Annual Report (10-k)

Date : 02/20/2020 @ 10:29PM
Source : Edgar (US Regulatory)
Stock : Intelsat SA (I)
Quote : 1.05  -0.04 (-3.67%) @ 9:15PM
After Hours
Last Trade
Last $ 1.08 ▲ 0.03 (2.86%)

Annual Report (10-k)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-35878
INTELSAT S.A.
(Exact name of registrant as specified in its charter) 
Grand Duchy of Luxembourg
 
 
98-1009418
 
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
4 rue Albert Borschette
L-1246
Luxembourg
+352
27 84
1600
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Shares, nominal value $0.01 per share
I
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes     No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes      No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated Filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
As of June 30, 2019, the aggregate market value of the registrant’s common shares held by non-affiliates of the registrant was approximately $1.6 billion.
As of February 18, 2020, 141,164,372 common shares, with a nominal value of $0.01 per share, were outstanding.
Documents incorporated by reference: Specified portions of the registrant’s proxy statement with respect to the registrant’s 2020 Annual Meeting of Shareholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2019, are incorporated by reference into Part III of this Annual Report on Form 10-K.






TABLE OF CONTENTS
 
 
Page
 
 
 
3
 
 
 
 
 
Item 1
5
Item 1A
28
Item 1B
39
Item 2
39
Item 3
40
Item 4
40
 
 
 
 
 
Item 5
41
Item 6
42
Item 7
45
Item 7A
63
Item 8
64
Item 9
112
Item 9A
112
Item 9B
112
 
 
 
 
 
Item 10
113
Item 11
113
Item 12
113
Item 13
113
Item 14
113
 
 
 
 
 
Item 15
114
 
114
Item 16
121
 
122

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FORWARD-LOOKING STATEMENTS
Some of the statements in this Annual Report on Form 10-K, or Annual Report, and oral statements made from time to time by our representatives constitute forward-looking statements that do not directly or exclusively relate to historical facts. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements as long as they are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements.
When used in this Annual Report, the words “may,” “will,” “ might,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “intend,” “potential,” “outlook” and “continue,” and the negative of these terms, and other similar expressions are intended to identify forward-looking statements and information. Examples of these forward-looking statements include, but are not limited to, statements regarding the following: our belief that the growing worldwide demand for reliable broadband connectivity everywhere at all times, together with our leadership position in our attractive sector, global scale, efficient operating and financial profile, diversified customer sets and sizeable contracted backlog, provide us with a platform for long-term success; our belief that the new and differentiated capacity of our next generation Intelsat Epic satellites will provide inventory to help offset recent trends of pricing pressure, new capacity from other satellite operators, and improved access to fiber links in our network services business; our outlook that the increased volume of services provided by our Intelsat Epic fleet is expected to stabilize the level of business activity in the network services sector; our expectation that over time incremental demand for capacity to support the new 4K format, also known as ultra-high definition, could offset some of the reductions in demand related to use of new compression technologies in our media business; our expectation that our new services and technologies will open new sectors that are much larger and faster growing than those we support today; our belief that selectively investing, employing a disciplined yield management approach, and emphasizing the development of strong distribution channels for our four primary customer sets will drive stability in our core business; our expectation that developing and scaling our differentiated managed service offerings in targeted verticals, leveraging the global footprint, higher performance and better economics of our Intelsat Epic fleet, in addition to the flexibility of our innovative terrestrial network, will drive revenue growth; our belief that completing targeted investments and partnerships in differentiated space and ground infrastructure will provide a seamless interface with the broader telecommunications ecosystem; our ability to incorporate new technologies into our network that could change the types of applications we can serve and increase our share of the global demand for broadband connectivity; our projection that our government business will benefit from the increasing demands for mobility services from the U.S. government for aeronautical and ground mobile requirements; our intention to maximize the value of our spectrum rights; our expectations as to the timing and content of a final FCC ruling with respect to the C-band proceeding; our expectations as to the timing of any related auction and our receipt of proceeds in connection with any such auction; our belief that developing differentiated services and investing in related software- and standards-based technology will allow us to unlock opportunities that are essential to providing global broadband connectivity; the trends that we believe will impact our revenue and operating expenses in the future; our assessments regarding how long satellites that have experienced anomalies in the past should be able to provide service on their transponders; our belief as to the likelihood of the cause of the failure of Intelsat 29e occurring on our other satellites; our assessment of the risks of future anomalies occurring on our satellites; our plans for satellite launches in the near-term; our expected capital expenditures in 2020 and during the next several years; our belief that the diversity of our revenue allows us to benefit from changing market conditions and lowers our risk from revenue fluctuations in our service applications and geographic regions; our belief that the scale of our fleet can reduce the financial impact of any satellite anomalies or launch failures and protect against service interruptions; and the impact on our financial position or results of operations of pending legal proceedings.
Forward-looking statements reflect our intentions, plans, expectations, anticipations, projections, estimations, predictions, outlook, assumptions and beliefs about future events. These forward-looking statements speak only as of their dates and are not guarantees of future performance or results and are subject to risks, uncertainties and other factors, many of which are outside of our control. These factors could cause actual results or developments to differ materially from the expectations expressed or implied in the forward-looking statements and include known and unknown risks. Known risks include, among others, the risks discussed in Item 1A—Risk Factors, the political, economic, regulatory and legal conditions in the markets we are targeting for communications services or in which we operate and other risks and uncertainties inherent in the telecommunications business in general and the satellite communications business in particular.
Other factors that may cause results or developments to differ materially from historical results or developments or the forward-looking statements made in this Annual Report include, but are not limited to:
 
risks associated with operating our in-orbit satellites;
satellite launch failures, satellite launch and construction delays and in-orbit failures or reduced satellite performance;

3





potential changes in the number of companies offering commercial satellite launch services and the number of commercial satellite launch opportunities available in any given time period that could impact our ability to timely schedule future launches and the prices we pay for such launches;
our ability to obtain new satellite insurance policies with financially viable insurance carriers on commercially reasonable terms or at all, as well as the ability of our insurance carriers to fulfill their obligations;
possible future losses on satellites that are not adequately covered by insurance;
U.S. and other government regulation;
changes in our contracted backlog or expected contracted backlog for future services;
pricing pressure and overcapacity in the markets in which we compete;
our ability to access capital markets for debt or equity;
the competitive environment in which we operate;
customer defaults on their obligations to us;
our international operations and other uncertainties associated with doing business internationally;
litigation; and
other risks discussed under Item 1A—Risk Factors.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, performance or achievements. Because actual results could differ materially from our intentions, plans, expectations, anticipations, projections, estimations, predictions, outlook, assumptions and beliefs about the future, you are urged not to rely on forward-looking statements in this Annual Report and to view all forward-looking statements made in this Annual Report with caution. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

INDUSTRY AND MARKET DATA
This Annual Report includes information with respect to regional and sector share and industry conditions from third-party sources, public filings and based upon our estimates using such sources when available. While we believe that such information and estimates are reasonable and reliable, we have not independently verified the data from third-party sources, including Euroconsult Satellite Connectivity and Video Markets Survey (September 2019), NSR Government & Military Satellite Communications, 16th Edition (November 2019), Seradata Spacetrak, NSR Global Satellite Capacity Supply and Demand Study, 16th Edition (June 2019), Euroconsult FSS Operators: Benchmarks & Performance Review, 11th Edition (November 2019), GSMA The Mobile Economy 2019, World Bank Group, NSR Wireless Backhaul via Satellite, 12th Edition (April 2019), Euroconsult Prospects for In-Flight Entertainment and Connectivity, 7th Edition (September 2019), Prospects for Maritime Satellite Communications, 7th Edition (June 2019), Cruise Market Watch, NSR VSAT and Broadband Satellite Markets, 18th Edition (November 2019), NSR M2M and IoT via Satellite, 9th Edition (September 2018), NSR Aero Satcom Markets, 6th Edition (June 2018), and NSR Maritime SATCOM Markets, 7th Edition (May 2019). Unless otherwise specified, all references contained in this Annual Report to these third-party sources are as of the dates of these sources stated above. Similarly, our internal research is based upon our understanding of industry conditions, and such information has not been verified by independent sources. Specifically, when we refer to the relative size, regions served, number of customers contracted, experience and financial performance of our business as compared to other companies in our sector, our assertions are based upon public filings of other operators and comparisons provided by third-party sources, as outlined above.
Throughout this Annual Report, unless otherwise indicated, references to market positions are based on third-party market research. If a regional position or statement as to industry conditions is based on internal research, it is identified as management’s belief. Throughout this Annual Report, unless otherwise indicated, statements as to our relative positions as a provider of services to customers and regions are based upon our relative share. For additional information regarding our regional share with respect to our customer sets, services and regions, and the bases upon which we determine our share, see Item 1—Business.

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PART I
Item 1.
Business
Key Information
In this Annual Report unless otherwise indicated or the context otherwise requires, (1) the terms “we,” “us,” “our,” “the Company” and “Intelsat” refer to Intelsat S.A., and its subsidiaries on a consolidated basis, (2) the term “Intelsat Holdings” refers to our indirect subsidiary, Intelsat Holdings S.A., (3) the term “Intelsat Investments” refers to Intelsat Investments S.A., Intelsat Holdings’ direct wholly-owned subsidiary, (4) the term “Intelsat Luxembourg” refers to Intelsat (Luxembourg) S.A., Intelsat Investments’ direct wholly-owned subsidiary, (5) the term "Intelsat Envision" refers to Intelsat Envision Holdings LLC, Intelsat Luxembourg's direct wholly-owned subsidiary, (6) the terms “Intelsat Connect” and “ICF” refer to Intelsat Connect Finance S.A., Intelsat Envision’s direct wholly-owned subsidiary, (7) the term “Intelsat Jackson” refers to Intelsat Jackson Holdings S.A., Intelsat Connect’s direct wholly-owned subsidiary, and (8) the term “Intelsat” refers to specific Intelsat-satellites. We refer to Intelsat General Communications LLC, one of our subsidiaries, as “Intelsat General.” In this Annual Report, unless the context otherwise requires, all references to transponder capacity or demand refer to transponder capacity or demand in the C-band and Ku-band only.
Business Overview
Overview
We operate one of the world’s largest satellite services businesses, providing a critical layer in the global communications infrastructure.
As the foundational architects of satellite technology, Intelsat operates the largest, most advanced satellite fleet and connectivity infrastructure in the world. We apply our unparalleled expertise and global scale to reliably and seamlessly connect people, devices and networks in even the most challenging and remote locations. We provide diversified communications services to the world’s leading media companies, fixed and wireless telecommunications operators, data networking service providers for enterprise and mobile applications in the air and on the seas, multinational corporations and Internet Service Providers (“ISPs”). We are also the leading provider of commercial satellite communication services to the U.S. government and other select military organizations and their contractors. Our network solutions are a critical component of our customers’ infrastructures and business models. Generally, our customers need the specialized connectivity that satellites provide so long as they are in business or pursuing their mission. In recent years, mobility services providers have contracted for services on our fleet that support broadband connections for passengers on commercial flights, cruise ships and commercial shipping, connectivity that in some cases is only available through our network. In addition, our satellite neighborhoods provide our media customers with efficient and reliable broadcast distribution that maximizes audience reach, a technical and economic benefit that is difficult for terrestrial services to match. In developing regions, our satellite solutions often provide higher reliability than is available from local terrestrial telecommunications services and allow our wireless and enterprise customers to reach geographies that they would otherwise be unable to serve.
In the future, we expect our network to be an integral part of machine-to-machine networks, especially those requiring massive software updates best delivered via broadcast, such as networks connecting cars and other vehicles. As we invest in new constellations, such as our Intelsat Epic high-throughput satellite ("HTS") platform, partner on new earth observation technology, and invest in new ground technologies, such as electronic antennas and standards-based modems, we are creating a portfolio of solutions that will be interoperable with other telecommunications technologies and seamlessly integrated with other telecommunications solutions to address the immense connectivity requirements of a fully-connected and converged landscape.
We hold the largest collection of rights to well-placed orbital slots in the most valuable C- and Ku-band spectrums. From these locations, our satellites offer services in the established regions historically using the most satellite capacity, as well as the higher growth oceanic regions, supporting mobility services, and emerging regions, where approximately 73% of our capacity is currently focused.
We believe our global scale, high-performing network, leadership position and valuable customer relationships enable us to benefit from growing demand for reliable broadband connectivity, resulting from trends such as:
 

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Global distribution of television entertainment and news programming to fixed and mobile devices;
Completion and extension of international, national and regional data networks, fixed and wireless, notably in emerging and developed regions, and the upgrade of those networks to 3G/4G/5G as content is increasingly consumed on mobile devices;
Universal access to broadband connectivity through fixed and mobile networks for consumers, corporations, government and other organizations;
Increasing deployment of in-flight and on-board broadband access for consumer and business applications in the commercial, business aviation and maritime sectors;
Requirements for cost-efficient space-based network solutions for fixed and mobile government and military applications; and
Global demand for services which enable connected devices, such as machine-to-machine communications and the Internet of Things (“IoT”), particularly with respect to connected car applications.
We believe that we have the largest, most reliable and most technologically advanced commercial communications network in the world. Our global communications system featured a fleet of 54 geosynchronous satellites as of December 31, 2019, covering more than 99% of the world’s populated regions. Our satellites primarily provide services in the C- and Ku-band frequencies, which form the largest part of the fixed satellite services ("FSS") sector.
Our next generation fleet of five HTS, known as Intelsat Epic, is designed specifically to reduce cost of service by optimizing performance and efficiency to the user. With Intelsat Epic, we are offering our commercial customers broadband services that allow them to innovate, in turn transforming their businesses and expanding the territories and applications that they can profitably serve. Our new Intelsat Epic fleet is designed to commercial-grade standards. This allows us to offer committed information rates for our service provider customers, as compared to satellite networks designed primarily to provide consumer “best effort”-grade services.
Our satellite capacity is complemented by our IntelsatOne terrestrial network and a growing suite of managed services optimized to the requirements of attractive vertical applications, including the enterprise, maritime and commercial and government aeronautical sectors. Recently we introduced fully-managed services under the Intelsat Flex brand for enterprise and commercial and government mobility applications. We also introduced Mobile Reach managed services for the telecommunications sector. Our managed services combine satellite services with network management, access to our terrestrial network comprised of leased fiber optic cable, access to Internet points of presence (“PoPs”), as well as multiplexed video and data platforms. Our satellite-based networking solutions offer distinct technical and economic benefits to our target customers and provide a number of advantages over terrestrial communications systems, including the following:
 
Fast, scalable, secure and high-performance infrastructure deployments;
Superior end-to-end network availability as compared to the availability of terrestrial networks, due to fewer potential points of failure;
Highly reliable bandwidth and consistent application performance, as satellite beams effectively blanket service regions;
Ability to extend beyond terrestrial network end points or to provide an alternative path to terrestrial infrastructure;
Efficient content distribution through the ability to broadcast high quality signals from a single location to many locations simultaneously;
Maximizing potential distribution of television programming, video neighborhoods, or capacity at orbital locations with a large number of consumer dishes or cable headend dishes pointed to them; and
Rapidly deployable communications infrastructure for disaster recovery.
We believe that our hybrid satellite-terrestrial network, combined with the world’s largest collection of FSS spectrum rights, is a unique and valuable asset.
Our network architecture is flexible and, coupled with our global scale, provides strong capital and operating efficiency. In certain circumstances we are able to re-deploy capacity, moving satellites or repositioning beams to capture demand. In early 2019, the final first generation HTS, Horizons 3e, was placed into service. Our technology has utility across a number of requirements with minimal customization to address diverse applications.

We have a reputation for operational and engineering excellence, built on our experience of over 50 years in the communications sector. Our network delivered 99.999% network availability to our customers on our operational satellites in 2019. We operate our global network from a fully-integrated, centralized satellite operations facility, with regional sales and marketing offices located close to our customers. The operational flexibility of our network is an important element of our differentiation and our ability to grow.

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As of December 31, 2019, our contracted backlog, which is our expected future revenue under existing customer contracts, was approximately $7.0 billion, roughly three and a half times our 2019 annual revenue. For the year ended December 31, 2019, we generated revenue of $2.1 billion and net loss attributable to Intelsat S.A. of $913.6 million. Our Adjusted EBITDA, which consists of EBITDA as adjusted to exclude or include certain unusual items, certain other operating expense items and certain other adjustments, was $1.5 billion, or 72% of revenue, for the year ended December 31, 2019.
In 2019, our financial results reflected the loss of our Intelsat 29e satellite in April 2019, as well as lower volume of services due to non-renewals of certain contracts. The effect of lower prices in 2019 was muted as compared to prior years. Overall, we believe we benefit from a number of characteristics that allow us to effectively manage our business despite these competitive and geo-economic pressures:
 
Significant long-term contracted backlog, providing a foundation for predictable revenue streams;
Entry into service of our next generation Intelsat Epic platform that was designed to support new services representing $4.4 billion of potential incremental growth by 2024 from expanded enterprise, wireless infrastructure, mobility, IoT and government applications;
High operating leverage, which has allowed us to generate an average Adjusted EBITDA margin of 76% in the past three years; and
A stable, efficient and sustainable tax profile for our global business.
We believe that our leadership position in our attractive sector, global scale, efficient operating and financial profile, diversified customer sets and sizeable contracted backlog, together with the growing worldwide demand for reliable broadband connectivity everywhere at all times, provide us with a platform for long-term success.
Our Sector
Satellite services are an integral and growing part of the global communications infrastructure. Through unique capabilities, such as the ability to effectively blanket service regions, to offer point-to-multipoint distribution and to provide a flexible architecture, satellite services complement, and for certain applications are preferable to, terrestrial telecommunications services, including fiber and wireless technologies. The FSS sector, excluding all consumer broadband, is expected to generate revenues of approximately $11.7 billion in 2020, and transponder service revenue is expected to grow by a compound annual growth rate (“CAGR”) of 2.7% from 2019 to 2024 according to a study issued in 2019 by Northern Sky Research ("NSR"), a leading international market research and consulting firm specializing in satellite and wireless technology and applications.
In recent years, the addressable market for FSS has expanded to include mobile applications because of satellite’s ability to provide the broadband access required by high bandwidth mobile platforms, such as for consumer broadband services on commercial ships and aircraft, as well as military mobility applications, including unmanned aerial vehicles.
Satellite services provide secure bandwidth capacity ideal for global in-theater communications since military operations often occur in locations without reliable communications infrastructure. According to a study by NSR, global revenue from FSS used for government and military applications is expected to grow at a CAGR of 6.7% from 2019 to 2024.
Our sector is noted for having favorable operating characteristics, including long-term contracts, high renewal rates and strong cash flows. The fundamentals of the sector are attractive, given the global need for connectivity everywhere and explosion of global content. The expected growth in demand for satellite-based solutions, combined with the high operating margins which are characteristic of the sector, provides a resilient business model.
There is a finite number of geostationary orbital slots in which FSS satellites can be located, and many orbital locations are already occupied by operational satellites pursuant to complex regulatory processes involving many international and national governmental bodies. These satellites typically are operated under coordination agreements designed to avoid interference with other operators’ satellites. See—Regulation below for a more detailed discussion of regulatory processes relating to the operation of satellites.

A resurgence of interest in low earth orbit ("LEO") and mid-earth orbit constellations is resulting in the potential for new satellite-based solutions that will complement and, in some cases, compete with our services. We believe that the ability of our geostationary orbit ("GEO") satellites to offer highly efficient point-to-multipoint services, and to concentrate throughput over areas of highest demand, provides us with competitive benefits that will be sustained even as new services come to market.
Today, there are only four FSS operators, including us, providing global services, which is important as multinationals and governments seek a one-stop solution for obtaining global connectivity. In addition, there are a number of operators with

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fewer satellites that provide regional and/or national services. We currently hold the largest number of rights to orbital slots in the most valuable C- and Ku-band spectrums.
We believe a number of fundamental trends in our sector are creating increasing demand for satellite services:
 
Connectivity and broadband access are essential elements of infrastructure supporting the rapid economic growth of developing nations. Globally dispersed organizations and regional businesses often turn to satellite-based infrastructure to provide better access, reliability and control of broadband services. Penetration of broadband connectivity in less developed regions has been growing rapidly and is expected to continue. Over the past 10 years, broadband penetration, including satellite connectivity, in the East Asia & Pacific Ocean regions grew at a 13% CAGR, in the Latin America & Caribbean region at a 11% CAGR, in the Middle East & North Africa regions at a 21% CAGR, and in Sub-Saharan Africa at a 18% CAGR according to the World Bank.
Wireless infrastructure in the global race to 5G represents a potentially generational opportunity for satellite technology. Wireless telecommunications companies often use satellite-based solutions to extend networks into areas where geographic or low population density makes it economically unfeasible to deploy other technology. Further deployments of wireless telecom infrastructure and the migration from 2G to 3G, 4G and 5G networks, which adds content and data to basic voice communications, create demand for satellite bandwidth. We believe that the emergence of 5G networks will result in a new growth vector for satellite connectivity. Satellite technology is uniquely responsive to the 5G requirement of ubiquitous coverage and fast deployments. We believe satellite systems will complement terrestrial networks and enable reliable and consistent global 5G user experience in a cost-effective manner. In 2018, 3GPP, the telecommunications standard development organization, approved work item studies to incorporate satellite systems in 5G standards to demonstrate key satellites attributes, including broadcasting, multicasting, and ubiquity and global mobile connectivity. According to the Global System for Mobile Communications Association, 4G & 5G mobile connections are expected to increase from 43% to 74% of total connections for the period from 2018 to 2025.
Mobility applications, such as maritime communications and aeronautical broadband services for commercial and government applications, are fueling demand for mobile connectivity. Commercial applications, such as broadband services for consumer air flights and cruise ships, as well as broadband requirements from the maritime commercial shipping and oil and gas sectors, provide increased demand for satellite-based services. The increasing demand for global broadband connectivity on commercial airlines is a key driver of satellite connectivity and services. 80% of North American aircraft provide in-flight entertainment and Wi-Fi services, while about 17% of European, African, Asian-Pacific and South American aircraft were connected in 2019, according to Valour Consultancy and Boeing. Global satellite services revenue related to demand for broadband mobility applications from land, aeronautical and maritime is expected to grow at a CAGR of 13% for the period from 2019 to 2024, according to NSR.
Globalization of economic activities is increasing the geographic expansion of corporations and the communications networks that support them, while creating new audiences for content. Globalization also increases the communications requirements for governments supporting embassy and military applications.
The emergence of new content consumers resulting from economic growth in developing regions leads to increased demand for free-to-air and pay-TV content. According to NSR, the highest expected growth in television channels is from developing regions, including Latin America at a CAGR of 1.8%, the Middle East and North Africa at 2.7%, Sub-Saharan Africa at 4.1%, and Asia-Pacific at 2.3% for the period from 2019 to 2024, respectively.
Proliferation of formats and new sources of entertainment content result in increased bandwidth requirements, as content owners seek to maximize distribution to multiple viewing audiences across multiple technologies. HDTV, the introduction of ultra-high definition (“UHD”) television, internet distribution of traditional television programming known as “Over the Top” or “OTT”, and video to mobile devices are all examples of the expanding format and distribution requirements of media programmers, the implementation of which varies greatly from developed to emerging regions. In its 2019 study, NSR forecasted that the aggregate number of standard definition (“SD”), high definition (“HD”), and UHD television channels distributed worldwide for cable, broadcast and direct-to-home ("DTH") is expected to grow at a CAGR of 2% for the period from 2019 to 2024.
Connected Devices and vehicles, such as those contemplated by machine-to-machine communications, the IoT and other future technology trends, will require ubiquitous coverage that might be best provided by satellite technology for certain applications in certain regions, and also for applications where ubiquitous, global access is required, such as enabling software downloads for connected cars marketed by the automotive sector or for the operations of connected vehicles, such as in agriculture applications. This represents an important potential source of longer-term demand.

