Lockheed Martin Commercial Space Systems had been competing against the European consortium Astrium (EADS)-Alcatel Espace and a US-Japanese consortium led by Sumitomo Corporation.

The deal was signed in Hanoi between the US giant and the state-owned Vietnam Posts and Telecommunications Corp (VNPT) for a package including the satellite, its launching and some ground equipement.

"We all look forward the day, two years from now, when a new star called Vinasat 1 will shine... marking the beginning of Vietnam global connectivity," said Ted Gavrilis, LMCSS president.

The amount of the contract was not released. Local papers reported it was worth 168 million dollars, compared with the 180 million figure earmarked for the whole project by Hanoi.

The satellite, carrying 20 communication modules, must be launched before the second quarter of 2008 or it faces losing an orbital position booked years ago.

Pham Long Tran, Chairman of VNPT, admitted time was ripe to start the construction. "It is in fact a very pressing schedule," he said, adding the project was still "facing numerous difficulties and challenges."

The ultra-sensitive project has suffered major delays over the last few years, partly caused by difficulties in coordinating frequencies with neighbouring satellites from other countries already in orbit.

Hanoi views Vinasat as an important symbol of its sovereignty and technological ability.

The satellite is expected to be operational for 15 years and will help transmit television, radio and civil aviation signals covering remote regions of the country.

But it also has major defence implications, requiring the construction "of a terrestrial command station to serve national defence communications," state media said last year.

The fact that Vietnam asked a US contractor is symbolic of a new era in its relations with the United States.

Last year Prime Minister Phan Van Khai made the first visit by a Vietnamese leader to Washington since the end of the Vietnam War, in 1975.

"The contract is a very strong signal that Vietnam has changed," said Alain Cany, president of the European chamber of commerce in Vietnam, who expressed his disappointment that the EU consortium had lost the bid.

"A satellite is not trivial. It's an instrument of monitoring for national security," he said.

A comment echoed by Adam Sitkoff, executive director of the American chamber of commerce in Hanoi. "US companies are now welcome in the most sensitive sectors possible in Vietnam. It is good news for both countries," he said.

The political context between the two countries is very positive.

Hanoi and Washington are trying to conclude a deal to enable Vietnam's entry to the World Trade Organization and US President George W. Bush is expected in Hanoi next November for the Asia-Pacific Economic Cooperation summit.

"There is a very strong push of American interests in Vietnam, just before the signature of the WTO deal and Bush visit," a European businessman said.

"It's a good thing. European companies will however make sure fair competition and transparency are strictly respected."

Last month, a few weeks after the world's biggest chipmaker Intel announced it would build a plant in Vietnam, Microsoft chairman Bill Gates received a rock star's welcome in Hanoi.

His visit stole the front-pages of local newspapers from the ruling communist party's five-yearly national congress.

The satellite deal might lead to similar contracts in the future.

"Clearly, this contract is a political decision showing that Vietnam wants to go further with the US," an observer said.

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