Intelsat-PanAmSat Merger in Round 2 at Justice
A Justice Dept. review of the Intelsat-PanAmSat merger is progressing, as shown in a 2nd round of requests by Justice officials for information from the firms, Intelsat CEO David McGlade said Thurs. Speaking at a Washington Space Business Roundtable lunch, McGlade said, “They're interviewing customers as we speak.” The firms still hope to complete their merger in 6-12 months, he said. The FCC’s public review of the proposed transaction launched this week, with the first round of pleading cycle comments and petitions due Nov. 14, replies Dec. 6 (IB docket no. 05-290).
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A newcomer to an old-guard industry, McGlade will be the “convergence man” for what looks to become the world’s largest Fixed Satellite Services (FSS) fleet of 53 spacecraft, he said. His ascendancy comes at what many dub a key stage for FSS, after much consolidation and entry into the satellite industry of Apax Partners Worldwide, Apollo Management, MDP Global Investors, Permira Advisors and other well-heeled equity firms. The new, new Intelsat will be one firm with different operating divisions, with efficiency paramount, he said.
The fleets fit because Intelsat’s is transoceanic and flexible, with a core telephony and advanced data focus, while PanAmSat’s video-centric system means heavy land mass coverage and less flexibility, McGlade said. Satellite analysts agree the fleets complement one other with little overlap, but the juxtaposition could complicate the task of creating synergy. McGlade’s main worry in combining the fleets is literally “flying the satellites,” he said. It could take 2 years or more to integrate command center software, he said.
The firms’ corporate cultures may need retooling before they fly as one, he said. Born rivals with a long, colorful history, Intelsat and PanAmSat have developed corporate mythologies containing “germs of truth on both sides,” McGlade said. But PanAmSat isn’t “necessarily as entrepreneurial as it was 10 years ago,” before it merged with Hughes, he said. And the privatized Intelsat isn’t as notoriously bureaucratic as in decades past, he said. McGlade said he wants to keep PanAmSat’s vigor and Intelsat’s technological heritage in creating a new culture.
“Many mergers fail because people don’t spend enough time and energy integrating the companies,” he said: “If we do it wrong, we fail to create the company we can be.” To avoid that, the firms created an executive steering committee with equal representation from both and a full time integration office, he said. But Spot the Dog -- PanAmSat’s much-loved canine mascot, which drew national attention to PanAmSat’s efforts against then-monopolistic Intelsat -- likely won’t make it into the new branding campaign, McGlade said: “Spot is integrating.” Whereabouts largely unknown since Aug., Spot now resides on McGlade’s couch, wearing his PanAmSat collar and an Intelsat scarf.
Applications are the future of FSS, McGlade said, warning against an inward focus. Emerging technologies and services will drive FSS, he said, citing IPTV, interactivity, video on demand, and, of course, HD. “There are lots of things happening that with one company, we can better leverage with better economies of scale,” he said: “There has to be another DARS [satellite radio] out there.” Telecom has moved from a fixed environment to a wireless environment, he said, and the satellite world should have natural extensions. “IPTV will be a part of that,” he said.
McGlade touched on Intelsat’s investment in satellite broadband provider WildBlue. WildBlue hasn’t committed to launching its own satellite for WildBlue service, to be called WildBlue 1, he said. It uses Ka-band space aboard Telesat’s Anik F2. WildBlue has cut prices since rolling out the service in June, which he said “is great news for consumers,” but puts pressure on revenues. “The Ka-band is a new frontier for us,” he said.