##### 









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 20-F


|           |  |                                                                                                     
|---------- |  | ----------------------------------------------------------------------------------------------------
|(Mark One)
|o          |  | REGISTRATION STATEMENT PURSUANT TO SECTION
    12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|or        
|          
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934            
|          
|           |  | For the fiscal year ended December 31,
    2002                                                     
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934        
|          
|           |  | For the transition period
    from           to                                                     

Commission file number 333-99189

Intelsat, Ltd.


(Exact Name of Registrant as Specified in Its
Charter)


|                                                    |  |                                                    
|--------------------------------------------------- |  | ---------------------------------------------------
|N/A                                                 |  | Bermuda                                            
|(Translation of Registrants Name Into
    English) |  | (Jurisdiction of Incorporation or
    Organization)

Dundonald House

14 Dundonald Street West


Hamilton HM 09, Bermuda


(Address of Principal Executive
Offices)


Securities registered or to be registered
pursuant to Section 12(b) of the Act:

|                    |  |                      
|------------------- |  | ---------------------
|                    |  | Name of Each Exchange
|Title of Each Class |  | On Which Registered  
|                    |  |                      
|N/A                 |  | N/A                  

Securities registered or to be registered
pursuant to Section 12(g) of the Act:


N/A

(Title of Class)


Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:

7 5/8% Senior Notes due 2012

(Title of Class)


Indicate the number of outstanding shares of each
of the issuers classes of capital or common stock as of
the close of the period covered by the annual report.

As of December 31, 2002, 166,666,755
ordinary shares, par value $3.00 per share, were issued and
outstanding.

Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.    Yes þ         No o

Indicate by check mark which financial statement
item the registrant has elected to
follow.    Item 17
o         Item 18    þ



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TABLE OF CONTENTS

|                                                            |          |  |                                                                                  |      |  |     | 
|----------------------------------------------------------- | -------- |  | -------------------------------------------------------------------------------- | ---- |  | --- | 
|                                                            |          |  |                                                                                  | Page
|                                                            |          |  |                                                                                  |     
|INTRODUCTION                                                |          |  | 1                                                                                |     
|OUR BUSINESS                                                |          |  | 1                                                                                |     
|FINANCIAL AND OTHER INFORMATION                             |          |  | 1                                                                                |     
|FORWARD-LOOKING STATEMENTS                                  |          |  | 2                                                                                |     
|PART I                                                      |          |  |                                                                                  |     
|                                                            | Item 1.  |  | Identity of Directors, Senior Management and
    Advisers                        |      |  | 3   | 
|                                                            | Item 2.  |  | Offer Statistics and Expected Timetable                                          |      |  | 3   | 
|                                                            | Item 3.  |  | Key Information                                                                  |      |  | 3   | 
|                                                            | Item 4.  |  | Information on the Company                                                       |      |  | 21  | 
|                                                            | Item 5.  |  | Operating and Financial Review and Prospects                                     |      |  | 60  | 
|                                                            | Item 6.  |  | Directors, Senior Management and Employees                                       |      |  | 87  | 
|                                                            | Item 7.  |  | Major Shareholders and Related Party Transactions                                |      |  | 97  | 
|                                                            | Item 8.  |  | Financial Information                                                            |      |  | 101 | 
|                                                            | Item 9.  |  | The Offer and Listing                                                            |      |  | 102 | 
|                                                            | Item 10. |  | Additional Information                                                           |      |  | 102 | 
|                                                            | Item 11. |  | Quantitative and Qualitative Disclosures About
    Market Risk                   |      |  | 116 | 
|                                                            | Item 12. |  | Description of Securities Other than Equity
    Securities                       |      |  | 117 | 
|PART II                                                    
|                                                            | Item 13. |  | Defaults, Dividend Arrearages and Delinquencies                                  |      |  | 117 | 
|                                                            | Item 14. |  | Material Modifications to the Rights of Security
    Holders and Use of Proceeds |      |  | 117 | 
|                                                            | Item 15. |  | Controls and Procedures                                                          |      |  | 117 | 
|                                                            | Item 16. |  | [Reserved]                                                                       |      |  | 117 | 
|PART III                                                   
|                                                            | Item 17. |  | Financial Statements                                                             |      |  | 117 | 
|                                                            | Item 18. |  | Financial Statements                                                             |      |  | 117 | 
|                                                            | Item 19. |  | Financial Statements and Exhibits                                                |      |  | 117 | 
|SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL
    LIABILITIES |          |  | 121                                                                              |     
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                  |          |  | F-1                                                                              |     



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##### 



INTRODUCTION

References in this annual report to
we, us and our refer to
Intelsat, Ltd. and, unless the context requires otherwise, to
its wholly owned subsidiaries. Intelsat, Ltd. is a limited
liability company incorporated under the laws of Bermuda.

We are the successor entity to the International
Telecommunications Satellite Organization, formerly known as
INTELSAT and referred to as the IGO, which was created on an
interim basis in 1964 in order to establish and operate a global
satellite system. The IGO was formally established in February
1973 upon entry into force of an international treaty. On
July 18, 2001, the IGO privatized by transferring
substantially all of its assets, liabilities, rights,
obligations and operations to Intelsat, Ltd. and its wholly
owned subsidiaries. References in this annual report to our
business and operations refer to the business and operations of
the IGO prior to the privatization and to the business and
operations of Intelsat, Ltd. and its wholly owned subsidiaries
subsequent to the privatization.

Our address is Dundonald House, 14 Dundonald
Street West, Hamilton HM 09, Bermuda, and our telephone number
is (441) 294-1650.

OUR BUSINESS

We are a leading global communications services
provider, supplying satellite capacity for carrier, corporate
network, video and Internet applications in over 200 countries
and territories. Our communications network includes 24
satellites and leased capacity on 2 additional satellites, as
well as selected strategic terrestrial assets. One additional
satellite with an expected launch date in late 2003 or early
2004 is under construction.

Our goal is to be a global connectivity leader
connecting people and businesses around the world with flexible
and innovative communications services. We intend to enhance our
leadership position in our industry by sustaining our core
business and focusing on further penetrating the video and
government/military customer segments. We also intend to make
incremental investments in business opportunities related to the
fixed satellite services sector in which we operate, including
investments in businesses that we believe provide opportunities
for growth, and in fiber optic cable and other ground facilities
that would enable us to continue to grow our hybrid
satellite/terrestrial network and enhance our integrated global
connectivity service offerings. Finally, we intend to enter into
strategic transactions that could enable us, among other things,
to provide enhanced landmass coverage of strategic geographic
regions, to diversify our customer base further and to achieve
operational efficiencies. While we have a limited operating
history as a private company and the extent to which we will be
able to respond effectively to market opportunities is
uncertain, we have already expanded our network capabilities
through the acquisition of selected strategic terrestrial assets
and have expanded our service offerings to respond to the
requirements of our customers. For example, in 2002 we acquired
teleport facilities in strategic locations around the world and
introduced a portfolio of services, called
GlobalConnexSM Solutions, designed to provide the
managed services and services integrating terrestrial and
satellite assets that our customers increasingly demand. In
addition, to position ourselves for entry into the satellite
broadband access market, in 2002 we entered into an agreement to
acquire a minority stake in Wildblue Communications, Inc., which
plans to offer broadband Internet access services in the
continental United States via Ka-band satellite.

