Freed from its parent Intelsat, New Skies CEO Bob Ross tells Chris Forrester that he has an eye on acquisition

New Skies Satellite has come a long way since its spin-off from Intelsat on November 30 1998. CEO Bob Ross has built an impressive organisation while at the same time boosting usage 30 per cent year-on-year, with fill rates now average 65 per cent. But there’s more to do, not least look at new developments.

Netherlands-based New Skies Satellite says it is definitely in the market for a slice of PanAmSat’s assets, should the company be broken up for disposal. CEO Bob Ross, talking exclusively to Interspace at last week’s PBI/Satel Conseil symposium in Paris, said he expected other, larger companies like Intelsat and Eutelsat to also be looking at PanAmSat. “As an individual and PAS shareholder I’d like to see it spun off to its shareholders. Spinning it off to its shareholders would facilitate the Murdoch purchase (of DirecTV), but the stumbling block is the huge block of shares held by General Motors’ Pension Fund and there are covenants which keeps the shares being sold more than once in a certain period, which I believe is 3 years. It is my under-standing that when they are sold then they cannot be sold again during this period. In other words better to sell them now ahead of time and prior to the Murdoch transaction. The current ‘common wisdom’ guess is that Murdoch will win the DirecTV battle, and then dismember PanAmSat piecemeal.”

Ross says he would not be surprised to see Japan’s JSAT also enter the picture. “They seem to have ambitions to expand outside their region. Anyone in this business who has not taken a look at PAS’ assets in detail, with a view to possible augmenting its own assets would be derelict in its duty. We have, and we know what we’d like.”

New Skies having won one recent bout of litigation over the cancelled Matra/Astrim K-TV satellite, might be back in the court-room (Interspace 724) over a disputed slot at 105 degrees West, also claimed by Mexico. Ross says it shouldn’t get that far: “The Mexicans had filed Filing Number 1, but this does not establish right of priority, which is Filing Number 2. The Mexicans never filed Number 2, and they also let Filing Number 1 lapse. The Dutch filed Number 2, and this establishes unambiguously the Netherlands’ rights under ITU rules. The Mexican decision to move this satellite to our position is a political attempt to muddy the waters and perhaps give them some leverage in any future negotiations. But the ITU rules are clear, and the Netherlands’, and consequently New Skies, has rights of priority at 105 degrees West. We are building a satellite to go there, NSS-8, which launches late in 2003 and we will operate it from that position come Hell or high water! We fully expect the Dutch government to talk to the Mexican government and make clear its intention to abide by the ITU rules.”

New Skies already has occupation of four orbital slots and has been granted rights to new orbital slots over the United States. The positions are 105 degrees West, 125 degrees West, 120.8 degrees West and 133 degrees West. The slots give Conus coverage as well as foot-prints over South America. Additionally, they have rights for Ka-band coverage.

In March last year it acquired Sydney-based uplink specialists Sat-Tel. That purchase is now settling down says Ross. “In an ideal world we wouldn’t have bought the Australian company when we did, perhaps a two-year wait would have been more suitable. But that’s not the way business runs. We knew it would not be hugely productive on Day 1, but on Day 3 it would really kick in, when we had (a) transferred the 803 craft to the POR from the AOR following the launch of NSS-7 to the Atlantic, and (b) the successful launch of NSS-6 to 95 deg East which is scheduled for October 2002. We would like to have 803 in its new position in August next year. The point is that by Q4/2002 we would have two large, extra craft in position and giving excellent coverage over the region. NSS-6 will have 15 transponders looking at Australia and another large batch from 803. They will be an effective sales force for us connecting Australia to the United States, or Australia to the rest of Asia and even internally. They have started that process, and we are now pitching a major deal to a very large Australian company for a significant amount of capacity.”

Ross says the New Skies sales force is also aggressively pursuing a valuable direct-to-aircraft in-flight video and broadband contract that might materially affect the shape and position of its next satellite. “We are very actively working in the in-flight area and have some hopeful expectations, possibly in the near future. We have been working on this for more than a year and there’s little more that I can add at the moment, but we have been working to try and find satellite solutions with various parties who are interested, and will be two-way and require us to build new satellites. Some of our planned new capacity would be task-specific for this application. Not all, but a lot. For example, NSS-9 was originally planned for an IOR location to augment or replace 703. But that was the old plan and the next contracted satellite might not go to an IOR position, but elsewhere, or perhaps with a role that included a significant slice of capacity for video.”

