PanAmSat Corp. on
Tuesday posted a higher fourth-quarter profit, beating the
average Wall Street forecast, but revenue declined as demand
for video services weakened.
The satellite communications company, which includes
broadcasters among its customers, also said that while it
expects revenue in 2003 to remain flat with 2002 it hopes to
take advantage of industry consolidation.
“In 2003 we expect to see another soft year for our
industry characterized by over capacity” and pricing pressure,
Chief Executive Joe Wright told analysts during a conference
call “If as some say the industry does turn around in the
second half of this year that’s great, but we’re not planning
on it.”
PanAmSat said its profit rose to $23.5 million, or 16 cents
a share, from $3.2 million, or 2 cents per share, a year
earlier. Analysts polled by Thomson First Call had expected
earnings of 13 cents a share.
The company, which has been hurt along with its peers by a
glut of capacity in the satellite market, said its revenue fell
to $196.8 million from $203.7 million.
“They were lower than we were looking for on revenue and
lower on EBITDA but margins seem to be holding up. They could
out some costs (and) so did a little bit better on earnings per
share,” Credit Lyonnais analyst Rick Grubbs said.
PanAmSat blamed the poorer revenues on a fall in demand for
occasional video broadcasts, including one-time sports events,
and a decline in demand for general video services, in
comparison to the fourth quarter last year when it experienced
increased demand after September 11.
PanAmSat shares closed up 32 cents, or more than 2 percent
at $15.50 on the Nasdaq on Tuesday. The stock’s 52-week high
was $25.99.
GROWTH BY ACQUISITION
PanAmSat includes acquisitions as well as expansion into
new markets including government services, as its main targets
for growth.
“Clearly consolidation is occurring in this industry and
PanAmSat is looking at these opportunities.” Wright said in a
statement.
“Our growth strategy will not rely on one transaction or
the launch of a new satellite or technology — we’re coming at
it from many angles,” Wright added, naming government services
as a target market.
PanAmSat’s ambitions for consolidation include European
satellite operator Eutelsat, which would improve its network
coverage in Europe, and Hughes Global Services, a unit of
Hughes Electronics that serves government agencies.
Hughes owns 81 percent of PanAmSat
.
Wright would not comment on the status of PanAmSat’s status
in the bidding process for Eutelsat beyond saying that the
company, which is bidding against rival Intelsat Ltd , has met
the deadlines the European operator has made.
PanAmSat is thought to be working with European investors
to come up with the money for the deal, which is understood to
be worth over $3 billion.
Wright estimated that the Hughes deal, which is expected to
close in the current quarter, would boost PanAmSat’s revenue
but added this was not factored into its 2003 revenue.
FINANCIAL ESTIMATES
PanAmSat said it expects to earn 13 cents to 17 cents a
share in the first quarter of 2003 on total revenue of $190
million to $200 million. In the full year 2003, it expects to
earn 52 cents to 62 cents a share on revenue of $790 million to
$820 million.
PanAmSat said it earned $144.4 million in the fourth
quarter before interest, tax, depreciation and amortization
(EBITDA).
It expects to post EBITDA of $140 million to $150 million
in the first quarter and $580 million to $600 million in 2003.
The satellite company said it has contracts for satellite
services representing $5.55 billion of future revenue or
backlog, compared to a backlog of $5.5 billion in September.
The company said in September that about $1.06 billion of
its future revenue from existing contracts is at risk. After a
broadcasting customer, DirecTV Latin America, said last week
that it could face bankruptcy, PanAmSat said the company
represented more than half of its at-risk backlog.
DirecTV Latin America is expected to pay PanAmSat a total
of $57 million in revenue this year.
