ALCATEL SIGNS BROADBAND AGREEMENT WITH SES GLOBAL AND GILAT
Alcatel signed separate agreements with SES Global and Gilat Satellite Networks to implement 2-way global satellite system. Plans call for Alcatel to use SES’ Broadband Interactive System (BBI) technology. SES will transfer industrial responsibility for technological development of BBI to Alcatel. Alcatel will endorse SES’ DVB-RCS standard for large-scale implementation of 2-way broadband system. SES developed DVB-RCS standard to provide 2-way satellite broadband access to professional users. Alcatel also promised to continue development of system and is guaranteeing supply of gateway and terminal products. Company’s name, board of directors and management team will be announced in coming weeks. Project will be funded by $43.8 million cash and $175 million of in-kind contributions. Gilat and SES will own 40%, Alcatel 20%.
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Principals include Alcatel, Skybridge, SES Global and Gilat. SES had been actively seeking broadband outlet since acquiring GE Americom. Meanwhile, Gilat and Alcatel signed separate memorandum of understanding to develop and improve Gilat 360 broadband satellite products as part of overall agreement. Goal is to provide seamless integration with telcos’ terrestrial broadband infrastructures and convergence between Gilat’s 360 consumer platform and DVB-RCS standard, companies said. They also are hoping to implement global satellite standard in future. Alcatel has agreed to provide financially strapped Gilat with unspecified amount of money for R&D as well as internal resources for joint development projects.
Target market for companies is Europe where anticipated growth in residential market is expected to increase at rate of more than 30% over next 5 years, companies said. Companies won’t sell directly to retail market, but will work with ISPs, telcos and pay-TV operators to provide service. Focus will be on 25% of broadband market that lacks access to cable or digital subscriber lines, Alcatel CEO Pascale Sourisse said. He said group expected to capture 5%-10% of market of market expected to be 7.3 million by 2005. SES Global CEO Romain Bausch said group probably would expand services outside Europe. SES and Alcatel refused to make revenue projections, but each expects operational breakeven by 2004. Group will be headquartered in Luxembourg.
“The new venture isn’t a start-up,” Gilat Pres. Amiram Levinberg said: “It brings mature, industry-leading satellite broadband technology and operational expertise to the enterprise and consumer markets immediately.” Bausch said goal of new company was to become “premier, pan-European enabler of 2-way satellite broadband. He said new company was “perfectly positioned” to meet strong European demand for services.
Alcatel and Skybridge signed agreement to invest in new company, but that is pending regulatory approval and final contract, which is expected to be signed in coming weeks, companies said. According to preliminary agreement, Alcatel is expected to make technical and marketing contributions along with undisclosed cash investment in return for 20% stake in venture. Gilat and SES then would reduce their stakes. New joint venture would acquire all of Gilat’s European units, whose staff would be transferred to new company.
Each of 4 companies involved would share existing facilities such as transponders, hubs, terminals and technology along with technical and marketing assistance. Alcatel-SES deal was prerequisite for agreement between Alcatel and Gilat, industry sources said. Alcatel and Gilat also will cooperate on marketing satellite broadband residential products and solutions to telcos, operators and ISPs.
“All of the players in this relationship have interest in U.S. market, but this deal is strictly a European deal,” SES attorney Phil Spector of Paul, Weiss, Rifkind, Wharton & Garrison told us: “It’s a real demonstration by some key parties in the market, including SES and Alcatel, that there is a future for satellite broadband, Internet access and that other interactive products via satellite make a lot of sense.”