20-F: Telesat Faces Mounting Losses, Debt Woes Amid LEO Transition

Telesat Corporation reported a significant increase in net loss and revenue decline for fiscal year 2025, alongside substantial debt maturities and a material weakness in internal controls, despite progress on its Lightspeed LEO constellation.

Summary

• Net loss for the year ended December 31, 2025, increased to $530.2 million, compared to a net loss of $302.5 million in the prior year.
• Total revenue decreased by $153.1 million to $418.0 million in 2025, down 26.8% from $571.0 million in 2024.
• Broadcast revenue decreased by $78.2 million, primarily due to lower rates on a DTH customer agreement renewal, non-renewal of another DTH agreement, and termination of service from a DTH customer.
• Enterprise revenue decreased by $61.1 million, mainly due to reductions in services for an Indonesian rural broadband program and lower revenue from aero and maritime markets.
• Consulting and other revenue decreased by $13.7 million, primarily due to reduced consulting services for NASA Goddard Space Flight Center.
• Adjusted EBITDA decreased by $171.0 million to $212.7 million in 2025, from $383.7 million in 2024, with the Adjusted EBITDA margin falling to 50.9% from 67.2%.
• An impairment loss of $302.2 million was recognized against goodwill in the GEO business segment, driven by reduced contract renewals and sustained pricing pressure from newer LEO technology.
• An additional $55.9 million impairment was recorded against satellites, property, and other equipment, and $7.1 million against intangible assets in the GEO segment.
• Orbital slots, previously considered indefinite-life assets, were reclassified as finite-life assets effective January 1, 2025, resulting in an additional $33.9 million in amortization expense for the year.
• Telesat Canada's Term Loan B and Senior Notes, totaling approximately $2.3 billion, are scheduled to mature between December 2026 and October 2027, creating significant liquidity pressure.
• Management is actively engaged in discussions with lenders' advisors about refinancing the Telesat Canada Debt, but there is no assurance of successful completion.
• A material weakness in internal control over financial reporting was identified related to balance sheet presentation and classification, specifically the misclassification of a derivative liability for Telesat Lightspeed Financing Warrants.
• The Telesat Lightspeed constellation development is progressing, with $690.0 million drawn from the $2.54 billion financing from the Government of Canada and Government of Quebec.
• Telesat secured a strategic partnership with the Government of Canada and MDA Space in December 2025 to develop a multi-frequency Arctic military satellite communications (MILSATCOM) capability.
• The company announced the addition of Mil-Ka frequencies to its Lightspeed network in 2026 to meet anticipated global demand for mission-critical Mil-Ka capacity in LEO.
• Telesat's top five GEO customers accounted for approximately 64% of its revenues and 62% of its GEO backlog for the year ended December 31, 2025.
• The company repurchased $11.4 million (US$8.2 million) of 6.5% Senior Unsecured Notes for $4.5 million (US$3.3 million), resulting in a gain of $6.9 million (US$5.0 million).
• Total debt as of December 31, 2025, was $2,944.6 million (US$2,145.6 million) for Telesat Canada Debt and $716.2 million for Telesat Lightspeed Financing.
• The fair value of Telesat Lightspeed Financing Warrants, classified as current liabilities, was $832.4 million as of December 31, 2025.
• Cash and cash equivalents stood at $509.8 million as of December 31, 2025, with $206.6 million held within Telesat Canada and Guarantor entities.
• Capital expenditures for the Telesat Lightspeed constellation were $704.7 million in 2025.
• Telesat is involved in legal proceedings challenging the September 2025 distribution of 62% equity of its Lightspeed business from Telesat Canada to a Non-Guarantor subsidiary.
• Ongoing tax disputes with Brazilian authorities for $109.4 million and Canadian tax authorities for $11.6 million are being vigorously defended.
• A contract dispute with Shaw Satellite G.P. and Shaw Satellite Services Inc. for $45 million in damages is ongoing, with Shaw counterclaiming $14 million.
• The company increased its workforce by approximately 160 employees (36%) in the last 12 months, primarily in the LEO business segment.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a significantly negative report due to substantial financial losses, declining core business revenue, and critical debt maturity issues that raise going concern doubts. While the LEO project shows progress and secures funding, the immediate financial health and legal challenges present considerable headwinds.

