SpaceX owes us $50m or a free flight after destroying Amos 6 satellite, says Israel's Spacecom

It's not just Facebook that is disappointed by the SpaceX Falcon 9 rocket explosion at Cape Canaveral Air Force Station in Florida on Thursday 1 September – Israeli satellite operator Space Communications (Spacecom) has been seriously affected and is demanding compensation for its communication satellite, which was also destroyed in the blast.

Spacecom was planning to launch the Amos 6 satellite into orbit in order to provide digital satellite TV coverage for Bezeq Israel Telecom, Israel's largest telecoms provider. At the same time, among other customers, Amos 6 was also slated to provide Facebook with wireless internet services in Africa.

However, these dreams were crushed when the Falcon 9 rocket exploded just before a routine engine-firing test, while it was being fuelled with liquid oxygen and rocket-grade kerosene propellant on the launch pad. SpaceX said that the explosion originated in the upper stage liquid oxygen tank and that it considers the incident to be an "anomaly".

Many Spacecom customers were counting on Amos 6

The loss of Amos 6 comes as a particularly hard blow for Spacecom, as it previously lost contact with its Amos 5 satellite earlier this year, and it was counting on Amos 6 for new customers and to move customers over from the much older Amos 2 and Amos 3 satellites.

Spacecom announced the news on Saturday 3 September, reassuring investors that it has the financial resources to honour early redemption on all bonds – a total of $232m (£174m) – because the company is due a total of $227m in compensation, including either $50m from SpaceX, or a commitment of a free satellite launch in the future, according to Haaretz.

Israel Aerospace Industries, the manufacturer of the satellite, will have to shoulder the entire cost of Amos 6 and refund Spacecom a total of about $205m, and Spacecom will also be able to claim $39m in premium payments it made to its insurer, since its $330m insurance policy for Amos 6 wasn't yet in force since the satellite hadn't been launched into orbit.

Explosion puts merger into doubt

However, Spacecom will also need to make repayments to the Israeli government for being unable to fulfil a federal contract using the satellite, or this will have a long-term impact on Israeli taxpayers. Spacecom's shares fell by 9% on Saturday 3 September and then by a massive 32.5% on Sunday 4 September on the Tel Aviv Stock Exchange, while its bonds fell by 8.3%.

But the beleaguered satellite operator also has other problems, as it was due to be bought by Chinese satellite telecoms technology provider Xinwei Technology Group for $285m, and that deal was contingent on Amos 6 being successfully launched into space. Spacecom is now scrambling to work on a new agreement with Xinwei in the hopes that the merger will still happen.