Interview: David Pollack, chief executive, Spacecom
March 14, 2017
No commercial satellite fleet operator — not even Russian Satellite Communications Co. — has suffered more from satellite and launch failures in recent years that Spacecom of Israel.
It’s Amos-5 satellite, purchased from Russia’s ISS Reshetev for a remarkably low price, failed in November 2015 after less than four years of service. Then in September 2016, Spacecom’s Amos-6 satellite was destroyed during a SpaceX Falcon 9 prelaunch static fire test.
The failure took a planned purchase by a Chinese company off the table and raised questions about Spacecom’s prospects as a going concern. Since then, the company has leased, for $22 million a year, an AsiaSat satellite for four years, ordered a new spacecraft from Boeing and is preparing an RFP for another satellite.
Chief Executive David Pollack gives an update on the company’s long road back.
Six months after the SpaceX failure, how do you see the business?
We were very much hurt by the explosion. It was devastating to us, a big setback to our company. Our proposed purchase [by Beijing Xinwei Technology Group], the valuation of the company, relations with suppliers, all of it was hurt. We lost the Facebook deal, which was very important for us. We may be able to find a way to get [a new launch with] SpaceX and we got our insurance payment, but we suffered greatly from the failure.
The insurance covers the value of the hardware, not the lost business.
Exactly, which is why I say were hard-hit by this. Some say it was the second hit, after the Amos-5 [2015 in-orbit failure after less than 4 years’ operations] and that we would not survive it. This is what we heard here and there, by way of questions people asked.
No one said: “You will not survive.” But people were asking how we would survive. Our way of surviving was to maintain the morale of the company and to get back into growth mode. We were very lucky that our local money markets didn't lose their trust in our debt.
You mean the bondholders?
Yes. This was very important. We had a program of Back to Africa and we were lucky that could finance this on very good terms. This means our bondholders trust the company. This was not a small thing.
Most of the bondholders are Israeli?
Yes. We asked for $250 million. The offer was oversubscribed, to $600 million, so we could stop the debt raise at around $260 million, when we thought the interest rate was most favorable for us. So we were able to make the deal with Boeing for a two-year construction period [of an Amos-17 satellite]. Now we are speaking to more than one launch company about the launch of the satellite — let me stress, more than one.
The bond proceeds cover the entire satellite program’s capex?
Yes. The satellite, the launch and insurance.
Was this a competed procurement?
Yes, we started it long before the Amos 6 disaster. At the beginning there were six competitors. We were left with two — Boeing and one more. And at the end of the day it was a BAFO [best and final offers] and that was when the Amos-6 explosion happened.
So there was a delay and we finished the BAFO competition after we got over the shock, and we chose Boeing. We started the program on Dec. 20.
We plan to launch the satellite in the beginning of 2019. It could be a dedicated launch on Falcon 9 or Proton, or a double launch on Ariane. We are meeting here with four launch service providers — two American, one European and one non-European.
I presume that includes Atlas 5, which in the commercial world is considered expensive.
In our situation we have to consider everything in the launch, not just price — reliability, safety, schedule credibility and time to launch.
Tell me about the payload of Amos-17.
It will have some unusual features — surprisingly, mostly in C-band. It’s uncommon to give this level of excellent service to cellular operators. We also have Ka-band, which we did not have on Amos-5; and Ku-band as well. We are hoping for a launch in early 2019.
We are back to Africa before then, of course, with the Africa beam of AsiaSat-8/Amos-7.
We brought this satellite to replace Amos-2, which unfortunately Amos-6 failed to do, and this was not inexpensive for us to do this.
Analytical Graphics produced a video simulating the satellite’s voyage across the geostationary arc — 109 degrees of movement in 47 days at 3.5 kilometers per second.
It was done above the geostationary arc, at a rate of 2.5 degrees per day and it is already at 4 degrees West. We did a first [in-orbit testing] at its original station, and a second one at 4 degrees West, and we already have customers on this satellite. We moved them gradually and our customers report that we brought a good replacement. We promised high performance with Amos-6 and they say they are not disappointed in what we have delivered.
Will your four-year lease of AsiaSat-8 be long enough?
We have an option for a fifth year, but I hope we won’t need it. Amos 17 will go to 17 degrees East. AsiaSat-8 now called Amos-7, is a gapfiller for four to five years.
The satellite that will replace the late Amos 6 is Amos 8. We hope to launch it to 4 degrees west in the beginning of 2020.
That would suggest a firm order by the end of the year. Do you have the financing or it?
We will need to raise capital. It will replace a satellite that has customers, so it would be easier to raise money. Amos-17 is going to a new orbital location for us, but Amos-8 will replace existing capacity and the capacity existing on it will be transferred to the new satellite. So that will be easier.
Africa satellite prices have not been good in the past few years.
What continent has been good for satellite prices in the past few years?
Western Europe for DTH for SES and Eutelsat.
Yes, but they used to get $5 million to $6 million per annum for a transponder. Those are not today’s prices.
It’s still a good market.
Yes it is, but it has fallen, like everywhere else. The CEOs of the big satellite operators cannot admit it but we all know what prices have done, and we all believe the future will be better. Africa is growing, and we hope the growth won’t be too slow. We’ll see good revenue for the satellite. The question is how long it takes.
But I wouldn’t delay the launch of the satellite.
No, I wouldn’t. It’s a risk we take but that’s always true in business. We believe it’s a reasonable risk that the revenue over the lifetime of the satellite will be satisfactory. A lot depends on when the market in Africa returns to growth. We hope it does not take years. We hope the turnaround comes in three years or less.
What happened with Facebook for Africa? They’ve gone quiet since the Amos-6 failure and did not sign up to Eutelsat’s planned new satellite there.
For Facebook, signing up for a geostationary satellite was not an easy decision. They had many alternatives. Then they decided to do something, went after it and were really disappointed. [Facebook Chief Executive] Mark Zuckerberg was in Kenya when this happened to discuss his African satellite business. And then this happens.
This a big blow to somebody who is new to the industry. It was not so important financially for them, but it was strategically important. It was a new step to serve Africa and something they were proud of.
They just announced a new fiber initiative in Africa.
They are reconsidering the alternatives, including satellites. I hope they are not too angry at us.
Why you? It was your house that burned down. They just rented a room there.
I know. And they did not say anything. We still have good relations with them. But they could associate us with a bad experience.
Facebook has maintained a satellite project in Africa with SES.
Iknow, they started this before our launch.
Is the merger with Beijing Xinwei now formally cancelled?
Let’s say this: I don’t know if it’s dead, but it’s not yet buried.
Peter B. de Selding