LAS VEGAS–With the company’s initial public offering (IPO) on the market for about a month and its quiet period officially over, Panamsat Corp. CEO Joseph Wright sat down with Satellite News Editor Gregory Twachtman last week at the National Association of Broadcasters annual trade show to talk about the IPO and the prospects for his company going forward.

What Wright revealed was a man confident about his company’s prospects in the face of a challenging market. He talked about the opportunities the Fixed Satellite Services (FSS) market has on the horizon and how Panamsat is positioned to take advantage of them, as well as his reaction to how his company’s stock has performed since its IPO. Here is what Wright had to say:

Satellite News: First, I would like to talk about the IPO. It went off at $18. It was originally targeted in the range of $19-$21. Why was the IPO priced in that range?

Joseph Wright: First of all, the investment bankers establish the price range considering what they think market demand is going to be. Since we were one of the first ones to come out as a high dividend stock with growth opportunities, they did the best they could without good historical comparisons. If you look at how the stock has done during the last few weeks, when the market has really gone down badly, we have pretty well held in the range of where we came out.

Satellite News: The stock has not traded above $18 and has not eclipsed that mark even as daily trading high on any given day since the IPO…

Joseph Wright: Yes, but it also has been a pretty bad market, and we are only one month after [the IPO]. So, we have held steady despite this and we have built a strong foundation of investors in place today, which is good.

There also are investors out there who have not come into the stock market yet. They are waiting for us to deliver a few quarters of solid performance, which we will do. Remember: we were public before and for the three years while I was the CEO, we never missed our guidance to shareholders. When I look at the strength of our company today in terms of fleet reliability, extraordinary customer service, contract backlog, cost controls and top-notch, young, aggressive personnel –and I combine that with the opportunities we have targeted to grow our revenues–I think we are under-priced in the market today.

Satellite News: If you waited a little bit longer, would you have seen some better performance from the stock?

Wright: Those are the kind of questions that I am not qualified to answer. Our performance going forward will have the major impact on our stock price.

Satellite News: Let’s talk about the company going forward. What is on deck for Panamsat?

Wright: To look at where you are going, you have to look at where you came from. Three and a half years ago, Panamsat was a company that operated like many of its competitors who were launching large satellites to open up new markets that may, or may not, develop; who had large operating costs; and was introducing new products without enough consideration for market demand. The result? Overcapacity and pricing pressures around the world. We stopped all those practices in 2001, broke with the standard industry practices and publicly announced the fact that we were going to start running Panamsat “like a business”. Since then, we have operated the company based upon three basic principles. First, we will not put up new satellites simply to open up new markets and we will design our satellites for market demand, reliability and simplicity.

Our small satellites are 24 – 36 MHz transponders compared to the 48s we used to put up. We have a couple of 72s in the fleet but I doubt if we will put any more of those up.

If we find a market has greater demand than our capacity, we just co-locate another satellite at the same orbital slot. This smaller, simpler satellite strategy not only improves our return on investment but also reduces risk and, as a result, we now have the highest uptime reliability in the industry.

Second, our operating costs had crept up and our margins had weakened. You cannot have that as a public company, so we reduced our operating expenses by about 40 percent on our satellite operations throughout a period of about two and a half years. That is hard and painful to do when you have a technical organization. But when you have an industry that is slowing down, as it has during the last couple of years, it is what you have to do. And we got rid of what I called “side ventures” or trying to announce the “product of the month” that was typical of our industry, that were requiring capital and people.

And finally, we decided to use fiber to complement our satellites as we focused all our energies on growing our video and networking. Today, as a result, we are the largest transmitter of TV signals in the world with 1,911 channels.

As we move ahead, we see some very interesting growth areas on the horizon. First, in the United States, HDTV is rolling out. The question among our customers is “how are they going to get the capacity to handle all of the requirements that they are going to need for the additional content?”

You also have the cable companies competing with the DTH providers for the consumer and now the RBOCs are coming into the video market. This means that in the United States, you have got one of the most extraordinary and interesting battles for the consumer that is going to combine product lines: audio, video, data and perhaps cellular into one offering.

There is one thing that all those have in common: they need content delivered from the provider into their system. In North America, this is developing into a very strong market. There were 26 new HD channels introduced into the cable system alone last year and we have 19 of them.

