ND Satcom is in position to receive a key satellite communications contract from the German armed forces later this year and hopes to use the momentum from that win to capture even more government business around the globe, the company’s chairman and CEO said.

ND Satcom teamed with EADS Space Services to bid for phase two of the Satcom Bw contract. The award to supply secured capacity and satellite network operations covers control of the space segment and provision of commercial satellite capacity.

“We are ranked number one in this bidding process by the German procurement organization,” ND Satcom Chairman and CEO Karl Classen told Satellite News. “Negotiations are taking place and we expect to receive the award later this year. The contract volume for this program will be more than twice our annual sales.”

ND Satcom and EADS were chosen as the preferred bidders over a team led by T-Systems, which teamed up with OHB Bremen and Thales. A spokesperson for the German Ministry of Defence confirmed that negotiations were taking place, but added that if negotiations did not reach a satisfactory conclusion, the German government could still enter into negotiations with the T-Systems team.

Revenues

The current focus at ND Satcom, a supplier of communication networks and ground stations based in Friedrichshafen, Germany, is on winning more government business, Classen said. Military and government work accounts for 60 percent of ND Satcom’s yearly revenue, but the company expects to see that number grow to 75 percent within the next year, he said.

ND Satcom already won some key contracts in 2005, including an award to supply a turnkey tactical satellite communications system and related services to the Swedish Armed Forces. Under this contract, valued at 5 million euros ($6.1 million), ND Satcom will install six of its Tactical Satcom Systems by the end of 2006.

ND Satcom recorded revenue of nearly $100 million in 2004 and has an average growth of more than 17 percent per year throughout the last five years. The company expects to see 10 percent revenue growth in 2005, and the German satellite communications contract would lead to much stronger growth in 2006, Classen said.

The Satcom Bw award could help ND Satcom in competitions for other armed forces awards. Classen said, “This is a very important program, which will also help us to gain further contracts with other NATO countries and selected countries outside of Europe,” he said. “Similar to the [United States], we are seeing a growing demand for satellite communications by the European armed forces organizations.”

Shift In The Business

The lucrative nature of military contracts is leading to an overall shift in ND Satcom’s business. Classen said, “The main challenge for ND Satcom in 2005 is the changing nature of our business, with government and military business becoming more predominant compared to the commercial business in terms of our overall activities,” he said.

Karim Nour, a satellite analyst at Frost and Sullivan told Satellite News, “In the United States, the military [satellite communications] market has been growing at around 15 percent per year over the last couple of years. It is definitely a long-term business. Whoever is getting into the business now can expect to have some pretty solid revenue streams throughout the next few years. The military market has been growing much more quickly than any area of commercial satellite services market.”

ND Satcom also hopes that the decision by SES Astra in April to increase its stake in ND Satcom from 10 percent to 25.1 percent will help in the quest for more military awards.

“The advantage of a larger SES stake in the company for us is that we become more visible within the SES Global group and have better access to key resources,” Classen said. “From a branding point of view, the SES Global brand will help us to get access to new custo-mers — more than we already have today. By being part of the SES Group, we will be better positioned to form key alliances in the industry.”

SES Astra’s interest in ND Satcom includes an option to assume full control of the German company in 2006. “From an SES point of view, the increase in stake has not only been done for financial, but also for strategic reasons,” Classen said. “I think what SES is looking for in ND Satcom is our unique capabilities, experience and track record in providing turnkey solutions to government and defense customers.”

Nour added, “The FSS operators are trying to get more into services anyway because their business has become a little bit commoditized. There has been a lot of price competition, which means that their margins are decreasing. They are looking to services as a way to diversify and broaden their offering and business portfolio.”

Revenues Outside of Western Europe

While the main focus will be on lucrative contracts in western Europe, ND Satcom also will look to drive revenues in markets in other areas around the globe, Classen said. “Throughtout the last three years the company was primary focused on building up strong local presence in three regions: North America, the Middle East and China,” he said. “In the past year, we worked on specific opportunities in countries such as Russia, Turkey and Kazakhstan, which resulted in winning larger contracts. In these particular countries we wish to also establish local sales and technical support organizations, for which we have started to evaluate potential partners. I expect that in the next six to 12 months we will be making some announcements regarding this.”

Classen expects government and defence needs to continue driving the satellite industry around the globe for the next two to three years. “We expect an increase in the need for complete end-to-end solutions and services instead of just providing solutions based on products,” he said. “In the commercial arena, we expect continuous growth in data and video services. That will be driven by the globalization of the industry itself.”

–Mark Holmes (Andrea Sinclair, ND Satcom, andrea.sinclair@ndsatcom.com; Karim Nour, Frost & Sullivan, Karim.nour@frost.com)