Satellite Consolidation Continues Apace as Loral Acquires BCE's Telesat

In keeping with the growing consolidation of the satellite sector, the Telesat satellite unit of Canada's BCE Inc. will be acquired by Loral Space & Communications and a Canadian pension fund for about $2.8 billion. Loral's existing satellites will combine with Telesat's to form a new fleet, based in Canada, that will constitute the fourth-largest commercial fixed-satellite operator in the world. Customers use in-orbit satellites to transmit video and data to televisions and over the Internet. The new company will have a lease backlog of $5 billion (Canadian). The union, which joins Telesat's North American coverage with Loral's international business, is designed to compete with global satellite companies Intelsat and SES Global. It will also enable BCE to leave the satellite business and focus more exclusively on its core phone business. Telesat was an attractive acquisition target because its satellite fleet has been generating a steadily rising amount of cash in an area with little competition. One surprising feature of this acquisition was the amount of interest Telesat received from private equity players rather than competitors. Telesat is expected to post sales of $489 million in 2007 and generate EBITDA of $293 million.
• Sources: Wall Street Journal, The Globe and Mail
• Related commentary: Why I Am Now Considering BCE, BCE's Strong Performance Not Dependent on Income Trust Conversion
• Potentially impacted stocks and ETFs: BCE Inc. (BCE), Loral Space & Communications Ltd. (LORL) Competitors: Gilat Satellite Networks Inc. (GILT), Boeing Co. (BA), Orbital Sciences Corp. (ORB) ETFs: iShares Dow Jones US Aerospace & Defense (ITA), PowerShares Aerospace & Defense (PPA), Vanguard Industrials ETF (VIS)

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