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Intelsat Sees Savings After Integrating PanAmSat

Satellite giant Intelsat expects to realize $92 million in annual operating-cost savings by the end of 2008 as a result of its acquisition of rival PanAmSat Holding, officials said Monday.

Intelsat officials outlined some of the details of the process of integrating PanAmSat -- which it acquired for $3.2 billion July 3 -- during a second-quarter conference call.

Chief operating officer Jim Frownfelter told analysts that about 75% of the projected cost savings overall reflect synergies derived from staff cuts and a reduction in the use of contractors. Intelsat plans to reduce its current work force of about 1,350 to roughly 1,000 by mid-2008.

The company -- now the largest global satellite company in the industry -- expects to “demonstrate modest cost-savings in our fourth-quarter results,” according to Frownfelter. By the end of 2007, the merged satellite companies will see about one-half of the annualized $92 million in cost savings.

To secure the expected savings, Intelsat will incur $180 million in one-time expenditures, with about one-half of that in the second half of this year and the balance in 2007, the company reported.

Intelsat’s second-quarter results did not reflect the purchase of PanAmSat. In the quarter, Intelsat reported revenue of $310.5 million, an increase of 7% versus the second quarter of last year, and a net loss of $42.7 million, down $10.7 million from a $53.4 million net loss one year ago.

Intelsat’s integration process includes sales and marketing; staffing, operations and facilities. The merged company has a fleet of more than 50 birds.