China’s IAC attendance, Galileo’s 7-day outage, ESA’s future budget: Jean-Yves Le Gall updates all three

PARIS — U.S. visas for Chinese nationals seeking to attend the October International Astronautical Congress (IAC) in Washington, July’s seven-day outage of Europe’s Galileo positioning, navigation and timing system and the upcoming European Space Agency (ESA) conference to set multi-year budget and program priorities were among the subjects addressed by Jean-Yves Le Gall.
Le Gall is president of the French space agency, CNES, which is ESA’s largest contributor. He is also chairman of the ESA council, which is preparing the Nov. 27-28 ESA ministerial conference in Spain, and chairman of he board of the European GNSS Agency, GSA, which manages Galileo.
International Astronautical Congress aims for 10,000 — how many Chinese?
He is also president of the International Astronautical Federation (IAF), which organizes the annual IAC conference, which is perhaps the biggest space-sector meeting of the year.
Le Gall said he bet NASA Administrator Jim Bridenstine that this year’s IAC, scheduled for Oct. 21-25, would surpass the 10,000-registrant market.
Some 4,330 abstract proposals were submitted.
But this year’s meeting comes at a time of rising tensions between the United States and China. How many Chinese papers will be presented, and how many Chinese will arrive in Washington, will depend on the U.S. State Department’s visa requirements.
“We have sent several messages to the U.S. administration” about the visa issue, Le Gall said. “At this point I have no information of any difficulties in getting visas. I cannot predict what will happen between now and the end of October, but at this point our Chinese colleagues have not had problems with visas.”
Galileo July outage: Still no word on root cause
Galileo service shut down on July 11 and took seven days to recover following an unspecified anomaly at one of its two main ground stations: http://bit.ly/2XOqcQ9
Two months later, the board of inquiry established to determine the cause of the problem and prevent its recurrence has still not rendered its conclusions, Le Gall said. He declined to discuss what happened until the inquiry is terminated.
“There are two ground stations, and while one was undergoing maintenance, the other had a problem,” he said.
The GSA said on July 19, after service was restored, that the issue was related to an anomaly in “the calculation of time and orbit predictions, which are used to compute the navigation message. The technical incident affected different elements of the ground facilities.”
Le Gall conceded that communication about the event fell short. A system managed by three organizations — the European Commission as owner, the GSA as operator and ESA as technical lead — makes it difficult to coordinate communications.
ESA ministerial: 14-plus billion euros, if all goes well
Le Gall said ESA’s 22 member governments are still determining their level of space spending for the next three years even as they debate with each other how much ESA’s new budget should be.
One reason for optimism, Le Gall said, is that the usual push-me, pull-you between the agency’s two biggest members, France and Germany, has become less contentious. He agreed there are still points of disagreement on spending details, but said 80%-90% of the issues have been resolved between the two nations. The current proposed total spending, including payments from the European Commission, Eumetsat and others, is about 14.25 billion euros ($16.2 billion).
ESA’s current budget proposal, subject to change, is that its general operating budget, couple with its mandatory-contribution science program, be financed at 4.3 billion euros for the three years starting in 2021.
Exploration would receive nearly 2 billion euros for Europe’s role in the International Space Station and future exploration missions.
An ESA budget line relating to industrial competitiveness in satellites would receive 2.4 billion euros, mainly for Earth observation and telecommunications-related spending.
Launch services: How and how much to compensate for market decline?
That leaves the “access to space” budget line, which includes work on the future Ariane 6 heavy-lift and Vega C light launchers, and technology investment into future launcher technologies including a possibly reusable rocket first stage.
Le Gall said this budget has been tentatively set at slightly more than 2.6 billion euros. He did not provide a breakdown of the different spending categories.
One of the potentially contentious budget lines will be to compensate industry —- ArianeGroup, OHB SE, Avio SpA, Ruag and others — for the collapse of the market for large telecommunications satellites.
This market may or may not be rebounding but has been the life blood for Europe’s Arianespace launch service provider over the past 40 years.
How, and by how much, to mitigate the the impact of this market development on Europe’s launcher sector is almost certain to be an issue at the ministerial conference.

