PARIS — CLS, a company known for its Argos satellite-tracking business for animal migrations, has given itself until the end of the year to raise upwards of 120 million euros to build its own constellation of narrowband satellites for a much broader Internet of Things (IoT) market.
Toulouse, France-based CLS, which is majority-owned by the French space agency, CNES, has signed on Thales Alenia Space as prime contractor for the Kineis network of 20 satellites, with Nexeya and Syrlinks as partners to provide the satellite platforms and radio-frequency payloads, respectively.
CNES has indicated it is willing to be among the investors in Kineis, with CLS taking a minority stake. CLS Chief Executive Christope Vassal said the remaining investors will be sought out starting Sept. 10 at Euroconsult’s World Satellite Business Week here.
Several startup IoT constellation programs have raised initial capital. What sets CLS apart is that it already has a well-established narrowband satellite tracking business and an ecosystem of terminal builders.
Vassal and Alexandre Tisserant of CLS, who will head up Kineis once its financing is settled, said the company’s constellation is an extension of the Argos business, not a green-field operation.
They discussed the state of the project.
You first announced a next-generation Argos system in 2017. What has happened since then?
During the past year we organized a competition between the two French prime contractors [Airbus Defence and Space and Thales] to determine who would be system prime contractor.
They had to be French?
Yes, we are a CNES-owned company and the idea is to start a Fresh small satellite sector. Also both had worked on Argos before, and our idea is to start quickly. They both had a knowledge of the business.
We needed a year to put all that into place. This is a much bigger market than Argos, but we also needed to provide continuity for the current users of Argos.
Thales Alenia Space has submitted a costed bid — prices included?
We already had the prices in the competition, and made our decision in March. Since then we have been working on a further development phase, a kind of Phase B, on orbit control and other tings beyond the simple fact of launching satellites.
Now that we’re comfortable with the specifics of the system we can begin looking for funding.
Did you do any benchmarking to assure that TAS or Airbus weren’t beyond the market prices?
That’s part of the appeal of New Space. A big contractor that wants to enter the sector has to be cost competitive. We already know they are making a big effort here and that in the coming weeks TAS and we will be able to sign a contract that reflects the cost we have to meet to be competitive.
But these aren’t small cubesats.
If you want to capture messages with low-power devices and have a return channel and to communicate with buoys on occasion all over the world, and occasionally send data at fairly high rates, it’s not the smallest satellites that will do that. These will be a 16U design, not really a cubesat.
The satellites will carry on-board propulsion?
Yes. Here too, if you want predictable performance for your users, you need to have the satellites overflying the same place at the same time and to control them in orbit.
What is the orbital architecture?
Five orbital planes, polar and helio-synchronous, with the same principle as Argos, with four satellites per orbital plane, but a little lower than Argos payloads’ orbit. We will be at 600 km.
Do you presume vendor financing in your financial planning?
For now, no. We want to separate the problems of fundraising from the problems of the technology and engineering. That is at least our point of departure.
What are the milestones between now and your planned operational debut in 2021?
The objective is to have the network in place 30 months from the signature of the industrial contract with Thales. The goal is to raise the financing and sign the contract by the end of the year and to begin the development in the first quarter.
You have the support of your shareholders for this?
Of course, they support us and help us and are even encouraging us. CNES has a strong interest in taking part in the financing, but this remains to be defined.
CNES is not normally associated with New Space.
CNES is now fully aware of what’s changing in the space sector and how it’s necessary to stimulate the evolution of the French space industry. Otherwise, in 10 years there would not be much of a space industry left in France.
Tisserant: CNES is providing very valuable technology support for us and they have shown an ability to change their methods to adapt to the new market dynamics. And their deep technical bank of talent has helped us conceive the project.
The CNES investment will be in-kind or also cash?
The bylaws of the agency allow them to invest cash. They have done this kind of thing before. They realize that smaller, faster, less-expensive satellites is the way the industry is going. But their ambivalence is wanting to build things that work at the first go, which includes redundancies and so forth that can put you beyond your budget. So there are these tradeoffs that are interesting.
Tisserant: But this project is being led by CLS.
What is your estimate of the capex?
Between 100 and 120 million euros.
Tisserant: In this figure is two generations of 20 satellites each, assuring eight years of operations and the ground segment. Each group of 20 has a lifespan of at least four years.
But the second batch to succeed the first would be identical so your order with TAS would be for 40 satellites in continuous production?
Yes, the same production run and we will launch the first 20 between the end of 2021 and early 2022. The satellites are likely to last beyond four years and we foresee we’ll need just 15 to be ready four years later.
This is the change in the space world. We have seen very often satellites with a lifespan of 5 years lasting 10 or 15 years. NOAA and Eumetsat satellites [which host Argos payloads] all last longer. Here we need to limit the design to near what the objective life is to assure the mission and keep within costs.
We are looking at one launch for 3 orbital planes, and another for the remaining two planes. We could do it with one but then you need several months to position the satellites. These are around 25 kilograms of mass.
Aside from CNES will your other shareholders take part in the financing?
We have a strong intention on the part of CNES, but today it’s CNES and CLS, with CLS using its own funds. CLS will invest in kind and maybe in cash in Kineis.
What do you see as the debt/equity split in the financing?
