buyers will lead to further increases in asset prices. Glen Gerstell, global head of telecoms at Milbank said deal size was also increasing due to the growth in financial sponsors ‘hunting in packs’ for larger telecoms targets, and to greater liquidity in private equity and hedge funds as well as the bank market. These factors have led to many incumbent operators previously thought ‘too big’ for LBOs now being decidedly ‘in play’. Ken Goldsbrough, Managing Director Global Media and Communications at GE Commercial Finance, argued that the biggest area for leveraged finance in 2005 was cable and he predicted that this would accelerate with further consolidation in 2006. Goldsbrough said that enormous liquidity has already created a highly competitive European leveraged market and it was driving high enterprise value and leverage multiples.
However Gerstell warned of the structural challenges that LBOs face. The highly leveraged nature of recent deals has led to an increased reliance on highly structured transactions; the growth in structured subordination to a holding company; and no recourse to sponsors. Credit risk has also been on the rise with 70% of newlyrated transactions rated B, as compared to 50% in 2004.

SES Global outlines acquisition strategy

SES Global CEO Romain Bausch, making a keynote speech at Telecom Finance 2006, said that the company would continue to grow by diversifying and developing its operations.
Bausch said that the acquisition of New Skies, which is pending regulatory approval, would boost SES Global’s positioning in the Indian DTH market in the next five years. However, he said any further acquisitions would be done on an incremental basis and that it was not a major priority for the company at this stage. “We are not disregarding acquisition opportunities, but it will be small ones that focus on a particular market,” he said. With around 25 satellite operators in Asia, Bausch said he would look to that market for consolidation.

Inmarsat to use existing cash flow

Inmarsat CFO Rick Medlock told delegates at the Telecom Finance 2006 conference that the company wanted to fund the launch and insurance of its third F3 satellite using existing cash flow, despite having a US$300m un-drawn line of credit in reserve. Inmarsat remains optimistic F3 would lift-off as early as 2007, following the successful launch of its F1 and F2 satellites in December 2005. Inmarsat’s need to find funding for the launch and insurance of the third satellite had been a worry for some analysts. The company proposes to launch the third satellite, which was made as a back-up satellite for the two that are already in orbit, over the Pacific Ocean in order to use BGAN as a navigation and aerospace service. Medlock said BGAN presented the real long-term growth opportunities for the company.