- The Washington Times - Friday, August 4, 2000

Lockheed Martin Corp. completed its $2 billion purchase of Comsat Corp. Thursday, ending a complicated, two-year ordeal that forced Congress to relax its regulation of satellite companies.

The deal makes Lockheed, the Bethesda, Md.-based defense and aerospace giant whose stock has struggled in the past year, a bigger player in the $80 billion commercial satellite industry.

Lockheed executives said Thursday they probably will lay off 40 to 50, or 2 percent, of the new venture's 2,200 workers. The bulk of the 1,700 Comsat employees will continue to be based at Comsat's office, also in Bethesda.

With the acquisition complete, executives said they will focus on attracting partners that can provide the new unit, Lockheed Martin Global Telecommunications, with management expertise and capital.

John V. Sponyoe, chief executive officer of Lockheed Martin Global Telecommunications, would not name potential partners at a press conference Thursday.

"We're not going to be looking for another Comsat at $2.3 billion, I can assure you of that," he said.

The new venture will proceed with its plan for a public offering of its stock within 18 months to raise cash, Mr. Sponyoe said.

Parent company Lockheed Martin Corp. likely will remain majority owner of the subsidiary, he said.

Lockheed announced its plan to buy Comsat two years ago, a process that proved even more complicated than executives anticipated.

The acquisition began when Lockheed bought 49 percent of Comsat's stock and committed to giving Comsat shareholders one share of Lockheed stock for every share of Comsat stock.

Lockheed then spent the past year lobbying Congress to change the laws preventing it from completing the purchase.

Congress chartered Comsat in 1962 to keep AT&T; Corp., which then had a monopoly over the telephone industry, from dominating the satellite business. Essentially, Comsat provided U.S. companies with a gateway to Intelsat, the international satellite consortium.

In June, after a long debate, Congress lifted its restrictions that prevented a single investor from owning a majority of Comsat stock.

The legislation also allows long-distance telephone companies to bypass Comsat to get direct access to Intelsat.

"This is the beginning of the end of an era," said Clayton Mowry, executive director of the Satellite Industry Association in Alexandria, Va.

"The merger begins the privatization of the world satellite network," Mr. Mowry said.

Commercial satellite companies will do $82 billion in business this year, a 32 percent increase from $62 billion in 1999, the satellite association said.

Driving the growth is increased demand for satellite services such as leasing satellite capacity to television networks like CBS and CNN, Mr. Mowry said.

Cai von Rumohr, a research analyst for SG Cowen Securities Corp. in Boston, said Comsat gives Lockheed a piece of the satellite services industry.

Lockheed has focused on the hardware end of the satellite business, such as manufacturing satellite dishes.

"This gives them much more bulk," Mr. von Rumohr said.

Wall Street reacted indifferently to the completion of the merger.

Shares in Lockheed Martin fell 38 cents, to $28.37, on the New York Stock Exchange Thursday.

Mr. Sponyoe said the company decided to use the Lockheed name for the new venture because "when you say you're from Lockheed Martin, it opens a lot more doors than if you say you're from X,Y,Z company."

However, he said it will still do business overseas under the Comsat name.

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