Satellite Executive Of The Year 2001

And The Nominees Are…

The year 2001 will be remembered as one of those significant time segments when the global satellite playing field changed. From privatization and consolidation to the introduction of new services and business innovations, executives further pushed the envelope and made significant headway as industry and business environment obstacles were overcome. While shrouded in a cloud of economic challenges and functioning within a generally flat market, the satellite industry did manage to pull through with some remarkable achievements within all of its sectors.

One of those achievements came in March with an announcement that consolidated the satellite operator arena and transformed a European player into the largest global service provider. Société Européenne des Satellite S.A. (SES Astra) acquired the U.S. operator GE American Communications Inc. (GE Americom) in a $4.3 billion transaction, which was successfully completed by year’s end.

Another achievement centered on the world’s launch pads where new partnerships emerged and old alliances were strengthened. International Launch Services (ILS) maintained its leadership edge within this churning niche, closing another year of flawless launches and introducing an enhanced vehicle upgrade to its stable of rockets.

Likewise, new services such as satellite radio entered the marketplace, possibly forever changing the way North Americans think and relate to this medium. In addition, a re- emergence of a LEO player continued to offer communications-via-satellite to the U.S. military while attacking vertical commercial markets outlined within its new business plan.

As in years past, the editors of Via Satellite review the most important accomplishments made by leading satellite executives to decide the winner of the annual satellite executive award. Via Satellite’s Satellite Executive of the Year 2001 will be honored March 7 at the SATELLITE 2002 conference in Washington, DC. Below is our short list of top nominees in the running for this year’s honor. We hope you will be there when we announce the winner.

Mark Albrecht — President, International Launch Services

As its market segment counterparts strategically align and form new partnerships in a round of launcher musical chairs of sorts, McLean, VA-based ILS is not getting up from its seat as an industry juggernaut. The joint venture of Lockheed Martin Corp. and Russian companies Khrunichev and Energia continues to change the launcher landscape to a service- oriented business. It once again closed out a good year with successes in all of its four Atlas launches and two ILS Proton missions. This was achieved in a global flat-lined launcher year that witnessed roughly 13 global commercial satellite launches in total.

Navigating ILS through these launcher waters is President Mark Albrecht. “ILS solidified its leadership position in the launch industry in 2001 by setting a new standard of service,” says Albrecht. “This is a new business approach, to sell service and not rockets. We offer our customers dedicated launches on reliable vehicles that can back each other up to provide schedule assurance.”

And this approach paid off. In 2001, not only did ILS post 100 percent mission success, but Albrecht also announced 12 contracts for future launches, many of which included the mutual back-up provision. In addition, ILS continued to capture nearly 50 percent of the market.

As an example of the service-oriented approach, ILS announced at the beginning of 2001 the launch of two spacecraft for SES Astra. Six months later, the first of those launches successfully reached orbit. “We achieved this rapid turnaround [for Astra 2C] because we bring an integrated service offering to our customers that extends from contract signing to spacecraft separation, including mission management, licensing and business partnering,” adds Albrecht.

These strong management maneuvers, however, were not the only shining moment in ILS’ year. With the U.S. government not renewing its quota on geostationary launches of U.S. satellites on Russian vehicles, ILS has a no-cap strategy of attack to further increase its market share. Albrecht says the original intent of the quota was to ensure that the Proton vehicle entered the marketplace at prices competitive with its commercial counterparts. With that objective having been met, the quota outlived its usefulness.

Now, ILS has set its sights on expanding its marketing campaign and launcher family of products to include the upgraded Proton M with its Breeze M upper stage, and yet another Russian-built launcher, the Angara.

In addition, this spring will see the commercial introduction of the Atlas 5 with Eutelsat’s Hotbird 6. Atlas 5 has already garnered 10 commercial missions. “The introduction of the Atlas 5 completes our mutual back-up offerings, so there’s an Atlas variant to back up every Proton version, and vice-versa,” Albrecht says. Whatever these enhancements bring forth, Albrecht will continue to ensure that ILS will remain a significant contender within the global launcher community.

