Closing Bell - Manifest Space: Powering Up O3B mPOWER & Europe’s Starlink Competitor with SES CEO Adel Al-Saleh 12/19/24

Episode Date: December 20, 2024

Earlier this week, SpaceX launched its third rocket in a 24-hour span to launch for SES, a communications satellite operator. The mission, launching the Luxembourg-based company’s O3B mPOWER satellites, will carry upgrades to address power issues experienced on earlier additions to the constellation. As the rocket awaited liftoff, SES CEO Adel Al-Saleh joined Morgan Brennan to discuss the future of broadband, competing with SpaceX’s Starlink, and the latest on the company’s $3 billion acquisition of U.S. based Intelsat.

Earlier this week, SpaceX launched its third rocket in less than 24 hours, a mission conducted for one of its oldest launch customers, Luxembourg-based communication satellite operator SES. The demand for satellite communication, satellite capacity is very robust. The growth is coming from multiple sectors. We're seeing big demand for what we have and big anticipation for what's coming. What's coming is two new broadband satellites, the 7th and 8th O3B M-Power satellites, destined for medium Earth orbit and carrying upgrades to address power issues experienced on earlier spacecraft from the Boeing-made Constellation. In an interview that started with a fueled Falcon 9 poised for countdown on the pad and ended minutes after a successful launch, I spoke with SES CEO Adel Al-Saleh about the significance of this mission.

Our first six satellites, which are in orbit already for this Empower constellation, had some technical issues. So they were running at subcapacity, if you will, for the last several months, right? Since April when we put them in operations. These two satellites are fully healthy. We fixed a technical issue with Boeing that we worked on tirelessly for the last few months. So they will increase the capacity

of the Constellation significantly, more than 30% boost in that capacity. On this episode, Al Saleh, who took the helm in January, discusses the future of broadband and competing with SpaceX's Starlink, and shares an update on the $3 billion acquisition of U.S.-based Intelsat. I'm Morgan Brennan, and this is Manifest Space. You've got a key milestone unfolding as we speak. That's right, Morgan. We're waiting. We got a launch that's very important to us today. Two additional Empower satellites are going up. The rocket is in a launch position. It's fueled. We're waiting for the countdown, but we need the

weather to cooperate with us a little bit. The weather is still a little bit finicky, but let's see. Hopefully in the next 10 minutes, it'll be going uh we'll be watching it so so we're talking about the o3b m power seven and eight satellites that's right um what is the significance of these two satellites being deployed to orbit well big significance for us because as you know our first six satellites which are in orbit already for this Empower constellation, had some technical issues. So they were running at subcapacity, if you will, for the last several months, right, since April when we put them in operations. These two satellites are fully healthy. We fixed a technical issue with Boeing that we worked on tirelessly for the last few months.

So they will increase the capacity of the constellation significantly, more than 30% boost in that capacity. So it's very, very important to us. And once they are launched and they are deployed to orbit, how long does it take for them to get online and for you to be able to see that this capacity boost has been successful? So we will know almost immediately because we start testing the satellite as it starts making its way to the orbit. So we'll do a lot of testing over the next 30 days. And then they will be fully operational within three months after launch. So as the satellites are left at a certain altitude, they need to go up to 8,000 kilometers above Earth. It takes a

little bit of time to get there. And while they're getting there, we're doing a lot of the testing. So about two to three months before they are fully operational. Okay. The first six satellites, are you able to use them in any capacity or are they going to have to be retired? No, no, no. They are fully utilized. That's our challenge. Morgan is there fully utilized.

The utilization is the max. Big customers like the U.S. government, as well as the cruise customers, are using it fully. So we need this capacity desperately. I see. How does it speak to the demand environment you are seeing for this product, this Constellation, as you're building it out? Morgan, in general, the demand for satellite communication, satellite capacity, is very robust. The growth is coming from multiple sectors. We're seeing big demand for what we have and big anticipation for what's coming. So the demand hasn't been a problem. Clearly, there's more and more capacity coming

online. But so far, the demand has been outstripping the supply that we have in the marketplace today. How large will this constellation need to be, especially accounting for some of those technical issues with the first six satellites? So we have five more to go, Morgan. So in 2025, there'll be three launch in the first half of the year and another two that will be launched in the second half of the year. And those will make up then exactly what we were planning to have with the original constellation. So we'll have the original six, kind of then the spares, and we transition to the new seven satellites as being the main satellites for the Constellation. So we get to the targeted capacity that we plan.

