The new spacecraft will use payload items held in reserve
Skynet 5, the UK's single biggest space project, is to be extended.
The £3.6bn system, which provides secure satellite telecommunications to British armed forces, will be boosted by the addition of a fourth spacecraft.
The first three satellites were only launched in 2007-2008, but military planners envisage even more bandwidth will be needed in the future.
Skynet 5D will be built in Portsmouth and Stevenage for a launch in 2013, most probably on an Ariane 5 rocket.
Its construction will be funded by City money.
The work will create 100 hi-tech jobs and secure another 800.
The Ministry of Defence does not actually own the Skynet system; it merely buys the services run over the spacecraft from a company called Paradigm Secure Communications.
This arrangement - one of the most expensive Private Finance Initiatives (PFI) ever signed by the MoD - pays for itself in part by the sale of spare bandwidth to "friendly" forces.
"The decision to go for a new satellite is an absolute vindication of the approach that made Skynet 5 a service contract," said Paradigm's chairman Malcolm Peto.
"It gives the MoD an assurance that the extra bandwidth will be there to meet their needs, and it gives us the ability to sell more capacity to third parties," he told BBC News.
The fourth spacecraft, which has a service value of £400m, will include spare payload items held in reserve during the roll-out of Skynets 5A, 5B and 5C. Its preparation will be undertaken by EADS Astrium.
The Skynet satellites match the sophistication of the very latest civilian platforms used to pass TV, phone and internet traffic - but also are "hardened" for military use and will resist attempts to "jam" them, for example.
The spacecraft allow the British Army, Royal Navy and Royal Air Force to pass much more data more quickly between command centres. The bandwidth capacity of Skynet 5 is two-and-a-half times that of the old satellite constellation, Skynet 4.
1. Skynet 5 overhauls satellite communications for UK forces
2. The largely autonomous satellites talk to two UK ground stations
3. Skynet 5 supports high-bandwidth applications, such as UAV video
4. Antennas and terminals are upgraded to make best use of Skynet
5. New battlefield networks, such as Cormorant, feed into the system
6. System gives commanders access to more information, faster
The new system enables UK forces to make use of next-generation weapons systems, such as the recently introduced Reaper drones.
These unmanned aerial vehicles (UAVs) are deployed over Afghanistan but are remotely piloted by RAF personnel in the US. Their near real-time video passes through Skynet.
The National Audit Office, when it initially reviewed the Skynet project, said the service was likely to cost the British taxpayer about £3.6bn over the lifetime of the 18-year contract. The new satellite will extend the contract by just over two years to 2022.
The MoD says the PFI should, in the long run, save many millions of pounds compared with a more standard procurement approach in which the government purchases the hardware outright.
The contract with Paradigm has included upgrades to ground stations and the installation of new antennas and terminals on military ships, planes and land vehicles.
Its apparent success has prompted some to wonder if the model can be extended to other areas of British space activity.
A recent report prepared jointly by industry, government, and academia said a PFI could be used to develop a national Earth observation programme. The idea has already been dubbed "Skysight".
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