Profile: Telespazio Leans Heavily on Italian, French Programs

Giuseppe Veredice

Chief Executive Officer, Telespazio

Telespazio
of Rome has assembled a package of assets in satellite telecommunications, navigation and Earth observation that Chief Executive Giuseppe Veredice says has enabled it to grow profitably in recent years and should assure further near-term growth.

Owned 67 percent by Finmeccanica of Italy and 33 percent by Thales of France, Telespazio is counting on Italian and French government program development, as well as the combined weight of
Italy
and
France
in
Europe
, to assure it a steady stream of government civil and military space contracts.

On the commercial side, its core satellite operations capability from the
Fucino
Space
Center
is a springboard for commercial work. With its Fucino center as a core capability, Telespazio has joined forces with the
German
Aerospace
Center
, DLR, in a combined bid to operate
Europe
‘s Galileo navigation satellite constellation. The bid has raised concerns at Inmarsat of London, which is competing against the Telespazio/DLR team.

The company also has leveraged Fucino to sell satellite operations services to
Italy
‘s RAI television network, and to DRS Technologies in the
United States
. For RAI, Telespazio is providing capacity it has leased from satellite fleet operator Eutelsat of Paris. For DRS, Telespazio combined its operations contract with the sale of Telespazio-owned capacity on the Italian Defense Ministry’s Sicral 1B telecommunications satellite, set for launch aboard a Sea Launch Co. rocket this month.

In Earth observation, Telespazio is expected to complete an agreement early this year with the Italian Space Agency on ownership stakes in a start-up company called e-geos to commercialize high-resolution radar Earth observation data from
Italy
‘s Cosmo-SkyMed satellites. Also in Earth observation, Telespazio is the exclusive distributor in
Europe
and
North Africa
for GeoEye Inc.’s GeoEye-1 high-resolution optical satellite.

Veredice
spoke about the company’s status and prospects with Space News staff writer Peter B. de Selding.

You have positions in a lot of businesses, some new and some mature. What is the total revenue being generated?

Our final revenue figures for 2008 aren’t available yet, but we did about 440 million euros ($572 million) in revenue last year, which is an increase of about 100 million euros from four years ago. And this revenue increase has been done while maintaining good performance. We have an EBIT [earnings before interest and taxes] margin of about 10 percent.

One of the competitions you are in this year is for the contract to operate the European Union’s Galileo satellite navigation project. How important is this for you?

We are finalizing a joint venture with
Germany
‘s DLR to operate the in-orbit validation phase of Galileo, with the first four satellites, and the FOC, or full operations capability, phase as well.

This kind of contract really reflects the DNA of Telespazio as an operations service company. The Galileo contract also would be an important tool for us to host equipment at our
Fucino
Space
Center
for worldwide Galileo satellite control.

Inmarsat

of

London
is your competitor for the Galileo operations management. Inmarsat officials say Telespazio and DLR, whose ground facilities are already selected for key Galileo functions, will have more flexibility than Inmarsat in bidding to be overall Galileo operations manager. Is this a fair concern?

We are aware of the concerns of our Inmarsat friends. They know we are ready to cooperate with them no matter who succeeds in winning the overall operations contract. We are in fact obliged to offer them the same services that we have included in our own bid. Inmarsat certainly will be an important partner for us. We have no problem with this.

Three of the four Italian civil-military Cosmo-SkyMed radar satellites are now in orbit, with the fourth scheduled for launch by a Boeing Delta 2 rocket in 2010. The Italian and perhaps other European defense forces will be the main user, but you are creating a company to commercialize Cosmo-SkyMed data. What is the status?

The e-geos company we are creating will be a joint venture with the Italian Space Agency (ASI). We have a staff already in place and we have started commercial efforts in a number of countries.

We are close to a final agreement with ASI on what assets they will contribute, and what we will contribute. The working assumption is that we will have around an 80 percent ownership stake, and ASI will have a 20 percent share. It should be completed in a couple of months.

You may have seen the images we took, at the request of the Chinese government, following the May 2008 earthquake. The images from Cosmo-SkyMed were processed from the
Matera
Space
Center
, which ASI owns but which is managed by Telespazio.

How important is the Earth observation component of your business portfolio?

We have doubled our Earth observation revenue from around 40 million euros in 2005 to nearly 90 million euros estimated for 2008. The demand for Earth observation applications is growing very fast. Of course it remains a relatively small market overall, but the growth is solid, especially for security and safety applications.

In
Europe
we see demand for these services being consolidated at the European Commission, but some nations –
Spain
is the latest example – want to pursue specific system development as part of national programs.

We recently saw in
Turkey
, with our selection as prime contractor for the Gokturk optical system, that being able to offer a full package of services and satellite assets was an advantage.

In
Latin America
, several nations want to join the satellite ownership club.
Italy
has an agreement with
Argentina
for an L-band radar to complement our Cosmo-SkyMed system, and there are other nations in the Middle East and in
Asia
that remain interested.

Several

Arab
Gulf
nations have been considering a two-satellite system called Hud-Hud for optical and radar reconnaissance. But the project has dragged on for years with no contract. Is this real?

These things do take time. My feeling is that the Hud-Hud project, in one form or another, will proceed. But when a contract will be signed I cannot say. Remember that the Turkish Gokturk system took more than two years to settle. Now that we have been selected by the Turkish customer, we expect to sign a contract in the near future. It’s a business where you have to be patient.

The Sicral 1B military telecommunications satellite, scheduled for launch this month, featured an unusual financing arrangement including Telespazio. How much Sicral 1B capacity do you have access to?

In return for our financing part of Sicral 1B development, we have access to one-third of the satellite’s capacity. We hope to be adding to this capacity in the future. For example, we are ready to consider investing in the Sicral 2 satellite that will be ordered by the French and Italian defense ministries. Nothing has been decided, but this is under discussion.

The same is true for the dual-use French-Italian Athena-Fidus Ka-band broadband satellite. We could consider an investment in Athena-Fidus as a way of consolidating our position as a niche satellite operator.