Winds of Change Blowing Through Milsatcom Market

By | March 1, 2012 | Editor's Note, Telecom

I would like to start this month’s issue by congratulating Matt Desch, CEO of Iridium, who has been selected as our 2011 Satellite Executive of the Year. It is always hard to pick a winner, but Desch scored highly against all the important metrics in which we measure the award. His role in the skilful re-positioning of Iridium has not only stabilized the company, but his latest initiatives could radically shake-up the MSS industry. The operator had excellent financial results throughout 2011, regularly beating analyst forecasts. It has also signed a slew of deals for its Iridium NEXT constellation, launched highly innovative product initiatives like Iridium Force and was a driving force in the creation of the Hosted Payload Alliance. We all know that Iridium has had a bumpy past, but thanks to Desch, the company is as well-positioned as it has ever been to build a long-term, sustainable and profitable business.

Every year, there are deals that cause much discussion in the industry. In 2011, two deals that instantly come to mind were the SES/SpaceX launch deal and the MacDonald, Dettwiler and Associates (MDA)/Intelsat in-orbit satellite servicing deal — both were announced around the time of SATELLITE 2011. But recently, news erupted that Intelsat has decided not to go ahead with the deal it struck with MDA. What this means to this nascent industry it is hard to say, but it is certainly a blow, particularly after the fanfare and excitement that greeted the deal at SATELLITE 2011.

Prolonging the life of space assets seems a great idea in theory, but now that Intelsat has pulled out of the project, it remains to be seen whether any other operators will look to pick-up the baton here and move forward in this area. For companies like MDA and ViviSat, making a success in this market has become more difficult as a result.

One of the likely factors as to why Intelsat pulled out is the uncertainty that currently surrounds U.S. government business. With U.S. budget cuts now in full swing, satellite players are finding the milsatcom market, particularly in the United States, a tough place to do business. This market could be one that is under pressure during the next few years, as the days of lavish projects in this area could be a thing of the past, despite the obvious needs for capacity. I think the milsatcom market will be intriguing to watch this year, both in the United States and globally, as governments around the world shape their policies and strategies here.

The landscape has undergone a fairly dramatic shift, and it may take time before we start to see this market rise again. Hosted payload discussions are increasing, but for all the undeniable economic sense it makes for governments and defense forces around the world to pursue such deals, the actual number of deals done is very few. For example, when we spoke to Khalid Balkheyour, CEO of Arabsat, in the middle of 2011, he told us the operator was very close to a key signature hosted payload deal in the Middle East. At the time of going to press, that deal had still not been announced although Balkheyour says the agreement is now very close to completion. It shows that these are not easy deals to complete and execute. While I am hopeful that we may see some contracts signed in 2012, it is likely to be very few. It could even be zero. The signing of such deals signals a change in approach and thinking, and sometimes for governments that have entrenched views on milsatcom policies, it can take time to bring about this change. Getting governments to actually sign these deals and move forward with these progressive policies is no easy task.

On a slightly different note, Via Satellite has launched a Facebook page. We have plenty of exciting things planned, so “like” our page and enjoy being part of our community.

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