Ross continued: “Within the FSS world one tends to build a structure that covers oceanic tasks or land-mass coverage. SES is clearly a land-mass operator, as was GE Americom originally. We have a bit of both, with 806 a land-mass craft, and NSS-6 will be land-mass over Asia. But what’s interesting about in-flight video is that a great part of its service will be land-mass. For example we know that Loral has contracted 14 transponders to Boeing for its ‘Connexion by Boeing’ services over the United States, but the Atlantic and Pacific are huge areas and someone like us is in a much better position to provide coverage. We have a number of orbital slots which are in the right position to provide coverage on those routes, and entrepreneurially have tried to exploit some of those slots by making sure the emerging in-flight business sector knows where we are. We are probably a few months away from an announcement.”

Ross says New Skies is fully funded for the current fleet expansion. “Last year we looked at a secondary offering to permit the monitisation of some of our share-holders’ interests beyond that which was achieved at the IPO. Market conditions didn’t give us much of an appetite for the exercise but should those market conditions change then the appetite from shareholders could also change. But there are no plans currently to do that, and the general state of the TMT sector, and in particular FSS stocks, would figure largely in our decision making. We would need a rejuvenation in the market before making that sort of decision.”

Which is not to say New Skies isn’t looking to further expand its fleet, and in particular the next craft on its list, NSS-9. Ross says there are a few variables to be considered: “If we get the in-flight order then we would need to build that satellite and this would postpone NSS-9. It would mean we would have 4 craft at various stages of build and administratively that’s a challenge for a company our size. The original NSS-9, targeted for the IOR, would then slip back. If the in-flight order happens then we would have to look at how we serve the IOR. We are rapidly filling up the premium capacity on our current 703 craft which serves the region. We’ll need extra inventory, and right now we don’t have another slot and have been looking at how we could over-come that. There’s a follow-on problem if we go ahead with NSS-9, which is where do we put 703? So we still need another slot, but while there are a number of options none of them are perfect. I would say it is more likely than not that we would undertake the construction of NSS-9 sometime in the next 12-18 months, but it is largely guesswork at this stage.”

Ross confirmed that New Skies had been in discussion with Eutelsat over business opportunities, and to other players both in terms of satellite operation and services. “On the question of Eutelsat, I have nothing but the highest regard for Giuliano Berretta and what he is doing at Eutelsat, and we keep a close eye on the technical and commercial developments that come out from them. As they move offshore we will increasingly be competitors and recently we lost some business to them on W4 which we should have held on to. I am also keen to see how their OpenSky platform develops. Eutelsat has been kind enough to keep us informed as to what he is doing, and for the very reason that he is not global and we have a global system there may be a commercial opportunity for the two companies to work together.”

As to other possible ventures, Ros says New Skies talked to iBEAM “very closely” ahead of the Williams acquisition of iBEAM. “We looked very carefully at working with Greece over the 38 deg E slot. Eutelsat work with Russia at the adjacent 40 deg East position. We were unsuccessful, and they are going ahead with a JV that involves Telesat [of Canada] and a Cyprus-held C-band slot. We are currently in discussion with other countries in the region about exploiting other assets, but there’s nothing to announce just yet.”

A Mexican Stand-Off?

Statement From New Skies

According to rules set out by the ITU, rights to use geo location are obtained on a “first in time, first in right” basis. That is, if a national administration properly submits all paperwork under the ITU’s rules before another administration does so, the first administration to file obtains “priority” rights to the orbital slot and frequencies in question.

Priority is determined not by the filing of an intention to coordinate (API), where Mexico did in fact precede Holland, but by date of the filing of a Request for Coordination (ApS4), where Holland’s filing in fact precedes Mexico’s.”

The Netherlands government filed an ApS4 application with the ITU to use C and Ku-band frequencies at 105 West in June, 1999. Shortly thereafter, the Dutch Government authorized New Skies to use those frequencies for one of its satellites, NSS-8. According to the procedures of the ITU, New Skies has priority rights at this location for the frequencies and coverage areas that are used by NSS-8.”