Here's a newer report!<br />Sky Network TV (SKY) <br />SATELLITE PROBLEMS OVERCOME <br /><br /><br />From http://www.unlimited.co.nz/unlimite...nDocument&More=Sharetrack&Click=<br /><br />Key points <br />* SKY's primary satellite control process (SCP) failed last Wednesday, causing it to switch its service to the back-up SCP, which was completed successfully.<br />* We believe there is a low risk that the back-up SCP will fail but this has increased SKY's vulnerability.<br />* Under a worst case scenario the failure of the back-up SCP could cost SKY up to $40m or 11cps. Our fair value for SKY is unchanged at $7.02 and re-iterate our BUY recommendation.<br /><br />Our Analysis<br /><br />Optus B1 SCP Fails, Changeover to Back-up SCP Successfully Implemented<br /><br />* SKY advised the market today that the primary satellite control processor (SCP) on the Optus B1 Satellite failed on<br />Wednesday, which caused it to implement its backup SCP. <br />* The backup SCP was implemented without any problems and we understand the downtime for the changeover was only 7 minutes. <br />* The key issue from here is that SKY does not have a contingent plan in place if the current SCP was to fail in the near-term. We believe this is a low probability outcome but still an uncomfortable position to be in.<br />* There are 36 identical Boeing 601 series satellites around the globe. Over the past few years there have been 7 instances where the primary SCP failed. In all but 1 case (Direct TV) the back-up SCP was implemented successfully. Of the 6 successful backup SCPs, the shortest period the backup SCP failed was 16 months, with the average life of the back-up SCP being around 4 years. This highlights low risk of failure for SKY's back-up SCP in the near-term. <br />* SKY is currently negotiating with Optus to secure a further back-up satellite to bridge the risk between now and the launch of the new Optus D1 satellite due to be completed in January/February 2006.<br />* The most likely contingent plan would be for Optus to identify a satellite that has spare capacity, which if required could be moved into the same location as the existing B1 Satellite. We understand moving a satellite would take about one week and SKY would incur the costs to move the existing clients from the replacement satellite plus the lost revenue from its subscribers and peripheral revenue.<br />* Realigning the dish on the houses is not an option, given it would take at least a year to implement the change and the new D1 satellite is due to be installed within 9 months.<br />* In an absolute worst case scenario, we believe the total cost to SKY would be a maximum of 1-month of lost revenue, equivalent to $40m or 11cps. Based on the experience to date of the other 6 examples where a back-up SCP has been implemented we believe this is a very low probability outcome.<br />* While the failure of the primary SCP has heighten the risk of SKY incurring a major disruption to its digital service given the potential delay and cost to implement a back-up service, we believe this risk can be managed to reduce the cost to less than $40m. SKY is exposed to this heighten risk until the new Optus D1 satellite is installed in early 2006.