Intelsat Puts Itself Back on the Auction Block

Intelsat, which is taking bids for around $5 billion, controls a fleet of satellites from a building on Connecticut Avenue NW.
Intelsat, which is taking bids for around $5 billion, controls a fleet of satellites from a building on Connecticut Avenue NW. (Intelsat)
By Kim Hart
Washington Post Staff Writer
Friday, June 15, 2007

Intelsat, the world's largest commercial satellite company, is up for sale again, and expected bidders include two of the country's biggest satellite-television providers.

EchoStar Communications and Liberty Media, which are affiliated with the Dish and DirecTV Group satellite-television companies respectively, are teaming up to try to buy the company that is based in Bermuda and has major operations in the District, according to an industry source, who was not authorized to speak about the matter and spoke on condition of anonymity.

Bids, which were due yesterday, are about $5 billion and include offers from private-equity firms, the source said.

Intelsat, EchoStar and Liberty Media declined to comment on the auction.

The satellite industry has been consolidating, and ownership of Intelsat has changed hands a number of times in recent years. The company, which once held a monopoly on incoming domestic satellite traffic, operates networks worldwide and controls 51 satellites from a futuristic-looking building on Connecticut Avenue. Its satellites reach about 99 percent of the world's populated areas.

Despite deep loses and heavy debt, Intelsat is in decent operational shape, and the market continues to grow at about 5 to 8 percent, said Christopher Baugh, president of Northern Sky Research in Cambridge, Mass.

But Baugh and other analysts expect any deal between EchoStar and Liberty, which plans to take control of DirecTV this year, could run into scrutiny from regulators seeking to preserve industry competition.

EchoStar and DirecTV are archrivals in the consumer television business. Intelsat, on the other hand, is a wholesaler of its services and leases signals to cable providers and television networks.

Combining the consumer businesses with the world's largest commercial satellite operator could raise significant antitrust issues, analysts said.

"Of course this has regulatory red lights all over it," said Marco Caceres, an analyst with the Teal Group, a Fairfax market-research firm. "Now you're talking about companies basically having a monopoly within satellite broadcasting, making it really tough for newcomers to compete."

The companies' interest in Intelsat was reported yesterday by the Wall Street Journal.

Intelsat, which is 42 years old, began as an intergovernmental operation providing satellite telephone services to countries that traditionally did not have access to the technology. In August 2004, four private-equity firms -- Apax Partners, Permira, Apollo Management and Madison Dearborn Partners -- paid $3.1 billion for the company.

A year later, Intelsat agreed to buy PanAmSat, its largest domestic rival, for $6.4 billion, including about $3.2 billion in assumed debt.

After a series of mergers and dividends paid to its private-equity owners, Intelsat now has about $11 billion in long-term debt. In April, Intelsat's owners approached a potential buyer, sparking an under-the-radar auction.

Dianne VanBeber, Intelsat's vice president of investor relations, said that the company's integration with PanAmSat is on track and that the company has seen a lot of growth supporting wireless networks overseas, such as in Africa.

Intelsat's largest customers are cable providers such as Fox News, HBO and CBS. Intelsat also supports mobile-video services for Verizon and other wireless companies.


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