Dan Colussy– Chairman, Iridium Satellite LLC

Along with the SES Global deal that thunderstruck the satellite industry in 2001, executives also witnessed a rebirth of a satellite service provider that many thought would never commercially resurface. In fact, all eyes where glued to the night sky the spring of 2000, in anticipation of the fiery display the Iridium satellites would cause as they disintegrated during their proposed de-orbit. But that never materialized. What did come to fruition was the $25 million purchase of the bankrupt $5 billion Iridium system. This was spearheaded by Dan Colussy, who took the helm as chairman of the new company, Iridium Satellite LLC, and launched into a feverish campaign of refocusing the organization’s business model, signing contracts, assembling an executive management team to manage the company and getting the system back to business.

Since the start-up in April, Iridium Satellite has added data capabilities, developed plans to launch more satellites in 2002, confirmed the existing constellation’s life through 2010 and introduced lighter and smaller handsets.

Another significant business step came early on when the Defense Information Systems Agency (DISA) entered a two-year contract with Iridium Satellite for unlimited airtimes to 20,000 government workers who currently use the Iridium network for mobile phones and paging. The Arlington, VA-based satellite service provider has an option to extend this contract with DISA through 2007.

In addition to the military market, the new Iridium is targeting industries that will subscribe to the system for communications to remote areas of the planet where terrestrial telephone networks do not exist. Such markets include construction, emergency services, maritime, mining, forestry, oil and gas and aviation.

The commercial vertical markets that responded to the new Iridium were most notably in the aviation and maritime arenas. In November, Iridium launched its SatTalk 2 system for operators of individual and corporate jets. The aeronautical voice and data communications system provides aircraft crew and passengers with reliable, worldwide communications in the air and on the ground. Likewise, Iridium launched a maritime satellite communications system that provides voice and data communications for the maritime market. Ideal for both large and small vessels, the unit provides users with a compact global communications tool using a small omni-directional antenna that has no moving components.

In June, Iridium took a significant step when it introduced its global satellite data and Internet service offering–something the old Iridium offering lacked. The company’s dial-up data capability provides connectivity to corporate data users at 2.4 kbps, while Iridium’s direct-Internet data services provide a connection to the Internet at 10 kbps.

Now, Colussy is focusing on building Iridium’s subscriber base. Leveraging his experience within the aviation community, Colussy is focusing on the company’s aviation initiatives, including a proposal to the FAA for using the Iridium system for real-time monitoring of cockpit communications. “Using its global footprint and voice and data capabilities, combined with existing commercially-available equipment, Iridium gives ground personnel unrestricted access in real time to vital voice and data communications from the aircraft,” Colussy says. Whatever the future holds for the new Iridium, we believe that Colussy’s business sense in recognizing market opportunities where others don’t will provide a template for success for others within the mobile satellite sector.

Romain Bausch –President and CEO, SES Global

While a fervor of business activity resonated throughout the global satellite operator community, no ripple was more felt than that of the monolithic acquisition which transformed a European satellite service provider into the industry giant. SES Astra’s $4.3 billion acquisition of GE Americom was officially completed in November under the leadership of Romain Bausch, president and CEO of SES Global.

Through this transaction, SES Global took 100 percent ownership of GE Americom, which operates 13 satellites over North America; 100 percent ownership of Columbia Communications, an operator of four satellites offering transoceanic service; and 50 percent of Americom Asia-Pacific, a one-satellite operator serving Asia. In addition, SES Global now owns 28.75 percent of Nahuelsat, an owner of one satellite serving Latin America; and controls an 18 percent stake in Israeli satellite company Gilat. These additions were added to the current stable of 12 satellites it operates through SES Astra in Europe. Bausch says that the combination of GE Americom and SES Astra, together with their strategic global investments, will help SES Global introduce products and services that will strengthen its market position.

