Spacecom
What successes did Spacecom enjoy over the past year?
In 2012, Spacecom began in earnest its transition into becoming a global satellite operator. During the year, we expanded our management, sales, technical and service staffs and our local presence in the different countries to assume this mantle.
The first major milestone of the year was commencement of operations of our newest satellite AMOS-5 at 17 degrees East for the African market, with connectivity to Europe and the Middle East. AMOS-5 is a game changer as it is one of the first satellites constructed and in an orbit specifically targeted for the African market, with three regional Ku-band and a pan-African C-band beams that encompass all of Africa. This makes the satellite an exciting solution for broadcasters and other communication providers who need either a regional or total African reach. We are seeing an increasing number of clients move to the satellite. For example, French broadcasters (among them TV5 Monde Afrique, ITA, Infrasat, OFIVE TV) joined the telecos and service providers such as Infrasat, ITA, Glo, PPC, and Infinity, among many others.
The entrance into the Africa market has opened a wide range of new business opportunities for us in one of the fastest growing continents for SATCOM, which we believe will keep producing growth opportunities over the years to come.
AMOS-2 and AMOS-3 are also continuing to have almost full capacity. During the past year we have added new capacity for Magyar Telekom’s DTH group and have enabled Ukraine’s XtraTV DTH to grow even stronger. In addition, we expanded our contracts for supplying services to the U.S. Department of Defense.
What challenges did Spacecom need to overcome over the past year, and what challenges will the satellite industry face over the next few months?
The future of the general economic malaise does not seem to be clear and we do not see an end to such, as of yet. To quote a proverb, “We truly live in interesting times.”
Spacecom remains committed to moving forward with our plans for new satellites and business development efforts. The AMOS-4 and AMOS-6 are in development and the former is close to its launch and we are maintaining our schedule, all the while as we continue to raise funds and expand our group of investors.
We have not announced plans for AMOS-7 or other satellites. However, we are working to find and develop the next spots for our business as a multi-regional satellite operator.
What upcoming projects are in the works and what may we expect to see from Spacecom over the next three to four quarters?
Spacecom is now a growing multi-regional satellite operator and we will continue to fill capacity on the AMOS-5 and look forward to bringing on new DTH clients as well strengthening our broadcast bouquets and data communications services.
In mid-2013, AMOS-4 is scheduled for launch to the 65 degrees West orbital position to satisfy growing needs in Russia and South East Asia, particularly in the Indian subcontinent. AMOS-4 will have multiple Ku- and Ka-bands to service broadcast and broadband needs. These high power transponders, with steerable beams, will create a powerful platform enabling a wide range of cross-region, cross-band and cross-beam connectivity options to reach the vast urban and rural areas of these regions.
We have already started the pre-sales process and we will make announcements, as needed. AMOS-4 will also be our first foray into Asia and will provide extensive broadcast and broadband reach for satellite services, including DTH, video distribution, VSAT communications and broadband Internet.
As 4 degrees West is well known as the AMOS Hot-Spot, we are energized by the new options that AMOS-6 will offer, especially for Broadband Internet via Satellite. This is an emerging market and we are looking forward to working closely with providers in Western, Central and Eastern Europe.
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TeleCommunication Systems, Inc. (TCS)
As the U.S. and the world struggles out of a global recession, TeleCommunication Systems, Inc. (TCS), a world leader in highly reliable and secure communications technology, continues to grow. This is due in large part to our Government Solutions Group, whose products and services have been optimized for best commercial practice pricing with MIL-SPEC reliability. This approach is critical in helping the U.S. government with state-of-the-art C4ISR solutions designed to combat increased threats from our adversaries in a shrinking budget climate.
In 2012, we were selected as one of the prime contractor awardees for the Custom SATCOM Solutions (CS2) contract. CS2 will be the main contract vehicle for the Department of Defense (DoD) and federal civilian agencies to purchase commercial SATCOM solutions for the next five years. As a leading provider of mission-critical total communication solutions consisting of deployable SATCOM solutions, managed SATCOM network services and field support staff, this positions us very well to offer our TCS TotalCom™ portfolio to new federal customers.
According to Northern Sky Research, the global market for commercial government satellite equipment and services will grow from $3.4 billion in 2011 to $7.9 billion in 2019. Additionally, according to Frost and Sullivan, the DoD C4ISR market is approximately $43 billion in size. This will likely grow, as the DoD’s reliance on Commercial-Off-The-Shelf (COTS) secured technology to eventually replace most embedded systems grows—the future for our offerings looks bright.
