The Top Satellite Industry Stories of 2009

[Satellite News 12-22-09] The global recession may have dominated global business plans and future outlooks in 2009, but the satellite industry finds itself standing at the end of one of its most active years in recent history. Acquisitions, bankruptcies and record-breaking profits seemed to happen on a daily basis and there were plenty of instances where the most time-consuming decision for our editors was deciding the “top story.”
Below are 10 significant stories from 2009 that attracted the most attention from our readers, in no particular order.

1. $7.2 Billion in Broadband Stimulus

The timing of the American Recovery and Reinvestment Act’s passage in February could not have been better for the satellite industry. After months of panicked discussion among analysts and executives over a devastated economy and which financial institutions would be willing to invest in the next-generation broadband projects — let alone survive the recession — the U.S. government put $7.2 billion up for grabs in a battle between telecoms, WiMax providers and satellite companies to propose the most efficient and job-creating solutions to close the digital divide and connect underserved areas with modern Internet service.
For some satellite companies, the government investment became less attractive as the program’s details became more vague and disheartening, but others, like Hughes Network Systems, SkyCasters and WildBlue, invested time and energy lobbying congress on behalf of promoting satellite as a viable source of technology. Hughes and WildBlue felt so strong about the prospects that the fierce U.S. broadband satellite services market competitors cooperated to produce joint-promotional advertising campaigns and initiatives on the broadband stimulus bill. “We’ve briefed many in congress and have had meetings with the administration. I think everyone in Washington understands that there is no single solution for the rural broadband connectivity problems. Satellites, cable and fiber all have a role to play in providing to served and unserved areas and we will see what that role will be at the end of the year,” says Hughes CEO Pradman Kaul.

2. ProtoStar Bankruptcy, Auction of ProtoStar 1 and 2

ProtoStar and its five affiliates filed for Chapter 11 bankruptcy protection from the U.S. Bankruptcy Court of Deleware on July 29. ProtoStar listed assets and liabilities between $100 million to $500 million and lists Philippine Long Distance Telephone Co. as its largest unsecured creditor.
To raise money, ProtoStar secured financing from its incumbent lender groups, allowing it to finance the costs of its operations throughout the proceedings. ProtoStar also decided to auction its two Boeing-built satellites, ProtoStar 1 and 2.
In November, Intelsat won the auction for ProtoStar 1 with a bid of $210 million in cash and renamed the satellite Intelsat 25. One month later, SES placed the winning bid in the ProtoStar 2 satellite auction for $185 million in cash. ProtoStar 2, located at 107.7 degrees East, with plans to integrate the spacecraft into global satellite fleet of SES World Skies to provide incremental capacity over Asia.

3. DISA, GSA Form Commercial Satcom Acquisition Partnership

The U.S. General Services Administration (GSA) and the U.S. Defense Information Systems Agency (DISA) partnered last summer to create FCSA, a common marketplace for commercial satellite communication acquisitions.
    The two agencies expect to spend more than $5 billion over 10 on commercial communications under the new approach that also is expected to save money for defense and civilian agencies as well as state, local and tribal governments.
    Lt. Gen. Carroll F. Pollett, director of DISA, and GSA Commissioner James Williams signed a memorandum of agreement July 28 to combine acquisition efforts.
“Why manage separate contract vehicles that offer essentially the same services when we can combine forces?” said Tony Montemarano, DISA’s component acquisition executive.
    In a press call, Bruce Bennett, director of satellite communications for DISA, said the agencies would replace the Defense Information Systems Network Satellite Transmission Services-Global (DSTS-G), Satcom 2 and Inmarsat contracts that expire in 2012, with FCSA. DISA and GSA have spent $350 million and $47 million on these contracts, respectively.
    “This partnership will provide one source for commercial vendors to come to in order to meet government and military demand. We expect this to result in 10 to 15 percent price drops for bulk bandwidth purchases,” said Bennett.

4. ViaSat Acquires WildBlue for $568 Million

In October, ViaSat Inc. signed a definitive agreement to acquire WildBlue Communications in a cash and stock transaction valued at $568 million.
    WildBlue’s Ka-band broadband service now will use capacity on the ViaSat-1 satellite, set for launch in early 2011. ViaSat will integrate its ground network technology with WildBlue’s operational and distribution platform, serving more than 400,000 customers in the United States. WildBlue’s high-speed, two-way Internet service already is powered by theViaSat SurfBeam networking system.
    WildBlue CEO David Leonard said the addition of ViaSat-1 capacity to WildBlue’s network will enable the company to grow its subscriber base domestically and internationally. “We believe ViaSat, through its success with WildBlue in the Unites States, Barrett XPlornet in Canada and Eutelsat Tooway in Europe has achieved the economies of scale needed to make satellite broadband affordable and competitive,” Leonard said in a statement.
    “This synergy, coupled with the improved free cash flow profile WildBlue has attained in the last year, has enabled us to structure what we believe is a highly capital efficient transaction that offers immediate financial benefits to ViaSat. In our view, it’s exceptional to be able to make an acquisition with so many strategic benefits under such favorable financial terms,” ViaSat CEO Mark Dankberg said.
    In addition to accelerating the growth of WildBlue’s consumer satellite broadband business, the transaction also is intended to promote growth opportunities for ViaSat’s commercial and defense businesses. “WildBlue’s satellites accelerate our entrance into new Ka-band broadband applications by over a year. We have been making steady progress pursuing defense and mobile broadband markets in the U.S. and globally,” said Dankberg.

