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Intangible Assets
 12 Months Ended
Dec. 31, 2021
Disclosure of intangible assets [text block] [Abstract]  
INTANGIBLE ASSETS

17. INTANGIBLE ASSETS

The intangible assets are split between assets with finite and indefinite lives.

The indefinite life intangible assets are summarized below.

 

Orbital slots

  

Trade name

  

Intellectual
property

  

Total indefinite
life intangible
assets

Cost as at January 1, 2020

  

$

608,021

 

  

$

17,000

  

$

65,822

 

  

$

690,843

 

Additions

  

 

—

 

  

 

—

  

 

5

 

  

 

5

 

Disposals/retirements

  

 

—

 

  

 

—

  

 

(229

)

  

 

(229

)

Impact of foreign exchange

  

 

(808

)

  

 

—

  

 

(757

)

  

 

(1,565

)

Cost as at December 31, 2020 and January 1, 2021

  

 

607,213

 

  

 

17,000

  

 

64,841

 

  

 

689,054

 

Additions

  

 

—

 

  

 

—

  

 

—

 

  

 

—

 

Disposals/retirements

  

 

—

 

  

 

—

  

 

—

 

  

 

—

 

Impact of foreign exchange

  

 

(268

)

  

 

—

  

 

(449

)

  

 

(717

)

Cost as at December 31, 2021

  

$

606,945

 

  

$

17,000

  

$

64,392

 

  

$

688,337

 

Accumulated impairment as at January 1, 2020

  

$

(1,100

)

  

$

—

  

$

—

 

  

$

(1,100

)

Impairment

  

 

—

 

  

 

—

  

 

—

 

  

 

—

 

Accumulated impairment as at December 31, 2020 and January 1, 2021

  

 

(1,100

)

  

 

—

  

 

—

 

  

 

(1,100

)

Impairment

  

 

—

 

  

 

—

  

 

—

 

  

 

—

 

Accumulated impairment as at December 31, 2021

  

$

(1,100

)

  

$

—

  

$

—

 

  

$

(1,100

)

Net carrying values

  

 

  

 

  

 

    

 

  

 

  

 

  

 

As at December 31, 2020

  

$

606,113

 

  

$

17,000

  

$

64,841

 

  

$

687,954

 

As at December 31, 2021

  

$

605,845

 

  

$

17,000

  

$

64,392

 

  

$

687,237

 

The finite life intangible assets are summarized below.

 

Revenue
backlog

  

Customer
relationships

  

Customer
contracts

  

Transponder
rights

  

Concession
rights

  

Software

  

Other

  

Total
finite life
intangible
assets

Cost as at January 1, 2020

  

$

223,664

 

  

$

198,476

 

  

$

12,858

 

  

$

16,718

 

  

$

30,148

 

  

$

—

 

  

$

59

 

  

$

481,923

 

Additions

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

24

 

  

 

—

 

  

 

—

 

  

 

24

 

Disposals/retirements

  

 

—

 

  

 

(3,943

)

  

 

(240

)

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

(4,183

)

Impact of foreign exchange

  

 

—

 

  

 

12

 

  

 

—

 

  

 

—

 

  

 

(7,258

)

  

 

—

 

  

 

—

 

  

 

(7,246

)

Cost as at December 31, 2020 and January 1, 2021

  

 

223,664

 

  

 

194,545

 

  

 

12,618

 

  

 

16,718

 

  

 

22,914

 

  

 

—

 

  

 

59

 

  

 

470,518

 

Additions

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

75

 

  

 

2,770

 

  

 

—

 

  

 

2,845

 

Disposals/retirements

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

(411

)

  

 

—

 

  

 

—

 

  

 

(411

)

Impact of foreign exchange

  

 

—

 

  

 

(19

)

  

 

—

 

  

 

—

 

  

 

(1,501

)

  

 

—

 

  

 

—

 

  

 

(1,520

)

Cost as at December 31, 2021

  

$

223,664

 

  

$

194,526

 

  

$

12,618

 

  

$

16,718

 

  

$

21,077

 

  

$

2,770

 

  

$

59

 

  

$

471,432

 

Accumulated amortization and impairment as at January 1, 2020

  

$

(202,783

)

  

$

(137,917

)

  

$

(6,951

)

  

$

(12,944

)

  

$

(8,240

)

  

$

—

 

  

$

(40

)

  

$

(368,875

)

Amortization

  

 

(6,198

)

  

 

(6,847

)

  

 

(834

)

  

 

(1,078

)

  

 

(2,235

)

  

 

—

 

  

 

(3

)

  

 

(17,195

)

Disposals/retirements

  

 

—

 

  

 

3,943

 

  

 

240

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

4,183

 

Impact of foreign exchange

  

 

—

 

  

 

(70

)

  

 

—

 

  

 

—

 

  

 

2,675

 

  

 

—

 

  

 

—

 

  

 

2,605

 

Accumulated amortization and impairment as at December 31, 2020 and January 1, 2021

  

 

(208,981

)

  

 

(140,891

)

  

 

(7,545

)

  

 

(14,022

)

  

 

(7,800

)

  

 

—

 

  

 

(43

)

  

 

(379,282

)

Amortization

  

 

(5,590

)

  

 

(6,894

)

  

 

(845

)

  

 

(1,078

)

  

 

(1,453

)

  

 

(277

)

  

 

(4

)

  

 

(16,141

)

Disposals/retirements

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

411

 

  

 

—

 

  

 

—

 

  

 

411

 

Impact of foreign exchange

  

 

—

 

  

 

13

 

  

 

—

 

  

 

—

 

  

 

408

 

  

 

— 

 

  

 

—

 

  

 

421

 

Accumulated amortization and impairment as at December 31, 2021

  

$

(214,571

)

  

$

(147,772

)

  

$

(8,390

)

  

$

(15,100

)

  

$

(8,434

)

  

$

(277

)

  

$

(47

)

  

$

(394,591

)

Net carrying values

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

As at December 31, 2020

  

$

14,683

 

  

$

53,654

 

  

$

5,073

 

  

$

2,696

 

  

$

15,114

 

  

$

—

 

  

$

16

 

  

$

91,236

 

As at December 31, 2021

  

$

9,093

 

  

$

46,754

 

  

$

4,228

 

  

$

1,618

 

  

$

12,643

 

  

$

2,493

 

  

$

12

 

  

$

76,841

 

The total combined indefinite and finite life intangible assets are summarized below.