In total, GEO FSS transponder service revenue (excluding consumer broadband) is expected to grow at a CAGR of 2.7% for the period from 2019 to 2024, according to NSR.

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Our Customer Sets and Growing Applications
We focus on business-to-business services that indirectly enable enterprise, government and consumer applications through our customers. Our customer contracts offer four different service types: transponder services, managed services, channel services and mobile satellite services and other. See Item 7—Management's Discussion and Analysis—Revenue for further discussion of our service types. Characteristics of our customer sets are summarized below:
 
Customer Set
 
Representative Customers
 
Year
 
Annual
Revenue
(1) (2)
 
% of 2019
Total
Revenue
(2)
 
% of 2019
Total
Backlog
(1) (2)
 
Backlog to
2019
Revenue
Multiple
Media
 
AT&T, MultiChoice, The Walt Disney Company, Discovery Communications, Telefonica, Sentech, Corporacion de Radio Television del Norte
 
2017
 
$
910

 
 
 
 
 
 
2018(3)
 
$
938

 
 
 
 
 
 
2019
 
$
883

 
43
%
 
61
%
 
4.8x
Network Services
 
Marlink, KVH Industries, Speedcast, Global Eagle, Gogo, Verizon, SoftBank, Orange, Telecom Italia, Ministry of Transport and Communications of Myanmar
 
2017
 
$
852

 
 
 
 
 
 
2018(4)
 
$
798

 
 
 
 
 
 
2019
 
$
770

 
37
%
 
25
%
 
2.3x
Government
 
Australian Defence Force, U.S. Department of Defense, U.S. Department of State, Leonardo
 
2017
 
$
353

 
 
 
 
 
 
2018(5)
 
$
392

 
 
 
 
 
 
2019
 
$
378

 
18
%
 
11
%
 
2.0x
 
(1)
Dollars in millions; backlog as of December 31, 2019.
(2)
Does not include satellite-related services and other.
(3)
Includes $67 million of ASC 606 adjustments.
(4)
Includes $3 million of ASC 606 adjustments.
(5)
Includes $33 million of ASC 606 adjustments.
We provide satellite capacity and related communications services for the transmission of video, data and voice signals. Our customer contracts cover on- and off-network capacity with primarily three different service types:
On-Network:
 
Transponder services
Managed services
Off-Network:
 
Transponder services
Mobile satellite services and other
We also perform satellite-related consulting services and technical services for various third parties, such as operating satellites for other satellite owners. We no longer proactively market a fourth service, known as channel services, although we still earn modest revenues from this type of on-network service.
Media
Media customers are our largest customer set and accounted for 43% of our revenue for the year ended December 31, 2019 and $4.3 billion of our contracted backlog as of December 31, 2019. Our business generated from the media sector is generally characterized by non-cancellable, long-term contracts with terms of up to 15 years with premier customers, including national and global broadcasters, content providers and distributors, television programmers and DTH platform operators.
We are the world’s largest provider of satellite capacity for media services, according to Euroconsult, with a 19% global share. We have delivered television programming to the world since the launch of our first satellite, Early Bird, in 1965. We provide satellite capacity for the transmission of entertainment, news, sports and educational programming for over 300 broadcasters, content providers and DTH platform operators worldwide. We have well-established relationships with our media customers, and in some cases, have distributed their content on our satellites for over 30 years.

Broadcasters, content providers and television programmers seek efficient distribution of their content to make it easily obtainable by affiliates, cable operators and DTH platforms; satellites’ point-to-multipoint capability is difficult to replicate via terrestrial alternatives. Our strong cable distribution neighborhoods offer media customers high penetration of regional and national audiences.

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Broadcasters, content providers and television programmers also select us because our global capabilities enable the distribution or retrieval of content to or from virtually any point on earth. For instance, we regularly provide fully integrated global distribution networks for content providers that need to distribute their products across multiple continents. DTH platform operators use our services because of our attractive orbital locations and because the scale and flexibility of our fleet can improve speed to market and lower their operating risk, as we have multiple satellites serving every region.
We believe that we enjoy a strong reputation for delivering the high network reliability required to serve the demanding media sector. As our media customers add additional distribution platforms and adopt new business models, such as OTT internet-delivered content, our goal is to deliver value beyond our cost-efficient linear distribution solutions to include cloud-based services that streamline multi-format content delivery.
Our fully integrated satellite, fiber and teleport facilities provide enhanced quality control for programmers. In addition to basic satellite services, we offer bundled, value-added services under our IntelsatOne brand that include managed fiber services, digital encoding of video channels and up-linking and down-linking services to and from our satellites and teleport facilities. Our IntelsatOne bundled services address programmers’ interests in delivering content to multiple distribution channels, such as television and Internet, and their needs for launching programs to new regions in a cost-efficient manner.
Highlights of our media business include the following:
 
Our fleet hosts 34 premium video neighborhoods, offering programmers superior audience penetration, with eight serving North America, nine serving Latin America, seven serving Africa and the Middle East, six serving Asia and four serving Europe;
We are a leading provider of services used in global content distribution to media customers, according to Euroconsult. Our top 10 video distribution customers buy services on our network, on average, across three geographic regions, demonstrating the value provided by the global reach of our network;
We believe that we are the leading provider of satellite service capacity for the distribution of cable television programming in North America, with thousands of cable headends pointed to our satellites. Our Galaxy 13 satellite provided the first HD neighborhood in North America, and today, our Galaxy fleet distributes over 380 HD channels; globally, we distribute over 5,500 TV channels, including approximately 1,600 HD channels;
We are a leading provider of satellite services for DTH providers, supporting 29 DTH platforms around the world with over 50 million subscribers, including DIRECTV in Latin America, Telefonica in Brazil, MultiChoice in Africa, and Canal+ in multiple regions;
We are a leading provider of services used in video contribution managed occasional use services, supporting coverage of major events for news and sports organizations, according to Euroconsult. For instance, we have carried programming on a global basis for every Olympiad since 1968; and
In its 2019 study, NSR forecasted that the number of SD, HD, and UHD television channels distributed worldwide for cable, broadcast and DTH is expected to grow at a CAGR of 2% for the period from 2019 to 2024. According to NSR, the highest expected growth in television channels is from developing regions, including Latin America at a CAGR of 1.8%, the Middle East and North Africa at 2.7%, Sub-Saharan Africa at 4.1%, and Asia-Pacific at 2.3% for the period from 2019 to 2024, respectively.
In 2019, several non-renewals and contract adjustments, the largest of which were in the Latin America, North America and Europe regions, caused our media business to underperform our expectations for the year. In 2020, we expect continuing pressure on our media business. Broadly, our global media customers increasingly seek to economize due to the need to support expanding infrastructure requirements. We expect customers to use compression, the elimination of distribution of standard definition feeds, and reduced commitments for contribution and ad hoc requirements, which will result in reduced volume for our business. In time, we expect some incremental demand for capacity to support the new 4K format, also known as UHD, which could offset some of the reductions in demand related to compression.
Network Services
Network services is our second largest customer set and accounted for 37% of our revenue for the year ended December 31, 2019 and $1.8 billion of our contracted backlog as of December 31, 2019. Our business generated from the network services sector is generally characterized by non-cancellable contracts, up to five years in length, with many of the world’s leading communications providers. This includes fixed and wireless telecommunications companies, such as global carriers and regional and national providers in emerging regions, corporate network service providers, such as very-small-aperture terminal ("VSAT") services providers to vertical markets including banks, value-added services providers, such as those serving the aeronautical and maritime industries, as well as multinational corporations and other organizations operating globally.

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According to Euroconsult, we are the world’s largest provider of satellite capacity for network services, with a 27% global share. Our satellite services, comprised of satellite capacity, and terrestrial network comprised of leased fiber, teleports and data networking platforms, enable the transmission of video and data to and from virtually any point on the surface of the earth. Basic communications and broadband connectivity in developed and emerging regions are meaningful contributors to economic growth. We provide an essential element of the communications infrastructure, enabling the rapid expansion of wireless services that support businesses, communities and governments in many emerging regions.
Our network services offerings are an essential component of our customers’ services, providing backbone infrastructure, expanded service areas and connectivity where reliability or geography is a challenge. We believe that we are a preferred provider because of our global service capability and our expertise in delivering services with enterprise-grade network availability and efficient network control.
Furthermore, as mobile communications have become essential to global networking and internet use, our satellite solutions, such as those provided by the Intelsat Epic platform, are being used for mobility applications. This includes services ranging from maritime enterprise VSAT data services to consumer broadband connectivity for cruise ships. In addition to maritime applications, Intelsat’s satellite solutions are used by service providers to deliver broadband connectivity for in-flight entertainment and Wi-Fi services for the aeronautical industry.
Our managed services provide regional shared data networking platforms at our teleports that are connected to approximately 40 of our satellites, with network transmissions managed by our operations team. In 2018, we introduced new platform as a service (PaaS) cloud-based offerings under the AgileCore brand, combining our satellite services with shared data platforms and our fiber network. As a result, our customers can quickly establish highly reliable services across multiple regions, yet operate them on a centralized basis. Our satellite-based solutions allow customers to rapidly expand their service territories, flexibly customize the access speed and capabilities for their existing networks and efficiently address new customer and end-user requirements. Since 2017, we have offered fully-managed services, called Flex, which address commercial and government aeronautical, maritime and land mobile applications.
Our leading position in network services has been pressured by new capacity from other satellite operators and improved access to fiber links, changing the competitive environment in certain regions and resulting in lower prices, although the rate of declines in pricing has slowed in the past two years. Intelsat Epic satellites provide differentiated inventory to help offset these recent trends, targeting wireless infrastructure, mobility and enterprise applications. In 2018, we successfully added new distribution channels in the maritime, business jet and wireless infrastructure verticals. As the volume of services sold on our Intelsat Epic fleet increases over time, we believe that the level of business activity in this sector will stabilize.
Highlights of our network services business include the following:
 
Our largest network services customer type is enterprise networking. We are the world’s largest provider of satellite capacity for satellite-based private data networks, including VSAT networks, according to Euroconsult;
The fastest growing customer type in our network services business is mobility services for the aeronautical and maritime sectors. We believe we hold a leading share of the aeronautical broadband services powering in-flight passenger connectivity. FSS revenue growth related to capacity demand for broadband aeronautical services is expected to grow from approximately $300 million to just over $1 billion annually, for the period from 2019 to 2024, at a CAGR of 28% according to Euroconsult. In addition, Euroconsult forecasts growth in FSS aeronautical terminals (excluding mobile satellite services ("MSS") and air-to-ground technology) at a CAGR of 17% for the period from 2019 to 2024;
We are the leader in the provision of FSS bandwidth for maritime broadband connectivity. 14% of our 2019 total Company revenues were derived from commercial mobility services, the largest segment of which was maritime. The number of FSS VSATs related to capacity demand for maritime broadband services (excluding MSS) is expected to grow at a CAGR of 12% for the period from 2019 to 2024 according to Euroconsult. Of the world’s largest cruise vessels, Intelsat’s services are incorporated in the broadband infrastructure for a majority of ships, in substantially all cases as the exclusive or primary source of satellite services;
Infrastructure for wireless operator services represents our third largest network services customer type. We believe we are the leading provider of satellite capacity for cellular backhaul applications in emerging regions, connecting cellular towers to the global telecommunications network, a global sector expected to generate over $900 million in revenue in 2020, according to NSR. Approximately 85 of our customers use our satellite-based backhaul services as a core component of their network infrastructure due to unreliable or non-existent terrestrial infrastructure. Our cellular backhaul customers include five of the top ten mobile groups worldwide, which serve a fifth of the world’s subscribers, excluding China;

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Approximately 130 value-added network operators use our IntelsatOne broadband hybrid infrastructure to deliver their regional and global services. Applications for these services include corporate networks for multinationals, internet access and broadband for maritime and commercial aeronautical applications. C-, Ku- and Ka-band and HTS revenue from capacity demand for mobility applications is expected to grow at a CAGR of 13.5% for the period from 2019 to 2024, according to NSR; and
The fixed enterprise VSAT sector (excluding all non-GEO HTS bandwidth) is expected to generate capacity revenues of approximately $2.7 billion in 2020, and capacity revenues are expected to grow at a CAGR of 7% from 2019 to 2024, according to NSR.

Government
We are the leading provider of commercial satellite services to the government sector, according to NSR, with a 24% share of military and government use of commercial satellite capacity worldwide. With more than 50 years of experience serving this customer set, we have built a reputation as a trusted partner for the provision of highly customized, secure and mission critical satellite-based solutions. The government sector accounted for 18% of our revenue for the year ended December 31, 2019 and $738 million of our contracted backlog as of December 31, 2019.
Our satellite communication services business generated from the U.S. government sector is generally characterized by single year contracts that are cancellable by the customer upon payment of termination for convenience charges, and include annual options to renew for periods of up to four additional years. In addition to communication services, our backlog includes some longer-term services, such as hosted payloads, which are characterized by contracts with originally contracted service periods extending up to the 15-year life of the satellite, cancellable upon payment of termination penalties defined by the respective contracts.
Our customer base includes the U.S. government’s military and civilian agencies, global government militaries, and commercial customers serving the defense sector. We consider each party within the U.S. Department of Defense and other U.S. government agencies that has the ability to initiate a purchase requisition and select a contractor to provide services to be a separate customer, although such party may not be the party that awards us the contract for the services.
We attribute our strength in serving U.S. military and government users to our global infrastructure of satellites, including the addition of the high-performance Intelsat Epic fleet, and our IntelsatOne network of teleports and fiber that complement the U.S. government’s own communications networks. Our fleet provides flexible, secure and resilient global network capacity, and critical surge capabilities. Our Intelsat Epic satellites provide high-throughput and performance that is highly attractive for aeronautical surveillance applications, offering HD video from small antennas, enabling use of a smaller airframe. In some instances, we provide our U.S. government customers managed, end-to-end secure networks, combining our resources in space and on the ground, for fixed and mobile applications.
In responding to certain unique customer requirements, we also procure and integrate satellite services provided by other satellite operators, either to supplement our capacity or to obtain capacity in frequencies not available on our fleet, such as L-band, X-band and other spectrums not available on our network. These off-network services are generally low risk in nature, typically with the terms and conditions of the third-party capacity and services we procure matched to contractual commitments from our customer. We are an attractive supplier to the government sector because of our ability to leverage not only our assets but also other space-based solutions, providing a single contracting source for multiple, integrated technologies.
Highlights of our government business include the following:
 
Our government business is fully engaged in the Intelsat managed services strategy, simplifying the use of high-throughput services. In 2019, we introduced FlexGround, a global end-to-end managed service providing cost-effective, high-performance connectivity for small land mobility applications, including airline checkable manpack terminals. FlexGround leverages the Intelsat Epic HTS network, which has high-powered spot beams, enabling high data rate services to small antennas. Operating in the Ku-band, these terminals are designed to be set up and connected in minutes by non-technical users operating in remote environs, enabling communications across a wide spectrum of scenarios.
The reliability and scale of our fleet and planned launches of new and replacement satellites allow us to address changing demand for satellite coverage and to provide mission-critical communications capabilities. For example, in 2019, we were awarded a key supplier contract by DRS Technologies to support their $977 million eight-year award to provide the United States Special Operations Command with worldwide satellite communications and support. We are providing significant on-net capacity on our newest satellites, as well as off-network capacity.

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The U.S. government and military is one of the largest users of commercial satellites for U.S. government and military applications on a global basis. In 2019, we served approximately 80 customers consisting of U.S. government customers, resellers to U.S. government customers or integrators.
According to a study by NSR, global revenue from FSS used for U.S. government and military applications is expected to grow at a CAGR of 6.7% for the period from 2019 to 2024.
Overall, business activity in this customer set reflects the current tempo of our end-customers’ operations and the budgetary constraints of the U.S. government; visibility into the U.S. government’s planned contract awards remains low and the pace of new business and subsequent awards remains flat.
Over the mid-term, we believe our reputation as a provider of secure solutions, our global fleet including our new high-performance Intelsat Epic platform and affiliated FlexAir managed service, our well-established customer relationships, our ability to provide turn-key services and our demonstrated willingness to reposition or procure capacity to support specific requirements position us to successfully compete for commercial satellite solutions for bandwidth-intensive military and civilian applications. We expect our government business to benefit over time from the increasing demands for mobility services from the U.S. government for aeronautical and ground mobile requirements.

Our Diverse Business
Our revenue and backlog diversity spans customer sets and applications, as discussed above, as well as geographic regions and satellites. We believe our diversity allows us to recognize trends to capture new growth opportunities, and gain experience that can be transferred to customers in different regions. For further details regarding geographic distribution of our revenue, see Note 3—Revenue to our consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this Annual Report.
We believe we are the sector leader by transponder share in three of the geographic regions covered by our network. We are generally ranked first or second in the regions identified by industry analysts as those that either purchase the most satellite capacity or are regions with high growth prospects, such as North America and the Asia-Pacific. WELLPOSITIONEDINATTRACTIVE.JPG
The scale of our fleet can also reduce the financial impact of satellite failures and protect against service interruption. No single satellite generated more than 7% of our revenue and no single customer accounted for more than 15% of our revenue for the year ended December 31, 2019.


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The following chart shows the geographic diversity of our contracted backlog as of December 31, 2019 by region and service sector, based upon the billing address of the customer.


