Boeing’s contract to build three large satellites for Mobile Satellite Ventures (MSV) includes a vendor-financing agreement but does not carry heavy risks for the satellite builder, Boeing officials said.
In Jan. 11 interviews following a conference call announcing the deal, Boeing Space and Intelligence Systems General Manager Howard Chambers and Stephen T. O’Neill, president of Boeing Satellite Systems International, sought to portray the MSV agreement as in keeping with Boeing’s recently cautious approach to the commercial satellite sector.
Apart from a big order from DirecTV Group in 2004, the El Segundo, Calif.-based Boeing satellite division has remained largely on the sidelines of commercial satellite competitions in the last three years. Like the DirecTV satellites, the MSV satellites are the kind of large and relatively more profitable satellites that Boeing officials have said they will concentrate on in the commercial market.
The company has made it clear that, following painful cost increases and schedule delays on previous commercial programs, it would no longer enter cutthroat competitions on the more routine satellite contracts in which the winning bid is only marginally profitable at best.
That policy has kept Boeing out of the winner’s circle in most commercial satellite orders. Alone among the major manufacturers, Boeing booked no new commercial satellite contracts in 2005.
The MSV contract announced Jan. 11 is valued at $500 million to just under $1 billion, depending on options, said Alexander H. Good, MSV’s chief executive. In a conference call, Good said Boeing’s agreement to a vendor-financing package was an important factor in MSV’s choice of contractor.
But O’Neill said the agreement should not be seen as one in which Boeing is taking uncharacteristic risks. “I would not characterize this as heavy-vendor financing,” O’Neill said.
Chambers said MSV met all of Boeing’s satellite-bid criteria, as do two or three other commercial satellite contracts to be decided in 2006.
“The direction I have been given [by Boeing management] is that we can look at any number of alternatives, but we have to provide a good business deal for Boeing,” Chambers said.
Boeing said the MSV contract is its biggest since a $1 billion September 1997 award, by Thuraya Satellite Telecommunications Co. of Abu Dhabi , for that company’s satellite-telephone system. The Thuraya contract included the construction of two satellites and the launch of one of them, plus satellite-telephone handsets and other ground gear.
Boeing made a small equity investment in Thuraya. Chambers said the company is not investing in MSV.
O’Neill said the MSV agreement is similar to Thuraya in that it calls for Boeing to take responsibility for several aspects of the MSV ground network. “We have taken system responsibility,” O’Neill said.
Reston, Va.-based MSV will be launching the first satellite in late 2009, with a second to be ready for launch five months later. The first two spacecraft will replace the two aging MSAT satellites operated for U.S. and Canadian customers. The third satellite, to be completed five months after the second, will target the South American market.
Each satellite is expected to weigh 5,500 kilograms at launch and to feature a 22-meter-diameter deployable mesh antenna — a larger version of the antennae used by Thuraya. Each spacecraft, based on Boeing’s 702 platform, will have a 15-year service life, provide 11,000 kilowatts of power at the end of its operational life and permit up to 10,000 simultaneous voice links.
The digital signal processor on the MSV satellites will be similar to the processors on board the U.S. Defense Department’s Wideband Gapfiller spacecraft and will not require new research and development investment, Chambers said.
While MSV has U.S. and Canadian regulatory approval to launch its satellites and deploy an elaborate network of ground-based signal amplifiers, called Ancillary Terrestrial Components, the company has yet to secure landing rights in Latin America.
Good said the company has enough cash on hand to continue its operations “well into 2007.” Further funding will be needed to complete payments to Boeing and to secure launch services for the satellites.
In addition, MSV this year will begin searching for one or more strategic partners — existing wireless carriers are one possibility — to help finance deployment of the signal amplifiers. Industry officials have estimated that for MSV to deliver on its promised business model, at least several hundred million dollars will be needed to deploy the ground repeaters.
Good repeated during the conference call that MSV’s service will be to mobile phones no bigger than today’s models, and that the signal will penetrate into buildings to the same extent as a terrestrial cellular signal.
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