Boeing Final presentation

SataLink strategic plan

Unicorn Consulting

SataLink’s position

Case at hand, case for change, constellations, recommendations

SataLink needs to replace 10 satellites that are retiring from 2020 to 2024

• All new satellites must generate revenue by 2023

• Must generate positive cash flow each year through 2027

• No capital raising

• Order to revenue generation time is 36 months

• Earliest order can be placed Jan 1, 2017 operational by 2020

• Boeing’s production capacity is 8 satellites per year

• Finite number of GEO slots

Money Time Space

Competition in the industry is led by several large firms attracted by a large satellite services market

Launch Satellite Services

SataLink specializes in satellite services and will struggle to increase market share inexisting territories due to large established players.

Satellite manufacturing

A

B

C

• Target emerging markets in Africa and Eastern Europe boasting high growth

• Escape competition and low revenues in Americas

• Bolster fleet with a few large 1000L satellites• Transition to smaller 600S and dual launch satellites• Take advantage of cost-reducing dual launches

• Kickstart cash flows with lowest transponder costs• Keep interest payments under control with 5-10% debt retirement• Focus on raising transponder fill rate

Satalink needs to focus smaller satellites in emerging markets such as the Middle East, Africa, and Asia.

Capture market share quickly with cheap transponders from 1000L, then use 600S to diversify the fleet.

North America

South America

Europe

Middle East

Africa

Asia

Oceania

2018

2020

2022

2024

2026

2028

2030

2032

Esat 1

Aosat 1

Asat 2

Esat 2

Aosat 2Asat 1 Asat 3

Mafsat 1

Aosat 3Asat 4

Esat 3Asat 6 Asat 5

Esat 4

Aosat 4

Aosat 3

1000L

600S

Old

Key

Phase 1

Phase 2

A

B

C






The global market for satellites is growing with an emphasis on emerging markets.

Revenue & Growth Rate by Region Revenue & Growth Rate by Segment

0%

1%

2%

3%

4%

5%

6%

7%

0

1

2

3

4

5

6

Africa/Middle East Americas Asia/Oceania Europe

Satellite market revenue and growth

Satalink Revenue Market size ($B) Growth Rate

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

20

40

60

80

100

120

140

Launch Industry Ground Equipment Satellite Services Satellite Manufacturing

Satellite market by segment

SataLink revenue Revenue by Segment ($B) Growth Rate

• Competition is strong due to high barriers to entry – around 7 companies capture 80% of the market

• The industry is limited by the number of new contracts demanded each year

• Due to large upfront costs, risk assurance plays a large part before contracts can be completed

• Demand for satellite services (TV, radio etc) grew by 4% in 2013

• Developing countries account for 63% of the 3.2 billion internet users

• Oil & Gas needs satellite services due to remote locations – the segment is set to grow by 28% to $460m in 2020.

• Government communications account for 14% global market

The global satellite market is driven mainly by the growing demand of the communications and telecom industries.

Market drivers

• New launch technologies drive down launch costs e.g. Falcon 9 re-usable rocket

• Small satellites increasingly common for earth imaging

• All electric satellites provide more functionality and lower costs

• Satellites designed for dual manifesting supply versatility

Demand Technology RaceSupply

Currently the operation is spread globally with a concentration in the Americas

70

90

70

50

50

70

70

100

90

50

90

80

60

50

Esat

Asat

MAfsat

AOsat

100

Smaller market

Larger market

Our recommendation would have the constellation changed to focus in the Middle East and Africa

1000L

600 SEsat

Asat

MAfsat

AOsat

90

100

70

220

90

100

90

220

220

220

220

7070

Smaller market

Larger market

70

One third of Eastern Europe’s GDP growth can be attributed to ICT from 1995-2007. The commercial sector occupied 46% of transponders in 2013.

