Viasat, Inc. (VSAT - Free Report) recently annulled its deal with Eutelsat Communications relating to the use of the ViaSat-3 satellite as the latter has decided to pursue a local market alternative. The Viasat and Eutelsat joint venture, which is operational for more than a year, will continue to be governed under the existing agreements. The company remains committed about its ViaSat-3 program for Europe, Middle East and Africa (EMEA), which is well underway and on track.
Once launched, the ViaSat-3 is expected to be the world’s highest capacity communications satellite system. The company believes that there is a significant interest in the ViaSat-3 program from prospective regional partners.
The ViaSat-3 satellite for EMEA is expected to serve more than 1 Terabit per second of total network capacity to meet the growing broadband needs of residential, commercial aviation, maritime, enterprise and government sectors.
Also, Viasat's capital plan is not dependent on Eutelsat's participation for proceeding with the ViaSat-3 program since there was no binding agreement with the latter for the satellite. The company confirmed that Eutelsat's ViaSat-3 decision has no direct impact on the existing contracts.
Viasat and Eutelsat closed a broadband joint venture in March 2017, which gave the former joint ownership of the KA-SAT satellite. The joint venture enabled Viasat to create new consumer retail services in Europe. It is currently in an early stage of operation and focuses on bringing enhanced broadband internet service plans to selected European countries.
The ViaSat-3 platform will help to form a global broadband network with sufficient network capacity to allow better consumer choices with an affordable, high-quality, high-speed internet and video streaming service. On the other hand, Viasat's joint ownership of the KA-SAT satellite will continue to serve Viasat's commercial aviation and government customers including direct-to-home residential subscribers across Europe.
ViaSat maintains a leading position in the satellite and wireless communications market. With rapid proliferation of the smartphone market and subsequent usage of mobile broadband, the user demand for coverage speed and quality has increased, fueling the demand for network tuning and optimization to maintain high data traffic. ViaSat continues to attract millions of unserved and under-served U.S. consumers and enterprises with its high-quality broadband service.
Over the last six months, shares of Viasat have underperformed the industry with an average loss of 2.8% against growth of 1.9% for the latter.
ViaSat 3 satellites are expected to provide ViaSat with a solid competitive edge over its peers, bolstering growth in the long run. Moving ahead, the company is eyeing opportunities to extend broadband satellite mobility to rotary wing aircraft, as it is a large addressable market that can emerge as a key profit churner.
Viasat carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the industry are Comtech Telecommunications Corp. (CMTL - Free Report) , BlackBerry Limited (BB - Free Report) and Orange S.A. (ORAN - Free Report) . While Comtech Telecommunications sports a Zacks Rank #1 (Strong Buy), BlackBerry and Orange carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comtech Telecommunications has an expected long-term earnings growth rate of 5%. It exceeded earnings estimates in each of the trailing four quarters, with an average of 111.4%.
BlackBerry has an expected long-term earnings growth rate of 18.6%. It exceeded earnings estimates twice in the trailing four quarters, with an average of 500%.
Orange has an expected long-term earnings growth rate of 25.9%.
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