Boeing's been under the microscope this year, not just for its aerospace business and its commercial business, but also for its space business. So the fact that Boeing is a manufacturer and you've had some technical difficulties, will you continue to work with them? We continue to work with them. We have a lot of confidence in them as a company. They're committed.

I mean, these satellites, Morgan, they are the most advanced satellites in the market. They're the most flexible. They're the most configurable. They're truly software defined. These things can be programmed by beam and each satellite has thousands of beams that they deliver. So think about it this way. We can

program a beam from the satellite to follow an object throughout the object movement, right? That's very, very flexible. So it's the most advanced satellites and with Boeing technology, we're able to do that. I'm quite confident that they will continue to improve their yields and their manufacturing processes, and we're working with them. We continue to work with them. When you talk about these beams being able to follow objects, is that how you're able to ink deals with cruise ships, for example? Exactly. Exactly right.

So we can guarantee capacity to a cruise ship. We continue to follow that ship as it goes from east to west or west to east or within Caribbean or within Mediterranean. We can switch it between satellites with a dedicated beam on it. So that's exactly how we do it. The same thing applies to an airplane, right, or to a moving object on the Earth. So that's why they're very, very flexible. Starlink is obviously getting a lot of attention, even more so now with Elon Musk involved with the Trump administration that's coming in. So how do you how would you describe this competitive landscape?

And is there room for everybody that's bringing an offering to market right now? Look, the competitive the landscape is very, very competitive, Morgan, very competitive, because there are many different applications that are coming online. There are different options. And the competition is not necessarily irrational now when it comes to pricing. It's still very rational pricing in the marketplace. And the job that you have to do as an operator, as a provider of a service, is to try to differentiate yourself, not just in capacity selling, but what kind of services can you wrap around it? How do you make it simple for the user to really use the service and be able to integrate

it into their application? That's where the competition is intensifying. And we're very fortunate in SES because we've got very, very strong managed services capabilities that we built around the satellite capacity that help our customers use this. Would you ever, and I ask this knowing that you come from the telecom industry before this, but how are you thinking about things like direct to cell service and some of these deals with telecom operators that we're seeing struck? Yeah, I see our industry, the satellite industry,

slowly converging with the terrestrial networks. And direct-to-device or direct-to-sell is a good example, right? We will work very closely with the mobile operators to augment their services and provide this additional capability. It's happening today, Morten. So if you look at where do telcos use satellite

capability is in the areas where it's very hard to build fiber, when the areas where, you know, mobile networks are just not reaching the populations. And there are plenty of them in United States and certainly plenty of them in Latin America and Asia. Europe is a little bit more advanced in terms of fiber penetration, but that's the areas where telcos use us in order to provide the backhaul or the trunking, if you will, for their capabilities. We're just not able to build their fiber. And direct-to-device will be a good example

where we can augment the terrestrial networks with new capabilities. So are you playing in the direct-to-device market specifically? Stay tuned, Morgan. There's more to do. We're not directly involved in the direct-to-device market today but we're working on supporting some of the important

players in that market which we'll be announcing hopefully in the beginning of 2025. okay that's a cliffhanger right there yes um so as we as you talk about this and and the value proposition for telcos i would imagine it's a similar value proposition for government as well, especially when we start to talk about national security type work. And I know in the U.S. there's a lot of talk and a big sort of investment opportunity around, for example, JADC2 at a time where everything's becoming more autonomous. Yeah. Well, look, the government remains the largest opportunity for satellite connectivity in the marketplace. Certainly, U.S. government has been the leader

in terms of developing an architecture that includes governmental assets as well as the commercial assets. And the world is following that philosophy, right, where they're augmenting their dedicated network with commercial capability that will create more resilience, create more bandwidth, create more security, if you will, for the networks. That will continue, Morgan, and that's the latest announcements that you've heard from Europe, what Europe is trying to do. The demand in government continues to grow, and satellites has always been strong in that segment. But the new applications that the governments are thinking about, the Department of Defense are thinking

about, continues to expand beyond what we know today. The last time you and I spoke, it was because you had just announced that you were striking this deal with Intelsat. How is that acquisition process or merger process going? It's progressing. There's a lot of work, Morgan, that we're doing with regulatory authorities. We have now a very large amount of regulatory authorities that have approved the transactions, but we still have a couple of big ones that are in progress, including, of course, the U.S., European Commission, U.K. There are a few others that we're working on clearances, but they're progressing as we have planned.

