Telesat Lands Record $1.9B Canada Deal, Expands Lightspeed Constellation

Key Points

• Telesat signed a US$1.9 billion, 15-year contract with the Canadian government to provide military Ka-band connectivity in the Arctic. About US$1.5 billion will be received through milestone payments, primarily from 2026 to 2028, and the deal is expected to add US$3.3 billion to backlog.
• The contract will expand Telesat’s fully funded Lightspeed constellation from 156 to 225 satellites, raising global capacity by more than 40% while maintaining the target for service to begin in the first quarter of 2028. Total committed investment has increased to approximately US$5.2 billion.
• Telesat raised its 2032 Lightspeed revenue forecast to US$4.9 billion from US$3.2 billion, with defense expected to contribute about 46% of revenue versus 14% previously. The company cited growing government demand and expects to add up to 70 more satellites by 2032 if demand warrants, though no funding has been committed for those additions.

Telesat NASDAQ: TSAT said it has signed a US$1.9 billion contract with the Government of Canada, the largest revenue contract in the satellite operator’s history, to provide military Ka-band connectivity in the Arctic under the Enhanced Satellite Communications Project program.

The 15-year agreement includes two five-year option periods that the company said it believes the government will exercise. The contract covers the Mil-Ka portion of the program, intended to provide connectivity for the Canadian Armed Forces north of the 65th parallel.

Telesat said US$1.5 billion of the contract’s cash revenue will be paid through milestone-based payments before service begins, primarily during 2026 through 2028. The remaining US$450 million is expected to be paid over the agreement’s term.

Constellation Expansion Fully Funded

As part of the award, Telesat will expand its Lightspeed low-Earth-orbit constellation to 225 satellites from 156 satellites, increasing global capacity by more than 40%. The company said the expanded constellation is fully funded and that launch vehicles have been secured except for one additional SpaceX Falcon 9 launch, for which it expects to finalize an agreement shortly.

Telesat maintained its target for global Lightspeed service to begin in the first quarter of 2028. The company said the additional satellites will roll off the production line following the originally funded 156 satellites and will not affect the planned service date.

Donald Tremblay, Telesat’s CFO, said total committed investment in the Lightspeed constellation is now expected to reach approximately US$5.2 billion, including a US$500 million contingency. That compares with a previous estimate of US$3.8 billion, including a US$300 million contingency.

As of March 31, 2026, Telesat had invested US$2 billion in the program. Tremblay said the remaining US$3.2 billion, including contingency if needed, will be funded through cash on hand, available financing from the governments of Canada and Quebec, vendor financing and the US$1.5 billion in contract milestone payments.

“A large majority” of constellation costs are covered by fixed-price contracts with manufacturer MDA and launch provider SpaceX, Tremblay said.

Backlog and Future Government Opportunities

Telesat expects the contract to add US$3.3 billion to its backlog, reflecting the total revenue it expects to recognize over the agreement’s term. The company said the milestone payments will be accounted for as deferred revenue and amortized over 15 years because it considers exercise of the renewal options highly likely.

The company also identified possible future contract opportunities within Canada’s broader satellite communications program. These include follow-on Mil-Ka work involving ground infrastructure, user terminals, network integration and network operations, as well as potential UHF- and X-band-related work in which MDA is the prime contractor and Telesat is a subcontractor.

Telesat said it expects a follow-on Mil-Ka contract related to ground infrastructure potentially next year, while UHF and X-band opportunities could emerge over the next several years, subject to government definition, funding and approval processes.

During the question-and-answer session, Michel Forest, Telesat’s CTO, said the company estimates it will have roughly 100 gigabits per second of capacity across the Arctic region. Telesat declined to provide the precise amount of capacity being supplied to the Canadian government, saying only that it involves “some dozens of gigabits” of Mil-Ka capacity.

Revised Lightspeed Revenue Outlook

Telesat raised its forecast for Lightspeed revenue in 2032 to US$4.9 billion from a prior forecast of US$3.2 billion. The company said its EBITDA forecast has also increased by 52%, reflecting its expectation for strong EBITDA contribution margins under its business-to-business strategy.

The updated outlook places greater emphasis on defense customers. Telesat now expects defense to account for about 46% of Lightspeed revenue in 2032, compared with 14% in its previous forecast. The company cited the addition of Mil-Ka capability, increased defense spending among NATO and allied governments, and discussions with defense users in Canada and abroad.

Telesat estimated the addressable market for satellite defense broadband connectivity could reach approximately US$43 billion by 2032. It also estimated its total addressable market across enterprise, aviation, maritime and defense markets at nearly US$360 billion in 2032.

The company said it expects to add another 70 next-generation satellites by the end of 2032, which would bring the constellation to 295 satellites, if demand warrants it. Telesat stressed that those additional satellites remain notional, with no capital commitments made for their construction.

Management said all 225 initially committed satellites will be dual-purpose, supporting both commercial Ka-band and Mil-Ka services. While the company described the spectrum allocation as generally 75% commercial Ka-band and 25% Mil-Ka, it said satellite power can be dynamically allocated based on demand.

About Telesat (NASDAQ:TSAT)

Telesat is a leading global satellite operator that designs, builds and delivers high-performance satellite communications solutions across multiple markets. The company operates a fleet of geostationary satellites to provide video distribution, data networking and managed broadband services to media companies, network operators, governments and enterprise customers. Telesat's infrastructure supports television distribution, cellular backhaul, rural broadband and corporate network applications.

In addition to its geostationary offerings, Telesat is developing a low Earth orbit (LEO) satellite constellation known as Lightspeed.

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