U.S. military signs seven-year, $738.5-million unlimited-use contract with Iridium

Credit: Iridium
PARIS — Mobile satellite services provider Iridium has renewed its showcase contract with the U.S. Department of Defense for $738.5 million over seven years, a renewal that includes a 32% increase in annual commitments and a two-year increase, two seven years, in contract duration compared to the previous arrangement.
Under the contract, the U.S. military, which has long been Iridium’s biggest customer, will have unlimited use of the Iridium constellation, which has recently been refreshed with new satellites as part of a $3 billion capital program.
Iridium officials had long expressed confidence that the increased use of Iridium by the U.S. military — 51,000 in 2013 and 125,000 now — would be reflected in the new contract.
Some analysts had speculated that the deal might reach $1 billion.
At $738.5 million over seven years, the commitment is $105.5 million per year, compared to $80 million per year under the 2013 deal, which lasted for five years and was then succeeded b a six-month, $44 million agreement and a more recent $8.3 million extension.
In addition to putting to rest what might have been seen as a risk factor, the new commitment from the U.S. Air Force Space Command will enable Iridium to refinance its current debt, mainly with the French export-credit agency, Bpifrance, in favor of commercial loans.
Iridium Chief Financial Officer Thomas J. Fitzpatrick said the current economic climate is very favorable for Iridium, especially given that Iridium is now set for a 10-year period of no more than maintenance capex spending.
“Iridium’s relationship with the U.S. government has been the model of what a public-private partnership should look like in the satellite industry,” Iridium Chief Executive Matt Desch said in a Sept. 16 statement.
“The U.S. government has made significant investment in Iridium over the years, and likewise, we have invested billions of dollars to ensure our network remains the premier reliable, mobile satellite service with a proven ability to be deployed anywhere in the world. While this new contract will see continued adoption of Iridium, it will also drive ongoing innovation through collaboration between the U.S. government, Iridium, industry partners and user communities.”

Sky and Space Global begins 10-day road show to secure crucial investor backing

Credit: Sky and Space Global
PARIS — Startup satellite IoT/M2M provider Sky and Space Global (SAS) has begun a 10-day road show in Asia and Australia to make a do-or-die case to investors to fund new satellites that the company says will carry it to recurring revenue.
In its latest presentation, SAS asks investors to see it as occupying a sweet spot between other satellite operators, narrowband and broadband, some of which are themselves in startup phase and looking for financing.
Credit: Sky and Space Global
SAS is asking shareholders to purchase 1.5 billion new shares, at 1 Australian cent each, to raise 15 million Australian dollars ($10.5 million): http://bit.ly/342vUlA
As of Sept. 13, SAS had a market capitalization of 61 million Australian dollars, with 2.1 billion shares held by 9,400 shareholders.
The funds will be used to pay satellite manufacture GomSpace of Denmark and Sweden to build eight 6U cubesats to be launched in time to begin revenue generation in late 2020. These satellites will use an inclination to provide coverage between 60 degrees North and 60 degrees South latitude.
These satellites then will be complemented by SAS’s larger 3U constellation in equatorial orbit that will focus on the company’s core equatorial markets. The first three of these satellites have been in orbit since 2017.
Credit: Sky and Space Global
SAS said it had signed agreements with more than 50 customers, “providing material revenue opportunity once first commercial satellites launched.”

Hughes: Early data shows $150-$200/month revenue from community Wi-Fi in South America, Africa, Russia

Credit: Hughes Network Systems
PARIS — Satellite broadband hardware and service provider Hughes Network Systems’ early experience with rural Wi-Fi in South America, Africa and Russia has shown that each installation generates, on average, monthly revenue equivalent to two U.S. fixed broadband subscribers.
Hughes Chief Executive Pradman P. Kaul said it was too soon to say whether this figure would hold up as Hughes expands its community-Wi-Fi service, but that the early results show each installation producing $150-$200 per month.
“Community wifi is exciting for markets to address people who can only afford $5-$10 per month by combing them to get ARPUs of $150-$200 per month,” Kaul said here Sept. 10 during Euroconsult’s World Satellite Business Week.
“This represents our initial experiences in these countries. It varies from country to country, but that is the general ballpark. I think it is sustainable. We’ll learn a lot more in a year or two. But it is a number that is standing up right now.”
One industry official familiar with community Wi-Fi in Mexico said that in some cases it can return $500 a month in gross revenue, but that a provider like Hughes or its U.S. competitor, Viasat Inc., will take home no more than half of that or less after paying local partners and what this official said is often-onerous government license fees.
Another industry official with experience in Brazil agreed. “Some governments, and Brazil is one of them, talk about universal access to broadband but then make it difficult for a service provider to make it a profitable business,” said this official, who does not work for Hughes or Viasat.
Hughes has said that a community-Wi-Fi terminal typically needs to have a capacity of up to several hundred Mbps to afford download speeds of 10 Mbps or more per user. Each Wi-Fi unit can cover a 500-meter area, depending on the local geography.
Hughes’s Russian partner, KB Iskra, has installed high-power Wi-Fi access points to provide coverage of more than 1,000 meters from the terminal, enough for an entire small village.
“Typically, each VSAT supports 20 to 30 subscribers, each paying on average 50% less each month than individuals with home-based service in urban areas, thanks to the cost-sharing model. The company has installed more than 600 shared VSATs, and now provides affordable service to almost 20,000 regular Wi-Fi users who would have otherwise remained unconnected,” Hughes said of the KB Iskra experience in eastern Russia.

