Intelsat’s near-term future looked fairly clear until its four private-equity owners decided to sell the company three years after they bought it. The June 19 agreement that paves the way for BC Partners to purchase a 76 percent stake, and in the process increase Intelsat’s debt to more than $15 billion, raises questions about
Intelsat’s future direction.
Intelsat Chief Executive David McGlade in April had won Intelsat owners’ approval for an accelerated capital-spending plan to meet pockets of growth. Intelsat had won its owners’ approval to spend some $615 million on new satellites this year, a move that suggested Intelsat had maintained its maneuverability despite its already heavy debt load.
Whether that will remain the case in the transition to the new ownership is unclear,
as is whether BC Partners will prove to be an active or passive shareholder. Intelsat’s debt covenants already make dividends an unlikely motive to own the company in the near term, so BC Partners’ motives must lie elsewhere.
SES
Luxembourg-based SES’s deal with GE Capital to sell SES’s
minority stakes in AsiaSat and Star One to GE, plus an underused satellite over the Pacific Ocean, was viewed by industry observers as a smart move. In addition to freeing SES from ownership stakes in companies it did not control, the GE sale removed GE as an SES shareholder and put to rest a concern that had weighed on SES stock. It also increased the stock’s liquidity on the Paris-based Euronext exchange, which has been a goal of SES management.
Alone among the top five satellite-fleet operators, SES has had no issues related to major shareholders. Revenue
was
up
7 percent in 2006, and SES’s services division – the business that sells business solutions to companies – is increasingly profitable even if it
never will reach the profit margins of the core satellite-lease business.
With things going so well, perhaps it was inevitable that SES Chairman Romain Bausch would begin to float the idea that the Luxembourg government might
now be amenable to a private-equity owner as a major partner. Is this a trial balloon, or does it signal a real change in Luxembourg policy? That’s not clear, but the fact that Bausch wants to raise the issue speaks volumes for the current valuations private-equity interests must be dangling before SES.
Eutelsat
Eutelsat does not seem to be able to go more than a few months at a stretch without some issue among its major shareholders. The ambitions of Spanish infrastructure builder abertis, which now has a 32 percent stake in Eutelsat, have been the subject of market speculation. The Spanish company has said it has no intention of seeking control of Eutelsat, although it has expressed an interest in a stake in Spanish satellite operator Hispasat, in which Eutelsat has a 27 percent stake.
More recently, the market has speculated about
whether the investment fund Franklin Resources, which
gradually has increased its Eutelsat stake to just above 10 percent, is just along for the ride or has other ideas.
Eutelsat
Chief Executive Giuliano Berretta has long maintained that “
think globally, act locally
” is his guiding principle, and that Eutelsat does not need to grow by acquisition despite the large gap that has opened up between the two biggest fleet operators and the Paris-based operator
.
Eutelsat’s recent bid to purchase Satmex of Mexico in an auction seems, in retrospect, half-hearted. Eutelsat’s offer did not even clear the minimum acceptable amount, and was rejected.
Telesat
Canada
Telesat Canada is moving from being 100 percent owned by a big customer, BCE Inc., to being majority owned by a supplier, Loral Space and Communications.
The Canadian satellite-fleet operator’s purchase by Loral and a Canadian pension fund -which will have majority voting rights
– is in keeping with Canadian telecommunications law. The deal is expected to close by September, according to Loral.
Once closed, the new Telesat will have a
fleet of 12 satellites, with three satellites on order. Satellite operators owned by companies that also build satellites have almost always favored their in-house products in the past, but Telesat Canada says it will have a free hand to determine suppliers based on value for money.
Loral, apparently without Telesat as an active partner, teamed with Intelsat to prepare a bid for Satmex but then withdrew before making a final offer.
Telesat
recently has been granted provisional licenses from the Canadian government to develop five new orbital positions for a variety of telecommunications services, including television broadcast and broadband. Telesat now faces a series of deadlines to prove to Canadian regulators that the company is serous about using these orbital positions.
JSAT Corp.
JSAT and Japanese satellite-television broadcaster SkyPerfect in April joined forces to create a holding company – SkyPerfect JSAT Corp. – that the two partners hope will better enable them to confront the terrestrial digital and IP competition for television viewers.
JSAT is facing continued erosion of its domestic market, and in part through its partnership with Intelsat is trying to compensate by expanding overseas, including North America.
The joint ownership structure with SkyPerfect should enable both companies to save money in designing subscriber set-top boxes. The new group expects to nearly double subscribers, to 8 million, by 2011.
In addition to geographic expansion, JSAT is pondering
how to enter new businesses including mobile communications – and even remote sensing and navigation over the longer term.
