Thales Beats Orbital To Capture Contract For Telenor’s Thor 6

Thales Alenia Space signed its first commercial deal with a new customer, Telenor. In what ultimately proved to be a two-horse race, Thales Alenia Space beat out Orbital Sciences Corp., which is manufacturing the Thor 5 spacecraft for Telenor, to clinch the deal.

The deal will see Thales Alenia Space build Telenor’s Thor 6 satellite, which will provide direct-to-home TV services from the 1 degrees West orbital position.

"The contract with Thales Alenia Space is very important for us as it concludes the procurement to successfully replace satellites," Cato Halsaa, managing director of Telenor Satellite Broadcasting, said. "Our long-term satellite strategy is to have three satellites where we can use capacity on at anytime. Our strategy is based on our ownership on Intelsat 10-02, and the new Thor 5 and Thor 6 satellites. Both Thales and Orbital have been in a close race with Telenor for Thor 5 and Thor 6. With Thor 5 the advantage went to Orbital. With Thor 6 it was also very close, but this time Thales was a little better on several counts."

Thus Thales Alenia Space may have won a deal against the odds, considering that Telenor has previously had more of a preference for Orbital.

The capacity on Thor 6 will be used to boost direct-to-home platforms in the Nordic region, and Central and Eastern Europe. Defining the long-term aims of Thor 6, Halsaa said, "the long-term aim is to handle the growth in the Nordics with [high-defintion] and new channels. But the main importance is that we have a lot more capacity for Central and Eastern Europe. We hope to have most of the capacity sold on the satellite when it is launched, but we also want capacity for expansion afterwards as well. I think the capacity will be 60 percent full by the time it is launched."

If the demand for high-definition services and from new direct-to-home platforms emerging in Eastern Europe is strong, other satellites could be procured, Halsaa said.

"Right now, we have enough expansion capacity," he said. "We have more frequencies to use, so it is possible for us to add more capacity if the demand goes beyond what we are seeing today. Right now, our plans revolve around Thor 6. However, we believe we have factored in [high-defintion] growth in terms of our plans. We also see that satellite service demand in Central and Eastern Europe will be strong as there are a number of new [direct-to-home] platforms are emerging in the region. This is the most important driver for satellite."

New Benefits For Manufacturing Business

The deal kicks off a new era for Thales Alenia Space, said Pascale Sourisse, the company’s CEO. "This was a program we were very interested in," she said. "So it was about delivering the Thor 6, a telecoms broadcasting satellite to Telenor. Telenor is a new customer for us, so winning this contract, means we are well-recognized by customers."

With the recent change of ownership deal still fresh in the memory, what benefits will Thales Alenia Space derive from its change of ownership?

"While there is a change in our shareholders, it does not mean that we are cutting the links with Alcatel Lucent," Sourisse said. "We have a cooperation agreement with Alcatel Lucent in the area of commercial telecoms. With our two shareholders plus this very close relationship with Alcatel Lucent, we will be supported by three large companies, two of them being very strong in the defense and aeronautics arena, and the third one being a global leader in telecoms. Overall, this is very favorable to us."

The potential exploitation of Thales’ strengths in the defense and aeronautics area could be a major consequence of the deal. "If you look at that concretely, and what it means in terms of programs, obviously you have the relationship between Galileo and the aeronautical sector, you have our position in space defense in areas such as defense telecommunications, Earth observation and intelligence systems for defense," Sourisse said. "All of these can be supported by our relationship with our two shareholders. We see this new configuration with this extremely strong link with Thales as a very strategic opportunity for our company to further develop in a number of sectors."

Sourisse believes the manufacturing side of the business will become more efficient as the result of being under the Thales umbrella. One area where the company hopes to improve is in the field of integrated applications, and thereby offering more compelling overall solutions to customers.

"We are strengthened by the existing cooperation with our two shareholders and Alcatel Lucent," Sourisse said. "We plan to develop more and more opportunities in which customers want solutions that integrate various types of technologies — the space part being one segment of the overall system — and the complete system, including other elements like terrestrial telecoms or aeronautical solutions. In the field of defense telecoms, you can combine our space competencies together with the positioning of Thales in the terrestrial military communications. This is a major opportunity and we will be in a better position to meet customer’s requirements."

Sourisse gave examples of how the notion of "integrated applications" may work, suggesting that "in the field of aeronautical communications, Thales is very strong in the area of air-traffic management and equipment for aircraft. If you marry that with our space competencies, it will enable us to strengthen our positioning in this sector overall. Secondly, if you look at the intelligence sector, you have our strengths in optical or radar observation, and you can combine this with Thales’ expertise in terms of intelligence systems and information systems. This will be instrumental."

Targets

So with new owners on board, Sourisse is confident Thales Alenia Space can perform strongly in 2007.

"We believe the market is quite active and that we should have a favorable year in 2007," Sourisse said. "There was a clear market recovery in 2006, and our forecast is that 2007 should continue at the same level. We therefore foresee growth at 10 percent a year. We have between one-third and 40 percent of our activities coming from the commercial sector in terms of revenues. We expect to stay in that range."

However, she noted that to achieve a rate of 10 percent growth this year will not be easy.

"We have two challenges here," Sourisse said. "Firstly, the exchange rate, which is of course an issue for our activities, which are basically export activities. We have market prices in dollars but production costs in euros. The second type of challenge is that, as everybody knows, the level of public support that we are getting through programs and [res contracts is not at the same level as our American counterparts."

–Mark Holmes