Israeli Government Intervention Likely to Void Deal with U.S Satellite Contractor Loral

Just one month after Israel-based satellite operator Spacecom announced it has awarded Palo Alto, California-based Space Systems/Loral LLC with a contract to design and manufacture its new communication satellite AMOS-8, an announcement concerning a letter sent by the Israeli government may indicate the deal is far from finalized.

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In a filing to the Tel Aviv Stock Exchange on Monday, Spacecom, also known as Space Communication Ltd., announced it has received a letter from a government official on Sunday, informing the company that the state intends to “work towards placing a satellite by Israel Aerospace Industries Ltd. (IAI),” a state-owned company, at the geostationary position intended for AMOS-8, which belongs to Israel. The announcement could mean that Israel plans to launch its own satellite through IAI, cutting Spacecom out of the loop. It may also mean Spacecom can find its way back into the deal if it commissions the satellite from IAI. In both scenarios, American Loral loses the contract.

IAI has built five of Spacecom’s seven satellites to date. It was one of four companies vying for the AMOS-8 contract but was unable to make a competitive offer. Following the announcement of Loral as the winner, IAI announced in March that it considers manufacturing, launching and operating a satellite of its own, using Israeli government funds. If successful, Spacecom could potentially lose the commercial contracts associated with AMOS-8.

Spacecom declined to comment.

In 2016, IAI’s AMOS-6 satellite was destroyed in a SpaceX launchpad rocket explosion. Spacecom was the intended operator. As a result, a planned $285 million acquisition of Spacecom by Shanghai-listed telecommunications technologies supplier Beijing Xinwei Technology Group Ltd. was canceled.

In March, an IAI spokesperson said that the Israeli government backed away from financially supporting IAI’s bid and as a result “IAI did not stand a chance to compete with the offers made by foreign companies.” One government employee familiar with the matter who spoke to Calcalist on condition of anonymity said, at the time, that Spacecom’s contract with Loral, which can be voided within 60 days, was only intended to pressure the government into providing the financial support IAI needed to qualify for the contract.

Earlier this month, after signing the $112 million deal with Loral, for which it lacks the necessary funds, Spacecom announced plans to raise $110 million through bond options and collateral bonds.