David Fawcett - LinkedinHere's the intro.
Why We’re Watching Telesat
Telesat (TSAT) is a satellite communications company operating through 2 business divisions: its established Geostationary Orbit (GEO) satellite services, and its emerging Low Earth Orbit (LEO) segment.
There are 3 intriguing aspects to the Telesat story that we wanted to highlight — this isn’t a comprehensive investment thesis. First, the potential upside to the stock is substantial if management executes on its LEO business plan. Second, investors should understand that the new LEO venture is, according to management, ring-fenced from the creditors of the legacy GEO business. And third, there are increasingly encouraging signs that Telesat can win its targeted share of the TAM.
1. The Upside Is Considerable
Let’s start with simple math. Telesat’s shares currently trade around US$16.50. Management has guided to $2.7 billion in EBITDA by 2032 once its Lightspeed constellation is fully deployed. If we apply a 10x multiple, that implies a valuation near $500 per share. Not our target, just math. We assign zero equity value to their declining GEO satellite business, which brings us to the second key point.
2. Is the LEO Business Truly Separate from the GEO Creditors?
On the surface, Telesat’s consolidated financials are troubling: declining revenues and ~$3 billion in debt, which trades at less than 0.50 cents on the dollar. But that may not be the full story.
According to management, the Lightspeed LEO business is ring-fenced and separate from the legacy GEO entity, which is structured as a restricted subsidiary. If accurate, this would significantly alter the investment risk profile. It implies that creditors have recourse only to the deteriorating GEO assets, while the LEO business—funded with $1.6 billion in equity, $1.9 billion in government funding, plus additional vendor support—is protected and self-sufficient with $3.8 billion allocated to fully deploy the new 156-satellite constellation.
This is a critical assumption underpinning the thesis. While we believe it to be true, we encourage all investors to conduct their own due diligence here. Management is currently planning to negotiate with bondholders this year to resolve the debt maturity in 2026 and 2027.
3. Can TSAT Realistically Hit Its 2032 Financial Targets?
Even if Lightspeed is structurally separate, we still need to assess whether the LEO business can meet its financial targets.
TSAT faces intense competition from Starlink and Amazon’s Kuiper, but our market analysis (PDF) shows Telesat has a credible path forward. Its B2B-only model contrasts with the B2C focus of its rivals, enabling partnerships with GEO operators and telcos that see Starlink as a threat. Growing government demand for sovereign-aligned, non-U.S. infrastructure—especially in defense—also supports a multi-provider environment where Telesat can play a key role.
This is a situation worth watching closely. For those willing to do the work, the potential reward may be significant.
Another 7 pages on line.