FINANCIAL AND OTHER INFORMATION

All references herein to $ are to
U.S. dollars. Unless otherwise indicated, all monetary amounts
in this annual report are presented in U.S. dollars. Unless
otherwise indicated, the financial information contained in this
annual report has been prepared in accordance with accounting
principles generally accepted in the United States.

Certain monetary amounts, percentages and other
figures included in this annual report have been subject to
rounding adjustments. Accordingly, figures shown as totals in
tables may not be the arithmetic aggregation of the figures that
precede them, and figures expressed as percentages in the text
may not total 100% or, as applicable, when aggregated may not be
the arithmetic aggregation of the percentages that precede them.





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##### 



On June 4, 2002, we effected a share
consolidation pursuant to which every three of our ordinary
shares of $1.00 par value each were consolidated into one
ordinary share of $3.00 par value and every three of our
preference shares of $1.00 par value each were consolidated into
one preference share of $3.00 par value. Unless otherwise noted,
all share figures in this annual report reflect the share
consolidation.

In this annual report, we refer to and rely on
publicly available information regarding our industry and our
competitors. Although we believe the information is reliable, we
cannot guarantee the accuracy and completeness of the
information and have not independently verified it.

FORWARD-LOOKING STATEMENTS

This annual report contains statements that
constitute forward-looking information. These forward-looking
statements are not guarantees of future performance or results
and involve risks and uncertainties, and actual results or
developments may differ materially from the forward-looking
statements as a result of various factors. You should not rely
on any forward-looking statements in this annual report. You can
usually identify forward-looking statements by terminology such
as may, will, should,
expect, plan, anticipate,
believe, estimate, predict,
intend, potential or
continue or by the negative of these terms or other
comparable terminology. Examples of the forward-looking
statements in this annual report include, but are not limited
to, statements made in the sections entitled
Item 4  Information on the Company
and Item 5  Operating and Financial Review
and Prospects regarding the following: our intent to
leverage our strengths and our leadership position in our
industry to grow our business; our ability to sustain our
leadership position in the fixed satellite services sector; our
ability to leverage our relationships with our diverse customers
to accelerate the introduction of new services; our belief that
the provision of satellite capacity to video and
government/military customers represents an opportunity for
stable growth over the long term; our ability to build new
broadcast communities for video services in certain markets; our
belief that the demand for broadband access and direct-to-home
transmission of television programming could contribute to
future growth in the demand for satellite services in certain
markets; our ability to continue to introduce new hybrid network
services; our belief that we can use strategic transactions to
improve our competitive position; our belief that growth in data
traffic, from which we benefit, will continue; our belief that
the demand for integrated communications services requiring both
satellite and terrestrial components is increasing; our belief
that the evolution of the Internet and the digitization of media
and entertainment properties will increase the demand for
broadband connectivity; our belief that our customer base
provides us with a competitive advantage in local markets around
the world as we introduce new services; our belief that our
customers require integrated and managed services best addressed
by a hybrid network that combines space and terrestrial
infrastructure; our expected capital expenditures in 2003; our
belief that there will be continued growth in the demand for
fixed satellite services; our belief that deregulation will
present additional opportunities for us; and the trends that we
believe will impact our telecommunications revenue and operating
expenses in the future. The forward-looking statements contained
in this annual report are subject to risks, uncertainties and
assumptions including, among other things, the risk factors
discussed in Item 3.D  Risk Factors
below. In addition to the occurrence of any of these risk
factors, other factors that may cause results or developments to
differ materially from the forward-looking statements include,
but are not limited to:



|  |                                                                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | the quality and price of similar or comparable
    communications services offered or to be offered by our
    competitors;                              
| 
| | financial community and rating agency perceptions
    of our business, operations and financial condition and the
    industry in which we operate;      
| 
| | political, economic and legal conditions in the
    markets we are targeting for communications services or in which
    we operate; and                 
| 
| | other risks and uncertainties inherent in the
    telecommunications business in general and the satellite
    telecommunications business in particular.

Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee our future results, level of activity,
performance or achievements. We undertake no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In light
of these risks and uncertainties, the forward-looking events
discussed in this annual report might not occur.

2



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##### 



PART I



|        |                                                          
|------- | ---------------------------------------------------------
|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS

Not applicable.



|        |                                            
|------- | -------------------------------------------
|ITEM 2. | OFFER STATISTICS AND EXPECTED
    TIMETABLE

Not applicable.



|        |                
|------- | ---------------
|ITEM 3. | KEY INFORMATION

A. Selected Financial Data

The following selected financial data should be
read in conjunction with, and is qualified by reference to, our
consolidated financial statements and their notes and with
Item 5  Operating and Financial Review and
Prospects included elsewhere in this annual report. The
consolidated statement of operations data for each of the years
in the four-year period ended December 31, 2002 and the
consolidated balance sheet data for the years ended
December 31, 2000, 2001 and 2002 have been derived from
consolidated financial statements audited by KPMG LLP,
independent auditors. The consolidated statement of operations
data for the years ended December 31, 1998 and 1999 and the
consolidated balance sheet data as of December 31, 1998,
1999 and 2000 have been derived from financial statements that
are not included in this annual report.

On November 30, 1998, the IGO transferred a
portion of its assets and liabilities to New Skies Satellites,
N.V., referred to as New Skies. The transferred assets and
liabilities included five in-orbit satellites, an additional
satellite under construction, a related launch contract and
associated contracts for the provision of satellite capacity.
The consolidated statement of operations data for the year ended
December 31, 1998 reflects eleven months of results prior
to the transfer of the net assets to New Skies and one month of
post-transfer results. Total assets as of December 31, 1998
reflect this transfer to New Skies.

