Understanding the Pieces on the Board in the New Satellite Game

The past year-an-a-half must have felt like an out-of-body experience for the satellite industry. After nearly two decades of rapid technology innovation and broadening access to space, the COVID-19 pandemic placed an already anxious and eager satellite industry in a waiting room with no windows.

What, or who is the industry waiting for? The list of answers is much longer than the industry would like it to be at this stage of its development. COVID-19 caused a traffic jam in the high-demand satellite launch market, slowed the progress of much-needed next-gen ground systems, put nearly the entire mobile end user segment on hold, and created numerous supply chain and logistics issues. For a multi-layered industry steeped in the culture of precision engineering, there’s very little room for disorder. High-tech chaos acts as an accelerant to high-tech bankruptcies.

The good news is that there’s definitive end to the chaos – immunization to COVID-19. Unlike the previous economic collapse of 2008-2009 that resulted in a tiring V-shaped recovery over many years, most of the satellite industry’s traditional end-user markets are projected to experience a sharper, quicker U-shaped recovery. This means that those at the very top of the satellite technology value chain can hope to get a clearer sense of when they will feel the ripple effects of the recovery and return to more certain and strategic planning.

And this is where we find ourselves at the halfway point of 2021 – the scene change from climax to resolution. What kind of new world is the satellite industry waking up to? This article encapsulates the major events and trends of the year’s first half in order to paint a picture of what “certainty” will look like in the years to come. We will focus on four of the most defining characteristics of the early year: the battle of the constellations; the establishment of space sustainability infrastructure; the Special-Purpose Acquisition Company (SPAC) trend; and the impact of launch delays.

The Constellation Wars Heat Up

There’s absolutely no argument or dispute that Non-Geostationary (NGSO) satellite constellations dominated the attention of the satellite telecommunications world in early 2021. Across predictions from the top 10 analysis firms covering the satellite industry, the average valuation of the small satellite market in 2021 is $2.9 billion, with a CAGR of approximately 15 percent to 20 percent during the next five years.

Research from analysis firm Euroconsult shows that constellations will make up 84 percent of all small satellite launched during the next few years, which will result in manufacturing and launch market revenues more than tripling over the next decade to approximately $35 billion and $19 billion respectively.

It is far from controversial to assert SpaceX’s dominance of the constellation landscape. Just look at the astounding numbers associated with its Starlink space-based internet service – at the end of May, SpaceX has already successfully launched 790 Starlink satellites in 2021. Their early 2021 output more than doubles the size of the constellation to around 1,700 satellites in orbit at press time.

But along with SpaceX’s controlling lead, the first half of 2021 was defined by the emergence of its greatest challengers.

In early February, Canadian operator Telesat made the year’s first big splash by revealing the name, manufacturer, and tech partnership network of its very own constellation. Telesat selected Thales Alenia Space as the prime contractor for Lightspeed – a $5 billion Low-Earth Orbit (LEO) constellation that will be made up of 298 Ka-band global broadband internet satellites currently scheduled to begin service in the second half of 2024.

Lightspeed will be built in the Quebec province in exchange for a $400 million Canadian dollar government investment. The project involves a Canadian all-star team of space companies, including MDA, CloudOps, Netcracker, and Analog Devices. Partners for the ground system development are expected soon.

The next big development in the constellation market would come two months later from one of the most unexpected sources. French satellite operator Eutelsat, which was considered for many years to be playing out the most conservative and traditional long-term strategic plan in GEO, suddenly announced that it was investing more than $500 million into OneWeb, giving it a 24 percent stake in the resurgent LEO constellation system.

The operator’s foray into the world of satellite data surprised analysts, who started to see the fit in the days that followed. Jefferies Satellite Equity Analyst Giles Thorne specifically notes that Eutelsat brings regulatory, technical, and commercial firepower to OneWeb’s arsenal, which already includes backing from Hughes, the U.K. government, and the Sunil Bharti Mittal empire. Bharti Mittal is already being quoted in OneWeb press releases, signaling his vested interest in guiding the constellation to success.

