Intelsat-PanAmSat merger creates global leader

The completion of the $6.4 billion deal that combines Intelsat and PanAmSat creates the largest global satellite entity and one capable of serving diverse markets cost-effectively, according to the man who will lead the new Intelsat.

“We will have the biggest breadth in terms of global distribution, which we think positions us well for our customers, and for international distribution of their content and data connectivity,” Intelsat CEO David McGlade said in an interview. “This positions us to provide one-stop shopping and hosted services, to a wide variety of customers. The new company is number one position in virtually every segment of FSS [fixed satellite service] industry.”

Intelsat acquired all of the outstanding shares of PanAmSat for $3.2 billion and assumed debt of about that same amount to account for the rest of the transaction’s value. The two global satellite networks were actually complementary, McGlade said, in that PanAmSat’s satellites covered large land masses and were widely used for video distribution, while Intelsat served more corporate networks with data needs.

“The combination will give us maximum operating flexibility, and the ability to adapt to changing market conditions, with unprecedented backup capabilities, and greater than 99.999% reliability,” he said. “This will be a new company with greater focus on providing higher levels of customer service, and streamlined internal processes and procedures.”

In addition to its 51 satellites, the combined company operates “eight owned teleports and more than 20 affiliated international gateways connected by 40,000 miles of fiber,” reaching 99% of the world’s populated regions, McGlade said. “We will have the most efficient distribution solution for our customers -- if they are looking for point to point, we can put that on our terrestrial network, if they are looking at point to multipoint, we can do that on our satellite network. If they are looking for international distribution, we can take that content over terrestrial links to Europe and uplink to satellite for distribution to Africa.”

The new organization will carry one out of every four TV channels that is carried over FSS, and is the top provider of transponders for video programming worldwide, carrying more high-definition TV programming than any other FSS carrier, according to an Intelsat press release. It will also be the leader provider of commercial satellite services to the government sector and to enterprise, Internet and mobile network operators.

Intelsat will continue to be headquartered in Bermuda, with U.S. offices in Washington, D.C.

Growth drivers going forward will include the high definition boom in the U.S. and other developed nations and the demand for communications in regions such as Africa, McGlade said.

“There is tremendous growth in the African continent for telecom distribution services,” he said. “There is an exploding need for ubiquitous connectivity and communications, and there is very little fiber infrastructure in Africa. They need cellular backhaul, Internet connectivity, cybercafes, a whole range of services. In the U.S. – high definition TV is a growth driver for the business. Over the next five years, we will see significant growth in that area in video. In general, as you look across the globe we are seeing strong developing applications and uses for VAST terminals for data connectivity, Internet connectivity and corporate networking.”

The integration process will include some job cuts to eliminate duplication. McGlade said planning for the combination of the two companies has been underway for some time – the merger was announced in August of 2005 – as the companies awaited regulatory approvals.