Although there has been no official confirmation on whether Zeus Holdings Ltd., the company formed by a consortium of private equity firms Apax Partners, Apollo Management, Madison Dearborn Partners and Permira, will actually complete its announced acquisition of Intelsat in the wake of the Intelsat Americas-7 blink and subsequent grounding of Intelsat Americas-8, the company did name the new CEO of Intelsat to take over when the transaction is closed.

Zeus went outside of the satellite industry and tapped Dave McGlade, current CEO of cellular operator O2 UK, a subsidiary of mmO2 plc, for the position. Current Intelsat CEO Conny Kullman will become the chairman of the company’s board of directors once Dave McGlade comes on board.

Zeus touted McGlade’s “extensive senior executive experience in the telecommunications industry” in its announcement of McGlade’s hiring, noting that he has for the last four years led the turnaround of O2 UK, including growing O2 UK’s customer base to more than 14 million subscribers with service revenues and operating profits of 1.8 billion pounds ($3.38 billion) and 341 million pounds ($638.7 million) respectively in the six months ending Sept. 30, 2004. Zeus said these numbers represent a year-on-year 20 percent service revenue growth and a 40 percent operating profit.

Zeus also noted McGlade’s work in the U.S. cellular market as the West Region president for Sprint PCS and his work in the cable market as president of local and regional cable advertising network Cable AdNet and vice president of TCI Telephony Services.

A spokesman for Zeus declined to comment on McGlade’s hiring and the status of the Intelsat sale to Satellite News.

A Fresh Perspective

That Dave McGlade is coming from the cellular industry has not triggered any significant red flags among those in the satellite industry that spoke with Satellite News.

“It’s useful and refreshing that the new owners of Intelsat are thinking out of the box,” said Phillip Spector, partner and chairman of communications and technology group at Paul, Weiss, Rifkind, Wharton & Garrison LLP. “A little bit of fresh perspectives in an industry like ours are not a bad thing at all.”

Spector noted that it is not the first time the satellite industry has gone outside of the family to fill key leadership roles. “You can look at, for example, the CEO of SES Astra, who comes from the media business. The CEO of Panamsat, Joe Wright, whose background is in government and some private investing, but not in the satellites,” he said.

“I think having someone who is telecommunications savvy and has been successful in running a telecommunications company is something that has the potential to help Intelsat along,” said an industry observer who spoke to Satellite News on background. “I don’t necessarily see this as a negative by any means. There is a little bit of a risk factor in terms of him not understanding the satellite business, but I am not sure the satellite business is that complicated that having a lot of knowledge is going to be that critical. And I think from what I have seen about McGlade’s track record, he should be fairly adept and capable” of leading Intelsat.

Roger Rusch, president of TelAstra Inc. was a bit more cautious in his appraisal of the new hire. “I thought it was kind of a mixed situation,” Rusch told Satellite News. “The good news is that Mr. McGlade will come to the company with a fresh and objective view of the satellite transmission business.” Rusch noted that people within the satellite industry tend to operate in isolation with “too little consideration of the overall communications industry.”

“But at the same time,” Rusch continued, “the guy doesn’t really understand the space business, which has a number of peculiarities. It’s really a risky business.”

However, even with the risks, McGlade’s background in the telecom industry should serve him well in his new role as CEO of Intelsat.

“The cellular people have excellent skills in managing communications companies,” Rusch noted. “I have been especially impressed with their ability to understand pricing and economic elasticity. The cellular business has become much more competitive in recent years and the successful companies have managed to deal with intense market forces.”

Rusch added that many difficulties that McGlade will face in the satellite industry are likely similar to issues he has already seen in the cellular industry such as excess capacity and numerous competitors vying for subscribers.

It is hard to evaluate how the lack of a background in the satellite idustry will impact McGlade at Intelsat, the industry observer said. “On the one hand, you’d think coming into an industry that is as competitive as the satellite industry is right now that the lack of knowledge might be a disadvantage. On the other hand, if you are being hired by a financial sponsor that is basically focusing on one thing and one thing only and that is the bottom line return, they may be much more concerned about general business acumen and may not even believe that knowledge in the satellite industry is that critical to the way they want to see Intelsat in the future.”

Additionally, other experiences working on the cellular side could be relevant for McGlade as he transitions from the terrestrial wireless world to the satellite one.

McGlade “comes from an organization that used to be part of British Telecom and has [experience with a company that transitioned from] a government monopoly mentality to a private entrepreneurial mentality,” Spector said. “That kind of transition is similar to what Intelsat has been going through the last few years.”

Merging With Inmarsat?

One interesting thing to note about the McGlade hiring is the speculation reguarding Intelsat and Inmarsat, opinions are floating around that the two companies could be working more closely or even combined at some point.

“Some people have speculated that Intelsat and Inmarsat might be combined since major investors in these firms are common,” Rusch noted.

“There appears to be a fairly strong connection between Dave McGlade and Andy Sukawaty who is now the CEO of Inmarsat and was hired by Apax and Permira after they acquired Inmarsat,” the observer said. “Sukawaty was the non-executive deputy chairman of mmO2, which was the parent company of the company that McGlade just finished running. McGlade is on the board of mmO2 as well. So there is clearly an obvious connection there and it’s hard to believe Apax and Permira and Sukuwaty were not fairly instrumental in McGlade being selected for this position.”

Other Market Opportunities?

Given McGlade’s experience outside of the cellular industry, one can certainly speculate as to whether Intelsat may be looking to broadening its telecommunications offerings.

Spector said it is “probably too soon to know [if any changes will come with McGlade], but obviously you’ve got new owners coming in and a new CEO from outside the industry, looking at a whole range of possibilities is quite likely.”

Rusch added, “It may very well be that he will alter the strategic direction of Intelsat. It seems that Intelsat has already considered the impact of fiber optics and has been offering combined satellite and fiber communications packages. No doubt there are additional possibilities.”

–Gregory Twachtman (Todd Fogarty, Kekst and Co. for Zeus, 212/521-4854; Phillip Spector, Paul, Weiss et al, 202/223-7340; Roger Rusch, TelAstra, 310/373-1925)