Intelsat Announces Fourth Quarter and Full-Year 2016 Results
28 February 2017
Intelsat S.A. announced financial results for the three months and full-year ended December 31, 2016.
Intelsat reported total revenue of $550.7 million and net income attributable to Intelsat S.A. of $662.8 million for the three months ended December 31, 2016.
Intelsat reported EBITDA1, or earnings before net interest, gain on early extinguishment of debt, taxes and depreciation and amortization, of $406.7 million and Adjusted EBITDA1 of $417.4 million, or 76 percent of revenue for the three months ended December 31, 2016.
For the year ended December 31, 2016, Intelsat reported total revenue of $2,188.0 million and net income attributable to Intelsat S.A. of $990.2 million.
Intelsat reported EBITDA of $1,613.4 million and Adjusted EBITDA of $1,650.7 million, or 75 percent of revenue for the year ended December 31, 2016.
“Our fourth quarter financial results, $551 million in revenue and $417 million in Adjusted EBITDA, demonstrate the increasing stability in our business as we executed on our initiatives to drive growth,” said Stephen Spengler, Chief Executive Officer, Intelsat. “For the full-year, our revenue and Adjusted EBITDA performance fell favorably within our guidance range, demonstrating the visibility and sustainability of our business. Our objective for 2017 is to build on this foundation as we work to transform our business, as the era of high performance satellites unlocks new and faster growing opportunities. Our Intelsat EpicNG high-throughput footprint now provides services to five continents, overlaying our Globalized Network with high performance, better economics and simplified access to satellite solutions.”
Mr. Spengler continued, “Each of our businesses is positioned for improved performance or new opportunities in 2017. Our network services business is moving from stability to renewed growth as new revenue on Intelsat EpicNG assets ramps up over the course of the year. Our media business is growing, with the full-year revenue benefit of two fully-booked DTH satellites that launched last year. Our government business is expected to benefit from Intelsat EpicNG now in service over regions of interest to its largest customer. Backlog as of December 31, 2016 was $8.7 billion, four times Intelsat’s 2016 revenue.” Mr. Spengler concluded, “In 2017, maintaining our momentum is one of our top objectives, whether on growth opportunities, the remaining Intelsat EpicNG satellite launches, implementing our managed services, or operationalizing production units of new ground technologies, such as electronically steerable antennas, in which we have invested. Additionally, our proposed merger with OneWeb which was announced earlier today aligns with our strategic objectives and will create the world’s first global broadband provider. We believe the complementary OneWeb technology, and the $1.7 billion investment by SoftBank, will create a company with greater growth opportunities and a strong financial foundation. Importantly, we will be more strongly positioned to achieve our shared mission to unlock new applications for satellite-based solutions, connecting people and devices everywhere.”
Fourth Quarter and Full-Year 2016 Business Highlights
Intelsat provides critical communications infrastructure to customers in the network services, media and government sectors. Our customers use our services for broadband connectivity to deliver fixed and mobile telecommunications, enterprise, video distribution and fixed and mobile government applications. For additional details regarding the performance of our customer sets, see our Quarterly Commentary.
Network Services Network services revenue was $221.9 million (or 40 percent of Intelsat’s total revenue) for the three months ended December 31, 2016, a decrease of 10 percent compared to the three months ended December 31, 2015. For the year ended December 31, 2016, the company reported total network services revenue of $900.3 million (or 41 percent of Intelsat’s total revenue); a decrease of 15 percent compared to the year ended December 31, 2015.
Media Media revenue was $228.4 million (or 42 percent of Intelsat’s total revenue) for the three months ended December 31, 2016, an increase of 4 percent compared to the three months ended December 31, 2015. For the year ended December 31, 2016, the company reported total media revenue of $868.1 million (or 40 percent of Intelsat’s total revenue), a decrease of 2 percent compared to the year ended December 31, 2015.
Government Government revenue was $93.2 million (or 17 percent of Intelsat’s total revenue) for the three months ended December 31, 2016, a decline of 7 percent compared to the three months ended December 31, 2015. For the year ended December 31, 2016, total government revenue was $387.1 million (or 18 percent of Intelsat’s total revenue), essentially flat when compared to the year ended December 31, 2015.
