What a difference 18 months makes. O3b Networks in September 2008 announced plans to launch a constellation of Ka-band satellites to provide high-speed connectivity to nations along the equatorial belt that are poorly served by the existing global information grid.
The project was met with broad skepticism, even derision. Industry veterans scoffed at the idea of delivering Ka-band in regions where heavy rain is likely to impede Ka-band signal reception. The constellation’s medium Earth equatorial orbit is also unusual, raising questions of whether the system would be able to achieve glitch-free handoffs to the ground stations as each satellite appears on the horizon and then passes out of view, to be followed by the next spacecraft.
Since then, the company, based in Britain’s States of Jersey, has signed a satellite manufacturing contract with Thales Alenia Space of France and secured a promise of some $525 million in bank financing anchored by a $465 million credit facility backed by France’s Coface export-credit agency. It has raised around $160 million in cash, including $75 million from SES of Luxembourg, a major satellite-fleet operator. More recently, it has signed a $47 million deal with ViaSat Inc., an experienced satellite-broadband company, to provide gateway teleports and trunking terminals, to be installed by early 2012.
The SES investment came with an unanticipated dividend when SES Chief Financial Officer Mark Rigolle was named O3b’s chief executive in February.
As might be expected given his background, Rigolle is devoting himself first and foremost to completing O3b’s equity financing and beefing up the company’s startup staff. Rigolle spoke to Space News staff writer Peter B. de Selding.
What are your immediate priorities for O3b?
Apart from continuing to go after sales, we need to raise more equity, some $235 million, and we are now on a road show talking with potential investors. Our second priority is landing rights in our coverage areas. We have help there from SES people, and we have a priority list of nations based on which telcos have signed up as future customers.
How much cash have you raised so far?
About $160 million from our original investors.
How much cash do you need to deploy your system?
The total, including the debt and the Coface facility, will be about $900 million, which should be enough to get us to a situation where we are fully funded, which means not only the first eight satellites but also the next 12 satellites should be covered.
When is the equity round scheduled to be completed?
We hope to get it done by June.
Has the
SES
investment made it easier for O3b to raise funds?
Yes. I call SES our big brother. Given the SES backing, there is an implied credibility for us that came with their investment.
Are the people showing interest more likely to be strategic investors like
SES
, or financial investors?
There are some strategic investors, representing users, and some financial investors, and some sovereign-wealth funds — it’s the usual suspects in this kind of exercise.
How many employees does O3b have?
We are about 30 people now, and we will be going to between 50 and 100 employees depending on what gets outsourced. We expect to be at the 50-employee level by later this year, so things are moving fairly rapidly.
O3b has said it has lined up nearly $600 million in commitments, mainly from African telcos who will be customers. Have you kicked the tires and confirmed that this is a solid figure?
Yes, and certainly this was part of a review that SES did before it agreed to the investment. The review lasted over a year. SES is a conservative company and doesn’t rush into things. Among the things they looked at, of course, was the commitment by future customers. It would be nice to bring some household names into the mix of customers, and we’ll be doing this too in the coming quarters as the SES sales force starts cross-selling the O3b products into its customer base. For lots of reasons, including the fact that our founder, Greg Wyler, has experience there, Africa has been an early focus. But we have also booked sales in other regions.
Is this a one-product company so far?
We have always been more than a one-product company and came into the market with both our Quickstart product, which enables customers to connect into the Internet backbone, and a pure wholesale transponder service where a customer gets the entire transponder and does what he wishes with it.
While we were building the organization we focused on bulk sales, mainly beam by beam, in a given geographic area. But we are preparing new products that include mobile backhaul and other products that can be used by cable operators, enterprise customers and even governments.
Has the work on the satellites at your prime contractor, Thales Alenia Space of
France
, slowed pending the completion of your equity drive and the arrival of the Coface funding?
No, it is continuing, and we still plan for launches starting in 2012. We have already spent about $100 million with the contractor. We have two launches booked on Soyuz vehicles, with each rocket carrying four satellites.
The system ultimately is to be 20 satellites. What can you expect in revenue with the initial eight-satellite constellation?
With eight satellites, there is already some backup in the system, and the business scales nicely as you grow with new satellites in orbit. We should be at $200 million to $250 million in annual revenue with just eight satellites.
Several companies, including satellite fleet operator Intelsat, which was also considering an investment in O3b, have questioned the technology, whether it be the rain-fade issue with Ka-band in your coverage area or the handoff from the satellites to the towers. How do you respond?
SES had those questions too when they started looking at O3b. But the fact is that for SES, promoting O3b was like cutting off its pinky finger in terms of how much market SES could lose. For Intelsat, it’s more like cutting off a leg. We’re going after their market, with a superior product owing to the reduced latency because of our lower orbit, and the bandwidth we have to offer.
And as for the rain-attenuation and other technical performance issues?
The handoff of the signal from the satellites to the ground infrastructure is not that complicated. We recently contracted with ViaSat to produce the infrastructure, meaning full-motion tracking systems for the satellites, control equipment and installation.
As for rain fade, well, yes, it does rain in Africa. But we can compensate for that with the power our satellites can deliver, helped by the lower orbit. We are aiming at having comparable to better availability than fiber in many markets we’ll be serving. As to the tracking mechanism, the way the antennas pick up the satellites as they come over the horizon is relatively straightforward, based on tried and tested existing technology.