BACKLOGBYSECTOR1.JPG BACKLOGBYREGION1.JPG
The majority of our on-network revenue aligns to emerging regions, based upon the position of our satellites and beams. The following chart shows the breakdown of our on-network revenue by the region in which the service was delivered as of December 31, 2019.
REVENUEBYREGION.JPG

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Our Strategy: Transforming Our Business and Our Sector
We are transforming our business and sector, investing in and deploying innovative new technologies that will change the types of applications that we can serve and increase our share of the global demand for broadband connectivity everywhere—for all communities and for all devices.
Our strategy is built around four competitive advantages that strengthen our ability to reach our goals: 

Our global footprint, which is essential given that the fastest growing applications, such as mobility and upcoming 5G deployments, require ubiquitous, consistent network performance;
Operating scale, with service delivery in approximately 200 countries and territories, which is important to new opportunities, such as connected car, machine-to-machine, land mobility and government applications, where service providers will look for global access. We believe the ability to serve these and other applications on a global basis creates new satellite-based communication solutions with multi-billion dollar revenue potential;
Our innovative technology, especially our high-throughput fleet that is already in-orbit, and that we will continue to evolve with satellites and other technologies that complement the high performance capabilities of our global network, provides our customers first-to-market advantage and experience; and
Our portfolio of spectrum rights, which provides unmatched flexibility and agility as we look at new opportunities.
Our strategy is to seek revenue growth with the following actions:

Drive stability in our core business;
Selectively invest, employ a disciplined yield management approach and emphasize the development of strong distribution channels for our four primary customer sets of broadband, mobility, media and government;
Scale our differentiated managed service offerings in targeted growth verticals in broadband, mobility, media and government, leveraging the global footprint, higher performance and better economics of our Intelsat Epic fleet and the flexibility of our innovative terrestrial network;
Complete targeted investments and partnerships in differentiated space and ground infrastructure to develop a standards-based ecosystem that will provide a seamless interface with the broader telecommunications ecosystem; and
Seek partnerships and investments for vertical expansion in the growing mobility sector and in adjacent space-based businesses to position for longer-term growth.
We believe that developing differentiated managed services and investing in related software- and standards-based technology will allow us to increase our relevance within the broader telecommunications landscape, unlocking opportunities that are essential to providing global broadband.
Our new services and technologies will also open new sectors that are much larger, and growing much faster, than the sectors we support today. Examples include:

Providing network infrastructure for 2G/3G/4G/5G wireless in developing regions;
Providing signal ubiquity in support of 5G services globally;
Providing flexible broadband services for enterprise networks and for commercial and government-related aeronautical, maritime and other mobile applications, and using our high-throughput platform and global footprint to provide differentiated services;
Optimizing content distribution networks to support cloud-based media applications, UHD, OTT programming and other multiscreen viewing applications; and
Providing ubiquitous broadband for global deployment of connected devices, such as the connected car, and the continuing formation of the IoT.
Our strategy with respect to capital investment and spectrum is expected to lead to longer-term outcomes, achieving the transformation of our business as we take the following actions:

Lower overall capital intensity and improve cost effectiveness through innovation emphasis on software-defined infrastructure and encourage a standards-based ecosystem built on widely adopted technologies, including the 3GPP standards. We will enhance our space and terrestrial infrastructure with platforms that are software-defined and less expensive to manufacture resulting in faster deployments and mission flexibility; and
Maximize the value of our spectrum rights. Leverage our sizeable portfolio of spectrum rights in the C-, Ku- and Ka-bands that provides the foundation of our ability to provide communications services over 99% of the Earth’s populated regions. Continue to participate in the FCC C-band proceeding, proposing solutions that address the need

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for C-band spectrum in the U.S. to fuel adoption of 5G, while also protecting and maintaining the essential services we provide in the mid-band today.
In advancing our spectrum rights strategy, we have worked since 2017 with other satellite operators and collaborated with customer groups, associations and other stakeholders to propose a market-based solution to a Notice of Proposed Rule Making (“NPRM”) issued by the FCC. The NPRM explored clearing spectrum currently licensed to satellite operators in order to accommodate the deployment of 5G wireless services in the United States. The proposal put forth by Intelsat and certain other satellite operators supported the FCC’s stated goals of clearing a large portion of spectrum quickly, while also protecting incumbent services.
On November 18, 2019, the FCC announced a decision to pursue a public auction of the C-band spectrum currently licensed to Intelsat and other satellite operators, a change from the private market solution for which Intelsat had been advocating over the past two years.
Subsequent to year-end 2019, on February 7, 2020, the FCC issued its draft order in the C-band proceeding. The draft order sets forth proposed acceleration incentive payments to certain C-band satellite operators of $9.7 billion, of which Intelsat would receive $4.85 billion, payable in two tranches over a period of 42 months. The draft order also outlines a cost reimbursement framework that would apply to the various stakeholders in the proceeding, as well as technical specifications and other elements.
Our near-term focus is on successfully improving the draft order proposed by the FCC while preserving all of our rights. There can be no assurance that the FCC will accept any of our proposed changes to the order. The next major event in this proceeding is the vote of the FCC on a final order, which is currently scheduled to occur on February 28, 2020. The final order could be issued later that day.
Competition
We compete in the communications market for the provision of video, data and voice connectivity worldwide. Communications services are provided using various communications technologies, including satellite networks, which provide services as a substitute for, or as a complement to, the capabilities of terrestrial networks. We also face competition from suppliers of terrestrial communications capacity.
We operate on a global scale. Our competition includes national, regional and global providers of traditional and high-throughput FSS. We also compete with providers of MSS for broadband services delivered for aeronautical and maritime applications.
We also compete with providers of terrestrial fiber optic cable capacity on certain routes and networks, principally for point-to-point services. The primary use of fiber optic cable is carrying high-volume communications traffic from point-to-point, and fiber capacity is available at substantially lower prices than satellite capacity once operational. Consequently, the growth in fiber optic cable capacity has led voice, data and video contribution customers that require service between major city hubs to migrate from satellite to fiber optic cable.
In recent years, increased availability of fiber in metropolitan regions of developing countries, and the oversupply of satellite services in certain regions, have resulted in increased competition in some of the regions we serve. The effect of these two trends has been significant price reductions for both fiber and satellite connectivity, primarily impacting our commercial and government data applications. As a result, Intelsat’s revenues have been reduced as services were terminated by customers moving to fiber alternatives, and also as contracts were renewed at lower prices.
Sales, Marketing and Distribution Channels
We strive to maintain a close working relationship with our customers. Our primary sales and marketing operations are located in the United Kingdom and the United States. In addition, we have established local sales and marketing support offices in the following countries around the world:

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•Australia
•Kenya
 
 
•Brazil
•Russia
 
 
•China
•Senegal
 
 
•France
•Singapore
 
 
•Germany
•South Africa
 
 
•India
•United Arab Emirates
 
 
•Israel
•Japan
By establishing local offices closer to our customers and staffing those offices with experienced personnel, we believe that we are able to provide flexible and responsive service and technical support to our customers. Our sales and marketing organization reflects our corporate focus on our three principal customer sets of network services, media and government. Our sales team includes technical marketing and sales engineering application expertise and a sales approach focused on creating integrated solutions for our customers’ communications requirements.
We use a range of direct and wholesale distribution methods to sell our services, depending upon the region, the vertical application, regulatory requirements and customer application.
Our Network
Our global network is currently comprised of 53 satellites following the January 2020 deorbiting of IS-805, as well as ground facilities, including teleports, access to internet PoPs and leased fiber that support our commercial services and the operation and control of our satellites.
Our customers depend on our global communications network and our operational and engineering leadership. Highlights of our network include:
Prime orbital locations, reflecting a valuable portfolio of coordinated fixed satellite spectrum rights;
Highly reliable services, including transponder availability of 99.999% on all operational satellites for the year ended December 31, 2019;
Flexibility to relocate satellites to other orbital locations as we manage fleet replacement, demand patterns change or in response to new customer requirements;
Design features and steerable beams on many of our satellites enable us to reconfigure capacity to provide different areas of coverage; and
Resilience, with multiple satellites serving each region, allows for improved restoration alternatives should a satellite anomaly occur.
As we design our new satellites, we work closely with our strategic customers to incorporate technology and service coverage that provide them with a cost-effective platform for their respective requirements.
The table below provides a summary of our satellite fleet as of December 31, 2019, except where noted.
 
Satellite
  
Manufacturer
 
Orbital
Location
 
Launch Date
  
Estimated End of
Service Life
(1)
Station Kept Satellites:
  
 
 
 
 
 
  
 
Intelsat 26
 
BSS (2)
 
63.65°E
 
Feb-97
 
2022
Galaxy 25
 
SSL (3)
 
32.9°E
 
May-97
 
2023
Intelsat 5
 
BSS
 
137°W
 
Aug-97
 
2024
Intelsat 805
 
LM (4)
 
169.1°E
 
Jun-98
 
2020
Galaxy 11
 
BSS
 
93.1°W
 
Dec-99
 
2024
Intelsat 9
 
BSS
 
DRIFT
 
Jul-00
 
2022
Intelsat 12
 
SSL
 
64.25°E
 
Oct-00
 
2021
Intelsat 1R
 
BSS
 
157.1°E
 
Nov-00
 
2023
Intelsat 10
 
BSS
 
47.5°E
 
May-01
 
2026
Intelsat 901
 
SSL
 
DRIFT
 
Jun-01
 
2024

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Satellite
  
Manufacturer
 
Orbital
Location
 
Launch Date
  
Estimated End of
Service Life
(1)
Intelsat 902
 
SSL
 
DRIFT
 
Aug-01
 
2024
Intelsat 904
 
SSL
 
29.5°W
 
Feb-02
 
2025
Intelsat 903
 
SSL
 
31.5°W
 
Mar-02
 
2030
Intelsat 905
 
SSL
 
24.5°W
 
Jun-02
 
2032
Galaxy 3C
 
BSS
 
95.05°W
 
Jun-02
 
2023
Intelsat 906
 
SSL
 
64.15°E
 
Sep-02
 
2020
Intelsat 907
 
SSL
 
27.5°W
 
Feb-03
 
2020
Galaxy 12
 
NGIS(5)
 
129°W
 
Apr-03
 
2025
Galaxy 23 (6)
 
SSL
 
121°W
 
Aug-03
 
2023
Galaxy 13/Horizons 1 (7)
 
BSS
 
127°W
 
Oct-03
 
2025
Intelsat 1002 (8)
 
Airbus
 
1°W
 
Jun-04
 
2021
Galaxy 28
 
SSL
 
89°W
 
Jun-05
 
2023
Galaxy 14
 
NGIS
 
125°W
 
Aug-05
 
2021
Galaxy 15
 
NGIS
 
133°W
 
Oct-05
 
2024
Galaxy 16
 
SSL
 
99°W
 
Jun-06
 
2027
Galaxy 17
 
Thales (9)
 
91°W
 
May-07
 
2024
Intelsat 11
 
NGIS
 
42.99°W
 
Oct-07
 
2022
Horizons 2 (10)
 
NGIS
 
84.85°E
 
Dec-07
 
2024
Galaxy 18
 
SSL
 
123°W
 
May-08
 
2028
Intelsat 25
 
SSL
 
31.5°W
 
Jul-08
 
2024
Galaxy 19
 
SSL
 
97°W
 
Sep-08
 
2028
Intelsat 14
 
SSL
 
45°W
 
Nov-09
 
2027
Intelsat 15
 
NGIS
 
85.15°E
 
Nov-09
 
2027
Intelsat 16
 
NGIS
 
76.2°W
 
Feb-10
 
2028
Intelsat 17
 
SSL
 
66°E
 
Nov-10
 
2027
Intelsat 28 (11)
 
NGIS
 
32.8°E
 
Apr-11
 
2025
Intelsat 18
 
NGIS
 
180°E
 
Oct-11
 
2028
Intelsat 22 (12)
 
BSS
 
72.1°E
 
Mar-12
 
2028
Intelsat 19
 
SSL
 
166°E
 
Jun-12
 
2028
Intelsat 20
 
SSL
 
68.5°E
 
Aug-12
 
2030
Intelsat 21
 
BSS
 
58°W
 
Aug-12
 
2030
Intelsat 23
 
NGIS
 
53°W
 
Oct-12
 
2030
Intelsat 30
 
SSL
 
95.05°W
 
Oct-14
 
2032
Intelsat 34
 
SSL
 
55.5°W
 
Aug-15
 
2033
Intelsat 31
 
SSL
 
95.05°W
 
Jun-16
 
2034
Intelsat 36
 
SSL
 
68.5°E
 
Aug-16
 
2032
Intelsat 33e
 
BSS
 
60°E
 
Aug-16
 
2028
Intelsat 35e
 
BSS
 
34.5°W
 
Jul-17
 
2033
Intelsat 37e
 
BSS
 
18°W
 
Sep-17
 
2030
Horizons 3e (13)
 
BSS
 
169°E
 
Sep-18
 
2036
Intelsat 39
 
SSL
 
61.95°E
 
Aug-19
 
2037
Payload Hosted on Third-Party Satellites:
 
 
 
 
 
 
 
 
Intelsat 1W (14)
 
Thales
 
0.8°W
 
Oct-09
 
2025
Intelsat 32e (15)
 
Airbus
 
43.0°W
 
Feb-17
 
2033
Intelsat 38 (16)
 
SSL
 
45.1°E
 
Sep-18
 
2036
 
(1)
Engineering estimates of the service life as of December 31, 2019 as determined by remaining fuel levels, consumption rates and other considerations (including power) and assuming no relocation of the satellite. Such estimates are subject to change based upon a number of factors, including updated operating data from manufacturers.
(2)
Boeing Satellite Systems, Inc. ("BSS"), formerly Hughes Aircraft Company.
(3)
Space Systems/Loral, LLC (“SSL”).
(4)
Lockheed Martin Corporation ("LM").

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(5)
Northrop Grumman Innovation Systems ("NGIS").
(6)
EchoStar Communications Corporation owns all of this satellite’s Ku-band transponders and a portion of the common elements of the satellite.
(7)
Horizons Satellite Holdings LLC (“Horizons Holdings”), a joint venture with JSAT International, Inc. (“JSAT”), owns and operates the Ku-band payload on this satellite. We are the exclusive owner of the C-band payload.
(8)
Telenor owns 18 Ku-band transponders (measured in equivalent 36 MHz transponders) on this satellite. EADS Astrium was renamed AIRBUS Defence & Space.
(9)
Thales Alenia Space ("Thales").
(10)
Horizons Holdings owns the payload on this satellite and we operate the payload for the joint venture.
(11)
Intelsat 28 was formerly known as Intelsat New Dawn.
(12)
Intelsat 22 includes an ultra high-frequency payload owned by the Australian Defence Force.
(13)
Horizons-3 Satellite LLC, a joint venture with JSAT, owns and operates this satellite. Horizons 3e entered into service in Q1 2019.
(14)
Intelsat 1W refers to a Ku-band payload on Thor 6, a satellite operated by Telenor.
(15)
Intelsat 32e refers to a HTS Ku-band payload we operate on a satellite also known as Sky Brasil 1.
(16)
Intelsat 38 refers to a Ku-band payload on Azerspace-2, a satellite operated by Azercosmos. Intelsat 38 entered into service in Q1 2019.
Satellite Systems
There are three primary types of commercial communications satellite systems: LEO systems, medium-earth orbit systems and GEO systems. All of our satellites are geosynchronous satellites and are located approximately 22,200 miles, or 35,800 kilometers, above the equator. These satellites can receive radio frequency communications from an origination point, relay those signals over great distances and distribute those signals to a single receiver or multiple receivers within the coverage areas of the satellites’ transmission beams.
Geosynchronous satellites send these signals using various parts of the radio frequency spectrum. The spectrum available for use at each orbital location includes the following frequency bands in which most commercial satellite services are offered today: 
C-band-low power, broad beams requiring use of relatively larger antennae, valued as spectrum least susceptible to transmission impairments such as rain;
Ku-band-high power, narrow to medium size beams facilitating use of smaller antennae favored by businesses; and
Ka-band-very high power, very narrow beams facilitating use of very small transmit/receive antennae, but somewhat less reliable due to high transmission weather-related impairments. The Ka-band is utilized for various applications, including consumer broadband services.
Substantially all of the station-kept satellites in our fleet are designed to provide capacity using the C- and/or Ku-bands of this spectrum.
A geosynchronous satellite is referred to as geostationary, or station-kept, when it is operated within an assigned orbital control, or station-keeping box, which is defined by a specific range of latitudes and longitudes. Geostationary satellites revolve around the earth with a speed that corresponds to that of the earth’s rotation and appear to remain above a fixed point on the earth’s surface at all times. Geosynchronous satellites that are not station-kept are in inclined orbit. The daily north-south motion of a satellite in inclined orbit exceeds the specified range of latitudes of its assigned station-keeping box, and the satellite appears to oscillate slowly, moving above and below the equator every day. An operator will typically operate a satellite in inclined orbit toward the end of its service life because the operator is able to save significant amounts of fuel by not controlling the north-south position of the satellite and is thereby able to substantially extend the service life of the satellite. The types of services and customers that can access an inclined orbit satellite have traditionally been limited due to the movement of the satellite relative to a fixed ground antenna. However, recent technological innovations now allow the use of inclined orbit capacity for certain applications. As a result, we anticipate demand for inclined orbit capacity may increase over the next few years if these applications are successfully introduced. As of December 31, 2019, 15 of our satellites were operating in an inclined orbit, with most continuing to earn revenue beyond our original estimated life for each of these satellites.
In-Orbit Satellites
We believe that our strong operational performance is due primarily to our satellite procurement and operations philosophy. Our operations and engineering staff is involved from the design through the decommissioning of each satellite that

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we procure. Our staff works at the manufacturers’ and launchers’ sites to monitor progress, allowing us to maintain close technical collaboration with our contractors during the process of designing, manufacturing and launching a satellite. We continue our engineering involvement throughout the operating lifetime of each satellite. Extensive monitoring of earth station operations, around-the-clock satellite control and network operations support ensure our consistent operational quality, as well as timely corrections when problems occur. In addition, we have in place contingency plans for technical problems that may occur during the lifetime of a satellite.
These features also contribute to the resilience of our network, which enables us to ensure the continuity of service that is important for our customers and to retain revenue in the event that we need to move customers to alternative capacity. The design flexibility of some of our satellites enables us to meet customer demand and respond to changing market conditions.
As of December 31, 2019, we had approximately 1,805 station-kept transponders on our traditional wide beam fleet, for which the average fill rate was 79%. The HTS Intelsat Epic transponder unit count was approximately 1,220, reflecting an increase from 2018 as a result of the entry into service of Horizons 3e.
The design life of a satellite is the length of time that the satellite’s hardware is designed by the manufacturer to remain operational under normal operating conditions. In contrast, a satellite’s orbital maneuver life is the length of time the satellite has enough fuel to remain operational. A satellite’s service life is based upon fuel levels and other considerations, including power. Satellites launched in the recent past are generally expected to remain in service for the lesser of maneuver life and 16 years. Satellites typically have enough fuel to maintain between 16 and 18 years of station-kept operations. The average remaining service life of our satellites was approximately 7.7 years as of December 31, 2019, weighted on the basis of nominally available capacity for the station-kept satellites we own.
Satellites on Order
As of December 31, 2019, we had one satellite under contract for construction and launch.
Satellite
 
Manufacturer
 
Role
 
Earliest
Launch Date
 
Expected
Launch
Provider
Galaxy 30
 
NGIS
 
Next generation North American video distribution platform
 
2020
 
Arianespace
Future Satellites
We would expect to replace other existing satellites, as necessary, with satellites that meet customer needs and that have a compelling economic rationale. We periodically conduct evaluations to determine the current and projected strategic and economic value of our existing and any planned satellites and to guide us in redeploying satellite resources as appropriate. In early 2020, Intelsat selected SSL to manufacture Intelsat 40e, a next generation Intelsat Epic geostationary communications satellite that is scheduled to launch in 2022.
Network Operations and Current Ground Facilities
We control and operate each of our satellites and manage the communications services for which each satellite is used from the time of its initial deployment through the end of its operational life, and we believe that our technical skill in performing these critical operations differentiates us from our competition. We provide most of these services from our satellite operations centers in McLean, Virginia and Long Beach, California, and our customer service center in Ellenwood, Georgia. In the event of a natural disaster or other situation disabling one of the facilities, each satellite operations center has the functional ability to provide instantaneous restoration of services on behalf of the other, demonstrating the efficiency and effectiveness of our network. Utilizing state of the art satellite command and control hardware and software, our satellite operations centers analyze telemetry from our satellites in order to monitor their status and track their location.
Our satellite operations centers use a network of ground facilities to perform their functions. This network includes 15 earth stations that provide tracking, telemetry and commanding (“TT&C”) services for our satellites and various other earth stations worldwide. Through our ground facilities, we constantly monitor signal quality, protect bandwidth from piracy or other interference and maintain customer installed equipment.
Our customer service center located in Ellenwood, Georgia includes a Radio Frequency Operations Center, a Managed Services Operations Center and an Intelsat Secured Operations Center. This facility is responsible for managing the communications services that we provide to our customers and is the first point of contact for customers needing assistance in

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using our network. We also maintain a back-up operations facility and data center a relatively short distance from our McLean, Virginia facility in Hagerstown, Maryland. This facility provides back-up emergency operational services in the event that our Ellenwood, Georgia customer service center experiences an interruption.
We have invested heavily in our fully integrated IntelsatOne terrestrial network which complements our satellite network. Our network includes teleport, leased fiber and network performance monitoring systems and enables us to provide end-to-end managed solutions to our customers. In addition to leased fiber connecting high-density routes, our ground network also features strategically located PoPs, which are drop-off points for our customers’ traffic that are close to major interconnection hubs for telecommunications applications, video transmissions and trunking to the internet backbone. Our terrestrial network is an all-IP network environment that results in improved ground support of high bandwidth applications such as HD video. The network architecture allows us to converge our media and network services terrestrial network infrastructures, resulting in reduced costs, and provides opportunities for generating additional revenue from existing and new customers by bundling combinations of media and network services products that can be offered through a single access circuit into our network.
Capacity Sparing and Backup and General Satellite Risk Management
As part of our satellite risk management, we continually evaluate, and design plans to mitigate, the areas of greatest risk within our fleet, especially for those satellites with known technical risks. We believe that the availability of spare transponder services capacity, together with the overlapping coverage areas of our satellites and flexible satellite design features described in—Our Network—Satellite Systems above, are important aspects of our ability to provide reliable service to our customers. In addition, these factors could help us to mitigate the financial impact to our operations attributable to the occurrence of a major satellite anomaly, including the loss of a satellite. Although we do not maintain backup for all of our transponder services operating capacity, we generally maintain some form of backup capacity for each satellite designated as being in primary operating service. Our restoration backup capacity may include any one or more of the following:
designated reserve transponders on the satellite or other on-board backup systems or designed-in redundancies;
an in-orbit spare satellite; or
interim restoration capacity on other satellites.
In addition, we provide some capacity on a preemptible basis and could preempt the use of this capacity to provide backup capacity in the event of a loss of a satellite.
We typically obtain launch insurance for our satellites before launch and will decide whether or not to obtain such insurance taking into consideration launch insurance rates, terms of available coverage and alternative risk management strategies, including the availability of backup satellites and transponders in the event of a launch failure. Launch insurance coverage is typically in an amount equal to the fully capitalized cost of the satellite, which generally includes the construction costs, the portion of the insurance premium related to launch, the cost of the launch services and capitalized interest (but may exclude any unpaid incentive payments to the manufacturer).
As of December 31, 2019, five of the satellites in our fleet were covered by in-orbit insurance. In-orbit insurance coverage may initially be for an amount comparable to launch insurance levels, generally decreases over time and is typically based on the declining book value of the satellite. We do not currently insure against lost revenue in the event of a total or partial loss of a satellite.
Satellite Health and Technology
Our satellite fleet is diversified by manufacturer and satellite type, and is generally healthy, with 99.999% transponder availability on all operational satellites during the year ended December 31, 2019. We have experienced some technical problems with our current fleet but have been able to minimize the impact of these problems on our customers, our operations and our business in recent years. Many of these problems have been component failures and anomalies that have had little long-term impact to date on the overall transponder availability in our satellite fleet. All of our satellites have been designed to accommodate an anticipated rate of equipment failures with adequate redundancy to meet or exceed their orbital design lives, and to date, this redundancy design scheme has proven effective. After each anomaly we have generally restored services for our customers on the affected satellite, provided alternative capacity on other satellites in our fleet, or provided capacity that we purchased from other satellite operators.