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Vega rocket prime contractor: Production error may be root cause of costly July failure

Credit: Avio
PARIS — The prime contractor of the European Vega rocket that failed in July, resulting in the loss of a United Arab Emirates reconnaissance satellite insured for $413 million, said a manufacturing defect in the rocket’s second-stage motor might be the root cause of the failure.
A European government board of inquiry concluded that a “thermal/structural” failure of the rocket’s Z23 second stage motor’s forward dome is the most likely cause. But the board’s Sept. 5 statement on the preliminary results of its inquiry was too vague to draw many conclusions: http://bit.ly/2lZ6FiB
In a Sept. 12 conference call with investors, Vega prime contractor Avio SpA said that while the precise mechanism that led to the failure was not yet known, there is the “possibility of an undetected non-compliance in production.”
The inquiry board said it found no evidence of poor workmanship or any design issues in the Z23 stage or its carbon-fiber forward dome. It suggested that it had reviewed all the documentation related to the flight hardware.
But the inquiry board said it would ask Vega contractors to reinforce multiple elements and present its work to the inquiry board in view to a return to flight in the first three months of 2020.
Avio Chief Executive Giulio Ranzo did not say the company had found on its own any indications of a manufacturing defect in the forward dome.
He said the temperatures and pressures that the hardware must withstand are severe, but that both Avio and the inquiry board had validated the dome’s design.
“We will develop a validation plan with subsystem tests and inspections and further engineering analyses,” Ranzo said. “This will help refine details of the causes of the failure.
“We have agreed to implement corrective actions in these subsystems on certain processes and certain equipment linked  directly to the failure mechanism, to make this motor more robust.”
Ranzo said a meeting with the inquiry board and the 22-nation European Space Agency (ESA), which oversaw the inquiry, will be held to verify that the corrective actions are implemented. He said the hardware for Vega’s next flight — in particular the Z23 stage — will be sent to Europe’s Guiana Space Center before the end of the year.
Credit: Avio
The failure’s cost to Avio and the broader Vega contracting team is yet to determine. Ranzo said it’s possible that part of the cost would be covered by ESA. Avio has prudently decided to commit to only 5 million euros ($5.7 million) of its approved 9-million-euro share-buyback plan to keep cash available if needed.
Assuming a return to flight by March, he said the inaugural flight of the more-powerful Vega C rocket would occur by June. It’s possible that there will be a second Vega flight before the introduction of Vega C.
Launch-service provider Arianespace has yet to settle on a 2020 manifest for Vega.
For the six months ending June 30, Avio reported a net profit of 7.1 million euros, up 14% from the same period a year ago. Revenue was up 6%, to 189 million euros.
Ranzo said that Vega production is only about 25% of Avio’s revenue, with the remaining 75% coming from production of components for the heavy-lift Ariane 5 rocket and development work related to Vega C and the Ariane 5 replacement, Ariane 6, whose inaugural flight is scheduled for late 2020.

