financial penalties.
David McFedjean (Analyst at ATB Cormark)
Okay, great. So, you know, it’s obviously November very soon as we look to 2027. Just kind of wondering if we’re going to see a bit of a slowdown in the decline on the GEO side. I don’t know if you can give any color right now, but that it’s worth asking.
Dan Goldberg (President and Chief Executive Officer)
I’m sorry, David, ask that one again, if you could.
David McFedjean (Analyst at ATB Cormark)
What do you think about the revenue decline for the GEO business in 2027? Like, do you think it could slow down?
Dan Goldberg (President and Chief Executive Officer)
Well, we’ll give guidance obviously for 2027, as you know, when we provide our guidance, that’ll be early next year. So, you know, I mean, just in my own mind, first off, the business has been trending down. Some of our GEO satellites have reached the end of their lives and they’ve come out of service, and so there’ll be some of that. The Nimiq 6 contract with Bell comes up for renewal sort of mid next year. Our expectation [is] that that’s an important satellite for Bell and certainly they still have a lot of subscribers that are still needing that service.
My expectation is that we will renew that contract with Bell, you know, likely to come at a lower rate, which will provide some, you know, headwinds in terms of, you know, what next year looks like. But anyway, so my expectation is there will be further revenue declines, but again, we’ll give guidance on that early next year.
David McFedjean (Analyst at ATB Cormark)
Okay. All right, thanks.
Dan Goldberg (President and Chief Executive Officer)
Thank you.
OPERATOR
Your next question comes from the line of Greg McDonald with Stifel. Your line is open.
Greg McDonald (Analyst at Stifel)
Thank you, Dan. I’m going to try and ask another question on the debt, but it’s one that I think you might be able to answer. So the changes that have happened in the last three months, one of the big ones is the Defense Industrial Agency becoming a Crown corp or about to become a Crown corp with new financial powers. My original thought on that was that it increases options for backstop scenarios, for bridging scenarios. Even given your new slightly changed free cash flow profile, maybe partial maturity, partial refi scenarios, so many non-dilutive options.
Would you read that the same way? Is that DIA change informing your commentary on other alternatives as well?
Dan Goldberg (President and Chief Executive Officer)
No, it’s not.
Greg McDonald (Analyst at Stifel)
So what is informing that new commentary?
Dan Goldberg (President and Chief Executive Officer)
Well, I don’t think that’s new commentary. I think we’ve suggested for some time that our focus has been on reaching a consensual outcome on the refi, that we’ve been engaging in good faith. But we’ve always emphasized that there are a number of alternatives that the company has been considering. And so I don’t—it’s not a new, you know, message from us around the refi. I think we’ve been pretty consistent in our communications around that.
Greg McDonald (Analyst at Stifel)
Okay, and then the second follow-on is just on, going back to the Starshield—I’ll call it restrictions, or I think that’s the way that they mentioned it. Have you gotten any increase in engagement from non-Canadian potential clients since that? Is that, like, lighting a fire in Europe more so than it did back in ’23 or ’22? I forget the first time they did that.
Dan Goldberg (President and Chief Executive Officer)
You know, I’d say for some time now governments have appreciated how consequential having access to an advanced LEO constellation is. And so we’ve been having good engagement with the government of Canada and, as I’ve mentioned, with Canada’s allies on using Lightspeed for their own sort of sovereign requirements. It’s certainly the case that the development with SpaceX in Ukraine has animated various governments. I read the news like everyone else.
Certainly we’ve read that the Europeans are wanting to move with increased focus and whatnot on, for instance, IRIS². So that’s something that we’ve read. I guess all I would say is just the way modern warfare is waged right now, the importance of these autonomous networks, the importance of having a high-throughput, low-latency, highly resilient network has just become really essential. Canada has identified space as a key sovereign capability in its fairly newish defense industrial strategy. And I think other governments, whether doing that explicitly like the government of Canada did, or just more tacit recognition—just all of that I think has, yeah, created—yeah, I guess that’s fair—more momentum around some of the discussions that we’re having.