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Significant Anomalies
On January 14, 2005, our Intelsat 804 satellite experienced a sudden and unexpected electrical power system anomaly that resulted in the total loss of the satellite. Intelsat 804 was a Lockheed Martin 7000 series (the “LM 7000 series”) satellite, and as of December 31, 2019 we operated one other satellite in the LM 7000 series, Intelsat 805, which was decommissioned in early 2020.
On April 5, 2010, our Galaxy 15 satellite experienced an anomaly resulting in our inability to command the satellite. Galaxy 15 is a Star-2 satellite manufactured by Orbital Sciences Corporation. On December 23, 2010, we recovered command of the spacecraft and we have since uploaded flight software code to protect against future anomalies of this type. As of December 31, 2019, Galaxy 15 continued to provide normal service.
On April 22, 2011, our Intelsat 28 satellite, formerly known as the Intelsat New Dawn satellite, was launched into orbit. Subsequent to the launch, the satellite experienced an anomaly during the deployment of its west antenna reflector, which controls communications in the C-band frequency. The anomaly had not been experienced previously on other STAR satellites manufactured by Orbital Sciences Corporation, including those in our fleet. The New Dawn joint venture filed a partial loss claim with its insurers relating to the C-band antenna reflector anomaly and all of the insurance proceeds from the partial loss claim were received in 2011. The Ku-band antenna reflector deployed and that portion of the satellite is operating as planned, entering service in June 2011. A Failure Review Board established to determine the cause of the anomaly completed its investigation in July 2011 and concluded that the deployment anomaly of the C-band reflector was most likely due to a malfunction of the reflector sunshield. As a result, the sunshield interfered with the ejection release mechanism, and prevented the deployment of the C-band antenna. The Failure Review Board also recommended corrective actions for Orbital Sciences Corporation satellites not yet launched to prevent reoccurrence of the anomaly. Appropriate corrective actions were implemented on Intelsat 18, which was successfully launched in October 2011, and on Intelsat 23, which was launched in October 2012.
During launch operations of Intelsat 19 on June 1, 2012, the satellite experienced damage to its south solar array. Although both solar arrays are deployed, the power available to the satellite is less than is required to operate 100% of the payload capacity. An Independent Oversight Board (“IOB”) was formed by SSL and Sea Launch to investigate the solar array deployment anomaly. The IOB concluded that the anomaly occurred before the spacecraft separated from the launch vehicle, during the ascent phase of the launch, and originated in one of the satellite’s two solar array wings due to a rare combination of factors in the panel fabrication and was unrelated to the launch vehicle. While the satellite is operational, the anomaly resulted in structural and electrical damage to one solar array wing, which reduced the amount of power available for payload operation. Additionally, we filed a partial loss claim with our insurers relating to the solar array anomaly. We received $84.8 million of insurance proceeds related to the claim in 2013. As planned, Intelsat 19 replaced Intelsat 8 at 166°E, in August 2012.
On February 1, 2013, the launch vehicle for our Intelsat 27 satellite failed shortly after liftoff and the satellite was completely destroyed. A Failure Review Board was established and subsequently concluded that the launch failed due to the mechanical failure of one of the first stage engine’s thrust control components. The satellite and launch vehicle were fully insured, and we received $406.2 million of insurance proceeds in 2013.
During orbit raising of Intelsat 33e in September 2016, the satellite experienced a malfunction of the main satellite thruster. Orbit raising was subsequently completed using a different set of satellite thrusters. The anomaly resulted in a delay of approximately three months in reaching the geostationary orbit, as well as a reduction in the projected lifetime of the satellite. Intelsat 33e entered service in January 2017. In addition, in February 2017, measurements indicated higher than expected fuel use while performing stationkeeping maneuvers. There is no evidence of any impact to the communications payload. A Failure Review Board completed its investigation of the primary thruster failure and the fuel use anomalies and identified several design, build and screening improvements that are being implemented by the satellite manufacturer for future satellites using the same engine. In addition, the manufacturer has adapted its propellant estimation software for both anomalies, which we take into account in making our end of life prediction. We filed a loss claim with our insurers in March 2017 relating to the reduction of life. As of December 31, 2018, we settled with all insurers and received total collection and settlement payments of $70 million in cash.
In April 2019, the Intelsat 29e satellite (in service since 2016) experienced an anomaly that resulted in a total loss of the satellite. A Failure Review Board comprised of the satellite’s manufacturer, Boeing Satellite Systems, Inc., the Company and external independent experts was convened to complete a comprehensive analysis of the cause of the anomaly. The board concluded that the anomaly was either caused by a harness flaw in conjunction with an electrostatic discharge event related to solar weather activity, or the impact of a micrometeoroid. As we have other similar spacecraft on-orbit of the same Boeing series, we extended the investigation by conducting a thorough analysis of other Boeing-manufactured satellites in our fleet.

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Based on our findings, we believe that the Intelsat 29e anomaly is an isolated incident and that other similar spacecraft are at a very low risk of experiencing the same sequence of events. We are also incorporating information gleaned from the investigation into future design and manufacturing plans to mitigate the conditions that may have caused the incident.
Other Anomalies
We have also identified four other types of common anomalies among the satellite models in our fleet, which have had an operational impact in the past and could, if they materialize, have an impact in the future. These are:
 
failure of the on-board satellite control processor ("SCP") in Boeing 601 (“BSS 601”) satellites;
failure of the on-board Xenon-Ion Propulsion System ("XIPS") used to maintain the in-orbit position of Boeing 601 High Power Series (“BSS 601 HP”) satellites;
accelerated solar array degradation in early Boeing 702 High Power Series (“BSS 702 HP”) satellites; and
failure of gyroscopes on certain SSL satellites.
SCP Failures. Many of our satellites use an on-board SCP to provide automatic on-board control of many operational functions. SCPs are a critical component in the operation of such satellites. Each such satellite has a backup SCP, which is available in the event of a failure of the primary SCP. Certain BSS 601 satellites have experienced SCP failures. The risk of SCP failure appears to decline as these satellites age.
As of December 31, 2019, we operated one BSS 601 satellite, Intelsat 26. This satellite was identified as having heightened susceptibility to the SCP problem. Intelsat 26 has been in continuous operation since 1997. Both primary and backup SCPs on this satellite are monitored regularly and remain fully functional. Accordingly, we believe it is unlikely that additional SCP failures will occur. Intelsat 26 is currently planned to be decommissioned in 2022.
BSS 601 HP XIPS. The BSS 601 HP satellite uses XIPS as its primary propulsion system. There are two separate XIPS on each satellite, each one of which is capable of maintaining the satellite in its orbital position. The BSS 601 HP satellite also has a completely independent chemical propulsion system as a backup to the XIPS. As a result, the failure of a XIPS on a BSS 601 HP satellite typically would have no effect on the satellite’s performance or its operating life. However, the failure of both XIPS would require the use of the backup chemical propulsion system, which could result in a shorter operating life for the satellite depending on the amount of chemical fuel remaining. XIPS failures do not typically result in a catastrophic failure of the satellite or affect the communications capability of the satellite.
As of December 31, 2019, we operated four BSS 601 HP satellites, Intelsat 5, Intelsat 9, and Intelsat 10, which are now in inclined orbit, and Galaxy 13/Horizons 1. Galaxy 13/Horizons 1 has one XIPS thruster available as its primary propulsion system. Intelsat 5, Intelsat 9 and Intelsat 10 have experienced the failure of both XIPS and are operating on their backup chemical propulsion systems. Intelsat 5 was redeployed in 2012 following its replacement by Intelsat 8, which was subsequently replaced by Intelsat 19. Also in 2012, Intelsat 9 and Intelsat 10 were redeployed following their replacements by Intelsat 21 and Intelsat 20, respectively. No assurance can be given that we will not have further XIPS failures that result in shortened satellite lives. We have decommissioned three satellites that had experienced failure of both XIPS. Intelsat 6B was replaced by Intelsat 11 during the first quarter of 2008, Galaxy 10R was replaced by Galaxy 18 during the second quarter of 2008, and Galaxy 4R was decommissioned in March 2009.
BSS 702 HP Solar Arrays. All of our satellites have solar arrays that power their operating systems and transponders and recharge the batteries used when solar power is not available. Solar array performance typically degrades over time in a predictable manner. Additional power margins and other operational flexibility are designed into satellites to allow for such degradation without loss of performance or operating life. Certain BSS 702 HP satellites have experienced greater than anticipated degradation of their solar arrays resulting from the design of the solar arrays. Such degradation, if continued, will likely result in a shortened operating life of a satellite or the need to reduce the use of the communications payload.
As of December 31, 2019, we operated three BSS 702 HP satellites, two of which are affected by accelerated solar array degradation, Galaxy 11 and Intelsat 1R. Service to customers has not been affected, and we expect that both of these satellites will continue to serve customers until we replace or supplement them with new satellites. Along with the manufacturer, we continually monitor the problem to determine its cause and its expected effect. Due to this continued degradation, Galaxy 11 was redeployed following its replacement by Intelsat 34. Intelsat 1R was redeployed following its replacement by Intelsat 14. The third BSS 702 HP satellite that we operated as of December 31, 2019, Galaxy 3C, was launched after the solar array anomaly was identified, and it has a substantially different solar array design intended to eliminate the problem. This satellite has been in service since September 2002 and has not experienced similar degradation problems.

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SSL gyroscopes. Some of our satellites use gyroscopes to provide 3-axes attitude information during orbit inclination maneuvers. Certain SSL satellites use gyroscopes that have been identified as having a higher probability of failing. There are four gyroscopes on each of these SSL satellites, three of which are needed for normal operation, and the fourth is a spare. The failure of a single gyroscope on a given satellite would have no effect on the satellite’s performance or its operating life. A failure of two or more gyroscopes on a given satellite would require us to use an alternative method for inclination control. This alternative method would likely result in a reduction in the remaining life of the satellite. As of December 31, 2019, we operated 11 SSL satellites that use these gyroscopes, seven of which are in inclined orbit. While in inclined orbit, inclination maneuvers are no longer required.
Regulation
As an operator of a privately-owned global satellite system, we are subject to U.S. government regulation, regulation by foreign national telecommunications authorities and the International Telecommunication Union ("ITU") frequency coordination process and regulations.
U.S. Government Regulation
FCC Regulation. The majority of the satellites in our current constellation are licensed and regulated by the FCC. We have final or temporary FCC authorization for all of our U.S.-licensed operating satellites. The special temporary authorizations (“STAs”) in effect relating to our satellites cover various time periods, and thus the number held at any given time varies. In some cases, we have sought STAs because we needed temporary operational authority while we are awaiting grant of identical permanent authority. In others, we sought STAs because the activity was temporary in nature, and thus no permanent authority was needed. Historically, we have been able to obtain the STAs that we have needed on a timely basis. FCC satellite licenses have a fifteen-year term. At the end of a license term, we can request an extension to continue operating a satellite. In addition, our FCC satellite licenses that relate to use of those orbital locations and associated frequencies that were transferred to the United States at the time of our privatization in July 2001 are conditioned on our remaining a signatory to the Public Services Agreement among the International Telecommunications Satellite Organization ("ITSO"), Intelsat, Ltd. and certain of our subsidiaries (the "Public Services Agreement"). Furthermore, any transfer of these licenses by us to a successor-in-interest is only permitted if such successor-in-interest has undertaken to perform our obligations under the Public Services Agreement. Some of our authorizations contain waivers of technical regulations. Many of our technical waivers were required when our satellites were initially licensed by the United States at privatization in 2001 because, as satellites previously operated by an intergovernmental entity, they had not been built in compliance with certain U.S. regulations. Since privatization, several replacement satellites for satellites licensed at privatization also have needed technical waivers as they are technically similar to the satellites they are replacing.
Changes to our satellite system generally require prior FCC approval. From time to time, we have pending applications for permanent or temporary changes in orbital locations, frequencies and technical design. From time to time, we also file applications for replacement or additional satellites. Replacement satellite applications are eligible for streamlined processing if they seek authority for the same orbital location, frequency bands and coverage area as an existing satellite and will be brought into use at approximately the same time, but no later than, the existing satellite is retired. The FCC processes satellite applications for new orbital locations or frequencies on a first come, first served basis. The FCC requires licensees of new, non-replacement, geostationary satellites to post a bond and to comply with a milestone to launch and operate the satellite within five years of the license grant. The bond starts at $1 million and increases, pro rata, in proportion to the time that has elapsed since the license was granted to the time of the launch and operate milestone. At the end of the five-year period, the bond amount will be $3 million. A satellite licensee that does not satisfy the launch and operate milestone will lose its license and must forfeit the bond absent circumstances warranting a milestone extension under the FCC’s rules and policies. An operator that elects to relinquish its license prior to the five-year launch and operate milestone will forfeit the amount of accrued bond as of the date the license is relinquished. We hold other FCC licenses, including earth station licenses associated with technical facilities located in several states and licenses for terminals. We must pay FCC filing fees in connection with our space station and earth station applications, and we must also pay annual regulatory fees to the FCC. Violations of the FCC’s rules can result in various sanctions including fines, loss of authorizations or the denial of applications for new authorizations or the renewal of existing authorizations.
One of our subsidiaries holds a Section 214 authorization. However, we currently do not sell services as a common carrier. Therefore, we are not subject to rate regulation or the obligation not to discriminate among customers.
U.S. Export Control Requirements and Sanctions Regulation. Intelsat must comply with U.S. export control and trade sanctions laws and regulations as follows:

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The Export Administration Act/International Emergency Economic Powers Act, implemented by the Export Administration Regulations (“EAR”) and administered by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), regulates exports of dual-use controlled items, which includes commercial communications satellites, associated ground equipment, related software, and technology. The EAR also controls dual-use equipment exported to earth stations in our ground network located outside of the United States and to customers as needed. Intelsat uses EAR approved licensing exceptions for many of our export-controlled programs, and EAR licenses as required. It is our practice to obtain all licenses necessary, or correctly document the license exception authorized, for the furnishing of original or spare equipment for the operation of our TT&C ground stations, other network stations, and customer locations in a timely manner to facilitate the shipment of this equipment when needed.
The Arms Export Control Act, implemented by the International Traffic in Arms Regulations (“ITAR”) and administered by the U.S. Department of State’s Directorate of Defense Trade Controls, regulates the export of items on the U.S. Munitions List, including the export of certain satellites and/or payloads with defined military and/or government end use capabilities and characteristics, certain associated hardware, defense services, and technical information relating to satellites to non-U.S. persons (including satellite manufacturers, component suppliers, launch services providers, insurers, customers, Intelsat employees, and other non-U.S. persons). A small portion of Intelsat’s controlled technology remains under ITAR. Intelsat does not currently have any active ITAR licenses.
Certain of Intelsat’s contracts for consulting, manufacture, launch, and insurance of Intelsat’s and third-party satellites involve the export to non-U.S. persons of technology and/or hardware; currently these exports are regulated under the EAR. We do not currently need any ITAR authorizations to fulfill our obligations under contracts with non-U.S. entities.
Trade sanctions laws and regulations administered by the U.S. Department of Treasury’s Office of Foreign Assets Control regulate the provision of services to certain countries subject to U.S. trade sanctions. As required, Intelsat holds the authorizations needed to provide satellite capacity and related administrative services to U.S.-sanctioned countries.
U.S. Department of Defense Security Clearances. To participate in classified U.S. government programs, we entered into a proxy agreement with the U.S. government that allows one of our subsidiaries to obtain security clearances from the U.S. Department of Defense as required under the national security laws and regulations of the United States. Such a proxy agreement is required to insulate the subsidiary performing this work from inappropriate foreign influence and control by Intelsat S.A., a Luxembourg company with significant non-U.S. investments and employees. Security clearances are subject to ongoing scrutiny by the issuing agency, as well as renewal every five years. Intelsat must maintain the security clearances obtained from the U.S. Department of Defense, or else lose the ability to perform our obligations under any classified U.S. government contracts to which our subsidiary is a party. Under those circumstances, the U.S. government would have the right to terminate our contracts requiring access to classified information and we would not be able to enter into new classified contracts. Compliance with the proxy agreement is regularly monitored by the U.S. Department of Defense and reviewed at least annually, and if we materially violate the terms of the proxy agreement, the subsidiary holding the security clearances may be suspended or debarred from performing any U.S. government contracts, whether classified or unclassified. Our current proxy agreement is subject to extension every five years with the agreement of the U.S. Department of Defense.
Regulation by Non-U.S. National Telecommunications Authorities
U.K. Regulation. The United Kingdom is the licensing jurisdiction for the Intelsat 12 and Intelsat 26 satellites. Satellite operators in the United Kingdom are regulated by the U.K. Office of Communications (“Ofcom”) and the U.K. Space Agency (“UKSA”). Additionally, Ofcom regulates the use of certain spectrum and orbital resources associated with some of our satellites. Specifically, the following satellites were operated under the regulation of Ofcom for the year ended December 31, 2019: Intelsat 33e, Intelsat 37e, and Intelsat 1R.
Papua New Guinea Regulation. The National Information & Communications Technology Authority of Papua New Guinea (“NICTA”) regulates the use of certain spectrum and orbital resources associated with some of our satellites. Specifically, the following satellites were operated under the regulation of NICTA for all or part of the year ended December 31, 2019: Galaxy 23, Intelsat 26, Intelsat 30, Intelsat 31, Intelsat 33e, Intelsat 36 and Intelsat 39. We are required to pay annual fees to NICTA in connection with the spectrum and orbital resources utilized by these satellites, as well as for other satellite network filings we have the right to use. In 2003, the FCC added the C-band payload of the Galaxy 23 satellite, which is licensed by NICTA, to its “Permitted Space Station List,” enabling use of the payload to provide non-DTH services in the United States.
German Regulation. We hold licenses from the Federal Network Agency ("Bundesnetzagentur" or "BNetzA") for several earth stations in Germany, as well as authorizations to use spectrum and orbital resources associated with the operation of the

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Intelsat 10, Intelsat 38, and Intelsat 904 satellites and with future satellites. We are required to pay annual fees to BNetzA in connection with the spectrum and orbital resources utilized by these satellites, as well as for other satellite network filings we have the right to use.
Australian Regulation. We hold licenses from the Australian Communications and Media Authority (“ACMA”) for several earth stations in Australia, as well as a Nominated Carrier Declaration.
Japanese Regulation. We hold licenses from the Ministry of Internal Affairs and Communications for several earth stations in Japan, terminals, as well as carrier registrations. We and JSAT are the sole members of Horizons Holdings, and in 2002 the Japanese telecommunications ministry authorized Horizons Holdings to operate the Ku-band payload on the Galaxy 13/Horizons 1 satellite. In 2003, the FCC added this Ku-band payload to its “Permitted Space Station List,” enabling Horizons Holdings to use the payload to provide non-DTH services in the United States. In May 2004, the FCC expanded this authority to include one-way DTH services. We are the exclusive owner of the C-band payload on Galaxy 13/Horizons 1, which the FCC has licensed us to operate.
Other National Telecommunications Authorities. As a provider of satellite capacity and services, we are also subject to the national communications and broadcasting laws and regulations of many other countries in which we operate. In addition, in some cases our ability to operate a satellite in a non-U.S. jurisdiction also arises from a contractual arrangement with a third party. Some countries require us to obtain a license or other form of written authorization from the regulator prior to offering satellite capacity services, operating terminals or providing managed services. We have obtained these licenses or written authorizations, or are in the process of doing so, in all countries that have required us to obtain them. As satellites are launched or relocated, we determine whether such licenses or written authorizations are required and, if so, we obtain them. Most countries allow authorized telecommunications providers to own their own transmission facilities and to purchase satellite capacity without restriction, facilitating customer access to our services. Other countries maintain strict monopoly regimes or otherwise regulate the provision of our services. In order to provide services in these countries, we may need to negotiate an operating agreement with a monopoly entity that covers the types of services to be offered by each party, the contractual terms for service and each party’s rates. As we have developed our ground network and expanded our service offerings, we have been required to obtain additional licenses and authorizations. To date, we believe that we have identified and complied with all of the regulatory requirements applicable to us in connection with our ground network and expanded services.
The International Telecommunication Union Frequency Coordination Process and Associated Regulations
Only nation states have full standing as ITU members. Therefore, we must rely on governments to represent our interests before the ITU, including obtaining new rights to use orbital locations and resolving disputes relating to the ITU’s regulations. We primarily rely upon the United States, the United Kingdom, Germany, and Papua New Guinea to file for orbital slots at the ITU. Our use of orbital locations is subject to the frequency coordination and recording process of the ITU. In order to protect satellite networks from harmful radio frequency interference from other satellite networks, the ITU maintains a Master International Frequency Register (“MIFR”) of radio frequency assignments and their associated orbital locations. Each ITU notifying administration is required by treaty to give notice of, coordinate and record its proposed use of radio frequency assignments and associated orbital locations with the ITU’s Radiocommunication Bureau.

