MSS operator Iridium Communications has signed an agreement with Harris for the use of remaining capacity on the hosted payload of its forthcoming Iridium NEXT constellation.
Under the deal, Iridium will receive hosting fees of up to US$45m for the use…
MSS operator Iridium Communications has signed an agreement with Harris for the use of remaining capacity on the hosted payload of its forthcoming Iridium NEXT constellation.
Under the deal, Iridium will receive hosting fees of up to US$45m for the use of the excess capacity on the hosted payload that is not being used by the Aireon joint venture, which is expected to use approximately 90% of the payload’s capacity. The total amount depends on Harris securing contracts with customers, the final configuration and the total resources used.
Iridium added that hosting fees will be paid to the company over the next four years as the Iridium NEXT constellation is built and launched, while additional data service fees, estimated to be between US$5-15m, will be paid for Iridium providing data transport and payload management services each year.
Matt Desch, CEO of Iridium, commented: “This is another important milestone for Iridium as we complete our vision for hosted payloads on Iridium NEXT. Finalizing this agreement deepens our relationship with Harris, who has been a fantastic technology partner for Aireon, and allows Harris to support other applications for their customers at a fraction of the cost of what they would have to pay to develop and launch independently.”
Bill Gattle, vice president of Aerospace Systems at Harris GCS, added: “We have made great progress to date on the Aireon payload project, and we are now very excited to work with Iridium on using the additional space on board to address other customer applications. Iridium NEXT offers a rare opportunity to leverage a global constellation of satellites for multiple applications. This new hosting agreement gives us a chance to showcase how the Harris AppSTARTM reconfigurable payload platform can provide responsive on-orbit capabilities to customers as hosted payloads on very aggressive schedules.”
In a research note, Raymond James analyst Chris Quilty suggested that Harris would likely use the capacity to supply services to the US government. He wrote: “Given Harris’ strong ties with the DoD and national intelligence community, we strongly suspect that these payloads will be used for Earth or space-oriented observational sensors, communications packages, signals intelligence, or other unique payloads. Consequently, final terms of this agreement may be withheld for national security reasons.”
As for Iridium, the deal means it has secured more incremental revenue for its NEXT business plan. It also means that along with the Aireon fees, the company has fulfilled a lender-based requirement of the US$1.8bn Coface-guaranteed financing that is funding the bulk of the second generation constellation.
Iridium stated that it also expects to generate additional incremental revenues beyond Aireon and the Harris payload as other capabilities of the Iridium NEXT platform are utilised.
Iridium expects US$300m fees from Aireon JV
Shortly after the Harris announcement, Iridium revealed that Aireon has signed its long-term commercial data services contract with Nav Canada.
While financial details were not disclosed Iridium outlined that it expects to receive recurring data communications service fees from Aireon of nearly US$300m over the life of Iridium NEXT, or approximately US$20m annually once fully operational. This is based on the assumption that ‘Aireon continues to successfully expand beyond Nav Canada to a global business’.
Chris Quilty suggested that there could be further service revenues, stating: “it is our impression that management’s definition of a “global business” merely contemplates an ANSP (air navigation service provider) business model and does not include secondary revenue sources.”
Aireon is already due to pay Iridium US$200m in hosting fees over the next four years, which it is likely to require a form of debt financing to fund, while Nav Canada is expected to invest up to US$150m in the venture over the next two years based on a set of development milestones. This investment will see it eventually end up with 51% of the JV, with Iridium retaining the remainder. Iridium would then consider further selling down a portion of its stake
Formed by Iridium and Nav Canada in June 2012, Aireon intends to track commercial aircraft and provide that information in near-real time to air traffic controllers for a fee.
Harris has been awarded a US$117m contract to build the hosted payload for the Iridium NEXT constellation that would enable the satellites to receive the “ADS-B” position signals from aircraft.
The second generation constellation is scheduled for first launch in early 2015 with the full system expected to be up and running by 2017.
