By Cynthia Boeke

The past year has been an eventful one, notable for what happened, as well as for what failed to materialize. In the latter category, two multibillion-dollar mobile satellite ventures ended in bankruptcy, and the number of satellites launched and ordered was significantly smaller than last year. Balancing that downturn was the significant investment made in several multimedia satellite ventures. Also in 1999, a large group of industry leaders were replaced, leaving the industry in the hands of new executives as it moves into the next century.

Mobile Satellites

On August 13, Iridium LLC attempted an in-court financial restructuring when it filed for Chapter 11 protection under U.S. bankruptcy law with the U.S. Bankruptcy Court in Delaware, after the company defaulted on $1.55 billion in bank loans. Two weeks later, ICO Global Communications Ltd. filed for voluntary Chapter 11 bankruptcy in a Delaware court, citing $1.18 billion in liability and $2.6 billion in assets.

ICO, which had been struggling to secure financing to build the world’s third satellite telephone network, failed to get $600 million in financing and fell short of raising the $4.6 billion it needs to launch its system. As we went to press, however, telecommunications pioneer Craig McCaw and his affiliated companies, Teledesic LLC and Eagle River Instruments LLC, said they would lead a group of international investors that will provide up to $1.2 billion to ICO ensuring the continuing development of that system.

With Iridium and ICO in financial turmoil, all hopes were pinned on Globalstar Telecommunications Ltd., which was set to initiate service as we went to press.

Satellite Contracts

As we went to press in mid-October, only 11 traditional geostationary, commercial communications satellites had been ordered in 1999, indicating a major slowdown in the pace of new orders compared to previous years. This fall, spacecraft builder Hughes Space and Communications said it would eliminate 450 jobs because of a slowdown in orders. A number of large contracts are expected to be announced in the coming months, however, as global operators continue their tremendous expansion plans and the Asia-Pacific market begins to turn around. In addition, several multimedia satellites, discussed below, are finally in production. As we went to press, Lockheed Martin appeared to be one of the year’s biggest winners in terms of new contracts, thanks in large part to a huge order from GE Americom.

Lockheed signed a contract to build a second A2100 satellite for the Asia Cellular Satellite (ACeS) system, called Garuda 2. The L-band spacecraft will provide GEO-based mobile telephony throughout Asia, serving first as a backup to Garuda 1 and then allowing ACeS to expand coverage in western and central Asia, Eastern Europe and parts of northern Africa.

In the year’s biggest contract, GE Americom ordered four A2100s to provide telecom services to the U.S. market. The new spacecraft, GE 6, GE 7, GE 8 and GE 9, will be launched in the 2000-1 time frame.

Space Systems/Loral was selected to build Intelsat 905, the fifth in a series of high-power, ninth-generation satellites for Intelsat. The huge satellite will carry 44 C-band and 12 Ku-band transponders.

On the DBS front, SES Astra ordered two high-power spacecraft from Hughes for its growing constellation at 28.2 degrees E, and DirecTV ordered a replacement satellite, DirecTV 1R, which was launched on the maiden commercial flight of Boeing’s Sea Launch rocket.

Eutelsat ordered the Atlantic Bird 1 from Alenia Aerospazio, to be made available through a long-term lease contract, which will provide Ku-band coverage of North and South America, as well as Europe, North Africa and parts of the Middle East.

Intelsat spinoff New Skies Satellites N.V. ordered an Atlantic Ocean region satellite for launch in early 2001. The mammoth 80-transponder satellite, called NSS 7, was ordered from Lockheed Martin. The new satellite will be adaptable in orbit so that New Skies will be able to move and reshape antenna patterns, or to change the configuration to provide fewer C-band transponders and more higher-power Ku-band ones, or vice versa, depending on the market.

Although the amount of satellites ordered was only half the number compared to last year, a sizable number of contracts are expected to be placed in the coming months. Customers shopping for satellites now include Intelsat, which is expected to recommend the purchase of four more satellites, including two large satellites to augment transatlantic capacity and two more Intelsat 9s. In addition, a Ka-band RFP from Intelsat is expected to be approved by year end. Eutelsat is shopping for as many as four new satellites, and follow-on orders should be coming from GE Americom, Panamsat, Nilesat and Astra. According to Euroconsult, RFPs have also been revived for Measat, Apstar and Thaicom, indicating the resurgence of the Asia-Pacific satellite market.

