Astrolink Seeking More Funds
Lockheed Martin Corp.’s Astrolink venture has raised little more than a third of the $3.7 billion needed to get its satellite Internet service off the ground and is returning to investors for more money.
Lockheed Martin, Liberty Media Corp., Telecom Italia and TRW Inc. have promised $1.33 billion for the project, Lockheed said in a Securities and Exchange Commission filing. Astrolink still needs $2.4 billion to complete its planned nine-satellite system and is in talks with those companies and with unnamed investors.
“It’s going to be very hard for them to raise money in this market,” said Robert Friedman, an analyst with Standard & Poor’s Corp., who has a “hold” rating on Lockheed Martin shares.
Astrolink, based in Bethesda, Md., hasn’t attracted new investors since October 1999, and competing ventures already have begun service using existing satellites. The company won’t say how many customers it expects to have, nor will it discuss the January resignation of Chief Executive Celso Azevedo.
“We have a strong management team and a board that’s running things,” Chief Financial Officer Margarita Dilley said. Astrolink is searching for a new chief executive, she said.
Timing is an issue, analysts say. Prices for wireless services have been dropping, demand for high-speed Internet access isn’t increasing as fast as some investors had hoped, and satellite-based providers have underestimated the appeal of ground-based services, analysts say.
Lockheed Martin, the largest defense contractor, created Astrolink in 1999 and persuaded Liberty Media, Telecom Italia and TRW to invest hundreds of millions of dollars. The venture plans to launch its first satellite in early 2003 and to begin offering high-speed Internet services to businesses and the government later that year. Astrolink originally planned for a 2002 launch.
Liberty Media, the cable-television programming arm of New York-based AT&T; Corp., is the most recent investor. It agreed to pay $425 million for a 32% stake.
Englewood, Colo.-based Liberty Media declined to comment.
Lockheed, which has pledged $400 million for the venture, invested $86 million last quarter and plans to spend $56 million in the next six months. It owns a 31% stake and has contracts to build the satellites and to help launch them. Lockheed’s Global Telecommunications unit may invest more money, said spokesman Morgan Broman. “We need to see how it goes,” before deciding on additional investments.
“[Lockheed] is fully committed to Astrolink and [is] fully satisfied TRW’s space and electronics business is making the switches and controls for the satellites.
A spokesman for the Cleveland- based company said Astrolink is meeting its timetables. He wouldn’t comment on TRW’s future involvement in the venture. TRW holds a 19% stake in the Astrolink.
The venture will compete with Hughes Electronics Corp.’s Spaceway division, which expects to begin service in 2003, and with Wildblue Communications Inc.
Lockheed Martin shares fell 25 cents to close at $39 on the New York Stock Exchange.