In addition, SES Global took some significant steps toward expanding its geographic presence. Under Bausch’s direction, SES strategically took a 34 percent investment in Asiasat; 50 percent investment in NSAB; and 19.99 percent investment in Star One. These partnerships added 11 additional satellites to the company’s service roster that enhances SES’ global coverage offering.

This acquisition, however, not only joins the respective hardware of the companies, but also their diverse customer base, enhancing their market presence in hopes of increasing profit margins by offering a more comprehensive package to clients. For one, SES Astra has strong DTH relationships with European broadcasters, while GE Americom is popular among North American broadcasters, cable and private enterprises. Therefore, SES Global now offers a complete spectrum of broadcast, video, broadband, multimedia, Internet and telecommunications services with a footprint that shadows much of the Earth.

Aside from this business deal, the satellite operator also spent much of 2001 activating service on a number of spacecraft, further expanding its market offerings. In February, the Astra 2D satellite entered service with its 16 Ku-band transponders, which provide digital service to its broadcast clients in the United Kingdom. Astra 2C became commercially active in August with its 32 Ku-band transponders providing a total of 56 channels within SES’ satellite back-up scheme.

One week later, Astra 1D was switched on for active service with its 18 Ku-band transponders. Astra 1D provides follow-now capacity for Deutsche Telekom’s DFS 1 Kopernikus spacecraft by carrying cable feed of TV and radio channels for the German market.

Finally, a much-awaited rollout materialized in 2001 when SES Astra announced the commercial availability of its Ka-band two-way broadband satellite service in Europe. Astra Broadband Interactive Service hit the market in November and can support all standard IP-based needs such as file transfers, e-mail, database management and broadband Internet access. Bausch’s accomplishments in 2001 demonstrate the business foresight needed to stay one step ahead of the competition.

Mark Dankberg — Chairman, President and CEO, Viasat Inc.

In the arena of satellite telecommunications equipment, Viasat Inc. made significant headway within its VSAT (Very Small Aperture Terminal) industry niche. From setting new company records through inking large contracts to shifting its major revenue base from government to commercial, the Carlsbad, CA-based supplier sped up the market ladder. At the helm rests Chairman, President and CEO Mark Dankberg who led his company to these new heights.

“We believe that in 2001 Viasat established itself as the leader in the full spectrum of cutting-edge satellite broadband ground segment technology,” says Dankberg. “We gained two advanced broadband system program opportunities in totally distinct market segments beating out the competition.”

One of those commercial contracts was finalized in June when Wildblue Communications Inc. selected Viasat to build the company’s satellite modem termination systems. Valued at $17 million, Viasat’s systems will support all six gateway earth stations for Wildblue’s launch of service.

The other came in November, when Viasat solidified its working relationship with Connexion by Boeing for the development and initial production quantities of the receive and transmit subsystem for Connexion’s broadband platform.

“While the current capital market constraints on financing new telecom projects is challenging several of our broadband start-up customers, that hasn’t diminished the significance of our competitive achievements and their implications for our technology leadership in satellite broadband,” Dankberg adds.

But landing these contracts are not the only feathers in Viasat’s 2001 cap. The company’s relatively broad diversification into several complementary market segments has helped them grow and prosper even in the current difficult financial market environment. In fact, Viasat reported that 62 percent of its 2001 revenues came from commercial business– unprecedented considering the year before revenues were still 75 percent defense. “So now we’ve set the stage for another challenging and eventful year and we have the leadership potential in markets that will ultimately prove rewarding,” Dankberg says. Whatever the broadband market brings to the satellite playing field, Dankberg will continue to ensure that Viasat is in the VSAT forefront within the industry.

Charles Ergen–CEO, Echostar Communications Corp.