And our timing is such that, you know, we’re coming to market soon. You know, we’re having our first launch of the initial two satellites and those will be tested not just by us, but by users as well. You know, that’s coming up in seven or eight months. And then, you know, less than a year from now, we’re going to be launching lots and lots of satellites. And so I think that’s very well known to the market—our timing—that, you know, we are well advanced in the project.
So anyway, yeah, that’s the environment right now, which is why, you know, when we’re bullish about what the pipeline looks like, when we have confidence about signing and announcing meaningful contracts, you know, over the course of next year, it comes from that. It comes from those conversations and the environment that we’re in right now.
Greg McDonald (Analyst at Stifel)
Much appreciated. Thanks.
OPERATOR
Your next question comes from the line of Maher Yaghi with Scotiabank. Your line is open.
Maher Yaghi (Analyst at Scotiabank)
Great. Thank you for taking my question, Dan. Correct me if I’m wrong, but on October 23rd, and without getting into the conversation that you’re having with the plaintiffs in the court—and I fully understand how that is privileged information and confidential—but can you give us maybe just a big-picture view of what the plaintiffs’ settlement proposal that they made on the 23rd was?
Dan Goldberg (President and Chief Executive Officer)
Thanks for the question. No, I don’t think it’s really appropriate for us to wade into that sort of a thing, and trying to conduct these refinancing engagements through the newspapers doesn’t seem like a good idea to us. So I guess all I would say is, you know, we’ve got some very capable advisors that are supporting us. They are engaged with the debt-holder advisors and our focus is genuinely, you know, achieving an outcome that’s good for the company, good for the various stakeholders that we have, and that’s what we’re spending our energy on.
But it’s just not productive to go into the details of exactly the nature of the conversations right now.
Maher Yaghi (Analyst at Scotiabank)
Okay, that’s fair, I understand. And maybe just to shift on the commercial side, which is more exciting and probably you can talk a little bit more about—that should, you know, pushing out the launch or the commercial, you know, the commercial phase of LEO—does that affect anyway the pace of how and when you can sign new contracts ahead of that launch? That is, you know, your commercial partners that you’re talking with, the airlines potentially, or any kind of terrestrial operators, are they waiting for validation from the two initial launches that you’re going to be making for them to commit into some sorts of long-term contracts?
Dan Goldberg (President and Chief Executive Officer)
Yeah, it’s a great question and I would say that yes, for some customers, they absolutely want to be able to test a real network and test the satellites. And we’ve got sort of a queue building up of just exactly those kinds of activities—doing real-world testing with various customers all over the world. And then there are other customers—I mean again, that’s why we have $5.6 billion of backlog right now on LEO. There are other customers that have done significant technical due diligence.
They’ve, you know, toured the factory. We have, you know, as you probably know, a Low Earth Orbit satellite in orbit right now. It’s not as capable as the Lightspeed satellites that will be built, but still a LEO satellite and we can do quite a bit of testing and demonstrations with it. And so there are other customers that are confident proceeding contractually with that. We still need to deliver the service. They can sign a contract, but if we’re unable to deliver the service that we promised to deliver, then obviously they’re not required to write us checks.
But it is important for us to get those initial satellites up and then it’s important for us to keep launching. The more satellites that we have up there, the more testing that we can support, the more real-life it is in terms of how the network operates, how the traffic is handed off from satellite to satellite, from gateway to user terminal and all of that. So we’re very focused on getting it done. And we shared that we’re sliding back by three months the date of global service.
The good news, though, is we are going to launch commercial service as planned at the end of Q1. You know, we would have preferred global service, but being able to support the higher latitude requirements, which, you know, are significant for Telesat with the ESCAPE program and other requirements, that’s important for us.
