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Intelsat Shuffles Capacity After IA-7 Satellite Fails

PARIS -- Intelsat has secured replacement capacity for all priority customers affected by the sudden failure Nov. 28 of its IA-7 satellite by moving them to other Intelsat satellites and booking emergency capacity aboard a satellite operated by competitor PanAmSat Corp., Intelsat's investor relations manager said Nov. 29.

Dianne VanBeber said some IA-7 customers with what are known as pre-emptible contracts -- lower-priced leases in which replacement capacity is not guaranteed - may still be facing difficulties as a result of the IA-7 failure.

Located at 129 degrees west longitude, IA-7 had showed no signs of difficulty until early in the morning of Nov. 28, when its electrical-distribution system suddenly failed. VanBeber said that while the satellite since then has shown some signs of life, "we are considering it a total loss. We are still investigating the cause, and at this point we don't even have a smoking gun."

IA-7 is one of four in-orbit satellites that Bermuda-headquartered, Washington-based Intelsat purchased from Loral Space and Communications earlier this year. The satellite was manufactured by Space Systems/Loral of Palo Alto, Calif.

The IA-7 in-orbit insurance policy was allowed to expire in September. As it has done in the past, Intelsat chose not to renew the policy because the satellite's book value had dropped to below $150 million.

Conversely, VanBeber said Intelsat recently decided to renew the in-orbit insurance policies for its seven Intelsat 9 spacecraft. The policy that expired earlier this month has been extended to March and includes the option for another extension to November 2005, VanBeber said.

The failure of IA-7 will permit private-equity consortium Zeus Holdings Ltd., which had agreed to purchase Intelsat for $3 billion plus assuming $2 billion in Intelsat debt, to reconsider the terms of the deal with a view to reducing the purchase price or even canceling it altogether. "We will be reviewing this with Zeus in the next few days," VanBeber said.

Intelsat had been planning to close the purchase agreement with Zeus before the end of the year. Intelsat shareholders approved the terms of the agreement Oct. 25.

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