Population by Age Internet Penetration Sat. TV Penetration

Technology Hours Per Day

Political Economy Consumer Culture

Communications Players

0-1415%

15-2411%

25-5442%

55-6413%

65+19%

5.8hrs• Strong real incomes• Increasing

employment• Nationalistic

Internet78%

No Internet22%

£ 6.3 billion

£ 7.632 billionSatellite

35%

DTT17%

Cable8%IPTV

6%

None34%

£ 6.3 billion

• Border instability, no overarching body

• Rising exports• High inflation

Sources: ICT, Rand.org

Both Africa and the Middle East have experienced rapid growth in discretionary spending in recent years. TV revenues for one are expected to double in the next ten years.

Population by Age Internet Penetration


Consumer Culture

0-1425%

15-2425%

25-5438%

55-648%

65+4%

4.8hrs• High birth rates• Link for

intercontinental trade

• 85% rural

Internet52%

No Internet48%

Sat. TV Penetration

Political Economy


Satellite13%

DTT0%

Cable24%

IPTV7%

None57%

$ 1.3 billion

$ 2.6 billion

$ .5 billion

• Large defence budgets

• Driven by energy exports

Sources: ICT, Rand.org

Southeast Asia is the epicentre of the developing world and is becoming rapidly more connected.

Population by Age Internet Penetration


Consumer Culture

0-1433%

15-2420%

25-5440%

55-644%

65+3%

7.5hrs• Large working age

population• Recent increase in

social mobility• Mobile platforms key

Internet40%

No Internet60%

Sat. TV Penetration

Political Economy


$2.14 billion.Satellite18%

DTT0%

Cable22%

IPTV25%

None35%

$ 1.9 billion

$ 1.4 billion

• Need for improved infrastructure

• Impending evolution of ASEAN and collaboration

Sources: ICT, Statistica

A

B

C






Transponders by Region

Region

2016 SataLink

Market Share

Market

Growth Rate

Transponder

Demand in Year N

SataLink Market

Share

Americas 11.8% 5.0% 5390 4.8%

Europe 7.7% 4.5% 3140 9.9%

Middle East / Africa 14.6% 6.0% 2295 16.1%

Asia / Oceania 12.2% 5.0% 3404 4.7%

Total 11.4% 14229 7.7%

Even though the 1000L is capital intensive, it gets us the most bang for our buck in the early years.

• Exceptional operating profit of the 1000L offsets its greater financing cost

600s Debt Obligation $ 170 $ 153 $ 138 $ 124 $ 112 $ 100 $ 90 $ 81 $ 73 $ 66

Cash Flow $ 125 $ 127 $ 128 $ 129 $ 130 $ 131 $ 132 $ 133 $ 134 $ 135

NPV (10 years) $ 857

1000L Debt Obligation $ 400 $ 360 $ 324 $ 292 $ 262 $ 236 $ 213 $ 191 $ 172 $ 155

Cash Flow $ 427 $ 431 $ 434 $ 437 $ 439 $ 442 $ 444 $ 446 $ 448 $ 449

NPV (10 years) $ 2890

• Purchasing the 1000L early allows us to capture market share in critical markets early and take advantage of high growth rates while they last


Region

2016 SataLink

Market Share

Market

Growth Rate

Transponder

Demand in Year N

SataLink Market

Share

Americas 11.8% 5.0% 5390 4.8%

Europe 7.7% 4.5% 3140 19.4%

Middle East / Africa 14.6% 6.0% 2295 29.2%

Asia / Oceania 12.2% 5.0% 3404 9.1%

Total 11.4% 14229 13.0%

Market Share in 2023 Using 1000L Market Share in 2023 Using 600S

SataLink’s bulk buy will take place in two main stages, the first focusing on revenue growth/cost efficiency and the second centred on diversification.