|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |         | 
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------- | ------- |  | ---- | ----------- | ------- |  | ---- | ----------- | ------- |  | - | ----------- | ------- |  | - | ----------- | ------- | 
|                                                                      |                                                                                                 |                                                                        
|                                                                      |                                                                                                 | Year Ended December 31,                                                
|                                                                      |                                                                                                 |                                                                        
|                                                                      |                                                                                                 | 1998                                                                    |             | 1999    |  | 2000 |             | 2001    |  | 2002
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |     
|                                                                      |                                                                                                 |                                                                        
|                                                                      |                                                                                                 | (in thousands, except ratios, percentages and share and per share data)
|Consolidated Statement of Operations
    Data:                        |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Telecommunications revenue(1)                                         |                                                                                                 | $                                                                       | 1,021,233   |         |  | $    | 979,032     |         |  | $    | 1,099,751   |         |  | $ | 1,084,009   |         |  | $ | 991,956     |        
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Operating expenses:                                                   |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|                                                                      | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                                                                         |             | 88,745  |  |      |             | 93,180  |  |      |             | 93,162  |  |   |             | 101,985 |  |   |             | 117,405 | 
|                                                                      | Selling, general and administrative                                                             |                                                                         |             | 44,877  |  |      |             | 47,362  |  |      |             | 61,900  |  |   |             | 95,600  |  |   |             | 121,077 | 
|                                                                      | Depreciation and amortization(2)(3)                                                             |                                                                         |             | 482,435 |  |      |             | 441,183 |  |      |             | 414,250 |  |   |             | 340,449 |  |   |             | 361,322 | 
|                                                                      | Privatization initiative                                                                        |                                                                         |             | 2,499   |  |      |             | 11,433  |  |      |             | 21,575  |  |   |             | 33,576  |  |   |             |        | 
|                                                                      | Intelsat 10-01 contract termination costs                                                       |                                                                         |             |        |  |      |             |        |  |      |             |        |  |   |             |        |  |   |             | 34,358  | 
|                                                                      | Restructuring costs                                                                             |                                                                         |             |        |  |      |             |        |  |      |             |        |  |   |             | 7,300   |  |   |             | 5,522   | 
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Total operating expenses                                              |                                                                                                 |                                                                         | 618,556     |         |  |      | 593,158     |         |  |      | 590,887     |         |  |   | 578,910     |         |  |   | 639,684     |        
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Income from operations                                                |                                                                                                 |                                                                         | 402,677     |         |  |      | 385,874     |         |  |      | 508,864     |         |  |   | 505,099     |         |  |   | 352,272     |        
|Interest expense                                                      |                                                                                                 |                                                                         | (65,639     | )       |  |      | (59,263     | )       |  |      | (24,859     | )       |  |   | (13,050     | )       |  |   | (55,053     | )      
|Other income                                                          |                                                                                                 |                                                                         | 13,246      |         |  |      | 29,561      |         |  |      | 20,885      |         |  |   | 12,293      |         |  |   | 9,942       |        
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Income before income taxes                                            |                                                                                                 |                                                                         | 350,284     |         |  |      | 356,172     |         |  |      | 504,890     |         |  |   | 504,342     |         |  |   | 307,161     |        
|Provision for income taxes(4)                                         |                                                                                                 |                                                                         |            |         |  |      |            |         |  |      |            |         |  |   | 5,359       |         |  |   | 33,021      |        
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Net income                                                            |                                                                                                 | $                                                                       | 350,284     |         |  | $    | 356,172     |         |  | $    | 504,890     |         |  | $ | 498,983     |         |  | $ | 274,140     |        
|                                                                      |                                                                                                 |                                                                         |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Basic and diluted net income per ordinary
    share(5)                |                                                                                                 | $                                                                       | 2.10        |         |  | $    | 2.14        |         |  | $    | 3.03        |         |  | $ | 2.99        |         |  | $ | 1.66        |        
|Dividends per ordinary share                                          |                                                                                                 |                                                                         |            |         |  |      |            |         |  |      |            |         |  |   |            |         |  |   |            |        
|Basic and diluted weighted average ordinary
    shares outstanding(5) |                                                                                                 |                                                                         | 166,666,755 |         |  |      | 166,666,755 |         |  |      | 166,666,755 |         |  |   | 166,666,755 |         |  |   | 164,893,283 |        

3



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##### 



|                                                         |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |         |  
|-------------------------------------------------------- | ----------------------------- | ----------------------------------------------------------------------- | -------- | ------- | - | ---- | -------- | ------- | - | ---- | -------- | ------- | - | - | -------- | ------- | - | - | -------- | ------- | -
|                                                         |                               |                                                                        
|                                                         |                               | Year Ended December 31,                                                
|                                                         |                               |                                                                        
|                                                         |                               | 1998                                                                    |          | 1999    |   | 2000 |          | 2001    |   | 2002
|                                                         |                               |                                                                         |          |         |   |      |          |         |   |     
|                                                         |                               |                                                                        
|                                                         |                               | (in thousands, except ratios, percentages and share and per share data)
|Consolidated Statement of Cash Flow
    Data:            |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        
|Net cash provided by operating activities                |                               | $                                                                       | 840,047  |         |   | $    | 820,886  |         |   | $    | 933,048  |         |   | $ | 856,388  |         |   | $ | 657,985  |        
|Net cash used in investing activities                    |                               |                                                                         | (487,249 | )       |   |      | (330,327 | )       |   |      | (546,020 | )       |   |   | (663,671 | )       |   |   | (678,222 | )      
|Net cash provided by (used in) financing
    activities  |                               |                                                                         | (374,496 | )       |   |      | (464,855 | )       |   |      | (411,828 | )       |   |   | (191,161 | )       |   |   | 31,504   |        
|Other Data:                                              |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        
|EBITDA, as adjusted(6)                                   |                               | $                                                                       | 885,112  |         |   | $    | 827,057  |         |   | $    | 923,114  |         |   | $ | 845,548  |         |   | $ | 713,594  |        
|Reconciliation of Net Income to EBITDA, as
    adjusted: |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        
|Net income                                               |                               | $                                                                       | 350,284  |         |   | $    | 356,172  |         |   | $    | 504,890  |         |   | $ | 498,983  |         |   | $ | 274,140  |        
|Add:                                                     |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        
|                                                         | Interest expense              |                                                                         |          | 65,639  |   |      |          | 59,263  |   |      |          | 24,859  |   |   |          | 13,050  |   |   |          | 55,053  |  
|                                                         | Provision for income taxes(4) |                                                                         |          |        |   |      |          |        |   |      |          |        |   |   |          | 5,359   |   |   |          | 33,021  |  
|                                                         | Depreciation and amortization |                                                                         |          | 482,435 |   |      |          | 441,183 |   |      |          | 414,250 |   |   |          | 340,449 |   |   |          | 361,322 |  
|Subtract:                                                |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        
|                                                         | Other income                  |                                                                         |          | (13,246 | ) |      |          | (29,561 | ) |      |          | (20,885 | ) |   |          | (12,293 | ) |   |          | (9,942  | )
|                                                         |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        
|EBITDA, as adjusted                                      |                               | $                                                                       | 885,112  |         |   | $    | 827,057  |         |   | $    | 923,114  |         |   | $ | 845,548  |         |   | $ | 713,594  |        
|                                                         |                               |                                                                         |          |         |   |      |          |         |   |      |          |         |   |   |          |         |   |   |          |        

|                                 |  |                                       |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|-------------------------------- |  | ------------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                 |  |                                      
|                                 |  | As of December 31,                   
|                                 |  |                                      
|                                 |  | 1998                                  |           | 1999 |  | 2000 |           | 2001 |  | 2002
|                                 |  |                                       |           |      |  |      |           |      |  |     
|                                 |  |                                      
|                                 |  | (in thousands, except per share data)
|Consolidated Balance Sheet Data: |  |                                       |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|Total assets                     |  | $                                     | 3,178,061 |      |  | $    | 3,164,089 |      |  | $    | 3,199,163 |  |  | $ | 3,576,135 |  |  | $ | 3,965,432 | 
|Total liabilities                |  |                                       | 1,585,393 |      |  |      | 1,612,682 |      |  |      | 1,497,523 |  |  |   | 1,580,309 |  |  |   | 1,815,198 | 
|Total shareholders equity       |  |                                       | 1,592,668 |      |  |      | 1,551,407 |      |  |      | 1,701,640 |  |  |   | 1,995,826 |  |  |   | 2,150,234 | 
|Book value per ordinary share    |  | $                                     | 9.56      |      |  | $    | 9.31      |      |  | $    | 10.21     |  |  | $ | 11.97     |  |  | $ | 13.41     | 



