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FROMTHEGROUNDUP
March2012 InsidethisIssue:
Page 1: The Way We See It Satellite, Telecom and Aerospace News Guest Column: Revolutionary Change Evident at Satellite 2012 Thats Quadrillion with a Q Page 2:

Page 6:

Page 10: In Defense of Space Prizes Page 13: Are FSS operators facing a GX moment? Page 17: Virtual Worlds and Real Dreams Page 21: Near Earth Analysis: Market Comparables Page 22: Near Earth Analysis: M&A Transactions

THEWAYWESEEIT
Satellite:

Seepage21 fordetailsonindexcomponents

At the Satellite 2012 conference, Boeing Satellite Systems announced a breakthrough contract for the sale of four satellites to Asia Broadcast Satellite and Satmex. In addition to using electric propulsion technology for orbit raising and stationkeeping for the first time commercially this breakthrough contract employed a block buy and teaming between smaller operators to get the kind of pricing that only larger operators usually get. Defense conglomerate Cobham plc bid 420 Danish Krone per share for maritime telecom and Inmarsat equipment provider Thrane and Thrane. The bid was rebuffed, but Thrane and Thrane initiated a strategic review. In maritime satcom, KVH Industries announced its Tracvision V11 a breakthrough dual mode Ku/C band VSAT terminal that, thanks to ViaSats arclight technology, gives customers global broadband coverage with only a 1 meter antenna. In the not a moment too soon department, the U.S. DoDs first (of five) Mobile User Objective System satellites was successfully launched. MUOS-1 will support new capabilities and more than double the UHF communications capacity for the U.S. armed forces. Congratulations to Lockheed Martin. In the friends sometimes fight department, ViaSat filed suit against Loral Space and Communications alleging that Loral appropriated its intellectual property in constructing Hughes Jupiter satellite. Loral claims to have meritorious defenses and will vigorously defend itself were hoping these old friends find an amicable way to settle their differences. Meanwhile, the Loral built ViaSat-1 has just entered commercial service offering 140 Gbps of broadband capacity.

Telecom:
Sometimes you win, sometimes you lose. DISH Network got authorization for its acquisitions of DBSD and TerreStar, bringing 40 MHz of the S band under one corporate parent, but then the FCC decided to embark on a rulemaking for the AWS 4 spectrum that seems likely to keep it bottled up for some time. In the close, but not quite department, Sprint Nextel apparently got cold feet and decided to withdraw from negotiations to acquire MetroPCS. While the combination makes a lot of sense to us by consolidating spectrum assets and broadening Sprints franchise in prepaid, we suspect Sprint didnt have the stomach to face the dilution completing a deal would have required. In the M2M space, automated (and conventional) metering giant Itron recently acquired privately held smart grid firm Smartsynch for about $100 million, extending its skill set to the rapidly growing smart grid sector.

Aerospace:
In a first step towards a future where the skies are full of aircraft, the FAA solicited comments from the public on establishing rules for the operation of UAVs in the national airspace. The Paul Allen venture to build the worlds largest aircraft to conduct airborne launch, Stratolaunch, took delivery of two 747s for disassembly and started construction of their massive new Mojave hangar. In other slightly more down to earth news, United Technologies, as part of its efforts to finance its $16.5 billion bid for Goodrich Aerospace announced that it intends to sell its Pratt & Whitney Rocketdyne unit, along with portions of Hamilton Sundstrand and Clipper Windpower. Quite the yard sale. Meanwhile in space, Iran launches a remote sensing satellite, North Korea prepares for satellite launch, China confirms next Shenzhou flight will be manned, and NASAs budget is cut Huh!

Hoyt Davidson hoyt@nearearthllc.com (212) 551-7960

John Stone john@nearearthllc.com (646) 290-7796

Ian Fichtenbaum ian@nearearthllc.com (646) 290-7794

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Guest Column: Revolutionary Change Evident at Satellite 2012

The satellite communications industry is thriving. Profits are growing.

Satellite 2012 was an assault on all the senses. I attended 14 sessions, typed up 48 pages of notes, and read all the articles published in the trade journals. The conference was well attended and the sessions were better attended than in past years. The conference added a cellular feedback system for polling. This was available to the 50% of the audience that carried the latest smart phones. Part of the polling was devoted to advertising for Proton and Baikonur. Nonetheless, the polling provided a way to interact with the audience on significant issues where subjective opinions could be displayed. The exhibit area was packed from one end to the other with about 280 exhibitors. The satellite communications industry is thriving. Profits are growing but there are signs that it may be slowing down a bit. Some of the new satellite launches have been stretched out. The number of commercial GEO satellites ordered dropped from 28 in 2010 to 17 in 2011. Most operators are expecting a larger fraction of unused capacity as new, higher-capacity satellites are launched. Since the conference I have been thinking about what was said and discussing it with various investors. It seems that we are in the midst of some major, even revolutionary, changes to the satellite industry. Here is a summary of 10 key topics. 1. Good News) Ka-band is now mainstream and will transform the business. It is definitely accepted as conventional technology today and no longer to be feared. DirecTV has been broadcasting in Ka-band with great success for nearly a decade. Eutelsat reports good results with KASAT. ViaSat has introduced Excede service, which is comparable to most terrestrial alternatives and praised by users and reviewers. Big Ka-band satellites have 10 times throughput of the ordinary C and Ku-band satellites and cost 1/5 as much to transmit a Megabyte of information. High Throughput Satellites (HTS) are in operation over Europe, North America, and the Middle East and most FSS satellites under construction now include some Ka-band transponders. These satellites represent a vast expansion of transmission throughput that may take a little while to absorb. Not all of these innovative systems will be successful. The migration from C and Ku-band to less expensive Ka-band is likely to put pressure on transponder prices over the next five years. As just one data point, ViaSat claims its ViaSat-1 satellite has 140 Gbps of capacity which is more than all traditional C and Ku-band capacity covering North America. ViaSat also stated they are already beginning to explore Q-band and V-band, so there may be even greater increases in capacity on the more distant horizon. Newtec and Novelsat have also made impressive gains in ground segment spectrum efficiency over standard DVBS2 and

Not all of these innovative systems will be successful.

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Guest Column: Satellite 2012 (cont.)

