Ergen Wants to Buy Loral Satellite Fleet - Multichannel

Ergen Wants to Buy Loral Satellite Fleet

Author:
Publish date:

EchoStar Communications Corp. has expressed interest in acquiring the satellite assets of Loral Space & Communications Corp., throwing a wrench into Intelsat Ltd.'s proposed deal to purchase the fleet.

Loral filed for Chapter 11 bankruptcy protection in July. Intelsat had bid $1 billion for the North American satellite fleet — five operational birds and one slated to launch next year — and was named by the court as the lead bidder in an auction for the assets slated for Oct. 20.

In a statement, Loral confirmed the informal offer from EchoStar, adding that it will evaluate any bid it may receive from EchoStar in accordance with the bidding procedures.

"EchoStar's interest reconfirms the value of the assets assembled by Loral over the years," Loral CEO Bernard Schwartz said in the statement. "We will consider all bids received very carefully, noting that our current plan is to emerge from the bankruptcy process with a viable, ongoing satellite-services and manufacturing business."

Sources said EchoStar placed a $1 billion value on the satellite fleet and $450 million on Loral's satellite-manufacturing facilities. It is expected that EchoStar would sell the manufacturing operations if it were to win the bidding.

Intelsat spokeswoman Susan Gordon said that the satellite service provider was aware of the EchoStar letter, adding that it would not change Intelsat's offer for the assets.

"We've known all along that this was going to be an open bidding process," Gordon said. "We're not surprised that other people are interested. These assets are pretty valuable."

Gordon added that Intelsat's bid has been approved by the boards of both companies and by Intelsat shareholders, and is fully financed.

"Those are steps which EchoStar clearly hasn't taken," Gordon said.

Oppenheimer & Co. cable and satellite analyst Thomas Eagan said that EchoStar has the financial wherewithal to make a deal — it has about $2.6 billion in cash — but said there are better uses for those funds.

"I'd rather they use that money to buy back shares," Eagan said.

EchoStar said it has not decided what course it will take.

"We have not made a determination whether to participate with a bid in the Loral bankruptcy case at this time," said EchoStar spokesman Steve Caulk. He declined further comment.

Four of the five operational satellites (Telstar 4, 5, 6 and 7) mainly carry television signals on a wholesale basis for major networks like ABC, CBS and Fox. The fifth, called EchoStar IX/Telstar 13, launched earlier this month and is jointly owned by EchoStar and Loral. EchoStar operates the Ku-band payload of EchoStar IX/Telstar 13 to enhance its Dish Network DBS service and a Ka-band spot beam for broadband services. The C-band payload is owned and operated by Loral.

While EchoStar would not be able to use the spectrum currently being used by the broadcasters for its own direct-to-home [DTH] service, Carmel Group senior research analyst Sean Badding said the company could convert the unlaunched bird to carry direct-to-home signals.

"The whole idea is a capacity issue and saving money," Badding said. "There are satellites on the ground that they can retool to make them DTH-capable."

Only two of the Loral satellites are positioned close to the EchoStar birds, according to Lyngemark Satellite, an Internet site that provides technical information on communications satellites.

EchoStar chairman Charlie Ergen has said in the past that EchoStar needs additional satellite capacity for local-to-local service, especially after its bid to acquire No.1 DBS service provider DirecTV Inc. was rejected by regulators in December.

Related