PARIS — Satellite fleet operator Intelsat on May 18 filed for a $1.75 billion initial public offering (IPO) of stock in a long-awaited transaction that will test investors’ belief in a satellite telecommunications sector that no longer offers double-digit growth rates but remains highly profitable once the initial barriers to entry are cleared.
The Intelsat filing, made with the New York Stock Exchange and managed by Goldman Sachs, will also answer the question of whether the market is willing to set aside Intelsat’s $16.2 billion in debt as of March 31 to focus on what Intelsat says are the industry’s solid cash-generating fundamentals.
Intelsat’s debt was mostly generated in several acquisitions of the company since 2005. Intelsat’s current owner is a group of private-equity companies led by BC Partners Holdings Ltd. and Silver Lake Funds. BC Partners purchased Intelsat in early 2008 for $5 billion in cash in a transaction that added some $3.7 billion to Intelsat’s debt.
Luxembourg- and Washington-based Intelsat operates 50 satellites in geostationary orbit, including 10 satellites in inclined orbits that extend the revenue-generating potential of satellites nearing retirement.
The company is the world’s largest commercial satellite fleet operator, just ahead of SES of Luxembourg in terms of revenue.
Both SES and the world’s third-largest commercial fleet operator, Eutelsat of Paris, are publicly traded on Europe’s NYSE Euronext exchange, but not in the United States.
Intelsat reported nearly $2.6 billion in revenue for 2011, with an adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, equivalent to 78 percent of revenue. For the three months ending March 31, Intelsat reported revenue of $644.2 million, up 1 percent over the same period a year earlier. As of March 31, Intelsat had a backlog of $10.5 billion.
The company is midway through a 10-satellite expansion program for which spending will peak this year at between $775 million and $850 million before dropping sharply starting in 2013. Intelsat’s ability to renovate its most valuable satellite slots with new spacecraft, and in some cases to expand its in-orbit capacity despite its debt — and despite the presumed desire of its owners to take cash out — has surprised many industry officials.
In addition to its current and planned fleet of C- and Ku-band satellites for television and conventional telecommunications transmissions, Intelsat has filed with international frequency regulators to place Ka-band satellite capacity at 25 locations around the geostationary arc nearly 36,000 kilometers over the equator, according to the IPO registration, submitted to the U.S. Securities and Exchange Commission.
Industry experts say it is likely that Intelsat will ultimately abandon most, if not all, of these positions. The reservations with the Geneva-based International Telecommunication Union, a United Nations affiliate, were made to hold the orbital slots until either the regulatory deadline for using them had passed or until a business plan materialized.
At least one of these Ka-band positions may be developed by ViaSat Inc. of Carlsbad, Calif. ViaSat’s purchase of consumer satellite broadband provider WildBlue included an option for WildBlue to purchase the rights to one of the Ka-band slots for $200,000. Unlike Intelsat, which sold its 28 percent ownership interest in WildBlue, ViaSat is a firm believer in the market for Ka-band satellite broadband for consumer, corporate and government use.
In its SEC filing, Intelsat raises the possibility of monetizing the Ka-band slots with other operators interested in developing Ka-band, even if Intelsat cannot do it itself.
