Wednesday, August 23, 2006

Sirius' Satellite Constellation

August 23, 2006

There has been some chatter relating to the Sirius Satellite Radio satellite constellation. Specifically, the chatter deals with the expected life span of the satellites, which was slightly shortened in the last quarterly report issued by Sirius.

Before discussing the change, it might be beneficial to go through a bit of the history. Sirius launched 3 satellites into geosychronous orbit in 2001. The expected life span of these satellites was 15 years each. This meant that sometime prior to 2016, Sirius would need to launch new satellites. Sirius also has a fourth, fully paid for, spare satellite (of this same family) on the ground.

Over the past year or so Sirius has been paying for a launch vehicle in preparation for the launch of an additional satellite. That agreement called for a launch prior to 2010. Recently Sirius announced that they have contracted for a new satellite (life span of 15 years) that would be placed in geostationary orbit in late 2008 or early 2009.

The decision to contract a new, more powerful satellite, and to place it in geostationary orbit, necessitated a slight change in the use of the current constellation. The effect was that two of the three current satellites would have their “expected life span” decreased by 2 years. The third would remain at 15 years.

To be clear, the “expected life span” of a satellite is an estimate of how long the device is expected to function to acceptable levels. The satellites could well last longer than the “expected life span”.

When the new geostationary satellite is launched (assume early 2009), here is what the Sirius constellation will look like.

Satellite #1 – Geosynchronous orbit – good through 2016
Satellite #2 – Geosynchronous orbit – good through 2014
Satellite #3 – Geosynchronous orbit – good through 2014
Satellite #4 - Fully Paid For Ground Spare of the first generation family
Satellite #5 – Geostationary orbit – good through 2024

There are a few items here that are important to note:

- The change in “expected life span” is due to the use, and not an operational issue” Satellites have a limited supply of fuel. Burning the fuel at a greater rate will shorten the life span of a satellite. For example, 1 gallon of gas in a car can last you a month if only drive 1 mile per day. If you drive 30 miles in a day, you will have used all of the fuel.

- The changes made by Sirius are designed to increase the coverage and improve the consumer experience of Sirius. The new satellite, coupled with the new orbit delivers quality, and perhaps features that will enable Sirius to offer more to their subscribers.

- Upon launch of the new satellite, the entire constellation will have an average lifespan of 8 years remaining (15 + 7+ 5 + 5 divided by 4), instead of 7 years remaining (7 + 7 + 7 divided by 3) if things remained the same. More importantly the constellation now has a staggered lifespan which can be very beneficial to cash flow on the years ahead. This coupled with a spare on the ground still gives Sirius plenty of time and latitude to develop their next course of action.

- The new satellite may also mean that Sirius does not have to supplement the terrestrial repeater network to the extent that they otherwise might have. Terrestrial repeaters require leases and expenses to build out and maintain.

In simple terms, the life span of the current constellation will be shortened slightly, but the new satellite and its lifespan need to be taken into consideration as well. When you consider the new satellite into the constellation, the life span of Sirius’ constellation is better, more healthy, and more versatile than it would have been before, and the benefits certainly outweigh the negatives.

8/23/2006 01:38:00 PM

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