The government has reached a deal with Europe's largest aerospace firm to provide satellite communication services for the military, it is expected to announce on Friday.
The British wing of the firm is also to build a weather satellite
The deal, worth an estimated £2.5bn, is the biggest private finance initiative contract yet signed by the Ministry of Defence.
Skynet 5 is a huge 15-year project, the largest military programme ever run by a private firm in this country.
It is the latest in a bold series of Private Finance Initiative projects backed by the MoD, with the government opting to buy in satellite services instead of buying actual satellites and systems.
The government says it will create or sustain at least 2,000 jobs in the UK.
Critics argue that PFI contracts for the armed forces place assets of national importance in the hands of commercial companies.
In this case all military data and voice communications will be carried on satellites and ground systems built and run by the giant European Aeronautic Defence and Space company.
"We expect to place a contract for Skynet 5 with Paradigm
Secure Communications very shortly," Armed Forces Minister Adam Ingram told parliament.
The last stage in the project, Skynet 4, was launched on an Ariane-4 rocket from the European Space Agency launchpad in Kourou, French Guyana in February 2001.
The British wings of EADS has also recently won the race to build a weather satellite to study wind patterns on Earth.