Loral to Buy AT&T;’s Skynet Satellite Unit

In the second big satellite system acquisition in less than a week, Loral Space & Communications said Wednesday that it will buy AT&T; Corp.’s broadcast satellite unit for $712.5 million in cash, creating a large and aggressive competitor in the fast-growing satellite services business.

Loral, recently formed as an offshoot of Lockheed Martin’s $9.1-billion purchase of Loral Corp.’s defense businesses, touted the acquisition of Skynet Satellite Services as the first purchase by the new Loral Space & Communications Ltd., suggesting there are more to come.

Skynet would provide Loral with a strong entry into the lucrative satellite service business, bringing it four orbiting satellites that beam TV programs, phone calls and computer data around the country.

“The demand for satellite services is huge and growing,” Bernard L. Schwartz, Loral’s chairman and chief executive, said in a statement. “It is the most cost-effective method of extending high-quality broadcast and broadband interactive multimedia services worldwide.”

Loral’s purchase follows Hughes Electronics’ announcement Friday that it had agreed to buy satellite operator PanAmSat’s 14-satellite global network for $3 billion. Both acquisitions aim to build on the growing demand for satellite transmission, particularly with the increasing popularity of direct-to-home satellite TV services.

Word of Loral’s Skynet acquisition sent its shares up $2.375 to $15.625 on the New York Stock Exchange. AT&T; gained 12.5 cents at $51.625, also on NYSE.

Loral’s Schwartz is “getting critical mass in the satellite services” business, said Lior Bregman, an Oppenheimer Co. analyst. “He doesn’t buy businesses at premiums. He buys businesses he can fix and add to.”

Satellite services will bring in revenues approaching $4 billion this year, analysts say. Satellite television is expected to see revenue growth of 60% to 70% a year, while telephone services are expected to grow in the high teens annually.

Purchasing Skynet, which would be renamed Loral Skynet, comes along with two other initiatives at Loral to build its satellite business.

Loral will start launching 48 low-Earth-orbiting satellites for its Globalstar worldwide telephone system in the second half of 1997. It also plans geostationary satellites for its CyberStar two-way digital data transmission system, to be rolled out beginning in late 1997. A geostationary satellite’s orbit keeps it above a single spot on the Earth.

New York-based Loral intends to expand Skynet to provide international service as well as its current domestic fare, said Jeanette Clonan, a spokeswoman for Loral. Specifics were not available.

The company said it will use $500 million of debt to finance the purchase, leaving it with about $400 million in cash after the deal is done. It requires the approval of the Federal Communications Commission and antitrust authorities and is expected to be complete within six months.

Skynet, based in Bedminster, N.J., employs 119 workers, all of whom will be offered jobs at Loral Skynet. While Skynet will move out of its current AT&T; facility, Clonan said it will probably remain in New Jersey.