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FROM THE GROUND UP 
January 2011 
Inside this Issue:  Near Earth Indices ‐ Last Twelve Months
Satellite Telecom NASDAQ New Media
Page 1: The Way We See It… 140
Satellite, Telecom and Aerospace News
130
Page 2: Guest Article: Future Technology Intersections - an
Investment and Leadership Opportunity 120

110
Page 8: The Future of FSS is Not Fixed
100
Page 14: AT&T Goes Shopping
90
Page 16: There’s Plenty of Room at the Top
80
Page 23: Near Earth Analysis: Market Comparables
70
Page 25: Near Earth Analysis: M&A Transactions Dec‐ Jan‐ Feb‐ Mar‐ Apr‐ May‐ Jun‐ Jul‐ Aug‐ Sep‐ Oct‐ Nov‐ Dec‐
09 10 10 10 10 10 10 10 10 10 10 10 10

See page 23 and 24 for details on index components

THE WAY WE SEE IT… 

Satellite:
Following its 3 Ka-band high throughput satellite order from Inmarsat in August, The Boeing Company has now won another 3
satellite order (one to be provided by subcontractor Orbital Sciences); this time from the Mexican government. Two of the birds are
L-Band MSS satellites – essentially twins to the SkyTerra birds they already have completed, while the third is a C/Ku hybrid bird.
As demand for higher throughput satellites and new spectral bands increases we would expect to see Boeing re-emerge as a major
supplier of commercial satellites. Avanti Communication’s HYLAS-1 and Eutelsat’s KA-SAT satellite both launch successfully,
heralding a new era of Ka broadband services over Europe. CPI International finally finds a home after the collapse of the
Comtech deal, as Veritas Capital bids $19.50 per share, or about $525 million for the microwave components builder. Harris
Corporation continues its rollup of the oil and gas communications market, adding to recent pickup CapRock with an acquisition of
Schlumberger GCS for $347.5 million. Hot on the heels of their acquisition of Crawford Satellite, the folks at Encompass Media
announced plans to acquire the content distribution business of Ascent Media for $113 million – creating a powerhouse in satellite
broadcast services.

Telecom:
In early December, Clearwire completed a $1.33 billion debt offering, but continued to face liquidity concerns about the expenses
nd
for the rollout of its 4G network. Subsequently, Clearwire’s majority owner Sprint let pass a January 2 option to invest an
additional $760 million. Amidst all this turbulence, Clearwire Chairman Craig McCaw resigned without citing differences with
management. The company was also in the market seeking bids for up to $2 billion of its spectrum holdings, and is laying off 15% of
its employees to save cash. Clearwire clearly needs a white knight – but will it be T-Mobile, Sprint, or someone else? And, what
will they want in return? Energy industry satcom provider RigNet completed a $60 million IPO at an offering price of $12 which rose
nicely in the aftermarket.

Aerospace:
M&A activity has been red hot in the geospatial and signals intelligence world, proving how net-centric warfare is changing the
aerospace and defense landscape. Following a cue from the Argon ST acquisition earlier this year, Veritas Capital picks up
Lockheed Martin’s Enterprise Integration Group for $815 million, GeoEye acquires imaging analytics firm SPADAC for $46 million,
and Raytheon made a bid for Applied Signal Technology at $38 a share, or about $500 million. Continuing their record of
groundbreaking success, SpaceX launched their Dragon cargo module on a Falcon 9 and recovered it intact, in a first for a privately
held enterprise. With 2 successful launches and the flight success for Dragon, SpaceX has jumped to a clear lead in NASA COTS
business, but we suspect Orbital’s significant capabilities and launch experience will guarantee a two horse race. Finally, one of our
favorite space vehicles, Boeing’s mysterious X-37B – the miniature unmanned space shuttle, successfully returned to a soft landing
after a six month mission. Whatever the nature of the classified mission, it does point to a future of greater on-orbit servicing.

Hoyt Davidson John Stone Ian Fichtenbaum Rich Pournelle

hoyt@nearearthllc.com john@nearearthllc.com ian@nearearthllc.com rich@nearearthllc.com
(212) 551-7960 (646) 290-7796 (646) 290-7794 (646) 290-7794

Near Earth LLC Page 1/27

From The Ground Up Volume 7, Issue 1
 Please visit Near Earth’s new offices at
250 Park Avenue, 7th Floor, New York, New York, 10077

Between 46th & 47th Streets, across from the Helmsley Building, 2 blocks from Grand Central Terminal

Near Earth LLC is pleased to announce an affiliation with Viriathus Capital

www.viriathus.com

a New York-based advisory firm for emerging growth companies and a specialist in PIPES
placements (Private Investment in Public Equity Securities)

Near Earth LLC is the recognized expert for specialized investment banking and advisory services to
management and boards in the satellite, telecom and aerospace sectors. Near Earth also makes its
capabilities available to hedge funds, private equity firms and government. Our boutique level of service
and dedicated industry focus differentiate our services.

Near Earth LLC Page 2/27

From The Ground Up Volume 7, Issue 1
 Future Technology Intersections - an Investment and Leadership Opportunity

It was sometime early-1995. I’d just seen the first World Wide Web
address broadcast on the bottom of the screen at the end of a television
commercial. I remember thinking to myself, how foolish, why would
anyone want to leave their television set, rush over to their computer, dial
into their service provider (at a blistering 33.6Kbps), try to remember what
the exact address was (consumer DNS resolution in those days left a lot
to be desired) and then use one of the early web browsers to look up more
How many of us information about the product that had just been advertised? I’d spent my
remember the first career working in the high-tech networking business. I couldn’t imagine
cell phone we what ‘regular’ people would think when they saw an internet address
carried? Was it in broadcast on TV.
a bag with a
cigarette lighter How many of us remember the first cell phone we carried? Was it in a bag
power adapter like with a cigarette lighter power adapter like mine was? Did you opt for the
mine was? super-high tech and equally expensive ‘brick’ phone route?

Any longer-term mariners amongst you? Do you remember the state-of-

the-art in commercial navigation systems in the late 80’s and early 90’s?
Loran-C systems with 9’ antennas dominated the commercial boating
industry www.navcen.uscg.gov/?pageName=loranMain. Were you an
early adopter of commercial marine grade GPS navigation systems?
Remember spending $5K-$8K+ for those early units or even more if you
opted for the 3’ differential whip antenna that allowed you to increase
positional resolution during the days of Selective Availability
www.pnt.gov/public/sa/? Beyond marine HF/VHF radios, how exciting was
it when we could install an 8’ marine-grade cellular antenna that matched
our VHF one, for good symmetry on the radar arch, and make cellular
calls when we were away from the dock?

What would your reaction have been to the person in 1998 who told you
that, within 10 years, you would be able to hold all of the above
Even if you technologies literally in the palm of your hand, use them globally, pay less
thought the than $300 for the equipment and roughly $150/month for the service to
technical make it all possible? Even if you thought the technical confluence was
confluence was plausible, would you have believed companies could actually make money
plausible, would in the process?
you have believed
companies could Flash forward to 2011. With Moore’s Law continuing to drive the
actually make semiconductor industry more than 40 years after Dr. Moore’s prediction,
money in the organizations across the technology marketplace are delivering new
process? capabilities and services at record pace.

Emerging wireless standards like 4G

www.wired.com/gadgetlab/2010/06/wired-explains-4g/ to enable the
gigabit-class cellular market, Zigbee www.zigbee.org/Home.aspx to
support highly adaptive and autonomous sensor and control networks,

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From The Ground Up Volume 7, Issue 1
 Future Technology Intersections (cont.)

Personal Area Networks (PANs) standardized around IEEE 802.15

grouper.ieee.org/groups/802/15/ to support small group and radius ad-hoc
wireless networks, all enabled by advancements in low-power Wi-Fi
technologies are quickly advancing businesses in their core markets.

In the Satellite market, the emergence of 100+Gbit class COMSATs,

proliferation of sub-meter resolution commercial imaging, continuing
advances in on-board processor and sensor technologies, and more
efficient modulation, compression and coding schemes are enabling
Geospatial significantly lower cost and greater efficiency of point-to-point connectivity
Services are a for next generation mobile applications, significantly enhanced satellite
prime example of broadband services and the commercial communications on the move
where the marketplaces.
combinations of
advancements Geospatial Services are a prime example of where the combinations of
across technology advancements across technology sectors are enabling a brand new
sectors are market. The preponderance of embedded GPS receivers in automobiles
enabling a brand and smart phones for navigation, satellite and aerial imagery for
new market commercial and consumer mapping and geo-location applications, and the
emergence of web-based geospatial services underpin this new core
market area.

