Thales CEO Aggressively Working Towards Iridium Deal

[Satellite News 11-07-08] Thales Alenia Space has seen a significant leadership change this year. Reynald Seznec replaced Pascale Sourisse as the company’s new CEO in May. It should be an interesting time for the satellite manufacturer. The company appears to be having a strong 2008, underlined in September when it announced it had started construction of 16 Low Earth Orbit (LEO) communications satellites for O3b Networks.
Seznec talks with Satellite News about his plans for the company, O3B Networks, ITAR-free satellites, as well as how he sees the satellite manufacturing space over the next 12 months.

Satellite News: What are the major challenges for Thales Alenia Space over the next 12 months?

Seznec: In the first half of 2008, the dynamics are very good. The growth is there. I think there is confirmation that the market is there. We are confident about that. In the short-term, what we need to do is convert the ATPs we have won into solid contracts. I am referring to O3B Networks and Inmarsat S-band contracts.
We also hope and are working on new opportunities. We feel that we can continue to take market share and grow. As a consequence of that, we have around 20 launches this year. We have tight delivery schedules and commitments to be met. All of our plants are very busy. We have been very pleased with the success of the constellations. After Globalstar, O3B was very good news for us. We are working actively, even aggressively, on Iridium. We are entering the last phase of the technical framework of the ongoing competition.

Satellite News: Would Inmarsat still be obliged to acquire the EuropaSat satellite if it fails to obtain a pan-Europe MSS license?

Seznec: Inmarsat, like Eutelsat and others, is a very big operator, and I am sure they will do everything they can to win this contest. It is because they are confident that they will get this success that they have trusted this contract to us. I am not going to speculate on the winner for a long time..

Satellite News: Do you think the French government will sell the Syracuse 3A and 3B satellites? Would this be a surprise move? How do you assess the French government’s need for military satellites?

Seznec: Apparently, there is consideration being given to this. I think this kind of consideration takes quite a lot of time to analyze and implement. If this is implemented, I guess there would be some kind of competition, and yes, we would be there. I am not surprised by this. If you look at Italy, for example. Italy has engaged on some kind of PPP on Sicral. I think the Italian government tried to optimize their cash and the service delivery for the capacity. I think it is normal that they look at these things. But, the decision is in the French government’s hands. I don’t know what will happen.

Satellite News: Do you see the market for new satellites being stable over the next couple of years?

Seznec: Absolutely, even beyond the next two years. What we see over the next five years is a consistent but reasonable growth, two to three percent a year on the market, maybe five percent. We don’t see any cycle so to speak. We could speculate on the potential impact of the financial crisis on the financing of our customers in the telecoms sector. Anyone can guess this, but the fact is today, we see no impact yet. My own view is that operators are extremely careful with their investments anyway. The demand for their services is very solid, so they can present a very solid business case to their shareholders and the financial community.

Satellite News: What are your capital expenditure plans in terms of developing new satellites and capabilities?

Seznec: We have invested in the past quite a lot. At the start of the century, we have invested in extending and renewing the capabilities we have. At the time, this was done on the premise that the market would be 30 to 35 satellites a year. It is more like 25 satellites a year. We think we have the capacity. We are not limited by capacity in terms of our growth. Nevertheless, we are still investing. Specifically, we are developing our plant in Spain. We will probably extend our plant in Toulouse, and we have just started a big modernization in Cannes. We have a breadth of facilities in Europe. We also have a plant in Rome. Italy is where we integrate the constellation. We are able to use sites in four countries (France, Spain, Italy, Belgium) in order to deliver to our customers. We are not really limited by investments. We continue to invest in order to fuel the growth.

Satellite News: How many orders do you hope to win?

Seznec: We have signed six contracts for a total of 21 satellites, including the O3B constellation. We have also signed two payloads and one Earth observation contract. There is still more to go. There are a number of negotiations, which are currently ongoing. My guess is we would hope to win one of two more contracts in the telecoms sector this year.

Satellite News: What is the significance of the consolidation in the European satellite manufacturing arena with EADS Astrium acquiring SSTL? What is your view on developing a small satellite capability for Thales Alenia Space?

Seznec: I think micro-satellite is a low cost market. It is something we have been and are still looking at. Is it something for us is really a question mark. We have considered also using existing micro-platforms, such as one from CNES, for example. Today, it is not a big market. We are watching the market, and considering our options, but we have not decided yet whether to go into this market or not. If we would, we would use an existing platform, or go with a partner.

Satellite News: What trends do you see emerging in the satellite manufacturing space?

Seznec: Ka-band will continue to develop. What we see also emerging is a trend of governments looks at dual satellites, so with two types of applications – one commercial and the other defense and security, for example. This is due to the fact that governments tend to optimise their capital expenditure requirements, and they also want to move towards service models, where they don’t operate the service themselves, but they trust the service to a third party, which sells capacity to them and to others. Another version of this is to have hybrid payloads. These are the trends that we see, but we also see Ka-band continuing to develop.

Satellite News: What percentage of revenues do you hope to derive from the commercial arena compared to the institutional markets?

Seznec: A little more than 50 percent of revenues are derived in the commercial sector. The other half is in the institutional sector. This is the balance we like. We need to have this kind of balance, which is different from some of my U.S. counterparts.

Satellite News: What are your views on developing ITAR-Free satellites?

Seznec: It is ESA policy to encourage European firms in the space industry to develop technology, which is ITAR free. One of the reasons is the lead time. Another is that it gives our clients the ability to sell to some other countries or the choice of using specific launchers. In terms of telecoms, we have one version of the Spacebus which is ‘ITAR’ free. On this, I would also insist ‘ITAR’ free also means ‘ITAR’ compliant. We don’t view what we are doing as a specific strategy. But, this does enable us to meet the expectations of some customers around the world.

Satellite News: Where do you hope to position the company over the next 12 months? What is your vision for the company?

Seznec: The first words that come to my mind is growth. This is essential for us. We want to grow in both the commercial and institutional sector. We also want to see growth outside of Europe. We want to develop this growth beyond just telecoms satellites also meaning observation at large. We are in an industry where the building of contracts is something that takes time. Managing a large organization across four countries is challenging. I strongly believe in progressive change and transformation towards better integration.

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