Commercial-satellite deal gives Boeing unit a big lift

CHICAGO — Boeing's long-stagnant commercial-satellite business got a boost Wednesday with the announcement of the unit's largest order in nine years: a contract to build three satellites and associated ground systems for Mobile Satellite Ventures.

Financial terms were not formally disclosed, but Mobile Satellite Ventures CEO Alexander Good said on a conference call that the deal was worth between $500 million and $1 billion.

That would make it Boeing's biggest commercial-satellite deal since an international order for two large satellites in 1997, according to the Chicago-based aerospace company.

While continuing to produce satellites regularly for the U.S. government through classified contracts, the company has built only a handful of commercial satellites in recent years at its facility in Seal Beach, Calif.

In fact, Boeing and Lockheed Martin, the Pentagon's biggest suppliers, are now seeking U.S. federal approval to merge their government rocket-launch businesses to help them offset doldrums on the commercial side.

Worldwide market demand tumbled after hitting a peak in the late '90s, partly due to new communications opportunities opened up by the Internet, and Boeing has had problems with some satellites already in orbit.

Analyst Paul Nisbet said the contract with MSV signals that Boeing's commercial-satellite business is slowly reviving as global demand picks up.

"To have it begin to come back is significant, simply because they're taking a losing operation and hopefully converting it to a profitable one," said Nisbet of Newport, R.I.-based JSA Research.

Asked about the potential for future deals, Howard Chambers, vice president of Boeing Space and Intelligence Systems, said the company is "competing vigorously on other contracts at the moment."

Chambers said Boeing is likely to bid on two or three commercial- satellite contracts this year, focusing on the more profitable models with greater power. There will be worldwide demand for 12 to 15 satellites in 2006, he said.

Still, Chambers said he expects military contracts to remain the bulk of Boeing's satellite revenue. "The marketplace is too tenuous at this point to see a lot of growth in the commercial world."

The MSV satellites, to be built by Boeing in Southern California, are to be launched in 2009 and 2010 for Reston, Va.-based MSV, which is privately held. They will supply 11,000 watts of power with a primary antenna almost 75 feet across, about twice as large as any existing commercial satellite, MSV said.

The satellite-communications company envisions them as the core of a hybrid wireless network that will incorporate satellites working in unison with ground-based towers. The network will be used by the transportation industry to track shipments and provide mobile-phone service in remote areas.

Unlike existing satellite-based communications, MSV said, its system will use small handsets nearly identical to standard cellphones and will enable calls and data to be transmitted smoothly from virtually anywhere in North America as well as parts of South America.

The company said the costs of using the satellite service will be much less than those for current mobile-satellite services and closer to what is charged for existing wireless.

"We are excited at the prospect of completing this paradigm-shifting project ahead of schedule and to provide improved service in both rural and urban areas, eliminating the telecommunications divide," Good, CEO of the company, said.

Ten-year-old MSV is backed by an investor group that includes Motient, SkyTerra Communications, TMI Communications, Columbia Capital and Spectrum Equity Investors. The clients for its two existing satellites include the U.S. Department of Homeland Security and the Coast Guard.

Information from Bloomberg News and Reuters is included in this report.

Maintenance center

in India planned

Boeing will spend $100 million to set up an aircraft-maintenance facility in India, as more carriers in the world's second-most-populous nation buy airplanes to expand.

Boeing also agreed to buy $1.9 billion of aviation-related equipment from India after Air India, the nation's biggest overseas airline, signed a previously announced order Wednesday to buy $11 billion of planes, civil-aviation minister Praful Patel told reporters in Bombay.

The jet maker also said it will set up a pilot-training facility in India.

Bloomberg News