PARIS — Sky Perfect JSat of Japan on May 11 said it had agreed to become the anchor investor in LeoSat Enterprises, which is designing a low-orbiting constellation of satellites to deliver massive quantities of data for corporate and government customers using optical inter-satellite links.
LeoSat Chief Executive Mark Rigolle said the investment is in the form of a preferred convertible note that will convert, at Sky Perfect JSat’s discretion, into LeoSat equity.
In an interview, Rigolle declined to disclose the size of the investment but said it would be used to win other investors to complete the project’s long-sought $100-million Phase A financing round.
Sky Perfect JSat “sees the strategic importance of aggressively participating in the LEO/HTS business and we see the LeoSat solution as a key opportunity to opening up new markets and delivering business growth,” SJC Senior Managing Executive Officer Koki Koyama said in a statement.
“With the current and future growth of data traffic and the unique nature of the LeoSat system and its focus on the business market, we believe there will be very strong demand,” Koyama said.
The financing will permit LeoSat’s prime contractor, Thales Alenia Space of France and Italy — which owns the LeoSat Ka-band spectrum rights — to advance work on the system’s design and to refine its cost, now estimated at around $3.5 billion for 78-108 1,500-kilogram satellites at 1,400 kilometers in altitude.
ITU deadline in 2021, but seeking prototype satellite launch in 2019
Rigolle said LeoSat had until 2021 to launch its first two satellites — the company is using Ka-band for the satellite-to-ground links — under its international frequency-rights deadline at the International Telecommunication Union (ITU), but was planning to launch two prototypes in 2019.
The prototypes would demonstrate to prospective customers and investors that one of LeoSat’s key technologies, the optical links between its satellites, functions as advertised.
The decision by Tokyo-based Sky Perfect JSat means that four of the top five FSS satellite fleet operators, when measured by revenue, have now allied themselves with a LEO constellation, albeit with different business models.
Fleet operator Intelsat has been pulled by prospective investor SoftBank of Japan into an arranged marriage with the OneWeb constellation of satellites to deliver broadband to the world’s masses, even the poorest among them.
SES has purchased the O3b Networks medium-Earth-orbit constellation of satellites for broadband connectivity to out-of-the-way telcos and corporate government users.
Telesat of Canada is investing in its own LEO constellation and has scheduled the launch of the first two demonstration satellites later this year.
With SJC aligning with LeoSat, only Eutelsat of Paris among the top-tier fleet operators has remained on the LEO sidelines.
Rigolle said SJC’s convertible note “gives them certain advantages when they convert this into the Series A. Call it a first chunk of the Series A.”
Rigolle has been traveling the world now for nearly two years seeking a high-profile investor, which he said would likely be a satellite fleet operator, to kick off the Series A round.
Sky Perfect JSat decides timing of note conversion to LeoSat equity
“My frustration has been that getting [prospective investors] onto the fence has been difficult enough. To get them over the fence, as a first investor, has been even more difficult. They have all been staring at each other. The great thing about this announcement today is that JSat has said: ‘You need a strategic investor. We get it and we’re taking the plunge. Who’s following?’”
“It’s convertible at will by [JSat],” Rigolle said of the convertible note. “It’s logical that it converts at the time we have the $100 million, because then we will have a negotiated market price for that round. But the timing is up to them to decide.”
For the moment, Thales Alenia Space has invested on its own preparatory work for LeoSat’s production but has not indicated it will be an equity investor in the project.
Rigolle said the initial funding on hand now is enough to get Thales Alenia Space to accelerate work. Once the full $100 million Series A is secured, the manufacturer can finish the satellites’ design specifications and select a contracting team.
Rigolle said design work on the first two satellites would start even before the Series B funding is booked so as to make the 2019 launch date.
The Series B round, of $175 million, will be enough to complete work on the two prototypes and launch them, Rigolle said, and to start production of the full constellation. Then the remaining equity and debt will need to be raised around 2019 to prepare for launches starting in 2021.
Optical inter-satellite links a key technology
Optical inter-satellite links are the technology the prospective investors are most interested in seeing demonstrated in orbit, Rigolle said. This has been done before, notably between satellites owned by the U.S. Missile Defense Agency and the German government — with Airbus as co-owner of the German spacecraft — and before that between a European Space Agency geostationary-orbit satellite and the French Spot 4 Earth observation satellite in low Earth orbit.
There are several companies in Europe and the United States developing smaller laser communications terminals designed to fit on smaller satellites. LeoSat’s satellites will use Thales Alenia Space’s EliteBus, whose production line most recently has produced 81 second-generation Iridium mobile communications satellites.
Rigolle said that LeoSat can come behind Iridium at the production facility but that the LeoSat platform is longer than what Thales has built for Iridium and for O3b.
The system has full global coverage with 54 satellites — nine satellites on six planes. Partial service can start with a few satellites.
“Our early birds will start generating some revenue, but only a small amount,” Rigolle said. “Once we populate one plane with at least nine satellites, we can provide a permanent service close to the poles continuously, and then twice a day we’ll have a 2- 2.5-hour service everywhere and then take the traffic to Svalbard.”
Svalbard is group of Norwegian islands between Norway and the North Pole. KSAT — Kongsberg Satellite Services, which since December 2016 has a partnership with Sky Perfect JSat — operates a ground station there.