Average Fill Rate Intelsat’s average fill rate on our approximately 2,175 station-kept wide-beam transponders was 77 percent at December 31, 2016, unchanged as of September 30, 2016. Note that Intelsat 31, an inorbit spare satellite, is not included in the station-kept transponder count. Because we report our highthroughput Intelsat EpicNG capacity separately, the station-kept count reported above excludes the 270 units of high-throughput capacity related to our first Intelsat EpicNG satellite, Intelsat 29e, which entered into service in the first quarter of 2016, and approximately 350 units of high-throughput capacity related to Intelsat 33e, which just entered into service in late January 2017.
Satellite Launches On August 24, 2016, Intelsat 33e and Intelsat 36 were successfully launched and Intelsat 36 entered into service in late September 2016. As previously communicated, Intelsat 33e’s in-service date was delayed due to a malfunction in the primary thruster used for orbit raising. Intelsat 33e entered into service on January 29, 2017, and all operations are performing according to plan.
The company has three satellite launches scheduled for 2017: Intelsat 32e, an Intelsat EpicNG Ku-band payload which launched on February 14, 2017; Intelsat 35e in the second quarter of 2017; and Intelsat 37e in the third quarter of 2017.
Contracted Backlog At December 31, 2016, Intelsat’s contracted backlog, representing expected future revenue under existing contracts with customers, was $8.7 billion, as compared to $8.9 billion at September 30, 2016.
Capital Structure Updates and Debt Transactions During the three months ended December 31, 2016 through the month of January 2017, Intelsat (Luxembourg) S.A. (“Intelsat Luxembourg”), an indirect wholly-owned subsidiary of Intelsat S.A., and our newly created subsidiary, Intelsat Connect Finance S.A. (“ICF”), a direct wholly-owned subsidiary of Intelsat Luxembourg, completed a number of public and private debt exchanges. The transactions allowed the Company to significantly reduce its upcoming 2018 maturity, the Intelsat Luxembourg’s 6.75% Senior Notes due 2018 (the “2018 Lux Notes”). Below is a summary of the transactions conducted during this period:
In December 2016, ICF completed a series of exchanges, receiving (i) $377.6 million aggregate principal amount of 2018 Lux Notes in exchange for $132.1 million aggregate principal amount of ICF’s newly issued 12.5% Senior Notes due 2022 (the “2022 ICF Notes”) and $226.5 million in cash, (ii) $979.1 million aggregate principal amount of Intelsat Luxembourg’s 7.75% Senior Notes due 2021 (the “2021 Lux Notes”) in exchange for $538.4 million aggregate principal amount of 2022 ICF Notes and $29.4 million in cash, and (iii) $111.7 million aggregate principal amount of Intelsat Luxembourg’s 8.125% Senior Notes due 2023 (the “2023 Lux Notes”) in exchange for $61.4 million aggregate principal amount of 2022 ICF Notes and $3.3 million in cash.
In January 2017, Intelsat Luxembourg completed an exchange offer whereby it exchanged $403.3 million aggregate principal amount of its 2018 Lux Notes for an equal aggregate principal amount of its newly issued 12.5% Senior Notes due 2024 (the “2024 Lux Notes”). This exchange consisted of the tender of $377.6 million aggregate principal amount of 2018 Lux Notes held by ICF as a result of the December 2016 ICF exchange transactions, together with $25 million aggregate principal amount of 2018 Lux Notes the Company repurchased in the fourth quarter of 2015.
Recent Developments Intelsat and WorldVu Satellites Limited (“OneWeb”) announced today that they have entered into a conditional combination agreement, pursuant to and subject to the terms and conditions of which, OneWeb, the builder of a new Low Earth Orbit (LEO) global communications system will merge with and into Intelsat, to create a next-generation communications company. In addition, subject to the terms and conditions of a share purchase agreement with Intelsat, SoftBank Group Corp. (“SoftBank”), which currently owns 43% of the equity of OneWeb, is expected to invest an additional $1.7 billion in newly issued common and preferred equity of the combined company to support the acceleration of the combined company’s growth strategies and strengthen the Intelsat capital structure.