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Telecommunications revenue includes revenue
    related to satellites transferred to New Skies of $106,452 for
    the year ended December 31, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(2) | Depreciation and amortization expense includes
    depreciation related to satellites transferred to New Skies of
    $64,884 for the year ended December 31, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) | As of January 1, 2001, we revised the
    estimated useful lives for certain satellites. The effect of
    these revised estimates was to increase the useful lives of
    substantially all of our Intelsat VII and VIII series
    satellites and thereby decrease depreciation expense by
    approximately $60,507 for the year ended December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) | Prior to privatization, the IGO was not subject
    to income taxes. Upon privatization, Intelsat, Ltd. and its
    subsidiaries became subject to taxes in various jurisdictions.
    Results of operations for the period from privatization through
    December 31, 2002 include a provision for these taxes.
    Intelsat, Ltd. and its subsidiaries also recognized a deferred
    tax benefit upon privatization as a result of the change in
    taxable status.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(5) | Basic and diluted net income per ordinary share
    for each of the four years ended December 31, 2001 has been
    computed assuming 166,666,755 ordinary shares had been
    outstanding for those periods. Basic and diluted net income per
    ordinary share for each of the five years ended December 31,
    2002 also assumes that our June 4, 2002 share consolidation
    occurred at the beginning of the earliest period presented. On
    June 4, 2002, we amended our bye-laws to decrease the
    number of authorized ordinary shares from 650,000,000 ordinary
    shares with a par value of $1.00 per share to
    216,666,666 2/3 ordinary shares with a par value of $3.00
    per share, and to decrease the number of authorized preference
    shares from 7,500,000 preference shares with a par value of
    $1.00 per share to 2,500,000 preference shares with a par value
    of $3.00 per share. Prior to our share consolidation, we had
    500,000,000 ordinary shares outstanding and no preference shares
    outstanding. At December 31, 2002, we had 160,382,120
    ordinary shares outstanding and no preference shares outstanding.

4



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | EBITDA, as adjusted, consists of earnings before
    interest, other income, taxes and depreciation and amortization.
    EBITDA is a measure commonly used in the fixed satellite
    services sector, and we present EBITDA, as adjusted, to enhance
    your understanding of our operating results. We use EBITDA as
    one criteria for evaluating our companys performance
    relative to that of our peers. We believe that EBITDA provides
    investors and analysts with a measure of operating results that
    is unaffected by differences in capital structures, capital
    investment cycles and ages of related assets among otherwise
    comparable companies. However, EBITDA is not a measurement of
    financial performance under generally accepted accounting
    principles and may not be comparable to other similarly titled
    measures of other companies. You should not consider EBITDA as
    an alternative to operating or net income, determined in
    accordance with generally accepted accounting principles, as an
    indicator of our performance, or as an alternative to cash flows
    from operating activities, determined in accordance with
    generally accepted accounting principles, as an indicator of
    cash flows, or as a measure of liquidity.

B. Capitalization and
Indebtedness

Not applicable.

C. Reasons for the Offer and Use of
Proceeds

Not applicable.

D. Risk Factors

Risk Factors
Relating to Our Business

We experience competition both within the
satellite industry and from other providers of communications
capacity, such as fiber optic cable. For example, we are
experiencing erosion of our point-to-point services revenue as a
result of the migration of customers to fiber optic cable.
Competition from other telecommunications providers could have a
material adverse effect on our business and could prevent us
from implementing our business strategy and expanding our
operations as planned.

We are a global operator in the fixed satellite
services sector of the satellite industry. Fixed satellite
services include point-to-point and point-to-multipoint services
for voice, data and video communications and for high-speed
Internet access. We compete against other global and regional
satellite operators and against suppliers of ground-based
communications capacity. Some of our competitors may have
greater financial resources than we do. In addition, if the
consolidation trend in the fixed satellite services sector
discussed below continues, some of our competitors in the future
may have more satellite capacity than we have.

The fixed satellite services sector is subject to
consolidation and competition from other forms of communications
technology, such as fiber optic cable. In addition, the
increasing availability of satellite capacity and capacity from
other forms of communications technology is creating an excess
supply of telecommunications capacity that in certain regions
has resulted in a decrease in the prices we are able to charge
for our services under new service contracts and therefore has
negatively affected our profitability. These trends are
contributing to reduced growth rates in the fixed satellite
services sector, which is currently expected to experience a
flat growth rate in 2003 and to grow modestly over the next few
years.

We face challenges to our business apart from the
industry trends noted above that our competitors may not face. A
significant portion of our revenue is derived from
point-to-point traffic. Since fiber optic cable capacity is
available at substantially lower prices than satellite capacity
for the same routes, competition from fiber optic cable has
resulted in a migration of our point-to-point customers from
satellite to fiber optic cable on certain routes. As a result,
we have experienced erosion in our revenue from point-to-point
services, and we expect this erosion to continue in the near
term. Some of our competitors in the fixed satellite services
sector have service mixes that are less dependent on
point-to-point connectivity than our current service mix. Our
plan to address this erosion and sustain our business includes
expanding our customer base in point-to-multipoint services,
such as video. However, we have historically served only a small
fraction of the video segment, and we may not be able to
increase our share of this market. Our ability to increase our
share will depend in part on our ability to attract customers
that do not currently use our system. Because some of our

5



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competitors have been able to leverage the use of
their satellites by a popular broadcaster to attract other
broadcasters to their satellites, a significant number of
broadcasters, cable systems and consumers may have satellite
access equipment already pointed at our competitors
satellites. In addition, popular broadcasters may have long-term
agreements with our competitors. We have not created the kind of
broadcast distribution communities on our satellites that some
of our competitors have created and may not be able to attract
popular broadcasters to our system. If we are unable to create
broadcast distribution communities or attract new customers in
this segment, we may be unable to offset erosion in our
point-to-point services revenue or to achieve future revenue
growth.


Our plan to address the erosion in our
point-to-point services revenue and to sustain our business also
includes introducing new integrated satellite/fiber services and
providing point-to-point services in areas of the world where
fiber optic cable does not yet exist or for which fiber optic
cable is believed to be unsuitable. However, we may not be able
to further penetrate the point-to-point services market in the
regions we are targeting or to successfully introduce new
integrated services. If we continue to experience the erosion of
our point-to-point services business and at the same time fail
to capture sufficient growth in the point-to-multipoint market
or fail to increase our revenue by offering integrated services,
our business could further shrink and our future revenue and
profitability would be materially adversely affected.

As discussed in more detail in a later risk
factor, we are also subject to contractual restrictions on our
ability to set prices for our services that may not be
applicable to our competitors. As a result, we may be limited in
our ability to compete with other satellite operators by
reducing or increasing our prices in selected geographic or
service areas.

Failure to compete effectively within the
satellite industry or failure to implement our business strategy
while maintaining our existing business would result in a loss
of revenue and a decline in profitability, a decrease in the
value of our business and a downgrade of our credit ratings,
which would restrict our access to the capital markets.

We may not be able to implement our plan
for continuing to expand and enhance our service offerings to
provide integrated global connectivity services.

