Comsat General Corp. has reached a preliminary agreement with Holiday Inns Inc. to build a $140 million satellite communications network to provide cable television, videoconferencing, voice and data services to all 1,496 Holiday Inns, sources said yesterday.
"We are in negotiations with Holiday Inns," said William L. Mayo, executive vice president of Comsat General, a subsidiary of Communications Satellite Corp., which provides satellite communications services in unregulated markets.
A spokeswoman for Hi-Net Communications Inc., a subsidiary of Holiday Inns that provides entertainment and videoconferencing services to 350 Holiday Inn hotels, also confirmed negotiations were ongoing.
Sources who requested anonymity said they expected a final agreement within two weeks.
The new Holiday Inns venture should bring about $60 million in revenue annually to Comsat General, which accounts for about 25 percent of Comsat's revenue.
"It would be incredible if it didn't help earnings," said Elliot Schneider, director of the research division at Gruntal & Co. Inc., a New York brokerage house. "It's a plus."
In its new venture, Comsat General will provide all the technical expertise in the installation, maintenance and operation of the network, while Holiday Inns will provide expertise in business and programming matters, sources familiar with the deal said.
The first, $70 million phase will provide cable television programming and teleconferencing to the Holiday Inns by the second quarter of 1985, the sources said.
Comsat General will distribute news, sports and entertainment programming from CNN, ESPN and Showtime, to the Holiday Inns, which have a total of 264,000 rooms. When that service begins, the Holiday Inns will no longer use cable operator services, sources said.
Comsat General, which will build 750 satellite earth stations for the venture and use existing satellite capacity, will also provide the Holiday Inns with videoconferencing services for hotel guests and employe training sessions.
The second phase of the network will be built at the end of 1985 and will provide a high-speed voice and data network to the hotels. The Holiday Inns will use the data network for a new reservations system, sources said.
The hotels, which run up a bill of about $500 million a year in communications costs, could save about 30 to 40 percent through routing the bulk of long-distance calls over the private network and using the network for inter-company communications, sources said.
The Holiday Inns venture is Comsat's first foray into domestic satellite business services since it sold its one-third ownership of Satellite Business Systems to IBM Corp. and Aetna Life & Casualty Co. earlier this fall. Satellite Business Systems, which offers high-speed video and data telecommunications services to business, had been a multimillion-dollar money loser for Comsat since 1976.
Comsat is also in the midst of consolidating a costly direct-satellite broadcast venture that has yet to beam television programming to homes not reached by conventional or cable television. That venture has cost Comsat over $200 million.
Comsat last week said earnings for the nine-month period ending Sept. 30 decreased by $4.5 million (26 cents a share) over the same period last year. Sales for the first three quarters of this year were $322 million, a decrease of $10.7 million compared with 1983.