European satellite operator SES Astra has increased its ownership stake in satellite ground-systems supplier ND Satcom and secured an option to take full control of the company in 2006 as part of a broader strategy to offer services to European military and civilian government agencies.

Luxembourg-based SES Astra, a subsidiary of SES Global, hopes to duplicate the success of its sister company, SES Americom of the United States, in making military and other government sales a growth story for the coming years.

SES Americom, like Intelsat Ltd. of Washington and PanAmSat Corp. of Wilton, Conn., has created a special subsidiary dedicated to serving the U.S. government’s growing demand for commercial satellite capacity. About 60 percent of current U.S. government commercial satellite capacity purchases are made by the U.S. Defense Department, according to SES Americom estimates.

U.S. government demand for commercial satellite capacity is estimated at more than $500 million per year, and growing. As defense planners reorganize the U.S. military posture to conduct network-centric warfare — in which space, air and ground assets are linked to provide broader battlefield awareness more quickly — demand for commercial capacity is likely to continue to grow. In addition, homeland security-related demand as well as other nonmilitary U.S. government business is considered a growth area at a time when satellite-fleet operators are confronting sluggish growth in their core business.

SES Global spokesman Yves Feltes said that while Europe’s military forces have nowhere near as much need as the Pentagon for satellite capacity, the defense business in Europe is growing. And when added to the civilian government market — including diplomatic communications and homeland security-related activities — “it is becoming an interesting market segment,” Feltes said.

“Enhancing our position in ND Satcom is a further step in our strategy to develop our portfolio of satellite service solutions provided to our customers in the media, enterprise and government sectors,” SES Astra President Ferdinand Kayser said in a statement announcing the equity purchase.

ND Satcom of Friedrichshafen, Germany, fits into that strategy. SES Astra and ND Satcom announced April 13 that ND Satcom would convert its outstanding debt to SES Astra to equity, a move that will increase SES Astra’s stake to 25.1 percent from the previous 10 percent. SES Astra also retained the option to take a controlling interest in ND Satcom in 2006. Augusta Technologie AG currently owns the 74.9 percent of ND Satcom not owned by SES Astra.

ND Satcom had revenues of $83.4 million in 2003, with some 36 percent of that business coming from the German and other national defense ministries, and the remaining 64 percent from civil government agencies and commercial customers, according to Christian Adolph, ND Satcom director of marketing. He said revenues between 2000 and 2003 increased by 19 percent. Year-2004 results are expected to be published before the end of the month, he said.

ND Satcom provides ground terminals and other hardware. It also helps customers book satellite capacity and as such can help drum up business for SES Global. SES Global Chief Financial Officer Mark Rigolle told investors April 8 that SES is willing to accept relatively low gross profit margins for the services businesses in which it invests in part because these companies steer customers to SES Global’s core business of leasing transponders.

ND Satcom is one of the companies bidding for the German Defense Ministry’s Satcom Bw Step 2 contract. Germany’s defense procurement office is expected to decide this spring whether to conduct the Satcom Bw program as a conventional procurement or a public-private partnership in which the contractors own the two planned military telecommunications satellites. Some combination of the two procurement methods may be selected.

For the German military satellite procurement, ND Satcom is allied with EADS Space Services, whose Paradigm Secure Communications subsidiary sells satellite capacity to European and other NATO governments following a 15-year concession, called Skynet 5, granted by the British Defence Ministry.

European defense forces also are moving toward network-centric warfare and greater reliance on unmanned aerial vehicles and other technologies that require large amounts of bandwidth.

SES Americom has estimated that in the U.S. military, bandwidth demand has increased nearly eightfold in the past decade, to where a 5,000-strong force needs almost 80 megabits per second of capacity. The company forecasts that this growth will continue in the next decade and that by 2020, the same 5,000-member force will need at least 160 megabits per second of throughput capacity, and perhaps more than 300 megabits per second.

Peter B. de Selding was the Paris bureau chief for SpaceNews.