The merger and the SoftBank investment are expected to be completed late in the third quarter of 2017, and are conditioned upon the consummation of certain Intelsat debt exchange offers, the receipt of regulatory approvals, consent and approval by both Intelsat and OneWeb shareholders as well as other customary closing conditions. There can be no assurance that the merger or the SoftBank investment will be completed, or whether the terms will be amended from those described above.
Financial Results for the Three Months Ended December 31, 2016
On-Network revenues generally include revenue from any services delivered via our satellite or ground network. Off-Network and Other Revenues generally include revenue from transponder services, Mobile Satellite Services (“MSS”) and other satellite-based transmission services using capacity procured from other operators, often in frequencies not available on our network. Off-Network and Other Revenues also include revenue from consulting and other services and sales of customer premises equipment.
Total On-Network Revenues reported a decline of $14.2 million, or 3 percent, to $504.1 million as compared to the three months ended December 31, 2015:
Transponder services reported an aggregate decrease of $13.1 million, primarily due to a $26.7 million decrease in revenue from network services customers, partially offset by a $14.6 million increase from media customers. The network services decline was mainly due to non-renewals and renewal pricing at lower rates for enterprise and wireless infrastructure services. The network services decline also reflects previously discussed reduced volumes from non-renewals of point-to-point connectivity, which are shifting to fiber alternatives. The media increase resulted primarily from growth in direct-to-home television services in the Latin America, Caribbean and the Africa regions, partially offset by declines in the Asia-Pacific and North America regions. The aggregate decrease also reflects $2.9 million in currency-related reductions of our contracts in Brazil across our network services and media businesses.
Managed services reported an aggregate increase of $0.6 million, largely due to an increase of $10.5 million in revenue from network services customers for broadband services for air and maritime mobility applications, partially offset by declines of $5.7 million in revenues primarily from network services customers for point-to-point trunking applications, which are switching to fiber alternatives, and a $2.0 million decrease from media customers for occasional video solutions.
Channel reported an aggregate decrease of $1.7 million due to the continued migration of international point-to-point satellite traffic to fiber optic cable. This legacy product is no longer actively marketed to our customers.
Total Off-Network and Other Revenues reported an aggregate decline of $6.4 million, or a decrease of 12 percent, to $46.5 million as compared to the three months ended December 31, 2015:
Transponder, MSS and other Off-Network services reported an aggregate decrease of $7.1 million, primarily due to lower pricing on renewing services for government applications and reduced sales of customer premises equipment.
Satellite-related services reported a slight aggregate increase of $0.7 million, primarily due to increased revenue from support for third-party satellites and other services.
For the three months ended December 31, 2016, changes in operating expenses, interest expense, net, and other significant income statement items are described below.
Direct costs of revenue (excluding depreciation and amortization) increased by $1.7 million, or 2 percent, to $86.8 million, as compared to the three months ended December 31, 2015. This reflects an increase of $3.5 million in staff-related expenses offset by a decrease of $6.0 million primarily due to lower cost of third-party fixed satellite services and mobile satellite services capacity purchased in support of the company’s government business.
Selling, general and administrative expenses increased by $12.0 million, or 27 percent, to $56.2 million, as compared to the three months ended December 31, 2015. This was primarily due to an increase of $6.7 million in staff-related expenses and an increase of $3.3 million in bad debt expense primarily due to a greater reduction in the prior year quarter due to improved collections in the Africa and Middle East regions.
Depreciation and amortization expense increased by $0.4 million to $174.0 million, as compared to the three months ended December 31, 2015.
