Intelsat Reports Second Quarter 2006 Results; Revenue Increases on Solid Performance of Lease Services and Managed Solutions; Cost Reduction Efforts Yield Improved Margins; PanAmSat Integration on Schedule

Business Wire, August 14, 2006

PEMBROKE, Bermuda -- Intelsat, Ltd., the world's largest provider of fixed satellite services, today reported results for the three-month and six-month periods ended June 30, 2006.

Results for both periods include Intelsat, Ltd. and its subsidiaries, referred to as Intelsat or the company. Results do not reflect our July 3, 2006 acquisition of PanAmSat Holding Corporation, which we renamed Intelsat Holding Corporation.

Intelsat, Ltd., reported revenue of $310.5 million and a net loss of $42.7 million for the quarter ended June 30, 2006.

The company also reported EBITDA, or Intelsat, Ltd. earnings before interest, taxes and depreciation and amortization, for the quarter of $221.6 million, or 71 percent of revenue, and the company also reported Sub Holdco Adjusted EBITDA(1) for the same period of $241.0 million, or 78 percent of revenue(2). Sub Holdco Adjusted EBITDA less the benefit of a one-time channel termination fee of $20.6 million recognized in the second quarter was $220.4 million, or 76 percent of revenue.

For the six months ended June 30, 2006, Intelsat reported revenue of $591.0 million, a net loss of $132.8 million, and EBITDA of $401.7 million, or 68 percent of revenue. Sub Holdco Adjusted EBITDA for the six month period was $447.7 million, or 76 percent of revenue. Sub Holdco Adjusted EBITDA less the benefit of the one-time channel termination fee of $20.6 million described above was $427.1 million, or 75 percent of revenue.

Intelsat generated strong free cash flow from operations of $123.5 million through the second quarter of 2006. Free cash flow from operations is defined as net cash provided by operating activities, less payments for satellites and other property, plant and equipment and associated capitalized interest.

"The second quarter featured solid performance at Intelsat and concluded with the closing of the PanAmSat transaction, a deal that has created the new global leader in satellite-based communications services," said Intelsat Chief Executive Officer, Dave McGlade. "Intelsat's core lease services and GlobalConnex(SM) managed solutions, up 8 percent and 26 percent respectively as compared to the year-ago quarter, continued to lead our business performance, driven by demand for corporate data and Voice Over IP applications. With the benefits of our controls over operating expense now demonstrated by the expansion in our margins, we are ready to enhance our global operations through continuing to execute a disciplined integration of PanAmSat."

"The integration is on track and proceeding as planned," McGlade added. "By making key integration decisions early on, we have been able to focus as one company on customers and the marketplace. Recent orders such as Intelsat General's contract in support of the German Military Satellite program validate that effort and position us to create 2007 revenue momentum."

Integration Process Highlights

Intelsat's integration process includes four primary thrusts: sales and marketing, staffing, operations and facilities. The sales and marketing organizations were integrated shortly after closing, with near term objectives that include network optimization in order to increase marketable capacity. Staffing decisions are largely complete. Intelsat expects total headcount to reduce from approximately 1,350 at deal close to a steady-state headcount of approximately 1,000 by mid-year 2008. Most facility closures and integration of back office functions are expected to be completed by mid-2007. Intelsat expects to conclude much of the satellite fleet and operations center integration in 2007, with the process fully complete by the end of 2008.

Intelsat expects to realize approximately $92 million in annualized operating cost savings by the end of 2008. In order to achieve these expected savings, Intelsat believes it will incur approximately $180 million in one time expenditures, approximately half of which are expected to be incurred in the second half of 2006 and substantially all of the balance in 2007. Integration expenses include approximately $40 million to $45 million in capital expenditures.

Financial Results for the Three Months Ended June 30, 2006

Total revenue increased $20.7 million, or 7 percent, for the three months ended June 30, 2006 from $289.8 million for the three months ended June 30, 2005, driven by strong results from lease, channel, and managed solutions service offerings. Lease services revenue increased $13.9 million, or 8 percent, to $196.9 million as compared to $183.0 million in the same period in 2005, primarily due to increased demand from Network Services and Telecom customers in North America, Africa, and the Middle East. Channel revenue increased $9.5 million to $66.7 million for the three months ended June 30, 2006 from $57.2 million for the three months ended June 30, 2005. The increase was primarily attributable to the previously mentioned one-time fee of $20.6 million, offset by the continuing decline in legacy channel services revenue. Mobile Satellite Services, or MSS, and other revenue declined by $9.9 million, or 45 percent, to $12.0 million for the three months ended June 30, 2006, as compared to $21.9 million in the prior-year period, primarily due to reduced usage of mobile satellite services sold to customers of Intelsat General. These declines were partially offset by increases in managed solutions revenue, which increased by $7.2 million, or 26 percent, to $34.9 million from $27.7 million in the year-ago period, driven primarily by increased demand for trunking and private line solutions for Network Services and Telecom customers.