Positives

• Progress on the Telesat Lightspeed constellation development, with $690.0 million drawn from the $2.54 billion financing from the Government of Canada and Government of Quebec.
• Secured a strategic partnership with the Government of Canada and MDA Space in December 2025 to develop a multi-frequency Arctic military satellite communications (MILSATCOM) capability.
• Announcement of the addition of Mil-Ka frequencies to the Lightspeed network in 2026 to meet anticipated global demand for mission-critical Mil-Ka capacity in LEO.
• Successful completion of Phase 1 LEO satellite (LEO 1) validation and de-risking, replaced by LEO 3 for continued demonstration purposes.
• Successful demonstrations of LEO network capabilities for enterprise, telecom, aviation, maritime, and government sectors, including 5G backhaul and optical inter-satellite links.
• Secured substantial multi-year contracts with Viasat and Orange for Telesat Lightspeed services.
• Repurchased $11.4 million (US$8.2 million) of 6.5% Senior Unsecured Notes for $4.5 million (US$3.3 million), resulting in a gain on repurchase of debt of $6.9 million (US$5.0 million).
• Reduced total Telesat Canada indebtedness by US$857 million since 2021 at a cost of US$450 million by repurchasing debt at a material discount to par.
• Increased workforce by approximately 160 employees (36%) in the last 12 months, primarily in the LEO business segment, indicating investment in future growth.
• The equity distribution of 62% of the Telesat Lightspeed business to a Non-Guarantor subsidiary provides more flexibility for future capital raises for the LEO project.

Negatives

• Net loss significantly increased to $530.2 million in 2025 from $302.5 million in 2024.
• Total revenue decreased by $153.1 million (26.8%) to $418.0 million in 2025.
• Broadcast revenue declined by $78.2 million due to DTH customer contract non-renewals and lower rates.
• Enterprise revenue decreased by $61.1 million due to service reductions and the sale of the Infosat subsidiary.
• Adjusted EBITDA decreased by $171.0 million, and the Adjusted EBITDA margin fell to 50.9% from 67.2%.
• A $302.2 million impairment loss was recognized against goodwill in the GEO segment due to increased competition and pricing pressure.
• Additional impairment losses of $55.9 million on satellites, property, and equipment, and $7.1 million on intangible assets were recorded.
• The reclassification of orbital slots from indefinite to finite life assets resulted in an additional $33.9 million in amortization expense.
• Telesat Canada faces significant liquidity pressure with approximately $2.3 billion in debt maturing between December 2026 and October 2027, and current cash flows are not expected to be sufficient for repayment without refinancing.
• A material weakness in internal control over financial reporting was identified related to balance sheet presentation and classification.
• The fair value of Telesat Lightspeed Financing Warrants increased by $215.3 million, contributing to a loss on changes in fair value of financial instruments.
• Ongoing legal proceedings initiated by debtholders challenging the equity distribution of the Lightspeed business, which could potentially impact the value of the Lightspeed business for Telesat Canada debtholders.
• Contract dispute with Shaw Satellite G.P. and Shaw Satellite Services Inc. for $45 million, with a $14 million counterclaim from Shaw.
• Ongoing tax disputes with Brazilian and Canadian authorities totaling $109.4 million and $11.6 million, respectively.

