We are the leading provider of commercial satellite services to the government sector, according to NSR, with a 46% share of the U.S. military and government use of commercial satellite capacity worldwide. With 50 years of experience serving this customer set, we have built a reputation as a trusted partner for the provision of highly customized, secure satellite-based solutions. The government sector accounted for 19% of our revenue for the year ended December 31, 2013, a decline of 7 % from 2012.  Government contracted backlog totaled $577 million at December 31, 2013, as compared to $744 million at year-end 2012.

Of our two primary service types we market to the government, our on and off-network satellite capacity sales are generally characterized by single year contracts, which reflects the U.S. Department of Defense procurement rules with respect to our types of services. In 2013, the U.S. government budget sequestration reduced the level of activity in our government business, causing our annual renewal rate to be 81% as compared to our prior three-year average of 85%.

In addition to satellite capacity services, we also market hosted payloads, under which we provide a proprietary government-owned satellite payload a ‘shared ride to orbit’, integrated with one of our spacecraft.  Hosted payload programs are generally characterized by contracts with service periods extending up to the 15 year life of the satellite.

We are an attractive supplier to the government sector because of our ability to leverage not only our assets (on-network services) and global footprint, but also our ability to combine our services with other space-based solutions (off-network services), providing a single contracting source for multiple, integrated technologies. Our solutions support a number of government applications, from highly complex, global mobility networks, to in-theater private data networks, as well as morale and welfare support, such as private entertainment networks.  We also support intelligence, surveillance and reconnaissance activities, such as the communications channels for operating unmanned aerial vehicles.

In 2013, recognizing the coming shifts in government spending levels, we sought to reposition our business, focusing on the provision of more complex, end to end solutions that include use of our ground network as well as our satellite capacity.  We have been successful in implementing this strategy, as we seek to increase our value-add to the important government sector.  We were selected as an approved provider under the Future COMSATCOM Services Acquisition program, and have a solid track record in winning the business for which we compete under that program.

In 2014, amidst a challenging budget environment, we will continue to build our end-to-end capabilities.  In addition, we will persevere in our efforts to lobby for procurement reforms that will allow our government customers to evaluate and procure commercial satellite capacity on a long-term basis, improving the economic benefits to the government and enhancing our ability to partner with the government, aligning our inventory planning to their future requirements.