Contemplating the Next Big Move

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  Space News Business

Contemplating the Next Big Move

By MISSY FREDERICK
Space News Staff Writer
posted: 25 July 2005
03:41 pm ET


Unlike his predecessor at the helm of the world’s second largest commercial satellite operator, David McGlade is not a career space person. But he’s no stranger to cutting-edge telecommunications technology, having spent the past 23 years managing ventures in terrestrial wireless, cable television and broadband services.

At Intelsat, McGlade is charged with bolstering the company’s position in markets like video, television, corporate networks and government services as its traditional satellite-based telephony business continues to decline. Intelsat also is pushing into the relatively new field of satellite broadband through stakes in Orbit Data Systems of Saudi Arabia and WildBlue of Denver.

McGlade joined Intelsat in April, not long after its acquisition by Intelsat Holdings, a consortium of private-equity investors. His immediate focus is consolidating Intelsat’s foothold in the North American market using a fleet of satellites purchased from Loral Space and Communications, including the recently launched IA-8, which is expected to begin service in August.

Possibilities on the horizon include a public stock offering and a merger with New Skies Satellites NV, which was spun out of Intelsat in 1998 as a condition of Intelsat’s eventual privatization. U.S. President George W. Bush on July 12 signed an amendment to the 2000 ORBIT Act — the law that set the terms and conditions for Intelsat’s privatization — striking a provision that had barred such a merger from taking place.

McGlade spoke recently with Space News staff writer Missy Frederick.


When might Intelsat issue a public stock offering?

We don’t comment or speculate on what we’d do in the equity markets. As a common course of action we look to see what’s happening around us. Inmarsat has done very well [going public], and we see New Skies trading well, so we’ll keep watching and listening. But it’s not something we’re pushing to do.

Are you looking to expand business in any particular geographical areas?

Regionally, I would love to do more in Asia, particularly South Asia. That area has been a challenge for the industry, so to do more there would be great.

Are you looking to add any new products or services?

 

Managed services has been a real growth area, anything from Internet trunking services to the occasional use of video. If you compare the first quarter of this year to last year, managed services grew 64 percent so it’s seen some pretty significant growth.

What are your plans for getting more business in broadcast and cable television?

 

Now that we have IA-8, that should help us with leveraging assets, and allow us to do more in North America, so we plan to continue to drive that business.

Intelsat made the decision last year to scale back its satellite insurance. Since that was before your time, what do you think of the move, and is the company planning any other cost-cutting measures?

The reason we eliminated the insurance was because of the size and diversity of our fleet. We did an in-depth analysis of how we would cover potential satellite failures, and our conclusion was that self-insurance was the right way to go. It was really a risk management thing.

Looking forward, we’ll focus on growing revenue, cutting operating expenses, optimizing capital expenses. We’ll continue to look at our costs and reduce where it makes sense.

Are there any major capital expenditures on the horizon for Intelsat?

 

The IA-9 is currently in the very early stages of construction [by Space Systems/Loral], but that’s a few years away.

We’ll continue to watch how well we do in terms of the sale efforts of 1A-8 and decide when to launch that.

Beyond that, we really have no plans. We’ve been fortunate enough to have a cap-ex holiday. That means we don’t have to spend a great deal of capital over the next several years because of the huge investments we’ve made over the past several years to build a healthy satellite fleet.

What drew you to Intelsat?

 

There were multiple factors that drew me to the company. It started with the private-equity owners that were looking at the company initially. Private equity is becoming a bigger and bigger force in the financial community, and I think they’re doing some very interesting things.

They allowed me to look at their due diligence, and once I got into it, more and more I saw a company that’s truly global. And even though SES Astra is larger, because we operate in over 200 countries and territories, we’re absolutely a global company.

Intelsat has a wonderfully diverse product set, from everything we do with the U.S. government and military to entertainment, corporate networking and voice, video and data. I also was drawn by the reputation for technical excellence and the great assets that the company has, like our 28 satellites.

Are you keeping your eye on any pending legislation in Congress this year?

 

Nothing too big. The thing that just happened was the ORBIT Act amendment being signed by the president July 12. That freed us up in many ways to do DTH (direct-to-home) video. It also freed us up for operating in North America, and it of course freed us up to do what we want if, and only if, New Skies came on the market. We were the only company prohibited by statute from acquiring New Skies.

Basically, once the ORBIT amendment was signed we became fully privatized, and we now have all the freedoms other companies enjoyed.

How are things with the Loral Atlantic satellite fleet you recently acquired?

 

We’re very pleased with the purchase. All the satellites, customers and controls that Intelsat acquired have been fully integrated with our existing fleet.

It’s really given us a good North American presence we hadn’t had before, as well as a video component we hadn’t had before, and an increase in DTH business.

The Comsat General purchase we made [in October 2004] gave us an even stronger position in the government sector, and the Loral purchase allowed us to have a real presence in North America and helped us build a video business. That means in four out of five categories, we’re the industry leaders.

 

Is Intelsat planning to sell its Washington headquarters building?

 

We haven’t put our headquarters on the market. So as it stands right now, we’re evaluating how we can best utilize this fantastic building.

 

Are you pleased so far with the Orbit Data Systems and WildBlue broadband ventures?

 

We’re one of the true pioneers in broadband. We’ve approached it on multiple levels, from large corporate platforms all the way down to the consumer, which is what WildBlue does and what Orbit does in the Middle East. Orbit is going very well and we’re happy to have them.

WildBlue is now getting more customers every day. Broadband is going to evolve, and we expect it to be a greater part of our business going forward. It is within the suite of what we call managed services, and that is really what’s provided the growth for us.