Another example is in the Unmanned Aerial Vehicle market where the

combination of advances in automation, precision navigation, composite
materials, communications, sensors and propulsion are improving the
versatility, maintainability, survivability and affordability of UAVs. The
result of which is an expanded market opportunity supporting inchoate civil
and commercial applications.

There is no shortage of new investment opportunity in the Space and

technology marketplaces. Companies, organizations and individuals are
continuing to advance, amongst many others, the state of the art in each
There is no of the aforementioned core market and sub-market areas. In addition to a
shortage of new standard checklist used to evaluate new investment opportunities
investment including:
opportunity in the • The extent of the investment and can the business meet the
Space and expense?
technology • How long will it take to repay the investment?
marketplaces. • When will the investment begin to yield returns?
• What is the return on investment?
• Would the money be better employed elsewhere?
• What is the average rate of return? The net present value? The
internal rate of return?

It’s important to think about where a potential investment technology might

intersect with another at some point in the future and either engender an
adjacent opportunity or an altogether new market. As Steven L’Heureux

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From The Ground Up Volume 7, Issue 1
 Future Technology Intersections (cont.)

discusses in his Special Report ‘Accelerating Revenue Growth’

www.slideshare.net/guestc4d058/accelerating-revenue-growth-
presentation, market adjacency is all about creating growth by expanding
the total addressable market. He goes on to talk about the fact that
markets are characterized by a commonality in key attributes such as
product needs, customers, cost structure and competitors. Slight
variations in one or more of the characteristics create market segments
within the same market. Significant differences in some, but not all
attributes create separate, but adjacent markets. Many high-tech
As organizations companies have notably increased revenue by expanding their core
enter new or markets into adjacencies. Investment methodologies, risk and return
expand their core analysis surrounding adjacencies are well understood.
markets … are
they looking at As organizations enter new or expand their core markets and seek either
where the internal or external investment dollars to drive innovation, are they looking
technology may at where the technology may take them in terms of intersections down the
take them in terms road? A good example from above is in the combination of GPS receivers
of intersections and smart phones to enable personal navigation applications. I don’t think
down the road? anyone would have even tried to make the case, during development of
the GPS constellation or the smart phone handset, that there was a future
technology intersection between the two that would result in an application
and market that would eventually combine them. Today, however, I think
it’s critical that leaders try to anticipate those intersections with every
opportunity.

Beyond market adjacencies, it’s become commonplace to assume the

intersection of technologies will create new business opportunities at
some point in the future. It’s easy to take for granted, for example, that we
can purchase a new vehicle or replacement audio head unit with
integrated voice-controlled GPS navigation, DVD video player, satellite
radio, RBDS/RDS traffic receiver, iPod control, auxiliary control interface
for USB key media, and integrated Bluetooth mobile phone control.
However, when each of the systems was originally developed, did the
…is it possible to
designers, leadership or investors forecast opportunity from the multiple
anticipate future
intersections of those technologies? Are we asking different questions
technology
today during our investment discussions in light of the fact that these
intersections that
successful intersections happened?
might maximize
returns? Does the
It’s important to develop metrics, or at least placeholders in our business
business plan look
plans, to capture the ‘unknown, unknowns’ in how users adapt, leverage
that far ahead?
and engage the technology or solution in ways that aren’t necessarily by
design. Concurrent with making new, core or adjacent investment
decisions, is it possible to anticipate future technology intersections that
might maximize returns? Does the business plan look that far ahead?
Has the organization considered incorporating that thought process into
the research, design, marketing, engineering and fund raising efforts?
Does the organization’s leadership have enough perspective about the
new possibilities to sustain the vision and execute on the promise?

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From The Ground Up Volume 7, Issue 1
 Future Technology Intersections (cont.)

To the last point, leadership is critically important. Anticipating future

technology intersections, in the context of Geoffrey Moore’s technology
adoption lifecycle model en.wikipedia.org/wiki/File:Technology-Adoption-
Lifecycle.png, demands leadership that is incontrovertibly comfortable
leading across the entire lifecycle model, not just during the early and late
majority phases when revenue rules the day. ‘Leaders’ that purport
understanding innovation and/or the intersection of technologies or don’t
take the time to understand the totality of the opportunity engendered are
usually the same people that virtually hide while the technology crosses
…institutionalize the chasm to the early adopters. They may be great at driving tactical
the notion of opportunities in proven markets, which, depending on the health of the
capturing future business, is equally if not more important, but will never be successful
technology creating new business paradigms for technology intersections that
intersection capitalize on the progenerate market opportunities.
opportunities
I’m not suggesting abandoning proven business practices or core markets
in favor of some nebulous future opportunity. Organizations should
positively continue to innovate and drive opportunities in their core and
adjacent market ecosystems and realize organic growth as a result.
Investors should absolutely continue to use proven evaluation methods for
new opportunities. I’m suggesting that organizations and investors
consider adding to what they’re already doing in order to institutionalize
the notion of capturing future technology intersection opportunities.

Thinking about potential technology intersections in the areas highlighted

earlier, and focusing on the Space Marketplace, here are some example
questions to think about.

How will 4G wireless, Zigbee and PANs change with the advent of 5th
generation wireless technology? Do any of these technologies potentially
apply to the next generation of satellite bus architectures? Are they
leveraged as-is? What modifications are required to make them
commercially survivable and safe to use in space?
What other
applications could
As innovation in the satellite market progresses, what happens when
be hosted aboard
terrestrial communication standards are incorporated with Terabit-class
the spacecraft to
satellite buses (internet protocol, wireless)? What do future on board
enable new or
processors look like and can we use terrestrial designs as a baseline?
enhanced services
What happens to the video distribution market if content servers are
on the ground?
deployed aboard spacecraft? What other applications could be hosted
aboard the spacecraft to enable new or enhanced services on the ground?
Does it make sense to trade these questions during the R&D phase of
future satellite designs? What applications would be required to take
advantage of these enhanced capabilities? Do they have to be different
than their terrestrial counterparts?

What happens to the Geospatial Services market when advancements in

on-board spacecraft processing and UAV technologies progress to the

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From The Ground Up Volume 7, Issue 1
 Future Technology Intersections (cont.)

point where users can control their own Geo-information? Can we overlay
weather services or even user-controlled live weather data as part of this
information?

What do next generation UAVs look like? Can they incorporate similar
advancements from the wireless market to provide enhanced functionality
and services? How does the combination of next generation terrestrial
Have you asked
wireless infrastructures, spacecraft that also incorporate terrestrial
the question about
wireless and other terrestrial communications standards potentially impact
technology
future fleets of UAVs? What new applications and user communities are
intersections? Are
served as a result?
you prepared for
the answer?
How does a combination or subset of all the above support the next
generation of Commercial Space companies like Virgin Galactic, Bigelow
Aerospace, SpaceX, Scaled Composites and others in their quest to
extend human presence beyond the boundaries of earth?

What does the potential matrix of these opportunities look like? What do
the dreamers or visionaries in your organization see as the potential for
your technology in the future? Have you asked the question about
technology intersections? Are you prepared for the answer? Can you
afford not to be?

By Rick Sanford
SpaceGroundAmalgam, LLC

Rick Sanford is the President of SpaceGroundAmalgam, LLC. He sits on the Board of the International
Space University and also serves as the Vice President Strategic Programs for Odyssey Moon Limited.
Mr. Sanford has over 20 years of experience in the global networking and satellite marketplaces. Prior to
founding SGA, LLC, he was the Chief Operating Officer of Cisco IRIS and the Director, Space and
Intelligence for Cisco Systems, Inc. He may be reached via email at rick@spacegroundamalgam.com.

SGA, LLC specializes in Global Market Creation, Market Transformation, Strategy Development, Business
Development, Marketing and Implementation Planning in the areas of global space communications
(government, civil, commercial), next generation command & control, intelligence and mobility.

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From The Ground Up Volume 7, Issue 1
 The Future of FSS is not Fixed

There has been no more important engine for growth in the satellite
industry than the fixed satellite service (FSS) sector. The recent
remarkable resilience of FSS during this global economic downturn has
also been well noted: mid to high single digit revenue growth, stable to
rising operating cash flow margins and high fill rates. The demand of the
FSS operators for new satellites, launch services, ground facilities and
customer premise equipment has also kept a broad swath of the satellite
Does this mean industry’s value chain profitably employed. In 2010, over 800 36-MHz
boom times are transponder equivalents of capacity were added in 22 commercial satellite
ahead or are we launches. This launch rate reflects the 21 new satellites ordered in 2008.
just reaching Capacity additions in 2008 and 2009 were in the same general range of
another temporary 750-850 36-MHz equivalents. But, note there were 40 new satellites
peak…? ordered in 2009 that should be launching in the 2011-12 time frame; a
significantly higher rate than recent levels. Does this mean boom times
are ahead or are we just reaching another temporary peak in FSS
capacity growth?

