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US to boost satellite communications budget

March 30, 2022

US President Joe Biden, in his plans for next year, shows a potential increase in the US space budget for defence and satellite communications. While the overall budget grows by 2 per cent, the amount suggested for the US Space Force is upped by 26 per cent.

A report from investment bank Exane/BNPP says that SES could be well placed to benefit from this increased investment. The bank’s focus is on the prospects for SES’s growing mPower constellation.

The bank says: “Our line-by-line budget review points to a 60 percent increase ($1.3 billion increase) in the US Air Force space procurement budget including a 86 percent ($14 million) budget increase in military satellite communications. The US Army satellite communications budget is up 12 percent ($49 million) while the US Navy has cut its satellite communications budget by 36 percent ($38 million). We estimate the combined satcom budget of the Army, Navy and Air Force to be up 5 percent or $25 million in this budget request. We also note that the Air Force space procurement budget sees a 10-fold increase in its ‘special space activities’ budget to $817 million.”

The bank reminds clients that the US Dept of Defense (DoD) is SES and Eutelsat’s single largest customer [and] account for respectively 21 per cent (when including the SES recent acquisition of GES) and 7 per cent of group revenues.

“The current geopolitical context coupled with the new warfare dimension of Space has led the US to significantly increase its budget as it seeks to modernize its space infrastructure. We also believe that the reduction in the US Navy satcom budget has to be seen in the context of its transition from legacy systems. Today, a US Navy aircraft carrier receives around 30Mb/s from legacy satellite systems. SES is able to deliver over 30x more to a single cruise ship with its new systems. We see SES well placed to benefit from the transition of the US Navy to new commercial satellite systems,” said Exane/BNPP.

However, as the bank states, this budget request still has to pass the US Congress but it seems unlikely that Republicans would meaningfully reduce the US DoD budget requests of a Democrat President.

“The complexity and lack of transparency of the US Space Force commercial satellite communications procurement system makes it difficult to be specific about what budget line items satellite operators precisely tap into, however, we believe that this overall increase in space and satcom funding is a positive for satellite communications providers. With its O3b assets and upcoming launch of mPower [MEO system] we see SES (+) best placed to benefit,” notes Exane/BNPP.

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