Boeing Awarded Contract for Satellites

Boeing Co. said Wednesday that it won a contract worth up to $1 billion to build three commercial satellites for Mobile Satellite Ventures, a start-up telecommunications company.

The contract, which also includes supplying ground support equipment, represents another boost to Boeing’s struggling satellite-making operations in El Segundo.

Boeing has been hurt in recent years by a prolonged slump in the telecommunication industry as commercial satellite sales have declined sharply and sales have been slow to recover.

Boeing has slashed nearly half of its workforce in El Segundo to about 5,000, although increased orders for spy and military satellites have helped recover some of the loss.

Wednesday’s order for the bus-sized satellites, known as 702s, is Boeing’s first major commercial sale since September 2004, when it sold three satellites to satellite television operator DirecTV Inc. Analysts at the time pegged the value of that deal at about $750 million.

Boeing said the Mobile Ventures deal was its largest commercial satellite sale in nine years in terms of its potential value. Boeing spokesman Eric Warren said that although the contract was a significant win, the company expected the commercial satellite business to “remain relatively flat over the next couple of years.”

Last year, Boeing’s backlog of civil and commercial satellites was 14, contrasted with more than 50 during its late-1990s heyday. Its production rate at that time was one a month.

Alexander Good, Mobile Satellite’s chief executive, said the Boeing satellite contract could be worth $500 million to $1 billion depending on how it exercised various options. The first satellite for MSV will provide cellphone-like service to customers in North America; MSV said it planned to use the third satellite to expand its service to South America. Its launch is planned for 2009.

MSV’s hybrid network would use satellites and land-based antennas to provide voice and data service. MSV said its system also would allow customers to use inexpensive, cellphone-style handsets instead of bulky, expensive satellite phones.

Boeing said the satellites, which would be assembled in El Segundo, would be among the largest and most powerful systems it has ever built. A satellite can cost $100 million to $250 million, and a more sophisticated model can take 18 months to build.

Shares of Chicago-based Boeing rose $1 to $70.10.