Most predictions point to a near term peak in capacity replacement and

additions with a gradual decline after 2011-12 in satellite orders and
launches that bottoms out in 2018. If true, that will certainly have a
material effect on the launch and manufacturing providers, or at least to
the extent they are dependent on the commercial versus government
market, but may or may not negatively affect other sectors of the industry.
First of all, this is not of course, the first such cycle of capacity expansion
for FSS and not all bad news. If you are an investor in FSS, you may be
looking forward to the higher levels of free cash flow generated from the
lower levels of capital expenditures. A period of reduced investment in
new capacity could be great for an industry with some balance sheets far
more levered than perhaps comfortable in this ever fragile global
economy.
What appears to
be a peaking or But what about top line growth? Clearly, if the industry is looking forward
maturing FSS to a period of lower capacity investment it is because its participants
industry could just believe they will be able to comfortably handle demand growth for several
be an industry in years with markedly lower investment. That suggests expectations of low
transition from one to moderate revenue growth and an increasing ability to predict near term
set of primary demand. Does that sound like a fast moving, volatile, high technology
drivers to another industry or a large, profitable and increasingly predictable industry
set. enjoying its mature years? It appears as if the engine of the satellite
industry’s growth is approaching a cyclical peak, or even worse, a level of
maturity that while financially enviable lacks some of the dynamism we
have enjoyed in the past --- or is it? What appears to be a peaking or
maturing FSS industry could just be an industry in transition from one set
of primary drivers to another set.

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From The Ground Up Volume 7, Issue 1
 The Future of FSS is not Fixed
If the FSS industry as we know it today is peaking/maturing and perhaps
evolving to something new, a couple of questions come to mind that we
would like to address:

1. Why is traditional FSS peaking/maturing; why should future growth

expectations be lower?
2. If you are an FSS operator, how do you position yourself for superior
growth in a peaking/maturing and evolving market?

Why is traditional FSS maturing

First, it should be noted that the FSS industry is already in its second life;
the first being one driven be international trunking of telephone traffic. The
…cellular backhaul current life began when video broadcasting and video contribution became
and Internet the new demand drivers, quickly outpacing the secular decline in the
should continue to trunking business. Today’s FSS market is driven by several applications,
grow, but fiber, each with its own level of maturity and growth expectations. Here is a
wireless and even summary of the major contributors along with commentary on near term
non-FSS satellite growth expectations of old and new applications.
solutions… may
eventually eat into • Traffic trunking (flat growth)
much of this o Old - The traditional voice telephony part of this business has been
demand declining for decades.
o New - Increasing levels of cellular backhaul and Internet data
transport have been offsetting the decline in the legacy trunking
business. In the near term, cellular backhaul and Internet should
continue to grow, but fiber, wireless and even non-FSS satellite
solutions, such as contemplated by O3B, may eventually eat into
much of this demand.

• Private networks (15% growth)

o Old – Driven largely by corporate VSAT networks, loss of
addressable market in developed countries due to fiber and
wireless penetration has been offset by rising average demand per
user with richness of Internet media and applications.
Internet o New – Increasing deployments in developing economies, as
connectivity is no Internet connectivity is no longer a luxury, but a necessity, has
longer a luxury, but driven above average growth. Government growth has also been a
a necessity major recent phenomenon and looks robust for the foreseeable
future as there is less threat of terrestrial competition for Comms-
on-the-Move applications and support of high bandwidth UAV and
aerial applications. There is also the more recent emergence of
direct to home Internet connectivity via satellite, especially with the
high throughput satellites employing spot beams and Ka-band.
Bandwidth requirements for this application could be one of the
major drivers going forward.

• Video contribution (flat growth)

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From The Ground Up Volume 7, Issue 1
 The Future of FSS is not Fixed (cont.)
o Old/New - Growth has been relatively flat for several years with
fiber transport cutting into any gains from video proliferation. Would
expect declines in future years.

• Broadcasting (5-10% growth)

… the consumer o Old - Worldwide, roughly 27,000 channels are currently broadcast
market will support by satellite. These are standard definition channels and some
only so many analog holdovers. This number is up approximately 3,000 channels
economically from a year ago. There are also approximately 120 direct-to-home
viable channels (DTH) service operators, with 10 new DTH operators added last
and DTH operators year. However, both channel growth and growth in DTH operators
appear to be leveling off and would be expected to as the
consumer market will support only so many economically viable
channels and DTH operators. We believe ARPU growth is unlikely
to support significant additional channel growth. For a back of the
envelope demonstration consider a world with a billion households
capable of paying $50 per month for video with half of that value
going to the content providers. For 30,000 channels that works out
to an average of $10 million of revenue per channel. Now, there are
certainly many channels produced for less than $10 million per
year, but as there is something like an 80/20 rule in effect in most
media businesses (20% of the media getting 80% of the revenue)
the major channels are probably taking the lion’s share of the
revenue. The amount left to produce the long tail (the lower earning
80%) is far less than $10 million per channel. For the number of
channels to double from here, ARPU in real terms would probably
also have to double. Unlikely, and even if ARPU did double in real
terms, much of the increase would go to supporting new services
such as wireless or satellite Internet connectivity or the switch of
… But have no some channels to higher definition or 3D formats. It should also be
fear, high definition noted that this channel growth has not necessary driven demand
(HD) is here… for a like amount of transponder capacity as more efficient wave
forms, modulation and compression technologies are allowing more
bits to be squeezed into the same amount of spectrum. The
number of transponders needed to handle broadcasting of standard
definition video channels may be peaking as bandwidth efficiency
upgrades have kept pace with channel growth.
o New – But have no fear, high definition (HD) is here. Excluding the
HD channels broadcast by DISH and DIRECTV, there are currently
roughly 440 HD channels broadcast in North America and another
560 outside of North America. At 3x the bandwidth requirement for
HD versus standard definition (SD) that represents a lot of potential
incremental transponder demand. The key question is how many of
the 27,000 SD channels will be converted to HD and over what time
period. It is beyond our scope of expertise to opine on that answer
other than to say, clearly the HD phenomenon has not played out
yet, is well liked by consumers in a world of large flat screen TVs

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From The Ground Up Volume 7, Issue 1
 The Future of FSS is not Fixed
and is likely to be a major driver of transponder capacity for many
years. However, at its current rate of adoption, growth has only
been sufficient to enable single digit top line sales growth. There
has been some hope that 3D video channels, which require 6x the
bandwidth of SD, would provide the higher growth levels desired.
… There has been
Initial results have not been that stellar, especially for sales of 3D
some hope that 3D
enabled TV sets. As anecdotal evidence, my three children came
video channels,
across a 3D demo at Costco over the Holiday period. It was set up
which require 6x
on a huge screen with specially chosen content to highlight the 3D
the bandwidth of
effects. All three took the glasses off within a few seconds saying it
SD, would provide
was nothing special and not worth wearing glasses to get. Granted
the higher growth
it is hard to impress technophile U.S. children these days, but that
levels
was not a ringing endorsement.

How should an FSS operator position itself for superior growth

This is not the first time the FSS industry has appeared to peak and
certainly not the first industry to reach a higher level of maturity. Such
situations may mean the traditional market pie may not be growing as
rapidly, but it does not at all mean clever companies are out of growth
opportunities. There will be many avenues for growth, but each involves
the FSS operator taking on a new set of risks. Here is our summary of the
key options they face and some Near Earth commentary.

• Growth through acquisition. Growth by acquisition is nothing new for

most of the major FSS operators and there are a few juicy targets out
there already, notably Telesat. However, with the top three operators
already controlling such a large share of the market there could be
some resistance to combinations of large operators. Even with ongoing
… The Asian consolidation, the total number of operators remains high as most
market has been nations dream of becoming “spacefaring” and having their own national
particularly satellite provider. These fleets of one to three satellites are very
fragmented … inefficient, but in many cases protected politically from consolidation
however, the and other economic realities - that is until times get tough or expensive
practical satellites need to be replaced. The Asian market has been particularly
constraints on fragmented and overdue for consolidation, however, the practical
achieving a major constraints on achieving a major roll-up in this region are considerable.
roll-up in this If it is to happen, we believe it will be far more likely to happen through
region are a primarily Asian controlled entity, perhaps with private equity backing.
considerable This is especially true as the “magic” operating efficiency level of 12 –
15 satellites has not been achieved by any purely Asian operator.
Funding such an efficiency gain would make for a lower risk
investment. The same can also be said for the Africa/Middle East
market. In short, while acquisitions are always an avenue for growth,
there is little to suggest there will be heightened activity other than
perhaps the emergence of one or two moderate consolidators in
developing regions.

