Introducing optical inter-satellite links in a global navigation satellite system enhances orbit determination and offer frequency synchronization across the constellation. To show proof-of-concept and system capabilities a laboratory demonstrator has been developed and first tests in laboratory environment have been taken out. The demonstrator is buildup of two reciprocal units interconnected via bi-directional free-space optical links. Each unit is composed of opto-mechanical terminal, optical communication system and digital signal processing implemented on a field programmable gate array. Ranging and time transfer is realized utilizing a 25.55 Gigachip-per-second binary phase shift keying modulation scheme. Correlating the received ranging sequence with a local generated reference, pseudo range determination within the order of 100 µm accuracy is achieved. In addition, a 50 Megabit-per-second data signal is multiplexed onto the ranging sequence for exchanging satellite and time information as well as user data. Frequency transfer is realized using a cavity stabilized laser as carrier transferring its stability onto the phase locked local oscillator at the receiver side. Global synchronization at system level is achieved by means of synchronizing the optical carrier and spread sequence to a highly stable clock reference as well precise ranging and information distributed through the data channel. Using on-satellite ultra-stable optical oscillator and a frequency comb for radio frequency reference generation short-term frequency stability in the order of 10-15 s/s (Allan deviation at 1 s gate time) is achieved. The aim of this paper is to show the current status of the laboratory demonstrator development and present first measurements of the entirely setup system. A general overview of the digital signal processing is given and data transmission as well as time transfer are discussed in particular. The laboratory demonstrator setup and mechanical construction is presented. Clock stability transfer between high-accuracy radio frequency reference and the digital signal processing system is shown. Further, optical frequency transfer experiments are performed demonstrating successful synchronization between laboratories.