Comsat tries new orbit Atmosphere: Having failed to live up to its promise as a telecommunications company, Comsat is seeking refuge in the deep pockets of Lockheed Martin.

November 22, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

In the frenetic telecommunications industry, where companies spring up like April grass, only a few firms have managed to develop and retain a truly distinct corporate character. AT&T Corp. is the distinguished, slightly dotty patriarch, looking to regain the vibrancy of youth. MCI WorldCom Inc. is the pushy parvenu gunning for the top spot.

Then there is Comsat Corp. If Maryland's most prominent telecommunications company were a person, it would be an aging playboy with a glamorous past and a squandered inheritance.

Conceived in the shoot-for-the-sky days of the Kennedy administration and created by an act of Congress, Comsat was charged with helping to establish a global satellite communications system. In this role, the company helped shape the way Americans see the world, making international events such as the Vietnam War seem as immediate and close as the local news. Comsat has even picked up two Emmy awards for its contributions to television.

Furthermore, Comsat seemed ideally situated to take advantage an enormous opportunity. The telecommunications industry was about to take off, and Comsat controlled access to the world's best satellite systems. If it used this birthright wisely, Comsat stood to become one of the most successful and important communications companies around.

It didn't turn out that way. Hurt by its own bad decisions and missed chances, Comsat stumbled from one ill-defined venture to another as the rest of the industry whizzed by.

"I think Comsat could never really come to grips with the company it wanted to be strategically, and it missed tremendous opportunities," said Michael Alpert, a former Comsat executive who now is an industry consultant in Washington.

So the dispirited playboy ripped up his little black book and got hitched. In the last two years, Comsat has jettisoned various ambitious projects and focused on its core satellite business. Then, on Sept. 20, Comsat announced that it was being acquired by defense giant Lockheed Martin Corp. for $2.7 billion.

The marriage of the two Bethesda companies faces an arduous approval process, but whether or not the merger ultimately goes through, it is clear that Comsat's colorful and checkered story is entering a new phase.

"Whether they merge or not they're facing huge changes," said Steven A. Solazzo, an analyst with TD Securities Inc. in New York.

For starters, Comsat will have to contend with the increasing privatization of the once highly regulated satellite industry. For decades, the company benefited from being the nation's sole provider of access to two key international satellite networks, as well as the top shareholder in those networks. Now those satellite groups are going private, a process that presents Comsat with both big opportunities and grave risks.

In addition, changes in telecommunications have raised tough questions about the future of the satellite market.

Fiber-optic cables can now carry vast quantities of information instantly and cheaply from continent to continent. This kind of long-haul communication used to be the stock in trade of satellites, but international voice traffic has increasingly moved onto fiber lines.

In addition, Comsat also faces ever-stiffer competition from rival satellite companies.

This month's debut of Iridium LLC's ballyhooed 66-satellite phone network was the latest salvo in an increasingly pitched battle for satellite business that Comsat once controlled.

Many of the upstart satellite players are affiliated with aerospace and communications titans. Comsat, with its relatively modest size, could be hard-pressed to compete if the merger with Lockheed Martin falls through, which is possible.

And if the merger does take place, Comsat faces the prospect of losing its independent identity and being swallowed up by a company that is only beginning to make a real run at the telecommunications market.

While Comsat officials speak optimistically about the merger and about the future of the company, they candidly admit what cannot be denied: Comsat failed to live up to its potential.

Proposed by Kennedy

Comsat -- originally known as Communications Satellite Corp. -- was an unusual creature from the start, a private, for-profit corporation created by an idealistic decree of government. In 1961, President Kennedy appeared before a joint session of Congress and called for an expanded space program, including a manned trip to the moon and an international satellite communications system.

Congress passed the Communications Satellite Act in 1962. That legislation committed the United States to the formation of a global satellite network "which will contribute to world peace and understanding." It also provided for the development of a new company -- Comsat -- to carry out the U.S. end of the deal.

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