Maher Yaghi (Analyst at Scotiabank)
Great, great. Thanks. Good to hear. And maybe just one last clarification. Can you just clarify for us—the, you know, the pushout of the two test satellites—is the decision that you guys made in terms of launch logistics and not due to any kind of production delays of these satellites? I’m just trying to make sure we understand it very well.
Dan Goldberg (President and Chief Executive Officer)
Yeah, no, I’d say it was twofold. The initial satellites are not yet ready for launch. The hardware’s coming together. I mean, we spend a lot of time in MDA’s factory and it’s good to see those two satellites being assembled, which is exactly what’s happening right now. There’s also software that needs to be available to support the operation and unlock, I would say, the functionality of the satellites. Software that MDA needs to deliver, and then software that Telesat, that we develop as well to fully exercise the capabilities of the satellite, which are important to do the testing.
So, so today that work is still being done. We expect it to be fully done in time to support the June launch opportunity that we have. So it’s those two things. I mean, if the launch vehicle were available today, we wouldn’t be ready to put those first two satellites on it. But it was never our expectation that we’d be doing it, you know, now, but that’s kind of what the situation is. Okay, thank you.
OPERATOR
Your next question comes from the line of Caleb Henry with Quilty Space. Your line is open.
Caleb Henry (Analyst at Quilty Space)
Hi, thanks for the question. I have two. The first is on backlog of the 5.06 billion. How should we think about conversion once the service starts? And is that even or does it ramp? And how much is take or pay?
Dan Goldberg (President and Chief Executive Officer)
How much is take or pay? I mean, pretty much all take or pay, the whole 2.6 billion in terms of how it. Maybe a couple of things. So one, we’ve got the $600 million deal with the Government of Canada for rural broadband connectivity. That’s a 10-year deal. And the revenue recognition there is pretty much linear, so about 60 million a year. And as we talked about before, on that contract, that creates a pool of bits that rural ISPs in Canada can tap into.
And when they do. And the Northwestel contract that we announced, I think earlier this year is an example of that. That’s on top of the 600 million. So we expect that 600 million from that pool of capacity to be greater. On the Escape contract, I think we provided quite a bit of information about the Escape contract. There’s a big prepayment that comes in, you know, and it’s already started to come in this year. And next year, as we build the 69 satellites that the Escape program helped unlock, again, Escape is going to be leveraging all 225 satellites. So a lot of the 2.7 billion of revenue recognition, that’s the 2.3 billion for the initial piece. And then there are two option periods of 200 million apiece.
But the revenue recognition, there’s a difference between cash and revenue recognition. The revenue recognition will be more or less over a 15-year period, pretty flat, I think. But the way the cash works is different. And because, you know, nearly 2 billion Canadian is being paid up front, there’s also this financing component. We’ve tried to be very transparent about that and show what that looks like in some of the materials that we provided and that, you know, those two alone cover, you know, so much of that 5.6 billion.
Then we’ve got, you know, a meaningful contract with Viasat and that is also a take or pay contract, but that one ramps and it’s a meaningful contract, but I don’t think we disclosed the exact value of it. I think that’s responsive, Caleb.
Caleb Henry (Analyst at Quilty Space)
Yeah, that’s very helpful, thank you. And then just my last one is on the user terminals, if you could give a sense of the roadmap for what the first types of user terminals you expect to be ready and then how they come online after that. From your earlier comments, it sounds like maybe enterprise and then aeronautical, but I’m wondering if that’s right and how we should think through their availability.
Dan Goldberg (President and Chief Executive Officer)
You know, we are progressing kind of a whole family of user terminals in parallel. So there will be user terminals that can support kind of fixed land applications and those are well under development. There are user terminals and these are flat panel antennas that I’m talking about. There’s also a parabolic antenna too. Those are very useful for, call it remote communities that need lots and lots and lots of capacity. But on the flat panel side, and we’re seeing the market very much wanting the flat panels, we are progressing in parallel, the FPAs, flat panel antennas for the fixed kind of land market for enterprise applications.