In major victory for ITU, Avanti and Arabsat settle Ka-band interference dispute

Avanit-Arabsat agreement on coverage in Europe, Africa and the Middle East.
PARIS — Satellite fleet operators Avanti and Arabsat have concluded an agreement that ends the Ka-band interference threatening both companies’ business in Africa and the Middle East by agreeing to a division of coverage satisfactory to both.
The agreement, which comes after months of negotiations — http://bit.ly/2xIi9tC — constitutes a rare victory for the International Telecommunication Union (ITU) as a mediator of disputes involving two powerful members — in this case, Britain and Saudi Arabia — and two satellite fleet operators.
Often maligned as toothless and unable to force administrations into negotiated settlements, the ITU’s Radio Regulations Board in this case was able to create the conditions that brought Avanti and Arabsat to the negotiating table.
Arabsat CEO Khalid Balkheyour. Credit: Arabsat
Arabsat Chief Executive Khalid Balkheyour commented “Our teams’ coordination meetings were held in a very professional way that resulted in a productive agreement,” Arabsat Chief Executive Khalid Balkheyor said in a statement announcing the agreement. “We are looking towards more future business cooperation and partnerships.”
Kyle Whitehall, London-based Avanti’s chief executive, said: “Avanti and Arabsat have been working together constructively since the start of the year under the auspices of the ITU to find a solution that enables both companies to serve their core markets.
“The agreement with Arabsat on Hylas 3 and   3, combined with Hylas 4 — which was unaffected by these discussions — puts Avanti in an optimal position to continue to serve its existing customers and to expand confidently in the future.”
Arabsat had claimed frequency priority over Avanti by alleging that it “brought into use” Ka-band frequencies on the Arabsat 5A satellite, launched to 30.5 degrees east in 2010. The latest satellite is just a continuation of that business, Arabsat said.
Avanti Chief Executive Kyle Whitehall. Credit: Avanti
Britain’s Ofcom telecommunications operator and Avanti challenged the Arabsat’s claim, saying no one anywhere has registered any Ka-band transmissions from Arabsat 5A.
When challenged on this point by Ofcom/Avanti written statements to the ITU, Arabsat invoked the ITU’s Article 48, used to denote military services that are not subject to ITU inquiries.
The ITU has been powerless in the past in getting nations to back down from Article 48 invocations, even in the face of evidence that some claims are on shaky ground.
The abuses of Article 48 have become frequent enough that the subject is on the agenda of the quadrennial World Radiocommunication Conference (WRC-19), scheduled Oct. 28-Nov. 22 in Sharm el-Sheikh, Egypt. Given the reluctance of the world’s major powers to cede any of their rights, it is unlikely that the ITU will be granted any major new prerogatives.
But officials hope that some of the worst abuses may be curbed.
The Arabsat-Avanti dispute became a matter of urgency for both companies with the entry into operations of the Arabsat 6A satelite following its April launch aboard a SpaceX Falcon Heavy rocket.
Arabsat 6A, with a Ka-band payload including mobile spot beams, operates from 30.5 degrees east, just half a degree away from Avanti’s Hylas 2 at 31 degrees east.
With the same frequencies beamed from satellites so close together and with overlapping footprints, interference was all but inevitable. Avanti said it had already started suffering interference on Hylas 2.
Even more interference was expected when Avanti’s Hylas 3 payload arrived at the 31 degrees east slot.
The Avanti payload is on a satellite that the 22-nation European Space Agency (ESA) and Airbus Defence and Space call EDRS-C, which was launched on Aug. 6. It carries a laser communications terminal to speed data from low-orbiting Earth observation satellites to ground operators as part of a commercial service called the Space Data Highway.
By allowing Avanti to develop most of its planned business from Hylas-3, the Arabsat-Avanti agreement makes it more likely that Avanti will pay ESA the $30-million “embarkation fee” associated with placing the Avanti payload on the EDRS-C satellite.
Avanti will be able to cover some of the business lost with the Arabsat agreement by training beams from its Hylas 4 satellite at 33.5 degrees west over that territory. A slot that far away from Arabsat 6A poses no risk of interference.

After 4 years of unwanted excitement, Spacecom looks to return to normalcy; Amos-17 operational in November