Satellite Launches

The pace of geostationary satellite launches screeched to a halt. As of mid-October, only 13 geostationary satellites were launched, virtually ensuring the predicted target of 33 would not be met. Late spacecraft deliveries, satellite export controls, political instability, launch failures and increased competition were major factors leading to this dramatic decline. The year’s launches include:

• Loral Skynet’s Telstar 6, a C-/Ku-band hybrid covering the United States and Caribbean, as well as part of Canada and Latin America;
• Jcsat 6, an all Ku-band, Japanese satellite for voice, data, DTH and Internet services;
• Arabsat 3A, a high-power Ku-band satellite built by Alcatel that will provide DTH, telephony and data services for the Arab region;
• Asiasat 3S, a Hughes-built C-/Ku-band satellite for television distribution and telecommunications services throughout Asia, the Middle East and CIS;
• India’s Insat 2E telecommunications and weather satellite;
• Eutelsat’s W3, a Ku-band digital communications satellite for telecommunications, business TV and DTH services in Europe, North Africa and the Middle East;
• Telesat Canada’s first high-power, DBS satellite, Nimiq;
• Astra 1H, the ninth satellite in the European SES Astra DTH constellation and the eighth to be co-positioned at 19.2 degrees E;
• Indonesia’s C-band Telkom 1 satellite for telecommunications throughout the 13,000 island archipelago;
• Korea Telecom’s Ku-/Ka-band Koreasat 3 spacecraft for the Asia-Pacific region;
• AT&T’s Telstar 7, another Loral Skynet satellite providing broadcast and data communications services in the United States and Caribbean, as well as parts of Canada and Latin America;
• Echostar’s fifth U.S. DBS satellite, Echostar 5, which will add 150 video and audio channels, including local networks, to Echostar’s 350-channel offering;
• Lockheed Martin Intersputnik’s LM 1 satellite for broadcast, fixed telecommunications and VSAT services to customers in Eastern Europe, South Asia, Africa and the Commonwealth of Independent States; and
• DirecTV 1R, a U.S. DBS satellite that also marked the first launch of Boeing’s Sea Launch rocket.

In other launch news, New Skies delayed the launch of its NSS KTV satellite built by Matra Marconi Space due to potentially faulty solar arrays. The delay, until mid-2000, will allow the companies time to ensure the viability of the high-power Ku-band satellite designed to serve Asia, the Indian region and Pacific Rim.

The second Delta 3 failure occurred this year, when the rocket placed the Loral Orion 3 satellite in the wrong orbit. The $230 million satellite was designed to serve Asia and the Pacific. To mitigate the loss, Loral Space and Communications leased the entire available transponder payload of the Apstar 2R satellite from APT Satellite Co. Ltd.

Meanwhile, the first commercial flight of Boeing’s Sea Launch rocket was successful. The Sea Launch system consists of the Sea Launch Commander, a floating mission-control center and rocket-assembly factory; the Odyssey, a self-propelled launch platform; and a Russian Zenit-3SL rocket that delivered the DirecTV satellite into space.

Hughes Space and Communications Co. became the first casualty of a restrictive new U.S. satellite export policy when Asia-Pacific Mobile Telecommunications (APMT) of Singapore terminated its order for a $450 million mobile satellite system to serve Southeast Asia. APMT cited Hughes’ inability to secure the needed U.S. export license as the reason for canceling the deal. The U.S. State Department blocked export of the APMT satellites for security reasons.

In a move that marked a strategic shift, Arianespace took an equity stake in Ellipso Inc. as part of a deal in which it will provide four Ariane 5 launches to lift Ellipso’s mobile telephony satellites into orbit. Financial details were not disclosed, but the companies said the transaction includes Ariane committing a "substantial financial package involving vendor financing and equity investment in Ellipso." This marks the first time Arianespace has taken an equity share in a company.

New Industry Leaders

This past year saw a huge shakeout at the industry’s highest echelons. New leadership at many of the world’s largest satellite companies will lead to new strategies and direction for much of the industry.

Panamsat’s president and CEO Fred Landman stepped down. He was replaced by Chief Operating Officer Douglas Kahn.

Iridium’s CEO Ed Staiano resigned because of a clash with his fellow directors about how to resolve distribution difficulties for the global mobile telephony service. The Iridium board appointed John Richardson, CEO of Iridium Africa Corp., as interim CEO. Iridium CFO Roy Grant also resigned. His replacement, long-time Iridium executive Leo Mondale, resigned in September.

Michael Storey took over from Warren Grace as the new CEO of Inmarsat. Storey previously served as executive vice president of MCI Worldcom Europe. Grace resigned as director general of Inmarsat, just two weeks before the organization became a private company. Grace became unhappy about a search committee being formed to look for a new chief for the privatized entity.

Globalstar named Anthony Navarra, who had been acting chief operating officer, as president.

John Klineberg was named president of Space Systems/Loral (SS/L) and vice president of Loral Space and Communications. Klineberg had been executive vice president responsible for the establishment of the Globalstar satellite network. He succeeds long-time SS/L leader Robert Berry, who has been appointed chairman of SS/L and who continues in his role as senior vice president of space technology at Loral.

