Eutelsat Leases Chinese Satellite at 11th Hour To Protect Orbital Slot

by

PARIS — Satellite fleet operator Eutelsat of Paris leased an in-orbit Chinese satellite and moved it from Asia to an orbital slot over Europe just before Eutelsat’s rights to the intended orbital slot were set to expire, government and industry officials said.

The satellite, Sinosat 3, was launched in May 2007 for China’s Sinosat satellite operator before being taken over by China Satcom in 2010 and renamed Chinasat 5C. In late 2010, according to satellite tracking data provided by the U.S. Air Force, it began moving westward along the geostationary arc from its position over East Asia.

Sometime in late April, it had arrived at 1.6 degrees east longitude over Europe, a slot that Eutelsat, through the French National Frequencies Agency, had reserved in June 2004 with international frequency and orbital-slot regulators at the Geneva-based International Telecommunication Union (ITU). The appellation used by ITU refers to the satellite as F-Sat-Ku-E-1.6E.

Under ITU rules, that gave Eutelsat until June 2011 to place a satellite at that slot or risk surrendering its right to it, as well as the Ku-band broadcast frequencies it intends to use. There are several other satellites from other national administrations that had registered satellites and frequencies near that orbital position, meaning an operator other than Eutelsat likely would have moved to occupy the position if Eutelsat had missed its deadline.

Eutelsat issued a statement May 13 saying only: “For the Chinese satellite … we intend to operate the satellite at 1.6 degrees East.” Eutelsat spokeswoman Vanessa O’Connor declined to provide details on the terms of the satellite’s lease from China, or whether Eutelsat intended to keep the satellite at that position.

Sinosat 3/Chinasat 5C has 24 36-megahertz Ku-band transponders. It is based on China’s DFH-3 satellite frame and is designed to operate for 15 years.

The deal may be the first time that a Chinese-built satellite has been leased by a Western satellite operator. Officials from China DBSat, the company that now has assumed control of China’s broadcast satellites, did not immediately respond to questions about why they were willing to let go of the spacecraft at a time of booming Chinese Ku-band demand and troubles with the performance of the latest-generation broadcast satellite platform, called DFH-4.

Two officials said Eutelsat may intend to use Sinosat 3 at 1.6 degrees east just long enough to secure the company’s rights to the slot before moving it to a nearby position such as 3 degrees east.

Eutelsat, which is the world’s third-largest satellite fleet operator when measured by revenue, did not mention the newest member of its satellite fleet when it presented its financial results for the three months ending March 31. As expected, the results — a 10 percent increase in revenue, to 295.2 million euros ($416 million) — were far stronger than the performance of Eutelsat’s competitors.

Intelsat of Luxembourg and Washington, SES of Luxembourg and Telesat of Canada — respectively the first-, second- and fourth-largest fleet operators — all reported top-line growth of less than 5 percent for the same period when compared with a year ago.

Eutelsat has long counted on its concentration in the direct-broadcast television market as its growth engine. Along with SES, it dominates the world’s most lucrative satellite market, Western Europe, and has been expanding south and eastward without seeking a position in North America.

Video applications remain Eutelsat’s core business and account for 68 percent of revenue. The company carried 3,835 channels as of March 31, up 8.4 percent from a year ago, with high-definition channels numbering 210, a 75 percent increase.

But it is Eutelsat’s discreetly named “Multi-usage” business line that has been the growth star for the company in the past couple of years. It is here that it books revenue from the U.S. Department of Defense and other militaries whose demand for satellite bandwidth over the Middle East and North Africa has been exceptionally strong for so long that it might no longer be called exceptional.

Alone among the major satellite fleet operators, Eutelsat has satellites at orbital slots covering this region and has benefited more than its competitors from the trend in the United States and other nations to carry vast amounts of military traffic over commercial satellites. Because these leases are often short-term purchases conducted on the spot market, they fetch a higher price than long-term leases.

For the three months ending March 31, Eutelsat said its Multi-usage business generated 32.6 million euros in revenue, up 30 percent over the same period a year ago.

The good news on revenue prompted Eutelsat to raise its forecast of what its full-year revenue will be to 1.16 billion euros. Eutelsat’s fiscal year ends June 30.

The company also announced that on April 6 it submitted a request for contract arbitration with the International Chamber of Commerce against Deutsche Telekom. Media Broadcast of Germany, which purchased Deutsche Telekom’s satellite business in 2008, is also a party to the arbitration.

The dispute turns on who has what rights to broadcast frequencies at 28.5 degrees east, where Eutelsat has its Eurobird 1 satellite, based on an agreement negotiated in June 1999. The area around that orbital slot has been subject to multiple arguments among satellite operators in the past. O’Connor said the disagreement concerns some, but not all, of the frequencies used by Eurobird 1.

“It is Eutelsat’s position that the rights to this orbital position were granted on an unlimited time basis. As Deutsche Telekom’s interpretation differs from ours, Eutelsat initiated a request for arbitration,” Eutelsat said in a May 13 statement.