We plan to continue to expand and enhance our
network infrastructure and service offerings to provide
integrated global connectivity services to our customers.
However, we may not be able to implement this strategy
successfully, which may prevent us from achieving our overall
strategic goals. We may have difficulties in obtaining the
regulatory approvals or, if we have other unanticipated capital
expenditures and require additional capital, the financing
needed to deploy new infrastructure to enhance our network.
Because our predecessor, the IGO, did not previously have the
opportunity to develop terrestrial facilities, we may face
difficulties that some of our competitors do not face in
managing a complex hybrid infrastructure and providing customers
with managed services and the customer support required in
connection with those services. We may not be successful in
implementing other facets of this business strategy, including
developing our business by expanding our customer base and
successfully introducing new services in our GlobalConnexSM
Solutions portfolio of services. Failure to implement any of our
business strategies may limit or undermine our ability to
achieve our overall business plan. Any such failure could have a
material adverse effect on our growth potential and increase our
exposure to competition from large satellite operators and other
telecommunications services providers.

The market for fixed satellite services may
not grow or may shrink and therefore we may not be able to
attract new customers or retain our existing
customers.

The fixed satellite services sector is currently
expected to experience a flat growth rate in 2003 and to grow
modestly over the next few years. However, the market for fixed
satellite services may not grow or may shrink. The development
of competitive technologies, such as fiber optic cable, is
adversely affecting the point-to-point segment of the fixed
satellite services sector, which has historically represented
the largest component of our revenue. In the point-to-multipoint
segment, the global economic downturn, with its impact on the
broadcasting industry, and the transition of video traffic from
analog to digital are contributing to reduced

6



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demand for fixed satellite services. New
technologies could also adversely affect other segments of the
market, including the market for integrated services that
combine or are supported by satellite and terrestrial
communications components. In addition, developments that we
expect to support the growth of the satellite services industry,
such as growth in the demand for broadband access services and
the continued growth in data traffic, may fail to materialize or
may not occur in the manner we anticipate.


Because the market for satellite services may not
grow or may shrink, we may not be able to attract customers for
the integrated global connectivity services we are providing and
the new services we intend to provide as part of our strategy to
expand our business. In addition, reduced growth in the
satellite services market may adversely affect our ability to
retain our existing customers. A shrinking market could reduce
the number and value of our customer contracts and would have a
material adverse effect on our revenue and profitability, as
well as on the value of our business. In addition, there would
be a substantial negative impact on our credit ratings and our
ability to access the capital markets.

We have several large customers, and the
loss of any one of them could reduce our revenue and materially
adversely affect our business. In addition, our customers are
primarily telecommunications companies. Our revenue backlog and
profitability may be negatively affected as a result of
financial difficulties experienced by our customers in the
telecommunications sector.

In 2002, our ten largest customers and their
affiliates represented approximately 45.8% of our
telecommunications revenue. The loss of any of these customers
could significantly affect our revenue and profitability. Based
on information available to us, our ten largest customers and
their affiliates, and their approximate contributions to our
2002 telecommunications revenue, were as follows:

|                                                                                                                                                                    |  |                   |                |                    |  |  |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------------- | ------------------ |  |  | ----- | 
|                                                                                                                                                                    |  |                   |                | % of 2002         
|                                                                                                                                                                    |  |                   |                | Telecommunications
|Customer                                                                                                                                                            |  | Customer Location |                | Revenue           
|                                                                                                                                                                    |  |                   |                |                   
|COMSAT Corporation and its affiliates                                                                                                                               |  |                   | United States  |                    |  |  | 15.3% | 
|Videsh Sanchar Nigam Limited                                                                                                                                        |  |                   | India          |                    |  |  | 4.7%  | 
|Telenor Satellite Broadcasting AS and its
    affiliates                                                                                                            |  |                   | Norway         |                    |  |  | 4.5%  | 
|British Telecommunications plc and its affiliate                                                                                                                    |  |                   | United Kingdom |                    |  |  | 4.2%  | 
|Teleglobe Inc. and its affiliate                                                                                                                                    |  |                   | Canada         |                    |  |  | 3.5%  | 
|Telkom SA Limited                                                                                                                                                   |  |                   | South Africa   |                    |  |  | 3.2%  | 
|France Telecom and its affiliates                                                                                                                                   |  |                   | France         |                    |  |  | 2.8%  | 
|Cable and Wireless plc and its affiliates                                                                                                                           |  |                   | United Kingdom |                    |  |  | 2.7%  | 
|Telefonica del Peru S.A.A., Compania Anonima
    Nacional de Telefonos de Venezuela, C.A., Telefonica de Espana,
    S.A.U and other affiliates of Telefonica, S.A. |  |                   | Spain          |                    |  |  | 2.6%  | 
|Reach Networks Australia Pty Limited and its
    affiliate                                                                                                          |  |                   | Australia      |                    |  |  | 2.2%  | 

Our largest customer in 2002 was COMSAT
Corporation, referred to as COMSAT, which, together with its
affiliates, represented 15.3% of our 2002 telecommunications
revenue. We have historically had a long-standing and
significant customer relationship with COMSAT. On
November 25, 2002, we acquired substantially all of the
contracts for the sale of our capacity of COMSATs World
Systems business unit. In connection with this acquisition, we
canceled our service contracts with COMSAT World Systems, and
COMSAT World Systems assigned to us its contracts for the sale
of our capacity. Had this acquisition

7



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occurred as of January 1, 2002, our ten
largest customers and their affiliates, and their approximate
contributions to our telecommunications revenue, would have been
as follows:


|                                                                                                                                           |  |                   |                |                    |  |  |      | 
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | -------------- | ------------------ |  |  | ---- | 
|                                                                                                                                           |  |                   |                | % of 2002         
|                                                                                                                                           |  |                   |                | Telecommunications
|Customer                                                                                                                                   |  | Customer Location |                | Revenue           
|                                                                                                                                           |  |                   |                |                   
|WorldCom, Inc. and its affiliates                                                                                                          |  |                   | United States  |                    |  |  | 5.9% | 
|Comsat General Corporation, the Government
    Systems business unit of Lockheed Martin Global
    Telecommunications and their affiliates |  |                   | United States  |                    |  |  | 5.6% | 
|Videsh Sanchar Nigam Limited                                                                                                               |  |                   | India          |                    |  |  | 4.7% | 
|Telenor Satellite Broadcasting AS and its
    affiliates                                                                                   |  |                   | Norway         |                    |  |  | 4.6% | 
|British Telecommunications plc and its affiliate                                                                                           |  |                   | United Kingdom |                    |  |  | 4.6% | 
|AT&T Corp. and its affiliates                                                                                                              |  |                   | United States  |                    |  |  | 3.8% | 
|Teleglobe Inc. and its affiliate                                                                                                           |  |                   | Canada         |                    |  |  | 3.5% | 
|Verestar, Inc. and its affiliate                                                                                                           |  |                   | United States  |                    |  |  | 3.5% | 
|Telkom SA Limited                                                                                                                          |  |                   | South Africa   |                    |  |  | 3.3% | 
|Cable and Wireless plc and its affiliates                                                                                                  |  |                   | United Kingdom |                    |  |  | 3.0% | 

The service contracts assigned to us in
connection with the COMSAT transaction include contracts with
WorldCom, Inc., which is now our largest customer, and with
AT&T Corp., Verestar, Inc. and Sprint Corporation. We may
not be able to maintain the same volume of business with these
new customers as we have historically enjoyed with COMSAT. If we
are not able to maintain the same volume of business or the same
pricing levels with these new customers, it could have a
significant negative impact on our revenue and profitability.

