A decade in the making, Northrop Grumman's (NYSE:NOC) space tow truck service has finally arrived.

At 6:18 a.m. EDT Wednesday, a Russian Proton rocket operated by Reston, Virginia-based ILS International Launch Services launched from Baikonur Cosmodrome in Kazakhstan. Its payload: one French communications satellite and Northrop's first-of-its-kind Mission Extension Vehicle-1, or "MEV-1."  

Sixteen hours later, Northrop tweeted its confirmation: Both satellites have "successfully separated from the launch vehicle and are operating nominally."  

MEV-1 spacecraft near Earth

Image source: Northrop Grumman.

What will MEV do?

We first learned about this novel space idea -- putting a self-propelled satellite in orbit, and using it to contact, refuel, and repair other satellites in orbit -- back in March of 2016 (although the company had been developing the idea for even longer than that). This was a concept hatched by space firm Orbital ATK. But Orbital ATK has since been acquired by Northrop Grumman -- so this is Northrop's baby now.

The concept isn't hard to follow: Big satellites are expensive, both to build and to launch. They're also finite, running out of fuel to maneuver around space junk, or simply dying of old age, after 15 years or so.

When a satellite goes defunct ahead of schedule, this can be devastating for the company that operates it. Earlier this year, for example, Northrop Grumman rival Maxar Technologies (NYSE:MAXR) lost an $85 million annual revenue stream -- and 31.5% of its stock price -- after a "control gyro" on its WorldView-4 failed, rendering the satellite incapable of holding steady to take photographs.

The mission of Northrop's Mission Extension Vehicle, therefore, will be to extend other satellites' missions by latching on to a client satellite and taking over guidance and propulsion functions for it. (Future iterations of MEV may even be able to make repairs and refuel satellites in situ -- eliminating the need to junk a billion-dollar investment on account of a single glitch).

MEV-1's first mission

MEV-1's first mission will be to rendezvous with Intelsat's 18-year-old IS-901 telecommunications satellite in geostationary orbit and dock with it, becoming in essence the new "engine" for IS-901 and extending the comsat's service life by at least five years. (At the end of these five years, Intelsat will either extend the contract or release MEV to service another client).

Just getting to IS-901, removing it from orbit, and returning it to a new orbit will take at least six months -- and isn't guaranteed to succeed. This will be, among other things, Northrop Grumman's first-ever attempt at docking two spacecraft in orbit.  

But a successful mission will leave MEV-1 with sufficient fuel to service at least two more satellites (for five years each) before MEV runs out of fuel. Of course, by that time Northrop Grumman could have an entire fleet of more advanced MEVs in orbit, buzzing all around the planet like a swarm of worker bees, not just towing satellites to and fro but performing repairs and refueling as well. Indeed, Northrop Grumman is already working on its second MEV spacecraft, which will service a client yet to be announced.  

What does it mean to investors?

Intelsat will pay Northrop Grumman $13 million per year for the time MEV is attached to IS-901, or $65 million total. That's a bargain price considering that it probably cost Intelsat $300 million to build the thing back in 2001, and it then cost more to launch it. After inflation, replacing IS-901 with a similar satellite today would probably cost even more.  

Still, it's not a bad deal for Northrop, either, as it will be using this mission to prove the concept and work out kinks with its new space tow truck. If all goes well with this trial run, investors can expect Northrop to scale up the business and probably raise prices once it has proved the concept.

According to Space.com, about 400 geosynchronous equatorial orbit (GEO) satellites are in space today, each of which will go out of service eventually and thus become a potential client for Northrop and MEV. And over the longer term, the orbit for GEO space vehicles has room to accommodate as many as 1,800 large satellites, leaving lots of room for Northrop to grow this market.  

What's more, for the time being at least, it looks like Northrop could have this market to itself. Although at one point, space rival Maxar Technologies had won competing contracts to develop "space tugs" to service NASA and DARPA satellites, in January Maxar abruptly abandoned its DARPA deal, raising questions about its ability to fulfill the NASA contract. And in 2015 Lockheed Martin, Northrop's only other potential rival in this market, fumbled an attempt to get NASA to pay for its own experiment in space tow trucks.  

The upshot of all this appears to be that this is Northrop Grumman's market to lose -- and so far, at least, it's winning.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.