PanAmSat’s purchase of the Alcatel-owned EuropeStar Ltd. satellite operator will give PanAmSat sought-after Middle East and African coverage and provide the company with an option to offer C-band transmissions from the EuropeStar orbital slots, according to PanAmSat Chief Executive Officer Joe Wright.

In a July 22 interview, Wright declined to disclose details of the EuropeStar purchase, which was announced July 19. Industry officials said London-based EuropeStar, which posted revenues of about $20 million in 2004, was sold for around $65 million.

That price would be far higher than other operators were willing to pay for EuropeStar, which Alcatel had been trying to sell for two years.

Wright specifically declined to say whether the EuropeStar deal with Alcatel includes a PanAmSat commitment to purchase an Alcatel satellite. PanAmSat of Wilton, Conn., already has one satellite, Galaxy 17, under construction at Alcatel.

“I can tell you that PanAmSat and Alcatel are expanding their relationship beyond manufacturing,” Wright said. “We are pleased to be working together with Alcatel, including some of the things they are doing in the United States. This is a win-win situation for both companies.”

Alcatel spokesman Laurent Zimmermann said Alcatel has agreed that only PanAmSat will comment on the EuropeStar transaction.

EuropeStar’s assets include the 30-transponder EuropeStar 1 satellite and its German-registered orbital position at 45 degrees east longitude. The satellite, built by Alcatel Space of Paris, was launched in October 2000 and has a 15-year service life.

The purchase also includes a continued lease of the former Koreasat 1 satellite, called EuropeStar B, and its German-registered position at 47.5 degrees. This satellite operates in highly inclined orbit and is nearing the end of its service life.

EuropeStar also has rights to a slot at 43 degrees east longitude, but access to this position would require coordination with other operators.

Wright said that in addition to its Ku-band satellites, EuropeStar has well-coordinated rights to C-band transmissions from the 45- and 47.5-degree positions.

Bruce A. Haymes, PanAmSat senior vice president, said that because PanAmSat was not changing the way EuropeStar functions, the transaction did not need the approval of the German government as a registrant of the orbital positions. Haymes said PanAmSat would be continuing a relationship with Germany’s Dr. Shulte Hillen Group, a small EuropeStar shareholder, as part of the purchase arrangement.

Alcatel up to now has not used the EuropeStar slots for C-band transmissions, but Haymes said it is an option that PanAmSat is considering.

An official with one satellite operator that declined to purchase EuropeStar said the company would be unlikely to fetch a sales price of more than two times its $20 million in annual revenues. “Anything more would be too high, and the satellite is only half full despite four years of operations,” this official said.

Wright said using a revenue multiple as a guide for EuropeStar’s value to PanAmSat is missing the point.

“We were going to get into this [Middle East and Africa] market anyway,” Wright said. “To put a satellite of our own there would have cost, say, $150 million or $160 million including launch and insurance for a mid-sized satellite. Here we are buying an asset that will be immediately accretive to us. We think it’s a classic example of the fact that companies like PanAmSat can generate value that would be difficult for companies with only one or two satellites.”

PanAmSat’s G2 Satellite Solutions subsidiary, which sells commercial satellite capacity to the U.S. government, will be a likely user of EuropeStar capacity and eventually will be able to transfer to that satellite some of its business for which it leases transponders from its competitors.

PanAmSat over the next six months will be transferring EuropeStar’s tracking and control functions from an Alcatel facility in Toulouse, France, to PanAmSat’s Long Beach, Calif., facility. Adding the EuropeStar satellites to PanAmSat’s existing ground control facility will incur little incremental cost and is one example of why PanAmSat thinks it can generate much more profit from EuropeStar than Alcatel did.