European Military Satellite Deals Examined

September has seen two significant deals in the European military space, as Italian satellite operator Telespazio won a contract from the Italian Defence Ministry for the launch and operation of the Sicral 1B satellite, and the U.K. Ministry of Defense extended its contract with NSSL for commercial satellite services.

Telespazio

The deal between Telespazio and defense ministry, valued at 118 million euros ($164 million), calls for Telespazio to finance part of the program. The company then will be allowed to use some of the satellite’s transmission capacity to offer services to NATO.

Sicral 1B is scheduled to be placed into orbit in the second half of 2008, and the deal is an example of more innovative thinking from satellite operators looking to monetize the military satellite communications space, said Giuseppe Veredice, Telespazio’s CEO.

"Telespazio is a service provider which wants to become a niche satellite operator for specific applications,”he said. "In Italy, we have the Italian Defence Ministry, which already has the Sicral 1 satellite, which is mainly used to ensure communications within NATO countries. The successor of Sicral 1 should be Sicral 2. But in the interim period, we have a gap filler satellite, which is Sicral 1B. The Italian Defence Ministry has invested a lot of money in this satellite.”

Telespazio saw this an opportunity to structure an innovative deal which could benefit the company and the government, Veredice said. "One of Telespazio’s strategic pillars is to become a satellite operator for specific applications, starting from military ones. We want to have the availability of satellite capacity, which can be sold to NATO countries which do not have their own satellite capacity. My proposal to the Italian Defence Ministry was to co-build the satellite. As a result, we have the ability to sell one-third of the satellite capacity,”he said.

The deal can be compared to the Skynet 5 deal in the United Kingdom and the marriage between commercial and government interests. Veredice believes further integration between different European military sitcoms systems is a realistic goal.

"The new policy of the Italian Defence Ministry could pave the way for some new dynamics,”Veredice said. "In my mind, over the next five to 10 years, it could be possible to see the military systems more integrated. For example, Sicral could work together with the Skynet system. We want to invest into the system. We want to try and reduce the capital the Italian Defence Ministry needs to invest. We hope to see more integration between the different systems. We need to see the capability of picking-up other systems.”

Veredice also hopes that Sicral 1B agreement will lead to Telespazio working more closely with the Italian Defence Ministry. "We are looking at the same type of approach for Sicral 2. There is also the Franco/Italia wideband Ka-frequency program called Athena-Fidus for institutional applications. Sicral 1B is the first step for us in terms of this future cooperation. Sicral 1B has been a good test for such a corporation in terms of using an innovative approach. The Italian Defence Ministry have been very supportive of innovative approaches to combine their needs with the needs of the industry.”

Telespazio expects the deal to generate revenues of 60 million to 70 million euros ($83.2 million to $97.1 million) throughout the next 10 years, Veredice said. "The turnover from the military space may be 10 to 15 percent of total revenue. We want to increase to it to a stage where one-third of revenues are coming from military applications in the coming years. With Sicral 1B, our goal is to reach 20 million euros ($27.4 million) a year with the Italian Defence Ministry.”

NSSL

NSSL’s deal with U.K. Ministry of Defense, valued at more than 200 million pounds ($399.1 million), is the largest for the company this year, said Danielle Edwards, product marketing manager at NSSL. Under the agreement, which falls under the umbrella of the Skynet 5 program, NSSL will supply handsets, digital video broadcast services and Broadband Global Area Network (BGAN) and integration assistance to units around the globe through 2020.

"We believe we have a thorough understanding of the challenges facing the [Ministry of Defense] both at home and in theater,”Edwards said.“… This means that we have a thorough understanding of all the satcoms products and services available and the advantages and disadvantages of those products and services.”

One of the key communication systems that the company is helping to deploy for U.K. armed forces is dubbed Bluey, which enables soldiers stationed in areas like Afghanistan, which suffers from poor terrestrial coverage, to get messages to and from family members quickly and easily. Bluey makes use of entry level BGAN which enables remote access from virtually anywhere in the world. To connect to entry level BGAN users plug in a portable satellite terminal to their laptop.

Edwards is confident that the demand for the company’s products and services in the military space will continue to be strong. "Satcoms has always been important to the military as it offers an alternative to radio and landlines,”she said. "Both of which have their drawbacks in terms of limited range and reliability. So the military has been very interested in satcoms for decades. But it is only as the terminals have become smaller, lighter, cheaper, more durable and less complicated that the use of mobile satcoms has become a real option for military planners. We expect demand to continue to grow as the technology continues to improve.”