Russian President Vladimir Putin has ordered the merger of a number of Russian space enterprises into a new company that will apparently become the flagship of Russia’s satellite manufacturing industry.

The Information Satellite Systems (ISS) company will be set up to “preserve and develop … the potential of the rocket and space industry, ensure defense capabilities of the state, concentration of … resources for … establishment of satellite systems designed for telecommunications and navigation,” according a decree Putin issued June 9.

The core asset of this new joint stock company will be the Academician Mikhail Reshetnev Scientific Production Association of Applied Mechanics (NPO PM), in the Siberian city Zheleznogorosk, Krasnoyarsky Krai.

NPO PM has designed and produced a range of satellites, including the Glonass global navigation satellites, Express multi-media telecommunications satellite, Gonets telecommunications satellite and Gorizont television broadcast spacecraft.

Other assets of the newly established company will include NPO PM’s current and former subsidiaries as well as the satellite maker’s subcontractors, such as Scientific Production Association “Polyus” of Omsk, Scientific Production Enterprise Kvant of Moscow, Siberian Instruments and Systems of Omsk, Scientific Production Enterprise “Geofizika-Kosmos” of Moscow, Scientific Production Association of Space Instrument-Engineering Kvant of Rostov-on-Don and Siberian Institute of Design of Machine-Building Enterprises of Zheleznogorosk.

Polyus, Kvant, Siberian Instruments and Systems, and Geofizika-Kosmos are to be transformed from federal enterprises into joint stock companies with their shares to be transferred to ISS, according to a June 20 written statement by Roman Turkenich, spokesman for NPO PM.

NPO PM’s subsidiaries, Kvant and Siberian Institute of Design of Machine-Building Enterprises of Zheleznogorosk are already joint stock companies and their shares also will be transferred to ISS, according to the June 20 statement issued in response to questions submitted by Space News. Turkenich declined to either elaborate on the statement or answer other questions when reached by phone June 23.

ISS’s priority projects would be development of the next generation of multi-media telecommunications satellites based on the lightweight satellite platform Express-1000 and the heavier Express-2000 platform. Further upgrades and production of the Glonass navigation satellites and Gonets satellites also would be among the newly established companies’ priorities, according to the NPO PM June 20 statement.

NPO PM will enter the new company under new leadership. Albert Kozlov, 68, who had been NPO PM’s general director and designer since 1996, stepped down June 23 after his contract expired.

Anatoly Perminov, head of the Federal Space Agency (Roskosmos), which oversees NPO PM, made 56-year old Nikolai Testoedov acting general director and general designer of this Zheleznogorosk-based satellite maker. Testoedov had previously worked as director of one of NPO PM’s subsidiaries — NPO-PM-Rapidity, which will become part of ISS. NPO PM currently employs a total of 5,700. The company has manufactured 1,120 satellites since its founding in 1959.

After the mergers ISS will employ some 12,000 people. Once it is restructured, the new company’s goal is to increase NPO PM’s current annual sales 50 percent by 2010, according to the statement.

NPO PM’s press service declined to specify what NPO PM’s sales totaled in 2000-2005, only noting that they tripled in that period. There are currently more than 60 spacecraft in orbit that were manufactured by NPO PM. That accounts for about two-thirds of Russia’s current satellite fleet, according to the June 20 statement.

On the subject of whether NPO PM’s long time suppliers — Alcatel of France and NEC of Japan — would be allowed to buy into ISS, the statement said all of ISS shares will be owned by the federal government and it will be up to the Russian president and the government to decide whether to allow the sale of its shares to private companies.

The new company should be formed within the next nine months. The Russian government first floated the idea of setting up a satellite industry flagship formed around NPO PM in 2003. However, the resignation of Prime Minister Mikhail Kasyanov in 2004 and the subsequent reorganization of the cabinet put those plans on hold.

The June 20 statement said ISS will continue NPO PM’s cooperation with companies from France, Germany, Italy and Japan in production of satellites.

NPO PM has cooperated with Alcatel of France and NEC of Japan on satellite production by supplying transponders and other spacecraft equipment.

In a June 27 response to a Space News inquiry, Tina Butkhuzi, spokesperson for Alcatel Russia, said her company hopes to continue cooperation with NPO PM when it becomes part of ISS.

“Alcatel has been cooperating with … NPO-PM for more than the last 10 years … During these 10 years we managed to successfully implement several projects and by the end of 2006 we delivered 11 payloads to NPO-PM for Russian and European telecommunication space programs,” she wrote. “Alcatel sees the announced decision to establish a new company positively and we are ready to continue our cooperation with NPO-PM in frame of the new organization,” Butkhuzi said.

Chris Shimizu, spokesman for NEC Europe Ltd, also failed to respond to a June 20 Space News inquiry.

Igor Panarin, spokesman for the Federal Space Agency, told Space News in a telephone interview June 29 that establishment of ISS is in “line with the agency’s strategy of uniting enterprises of the space industry into holdings.

“Roskosmos has already managed to set up such holdings on the basis of the Scientific Research Institute of Space Device Engineering in Moscow.” Another holding will be formed on the basis of the Scientific Production Association of the Machine-Building in Reutovo, according to Roskosmos’ plans.

Panarin said it is too early to say if some of ISS’ shares would be sold to private companies, but stressed that the federal government intends to retain the majority stake of the satellite flagship in any scenario.

Alexander Zheleznyakov, one of Russia’s leading space experts and member of the Russian Academy of Space Exploration, said he was of two minds on the planned company. “On one hand, this would be in line with international trends and would increase our competitiveness on international markets. But, on the other hand, it will lead to absence of domestic competition, which is a negative development.” A dominant company has less incentives to make qualitative leaps in research and development , Zheleznyakov told Space News in a June 26 telephone interview.

Zheleznyakov said he expects that other, smaller manufacturers of telecommunications satellites, such as the satellite branch of the Khrunichev State Research and Production Space Center, Moscow, will find it more difficult to compete for orders with the planned flagship.

Khrunichev spokesman Alexander Bobrenev told Space News June 26 that his company, which manufactured and recently launched Kazsat, Kazakhstan’s first telecommunications satellite, is not overly concerned.

Bobrenev noted that Khrunichev, which specializes in design and production of launch vehicles, has been trying to find a niche in the light-weight telecommunications satellite market whereas NPO PM and now ISS will be focused on heavier satellites.