When a frequency assignment is recorded in the MIFR, the ITU publishes this information so that all potential users of frequencies and orbital locations are aware of the need to protect the recorded assignments associated with a given orbital location from subsequent or nonconforming interfering uses by member states of the ITU. The ITU’s Radio Regulations do not contain mandatory dispute resolution or enforcement mechanisms. Rather, the ITU relies on technical rules as a basis for coordination and consultations between member states for matters related to spectrum disputes. Given the lack of enforcement mechanisms within the ITU treaty, neither the ITU specifically, nor international law generally, provide clear remedies if this voluntary process fails.
In the U.S. regulatory process, an operator may submit an ITU satellite network filing to the FCC for forwarding to the ITU prior to the operator filing a complete FCC license application. Submission of such an ITU filing will reserve for the operator a place in the FCC’s first come, first served licensing queue provided the operator posts a $500,000 bond. If the operator fails within two years to file a complete FCC license application for the orbital location, frequencies and polarization proposed in the ITU satellite network filing, the bond will be forfeited.
Environmental Matters
Intelsat aims to provide leadership in the identification and promotion of sustainable practices and services that reduce the company’s environmental impact, educate and engage staff and create a more environmentally sustainable organization. Our

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operations are subject to various laws and regulations relating to the protection of the environment, including those governing the management, storage and disposal of hazardous materials and the cleanup of contamination should it arise. As an owner or operator of property and in connection with current and historical operations at some of our sites, we could incur significant costs, including cleanup costs, fines, sanctions and third-party claims, as a result of violations of or liabilities under environmental laws and regulations. For instance, some of our operations require continuous power supply, and, as a result, current and past operations at our teleports and other technical facilities include fuel storage and batteries for back-up power generators. We believe, however, that our operations are in substantial compliance with applicable environmental laws and regulations. Moreover, Intelsat’s properties generally operate pursuant to a Conditional Use Permit. In order to obtain such a permit, Intelsat must demonstrate compliance with all applicable environmental laws and must maintain programs to prevent or minimize damage to public health, safety and the environment, from, for example, a release or threatened release of hazardous materials, including but not limited to ground water, air, offsets and storage. Intelsat also complies with community right-to-know laws and has undertaken compliance with International Organization for Standardization (ISO) 45001:2018, which specifies requirements for an occupational health and safety management system, and is seeking certification at this time.
Employees
As of December 31, 2019, we had 1,195 full-time regular employees. These employees consisted of:
 
611 employees in engineering, operations and related information systems;
193 employees in finance, legal and other administrative functions;
305 employees in sales, marketing and strategy; and
86 employees in support of government sales and marketing.
We believe that our relations with our employees are good. None of our employees is represented by a union or covered by a collective bargaining agreement.
History and Development of the Company
The Company
Our legal and commercial name is Intelsat S.A. The Company was organized as a public limited liability company (société anonyme) under the laws of the Grand-Duchy of Luxembourg on July 8, 2011. Our principal executive office is located at 4, rue Albert Borschette, L-1246, Luxembourg, telephone number +352 27 84 1600. The Company is registered with the Luxembourg Registre de Commerce et des Sociétés under number B162135.
Our History
Intelsat, Ltd., a Bermuda company, was the successor entity to the International Telecommunications Satellite Organization (the “IGO”). The IGO was a public intergovernmental organization created on an interim basis by its initial member states in 1964 and formally established in February 1973 upon entry into force of an intergovernmental agreement. The member states that were party to the treaty governing the IGO designated certain entities to market and use the IGO’s communications system within their territories and to hold investment share in the IGO.
The Privatization
In November 2000, the IGO’s Assembly of Parties unanimously approved our management’s specific plan for our privatization and set the date of privatization for July 18, 2001. On July 18, 2001, substantially all of the assets and liabilities of the IGO were transferred to Intelsat, Ltd., which was domiciled as a Bermuda company.
The IGO, referred to post-privatization as the International Telecommunications Satellite Organization (“ITSO”), was established and was to exist as an intergovernmental organization for a period of at least 12 years after July 18, 2001, and then could be terminated by a decision of a governing body of ITSO called the Assembly of Parties. The Assembly of Parties voted in 2012 to continue ITSO until at least 2021. Pursuant to a Public Services Agreement among ITSO and Intelsat, Ltd. and certain of our subsidiaries, we have an obligation to provide our services in a manner consistent with the core principles of global coverage and connectivity, lifeline connectivity and non-discriminatory access, and ITSO monitors our implementation of this obligation.

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The Luxembourg Migration
On December 15, 2009, Intelsat, Ltd. and certain of its parent holding companies and subsidiaries migrated their jurisdiction of organization from Bermuda to Luxembourg (the “Migration”). As a result of the Migration, our headquarters are located in Luxembourg.
The Initial Public Offering
On April 23, 2013, we completed our initial public offering, in which we issued 22,222,222 common shares, and a concurrent public offering, in which we issued 3,450,000 5.75% Series A mandatory convertible junior non-voting preferred shares (the “Series A Preferred Shares”), at public offering prices of $18.00 and $50.00 per share, respectively (the initial public offering together with the concurrent public offering, the “IPO”). In May 2016, all of the outstanding Series A Preferred Shares were converted in accordance with their terms into common shares.
Available Information
We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Securities Exchange Act of 1934, as amended. You may obtain any reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.
You also may view and download copies of our SEC filings free of charge at our website, www.intelsat.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and is not considered part of, this Annual Report on Form 10‑K. Investors should also note that we use our website, as well as SEC filings, press releases, and public conference calls, to announce financial information and other material developments regarding our business. We use these channels, as well as social media, to communicate with investors and members of the public about our business. It is possible that the information that we post on our social media channels could be deemed material information. We encourage investors, the media and others interested in our Company to review the information that we post on our social media channels.
Item 1A.
Risk Factors
The risks described below are not the only ones that we may face. Additional risks that are not currently known to us or that we currently consider immaterial may also impair our business, financial condition or results of operations.
Risk Factors Relating to Our Business
We are subject to significant competition from within the FSS sector, from alternative satellite service providers and from other providers of communications capacity, such as fiber optic cable capacity. Competition from other telecommunications providers could have a material adverse effect on our business and could prevent us from implementing our business strategy and expanding our operations as planned.
We face significant competition in the FSS sector in different regions around the world. We compete against other satellite operators and against suppliers of ground-based communications capacity. The increasing availability of satellite capacity and capacity from other forms of communications technology has historically created an excess supply of telecommunications capacity in certain regions from time to time. We believe such an imbalance could again occur in certain regions, particularly as we and other operators begin to introduce next generation HTS technology on our fleets. Additionally, there is emerging interest from new entrants to launch new constellations in different orbits that could potentially compete with portions of our business. Increased competition in the FSS sector could lower prices, which could reduce our operating margins and the cash available to fund our operations and service our debt obligations. In addition, there has been a trend toward consolidation of major FSS providers as customers increasingly demand more robust distribution platforms with network redundancies and worldwide reach, and we expect to face increased competition as a result of this trend. Our direct competitors are likely to continue developing and launching satellites with greater power and more transponders, which may create satellite capacity at lower costs. In order to compete effectively, we invest in similar technology.
We also believe that there are many companies that are seeking ways to improve the ability of existing land-based infrastructure, such as fiber optic cable, to transmit signals. Any significant improvement or increase in the amount of land-based capacity, particularly with respect to the existing fiber optic cable infrastructure and point-to-point applications, may cause our video and network services customers to shift their transmissions to land-based capacity or make it more difficult for

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us to obtain new customers. If fiber optic cable networks or other ground-based high-capacity transmission systems are available to service a particular point, that capacity, when available, is generally less expensive than satellite capacity. As land-based telecommunications services expand, demand for some satellite-based services may be reduced.
In addition, we face challenges to our business apart from these industry trends that our competition may not face. A portion of our revenue has historically been derived from channel services, and from other point-to-point services which comprise a portion of our transponder services. Because fiber optic cable capacity is generally available at lower prices than satellite capacity, competition from fiber optic cable providers has historically caused a migration of our point-to-point customers from satellite to fiber optic cable on certain routes, resulting in erosion in our revenue from point-to-point services over the last ten years. Some other FSS operators have service mixes that are less weighted towards point-to-point connectivity than our current service mix. We have been addressing this erosion and sustaining our business by expanding our customer base in point-to-multipoint services, such as video, and growing our presence in serving wireless communications providers and the mobility sector.
Failure to compete effectively with other FSS operators and to adapt to new competition and new technologies or failure to implement our business strategy while maintaining our existing business could result in a loss of revenue and a decline in profitability, a decrease in the value of our business and a downgrade of our credit ratings, which could restrict our access to the capital markets.

The market for FSS may not grow or may shrink, and therefore we may not be able to attract new customers, retain our existing customers or implement our strategies to grow our business. In addition, pricing pressures may have an adverse impact on FSS sector revenue.
The FSS sector, as a whole, has experienced growth over the past few years. However, the future market for FSS may not grow or may shrink. Competing technologies, such as fiber optic cable, continue to adversely affect the point-to-point segment of the FSS sector. In the point-to-multipoint segment, economic downturns, the transition of video traffic from analog to digital and continuing improvements in compression technology, which allow for improved transmission efficiency, have negatively impacted demand for certain fixed satellite services. Developments that we expect to support the growth of the satellite services industry, such as continued growth in data traffic and the proliferation of DTH platforms, high-definition television (“HDTV”) and niche programming, may fail to materialize or may not occur in the manner or to the extent we anticipate. Any of these industry dynamics could negatively affect our operations and financial condition.
Because the market for FSS may not grow or may shrink, we may not be able to attract customers for the services that we are providing as part of our strategy to sustain and grow our business. Reduced growth in the FSS sector may also adversely affect our ability to retain our existing customers. A shrinking market could reduce the number and value of our customer contracts and would have a material adverse effect on our business and results of operations. In addition, there could be a substantial negative impact on our credit ratings and our ability to access the capital markets.
The FSS sector has in the past experienced periods of pricing pressures that have resulted in reduced revenues of FSS operators. Current pricing pressures and potential pricing pressures in the future could have a significant negative impact on our revenues and financial condition.
We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.
As of December 31, 2019, on a consolidated basis, we had approximately $14.7 billion principal amount of third-party indebtedness outstanding, approximately $4.9 billion of which was secured debt. Our subsidiaries were the issuers or borrowers of portions of this debt as follows: (a) Intelsat (Luxembourg) S.A. (“Intelsat Luxembourg”), had approximately $14.3 billion principal amount of total third-party indebtedness outstanding on a consolidated basis, approximately $4.9 billion of which was secured debt, (b) Intelsat Connect Finance S.A. (“ICF”), had approximately $1.25 billion principal amount of total third-party indebtedness outstanding on a stand-alone basis, and (c) Intelsat Jackson Holdings S.A. (“Intelsat Jackson”), had approximately $11.8 billion principal amount of total third-party indebtedness outstanding on a consolidated basis, approximately $4.9 billion of which was secured debt. Intelsat Luxembourg debt, ICF debt and Intelsat Jackson debt are included in our consolidated debt.
The indentures and credit agreements governing a substantial portion of the outstanding debt of Intelsat Luxembourg, ICF and Intelsat Jackson and their respective subsidiaries permit each of these companies to make payments to their respective direct and indirect parent companies to fund the cash interest payments on such indebtedness, so long as no default or event of default shall have occurred and be continuing or would occur as a consequence thereof.

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Our substantial indebtedness could have important consequences. For example, it could:
 
make it more difficult for us to satisfy obligations with respect to indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under the indentures governing our notes and the agreements governing such other indebtedness;
require us to dedicate a substantial portion of available cash flow to pay principal and interest on our outstanding debt, which will reduce the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes;
limit flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
increase our vulnerability to general adverse economic and industry conditions and to deterioration in operating results;
limit our ability to engage in strategic transactions or implement our business strategies;
limit our ability to borrow additional funds, or to refinance, repay or restructure our existing indebtedness; and
place us at a disadvantage compared to any competitors that have less debt.

Any of the factors listed above could materially and adversely affect our business and our results of operations. Furthermore, our interest expense could increase if interest rates rise because certain portions of our debt bear interest at floating rates. Although we have hedged the full amount of our floating rate debt of $2.4 billion through February 2021 for increases in the 1-month London InterBank Offered Rate (“LIBOR”) to a rate above 1.89%, any increases in 1-month LIBOR from current levels to 1.89% would cause our interest expense to increase. Our interest expense could also increase when we refinance debt. If we do not have sufficient cash flow to service our debt, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can guarantee we will be able to do.
We may be able to incur significant additional indebtedness in the future. Although the agreements governing our indebtedness contain restrictions on the incurrence of certain additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. If we incur new indebtedness, the related risks, including those described above, could intensify.
To service our third-party indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our third-party debt service obligations could harm our business, financial condition and results of operations.
Our estimated payment obligations with respect to third-party indebtedness (i.e., indebtedness not held by the Company or any of our subsidiaries) for 2020 comprise approximately $1.1 billion of interest payments, excluding payments related to satellite performance incentives due to satellite manufacturers. Of this amount, $908 million is attributable to Intelsat Jackson, $105 million is attributable to Intelsat Luxembourg, $119 million is attributable to ICF, and $18 million is attributable to Intelsat S.A.
Our ability to satisfy our debt obligations will depend principally upon our future operating performance. As a result, prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to make payments on our indebtedness. If we do not generate sufficient cash flow from operations to satisfy our debt service obligations, or if our subsidiaries are prohibited from paying dividends or making distributions because of restrictions in the agreements governing their indebtedness or otherwise, we may have to pursue alternative financing plans, such as refinancing or restructuring our indebtedness, selling assets, reducing or delaying capital investments or seeking to raise additional capital. Our ability to refinance or restructure our debt will depend on the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of our and our subsidiaries’ existing or future debt instruments, including the Intelsat Jackson Secured Credit Agreement and the indentures governing Intelsat S.A.'s, Intelsat Luxembourg’s, Intelsat Jackson’s and ICF’s outstanding notes, may restrict us from adopting some of these alternatives. Furthermore, Serafina S.A. has no obligation to provide us with debt or equity financing in the future. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance our obligations on commercially reasonable terms would have an adverse effect, which could be material, on our business, financial position, results of operations and cash flows.
The terms of the Intelsat Jackson Secured Credit Agreement, the indentures governing our existing notes and the terms of our other indebtedness may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.
On January 12, 2011, Intelsat Jackson entered into a secured credit agreement (as amended, the “Intelsat Jackson Secured Credit Agreement”). The Intelsat Jackson Secured Credit Agreement, the indentures governing our existing notes and the terms of our other outstanding indebtedness contain, and any future indebtedness of ours would likely contain, a number of restrictive covenants imposing significant operating and financial restrictions on Intelsat S.A. and some or all of its subsidiaries, including

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restrictions that may limit our ability to engage in acts that may be in our long-term best interests. The Intelsat Jackson Secured Credit Agreement includes one financial covenant: Intelsat Jackson must maintain a consolidated secured debt to consolidated EBITDA ratio of less than or equal to 3.50 to 1.00 at the end of each fiscal quarter, as such financial measure is defined in the Intelsat Jackson Secured Credit Agreement. To meet this financial maintenance covenant ratio over the course of 2020 and beyond, management may seek to amend the covenant to loosen or eliminate the ratio requirement or may use the equity cure provisions in the agreement by contributing cash held at ICF, the parent company of Intelsat Jackson. However, an amendment to the covenant may not be available on commercially reasonable terms and effecting an equity cure may require substantial cash contributions.
In addition, the Intelsat Jackson Secured Credit Agreement requires Intelsat Jackson to use a portion of the proceeds of certain asset sales, in excess of a specified amount, that are not reinvested in its business to repay indebtedness under the agreement.
The Intelsat Jackson Secured Credit Agreement, the indentures governing our existing notes and the terms of our other outstanding indebtedness include covenants restricting, among other things, the ability of Intelsat S.A. and its subsidiaries to:
 
incur or guarantee additional debt or issue disqualified stock;
pay dividends (including to fund cash interest payments at different entity levels), or make redemptions, repurchases or distributions, with respect to ordinary shares or capital stock;
create or incur certain liens;
make certain loans or investments;
engage in mergers, acquisitions, amalgamations, asset sales and sale and leaseback transactions; and
engage in transactions with affiliates.
In addition, under certain circumstances as described in the Intelsat Jackson Secured Credit Agreement, Intelsat could be required to apply a certain percentage of its Excess Cash Flow (as defined in such agreement), if any, after operational needs for each fiscal year towards the repayment of outstanding term loans, subject to certain deductions.
These covenants are subject to a number of qualifications and exceptions. The operating and financial restrictions and covenants in our existing debt agreements and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities. A breach of any of the restrictive covenants in the Intelsat Jackson Secured Credit Agreement, including the financial maintenance covenant referred to above could result in a default under such agreement. If any such default occurs, the lenders under the Intelsat Jackson Secured Credit Agreement may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable, enforce their security interest or require us to apply all available cash to repay these borrowings. If this occurred under the Intelsat Jackson Secured Credit Agreement, this would result in an event of default under our existing notes. If Intelsat Jackson were unable to repay outstanding borrowings when due, the lenders under the Intelsat Jackson Secured Credit Agreement would have the right to proceed against the collateral granted to them to secure the debt owed to them. If the debt under the Intelsat Jackson Secured Credit Agreement were to be accelerated, our assets might not be sufficient to repay such debt in full or to repay our notes and our other debt.
Our business is capital intensive and requires us to make long-term capital expenditure decisions, and we may not be able to raise adequate capital to finance our business strategies, or we may be able to do so only on terms that significantly restrict our ability to operate our business.
Implementation of our business strategy requires a substantial outlay of capital. As we pursue our business strategies and seek to respond to opportunities and trends in our industry, our actual capital expenditures may differ from our expected capital expenditures and there can be no assurance that we will be able to satisfy our capital requirements in the future. The nature of our business also requires us to make capital expenditure decisions in anticipation of customer demand, and we may not be able to correctly predict customer demand. We have only a fixed amount of transponder capacity available to serve a particular region. If our customer demand exceeds our transponder capacity, we may not be able to fully capture the growth in demand in the region served by that capacity. We currently expect that our liquidity requirements in 2020 will be satisfied by cash on hand and cash generated from our operations. However, if we determine we need to obtain additional funds through external financing and are unable to do so, we may be prevented from fully implementing our business strategy.
The availability and cost to us of external financing depend on a number of factors, including general market conditions, our financial performance and our credit rating. Both our credit rating and our ability to obtain financing generally may be influenced by the supply and demand characteristics of the telecommunications sector in general and of the FSS sector in particular. Declines in our expected future revenue under contracts with customers and challenging business conditions faced

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by our customers are among factors that may adversely affect our credit. Other factors that could impact our credit include the amount of debt in our current capital structure, activities associated with our strategic initiatives, our expected future cash flows and the capital expenditures required to execute our business strategy. The overall impact on our financial condition of any transaction that we pursue may be negative or may be negatively perceived by the financial markets and ratings agencies and may result in adverse rating agency actions with respect to our credit rating. A disruption in the capital markets, a deterioration in our financial performance or a credit rating downgrade could limit our ability to obtain financing or could result in any such financing being available only at greater cost or on more restrictive terms than might otherwise be available. Our debt agreements also impose restrictions on our operation of our business and could make it more difficult for us to obtain further external financing if required. See—The terms of the Intelsat Jackson Secured Credit Agreement, the indentures governing our existing notes and the terms of our other indebtedness may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.
Long-term disruptions in the capital and credit markets as a result of uncertainty due to recessions, changing or increased regulation or failures of significant financial institutions could adversely affect our access to capital. If financial market disruptions intensify, it may become difficult for us to raise additional capital or refinance debt when needed, on acceptable terms or at all. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Such measures could include deferring capital expenditures and reducing or eliminating other discretionary uses of cash, which could adversely impact our business and our ability to execute our business strategies.

Our financial condition could be materially and adversely affected if we were to suffer a satellite loss that is not adequately covered by insurance.
We currently carry in-orbit insurance only with respect to a small portion of our satellite fleet, generally for a short period of time following launch. As of December 31, 2019, five of the 54 satellites in our fleet were covered by in-orbit insurance. Amounts recoverable from in-orbit insurance coverage may initially be comparable to amounts recoverable with respect to launch insurance coverage; however, such amounts generally decrease over time and are typically based on our declining potential repayment obligations with respect to certain customer prepayments made prior to or during the manufacture of certain satellites, or the declining book value of the satellite.
As our satellite insurance policies expire, we may elect to reduce or eliminate insurance coverage relating to certain of our satellites to the extent permitted by our debt agreements if, in our view, exclusions make such policies ineffective or the costs of coverage make such insurance impractical and we believe that we can more reasonably protect our business through the use of in-orbit spare satellites, backup transponders and self-insurance. A partial or complete failure of a revenue-producing satellite, whether insured or not, could require additional, unplanned capital expenditures, an acceleration of planned capital expenditures, interruptions in service, a reduction in contracted backlog and lost revenue and could have a material adverse effect on our business, financial condition and results of operations. We do not currently insure against lost revenue in the event of total or partial loss of a satellite.
We also maintain third-party liability insurance on some of our satellites to cover damage caused by our satellites. This insurance, however, may not be adequate or available to cover all third-party liability damages that may be caused by any of our satellites, and we may not in the future be able to renew our third-party liability coverage on reasonable terms and conditions, if at all.
We may become subject to unanticipated tax liabilities that may have a material adverse effect on our results of operations.
Intelsat S.A. and certain of its subsidiaries are Luxembourg-based companies and are subject to Luxembourg taxation for corporations. We believe that a significant portion of the income derived from our communications network will not be subject to tax in certain countries in which we own assets or conduct activities or in which our customers are located, including the United States and the United Kingdom. However, this belief is based on the presently anticipated nature and conduct of our business and on our current position under the tax laws of the countries in which we own assets or conduct activities. This position is subject to review and possible challenge by taxing authorities and to possible changes in law that may have a retroactive effect.
In addition, we conduct business with customers and counterparties in multiple countries and jurisdictions. Our overall tax burden is affected by tax legislation in these jurisdictions and the terms of income tax treaties between these countries and the countries in which our subsidiaries are qualified residents for treaty purposes as in effect from time to time. Tax legislation in these countries and jurisdictions may be amended and treaties are regularly renegotiated by the contracting countries and, in each case, may change. If tax legislation or treaties were to change, we could become subject to additional taxes, including retroactive tax claims or assessments of withholding on amounts payable to us or other taxes assessed at the source, in excess

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of the taxation we anticipate based on business contracts and practices and the current tax regimes. The extent to which certain taxing jurisdictions may require us to pay tax or to make payments in lieu of tax cannot be determined in advance. Our results of operations could be materially adversely affected if we become subject to a significant amount of unanticipated tax liabilities.
We are subject to political, economic, regulatory and other risks due to the international nature of our operations.
We provide communications services in approximately 200 countries and territories. Accordingly, we may be subject to greater risks than other companies as a result of the international nature of our business operations. We could be harmed financially and operationally by tariffs, taxes, government sanctions and regulatory actions, and other trade barriers that may be imposed on our services, or by political and economic instability in the countries in which we provide services, for instance in countries heavily reliant on revenues from natural resources. If we ever need to pursue legal remedies against our customers or our business partners located outside of Luxembourg, the United States or the United Kingdom, it may be difficult for us to enforce our rights against them depending on their location.
Substantially all of our ongoing technical operations are conducted and/or managed in the United States, Luxembourg and Germany. However, providers of satellite launch services, upon which we are reliant to place our satellites into orbit, locate their operations in other countries, including Kazakhstan. Political disruptions in this country could increase the risk of launching the satellites that provide capacity for our operations, which could result in financial harm to us.