Interest expense, net consists of the interest expense we incur together with gains and losses on interest rate swaps (which reflect net interest accrued on the interest rate swaps as well as the change in their fair value), offset by interest income earned and the amount of interest we capitalize related to assets under construction. Interest expense, net increased by $22.8 million, or 10.3 percent, to $243.6 million for the three months ended December 31, 2016, as compared to $220.8 million in the three months ended December 31, 2015. The increase was principally due to a net increase of $18.8 million in interest expense largely resulting from a net increase in debt outstanding resulting from our new debt issuances, which were offset by certain repurchases and exchanges in 2016, and a net increase of $3.4 million from lower capitalized interest for the three months ended December 31, 2016, primarily resulting from a decreased number of satellites and related assets under construction.
The non-cash portion of total interest expense, net was $7.0 million for the three months ended December 31, 2016, due to the amortization of deferred financing fees and the accretion and amortization of discounts and premiums.
Gain on early extinguishment of debt was $679.1 million for the three months ended December 31, 2016, as compared to a gain of $7.1 million for the three months ended December 31, 2015. The gains were related to certain debt transactions that occurred during the respective fourth quarters of each year. The gains on early extinguishment of debt consisted of the difference between the carrying value of the debt redeemed or exchanged and the fair value of the debt issued, if applicable, and the total cash amount paid (including related fees), together with a write-off of unamortized debt issuance costs.
Other expense, net was $1.0 million for the three months ended December 31, 2016, as compared to other income, net of $1.6 million for the three months ended December 31, 2015. The decrease of $2.6 million was primarily due to a decline in expenses mainly related to our business conducted in Brazilian reais.
Provision for income taxes was $4.4 million for the three months ended December 31, 2016, as compared to $6.1 million for the three months ended December 31, 2015. The difference was principally due to lower tax expense in our foreign operations in the three months ended December 31, 2016 as compared to the same period in 2015. Cash paid for income taxes, net of refunds, totaled $4.7 million for the three months ended December 31, 2016, as compared to $3.8 million for the three months ended December 31, 2015.
Net Income, Net Income per Diluted Common Share attributable to Intelsat S.A., EBITDA and Adjusted EBITDA
Net income attributable to Intelsat S.A. was $662.8 million for the three months ended December 31, 2016, compared to a loss of $4,116.3 million for the same period in 2015.
Net income per diluted common share attributable to Intelsat S.A. was $5.56 for the three months ended December 31, 2016, compared to a loss of $38.29 per diluted common share for the same period in 2015.
EBITDA was $406.7 million for the three months ended December 31, 2016, compared to a loss of $3,721.9 million for the same period in 2015.
Adjusted EBITDA was $417.4 million for the three months ended December 31, 2016, or 76 percent of revenue, compared to $452.5 million, or 79 percent of revenue, for the same period in 2015.
Intelsat management has reviewed the data pertaining to the use of the Intelsat network, and is providing revenue information with respect to that use by customer set and service type in the following tables. Intelsat management believes this provides a useful perspective on the changes in revenue and customer trends over time.
Free Cash Flow From (Used in) Operations Free cash flow from (used in) operations1 was $6.6 million for the three months ended December 31, 2016. Free cash flow from (used in) operations is defined as net cash provided by operating activities, less payments for satellites and other property and equipment (including capitalized interest). Payments for satellites and other property and equipment from investing activities during the three months ended December 31, 2016 was $94.1 million.
Financial Outlook 2017 Today, Intelsat issued its 2017 financial outlook, in which the company expects the following:
Revenue: Intelsat forecasts full-year 2017 revenue to be in a range of $2.180 billion to $2.225 billion. Revenue performance reflects:
An increase of 3 to 5 percent in our media business.
Flat to a decline of 3 percent in our network services business.
A decline of 7 to 9 percent in our government business.
Adjusted EBITDA: Intelsat forecasts Adjusted EBITDA performance for the full-year 2017 to be in a range of $1.655 billion to $1.700 billion.
Cash Taxes: Annual 2017 cash taxes are expected to total approximately $30 million to $35 million.
Capital Expenditures: In light of the proposed merger with OneWeb, we will defer providing guidance on capital expenditures prior to the completion of the transaction. We anticipate that, assuming completion of the merger, there will be capital expenditure reductions as a result of combining our two fleets that are achievable in the mid- to long-term. A thorough technical and business evaluation will be completed to quantify these synergies; also taking into account new technologies that we believe will surface in the ecosystem.
