Intelsat to buy Loral’s NA satellites

Intelsat plans to buy six of Loral Space and Telecommunications’ 11 satellites and the rights to their orbital locations, it said Tuesday.

The $1 billion deal involves all of Loral’s North American satellites, and will complete Intelsat’s coverage of the North American market, Intelsat said in a statement.

The company has been actively looking for acquisitions to extend both the services it can offer and its geographic coverage, and this deal meets both of those objectives, Intelsat said.

Since its privatization in 2001, Intelsat has been looking at ways to improve its presence in the U.S. telecommunication market, Susan Gordon, Intelsat’s director of corporate communications said Tuesday. “When we were set up [as a government organization] Intelsat was prohibited from the intra-U.S. communications market. But when we were privatized the FCC (U.S. Federal Communications Commission) lifted that ban and allowed us to provide the same services as any other company,” she said.

Of the six satellites being bought, four (Telstar 4, Telstar 5, Telstar 6 and Telstar 7) are operational and two (Telstar 8 and Telstar 13) have yet to be launched. The in-orbit satellites carry traffic for broadcasters, cable operators and private data network operators and have a contracted backlog of $550 million, Intelsat said.

Intelsat currently has 24 satellites of its own and leases capacity on two others, Gordon said.

The Washington, D.C., company has also ordered a new satellite from Loral and will make a $100 million down payment on that order when the sale of the five existing satellites is closed, it said.

Meanwhile, Loral of New York has filed for reorganization under Chapter 11 the U.S. Bankruptcy Code, it said in its own statement Tuesday. Proceeds from the sale of its North American satellites will be used to repay outstanding bank debt of $959 million, it said.

Pending court approval, the sale to Intelsat is expected to be completed within four to six months, Loral said. Intelsat, on the other hand, expects the process to take a little longer. All required approvals are expected to be obtained, and closing conditions satisfied, by early to mid 2004, it said.

Loral could not immediately be reached for comment.

Loral will retain five satellites serving markets in South America, Europe and Asia. Telstar 10, Telstar 11 and Telstar 12 are currently in orbit, and Telstar 18/Apstar V and Telstar 14/Estrela do Sul are scheduled to be launched within nine months, Loral said. The company will also hold on to its satellite design and manufacturing business, Space Systems/Loral (SS/L).

The struggling company said that overcapacity in the satellite industry, in conjunction with the general economic downturn, meant few new satellites have been ordered in recent months. SS/L has, however, recently been awarded a $113 million contract to provide batteries and power systems for the International Space Station, and is to restart work on a satellite program for WildBlue Communications.