are turning their attention to designing systems to better exploit the higher bandwidth Ka-band systems. 2. Good News) All-electric satellites double satellite capability or cut launch costs in half. This breakthrough caught many off guard. This technology is a factor of two improvement. Today satellites are launched with 42% spacecraft 58% fuel. In the future that will be 83% payload and 17% fuel. This represents a huge difference in launch cost or a huge expansion on payload capability. Boeing has a contract to build four allelectric satellites and other satellite manufacturers are making plans. The down side is 4 to 6 months to transfer a satellite to GEO. Since 80% of satellites are replacements this delay may be acceptable in many cases, although I understand Elwing has a plasma propulsion technology currently being tested at NASA that may reduce this wait to 2 - 3 months. 3. Struggles) MSS operators plan to use FSS bands and FSS operators are providing MSS services. Some call this convergence, but this is really about broadband service demand. The reality is trouble for everyone. Intelsat and Inmarsat are both experiencing difficult financial times. Intelsat has no Ka-band capability and has decided to poach MSS maritime traffic from Inmarsat. All the FSS operators are experiencing interference, often from mispointing of mobile FSS terminals. To expand its high-speed data services Inmarsat will use Ka-band satellites for Global Xpress service. MSS operators are also preparing for substantial expansion with the production of satellites for Globalstar 2, ORBCOMM 2, and Iridium NEXT. The MSS industry now has five major operators competing in a business that produces only 10% to 15% of the FSS operator revenues. 4. Bad news) Government cutbacks and military withdrawal will reduce revenues for many operators. Many operators derive 10% to 25% of their revenue from government sources. New government programs are drying up. Fewer troops on the battlefield cuts telecommunications demand across the board. The likely reductions may be balanced by increased use of satellite services for surveillance, e.g., Unmanned Aerial Vehicles (UAV). Unfortunately, there are indications that even funds for surveillance transmissions have been constrained. CFOs indicated that revenues would be impacted by tens of millions of dollars. One employee of a defense advisory firm said that his firm was expecting 10% to 20% layoffs, the first in decades. Government cutbacks alone will slow satellite industry growth. 5. Amazing) Iridum is a fantastic success so far. The Iridium CEO was the toast of the town as he received the Via Satellite Executive of the Year Award. [His predecessor, Robert Kinzie, was selected as Executive of the Year in 1998, one year before his company declared bankruptcy.] Iridium Communications has been growing steadily with $384 M revenues,
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All-electric satellites double satellite capability or cut launch costs in half. This breakthrough caught many off guard.

there are indications that even funds for surveillance transmissions have been constrained

Guest Column: Satellite 2012 (cont.)

up 10% in 2011. It added 35,000 voice subscribers in 2011 and 56,000 machine-to-machine subscribers, which produce far less revenue. Caveat Emptor. The company is facing the likely reduction of revenues from reduced government spending. Its aging constellation operates with satellites that are almost 13 to 15 years old. The constellation is functioning effectively although it was only designed to operate for 5 years. 24% of the original satellites have failed. There are holes in the coverage due to component failures. Service availability has suffered and the fragile satellites are facing a hostile space environment over the next three years until replacement satellites are launched at the end of 2015. Competitors are offering less expensive services and user terminals. 6. Opportunity) Everyone is headed for the Latin American Market. Nature and satellite operators abhor a vacuum. Five years ago Africa was the continent of satellite opportunity. There was a scarcity of transponders and prices were high. Now fiber cables have surrounded the coastal areas of Africa. Several satellites have been built for dedicated service and there is ample unused capacity over Africa, although often at price points the less affluent market will not support. Latin America now has rapidly growing demand for communication services. Chile has wired the entire country with fiber, including Easter Island. Argentina has Ku-band satellites under construction and is studying Ka-band satellites. International operators from North America and Europe are staking out slots to provide service. Even Eutelsat, a company that focuses most of its attention on Europe, has won a license to serve South America. 7. Turmoil) LightSquared is in deep trouble. The FCC has withdrawn its conditional waiver and its ATC service approval due to GPS interference issues. There was a great deal of discussion about how did this happen. Inmarsats revenues were augmented by payments from LightSquared, which have stopped. LightSquared is attempting to resolve the issues by introducing GPS receivers that are compatible with its terrestrial transmissions. The FCC has initiated a proceeding to define requirements, but the process will take some time to define and implement changes. Conference panel members estimated that the interference issues could be resolved within 2 to 30 years. My estimate is that a realistic estimate would be at least 10 years because there are millions of GPS receivers deployed today. The process could be shortened if someone would provide financial incentives for replacements. 8. Risks) Astronomical events could disrupt satellite communications. Internet blogs by users reported that the solar storms had knocked out the LightSquared and Spaceway 3 satellites for a time. Boeing confirmed the incident in private discussions. Clearly, energetic particle bursts from the sun are causing anomalies on satellites, but there is very little public information that has been released by the operators. The sun spot cycle is expected to peak in 2013, but strong flares and
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Latin America now has rapidly growing demand for communication services.

...energetic particle bursts from the sun are causing anomalies on satellites, but there is very little public information

Guest Column: Satellite 2012 (cont.)

particle storms are common after the peak as well. The worlds only solar storm warning satellite, ACE, is now 12 years past its design life and its replacement is years away from deployment. 9. Financial easing) Export financing is a robust approach for many operators. In 2009 Coface agreed to guarantee loans for construction of the Globalstar 2 satellites. This was followed by a similar guarantee for Iridium NEXT. Both of these systems were unable to obtain financing from conventional sources. Subsequently, even the well-established, creditworthy operators recognized that Export Credit Agency (ECA) financing resulted in lower interest rate loans and many applied for these loans to finance satellite procurements. The U.S. Ex-Im Bank has also been quite active and expects its facility to continue to grow because it has been profitable for the country. 10. Transition) Hybrid Networks are changing the role of satellites. Many of the questions and issues at the conference were the same as in the past, but some of the answers are changing. Seven years ago there was no interest in using anything but satellites for distribution of video media content. Today there is interest in considering substitution of fiber in some cases. Hybrid solutions are being developed for VSAT networks as well. Direct broadcasting is not likely to go away, but attitudes and decisions are changing. Another hot topic was the desire of many in the satellite industry to eliminate or roll back ITAR controls. Operators in particular would like to be able to launch on cheap Chinese rockets.
By Roger Rusch TelAstra Inc.
Roger Rusch is an expert on the satellite telecommunications industry and is President of space consulting firm TelAstra Inc. For a full set of notes from the conference contact: RogerRusch@telastra.com

Many of the questions and issues at the conference were the same as in the past, but some of the answers are changing.

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Thats Quadrillion with a Q

Hyperinflation aside, real value creation has to be constrained at least partially by the boundary conditions of the economic system

There was a period in 2010-2011 when commentators would say, often in wide eyed voices, Thats Trillion with a T. They wanted to make sure the listener was fully aware we were entering new uncharted economic territory and would no longer be talking in such pedestrian amounts as billions or even hundreds of billions. Trillions have, in fact, become quite commonplace in our dialog. Almost nothing worth a vigorous national debate involves mere billions anymore. Our annual budget deficit is in trillions, we increase our debt ceiling in increments of a trillion or more, Quantitative Easing exceeded a trillion, the Iraq/Afghanistan War cost over a trillion, we owe China more than a trillion, and some believe that if only the Stimulus Plan had been a trillion we would have had a faster recovery. How silly of us to think we could stimulate our economy with mere billions. But, surely Trillions is as far as it goes right? We wont in a few decades hear commentators say Thats Quadrillion with a Q will we? Hyperinflation aside, real value creation has to be constrained at least partially by the boundary conditions of the economic system; which in this case would be the finite surface area of the Earth, its limited extractable and recyclable resources, the amount of population such area and resources can support productively, and the ability to generate enough energy, alternative or otherwise, to power it all. Whatever our future, surely it cannot involve Quadrillions, can it? The United Nations predicts, under its medium fertility variant set of assumptions, that the Earth will reach a population of 10 billion around 2080 and enter a prolonged period of rough stabilization at that level. While this is a 10x gain from approximately 1 billion people in 1800, no one seems to be suggesting 100 billion people is doable in another 280 years, say by 2360. Our land, resources and energy sources may maintain modest economic growth rates for another century or so, but has anyone suggested 520 years of such growth (the period since Columbus) or even 386 years (the period from the Dutch purchase of Manhattan where our office sits)? Surely, we are heading toward an era of slower growth to, at best, the Stabilization the U.N. hopefully predicts. Will Trillions be it then; the apogee of human economic value creation? What does a constrained future without growth even mean? Can the human psyche even handle that prospect? Just think about these dates. 2080 is only 68 years from now. Our grandchildren will experience this event; a maxed out Earth. Is this what we want to leave our grandchildren, double digit trillions of debt and underfunded entitlements and no growth? Lets hope not. Growth with its creative destruction, business cycles and disproportionate allocations of wealth may at times be painful, and even seem unfair, but it is a heck of a lot better than decline, stagnation or even

What does a constrained future without growth even mean? Can the human psyche even handle that prospect?

