Hughes to Buy IBM Satellite Leasing Operation

Times Staff Writer

In the latest in a series of acquisitions aimed at expanding its satellite communications business, Hughes Aircraft Co. said Friday that it will buy the satellite leasing subsidiary of International Business Machines Corp.

Hughes Aircraft's El Segundo-based Hughes Communications Inc. unit will buy all of IBM's Satellite Transponder Leasing Corp., which has two satellites in orbit and is readying a third for launch next June, Hughes said.

Terms were not disclosed, but a Hughes spokesman said Hughes estimates the value of STLC's assets at $250 million.

The acquisition, subject to Federal Communications Commission and other approvals, comes half a year after Hughes completed the purchase of Western Union's Westar satellite system in a deal that analysts valued at between $100 million and $200 million.

Manufacturing Experience

As with the Westar takeover, the current deal would be consistent with Hughes' strategy of diversifying beyond manufacturing and selling satellite technology, said Lawrence M. Harris, an aerospace analyst with the Los Angeles investment firm of Bateman Eichler, Hill Richards.

Hughes built all of the orbiting satellites in the Westar and STLC systems and is completing the third STLC satellite at its Space & Communications Group in El Segundo.

"Hughes' experience base has been in manufacturing the satellites; with the acquisitions, they're trying to provide a full line of services," Harris said.

STLC will give Hughes its first system with the capacity to transmit data and private business video on the so-called Ku-band--the high-frequency spectrum necessary to attract a different set of business customers from those served by the firm's other satellites, said Eddy W. Hartenstein, a senior vice president with Hughes Communications.

The STLC system would complement Hughes' existing system of six satellites that transmit video and audio signals on the lower-frequency C-band. Its customers include MCI Telecommunications and broadcast and cable television networks, he added.

Hughes also leases a separate system of three satellites that transmit voice and tactical data to the Navy. A fourth Hughes satellite for the Navy is scheduled for launch in December on the space shuttle Columbia, Hartenstein said.

Support Services

The STLC acquisition was set in motion in September, when Hughes agreed to provide exclusive marketing services for STLC's two orbiting satellites. The third is scheduled for launch on an Ariane rocket from French Guiana, Hartenstein said.

Under a separate agreement, Hughes said it will provide support services for the launch and subsequently lease satellite capacity back to IBM for its own corporate communications needs.

The STLC satellites would work in conjunction with Hughes' system of very small earth satellite stations, acquired in 1987 when Hughes bought MA-COM Telecommunications for $105 million.

Los Angeles-based Hughes Aircraft, which is a unit of General Motors Corp.'s GM Hughes Electronics company, also has been acquiring flight training and simulator companies, including Rediffusion Simulation and Honeywell's training division.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World