Dave McGlade, CEO, Intelsat

David McGlade joined Intelsat as CEO in April 2005, following the company’s acquisition by a group of private equity firms. Since then, McGlade led the acquisition of PanAmSat and guided Intelsat through its own acquisition by a group of investors led by BC Partners.

With the integration of PanAmSat’s assets nearly complete and Intelsat under stable ownership, McGlade, a 25-year veteran of the telecommunications and media industry, can begin the hard work of shaping Intelsat to compete in today’s competitive and continually changing communications landscape.

"There’s a lot of excitement in the industry now. You see a difficult economic environment at a macro level around the world, and we’re still performing well. I’ve even coined the term recession resistant. But we can’t get caught up in that overexuberance, and for us its about being a smart company. Grow where we can but make sure that we don’t get back into this boom-bust phase that we’ve seen before."

McGlade discusses Intelsat’s transformation and his plans for the company with Via Satellite Editor Jason Bates.

VIA SATELLITE: What is the status of the integration?

McGlade: The integration is virtually complete at this point. We expect to complete the final step by the end of the year — moving the last three satellites operated by our West Coast Operations Center to our Washington Satellite Operations Center. I’m glad we’re beyond integration. It is now about running the business and taking Intelsat to the next level. We would like to build even closer relationships with our customers, aligning our plans with theirs and delivering better customer service. It is all about continuous improvement.

VIA SATELLITE: Have you met the financial goals set prior to the PanAmSat acquisition?

McGlade: We had committed that we would have a certain amount of operating and capital expense savings, and that is occurring, so everything that we promised, plus some, has occurred and is now benefiting our current shareholders.

VIA SATELLITE: How should observers view the executive changes taking place at Intelsat?

McGlade: Some of the changes are natural, given the change in ownership, and some are upgrades that bring the company to a higher performance level. I am extremely pleased that Intelsat has the bench strength with executives ready to step into these roles. Stephen Spengler Intelsat’s new Executive Vice President, Sales & Marketing, and Thierry Guillemin Intelsat’s Senior Vice President & Chief Technical Officer, along with Kay Sears, Intelsat General’s new President — each bring more than 20 years experience to Intelsat. Overall, I think the team is flourishing. It most definitely allows our senior management to showcase the outstanding talent available in our company. I love the idea of promoting people from within — it is an opportunity for our management team to grow and with that energy comes creativity.

VIA SATELLITE: How much focus are the new owners putting on cutting Intelsat’s debt?

McGlade: The real question is: can our business support it? The answer is ‘yes!’ Clearly, over time, we want to de-lever the company, so the key is to make sure that our revenues and profits grow. We are doing everything we can to intelligently grow Intelsat through smart investments.

I think that proper discipline is needed in successfully running a leveraged company. I think in 10-year cycles. I even try to model 15 years so we are not caught up in every quarter. My operating philosophy is the same, whether I was $1 billion in debt or $15 billion in debt: I’d run the company the same. I never want to be in the position to sacrifice the long-term health of the company to accomplish short-term activities. It is about building a fundamentally stronger company.

VIA SATELLITE: What are your plans for Intelsat’s network?

McGlade: Sometimes the other operators try to paint a picture that we are going to cut back because we are highly leveraged. One of the promises I’ve made to our customers was to enhance the quality of our network. Our investment in our terrestrial network has been instrumental in generating growth from new applications. Our terrestrial network is extensive, and we have invested further in upgrading facilities around the world. They are more robust and more resilient. We just enhanced the fiber network in the United States. We are now doing that in Europe. This means more platforms for growth in terms of managed services and added resilience so we can further grow and combine terrestrial capabilities with our satellite segment.

On the satellite side, it is all about getting better utilization out of our space assets. We have done very well over the last couple of years on maximizing our satellite fleet, with in excess of the equivalent of one and a half satellites in incremental marketable capacity as a result of our asset optimization program. We have successfully launched four satellites in the last two years, and Galaxy 19 is slated for launch this month. We plan for capacity growth by customer, by service application and by the economic drivers within each country and region. This allows us to grow our business with our customers in a prudent and responsible way.

VIA SATELLITE: Where do you see your growth coming from?

