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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: brian h who wrote (7201)	1/11/2000 3:40:00 PM
From: FreekBro	Read Replies (1) \| Respond to of 10852

INTERVIEW-Mexico's Satmex eyes diversification By Fiona Ortiz Tuesday January 11, 3:23 pm Eastern Time biz.yahoo.com MEXICO CITY, Jan 11 (Reuters) - Satelites Mexicanos Satmex), an affiliate of Loral Space & Communications, plans to fill up idle capacity on its three satellites and move into new business areas and perhaps launch a new satellite, a top eexecutive said. Satmex Chief Executive Officer Lauro Gonzalez said in an interview with Reuters that the firm, privatized in 1997 and 49-percent held by New York-based Loral Space (NYSE:LOR - news), was exploring the possibility of launching a fourth satellite by 2001. But he said Satmex, in drawing up its corporate strategy, was weighing whether it made more sense for the company to diversify into new telecommunications ventures or to stick to its traditional focus of providing satellite services. As an example of a new direction the company could take, Gonzalez cited a concession for a public telecommunications network recently granted by Mexico's Federal Telecommunications Commission, pending approval from the Telecommunications Ministry. Through the concession Satmex could get into products that use satellite capacity and offer more added value services for clients, not just linkups to its three satellites, which are part of Loral's worldwide fleet of satellites, he said. The Mexican government retains a 25 percent stake in Satmex after selling off the balance in 1997 to Loral and Principia, which holds a 26 percent stake in the company. Principia is is linked to one of Mexico's most powerful business families, the Autreys. In the Reuters interview conducted late Monday, Gonzalez said a new sales force has increased the average length of the company's contracts to three years, from a one year average when Satmex was privatized. Also, Satmex last year renegotiated its contract with its most important client, Mexican satellite television company Sky TV, extending it through to the end of 2001. Gonzalez said Satmex V, the company's first satellite with coverage of the entire Western hemisphere, has outstripped projections by filling up more than 75 percent of its capacity since it went on line last February. He said he expected to completely occupy Satmex V's capacity within a few months. Gonzalez said his goal for this year is to also fill up Satmex's older satellite, Solidaridad I, which is at just over 50 percent capacity. The company's third satellite, Solidaridad II, is at 95 percent capacity utilization. Satmex received a capital injection of $30 million in 1999, half from Principia and half from Loral. Loral also gave the company further help by taking out a long-term lease on three Satmex V transponders, paying some $25 million up front. Gonzalez said with the capital injections, the company paid off debt, but he declined to say what current debt load is. Industry analysts said the leasing deal bailed out Satmex just when it was at risk of violating terms on bank loans but that it was done on a fair basis and was not an uncommon transaction. In a 6-K filing with the U.S. Securities and Exchange Commission in September, Satmex asked for a loosening of covenants on bank loans, saying future operating cash flow was enough to service debt but it ``may not be adequate to maintain certain financial ratios required by its debt agreements.' However, Gonzalez said a team of new administrators and marketers has completed a successful turnaround of Satmex since it was run by the government. ``Our cash flow is very healthy. The business is generating an excess to cover all of its operational as well as financial needs. (Our margins) are well above the standards for our type of business,' Gonzalez told Reuters. But industry analysts said the company has not entirely overcome the legacy of inefficiency from its government owners. ``Revenues have gone up but they still remain unprofitable through 1999. Their 1999 loss was less than the 1998 loss, but part of that is due to the sale of transponder capacity to Loral... They do need to rein in expenses... Satmex has never had a reputation as a well-run company in the past, and that's been a problem,' said Greg Caressi, industry business manager with Frost & Sullivan telecommunications consulting firm. An analyst with ING Barings said Satmex has persistently had higher-than-expected expenses. Gonzalez said expenses were well under control and always had been. Despite concerns about expenses, analysts said demand for satellite space in Latin America was growing and that Satmex was well-positioned, especially as it has rights to send and receive signals in 26 countries in the Americas, including a major coup last year of obtaining rights for Brazil. ``Key markets like the Internet and the datacom markets have begun to really heat up throughout the region, which bodes well for Satmex because they do have the kind of satellite that can exploit those kinds of applications,' said Juan Fernandez, a telecommunications analyst with Frost & Sullivan.