Boeing Receives Military Contract for Satellite System

Boeing Satellite Systems Inc., an El Segundo-based commercial satellite maker, said Wednesday that it won a contract potentially worth $1.3 billion to develop a constellation of satellites that would provide high-capacity communication links for the U.S. military.

The contract is the largest since Boeing Co. acquired the former Hughes space and communications business in the fall and marks the first time that the subsidiary has been named as a prime contractor for the Air Force.

Moreover, the Pentagon contract upends Lockheed Martin Corp.’s dominance of communication satellites for the military and represents Boeing’s biggest move to develop “off-the-shelf” commercial spacecraft for the military.

Lockheed Martin, based in Bethesda, Md., is the nation’s largest defense contractor and operates the satellite communications system for the military known as Milstar. Boeing Satellite Systems, which employs more than 8,000 workers in El Segundo, is the world’s largest maker of commercial satellites.

“This is a real coup for us,” said Boeing spokesman George Torres, adding that the military has increasingly looked to commercially available satellites to fill its communications needs.

Boeing’s contract has it essentially building an interim system, known as the Wideband Gapfiller Satellite System, until the next-generation military telecommunications system goes online. Boeing’s interim system, which includes participation by the Army, is slated to be launched in 2004.

The contract, which includes $160.3 million to design and develop the system with options to purchase six satellites, increases Boeing’s chances of winning a contract to build the next generation of military communications satellites, Boeing officials said. That generation would replace the current system by 2010.

Congress already has approved purchasing three satellites for the interim system. The satellites would be a variant of Boeing’s 702 satellite, the world’s largest commercial communications satellite available. A 702 satellite can carry up to 118 high-power transponders, more than double that of the typical satellite currently orbiting Earth.

Boeing officials said it has launched three 702 satellites for commercial telecommunication companies in the last year and has eight other commercial 702s on order. Depending on the configuration, the satellites range in price from $175 million to $250 million and can take up to 18 months to build, a Boeing spokesman said.

In addition to building the satellites, Boeing will lead a team of technology companies that would provide control equipment for the payload and the spacecraft. The team includes Northrop Grumman Corp.’s Logicon unit, which provides network-management software and operations.

The contract also could provide a boost to Boeing’s space and communications subsidiary in Huntington Beach, which makes the Delta IV rocket. The Air Force has contracted for 18 Delta rockets, which would be able to carry the satellites into space.

Boeing, whose shares rose 56 cents Wednesday to close at $62.56 on the New York Stock Exchange, acquired the former Hughes space and communications unit for $3.75 billion in October.