Most of our customers are telecommunications
companies, and the telecommunications sector has been
experiencing a downturn. To the extent the credit quality of our
customers who are telecommunications carriers deteriorates or
these customers seek bankruptcy protection, we may not be able
to collect our receivables from these customers, which may
adversely affect our operating results. In addition, our
expected future revenue from customers who are experiencing
financial difficulties may be at risk.

For example, WorldCom, Inc. and Teleglobe Inc.
are customers of ours that have been experiencing financial
difficulties, as has our Brazilian customer described below. On
July 21, 2002, WorldCom, Inc. filed a voluntary petition
for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Our telecommunications revenue generated from WorldCom,
Inc. and its affiliates as direct customers was
$7.3 million, or 0.7%, for the year ended December 31,
2001 and $10.7 million, or 1.1%, for the year ended
December 31, 2002. Prior to the closing of the COMSAT
transaction, WorldCom, Inc. purchased our capacity primarily
from COMSAT. We understand from Lockheed Martin Corporation,
COMSATs parent company, that WorldCom, Inc. accounted for
approximately $60 million of COMSATs revenue from the sale
of our capacity in 2001 and for approximately $47.8 million
of COMSATs revenue from the sale of our capacity for the
period from January 1, 2002 to the date of closing of the
COMSAT transaction described above. On a pro forma basis,
WorldCom, Inc. and its affiliates would have accounted for
approximately 6% of our revenue in each of the years ended
December 31, 2001 and 2002 had the COMSAT transaction
occurred as of January 1, 2001. As of December 31,
2002, WorldCom, Inc. and its affiliates accounted for
$101.2 million, or 2.5%, of our backlog. In addition, at
December 31, 2002, we had receivables of $10.1 million
due from WorldCom, Inc. and its affiliates, of which
$9.8 million was reserved for in our allowance for doubtful
accounts. Of the $10.1 million in receivables from
WorldCom, Inc. and its affiliates, $8.6 million relates to
pre-petition receivables. The loss of WorldCom, Inc. as a
customer would reduce our revenue and backlog and could
materially adversely affect our business.

One of our Brazilian customers has been
experiencing financial difficulties. As a result of these
difficulties, we decided at the end of 2002 to exclude from our
backlog the amounts associated with this customer. The reduction
in our December 31, 2002 backlog associated with this
customer was $206.2 million.

8



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This reduction has had a negative impact on our
expected future revenue and profitability. If we were to exclude
from backlog amounts associated with other customers that are
experiencing financial difficulties, our revenue and
profitability would be further negatively impacted.


On May 15, 2002, Teleglobe Inc. filed for
creditor protection under the Companies Creditors
Arrangement Act in the Ontario Superior Court of Justice.
Telecommunications revenue generated from Teleglobe Inc. and its
affiliates was approximately $41.7 million in 2000,
$47.8 million in 2001 and $35.1 million in 2002. Our
revenue and profitability would be negatively impacted if
Teleglobe Inc.s financial difficulties result in the loss
of Teleglobe Inc. as a customer.

On August 21, 2002, our subsidiary Intelsat
Global Sales & Marketing Ltd., referred to in this annual
report as Intelsat Global Sales, entered into a share purchase
agreement with Teleglobe Inc. The closing of the share purchase
transaction occurred on September 20, 2002. In connection
with the share purchase transaction, Intelsat Global Sales
agreed to terminate some of Teleglobe Inc.s and its
affiliates service orders with us. These terminated
service orders represented approximately $47.4 million, or
1%, of our backlog as of the closing date of the share purchase
transaction. As of December 31, 2002, Teleglobe Inc.
accounted for approximately $131.7 million, or 3%, of our
backlog. The reduction in our backlog due to the termination of
service orders pursuant to the share purchase transaction had a
negative impact on our profitability in 2002. If Teleglobe
Inc.s financial difficulties result in a further reduction
in our backlog, our revenue and profitability would be further
negatively impacted.

We may not be able to enter into strategic
transactions or integrate new businesses successfully into our
business, which may prevent us from implementing our current
strategies to grow our business. In addition, our strategy to
position ourselves for leadership in potential growth businesses
related to the fixed satellite services sector may not succeed
if we are unable to identify suitable investments or if the
businesses in which we invest fail to perform as
expected.

Our ability to complete strategic transactions is
central to the successful implementation of our business
strategies, including our strategies to provide enhanced
landmass coverage of strategic geographic regions and to broaden
our customer base. Our strategies also include positioning
ourselves for leadership in businesses related to the fixed
satellite services sector that we believe represent longer-term
opportunities for growth as next-generation services are
developed and as the market for satellite services evolves.
Acquisitions, joint ventures, partnerships or similar
transactions may enable us to meet our strategic goals more
quickly than otherwise would be possible based on our own
internal growth. We could be prevented from or significantly
delayed in achieving our strategic goals if we are unable to
enter into strategic transactions or to integrate new businesses
successfully into our business or if investments we make in
businesses related to the fixed satellite services sector do not
perform as expected.

Our ability to engage in strategic transactions
depends in the first instance on our ability to identify
suitable transactions and partners. For example, we may not be
able to identify successfully the businesses related to the
fixed satellite services sector that are likely to succeed in
providing next-generation services, such as broadband services,
once the market for these services develops or the businesses
that will be successful within growing markets, such as the
market for direct-to-home transmission of television
programming. In addition, we may not be able to complete any
strategic transaction that we identify. Successful completion of
any transaction depends on a number of factors that are not
entirely within our control, including our ability to negotiate
acceptable terms, conclude satisfactory agreements and obtain
all necessary regulatory approvals. Finally, we must be able to
obtain the necessary financing for any strategic transaction,
which we may be unable to do on the terms and within the
timeframe that would permit a transaction to proceed. If any of
these factors prevents us from completing strategic transactions
to promote our business strategy, we may not be able to expand
our business in the manner and on the schedule that we have
planned.

We may incur significant costs arising from our
efforts to engage in strategic transactions. These costs may
exceed the revenue that we realize from a given transaction.
Moreover, these expenditures may not result in the successful
completion of a transaction. Our management may be diverted from
operating our business

9



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while completing, or trying to complete, a
strategic transaction or while assimilating a new business,
which may cause our existing business to suffer. In addition,
depending on how any such transaction is structured, there may
be an impact on our capital structure.


Even if we do complete one or more strategic
transactions, any such transaction may not provide the benefits
we had anticipated. For example, we might lose key personnel
from an acquired business or be unable to integrate successfully
the personnel and operations of a new business. Moreover, we
might fail to discover liabilities of a business or operating or
other problems prior to completing a transaction. We could
experience adverse accounting and financial consequences, such
as the need to make large provisions against the acquired assets
or to write down acquired assets. We might also experience a
dilutive effect on our earnings. With respect to our strategy to
invest in potential growth businesses related to the fixed
satellite services sector, any businesses in which we invest may
not perform as expected. For example, we have entered into an
agreement to invest in Wildblue Communications, Inc., which
plans to offer broadband Internet access services in the
continental United States via Ka-band satellite, and have made
an indirect investment in Galaxy Satellite Broadcasting Limited,
which plans to provide a pay television service in Hong Kong.
The opportunities for longer-term growth that we expect in these
businesses may fail to materialize. In addition, the market
demand for the services to be offered by these companies may be
insufficient or the services offered by these companies
competitors may be superior in terms of quality or price. These
companies may experience delays in implementing their business
strategies or may be unable to access sufficient capital to meet
their operating and financing needs.