Spacecom Chief Executive David Pollack. Credit: Spacecom
PARIS — Israeli satellite fleet operator Spacecom has weathered its own plague of frogs and can now wish for nothing more than stability.
The company reported a nearly 4% increase in revenue, to $41.2 million, for the first six months of 2019 compared to the previous year. Gross profit was up 23%, to $15.3 million. The increase was mainly due to an uptick in revenue from the Amos 4 satellite at 65 degrees east.
Its new, Boeing-built Amos-17 satellite, launched by SpaceX on Aug. 6, is healthy in orbit and scheduled to enter commercial service in November — a longer-than-usual testing period to give Spacecom time to get used to the satellite’s digital channelizer.
As of Sept. 1, Spacecom had booked $61 million in orders for Amos-17, which is replacing Amos-5 at 17 degrees east.
So, a string of relatively normal events for a company that has not had a normal life for several years:
The 2015 in-orbit failure of its Amos-5; the 2016 on-pad failure of the SpaceX Falcon 9 rocket, destroying the Amos-6 satellite and scuttling an African partnership with Facebook; turmoil at its largest shareholder; dithering by the Israeli government on future satcom demand; an abandoned buyout offer by a Chinese investor — Spacecom has had to contend with all of this.
It’s issues now are more garden variety, including building a business in a rough, highly competitive African market, and waiting for the Israeli government to decide whether communications satellite manufacturing is a strategic national priority.
David Pollack has been Spacecom’s chief executive through all of these travails. With light now appearing at the end of the tunnel, Pollack was able to discuss business as a “normal” satellite operator.
When will Amos-17 enter commercial service?
In November. We will have a long payload test procedure. This is the first time we are using a digital channelizer. We want to check all its possibilities.
Were you kept informed of the inquiry into the failure of the Intelsat IS-29e satellite, which like Amos-17 is a Boeing 702MP model?
We were as much a part of the investigation as we could be. We followed it very, very closely. We had a U.S. citizen who was authorized to be part of it with the Boeing team. We were updated as much as ITAR permits. But our American representative was fully updated and we were assured everything was OK.
The IS-29e situation was known before we purchased our [Amos-17] insurance and the insurers were very involved in this. They received all the answers to their many questions. And Boeing performed some additional checkouts for the satellite after what happened.
You’re looking at lots of markets in Africa for Amos-17, which has C-, Ku- and Ka-band capacity. What are the most promising?
I am still grieving the loss of Facebook as our customer for Amos-6. Unfortunately, I do not yet have another Facebook. But we changed the design of the satellite [compared to Amos-6] because we know that nothing stands still. So the Amos 6 design, which Facebook liked, we don’t have any more. We have HTS on C-band and we are targeting large customers for in-country C-band in several nations. C-band isn’t easy to put many beams on because the equipment is larger, but the guys who designed this did a very good job.
We are already in discussions with potential large customers on C-band. I believe that shortly after the satellite starts commercial operations, we will have some large contracts. Not 5MHz or something like that, but larger.
Amos-17 during testing. Credit: Boeing/Spacecom
On the Ka-band also — this is different from the Amos-6 Ka-band, resulting from lessons learned. Many are going in the Amos-6 design with multi-beam Ka-band in Africa today. Everyone is going there. But our Ka-band is different and I think most of it will be sold soon after commercial start.
We did not plan to fill the satellite immediately. I believe we will follow that path.
Is a 50% fill rate within a year of operations reasonable?
In general, for a satellite that is not a replacement but has to build an orbital position, 50% is aggressive.
What is the most promising market for Amos-17 in the first five years?
MNOs definitely will be big.
Africa is already competitive, and more competition is coming, including your former Amos-6 customer, Eutelsat, with its Konnect satellite, and Viasat in 2022.
My wish is that both Eutelsat and Viasat win each other’s business! We are a bit away from the crowd there, so that we don’t repeat the Amos-6 payload concept.
What do you mean by that?
A Ka-band multi-beam satellite is for a specific market and everybody will compete there for low prices to see who can produce the cheapest megabit. A lot of capacity is required, I just hope that people don’t bring in more capacity than is required.
What is the level of preorders you have for Amos-17?
It’s about $61 million.
How is business on the Amos-3 and Amos-4 satellites?
You have forgotten Amos-7.
I meant the native-born Spacecom assets. Amos-7 is leased from AsiaSat.
Amos-3 and Amos-4 are full right now. Amos-7 is in good shape. We need to have more customers in Africa on Amos 7 and we will have.
Is there any news on an Amos-8, which has been stalled by Israel’s debate over industrial policy?
That is a semi-political question. All the parties are still talking and there may be a decision soon. What we are looking for is to replace Amos-3. Amos-8 should have replaced Amos 2 or Amos 6 but now we are looking at another concept and a the replacement of Amos-3. We might have partners fore Amos-8. So we cannot make our own decision on this.
Your Amos-7 contract with AsiaSat goes to 2020. Will you renew it?
It is too soon to say because AsiaSat is the owner and we have not yet worked out with them the possibilities.

OneWeb gives up on Bpifrance export-credit financing for now, plans more equity raises in coming months