And we still have very high confidence that sometime in the middle of the year, second half of 2025, we'll get the transaction approved. And just to revisit, what will this combined entity bring to the table that the two companies separately could not? Morgan, it's all about scale, right? It's creating a much bigger company that gives it scale, both from a resources point of view, from a network point of view. But the most important is creating a better competitor in the market, a stronger competitor in the market that's able to continuously invest in networks every year to be able to put a certain amount of R&D for improving the network

and building expansion of the network and building expansion of the network going forward. And independently, two companies couldn't afford to continuously invest in those networks. That's what we're trying to do. You mentioned Europe before, and the headline is Europe's Starlink competitor is a go. And this is the deal for the Iris constellation. You're part of this. What does this bring is the deal for the Iris constellation. You're a part of this. What does this bring to the table for Europe? Look, it's less about Starlink competition

because Starlink plays a big role across the world, including Europe, right? So they have plenty of businesses that's sitting in Europe. This is about building a sovereign, secure constellation for Europe. So it's not dependent exclusively on others. For us, it's a big deal, right? Because for us, the current empower constellation that we talked about earlier, by 2030 will be fully utilized. So we need to continue to expand that network. We need to continue to build additional capabilities as we go forward. And Iris Square creates that foundation. So in addition to building this constellation to provide European sovereign secure network,

we'll be able to start adding our commercial capability to it and building on top of it as we go forward. So it's quite a big deal for SES, Utilsat and Hispasat, which is the consortium that is one that deal in Europe. Is it the right way to think about this, that it's a public private partnership or is it, okay. It is, it's exactly that. It's a concession contract. It's a public private partnership

where the interests were aligned and the contract is very exciting one because this is quite significant from a revenue point of view and from overall capital deployment, if you will. We talk about commercial space so much as a U.S. phenomenon and maybe now even a little bit as a Chinese phenomenon. Is Europe behind the ball or is this just now a global phenomenon? It's a global phenomenon and it's a global phenomenon at different scales.

Right. It's very difficult to compare the U.S. scale to other countries. I mean, China is a good, you know, maybe could be a competitor from a scale and what the governments want to invest in. But every government around the world is thinking about what role do they play in this new space economy? This is a very, very buoyant area. Even small countries who cannot afford to build big constellations are thinking about, can I build one or two satellites and then can I partner with partners, whether it's the West or the East, in order to augment my dedicated sovereign capacity with commercial capability or other partnerships?

This is happening all over the world. So looking to 2025 then, what do you expect for policy, both domestically here in the U.S. and globally as we have this conversation? Look, the new administration in the U.S. has a very strong track record in space. We should not forget that the first Trump administration was the driver of creating the Space Force that's there and a lot of the investments that will enable us to put more investments in the sector. And I don't think Europe is far behind. Europe is thinking very hard about how do we align the regulatory framework to the investment attractive environment in the marketplace.

The tricky part for us is to make sure, because we are global, right? So if you think about us, Eutelsat, Starlink, we operate across many countries. Our constellations are global in nature. They're not just focusing on one particular country. We want to make sure there's no big divergence between these regulatory frameworks because that will make it very difficult for us to operate seamlessly around the world. And, of course, as we're having this conversation, it looks like it was a successful liftoff of the Falcon 9 rocket carrying your satellites to space from Kennedy Space Center.

So I have to say this has been a very exciting conversation to have because we started with a countdown to liftoff, and now we're ending with a successful launch here. So I think I better let you get to it. Morgan, I've been focused in my conversation. Thank you for watching it on the sideline. No, this is big news, very, very good news for us. All right.

Well, I will let you get back to work then, Adele Al-Saleh, SES CEO. Thank you so much for joining me. Appreciate it. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.