We may not be able to complete strategic
transactions successfully in accordance with our business
strategy, and any strategic transactions that we do complete may
not promote our business strategy, may negatively affect the
value of our business or may adversely affect our prospects for
long-term growth.

We may not be able to raise adequate
capital to finance part or all of our currently planned business
strategy or to respond to changes in technology, products or
services or to the competitive environment.

Implementation of our business strategy,
including our plans to expand our business by introducing new
services and to enter into strategic transactions, will require
a substantial outlay of capital. We expect our capital
expenditures to total approximately $350 million in 2003.
Although we currently expect that substantially all of our
capital requirements in 2003 will be funded by operating cash
flows, we may need to raise capital from external sources,
including from the capital markets, to finance currently
unplanned strategic transactions. Absent any such transaction,
we currently estimate that we will not need external funding to
execute our business plan other than for working capital.

The availability of external financing depends on
a number of factors, including general economic and market
conditions, investor perception of our industry and the
individual appeal of our business to investors. We expect that
there will be significant competition for opportunities and
capital resources in the global satellite communications market.
Many of our competitors are committing substantial capital and,
in some instances, forming alliances to strengthen their market
positions. We do not know how successfully we will be able to
compete with other businesses in our industry for available
external financing. The actual amount of funds necessary to
implement our business strategy may exceed our current
estimates, and we may be unable to raise the full amount of
capital that we need. We may also need to raise funding in
connection with the completion of any strategic transaction.
Depending on how much financing we obtain in the form of
borrowings, we could experience ratings downgrades that could
increase the cost of such financings or make such capital
unavailable to us.

If we are unable to obtain funding from external
sources, we may not have sufficient capital to finance fully our
current business strategies and may have to forego some elements
of these strategies. For example, we may be prevented from
completing a strategic acquisition that is important to our
business plan.

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We may not be able to meet our planned
schedule for launching or commencing operations of our new
satellite. Extensive delays in the launch or commencement of
operations of new satellites could affect our ability to
generate revenue.

We may not be able to launch new satellites as
planned. Satellite launches may be delayed for several reasons,
including delays in the manufacture of satellites or launch
vehicles or the periodic unavailability of optimum launch dates.
We may also experience delays or be unable to deploy new
satellites as a result of our inability to obtain necessary
regulatory approvals or our inability to obtain required
financing.

Significant delays in the manufacture of a
satellite could result in the unavailability of a launch date at
the time the satellite is delivered and ready to be launched. In
late 2002, we terminated the portions of a construction contract
relating to one of the satellites that we had ordered due to the
manufacturers significant postponement in the delivery
date of the satellite. In addition, we are experiencing delays
in the manufacture of the one satellite we currently have on
order. Any prolonged inability to launch new satellites may
adversely affect our ability to maintain continuity of service
to our customers, resulting in reduced revenue and a reduction
in our backlog.

We may experience a launch failure or other
satellite damage or destruction during launch, which could
result in a total or partial satellite loss. A new satellite
could also fail to achieve its designated orbital location after
launch. The loss of a satellite due to launch failure could
result in significant delays, which could negatively impact our
business plans and could reduce our revenue.

We may experience launch failures with respect to
future satellites that could result in the partial or total loss
of a satellite. Satellite construction and launch involve
complex processes and technology, and we rely on contractors for
both the manufacture and the launch of our satellites. Even if
launched into orbit, a satellite may fail to enter into its
designated orbital location or we may use more fuel than planned
to place a satellite into its orbital location and, as a result,
reduce the orbital maneuver life of the satellite.

Since 1975, we and our predecessor, the IGO, have
launched 50 satellites. Four of these 50 satellites were
destroyed as a result of launch failures. In addition, one of
these 50 satellites did not achieve the correct orbit upon its
launch but was later rescued and placed into the correct orbit.
We also experienced several launch failures during the 1960s and
early 1970s. We currently plan to launch one additional
satellite by late 2003 or early 2004. This satellite is the
10-02 satellite, which is in our Intelsat X series. Launch
failure rates vary according to the launch vehicle used. We
intend to use a Proton M/ Breeze M launch vehicle for the launch
of our Intelsat X series satellite. The Proton M/ Breeze M
launch vehicle has been used to launch only two satellites, and
may present a higher risk of launch failure than other launch
vehicles.

The loss of a satellite due to launch failure
could result in significant delays. The construction of a
satellite typically takes more than three years. Even after the
satellite has been manufactured, an appropriate launch date may
not be available at that time. Any significant delay in the
commencement of service of a satellite due to a launch failure
would delay and could potentially permanently reduce the revenue
anticipated to be generated by the satellite and could give our
customers who have purchased or reserved capacity on that
satellite a right to terminate their service contracts relating
to the satellite. We may not be able to accommodate affected
customers on other satellites until a replacement satellite is
available. A customers termination of its service
contracts with us as a result of a launch failure would reduce
our contracted backlog. Delay caused by launch failures may also
preclude us from pursuing new business opportunities and
undermine our ability to implement our strategic business plans.

We may experience in-orbit satellite
failures or degradations in performance that could impair the
commercial performance of our satellites, which could lead to
lost revenue.

Satellites are subject to in-orbit failures after
they have been successfully put into operation. Potential
in-orbit failures that could affect our satellites include
circuit and transponder failures and solar array and battery
cell failures. Other potential failures include satellite
control system failures and propulsion system failures. Failures
can result from manufacturing errors or operational errors and
can degrade performance, reduce available capacity or decrease
the orbital maneuver lives of the affected satellites. Military
action or acts of

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war, anti-satellite devices, electrostatic or
solar storms and collision with space debris or micro-meteoroids
could also damage our satellites. We may experience future
failures or performance degradation on any of our satellites as
a result of any of these or other events.


We have experienced some technical problems with
our current satellite fleet. The most significant in-orbit
losses that have impacted our current fleet are the failures of
several battery cells on our 706 and 709 satellites. These
failures reduce the energy available for operating the 706 and
709 satellites during eclipse periods when the sun is not
visible to the satellites. A satellite relies on its battery
power during solar eclipse periods, which occur twice per year
and can last up to 72 minutes per day over a period of
45 days. Due to the battery cell failures, the ability of
the 706 and 709 satellites to carry full traffic loads during
solar eclipse periods has been negatively impacted. Another
significant in-orbit loss impacting our current fleet is the
result of the damage to the north solar array structure of our
801 satellite that occurred in March 1997. This damage has
reduced the orbital maneuver life of the satellite, which
resulted in a reduction in the depreciable life of the
satellite. In addition, the satellite is at risk of further
structural damage to its north solar array. Due to the solar
array damage that occurred in March 1997, some of the 801
satellites thrusters are being used beyond their design
parameters to control the satellite. One of these thrusters has
already experienced degraded performance. Should the
satellites redundant thruster also experience degraded
performance, we may no longer be able to control the 801
satellite adequately for commercial services. We also have
experienced technical problems with other satellites in our
fleet. Most of these problems have been component failures and
anomalies. Because our satellites are designed to accommodate an
anticipated rate of equipment failure, the technical problems
experienced with the other satellites in our fleet have not had
a significant impact on the availability of our satellite
capacity to date. However, this may not continue to be the case.
Our satellites may experience technical problems in the future
related either to the failures or anomalies that have already
occurred or to other failures. In addition, our 10-02 satellite,
which will be the first in its series to be launched, may face a
slightly greater risk of in-orbit failures than a satellite that
is not the first in its series to be launched, as the 10-02
satellite includes systems and components that have not been
used previously in orbit. We have attempted to minimize this
risk through the use of testing and qualification requirements
that we believe exceed the recommendations of most manufacturers
and through thorough on-site monitoring of the construction and
testing of the 10-02 satellite. However, we cannot be certain
that the measures we have taken to mitigate this risk will be
successful. Significant in-orbit failures could put at risk the
revenue from the satellites suffering these failures to the
extent that we are unable to move traffic on the affected
satellites to other satellites.