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From The Ground Up Volume 7, Issue 1
The Future of FSS is not Fixed (cont.)
• Growth through vertical integration. To some extent, this has been tried
before, but with little sustainable success outside of government
services. Operators have become efficient wholesalers and B2B
service providers, but can lose their way when striving to get closer to
end users, especially all the way down to consumers. Most operators
… Operators have realize this and have avoided any direct retail or B2C type activities.
become efficient Interestingly, EchoStar is an example of the reverse: a B2C direct
wholesalers and broadcast satellite company looking to become an FSS operator.
B2B service Performance to date, suggests the reverse path has been just as hard
providers, but can and challenging. Part of the problem is the difference in mindset
lose their way required for success in these two different types of business, as well as
when striving to issues of incumbency, but there may also be strong resistance from
get closer to end the shareholder base. If you own an FSS stock and like 80% EBITDA
users margins, you may be quite shocked to learn management decreased
that margin to 60% while chasing higher revenue growth. For all of the
above reasons, we do not believe vertical integration is likely to be a
major source of growth for the FSS operators.

• Growth through geographic market expansion. If you are a small

operator, there is of course enormous theoretical room to expand your
geographic coverage, other than the fact that most good C and Ku-
band slots have been developed. On the other hand, there are quite a
few interesting Ka-band slots that could be developed and growing
acceptance of this new band as evidenced by Inmarsat-5 and other
such announcements. These Ka-band slots will be increasingly
interesting to the larger operators as well. In many cases, however, it is
becoming increasingly hard to get good orbital slots without strong
political support from the countries and major customers within the
… it is becoming footprint. The risks of developing some of these new slots and
increasingly hard spectrum may be too high for many investors unless there are export
to get good orbital credit agency loan supports or special joint venture relationships with
slots without in-country partners. We are already seeing such joint ventures as with
strong political New Dawn between Intelsat and an African investor group led by
support Convergence Partners. We do expect to see more such joint ventures
in the future, as both sides gain and overall development risk and cost
is reduced.

• Growth through provision of new services. As we discussed above, the

FSS industry may be transitioning away from a video driven business
and toward a business driven more by the need for Internet
connectivity and the backhaul of cellular and data traffic. Purists will
argue the superiority of a geosynchronous satellite’s point to multi-
point broadcasting can never be topped by terrestrial alternatives. We
would agree, but that does not alter the fact that the broadcasting of
video may be peaking for the simple reason that linear broadcasting
applications are peaking in this new world of time-shifted, device-
flexible, video on demand, IPTV, user generated, short form video

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From The Ground Up Volume 7, Issue 1
The Future of FSS is not Fixed (cont.)
content. What isn’t peaking is Internet and cellular traffic (other than
because of infrastructure bottlenecks) and even if the satellite industry
only gets a small slice of the total pie, it will make for one everlasting
gobstopper (to borrow from Willy Wonka). This is what we see as the
major source of growth for the FSS industry for ensuing decades.
Companies that position themselves to capture this market will be the
winners. The large FSS incumbents have many advantages, but
companies such as ViaSat, Hughes, O3B and Avanti may also rise in
global importance. For a “maturing” industry, it may be one hell of a
ride to a new higher plateau.

By Hoyt Davidson
Near Earth LLC

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From The Ground Up Volume 7, Issue 1
 AT&T Goes Shopping

On December 20th, AT&T did a little Holiday shopping, picking up a nice

chunk of “beachfront property” of lower 700 MHz spectrum from the folks
at Qualcomm. Until now, Qualcomm has been using the spectrum for its
MediaFLO mobile video service, which it is shutting down in March 2011.
For the princely sum of $1.93 billion, AT&T walked away with 6 MHz of
unpaired spectrum licenses covering the U.S., and an extra 6 MHz in 12
First and foremost, metropolitan markets totaling an additional 70 million people – a total of
what does AT&T 2.2 billion MHz-POPs of spectrum. With a deal of this size, there are
have in mind for bound to be conclusions to be had and consequences to anticipate – what
this new toy of might they be?
theirs?
First and foremost, what does AT&T have in mind for this new toy of
theirs? Fortunately, in this case we really don’t have to do a lot of
guesswork, since they were nice enough to tell us. As stated in their
release, AT&T intends to use this spectrum for “supplemental downlink”
capacity using carrier aggregation technology. Translated to English, this
means simply that the spectrum in question will principally be used for
streaming audio and video content – a use quite similar to the mediaFLO
application, but with a critical difference: the transmissions will be unicast
and not broadcast. Which leads us to the second important conclusion:
Broadcast video to
handsets is dead. Broadcast video to handsets is dead. Stick a fork in it. With apologies to
Stick a fork in it. Month Python, it’s not pining for the fjords, it’s an ex-business model.
Despite the backing of names like Verizon, AT&T, Qualcomm and even
the vaunted ESPN, mobile TV in the U.S. has failed again, joining its
brethren in Japan, Korea and casting severe doubts about the future of
Sirius’ Backseat TV service and the yet to roll out ICO MIMS and Solaris
mobile video services. As demonstrated by AT&T, the resources for
providing mobile broadcast video simply have higher and greater uses –
giving people customized video when they want it. The implications for
fixed video providers like the cable and satellite MSOs are obvious – go
unicast (i.e. video on demand) or be a dinosaur. And the mammals are
taking over.

The third implication takes a little math. While Qualcomm crowed in its
announcement about the sale that it was getting a nice profit by selling
spectrum for $1.93 billion that it had “only” paid $683 million for between
2003 and 2008, the fact of the matter is that the sale price represents a
significant retreat in prices from the FCC’s 2008 700 MHz auction. In that
auction, a de facto national spectrum license went to Verizon Wireless for
$1.10 per MHz-POP, but AT&T’s purchase only comes to $0.87 per MHz-
POP, a 21% discount. Some of this discount probably reflects the
unpaired nature of the spectrum, which makes it less suited for LTE
(which requires carrier aggregation technology), but we think a significant

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From The Ground Up Volume 7, Issue 1
 AT&T Goes Shopping (cont.)
portion of the discount reflects an actual decline in valuations since March
2008.

While many have continued to argue that spectrum valuations can only go
while demand for up, here we have a real transaction comp that argues otherwise. Much of
spectrum is indeed the basis for our position is that while demand for spectrum is indeed
exploding … there exploding (thank you Apple!), there is substantial supply overhang and the
is substantial ability to pay for more spectrum is not boundless given the consumer
supply overhang resistance to higher ARPU.
and the ability to
pay for more On the supply side, we have the following sources:
spectrum is not • Potential re-auction of the 700 MHz D (“public safety”) block that
boundless … failed (3 billion MHz-POPs)
• Clearwire selling excess spectrum (potentially over 20 billion or
more MHz-POPs)
• Spectrumco AWS spectrum holdings (5.3 billion MHz-POPs)
• Nextwave WCS, BRS and AWS spectrum holdings (3.9 billion
MHz-POPs)
• Lightsquared wholesaling capacity on their anticipated 4G network
• Terrestar’s and DBSD’s ATC holdings of 6 billion MHz-POPs each

Now, we’re the first to acknowledge that these various flavors of spectrum
have varying utility due to their associated regulatory constraints, but in
the aggregate that’s a lot of spectrum (40 – 60 billion MHz-POPs). And the
white space bands offer potentially even more.
in the aggregate
that’s a lot of On the ability to pay issue, we note that the source of funds for spectrum
spectrum… purchases is the carriers themselves – who also have to fund
maintenance capex, expansion capex and ultimately, dividends and
interest for their security holders. While there has been marked
improvement of late, the fact remains that the enterprise values of every
substantial wireless carrier are below their values in March 2008.

So, given this landscape, we find the discount AT&T received to be pretty
reasonable – proving once again that trees do not grow to the sky.

By John Stone
Near Earth LLC

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top

Surely and steadily, commercial space activities have crept further along
in both their development and their public prominence. Every few weeks
brings a new headline to the news about a new accomplishment by Virgin
Galactic or SpaceX or any of the many other ventures planning to do
things no commercial company has done before. These are exciting times
and it is equally exciting to have a front row seat for these developments
…many and be able to see things as they get started. 2010 has been a great year
commercial and 2011 promises to hold more progress to come.
entities vying to
participate in this For casual viewers, this narrative has been that of startups and
market are also entrepreneurs stepping up to offer services that have long been the
very established, exclusive domain of government. This is not entirely accurate, as many
large companies commercial entities vying to participate in this market are also very
established, large companies that are now offering services that are more
in keeping with the newer, fixed-price commercial procurement practices
that NASA is seeking to adopt.

