Telenor Satellite Broadcasting (TSB) plans to issue requests for bids this year for what may be a dual- or triband telecommunications satellite as the company plots its expansion in the Middle East and perhaps Africa.

The decision to order a new satellite to replace the aging Thor 3 spacecraft at Telenor’s 1 degree west longitude orbital slot, coupled with Telenor’s decision in late 2005 to purchase the Thor 2R satellite, is further evidence that the company’s parent owner, majority state-owned Telenor, has no plans to sell the satellite operator, company officials said.

Telenor Satellite Broadcasting, after three difficult years early in this decade, had been on the sales block for more than two years as the parent company sought to shed non-core assets.

But as Telenor Satellite Broadcasting’s Canal Digital direct-broadcast television blossomed, the advantages of having an in-house satellite operating company became more compelling. Cato Halsaa, chief executive of Telenor Satellite Broadcasting, said the business case favoring retention of the satellite operator also was strengthened by the fact that the bids received for the satellite operator fell short of management expectations.

“The company went to due diligence [with at least one bidder] and realized that the price the market was offering was less than what the business plan was worth,” Halsaa said here May 5 in a presentation of Telenor Satellite Broadcasting’s strategy.

Telenor Satellite Broadcasting operates three satellites providing the equivalent of 40 transponders of Ku-band transmissions for television, broadband Internet and other telecommunications services.

Thor 2 is set to be retired in late 2008 and will be replaced by the Thor 2R under construction at Orbital Sciences Corp. of Dulles, Va. Thor 3, to be retired in late 2010, will be replaced by the new satellite, which will be designated Thor 3R, whose contractor will be selected in early 2007.

Telenor also is half-owner, with satellite-fleet operator Intelsat of Washington, of the Intelsat 10-02 satellite, launched in 2004.

Telenor Satellite Broadcasting revenues in 2005 were 663 million Norwegian kroner (about $108 million), down slightly from 2004 and continuing a slide that dates from the beginning of the decade. But EBITDA, or earnings before interest, taxes, depreciation and amortization, increased for the third consecutive year. Backlog was $381 million. More than 40 percent of revenues came from the Canal Digital direct-to-home television venture that is not part of Telenor Satellite Broadcasting but is a sister company also owned by Telenor Broadcast Holdings.

Stig Eide Sivertsen , chief executive of Telenor Broadcast Holdings, said Canal Digital continues to grow, with more than 900,000 subscribers, compared to about 650,000 subscribers for its Nordic competitor, Viasat.

The growth of Canal Digital has given Telenor’s satellite operating arm a strong and growing customer base and provided Canal Digital with some protection against a possible increase in transponder-lease rates that might occur if the satellite operator was sold.

In addition to subscriber growth, Canal Digital has succeeded in reducing its subscriber turnover, or churn, to just 13 percent per year, an unusually low figure for a broad-based satellite television company.

In much of Europe, dueling satellite-television companies have merged to form a single, stronger monopoly player. But Sivertsen said this is unlikely to occur in the Nordic region because both competitors are financially healthy and government competition authorities would probably refuse any attempted merger.

Sivertsen also said that if the satellite-television companies merged to create a single player in Norway, Sweden, Finland and Denmark, it would almost inevitably lead to a strategic cooperation or merger of Telenor Satellite Broadcasting with its Swedish rival, satellite operator SES NSAB, which is minority-owned by fleet operator SES Global of Luxembourg.

With its ownership now seemingly stable and its core DTH customer in robust health, Telenor Satellite Broadcasting is looking to expand, TSB officials said.

Halsaa said TSB growth probably will not include a strategic partnership or merger with a larger operator despite the industry consolidation occurring throughout the global fixed satellite services industry. The advantages enjoyed by large satellite-fleet operators — savings in operating costs, greater leverage with suppliers and insurers, and greater in-orbit backup — are overrated, he said.

“When you look closely at it, these are relatively small amounts of money that are saved,” Halsaa said. “It’s not significant. I would not conclude from the merger and consolidation trend that we are about to be put up for sale again.”

TSB Commercial Director David Gilmore said incremental internal growth, aided by the Thor 3R to be ordered in early 2007, will be the near-term strategy.

“We have been a small regional operator,” Gilmore said here May 5. “What we’re looking at is moving from Nordic, to European and to the Middle East.”

The 11 transponders that TSB owns on the Intelsat 10-02 have been partly dedicated to communications to, from and within the Middle East. It is a business that was quickly filled to capacity, and TSB wishes it had more of it to offer, Gilmore said.

Of the 40 transponders TSB has on all three of its spacecraft, the equivalent of all but 1.5 transponders are booked.

TSB’s decision in late 2005 to order a relatively small Thor 2R from Orbital Sciences — the satellite will carry 15 transponders — means expansion must come from Thor 3R.

In addition to a complement of Ku-band transponders to replace Thor 3, the new satellite may include one or more Ka-, C- or S-band transponders, depending on a market assessment that TSB expects to complete this year, Gilmore said.

TSB had considered adding one or two Ka-band transponders to Thor 2R to address the market for two-way broadband. The idea was dropped because it would have lengthened the satellite’s manufacturing time beyond what was acceptable given the need to have the satellite in orbit before Thor 2 is taken out of regular service. This would have been true regardless of which manufacturer had been selected, Gilmore said.

With Thor 3 expected to continue operations until 2010, TSB has more time to consider coverage contours and frequencies for Thor 3R. A Ka-band payload is again being weighed to provide broadband access to the shrinking but still viable market of those in northern Europe that are beyond the reach of cable or DSL service.

Up to 16 C-band transponders could be added as well to address the market in west Africa, where TSB has ambitions. Its current satellites’ footprint includes the tip of northern Africa only.

An S-band payload is also an option if hybrid terrestrial-satellite systems for mobile video broadcasting catch on. Alcatel in France is testing such a system — as yet without a satellite link — with assistance from the French government. Satellite-fleet operator Eutelsat of Paris has said it may add an S-band payload to a satellite it plans to contract this year.

“If a satellite-terrestrial architecture becomes an accepted standard, we want to be part of it,” Gilmore said.

With these options still undecided, TSB is not certain how big Thor 3R will be. Gilmore said the company is willing to divide the construction and launch costs of the satellite with another operator along the lines of its deal with Intelsat for the 10-02 satellite if that improves the business case.