Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information about us and the common shares that we are offering, but does not contain all of the information you should consider before investing in our common shares. Before making an investment decision you should read this entire prospectus carefully, including the risks of investing in our common shares described under “Risk Factors” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This prospectus includes forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.”In this prospectus, unless otherwise indicated or the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Intelsat” refer to Intelsat Global Holdings S.A. and its consolidated subsidiaries. In this prospectus, unless the context otherwise requires, all references to transponder capacity or demand refer to transponder capacity or demand in the C-band and Ku-band only.
Our Company
Overview
We operate the world’s largest satellite services business, providing a critical layer in the global communications infrastructure. We generate more revenue, operate more satellite capacity, hold more orbital location rights, contract more backlog, serve more commercial customers and deliver services in more countries than any other commercial satellite operator. We provide diversified communications services to the world’s leading media companies, fixed and wireless telecommunications operators, data networking service providers for enterprise and mobile applications, multinational corporations and Internet service providers (“ISPs”). We are also the leading provider of commercial satellite capacity to the U.S. government and other select military organizations and their contractors.
Our network solutions are a critical component of our customers’ infrastructures and business models. Our customers use our global network for a broad range of applications, from global distribution of content for media companies to providing the transmission layer for unmanned aerial vehicles to enabling essential network backbones and broadband access networks for telecommunications providers, including in emerging regions. In addition, our satellite solutions provide higher reliability than is available from local terrestrial telecommunications services in many regions and allow our customers to reach geographies that they would otherwise be unable to serve.
We believe that we have one of the largest, most reliable and most technologically advanced commercial communications networks in the world. Our global communications system features a fleet of over 50 geosynchronous satellites that covers more than 99% of the world’s populated regions. Our satellites primarily provide services in the C- and Ku-band frequencies, which form the largest part of the fixed satellite services (“FSS”) sector. Our satellite capacity is complemented by our suite of IntelsatONESM managed services, including our terrestrial network comprised of leased fiber optic cable, multiplexed video and data platforms and owned and operated teleports. Our satellite-based network solutions offer distinct technical and economic benefits to our target customers and provide a number of advantages over terrestrial communications systems, including the following:
As of March 31, 2012, our contracted backlog, which is our expected future revenue under existing customer contracts, was approximately $10.5 billion, or more than four times our 2011 annual revenue. For the year ended December 31, 2011, we generated revenue of $2.6 billion and a net loss of $0.4 billion. Our Adjusted EBITDA, which consists of EBITDA as adjusted to exclude or include certain unusual items, certain other operating expense items and certain other adjustments, was $2.0 billion, or 78% of revenue, for the year ended December 31, 2011.
We believe we are well-positioned to enjoy growth in free cash flow in the near future based on the following factors:
We believe that our leadership position in our attractive sector, global scale, efficient operating and financial profile, diversified customer sets and sizeable contracted backlog, together with the growing worldwide demand for reliable bandwidth, provide us with a platform for success.
Our Sector
Satellite services are an integral and growing part of the global communications infrastructure. Through unique capabilities, such as the ability to effectively blanket service regions, to offer point-to-multipoint distribution and to provide a flexible architecture, satellite services complement, and for certain applications are preferable to, terrestrial telecommunications services, including fiber and wireless technologies. The FSS sector is expected to generate revenues of approximately $11.1 billion in 2012, and C- and Ku-band transponder service revenue is expected to grow by a compound annual growth rate (“CAGR”) of 5.1% from 2011 to 2016 according to a study issued in 2011 by NSR, a leading international market research and consulting firm specializing in satellite and wireless technology and applications.
In recent years, the addressable market for FSS has expanded to include mobile applications because existing mobile satellite systems cannot provide the broadband access required by high bandwidth mobile platforms, such as ships and aircrafts, including unmanned aerial vehicles.
Our sector is noted for having favorable operating characteristics, including long-term contracts, high renewal rates and strong cash flows. The fundamentals of our sector—solid growth in demand, moderate price improvements and high operating margins—were maintained throughout the recent economic downturn.