Another milestone is our partnership with Northrop Grumman and Lockheed Martin to produce highly affordable satellite terminals for protected Communications-On-The-Move (COTM) and Communications-At-The-Halt (CATH). Our Low Cost Terminal (LCT) solution enables protected and secure communications for tactical warfighters in theater.
The DoD has also asked the industry to make more of an investment in developing and using innovative technologies to ensure our troops are receiving the solutions they need to help achieve success; development of the LCT solution clearly shows that TCS, Northrop Grumman and Lockheed Martin are more than capable of meeting this challenge. No other existing or developing terminals provide P-SATCOM for the tactical warfighter at similar price points or timetable; the LCT solution at full production levels is priced at one-tenth the price of currently fielded extremely high-frequency terminals.
We have seen an upswing in interest and orders for our SNAP Tactical Transportable TROPO (3T) system, which provides long-haul, high-bandwidth and low-latency communications with best-in-class proven technology. As satellite bandwidth continues to be an increasingly limited and expensive commodity, the military is giving our 3T solution more scrutiny, as it is a significantly superior product to legacy Tropo systems. We currently have 28 3T systems deployed globally.
As of this writing, the outcome of the looming sequestration is unknown; this is key to what 2013 will hold for the Company. This unknown could present a “perfect storm” scenario for defense spending when you also consider the drawdown of troops in Afghanistan that is slated for 2014 and the current trend toward resets for federal entities—refurbishments of existing equipment instead of new equipment purchases. In anticipation of this trend, TCS has recently set up an 8,000 square-foot reset/repair facility to ensure we can meet the demand for re-use of the hundreds of existing systems fielded over the last few years.
TCS is also well-positioned in the space services arena, where we are building Earth stations and putting high-reliability components on space launch vehicles for the U.S., as well as foreign governments. Our successful relationship with the Japan Aerospace Exploration Agency is also continuing, as we provide ground tracking services via our stations on Guam and Christmas Island.
ViaSat
What successes did ViaSat enjoy over the past year?
The ultimate success was when our new high-capacity satellite system entered service in January. That included the rollout of our Exede Internet service at the end of March. We had planned for that to occur for many years, starting with the design of our new system, including ViaSat-1, the satellite construction, building all the back office facilities and infrastructure for the network, and then the launch of the satellite in 2011. Consumer and media response to Exede Internet has been overwhelmingly positive and we’ve added more than 100,000 subscribers in the first six months.
Two additional commercial successes were winning satellite infrastructure contracts from NBN Co in Australia and KACST in the Middle East. Those helped solidify our position as the leader in new Ka-band technology.
ViaSat experienced a successful year in our defense business, in spite of the current budget environment. This happened because we’re working on unconventional projects that deliver capabilities that aren’t being effectively addressed by bigger-budget programs of record. Two of the areas we saw grow the fastest this year were government mobile broadband services, mostly for airborne ISR missions, and our new system for U.S. Army Blue Force Tracking 2. Our year-over-year government segment revenues increased by almost 25 percent.
What challenges did ViaSat need to overcome this past year, and what challenges will the satellite industry—and specifically your market segment—face over the next few months?
The launch delays we encountered with ViaSat-1 also put us in a tough position as our fixed costs kicked in without the network up and running to generate revenue. That created a challenge across the company to build revenues from other sources to support that business until we could start to grow service revenues.
As we mentioned, we had to overcome the budget uncertainty created by sequestration, which delayed some government awards. But overall, I think we met all of those challenges extremely well.
As an industry, we need to continue to innovate to compete, not just within the satellite business, but within the greater communications industry. It’s moving so fast that you can’t rest. For example, we’ve had great response to our Exede service, but we’re continually thinking about how to improve the service. In August, we launched the Late Night Free Zone so our customers can download large files in the nighttime hours without the usage counting against their volume cap. In October, we increased the data allowance on our entry-level plan from 7.5GB to 10GB.
Certainly the government budget situation—sequestration and the fiscal cliff—are a challenge for all businesses, particularly for those of us who derive a major part of Company revenues from government contracts. The administration is promising to resolve the problem before it takes effect and we hope they are able to get that done.
Another ongoing challenge is finding talented employees, particularly engineers, who can help us carry on with our growth as we execute on the new projects we’re winning. We work hard to build the academic-corporate partnerships to foster talented students and attract them to ViaSat.
What upcoming projects are in the works and what may we expect to see from ViaSat over the next three to four quarters?
Another area where you will see continued innovation from us will be in improving and expanding our airborne broadband networks and services for private jets, commercial airlines, and the military. You may have seen the recent forecasts that Ka-band is going to see substantial growth in airborne broadband applications in the coming years. We will be at the forefront of that technology development.