EADS Space Services has purchased a 49-percent stake in London Satellite Exchange, a seller of spot-market satellite capacity, with an option to buy the entire company, according to industry officials. The deal expands EADS Space Services’ reach into civilian and commercial satellite capacity sales. Financial terms were not disclosed.
London Satellite Exchange, created by a group of venture capitalists in 2000, posted sales of 1.5 million euros ($1.8 million) in 2005 and expects to double that figure in 2006, according to the company’s managing director, Dylan Browne.
“There is a general uplift in the market and we are profiting from that,” Browne said in an interview. “We are also getting better known, and we are getting better at what we do.”
London Satellite Exchange sells satellite capacity from many of the world’s satellite-fleet operators, usually in short-term contracts but also for multi-year leases. Satellite operators that wish to outsource the marketing and sales function for some of their unused transponders are regular customers, as are media companies and government agencies — both military and civil — that contract with the company to find the best available transponders for their intended coverage.
Browne said the current business is evenly divided between government and commercial customers.
EADS Space Services’ principal business is with the British Defence Ministry through Paradigm Secure Communications Ltd. of Britain. Paradigm is selling satellite communications to British defense forces under a contract recently extended by two years, to 2020.
The British Defence Ministry has transferred operational control of the current Skynet 4 satellites to Paradigm, and the company in turn has contracted with EADS Astrium to build three Skynet 5 satellites to replace the aging Skynet 4 series. The first Skynet 5 is scheduled for launch late this year, with the two others to follow in 2007 and 2008.
The previous 15-year Skynet contract had been valued at about $4.4 billion. The two-year extension will add an undisclosed amount to that figure. Paradigm officials said the annual cost to the British government will not change. Paradigm also is under a 15-year contract, alongside French and Italian partners, to supply satellite capacity to the NATO alliance.
On the strength of the Paradigm and NATO contracts, and smaller deals with the French Defense Ministry and others, EADS Space Services reported sales of about 189 million euros in 2005 — a 21.5-percent increase over 2004 .
One of EADS Space’s contracts outside Paradigm-Skynet is the Astel-S agreement to provide the French Defense Ministry with C- and X-band satellite capacity for two years, beginning in mid-2005. The company’s partner in Astel-S is London Satellite Exchange.
Purchasing an ownership stake in London Satellite Exchange will broaden EADS Space Services’ reach as a satellite wholesaler to commercial markets. For London Satellite Exchange, the entry of EADS Space Services into its ownership provides secure financial backing that should permit the company to take on larger or more-risky customers that are buying or selling capacity.
Browne said that in the past, London Satellite Exchange has refused business because of some customers’ risk profiles. “We are talking about fairly large sums for a company of our size, and we could not afford to assume these risks,” Browne said.
Depending on the region, a single 36-megahertz satellite transponder sells for around $1.5 million per year, with higher rates applied to short-term leases.
Browne said London Satellite Exchange and EADS Space Services negotiated for months and have agreed that the independence of the smaller company will be preserved. “We have always been a neutral agent trying to find the best deal for the customer, no matter what the satellite is,” Browne said. “Both we and EADS Space Services have an interest in maintaining that independence.”
Jean-Francois Gambart, EADS Space Services vice president for business development, said EADS fully intends to safeguard London Satellite Exchange’s independence. “This is a clear limit we have put on our relations with them,” Gambart said. “We absolutely do not want to absorb the company. They have expertise in areas where we are not active. They are a highly reactive company that keeps in regular contact with satellite operators worldwide, and we expect a nice cross-fertilization of business between the two of us.”
Gambart also said EADS space services currently has no intention of purchasing the remaining 51 percent of London Satellite Exchange.