Same with maritime. I mean, you know, they’re basically the same antenna but with some modifications to support a maritime and mobile environment. We’re working also in parallel on the aeronautical antennas that could go on commercial, you know, large commercial planes, but also biz jets as well. Those are two different kinds of antennas and then some particular types of antennas. I’d say more ruggedized, sometimes multi-frequency even for defense applications.
So those are all progressing, I’d say, well, and we fully expect them to be available of course, when we’re coming online for the various customers that we have. Thank you.
OPERATOR
Your next question comes from the line of Walter Bissick with LightShed. Your line is open.
Walter Bissick (Analyst at LightShed)
Hey Dan, how’s it going? Question. Follow up on Viasat. I mean that was one of your early sign offs for Lightspeed. Just curious, if you look at the 2030, 2035, a customer like that, what percent do you think they represent of the total? Would they be the largest or would they just be one of many customers that you would be generating services or revenue from on Lightspeed?
Dan Goldberg (President and Chief Executive Officer)
We don’t really do our kind of projections kind of customer by customer like that. We do it more kind of, you know, vertical by vertical, region by region. And then if there are kind of big chunky, if we’re tying for particular customers, for sure, if we’ve got a contract with them already, we just kind of roll out the backlog and that underpins the projections. And then you do that with countries as well, the governments because those are big chunky opportunities.
So, so with Viasat, I’d say kind of it depends. Viasat obviously a large provider in the commercial in-flight connectivity market for aeronautical, but they’re also a meaningful provider to governments, including the U.S. government. Of course they’ve got ambitions in the maritime space, so we’ll have to see. We’ve got what I think is a very good partnership with Viasat. We’ve worked with Viasat for decades as a, you know, sometimes they’re a customer of ours, sometimes we’re a customer of theirs, sometimes we do things together.
So in any event, I’d say, you know, they’re a channel for us in a lot of those different verticals.
Walter Bissick (Analyst at LightShed)
Got it. And then just, I think just following up on Chris’ question, that contract is take or pay. So that if Amazon purchased Viasat and I’d also be interested in your views on the industrial logic of an acquisition like that. But if that did occur and they wanted to integrate Amazon’s future LEO as well. Does that contract still get paid out or is there an ability for them to step away from it?
Dan Goldberg (President and Chief Executive Officer)
No, the contract is a take or pay commitment. So long as we meet our obligations. They need to meet their obligations, which is to say, you know, pay us and we, you know, intend to meet our. We intend to meet our obligations. So. And you know, certainly today for Viasat, having access to Lightspeed I think is, you know, an important strategic focus of theirs. So yeah, that’s kind of how we think about it.
Walter Bissick (Analyst at LightShed)
Got it. Thank you.
Dan Goldberg (President and Chief Executive Officer)
Okay, thank you.
OPERATOR
Your next question comes from the line of Chris Quilty with Quilty Space. Your line is open.
Chris Quilty (Analyst at Quilty Space)
Thank you. How’d you let Caleb in before me and ask questions? Nevermind.
Dan Goldberg (President and Chief Executive Officer)
Press star one first.
Chris Quilty (Analyst at Quilty Space)
I know. Okay, I did have a follow up question or maybe a commentary on the terminals. We don’t have to go through it here, but it’d be helpful on future calls or in your deck if you kind of run through who those vendors are. Just knowing the history, whether it was Inmarsat rolling out BGAN and they didn’t have terminals or Iridium rolling out Certus, they didn’t have terminals. The Navy, the MUOS system was up for years, they didn’t have terminals.
It’s historically been a big challenge and I think having some visibility on that would be super helpful.
Dan Goldberg (President and Chief Executive Officer)
Yeah, no, we take the point. We’ve made some announcements about the folks that we’re working with in the past. We’ve, I think made some announcements around Intellian, around Kest Farcast, which used to be called UT Date, I believe. And so, you know, we’ve been pretty transparent about the folks that we’re working with out there. We’ve done some demos with others. We tend to make press releases when we do that. But yeah, and listen, we share your view.
