Wall Street Analysis

New Skies Satellites N.V. [NSK], a satellite operator in The Hague, The Netherlands, reported its second quarter 2004 financial results last Thursday and showed that transponder pricing pressure is continuing to curb profits within the sector. Since New Skies operates worldwide, its performance indicates that transponder overcapacity in certain regions is exerting a drag on results.

The company reported that its net income, excluding one-time items, slipped to $800,000 during second quarter 2004, compared to the same period last year when net income hit $3.1 million. However, one-time items lifted second quarter 2004 net income for New Skies to $19.5 million. That boost came from a one-time cash payment of $32 million by Intelsat Ltd. to New Skies as part of an orbital slot coordination agreement that more than offset $2.8 million in one-time costs during the period related to the purchase of New Skies by affiliates of The Blackstone Group, a private equity firm. The Intelsat payment allowed New Skies to boost its revenues for second quarter 2004 to $83.3 million, up from $54.7 million for the same period last year.

Investors seemed largely unsurprised by the results. With New Skies awaiting final approvals to complete its sale to The Blackstone Group, the company’s stock price inched up just 0.5 percent for the week of Aug. 13-19 tracked by our Satellite News stock index. Overall, the stock prices of satellite operators listed in the index fell 3.9 percent for the week, compared to a 2.8 percent rise in the prices of the manufacturers. Those trends are a reversal of the full-year stock price movements among operators and manufacturers tracked in the index. For the past year through Aug. 19, the stock prices of public satellite operators collectively rose 7.4 percent, compared to a 0.8 percent dip in the prices of the manufacturers.

With the closing of PanAmSat’s sale expected shortly after press time and New Skies’ purchase anticipated by year-end, fewer publicly traded operators will remain to give industry observers insights into industry trends. For now, it seems clear that transponder price-cutting is hurting the results for virtually all fixed satellite services operators worldwide.

Paul Dykewicz is senior editor and senior analyst of Satellite News. He can be reached at 301/354-1769 or at [email protected].