John Celli

US satellite radio provider Sirius XM (NASDAQ:SIRI) has commissioned Space Systems Loral to design and build two birds, designed to replace the Boeing Satellite Systems-made XM-3 and XM-4 satellites on their retirement.

Announced at the end of July, the next-generation SXM-7 and SXM-8 will be based on the SSL 1300 platform and will launch in 2019 and 2020, respectively, providing radio via S-band spectrum for an expected 15 years.

SSL has previously built seven satellites – one of which was a ground spare – for Sirius XM, including the first generation Sirius satellites launched in 2000.

John Celli, president of SSL, said: “We have a long history of working with Sirius XM to develop some of the world’s most advanced satellites which broadcast to cars and radios for the home, office, and mobile devices.

“We are honoured to be selected to build two additional satellites that will reinforce and augment the fleet’s capability.” Many of SSL’s satellite sales are supported by Export Development Canada but both companies declined to comment on the financing.

The contract fits into SSL’s Canadian parent MacDonald, Dettwiler and Associates’ (TSX:MDA) strategy to become more US-focused that saw it appoint Howard Lance, an American, as CEO in April, although the primary reason for this move was to secure US government defence and intelligence contracts.

Lance is now based in Palo Alto, California, where SSL is headquartered.

Bridget Neville, VP of satellite and terrestrial engineering and operations at Sirius XM, said: “We are pleased to once again collaborate with SSL on two advanced satellites that will bolster service to our subscribers for years to come.

“SSL is a premier designer and manufacturer of reliable communications satellites, with the technological capability to meet our demanding requirements.” Sirius XM generates more revenue than any other radio company serving 30.6 million subscribers across North America with audio entertainment and data services.

It is in the process of consolidating Canadian affiliate Sirius XM Canada that will see it pay US$275m to increase its economic interest in the target from 37% to 70%.

The SSL contract was announced days after Sirius XM released its Q2 results, with the company’s debt to adjusted EBITDA remaining at 3.5 times and ending the quarter 2016, with a cash balance of US$476m following a US$1bn bond offering in May.

David Frear, Sirius XM’s CFO, said: “We have ample flexibility to continue making strategic investments in technology, content, and new satellite infrastructure while maintaining strong capital returns to our stockholders.”