It’s critical, you know, having satellites in orbit and ground stations rolled out and software managing all the traffic is great and it’s necessary, but it’s not sufficient. You need capable, affordable, high performing user terminals out there that can support a range of use cases. The use cases are multiplying with the passage of time, including for these defense requirements. And we are very focused around here on making sure that Lightspeed can support those various use cases and that there are terminals available for our customers, timely available to our customers to support all that.
But I would say go back and look at some of the things that we’ve said before about the folks that we’re working with and there are good developments on the user terminal side in terms of new technologies, new chipsets that are coming out and all of that that just make it better and better.
Chris Quilty (Analyst at Quilty Space)
Yeah, and I guess I should have qualified. I mean as you go forward and those vendors go through the testing and whatnot, keeping us updated on the status to make sure everything’s aligned. Also a follow up question, I think. You know, you mentioned bringing the, the Polar Service in. How many satellites do you need for that?
Dan Goldberg (President and Chief Executive Officer)
Oh, I think we estimate around 45.
Chris Quilty (Analyst at Quilty Space)
Okay. And then another question.
Dan Goldberg (President and Chief Executive Officer)
So I mean just to do the math, that’s three launches for us.
Chris Quilty (Analyst at Quilty Space)
Yeah, sorry. And I think you’re talking about like a three month timing between the Pathfinder and operational satellites. Is that enough time to test out a satellite? I couldn’t look, but I don’t know how long it was with Globalstar before they had the reaction wheel problems. I think it was more like three to six months.
Dan Goldberg (President and Chief Executive Officer)
No, we’ve got what we consider to be a very comprehensive test campaign. It’s more like in the 60-day kind of range. And you know, we said it before, but I’ll say it again, we’re going to do an enormous amount of testing on the ground. It doesn’t obviate the need to do testing with real satellites in orbit. But no, we feel confident that, you know, and we’ll have all the ground stations around the world that we need to support of the testing. We’ve got a detailed kind of, you know, testing validation protocol for all the various network elements, including the spacecraft, of course.
So yeah, no, we, I would say, you know, Telesat is, is many things but one thing we’re very good at is, you know, bringing new spacecraft into service. And so the team I think has a robust approach for that.
Chris Quilty (Analyst at Quilty Space)
Gotcha. And final one, if I can just. On the sovereign deals, I think there’s sort of two models we’re generally seeing in the market where either you sell a system to the customer and maybe use the Starlink example. SpaceX sold satellites to the NRO for the proliferated LEO which was a sale transfer of the government even though they fly versus Starshield running across the Starlink as a service. And then perhaps again the Escape P almost looks kind of like the WGS type arrangement where allied countries contributed for capacity.
I mean which of those models or are there others that you’re talking about with sovereign customers? And are you able to meet all those models?
Dan Goldberg (President and Chief Executive Officer)
Yeah, maybe. A couple thoughts on that in many instances. And again, I’ll go back to something I said earlier. We’ve been serving the sovereign market for decades. So one model is we’re just providing a service on the Lightspeed network to an allied government. That’s one. Two, we’re providing the service to a trusted service provider of the allied government. So pick a country and imagine, you know, a satellite services provider in that country that has a very close relationship with their own government and has served that government for decades.
That’s another model. We contract with their trusted service provider, who in turn provides a service to them. Sometimes it could be government to government. And so we’re providing the capability, for instance, to the government of Canada, and they enter into their own arrangement with one of their allied governments, and it goes that way. And some of these things aren’t mutually exclusive. You can mix and match on a particular opportunity. That’s kind of what it’s looking like to us right now.
Okay, thank you.
OPERATOR
I will now turn the call back over to Dan Goldberg, CEO for closing remarks.
Dan Goldberg (President and Chief Executive Officer)
Okay. Well, operator, thank you very much, and thank you all for joining us this morning. And we look forward to chatting with you again when we release our full year numbers. So thank you again,
OPERATOR
Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.
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