There is a finite number of geostationary orbital slots in which FSS satellites can be located, and many orbital locations already hold operational satellites pursuant to complex regulatory processes involving many international and national governmental bodies. We currently hold the largest number of rights to orbital slots in the most valuable C- and Ku-band spectrums.
We believe a number of fundamental trends are creating increasing demand for satellite services:
Our Customer Sets and Growing Applications
We focus on business-to-business services, indirectly enabling enterprise, government and consumer applications through our customers. Our customer contracts offer four different service types: transponder services, managed services, channel services and mobile satellite services and other. We also perform satellite-related consulting and technical services for various third parties, such as operating satellites for other satellite owners.
Network Services
We are the world’s largest provider of satellite capacity for network services, according to Euroconsult, with a 35% global share. Our satellite capacity, paired with our terrestrial network comprised of leased fiber, teleports and data networking platforms, enables the transmission of video, data and voice to and from virtually any point on the surface of the earth. There is an increasing need for basic and high-speed connectivity in developed and emerging regions around the world. We provide an essential element of the infrastructure supporting the rapid expansion of wireless services in many emerging regions.
Network services is our largest customer set and accounted for 47% of our revenue for the year ended December 31, 2011 and $3.1 billion of our contracted backlog as of March 31, 2012. Our business generated from the network services sector is generally characterized by non-cancellable, two to five year contracts with many of the world’s leading communications providers, including fixed and wireless communications companies, multinational corporations and corporate network services providers, including very small aperture terminal (“VSAT”) service providers and value added service providers such as those serving the banking, oil and gas and maritime industries.
Highlights of our network services business include the following:
Media
We are the world’s largest provider of satellite capacity for media services, according to Euroconsult, with a 22% global share. We have delivered television programming to the world since the launch of our first satellite, Early Bird, in 1965. We provide satellite capacity for the transmission of entertainment, news, sports and educational programming for approximately 300 broadcasters, content providers and DTH platform operators worldwide. We have well-established relationships with our media customers, and in some cases have distributed their content on our satellites for over 25 years.
Media customers are our second largest customer set and accounted for 32% of our revenue for the year ended December 31, 2011 and $6.4 billion of our contracted backlog as of March 31, 2012. Our business generated from the media sector is generally characterized by non-cancellable, long-term contracts with terms of up to 15 years with premier customers, including national broadcasters, content providers and distributors, television programmers and DTH platform operators.
Highlights of our media business include the following:
Government
We are the leading provider of commercial satellite services to the government sector, according to Frost & Sullivan, with a 26% share of the U.S. military and government use of commercial satellite capacity worldwide. With over 45 years of experience serving this customer set, we have built a reputation as a trusted partner for the provision of highly customized, secure satellite-based solutions. The government sector accounted for 20% of our revenue for the year ended December 31, 2011 and $817 million of our contracted backlog as of March 31, 2012. Our satellite capacity business generated from the government sector is generally characterized by single year contracts that are cancellable by the customer upon payment of termination for convenience charges and include annual options to renew for periods of up to four years. Our customer base includes many of the leading government communications providers, including U.S. military and allied partners, civilian agencies and commercial customers serving the defense sector.
Highlights of our government business include the following:
Our leading position with the government sector has allowed us to benefit from a number of recent trends, including:
Our Competitive Advantages
The following competitive advantages characterize our business:
Global Leader
We are the global leader in our sector based upon both revenues and in-service transponders. We generate more revenue, operate more satellite capacity, hold more orbital location rights, contract more backlog, serve more commercial customers and deliver services in more countries than any other commercial satellite operator. As a result of our leading position, we work with the world’s largest media, telecommunications and governmental organizations, integrating our global network with customers’ communications networks and aligning our capital investments to support customers’ strategic objectives.
An Exceptional Global Network
We believe that we have one of the largest, most technologically advanced and most flexible commercial communications systems in the world, comprised of a fleet of over 50 geosynchronous satellites located in well-placed orbital locations and our suite of IntelsatONESM managed services, which consists of teleports, points of presence and leased fiber. Each region of the globe is served by multiple satellites of our fleet. Moreover, the reliability of our network is outstanding, delivering 99.999% network availability on station-kept satellites to our customers in 2011.