Stage One

*Each stage is compared against the opportunity cost of an alternative investment strategy

Unicorn StrategyStatus Quo Strategy

(Asia/America)

Stage Two

Unicorn StrategyStatus Quo Strategy

(Asia/America)

Average Cost Per Transponder

Transponder Fill Rate

Net Cash Flows

Average Revenue Per Transponder

• Larger Sats

$2.4M$1.8M• Smaller Sats

$1.8-2.3M $1.5-1.8M

90% 80%

Regions with ~20%+ Market Share (Power)

2 0 $-

$500

$1000

$1500

$2000

$2500

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Unicorn Status Quo

Our financial strategy is meant to weather worst case macroeconomic conditions.

We have conducted a sensitivity analysis for the following considerations:Tax Rate, Variable Interest Rate, Cost Growth, Cost of Capital, Financing Percentage, Debt Retirement

Main scenario4 600S’s and 5 1000L’s

Satellite Error600S knocked out of fleet

Financing ProblemsHigh Interest Rate, High Debt Retirement

Tax Rate 9%

Debt Interest Rate 9%

Cost Growth .5%

Cost of Capital 8.3%

Financing Percentage 80%

Debt Retirement per year 5-10%

Revenue Growth Rates ~3%

NPV ($MM) 6,808

Tax Rate 9%


Cost Growth 1%

Cost of Capital 12%


Debt Retirement per year 15%

Revenue Growth Rates 0%

NPV ($MM) 5,065

Tax Rate 9%


Cost Growth .5%

Cost of Capital 8.3%


Debt Retirement per year 5-10%

Revenue Growth Rates 1%

NPV ($MM) 6,506

Overall, our main scenario lowers debt obligation from $3.2B at the beginning of the case to only $1.6B by 2028.

A

B

C






Technology trends

Technology Before Now

Reusable rockets

Launch costs very expensive

Launch costs significantly cheaper

• Falcon 9 re-usable rockets

SmallSats Large Smaller and cheaper• Over the past decade, roughly $2.5 billion has

been invested in small satellites

3D printing Labor intensiveManufacture small parts

within days

• Using a rocket consisting of 3D-printed parts, Rocket Lab intends to put small satellites weighing as much as 220 pounds into orbit above the Earth, all for a price of $4.9 million per launch.

Source: State of the Satellite Industry Report

SataLink needs to increase its transponder fill rate in order to capitalize on its transponders and consolidate its fleet.

Our core strategy in emerging markets is to increase video presence and bandwidth. A tiered pricing model and an emphasis on long-term customer relationships will help us integrate vertically within

industries instead of diluting our influence.

Use to increase transponder fill rate

Company

Target Consumers who generate

greatest commercial satellite revenue

New Sales Force

Increase bandwidth to rural, remote and

growing areas

Internet

Integrated tier pricing system for

consumers

Payment

Satellite T.VDemand is bound to

increase as countries grow

GPSProjects

undertaken by Google, Facebook,

Local Governments

Partnerships

Comprises the largest amount of traffic in mobile

channels

Video ServicesPay per year,

set up as a try-before-you-buy

system

Tier 1

Scaled pricing for high volume

customers, long term contracts

Tier 2

Compromises 95% of

Commercial Revenue

SataLink faces several risks following our main scenario

Risk Explanation Impact Risk mitigation

Disruptive technology• Current growth projections are based on historical figures – a disruptive technology can

turn the market on its head

• Active market research team looking for new trends and technology

Production

• There tight time window for orders and launch, causing delayed

• Any production delays will cause significant revenue disruption

• Using best satellite manufacturer (Boeing)• Direct and regular contact with

manufacturer

Finance

• Economic upheaval could lead to lower demand across the board

• Revenue losswould make it tough to finance new satellite purchases as well as maintenance costs

• Insurance for failed orders

New Dual Launch Method May Not Work

• Failed launches could destroy companies image, lose all customers

• Failed launches set back operations schedules significantly

• Continue to send up other satellites using proved launch method to hedge bets

Satellite failure

• Several satellites are successfully launched but never work as expected

• Satellites in GEO can not be adjusted once in orbit

• Have in house engineering team to check on production quality at manufacturer

M

H

M

L

L

Summary

Recommendations, Risks, Timeline

Throughout the next 10 years there are several time critical actions that need to be undertaken

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

1

2

3

Take control of debt payments while purchasing power is limited

Focus launches in North Africa and Eastern Europe

Undertake sales/marketing plan to raise transponder fill rate

Follow trend towards smaller satellites, diversify fleet

Capture market share quickly with cheap transponders from 1000L, then use 600S to diversify the fleet.

