Intelsat reported a sharp increase in the use of its satellite fleet by government agencies in 2005, the first full year following its acquisition of Comsat General and Loral’s Atlantic satellite fleet.
Those two purchases — the Loral fleet in March 2004 and Comsat General in October 2004 — helped Intelsat boost its 2005 revenues by 12 percent, to $1.17 billion.
The company’s other principal financial measures remained stable, except for the net result. Intelsat reported a net loss of $325.3 million in 2005, compared to a loss of about $39 million in 2004, in part because of interest charges on its $4.8 billion in debt.
Intelsat Chief Executive Officer Dave McGlade said Intelsat’s $3.2-billion purchase of competitor PanAmSat of Wilton, Conn., has faced no regulatory hurdles and is likely to close by mid year.
Once complete, the PanAmSat acquisition will more than double Intelsat’s debt, to more than $11 billion. Intelsat’s current owners, a group of private-equity investment companies, have agreed not to be paid a dividend for at least 12 months after the purchase to ease the combined company’s transition period.
“The PanAmSat acquisition is really a transformational event,” McGlade said during an April 19 conference call with investors. “We need to focus on closing, so [Intelsat’s owners] have agreed not to take a dividend for a year.”
McGlade made clear that merging the PanAmSat operation into Intelsat would create numerous synergies and that there will be reductions in staff and at least some site closures. He declined to be specific until the U.S. Department of Justice has completed its review of the deal.
In the conference call and in an April 17 filing with the U.S. Securities and Exchange Commission (SEC), Intelsat reported that its backlog, at $3.8 billion, was down 4.3 percent from a year ago despite the launch of the IA-8 satellite. Intelsat in early 2005 suffered the loss of the IS-804 satellite over the Pacific Ocean, and competitor New Skies Satellites of The Hague, Netherlands, picked up much of that business.
Intelsat’s sales to government agencies in 2005 accounted for nearly 21 percent of its total revenues, compared to 14 percent of revenues in 2004. Government customers customarily do not purchase satellite capacity in multi year leases — one reason why a robust government-services business will not show up in backlog.
Intelsat operates 27 satellites in orbit and leases capacity on one satellite operated by the Indian Space Research Organi sation. Twenty-three of Intelsat’s 27 spacecraft are considered fully operational, and these satellites were 63 percent full as of Dec. 31 — unchanged from the same period a year earlier, Intelsat reported in an April 17 filing with the U.S. Securities and Exchange Commission (SEC).
McGlade said the company’s early success in signing up customers for the IA-8 satellite, which was launched in June to an orbital location serving the Americas, has accelerated the construction and launch schedule of Intelsat’s only satellite on order, the IA-9 being built byof Palo Alto, Calif.
Previously scheduled for launch in 2010, IA-9 will be ready for a launch in late 2007, expanding Intelsat’s service offering at the 97 degrees west longitude orbital slot. The IA-5 satellite there now will be moved to another location, probably to the 77 degrees west position, according to Intelsat officials.
“Demand for North American Ku-band capacity is still strong for data and video,” McGlade said. North America accounted for 28 percent of Intelsat’s backlog as of Dec. 31. European customers accounted for another 28 percent, followed by 21 percent for the Middle East and Africa, 12 percent for Latin America and 11 percent for the Asia-Pacific region.
Fed by demand for video transmissions, including high-definition television and broadcasts via consumer DSL lines, the United States is currently the world’s most dynamic Ku-band satellite market.
Global of Luxembourg, which will be Intelsat’s principal global competitor after the PanAmSat purchase, also is expanding its capacity over North America.
Intelsat expects to increase its planned capital expenditures in 2006 to about $120 million to pay for construction and initial launch costs of IA-9. The company’s capital expenditures totaled $134 million in 2005, a figure that includes a $58 million insurance payment for the launch of the IA-8 satellite in June.
Intelsat was several weeks late in making its SEC filing and reporting its 2005 financial results because of a series of missteps in financial accounting. The company said the errors would not result in a restating of Intelsat’s financial results.
Intelsat has completed an internal audit of what went wrong and has hired a consulting company to train Intelsat’s accounting staff, McGlade said.