Telespazio Chief Eyes Avio as Part of Broader Strategic Review

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LE BOURGET, France — The new chief executive of satellite services provider Telespazio said he is positioning the company to better compete with Astrium Services, and that ownership of Italy’s Avio rocket builder would enhance his product portfolio.

In a June 19 interview here at the Paris Air Show, Luigi Pasquali declined to say whether Rome-based Telespazio’s parent company, Finmeccanica, would enter the bidding for Avio in competition with France’s Safran/Snecma and with the EADS-owned Astrium Space Transportation company of France and Germany.

Other bidders may appear, depending on whether the Italian government weighs in with an opinion on the future of Avio, which is the industrial prime contractor for Europe’s Italian-led Vega small-satellite launcher. Vega has flown twice and is the first European rocket to succeed in its first two missions.

OHB AG of Germany ultimately may take part in an Avio bid but is unlikely to seek to purchase the entire stake of Avio’s majority owner, European private-equity investor Cinven, industry officials said. 

Cinven is organizing a sale of Avio that industry estimates say could fetch some 350 million euros ($460 million). Avio reported 285 million euros in revenue in 2012.

“The question is whether the Italian government views this as strategic, in which case it will back a Finmeccanica bid, or instead is willing to let control of solid propulsion in Italy, and the Vega rocket, be purchased by a French company,” one industry official said. 

Italy’s Finmeccanica aerospace conglomerate already owns 14 percent of Avio, which is majority owner of Vega prime contractor ELV SpA. The Italian Space Agency, ASI, is a minority shareholder in ELV.

“We are not yet fully into the field of launchers but in the end it may be something that we need as a business segment,” Pasquali said, noting that his company has already booked Vega’s first fully commercial mission, which will launch the Gokturk high-resolution optical Earth observation satellite that a Telespazio-led consortium is building for the Turkish Ministry of Defense.

“We persuaded our customer that Vega could be the solution,” Pasquali said. “It is a good flag for us to have on the Vega manifest, the Turkish military procurement agency.”

Pasquali said one of Telespazio’s long-established business lines is satellite launch-phase control and early orbit testing, a business that would be complemented by a majority share of Vega.

“If the Space Alliance can claim ownership of the only launcher adapted to small satellites in low Earth orbit, that could be positive,” Pasquali said, referring to the partnership between Telespazio and satellite builder Thales Alenia Space

Both companies are jointly owned by Finmeccanica and France’s Thales Group. Finmeccanica is the majority shareholder in Telespazio, and Thales the majority owner of Thales Alenia Space. Pasquali is the former deputy chief executive of Thales Alenia Space.

Pasquali said one of his top priorities is to tighten relations with Thales Alenia Space so that the Space Alliance presents itself as a full-service provider to prospective customers. 

“We have been a bit less effective” than Astrium Services in integrating the hardware and services offers in bid competitions, Pasquali said. Like Astrium Services’ arrangement with the British Ministry of Defence (MoD) on the Skynet military telecommunications satellite program, Telespazio has entered into partnerships with the Italian Defense Ministry for the Sicral telecom satellites.

The next big competition in Europe between the Space Alliance and the Astrium team likely will be for the French Defense Ministry’s next-generation Syracuse telecommunications satellites. Whether this will be done as a conventional procurement, a full outsourcing as in Britain or some combination of the two remains unknown.

Telespazio and Thales Alenia Space Italy agreed to take shares in the Sicral 1b, now in orbit, and the Sicral 2 satellite, to be launched in about a year. “We are open to doing the same thing for the French MoD,” Pasquali said, suggesting that the Syracuse procurement is unlikely to be a full outsourcing arrangement.

“In the end, most MoDs like to control their own infrastructure,” he said.

Pasquali said he is spending his first six months at Telespazio examining what business areas are most promising for investment. In September he will present his conclusions to his two shareholders with a request for the corresponding investment. “The idea is to prepare for 2014-2016 with a different company shape,” he said.

Telespazio is already present in nine nations including the United States, Argentina and Brazil, and is preparing to adjust its British operation to the new investment the British government is committing to the 20-nation European Space Agency, Pasquali said.

“In the U.K. our portfolio fits with the priorities of the U.K. Space Agency, which is based on space applications such as oil and gas, maritime and Earth observation,“ he said.

The U.K. Space Agency has made clear it does not want to let Astrium, whose Astrium Satellites division is Britain’s largest space-hardware builder, to establish a monopoly position. Astrium also owns British small-satellite builder Surrey Satellite Technology Ltd.

Telespazio and Thales Alenia Space are among the three finalists for Brazil’s civil/military Geostationary Defense and Strategic Communications Satellite, or SGDC, which Brazilian authorities hope will extend to a partnership on Earth observation. The other two finalists are Mitsubishi Electric of Japan and Space Systems/Loral of the United States and Canada. A decision on the contract is expected by this fall.

“Our goal is to start with telecommunications, but we also have an Earth observation offer” for Brazil, Pasquali said.