28 February 2017
Intelsat S.A. announced financial results for the three months and full-year ended December 31, 2016.
Intelsat reported total revenue of $550.7 million and net income attributable to Intelsat S.A. of $662.8 million for the three months ended December 31, 2016.
Intelsat reported EBITDA1, or earnings before net interest, gain on early extinguishment of debt, taxes and depreciation and amortization, of $406.7 million and Adjusted EBITDA1 of $417.4 million, or 76 percent of revenue for the three months ended December 31, 2016.
For the year ended December 31, 2016, Intelsat reported total revenue of $2,188.0 million and net income attributable to Intelsat S.A. of $990.2 million.
Intelsat reported EBITDA of $1,613.4 million and Adjusted EBITDA of $1,650.7 million, or 75 percent of revenue for the year ended December 31, 2016.
“Our fourth quarter financial results, $551 million in revenue and $417 million in Adjusted EBITDA, demonstrate the increasing stability in our business as we executed on our initiatives to drive growth,” said Stephen Spengler, Chief Executive Officer, Intelsat. “For the full-year, our revenue and Adjusted EBITDA performance fell favorably within our guidance range, demonstrating the visibility and sustainability of our business. Our objective for 2017 is to build on this foundation as we work to transform our business, as the era of high performance satellites unlocks new and faster growing opportunities. Our Intelsat EpicNG high-throughput footprint now provides services to five continents, overlaying our Globalized Network with high performance, better economics and simplified access to satellite solutions.”
Mr. Spengler continued, “Each of our businesses is positioned for improved performance or new opportunities in 2017. Our network services business is moving from stability to renewed growth as new revenue on Intelsat EpicNG assets ramps up over the course of the year. Our media business is growing, with the full-year revenue benefit of two fully-booked DTH satellites that launched last year. Our government business is expected to benefit from Intelsat EpicNG now in service over regions of interest to its largest customer. Backlog as of December 31, 2016 was $8.7 billion, four times Intelsat’s 2016 revenue.” Mr. Spengler concluded, “In 2017, maintaining our momentum is one of our top objectives, whether on growth opportunities, the remaining Intelsat EpicNG satellite launches, implementing our managed services, or operationalizing production units of new ground technologies, such as electronically steerable antennas, in which we have invested. Additionally, our proposed merger with OneWeb which was announced earlier today aligns with our strategic objectives and will create the world’s first global broadband provider. We believe the complementary OneWeb technology, and the $1.7 billion investment by SoftBank, will create a company with greater growth opportunities and a strong financial foundation. Importantly, we will be more strongly positioned to achieve our shared mission to unlock new applications for satellite-based solutions, connecting people and devices everywhere.”
Fourth Quarter and Full-Year 2016 Business Highlights
Intelsat provides critical communications infrastructure to customers in the network services, media and government sectors. Our customers use our services for broadband connectivity to deliver fixed and mobile telecommunications, enterprise, video distribution and fixed and mobile government applications. For additional details regarding the performance of our customer sets, see our Quarterly Commentary.
Network Services Network services revenue was $221.9 million (or 40 percent of Intelsat’s total revenue) for the three months ended December 31, 2016, a decrease of 10 percent compared to the three months ended December 31, 2015. For the year ended December 31, 2016, the company reported total network services revenue of $900.3 million (or 41 percent of Intelsat’s total revenue); a decrease of 15 percent compared to the year ended December 31, 2015.
Media Media revenue was $228.4 million (or 42 percent of Intelsat’s total revenue) for the three months ended December 31, 2016, an increase of 4 percent compared to the three months ended December 31, 2015. For the year ended December 31, 2016, the company reported total media revenue of $868.1 million (or 40 percent of Intelsat’s total revenue), a decrease of 2 percent compared to the year ended December 31, 2015.
Government Government revenue was $93.2 million (or 17 percent of Intelsat’s total revenue) for the three months ended December 31, 2016, a decline of 7 percent compared to the three months ended December 31, 2015. For the year ended December 31, 2016, total government revenue was $387.1 million (or 18 percent of Intelsat’s total revenue), essentially flat when compared to the year ended December 31, 2015.
