Exclusive Interview With The CEO And President: Loral Space And Communications (LORL) - Michael B. Targoff
January 24, 2012 - The Wall Street Transcript has just published Wireless Communications & Telecom Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Michael B. Targoff is Chief Executive Officer and President of Loral Space & Communications, which has its headquarters in New York City. He is also Vice Chairman of Loral's board of directors and serves on the board's executive committee. Mr. Targoff was named CEO in 2006 and became President in January 2008. He originally joined Loral in 1981 and served as Senior Vice President and General Counsel until January 1996, when he was elected President and Chief Operating Officer of the newly formed Loral Space & Communications. Mr. Targoff attended Brown University, where he received a B.A. in 1966, and he earned a doctor of jurisprudence degree from the Columbia Law School in 1969. He was a Harlan Fiske Stone Scholar and Editor of the Columbia Journal of Law and Social Problems.
TWST: Please start by giving our readers an overview and history of Loral.
Mr. Targoff: Loral is a satellite communications company. We have a manufacturing division called Space Systems/Loral, which we also refer to as SS/L, and we own 64% of Telesat, which is the world's fourth-largest satellite operator. Loral was at one time a defense electronics business, and the company obtained the satellite manufacturing business from Ford Aerospace in 1991. Loral spun off the defense electronics business to Lockheed in 1996 and acquired some satellite operators, which included the Skynet operations of AT&T and some satellites from an international operator called Orion, and ultimately we made investments in acquiring Satmex from the Mexican government.
In 1996, when the defense businesses were spun off and sold to Lockheed, I became the President of Loral Space And Communication (LORL)s. I left in 1998 to do certain venture-type entrepreneurial activities. In 2005, I was asked to come back to Loral as a Director and Vice Chairman of the board. And ultimately, in 2006, when Bernard Schwartz, the long-established and very high-profile CEO and father of Loral, resigned, I accepted a request from the board to become the CEO. When I assumed the CEO role in the spring of 2006, at our service business, which was called Loral Skynet, we had the equivalent of a little more than three satellites.
TWST: Loral owns satellites, but also owns rights to satellite slots. What does that mean?
Mr. Targoff: The location and use of satellites is regulated by an international body called the ITU. Governments make applications to this body to get the rights to what's colloquially described as "beachfront property." Remember, I said there is a geostationary spot right above, let's say the eastern part of the United States and it has a description, for example 65 degrees west longitude or 119 degrees west longitude. These locations, or orbital slots, are parking places for the satellites. In order to put your satellite there, you apply to a government, the government seeks from the ITU a right to put a satellite in that location, and then the government allocates that right, sometimes through direct one-on-one process, and sometimes through auction to a particular company that will then have the right to build and launch a satellite and park it in that location.
If you had two satellites close together, closer than two degrees, for example, and they were both using the same frequencies, they would interfere with each other and effectively make both satellites less useful. So satellites are spaced from two degrees to nine degrees apart depending on where you are, what kind of service is contemplated, and what frequencies you are using. The greater the separation, the smaller the antenna on the ground is necessary to receive the signal effectively. So you have two degrees of separation for TV distribution to headends. And in this country, you have generally nine degrees of separation for the optimal distribution of TV to an 18-inch parabolic dish you see on households.
In other words, it's a license. It's a right to put a satellite there. Telesat has the rights to put their satellites at a number of different orbital locations. We would hope to find a business case to justify putting a satellite in some of these new locations. New orbital slots are generally only populated with satellites when the business case justifies it. With our manufacturing company, we at times will apply with different governments for a satellite location as part of our business of providing a full-service opportunity for our customer, the satellite operator.
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