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Thats Quadrillion with a Q (cont.)

stabilization. What do you do when the land of opportunity stops having opportunities? To many of us in the space community, the answer is obvious. You look for new land. The problem is that humanity is stuck on Earth its lovely, but oh so finite cradle. If you stop thinking about a stabilized Earth as the ultimate destiny of Humankind, then there are no limits to human progress. That has always been the promise of Space. It is our untapped reservoir of resources, growth and opportunity. We humans do not want boundary conditions constraining our growth. We want unlimited frontiers. Perhaps no one has put it better or more simply than Rick Tumlinson of the Space Frontier Foundation, we are here, to go there. Earth is just the cradle. Our DNA wants off planet. Not just for the survival of our species against some unpredictable cataclysm, not just to explore, but for long term growth and opportunity. Asking why we should spend money exploring and colonizing space is like asking why we are human. Were going to go. We have to go. We just need to figure out the most economical and judicious path forward. That brings us back to billions and trillions. NASAs 2013 budget is only $17.7 billion, roughly half of a penny of the U.S. tax dollar. Normally, debate over such a tiny amount would not make it onto the front pages of major media and into Presidential debates. No ones talking about Trillions for Space. But somehow, spending money on Space becomes a supercharged debate of extremes and not necessarily along partisan lines. On the one extreme, NASAs budget should be zeroed out entirely to flow more money to social welfare programs or at least limited only to national security interests. If an Earth-bound existence is our future, we might as well accept it and start funding the stabilization or defending our pile right? Two missions to Mars were, in fact, recently cancelled. At the other extreme, are the proponents of humans on Mars ASAP, almost regardless of the cost and budgetary trade-offs. The promised future of our childhood has already been delayed far too long for these people. Lets get with it already! For these enthusiasts, hundreds of billions of expenditures are easily justified. Actually, these enthusiasts make a good point. The benefits have been extraordinary, if largely under reported. It is not too hard to actually get to Trillions when you add up satellite communications, GPS, and hundreds of other computer and healthcare technology spin-offs. A great summary of recent benefits is described each year by The Space Foundation in The Space Report The Authoritative Guide to Global Space Activity. I highly recommend it. In the middle of the debate are those who argue the pros and cons of a status quo, federally lead space program versus a new commercially lead space industry and what the relative budget priority and role of government should be within sane levels of expenditure. My favorite new proposal within this middle ground of recommendations is a petition to
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Asking why we should spend money exploring and colonizing space is like asking why we are human. Were going to go.

It is not too hard to actually get to Trillions when you add up satellite communications, GPS, and hundreds of other computer and healthcare technology spinoffs

Thats Quadrillion with a Q (cont.)

increase NASA's Budget to 1% of the Federal Budget. As Dr. Neil deGrasse Tyson says, for a penny on a dollar - we can transform the country from a sullen, dispirited nation, weary of economic struggle, to one where it has reclaimed its 20th century birthright to dream of tomorrow. We would still only be talking $36 billion, or $0.036 Trillion. Dr. Neil DeGrasse Tyson went on to ask the Senators at his Committee hearing, how much would you pay for the universe? That question hits right at the heart of the problem. If Wall Street focuses on next quarter and private equity investors look at five year investment horizons, who is in charge of investing for the next century? Who is in charge of making sure mankind doesnt max out here on Earth in our grandchildrens lifetime? Isnt that something we want our national government to be doing? But nations and kings have historically been just as near sighted as investors. My favorite example of the inability of governments to appreciate long term value potential is the 1763 Treaty of Paris ending the Seven Years War. As part of the treaty, England gave France the choice of either keeping Guadelope, a Caribbean island with sugar plantations or what was then called New France, an area significantly larger than what the U.S. later acquired in the Louisiana Purchase. France chose the sugar (Note: this huge tract of land was so inconsequential that England later traded the Non-Canadian part back to France under a subsequent treaty). 245 years later, from our 2012 perspective, that choice seems ludicrous. But for France, Guadelope had a larger European population, a higher GDP and was easier to defend. Think of the space corollary to that choice today. Earth orbit has hundreds of satellites, billions of dollars of commerce and is easier to get to than deep space, but is it really worth more than the rest of the universe? Will our descendants think so 245 years from now from their Martian timeshares or just laugh at the very idea? Isnt NASA being stuck investing largely in low Earth orbit just such a situation; supporting the sugar plantations versus getting on with the hard work of frontier settlement and expansion? Wasnt the United States supposed to be the first country to think grand and long-term? Jefferson did, after all, acquire New France from Napoleon, and we developed it. We understood manifest destiny right? We even bought Alaska from Russia, even though by then such things were already labeled as follies. These prior US governments understood long term investment and the value of undeveloped frontiers. For small investments they created enormous potential for the nation. Well its 2012. Wheres the Manifest Destiny for this Millennium? Perhaps this petition for a penny on the dollar is our generations chance to start getting it right. It is still a small investment, but it may give NASA enough funds to start building frontiers again. Politicians can then stop fighting over which district loses which space program jobs and get on to the real work of pioneering space and
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If Wall Street focuses on next quarter and private equity investors look at five year investment horizons, who is in charge of investing for the next century?

Earth orbit has hundreds of satellites, billions of dollars of commerce and is easier to get to than deep space, but is it really worth more than the rest of the universe?

Thats Quadrillion with a Q (cont.)

helping commercial industry take over activities in Earth orbit. Let industry run the sugar plantations and build a more prosperous island community. Let NASA explore the frontier and then help industry colonize the new continent, because when you get right down to it Trillions just arent going to be enough. There are Quadrillions out there and we want them. Penny for your thoughts - future?