OneWeb Chief Financial Officer Tom Whayne. Space Intel Report photo
PARIS — Startup satellite broadband constellation startup OneWeb has given up on securing export-credit financing from France’s Bpifrance and will conduct several new rounds of funding from current and prospective equity investors in the coming months to complete its Phase 1 capex plan, OneWeb Chief Financial Officer Tom Whayne said.
Whayne conceded that the universe of investors willing to support OneWeb is not large given the company is building a greenfield infrastructure with no existing customers.
What Whayne did not say, but what has been said by bankers looking at OneWeb for months, is that the company has a risky business plan and a major investor — Softbank of Japan — whose own debt is classed as junk by the major rating agencies and whose role in OneWeb remains unclear.
OneWeb has raised $3.4 billion with the latest $1.25-billion round completed in March. To complete its first-generation network, what OneWeb calls Phase 1, of 650 low-orbiting satellites, the company needs around $5 billion.
Given that OneWeb has partnered with Airbus Defence and Space to build the OneWeb fleet, and with France-based Arianespace to launch the constellation, albeit mainly aboard Russian rockets from Russian territory, OneWeb sought the support of Bpifrance.
Offering broadband to the world’s poorest regions was never going to be an easy sell, and industry officials said the lack of customer commitments made it tougher. OneWeb has since tweaked is business model to go after vertical markets including aeronautical and maritime customers. But these markets already coveted by multiple other satellite operators.
One industry official said OneWeb’s hopes for Bpifrance support were all but abandoned months ago.
Addressing the World Satellite Business Week conference organized by Euroconsult here Sept. 9, Whayne said the search for new equity investors has already begun, as well as preparations to seek more capital from the existing equity owners.
“We are in active discussions with our existing investors as well as some new potential investors for an equity financing. We’ll do one in the next few months. We are also having conversations with a number of third-party debt providers and we’ll do some debt financing in the next few months. And we’ll do a fair amount of equity at some point next year.”
An easier-to-tell story once monthly launches start
Whayne said investor sentiment toward OneWeb should improve as the company starts launching satellites on a regular basis.
Six OneWeb satellites are in orbit and working well, the company has said. Monthly launches of 30-plus satellites each on Russian Soyuz rockets from three Russian spaceports are scheduled to start in December.
Stephane Israel, chief executive of Arianespace, said here Sept. 9 that Arianespace, on the strength of its agreement with Russian entities, was selected because of Russia’s demonstrated capability to launch Soyuz rockets at sustained high levels. OneWeb has contracted for 20 Soyuz launches, each carrying 30 or more 150-kilogram OneWeb broadband satellites.
“When we sit here next year, we will have half our constellation deployed,” Whayne said. “We think that will be very interesting for new equity investors. Export credit finance will not form the bedrock of our phase-one deployment, but it is something we are actively thinking about for our Phase 2 and Phase 3 deployments once we’re fully operational.”
OneWeb founder Greg Wyler has already been talking about what a more-capable next-generation system would look like.
But outlining tomorrow’s architecture does not do much for financing today’s constellation design.
Whayne said educating investors on the OneWeb story has been no easy task. He said the technical and financial due diligence has been “the most exacting I have ever seen.”
The fact that [several original OneWeb investors] stepped forward and continued to support the company in a big way — most having participated in multiple rounds — says a lot,” Whayne said.
“Given where we are in the deployment phase, and how much capital we have raised and how much we have to continue to raise, we cannot go tap many sources. It’s a very unique story — something for equity or debt providers willing to roll up their sleeves and understand the story.
“And like our existing investors, they have to be willing to get behind the fact that we have a decided, multi-year advantage versus anybody else that’s going to be a potential competitor, and have comfort int eh commercial opportunities that we have, and our business plan and our ability to defend it.”
OneWeb’s $1.25-billion equity round, which caused some original investors to write down the value of their stakes in the company, included $500 million from Softbank, $300 million from Grupo Salinas of Mexico, $200 million from Airbus, $98 million from Qualcomm and $27 million from the government of Rwanda.

LeoSat cuts capex by 15% & boosts throughput, but is still struggling to close Series A financing; seeking IoT play