Average Fill Rate Intelsat’s average fill rate on our approximately 2,175 station-kept wide-beam transponders was 77 percent at December 31, 2016, unchanged as of September 30, 2016. Note that Intelsat 31, an inorbit spare satellite, is not included in the station-kept transponder count. Because we report our highthroughput Intelsat EpicNG capacity separately, the station-kept count reported above excludes the 270 units of high-throughput capacity related to our first Intelsat EpicNG satellite, Intelsat 29e, which entered into service in the first quarter of 2016, and approximately 350 units of high-throughput capacity related to Intelsat 33e, which just entered into service in late January 2017.
Satellite Launches On August 24, 2016, Intelsat 33e and Intelsat 36 were successfully launched and Intelsat 36 entered into service in late September 2016. As previously communicated, Intelsat 33e’s in-service date was delayed due to a malfunction in the primary thruster used for orbit raising. Intelsat 33e entered into service on January 29, 2017, and all operations are performing according to plan.
The company has three satellite launches scheduled for 2017: Intelsat 32e, an Intelsat EpicNG Ku-band payload which launched on February 14, 2017; Intelsat 35e in the second quarter of 2017; and Intelsat 37e in the third quarter of 2017.
Contracted Backlog At December 31, 2016, Intelsat’s contracted backlog, representing expected future revenue under existing contracts with customers, was $8.7 billion, as compared to $8.9 billion at September 30, 2016.
Capital Structure Updates and Debt Transactions During the three months ended December 31, 2016 through the month of January 2017, Intelsat (Luxembourg) S.A. (“Intelsat Luxembourg”), an indirect wholly-owned subsidiary of Intelsat S.A., and our newly created subsidiary, Intelsat Connect Finance S.A. (“ICF”), a direct wholly-owned subsidiary of Intelsat Luxembourg, completed a number of public and private debt exchanges. The transactions allowed the Company to significantly reduce its upcoming 2018 maturity, the Intelsat Luxembourg’s 6.75% Senior Notes due 2018 (the “2018 Lux Notes”). Below is a summary of the transactions conducted during this period:
In December 2016, ICF completed a series of exchanges, receiving (i) $377.6 million aggregate principal amount of 2018 Lux Notes in exchange for $132.1 million aggregate principal amount of ICF’s newly issued 12.5% Senior Notes due 2022 (the “2022 ICF Notes”) and $226.5 million in cash, (ii) $979.1 million aggregate principal amount of Intelsat Luxembourg’s 7.75% Senior Notes due 2021 (the “2021 Lux Notes”) in exchange for $538.4 million aggregate principal amount of 2022 ICF Notes and $29.4 million in cash, and (iii) $111.7 million aggregate principal amount of Intelsat Luxembourg’s 8.125% Senior Notes due 2023 (the “2023 Lux Notes”) in exchange for $61.4 million aggregate principal amount of 2022 ICF Notes and $3.3 million in cash.
In January 2017, Intelsat Luxembourg completed an exchange offer whereby it exchanged $403.3 million aggregate principal amount of its 2018 Lux Notes for an equal aggregate principal amount of its newly issued 12.5% Senior Notes due 2024 (the “2024 Lux Notes”). This exchange consisted of the tender of $377.6 million aggregate principal amount of 2018 Lux Notes held by ICF as a result of the December 2016 ICF exchange transactions, together with $25 million aggregate principal amount of 2018 Lux Notes the Company repurchased in the fourth quarter of 2015.
Recent Developments Intelsat and WorldVu Satellites Limited (“OneWeb”) announced today that they have entered into a conditional combination agreement, pursuant to and subject to the terms and conditions of which, OneWeb, the builder of a new Low Earth Orbit (LEO) global communications system will merge with and into Intelsat, to create a next-generation communications company. In addition, subject to the terms and conditions of a share purchase agreement with Intelsat, SoftBank Group Corp. (“SoftBank”), which currently owns 43% of the equity of OneWeb, is expected to invest an additional $1.7 billion in newly issued common and preferred equity of the combined company to support the acceleration of the combined company’s growth strategies and strengthen the Intelsat capital structure.