Our business is subject to foreign currency risk.
Almost all of our customers pay for our services in U.S. dollars, although we are exposed to some risk related to customers who do not pay in U.S. dollars. Fluctuations in the value of non-U.S. currencies may make payment in U.S. dollars more expensive for our non-U.S. customers, and in certain circumstances, cause us to renegotiate prices or other terms in contracts in order to retain such customers. For instance, our Russian and Venezuelan customers and others may face difficulties paying for our services because of recent deterioration in their respective currencies and the relative strength of the U.S. dollar compared to many other currencies. In addition, our non-U.S. customers may have difficulty obtaining U.S. currency and/or remitting payment due to currency exchange controls.
Serafina S.A. owns a significant amount of our common shares and may have conflicts of interest with us in the future.
Serafina S.A. holds in the aggregate approximately 34% of our common shares. By virtue of its share ownership, Serafina S.A. may be able to influence decisions to enter into any corporate transaction or other matter that requires the approval of shareholders. Additionally, Serafina S.A. is in the business of making investments in companies and, although it does not currently hold interests in any business that competes directly or indirectly with us, it may from time to time acquire and hold interests in businesses that compete with us. Serafina S.A. may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
We have several large customers and the loss of, or default by, these customers could materially reduce our revenue and materially adversely affect our business.
A limited number of customers provide a substantial portion of our revenue and contracted backlog. For the year ended December 31, 2019, our ten largest customers and their affiliates represented approximately 41% of our revenue. The loss of, or default by, our larger customers could adversely affect our current and future revenue and operating margins.
Some customers have in the past defaulted and, although we monitor our larger customers’ financial performance and seek deposits, guarantees and other methods of protection against default where possible, our customers may in the future default on their obligations to us due to bankruptcy, lack of liquidity, operational failure, devaluation of local currency or other reasons. Defaults by any of our larger customers or by a group of smaller customers who, collectively, represent a significant portion of our revenue could adversely affect our revenue, operating margins and cash flows. If our contracted backlog is reduced due to the financial difficulties of our customers, our revenue, operating margins and cash flows would be further negatively impacted.
Reductions or changes in U.S. government spending, including the U.S. defense budget, could reduce our revenue and adversely affect our business.
The U.S. government, through the U.S. Department of Defense and other agencies, is one of our largest customers. Spending authorizations for defense-related and other programs by the U.S. government have fluctuated in the past, and future levels of expenditures and authorizations for these programs may decrease, remain constant or shift to programs in areas where we do not currently provide services. We provide services to the U.S. government and its agencies through contracts that are

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conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal year basis, even though contract performance may extend over many years. In recent years, there has been a pattern of delays in the finalization and approval of the U.S. government budget, which can create uncertainty over the extent of future U.S. government demand for our services. Furthermore, in light of the current geopolitical situation, with uncertainty surrounding the level of U.S. operational presence in Iraq, Afghanistan and potentially the Middle East more generally, there may be future declines in the U.S. government’s demand for and use of our services. To the extent the U.S. government and its agencies reduce spending on commercial satellite services, this could adversely affect our revenue and operating margins.
The loss of the services of key personnel could have a material adverse effect on our business.
Our executive officers and other members of our senior management have been a critical element of our success. These individuals have substantial experience and expertise in our business and have made significant contributions to its growth and success. We have entered into employment agreements with each of our executive officers, including Stephen Spengler, our Chief Executive Officer, David Tolley, our Executive Vice President and Chief Financial Officer, Samer Halawi, our Executive Vice President and Chief Commercial Officer, Michelle Bryan, our Executive Vice President, General Counsel and Chief Administrative Officer, and Michael DeMarco, our Executive Vice President and Chief Services Officer, and certain targeted retention mechanisms; however, these agreements and mechanisms do not guarantee that these executives will remain with us. The unexpected loss of services of one or more of our executive officers or members of senior management could have a material adverse effect on our business.

Risk Factors Relating to Our Industry
We may experience in-orbit satellite failures or degradations in performance that could impair the commercial performance of our satellites, which could lead to lost revenue, an increase in our cash operating expenses, lower operating income or lost backlog.
Satellites utilize highly complex technology and operate in the harsh environment of space and, accordingly, are subject to significant operational risks while in orbit. These risks include malfunctions, commonly referred to as anomalies that have occurred in our satellites and the satellites of other operators as a result of:
 

the satellite manufacturer’s error, whether due to the use of new and largely unproven technology or due to a design, manufacturing or assembly defect that was not discovered before launch, including:
failure of components from inadvertent susceptibility to the harshest spaceweather conditions; and/or
problems with the power systems of the satellites, including:
circuit failures or other array degradation causing reductions in the power output of the solar arrays on the satellites, which could cause us to lose some of our capacity, require us to forego the use of some transponders initially and to turn off additional transponders in later years; and/or
failure or other degradation of the cells within the batteries, whose sole purpose is to power the payload and spacecraft operations during the daily eclipse periods which occur for brief periods of time during two 40-day periods around March 21 and September 21 of each year; and/or
problems with the control systems of the satellites, including:
failure of the command or telemetry processing units; and/or
failure of the primary and/or backup SCP; and/or
failure of one or more earth sensors, star trackers, gyroscope and/or associated electronics that are used to provide satellite attitude information; and/or
failure of the control wheel actuators; and/or
problems with the propulsion systems of the satellites, including:
failure of the primary and/or backup chemical thrusters; and/or
failure of the XIPS used on certain Boeing satellites, which is an electronic propulsion system that maintains the spacecraft’s proper in-orbit position; and/or
propellant leaks from lines or thrusters; and/or
problems associated with strikes from micrometeoroids or space orbit debris; and/or
general failures resulting from operating satellites in the harsh space environment, such as premature component failure or wear out of mechanisms exceeding available redundancy.
We have experienced anomalies in each of the categories described above. Although we work closely with the satellite manufacturers to determine and eliminate the cause of these anomalies in new satellites and provide for on-satellite backups for certain critical components to minimize or eliminate service disruptions in the event of failure, we may experience anomalies in the future, whether of the types described above or arising from the failure of other systems or components. These anomalies can manifest themselves in scale from minor reductions of equipment redundancy to marginal reductions in capacity to

34





complete satellite failure. Some of our satellites have experienced significant anomalies in the past and some have components that are now known to be susceptible to similar significant anomalies. Each of these is discussed in Item 1—Business—Business Overview—Satellite Health and Technology. An on-satellite backup for certain components may not be available upon the occurrence of such an anomaly.

Any single anomaly or series of anomalies could materially and adversely affect our operations, our revenues, our relationships with our current customers and our ability to attract new customers for our satellite services. In particular, future anomalies may result in the loss of individual transponders on a satellite, a single beam or multiple beams, a group of transponders on that satellite or the entire satellite, depending on the nature of the anomaly and the availability of on-satellite backups. Anomalies and our estimates of their future effects may also cause a reduction of the expected service life of a satellite and contracted backlog. Anomalies may also cause a reduction of the revenue generated by that satellite or the recognition of an impairment loss, and in some circumstances could lead to claims from third parties for damages, if a satellite experiencing an anomaly were to cause physical damage to another satellite, create interference to the transmissions on another satellite, cause other satellite operators to incur expenses to avoid such physical damage or interference or lower operating income as a result of an impairment charge. Finally, the occurrence of anomalies may adversely affect our ability to insure our satellites at commercially reasonable premiums, if at all. While some anomalies are covered by insurance policies, others are not or may not be covered. See—Risk Factors Relating to Our Business—Our financial condition could be materially and adversely affected if we were to suffer a satellite loss that is not adequately covered by insurance.
Many of the technical problems we have experienced on our current fleet have been component failures and anomalies. Our Intelsat 804 satellite experienced a sudden and unexpected electrical power system anomaly that resulted in the total loss of the satellite in January 2005. The Intelsat 804 satellite was an LM 7000 series satellite, and as of December 31, 2019, we operated one other satellite in the LM 7000 series, Intelsat 805, which was decommissioned in early 2020. We believe that the Intelsat 804 satellite failure was most likely caused by a high current event in the battery circuitry triggered by an electrostatic discharge that propagated to cause the sudden failure of the high voltage power system.
Our Galaxy 15 satellite experienced an anomaly in April 2010 resulting in our inability to command the satellite. We transitioned all media traffic on this satellite to our Galaxy 12 satellite, which was our designated in-orbit spare satellite for the North America region. Galaxy 15 is a Star-2 satellite manufactured by Northrup Grumman Innovation Systems ("NGIS"). On December 23, 2010, we recovered command of the spacecraft and subsequently completed diagnostic testing and uploading of software updates that protect against future anomalies of this type. As of December 31, 2019, Galaxy 15 continued to provide normal service.
We may also experience additional anomalies relating to the failure of the SCP in our BSS 601 satellite, various anomalies associated with XIPS in our BSS 601 HP satellites or a progressive degradation of the solar arrays in certain of our BSS 702 satellites.
Three of the BSS 601 satellites that we operated in the past, as well as BSS 601 satellites operated by others, have experienced a failure of the primary and backup SCPs. On February 1, 2010, our Intelsat 4 satellite experienced an anomaly of its backup SCP and was taken out of service. This event did not have a material impact on our operations or financial results. As of December 31, 2019, we operated only one BSS 601 satellite, Intelsat 26.
Certain of the BSS 601 HP satellites have experienced various problems associated with their XIPS. We currently operate four BSS 601 HP satellites of this type, three of which have experienced failures of both XIPS and the other has experienced a partial loss of its XIPS. We may in the future experience similar problems associated with XIPS or other propulsion systems on our satellites.
Two of the three BSS 702 HP satellites that we operate, as well as BSS 702 HP satellites of a similar design operated by others, have experienced a progressive degradation of their solar arrays causing a reduction in output power. Along with the manufacturer, we continually monitor the problem to determine its cause and its expected effect. The power reduction may require us to permanently turn off certain transponders on the affected satellites to allow for the continued operation of other transponders, which could result in a loss of revenues, or may result in a reduction of the satellite’s service life. In 2004, based on a review of available data, we reduced our estimate of the service lives of both satellites due to the continued degradation.
On April 22, 2011, our Intelsat 28 satellite, formerly known as the Intelsat New Dawn satellite, was launched into orbit. Subsequent to the launch, the satellite experienced an anomaly during the deployment of its west antenna reflector, which controls communications in the C-band frequency. The anomaly had not been experienced previously on other STAR satellites manufactured by NGIS, including those in our fleet. The New Dawn joint venture filed a partial loss claim with its insurers relating to the C-band antenna reflector anomaly and all of the insurance proceeds from the partial loss claim were received in

35





2011. The Ku-band antenna reflector deployed and that portion of the satellite is operating as planned, entering service in June 2011. A Failure Review Board established to determine the cause of the anomaly completed its investigation in July 2011 and concluded that the deployment anomaly of the C-band reflector was most likely due to a malfunction of the reflector sunshield. As a result, the sunshield interfered with the ejection release mechanism, and prevented the deployment of the C-band antenna. The Failure Review Board also recommended corrective actions for Orbital Sciences Corporation satellites not yet launched to prevent reoccurrence of the anomaly. Appropriate corrective actions were implemented on Intelsat 18, which was successfully launched in October 2011, and on Intelsat 23, which was launched in October 2012.

During launch operations of Intelsat 19 on June 1, 2012, the satellite experienced damage to its south solar array. Although both solar arrays are deployed, the power available to the satellite is less than is required to operate 100% of the payload capacity. The Independent Oversight Board, formed by Space Systems/Loral, LLC (“SSL”) and Sea Launch to investigate the solar array deployment anomaly, concluded that the anomaly occurred before the spacecraft separated from the launch vehicle during the ascent phase of the launch, and originated in one of the satellite’s two solar array wings due to a rare combination of factors in the panel fabrication that was unrelated to the launch vehicle. While the satellite is operational, the anomaly resulted in structural and electrical damage to one solar array wing, which reduced the amount of power available for payload operation. Additionally, we filed a partial loss claim with our insurers relating to the solar array anomaly. We received $84.8 million of insurance proceeds related to the claim in 2013. As planned, Intelsat 19 replaced Intelsat 8 at 166°E, in August 2012.
During orbit raising of Intelsat 33e in September 2016, the satellite experienced a malfunction of the main satellite thruster. Orbit raising was subsequently completed using a different set of satellite thrusters. The anomaly resulted in a delay of approximately three months in reaching the geostationary orbit, as well as a reduction in the projected lifetime of the satellite. Intelsat 33e entered service in January 2017. In addition, in February 2017, measurements indicated higher than expected fuel use while performing stationkeeping maneuvers. There is no evidence of any impact to the communications payload. A Failure Review Board completed its investigation of the primary thruster failure and fuel use anomalies and identified several design, build and screening improvements that are being implemented by the satellite manufacturer for future satellites using the same engine. In addition, the manufacturer has adapted its propellant estimation software for both anomalies, which we take into account in making our end of life prediction.
In April 2019, the Intelsat 29e satellite (in service since 2016) experienced an anomaly that resulted in a total loss of the satellite. A Failure Review Board comprised of the satellite’s manufacturer, Boeing Satellite Systems, Inc., the Company and external independent experts was convened to complete a comprehensive analysis of the cause of the anomaly. The board concluded that the anomaly was either caused by a harness flaw in conjunction with an electrostatic discharge event related to solar weather activity, or the impact of a micrometeoroid.
We may experience a launch failure or other satellite damage or destruction during launch, which could result in a total or partial satellite loss. A new satellite could also fail to reach its designated orbital location after launch. Any such loss of a satellite could negatively impact our business plans and could reduce our revenue.
Satellites are subject to certain risks related to failed launches. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take 24 months or longer, and to obtain other launch opportunities. Such significant delays could materially and adversely affect our operations and our revenue. In addition, significant delays could give customers who have purchased or reserved capacity on that satellite a right to terminate their service contracts relating to the satellite. We may not be able to accommodate affected customers on other satellites until a replacement satellite is available. A customer’s termination of its service contracts with us as a result of a launch failure would reduce our contracted backlog. Delays caused by launch failures may also preclude us from pursuing new business opportunities and undermine our ability to implement our business strategy.
Launch vehicles may also under-perform, in which case the satellite may still be placed into service by using its onboard propulsion systems to reach the desired orbital location, resulting in a reduction in its service life. In addition, although we have had launch insurance on all of our launches to date, if we were not able to obtain launch insurance on commercially reasonable terms and a launch failure were to occur, we would directly suffer the loss of the cost of the satellite and related costs, which could be more than $300 million.
On February 1, 2013, the launch vehicle for our Intelsat 27 satellite failed shortly after liftoff and the satellite was completely destroyed. A Failure Review Board was established and subsequently concluded that the launch failed due to the mechanical failure of one of the first stage engine’s thrust control components. The satellite and launch vehicle were fully insured, and all of the insurance proceeds from the loss claim were received in 2013.

36





Since 1980, we and the entities we have acquired have launched 124 satellites. Including the Intelsat 27 satellite, seven of these satellites were destroyed as a result of launch failures, all but one of which occurred prior to 2000. In addition, certain launch vehicles that we have used or are scheduled to use have experienced launch failures in the past. Launch failure rates vary according to the launch vehicle used. Our capital expenditure guidance for 2020 through 2022 assumes investment in five satellites, two of which are currently in the manufacturing phase. Of the remaining three satellites, no manufacturing contracts have yet been signed.

New or proposed satellites are subject to construction and launch delays, the occurrence of which can materially and adversely affect our business, operating results and financial condition.
The construction and launch of satellites are subject to certain delays. Such delays can result from delays in the construction of satellites and launch vehicles, the periodic unavailability of reliable launch opportunities, possible delays in obtaining regulatory approvals and launch failures. We have in the past experienced delays in satellite construction and launch which have adversely affected our operations. Future delays may have the same effect. A significant delay in the future delivery of any satellite may also adversely affect our marketing plan for the satellite. If satellite construction schedules are not met, a launch opportunity may not be available at the time a satellite is ready to be launched. Further, any significant delay in the commencement of service of any of our satellites could enable customers who pre-purchased or agreed to utilize transponder capacity on the satellite to terminate their contracts and could affect our plans to replace an in-orbit satellite prior to the end of its service life. The failure to implement our satellite deployment plan on schedule could have a material adverse effect on our financial condition and results of operations. Delays in the launch of a satellite intended to replace an existing satellite that result in the existing satellite reaching its end of life before being replaced could result in loss of business to the extent an in-orbit backup is not available.
Our dependence on outside contractors could result in increased costs and delays related to the launch of our new satellites, which would in turn adversely affect our business, operating results and financial condition.
There are a limited number of companies that we are able to use to launch our satellites and a limited number of commercial satellite launch opportunities available in any given time period. Adverse events with respect to our launch service providers, such as satellite launch failures or financial difficulties (which some of these providers have previously experienced), could result in increased costs or delays in the launch of our satellites. General economic conditions may also affect the ability of launch providers to provide launch services on commercially reasonable terms or to fulfill their obligations in terms of launch dates, pricing, or both. In the event that our launch service providers are unable to fulfill their obligations, we may have difficulty procuring alternative services in a timely manner and may incur significant additional expenses as a result. Any such increased costs and delays could have a material adverse effect on our business, operating results and financial condition.
A natural disaster could diminish our ability to provide communications service.
Natural disasters could damage or destroy our ground stations, resulting in a disruption of service to our customers. We currently have the technology to help safeguard our antennas and protect our ground stations during natural disasters such as a hurricane, but the collateral effects of disasters such as flooding may impair the functioning of our ground equipment. If a future natural disaster impairs or destroys any of our ground facilities, we may be unable to provide service to our customers in the affected area for a period of time and may incur an impairment charge lowering our operating income.
Risk Factors Relating to Regulation
We are subject to the orbital slot and spectrum access requirements of the ITU and regulatory and licensing requirements in each of the countries in which we provide services, operate facilities, or license terminals, and our business is sensitive to regulatory changes internationally and in those countries.
The telecommunications industry is highly regulated, and we depend on access to orbital slots and spectrum resources to provide satellite services. The ITU and national regulators allocate spectrum for satellite services, and may change these allocations, which could change or limit how Intelsat’s current satellites are able to be used. In addition, in connection with providing satellite capacity, ground network uplinks, downlinks and other value-added or managed services to our customers, we need to maintain regulatory approvals, and from time to time obtain new regulatory approvals, from various countries. Obtaining and maintaining these approvals can involve significant time and expense. If we cannot obtain or are delayed in obtaining the required regulatory approvals, we may not be able to provide these services to our customers, operate facilities and terminals, or expand into new services. In addition, the laws and regulations to which we are subject could change at any time, thus making it more difficult for us to obtain new regulatory approvals or causing our existing approvals to be revoked or adversely modified. Because the regulatory schemes vary by country, we may also be subject to regulations of which we are not presently aware and could be subject to sanctions by a foreign government that could materially and adversely affect our operations in that country. If we cannot comply with the laws and regulations that apply to us, we could lose our revenue from

37





services provided to the countries and territories covered by these laws and regulations and be subject to criminal or civil sanctions.

