ViaSat Inc. (VSAT)
Constant and Pervasive Lack of Visibility
We are short shares of ViaSat Inc. Please click here to read full disclosures.
Throughout our research efforts, we’ve encountered difficulty and a consistent lack of appropriate transparency in validating many of the claims, projections, and metrics provided by the company. To name but a few examples: the company inconsistently describes their addressable market, excludes key metrics from quarterly reporting, obfuscates points of technical failure regarding satellite efficiency, and does not provide adequate disclosure in press releases regarding defense contract awards to determine what is new versus incremental.
From a reported KPI perspective, the company does not provide detailed ARPU, churn, CPGA (cost per gross add), nor capital expenditure break-outs that are standard in telecom industry financial reporting.
With regard to technology and understanding the capabilities of the satellites themselves, we have also encountered conflicting and ambiguous characterizations in areas that, by their nature, require exactitude of detail, like satellite capacity, core bit rate efficiency, detailed capex allocations, and project delivery windows.
In terms of primary, essential core business model drivers, like satellite capacity, we were initially confused how a satellite like ViaSat-1, with a stated gross capacity of 140 Gbps, failed to keep pace from both a subscriber count and FCC performance report card, with its competitive cousin, Jupiter-1, a satellite with lower stated gross capacity. Based on conversations with industry participants, we believe that Jupiter-1 is a far more competitive satellite than simple gross capacity would suggest because of a more efficient level of encoding and better subscriber management.
The lack of visibility extends beyond KPIs and the capabilities of satellites to the very swaths of spectrum the company’s satellites are reliant on for transmitting data. The impairment of a material amount of spectrum that the company requires to provide service on ViaSat-2 and -3 is obliquely referenced in the company’s SEC filings, but given the lack of specific public discourse on the subject, we believe investors do not appreciate the severity of this downside risk. Because of potential interference from non-geostationary satellites, in the next few years ViaSat may lose access to 500 Mhz of downlink spectrum (nearly a quarter of the total amount of spectrum) in large parts, if not the whole of the ViaSat-3 footprint. One of our future research series will shed further light on this poorly understood risk.