Risks

• Inability to generate sufficient cash to service all of the Telesat Canada Debt, potentially leading to default, foreclosure by secured lenders, or bankruptcy/liquidation of Telesat Canada, which could substantially impair investment in Telesat Corporation.
• Increased level of indebtedness, reducing financial flexibility and making it more difficult to repay or refinance existing debt.
• Business is capital intensive, and restrictions on incurring additional debt may impair ability to obtain other financing.
• Significant and intensifying competition in the satellite industry, particularly from Starlink, Amazon LEO, and Eutelsat OneWeb, could result in loss of revenues and decline in profitability.
• Changes in technology could have a material adverse effect on results, as new technologies provide increased capacity at lower cost, reducing demand for existing services.
• In-orbit satellites may fail to operate as expected due to operational anomalies, leading to lost revenues, increased costs, and/or contract terminations.
• Adverse impact from anti-satellite weapons or other attacks, potentially resulting in direct loss of satellites, intentional interference, or increased orbital debris.
• Changes in consumer demand for traditional television services and expansion of terrestrial networks adversely impacting DTH television services and future revenues.
• Fluctuations in available satellite capacity leading to oversupply and decreased rates for satellite services.
• Numerous technological risks and uncertainties associated with the Telesat Lightspeed constellation, including potential for technical underperformance, delays, or failure to achieve commercial viability.
• Inability to comply with drawdown requirements for Telesat Lightspeed Financing or raise sufficient capital for future expansion.
• Dilution of shareholder ownership due to potential future equity capital raises to fund Telesat Lightspeed or refinance existing debt.
• Substantial governance rights of MHR and PSP Investments, whose interests may differ from other shareholders and could block certain corporate actions.
• Indemnification and post-closing obligations to PSP Investments, which are uncapped in certain circumstances and may result in dilution.
• Operations may be limited or precluded by rules or processes of the International Telecommunication Union (ITU) or failure to coordinate with other satellite/terrestrial operators.
• Highly regulated industry with government regulations potentially affecting market access, service pricing, or business operations.
• Telesat Lightspeed operations depending on NGSO spectrum use and regulations, including sharing requirements, which could impact system capacity.
• New or revised regulations, especially for NGSO systems (e.g., draft EU Space Act), could have a material adverse impact on the Lightspeed constellation.
• Potential adverse U.S. tax consequences if Telesat Corporation or Telesat Partnership are treated as a U.S. corporation or surrogate foreign corporation, or if Loral is treated as an expatriated entity.
• Distributions from Telesat Partnership may be insufficient to cover tax liabilities for U.S. tax purposes.
• Potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, resulting in adverse tax consequences for U.S. shareholders.
• Potential liability for SIFT Tax under Canadian rules, reducing after-tax returns to unitholders and shareholders.
• Non-Canadian limited partners potentially subject to Canadian federal income tax on Canadian source business income.
• Payments of dividends by Telesat CanHoldco to Telesat Partnership being subject to Canadian federal withholding tax.
• Market price volatility of Telesat Public Shares due to various factors, including operating results, analyst recommendations, competition, management changes, litigation, and economic conditions.
• Potential for the departure of key employees or inability to recruit necessary talent.
• Adverse impact on future reported net income and asset values from impairments of goodwill and intangible assets.
• Significant changes in exchange rates, particularly USD to CAD, affecting debt service costs and capital expenditures.
• Limitations on Telesat Canada's access to usual protections from creditors under the Telesat Canada Reorganization and Divestiture Act in case of insolvency.
• Interruption or failure of, or cyber-attacks on, information technology and communication systems, data breaches, or hacking, harming reputation and business operations.
• Pandemics adversely affecting business, financial condition, and results of operations, including access to capital.
• Risks associated with pursuing acquisitions, dispositions, and strategic transactions, including additional costs, liabilities, and potential disruption.
• The Telesat Articles include a renunciation of certain business opportunities, which could enable related parties to benefit from opportunities that might otherwise be available to Telesat.

Future Outlook

Telesat expects to launch the first Lightspeed satellites in late 2026 and anticipates commercial operation around the end of 2027. The company intends to retain all available funds and future earnings to fund the Lightspeed constellation, other capital investments, and debt reduction, thus not expecting to pay cash dividends in the foreseeable future. Management is actively engaged in discussions to refinance the Telesat Canada Debt maturing in late 2026 and 2027, but cannot assure successful completion. The company will continue to seek to maintain utilization of its existing GEO satellite capacity and operating efficiency.