North America

South America

Europe

Middle East

Africa

Asia

Oceania

2018

2020

2022

2024

2026

2028

2030

2032

Esat 1

Aosat 1

Asat 2

Esat 2

Aosat 2Asat 1 Asat 3

Mafsat 1

Aosat 3Asat 4

Esat 3Asat 6 Asat 5

Esat 4

Aosat 4

A

B

C






AppendixA. Revenues

B. Costs and Operating Cash Flow

C. Financing Activities

D. Market Data

E. Works Cited

A. SataLink Revenues

SataLink 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

AMERICAS Revenues# of transponders on orbit 430 430 430 430 360 360 240 310 260 260 260 260 260

Transponder fi l l rate 80% 85% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90%

Filled transponders 344 365.5 387 387 324 324 216 279 234 234 234 234 234

Revenue per American transponder $ 1.58 $ 1.58 $ 1.58 $ 1.58 $ 1.63 $ 1.63 $ 1.63 $ 1.63 $ 1.63 $ 1.63 $ 1.68 $ 1.68 $ 1.68

Total Americas Revenues 544$ 577$ 611$ 611$ 527$ 527$ 352$ 454$ 381$ 381$ 392$ 392$ 392$

EUROPE Revenues# of transponders on orbit 170 170 170 170 100 320 540 610 610 610 610 610 610




Total Europe Revenues 299$ 318$ 337$ 337$ 200$ 640$ 1080$ 1220$ 1220$ 1220$ 1232$ 1232$ 1232$

AFRICA/ME Revenues# of transponders on orbit 210 210 210 210 430 580 580 670 670 670 670 670 670




Total Africa/ME Revenues 336$ 357$ 378$ 378$ 782$ 1054$ 1054$ 1218$ 1218$ 1218$ 1230$ 1230$ 1230$

ASIA/OCEANIA Revenues# of transponders on orbit 280 280 280 280 280 220 390 390 310 310 310 310 310


Filled transponders 224 238 252 252 252 198 351 351 279 279 279 279 279


Total Asia/Oceania Revenues 367$ 390$ 413$ 413$ 426$ 334$ 593$ 593$ 471$ 471$ 485$ 485$ 485$

B. Costs and Operating Cash Flow

Operating Expenses# of sats. on orbit 15 15 15 15 14 14 12 11 12 12 12 12 12

Fixed costs $ (600) $ (603) $ (606) $ (609) $ (612) $ (615) $ (618) $ (621) $ (624) $ (628) $ (631) $ (634) $ (637)

Support costs per sat $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10) $ (10)

Sat. support costs $ (151) $ (151) $ (151) $ (151) $ (141) $ (141) $ (121) $ (111) $ (121) $ (121) $ (121) $ (121) $ (121)

Support costs per transponder $ () $ (50,250) $ (50,501) $ (50,754) $ (51,008) $ (51,263) $ (51,519) $ (51,776) $ (52,035) $ (52,296) $ (52,557) $ (52,820) $ (53,084)

Transponder support costs $ (55) $ (55) $ (55) $ (55) $ (60) $ (76) $ (90) $ (103) $ (96) $ (97) $ (97) $ (98) $ (98)

Total Operating Expenses $ (805) $ (809) $ (812) $ (815) $ (812) $ (832) $ (829) $ (834) $ (841) $ (845) $ (849) $ (852) $ (856)

Operating Cash Flow (NET OF TAX) 674$ 759$ 844$ 841$ 1021$ 1569$ 2047$ 2412$ 2228$ 2225$ 2267$ 2264$ 2261$

