NO-3b
Friday 1 November, 2013, 13:00 - Satellites
Recently Wireless Waffle reported on the launch of the first four satellites in the O3b fleet which were intended to launch a service to provide high speed wholesale broadband services in remote areas. We suggested that there were many business and technical challenges that O3b might face in commercialising their service. It seems we may have tempted fate a little - oops!
Rumour has it that a power component in all of the satellites currently in orbit has failed meaning that they will have to be scrapped. In addition, the launch of the next set of satellites will be delayed by up to a year whilst they are re-fitted. The reason for this is not certain, but might be related to the orbit of the O3b satellites being in the Van Allen belt.Whilst the technical failure can be recovered from, there are, of course, commercial implications of these problems. Firstly there is the cost of replacing the first 4 satellites - although this should be able to be claimed from insurance (which all satellite launches have). Like any insurance policy though, the broker will want to investigate the fault in detail, identify who is culpable, and assess what payments are due and this will certainly add delays to any re-payments and may not necessarily result in the recovery of all the losses.
Then there is the also cost associated with the need to re-fit the yet-to-be-launched satellites. But perhaps the biggest loss may arise from the delay associated with the launch of the service. Like any project requiring infrastructure, O3b will be relying on funding from banks and other organisations to finance the launch of the service. And like any loan, there will be expectations on repayments. Delaying the launch will delay any revenues and thus the abililty to service debts. This might even result in O3b breaching its banking covenants.
Technical failures of satellites are not uncommon but such a major fault on multiple satellites leading to delays in the launch of a service that will, in the long term, be replaced by fibre connectivity, will make the business model look less attractive to investors. The question now is whether the service will become O3bsolete before it gets off the ground!
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