By Hoyt Davidson Near Earth LLC

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In Defense of Space Prizes

The success record of prizes for accelerating innovation and leveraging scarce funds is quite remarkable

During a speech as part of the Republican Florida primary, Newt Gingrich proposed setting aside 10% of NASAs annual budget (roughly $1.8 Billion) to support prize competitions to encourage greater commercial activity and investment in space. While some may think this idea is unaffordable or even zany, it has many supporters in the space industry and, if scored appropriately against its annual budget, could even have considerable support within NASA. By scoring I mean that it would hardly be fair to deduct the full amount of the hypothetical prize amount from NASAs budget as the prize may not be won for many years, if at all. The success record of prizes for accelerating innovation and leveraging scarce funds is quite remarkable. The primary obstacle to more and larger prizes has not been that they do not work, but that Congress for the most part does not like them. As it was explained to me by a leading space policy analyst on the Hill, Congressmen do not like to vote money for something unless they know what district will benefit from it and when. An open ended commitment on future tax dollars that Congressmen cannot have a hand in allocating is just too much for many politicians to stomach. Prizes, therefore, end up being difficult to protect during budget negotiations and are often the first to go. And yet the prizes do work. Here are three recent examples: Ansari X PRIZE. On October 4, 2004, the X PRIZE Foundation awarded a $10 million prize to Scaled Composites for building and launching a spacecraft capable of carrying three people to 100 kilometers above the earth's surface, twice within two weeks. This $10 million prize inspired Burt Rutan and Paul Allen of Microsoft fame to invest a much greater amount in their effort, not counting the many other teams that raised money and tried, but failed to win the prize. After winning this prize, Scaled Composite was able to attract Virgin Galactic to become its strategic partner. Virgin Galactic is aggressively pursuing a space tourism business plan. In 2009, less than five years after the prize award, Virgin Galactic raised $380 million from Aabar Investments for a 31.8% stake in the company, an $875 million valuation. In 2001, Aabar invested another $110 million to increase its stake to 37.8%, a $1.8 Billion valuation. One may dismiss all of this as mere thrill rides for the 1%ers, but the benefit to space development is a business that can now work out what NASA calls the ilities, meaning repeatability, reliability, maintainability versus the status quo of costly and infrequent expendable rocket launches. Google Lunar X PRIZE. Google has sponsored a $30 million X PRIZE to be won by the first privately funded teams to safely land a robot on the surface of the Moon, have that robot travel 500 meters, and send video and data back to the Earth. To date, there are 26 active teams around the

can now work out what NASA calls the ilities, meaning repeatability, reliability, maintainability

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In Defense of Space Prizes (cont.)

world competing for this prize. The X PRIZE Foundation estimates that, based on its and other groups experiences with prize competitions, some entrants will spend as much as 5 times the prize amount in their efforts with expenditures of 2.5 times the prize purse being relatively common. Just do the math and you will quickly see the enormous leveraging of tax dollars prizes could achieve. But then there is the snicker factor. Who cares if a bunch of space cadets blow their money on a pipe dream? What does that have to do with the real world? Well, here is a partial list of some of the most recognizable academic and industry partners involved: Carnegie Mellon, MIT, Penn State, University of Alabama, Aerojet, Alcoa, Caterpillar, Dynetics, Draper Laboratories, Lockheed Martin, MacDonald Dettwiler & Associates, Pratt & Whitney Rocketdyne, Sierra Nevada Corp., and Teledyne Brown Engineering, not to mention a few wealthy Silicon Valley entrepreneurs. Well, okay, so perhaps its not a big joke, what about an actual lunar market? According to a 2009 report conducted by Futron Corporation, the market for commercial services to support precursor scientific and exploratory missions, as well as unmanned cargo delivery and logistical services to the lunar surface, is estimated to be in excess of $1.5 billion over the next decade. Additionally, an internal study presented to the NASA Commercial Lunar Working Group at the Lunar Science Forum on July 2009 predicted that the commercial lunar services market for NASA-related surface activities alone will be closer to $3 billion over the next decade. A NASA robotic lunar exploration program study concluded that at least 20 unmanned surface missions would be required to provide reliable ground truth on the Moons surface composition. While this may be a moot point for NASA if the U.S. does not decide to return to the Moon, a number of other nations have stated aspirations for missions to the surface of the Moon in the 20152030 time frame. NASAs Centennial Challenges. None of this leveraging effect is lost on NASA. Its experience with competitions has been very successful despite extremely modest budgets for prizes. Still, even at these modest prize levels, NASAs Centennial Challenge program has been very successful at attracting large numbers of competitors from a wide range of participants and NASA has benefited greatly and cost effectively from this program. To date, NASA has paid out roughly $4 million in four of the challenges it has offered. Others have yet to be won. For instance, in the Lunar Lander competition won by Masten Space and Armadillo Aerospace, NASA gained access to lunar landers as test beds saving tremendous development time and money and also helped move forward a reusable sub-orbital rocket vehicle with the potential for future off-theshelf availability for NASAs needs. In the Regolith Excavation challenge, over 40 robotic solutions were tested for a total cost to NASA of $750,000. The value of just knowing which techniques and technologies do not work was worth far more than that small investment. This challenge was also notable in that a group of students beat out the professionals. The Astronaut Glove competition not only generated significantly improved
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some entrants will spend as much as 5 times the prize amount in their efforts with expenditures of 2.5 times the prize purse being relatively common

The value of just knowing which techniques and technologies do not work was worth far more than [the] small investment.

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In Defense of Space Prizes (cont.)

glove designs for NASA, but has also generated two companies founded by the winning and runner-up teams to pursue commercial opportunities. In this case, Peter Homer the winner was an individual inventor and virtually unknown to NASA. Prizes work. Challenges work. Commercial competition works Prizes work. Challenges work. Commercial competition works. Prizes not only significantly leverage scarce tax dollars, they also greatly expand participation, accelerate innovation and create breakthroughs and affordable solutions that a top down government contracting methodology can never hope to duplicate. Prize awards are also likely to be spread over many years, and some may never be won, yet the benefits will still be generated from the commercial activity they inspire. As for the prize winners, they not only recoup part of their expenditures, they also receive NASAs seal of approval and a very public acknowledgement that their solution was best. The credibility this gives the winning team allows them to more easily raise capital from skeptical investors and more effectively compete for follow-on commercial and government projects. I cannot imagine a more obvious way to win the future than using prizes to unleash the entrepreneurial fervor of American ingenuity.

By Hoyt Davidson Near Earth LLC

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Are FSS operators facing a GX moment?

With much fanfare, in 2010 Inmarsat PLC announced that it was investing $1.2 billion in a breakthrough new program: Global Xpress (or GX). In addition to being a technological tour de force with near global coverage at planned speeds of 50 mbps, Global Xpress represented a strategic departure for Inmarsat, which heretofore had been committed to providing service using the Mobile Satellite Service (MSS) band. In contrast Global Xpress will use the Ka band, which has previously been used for providing fixed services, and radically different user terminals as a result. Combined with its extensive reuse of spot beam technology to provide lower cost capacity, GX represents a new type of service for Inmarsat providing new capabilities that substantially augment their legacy capabilities.

GX represents a new type of service for Inmarsat providing new capabilities that substantially augment their legacy capabilities

Inmarsat Global Xpress spot beam coverage However, this new capability is coming at substantial cost! Inmarsats announcement came on the heels of its $1.5 billion investment in Inmarsat 4 satellites, which were finished just two years earlier. Given that the Inmarsat 4 series has a design life of 13 years, this substantial incremental expenditure for GX is going to need to result in equally impressive revenues to justify itself and it looks set to at least partially cannibalize the revenues its predecessor Inmarsat 4 system is generating. While its hard to say that this is a direct consequence, Inmarsats equity has suffered since the Global Xpress announcement as compared to other public FSS operators such as SES and Eutelsat (recent problems at Lightsquared have also contributed, as well as increased MSS competition in general).

