Loral Reports Third Quarter 1999 Financial Results - Company Financial Information

Cambridge Telcom Report, Nov 1, 1999

FSS segment EBITDA for the third quarter of $50 million was virtually equal to the year-earlier quarter, and continued to reflect expenses associated with the expansion of the fleet prior to generating revenue on the new satellites. Segment EBITDA and EBITDA margins are expected to improve going forward as Telstar 7 and Orion 2 enter service and as capacity utilization rates increase overall.

At the end of this year, the Loral Global Alliance fleet will include 10 satellites with a total of 431 transponders, twice the fleet capacity at the end of 1998. The end-of-year capacity utilization rate for the Global Alliance fleet, absent its newest members, is expected to be approximately 70 percent. The five satellites that entered service for Loral or were launched during 1999 - Satmex 5, Telstar 6, Telstar 7, Apstar IIR and Orion 2 - have a revenue potential, on an annualized basis, of approximately $387 million. In service for only a portion of the year, these satellites will generate approximately $43 million in revenue in 1999, indicating substantial revenue growth potential for the FSS segment.

Lease rates for both C- and Ku-band transponders have held steady overall during the third quarter in all geographic regions with the exception of Asia where there has been a temporary weakness in Ku-band transponder rates. The company is optimistic that rates in Asia are strengthening.

In the aftermath of losing its Orion 3 satellite at launch in May, Loral swiftly found a replacement satellite to provide coverage of the Asia/Pacific region and add capacity to the Global Alliance, by purchasing from APT Satellite Company Limited, Hong Kong, the transponder payload of Apstar IIR and the ongoing right to use its orbital slot at 76.5 degrees East longitude. Apstar IIR, which was built by Space Systems/Loral, was launched in late 1997 and has a mission life of 15 years. It offers customers a powerful footprint covering a region that includes Asia, Europe, Africa, and Australia. Apstar IIR has an existing backlog of $88 million and a current annual revenue base of $17 million. Insurance proceeds from the failed launch of Orion 3 will be used to fund a substantial portion of the $273 million purchase price.

Telstar 7, Loral Skynet's new broadcast video and data communications satellite, was successfully launched on September 25 aboard an Ariane 44LP rocket, and is expected to begin service in early November. Telstar 7 will provide service to the continental United States, Hawaii, Alaska and Puerto Rico, as well as parts of the Caribbean and Latin America from its orbital slot at 129 degrees West longitude. Carrying a total of 48 transponders - 24 at C-band and 24 at Ku-band - the satellite establishes a strong cable neighborhood anchored by Time Warner's AthenaTV, Viewer's Choice and Arts & Entertainment. The three-axis, body-stabilized satellite was built by Space Systems/Loral, which also built Telstars 5 and 6 and Orion 2.

The Orion 2 broadcast video and data communications satellite was successfully launched aboard an Ariane 44 LP rocket on October 19. The satellite's in-orbit testing is being conducted in the 15 degrees West longitude orbital slot, and the satellite is expected to enter service in January. Loral Skynet will manage the leasing of Orion 2's 38 Ku-band transponders.