Alcatel and Finmeccanica announced Jan. 28 that the two companies have signed an agreement to merge their respective space activities through the creation of two joint venture companies, to which both partners will contribute their respective satellite industrial and service activities.
The first company is Alcatel Alenia Space, of which Alcatel will hold a 67 percent ownership stake and Finmeccanica will hold a 33 percent ownership. This company will concentrate end-to-end space systems. The second company, Telespazio, will be owned 67 percent by Finmeccanica and 33 percent by Alcatel. It will concentrate on operations and services for satellite solutions.
During a press conference an-nouncing the formation of the two companies, Alcatel CEO Serge Tchuruk said, “What we are doing today is creating what we call a space alliance between the two companies” to create “the European leader in satellite systems and services.” He stressed that who ever ends up running the companies (management teams have not yet been announced for either of them) will operate them as purely European companies and not as ones focused within specific European counties. “We talk obviously about France and Italy, but we [would like to add] that Spain and Belgium are also playing a key role in these companies.”
Alcatel Alenia Space
Tchuruk introduced Alcatel Alenia Space by saying the company has estimated revenues in 2004 of 1.8 billion euros ($2.35 billion) and will be focusing on offering “end-to-end space systems” including satellites, platforms, payloads, instruments, equipment and components. Alcatel Alenia Space also will offer space planes, transfer vehicles, in-orbit modules, facilities and retrievable systems, and ground segment equipment.
The technology offered by Alcatel Alenia Space will “address both the civilian and defense applications in telecommunications, optical and radar observation, meteorology, environment, science, navigation and space infrastructure,” Tchuruk said.
Tchuruk added the company will be run as “an integrated company” with five business units addressing specific segments including telecom; observation systems and radar; optical observation and science; infrastructure and transportation; and navigation. The company will have its own board of directors and CEO.
“The combination of the two entities will clearly generate synergies,” Tchuruk said. “The synergies are going to relate largely to optimization of the research and development.”
Telespazio
Telespazio, as Finmaccanica Chairman and CEO Pier Guarguaglini noted, is a smaller company than its newly-created partner, with 2004 estimated revenues of 350 million euros ($456.3 million) and will be focused on satellite operations, including launch, control and exploitation. The company also will offer network and connectivity solutions, including network operations management systems and providing and reselling transponder capacity for television broadcast as well as other networking, value-added services, multimedia and earth observation services. He said the company will market its services to the telecom, earth observation, navigation and other areas on both the commercial and defense sides of the industry.
The company will be organized similarly to Alcatel Alenia Space, with its own board of directors and CEO, as well as four business units: satellite operations; network and connectivity; value-added services and programs.
A Positive Merger
“It’s a really positive step for both of those companies,” Karim Nour, program manager of space and communications for Frost & Sullivan, told Satellite News. “They both have excellent brand equity and have a lot to offer.”
Nour noted that while both companies were strong companies individually, combined, they could become a more dominant force as the market improves. “The satellite market has been a little bit sluggish, but we think its going to rebound in the next couple of years and this merger is going to allow both of those companies to take advantage of that,” he said.
However, one aspect of the merger that was touted by Tchuruk during the press conference–Alcatel Alenia Space becoming the largest satellite company in Europe–may not offer that much of a competitive advantage.
“Size isn’t everything,” Nour said. “I think all of the major manufacturers right now have an uncomfortable ratio between their manufacturing capacity and the actual demand they are facing. In the future, that situation may change and Alcatel and Telespazio may be able to take advantage of that, but its not as if manufacturers have a tremendous backlog.” Tchuruk declined to discuss the backlog when queried about it during the press conference.
But Nour added that, “Both of those companies can leverage distribution channels. They are both excellent manufacturers.” And the companies have excellent relationships in Europe, specifically within the French and Italian governments, which could give them a greater competitive advantage more so than the size of the company.
Where the merger could potentially come into play is in the bidding process for the Galileo European satellite navigation system that is expected to be operational in 2010. Both Alcatel and Finmeccanica are part of the Eurely consortium, one of the two consortia bidding for the project.
Whether the merger helps the Eurely bid “really depends on the degree to which Alcatel and Finmeccanica integrate,” Nour said. “If the plan is just having both of those teams working together and collaborating on projects, they were going to do that anyway. Satellite manufacturers quite often collaborate on projects and just by being merged in a corporate and financial sense may not necessarily make that much of a difference. But, by mergering, if it means a higher degree of integration, that could conceivably make the process more efficient and more effective. It just depends on the extent to which the two integrate.”
–Gregory Twachtman (Karim Nour, Frost & Sullivan, +33 1 42 81 12 40)