Diversified Business Serving Blue Chip Customers
Our business is diversified across customers, service offerings and regions, with little revenue concentration by customer, satellite or geography. Our diversity reduces our market and operating risk. For the year ended December 31, 2011, no single customer accounted for more than approximately 4% of our revenue. Our diversity, combined with our flexible transmission services, exposes us to a broad set of commercial opportunities, including supporting the growth strategies of our customers as they expand into new regions.
Leading Position in Emerging Regions
We have unmatched experience in supplying highly reliable communications infrastructure to the developing world. We believe our leading position in serving emerging regions represents a significant long-term opportunity for us given the rapid evolution and modernization of communications infrastructure in these regions. The chart below illustrates the forecasted C- and Ku-band growth rates for selected regions and our share and relative position in those regions.
Source: Euroconsult 2011—Satellite Communications
High Visibility on Future Revenues
Our network solutions are a critical component of our customers’ infrastructures. Our network services and media customers enter into long-term contracts with us, resulting in substantial contracted backlog, providing significant near-term revenue visibility as well as a reliable stream of future revenues. Our government customers typically contract for shorter periods, as a result of government procurement practices, but renewal rates have been in excess of 88% for each of the last three fiscal years.
As of March 31, 2012, our contracted backlog was approximately $10.5 billion. This backlog represents a 4.1x multiple of our 2011 annual revenue, and had a weighted average life of 5.2 years, demonstrating the long-term visibility of future revenue streams.
In addition, at the beginning of each of the last three years, the current-year portion of our contracted backlog represented on average approximately 80% of that year’s actual revenue. During the last three years, we have converted on average 99% of the current year backlog into revenue.
Efficient Operating and Financial Profile Resulting in Favorable Cash Flow Generation
Our sector requires sizable investment to procure, manufacture and launch satellites. However, once satellites are operational, costs do not vary significantly. This results in significant operating leverage, which we define as an operating environment where fixed costs increase at a rate significantly lower than the rate of revenue increase. Our operating leverage leads to high margins and strong cash flow from operations, a large portion of which cash flow we currently use to service our debt commitments. Features of our efficient operating profile include:
We believe our efficient operating profile is a strategic advantage that should allow us to capture business growth, while incurring relatively low additional costs, and to increase our cash flows from our operations. Our debt commitments have resulted in high levels of interest expense and this, in combination with our refinancing activities, has historically been a major contributor to the net losses we have reported over the past several years. We believe our capital structure, operating profile and expected growth as we execute our business plan will increase our operating cash flows and reduce our financing costs.
Seasoned Management Team with Track Record of Execution
We are led by a senior management team with broad experience in the telecommunications and satellite industries and functional expertise. Our management team has focused on creative and cost-efficient approaches to asset management, and establishing a culture of continuous improvement. Our senior management team and other employees will collectively beneficially own approximately % of our equity on a fully-diluted basis following this offering.
Our Strategy
We seek revenue growth and increased cash flows by expanding our leading infrastructure business in high growth regions and applications while maintaining our focus on operational discipline. Given our efficient operating structure, we believe our strategies will position us to continue to deliver high operating margins, and to generate strong cash flow and growth as our current fleet investment program is completed. The key components of our strategy include the following:
Focus our core business on attractive and growing broadband, mobility and media applications and innovative government solutions We are a business-to-business provider of critical communications infrastructure. We have an industry-leading position in each of the customer sets served by our business. We intend to leverage our leading position, customer relationships, global network and regional strengths to capture new business opportunities as our customers expand their service territories, introduce new offerings and add new capabilities.