The merger and the SoftBank investment are expected to be completed late in the third quarter of 2017, and are conditioned upon the consummation of certain Intelsat debt exchange offers, the receipt of regulatory approvals, consent and approval by both Intelsat and OneWeb shareholders as well as other customary closing conditions. There can be no assurance that the merger or the SoftBank investment will be completed, or whether the terms will be amended from those described above.
Financial Results for the Three Months Ended December 31, 2016
On-Network revenues generally include revenue from any services delivered via our satellite or ground network. Off-Network and Other Revenues generally include revenue from transponder services, Mobile Satellite Services (“MSS”) and other satellite-based transmission services using capacity procured from other operators, often in frequencies not available on our network. Off-Network and Other Revenues also include revenue from consulting and other services and sales of customer premises equipment.
Total On-Network Revenues reported a decline of $14.2 million, or 3 percent, to $504.1 million as compared to the three months ended December 31, 2015:
Transponder services reported an aggregate decrease of $13.1 million, primarily due to a $26.7 million decrease in revenue from network services customers, partially offset by a $14.6 million increase from media customers. The network services decline was mainly due to non-renewals and renewal pricing at lower rates for enterprise and wireless infrastructure services. The network services decline also reflects previously discussed reduced volumes from non-renewals of point-to-point connectivity, which are shifting to fiber alternatives. The media increase resulted primarily from growth in direct-to-home television services in the Latin America, Caribbean and the Africa regions, partially offset by declines in the Asia-Pacific and North America regions. The aggregate decrease also reflects $2.9 million in currency-related reductions of our contracts in Brazil across our network services and media businesses.
Managed services reported an aggregate increase of $0.6 million, largely due to an increase of $10.5 million in revenue from network services customers for broadband services for air and maritime mobility applications, partially offset by declines of $5.7 million in revenues primarily from network services customers for point-to-point trunking applications, which are switching to fiber alternatives, and a $2.0 million decrease from media customers for occasional video solutions.
Channel reported an aggregate decrease of $1.7 million due to the continued migration of international point-to-point satellite traffic to fiber optic cable. This legacy product is no longer actively marketed to our customers.
Total Off-Network and Other Revenues reported an aggregate decline of $6.4 million, or a decrease of 12 percent, to $46.5 million as compared to the three months ended December 31, 2015:
Transponder, MSS and other Off-Network services reported an aggregate decrease of $7.1 million, primarily due to lower pricing on renewing services for government applications and reduced sales of customer premises equipment.
Satellite-related services reported a slight aggregate increase of $0.7 million, primarily due to increased revenue from support for third-party satellites and other services.
For the three months ended December 31, 2016, changes in operating expenses, interest expense, net, and other significant income statement items are described below.
Direct costs of revenue (excluding depreciation and amortization) increased by $1.7 million, or 2 percent, to $86.8 million, as compared to the three months ended December 31, 2015. This reflects an increase of $3.5 million in staff-related expenses offset by a decrease of $6.0 million primarily due to lower cost of third-party fixed satellite services and mobile satellite services capacity purchased in support of the company’s government business.
Selling, general and administrative expenses increased by $12.0 million, or 27 percent, to $56.2 million, as compared to the three months ended December 31, 2015. This was primarily due to an increase of $6.7 million in staff-related expenses and an increase of $3.3 million in bad debt expense primarily due to a greater reduction in the prior year quarter due to improved collections in the Africa and Middle East regions.
Depreciation and amortization expense increased by $0.4 million to $174.0 million, as compared to the three months ended December 31, 2015.
Interest expense, net consists of the interest expense we incur together with gains and losses on interest rate swaps (which reflect net interest accrued on the interest rate swaps as well as the change in their fair value), offset by interest income earned and the amount of interest we capitalize related to assets under construction. Interest expense, net increased by $22.8 million, or 10.3 percent, to $243.6 million for the three months ended December 31, 2016, as compared to $220.8 million in the three months ended December 31, 2015. The increase was principally due to a net increase of $18.8 million in interest expense largely resulting from a net increase in debt outstanding resulting from our new debt issuances, which were offset by certain repurchases and exchanges in 2016, and a net increase of $3.4 million from lower capitalized interest for the three months ended December 31, 2016, primarily resulting from a decreased number of satellites and related assets under construction.