If we do not maintain regulatory authorizations for our existing satellites, associated ground facilities and terminals, services we provide, or obtain authorizations for our future satellites, associated ground facilities and terminals, and services we provide, we may not be able to operate our existing satellites or expand our operations.
The operation of our existing satellites is authorized and regulated by the FCC in the U.S., Ofcom and UKSA in the U.K., NICTA in Papua New Guinea, the Ministry of Internal Affairs and Communications of Japan, and BNetzA in Germany.
We believe our current operations are in compliance with FCC and non-U.S. licensing jurisdiction requirements. However, if we do not maintain the authorizations necessary to operate our existing satellites, we will not be able to operate the satellites covered by those authorizations, unless we obtain authorization from another licensing jurisdiction. Some of our authorizations provide waivers of technical regulations. If we do not maintain these waivers, we will be subject to operational restrictions or interference that will affect our use of existing satellites. Loss of a satellite authorization could cause us to lose the revenue from services provided by that satellite at a particular orbital location or using a particular frequency band, to the extent these services cannot be provided by satellites at other orbital locations or with a different frequency band.
Our launch and operation of planned satellites require additional regulatory authorizations from the FCC or a non-U.S. licensing jurisdiction. Likewise, if any of our current operations are deemed not in compliance with applicable regulatory requirements, we may be subject to various sanctions, including fines, loss of authorizations, or denial of applications for new authorizations or renewal of existing authorizations. It is not uncommon for licenses for new satellites to be granted just prior to launch, and we expect to receive such licenses for all planned satellites. If we do not obtain required authorizations in the future, we will not be able to operate our planned satellites. If we obtain a required authorization but we do not meet milestones regarding the construction, launch and operation of a satellite by deadlines that may be established in the authorization, we may lose our authorization to operate a satellite using certain frequencies in an orbital location. Any authorizations we obtain may also impose operational restrictions or permit interference that could affect our use of planned satellites.
If we do not occupy unused orbital locations or use certain frequencies by specified deadlines, or do not maintain satellites in orbital locations we currently use, our rights and/or priority to use these orbital locations and associated frequencies may lapse or become available for other satellite operators to use.
If we are unable to place satellites into currently unused orbital locations by specified deadlines and in a manner that satisfies the ITU or national regulatory requirements, or if we are unable to maintain satellites at the orbital locations that we currently use, we may lose our rights and/or priority to use these orbital locations and associated frequencies, and the locations and frequencies with ITU priority could become available for other satellite operators to use. The loss of one or more of our orbital locations and associated frequencies could negatively affect our plans and our ability to implement our business strategy.
Coordination results may adversely affect our ability to use a satellite at a given orbital location in certain frequency bands for our proposed service or coverage area.
We are required to record frequencies and orbital locations used by our satellites with the ITU and to coordinate with other satellite operators and national administrations the use of these frequencies and orbital locations in order to avoid interference to or from other satellites. The results of coordination may adversely affect our use of satellites at particular orbital locations using certain frequencies, as well as the type of applications or services that we can accommodate. If we are unable to coordinate our satellites by specified deadlines, we may not be able to use a satellite at a given orbital location or use certain frequencies for our proposed service or coverage area. The use of our satellites may also be temporarily or permanently adversely affected if the operation of adjacent satellite networks does not conform to coordination agreements resulting in the acceptable interference levels being exceeded (e.g., due to operational errors associated with the transmissions to adjacent satellite networks).
We can provide no assurance as to our ability to obtain value for making spectrum available for terrestrial mobile services in the United States in connection with the FCC’s C-band proceeding. Furthermore, there are a number of technical challenges to making C-band spectrum available.
On October 2, 2017, Intelsat and Intel Corporation submitted a proposal to the FCC that would enable joint use of 3.7-4.2 GHz C-band spectrum in the United States by fixed satellite services operators and terrestrial mobile services providers (the “C-band Proposal”). The FCC issued a Notice of Proposed Rule Making (“NPRM”) in July 2018 that included aspects of the C-band Proposal, and the proposal was later supported by a consortium of satellite operators comprised of Intelsat, SES Americom, Inc. and Telesat. On November 18, 2019, the FCC announced its intention to conduct a public auction of C-band

38





spectrum as opposed to the market-driven auction mechanism set forth in the C-band Proposal. On February 7, 2020, the FCC issued a draft order in this regard. The Company is still in the process of analyzing the impact of the draft order and commenting on it to the FCC. To the extent the FCC does not ultimately accept the requested modifications to the draft order, the benefits to Intelsat of making the C-band spectrum available for terrestrial mobile services in the United States could be materially limited. The FCC has indicated its intent to vote on the order at its open meeting scheduled for February 28, 2020. In addition, while we believe that there is potential for the FCC to hold an auction of C-band spectrum in 2020, we can provide no assurances as to the final terms of the order to be voted upon, the outcome of the FCC vote on the order, when or whether the order becomes final and non-appealable, the actual timing of any auction of spectrum, or the receipt of proceeds by the Company in connection with any such auction. All of these matters are outside the control of the Company.
Furthermore, there are a number of technical challenges to making C-band spectrum available for terrestrial mobile services. The technical solutions could include moving services and customers to another portion of the licensed C-band spectrum, implementing filters at earth station antennas, relocating earth station antennas or other technical solutions which may result in significant costs to incumbent satellite operators. The FCC’s draft order addresses reimbursement of such costs, but we can provide no assurance that all such costs would actually be reimbursed through auction proceeds or otherwise.
Our failure to maintain or obtain authorizations under the U.S. export control and trade sanctions laws and regulations could have a material adverse effect on our business.
The export of satellites and technical data related to satellites, earth station equipment and provision of services are subject to U.S. Department of State, U.S. Department of Commerce and U.S. Department of Treasury regulations. If we do not maintain our existing authorizations or obtain necessary future authorizations under the export control laws and regulations of the United States, we may be unable to export technical data or equipment to non-U.S. persons and companies, including to our own non-U.S. employees, as required to fulfill existing contracts. If we do not maintain our existing authorizations or obtain necessary future authorizations under the trade sanctions laws and regulations of the United States, we may not be able to provide satellite capacity and related administrative services to certain countries subject to U.S. sanctions. Our ability to acquire new satellites, launch new satellites or operate our satellites could also be negatively affected if our suppliers do not obtain required U.S. export authorizations.
If we do not maintain required security clearances from, and comply with our agreements with, the U.S. Department of Defense, or if we do not comply with U.S. law, we may not be able to continue to perform our obligations under U.S. government contracts.
To participate in classified U.S. government programs, we sought and obtained security clearances for one of our subsidiaries from the U.S. Department of Defense. Given our foreign ownership, we entered into a proxy agreement with the U.S. government that limits our ability to control the operations of this subsidiary, as required under the national security laws and regulations of the United States. If we do not maintain these security clearances, we will not be able to perform our obligations under any classified U.S. government contracts to which our subsidiary is a party, the U.S. government would have the right to terminate our contracts requiring access to classified information and we will not be able to enter into new classified contracts. As a result, our business could be materially and adversely affected. Further, if we materially violate the terms of the proxy agreement or if we are found to have materially violated U.S. law, we or the subsidiary holding the security clearances may be suspended or barred from performing any U.S. government contracts, whether classified or unclassified, and we could be subject to civil or criminal penalties.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
We lease approximately 217,650 square feet of office space in McLean, Virginia for our U.S. administrative headquarters and primary satellite operations center. The building also houses the majority of our sales and marketing support staff and other administrative personnel. The lease for the building expires on July 31, 2029.
We own a facility in Ellenwood, Georgia in which our primary customer service center is located, together with our Atlanta Teleport. The facility has approximately 130,000 square feet of office space and operations facilities, which are based in two buildings and multiple antenna shelters and 68 antennas on the property. See Item 1—Business—Business Overview—Our Network—Network Operations and Current Ground Facilities for a description of this facility.

39





Our backup satellite operations center is located at a facility that we own in Long Beach, California, which includes approximately 68,875 square feet for administrative and operational facilities. We have entered into two lease agreements for 20,900 square feet with two third-party tenants.
We use a worldwide terrestrial ground network to operate our satellite fleet and to manage the communications services that we provide to our customers. This network is comprised of 63 owned and leased earth station and teleport facilities around the world, including 23 teleports that allows us to perform TT&C services.
The eight teleports in our terrestrial ground network that we own are located in Hagerstown, Maryland; Ellenwood, Georgia; Castle Rock, Colorado; Fillmore, Napa and Riverside, California; Paumalu, Hawaii; and Fuchsstadt, Germany. We lease facilities at 55 other locations for satellite and commercial operations worldwide. We also contract with the owners of some of these facilities for the provision of additional services. The locations of other earth stations in our ground network include Argentina, Australia, Bonaire, Brazil, Canada, England, Germany, Greenland, Iceland, India, Italy, Japan, Kazakhstan, Mongolia, Morocco, Myanmar, the Netherlands, New Zealand, Norway, Peru, Singapore, South Africa, South Korea, the United Arab Emirates, Uruguay, and the United States. Our network also consists of the leased communications links that connect the earth stations to our satellite operations center located at our McLean, Virginia location and to our back-up operations facility.
We have established PoPs connected by leased fiber at key traffic exchange points around the world, including Atlanta, Honolulu, Los Angeles, New York, McLean, Miami, Palo Alto, London, Rio de Janeiro, and Tokyo. We lease our facilities at these traffic exchange points. We have also established video PoPs connected by leased fiber at key video exchange points around the world, including Johannesburg, Los Angeles, Denver, New York, Washington, D.C., Miami and London. We lease our facilities at these video exchange points. We use our teleports and PoPs in combination with our satellite network to provide our customers with managed data and video services.
We lease office space in Luxembourg and London, England. Our Luxembourg office serves as the global headquarters for us and our Luxembourg parents and subsidiaries. Our London office houses the employees of Intelsat Global Sales and Marketing Ltd., our sales and marketing subsidiary, and administrative support, and functions as our global sales headquarters.
We also lease office space in Florida, Australia, Brazil, China, France, Germany, India, Israel, Japan, Kenya, Mexico, Russia, Singapore, South Africa, Senegal and the United Arab Emirates for our local sales and marketing and administrative support offices.
The leases relating to our TT&C earth stations, teleports, PoPs and office space expire at various times. We do not believe that any such properties are individually material to our business or operations, and we expect that we could find suitable properties to replace such locations if the leases were not renewed at the end of their respective terms.
Item 3.
Legal Proceedings
We are subject to litigation in the ordinary course of business, but management does not believe that the resolution of any pending proceedings would have a material adverse effect on our financial position or results of operations.
Item 4.
Mine Safety Disclosures
Not applicable.

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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Since our IPO on April 23, 2013, our common shares have traded on the New York Stock Exchange under the symbol “I”.
Holders
As of February 18, 2020, there were six holders of record of our common shares. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. The number of holders of record also does not include shareholders whose shares may be held in trust by other entities.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
There have not been any sales by the Company of equity securities in the last three fiscal years that have not been registered under the Securities Act of 1933.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no common share repurchases during the quarter ended December 31, 2019.
Performance Graph
Comparison of Five-Year Total Return Among Intelsat, S&P 500 Index and NASDAQ Telecommunications Index
STOCKPERFORMANCEGRAPH.JPG
The five-year total return performance graph assumes $100 was invested on December 31, 2014 in Intelsat common shares, the S&P 500 Index and the NASDAQ Telecommunications Index.

41





Item 6.
Selected Financial Data
The following selected historical consolidated financial data should be read in conjunction with, and is qualified by reference to, Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations and our audited consolidated financial statements and notes thereto included in Item 8—Financial Statements and Supplementary Data of this Annual Report. The consolidated statement of operations data and consolidated cash flow data for the years ended December 31, 2017, 2018 and 2019, and the consolidated balance sheet data as of December 31, 2018 and 2019 have been derived from audited consolidated financial statements included in Item 8—Financial Statements and Supplementary Data of this Annual Report. The consolidated statement of operations data and consolidated cash flow data for the years ended December 31, 2015 and 2016 and the consolidated balance sheet data as of December 31, 2015, 2016 and 2017 have been derived from audited consolidated financial statements not included in this Annual Report.

42





 
Year Ended December 31,
 
2015
 
2016 (1)
 
2017 (1)
 
2018 (2)
 
2019 (4)
 
(in thousands, except per share amounts)
Consolidated Statement of Operations Data
 
 
 
 
 
 
 
 
 
Revenue
$
2,352,521

 
$
2,188,047

 
$
2,148,612

 
$
2,161,190

 
$
2,061,465

Operating expenses:
 
 
 
 
 
 
 
 
 
Direct costs of revenue (excluding depreciation and amortization)
328,501

 
342,634

 
324,232

 
330,874

 
406,153

Selling, general and administrative
199,412

 
232,537

 
205,475

 
200,857

 
226,918

Impairment of goodwill and other intangibles
4,165,400

 

 

 

 

Depreciation and amortization
687,729

 
694,891

 
707,824

 
687,589

 
658,233

Satellite impairment loss

 

 

 

 
381,565

Total operating expenses
5,381,042

 
1,270,062

 
1,237,531

 
1,219,320

 
1,672,869

Income (loss) from operations
(3,028,521
)
 
917,985

 
911,081

 
941,870

 
388,596

Interest expense, net
890,279

 
938,501

 
1,020,770

 
1,212,374

 
1,273,112

Gain (loss) on early extinguishment of debt
7,061

 
1,030,092

 
(4,109
)
 
(199,658
)
 

Other income (expense), net
(6,201
)
 
522

 
10,114

 
4,541

 
(34,078
)
Income (loss) before income taxes
(3,917,940
)
 
1,010,098

 
(103,684
)
 
(465,621
)
 
(918,594
)
Provision for (benefit from) income taxes
1,513

 
15,986

 
71,130

 
130,069

 
(7,384
)
Net income (loss)
(3,919,453
)
 
994,112

 
(174,814
)
 
(595,690
)
 
(911,210
)
Net income attributable to noncontrolling interest
(3,934
)
 
(3,915
)
 
(3,914
)
 
(3,915
)
 
(2,385
)
Net income (loss) attributable to Intelsat S.A.
(3,923,387
)
 
990,197

 
(178,728
)
 
(599,605
)
 
(913,595
)
Cumulative preferred dividends
(9,919
)
 

 

 

 

Net income (loss) attributable to common shareholders
$
(3,933,306
)
 
$
990,197

 
$
(178,728
)
 
$
(599,605
)
 
$
(913,595
)
Other Data
 
 
 
 
 
 
 
 
 
Capital expenditures
$
724,362

 
$
714,570

 
$
461,627

 
$
255,696

 
$
229,818

Other payments for satellites
$

 
$
18,333

 
$
35,396

 
$

 
$

Basic income (loss) per common share attributable to Intelsat S.A.
$
(36.68
)
 
$
8.65

 
$
(1.50
)
 
$
(4.63
)
 
$
(6.51
)
Diluted income (loss) per common share attributable to Intelsat S.A.
$
(36.68
)
 
$
8.36

 
$
(1.50
)
 
$
(4.63
)
 
$
(6.51
)
Basic weighted average shares outstanding (in millions)
107.2

 
114.5

 
118.9

 
129.6

 
140.4

Diluted weighted average shares outstanding (in millions)
107.2

 
118.5

 
118.9

 
129.6

 
140.4

Dividends declared per 5.75% series A mandatory convertible junior non-voting preferred share
$
2.88

 
$

 
$

 
$

 
$

Consolidated Cash Flow Data(3)
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
910,031

 
$
678,755

 
$
464,246

 
$
344,173

 
$
255,539

Net cash used in investing activities
(749,354
)
 
(730,589
)
 
(468,297
)
 
(283,634
)
 
(292,733
)
Net cash provided by (used in) financing activities
(102,986
)
 
546,347

 
(121,698
)
 
(90,323
)
 
362,910

Consolidated Balance Sheet Data
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, net of restricted cash(3)
$
171,541

 
$
666,024

 
$
525,215

 
$
485,120

 
$
810,626

Restricted cash(3)

 

 
16,167

 
22,037

 
20,238

Satellites and other property and equipment, net
5,998,317

 
6,185,842

 
5,923,619

 
5,511,702

 
4,702,063

Total assets
12,253,590

 
12,942,009

 
12,610,036

 
12,241,513

 
11,804,382

Total debt
14,611,379

 
14,198,084

 
14,208,658

 
14,028,352

 
14,465,483

Shareholders’ deficit
(4,649,565
)
 
(3,634,145
)
 
(3,807,870
)
 
(4,097,005
)
 
(4,999,858
)
Net assets
(4,620,353
)
 
(3,609,998
)
 
(3,788,564
)
 
(4,082,609
)
 
(4,988,848
)
Number of common shares (in millions)
107.6

 
118.0

 
119.6

 
138.0

 
141.1

Number of 5.75% series A mandatory convertible junior non-voting preferred shares (in millions)
3.5

 

 

 

 


(1)
We adopted Accounting Standard Update (“ASU”) 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASC 715"), on January 1, 2018 using the retrospective method. As a result, the Company reclassified a net credit for pension and postretirement benefits from operating expenses to other income for the years ended December 31, 2017 and 2016, to conform to the current year presentation. Years prior to 2016 do not reflect the effects from our January 1, 2018, adoption of ASC 715.


43





(2)
We adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), effective January 1, 2018, using the modified retrospective method. Years prior to 2018 do not reflect the effects from our January 1, 2018, adoption of ASC 606.

(3)
We adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash on January 1, 2018 using the retrospective method. Balance sheets prior to 2017 and statements of cash flows prior to 2016 have not been restated.

(4)
We adopted ASU 2016-02, Leases (Topic 842) ("ASC 842"), and ASU 2019-01, Leases (Topic 842) - Codification Improvements on January 1, 2019 using the effective date method and applied the package of practical expedients included therein. By applying ASC 842 at the January 1, 2019 adoption date, as opposed to at the beginning of the earliest period presented, our reporting for periods prior to January 1, 2019 continues to be in accordance with ASC 840, Leases. Our accounting policies and reported amounts with respect to the year ended December 31, 2018 and prior were not affected by the adoption of ASC 842.

44





Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion should be read together with Item 6—Selected Financial Data and our audited consolidated financial statements and notes thereto included in Item 8—Financial Statements and Supplementary Data of this Annual Report. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and, unless otherwise indicated, the other financial information contained in this Annual Report has also been prepared in accordance with U.S. GAAP. See “Forward-Looking Statements” and Item 1A—Risk Factors, for a discussion of factors that could cause our future financial condition and results of operations to be different from those discussed below. Certain monetary amounts, percentages and other figures included in this Annual Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them. Unless otherwise indicated, all references to “dollars” and “$” in this Annual Report are to, and all monetary amounts in this Annual Report are presented in, U.S. dollars.
Overview
We operate one of the world’s largest satellite services businesses, providing a critical layer in the global communications infrastructure.
We provide diversified communications services to the world’s leading media companies, fixed and wireless telecommunications operators, data networking service providers for enterprise and mobile applications in the air and on the seas, multinational corporations and ISPs. We are also the leading provider of commercial satellite capacity to the U.S. government and other select military organizations and their contractors.
Our customers use our global network for a broad range of applications, from global distribution of content for media companies to providing the transmission layer for commercial aeronautical consumer broadband connectivity, to enabling essential network backbones for telecommunications providers in high-growth emerging regions.
Our network solutions are a critical component of our customers’ infrastructures and business models. Generally, our customers need the specialized connectivity that satellites provide so long as they are in business or pursuing their mission. In recent years, mobility services providers have contracted for services on our fleet that support broadband connections for passengers on commercial flights and cruise ships, connectivity that in some cases is only available through our network. In addition, our satellite neighborhoods provide our media customers with efficient and reliable broadcast distribution that maximizes audience reach, a technical and economic benefit that is difficult for terrestrial services to match. In developing regions, our satellite solutions often provide higher reliability than is available from local terrestrial telecommunications services and allow our customers to reach geographies that they would otherwise be unable to serve.
Revenue
Revenue Overview
We earn revenue primarily by providing services over satellite transponder capacity to our customers. Our customers generally obtain satellite capacity from us by placing an order pursuant to one of several master customer service agreements. The master customer agreements and related service orders under which we sell services specify, among other things, the amount of satellite capacity to be provided, whether service will be non-preemptible or preemptible and the service term. Most services are full time in nature, with service terms ranging from one year to as long as 16 years. Occasional use services used for video applications can be for much shorter periods, including increments of one hour. Our master customer service agreements offer different service types, including transponder services, managed services, and channel, which are all services that are provided on, or used to provide access to, our global network. We refer to these services as on-network services. Our customer agreements also cover services that we procure from third parties and resell, which we refer to as off-network services. These services can include transponder services and other satellite-based transmission services sourced from other operators, often in frequencies not available on our network, and other operational fees related to satellite operations provided on behalf of third-party satellites.

45





The following table describes our primary service types:
Service Type
  
Description
On-Network Revenues:
  
 
 
 
 
Transponder Services
  
Commitments by customers to receive service via, or to utilize capacity on, particular designated transponders according to specified technical and commercial terms. Transponder services also include revenues from hosted payload capacity. Transponder services are marketed to each of our primary customer sets as follows:
 
•Network Services: fixed and wireless telecom operators, data network operators, enterprise operators of private data networks, and value-added network operators for fixed and mobile broadband network infrastructure.
 
•Media: broadcasters (for distribution of programming and full time contribution, or gathering, of content), programmers and DTH operators.
 
•Government: civilian and defense organizations, for use in implementing private fixed and mobile networks, or for the provision of capacity or capabilities through hosted payloads.
 
 
 
Managed Services
  
Hybrid services primarily using IntelsatOne, including our IntelsatOne Flex broadband platform, which combine satellite capacity, teleport facilities, satellite communications hardware such as broadband hubs or video multiplexers and fiber optic cable and other ground facilities to provide managed and monitored broadband, trunking, video and private network services to customers. Managed services are marketed to each of our customer sets as follows:
 
•Network Services: enterprises, cellular operators and fixed and mobile value-added service providers which deliver end-services such as private data networks, wireless infrastructure and maritime and aeronautical broadband.
 
•Media: programmers outsourcing elements of their transmission infrastructure and part time occasional use services used primarily by news and sports organizations to gather content from remote locations.
 
•Government: users seeking secured, integrated, end-to-end solutions.
 
 
Channel
  
Standardized services of predetermined bandwidth and technical characteristics primarily used for point-to-point bilateral services for telecommunications providers. Channel is not considered a core service offering due to changing market requirements and the proliferation of fiber alternatives for point-to-point customer applications. Channel services are exclusively marketed to traditional telecommunications providers in our network services customer set.
 