However, there is another, more subtle, misconception about this new

industry. At first glance, the ecosystem appears divided between
aerospace firms providing systems and engineering services (e.g. Boeing,
Lockheed Martin, Raytheon and so forth); and operators which seek to
provide commercial services on platforms which they intend to develop
(e.g. SpaceX, Orbital, Virgin Galactic and others). This duality entirely
ignores many players, like satellite operators or payload integrators, which
don’t fit into either category, but which we think will also play a large role in
the evolution of this industry.

We would like to highlight some of these companies to give a larger

a larger picture of picture of the kind of activities we will start seeing in the next few years as
the kind of many new space companies enter commercial operation. This list certainly
activities we will isn’t and isn’t meant to be comprehensive and we are probably leaving out
start seeing in the many others of importance, but we think it’s a good start.
next few years as
many new space United Launch Alliance
companies enter When the United Launch Alliance was formed, it produced many howls
commercial from industry observers. After all, its formation represented the merger of
operation… the principal launch businesses of both Boeing (with Delta IV) and
Lockheed Martin (with Atlas V), both of whom loom very large on the US
aerospace stage. Although it eliminated competition, it was likely
necessary due to the dropoff in launch demand in the first half of the
2000s. It was also just as well for operators, since the two launchers have
not been particularly competitive on price, but not so good for US
taxpayers, who are mostly captive to the ULA for their government
launches, for exactly the same reasons.

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top (cont.)
Change is arriving at ULA. It couldn’t hurt that space module mogul Robert
Bigelow came to visit their facilities in Decatur, Alabama to talk about his
plans for 24 launches per year. Nice if that happens, but we wouldn’t
expect ULA to be counting on that just yet. A little better and slightly
nearer are NASA’s plans to support commercial crew transport. With
SpaceX having not enough launches of the Falcon 9 under their belt to
alleviate reliability concerns, the ULA is filling the breech and NASA
CCDev-2 participants are taking notice by including ULA rockets in almost
all their proposals. And speaking of SpaceX – a little domestic competition
The true test of is keeping ULA on its toes. In a recent Space News, one article reported
ULA will come that ULA was cutting costs and reviewing processes in pursuit of lower
when competition launch prices. We like where this is headed. It gets taxpayers a better deal
for Delta/Atlas while bringing sorely-needed competition and launch price pressure. In the
class DoD meanwhile, demand from traditional defense customers and science
launches is missions is picking up, leaving ULA rather busy. The true test of ULA will
opened up to other come when competition for Delta/Atlas class DoD launches is opened up
U.S. launch to other U.S. launch service providers such as SpaceX and Orbital.
service providers
Space Systems / Loral
From a distance, Space Systems / Loral looks a lot like a typical
aerospace company. In reality, it is a most rare and possibly unique beast
in the space ecosystem – a prime contractor with a customer base almost
exclusively commercial. Actually, we can take that even one step further,
as many of SS/L’s customers are themselves almost exclusively
consumer oriented, such as those for DirecTV and Sirius XM, delinking
themselves from the year-to-year swings in government spending. Having
over sixty of its spacecraft on orbit, with more joining every year, certainly
makes them a premier example of a commercial space company and one
just as different from the traditional large aerospace companies as
emerging NewSpace-type ventures are.
…leveraging the
commonalities
So far, SS/L has been below the radar in its support of commercial space
between
outside of its core telecom satellite manufacturing business. However, we
commercial
find the few steps it’s taken outside of that business most intriguing. Early
telecom satellite
in 2010, SS/L was awarded a contract by NASA Ames to develop the
systems and other
propulsion system for LADEE, a lunar science mission. This followed
types of spacecraft
SS/L’s provision of a Ka-band antenna for NASA’s Solar Dynamics
Observatory, leveraging the commonalities between commercial telecom
satellite systems and other types of spacecraft. We hope this work will
continue and although we think that all satellite manufacturers (including
Boeing, Lockheed, Orbital and the European manufacturers) will have a
role to play, we think that the combination of SS/L’s technical heritage,
experience and prowess and its unique commercial orientation could be a
powerful asset in the years to come.

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top (cont.)
The Satellite Operators
Being frequent attendees of both space and satellite conferences, we are
sometimes taken aback by how separate their worlds often are. On closer
consideration, this shouldn’t be too surprising. The satellite industry is
focused on telecom and broadcast markets while space is focused on
aerospace systems and services; two different industries which happen to
connect in some key areas. But just because the operators are focused on
telecom markets, doesn’t mean they can’t play a role in other areas. For
Operators may instance, we’ve covered the hosted payload phenomenon here before
also be eventual (See article in August 2009’s newsletter “Bumming a Ride to Orbit”). It’s
adopters and gotten a lot of attention by Intelsat, SES, Iridium and others and will
beneficiaries of in- certainly continue to play a role in their business plans. Their satellites are
orbit services, convenient platforms for technology demonstration, earth observation and
such as refueling, space situational awareness. Civil space agencies and commercial
refurbishing and entities just can’t ignore such a convenient new route to orbit.
relocation services
Operators may also be eventual adopters and beneficiaries of in-orbit
services, such as refueling, refurbishing and relocation services provided
by robotic vehicles while benefiting from the renewed focus on debris
removal and mitigation. Operators will also be a source of institutional
knowledge, providing expertise on operations and procurement of
commercial spacecraft. Finally, operators will continue to push the limits of
the capabilities of their spacecraft, demanding greater power, more
bandwidth, greater frequency agility, even pushing the limits of satellite
propulsion systems and other bus components. Although pursued by
satellite operators for the benefit of their customers, these improvements
will benefit all.

Universal Space Network and Telesat

Ground systems
When the space age was getting started, everything had to be built from
are just the type of
scratch. Not only did this include building the satellite itself, but often very
business that
costly ground systems to monitor, track and control the satellite wherever
yearns for a
it was in the sky. In many cases, these systems are a large portion of the
provider of shared
costs. But it doesn’t really make economic sense for each operator to
services…
have dedicated ground systems. Ground systems are just the type of
business that yearns for a provider of shared services.

Although a number of satellite operators and aerospace firms offer

outsourced engineering services, we highlight Universal Space Network
(along with its partner and parent company, Swedish Space Corporation)
and operator Telesat as being particularly prominent in providing full end-
to-end satellite control, monitoring and operations services to a wide
variety of both large and small clients. USN and SSC operates a
worldwide network of ground stations, already providing services for a
wide variety of civil, commercial and defense satellites. Telesat leverages
its existing network used for its own satellites to take care of others’, and it
does it very well. Even the largest of operators, like Echostar and DirecTV

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top (cont.)
use outsourced services nowadays and it is in no small measure due to
the technical competency and range of services these companies offer.

Except in the case of unique constellations or systems, or in the case of

sensitive national assets, we think outsourcing ground systems operations
just makes sense. With remote presence now available essentially
anywhere in the world and the cost of setting up a monitoring terminal little
With remote more than that of a home computer, many users will be able to benefit
presence now from the economies of scale and reduced capital expenditure. In a new
available commercial space market, this area should see lots of growth. Although
essentially there are other participants in this area (such as SES, SED Calian) and
anywhere in the room for new entrants, we think these two are positioned particularly well.
world … many
users will be able Component builders
to benefit Travel down the long list of components and subsystems that go into most
communications satellites and you’ll usually find for each item one or two
major, sometimes exclusive, vendors. For instance, solar panels are
dominated by Spectrolab (a division of Boeing) and Emcore while Saft,
EaglePicher and ABSL are some of the leaders in batteries. Honeywell is
a very significant producer of reaction wheels, Aerojet and AMPAC ISP
dominates propulsion systems while Harris Corporation essentially owns
the market for very large mesh antennas. A list like this can go on and on.
Our point isn’t to highlight these vendors or their products in any way that
is bad or good (although we are certain they all make excellent products),
only to highlight that relatively small markets for highly complex items
naturally result in vendor concentration with high barriers to entry. While
this is good for those companies that have positioned themselves and
their wares in these privileged positions, we can’t help wondering the
extent this stifles technical innovation and increases costs for satellite
manufacturers across the board. For up-and-coming developers of space
…platforms components, getting over subcontractor incumbency and space heritage
needing to requirements can be frustrating barriers to entry.
compete in a more
aggressive New markets and expanded markets have been known to shake things up
commercial and we think this presents a distinct opportunity for new entrants. New
environment may customers and platforms needing to compete in a more aggressive
look to adopt commercial environment may look to adopt newer, more cost-effective
newer, more cost- and higher performance technologies at a more rapid pace than current
effective and customers. With more opportunities and more avenues of gaining space
higher heritage (through small satellites, suborbital platforms, upper stages or
performance secondary payloads), we think this may be the time to get into developing
technologies new, more agile technologies. Particularly interesting will be the providers
of cross-platform components, such as radiation-hardened electronics,
solar panels, robotic mechanisms, ion propulsion systems or new star
sensors or deployable composite reflectors, although the list doesn’t stop
here.