Mark Rigolle, CEO, LeoSat. Credit: LeoSat
PARIS — LeoSat Enterprises, which is planning a constellation of broadband satellites for business-to-business data trunking, has cut its estimated capex by 15% by seeking bids beyond its presumed prime contractor, Thales Alenia Space, but is still struggling to close its $50-million Series A financing round.
Chief Executive Mark Rigolle said the company is widening its search for equity partners to include an undisclosed IoT operator whose investors have signaled an interest in LeoSat. Rigolle said he encountered the IoT operator as a possible LeoSat partner after his future customers indicated that a high-end IoT capacity was a priority for them.
A second possible source of funding, he said, is what he said appears to be a renewed trend among some space-hardware builders to enter the higher-margin satellite operations business.
Rigolle said LeoSat, at the urging of its two satellite operator investors — Hispasat of Spain and Sky Perfect JSat of Japan — has improved the 84-satellite system’s throughput and added more beams per satellite. This has been done even as the system’s cost has been reduced, to just over $3 billion from the previous $3.6 billion.
But that good news has not made completing the equity piece of LeoSat’s financing any easier. Despite securing modest investments from JSat and Hispasat over a year ago, the company has been unable to close a planned $50 million-$60 million Series A round despite having secured customer commitments valued at more than $2 billion.
Thales Alenia Space owns the International Telecommunications Union (ITU) Ka-band regulatory filing for LeoSat, giving it more power with respect to its LeoSat customer than it would have otherwise. But this filing faces a January 2021 deadline to launch inaugural spacecraft.
“There is progress on many fronts, but a little step back on the investor front,” Rigolle said. “So we need to rebuild a strong coalition, whereas at one point we thought we had it.” Here are excerpts from our Sept. 7 interview.
I had expected announcements from the JSat and Hispasat boards on further funding for the Series A by now. What happened?
What has happened over the past six to 12 months is the input we got from our shareholders and new investors was that $3.6 billion for 84 satellites, is a lot of money. Constellations cost a lot of money but we need to get that down.
We have been working with TAS [Thales Alenia Space], but not solely with them, on reducing the cost per satellite while a the same time listening to our customers about performance.
Two things come through clearly. The first is that they will need more bandwidth and so we have been working on roughly doubling the capacity per satellite. The second is that it makes sense to have more beams than we would be able to do with the gimbaled antennas.
So we have been working hard on getting that new design together. The good news is that we now have a better design, at a lower price in absolute terms, and a much lower cost per bit — an important metric in any business plan.
Credit: LeoSat
We had been talking publicly about capex of around $3.6 billion. We have managed to get that down to just over $3 billion — still a big number, but more than half a billion lower. Manufacturers aren’t happy but I am not in the business of making manufacturers happy. I want to make customers happy.
Another thing we have been hearing from customers is the need for some kind of IoT solution — industrial and high-end, but still an IoT solution, for which our system is not designed.
So we have been working on finding someone we could partner with, at least on a commercial basis, such as cross-selling. And depending on the satellite design there may also be some capex synergies.
You mean a hosted payload arrangement?
No, that would be too complicated. But joint procurements of certain things to reduce cost.
The problem is that $3 billion is still a very big number. We had thought that with Hispasat and JSat we had the Series A round buttoned up. That is not the case. At the moment I am talking to investors again to get them to join us. We need new investors to get this whole equity check done.
We have made good progress but we will not be making any announcements of new investors right now.
Unnamed IoT partner as source of funds
But there are two possibly interesting sources of financing that we hadn’t tried to tap into before because we didn’t know they existed. One is the IoT player we are closest with — and probably will be announcing some kind of strategic partnership with — has shareholders who are interested in possibly investing in us as well. That would be great. I can’t give any more details, but it’s interesting that through the IoT partnership we have started conversations on the investor front as well.
Another one is that hardware people go through cycles. They say they need to get into the operator business and then try and fail, and they say they need to stick to their knitting, with management consultants urging them to stay with their core business.
Then, 15-20 years later, they want to diversify again. I think that pendulum is swinging. We have, from at least one manufacturer — not necessarily a satellite manufacturer but in the value chain of our business — hardwire people interested in moving their business model partly into operations, because they like the margins. So we are having conversations as well there.
The Series A is still planned to be $50-$60 million?
The size of the round may change again and if it changes it will be up.
Sky Perfect JSat’s annual report, out a couple of weeks ago, has a section on investment and growth opportunities that makes no mention of LeoSat. Should we read anything into that fact?
I wouldn’t read much into that. They have never been splashy in communications. They have a new management team and it’s perfectly normal that they would want to review everything.
How does Hispasat feel about LeoSat these days?
They want to see this come together. With the right partners around the table, I definitely see them participating in the next steps.
So overall there is progress on many fronts but a little step back on the investor front. So we need to rebuild a strong coalition, whereas at one point we thought we had it.
Thales Alenia Space is the owner of the frequency filing at the ITU on which LeoSat is based.
They have the best filing available, yes.
But the fact that they have the filings doesn’t mean you have to work with them?
No. It’s a very strong asset they have and we have an agreement that if and when we sign a manufacturing contract with them, they’ll assign the filing to us. But there are other filings and if we don’t use this filing then the other filings go up [in the ITU reservation hierarchy].
It’s not like being married, but they do have a good hand to play.
So you are also looking at other possible primes?
The best way to get a good price is to have some kind of competition. We have just quite drastically improved our price, so that points in a certain direction. Does that mean we will not build with TAS? No. Just as in the past the fact of their filing didn’t mean we would necessarily build with them.
They have a very good hand. But the filing is just one element. Cost is another, so is throughput, heritage, customer focus…
So you are still with Thales Alenia Space, but you have sought competing bids to get your capex down.
Yes, and with the clock ticking on all the filings we are cognizant fo the fact that if we want to move manufacturers that implies a big change in terms of the filing and our investors would need to get comfortable with that. It’s not our preferred option, but it is an option.
When is the ITU deadline for the Thales filing to have something in orbit — even if it’s only a single satellite.
The BIU [bringing into use] needs to be done before January 2021. It can’t be a 6U but it can be a non-constellation.
The ITU World Radiocommunication Conference, WRC-19, starts next month. There is move afoot to stiffen requirements so an operator can’t just launch a couple of smallsats and register the network as having been brought into use. One proposal would have the new rules take effect on the last day of WRC-19, which is Nov. 2.
Indeed, and there are multiple variables over when they new regime would come into force, either November or some future point in time. And it might well include something that obliges a BIU to be more reflective of the actual network. You can’t BIU a 4,000-satellite constellation and frequencies with one or two satellites and then not build anything for five years.
The idea of requiring milestones on development makes sense. How high these milestones are and how quickly you have to meet them will be important to see whether the industry will be able to get project funding.
Are the proposed broadband constellations — SpaceX’s Starlink, Amazon’s Kuiper, Telesat’s LEO, OneWeb and LeoSat — all fishing in the same funding pond?
First you have the billionaires’ club. Their projects will happen as long as the billionaires want them to happen. I don’t see Kuiper as needing cash so they are not fishing in anybody’s funding pond. Amazon throw off lots of cash. Elon Musk, through Google and Fidelity and his usual investors, will be able to continue.
OneWeb has Softbank, which has already increased its investment.
Telesat is an interesting case. It has an existing cash-cow business and has this offshoot that is getting lots of its attention. They have postponed, several times, the date at which they will choose their manufacturer. Now it’s supposed to be the end of the year. We’ll see. And yes, I know, I am the last person to be able to criticize a project for not meeting its schedule objectives!
I don’t know what they are waiting for to line up. Do they need external investors? Probably. 
And still no debt financing for OneWeb from Bpifrance, where you’ll likely seek financing too.
Well, Florida [where the OneWeb satellites are being built, except for the first 10] is not part of France.

