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[Satellite TODAY 04-25-13] Iridium Communications has announced that it has signed an agreement with Harris Corporation to enable the use of expanded hosted payload space on the Iridium NEXT platform, Iridium’s second-generation satellite constellation that is scheduled for launch beginning in early 2015. The deal makes Iridium the latest operator to sign a hosted payload deal and provide much needed momentum to this sector.
The agreement provides for “hosting fees” for Iridium NEXT resources that will be used when launched into orbit on Iridium’s new satellites. The company could raise around $45 million in hosting fees depending on Harris’ ability to secure contracts with customers, and on the final configuration and resources utsed. The total amount won’t be finalized until all payloads are launched on Iridium NEXT, scheduled to be complete in 2017. With this agreement, Iridium has enabled full use of the hosted payload resources it made available to the industry when it specified the Iridium NEXT system in 2007.
Last year, the company announced the creation of Aireon LLC, a joint-venture with NAV CANADA to fly a payload on the Iridium NEXT constellation that will track commercial aircraft and provide that information in near-real time to air traffic controllers. Harris was selected by Aireon to supply the payload, and is building 81 payloads that will be integrated with Iridium’s new satellites to receive the “ADS-B” position signals from aircraft, including those over the world’s oceans, poles, and remote regions where there is currently no surveillance of aircraft. After finalizing the requirements for the Aireon system, additional hosted payload space remained available to support the other missions that Harris will now use.
Janet Nickloy, director of Mission Solutions, Harris Aerospace Systems and Chair of the Hosted Payload Alliance explained to SatelliteTODAY.com the reasons behind the partnership. “The Harris-Iridium partnership is certainly strategic from both a relationship and capability perspective. Once Harris was selected as the Aireon hosted payload contractor, and the deal had other strategic touch points between our companies, we started exploring whether there was sufficient size, weight, and power for any additional hosted payloads. Once we determined that there was some available capacity, we decided to formalize the business arrangement under which Harris could use that additional capacity. That led to this deal. It is significant in that we are finding some customer interest that could yield hosting and data service upside to Iridium,” she said.
One of the questions now is whether the U.S. Department of Defense will look to have a more progressive approach in terms of hosted payloads. Nickloy says she expects a deal to happen. “In general, the DoD is very interested in leveraging hosted payloads and has taken proactive steps to take advantage of this more cost effective, time-efficient access to space.”
In terms of the key learnings of the deal, Nickloy says, “The Iridium-Harris deal was a learning experience for all parties as we are pioneering a new contractual relationship with all the complexities people often discuss when they refer to hosted payloads. Risk allocation, primacy, and pricing were all key elements of the deal. There were many key learnings, but I would say the most significant is that regardless the issue, there is always a way forward if the parties want it to work.”
Chris Quilty, senior vice president, Raymond James, said in a research note that the deal represented an important milestone for Iridium. “While $45 million is arguably a ‘drop in the bucket’ when compared to the $3 billion cost of NEXT, we nonetheless view the announcement as an important milestone that: 1) fulfills a lender-based financing requirement with Coface; 2) contributes incremental service revenues; and 2) visibly demonstrates the unique value of the Iridium constellation. Given Harris’ traditionally conservative culture, yesterday’s public announcement suggests that incremental customer hosted payload agreements are a near-certainty,” he said.
The hosted payload market has really kicked into gear in 2013. Besides Iridium, other companies have announced hosted payload type deals. In February, Arabsat and Emerging Markets Communications (EMC) signed a strategic commercial agreement to use the new Badr-7 satellite currently under manufacturing and expected to be launched by the end 2015. As part of this deal, EMC has designed and acquired exclusive use of hosted payload to be carried onboard Arabsat Badr-7 Satellite to operate a multi-purpose Ka-band hosted payload covering 34 countries in the EMEA and Central Asia regions.
Also, earlier this month, AsiaSat announced a new commercial partnership with GeoMetWatch to launch a severe weather payload. “I am not at all surprised by the recent increase in hosted payloads. Hosted payloads are a good idea, and good ideas prevail. It would not surprise me to see a continuation of this trend,” Nickloy said.
Read an interview with Iridium CEO, Matt Desch tomorrow with Iridium’s perspective on the deal.
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