Australian satellite operator NewSat acknowledges that one of the pitfalls in securing business from Australia’s defense department and other national militaries is that if NewSat were to ever be sold to a foreign party, Australia’s military may take issue.
NewSat’s newly appointed chief commercial officer, Scott Sprague, says the Australian and U.S. governments both have requirements for satellite communications for defense and other purposes, and that “both are good opportunities for us.” But he concedes that “if down the road NewSat’s shareholder profile changes and becomes different, then we can see there may be issues.” NewSat is listed on the Australian stock exchange.
A precedent was set in 2001 when U.K. company Cable & Wireless sold Australian-based telecommunications company and satellite operator Optus to Singapore government-controlled telecommunications firm SingTel. Australia’s defense department, with a hosted military payload on the Optus C1 satellite, took issue with the takeover. Australia was concerned that selling Optus to a foreign government-controlled entity might compromise Australia’s national security. The deal went through only after Singapore gave strong assurances to the Australian government.
Although Optus is still controlled by SingTel, the Singapore telecommunications company has just decided to put Optus’ satellite business up for sale, reportedly for more than $2 billion. NewSat CEO Adrian Ballintine has told Australian news media that private equity companies and some banks have approached NewSat about being part of a consortium that could bid for the Optus satellite business.
But SingTel told potential buyers that the first deadline for bids was June 14, and Sprague says NewSat has declined to submit any documents in this first round. “If you look at how much they are asking for the Optus satellite business, you can come to some pretty interesting conclusions about what NewSat may be worth in the future.”
Australia’s defense department is less dependent on the Optus satellite than before, because it also uses other commercial satellites from other operators. In addition, there is the U.S. government’s Wideband Global Satcom (WGS), a constellation in which Australia is paying for one satellite but is using the whole constellation based on its proportionate contribution to the program.
Sprague says even though the U.S. and Australian governments have signed up for the WGS program, there are still opportunities for private operators like NewSat. “The U.S. government is already using commercial satellites for 65-75% of its requirements and WGS won’t be able to take over all the requirements.”
Sprague says demand for satellite communications is growing rapidly because while the number of U.S. troops overseas is decreasing, the use of UAVs and other equipment dependent on satellite communications has increased.
UAVs such as theMQ-4C Triton (BAMS) aircraft use a lot of satellite communication bandwidth. And NewSat said this month it will be openly lobbying the Australian government to introduce UAVs for surveillance purposes. But it won’t have to lobby hard, because Australia’s government has already said the Australian defense ministry plans to procure the MQ-4C Triton.
Sprague says NewSat has already spoken to the Australianabout providing satcom services to the country’s BAMS program. He says NewSat’s Jabiru-1 satellite, which is due to launch in mid-2015, is well suited to meet the Australian military’s needs because “the satellite has high levels of encryption” and NewSat has agreed that Australia’s defense department “will hold the encryption keys to Jabiru-1.” , which has made many satellites for the U.S. Defense Department, manufactures Jabiru-1.
NewSat also is planning to launch more satellites, and Sprague says “we are open to the idea of hosted military payloads on satellites.” But he adds that governments need to realize that by going down that path, “you are committed to an orbital location and committed to that asset.”
Chief Technology Officer David Ball says the Jabiru-1 satellite that Lockheed Martin is building for NewSat will weigh a little more than 6 tons and be the biggest commercial satellite that Lockheed Martin has ever built. He says it will be have around 15 kw. in power. Lockheed Martin is working on electric propulsion systems for satellites, but Ball says NewSat’s satellite will be powered by chemical propulsion.
Sprague also sees NewSat as well positioned to serve the U.S. armed forces because of the close military ties between Australia and the U.S. But he adds that NewSat has no desire to sell directly to the U.S. government and prefers to partner with companies such as Astrium Government Services, which has direct relationships with the U.S. and other governments.
Sprague is a former senior VP of global sales for SES and was previously chief operating officer of Hong Kong’s Asia Broadcasting Satellite. Based on his SES experience, Sprague says that once a company gets directly involved with the U.S. government, it adds costs and complexity to the business because many additional people have to be employed to cope with the U.S. government’s procurement process.
“I’ve seen in the past that when you start doing direct deals, you need to employ over 100 people to sell and deal with the U.S. government. We don’t want to deal with that, and prefer to keep with a small team,” Sprague said.