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Shares of Canadian telecommunications satellite operator Telesat (NASDAQ:TSAT) popped sharply on Friday following a decision to swap suppliers for its Lightspeed global internet network. Given the significant cost savings implication, TSAT stock initially popped 50% higher before settling at around 41%.
In the company’s disclosure for its second-quarter earnings report, Telesat stated that Canadian space technology firm MDA (OTCMKTS:MDALF) will be the prime satellite contractor for Telesat Lightspeed, which is the largest space program ever conceived in Canada, according to a separate press release. Lightspeed will rank “among the most innovative, cutting-edge broadband satellite networks in the world,” pet the aforementioned document.
Earlier, CNBC reported that MDA will take the place of French-Italian manufacturer Thales Alenia Space under Thales Group (OTCMKTS:THLLY). Most importantly, the supplier-swapping deal will result in “total capital cost savings” of about $2 billion. MDALF gained approximately 28% during the early afternoon session while THLLY slipped roughly 1%.
TSAT Stock Surges on a More Credible Path
Per CNBC, Telesat expects to begin launching the first Lightspeed satellites in the middle of 2026. Further, global service will begin once the first 156 satellites are launched into orbit. Overall, the full network should consist of 198 satellites. Naturally, the cost savings should go a long way for TSAT stock by fostering more consistent profitability.
Notably, Telesat posted $180 million in revenue for Q2, which represented a 4% decline from the year-ago quarter. However, net income soared to $520 million, comparing very favorably to a net loss of $4 million in Q2 2022. Finally, management reaffirmed its full-year 2023 revenue guidance, which calls for a range between $690 million and $710 million.
“I’m incredibly proud of the Telesat team for their innovative work to further optimize … resulting in dramatically reduced costs,” Telesat CEO Dan Goldberg remarked in a release.
According to Grand View Research, the global satellite internet market reached a valuation of $8.23 billion in 2022. Analysts project that the segment will expand at a compound annual growth rate (CAGR) of 13.6% from 2023 to 2030. At the culmination of the forecast period, the industry should print revenue of $22.57 billion.
At the moment, TSAT stock features a market capitalization of 1.3 billion CAD or approximately $967.34 million.
Why It Matters
Goldberg previously emphasized to CNBC that Lightspeed is not intended to compete in direct-to-consumer markets, where it might clash with SpaceX’s Starlink or Amazon’s (NASDAQ:AMZN) Kuiper. Instead, Telesat will continue focusing on enterprise-level customers found in government and commercial markets.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.