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Fri 18 Apr 2014 10:10 AM

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UAE's role in the new space race

In the last five years, the UAE has invested heavily in a bid to become a new hub for the space industry. Are such plans realistic?

UAE's role in the new space race

In November last year, the skies around the Yasny launch base in the Russian province of Orenburg lit up as a Dnepr-1 rocket lifted off. Included on that rocket’s payload was DubaiSat-2, an advanced electro-optical Earth observation satellite. Ever since the launch, the satellite has been quietly tested, and at some point last week, it became fully operational.

The event was covered briefly in the local press, but in truth, the steady flow of satellite launches has become commonplace. Yet only five years ago the UAE was merely a blip on the global space radar.

While quietly building up the industry with launches of Etisalat-backed satellite phone company, Thuraya, in 1997 and Yahsat by Abu Dhabi investment vehicle Mubadala 10 years later, the country’s endeavours have been on a slow, though steady, trajectory.

Enter the high-profile investment in 2009 of Abu Dhabi’s Aabar Investment in British billionaire Sir Richard Branson’s Virgin Galactic commercial space flight company with a 32 percent $280m initial stake and all of a sudden the Middle East’s star turn in the industry grew.

At the same time, the Dubai government’s launch of the Emirates Institution for Advanced Science and Technology (EIAST), three years earlier was also beginning to bear fruit with the launch of DubaiSat-1.

DubaiSat-2 soon followed and the government has plans for a third entirely locally-developed third satellite, Khalifa-Sat, to be launched in 2017.

“Until about three years ago things were very boring in this business until there was a bunch of stuff that started happening — from SpaceX to space tourism to CubeSats and… planned missions to Mars, moon mining,” Thuraya CEO Samer Halawi told delegates at the Aerospace Summit in Abu Dhabi this month.

For Halawi, Thuraya’s “contribution to the excitement” has been the Thuraya SatSleeve — a product first launched in 2013 that transforms a person’s iPhone or, more recently, Android phone, into a satellite smartphone, providing access to phone calls, emails, instant messages and applications in satellite mode across the 161 countries in Thuraya’s coverage network.

“It pioneers the concept of bringing your own device to the satellite world and is trying to take the satellite world to be more exciting and more in line with the terrestrial world,” Halawi says.

For the past three years, Thuraya, which launched the first of its three satellites and the UAE’s first mobile telecommunications satellite in 2000 (its first satellite Thuraya-1 has since been decommissioned), has trebled its growth to 15 percent in 2013 in a declining industry and raised its earnings before interest and tax (EBIT) by 29 percent and bottom line by 66 percent.

“Most of that is coming from the focus on innovation and trying to find innovative and different business models to the satellite world that have not been adopted before, that have kind of limited our ability and our economics capability to bring things that are exciting to the world,” he says.

But Thuraya is by no means the UAE’s only satellite player.

Masood M Sharif Mahmood, CEO of Yahsat — a division of Mubadala - says it also has big growth plans. The company has two “birds in the sky” — with its major business supporting anchor customer the UAE government, including the UAE armed forces, as well as satellite broadband services that it hopes will serve 28 markets in the region by the end of the year.

He describes Yahsat, which was started in 2007 and launched its first satellite in 2011 and second in 2012, as having a “dual DNA” with both government and commercial interests. “For companies like Yahsat, for regional players who started by the backing of governments and are hoping to go towards the commercial route and to grow out of the state or the local player to more of the regional and global player, the advancement of the industry… in terms of cost, in terms of cost of technology, development of the business plans, is really crucial for us to be able to grow and to be able to, of course, take it to the next level,” he says.

Like many of its fellow advanced manufacturing firms in Abu Dhabi, Yahsat has sought to enlist the help of overseas expertise. In 2008, the company signed a deal with EADS Astrium and French firm Thales Alenia to build its satellites, with the manufacturing process taking 36 months. One of the key executives who helped broker that deal was Pascale Sourisse, then CEO of Thales Alenia, and now Thales’ senior executive vice president of international development.

“I think Mubadala is right to have an approach based on partnerships,” Sourisse says. “What it requires is a decision to invest based on the domain, and the UAE has indeed taken a decision to invest in aeronautics, as well as communications and cybersecurity.

“That’s the first step, which is essential, and after that, if you want to implement the system, it’s certainly very useful to work with trusted partners.”

Aside from the commercial satellite space, Thales has also developed close ties with the UAE’s armed forces as well. Last year, the French giant played a vital role in winning a key contract to provide ‘Falcon Eye’ optical observation satellites to the country, in a deal worth just under $1bn. The satellites are the most advanced ever sold by France to another country, and saw the European nation beat off stiff competition from American companies.

Sourisse says that this contract could result in the UAE gaining even more industry know-how as it gets to grips with the full capability of the two satellites, which launch at some point towards the end of this decade.