Management Comments

• Management is actively engaged in discussions with lenders' advisors about refinancing the Telesat Canada Debt.
• We believe the debtholders lawsuit to be without merit and intend to defend itself vigorously.
• We believe we have a strong position in this contract dispute with Shaw, no assurances can be made on a successful outcome to the dispute and, further, no assurances can be made on recovery of any amounts in connection therewith.
• We believe the likelihood of a favorable outcome in these tax disputes is more likely than not and, as such, no reserve has been established.
• We continue to expect to launch the first Telesat Lightspeed satellites in late 2026 and expect to be in commercial operation around the end of 2027.
• We believe that the global broadband internet connectivity provided by Telesat Lightspeed will allow Telesat to rapidly and profitably grow its business.
• We believe our accumulated experience and expertise in the design, procurement, launch, operation and commercialization of satellites and satellite networks is unparalleled and will continue to drive our success into the future.
• We believe our advanced constellation design, leading network capabilities and decades of deep commercial, technical, operational and regulatory experience put us in a strong position to capture the growing demand for affordable, high-capacity broadband connectivity around the world allowing us to grow our business.
• We will continue to be disciplined in our satellite replacement and expansion program, seeking to secure high-quality, long-term customers to anchor any new or replacement geostationary satellites in advance of committing to the construction of such satellites, should such opportunities arise.
• We will be alert to, and will evaluate, merger and acquisition opportunities in a thoughtful and disciplined manner as they arise with the aim of enhancing our competitive position and shareholder value.
• We believe that the innovative architecture and advanced technology of Telesat Lightspeed, as well as the market dynamics in the verticals we plan to serve, will allow us to compete effectively against any of the current and proposed systems.

Industry Context

StockSavvy.ai notes that the satellite industry is undergoing a significant transformation, with a shift from traditional GEO satellites to advanced LEO constellations. The filing highlights intensifying competition from major LEO players like SpaceX (Starlink), Amazon (Amazon LEO), and Eutelsat Group/OneWeb, which are increasing available capacity and driving down prices for GEO services. This trend is directly impacting Telesat's legacy GEO business, as evidenced by declining revenues and goodwill impairment. The focus on government and enterprise customers for Lightspeed, including the addition of Mil-Ka frequencies, aligns with a broader industry trend of LEO operators targeting high-value, mission-critical connectivity needs, especially in defense and remote broadband. The consolidation among satellite operators (e.g., Viasat acquiring Inmarsat, Eutelsat acquiring OneWeb) underscores the competitive pressures and the need for scale and diversified offerings in the evolving market.

Comparison to Industry Standards

• Telesat's GEO business faces intensifying competition from global competitors like SES S.A. and Eutelsat Group, which are substantially larger in terms of satellites in orbit and revenues, allowing them greater economies of scale and flexibility.
• The LEO Lightspeed constellation competes with established and rapidly deploying systems such as SpaceX's Starlink and Eutelsat Group/OneWeb, which have already commenced operations and made significant inroads in commercial aero and maritime markets.
• Amazon's Amazon LEO and Blue Origin's TeraWave are also noted as significant LEO competitors, with some having greater access to capital and in-house launch/manufacturing capabilities (e.g., SpaceX, Amazon) compared to Telesat's reliance on third-party suppliers.
• The industry is experiencing an oversupply of telecommunications capacity due to new HTS GEO satellites and NGSO constellations, leading to decreasing prices for satellite services, a trend impacting Telesat's GEO revenues.
• Telesat's Lightspeed constellation aims to provide fiber-like broadband connectivity, competing with terrestrial networks and other LEO systems by offering low latency (18-40 milliseconds demonstrated in tests, comparable to terrestrial networks), high throughput, and global coverage, including poles.
• The company's strategic partnership with the Government of Canada and MDA Space for Arctic MILSATCOM capability aligns with a global trend of allied nations investing in sovereign and diverse LEO satellite communication systems to enhance national security and reduce strategic dependence, as seen with the EU's IRIS, Germany's, Italy's, and South Korea's national LEO initiatives, and the U.S. Space Force's pLEO initiative.
• Telesat's use of Ka-band frequencies for Lightspeed is a competitive factor, as some competitors use Ku-band, which is less susceptible to rain fade, potentially impacting market size for Lightspeed services.