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top (cont.)
The Boeing Company
No, we weren’t lying when we said we’d wouldn’t be looking at the large,
traditional aerospace firms in this article. So why are we talking about
Boeing here? We’ll get to that soon. Early in 2010, Boeing and its
development partner, Bigelow Aerospace, unveiled the CST-100 crew
spacecraft, their entrant in the new commercial space race and winner of
Some inevitable NASA CCDev development money. Later in the year, we heard of a
comments were partnership between Boeing and Space Adventures, the travel brokerage
made about firm made famous for sending centi-millionaires to the Space Station, an
luggage lost in announcement which sent commentators wagging about Boeing getting
space, but let’s into the space passenger business just as it would develop a new airliner.
leave those Some inevitable comments were made about luggage lost in space, but
aside… let’s leave those aside…

From our usual perspective, we see Boeing as a giant defense and space
contractor, through its Defense, Space and Security (DSS) division. Were
it not for the fact that we often travel by air too, we would almost overlook
the side of Boeing most of the rest of the world knows it by, its very
prominent Commercial Airplanes division. This dual nature of Boeing
distills the very distinct dichotomy in the world of aerospace – between
that of government contractors working on a diversity of unique defense
systems, often on cost-plus contracts, and that of developers of
commercial aircraft, which serve a worldwide market for air travel and
transport. This is a fact of life in the aerospace business and makes for
very different cultures on either side of the divide.

By all accounts, the CST-100 is a project of the DSS side of Boeing and
likely to remain so for some time, owing to the institutional engineering
expertise available there. But from a sales and marketing point of view, we
…competitively wonder how much the Defense side of Boeing can learn from the
offering large Commercial Airplane side. While it’ll be a long while before selling
aerospace spacecraft is anything like selling aircraft, if ever, the fact remains that
systems to competitively offering large aerospace systems to commercial clients
commercial clients around the globe is what Boeing Commercial Airplanes does best. There
around the globe is may even be sales synergies. A recent leaked cable from the US embassy
what Boeing in Turkey indicated that the Turkish government wanted the US
Commercial government (through NASA) to send an astronaut into space in exchange
Airplanes does for ordering Boeing aircraft. It doesn’t appear that anything like that came
best out of the request but with the CST-100, Boeing could offer its own rides
as sales incentives. We’d like to see Airbus try to match that. As long as
Boeing avoids the same supply chain and procurement problems that
have dogged the 787 Dreamliner, taking a commercial aircraft approach to
space may be a way to go.

Channel Partners
New businesses and platforms don’t exist in a vacuum. If successful, they
cultivate an ecosystem of brokers, agents, value added resellers and other

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top (cont.)
components of a mature sales channel. In the satellite industry, this has
meant the employment of transponder brokers and exchanges and
bundling of specialized managed networking and teleporting services as
the needs of users demand. For something like Virgin Galactic, it means
engaging travel agents to include once-in-a-lifetime vacations to beyond
the upper atmosphere as part of their portfolio of destinations. If we are
If we are going to going to start getting commercial spacecraft with government as an initial
start getting anchor tenant and user, it won’t be long before someone comes up with a
commercial way to make good economic use of spare capacity.
spacecraft … it
won’t be long While the passenger partnership between Boeing and Space Adventure
before someone got a lot of press, we think there are lots of opportunities on the payload
comes up with a side. SpaceX is looking for clients of its freeflying DragonLab vehicle and
way to make good Bigelow’s potential sovereign clients will want to find favorite-son users of
economic use of whatever modules they lease. Businesses can surely be made on the
spare capacity. back of providing end-to-end turnkey integration and payload
management services - the kind of things NASA didn’t and couldn’t offer to
users because of its role as a government agency. A good start would be
to make better use of the International Space Station, which is sorely
underutilized and is yearning for the right operations and the right
economic incentives to start producing the kinds of results that it is now
uniquely able and positioned to do. One firm, NanoRacks, has already
entered this space and already has dedicated rack space on ISS from
which it is marketing micro-gravity research services.

Users
Commercial infrastructure and services are nothing without users,
customer demand and markets. The space and satellite industries have
long rested on two major pillars of economic demand and user
communities. One pillar has been telecom and broadcast, which has been
we are intrigued at
responsible for much of the commercial satellite industry. The other pillar
the opening up of
has been government, which has provided the demand for a multitude of
other markets,
activities, from science and exploration of the universe, to
particularly those
communications, surveillance, navigation and intelligence in pursuit of
that use the unique
national security. A new commercial spaceflight industry, while initially
zero-gravity
government-dominated, will eventually need to open into new markets and
environment for
sectors of the civil economy, much as satellite telecom has largely done
R&D into materials
and how satellite imaging is now on its way to accomplishing.
science and
biotechnology…
Much has been made of the new “travel and leisure” side of spaceflight;
that is, providing avenues for tourists to experience space travel. This
market exists now but we wonder how big this will be in the short term. On
the other hand, we are intrigued at the opening up of other markets,
particularly those that use the unique zero-gravity environment for R&D
into materials science and biotechnology. No doubt this is still in its
infancy, but it is enticing to look at the tens of billions of dollars spent in
the R&D budgets of Johnson & Johnson, 3M, Pfizer, Amgen,

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From The Ground Up Volume 7, Issue 1
 There’s Plenty of Room at the Top (cont.)
GlaxoSmithKline and many other very large organizations. The space
the discovery of agencies of the world have laid the scientific groundwork for much of this
significant value over the decades - now it’s time for applied researchers to pick up the ball
through and run with it. While our expertise is in telecom and aerospace, and thus
commercial don’t feel it’s our perogative to make any analysis of what demand from
applied micro- biotech and pharma could look like, it would seems to us that the
gravity research discovery of significant value through commercial applied micro-gravity
could open the research could open the floodgates to a whole new user community.
floodgates to a Whatever the scale and nature of this demand, assisting and servicing this
whole new user user base may well be a significant ongoing opportunity for commercial
community … providers able to deliver efficient and useful turnkey operational platforms.
If those are successful and economically sustainable, who knows where
we can go next. We all know there’s plenty of room at the top.

By Ian Fichtenbaum
Near Earth LLC

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From The Ground Up Volume 7, Issue 1
NEAR EARTH ANALYSIS: MARKET COMPARABLES
Public Market Valuation Analysis of Selected Companies in the NEAR EARTH MEDIA INDEX
($ in millions, except per share data) Stock Price: Enterprise Value as a Multiple of: Price as a Multiple of:
Market
Value of Enterprise LTM LTM LTM LTM Trailing Forward
1/7/11 Equity Value (a) Sales EBITDA EBIT EPS EPS (b) EPS (b)

Satellite Broadcast (DBS and DARS)

BSY.L British Sky Broadcasting (f) £ 7.47 $20,347.10 $23,160.09 2.5x 5.9x 18.0x 19.3x 29.7x 24.6x
DISH Dish Network Corp $ 21.14 $9,366.08 $13,222.36 1.1x 4.2x 6.1x 8.3x 9.9x 8.9x
DTV DirecTV Group Inc. $ 41.86 $36,236.11 $44,419.11 1.9x 7.1x 11.9x 20.1x 17.7x 13.6x
SIRI Sirius XM Radio $ 1.61 $6,317.38 $9,028.49 3.3x 11.6x 17.7x 23.1x n/m n/m
Mean 2.2x 7.2x 13.4x 17.7x 19.1x 15.7x

Cable Television
CMCSA Comcast Corporation $ 22.70 $63,787.00 $90,439.00 2.4x 6.3x 11.6x 17.7x 18.0x 15.5x
MCCC Mediacom Communications Corp. $ 8.60 $585.83 $3,859.48 2.6x 7.1x 12.8x 0.8x 35.8x 10.2x
TWC Time Warner Cable Inc. $ 66.75 $23,736.30 $44,230.30 2.4x 6.6x 12.4x 16.6x 18.7x 15.0x
CVC Cablevision Systems Corp $ 34.64 $10,394.42 $21,288.13 2.6x 8.1x 13.3x 22.7x 26.4x 17.6x
Mean 2.5x 7.0x 12.5x 14.5x 24.7x 14.6x

