Intelsat restructuring plan offered by Comsat, government

February 16, 1996|By BLOOMBERG BUSINESS NEWS

Comsat Corp. and the U.S. government yesterday proposed a restructuring of Intelsat that would include a sale to the public of a portion of the international telecommunications and broadcast satellite operator.

The proposal, which Bethesda-based Comsat says may be challenged by others in the 125-nation consortium that owns Intelsat, is unrelated to the loss Wednesday of a $204 million Intelsat satellite in a failed launch attempt in China.

Instead, it reflects massive competitive changes that have taken place in the satellite business -- particularly for the long-distance telephone services -- in recent years, Comsat officials said.

"Intelsat was derived 30 years ago to provide service in a monopoly environment," said John Mattingly, vice president and general manager for Comsat World Systems. "There's no longer a monopoly environment."

Competition from private satellite communications providers like Greenwich, Conn.-based PanAmSat and fiber-optic telecommunications carriers "is growing like gangbusters," Mr. Mattingly said. That cuts into the business of Intelsat, a Washington-based organization owned and operated by the United States and other countries that use its services.

For Comsat, which owns 19 percent of Intelsat, the preferred solution is to divide Intelsat into two separate entities.

One would have public shareholders, like Comsat, and would be structured to compete in the satellite "markets of the '90s and beyond," Mr. Mattingly said. The remainder of Intelsat would remain a cooperative intergovernmental organization that would continue to provide basic public network services.

The proposal could take years to be put in place. Even so, shares of Comcast jumped $2.875 yesterday to close at a 52-week high of $25.375. The total of 1.6 million shares was almost seven times its average daily volume for the last six months.

Comsat plans to present the proposal to Intelsat's board of governors in March, Mr. Mattingly said. If it wins approval from the governors at its April 1997 meeting, Comsat would like to see it implemented "shortly thereafter." and an offering could take place at the earliest about a year later, he said.

Still, "there will be competing proposals" from some of the other 135 Intelsat members, he said. "We expect there to be a couple of alternative approaches. What we have is not the end but the beginning."

Comsat and Intelsat were created in the early 1960s, when satellites were first developed to carry telephone calls and broadcast signals. No U.S. government funds are invested in Comsat, the company says, but, reflecting its original sponsorship, the U.S. president names three of Comsat's 15 board members.

In addition to its investment in Intelsat, Comsat also owns the Denver Nuggets team in the National Basketball Association.

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