[Satellite News 09-29-10] Orbcomm, a two-way machine-to-machine (M2M) communications and automatic identification system (AIS) service specialist, awarded a contract to German manufacturer OHB System to build and launch two AIS-enabled microsatellites based on OHB’s Pathfinder design, currently being tested from the International Space Station (ISS).
    Rather than buy the satellites, Orbcomm will receive exclusive licenses from OHB for AIS data collected by the two satellites and non-exclusive licenses for a third satellite, Pathfinder 3, which will be launched by OHB affiliate LuxSpace. OHB also will provide required ground support equipment for the two satellites. OHB will launch the satellites in May and June 2011, respectively.
    LuxSpace launched Pathfinder 2 in September 2009 and also developed the AIS receiver for the ISS, which will be activated in October. “The two satellites for Orbcomm will be based on the experience acquired in the previous projects and will allow higher detection rates compared to the satellites launched so far," LuxSpace Managing Director Jochen Harms said in a statement.
    The satellites aim to provide additional coverage and AIS data in the polar and equatorial regions, supplementing Orbcomm’s constellation of 18 AIS-enabled next-generation satellites that are scheduled to be launched beginning in mid-2011, with launches extending into 2013.
    Orbcomm did not release the financial details of the transaction with OHB but confirmed to Satellite News that it will provide the German manufacturer an initial $2 million milestone payment and then pay OHB cumulative lease payments totaling $546,000 over a 36-month period once the satellites are placed in service. Orbcomm also has the option of extending the exclusive arrangement at cost of $6,250 per month.
    Raymond James Analyst Chris Quilty told Satellite News that he thinks OHB will use a low-cost foreign launch provider from India, China or Russia to place the satellites in orbit. “If we are correct, this would also explain the unusual lease structure of the OHB/Orbcomm agreement. Orbcomm would be legally restricted from using these launch providers if they owned the satellites.”
   Orbcomm entered the AIS business in June 2008 with the launch of six AIS-enabled quick launch satellites. Five of the six satellites Orbcomm developed then failed,  but not before the company was able to build a small distribution network that is generating about $3 million of annualized revenues. The OHB agreement gives Orbcomm the ability to rapidly place two AIS microsatellites in service in order to reduce the risk that the sixth and final quick launch satellite would fail before replacement AIS satellites can be brought online.
    Quilty called the OHB agreement a “home run transaction” for Orbcomm. “For only $2.5 million, Orbcomm will be able to significantly increase its geographic coverage while also mitigating a major risk factor. The agreement should also bolster Orbcomm’s competitive standing and give customers another reason to hang tight with the company.”