Assumptions

Cost of Equity 10.0%

Percent of Debt

to Retire 10%

Fixed Cost

Growth Rate

0.5% Proportion of

Equity Funds 20.0%

Support Costs

Growth Rate

0.5% Cost of Debt

(Interest) 9.0%

Interest Rate 9.0% Proportion of

Debt Funds 80.0%

% Payment

Financed

80.0%Tax Rate 9.0%

Cost of

Debt/Equity 0.08372

$-

$500

$1000

$1500

$2000

$2500

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

SataLink Cash Flows

C. Financing Activities

Capital ExpedituresNew Payments due to SC/LV Suppliers -$ -$ -$ -$ 100$ 200$ 200$ 155$ -$ -$ -$ -$ -$

Total Payments due to SC/LV Suppliers -$ 100$ 300$ 500$ 655$ 555$ 355$ 155$ -$ -$ -$ -$ -$

% of payment financed 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%

Payment financed -$ 80$ 240$ 400$ 524$ 444$ 284$ 124$ -$ -$ -$ -$ -$

Paid with equity -$ 20$ 60$ 100$ 131$ 111$ 71$ 31$ -$ -$ -$ -$ -$

Interest ExpedituresOld debt 3250$ 2925$ 2705$ 2650$ 2745$ 2942$ 3048$ 2998$ 2810$ 2529$ 2276$ 2049$ 1844$

Additional debt -$ 80$ 240$ 400$ 524$ 444$ 284$ 124$ -$ -$ -$ -$ -$

Total debt before principle payments 3250$ 3005$ 2945$ 3050$ 3269$ 3386$ 3332$ 3122$ 2810$ 2529$ 2276$ 2049$ 1844$

Interest % 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9%

Total Interest Expense (NET OF TAX) $ (266) $ (246) $ (241) $ (250) $ (268) $ (277) $ (273) $ (256) $ (230) $ (207) $ (186) $ (168) $ (151)

Net Cash Flow 408$ 493$ 543$ 491$ 622$ 1181$ 1703$ 2125$ 1998$ 2018$ 2081$ 2096$ 2110$

DebtDebt retired on Dec. 31 (Entered as a positive #) 325$ 301$ 294$ 305$ 327$ 339$ 333$ 312$ 281$ 253$ 228$ 205$ 184$

Total debt carried forward 2925$ 2705$ 2650$ 2745$ 2942$ 3048$ 2998$ 2810$ 2529$ 2276$ 2049$ 1844$ 1659$

Cash Flow After Debt Retirment 83$ 193$ 248$ 186$ 296$ 842$ 1370$ 1813$ 1717$ 1765$ 1853$ 1891$ 1925$

$-

$500

$1000

$1500

$2000

$2500

$3000

$3500

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Total Debt Carried Forward by Year

D. Market Data

Satellite RevenuesRegion Avg Revenue 2016-2020 Revenue Growth Rate I Avg Revenue 2021-2025 Revenue Growth Rate II Avg Revenue

Americas $ 1.58 3% $ 1.63 3% $ 1.68

Europe $ 2.20 1% $ 2.22 1% $ 2.24

Africa/ME $ 2.00 1% $ 2.02 1% $ 2.04

Asia/Oceania $ 1.64 3% $ 1.69 3% $ 1.74


Region

2016 SataLink

Market Share

Market

Growth Rate

Transponder

Demand in Year N

SataLink Market

Share

Market Share

Capture Rate

Americas 11.8% 5.0% 5390 4.8% 15%

Europe 7.7% 4.5% 3140 9.9% 33%

Middle East / Africa 14.6% 6.0% 2295 16.1% 43%

Asia / Oceania 12.2% 5.0% 3404 4.7% 15%

Total 11.4% 14229 7.7% 24%

New markets from economic growth

E. Works Cited

• Rand.org• International Telecommunication Union• State of the Satellite Industry Report• Frost and Sullivan• Offshore Mag• Statistica• Satellite Markets

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