Intelsat Buys Two Satellites for Lease to DirecTV in $1B Deal

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UPDATED Sept. 9 at 5:18 p.m.

PARIS — In a deal valued at more than $1 billion, satellite television provider DirecTV Group’s fast-growing Latin American subsidiary has agreed to lease 144 Ku-band transponders on two large Intelsat-owned satellites for the satellites’ full 15-year operational lives, the two companies and industry officials said Sept. 8 and Sept. 9.

As part of the arrangement, Luxembourg- and Washington-based Intelsat is ordering the two satellites from Space Systems/Loral of Palo Alto, Calif., in a contract valued at more than $500 million.

The two satellites, each capable of delivering 20 kilowatts of power to their payloads at the end of their service lives, will be launched in November 2014 and November 2015 and stationed alongside Intelsat’s Galaxy 3C satellite at 95 degrees west.

Each satellite will carry 72 Ku-band transponders and will feature spot beams permitting reuse of the Ku-band spectrum. Each will also carry 10 C-band transponders that Intelsat will use to continue to expand its business in Latin America. The region is one of the most dynamic commercial satellite telecommunications markets in the world.

“Intelsat and DirecTV Latin America strategically designed a Ku-band payload to optimize the available frequencies to maximize our channel capacity in Spanish-speaking South America using both local and pan-regional beams,” DirecTV Latin American President Bruce Churchill said in a Sept. 8 statement.

Besides these two satellites, El Segundo, Calif.-based DirecTV is negotiating the purchase and launch of two satellites for its use. One industry official said the company as of Sept. 9 was in negotiations with the Arianespace launch consortium of Evry, France, to purchase two firm launches and perhaps two others as well.

Another industry official said a four-satellite launch deal could include the two Intelsat-owned satellites. Intelsat spokeswoman Dianne J. VanBeber said Sept. 9 that the company expects to be the entity purchasing the launches for the two Latin American satellites, which will be named Intelsat 30 and Intelsat 31.

The two-satellite win was important for Space Systems/Loral insofar as it will make it more likely the company will be able to meet its minimal contract requirement to operate its newly expanded production facility and avoid cutbacks. Space Systems/Loral, unlike its competitors, is almost entirely focused on the commercial telecommunications market. The company has said it needs four or five satellite orders per year to run the factory efficiently.

VanBeber on Sept. 8 declined to disclose the value of the contract with Loral, but said Intelsat has informed its investors that the two-satellite deal will increase Intelsat’s planned capital spending by $300 million in 2012 and $200 million in 2013. Intelsat does not give its investors guidance on the company’s spending plans beyond 2013.

Spending on the two satellites in 2012 and 2013 would cover most of the construction of the spacecraft, but very little of the cost of the launch services and none of the premium for the launch-insurance policy.

Intelsat had seven satellites under construction before the DirecTV deal was signed, and had announced its intention to order one more spacecraft before the end of 2013. In a Sept. 8 filing with the U.S. Securities and Exchange Commission (SEC), Intelsat said its capital spending in 2011 will fall between $725 million and $800 million.

In 2012, spending will increase to between $875 million and $950 million before falling in 2013 to between $375 million and $450 million.

DirecTV Latin America includes three business units — DirecTV Panamericana, which operates in Argentina, Chile, Colombia, the Caribbean, Ecuador, Peru, Venezuela, Puerto Rico and Uruguay; Sky Brasil, which is 93 percent DirecTV-owned; and Sky Mexico, which is 41 percent DirecTV-owned.

The three operating companies as of July had a combined 10 million subscribers. Subscriber and revenue for DirecTV Latin America grew at record rates in 2010. For the three months ending June 30, average monthly revenue per subscriber was $64.56 and subscriber churn — meaning the number of subscribers leaving the service — was less than 1.5 percent per month.