SES Americom Moves Aggressively

By | April 12, 2004 | Feature

Princeton, N.J.-based SES Americom, a unit of Luxembourg-based SES Global [SESG], is pursuing a multi-pronged expansion that most recently features a $18.5 million purchase of the teleport facilities and other assets of bankrupt Verestar. Another important part of the U.S. satellite operator’s growth strategy is to expand its budding business alliance with satellite TV service EchoStar Communications [DISH].

These two moves alone give SES Americom heightened opportunity to tap into the growing government-services marketplace as well as the still-flourishing U.S. satellite TV subscription business. In addition, SES Americom recently signed a contract to provide in-flight satellite broadband capacity to Connexion by Boeing in the Asia-Pacific region.

SES Americom appears interested in gaining an enlarged slice of the mobile satellite services (MSS) business in light of the company’s opposition last week to a request by the world’s largest mobile satellite operator, London-based Inmarsat. In that matter, Inmarsat sought to waive its requirement under the U.S. ORBIT Act to complete an initial public offering (IPO). Objections to that request were presented from SES Americom and Reston, Va.-based Mobile Satellite Ventures to the Federal Communications Commission (FCC). Each opposition filing criticized Inmarsat’s attempt to consider its recent sale to private investors as a substitute for a public stock offering.

Industry analysts and consultants generally praised SES Americom for winning bankruptcy court approval to acquire the assets of Fairfax, Va.-based Verestar. The transaction was approved by the U.S. Bankruptcy Court for the Southern District of New York in Manhattan after completion of a formal auction process.

Verestar’s managed network services capabilities should help SES Americom to enhance its existing communications services to government, broadcast, business and international market segments, industry observers said. Under the combination, Verestar would gain access to potential new customers through the support of SES Americom, a fixed satellite services (FSS) operator whose client base includes dozens of broadcasters and special-event producers that need occasional news-gathering services.

SES Americom is pursuing needed regulatory approval to operate Verestar’s teleports in the United States and elsewhere. Verestar had been operating under Chapter 11 bankruptcy court protection since December 2003, and regulatory approval from the FCC and other bodies is expected during the next several months. At that point, the transaction could be finalized.

The Verestar assets will create a “bigger and better” SES Americom to buoy the combined organization’s financial performance, said Dean Olmstead, president and CEO of SES Americom. The two companies are “complementary,” and SES business unit Americom Government Services (AGS) will benefit significantly from the integration of the operations, he added.

David Helfgott, president of AGS, said the acquisition of Verestar would add key new assets, contracts and employees who can grow his business unit’s revenues “substantially.”

Verestar’s access to both satellite and fiber pathways across the United States as well as in the Atlantic and Pacific Ocean regions would aid SES Americom in enhancing its capabilities as a full-service provider, said D.K. Sachdev, president of the Vienna, Va.-based SpaceTel Consultancy. The networks of Verestar and SES Americom might appear to compete at times in providing satellite capacity to the same long-term customers but the benefits of “one-stop shopping” for end-to-end service should smooth out such situations, he added.

Steve Symonds, a satellite consultant who is chief of Wilton, Conn.-based Symonds Associates, said, “SES’ acquisition of Verestar is a very smart move for several reasons. Verestar has a nice portfolio of U.S. government business and is well regarded by its governmental customers. Verestar should be a wonderful fit with Americom Government Services and make AGS a real powerhouse in this sector.” Turning to other assets, Verestar’s ground facilities also are a good fit with SES, and they are expected to enhance the company’s terrestrial capabilities.

Another fan of the purchase is William Coulter, a partner in the Washington office of the Coudert Brothers law firm.

The deal falls under the category of “bigger is better,” while also offering benefits of “vertical integration,” Coulter said.

Roger Rusch, who heads the Palos Verdes, Calif.-based TelAstra consulting firm, said SES Americom’s management is showing a willingness to take on new ventures and to expand more than some other FSS companies.

Certainly, government leasing of commercial satellite services is a growing market, Rusch said. However, it remains to be seen if that business niche will continue to expand long-term, he added.

“Part of the government growth has been related to a more assertive military role in the world than many Americans find comfortable,” Rusch said. “New government-owned facilities are coming on line that will reduce the demand for commercial alternatives, and there are war fighters who prefer to own and control their own assets.”

Targeting Television

EchoStar and SES Americom noticeably started to become a bit cozy in March 2003. It was then that EchoStar agreed to fully lease SES Americom’s AMC-15 satellite for as long as 15 years.

The alliance deepened last month when EchoStar committed to long-term leases on SES Americom’s AMC-14 and AMC-16 satellites (SN, March 29).

The AMC-14 satellite should become a significant contributor to future revenues for SES Global in the second quarter of 2005, while AMC-16 should do likewise in the same quarter the following year. The AMC-14 satellite would be equipped with 32 Ku-band transponders, while the AMC-15 and AMC-16 satellites each would offer 24 Ku-band and 12 Ka-band transponders, said Yves Feltes, SES Global’s press relations manager.

Thus far, EchoStar has agreed to lease three yet-to-be-launched SES Americom satellites that total 78 Ku-band and 24 Ka-band transponders.

–Paul Dykewicz

(Monica Morgan, SES Americom, 609/987-4143; D.K. Sachdev, SpaceTel Consultancy, 703/757-5880; Steve Symonds, Symonds Associates, 203/834-2766; William Coulter, Coudert Brothers, 202/775-5100; Roger Rusch, TelAstra, 310/373-5539)

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