Europe’s Two Competing Galileo Consortia Now Expected To Merge

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The two consortia bidding to operate Europe’s Galileo satellite navigation system are likely to merge this spring so they can to negotiate a long-term contract to be signed with European government authorities by the end of the year, European government and industry officials said.

The long-expected merger of the two competitors was made more likely by the March 1 decision of Galileo’s oversight agency to call the competition a draw. The Galileo Joint Undertaking (GJU), appointed by European Union governments to manage the Galileo operator selection, said it found both bids equally attractive and could not select one over the other.

The Brussels-based GJU said it will now open contract negotiations with both teams, instead of one. These negotiations should not delay the planned late-2005 contract-signing date with a designated operator, GJU General Counselor Hans Peter Marchlewski said.

“It will make things a bit more complicated, but we will not lose any time in the program schedule by opening negotiations with both teams,” Marchlewski said in a March 2 interview. “People may not like our decision, but we had no choice. Our evaluation concluded that there was something like one-tenth of 1 percent difference between the bids. We could not make a selection on that basis.”

Marchlewski said the GJU is evaluating whether it will finance the two consortia now that the formal contract-negotiating phase has begun. Up to now, the bidders have not been paid for their work.

Galileo is designed as a European version of the U.S. military’s Global Positioning System of navigation satellites. system. But Galileo is funded by European research and transport ministries and is intended to be operated by a private consortium, eventually on a profit-making basis.

The consortium will provide, through bank loans, up to two-thirds of the 2.3 billion euros ($3 billion) needed to finance the launch and deployment of the 30-satellite constellation. The governments that fund the European Union and European Space Agency governments have already paid about 1.2 billion euros for Galileo design and development, and have agreed to finance at least one-third of the deployment phase.

Government funding also will be used for the first years of Galileo’s operations before being phased out.

Two consortia are bidding for the operating license.

The iNavsat consortium is led by EADS Space of France, Germany and Britain; satellite operator Inmarsat Ltd. of London; and Thales Group of France and Britain.

The Eurely consortium is led by Alcatel Space of Paris, satellite operator Hispasat S.A. of Spain, Finmeccanica of Italy and Aena, Spain’s civil-aviation authority.

During the months of bidding, both consortia have expressed concerns that pressure by individual European governments would bias the selection.

Consortia members have variously said the Italian or German government was using its lobbying muscle in Brussels to force a decision in favor of its preferred bidder. The iNavsat consortium is lacking significant Italian and Spanish participation, and Eurely has little German participation.

The French, German, Italian and British governments are the leading financial backers of Galileo, with the Spanish government in fifth place. Other European Union and European Space Agency governments have lesser stakes in the project.

Marchlewski said he was aware of these concerns but that they have no basis in fact. “Brussels is full of rumors,” he said. “We have had an open and fair bidding process, and it was reviewed by Mr. Van Miert and Mr. Bonnet. I don’t think anyone could accuse these gentlemen of bias.”

Karel Van Miert, former European Commissioner for competition policy, and Roger M. Bonnet, former director of science at the European Space Agency, were invited to review the GJU’s evaluation earlier this year.

Bonnet said in a March 3 interview that the GJU had conducted “a thoroughly fair bid evaluation. I would say the quality of their analysis was remarkable.”

Bonnet said he and Van Miert had been brought in to oversee the process in part to assure critics that the evaluation would be even-handed.

“There is no basis for any suspicions now,” Bonnet said. “The fact that the two bids ended up being evaluated equally does not surprise me at all. In fact it was almost inevitable. It also seems unavoidable that they now get together in some way.”