Satellite-fleet operator SES remains hungry

to acquire

satellites now owned by competitors despite its failed attempt at purchasing the assets of Spacecom of Israel. The company

specifically has its eyes on orbital positions that competitor Intelsat either will abandon or cannot fully develop, SES officials said.

The Luxembourg-based company continues to throw off such cash flow that it is having trouble raising its debt to the desired level

despite a sizable increase in dividend payments to shareholders in addition to a share-buyback program.

The company will be purchasing two new satellites in the coming weeks, raising its capital-expenditure plan for the next few years. But even this will leave plenty of room for selected purchases of satellites covering areas outside

SES’s core North American and European markets managed by the Americom and Astra divisions. These new purchases, should they occur, would be integrated into the company’s New Skies division.

“We are focusing on geographies and on assets that would complement the New Skies fleet, eventually taking advantage of the fact that the largest international satellite operator focusing on these kinds of trans-oceanic activities – namely Intelsat – for reasons well known to the investor community might not be in a strong position to go after growth opportunities,” SES Chief Executive Romain Bausch said during

Feb. 18 conference calls with journalists and investors. “So it might be an opportunity for us to acquire positions which would be comparable to the ones we have today in Europe and North America.”

Bausch also evoked the possibility that Intelsat, which following a series of ownership changes

now is indebted heavily

at a time when debt conditions are getting tougher, may wish to sell certain of its satellites. Here too, Bausch said, SES could be a buyer.

It is not the first time that Bausch has contrasted SES’s relatively debt-free status with that of Intelsat. Intelsat’s new private-equity owners nonetheless in 2007 agreed to an accelerated Intelsat capital investment program to permit the company to take advantage of growth prospects. Intelsat Investor Relations Vice President Dianne J. VanBeber said Feb. 19 that the company would have no comment on Bausch’s remarks.

Bausch said the recent SES attempt to purchase the principal orbital slot and two of the three satellites owned by Spacecom of Israel is an example of the kind of acquisition SES has in mind. Spacecom management, saying the SES proposal would leave Spacecom with too few assets to assure its survival, rejected the offer. “I am not overly optimistic” about concluding an eventual deal with Spacecom, Bausch said.

SES Chief Financial Officer Mark Rigolle said SES still hopes to raise its debt level to the equivalent of 3.5 times the company’s earnings before interest, taxes, depreciation and amortization, or EBITDA. In the past year it has raised debt from 2.68 to 2.95 times EBITDA. “We’re going in the right direction,” Rigolle said during the conference calls. “We are trying to get to 3.5 by the end of the year.”

SES expects to order two new satellites in the coming weeks

to reinforce its coverage in North and South America and the trans-Atlantic region,

Bausch said Feb. 18. That would increase th

e number of satellites the company has under construction to 10.

Bausch said the 10 new satellites, to be launched between 2008 and 2010, would boost the Luxembourg-based company’s commercially available capacity by 287 transponders – a 27 percent increase.

SES expects to order the AMC-1R satellite from Orbital Sciences Corp. of Dulles, Va., exercising an option in a contract signed last year for up to five nearly identical spacecraft for the SES Americom division for North and South America. In addition to increasing the level of in-orbit backup at Americom’s HD-Prime orbital slot for cable companies, the AMC-1R will give Americom seven new transponders to aim at the Latin American market, Bausch said.

The second satellite to be ordered, NSS-14, will be for the SES New Skies division, which is responsible for SES’s markets outside those covered by Americom in the Americas and SES Astra in Europe. Sources said the second satellite would be ordered from Space Systems/Loral, of Palo Alto, Calif., and that it would be the largest spacecraft SES has ever ordered.

SES reported that when one-time financial events are excluded, its revenue in 2007 increased by 8.5 percent, to 1.6 billion euros ($2.3 billion). EBITDA was 81.5 percent of revenue for the satellite-fleet operations, and 11.6 percent of revenue for the company’s ground-based services businesses. When the two are blended, SES reported an EBITDA of 67.7 percent. SES and its main European rival, Eutelsat of Paris, habitually dispute the title of the most profitable major satellite-fleet operator.

SES wins if just the satellite-fleet operations are counted, but Eutelsat wins of the comparison is company to company.