Television
TVL LIN TV Corp. $ 5.10 $280.25 $912.82 2.3x 5.9x 9.8x 9.6x 8.6x 12.4x
SBGI Sinclair Broadcast Group $ 7.95 $638.78 $1,852.24 2.6x 5.6x 8.9x 11.7x 8.4x 8.7x
FSCI Fisher Communications Inc $ 24.96 $219.40 $283.88 1.8x 9.0x n/m n/m n/m n/m
Mean 2.2x 6.9x 9.3x n/m n/m 10.6x

Radio
CMLS Cumulus Media Inc. $ 4.26 $179.05 $770.03 2.9x 10.0x 11.5x 5.8x n/m n/a
ETM Entercom Communications $ 11.08 $411.18 $1,096.50 2.8x 10.5x 11.9x 8.6x 9.6x 8.5x
Mean 2.9x 10.2x 11.7x n/m 9.6x 8.5x

New Media
MSFT Microsoft Corporation $ 28.30 $245,304.40 $213,455.40 3.4x 8.0x 8.8x 13.1x 11.6x 10.5x
AAPL Apple Inc. $ 336.12 $307,875.84 $256,864.84 3.9x 13.3x 14.0x 22.0x 17.4x 14.9x
YHOO Yahoo! Inc. $ 16.90 $22,001.43 $19,353.75 3.0x 14.3x 28.1x 25.1x 19.7x 21.4x
GOOG Google Inc. $ 616.44 $196,786.14 $165,528.14 6.0x 14.7x 16.8x 24.8x 21.3x 18.3x
ERTS Electronic Arts Inc. $ 16.05 $5,296.50 $3,639.50 1.0x 33.1x n/m n/m 25.1x 19.1x
Mean 3.5x 16.7x 16.9x 21.2x 19.0x 16.8x

Satellite Imagery
GEOY GeoEye $ 40.60 $897.67 $983.30 3.1x 5.9x 9.9x 25.1x 21.6x 21.6x
DGI DigitalGlobe Inc. $ 30.46 $1,388.06 $1,545.66 5.0x 9.3x 25.9x n/m n/m n/m
Mean 4.0x 7.6x 17.9x 25.1x 21.6x 21.6x

MEDIA SERVICES INDEX

High 6.0x 33.1x 28.1x 25.1x 35.8x 24.6x
Mean 2.7x 9.8x 13.8x 18.3x 17.6x 13.4x
Low 1.0x 4.2x 6.1x 0.8x 8.4x 8.5x

(b) EPS estimates from Thompson First Call. Near Earth does not estimate EPS and does not condone or v alidate these estimates. n/m Not Meaningful.
(c ) Conv erted to US $ from Euro at an ex change rate of 1.291 US $ per Euro. n/a Not Av ailable
(d ) Conv erted to US $ from C$ at an ex change rate of 1.0078 US $ per C$.
(f) Conv erted to US $ from British Pound at an ex change rate of 1.555 US $ per British Pound.

Member of NEAR EARTH SATELLITE INDEX

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From The Ground Up Volume 7, Issue 1
NEAR EARTH ANALYSIS: MARKET COMPARABLES
Public Market Valuation Analysis of Selected Companies in the NEAR EARTH TELECOM INDEX
($ in millions, except per share data) Stock Price: Enterprise Value as a Multiple of: Price as a Multiple of:
Market
Value of Enterprise LTM LTM LTM LTM Trailing Forward
1/7/11 Equity Value (a) Sales EBITDA EBIT EPS EPS (b) EPS (b)

Fixed Satellite Services (FSS)

ETL.PA Eutelsat Communications ( c) € 28.39 $8,066.74 $11,279.47 8.1x 10.6x 17.2x 22.1x 20.1x 18.1x
SESG.PA SES Global S.A. ( c) € 18.22 $9,398.98 $14,427.42 6.3x 9.0x 15.0x 16.3x 14.9x 13.9x
Mean 7.2x 9.8x 16.1x 19.2x 17.5x 16.0x

Mobile Satellite Services (MSS)

ISAT.L Inmarsat (f) £ 6.72 $4,809.61 $6,130.51 5.3x 9.6x 14.7x 25.2x 12.9x 10.7x
IRDM Iridium Communications Inc. $ 8.25 $579.56 $474.92 1.4x 5.0x 10.7x 27.1x 27.5x 15.6x
ORBC ORBCOMM Inc. $ 2.89 $123.13 $37.30 1.0x 3.9x n/m n/m n/m n/m
GSAT Globalstar Inc. $ 1.42 $436.42 $1,004.47 14.9x n/m n/m n/m n/m n/m
Mean 5.7x 6.2x 12.7x 26.1x 20.2x 13.1x

Satellite Ground Segment

CMTL Comtech Telecommunications $ 27.92 $772.27 $369.57 0.4x 2.5x 2.8x 10.0x 14.0x 19.3x
GCOM Globecomm Systems Inc. $ 10.15 $219.14 $188.16 0.8x 10.3x 17.4x 26.0x 19.2x 15.4x
GILT Gilat Satellite Networks $ 5.78 $234.21 $111.72 0.6x 7.7x n/m 6.2x 6.9x n/m
HUGH Hughes Communications, Inc. $ 41.29 $901.36 $1,398.18 1.4x 6.9x 17.7x n/m n/m 16.7x
ISYS Integral Systems Inc. $ 11.41 $200.47 $230.02 1.3x n/m n/m n/m n/m n/a
VSAT ViaSat Inc. $ 44.85 $1,836.16 $2,102.13 2.8x 16.3x n/m n/m 30.5x 30.3x
Mean 1.2x 8.7x 12.6x 14.0x 17.6x 20.4x

Satellite Space Segment

ORB Orbital Sciences $ 17.80 $1,032.40 $879.43 0.7x 10.2x 13.8x 29.0x 25.8x 21.2x
CDV.TO COM DEV International (d) $ 2.45 $188.05 $187.61 0.8x 10.2x 26.2x 32.9x n/m 11.7x
MDA.TO McDonald Dettwiler and Associates (d) $ 49.65 $2,049.53 $2,229.42 2.2x 12.0x 14.9x 17.3x 15.2x 13.4x
OHB.DE OHB Technologies (c ) € 16.52 $371.10 $362.36 0.7x 8.5x 13.1x 15.1x 21.2x 17.2x
Mean 1.1x 10.2x 17.0x 23.6x 20.7x 15.9x

Towers
AMT American Tower $ 50.50 $20,180.31 $24,573.73 13.0x 20.5x 32.0x n/m n/m n/m
CCI Crown Castle $ 42.60 $12,393.19 $19,021.27 10.4x 17.6x 33.9x n/m n/m n/m
SBAC SBA Communications $ 39.66 $4,546.23 $7,167.95 11.8x 20.4x n/m n/m n/m n/m
Mean 11.8x 19.5x 33.0x n/m n/m n/m

General Telecom
S Sprint Nextel Corporation $ 4.68 $13,974.48 $29,606.48 0.9x 5.1x n/m n/m n/m n/m
T AT&T $ 28.85 $170,499.46 $236,518.46 1.9x 5.6x 10.5x 8.1x 12.6x 11.5x
VZ Verizon Communications, Inc. $ 35.93 $101,566.21 $195,468.21 1.8x 5.4x 10.1x 18.5x 16.0x 15.9x
Mean 1.5x 5.4x 10.3x 13.3x 14.3x 13.7x

TELECOM SERVICES INDEX (excludes Towers stocks)

High 14.9x 16.3x 26.2x 32.9x 30.5x 30.3x
Mean 2.8x 7.7x 14.2x 19.5x 21.5x 17.7x
Low 0.4x 2.5x 2.8x 6.2x 6.9x 10.7x

(b) EPS estimates from Thompson First Call. Near Earth does not estimate EPS and does not condone or v alidate these estimates. n/m Not Meaningful.
(c ) Conv erted to US $ from Euro at an ex change rate of 1.291 US $ per Euro. n/a Not Av ailable
(d ) Conv erted to US $ from C$ at an ex change rate of 1.0078 US $ per C$.
(f) Conv erted to US $ from British Pound at an ex change rate of 1.555 US $ per British Pound.

