COMSAT Reports 1999 Earnings; COMSAT Builds Foundation for Growth in Data Communications; INTELSAT Privatization Moves Forward - Company Financial Information

Cambridge Telcom Report, Feb 21, 2000

COMSAT Corporation (NYSE:CQ) Friday reported a consolidated 1999 net loss of $2.6 million, or $0.05 per fully diluted share, due to the write-off of its investment in ICO Global Communications (Holdings) Limited ("ICO").

During the second half of 1999 COMSAT recognized a pre-tax $70.6 million loss from the write-off of its investment in ICO. ICO filed for Chapter 11 Bankruptcy in August of 1999.

Exclusive of the ICO write-off, COMSAT's net income for 1999 was $41.7 million or $0.79 per share, up $15.3 million, or $0.29 per share over 1998. Net income for 1998 was $26.4 million, or $0.50 per share. Revenues in 1999 were $618.3 million, up from $616.5 million in 1998. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $226.9 million in 1999, down 23% from $293.4 million in 1998 because of an accounting change related to the privatization of Inmarsat.

"In 1999, COMSAT significantly strengthened its competitive position in the international telecommunications market by expanding its data communications services and products across all areas of the company," said COMSAT President and Chief Executive Officer Betty C. Alewine. "COMSAT is poised to capture continuing growth driven by the Internet and data, as approximately forty percent of the company's 1999 revenues came from data communications. COMSAT also continued to take a leadership role in the successful privatization of two of the world's major satellite systems, INTELSAT and Inmarsat."

In the fourth quarter of 1999, INTELSAT's member countries committed to implement an aggressive plan to achieve full privatization by April 2001. COMSAT currently owns 20.4% of INTELSAT. While the new privatized company will not immediately be publicly traded, an initial public offering is planned for 2002, subject to market conditions and the actual date of incorporation of the restructured INTELSAT. Earlier in the year, Inmarsat completed its privatization and is planning an initial public offering for 2001 subject to market conditions. COMSAT is the largest owner of Inmarsat with a 22.2% ownership stake.

"Privatization of these two satellite systems will allow them to compete more effectively in today's rapidly evolving marketplace," said Alewine.

Due to the write-off of the ICO investment, COMSAT Mobile Communications (CMC) posted a segment loss of $52.2 million on revenues of $123.0 million for 1999, down from segment income of $31.9 million on revenues of $169.1 million in 1998. Exclusive of the ICO write-off, CMC's segment income for 1999 was $18.4 million. CMC's results reflect the continuing decline in analog traffic and an accounting change due to the privatization of the Inmarsat satellite system.

"As the leading service provider over the Inmarsat system, COMSAT Mobile Communications is strongly positioned to meet growing customer demand for advanced, secure and reliable mobile high-speed digital communications," Alewine noted. "In 2000, COMSAT Mobile will continue to use the proven technology and service reliability of the Inmarsat system to expand its global data service offerings with mobile ISDN and mobile IP services."

On-going economic uncertainty in Latin America is continuing to constrain growth in the international services market. Economic downturns in several international markets, including Brazil, Argentina and Venezuela have negatively impacted overall performance. The fifty percent devaluation of the Brazilian real during 1999 had a substantial negative impact on COMSAT's revenues in Brazil. The Brazilian currency crisis also had a dampening effect in markets throughout Latin America.

COMSAT International's (CI) revenues in 1999 were $108.6 million, down 4% from $113.3 million in 1998. EBITDA in 1999 was $11.0 million, down from $12.9 million in 1998. COMSAT International posted segment income of $100,000, versus a segment loss of $21.0 million in 1998, due to the sale of its Viatel investment.

During 1999 and 1998 CI sold its investment in Viatel, Inc. This sale resulted in a gain in 1999 of $25.7 million and in 1998 of $14.6 million. In addition, CI recognized a non-cash impairment loss of $14.0 million in 1998 related to the long-lived BelCom assets. Exclusive of the gains on the sale of Viatel and the impairment loss, CI's 1999 segment loss was $25.6 million versus $21.6 million in 1998.

"COMSAT InternationaI's new GlobalWay service platform, introduced in September 1999, provides the first integrated, fully-interconnected regional network for Latin America," said Alewine. "The breakthrough capability of GlobalWay as an intra-regional network has established CI as an Internet Protocol-oriented service provider, offering a wide range of data communications solutions from virtual private networks (VPN) to such Internet-related offerings as web hosting and web farming services for major Internet Service Providers (ISP's) in foreign markets. COMSAT International will expand GlobalWay service in 2000 to further strengthen its market position."