Inmarsat 4 satellites, which were finished just two years earlier

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Are FSS operators facing a GX moment? (cont.)

Global Xpress represented the logical response take the best of the competing technologies, combine it with Inmarsats market leadership and print money

We are quick to note that Inmarsat is simply responding to technological and competitive dynamics that are affecting its core business and are not criticizing in as much as we believe it had little choice. In 2010, Inmarsat was facing pressure from service providers such as Ship Equip and KVH that employed tracking satellite antennas using Ku band capacity, which greatly lowered the cost per bit compared to Inmarsat 4. Likewise, in the case of technology, ViaSats HTS satellite program as well as Hughes Spaceway and Jupiter programs proved that with vast new spectrum resources and heavy spectrum reuse designs satcom cost per bit can come down by more than an order of magnitude compared to traditional Ku band. Global Xpress represented the logical response take the best of the competing technologies, combine it with Inmarsats market leadership and print money. All well and good, except this effectively meant that Inmarsats investment in Inmarsat 4 was, at least partially, stranded and as the market recognized this over time it got priced in. But then, if Inmarsats stock is being penalized because of the heavy investment needs of Global Xpress, which in turn we would argue was driven by evolution in technology and the marketplace beyond Inmarsats control, the question arises whether the remaining FSS operators face a similar risk from the advent of HTS satellites. With their 50+ satellite fleets and substantial financial leverage to boot (especially at Intelsat), this is not a trivial issue were talking about ~$10 billion in sunk fleet investments. While the marketplace will be the ultimate arbiter, ViaSats Exede broadband offering (soon to be augmented by an enhanced HughesNet) offers broadband connectivity at a breakthrough cost per bit that is likely to

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Are FSS operators facing a GX moment? (cont.)

seriously affect demand for Ku VSAT networks in the North American market. We already know that Hughes has transferred significant amounts of Ku traffic from other FSS birds to its own SPACEWAY Ka bird releasing the unused Ku capacity into the marketplace. With over 200 Gbps of capacity between them, ViaSat-1 and Hughes own Jupiter satellite are likely to extend this trend, further depressing conventional Ku demand in North America even as they drive expansion of the overall market for satcom. Beyond North America, Newsat, Avanti, Eutelsat, Yahsat and others also have multi spot beam high capacity satellites that are going to remake these markets as well. So, what is the magnitude of this effect on the operators? First, we need to point out that these new satellite designs are optimized for data networking (typically via VSAT), not broadcasting. So, while they do very well for carrying enterprise and government data traffic, they offer no particular advantage for distribution of video to consumers or cable head ends. In fact, given the higher cost of these massive spot beam designs as compared to conventional satellites, employing them for these services may not always be capital efficient. So, if the real threat is to networking traffic versus video broadcasting, who is at risk? The operators use somewhat different language to describe their respective customer bases, so we have limited visibility into their revenue sources. With that said, according to its 2011 SEC form 10-K, Intelsat received 47% of its revenue from Network Services and 29% of its $10.7 billion backlog was for these services. At year end, Intelsat had $6.0 billion (net of depreciation) of satellite assets. Likewise, SES receives 25% of its revenue from voice and data services, with 6.6 billion in total backlog (no breakdown by type was given). In the case of Eutelsat, which derives 20% of its revenue from data services, at year end 2011 the firm had 5.3 billion in backlog, 93% of which was video leaving the firm significantly less exposed to networking traffic. Finally, in the case of Telesat, 42% of revenues come from enterprise services against a backlog (type unspecified) of $5.4 billion. If the untimely obsolescence of a significant amount of satellite capacity drives a new round of capex as operators upgrade their fleets, much as Inmarsat had to, who is best positioned to spend the cash? Looking at the finances for the larger FSS firms, we start with Intelsat, which has $15.5 billion in net debt (8.1x EBITDA). For comparison, SES has net debt/EBITDA of 3.0x and Eutelsat has net debt/EBITDA of 2.5x. In the case of Telesat, after adjusting for a proposed dividend recap, the firm carries net debt to EBITDA of 5.1x. In coming years, the ability to more aggressively pursue the opportunities this potential upgrade cycle represents could be a value differentiator for investors and the less levered players are going to have greater flexibility.

given the higher cost of these massive spot beam designs as compared to conventional satellites, employing them for [data networking] may not always be capital efficient

If the untimely obsolescence of a significant amount of satellite capacity drives a new round of capex as operators upgrade their fleets , who is best positioned to spend the cash?

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Are FSS operators facing a GX moment? (cont.)

Balancing this potential negative impact to the global FSS operators fleet valuation, we note that the trend to extract new revenue streams from depreciated satellites that we identified in 2009 (largely by virtue of using tracking antennas to monetize inclined capacity - see Turning Space Junk into Cash at www.nearearthllc.com/analysis/presentations/vol5.3.3.pdf) remains intact. In addition, the FSS operators have significant advantages that Inmarsat does not diverse service revenue streams (i.e. data and broadcast) as well as substantial booked backlog. Thus, we expect the financial effects of a new HTS inspired capex cycle to be significantly more muted in their case than has been the case with Inmarsat. We suspect the major FSS companies are all over this new development and certainly have more time to consider their responses. All of them have the financial and technical resources to respond, if they so choose. However, predicting the level and timing of new market demand created by HTS price points is not a trivial endeavor. Some will get it right, some will bet wrong. In our view, the less risky path is to be bold like Inmarsat rather than denying the nearer term fleet obsolescence the arrival of HTSs may represent. Potential beneficiaries of an accelerated construction cycle would also include satellite manufacturers such as Loral, Astrium and Boeing and launch service providers such as ILS and SpaceX. Alternatively, the pressures from this sea change could drive new rounds of M&A activity, as operators figure that they can buy faster than they can build. We suspect that investors in several of the smaller operators mentioned above could view this as their ultimate exit strategy. Of course, the ultimate winners will be customers with lower cost, better coverage service. And, who can complain about that?
By John Stone Near Earth LLC

we expect the financial effects of a new HTS inspired capex cycle to be significantly more muted in [the FSS operators] case

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Virtual Worlds and Real Dreams

Poor Mr. Falcone. What started as a glorious dream a wireless network spanning from sea to sea fashioned out of some underused spectrum is now rapidly disintegrating into a melee of claims, counterclaims, unforeseen technical barriers, FCC actions and an unending series of embarrassing newspaper headlines. What a mess. Less talked about will be role of the one piece of the story that was so critical that its criticalness was often just assumed - GPS Whatever the fate of Falcones Lightsquared dreams, fund or fortune, you can be sure we and a whole lot of other watchers will be studying the history and the aftermath of this spectacle and drawing lessons for future moguls. Some will note the cavalier attitude to market incumbents while others will note the close ties with government regulators. All sorts of wonderful things can happen when one aligns themselves with a major government mandate, in this case rapid deployment of mobile and rural broadband, unless of course an even more powerful government constituency has different priorities. Still others will cite the high lifestyle and risk-taking attitude for the plunging lows as much as for the soaring heights. Sometimes the risks are so large you just need a believing billionaire to make it happen or not. Less talked about will be role of the one piece of the story that was so critical that its criticalness was often just assumed - GPS. It has become so pervasive, so crucial to the modern world, that even the first hint that the Lightsquared network would interfere with it, even a tiny bit, was enough to cause serious concern by everyone involved. So many applications automotive, agriculture, aviation, military, logistics and many others depend on it that in retrospect, it is hard to see how any group, no matter how powerful, could have gone up against it and won. GPS and its associated positioning and navigation applications singlehandedly beat out wireless spectrum shortages, national broadband plans and billion dollar hedge funds. One lesson we can draw from this story is that the need to know where you are and how to get to where youre going can often be much more important than being able to communicate from where you are. History records that it was the compass and the astrolabe that discovered continents and conquered the oceans, long before the telegraph and radio were but a glint in an inventors eye. Mapmaking and surveying were arts at least hundreds of years older than any Pony Express. Now, not just GPS satellites, but digital roadmaps, satellite images, triangulation from cellular base stations and wifi hotspots, even 360 degree fully immersive streetview images help people, businesses and things find their way. Surely, as the multitude and economic importance of applications increase, the demand for precision, resolution and timeliness will only get more intense.