Just as 2001 was coming to a close, another mega-merger rocketed throughout the satellite industry. After years of broadcast rivalry within North America, Echostar Communications Corp. CEO Charles Ergen announced an agreement that DirecTV and other Hughes Electronic assets would merge with Echostar, definitively changing the U.S. pay television marketplace.

The combined company would harbor more than 14.9 million own-and-operated satellite direct-to-home subscribers. “The combination of Echostar and Hughes is expected to generate very substantial synergies utilizing the advantages of direct-broadcast satellite television, cost savings from the elimination of costly duplicate satellite bandwidth and infrastructure, and strong management offering more effective fundamental business practices,” says Ergen. “The new company would also have enhanced scale to compete more effectively against the dominant U.S. cable and broadband providers which is a critical factor given increasing consolidation in the cable industry.” In addition, the new company would be led by Ergen as a chairman and CEO and be based in Littleton, CO.

But this latest business maneuver is only one of many significant milestones Ergen reached in 2001. From subscriber numbers increasing to record-breaking revenues, all things looked bright for Echostar. In 2001, Echostar surpassed the six million-customer milestone mark by June and continued to be the fastest growing pay television provider in the United States. By the end of the third quarter alone, it had signed on more than one million new subscribers which increased its total subscriber base to more than six million, a 35 percent raise in one year. In addition, Echostar reported that total revenue through its third quarter surpassed the $1 billion mark.

Finally, with all these achievements, Ergen increased Echostar’s financial investment in Starband by an additional $50 million in a cash transaction in September. This agreement was yet another move toward building Echostar’s offering of a complete bundled package of Internet, programming and interactive television services to its customers.

Now, Ergen is embarking on a new campaign to win over regulators and financiers as he takes the next step toward closing the $26.3 billion deal with Hughes. Facing opposition within these communities that are charging the deal would hurt competition and consumers, Ergen is saying that even though choices will be reduced, Echostar would only have 17 percent of the pay-television market after the deal is done. “This hardly makes us a monopoly,” Ergen adds. Whatever the future holds, we believe that Ergen’s dedication, experience and industry foresight will keep Echostar transmitting content throughout the 21st century.

Hugh Panero–President and CEO, XM Satellite Radio

While the pay television community stirred with development, another service provider emerged onto the satellite landscape. XM Satellite Radio launched into commercial service in 2001 and Hugh Panero, XM’s president and CEO, is building the business one dial turn at a time as the face of radio changes forever.

In March, the first of two satellites “Rock” successfully reached orbit after separating from the Sea Launch’s Zenit rocket. Its twin “Roll” reached orbit in May after another successful Sea Launch campaign.

In September, after 10 years and $1.5 billion in the making, Washington, DC-based XM finally hit the airways making its debut in the Dallas/Ft. Worth-San Diego markets. By the end of November, XM Radio had launched nationwide. “Just six weeks after our initial launch, XM now brings 100 channels of radio coast-to-coast,” Panero says. “Remember when there were only three broadcast television networks? Soon people will be remembering when there was only AM and FM.” XM’s programming lineup features 71 music channels, from hip-hop to opera, classical to country, bluegrass to blues, along with 29 channels are of sports, talk, children’s and entertainment. “We demographically researched what sort of content is currently most popular to listeners and established that channel base first,” Panero says. “Our lineup, however does have room for growth and we plan on that as the listener market changes.”

Now, Panero is focusing the company on gearing up its sales and marketing effort and increasing its customer base. In fact, with XM gaining some monetary momentum, executives can do just that. Shortly after national service roll out, XM closed a $66 million financing and a $129 million financing deal and is funded into the fourth quarter of 2002.

Panero remains confident that all goals will be met with 200 million U.S. registered vehicles and XM’s breakeven point of four million subscribers by 2004 or 2005. We believe his dedication, realistic approach toward breaking new industry ground and business insight will prove to be the recipe for financial and product success as listeners continue to tune in to a frequency that remains beyond AM and FM.

Nick Mitsis is Via Satellite’s Associate Editor.