 

As at December 31, 2021

  

As at December 31, 2020

Cost

  

Accumulated
amortization
and
impairment

  

Net carrying
value

  

Cost

  

Accumulated
amortization
and
impairment

  

Net carrying
value

Indefinite life intangibles

  

$

688,337

  

$

(1,100

)

  

$

687,237

  

$

689,054

  

$

(1,100

)

  

$

687,954

Finite life intangibles

  

 

471,432

  

 

(394,591

)

  

 

76,841

  

 

470,518

  

 

(379,282

)

  

 

91,236

Total intangibles

  

$

1,159,769

  

$

(395,691

)

  

$

764,078

  

$

1,159,572

  

$

(380,382

)

  

$

779,190

The orbital slots represent a right to operate satellites in a given longitudinal coordinate in space, where geostationary orbit may be achieved. They are limited in availability and represent a scarce resource. Usage of orbital slots is licensed through the International Telecommunications Union. Satellite operators can generally expect, with a relatively high level of certainty, continued occupancy of an assigned orbital slot either during the operational life of an existing orbiting satellite or upon replacement by a new satellite once the operational life of the existing orbiting satellite is over. As a result of the expectancy right to maintain the once awarded orbital slots, an indefinite life is typically associated with orbital slots.

The Company’s trade name has a long and established history, a strong reputation and has been synonymous with quality and growth within the satellite industry. It has been assigned an indefinite life because of expected ongoing future use.

The Company’s intellectual property relates to development relating to its planned Telesat Lightspeed constellation. It has been assigned an indefinite life because of anticipated ongoing future use.

The following are the remaining useful lives of the intangible assets:

 

Years

Revenue backlog

  

3

Customer relationships

  

5 to 7

Customer contracts

  

5

Transponder rights

  

1

Concession rights

  

1 to 15

Software

  

5

Patent

  

4

All of the Company’s intangible assets, excluding the intangible assets held in an unrestricted subsidiary, have been pledged as security as a requirement of the Company’s Senior Secured Credit Facilities, Senior Secured Notes and 2026 Senior Secured Notes (Note 24).

Impairment

Finite life intangible assets are assessed for impairment at the Company’s CGU level. With the exception of trade name, which is tested for impairment at the asset level, the indefinite life intangible assets are tested for impairment at the individual CGU level. The annual impairment tests for these assets were performed in the fourth quarters of 2021 and 2020 in accordance with the policy described in Note 4.

Orbital slots

The orbital slots were valued using an income approach.

The income approach is most sensitive to the following assumptions:

•        Movements in the underlying business plan;

•        Discount rate; and

•        Growth rate assumptions.

Movements in the underlying business plan

The business plans reflect the most up-to-date assumptions concerning the markets and development and trends in the business. For the provision of satellite capacity, the will take into account the following factors:

•        The expected developments in sale of satellite capacity;

•        Any changes in the expected capital expenditure cycle; and

•        Any changes in satellite procurement, launch or cost assumptions.

Discount rates

Discount rates reflect management’s estimates of the specific risks. Management uses a weighted average cost of capital as a discount rate. The discount rates used was 7.5% in 2021 and 8.0% in 2020.

Growth rate assumptions

Growth rate assumptions used to extrapolate the cash flows beyond the business planning period are based on commercial experience and the expectations for the development of the markets which they serve.

Trade name

Relief from royalty method was used to calculate the fair value of the Telesat Trade name. The relief from royalty analysis requires determining a hypothetical royalty rate and subsequent application of the rate to projected revenue.

The relief from royalties method is most sensitive to the following assumptions:

•   Movements in the underlying business plan;

•   Royalty rate;

•   Discount rate; and

•   Growth rate assumptions.

Movements in the underlying business plan

The business plans reflect the most up-to-date assumptions concerning the markets and development and trends in the business. For the provision of satellite capacity, the business plan will take into account the expected developments in sale of satellite capacity.

Royalty rate

The determination of the hypothetical royalty rate used in the relief from royalty approach will consider comparable license agreements and other qualitative factors. The royalty rate used for 2021 and 2020 was 0.25% of revenue.

Discount rates

Discount rates reflect management’s estimates of the specific risks. Management uses a weighted average cost of capital as a discount rate. The discount rates used was the following:

 

2021

  

2020

Geo royalties

  

7.5

%

  

8.0

%

Leo royalties

  

17.5

%

  

17.5

%

Growth rate assumptions

Growth rate assumptions used to extrapolate the cash flows beyond the business planning period are based on commercial experience and the expectations for the development of the markets which they serve. The long-term growth rate was the following:

 

2021

  

2020

Geo

  

—

%

  

—

%

Leo

  

3.0

%

  

3.0

%

No impairment loss was recognized in the years ended December 31, 2021 and 2020.

Some of the more sensitive assumptions used in the quantitative analysis, including the forecasted cash flows and the discount rate, could have yielded different estimates of the recoverable amount. Actual operating results and the related cash flows of the Company could differ from the estimated operating results and related cash flows used in the impairment analysis, and had different estimates been used, it could have resulted in a different fair value.