We do not envisage having debt. Debt financing is complicated. We looked at this, but it could come from CLS. But direct debt for the project right from the start, no. Perhaps once we have proved it. For now it’s 100% equity.
There are several IoT constellations that have raised Series A funding.
There are projects in Australia, China and Europe. Not so much in the United States, where big actors like Orbcomm and Iridium are already present. There are barriers to entry. Beyond the satellites, the ground segment needs to be adapted. We are going to deploy 20-25 Earth stations around the world. If you want to get the data in real time, you need at least 20 antennas.
Have you selected Kineis terminal builders?
These will be compatible with the existing Argos system terminals. That’s one of our advantages. There are 30-40 Argos builders around the world. All of them understand we are about to do something that is much bigger in terms of commercial deployment. Some are already developing micro transmitters and we have developed a chipset we are completing at CLS which will also be compatible with Kineis. That will be ready by the end of the year.
We think that with 50-80 milliwatts will do for our orbit. Remember we are not going to compete with terrestrial IoT. We cover the zones where there is no terrestrial connectivity.
We have followed birds as they traverse Europe and North Africa with a small solar panel, and it works for years.
Today we have six satellites, which means that at the equator we have an overflight every two hours on average, but there are gaps that can last up to four hours.
What prevents us today from going after much broader applications is the system’s capacity and revisit time.
Will you be asking terminal builders to invest in Kineis?
Probably not. Most of them are small companies that are oriented toward specific markets. For example in the United States we have suppliers that are biologists interested in following specific animals and they make between 1,000 and 5,000 terminals a year.
That’s the ecosystem today. What we need are actors that can build 10,000 to 50,000 per year.
Are you looking for strategic or financial investors?
Certainly financial. We will be looking at venture capital and also operators may be interested in furnishing a service like this to some of their customers.
You have an ecosystem already established.
We have a customer set and we have teams that know these markets. At CLS we have deployed around 100,000 terminals — not just Argos, we also use Iridium, Inmarsat and terrestrial networks.
How many constellations of this kind can co exist?
Maybe two or three low-power constellations. We have been conservative in terms of forecasting how many hundreds of thousands of terminals we can operate. But estimates of the IoT market are in the hundreds of millions. If that turns out to be true than there is a place for five constellations.
Making a system based on nano-satellites that can handle millions of terminals, no one knows how to do this. It requires too much capacity. Iridium and Orbcomm today have put themselves into markets of tracking and data collection where you have on-board energy and where you have to recharge the terminal after a few hours or a couple of days.
We have been trying for years to open up new markets with Iridium, but at the end of the day the terminal cost and its energy consummation are too high. It needs recharging after maybe 4-7 days maximum. And in any event Iridium’s focus is high-throughput and voice applications.
Does CLS intend to remain a Kineis shareholder over time?
We hope to keep a reasonable minority stake. CNES and the two or three other investors we are speaking to have all said they want CLS to remain because we know the market.
Other IoT startups are launching proof-of-concept satellites. You’re not.
If we have not raised all the needed funds in three or four months we will not build the system. We want full financing so we can sign with Thales Alenia Space. We are starting with the full 20 satellite constellation. Given our experience, we did not need to proceed in small steps. We’ve been doing Argos for 40 years.
Tisserant: People are aware of our experience and they know that with the six satellites we use now we cannot grow the market in the way we can with Kineis. So 20 satellites is a good compromise the system cost and revisit time.
What were CLS’s financial results in 2017?
Revenue was 122.4 million euros [2016: 112.6 million] with 8.3 million in EBIT and an EBITDA of 16.5 million. We made two acquisitions in 2017 and reorganized into business units according to our five markets: Fishing, environment and climate, energy and mines, terrestrial transport and maritime security. Each represents about 20%.
Which of these will be the biggest market for Kineis?
Fishing — meaning artisanal boats. There are 10s and 10s of thousands of small boats that will use this product. Today we have some of them as customers but we don’t have the technology they need in terms of terminals. With a hole of four hours, Argos won’t work. And Inmarsat or Iridium terminals are too large and costly.
The second market is environment and climate. Now we follow wild animals and their migrations. The big coming market is to follow domesticated herds for food security. This is a huge potential market. There are nations that want to have a terminal on each of their animals. If we can put a chipset and a small battery on the ear tags used today, that could be a very interesting.
We have begun a project with [the European Space Agency], in Russia, where there is a big problem in mixing of domestic reindeer herds and the wild herds in terms of health and disease transmission. It’s a food security issue. There are several million people in Siberia that live on reindeer meet.
For this we will be blending terrestrial and satellite connectivity. Terrestrial systems cover around 10% of the planet and we can come in for the rest. So we can complement SigFox and LoRa and the rest.
Should a company like SigFox see you as a prospective partner?
We are already capable of dealing with SigFox data in our control center. And for 10-15 km from the coast it could be land and then the satellite takes over. There is a product that will be out in six months using this kind of hybrid technology.
How is your AIS business going?
We add value to providers’ systems, we purchase from exactEarth and Orbcomm and so on. We are considering whether to add an AIS payload on the Kineis constellation, there is place on board for it. There are places with such heavy boat density that it’s difficult to sort out the signals. We are not yet at a stage where you get an immediate sense of what’s going on. It takes several hours. I think there is a place to be taken in this market for a technology that is more precise.