PARIS — Satellite broadband hardware and services provider ViaSat Inc. is in final negotiations with Lockheed Martin on the purchase of a Ka-band satellite to back up and extend the coverage of the ViaSat-1 satellite, with a contract announcement expected in the coming weeks, industry officials said.
One industry official said the two companies have not excluded the possibility of a contract for two Ka-band satellites, each smaller than ViaSat-1, instead of a single spacecraft.
While a two-satellite order likely would be more expensive for Carlsbad, Calif.-based ViaSat, it would permit the company to spread its capital spending over a longer period. It also would allow ViaSat added flexibility in selecting coverage areas for its Exede consumer broadband service.
If the contract were signed, it would add evidence to Lockheed Martin’s claim that it is refocusing on the commercial satellite telecommunications market as U.S. defense budgets stagnate or decline, ending an unprecedented period of growth in military space spending.
Lockheed Martin in 2011 won a contract with NewSat of Australia to build the Jabiru-1 commercial telecommunications satellite, which has mainly a Ka-band payload.
The ViaSat deal also would signal a kind of revenge for Lockheed Martin Space Systems. The Sunnyvale, Calif.-based company thought it had won the $300 million ViaSat-1 order in 2007. In fact it had, according to ViaSat.
But competitor Space Systems/Loral (SS/L), which had been informed it had lost the ViaSat-1 deal to Lockheed, approached ViaSat with a last-minute offer to purchase the equivalent of 15 percent ViaSat-1’s capacity for the life of the satellite.
Lockheed could not counter, especially since Palo Alto, Calif.-based SS/L made the offer on the assumption that the capacity could be resold to satellite fleet operator Telesat of Canada. Loral’s parent company, Loral Space and Communications Co. of New York, has a majority economic ownership of Ottawa-based Telesat. Telesat ultimately did purchase ViaSat-1 capacity for Canadian consumer broadband service.
In a May 25 document filed with the U.S. District Court for the Southern District of New York as part of its lawsuit against SS/L, ViaSat discloses that it had selected a competing bid before returning to SS/L. The company does not name the other bidder in the document, but industry officials said it was Lockheed Martin.
ViaSat’s allegation — that SS/L stole ViaSat intellectual property and used it to win contracts to build a competitor’s consumer broadband satellite system — has poisoned relations between the two companies.
As a result, SS/L, which might have been a shoo-in for the ViaSat-2 work, has been excluded from the competition despite the fact that ViaSat is happy with the satellite’s performance despite several delays in its delivery.
ViaSat Chief Operating Officer Rick Baldridge said, in a presentation to investors June 13, that ViaSat regrets not being able to order a repeat copy from Space Systems/Loral.
“It was late, but it is performing without a problem,” Baldridge said of ViaSat-1. “We are very happy with the satellite Loral delivered. Buying another one would have been nice.”
Baldridge said the ViaSat-1 competition nonetheless demonstrated to ViaSat that at least one other manufacturer besides Space Systems/Loral could produce high-throughput satellites like ViaSat-1.
Lockheed Martin Space Systems spokeswoman Dee Valleras said the company is “constantly seeking new opportunities” but does not comment on specific contract talks. ViaSat spokesman Bruce Rowe said the company would not comment on ViaSat-2 negotiations.
Baldridge said that with ViaSat’s operating cash flow, cash on hand and the liquidity provided by a recent bond issue, the company does not foresee the need to seek outside financing for ViaSat-2.
Baldridge said ViaSat is preparing for the launch of the EchoStar 17/Jupiter satellite owned by Hughes Network Systems of Germantown, Md., and EchoStar Corp. of Englewood, Calif.
That launch, now set for July 5 aboard a European Ariane 5 rocket, will give HughesNet, the Hughes consumer broadband service that directly competes with ViaSat’s Exede, a satellite just as powerful as ViaSat-1. It is the strong similarity between ViaSat-1 and EchoStar 17/Jupiter that caused ViaSat to file suit against Space Systems/Loral for patent infringement and breach of contract.
Baldridge said ViaSat’s early assessment of the EchoStar/Hughes challenge is that ViaSat will be able to compete on price given what he said are Hughes’ higher monthly subscriber fees.
He also said ViaSat-1 has room to increase the bandwidth offered subscribers beyond the current package of 3 megabits per second uplink and 12 megabits per second downlink.