The second area we have entered is the U.S. government, which is expanding its use of commercial satellites by more than 10 percent per year. But this requires a higher level of service and reliability than is traditional for our industry –and we are providing just that.

The third opportunity we are going after is the network connectivity market on a global basis. In the United States, it is VSAT, corporate networks and broadband. But in developing countries, this is the only way entire villages and towns get connectivity.

In developing regions of the world, we can deliver signals via satellite into either an existing wiring system in a resort area, a business or a COLO into a VSAT using Wi- Fi/WiMAX for access to a wider area. This is going to be one of the ways that developing nations will be getting connectivity that is really needed. We are being very selective in that the markets we have chosen are those that are going to grow faster than the FSS industry in total.

Satellite News: Is HD going to be the driver for growth in capacity usage and filling up some of the overcapacity we have now?

Wright: There is not a lot of overcapacity in the United States. The overcapacity in the United States is pretty well gone.

There was some capacity coming into the marketplace last year from SES Americom, but Echostar took all the capacity for the life of those two satellites. So the new capacity coming into [the U.S.] market was absorbed.

In addition, the two DTH providers must provide HD programming in the local-to-local markets to compete with the MSOs. That is going to require a huge amount of capacity. DirecTV is doing it with their Spaceway satellites and they say they are going to provide 1,500 HD channels to more than 200 communities.

Echostar has got to match this to be competitive. So they have taken the Americom satellites and the Voom satellite and announced they are also going to launch four new satellites throughout the next few years. So a lot of capacity we thought was coming into the market for the cable systems is being taken out.

But it is not just HD, it is also all the additional programming, including the ethnic programming, that will require more capacity.

Satellite News: What about two-way broadband over satellite?

Wright: I believe that two-way broadband is going to take place over satellites in some of the wealthier developing markets maybe before it is in the United States. It depends on what the big companies do–if they make it economical for the consumer to pick up along with their video service, and then it could roll out pretty quickly here. I think it is going to happen; it is just a matter of economics.

An example of our broadband services over satellite is our joint venture with Grupo Pegaso in Mexico to provide two way consumer broadband service. If this service were provided to 100,000 subscribers, it would likely consume 10+ full Ku-band transponders. Mexico has approximately 1.8 million dial-up Internet households. So with a penetration rate of about 5 percent for satellite broadband would consume the equivalent of entire spot beam on an FSS service. Apply that math to all of Latin America and you can see how important this application is to the satellite industry.”

In addition, we made a direct investment in an iDirect high-speed VSAT platform to support our growing need of the U.S. government that needs the speed and flexibility of these networks. The importance of VSATs and the technological developments that have come down the pipe with respect to that technology in the last two years also have the potential to drive significant demand for FSS services both in the developing and lesser developed parts of the world. Low-cost broadband terminals and hubs are key to the success of satellite broadband and vendors have finally introduced these products to the market–and we are going to be there, both adopting the platforms as well as creating the relationships with the government.”

Finally, we believe that there will be demand for two-way broadband in Africa. We are already starting to see the beginnings of this demand in the form of satellite-based business IP networks in Africa and our expectations are that this will quickly convert into true consumer demand which can only be supported via satellite given the poor terrestrial infrastructure of the continent.”

Satellite News: What challenges do you see lying ahead for the FSS market?

Wright: I think you are going to see an industry that stabilizes with rational behavior and by that I mean more professional management. In part this is helped by the new ownership of the Private Equity firms. I think you also are going to see expanded services because the market demand for new applications is expanding. We cannot, as an industry, just lease transponders any more–we have to get closer to the customer.

I think you are going to see it becoming more difficult for some of the smaller operators to compete. Of the 34 smaller operators, there are a few strong ones like JSAT and New Skies but as more global video applications are being used on satellites in combination with fiber, the smaller guys just do not have the economy of scale needed. They may have to affiliate in some way with one of the four larger global operators.

Satellite News: Will they get larger through acquiring the smaller operators?

Wright: You can do it that way, as in the past, but you can also do it through joint ventures and partnerships like we have with JSAT. Everybody likes to talk about acquisitions, but that is not the only way to expand successfully.