NSR’s Take On Astrium’s Award From European Defense Agency…Small Token Or Window Of Opportunity? (Editorial)

[SatNews] Perhaps this is a personal evaluation of, ‘is the glass half empty or half full?’…

The recent 3-year contract awarded to Astrium Services by the European Defense Agency (EDA) for €2.3 million of commercial satellite capacity seems very small but still quite timely in a restrained budget environment.  But how long will the window of opportunity last to sell bulk satellite capacity to government entities in Europe?

The climate of European defense over the past few months provides hope that a window of opportunity could lead to more deals like this for future ComSatCom in Europe.  With over twenty military and civilian missions deployed over the past ten years by members of the European Union, some governments view this record as a way to further strengthen the EU role beyond just managing the civilian side of conflicts and acting as a second fiddle to NATO.

France’s new Foreign Affairs Minister recently stated that ‘the EUs security and defense cannot fall back on NATO’s shoulder alone’.  As the U.S. transitions its military focus to the Asia-Pacific region, he said that Europe ‘must take greater responsibility for its security…and act more autonomously across the spectrum of international security”, when the U.S. is not interested in participating or leading operations such as in Libya.  The roadmap for this to happen consists in capacity-building, more cooperation, and pooling and sharing of resources, as reduced budgets take hold until a recovery is in sight.

The EDA contract is in that vein as it involves five countries that consider this expected savings a serious enough matter to buy and exchange capacity as a group. And at $3 million for three years, there is room to grow compared to commercial capacity leasing by EU member States, which stood at about one-tenth the U.S. level in 2010.  It is also peanuts compared to the overall European defence spending, which was just below €200 billion in 2011. 

On the other hand, three of these countries have spent billions of euro on proprietary military satellites and terminals for years, so the envelope allocated is miniscule in comparison.  Why would they then do this? Perhaps the uncertainty in budgets is reason enough but with current budget pressures, we could see changes in these programs with more private-public partnerships where excess capacity could be sold commercially.  France (for one) is embarking on studies to find the best solution for its next-generation military satellites, and it has partnered with Italy for its Syracuse 3 military satellite system to save resources.  Underneath this austerity canvas, EDA was tasked with looking at programs that pool resources and increase cooperation to save close to €1 billion in European defense budgets. 

Thus, synergies and more oversight of budgets in Europe can mean an opening for cheaper commercial capacity for defence.  NSR believes that for the short-term, the value proposition that offers an easy transition to improve performance in terms of capacity, bandwidth and equipment features will be highly-sought.

Still, a growing portion of users of satellite communications will continue to investigate and even migrate from C- and Ku-band to internal military capacity or higher frequencies (in particular X-band) due to the increasing bandwidth demand and the need for more secure communications. And for some European defense ministries, such as Denmark, Luxembourg and the Netherlands, it is via partial funding of U.S. military satellites in the latter part of this decade that they will fulfill this need.  So how much money and how big will the orders be for other EDA contracts?

By Claude Rousseau