Lockheed Martin Corp.'s plan to purchase Comsat Corp. took a long step forward yesterday as the House approved legislation that would redraw the rules of international communications satellite competition.
An acquisition of Comsat has been barred by the 1962 Satellite Act, which established the Bethesda-based company as the sole U.S. member of the global satellite consortium Intelsat.
Lockheed has acquired 49 percent of Comsat for $1.2 billion in cash, and if the changes in the Satellite Act become law, it intends to purchase the remainder by exchanging Lockheed shares for Comsat's 1-for-1.
Lawmakers now will attempt to reconcile key differences between the House measure and legislation previously passed by the Senate, before Congress adjourns.
The stakes remain high for Comsat, Lockheed Martin, Intelsat and the rest of the satellite industry. A key provision of the House version--but not the Senate legislation--would permit telecommunications companies to invest directly in Intelsat, eroding Comsat's 22 percent ownership in the global satellite network. Comsat calls the provision an "unconstitutional seizure" of its Intelsat stake.
Both House and Senate measures could permit companies to purchase access to Intelsat satellites directly, without going through Comsat as is now the case.
Backers of the House legislation said that Comsat's dominance of U.S. use of the Intelsat network was unfairly limiting telecommunications competition.
"The world has changed . . . particularly in telecommunications and space technology. It's high time the law caught up with the reality," Rep. W.J. "Billy" Tauzin (R-La.) said in introducing the measure yesterday. It passed on a voice vote after a sparsely attended House session agreed unanimously to take up the bill.
Intelsat opposes the House measure, asserting that the new rules that would be imposed on the 143-nation satellite consortium would leave it at a competitive disadvantage with commercial satellite services providers.
Lockheed has reason to see the measure pass, permitting it to acquire Comsat while its shares are near a 52-week low, analysts noted. "Check and mate, Lockheed emerges the winner," John B. Coats, an analyst with Salomon Smith Barney Holding Inc., said in a report issued yesterday. But Lockheed also has a stake in protecting Comsat's future value from the erosion the House bill would cause, analysts added.