it was the compass and the astrolabe that discovered continents and conquered the oceans, long before the telegraph and radio

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Virtual Worlds and Real Dreams (cont.)

Some of this demand will be met through improved GPS or competitors to GPS (such as the Russian GLONASS or the Chinese Compass-Beidou) or by any number of GPS augmentation systems. Higher resolution and more timely images of the Earth will likely be met by larger and more capable constellations of imaging satellites and airborne platforms. Still other demand, such as for places, street layouts and people locations, will come from the crowd, the lively cacophony of user-created content that has exploded data generation. Never in human history has more of our environment been so precisely tracked, recorded and virtualized as it is now, all for want of knowing Where am I?. In Information superhighways get streetwise (January 2010), we postulated that the virtualization of the real world, implemented in part by Google StreetView and others, would be just as valuable if not more so than the many virtual worlds that are served up by online games and social networks. We thought this because, as much as our attention is increasingly being diverted online, we never will and cannot replace the real world as a place where we interact, meet-up, experience and conduct commerce. What we will have instead is a melding of the real and the virtual, where virtualizations are being used to support interaction in the real world. At first this means location-based services, such as Foursquare and Facebook Places. Then there is augmented reality, where we use mobile devices to superimpose virtual entities and information over the real world. Some have more esoteric but practical ideas, such as identifying physical addresses with virtual identifiers and establishing hyper-local geographic social networks. Having virtualized the real world for our benefit, theres no reason not to flip things around and use the full array of data processing and sensor technology to let unmanned systems go wherever we wish autonomously. While easy enough in a virtual world, where there are no constraints on where you can go and what you can do, the real world is trickier. Physics, geography and weather, not to mention city streets, buildings and even legal boundaries and traffic laws are all obstacles and constraints. But our compass and astrolabe come in handy once more. GPS helps with coordination; satellite images, up-to-date weather-reports, street maps and places and the knowledge of the cloud helps some more. Add advanced cameras and sensors to monitor local changes and conditions and inexpensive machine intelligence to tie them together in a package. Now we have everything we need to navigate the world. Energy and an engine make it go. The possibilities are endless. Google took all of the above and more and built the driverless car. Now you can have a car that drives across the country with little more need for driver interaction than refueling. Maybe the future will be less about driving and more about efficient transportation and just enjoying the ride.
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Higher resolution and more timely images of the Earth will likely be met by larger and more capable constellations of imaging satellites and airborne platforms

Having virtualized the real world for our benefit, theres no reason not to flip things around

Virtual Worlds and Real Dreams (cont.)

If you had a fleet of affordable, eminently navigable but greatly autonomous robotics with almost total freedom of the sky what would you do with them?

The Google driverless car. Autonomous, but very connected. But why just stick to roads? If only the FAA would let amply creative inventors use them in American airspace (and indications are that it may start doing so), unmanned aerial vehicles may become the next major application. Already, small quadrotors simple but very stable helicopters with four rotors are proving popular toys for lazy Sunday afternoons. For others they have become a delightful engineering platform. In the last few months, very popular videos of the latest demonstrations of coordinated swarms of quadrotors from the University of Pennsylvania, ETH Zurich and others have made the rounds. For a sample of some of them, be sure to take a look at www.kmelrobotics.com

Simple, small and agile quadrotors For some, this is almost frightening but for others it is opportunity. If you had a fleet of affordable, eminently navigable but greatly autonomous robotics with almost total freedom of the sky and the same access to data and intelligence as the Google driverless car, what would you do with
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Virtual Worlds and Real Dreams (cont.)

them? If you are the government, you might slap a small camera on some and use them to keep an eye on citizens. If you were a citizen, you might use the same to keep an eye on government or your teenaged daughter. If you were an enterprising sort of chap, then how about building a transportation network? The internet was abuzz this week about a Tacocopter service, purporting to use a fleet of quadrotors to deliver tacos right to their customers, wherever they and their smartphone happened to be. The concept turned out to be part joke, part concept, but we are not laughing. Another startup and spin-off of Singularity University, Matternet (www.matternet.net) is aiming to build a roadless transportation network using low-cost unmanned aerial vehicles to serve the rising one billion with point-to-point package delivery in developing countries. An interesting concept and one which may end up having more applications in the developed world, but no doubt a starting point for things to come. If it isnt already here, the era of personal autonomous robotics may soon be upon us, made possible where big data intersects hardware and the real world. In Building Blocks of the Future (March 2011), we noted that low-cost commodity hardware and almost frictionless sharing of ideas through digital channels was engendering an open hardware / do-ityourself / maker movement around hacking the physical world. In the year since, what we have seen only confirms that this trend is accelerating. Once affordable consumer 3D printers (a topic that merits its own entire article) are able to churn out driverless cars, quadrotors, aircraft, boats and who-know-what-else, the future starts looking rather interesting. Despite economic calamities, a daunting pile of public liabilities and a growing beadledom of officious regulators, America has always been where people dream big dreams. Some dream of building nationwide broadband telecommunications networks while others dream of deploying flocks of mechanical carrier pigeons delivering lifesaving packages around the world. Others dream of being able to go anywhere, anytime. Many think you have to be a big-time industrialist or a swinging hedge fund manager, a 1%er, to make those dreams a reality. We think otherwise this is the era that unprecedented access to information technology and the meshing of virtual and real worlds means anyone with an idea and a little gumption can make their dreams a reality. Ubiquity, at least in the ability to sense and then act anyplace and anywhere on Earth, used to be limited to gods, then to the Department of Defense, now someday soon even us private citizens may get a small taste of it.

the era of personal autonomous robotics may soon be upon us, made possible where big data intersects hardware and the real world

Despite economic calamities, a daunting pile of public liabilities and a growing beadledom of officious regulators, America has always been where people dream big dreams

By Ian Fichtenbaum Near Earth LLC

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NEAR EARTH ANALYSIS: MARKET COMPARABLES

Public Market Valuation Analysis of Selected Companies in the NEAR EARTH INDEX
($ in millions, except per share data) Stock Price: Market Value of Equity Enterprise Value (a) Enterprise Value as a Multiple of: LTM Sales LTM EBITDA LTM EBIT Price as a Multiple of: LTM EPS Trailing EPS (b) Forward EPS (b)

3/27/12 Fixed Satellite Services (FSS) Eutelsat Communications ( c) SES Global S.A. ( c) Loral Space & Comm. Inc. EchoStar Corporation Mobile Satellite Services (MSS) Inmarsat (f) Iridium Communications Inc. ORBCOMM Inc. Globalstar Inc. Satellite Ground Segment Comtech Telecommunications Globecomm Systems Inc. Gilat Satellite Networks KVH Industries, Inc. ViaSat Inc.