Thorne thinks Eutelsat will enjoy several benefits from the deal. “OneWeb’s $5 billion of invested capital to date, the opportunism of funding OneWeb out of bankruptcy, and OneWeb’s priority spectrum rights,” are all attractive incentives for Eutelsat, says Thorne, who adds that the operator is getting access to these perks at a much lower cost than it would if it built its own system.

In summary, the global connectivity constellation players that have cemented their position in early 2021 are: SpaceX Starlink with direct-to-consumer broadband service to the remote (and soon, mobile) end user; Telesat Lightspeed with a service distribution partnership network to a wide range of markets; and OneWeb, with fixed data, government, and mobility applications in a wholesale B2B model. These are followed by SES’s unique and more market concentrated O3b constellation in Medium-Earth Orbit (MEO) and the ViaSat-3 system, which is scheduled to start launching this year.

The wild cards that remain are Amazon’s somewhat still mysterious Kuiper constellation and South Korean defense company Hanwha Systems’ proposed 2,000-satellite LEO constellation to serve mobility applications.

Two Giant Leaps for Space Sustainability

Last year marked a truly operational beginning to a new age of what some call, responsible space operations. Built on the success of resuable launch vehicles and Northrop Grumman’s ground-breaking MEV-1 in-space servicing vehicle, and reacting almost naturally to the proliferation of activity in LEO, the industry witnessed two significant developments in space debris tracking and removal capabilities in early 2021.

The first was the long-awaited launch of Japanese startup Astroscale’s ELSA-d debris removal spacecraft in March. Designed to remove dangerous clutter from the congested space environment, ELSA-d is in the middle of a world’s first “End-of-Life” on-orbit servicing demonstration mission licensed by the UK Space Agency. Astroscale Founder and CEO Nobu Okada says that the ELSA-d mission has both important technical and political implications. If successful, the debris-sweeping satellite will prove that it is a viable commercial service for responsible satellite operators, as well as enable better-informed global policy that benefits all space-faring nations.

Removal, however, is only the second half of a process that begins with awareness. The second big space sustainability development of early 2021 happened in April with the full opening of space situational awareness services provider LeoLabs’ Space Radar facility in Costa Rica.

Having a radar site near the equator gives LeoLabs the ability to track active satellites and orbital debris as small as 2 centimeters in low inclination orbits, and provide full coverage of other activities in LEO. This is a huge step forward in space situational awareness capabilities, comparable to the establishment of the Space Data Association a decade earlier. LeoLabs, which has been an investor darling since its founding in 2016, represents commercially provided hope where collaborative government solutions seem nearly impossible in today’s geopolitical environment.

Where Space SPACs Stand

Most people – including some investors – didn’t know what a SPAC was a year ago. Now, with the creation of a flock of major space industry combinations proposed to go public with valuations over $1 billion, special purpose acquisition companies — SPACs — have become one of Via Satellite’s most popular (and heated) topics of coverage. Here is an overview of where all of the largest proposed SPACs stand at mid-year.

Space infrastructure company Momentus first announced its intent to go public through a SPAC with Stable Road Acquisition Corp. in October with a $1.2 billion valuation. But the company has run into issues with its founding CEO Mikhail Kokorich, a Russian citizen, stepping down in order to expedite the resolution of national security and foreign ownership concerns. The company has received an extension from shareholders that will give it until August to clear hurdles and complete the SPAC.

Another space infrastructure provider, Redwire, will go public through a merger with Genesis Park Acquisition Corp., which will make Redwire a publicly traded company valued at $615 million. This is one of the more conservative valuations from the space sector so far and one from a company that will not face the same security hurdles as its counterpart Momentus.