Management Changes

Corporate Governance

Legal Proceedings

• Wilmington Savings Fund, FSB (Administrative Agent for Term Lenders) filed claims in New York and Ontario on January 21, 2026, against Telesat Canada and other entities.
• The lawsuit challenges the September 12, 2025, distribution of 62% equity of the Telesat Lightspeed business from Telesat Canada to a Non-Guarantor subsidiary.
• Plaintiffs allege violations of Canada Business Corporations Act (CBCA) sections 34 or 36, oppression/unfair prejudice to Term Lenders, breach of Credit Agreement Section 6.03 (transfer of substantially all value), and violation of Ontario Fraudulent Conveyances Act (insolvency with intent to harm lenders).
• Plaintiffs seek various relief, including remedying the transaction's effects, damages, a declaration that the transaction is void, and restoration of distributed amounts to Telesat Canada.
• If plaintiffs prevail on the Credit Agreement breach claim, it could accelerate the payment of the Term Loan and potentially the remainder of the Telesat Canada Debt.
• Telesat believes the lawsuits are without merit and intends to defend vigorously.
• Telesat Canada is in a contract dispute with Shaw Satellite G.P. and Shaw Satellite Services Inc. regarding payments for services on the Anik F2 satellite, seeking $45 million in damages for breach of contract and duty of good faith.
• Shaw has denied Telesat's claims and counterclaimed $14 million for breach of contract, alleging Anik F2 RF channel services failed to meet performance parameters.
• Telesat believes it has a strong position in the Shaw dispute, but no assurances can be made on a successful outcome or recovery of amounts.
• Telesat is involved in disputes with Brazilian tax authorities for $109.4 million (including interest and penalties) for the period 2002-2021, relating to revenue characterization. Telesat believes a favorable outcome is more likely than not.
• Canadian tax authorities reassessed Telesat for $11.6 million relating to Scientific Research and Experimental Development claims for 2016 and 2017. Telesat has challenged the reassessments and believes a favorable outcome is more likely than not.

Related Party Transactions

• The Transaction: On November 23, 2020, Loral, Telesat Canada, Telesat Corporation, Telesat Partnership, and others entered into a Transaction Agreement, which closed on November 18, 2021. This resulted in pre-closing stockholders of Loral, PSP Investments, and other Telesat Canada shareholders owning approximately the same percentage of equity in Telesat Canada indirectly through Telesat Corporation and/or Telesat Partnership.
• PSP Investments (through Red Isle) contributed equity interests in Telesat Canada for Class C Shares and Class C Units, and is entitled to a $7 million payment, a post-closing economic adjustment, and indemnification for certain losses and tax matters.
• Investor Rights Agreements: Telesat Corporation entered into agreements with MHR Fund Management LLC and Public Sector Pension Investment Board (PSP Investments) on November 23, 2020. These agreements grant each of MHR and PSP Investments the right to designate three directors to the Telesat Corporation Board and exclusive rights to fill those vacancies.
• The number of designated directors for MHR and PSP Investments will decrease if their aggregate ownership of Telesat Corporation Shares and Telesat Partnership Units falls below 25%, 15%, or 5%.
• MHR and PSP Investments have veto rights or participation rights over certain proposed changes by Telesat, including organizational documents, restructurings, non-pro rata dividends, and certain tax elections.
• Registration Rights and Tag Along Rights: MHR and PSP Investments entered into a Registration Rights Agreement with Telesat Corporation, effective at the Transaction's closing.
• Goldberg, Godles, Wiener & Wright: Henry Goldberg, father of CEO Daniel Goldberg, is a partner in this law firm, which provided approximately US$0.7 million in services to Telesat Corporation and its subsidiaries in 2025.
• Indemnification Agreements: Telesat has indemnification agreements with its directors and executive officers, covering fees, costs, charges, and expenses related to claims arising from their roles.
• Telesat Corporation and Telesat CanHold Corporation have indemnified PSP Investments on a grossed-up basis for its pro rata share of costs related to Transaction losses, litigation, Loral losses/expenses, and certain tax matters. This indemnification is uncapped for most obligations, with a US$50 million cap for certain tax matters (excluding defense costs and gross-up payments).
• Compensation of executives and Board level directors: Total compensation for executives and directors, including short-term benefits, special payments, post-employment benefits, and share-based payments, amounted to $21.54 million in 2025.