ETL.PA SESG.PA LORL SATS

$ $

28.18 18.80 79.65 28.71

$8,259.87 $10,005.42 $2,437.29 $3,967.88

$11,485.34 $15,415.20 $2,241.31 $4,814.81 Mean $4,652.44 $943.53 $96.78 $935.30 Mean $442.91 $304.41 $169.98 $136.10 $2,434.94 Mean $654.87 $164.13 $1,237.50 $286.29 Mean $31,451.81 $22,249.22 $8,858.01 Mean $23,155.68 $249,361.28 $200,698.44 Mean $20,780.29 $19,996.85 $46,177.14 $11,159.99 Mean $135,721.91 $47,184.65 $14,458.26 Mean $229.85 $119.95 $117.91 $148.70 $80.68 Mean $232,778.64 $475,223.40 $17,217.16 $169,788.33 $83,899.20 Mean $860.56 $909.71 Mean

7.2x 6.7x 2.0x 1.7x 4.4x 3.3x 2.5x 2.1x 12.8x 5.2x 0.9x 1.0x 0.5x 1.2x 2.9x 1.3x 0.5x 0.8x 1.6x 0.4x 0.8x 12.9x 10.9x 12.7x 12.2x 0.7x 2.0x 1.8x 1.5x 1.9x 1.4x 1.7x 3.7x 2.2x 2.4x 2.4x 2.2x 2.3x 1.1x 0.2x 2.3x 2.5x 0.5x 1.3x 3.2x 3.7x 3.5x 4.5x 1.7x 3.3x 2.4x 2.7x 2.5x

9.1x 9.1x 18.8x 9.6x 11.7x 5.4x 5.0x 12.8x n/m 7.7x 5.0x 8.5x 5.4x n/m 17.8x 9.2x 5.8x 4.2x 6.7x 5.0x 5.4x 8.3x 17.5x 20.5x 15.4x 4.5x 7.2x 5.7x 5.8x 8.7x 5.7x 6.6x 11.8x 8.2x 7.3x 6.5x 6.4x 6.8x 9.5x n/m 11.4x 27.3x 5.4x 13.4x 7.8x 10.5x 11.7x 12.1x n/m 10.5x 5.0x 6.3x 5.6x

13.2x 14.3x 25.9x n/m 17.8x 7.6x 12.3x 37.4x n/m 19.1x 6.4x 12.5x 23.0x n/m n/m 14.0x 8.2x 5.9x 7.1x 7.9x 7.3x 9.7x 31.0x n/m 20.3x n/m 15.3x 10.7x 13.0x 11.3x 7.7x 10.0x 16.5x 11.4x 12.5x 11.2x 11.6x 11.8x 15.0x n/m 14.0x n/m 9.2x 12.7x 8.6x 11.0x 20.9x 13.9x n/m 13.6x 8.5x 33.3x 20.9x

18.4x 12.2x n/m n/m 15.3x 9.5x 16.7x n/m n/m 13.1x 14.4x 13.8x 23.5x n/m n/m 17.2x 11.7x 10.3x 10.8x 17.4x 12.6x 11.3x n/m n/m n/m n/m 22.4x 13.4x 17.9x 14.3x 11.0x 12.7x 20.6x 14.6x 19.2x 14.6x 13.6x 15.8x 29.6x n/m 24.4x n/m 9.9x 21.3x 11.6x 17.4x 17.7x 20.6x n/m 16.8x 11.3x n/m 11.3x

17.5x 16.5x 20.4x n/m 18.1x 8.2x 11.9x 31.7x n/m 17.2x 24.3x 18.8x 16.1x 36.6x n/m 24.0x 13.0x 9.5x 12.1x 14.7x 12.3x 37.0x n/m n/m n/m n/m 13.5x 15.6x 14.5x 14.2x 11.8x 11.1x 32.1x 17.3x 16.1x 14.7x 16.2x 15.7x 23.4x 11.9x 16.3x 33.5x 8.1x 18.6x 12.1x 14.0x 18.8x 15.3x n/m 15.0x 11.3x 29.2x 20.2x

15.2x 16.5x 16.8x 27.9x 19.1x 8.2x 9.5x 21.1x n/m 12.9x 23.5x 15.9x 20.1x 22.1x n/m 20.4x 11.4x 7.7x 11.2x 12.8x 10.8x 31.4x n/m n/m n/m n/m 12.5x 13.9x 13.2x 12.7x 11.2x 9.0x 20.5x 13.3x 13.9x 12.2x 13.1x 13.0x 15.1x 10.2x 15.4x 24.5x 7.4x 16.0x 10.8x 12.3x 16.8x 13.0x n/m 13.2x 10.4x 16.0x 13.2x

ISAT.L IRDM ORBC GSAT

$ $ $

4.60 9.01 3.80 0.74

$3,285.54 $662.77 $173.55 $221.37

CMTL GCOM GILT KVHI VSAT

$ $ $ $ $

33.34 14.45 4.02 10.62 47.48

$643.13 $331.05 $163.80 $153.99 $2,031.67

ORB CDV.TO MDA.TO OHB.DE

Satellite Space Segment Orbital Sciences $ COM DEV International (d) $ MacDonald Dettwiler and Associates (d) $ OHB Technologies (c ) Towers American Tower Crown Castle SBA Communications General Telecom Sprint Nextel Corporation AT&T Verizon Communications, Inc. Satellite Broadcast (DBS and DARS) British Sky Broadcasting (f) DISH Network Corp DirecTV Group Inc. Sirius XM Radio Cable Television Comcast Corporation Time Warner Cable Inc. Cablevision Systems Corp Machine-to Machine Communications Digi International Inc. Sierra Wireless Incorporated Telular Corp. Numerex Corp Telit Communications plc (f) Big Data and Mobile Microsoft Corporation Apple Inc. Yahoo! Inc. Google Inc. Amazon.com Inc. Satellite Imagery GeoEye DigitalGlobe Inc.

