Satellite Operators Consider Cost-Saving Measures By Andy Pasztor Wall Street Journal
Friday March 25, 3:28 PM EST
http://finance.myway.com/jsp/nw/nwdt_rt.jsp?section=news&cat=INDUSTRY&feed=dji&news_id=dji-00056120050325&date=20050325
WASHINGTON -- Turmoil among global satellite operators is prompting them to consider previously unthinkable cost-saving measures, from eliminating insurance for spacecraft launches to providing rivals with backup capacity.
Such proposals reflect a series of ownership changes that over the past two years gave control of three of the industry's four-largest international players to private-equity groups. Roiled by the new owners' emphasis on maximizing short-term returns, industry executives at a conference here disclosed a range of possible steps to limit capital expenditures, reduce other costs and boost cash flows.
Conny Kullman, chief executive of Bermuda-based Intelsat Ltd., which previously dropped insurance coverage for older satellites in orbit, said, " There might be a time in the future" when his company also "would look at not insuring launches" as a way to save money.
Romain Bausch, head of Luxembourg's SES Global SA, which operates the largest satellite fleet and hasn't been taken over by private-equity groups, told reporters at a briefing that some of his rivals are asking for help with backup capacity in orbit. Instead of building replacement satellites, Mr. Bausch said competitors are looking to buy capacity from SES "so they could continue serving some of their customers" when their spacecraft reach the end of their operational lives. "We're seeing an increased interest in exploring such opportunities with us." Those and other cost-cutting proposals coincide with heightened debate over whether private-equity owners will help or hurt satellite operators as the industry struggles to revive from a glut of in-orbit capacity and soft prices in some regions.
In addition, Intelsat and Inmarsat Group Ltd., a London-based provider of mobile satellite services, are both mulling initial public offerings later this year.
Insuring a $200 million satellite's launch into orbit and its first year of operation can add as much as $50 million to the price tag.
================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu
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