BUSINESSWEEK ONLINE : AUGUST 30, 1999 ISSUE
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INTERNATIONAL -- EUROPEAN BUSINESS

Q&A: France's Digital Satellite Queen Reaches for the Stars (int'l edition)


As chief executive officer of SkyBridge, Pascale Sourisse is working on one of the most promising fronts in the digital revolution: the construction of a new generation of satellite networks that will bring high-speed Internet access and other digital services to every corner of the globe.

As many a frustrated Web surfer can attest, ordinary telephone lines can no longer handle the rising tide of information flowing over the Internet. That's why phone companies, cable-TV providers, and others are wiring the globe with higher-speed lines. But millions of customers are far enough from densely populated urban centers to be economically served by these lines. That's where the satellite networks come in. SkyBridge is one of several companies racing to deliver high-speed data services via satellite antenna -- everything from high-speed Internet access to voice transmission and videoconferencing.

SkyBridge, founded in 1997 by French telecommunications giant Alcatel, expects to be one of the first to get its satellites into orbit. Its 80-bird network is due to be launched in mid-2002. In a recent interview with Business Week European correspondent Carol Matlack, Sourisse -- a 37-year-old French engineer who is one of the few female CEOs in the satellite industry -- talked about her company's plans.

Q: What is SkyBridge's target market?
A:
Our focus is on users who cannot easily be served by terrestrial services. Many of these will be individuals and small to medium-sized businesses in less densely populated regions. But a very important part of our market will be multinational clients that have a requirement for consistent high-quality service to all their sites. If you have a big company that has offices in 100 countries -- Alcatel has offices in more than 100 countries -- often you have factories and small offices outside the larger cities. It's very difficult to obtain services to all those locations because you would have to have agreements with (telephone) operators all over the world. Satellite is globally available and can be used to offer high-speed service to all locations.

Q: How will your services be marketed?
A:
SkyBridge will be a wholesaler of capacity to telecommunications operators and other service providers, which will themselves market the services to end users. There will be no direct link between SkyBridge and the end users. Our intention is to build partnerships with operators very early in the program. For example, we announced a few weeks ago an agreement with Telstra (the largest telephone company in Australia). They will be the service provider for SkyBridge in Australia, New Zealand, and Southeast Asia. We're discussing similar agreements with other operators in other regions. Our regional partners would be in charge of providing services in their regions, but they would also have access to the global capacity of our system to serve their multinational clients.

Our objective is to complement terrestrial networks, with a satellite solution that will allow operators to provide services at prices very similar to the prices available on terrestrial networks. From the very beginning, we've paid a lot of attention to pricing of the terrestrial solutions, and we've built in as a key requirement of SkyBridge that it can meet the same price levels.

Q: How does SkyBridge differ from some of the other proposed systems -- especially Teledesic, which is backed by Bill Gates, wireless entrepreneur Craig McCaw, and corporations such as Motorola and Boeing?
A:
Because of the approach we are taking, we are on schedule, and we will be very much ahead of the competition. Teledesic is also targeting broadband multimedia and Internet services, but we are very different. Teledesic will have switching equipment on their satellites and intersatellite links. It means that these are more complex satellites, more costly, and of course this has an impact on the price to the end user. It seems that the cost of their system will be more than $9 billion, maybe as much as $12 billion or $13 billion, which is much more than the approximately $4 billion we will need.

Another advantage of our system is that we are using a lower-frequency band, while all our competitors are on a higher-frequency band. The band we are using, the Ku band, has a much more robust signal than the higher-frequency band being used by our competitors. This means the signal is less likely to fade if there is heavy rain. Also, since the lower-frequency band is the one used by geostationary satellites, there is an economic advantage because the technology is already available and less costly.

Q: Aren't there some regulatory complications, since you will need to share the same frequency being used by big geostationary satellites for TV broadcasting?
A:
It's true that the band we will be using is the one used by geostationary satellites. But it is congested only over one arc, and the rest of the space is free. So we developed a concept of sharing the frequency with geostationary satellites. This concept raised new issues for international regulation, but it was discussed at the World Radio Conference in 1997, and approved. Now all that remains is to discuss the final technical values, which have to be approved at the next conference, in 2000.

Q: How much have you raised of the estimated $4.2 billion it will take to launch SkyBridge?
A:
We are not disclosing any numbers, but we have already raised a substantial amount of funding. We've raised equity funding from manufacturers. Alcatel is the largest shareholder, but we also have shareholders in Japan, and in the U.S., including Loral Corp. Also we have a Canadian shareholder and others in Europe. We plan to continue to raise funding in the form of strategic equity -- looking for partners that have a strategic interest in SkyBridge. We plan to raise vendor financing, and we will also raise debt on financial markets. We are planning an IPO for the year 2001. It's progressing well. Our concept is well received because of our approach to minimize the cost and minimize the risks.

Q: Have you had trouble finding investors because of the difficulties with the Iridium satellite telephone venture?
A:
It's true the problems with Iridium are creating a certain degree of uncertainty in the satellite industry. But the investors we talk to understand that we are nothing like Iridium. They are providing systems for mobile communications with small handsets, while we will provide high-speed access to the Internet for fixed terminals.

Q: How did SkyBridge start?
A:
It started as an R&D project within Alcatel, back in 1993. At that time, the Internet was just beginning. It was seen as something for the future -- and of course since then, it has completely exploded. I was assigned to manage the program in 1996, to transform it from R&D into an overall business initiative. Alcatel decided to set up a dedicated company in 1997. Initially Alcatel was the shareholder, then Loral joined in June, 1997, and then others. We have moved our headquarters from Paris to Bethesda, Md. The U.S. represents a very large market for SkyBridge, and in addition, we'll be raising a substantial part of the funding on U.S. markets.

Q: What is your background?
A:
My background is on the engineering side in telecommunications, but I've had several opportunities to work on the management side. I joined Alcatel in 1995 as director for planning and strategy for space activities. Before that, from 1990-94, I worked for the French Ministry of Industry, Post & Telecommunications. I also worked for France Telecom.

When I came to Alcatel and learned about this project, I could see right away that there was a lot of potential. Of course we had to work out a business plan and a financial approach, but we have done this. What we've done is to select a system which is as simple as possible, as inexpensive as possible, and as low-risk as possible.



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