Hughes Space First in Line for Middle East Satellite Deal

Hughes Space & Communications International will get first crack at negotiating a contract to build a satellite communications system to serve a wide swath of the Middle East in a deal that could be worth $1.2 billion.

Thuraya Satellite Telecommunications of the United Arab Emirates announced Wednesday that the El Segundo satellite maker has been selected as the preferred bidder for a project that would bring mobile phone service to 1.8 million people in 49 countries from India to Morocco. The companies have two weeks to work out a final deal.

The Hughes Electronics division, which is the world’s largest manufacturer of commercial satellites, beat rival bids from Lockheed Martin of Bethesda, Md., and Aerospatiale of Paris.

“Sept. 11, 1997, is the target date for signature” of a final deal, Mohammed Hassan Omran, Thuraya’s chairman, said in a statement. “Should there be any difficulty in finalizing the agreement with [Hughes], then one of the two remaining bidders will be considered for further negotiations.”

Hughes spokesman Emery Wilson said the company could not comment on the contract “because it’s not a done deal yet.”

Earlier this month, Thuraya project manager Yousuf al-Sayed valued the project at $1.2 billion over 12 years. A separate study released this month by Etisalat, the United Arab Emirates’ telecommunications monopoly, valued the total project at $900 million. Etisalat expects the project to generate $4 billion in revenue within 10 years.

Wilson declined to comment on how many jobs the deal might create. Howard Rubel, an aerospace analyst with Goldman, Sachs & Co. in New York, said the agreement to design, construct and launch the satellite could represent up to 20% of Hughes’ manufacturing backlog.

Shares in Hughes Electronics, a subsidiary of General Motors, rose 25 cents to close at $64.13 in New York Stock Exchange trading.

The new satellite system will bring modern telecommunications service to regions not served by current or future cellular systems, Thuraya said. In addition to hand-held phones, the company plans to provide service for “vehicle-mounted, maritime and semi-fixed mobile units,” the statement said.

The Thuraya satellite is scheduled to be launched over the Indian Ocean in the middle of 2000 and will have the capacity to handle 1.75 million subscribers. A second satellite will be launched a couple of years later if there is sufficient demand, said Thuraya officials.

Thuraya was formed in January to own and operate the new satellite project. The company said it has commitments for more than 75% of the $500 million it plans to raise in initial share capital. Etisalat has a 26% stake in Thuraya; nine other companies also have stakes.