Intelsat Initial Public Stock Offering Takes a Step Forward with FCC Filing

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PARIS — Satellite fleet operator Intelsat has asked U.S. regulators to allow the company to transfer control of all its satellite assets to new owners following an initial public offering (IPO) of Intelsat stock, the timing of which has not been determined.

The filing with the U.S. Federal Communications Commission (FCC) says the IPO, likely to result in Intelsat stock being listed on a major U.S. exchange, will almost certainly result in publicly traded stock equivalent to more than 40 percent of Intelsat’s total equity.

In addition to the public stock listing, the IPO could be accompanied by private transactions in which current Intelsat owners sell all or part of their stakes to other institutions, Intelsat said.

Luxembourg- and Washington-based Intelsat is the world’s largest commercial satellite fleet operator. Following successive sales to private-equity owners, the most recent in 2008, Intelsat has been saddled with a high debt load that the company hopes to reduce with the sale of stock.

For the nine months ending Sept. 30, Intelsat reported revenue of $1.94 billion. It had a backlog of $10.7 billion in firm contracts. Its 50-satellite fleet was 78 percent full. Total debt as of Sept. 30 was $15.8 billion.

Despite its debt and the fact that its private-equity owners were always expected to sell their stakes in the coming years, Intelsat has entered into a heavy capital-spending cycle to replace certain of its satellites and expand its presence in emerging markets, where demand for satellite bandwidth is growing fastest.

The company has eight satellites under construction and scheduled for launch between 2012 and 2014. Capital investment in new satellite infrastructure is expected to total between $725 million and $800 million in 2011 and peak at between $875 million and $950 million in 2012 before dropping sharply in 2013.

BC Partners Holdings Ltd. of Britain’s Guernsey Islands and Silver Lake Partners of New York are Intelsat’s biggest owners, with 71.9 percent and 15.9 percent stakes, respectively.

In its FCC filing, dated Nov. 23, Intelsat says an IPO will bring multiple advantages. “[T]he reduction of Intelsat’s debt, enhancement of its working capital accounts and its access to public equity markets will greatly enhance Intelsat’s position on the competitive marketplace,” the company says, adding that Chief Executive David McGlade and other senior Intelsat managers are expected to remain with the company after the IPO.

In response to Space News inquiries, Intelsat Investor Relations Vice President Dianne J. VanBeber on Dec. 8 issued the following statement:

“Our current owners acquired Intelsat nearly 4 years ago (in February of 2008) and we expect that they will seek to exit their investment, as is typical with any private equity transaction.

“The FCC filing is a regulatory requirement that allows them to do so. The filing is not intended to provide precise details with respect to the structure or timing of an exit, which will depend on industry and company factors and general market conditions. We do not comment on our capital markets plans.”

In its FCC statement, Intelsat says an IPO is unlikely to undermine competition in the satellite telecommunications market. “Intelsat does not expect any entity holding a controlling interest in another satellite operator will acquire” a substantial Intelsat ownership stake in the IPO.

The satellite telecommunications market worldwide has survived the financial turmoil sweeping North America and Europe with little damage. While these two markets are expected to see minimal growth in the foreseeable future, South America, sub-Saharan Africa and Central and South Asia are expected to remain dynamic.

Whether the growth in these regions will match the increased satellite capacity now being positioned over them is a subject of wide debate in the industry.

Intelsat’s most direct competitor, SES of Luxembourg — which is in the middle of the biggest capacity expansion program in its history, targeting mainly the emerging markets — has accepted that satellite fill rates may dip for a time as capacity outstrips demand.

Other market forecasts show global satellite telecommunications growth at less than 5 percent per year in the near term. The influence of new technologies such as high-throughput Ka-band satellites, and the effect of the drawdown of U.S. military forces in the Middle East, on overall market demand remain unclear.

Also unclear is whether the recent proliferation of one- or two-satellite operators, many backed by governments seeking to establish a national presence in space and reduce foreign-currency outflows to the big satellite operators, will continue.

The Paris-based Euronconsult consultancy, in a recent report on the satellite telecommunications sector, said that while 70 percent of the new satellite capacity launched between 2005 and 2009 was for the four biggest satellite fleet operators, that figure had dropped to 27 percent in 2010.

The four largest satellite fleet operators, in order of 2010 revenue, are Intelsat, SES, Eutelsat of Paris and Telesat of Canada.