Intelsat Satellites Are Not for Sale, Chief Exec McGlade Says

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  Space News Business

Intelsat Satellites Are Not for Sale, Chief Exec McGlade Says

By PETER B. de SELDING
Space News Staff Writer
posted: 24 March 2008
02:11 pm ET





PARIS —


Intelsat’s decision to reduce its fleet size in the coming years to focus on high-growth markets will be carried out slowly by attrition, with even those satellites the company does not plan to replace being




put into life-extending inclined orbits, Intelsat Chief Executive David McGlade said March 20.

“We are not selling satellites,” McGlade said in a conference call with investors.

McGlade’s
remarks appeared to be a response to suggestions made by Intelsat’s principal competitor, SES of Luxembourg, that Intelsat may elect to sell satellites and orbital slots to manage its high debt.

SES officials made clear they would be interested in purchasing some of these satellites as part of a growth strategy that SES, with its low debt load, is able to pursue.

Intelsat’s
eclectic fleet now counts 53 satellites, including seven that are in inclined orbit, meaning their on




board fuel no longer is used to keep them stable on their north-south axis. Such satellites appear to move in small figure-eight patterns at their assigned locations in geostationary orbit, making them less useful for certain applications such as satellite-television reception.

But inclined-orbit spacecraft can be used for other applications, including some types of mobile services whose customers have antennas designed to orient themselves toward a satellite.



In a March 21 filing with the U.S. Securities and Exchange Commission (SEC), Washington-based, Bermuda-headquartered Intelsat said mobile communications is one area in which the company hopes to grow.

In addition to squeezing more revenue from older satellites, the inclined-orbit strategy is one way for Intelsat to maintain its licenses at orbital slots as long as possible before the satellites finally are moved to graveyard orbits.

Once an operator removes its satellite from an orbital slot, and does not replace it,




the position and the associated frequencies become available for others through the usual International Telecommunication Union




process.

Intelsat’s
recent purchase by an investor group led by BC Partners and Silver Lake Partners, which was completed in February, has brought Intelsat’s total debt load to $15.1 billion.

Intelsat reported that revenue




in 2007 was




about $2.2 billion, a 7 percent increase over 2006 after one-time gains are removed, and after the effects of Intelsat’s mid-2006 purchase of satellite-fleet operator PanAmSat are accounted for.

The company said its adjusted EBITDA – earnings before interest, taxes, depreciation and amortization – was 77 percent of revenue




. Contract backlog, at $8.2 billion, was up 3.8 percent from a year earlier despite the fact that Intelsat reported no major long-term contract renewals among its video-broadcast customers.

Of the company’s 46 fully stabilized satellites, the rate of occupancy was 76 percent as of Dec. 31, compared to 70 percent a year earlier.

Intelsat Chief Financial Officer Jeffrey Freimark said the sale to the BC Partners-led group, which was initiated before the current financial-market turmoil but completed well after it had begun, did not add any new terms and conditions to Intelsat’s debt that would affect the company’s ability to manage its business.



McGlade said Intelsat thus far has seen no concrete sign of a business downturn due to a slowing world economy. “As far as pricing, we’ve seen improvements throughout the world,” McGlade said. “Europe-to-Africa services, and Europe generally; Africa; Latin America has improved rather dramatically; and there have even been some modest improvements in the Asia-Pacific.”

Intelsat in January announced that it had sold the entire 24-transponder capacity of the Intelsat 16 satellite, now under construction at Orbital Sciences Corp. of Dulles, Va., to direct-broadcast television providers Sky Mexico and Sky Brazil.

Intelsat 16 is scheduled for launch in 2009. The two direct-to-home television companies have agreed that, within a year of the satellite’s entry into service, they will make a large prepayment to Intelsat. McGlade said the prepayment will be larger than the capital expenditure Intelsat is making on




the satellite.









Industry officials said that one way of measuring how debt is affecting Intelsat will be to track its capital spending on new satellites. With the global fixed satellite services industry in a growth period, the major operators are expanding their fleets. McGlade has said he is confident that the company’s new owners will allow Intelsat to invest in growth despite the company’s debt-service obligations.

Intelsat’s
capital spending in 2007 totaled $557 million. It is expected to be between $460 million and $500 million in 2008. The company has two satellites scheduled for launch in 2008 and three in 2009, including Intelsat 16.