5. TSAT Cancelled; Commercial Capacity Becomes the Alternative

As part of a restructuring of U.S. defense spending in the 2010 U.S. federal budget, U.S. Defense Secretary Robert Gates recommended in April that the U.S. Air Force’s $26 billion Transformational Satellite (TSAT) program be terminated.
    According to a transcript of Gates’ statement on the White House Web site, high costs, technological risk and development delays were cited as primary reasons for the program’s cancellation. The TSAT program consisted of a six-satellite constellation, satellite operations centers, a mission operations system and ground gateways. Teams led by Lockheed Martin and Boeing were in competition for its primary contract.
    As a replacement strategy, Gates recommended the fielding of two additional Advanced Extremely High Frequency satellites.
    Gates eventually decided to kill the program, which impacted Boeing and Lockheed Martin and forced the U.S. Military to look toward commercial capacity as an alternative.

6. Globalstar Secures $738 Million in Coface Financing

Globalstar has completed its financing of $738 million that will fund the company’s next-generation satellite system in July.
    The total financing combines a $586 million credit facility secured in March by Coface, France’s export credit agency; a registered direct offering of convertible debt and warrants for $55 million; and a $60 million deposit by Thermo Funding, the majority shareholder of Globalstar.
    The company said the $738 million financing fully funds the manufacture, delivery and launch of Globalstar next-generation network and ground facilities by Thales Alenia Space as well as accelerated delivery of additional second-generation spare satellites. The financing also will facilitate the introduction of Globalstar’s next-generation satellite interface chipsets being designed by Hughes Network Systems.
    “With this funding, we have the resources needed to deploy a new constellation of satellites designed to last beyond 2025 and to build the supporting ground infrastructure that will position us to be first to market with a host of advanced IP-based mobile satellite services years ahead of our primary competition,” Jay Monroe, chairman and CEO of Globalstar, said in a statement.

7. Sea Launch Files for Chapter 11 Bankruptcy Protection

Sea Launch Company LLC and Sea Launch Limited Partnership and subsidiaries filed voluntary petitions to reorganize under Chapter 11 in U.S. Bankruptcy Court in June.
    In the filing in Wilmington, Del., Sea Launch listed assets of between $100 million and $500 million against liabilities of between $500 million and $1 billion.
    Sea Launch continues to maintain all normal business operations, using its cash to fund operations.
    “We want to assure our customers, employees, suppliers and partners that Sea Launch intends to continue to operate after the filing,” Kjell Karlsen, president and general manager of Sea Launch, said in a statement. “Chapter 11 reorganization provides an opportunity for us to continue operations and focus on building our future plans. We are grateful for the continued support of our customers and partners while we focus on reorganizing for the future.”
    The company placed Measat-3a and Intelsat 15 in orbit in June and December, respectively, using a land-launch rocket. The company also secured a $12.5 million credit facility from Space Launch Services in December.

8. Inmarsat, Solaris Mobile Win S-band Spectrum Award; ICO, Terrestar Protest

The European Commission (EC) selected Inmarsat and Solaris Mobile to operate mobile satellite services (MSS) system in Europe using 60 megahertz of S-band radio spectrum in May.
The awards conclude an application process, which began in August and involved several competing companies, including TerreStar, ICO, Thuraya and Ondas. The EC said that four operators were admitted to the selection phase in December and with the assistance of independent experts, analyzed the technical and commercial development of the MSS competitors in cooperation with national authorities.
ICO Global Communications and Terrestar immediately filed legal challenges against the EC. “We believe the just-concluded EU process jeopardizes years of international cooperation and coordination that has governed satellite communications worldwide … ICO will continue assessing its options in defending its international legal rights,” said ICO CEO Michael Corkery, in a statement.

9. Liberty Media Gives Bailout to Sirius XM

Sirius XM Radio and Liberty Media Corp. have entered into agreements for Liberty to invest $530 million in the form of loans to Sirius XM and its subsidiaries in an attempt to save the satellite radio provider from bankruptcy in February.
    The funding would be issued in two phases. The first phase included a $280 million senior secured loan from Liberty to Sirius XM — $250 million of which will be funded immediately. The proceeds of that loan would be used to repay $171.6 million of notes due Feb. 17 and for general corporate purposes, including working capital and transaction costs.
    The second phase provided an additional loan of $150 million to XM Satellite Radio, Sirius XM’s wholly owned subsidiary. Liberty also agreed to offer to purchase up to $100 million of the loans outstanding under XM Satellite Radio’s existing credit facilities from the lenders.
    Upon completion of the second phase of the Liberty investments, Sirius XM said it would issue Liberty an aggregate of 12.5 million shares of preferred stock convertible into 40 percent of the common stock of Sirius XM. John Malone, Liberty’s chairman, and Greg Maffei, president and CEO of Liberty, also will join the Sirius XM board of directors.

10. Iridium Satellite Destroyed in Collision with Russian Cosmos

In February, a defunct Russian satellite collided with an Iridium satellite above Siberia resulting in the destruction of both spacecraft.
    The Russian satellite involved was a Cosmos telecom spacecraft launched in 1993 and no longer in service. The Iridium satellite, launched in 1997, was still active in its network.
    “Although this event has minimal impact on Iridium’s service, the company is taking immediate action to address the loss,” Iridium said in an announcement.
    Two massive clouds of debris, formed from the collision, were seen as a possible threat to NASA’s International Space Station (ISS). However, NASA officials told press officials that the ISS was not thought to be in significant danger as it orbits at an altitude of 220 miles, well below that of the satellite wreckage clouds.
    The issue has sparked discussion of the need for global space situational awareness throughout the year.

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