Vega failure review conclusion: ‘We’re not sure what happened. Check everything for a Q1 2020 return to flight’

Giulio Ranzo, chief executive of Vega prime contractor Avio, in a Sept. 5 video on the findings of the Vega failure review board. Credit: Avio video
PARIS — The board of inquiry investigating the July 11 failure of Europe’s Vega rocket issued preliminary findings that left unanswered the core question of why, after 14 successes since its inaugural flight, the vehicle’s second stage appeared to break up under normal launch conditions.
The commission’s recommendation, that the Vega team make its own verification of the findings and then conduct unspecified “corrective actions on all subsystems, processes and equipment concerned,” did not help clarify the issue.
One European government officials who was not part of the inquiry agreed that the inquiry’s conclusion seemed vague, but said the history of space launches is replete with inconclusive failure investigations that allow rockets to return to service without finding a definitive root cause.
The Vega rocket lifted off without incident on July 11 carrying the United Arab Emirates’ FalconEye-1 optical reconnaissance satellite, which was insured for 368.2 million euros ($413 million). The failure resulted in the single largest loss in the history of the space insurance industry.
The commission concluded, as expected, that the rocket’s P80 first stage performed nominally. The Z23 second stage ignited as expected and burned without incident for 14 seconds.
Then, at 130 seconds into the flight, “a sudden and violent event” occurred around the second-stage motor, leading to the launcher’s breakup into two pieces — the second-stage engine and the rocket’s Zefiro 9 stage, the rocket’s fairing and the satellite.
At 213 seconds, ground controllers sent a neutralization command to end the mission. As of 314 seconds, no more telemetry was received.
In a Sept. 5 statement issued by the 22-nation European Space Agency (ESA), the commission said the most likely cause is a “thermo-structural breakup” of the forward dome of the vehicle’s second stage.
There was no explanation of whether the temperatures or other data showed unusual stresses, or whether the inquiry had found traces that might point to a defect in workmanship on the Z23 stage. The investigation had reviewed documentation from the production sites of Vega managed by Vega contractor Avio SpA.
The other possible causes investigated — including the inadvertent activation of the Z23 stage’s neutralization system or “a malicious act” — were ruled out.
Nonetheless, the board said Vega launches could begin in the first three months of 2020.
Avio Chief Executive Giulio Ranzo, in a Sept. 5 video statement on the inquiry’s conclusions, said the company will implement all recommended actions to be able to return to flight in early 2020 and would report back before then on what it has done. Ranzo said the inquiry was supported by ESA, the French space agency, CNES; the Italian Space Agency, ASI; Arianespace and Avio.
“Learning from failures is an integral part of the mission to provide our customers with improved products and solutions,” Ranzo said.

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