McGlade: We feel good about how our business is growing. We are different from many of the other operators. We have the most diversified business catering to media, network services and government. We are dispersed more globally, operating in more countries than other satellite operators. When you look at the Intelsat business, our media services are performing to plan. Our network services business is growing more quickly than anyone ever anticipated — driven by demand for data networks and wireless networks around the globe. In my view, the government business is performing better than it ever has. It has been run really well, and I am very pleased with the leadership team and how they are performing.

: Indeed the growth of your network services business topped 13 percent in the first quarter — way ahead of the single digit growth rates typically delivered by FSS. Are you surprised by the performance of this business?

McGlade: Not at all — we are well-positioned in regions that are undergoing rapid economic development, and as other companies build out infrastructure in these regions, Intelsat has partnered with them to grow their businesses. Wireless expansion services, private corporate networks, Internet trunking services and broadband services are vital elements of the communications landscape, and Intelsat has been able to parlay its heritage relationships as markets deregulate and new entrants bring new services to market. Overall, we are trying to push the technology, make it more cost effective, simpler and less labor intensive. The expansion of our terrestrial network supports this effort, and makes satellite a more efficient and accessible technology. We saw this need and our response effectively expanded the market, and that is what you are seeing in our results.

VIA SATELLITE: How do you see the broadband market evolving?

McGlade: When I look at broadband, I keep seeing so much potential, and it has not been fully realized. The frustration still exists that the industry should be further along than we are, but we should also be proud of what we have accomplished. The industry has had success with WildBlue and Hughes. Even so, I believe that there is more to be done in the broadband market place. You have to look at it country-by-country. Looking at mobile broadband is key as well. The big questions are: ‘will we have as much success through satellite as is possible through a terrestrial network in providing robust broadband?’ I think so. ‘How will these technologies develop?’ ‘Will it take longer and be more expensive?’

VIA SATELLITE: Which other applications do you see growing?

McGlade: In regard to applications, we continue to see HD (high-definition) proliferating. Intelsat carries nearly 80 channels of HD globally now, and I still see continued growth coming from HD, partly due to the success of this summer’s European soccer championship and the Olympics. I believe the DTH (direct-to-home) platforms will increase globally and proliferation of ethnic channels around the world will continue as well. And then you have the "big unknowns" like IPTV. That market is still growing. When you look at the development of the emerging economies, there is a strong need for communication bandwidth and satellite is a good place to be.

VIA SATELLITE: Is the rate of growth in the HD market meeting your expectations?

McGlade: I am a believer that all major programming will move to HD over time. I am encouraged because I am seeing growth of HD in other regions such as in Latin America and in the Asia-Pacific countries. The epicenter that started in Japan and continued to Europe is now spreading around the globe. To maximize the return on HD content, programmers should strive to select transmission services with maximum flexibility, efficiency and above all, quality. When HD programming can be instantly delivered to a global footprint, distribution opportunities are limitless, increasing returns — and viewer loyalty — worldwide.

VIA SATELLITE: What is the future of IP and satellite?

McGlade: I am a huge believer in open standards. My view is if you standardize technology and how it is delivered, you then create a bigger market place, you bring down cost all while increasing quality. IP is a vehicle for that. We look at IP from all angles — from the government angle with the router in space, IPTV, broadband and Voice Over IP. Internet Protocol is the natural enabler to have cost-effective content for video, voice and data and to bring those things together. I think that trend will grow.

VIA SATELLITE: What will the fixed satellite services industry look like in several years?

McGlade: I believe it will be more recognized as a source of global communications infrastructure. Our technology will be core to mobility applications and our inherent broadcast capabilities, along with HD proliferation, will propel new entertainment standards. The satellite industry is a very exciting place to be.

VIA SATELLITE: What was your view of the industry when you took over Intelsat and what imprint did you want to put on the industry?

McGlade: Historically, this industry has been run by engineers with great technical expertise. Today, you are seeing leadership coming from those holding more business expertise. So I saw an opportunity to introduce a more customer-centric view into the business when I entered this industry. I like to start with the customer and work backwards as I build the business. What are the opportunities you have with those customers? How do you find ways to grow with them? It is still a work in progress, but the idea is to ensure that we have a motivated, highly skilled and diversified management team. It’s about a highly motivated team with clear objectives that provides the best solutions for the customer. I think we’ve done that, but there’s a lot more to do.

The Connected Cockpit: Driving the Change
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