The non-cash portion of total interest expense, net was $7.0 million for the three months ended December 31, 2016, due to the amortization of deferred financing fees and the accretion and amortization of discounts and premiums.
Gain on early extinguishment of debt was $679.1 million for the three months ended December 31, 2016, as compared to a gain of $7.1 million for the three months ended December 31, 2015. The gains were related to certain debt transactions that occurred during the respective fourth quarters of each year. The gains on early extinguishment of debt consisted of the difference between the carrying value of the debt redeemed or exchanged and the fair value of the debt issued, if applicable, and the total cash amount paid (including related fees), together with a write-off of unamortized debt issuance costs.
Other expense, net was $1.0 million for the three months ended December 31, 2016, as compared to other income, net of $1.6 million for the three months ended December 31, 2015. The decrease of $2.6 million was primarily due to a decline in expenses mainly related to our business conducted in Brazilian reais.
Provision for income taxes was $4.4 million for the three months ended December 31, 2016, as compared to $6.1 million for the three months ended December 31, 2015. The difference was principally due to lower tax expense in our foreign operations in the three months ended December 31, 2016 as compared to the same period in 2015. Cash paid for income taxes, net of refunds, totaled $4.7 million for the three months ended December 31, 2016, as compared to $3.8 million for the three months ended December 31, 2015.
Net Income, Net Income per Diluted Common Share attributable to Intelsat S.A., EBITDA and Adjusted EBITDA
Net income attributable to Intelsat S.A. was $662.8 million for the three months ended December 31, 2016, compared to a loss of $4,116.3 million for the same period in 2015.
Net income per diluted common share attributable to Intelsat S.A. was $5.56 for the three months ended December 31, 2016, compared to a loss of $38.29 per diluted common share for the same period in 2015.
EBITDA was $406.7 million for the three months ended December 31, 2016, compared to a loss of $3,721.9 million for the same period in 2015.
Adjusted EBITDA was $417.4 million for the three months ended December 31, 2016, or 76 percent of revenue, compared to $452.5 million, or 79 percent of revenue, for the same period in 2015.
Intelsat management has reviewed the data pertaining to the use of the Intelsat network, and is providing revenue information with respect to that use by customer set and service type in the following tables. Intelsat management believes this provides a useful perspective on the changes in revenue and customer trends over time.
Free Cash Flow From (Used in) Operations Free cash flow from (used in) operations1 was $6.6 million for the three months ended December 31, 2016. Free cash flow from (used in) operations is defined as net cash provided by operating activities, less payments for satellites and other property and equipment (including capitalized interest). Payments for satellites and other property and equipment from investing activities during the three months ended December 31, 2016 was $94.1 million.
Financial Outlook 2017 Today, Intelsat issued its 2017 financial outlook, in which the company expects the following:
Revenue: Intelsat forecasts full-year 2017 revenue to be in a range of $2.180 billion to $2.225 billion. Revenue performance reflects:
An increase of 3 to 5 percent in our media business.
Flat to a decline of 3 percent in our network services business.
A decline of 7 to 9 percent in our government business.
Adjusted EBITDA: Intelsat forecasts Adjusted EBITDA performance for the full-year 2017 to be in a range of $1.655 billion to $1.700 billion.
Cash Taxes: Annual 2017 cash taxes are expected to total approximately $30 million to $35 million.
Capital Expenditures: In light of the proposed merger with OneWeb, we will defer providing guidance on capital expenditures prior to the completion of the transaction. We anticipate that, assuming completion of the merger, there will be capital expenditure reductions as a result of combining our two fleets that are achievable in the mid- to long-term. A thorough technical and business evaluation will be completed to quantify these synergies; also taking into account new technologies that we believe will surface in the ecosystem.