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Telenor Noncommittal On Satellite Business Disposal

By | July 3, 2002

      In recent years, many telcos have been divesting their satellite activities in order to reduce debt and focus on core activities. However, Norwegian telco Telenor has not yet disposed of any of its satellite businesses. Telenor is still involved in several areas of satellite communications, which are spread throughout the company.

      According to spokesman Dag Melgaard, “Satellite is a very integrated part of our businesses, but not a core activity. We have the satellite broadcasting unit which is part of Telenor Plus, and then we have Telenor Satellite Services, which is basically our mobile satellite business, and Telenor Satellite Networks, which provides a diverse range of fixed services such as corporate networks, international telephony and so on. Telenor Satellite Services and Telenor Satellite Networks are not part of our four core business areas.”

      Added Bjarne Aamodt, senior vice-president at Telenor, “The policy of Telenor is to define these [satellite] units as non-core. This means that we have more flexibility to do certain transactions that wouldn’t be possible if the businesses were one of our four core businesses. This might mean that the ownership could be changed or diluted. However, Telenor does not have a high debt level compared to several other telcos, and we therefore have more time for developing our businesses assets in order to create more value for Telenor shareholders.” As of the 1Q 2002 Telenor’s debt was 24.4 billion NOK ($3.2 billion).

      Telenor’s satellite broadcasting platform includes the Thor I, II and III satellites located at the 1 degrees West orbital position, as well as 14 transponders leased on Intelsat 707. All of Telenor’s satellites are Boeing 376HPs. As of the end of 2001, the Thor satellites had 45 transponders, of which 42 were used for broadcasting services and three were used for satellite network and mobile services. The satellite broadcasting unit provides the bulk of satellite-related revenues, contributing $125 million in 2001. Those revenues are growing at a rate of 6 per cent to 8 per cent per year.

      As of the end of 2001, Telenor transmitted more than 115 digital TV channels, 65 radio and other services and 15 analogue TV channels in the Nordic area on behalf of more than 30 content providers. However, the transfer from analogue to digital transmission means that Telenor has more spare capacity and has decided to postpone a decision regarding the construction of the Thor IV satellite, even though Thor I has been decommissioned from DTH operations and is now being used for inclined orbit operations. Thor II and III are scheduled for replacement in 2009.

      Telenor has stakes in the major international satellite operators Inmarsat, Intelsat and Eutelsat and agreements with other major satellite operators. The company has a 15 per cent stake in Inmarsat, a 4.11 per cent stake in Intelsat, a 3.65 per cent stake in New Skies Satellites and a 0.04 per cent stake in Eutelsat. According to Telenor’s 2001 annual report, these stakes are valued at around 2,559 million NOK ($340 million).

      In 2001, Telenor acquired Comsat Mobile Communications from Lockheed Martin Global Telecommunications for $116.5 million. Also in 2001, Telenor acquired SAIT Communications S.A. from SAIT-STENTO. Following the Comsat acquisition, Telenor became the largest Inmarsat operator in the world. Historically, Telenor has taken the lead in launching new Inmarsat services. For example, it was the first to offer Inmarsat’s 64 Kbps Global Area Network (GAN) service in November 1999. After a slow start, the GAN service picked up significantly in the final quarter of 2001. In fact, in 2001, Telenor had a market share of almost 30 per cent of all GAN services. Telenor will also be the first to launch Inmarsat’s next generation maritime services, known as Fleet. Revenues for Satellite Mobile were 1,210 million NOK ($161 million) in 2001.

      Aamodt commented: “I would characterise the mobile satellite business as a steady, growth business. By steady, I mean mid to high single digit growth. There has been quite a bit of consolidation in the business already and we will probably see a further reduction in the number of Inmarsat land Earth station operators (LESOs). The biggest challenge for the mobile satellite business in the next few years will be the launching of mobile broadband such as the regional GAN service [on Thuraya] and the new Inmarsat I4 satellite fleet. However, these challenges are more business related than technical. For example, it will be crucially important to develop the right type of services and get into place the right distribution structure.”

      Telenor Satellite Networks provides international satellite-based communications to large corporate, public and intergovernmental organisations; satellite-based Internet and IP services, corporate VSAT networks and data-relaying services for polar satellites. The company has a number of subsidiaries in Eastern Europe that provide VSAT services, such as Telenor Slovakia, Telenor Czech Republic and Telenor Polska. Revenues for Telenor Satellite Networks were 354 million NOK ($47 million) in 2001.

      –Gareth Owen

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