SkyTerra Might Launch 1st of Two L-Band Satellites Early

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PARIS —  Satellite services provider SkyTerra Communications said it may be able to launch the first of two large L- band satellites late this year, rather than in mid-2010, if prime contractor Boeing stays on schedule. The company also said there are no indications that its principal sponsor, U.S. hedge fund Harbinger, will back off from a promise of further investment despite the current economic climate.

In a Feb. 26 conference call with investors, Reston, Va.-based SkyTerra said it has enough cash to pay Boeing Satellite Systems International of El Segundo, Calif., to complete the SkyTerra 1 and SkyTerra 2 satellites, and to launch and insure both of them, in addition to paying the company’s operating costs.

SkyTerra had paid Boeing $435.6 million as of Dec. 31 and will owe the manufacturer another $110.9 million by late 2010, assuming both satellites are completed as scheduled. Boeing has agreed to defer payments of about $70 million, which SkyTerra will need to pay subsequently. SkyTerra 1 and SkyTerra 2, formerly called MSV-1 and MSV-2, are identical. The second satellite is scheduled for launch in late 2010 or early 2011.

SkyTerra Chief Executive Alexander H. Good said the 22-meter reflector antenna for SkyTerra 1 has been completed, with testing showing no major problems. Testing has begun on the satellite’s payload module, and SkyTerra has begun negotiating frequency use with other L-band operators in the United States, ,

Four satellite gateway Earth stations, two in and two in the , will be completed by September, Good said.

SkyTerra Chief Financial Officer Scott Macleod said Harbinger Capital Partners, which has invested in several mobile satellite services companies, has given no hint of slowing or canceling its promised $500 million investment in SkyTerra. The investment is to be made in four tranches. The first $150 million payment was booked in January.

Macleod said the second tranche, of $175 million, is due in April, with a $75 million payment to arrive in July and a final $100 million expected in January 2010.

SkyTerra had $112.4 million in cash as of Dec. 31, to which the Harbinger cash has been added. Under current planning, Harbinger should have some $274 million in cash remaining as of October 2010, when most of its Boeing and launch-related costs will have been paid assuming Harbinger delivers on its promised investment.

Many hedge funds have faced withdrawals in the economic downturn. Harbinger, in making its January payment, won improved lending terms from SkyTerra but ultimately paid the agreed-to amount. Macleod said he expects the remaining $350 million to be paid on time, but that SkyTerra has some financial latitude in the event a payment is late.

Harbinger, which is also a major shareholder in established – and profitable – mobile satellite services operator Inmarsat of London, is at the center of an effort to merge Inmarsat into SkyTerra.

Good said today’s credit environment makes any debt-based merger more difficult, but that the U.S. dollar’s appreciation against the British pound could make the merger easier. “We have in no way given up on the merger idea,” Good said, adding that it would make strategic and operational sense for both Inmarsat and SkyTerra.

The U.S. Federal Communications Commission is reviewing the proposed merger, and only after the agency rules in its favor will SkyTerra, Harbinger and Inmarsat decide whether to pursue the deal.