“We’re talking with our customer here in this country to finalise all the negotiations, so we expect case finalisation to take place rather soon in our view,” she says. “Then the next step will be the execution of the contract and obviously when the UAE has this tool in space, it will be possible to develop a number of different services.

“We are prepared also to work with them from an applications standpoint; we have a lot of experience in processing images from satellites, and then using those images in a number of applications.”

Other global companies are also interested in teaming up with the UAE’s bid to become the foremost Arab country in the satellite space. Lockheed Martin, America’s biggest defence contractor, may have lost on the Falcon Eye deal, but is clearly still hoping it can bring its expertise to bear.

“I think the expertise in Abu Dhabi and just the focus they have on transforming [this industry] is a very good catalyst for growth in the country,” says Marillyn Hewson, Lockheed Martin’s chairman and chief executive.

“We’re looking at commercial satellite capabilities that we could provide — earth observation satellites and things of that nature, and we have a large portfolio we can bring to bear.”

Mubadala Aerospace CEO Homaid Al Shemmari says while the aerospace industry is in its relative infancy in the UAE it aims to ultimately contribute one to three percent of Abu Dhabi’s total gross domestic product through aerospace, defence and satellites. Since 2006, he says, the company has followed the Abu Dhabi Vision 2030, which calls for investment in industries that the government will strategically target as it aims to diversify from its oil-based economy. Of those, aeropace, aviation, defence and satellites — all part of Mubadala Aerospace’s remit — are key.

While Al Shemmari is speaking broadly, Virgin Galactic has certainly taken heed of Abu Dhabi’s interest in the space market. Following Aabar’s investment into the company’s space flight operations, the first of which is slated to launch later this year with Branson and his family aboard, Virgin Galactic is clearly still eyeing a spaceport in the UAE capital.

“That, ultimately, as we’ve said in the past, is dependent on regulators in the US and the Emirates as well as stakeholders,” Virgin Galactic CEO George Whitesides says, speaking on the sidelines of the summit. “But I do think that prospect is fundamentally exciting both for the future of technology and also science education in this country.”

He says the company, which first flagged the idea in 2012, has had “conversations with US regulators about the possibility of exporting the system”.

“Obviously we’ve got a new type of system and so this is a new area for US regulators to consider,” he says. “What we’re trying to do is approach conversations with them in a measured manner so that we do it step by step.” Commercial space is an area of focus for the US government. The possibility of non-US customers for US aerospace products is obviously a priority and so we are getting positive attention within the US government around these concepts.”

Aerospace Industries Association president and CEO Marion Blakey says innovation-driven economies have benefitted dramatically from aerospace and defence industries and she believes Abu Dhabi is “moving in the right direction”.

“Aerospace and defence works well in clusters:  Seattle, Washington, Dellingham, Tacoma [in the US], we have a tremendous cluster there,” she told delegates on the opening day of the summit. “You also see that in Toulouse [France] where there is a lot of cross-fertilisation. Abu Dhabi is going to be one of those clusters, I project.”

Blakey also predicts the industry will see more public-private partnerships, with robust investment coming from the private sector. However, she acknowledges there are some areas best funded, or at least led, by the state.

Jean Yves Le Gall, president of the French Space Agency and former CEO of leading launch services company Arianespace, says the role of government agencies is two-fold: supporting non-commercial applications such as science and research and helping entrepreneurs to develop new space applications and “making space more popular”. He says the global trend, which he sees continuing through to 2030, is that space is “more and more oriented to consumers”, meaning space systems developed today are more cost driven.

However, Halawi says the government’s role in protecting spectrum is also a key issue. “If we don’t have a service to offer, because we don’t have spectrum, then you’re not selling satellites, you’re not launching satellites and the whole industry dies,” he says. Other issues are breaking regulatory barriers, reducing custom fees and reducing regulations that limit the use of satellite-related products. “Very little is being done on this front and there is no united body that is lobbying for all of this properly,” he notes.

Yahsat’s Mahmood says government support is an important kick-start for long-term programmes that require a big upfront capex investment, though eventually the entities need to become economically self-sufficient.

He points to figures on the structure of satellite operators, saying in the US 0-25 percent of operators were state-owned, compared to the Asia Pacific and Latin America area (40-60 percent), the Middle East (90 percent) and Russia (90-100 percent).

“Eventually these entities need to find their own balance and they need to be self-sufficient to have the flexibility and the freedom that the private sector has to be able to explore innovative and in some instances new frontiers,” he says.

If Virgin Galactic’s plan to build a spaceport in Abu Dhabi goes ahead — coupled with the billions of dollars that are being invested to build up the industry in the country — there is no reason why the UAE’s ambitions plans shouldn’t see it develop as a global hub for the space industry.

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