Luxembourgh Times
military spending

SES increases ties to US Pentagon with €410m purchase

Luxembourg company's acquisition expected to double its US government revenues

SES's headquarters campus in Betzdorf

SES's headquarters campus in Betzdorf © Photo credit: SES

Luxembourg satellite pioneer SES is deepening its ties to the US military, announcing on Tuesday that it will spend nearly €410 million to take over another government communications company's American subsidiary.

The purchase by SES Government Solutions of the DRS Global Enterprise Solutions military and sensitive-communications network is expected to double the Luxembourg space giant's revenues from the US government, the company said in a statement.

The SES unit based near the Pentagon already provides a broad scope of communications capabilities "to the (US) Department of Defense and its warfighters,” said SES Government Solutions CEO Pete Hoene, a retired US Air Force general.

Assuming regulatory approvals and the deal's completion sometime after June, "we look forward to continuing to provide critical elements to meet the DoD’s connectivity requirements and deliver assured communications,” Hoene said.

The business that Société Européennes des Satellites (SES) is buying is owned by US-based defence contractor Leonardo DRS, a subsidiary of Italy's aerospace and security company Leonardo S.p.A. DRS Global Enterprise Solutions operates land-based communications infrastructure and services, but not Earth-orbiting satellites.

The acquisition is expected to expand SES's customer base for the O3b mPOWER constellation of satellites the company expects to launch and make operational by the end of this year. The satellites hovering at least 2,000 km above the Earth are designed to provide faster links between ground points than SES’s existing assets in geo-stationary orbit about 36,000 km high. SES now operates about 50 satellites in the higher orbit and about 20 in mid-Earth orbit.

SES said its purchase is designed to increase revenue for its growing Networks business as income from video services fades. SES has increased revenue from government customers by around 30% since 2017, the company said. Independent satellite consultancy Northern Sky Research last year estimated that governments around the world will nearly quadruple spending on space communications services by 2030 due to demand for military intelligence and surveillance capabilities and for on-the-go communications.

The company also operates the GovSat military communications satellite, which it owns alongside Luxembourg's government.

SES, based in Betzdorf, employed 580 people in Luxembourg at the start of 2021, according to government figures. It is doing its own restructuring, cutting staff and closing offices in Europe.

The companies are negotiating changes in the industry forced by a steady flood of satellite launches backed by space billionaires Elon Musk and Jeff Bezos to lower prices, leading analysts to predict industry consolidation ahead.