13.29 2.08 44.15 13.56

$782.91 $159.19 $1,410.29 $314.07

AMT CCI SBAC

$ $ $

62.10 53.14 50.70

$24,445.04 $15,443.02 $5,544.55

S T VZ

$ $ $

2.83 31.64 38.66

$8,478.68 $187,530.28 $109,562.44

BSY.L DISH DTV SIRI

$ $ $

6.93 32.53 48.20 2.25

$19,242.91 $14,542.54 $33,321.14 $8,920.01

CMCSA TWC CVC

$ $ $

30.17 81.31 14.90

$81,637.91 $25,612.65 $4,087.22

DGII SWIR WRLS NMRX TCM.L

$ $ $ $

11.00 7.35 8.64 10.06 0.53

$281.93 $230.06 $131.24 $152.31 $85.38

MSFT AAPL YHOO GOOG AMZN

$ $ $ $ $

32.52 614.48 15.43 647.02 205.44

$272,582.64 $572,824.40 $19,137.83 $210,210.33 $93,475.20

GEOY DGI

$ $

24.64 13.42

$547.50 $621.61

High Mean Low

OVERALL INDEX 12.9x 27.3x 3.2x 9.0x 0.2x 4.2x

37.4x 14.0x 5.9x

29.6x 15.1x 9.5x

37.0x 17.9x 8.1x

31.4x 15.1x 7.4x

(b) EPS estimates from Thompson First Call. Near Earth does not estimate EPS and does not condone or v alidate these estimates. (c ) Conv erted to US $ from Euro at an ex change rate of 1.3319 US $ per Euro. (d ) Conv erted to US $ from C$ at an ex change rate of 1.0045 US $ per C$. (f) Conv erted to US $ from British Pound at an ex change rate of 1.5948 US $ per British Pound. Member of NEAR EARTH SATELLITE INDEX Member of NEAR EARTH WIRELESS TELECOM INDEX

n/m Not Meaningful. n/a Not Av ailable

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NEAR EARTH ANALYSIS: M&A TRANSACTIONS

Selected Satellite, Telecom & Aerospace Transactions
(US$ in millions unless noted) Date Announced Acquiror Satellite Operators 09/23/09 GHL Acquisition Corp 10/01/09 ViaSat, Inc 07/28/10 Measat Global NS (Ananda Krishnan) 02/14/11 Echostar Corporation 01/13/12 Market 02/21/12 Abertis Telecom Ground Equipment & Systems Integrators 05/12/08 Comtech Telecommunications Corp 05/09/09 Rockwell Collins 03/05/10 Integral Systems 06/16/10 Teledyne Technologies, Inc. 10/13/10 Gilat Satellite Networks 11/26/10 Veritas Capital 06/03/11 Honeywell International Satellite Managed Network Services 06/01/09 Globecomm Systems Inc. 11/23/09 Inmarsat plc 03/08/10 Globecomm Systems Inc. 05/21/10 Harris Corporation 11/08/10 Harris Corporation 03/31/11 Inmarsat plc 08/02/11 EADS Astrium Aerospace and Defense Equipment 05/12/08 Finmeccanica SPA 05/13/08 Cobham plc 06/04/08 Cobham plc 12/16/08 Sierra Nevada Corporation 12/23/09 OM Group 03/05/10 Orbital Sciences Corp. 05/16/11 Kratos Defense & Security Solutions 09/22/11 United Technologies Aerospace and Defense ISR and Analysis 06/30/10 The Boeing Company 10/13/10 Veritas Capital 12/08/10 GeoEye, Inc. 12/20/10 Raytheon Company Video Distribution 03/12/09 Harmonic Inc. 10/01/09 Cisco Systems Inc. 05/06/10 Harmonic Inc. General Telecom 08/07/08 01/10/09 12/24/09 (Wireless) Verizon Wireless Verizon Wireless Sprint Nextel Corp. Equity Value (a) 500.0 568.0 1,651.8 1,418.0 6,131.3 937.3 Transaction Value (b) 517.3 500.0 R 2,259.7 2,038.6 9,326.6 937.3 Mean 223.6 130.0 34.7 35.0 130.0 545.2 491.0 Mean 7.6 110.0 15.0 525.0 347.5 159.5 960.0 Mean 4,930.0 425.0 416.0 26.6 171.9 55.0 250.9 18,400.0 Mean 765.4 815.0 46.0 505.5 Mean 47.6 3,622.0 274.0 Mean 2,757.0 28,100.0 509.0 Mean 30.7 271.0 113.2 22.9 163.0 64.5 18.2 42.0 100.0 Mean Transaction Value/ LTM LTM Sales EBITDA 1.6x 2.4x 7.3x 1.9x 7.9x 4.3x 4.2x 1.5x 0.5x 1.0x 0.9x 1.9x 1.5x 1.4x 1.2x 0.6x 1.6x 0.8x 1.5x 2.0x 2.8x 1.5x 1.5x 1.4x 0.9x 1.4x 0.7x 1.4x 1.1x 1.3x 2.3x 1.3x 2.5x 1.3x 1.7x 2.2x 1.9x 0.8x 4.0x 2.6x 2.5x 4.1x 2.9x 0.4x 2.5x 3.0x 2.3x 2.8x 1.0x 1.1x 1.1x 1.2x 1.2x 2.0x 1.7x 5.6x 6.6x 11.0x 8.8x 10.1x 5.4x 7.9x 16.0x n/d n/d 6.0x 10.6x 14.1x 13.8x 12.1x n/d n/d n/d 9.7x 8.5x n/d 10.1x 9.4x 11.0x 6.8x 12.1x 23.3x n/d n/d n/m 11.1x 12.8x 31.4x n/d n/d 17.3x 24.4x n/m 18.7x n/d 18.7x 9.7x 8.3x 4.4x 7.5x 6.9x n/m 7.5x 3.9x 8.2x n/d n/m 8.4x n/d 7.0x

Target Iridium Satellite LLC WildBlue Coimmunications, Inc. Measat Global Bhd. (40.44% share) Hughes Network Systems, LLC Eutelsat (16% share) Hispasat (13.23% share)

Radyne Datapath, Inc. CVG-Avtec Systems, Inc. Intelek plc Wavestream Corporation CPI International, Inc. EMS Technologies

201.9 130.0 34.7 28.0 130.0 393.1 506.0

Telaurus Communications LLC Segovia, Inc. Carrier to Carrier Telecom BV CapRock Communications Schlumberger GCS Ship Equip International AS Group Vizada

7.6 110.0 15.0 525.0 347.5 159.5 960.0

DRS Technologies Inc M/A-COM Sparta Inc SpaceDev, Inc. EaglePicher Technologies LLC GD Advanced Information Systems Integral Systems Goodrich Corp

3,358.0 425.0 416.0 31.7 171.9 55.0 223.7 16,500.0

Argon ST, Inc Lockheed Martin EIG SPADAC Inc. Applied Signal Technology, Inc.

807.1 815.0 46.0 539.0

Scopus Video Networks TANDBERG ASA Omneon, Inc.

78.3 3,322.0 274.0

Rural Cellular Corp Alltel Wireless Virgin Mobile USA

728.0 5,900.0 348.0

Machine-to-Machine Communications 11/21/08 EMS Technologies Inc. 12/02/08 Sierra Wireless Inc. 07/01/09 Inmarsat plc 01/22/10 Francisco Partners 06/29/10 Gemalto NV 11/08/10 Novatel Wireless, Inc. 02/24/11 ORBCOMM 12/05/11 Telular 02/15/12 Itron, Inc.
(a) When Equity Value w as not disclosed, Transaction Value w as used

Satamatics Global Ltd. Wavecom SA SkyWave Mobile (19%) Cybit Cinterion Wireless Modules GmbH Enfora Inc. StarTrak SkyBitz SmartSynch, Inc.

30.7 306.0 113.2 22.9 163.0 64.5 18.2 42.0 100.0

(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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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

NearEarthLLC FromTheGroundUp

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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.

NearEarthLLC FromTheGroundUp

Page24/24 Volume8,Issue1