NEW LORAL ORDERS: COMPANY “WILL BENEFIT FROM CONSOLIDATION”

Chris Forrester Editor

Last week it emerged that Loral’s satellite manufacturing arm, Space Systems Loral, is “very close” to finalising a number of satellite contracts including an order for DirecTV 7-S.

DirecTV spokesman Bob Marsocci says Space Systems Loral has an authorisation to proceed with DirecTV for a new spot-beam satellite, DirecTV 7-S. Subject to final negotiations, a contract is expected within weeks.

According to Loral the DirecTV 7-S craft is just one of five similar deals awaiting confirmation. A final deal for Loral’s manufacturing business was announced with Hong Kong- based APT Satellite Holdings for its APSTAR-V satellite. During a conference call for analysts Loral chairman Bernard Schwartz said he was quite pleased with the satellite manufacturing orders, saying the five orders “represent very strong bookings for SS/L through the first half of the year.” DirecTV has two satellites being prepared for launch, which are DirecTV 5 and the spot-beam bird DirecTV 4-S.

The upbeat announcement from Loral disguised mixed results for the company during the 2Q/2001, which persuaded investment banker Merrill Lynch to reduce their rating on Loral from ‘accumulate’ to ‘neutral’, not helped by revenues of $275 million (E307.77) during the quarter, well down on market expectations which were nearer $319 million. This is also down (15 per cent) from the $324 million recorded in 2Q00, as growth from the fixed satellite services (FSS) segment was offset by sales declines in its Space Systems/Loral satellite-manufacturing unit. Longer term, Merrill Lynch is happy with an ‘accumulate’ rating “based on our unchanged belief that Loral’s core business assets (FSS and satellite manufacturing) are worth more than the whole. We believe that FSS operators are seeing the benefits of providing customers with global reach and redundancy, which, in our opinion, remains the primary catalyst for industry consolidation over the next 12-24 months. Loral’s FSS business, as it is one of a handful of global satellite operators in the world, should be a beneficiary.