The decision to award the construction of Israel’s newest communications satellite to a state-owned company has probably saved the life of the production line and was likely done to preserve independence for defense communications.

The Israel Aerospace Industries (IAI) has announced that it was selected in an international tender to produce the Amos 6 communications satellite, which is to replace the Amos 2 sometime in 2016. The deal is worth $200 million and includes a satellite ground control station and operating services.

The firm that chose IAI is the Israeli company Spacecom, a publically traded company, which will use Amos 6 to bolster its fleet of satellites well into the next decade.

Though small, Israel’s space program is robust and it is only one of eight countries in the world to have produced and launched satellites into space. Its expertise is not just in observation, or “spy” satellites, but in communication satellites as well.

But this recent deal had been a make or break issue for the communications satellite branch of the state-owned IAI, the sole producer of satellites in the country. Spacecom had broken IAI’s monopoly in 2008 when it chose a Russian firm, ISS-Reshetnev, to build Amos 5, which was launched last December. 

Since then, IAI says it has improved its competitiveness to offer a better deal. In a statement, IAI said it has “implemented improvements in the engineering and production processes of communication satellites.”

IAI’s new President and CEO Joseph Weiss lauded the deal as a “significant leap forward in the capabilities of IAI and the State of Israel in space.” He added that various components to be developed for Amos 6 would “constitute an additional step toward achieving independence in the development and production of communication satellites.”

Still, the decision to award the Israeli aerospace company the lucrative contract was not entirely commercial. Some analyst say it was necessary for Israel to maintain its independence in space and that having an indigenous capability was not something the defense establishment would like to see fold, despite the costs. IAI reportedly sought intervention by the Ministry of Defense to save the country’s independence satellite capability.

“It didn’t save the satellite industry, but it certainly did save the communication satellite line at Israel Aerospace Industries,” Tal Inbar, Head of Space & UAV Research Center at the Fisher Institute for Air and Space Strategic Studies, told The Media Line.

“If the IAI didn’t get this contract they probably would have decided to stop manufacturing communication satellites or invest in it anymore,” he added.

Spacecom today operates Amos 2, Amos 3 and Amos 5, and in 2013 it is expected to launch Amos 4 that will boost links over Russia and India. Spacecom competes against some one dozen other global firms operating communication satellites in its market, including Telenor, Eutelsat and Intelsat.

When Spacecom chose Amos 5 it was looking at the bottom line. The Russians, aided by a government subsidy, had simply offered a cheaper price tag and the publicly traded Spacecom was compelled to accept it.

Now, the issue is so sensitive that Spacecom opted not to issue any press release in English to the foreign media about the new deal and declined to answer queries on the matter.

In a Hebrew press release issued last week, Spacecom notified the Tel Aviv Stock Exchange that it would enter into a contract with a “significant customer” to supply them with satellite communications services for 10 years for $95 million. It also said that this funding would provide $20 million up front to assist IAI during the construction of the satellite.

The U.S.-based Defense News reported that the “significant customer” was the Israeli government.  

Spacecom also said that it estimated the cost of launching Amos 6, including insurance and a full year of operation, would be about $85 million. Amos 6 is planned to replace Amos 2 at the end of that satellite’s life in 2016. The launch of Amos 6 is expected to take place in early 2015 and it is expected to have a life-span of at least 16 years, the company said.

Shortly after that deal was announced, a Canadian-based satellite producer, MacDonald, Dettwiler and Associates Ltd. said it had been awarded a $90-million-plus contract by IAI to supply the communications payload for the AMOS-6 satellite.

The Amos 6 will be IAI's 14th satellite. Ten of the satellites are still operational, and used for intelligence and communications missions.

“If you want to be an actor in the space arena then you have to be independent in more ways than one and not just produce and operate observation satellites. The communication satellites are important as well,” Inbar said.

“Look at the United States. They are operating UAVs over Afghanistan, and they couldn’t have done it without a (satellite) data link. If you are dependent on foreign suppliers then it limits your operational capabilities. Imagine if the U.S. needed to rely on the Russians or the Chinese for data links with their UAV operations in Afghanistan. They are sure not going to rely on them,” he said. 
For a country like Israel, that has contemplated long-range strikes against possible nuclear targets in Iran, this is doubly crucial. But winning the contract and staying aloft also sends a commercial message.

“If you know how to build a satellite that can stay aloft for years like the Amos, then that also resonates on your other capabilities in space,” Inbar added.