- The Washington Times - Thursday, July 19, 2001

Employees at satellite communications company Intelsat Ltd. completed a two-year project last night at exactly one second before 8 p.m.

That's when Intelsat shed its 37-year-old status as an intergovernmental organization and became the District's newest and possibly its largest privately held technology company.

It will take another step in its evolution next year, when company executives plan to hold an initial public offering of Intelsat stock that could reap the company $1 billion.

For now, though, Intelsat must adjust to a competitive global business climate in which it no longer has automatic market access in the 146 countries that supported it, no longer has tax-exempt status and it must react more quickly to meet the demands of consumers.

"We're ready to go. We've got the organization ready," said Ramu V. Potarazu, president of District-based Intelsat Global Service Corp., the largest subsidiary of the new holding company that will be based in Bermuda.

Intelsat's 19 satellites orbit 22,000 miles above the Earth and transmit video, voice and data.

Formerly, Intelsat's 146 member countries directed government-designated telecommunications firms or signatories to operate the organization on their behalf. Intelsat marketed services to customers in each member country through the signatories, which supported Intelsat financially and shared its profits.

Now the company can market services anywhere and no longer must rely on signatories like France Telecom or Lockheed Martin Corp. The change also puts Intelsat in direct competition with satellite companies like PanAmSat Corp., a Greenwich, Conn., firm that looks forward to competing with a privately held Intelsat.

"We always think we will eat their lunch, but the more accurate characterization is that Intelsat will be competitive. They have some work to do. I think they will find that without the ties they had in the past to their shareholders, they will have to do business in a different way," said Kalpak Gude, vice president and associate general counsel for PanAmSat, which delivers video and data via a network of 22 satellites.

Turning Intelsat into a market-driven company could prove difficult, said Intelsat Chief Executive Officer Conny Kullman.

"Coming out into privatization and really functioning as a true commercial company is the harder part. The hardest part is for us to take all these advantages and try to move the company in the direction of growth," Mr. Kullman said.

Intelsat, with 850 employees, already has seen substantial growth. With 450 customers, it recorded revenue last year of $1.1 billion. But its signatories, which invested an estimated $1.8 billion in Intelsat during its long life as an intergovernmental organization and will continue to own shares in the privately held company, expect more.

"We expect that to grow. Without getting into predictions, we certainly believe the near term looks positive," said Maury Mechanick, vice president of satellite systems investment management at Beth-

esda-based Lockheed Martin Global Telecommunications, which owns 24 percent of Intelsat.

Intelsat will try to boost revenue through substantial investment in its fleet of satellites. That will increase the amount of voice, video and data traffic the fleet can accommodate. The company will spend $3.5 billion on 10 new satellites, all of which will be launched by 2003.

It will help the company market new services like high-speed Internet access. Internet services now account for about 15 percent of Intelsat's revenue.

Intelsat also is expected to gain value after privatization. The company will be worth an estimated $3 billion once it is private, said Mr. Mechanick, former chairman of Intelsat's board of governors.

"When you have an IPO, it lets the market determine the company's value. We think the real market value will be much higher than $3 billion," he said.

An IPO is planned by the end of 2002, but Mr. Kullman talks in little detail about the pending transaction. He expects the market to look favorably upon Intelsat's stock offering, despite the fact some satellite companies ICO Global Communications and Iridium LLC went bankrupt. Globalstar Telecommunications Ltd., based in New York, has warned it might seek bankruptcy protection.

Others, including PanAmSat, Paris-based Eutelsat S.A. or Societe Europenne des Satellites S.A., have done well, Mr. Kullman argued.

"We will do our best to go out at the right time," he said.

Until then, Mr. Potarazu said, the reformed company's mission is both simple and difficult.

"It really comes down to three things," he said. "Execution, execution, execution."

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