French Defense Ministry Offers Assurances on Satellite Privatization

by

PARIS — The French Defense Ministry, seeking to overcome parliamentary opposition to the proposed sale and leaseback of France’s military telecommunications satellites, has given written assurances that the deal will go through only if it guarantees France sufficient access to satellite capacity on attractive financial terms.

In a March 23 response to demands for clarification from members of France’s National Assembly, the Defense Ministry says it reserves its right to walk away from the proposed agreement if the selected private-sector operator cannot agree to strict terms and conditions.

French defense officials have informally said the two orbiting Syracuse 3 satellites, plus a Syracuse 3 payload to be placed on the French-Italian Sicral 2 satellite to be launched in 2012 or 2013, would be sold to a commercial operator for about 400 million euros ($541 million).

Under one scenario, the Defense Ministry would then make annual lease payments totaling some 800 million euros over the next 15 years. Syracuse 3A was launched in 2005, Syracuse 3B in 2006. Both have contracted service lives of 15 years. The sale of these satellites and of Sicral 2 would occur under a contract lasting until 2020, according to the Defense Ministry.

The French government has said it expects to lease some 90 percent of the Syracuse capacity, leaving 10 percent for lease by the commercial operator to third parties.

Several French parliamentarians in recent months have criticized the arrangement on grounds that France would be privatizing a national strategic asset to satisfy short-term budget demands, and that the sale might put current Syracuse ground teams out of work.

In its March 23 response, the Defense Ministry says it will make sure that the contract gives French authorities guaranteed access to satellite capacity. All leases to third parties will need to be cleared by the French Interministerial Commission for the Study of Exports of War Materiel (CIEEMG).

The ministry also said the contract would preserve the employment of the Syracuse ground teams.

France is looking at the British Defence Ministry’s experience in outsourcing all beyond-line-of-sight communications to a private company. British officials have said they are happy with the contract, which gives Paradigm Secure Communications, a part of Astrium Services, ownership of the Skynet military telecommunications satellites. British defense authorities recently extended the lease and asked that Paradigm increase the amount of capacity available to the British government for an additional payment. Paradigm responded by ordering a fourth Skynet 5 satellite. The first three are healthy in orbit.

Italy’s Sicral military telecommunications satellites have been partly funded by Telespazio of Rome in return for granting Telespazio the right to sell the unused capacity on a commercial basis to third parties.

Germany has proceeded in still another direction with its public-private partnership for the two ComsatBw satellites, hiring a joint-venture company created for the purpose to build and launch the two satellites, and to perform operations for at least 10 years.

Astrium and ThalesAlenia Space, with their respective service companies, have said they hope to bid for the Syracuse contract.

The French Defense Ministry said that while it assumes it will be signing a deal, it is not committed to doing so.

“In any event, the partnership will only be realized if the state’s interests, both economic and in terms of [satellite] capacity, are preserved,” the Defense Ministry said.