 
 
Transponder, Mobile Satellite Services and Other
  
Capacity for voice, data and video services provided by third-party commercial satellite operators for which the desired frequency type or geographic coverage is not available on our network. These services include L-band MSS, for which Intelsat General is a reseller. In addition, this revenue category includes the sale of customer premises equipment and other hardware, as well as certain fees related to services provided to other satellite operators. These products are primarily marketed as follows:
 
•Government: direct government users, and government contractors working on programs where aggregation of capacity is required.
 
 
 
Satellite-related Services
  
Services include a number of satellite-related consulting and technical services that involve the lifecycle of satellite operations and related infrastructure, from satellite and launch vehicle procurement through TT&C services and related equipment sales. These services are typically marketed to other satellite operators.
We market our services on a global basis, with almost every populated region of the world contributing to our revenue. The diversity of our revenue allows us to benefit from changing market conditions and lowers our risk from revenue fluctuations in our service applications and geographic regions.
Trends Impacting Our Revenue
Our revenue at any given time is dependent upon a number of factors, including, but not limited to, demand for our services from existing and emerging applications; the supply of capacity available on our fleet and those of our competitors in a given region, and the substitution of competing technologies such as fiber optic cable networks. See Item 1—Business—Our Sector for a discussion of the global trends creating demand for our services. Trends in revenue can be impacted by:
 
Growth in demand from wireless telecommunications companies seeking to complete or enhance broadband infrastructure, particularly those operating in developing regions or regions with geographic challenges;
Growth in demand for broadband connectivity for enterprises and government organizations, providing fixed and mobile services and value-added applications on a global basis;
Lower overall pricing for satellite-based services, resulting from oversupply of wide beam capacity or due to the introduction of high-throughput technology, which is designed to achieve a lower cost per unit;
Lower demand for satellite-based solutions, resulting from fiber substitution;
Satellite capacity needed to provide broadband connectivity for mobile networks on ships, planes and oil and gas platforms;
Global demand for television content in SD, HD and UHD television formats, which uses our satellite network and IntelsatOne terrestrial services for distribution, in some regions offset by next generation compression technologies;

46





Increased popularity of OTT content distribution, which will increase the demand for broadband infrastructure in the developing world, but could decrease demand in developed markets over the mid to long-term as niche and ethnic programming transitions from satellite to internet distribution;
Use of commercial satellite services by governments for military and other operations, which has partially slowed as a result of the tempo of military operations and recent changes in the U.S. budget; and
Our use of third-party or off-network services to satisfy government demand for capacity not available on our network. These services are low risk in nature, with no required upfront investment and terms and conditions of the procured capacity which typically match the contractual commitments from our customers. Demand for certain of these off-network services has declined with reductions in troop deployment in regions of conflict.

See Item 1—Business—Our Customer Sets and Growing Applications for a discussion of our customers’ uses of our services and see Item 1—Business—Our Strategy for a discussion of our strategies with respect to marketing to our various customer sets.
Customer Applications
Our transponder services, managed services, MSS and channel are used by our customers for three primary customer applications: network service applications, media applications and government applications.
Pricing
Pricing of our services is based upon a number of factors, including, but not limited to, the region served by the capacity, the power and other characteristics of the satellite beam, the amount of demand for the capacity available on a particular satellite and the total supply of capacity serving any particular region. In 2019, pricing trends varied by application, but were fairly stable throughout the year overall. Slight declines in network services were fueled by lower pricing on high volume commitments leveraging our global wide beam and Intelsat Epic fleets for large mobile network operators, balanced by relatively stable pricing for mobility customers. Government applications commanded competitive prices due to lowest price technically acceptable policies in some regions, but continued to command a premium in coverage areas with limited capacity. Media application pricing was stronger in 2019 as compared to 2018, but demand faces pressure from competing lower-cost terrestrial alternatives. According to Euroconsult, the annual average price per transponder for regular capacity is forecasted to be on a slight downward trend globally from $1.20 million to $1.03 million per 36 MHz transponder over the period from 2019 to 2024, reflecting increasing supply from new satellite entrants, among other factors. HTS capacity, which is designed to attain a lower cost point, facilitating market expansion into new applications, is expected to have similar rates of yield decline over time as increased supply enters the market.
The pricing of our services is generally fixed for the duration of the service commitment. New and renewing service commitments are priced to reflect regional demand and other factors as discussed above.
Operating Expenses
Direct Costs of Revenue (Excluding Depreciation and Amortization)
Direct costs of revenue relate to costs associated with the operation and control of our satellites, our communications network and engineering support, and the purchase of off-network capacity. Direct costs of revenue consist principally of salaries and related employment costs, in-orbit insurance, earth station operating costs and facilities costs. Our direct costs of revenue fluctuate based on the number and type of services offered and under development, particularly as sales of off-network transponder services and sales of customer premises equipment fluctuate. We expect our direct costs of revenue to increase as we add customers and expand our managed services and use of off-network capacity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses relate to costs associated with our sales and marketing staff and our administrative staff, which include legal, finance, corporate information technology and human resources. Staff expenses consist primarily of salaries and related employment costs, including stock compensation, travel costs and office occupancy costs. Selling, general and administrative expenses also include building maintenance and rent expenses and the provision for uncollectible accounts. Selling, general and administrative expenses generally fluctuate with the number of customers served and the number and types of services offered. These expenses also include research and development expenses, and fees for professional services.

47





Depreciation and Amortization
Our capital assets consist primarily of our satellites and associated ground network infrastructure. Included in capitalized satellite costs are the costs for satellite construction, satellite launch services, insurance premiums for satellite launch and the in-orbit testing period, the net present value of deferred satellite performance incentives payable to satellite manufacturers, and capitalized interest incurred during the satellite construction period.
Capital assets are depreciated or amortized on a straight-line basis over their estimated useful lives. The remaining depreciable lives of our satellites range from less than one year to 16 years as of December 31, 2019.
Contracted Backlog
We benefit from strong visibility of our future revenues. Our contracted backlog is our expected future revenue under existing customer contracts and includes both cancelable and non-cancelable contracts. As of December 31, 2019, our contracted backlog was approximately $7.0 billion. Approximately 88% of this backlog related to contracts that were non-cancelable and approximately 11% related to contracts that were cancelable subject to substantial termination fees. The remaining 1% of backlog related to contracts with little or no termination fees, and represented the difference between our contracted backlog and remaining performance obligations. As of December 31, 2019, the weighted average remaining customer contract life was approximately 4.2 years. We expect to deliver services associated with approximately $1.6 billion, or approximately 23%, of our December 31, 2019 contracted backlog during the year ending December 31, 2020. The amount included in backlog represents the full service charge for the duration of the contract and does not include termination fees. The amount of the termination fees, which is not included in the backlog amount, is generally calculated as a percentage of the remaining backlog associated with the contract. In certain cases of breach for non-payment or customer financial distress or bankruptcy, we may not be able to recover the full value of certain contracts or termination fees. Our contracted backlog includes 100% of the backlog of our consolidated ownership interests, which is consistent with the accounting for our ownership interest in these entities.
Our contracted backlog as of December 31, 2019 was as follows (in millions):
Period
Contracted Backlog
2020
$
1,611

2021
1,137

2022
870

2023
681

2024
550

2025 and thereafter
2,108

Total
$
6,957

Our contracted backlog by service type as of December 31, 2019 was as follows (in millions, except percentages):
Service Type
Contracted Backlog
Percent
Transponder services
$
5,663

81
%
Managed services
1,010

15
%
Off-Network and Other
281

4
%
Channel
3

%
Total
$
6,957



We believe this backlog and the resulting predictable cash flows in the FSS sector make our results less volatile than that of typical companies outside our industry.

48





Operating Results Years Ended December 31, 2018 and 2019
The following table sets forth our comparative statements of operations for the periods shown with the increase (decrease) and percentage changes, except those deemed not meaningful (“NM”), between the periods presented (in thousands, except percentages):
 
Year Ended
December 31, 2018
 
Year Ended
December 31, 2019
 
Increase
(Decrease)
 
Percentage
Change
Revenue
$
2,161,190

 
$
2,061,465

 
$
(99,725
)
 
(5
)%
Operating expenses:
 
 

 
 
 
 
Direct costs of revenue (excluding depreciation and amortization)
330,874

 
406,153

 
75,279

 
23
 %
Selling, general and administrative
200,857

 
226,918

 
26,061

 
13
 %
Depreciation and amortization
687,589

 
658,233

 
(29,356
)
 
(4
)%
Satellite impairment loss

 
381,565

 
381,565

 
NM

Total operating expenses
1,219,320

 
1,672,869

 
453,549

 
37
 %
Income from operations
941,870

 
388,596

 
(553,274
)
 
(59
)%
Interest expense, net
1,212,374

 
1,273,112

 
60,738

 
5
 %
Loss on early extinguishment of debt
(199,658
)
 

 
199,658

 
NM

Other income (expense), net
4,541

 
(34,078
)
 
(38,619
)
 
NM

Loss before income taxes
(465,621
)
 
(918,594
)
 
(452,973
)
 
97
 %
Provision for (benefit from) income taxes
130,069

 
(7,384
)
 
(137,453
)
 
NM

Net loss
(595,690
)
 
(911,210
)
 
(315,520
)
 
53
 %
Net income attributable to noncontrolling interest
(3,915
)
 
(2,385
)
 
1,530

 
(39
)%
Net loss attributable to Intelsat S.A.
$
(599,605
)
 
$
(913,595
)
 
$
(313,990
)
 
52
 %
Revenue
The following table sets forth our comparative revenue by service type, with Off-Network and Other Revenues shown separately from On-Network Revenues for the periods below (in thousands, except percentages):
 
 
Year Ended
December 31, 2018
 
Year Ended
December 31, 2019
 
Increase
(Decrease)
 
Percentage
Change
On-Network Revenues
 
 
 
 
 
 
 
Transponder services
$
1,570,278

 
$
1,468,791

 
$
(101,487
)
 
(6
)%
Managed services
393,264

 
374,026

 
(19,238
)
 
(5
)%
Channel
4,250

 
2,400

 
(1,850
)
 
(44
)%
Total on-network revenues
1,967,792

 
1,845,217

 
(122,575
)
 
(6
)%
Off-Network and Other Revenues
 
 

 

 

Transponder, MSS and other off-network services
150,186

 
175,602

 
25,416

 
17
 %
Satellite-related services
43,212

 
40,646

 
(2,566
)
 
(6
)%
Total off-network and other revenues
193,398

 
216,248

 
22,850

 
12
 %
Total
$
2,161,190

 
$
2,061,465

 
$
(99,725
)
 
(5
)%
Total revenue for the year ended December 31, 2019 decreased by $99.7 million, or 5%, as compared to the year ended December 31, 2018. By service type, our revenues increased or decreased due to the following:
On-Network Revenues:
 
Transponder services— an aggregate decrease of $101.5 million, primarily due to a $53.0 million net decrease in revenue from network services customers and a $48.8 million decrease from media customers. The decline from network services customers was primarily due to non-renewals, renewals at lower pricing or lower capacity, and service contractions for enterprise and wireless infrastructure applications mainly in the Latin America, North America, and Europe regions. This decline includes approximately $22.5 million in lost revenue resulting from the failure of Intelsat 29e, a portion of which services were restored with off-network services. Revenue from network

49





services customers also declined in part due to non-renewals and pricing declines related to Europe-to-Africa connectivity. These declines were partially offset by increased revenues from maritime and aeronautical mobility customers and increased revenues from customers for telecommunications infrastructure in the Asia-Pacific region. The decline from media customers was primarily due to non-renewals relating to distribution services.

Managed services—an aggregate decrease of $19.2 million, largely due to a $12.5 million decrease in revenue from government customers and a $6.6 million decrease in revenue from media customers mainly due to non-renewals and renewals at lower pricing. This decline includes approximately $12.6 million in lost revenue resulting from the failure of Intelsat 29e, a portion of which services were restored with off-network services. These declines were partially offset by increased revenues from maritime mobility services.
Off-Network and Other Revenues:
 
Transponder, MSS and other off-network services—an aggregate increase of $25.4 million, primarily due to a $27.3 million increase in revenue from network services customers largely relating to revenue recognized in the first quarter of 2019 accounted for as a sales-type lease under ASC 842 as well as the transfer of certain Intelsat 29e customer services to off-network capacity. This was partially offset by a $2.5 million decrease in revenue from government customers.

Satellite-related services—an aggregate decrease of $2.6 million, reflecting decreased revenues from professional services supporting third-party satellites.
Operating Expenses
Direct Costs of Revenue (Excluding Depreciation and Amortization)
Direct costs of revenue increased by $75.3 million, or 23%, to $406.2 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018. The increase was primarily due to the following:

an increase of $48.7 million in costs incurred in connection with the purchase of capacity from two uncapitalized satellites, Intelsat 38 and Horizons 3e, that entered into service in 2019;

an increase of $16.2 million in equipment and third-party capacity costs recognized under ASC 842;

an increase of $13.2 million in third-party capacity costs incurred as part of the Intelsat 29e customer restoration process; and

an increase of $9.7 million in staff-related expenses; partially offset by

a decrease of $5.7 million in costs largely due to the write-off of uncollectible revenue related to Horizons 2 that is payable to JSAT as part of a revenue sharing agreement;

a decrease of $3.9 million in third-party costs for off-network services; and

a decrease of $3.0 million in satellite-related insurance costs.
Selling, General and Administrative
Selling, general and administrative expenses increased by $26.1 million, or 13%, to $226.9 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018. The increase was primarily due to the following:

an increase of $18.0 million in bad debt expense largely related to certain customers in the Europe, Latin America and Africa regions;

an increase of $16.8 million in staff-related expenses; and

an increase of $3.2 million in costs for licenses and fees; partially offset by


50





a decrease of $15.1 million in professional fees largely due to higher costs incurred in 2018 relating to financing transactions and the reorganization of ownership of certain assets among our subsidiaries that was implemented in 2018 (the "2018 Internal Reorganization").
Depreciation and Amortization
Depreciation and amortization expense decreased by $29.4 million, or 4%, to $658.2 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018. Significant items impacting depreciation and amortization included:
 
a decrease of $27.0 million in depreciation expense due to the write-off of Intelsat 29e;

a decrease of $21.9 million in depreciation expense due to the timing of certain satellites becoming fully depreciated; and

a decrease of $4.1 million in amortization expense primarily due to changes in the pattern of consumption of amortizable intangible assets, as these assets primarily include acquired backlog, which relates to contracts covering varying periods that expire over time, and acquired customer relationships, for which the value diminishes over time; partially offset by

an increase of $14.3 million in depreciation expense resulting from the impact of satellites placed in service; and

an increase of $9.2 million in depreciation expense resulting from the impact of certain ground segment assets placed in service.
Satellite Impairment Loss
We recognized an impairment charge of $381.6 million for the year ended December 31, 2019 relating to the failure of Intelsat 29e (see Note 8—Satellites and Other Property and Equipment). The impairment charge consisted of approximately $377.9 million related to the write-off of the carrying value of the satellite and associated deferred satellite performance incentive obligations and approximately $3.7 million related to prepaid regulatory fees. No comparable amounts were recognized for the year ended December 31, 2018.
Interest Expense, Net
Interest expense, net consists of gross interest expense incurred together with gains and losses on the interest rate cap contracts we hold (which reflect the changes in their fair values), offset by interest income earned and interest capitalized related to assets under construction. As of December 31, 2019, we held interest rate cap contracts with an aggregate notional amount of $2.4 billion to mitigate the risk of interest rate increases on the floating-rate term loans under our senior secured credit facilities. The interest rate cap contracts have not been designated as hedges for accounting purposes.
Interest expense, net increased by $60.7 million, or 5%, to $1.3 billion for the year ended December 31, 2019, as compared to the year ended December 31, 2018. The increase in interest expense, net was principally due to the following:
 
an increase of $37.4 million corresponding to the decrease in fair value of the interest rate cap contracts;

a net increase of $30.1 million primarily resulting from our refinancing activities in 2018 and incremental debt raise in 2019; and

an increase of $5.2 million from lower capitalized interest primarily resulting from decreased levels of satellites and related assets under construction; partially offset by

a decrease of $6.9 million resulting from increased interest income largely due to higher cash balances; and

a decrease of $3.4 million from lower interest expense associated with deferred satellite performance incentives.

The non-cash portion of total interest expense, net was $150.4 million and $179.1 million for the years ended December 31, 2018 and 2019, respectively, primarily consisting of interest expense related to the significant financing

51





component identified in customer contracts, the gain or loss resulting from the change in fair value of the interest rate cap contracts we hold, amortization and accretion of discounts and premiums and amortization of deferred financing fees.
Loss on Early Extinguishment of Debt
No gain or loss on early extinguishment was recognized for the year ended December 31, 2019, as compared to a loss of $199.7 million for the year ended December 31, 2018, consisting of the difference between the carrying value of the debt repurchased and the total cash amount paid (including related fees and expenses), together with write-offs of unamortized debt issuance costs and unamortized debt discount or premium.
Other Income (Expense), Net
Other expense, net was $34.1 million for the year ended December 31, 2019, as compared to other income, net of $4.5 million for the year ended December 31, 2018. The decrease of $38.6 million was primarily driven by a net loss of $43.8 million related to the change in value of certain investments in third parties and loans held-for-investment with no comparative amounts in 2018, partially offset by lower foreign exchange fluctuation losses of $4.9 million mainly related to our business conducted in Brazilian reais and Euros.
Provision for (Benefit from) Income Taxes
Our income tax expense decreased by $137.5 million to a benefit of $7.4 million for the year ended December 31, 2019, as compared to a provision of $130.1 million for the year ended December 31, 2018. The decrease was primarily attributable to the 2018 Internal Reorganization and a decrease in valuation allowance recorded for our U.S. subsidiaries, offset by the impact of the final Base Erosion Anti-Abuse Tax regulations released by the U.S. Department of Treasury and the U.S. Internal Revenue Service.

Cash paid for income taxes, net of refunds, totaled $33.6 million and $57.1 million for the years ended December 31, 2019 and 2018, respectively.
Net Loss Attributable to Intelsat S.A.
Net loss attributable to Intelsat S.A. was $913.6 million for the year ended December 31, 2019, as compared to net loss attributable to Intelsat S.A. of $599.6 million for the year ended December 31, 2018. The change reflects the various items discussed above.
Operating Results Years Ended December 31, 2017 and 2018
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2018, filed with the SEC on February 20, 2019, in Part I, Item 5 under the heading "Operating Results Years Ended December 31, 2017 and 2018." You are encouraged to reference that disclosure for a discussion of our operating results for the year ended December 31, 2017 compared to the year ended December 31, 2018.
EBITDA
EBITDA consists of earnings before net interest, loss (gain) on early extinguishment of debt, taxes and depreciation and amortization. Given our high level of leverage, refinancing activities are a frequent part of our efforts to manage our costs of borrowing. Accordingly, we consider loss (gain) on early extinguishment of debt an element of interest expense. EBITDA is a measure commonly used in the FSS sector, and we present EBITDA to enhance the understanding of our operating performance. We use EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. However, EBITDA is not a measure of financial performance under U.S. GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. EBITDA should not be considered as an alternative to operating income (loss) or net income (loss) determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities determined in accordance with U.S. GAAP, as an indicator of cash flows, or as a measure of liquidity.


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A reconciliation of net loss to EBITDA for the periods shown is as follows (in thousands):
 
 
Year Ended
December 31, 2017
 
Year Ended
December 31, 2018
 
Year Ended
December 31, 2019
Net loss
 
$
(174,814
)
 
$
(595,690
)
 
$
(911,210
)
Add:
 
 
 
 
 
 
Interest expense, net
 
1,020,770

 
1,212,374

 
1,273,112

Loss on early extinguishment of debt
 
4,109

 
199,658

 

Provision for (benefit from) income taxes
 
71,130

 
130,069

 
(7,384
)
Depreciation and amortization
 
707,824

 
687,589

 
658,233

EBITDA
 
$
1,629,019

 
$
1,634,000

 
$
1,012,751

Adjusted EBITDA
In addition to EBITDA, we calculate a measure called Adjusted EBITDA to assess the operating performance of Intelsat S.A. Adjusted EBITDA consists of EBITDA of Intelsat S.A. as adjusted to exclude or include certain unusual items, certain other operating expense items and certain other adjustments as described in the table and related footnotes below. Our management believes that the presentation of Adjusted EBITDA provides useful information to investors, lenders and financial analysts regarding our financial condition and results of operations because it permits clearer comparability of our operating performance between periods. By excluding the potential volatility related to the timing and extent of non-operating activities, such as impairments of asset value and other non-recurring items, our management believes that Adjusted EBITDA provides a useful means of evaluating the success of our operating activities. We also use Adjusted EBITDA, together with other appropriate metrics, to set goals for and measure the operating performance of our business, and it is one of the principal measures we use to evaluate our management’s performance in determining compensation under our incentive compensation plans. Adjusted EBITDA measures have been used historically by investors, lenders and financial analysts to estimate the value of a company, to make informed investment decisions and to evaluate performance. Our management believes that the inclusion of Adjusted EBITDA facilitates comparison of our results with those of companies having different capital structures.
Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and may not be comparable to similarly titled measures of other companies. Adjusted EBITDA should not be considered as an alternative to operating income (loss) or net income (loss) determined in accordance with U.S. GAAP, as an indicator of our operating performance, as an alternative to cash flows from operating activities determined in accordance with U.S. GAAP, as an indicator of cash flows, or as a measure of liquidity.

A reconciliation of net loss to EBITDA and EBITDA to Adjusted EBITDA is as follows (in thousands):
 
 
Year Ended
December 31, 2017
 
Year Ended
December 31, 2018
 
Year Ended
December 31, 2019
Net loss
 
$
(174,814
)
 
$
(595,690
)
 
$