Member of NEAR EARTH SATELLITE INDEX

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From The Ground Up Volume 7, Issue 1
NEAR EARTH ANALYSIS: M&A TRANSACTIONS
Selected Satellite, Telecom, Media & Aerospace Transactions
(US$ in millions unless noted)
Transaction Value/
Date Equity Transaction LTM LTM
Announced Acquiror Target Value (a) Value (b) Sales EBITDA
Satellite Operators
12/05/06 Abertis Telecom EutelSat (32% share) 1,000.0 1,838.0 7.3x 9.7x
12/18/06 Telesat (new) Telesat/Skynet Combined 3,491.0 3,990.0 7.1x 13.4x
06/19/07 BC Partners Intelsat 5,000.0 16,400.0 7.7x 11.3x
08/02/07 Abertis Telecom Hispasat (28.4% share) 199.0 199.0 5.8x 7.9x
09/23/09 GHL Acquisition Corp Iridium Satellite LLC 500.0 517.3 1.6x 5.6x
10/01/09 ViaSat, Inc WildBlue Coimmunications, Inc. 568.0 500.0 2.4x 6.6x
Mean 5.3x 9.1x
Ground Equipment & Systems Integrators
05/12/08 Comtech Telecommunications Cor Radyne 201.9 223.6 1.5x 16.0x
05/09/09 Rockwell Collins Datapath, Inc. 130.0 130.0 0.5x n/d
03/05/10 Integral Systems CVG-Avtec Systems, Inc. 34.7 34.7 1.0x n/d
06/16/10 Teledyne Technologies, Inc. Intelek plc 28.0 35.0 0.9x 6.0x
10/13/10 Gilat Satellite Networks Wavestream Corporation 130.0 130.0 1.9x 10.6x
11/26/10 Veritas Capital CPI International, Inc. 393.1 545.2 1.5x 14.1x
Mean 0.6x 11.7x
Satellite Managed Network Services
03/19/07 CIP Canada Investment Inc. Stratos Global Corporation 293.3 621.5 1.2x 6.3x
06/01/09 Globecomm Systems Inc. Telaurus Communications LLC 7.6 7.6 0.6x n/d
11/23/09 Inmarsat plc Segovia, Inc. 110.0 110.0 1.6x n/d
03/08/10 Globecomm Systems Inc. Carrier to Carrier Telecom BV 15.0 15.0 0.8x n/d
05/21/10 Harris Corporation CapRock Communications 525.0 525.0 1.5x 9.7x
11/08/10 Harris Corporation Schlumberger GCS 347.5 347.5 2.0x 8.5x
Mean 0.6x 6.1x
Aerospace and Defense
05/12/08 Finmeccanica SPA DRS Technologies Inc 3,358.0 4,930.0 1.4x 11.0x
05/13/08 Cobham plc M/A-COM 425.0 425.0 0.9x 6.8x
06/04/08 Cobham plc Sparta Inc 416.0 416.0 1.4x 12.1x
12/16/08 Sierra Nevada Corporation SpaceDev, Inc. 31.7 26.6 0.7x 23.3x
12/23/09 OM Group EaglePicher Technologies LLC 171.9 171.9 1.4x n/d
03/05/10 Orbital Sciences Corp. GD Advanced Information Systems 55.0 55.0 1.1x n/d
06/30/10 The Boeing Company Argon ST, Inc 807.1 765.4 2.5x 31.4x
10/13/10 Veritas Capital Lockheed Martin EIG 815.0 815.0 1.3x n/d
12/08/10 GeoEye, Inc. SPADAC Inc. 46.0 46.0 1.7x n/d
12/20/10 Raytheon Company Applied Signal Technology, Inc. 539.0 505.5 2.2x 17.3x
Mean 1.3x 17.0x
Video Distribution
04/23/07 Motorola Terayon Communication Systems Inc. 139.7 127.2 1.9x n/m
12/07/07 Macrovision Corp Gemstar-TV Guide Intl Inc 2,842.1 2,325.1 3.7x 21.9x
03/12/09 Harmonic Inc. Scopus Video Networks 78.3 47.6 0.8x n/m
10/01/09 Cisco Systems Inc. TANDBERG ASA 3,322.0 3,622.0 4.0x 18.7x
05/06/10 Harmonic Inc. Omneon, Inc. 274.0 274.0 2.6x n/d
Mean 2.6x 20.3x
Towers
03/17/06 Crown Castle Trintel Communications 145.0 145.0 10.1x n/d
03/17/06 SBA Communications Corp AAT Communications Corp 1,002.0 1,002.0 12.0x 17.9x
05/08/06 Crown Castle Mountain Union Telecom LLC 309.0 309.0 11.9x n/d
10/06/06 Crown Castle Global Signal 4,000.0 5,800.0 12.1x 26.6x
07/21/08 SBA Communications Corp Optasite Towers 253.2 428.2 14.8x n/m
Mean 12.2x 22.2x
General Telecom (Wireless)
03/06/06 AT&T (new) Bell South 67,000.0 89,000.0 4.3x 10.7x
08/07/08 Verizon Wireless Rural Cellular Corp 728.0 2,757.0 4.1x 9.7x
01/10/09 Verizon Wireless Alltel Wireless 5,900.0 28,100.0 2.9x 8.3x
12/24/09 Sprint Nextel Corp. Virgin Mobile USA 348.0 509.0 0.4x 4.4x
Mean 2.9x 8.3x
Telematics
11/21/08 EMS Technologies Inc. Satamatics Global Ltd. £30.67 £30.67 3.0x 6.9x
12/02/08 Sierra Wireless Inc. Wavecom SA 306.0 271.0 2.3x n/m
07/01/09 Inmarsat plc SkyWave Mobile (19%) 113.2 113.2 2.8x 7.5x
01/22/10 Francisco Partners Cybit £22.85 £22.91 1.0x 3.9x
06/29/10 Gemalto NV Cinterion Wireless Modules GmbH € 163.0 € 163.0 1.1x 8.2x
11/08/10 Novatel Wireless, Inc. Enfora Inc. 64.5 64.5 1.1x n/d
Mean 1.9x 6.6x
Radio
07/29/08 Sirius Satellite Radio Inc. XM Satellite Radio Holdings Inc. 2,301.7 3,957.7 3.4x n/m
07/30/08 Bain Capital Clear Channel 17,923.8 23,724.1 3.5x 10.8x
05/29/09 Cox Enterprises, Inc Cox Radio 381.5 704.3 1.8x 6.2x
Mean 2.9x 8.5x
(a) When Equity Value w as not disclosed, Transaction Value w as used
(b) Calculated as Value of Equity plus interest bearing liabilities and preferred stock, less cash & equivalents n/d Not Disclosed
n/m Not Meaningful

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From The Ground Up Volume 7, Issue 1
 ABOUT NEAR EARTH LLC
Near Earth is a specialized Investment Bank which brings the highest quality senior level
attention to companies in the greater commercial satellite/space, telecom, aerospace and
technology industries.

Near Earth provides a full range of capital raising, advisory and consulting services to
companies and their Boards. We also provide financial advisory services, valuation, structuring,
and due diligence support to private equity, hedge and distressed debt funds. Please contact us
if you would like our assistance with a contemplated satellite, telecom or aerospace investment
or portfolio divestment.

For more information about our current assignments or about Near Earth LLC, please visit our
website at www.nearearthllc.com or contact us at our location below:

Headquarters
250 Park Avenue, 7th Floor
New York, NY 10177
Telephone (212) 551-7960

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From The Ground Up Volume 7, Issue 1
IMPORTANT DISCLOSURES AND INFORMATION ABOUT THE USE OF THIS DOCUMENT:

Near Earth, LLC ("Near Earth") has published this report solely for informational purposes. The
report is aimed at institutional investors and investment professionals, and satellite, media and
telecom industry professionals. This report is not to be construed as a recommendation or
solicitation to buy or sell securities. The report was written without regard for the investment
objectives, financial situation, or particular needs of any specific recipient, and it should not be
regarded by recipients as a substitute for the exercise of their own judgment. The content
contained herein is based on information obtained from sources believed to be reliable, but is
not guaranteed as being accurate, nor is it a complete statement or summary of any of the
markets or developments mentioned.

The authors of this report are employees of Near Earth, LLC, which is a member of FINRA. The
opinions expressed in this report accurately reflect the personal views of the authors but do not
necessarily reflect the opinions of Near Earth itself or its other officers, directors, or employees.

The portions of this report produced by non-Near Earth employees are provided simply as an
accommodation to readers. Near Earth is under no obligation to confirm the accuracy of
statements written by others and reproduced within this report.

Near Earth and/or its directors, officers and employees may have, or have had, interests in the
securities or other investment opportunities related to the companies or industries discussed
herein. Employees and/or directors of Near Earth may serve or have served as officers or
directors of companies mentioned in the report. Near Earth does, and seeks to do, business
with companies mentioned in this report. As a result, Near Earth may have conflicts of interest
that could affect the objectivity of this report.

This report is subject to change without notice and Near Earth assumes no responsibility to
update or keep current the information contained herein.

Near Earth accepts no liability whatsoever for any loss or damage of any kind arising out of the
use of all or any part of this report.

No part of this report may be reproduced or distributed in any manner, via the Internet or
otherwise, without the specific written permission of Near Earth. Near Earth accepts no liability
whatsoever for the actions of third parties in this respect.

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From The Ground Up Volume 7, Issue 1