the sky's no limit for newsat

Business Spectator
The sky's no limit for NewSat

Robert Gottliebsen, Management Insights

Published 5:03 PM, 6 Sep 2011 Last update 10:05 AM, 7 Sep 2011
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Our Management Insights interview with the chief operating officer of NewSat, Michael Hewins, is an inspiration to all those who believe small companies can succeed in the current environment if they have the right technology.

Incredible as it may seem, the low-cap Australian-listed NewSat provides the satellite communications for the US land forces in Afghanistan.

The Australian army believes that it is better to use satellites linked to China for its Afghanistan military satellite communications.

NewSat operates satellite teleports out of Adelaide and Perth and its services have been so successful in coordinating the US Afghanistan land forces that the US military wants NewSat to go the next step and extend its satellite operation from simply operating satellite communication to owning a satellite or satellites.

Remember this is a company whose shares are at 0.7 cents and has a tiny capitalisation, although it is profitable. But with the right technology, and the US military behind you, anything is possible.

And that?s why American satellite expert Michael Hewins has come to Australia to join NewSat chief executive Adrian Ballintine ? to give NewSat the management clout to take the next step.

Satellite spots are not easy to obtain and NewSat has bought seven of them.

Hewins explains how a tiny company can fund a $US300 million to $US400 million satellite from Australia.

First, you need to sign up groups who will use the satellite so you have a guaranteed source of cash flow. NewSat has contracts with major satellite users who have so far agreed to spend $US239 million on NewSat?s proposed Jabiru-1, Ka-band, next generation satellite.

NewSat says Jabiru-1 will provide superior coverage over South East Asia, the Middle East and North Africa plus Australia. It will be Australia?s first independently-owned commercial satellite. NewSat still needs more contracts but the demand is building so a second satellite is now in the pipeline.

When NewSat has sufficient contracts they will go to both the French and American satellite launching groups and select one. The French and American export banks will provide 80 per cent of the funding and, given the secure nature of a satellite?s cash flows, global institutions will provide the equity.

So a tiny company can erect a $US300 million to $400 million satellite if it has mustered sufficient customer commitments. The American military favours Australia because we are uniquely placed to operate satellites and they think it is better to have Australians running their military communications than groups linked to the Chinese.

The Australian military thinks China is better than Australia and no doubt saved a few bob on the way through. The problem for Australians is that no one can believe that a tiny local company can actually fund a satellite. By contrast, overseas groups can see that anyone providing satellite services to US land forces in Afghanistan has to be good.

NewSat is one of the few original dot.com companies that were launched in the 1990s that has survived. In its previous incarnations it had operational links with Steve Vizard and Eddie McGuire, which is a long way from satellites.

The fastest growing satellite demand in Australia will be for minerals ventures and the NBN. No one is sure how the NBN will fund its satellite. They may buy a satellite spot, use the Chinese, or follow the US military to Australia.