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In Europe, the Space Business Has Its Own Peculiar Landscape

Posted on: Wednesday, 26 January 2005, 12:00 CST

In describing the final hours leading to the culmination of the decade-long project to land a probe on Titan, one of Saturn's moons, Pascale Sourisse took a deep breath and characterized the atmosphere in the European Space Agency's control room in Darmstadt, Germany, on Jan. 14 as "incredibly emotional." When the first signals came from the Huygens probe, there was a collective sigh of relief for Sourisse and her team at Alcatel Space, which led the European consortium as the prime contractor that built the spacecraft. "People were so happy, both on the agency side and on the industrial side," said Sourisse, chief executive of Alcatel Space, in an interview at the parent company's Paris headquarters last week. "Everybody was really very moved when the first signal was received, when we understood that we could see the signal content, that true information was available and that this information was extremely useful.

"And then at the end of the day we saw the actual images that the probe had transmitted it was an historic achievement," she said.

The gathering also mirrored the peculiar landscape of the European space industry: Also in the room were executives from Alcatel's business competitors, like the Paris- and Munich-based European Aeronautic Defense & Space, which also contributed to building the spacecraft, notably the heat shield that protected it on its descent through the atmosphere. The two companies shared in the moment of joy at a successful cooperative effort, yet each wrote news releases promoting its own success, while not mentioning the involvement of the other company by name. For in other areas they remain rivals in the relatively small but highly competitive space industry.

"It is one of the particularities of space; people have the impression that we are competitors yet we work together," said Remi Roland, a spokesman at EADS Space. "We work together on common programs, where it is essential that everything functions. And that's another particularity about space: No part can be any less good than another."

Cooperative efforts among some space industry companies are marriages of convenience in a sector that has gone through hard times in recent years, and despite huge outlays by customers is a relatively small pie in the best of times. In the area of satellites, Alcatel is No.3 in the world, behind Boeing and Lockheed Martin of the United States. EADS is fourth, with Loral Space & Communications, another American company, in fifth place. While the scope of the satellite industry is a broad one, with companies and governments needing spacecraft for everything from scientific research to meteorological and military observation, the number of contracts is quite small. For telecommunications satellites, for instance, the total market in a good year is often only about 25 craft, but each satellite is valued at as much as $200 million, insurance and launch costs included. Alcatel, one of the world's leading makers of telecommunications equipment, spent several years shedding extraneous holdings, but the company, the leading maker of broadband Internet equipment, held on to its space division. "In terms of customer requirements it's good for Alcatel to include satellite solutions in the deployment of telecommunication networks," Sourisse said. "There's not only a technology synergy, there is also a customer synergy, in terms of the solutions offered to customers. And Alcatel finds it appropriate to have a complete portfolio for solutions."

Alcatel builds satellites to help extend the reach of its mobile telecommunications networks especially in developing countries, where installing earth-based systems may be prohibitively expensive. It also works directly with the Alcatel mobile communications group in using satellites to help deploy third-generation cellphone networks, to broadcast information to base stations or even directly to telephones. Satellites are also used in the company's DSL, or digital subscriber line, high-speed networks.

Sourisse declined to provide the most recent sales figures before an official announcement scheduled for Feb. 3, she said that in 2003, Alcatel Space represented about 10 percent of the parent company's revenue. About 50 percent of the contracts are commercial and 50 percent are institutional. Of the institutional sales, 20 percent are for the military and 30 percent are civilian contracts. In the United States, military contracts make up a much larger share of sales, providing a constant flow of contracts to the American companies. That is one of the main reasons why companies in the European space business are so willing to cooperate with each other. "There's an expanding military space market in Europe, but it's nowhere near what Boeing and Lockheed Martin can rely on," said Stephane Chenard, an analyst at Euroconsult, a Paris-based consulting firm that specializes in the space industry. Indeed, when business slowed at the beginning of the decade, the European Space Agency put pressure on Alcatel and the satellite division of EADS, Astrium, to merge. But the shareholders of the companies opposed such a move.

Alcatel is, nevertheless, in the process of merging its satellite business with the space division of Finmeccanica, the leading Italian maker of military hardware. The deal, which was announced last June, has not yet been completed. Asked about the possibility of a three-way combination with Astrium, Sourisse said, "What we have always said, and was the position expressed by our chairman at Alcatel and Finmeccanica, is that our alliance was not closed to a third partner."

At the moment, EADS and Alcatel are battling for the same lucrative contract. On Tuesday, the two companies submitted competing proposals to the European Union in the contest to be named prime contractor of the second phase of the Galileo global navigation satellite system project.

Galileo is a joint European Union and European Space Agency project to create a global positioning and navigation system designed for civilian use, and is expected to be operational in 2008.

For the first phase of the project, a joint-venture called Galileo Industries, and owned by Alcatel, Alenia Spazio of Italy, Astrium, Thales of France and a Spanish consortium was created to handle the management of the project. The bidding proposals submitted Tuesday are for a much more important role, that of building, launching and operating the rest of the eventual constellation of 30 satellites that will make up the road, rail, ship and air-traffic control network. And the concession agreement could last for about 20 years. The prime contractor would also be in charge of raising the financing and completing construction of the system. This second phase of the project will cost more than 3 billion, or $3.9 billion, for both the ground and space parts. One- third of the cost will come from governments, with the rest provided by private business. This may be part of the reason why some people maintain that the time is not quite ripe for a merger of the space divisions of Alcatel and EADS. As Chenard put it, "When they feel it makes better sense to compete, they compete."

Source: International Herald Tribune

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