As part of a sweeping realignment at Lockheed, Mark Albrecht is taking over as president of International Launch Services, the joint U.S.-Russian venture that markets the Russian Proton and Lockheed Martin Corp. Atlas rockets. Albrecht replaces Wilbur Trafton, a former NASA official who resigned.

Multimedia Systems

After years of planning, huge multimedia systems were finally given a boost. But, after the stunning flop of two major satellite telephony projects, the system backers turned to themselves and outside partners, not Wall Street, for the hundreds of millions of dollars needed to get the projects started.

Lockheed Martin was selected to build four geostationary Ka-band telecommunications satellites for Astrolink, Lockheed Martin Corp.’s satellite-based, global wireless broadband system. Astrolink LLC also announced a $900 million funding package involving Telespazio and TRW Inc. The cash injection will drive the initial construction of the Astrolink system, which the participants claim will be the world’s first global, on-demand, wireless broadband service provider when it begins offering services in 2003. Lockheed Martin Global Telecommunications Group is investing $400 million, while Telecom Italia Group’s Telespazio subsidiary and TRW each will invest $250 million in the $3.6 billion project.

Astrolink will focus on the high-growth area of broadband data services, carrying traffic for Internet, Intranet, multimedia and corporate data networks. Customers will be able to install small satellite dishes at businesses and homes, to link to high-speed networks for "bandwidth on demand" connectivity.

Hughes Electronics Corp. invested an initial $1.4 billion in a hybrid GEO/LEO satellite system to provide high-bandwidth, high-speed communications for broadband multimedia applications. The injection of capital will allow Hughes’ Spaceway project to progress with its scheduled commercial North American rollout in 2002. Spaceway will consist of two HS 702 geosynchronous birds built by Hughes Space and Communications Co., plus an in-orbit spare. The investment commits Hughes to spend a total of $4 billion on the larger first phase of the project that will position a total of eight geostationary birds to serve most of the world by year-end 2003. Hughes also plans to introduce a complementary non-geosynchronous system with spacecraft operating in low earth orbits to cover developing markets in Europe, the Middle East, Africa, Latin America and Asia.

That announcement was followed by news that America Online Inc. (AOL) would invest $1.5 billion in Hughes Electronics Corp. to form an alliance that will offer high-speed broadband entertainment and Internet services by satellite.

Other Major Events

On April 15, Inmarsat became the first inter-governmental organization to transition to a private company. Established in 1979 to serve the maritime community, Inmarsat has evolved to provide communications for commercial applications at sea, in the air and on land. Now under new leadership, the organization plans a public offering as well as more advanced data services.

The FCC gave Lockheed Martin Corp. permission to buy 49 percent of U.S. Intelsat signatory Comsat Corp. The downturn in both companies’ stocks, caused by Lockheed Martin’s financial troubles, has put the overall status of the deal in question.

The much-touted Worldspace service, providing digital audio radio services directly to users throughout Africa and the Middle East via the Afristar satellite, was delayed. Technical and regulatory problems prevented the service from being initiated this spring. As we went to press, Worldspace’s 80-channel offering was set to begin a test phase. Two additional launches for the project, Asiastar and Ameristar, have also been delayed. At the same time, U.S. digital audio radio service ventures, CD Radio and XM Satellite, continue full speed ahead. Both systems continue to find the funding they need and signed agreements with major automotive companies to build satellite radios into their cars.

GE Americom announced its acquisition of Columbia Communications. The deal, which requires approval by the FCC, adds transoceanic capacity to GE Americom’s fleet that will provide satellite services in the Americas and Europe. The service will spread to Asia with the planned launch of the GE 1A satellite during first quarter 2001.

The three satellites that Columbia operates carry television and news programming, data, Internet services and telephony services among African, Asian, European, North and South American continents. Upon FCC approval of the transaction, GE Americom will begin construction of two additional satellites, one with Atlantic Ocean region and one with Pacific Ocean region coverage.

Upcoming Events

The coming months will be crucial ones for the satellite industry. Events to watch include the success or failure of Globalstar, the industry’s upcoming mobile satellite telephony venture; the ultimate success or failure of Iridium and ICO; the development of the broadband satellite market; continued growth of Internet and data broadcasting services that are propelling much of the industry’s current expansion; the ongoing enlargement and possible shakeout among global satellite operators; the revitalization of the Asia-Pacific satellite market; new strategies for success from the industry’s new leaders; and the decrease in satellite manufacturing delays and subsequent increase in spacecraft launches. Each year brings its share of success and failure for those in the satellite business, and in this regard, the turn of the millennium will be no different.

Cynthia Boeke is the editor of Via Satellite. Information for this article was also provided from Satellite Today, Phillips Business Information Inc.’s daily, subscriber-based email service. For more information on Satellite Today, send an email to Tom Breen at [email protected].

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