In March, Spire Global, which operates one of the largest remote sensing constellations in the world, announced its plans to go public through a merger with NavSight Holdings, in a deal that values the combined company at $1.6 billion. The merger is expected to close this summer.

Space-based cellular broadband network provider AST SpaceMobile is probably the furthest space company along the SPAC route, as it went public in April after it completed its combination with New Providence Acquisition Corp. The companies estimated in December that combined entity would be worth $1.4 billion. AST and New Providence hit its forecasted $462 million gross proceeds target from the completion of the IPO.

Launch company Astra will merge with Holicity Inc. to form a publicly traded company valued at approximately $2.1 billion. The transaction is expected to provide up to $500 million in cash proceeds. The announcement came just two months Astra reached space for the first time in December 2020. Astra is building a mass-produced portable smallsat launch system that can go from payload delivery to launch within days.

Competing with Astra is Rocket Lab, which plans to go public through a SPAC merger with Vector Acquisition Corporation in a deal that values the combined company at $4.1 billion. Though Rocket Lab already had a group of 39 institutional investors committed to participate in the transaction and several successful launches under its belt, many analysts believed the company has set difficult projections for itself. Rocket Lab had $35 million in revenue in 2020 and expects $69 million in revenue in 2021, followed by a significant jump to more than $1 billion in revenue by 2026. Since setting this goal, Rocket Lab experienced its second launch failure within a year, losing two Earth Observation (EO) satellites for another SPAC, BlackSky, in May.

Which brings us to BlackSky, which confirmed its intent to form a SPAC merger with Osprey Technology Acquisition Corp. in February, with a combined valuation of $1.1 million. The deal is expected to generate approximately $450 million in net proceeds. BlackSky said the cash will fund extension of its Artificial Intelligence/Machine Learning (AI/ML) analytics platform, expand its satellite constellation, and add additional data feeds to its network. It remains unknown whether or not its most recent loss of two satellites will impact its progress.

Launch Delays Pile Up

The start of 2021 proved frustrating for satellite operators waiting in the launch queue, especially as they watched the world’s largest and most active launch provider SpaceX send Starlink satellites into space on a near weekly basis. While the universal culprit seems to be logistical challenges associated with the COVID-19 shutdown, launch delays began piling up months before due to production issues with manufacturers. The pandemic compounded these issues and pushed major satellites even further behind schedule.

Eutelsat pushed back the launch of its QUANTUM satellite on an Arianespace rocket to the third quarter of the 2021 calendar year. This is the second time the operator had to reschedule since setting its initial launch date at the end of 2020

Hughes Network Systems pushed back the launch of its Jupiter 3 satellite to the second half of 2022 due to COVID-19 restrictions and in part to component production issues with the satellite’s manufacturer Maxar. Hughes still hasn’t announced a launch provider for the satellite.

Viasat pushed back the launch of its first ViaSat-3 satellite with Arianespace to early 2022. The company recently delivered the first satellite payload to Boeing, after delays, beginning the final phase of the countdown to launch readiness. Viasat CEO Rick Baldridge blamed record COVID case spikes in Arizona earlier in the year where its payload facilities are located for the prior delays.

After the U.S. Space Force passed over Blue Origin’s New Glenn and picked ULA and SpaceX‘s rockets for the National Security Space Launch (NSSL) Phase 2 Launch Services Procurement (LSP) contract, Blue Origin pushed New Glenn’s debut launch all the way back to the end of 2022. Blue Origin is now focused on the first crewed spaceflight of its New Shepard rocket scheduled for July, which will carry its founder Jeff Bezos.

The NSSL program itself is experiencing delays. In May, the U.S. Space Force reported that its first SpaceX Falcon Heavy will be postponed from July until October to accommodate payload readiness, according to Col. Robert Bongiovi, director of Space and Missile Systems Center‘s (SMC) Launch Enterprise.

Overall, there are more delayed satellites still waiting for launch now than there have been in at least the last decade. VS