Optimize our space-based assets, including orbital locations and spacecraft
We intend to maximize the revenues and returns generated by our assets by managing capacity in a disciplined and efficient manner. Key elements of our strategy include:
Leverage the growth capacity resulting from completion of the current fleet investment program
Our $3.7 billion fleet investment program that began in 2008 will be substantially complete in 2012. We will utilize our new and enhanced capacity to support our customers’ business needs and to increase our revenue growth potential. Key characteristics of our refreshed fleet are expected to include:
In addition, we intend to leverage our frequent satellite launches and collection of orbital rights to address opportunities to supply specialized capabilities for large media companies and government applications. For instance, in September 2011 we announced an agreement with DIRECTV Latin America to provide customized services for DTH satellite services on two new satellites, and we recently integrated a specialized payload for the Australian Defence Force (“ADF”) into our Intelsat 22 satellite, which we launched in 2012.
Incorporate new technology into our core network to capture growth from new applications and evolving customer requirements Our global scale, leadership position and technical expertise in procuring and designing satellites enable us to identify and capitalize on new opportunities in satellite services. As satellites reach the end of their service lives, we have an ongoing opportunity to refresh the technology we use to serve our customers, resulting in flexibility to address new opportunities as they are identified. As a result, we believe that we are well positioned to efficiently incorporate new technologies into our network, such as:
Drive innovation through creative acquisitions and new business models
Our record of capitalizing on strategic growth opportunities through targeted acquisitions is well established. In addition, we have demonstrated our ability to integrate acquisitions efficiently and quickly, due to our scale and our centralized satellite operations philosophy. Going forward, we will consider select acquisitions of complementary businesses or technologies that enhance our product and geographic portfolio and can benefit from our scale, scope and status as a global leader.
Our Reorganization Transactions
Our predecessors have been in the satellite services business since 1964. We have historically conducted our business through Intelsat Global S.A. and its subsidiaries and, prior to that, Intelsat Holdings, Ltd. (“Intelsat Holdings”) and its subsidiaries. In connection with this offering, we engaged in a series of transactions to form a new holding company that acquired all of the common shares of Intelsat Global S.A., and we converted all options to purchase Class A shares of Intelsat Global S.A. into options to purchase our Class A shares. Prior to the consummation of this offering, all of our outstanding Class A shares and Class B shares will be reclassified into our common shares, and the options to purchase our shares will be adjusted consistent with the reclassification. Following these transactions, the common shares being sold in this offering will be our only class of outstanding capital stock. We refer to these transactions as the “reorganization transactions.”
Following the reorganization transactions and this offering, if our principal shareholders hold a majority of our outstanding common shares, they would be able to control certain matters requiring a shareholder vote, including the election of our directors. Even if they do not hold a majority of our common shares, the principal shareholders may exercise significant influence over such matters.
The reclassification of our outstanding Class A shares and Class B shares into a single class of common shares is intended to simplify our capital structure and to facilitate this offering. The reorganization transactions will also simplify and optimize the accounting and tax structure of our holding company.
Set forth below are charts depicting our corporate structure prior to the reorganization transactions and after giving effect to the reorganization transactions and this offering:
Intelsat S.A., our indirect wholly-owned subsidiary, has been a public reporting company since 2002. Intelsat Corporation (formerly known as PanAmSat Corporation), our indirect wholly-owned subsidiary, was a public reporting company until January 2011.
Principal Shareholders
After giving effect to the reorganization transactions and this offering, funds advised by BC Partners and funds advised by Silver Lake (collectively, the “Sponsors”) will beneficially own a significant portion of our common shares. See “Principal Shareholders.”
Key Risks
Investing in our common shares entails a high degree of risk as more fully described in the “Risk Factors” section of this prospectus. You should carefully consider such risks before deciding to invest in our common shares. These risks include, among others, that:
Corporate and Other Information
Intelsat Global Holdings S.A. is a joint stock company (société anonyme) incorporated and existing under the laws of Luxembourg. Prior to the consummation of this offering, Intelsat Global Holdings S.A. will be renamed Intelsat S.A. We were incorporated on July 8, 2011 under Luxembourg law and are registered at the Register of Commerce and Companies of Luxembourg under number B162135. The mailing address and telephone number of our registered office is: 4, rue Albert Borschette, L-1246 Luxembourg, Luxembourg, tel: +(352) 27-84-1600. Our website address is www.intelsat.com. Information contained on our website does not constitute a part of this prospectus.