Post-merger SS/L Turns Its Gaze to Russia, Brazil

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PARIS — Telecommunications satellite competitions in Russia and Brazil will be the first tests of a wider commercial strategy for satellite builder Space Systems/Loral (SS/L) under the direction of its new owner, MDA Corp. of Canada, MDA officials said Feb. 28.

MDA is counting on a fast start for SS/L in 2013 to compensate for the Palo Alto, Calif.-based satellite builder’s weak showing in the second half of 2012.

In a conference call with investors, officials from Richmond, British Columbia-based MDA said SS/L in late 2012 suffered from two problems that led prospective customers to look elsewhere for suppliers.

The first was an unresolved solar-array deployment issue on its satellites that took an unusually long time to resolve.

MDA Chief Executive Daniel E. Friedmann said the issue is now fully understood, and corrective action has been taken on completed satellites to assure they do not suffer from the same problem, which on three previous SS/L satellites caused minor explosions that disabled the solar arrays.

The second issue was the general uncertainty in the industry about SS/L’s future given that the company had been for sale for some time.

Friedmann said MDA has been able to reassure the market that the new owners are fully committed to the business and to the expansion of SS/L’s core market of large commercial telecommunications satellites.

Even before purchasing SS/L, MDA had begun expanding its business of satellite components to building full satellite payloads for Russian and Ukrainian government customers. The company won a $100 million contract to provide Israel-based Spacecom’s Amos 6 telecommunications satellite payload.

MDA had said Russia and surrounding nations were planning numerous satellites and that SS/L, with MDA’s help, would now be active in this market. Friedmann said Russia and Brazil both have announced telecommunications satellite competitions.

With the solar-array and ownership issues now behind it, SS/L should be able to regain market share in 2013, especially since this year looks to be particularly rich in telecommunications satellite bidding. He said SS/L already has more than $1 billion in bids out.

“Bidding activity has been very high,” Friedmann said.

SS/L’s Palo Alto facility is capable of processing 13 satellites per year. Its previous owner, Loral Space and Communications of New York, said the company needed five or six awards each year, depending on each satellite’s size, for optimal efficiency.

Friedmann said it is not only the number of satellite awards, but also their timing, that makes life easier or more difficult for SS/L. Regular orders throughout the year are easier to digest than orders that are bunched together.

The drop off in new business in late 2013 will now create a “hole” in SS/L’s production line that will have ripple effects for months to come — all the more reason for the company to focus on new orders early this year, Friedmann said.

Industry officials have said the Russian government demand is clear, but less clear is whether Russia will reserve its contract awards to Russian contractors or will accept non-Russian participants. Friedmann said a competition expected in March could be Russian-only or could be opened to foreign bidders.

Thales Alenia Space of France and Italy on Feb. 28 announced the creation of a joint venture with Russia’s ISS-Reshetnev satellite builder in part to appeal to the Russian government market.

In its report to shareholders Feb. 28, MDA said it recorded a loss of $1.7 million on the sale of a satellite component structures business based in Los Alamitos, Calif., in December. The business was sold because it was “no longer strategic” to MDA given the SS/L purchase, the company said.