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Gilat enters new market with contract potentially worth $70m

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Tuesday, August 9th, 2011

As reported in IVC:

Gilat will supply European satellite operator SES Astra with network equipment and Ka-band end-user terminals.

Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT) is entering a new market with a contract potentially worth $70 million over the next five years. Under the contract with European satellite operator SES Astra SA, Gilat will supply network equipment and Ka-band end-user terminals, in contrast with the prevailing Ku-band.

Gilat competitors Hughes Communications Inc. (Nasdaq: HUGH) and ViaSat Inc. (Nasdaq: VSAT) already provide Ka-band service in North America. The Ka-band communications market is new, and Gilat expects that it will provide a future growth engine. Ka-band offers customers higher speeds and is suitable for broadband Internet connectivity by households.

Gilat had a bitter experience in a previous attempt to enter the consumer market, when, a decade ago, it found itself in difficulties after investing heavily in a US project, Starband, to provide consumers with high-speed Internet service via satellite. This time, however, Gilat is only an equipment vendor, and is not offering the service, and the technology is different.

Gilat will provide SES satellite-based Internet service ASTRA2Connect with gateway equipment and related services, as well as terminals for the provision of Internet and VoIP services to households and small businesses in Europe. SES plans to launch the services by the end of 2012. Gilat initially expects negligible revenue, but believes that it will grow as the project gains momentum.

Gilat CEO Amiram Levinberg said, “This is an important milestone for Gilat and a strong acknowledgement of our Ka-band technology. The use of Ka-band technology represents a significant shift in the satellite market. This agreement represents an important opportunity for Gilat to be at the forefront of next-generation satellite services.”

Gilat’s share price will open at $4.96 on Nasdaq today, giving a market cap of $200 million and rose 3.1% by mid-afternoon on the TASE to NIS 16.92.