Alcatel Space CEO Pascale Sourisse is hopeful that French satellite manufacturer can secure around 25 per cent to 30 per cent of new commercial satellite orders this year, even though the overall number is likely to be only 12 to 15 orders. In terms of the numbers of satellite orders forecast for 2003, Sourisse told Interspace: “We are also a bit concerned by the fact that certain projects seem to be slipping. So if you remember market estimates that were given in February, not only by myself, but by a number of market players, people were talking about something like 15 to 20 satellite orders globally in 2003. I gave a range of between 12 and 15 satellites.”

She continues: “At the time, I was considered by the press as being pessimistic. Unfortunately, I don’t think I was pessimistic and our view is that the number of orders will be at the lower end of the range I gave, rather than the higher end.”

So, if there are 12 commercial satellite orders, according to Sourisse’s estimates, Alcatel Space will pick up three to four of these. Sourisse is optimistic the operator can secure this number of orders. She said: “It is a small number of contracts, which will be awarded but we think this 25 per cent to 30 per cent figure is very reasonable. We are very close to gaining new satellite contracts, so this is a very realistic figure.”

Alcatel Space announced in late-April a further round of restructuring, which saw the company cut its workforce by 650 in 2003. The operator is closing down subsidiaries in Norway and Denmark and also expects to sell its subsidiary in Switzerland. Sourisse outlined the reasons behind these moves. She said: “We have decided to sell our subsidiaries in the Nordics because it is a question of workload. Those subsidiaries were becoming too small to be adequate for Alcatel to keep them. When you are quite a large group, it is probably better to concentrate the workforce, rather than keep too many small parts.”

Despite the restructuring initiatives, and the fact the number of commercial satellite orders in 2003 is likely to be lower than original estimates, Sourisse is confident the company can survive this prolonged downturn. She said: “The company is performing according to expectations. In 2002, the results were financially rather good for Alcatel Space. I say ‘rather good’ considering the very tough market environment we had in 2002.”

Yet, with still a number of players in the satellite manufacturing market, the omens are still not good. The small number of commercial satellite orders is putting incredible pressure on all the players in the sector. Alcatel Space’s restructuring is unlikely to be the last in the sector. Significantly, Alcatel Space is likely to derive the majority of its revenues from the government/institutional arena in 2003, rather than the commercial arena. This potentially could mark a significant shift. Alcatel Space’s most recent order was from Eumetsat, an intergovernmental organisation that maintains operational meteorological satellites, to provide a Meteosat second-generation (MSG) satellite. Sourisse comments: “The key for us is even if the level of commercial orders is still pretty low, we have adapted our cost structure in order to remain profitable. You need to keep in mind that the commercial sector represents a maximum of 50 per cent of our revenues. It used to be more than 60 per cent in the past, but last year it was 50 per cent. Maybe this year, it is going to be a bit less than 50 per cent.”

She continued: “We are also playing a role as the prime contractor in the French Military Communications System called Syracuse. That is a very large programme. We are expecting additional orders from CNES [the French space agency]. We are also expecting the start of Galileo [the European satellite navigation system]. I do not think we are very far now from the final implementation of Galileo. It has taken a very long time. We hope to be selected by NATO following the offer jointly submitted by France, the UK and Italy concerning their new satellite communication system.”

The situation could be viewed as tougher for European satellite manufacturers than for their U.S. counterparts. “This is a difference compared to the U.S., where U.S. suppliers generate 80 per cent of their revenues through government contracts. The situation in Europe is different, where less 50 per cent of the revenues come from government contracts.”

With the lack of commercial satellite orders, consolidation has been seen by many as inevitable. At both Satellite 2002 and Satellite 2003, CEOs of leading satellite manufacturers spoke with one voice saying that consolidation would have to happen. Yet, as we approach mid-2003, consolidation seems no nearer despite the fact that commercial satellite orders could be a lot less than some of the companies were expecting. While in favour of industry consolidation, Sourisse commented: “The key question is, Will anything happen in the field of consolidation, not only for European suppliers but also for U.S. suppliers? I can’t tell what is going to happen. It is a very complex question. For the time being, the various players have objectives, which are not completely compatible.”

One of Alcatel Space’s major initiatives is its participation in SatLynx, a joint venture with SES Global (Luxembourg: SESG) and Gilat Satellite Networks (Nasdaq: GILTF) to provide two-way broadband services to enterprises, small office/home office and home users. Alcatel Space is due to take a 20 per cent stake in the operation. SES Global CEO Romain Bausch had indicated at the end of March (see Interspace 765) that the negotiations to finalize Alcatel’s 20 per cent stake would be wrapped up very quickly. But there appears to have been a delay. “The shareholder issues concerning SatLynx have not been finalized yet. It is making good progress. We hope to have it sorted out soon,” Sourisse said.

SatLynx has picked up a new contract and the partners are optimistic for its future. “[SatLynx has received] an interesting contract with a large operator in addition to the contracts it already had with BT and Tiscali. The big progress that has been made for broadband access via satellite is the substantial reduction in terms of costs … It is now really making the solution attractive, not only for mid-size and large enterprises, but also for smaller enterprises and we are reaching the point where it will be attractive to residential users,” Sourisse observed.

— Mark Holmes

Contact: Laurent Zimmermann, Alcatel Space: e:mail: Laurent. [email protected]