Lockheed takes 30% stake in Asia Cellular Satellite

Lockheed takes 30% stake in Asia Cellular Satellite

JAKARTA (JP): PT Pasifik Satelit Nusantara (PSN) announced on
Tuesday the addition of the United States aerospace, defense and
telecommunications giant Lockheed Martin Global
Telecommunications as a major equity participant in PT Asia
Cellular Satellite (ACeS).

ACeS president and chief executive officer Adi Rahman Adiwoso
said that the investment gave Lockheed Martin 30 percent
ownership in PT ACeS, a joint venture company formed by PSN,
Thailand's Jasmine International and the Philippines Long
Distance Telephone Company.

PT ACeS is developing the ACeS system, a US$850 million mobile
satellite telecommunications project which will begin operations
in the fall of 1999.

Under the agreement, the three founding partners of ACeS will
retain a total 70 percent stake in the venture, led by PSN's 30.7
percent holdings.

"With the equity and financial commitment of Lockheed the ACeS
project will be financially stronger and have significantly lower
leverage on its balance sheets," Adi said at a media briefing.

Lockheed Martin has been working to develop the satellite
telecommunications system since 1995. It provides the system's
satellite gateways, ground-based processing and overall
engineering and integration systems.

Adi said that in 1997, ACeS signed an underwriting agreement
with PT Danareksa Finance to raise $250 million through a
syndicated loan to finance the entire project.

Around $140 million of the loan was disbursed by Danareksa and
five local banks; Bank International Indonesia, Bank Danamon,
Bank Panin, Bank Niaga and the now liquidated Bank PDFCI.

"However, due to the country's ailing economy, which hit the
banking sector especially hard, those banks were not able to
provide the rest of the loans, so we had to recapitalize our
project and look for a new partner," he said.

Adi said that ACeS had secured $210 million in stockholders'
equity, which, with the equity addition from Lockheed, will bring
ACeS paid-up capital to $372 million.

Adi also said that the project was running smoothly and on
schedule.

"We will launch the Garuda-1 satellite in late May or early
June from Kazakhstan, and we will start our commercial services
by the end of this year. The satellite is now undergoing final
testing, the ground segment is nearing completion and gateways in
Indonesia, the Philippines and Thailand are under construction,"
he said.

"We are also beginning construction of the Garuda-2 satellite,
which will initially serve as a backup satellite and then will be
used to expand the system."

Through ACeS's Garuda-1 satellite, the system will be able to
provide voice, facsimile and data services covering an area from
India in the west to Indochina in the east, and from China in the
north to Southeast Asia in the south.

Adi said that the company's goal was to provide links between
cellular telephone networks and the existing fixed-lines in
several Asian countries, including Bangladesh, Brunei, Myanmar,
China, Indonesia, Hong Kong, India, Japan, South Korea, Malaysia,
the Philippines, Singapore, Taiwan, Thailand and Vietnam.

With the operation covering most of Asia, any person with a
hand held device will be able to directly communicate with
another person carrying a similar device within the satellite
coverage area through ground station gateways and normal public
switch telephone networks, or with any person with a cellular or
fixed telephone anywhere in the world.

The project claims to be simpler and cheaper than other
satellite-based cellular telecommunications projects, such as the
ICO of Inmarsat, Iridium, Globalstar, Odyssey and Teledesic.

"It is simpler and cheaper because ACeS will focus on
regional, not global, coverage. For example, our national service
providers will offer retail service rates of $1.00 per minute,
while our competitors offer rates of $3.00 to $7.00 per minute,"
Adi said.

"We have set a target of serving 2 million customers by 2003,"
he added.

The ACeS system is based on the Global System for Mobile
Communications standard and will employ dual-mode handsets (ACeS-
GSM and ACeS-AMPS). The handset's contract was awarded to
Ericsson of Sweden in September 1996.

The contract with Ericsson is not, however, exclusive.

"For the first stage we picked Ericsson to provide 250,000
dual-mode handsets worth $225 million. But there is no
exclusivity to the contract. We are free to order handsets from
any cellular phone producer as long as they meet our technology
standards," he said. (gis)