Stakeholder Impact

• Shareholders: Face significant dilution risk from potential future equity capital raises to fund the Lightspeed constellation or refinance debt. The material weakness in internal controls and going concern doubt for Telesat Canada could negatively impact investor confidence and share price. The substantial governance rights of MHR and PSP Investments mean their interests may not always align with other shareholders.
• Employees: The company increased its workforce by 160 employees, primarily in the LEO segment, indicating growth opportunities. The Employee Share Purchase Plan offers a benefit for employees to acquire company shares. However, the financial challenges and potential restructuring could create uncertainty.
• Customers: Existing GEO customers may experience service disruptions or changes as older satellites reach end-of-life and capacity is reduced. New Lightspeed customers are expected to benefit from advanced broadband connectivity, but delays in deployment or technical issues could impact service delivery. The contract dispute with Shaw highlights potential risks to customer relationships.
• Suppliers: The Lightspeed constellation relies on a limited number of manufacturers and launch providers, creating dependence. Delays or failures by these suppliers could impact the project. Increased demand for components due to the AI industry is causing cost increases and delays for Telesat's procurement.
• Creditors: Telesat Canada's debt holders face substantial risk due to upcoming maturities ($2.3 billion in 2026) and the stated uncertainty regarding successful refinancing. The legal challenge by debtholders regarding the Lightspeed equity distribution could impact their recourse in case of default. The going concern doubt directly impacts creditors' assessment of repayment likelihood.
• Government (Canada & Quebec): Are significant stakeholders through financing ($2.54 billion for Lightspeed), strategic partnerships (Arctic MILSATCOM), and capacity agreements ($600 million from GoC). They also hold warrants in Lightspeed LEO Limited Partnership, giving them an equity interest. Tax authorities are involved in ongoing disputes.

Next Steps

• Management is actively engaged in discussions with lenders' advisors about refinancing the Telesat Canada Debt maturing in December 2026 and October 2027.
• Remediation plan initiated to address the identified material weakness in internal control over financial reporting, including designing and implementing formal processes for technical accounting and disclosure matters and strengthening continuity and oversight.
• Launch of the first Telesat Lightspeed satellites is expected in late 2026.
• Commercial operation of the Telesat Lightspeed constellation is expected around the end of 2027.
• Telesat will continue to evaluate merger and acquisition opportunities to enhance its competitive position and shareholder value.
• The company intends to defend itself vigorously against the debtholders' lawsuit challenging the Lightspeed equity distribution.
• Ongoing defense against Brazilian and Canadian tax authorities regarding disputed tax assessments.
• Continuation of the contract dispute with Shaw Satellite G.P. and Shaw Satellite Services Inc.

Key Dates

Recommendation

Telesat Corporation faces severe financial headwinds, including a substantial increase in net loss, significant revenue decline in its core GEO business, and a material weakness in internal controls. The most critical factor is the 'going concern' doubt explicitly raised by management regarding Telesat Canada's ability to refinance $2.3 billion in debt maturing in late 2026. While the Lightspeed LEO constellation shows promise and has secured significant government funding, its commercial operation is not expected until late 2027, and its success is subject to numerous technological, market, and regulatory risks. The ongoing legal challenge by debtholders regarding the Lightspeed equity distribution adds further uncertainty and could complicate refinancing efforts. Given the immediate liquidity pressures, the declining performance of the legacy business, and the high-risk, long-term nature of the LEO project, a seasoned investor would likely view the stock as a strong sell due to the significant downside risk and uncertainty surrounding its ability to meet its financial obligations.

Keywords

Satellite Communications, LEO Constellation, Telesat Lightspeed, Geostationary Satellites, Broadband Connectivity, SEC Filing, Annual Report, Financial Performance, Debt Refinancing, Goodwill Impairment, Risk Factors, Corporate Governance, MILSATCOM, Ka-band Spectrum, SpaceX Starlink, Amazon LEO, Eutelsat OneWeb, Telecommunications, Government Contracts, Cybersecurity, Internal Controls, Canadian Economy, International Telecommunication Union, Tax Implications