Commission Okays Intelsat Buyout, but Deal Still Subject to Orbit Act
FCC’s approval of Zeus Holdings’ buyout of Intelsat means the Commission believes the transaction doesn’t raise anti-competitive questions, although 2 of the private equity firms that make up Zeus -- Apax Partners and Permira -- hold 25.8% interests each in mobile satellite provider Inmarsat. Zeus convinced the Commission that the degree of common ownership doesn’t pose a significant competitive concern because the companies serve distinct markets.
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But Apollo Management, which will have a 25% stake in Intelsat, has an indirect 30.3% investment in Mobile Satellite Ventures (MSV), Communications Daily has learned. SkyTerra, which acquired a 22% stake in MSV in Nov., is an Apollo affiliate. The FCC order doesn’t mention MSV or that the company is a direct competitor of Inmarsat’s, but the issue was considered by FCC policy staff as they worked on the case, we're told. MSV and Inmarsat are engaged in a regulatory battle over the authority granted by the FCC for MSV to add an ancillary terrestrial component (ATC) to its mobile satellite service (MSS) -- a decision Inmarsat said may cause interference to its service (CD Dec 27 p3).
Overlap between mobile and fixed satellite services (FSS), which used to be 2 distinct markets, is a trend that industry attorneys and analysts are watching closely. For instance, Boeing’s Connexion service is provided via FSS, and DBS services are received by commercial airliners, private automobiles and boats. Another example is the Maritime Telecom Network, which provides a maritime mobile service via FSS satellites. Likewise, Qualcomm’s OmniTRACS is a mobile service supported by FSS satellites. In the mobile satellite area, Inmarsat offers itinerant fixed services via its “suitcase” and larger transportable terminals and MSV provides a fixed uplink station from the Bahamas to transmit environmental data for a marine-sciences research project.
Competition and overlapping service issues aside, Intelsat remains subject to Orbit Act privatization requirements, which require a buyer be deemed a national corporation or “similar accepted commercial structure,” the FCC said. Zeus and its principals could meet this requirement by an initial public offering (IPO) like their competitor PanAmSat announced last week (CD Dec 22 p6). But Congress provided a process under which the company may forgo an IPO if it provides certain certifications about its privatization, and the FCC determines that it’s in compliance with such certification. According to the FCC, the application filed before the most recent amendment statute doesn’t address the amended requirements; so the Commission’s license grant is subject to a future decision that the transaction meets Orbit Act requirements.
To that effect, Intelsat petitioned the FCC on Dec. 23 for a declaratory ruling to affirm that the company now wholly complies with the Orbit Act. In the filing, Intelsat pushes the FCC to “expeditiously commence a notice and comment period” and determine that Intelsat is in compliance with the law. The filing states that upon consummation of the proposed Zeus buyout, “all existing signatory or former signatory financial interests in all Intelsat entities will be eliminated.” The company also certifies that “no signatories or former signatories will possess, together or individually, effective control of a successor entity of Intelsat” and that no intergovernmental group has or will have any ownership in the corporation. The company’s compliance with the Orbit Act is a priority for the International Bureau, and a comment period is expected in the first quarter of 2005, quite possibly by sometime next month, officials said.