Intelsat's McGlade Sees Latin America Capacity Shortage through 2012

[Satellite TODAY Insider 11-09-10] A sustained increase for video services in Latin America has created significant potential for FSS operators in the region, Intelsat CEO David McGlade said during his company’s 2010 third quarter results conference call Nov. 8.
    McGlade said while he sees the region as the fastest growing region for FSS, the operator might not be able to capitalize on the market in the short-term. “We will have a lack of capacity to meet the region’s demands in the short term and will not realize this growth until Intelsat 27 is launched in late 2012 to replace Intelsat 805. In the meantime, we’re going to continue to groom our network and get the best yield of what’s available.”
    Intelsat reported 2010 third quarter revenues of $644.3 million — a 4 percent increase from the same period 2009 — but posted a net loss of $106.4 million in the most recent three months. The operator’s EBITDA was $478.1 million, an increase of $38.3 million from EBITDA of $439.8 million for the same period in 2009.
    Intelsat CFO Michael McDonnell said the increase in EBITDA is a result of the company’s focus on controlling its costs. “We’re also working to simplify our capital structure and reaffirming our 2010 capital expenditures projection to be between $825 [million] and $900 million. Intelsat’s capital expenditures will continue to drop in 2011 to between $800 [million] and $875 million and then fall significantly in 2012 to the $450 [million] to $525 million range. This guidance excludes the capital expenditures associated with the Intelsat New Dawn satellite and several late 2010 contract milestones could affect the timing of capital expenditure payments between 2010 and 2011.”
    The operator ended the third quarter with a backlog of $9.3 billion, a slight decline from its position during the previous year, but Intelsat boosted its cash reserves from $504 million at the end of the 2009 third quarter to $651 million at the end of September. At the very end of the quarter, the company completed an offering of $1 billion in 7.25 senior notes due 2020. The majority of the proceeds were used to repurchase debt due in 2014 and 2028 with $34.1 million of the proceeds used to repurchase and cancel some of the remaining outstanding Intelsat Subsidiary Holding Company debt due in 2013. McDonnell said $227.8 million of the proceeds from the offering remain available for general corporate purposes.
    McGlade also described the operator’s position in Africa, where a growing presence of fiber has impacted its short-term revenues. “The mix will continue to have third party capacity with a lower margin. We still see long-term growth in Africa, but we have seen some short-term impact by the increase of fiber and expect that trend to continue.”
    Asian markets have seen little change in the third quarter, according to McGlade, who said his company is confident in its acquisition of the Protostar 2 satellite. “Despite the fact that the take-up of its capacity has been slower than we planned, we’re still confident we’ll hit our fill-rate goals.”
    Intelsat also updated its nine-satellite procurement and building strategy, which is expected to see all of the satellites, including Intelsat New Dawn, launched by the end of 2012. “Intelsat has three launches scheduled before year-end 2011. Intelsat 17 will launch in the fourth quarter of 2010, and Intelsat New Dawn will launch late in the first quarter of 2011 as planned. However, Intelsat 18 has been rescheduled to launch late in the second quarter of 2011 due to manufacturing delays.”
    McGlade also was asked if the Republican takeover of the U.S. House of Representatives in January would affect Intelsat General’s revenues, as the party’s leaders have hinted at possible cuts in military spending. “We do see risk in some opportunities,” McGlade said. “We think there may be cuts in some programs where we have a presence, and there will be times when it affects our revenue growth, but overall, we see it as a net positive as some of the expensive government programs are augmented to better serve our customers in the government sector.”

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Intelsat’s McGlade Sees Latin America Capacity Shortage through 2012

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