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Gilat Does $200 Million Euro Deal To Sell Internet Via VSAT

Bringing Europe faster Internet

Gilat Satellite Networks Ltd., with its global subsidiaries Spacenet Inc., Gilat Europe and Gilat Latin America, is a leading provider of telecommunications solutions based on Very Small Aperture Terminal (VSAT) satellite network technology - with nearly 400,000 VSATs shipped worldwide.
Paris - Apr 8, 2002
SES Global, Gilat Satellite Networks Ltd., as well as Alcatel Space and SkyBridge, subsidiaries of Alcatel, announced Monday the formation of a new company that will provide two-way satellite broadband communications services to enterprises, consumers and small office/home office (SOHO) users throughout Europe.

The value of the company exceeds EUR 200 million and includes cash of more than EUR 50 million with additional contributions from each of the partners. Such contributions include existing facilities, transponders, hubs, terminals, other technology and technical as well as marketing assistance.

By combining industry leading satellite communications technology and expertise from SES Global, Alcatel and Gilat - along with Gilat's existing European operations and substantial customer base - the new company immediately becomes a potent force in the European broadband market. The experience and resources of its founding companies will position it to become Europe's leading provider of two-way satellite broadband services.

Building on a strong base in the enterprise market, the new company will expand into the residential market to meet the growing demand for broadband services in Europe, which it expects will increase at an annual rate of more than 30 percent over the next five years.

By 2005, approximately 8.6 million potential residential and SOHO users in Europe will still not have access to high-speed cable modem or Digital Subscriber Line (DSL) services, according to analysis by McKinsey & Company. This represents an important market potential for the new venture.

Markets and Service Platforms

In the enterprise market and for some small and medium size enterprises (SMEs), the venture will offer complete satellite communications services. These services will be provided both directly by the new company and through wholesalers and will utilize Gilat's Skystar Advantage Very Small Aperture Terminal (VSAT) product, as well as SES ASTRA's Broadband Interactive System (BBI), which is based on the DVB-RCS standard.

Through the new company, enterprises can now benefit from a robust, mature SkystarAdvantage platform that has been used at more than 250,000 sites worldwide, including some of Europe's largest companies over the past 10 years. These platforms can support virtually any broadband data, multicast content delivery, video or audio application.

In the consumer and SOHO markets, and for some SMEs, the company will provide broadband communication services via Gilat's 360 VSAT satellite modem at speeds up to 20 times higher than dial-up modems.

In these markets, the company will serve as a wholesale provider of broadband services - such as hub operations, space segment, second-level help desk, maintenance and engineering support - to telcos, Internet Service Providers (ISPs) and direct-to-home television (DTH TV) providers. DTH TV providers can use the company to combine their services with broadband Internet on a single dish.

Gilat has formed strong relationships with some of Europe's most prestigious broadband service providers - including BTopenworld and Tiscali - to bring reliable, cost-effective satellite broadband services to consumers and SOHO users. The new company is under discussions with several other prominent service providers in order to expand its reach into new markets and additional countries.

The Partnership

SES Global and Gilat have executed definitive agreements whereby they will serve as equal shareholders (50/50 initially) in the new company, which will be headquartered in Luxembourg. SES Global and SES ASTRA will provide space segment over Europe and contribute hub and terminals, which constitute part of its innovative BBI system, as well as cash. Gilat will enter into a supply agreement for its Skystar Advantage and 360 VSAT products and make available its satellite hub equipment, its service licenses and rights, and its existing wholesale contracts with broadband service providers. The German cartel authority has cleared the joint venture between SES Global and Gilat on April 4, 2002.

Alcatel Space and SkyBridge have executed an agreement in principle with the new company in connection with a potential investment, which is subject to signature of definitive agreement and regulatory approval.

Alcatel will make technical and marketing contributions as well as a cash investment to the new venture in exchange for a 20 percent equity stake. As a consequence, SES Global and Gilat shares will be diluted proportionally. All three partners will contribute management expertise to the joint venture.

The new company will acquire 100 percent of Gilat Europe companies, including the Gilat Satellite Networks subsidiary based in Backnang, Germany. Gilat Europe has offices and operating licenses across Europe and has deployed enterprise-wide VSAT networks for companies such as Peugeot/Citroen, GIS Bank, Esso Deutschland, TOTAL, AGIP, and GE Capital Bank. Approximately 120 employees - including all of Gilat Europe's staff, part of SkyBridge's European staff and part of SES Multimedia's staff - will be transferred to the new entity.

The company's name, its board of directors and management team will be announced within the coming weeks. The company's operations will be supported by far-reaching industrial and marketing agreements between Alcatel and Gilat, as well as between Alcatel and SES Global (see separate press releases issued today).

Romain Bausch, President and CEO of SES Global, said, "Our goal is for this new venture to become the premier, pan-European enabler of two-way satellite broadband communications services - for both enterprises and consumers. The new company is perfectly positioned to meet Europe's strong demand for broadband Internet connectivity, including the attractive bundling with DTH TV services, and provide corporations with a wide range of business-critical applications."

Gilat President and Chief Operating Officer Amiram Levinberg said, "This initiative demonstrates Gilat's commitment to strengthening its role in Europe by joining forces with the strongest partners in the market. Through this venture, all three companies plan to capitalize on the growing demand for broadband services. The new venture is not a start-up. It brings mature, industry leading satellite broadband technology and operational expertise to the enterprise and consumer markets immediately."

Pascale Sourisse, Alcatel Space Chairman and Chief Executive Officer said, "This venture will benefit from the experience of its partners, all leaders in satellite communications and networking. It will enable service providers to offer a wide range of satellite based broadband services to their residential and enterprise customers. Alcatel Space and SkyBridge are committed to supporting this initiative, which is fully in line with their goal to provide reliable high-speed solutions and services complementing Alcatel's telecom offer."

Related Links
Gilat
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Alcatel Space
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Gilat Continues To Connect Rural Peru Via VSAT Rollout
Lima - Feb 25, 2002
Gilat Satellite Networks Ltd. today announced that it has signed a new contract with Fondo de Inversion en Telecomunicaciones del Peru (FITEL) to provide a fixed rural satellite telephony network. The FITEL network will serve more than 1,300 communities throughout Peru. The value of the project is approximately US$9.7 million.


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