Our insurance for the in-orbit operations
of our satellites and for future satellite launches will not
protect us against all satellite-related losses. In addition, we
do not have in-orbit insurance coverage for all of our
satellites, and we may not renew our current in-orbit insurance
coverage. A partial or total loss of a satellite could have a
material adverse effect on our business.

Our current satellite insurance does not protect
us against all satellite-related losses that we may experience,
and we do not have in-orbit insurance coverage for all of the
satellites in our fleet.

We currently have insurance covering the in-orbit
operations of 11 of our 24 satellites. Accordingly, we would
have to bear the entire cost of any loss to the 13 satellites
for which we do not have in-orbit insurance coverage. The net
book value of these 13 satellites as of December 31, 2002
was $586.6 million. In addition, under the terms of our
insurance policy for 7 of the 11 satellites that we currently
insure, we co-insure $100.0 million of the net book value
of each satellite, and the insurers cover the balance of the net
book value, excluding capitalized performance incentives
relating to the satellites. Accordingly, if any significant loss
occurred to one of these seven satellites, we would bear up to
$100.0 million of the cost, as well as the cost of any
capitalized performance incentives. Our current insurance for
the remaining 4 of the 11 satellites that we insure does not
contain a co-insurance requirement but also does not include
capitalized performance incentives for the period of in-orbit
operations.

Our in-orbit insurance policy with the
$100.0 million co-insurance requirement for seven of our
satellites, the Intelsat 706, 707, 802, 805, 901, 902 and 904
satellites, continues until November 8, 2003. Our current
insurance coverage for the 903, 905, 906 and 907 satellites,
which has no co-insurance requirement, expires

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one year after each satellites launch date.
Upon the expiration on March 29, 2003 of the current
insurance coverage for the 903 satellite, this satellite will be
covered by the policy with the $100.0 million co-insurance
requirement described above until that policys expiration
on November 8, 2003. Upon the expiration of the current
insurance coverage for each of the 905 and 906 satellites, each
will then be covered by the policy with the $100.0 million
co-insurance requirement until that policys expiration.
The 907 satellite will be insured for its first year of in-orbit
operations, with no co-insurance requirement, through
February 14, 2004. We may determine not to obtain
replacement insurance when the in-orbit insurance coverage for
any of our satellites expires. We also may not seek to obtain
in-orbit insurance for any of our future satellites. Any
determination we make as to whether to purchase additional
insurance will depend on a number of factors. These factors
include the availability of insurance in the market and the cost
of available insurance. We will also consider the exclusions to
coverage, if any, required by insurers and the other terms and
conditions upon which insurance is available. Our ability to
provide back-up capacity from available satellites and our
historical experience with launch and in-orbit malfunctions will
also be considered.


Even if we seek to extend the in-orbit insurance
coverage for our currently insured satellites, or seek to obtain
new in-orbit insurance coverage for future satellites, we may
not be able to obtain this insurance on reasonable terms and
conditions. Moreover, this insurance coverage may be costly, if
available at all. Costs for in-orbit insurance have increased
due to events affecting the insurance industry, including the
September 11, 2001 terrorist attacks in the United States,
launch vehicle failures and in-orbit failures of satellites
owned by some of our competitors. The condition of the insurance
market may not return to its position before these events, and
may even deteriorate further. The cost for us to obtain in-orbit
insurance could further increase in the future for a number of
other reasons. For example, costs could increase as a result of
the failure or degradation of performance of one of our in-orbit
satellites or the failure of a similar satellite owned by
another operator.

At this time, we intend to obtain insurance for
the launch of our 10-02 satellite, but we may not be able to
obtain this insurance on reasonable terms and conditions, if at
all. Costs for satellite launch insurance have increased due to
the events affecting the insurance industry mentioned above. The
cost for us to obtain launch insurance could further increase in
the future for a number of reasons. For example, costs could
increase as a result of a launch failure involving a launch
vehicle that is the same as, or similar to, a launch vehicle
that we intend to use.

Even where we have obtained launch and in-orbit
insurance for a satellite, this insurance coverage will not
protect against all losses to the satellite. Our current
insurance policies contain specified exclusions and material
change limitations. These exclusions relate to losses resulting
from acts of war, insurrection or military action, as well as
lasers, directed energy beams, or nuclear or anti-satellite
devices. These exclusions also relate to losses resulting from
government confiscation and nuclear reaction or radioactive
contamination. Our in-orbit insurance policy with the
$100.0 million co-insurance requirement contains exclusions
for losses relating to acts of terrorism and to specified
problems we have experienced on three satellites covered by the
policy. In addition, our insurance does not protect us against
lost or delayed revenue, business interruption or lost business
opportunities. The total or partial loss of an uninsured
satellite would cause us to recognize a loss equal to the book
value of any such total loss or, in the case of a partial loss,
equal to the proportion of the satellites book value
corresponding to such partial loss.

We also maintain third-party liability insurance.
This insurance may not be adequate or available to cover all
third-party liability damages that may be caused by any of our
satellites, and we may not in the future be able to renew our
third-party liability coverage on reasonable terms and
conditions, if at all.

We may not be able to attract and retain
qualified personnel, which may negatively impact our ability to
operate and maintain our satellite fleet, to sustain our
business and to implement our business strategy.

We rely on management, professional and other
personnel with significant experience in the global
telecommunications market and the fixed satellite services
sector to maintain our satellite fleet and manage our business.
The success of our business depends in part on the skills,
experience and efforts of these

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individuals. If we are not able to attract and
retain qualified personnel, our ability to operate and maintain
our satellite fleet, to sustain our business or to implement our
business strategy could be negatively impacted.


The construction, launch and in-orbit operations
of a satellite involve complex processes and technology. We and
other satellite operators compete for the services of those
individuals with the skills needed to operate and manage a
satellite fleet. If we are not able to attract and retain
qualified technical personnel, the quality of our services and
reliability of our satellite fleet may be negatively impacted.
We believe that our history of high-quality, reliable service is
a leading contributing factor to our ability to attract and
retain our customers. Any sustained degradation in the quality
or reliability of our services could result in the loss of
customers, which would negatively impact our revenue and
profitability. We also rely on experienced management, sales and
other personnel to manage our technical staff, global customer
base and business operations, as well as to implement our
business strategy. The success of our business depends in part
on our ability to attract and retain such personnel with an
understanding of the technical aspects of our business and
experience in the global telecommunications market. If we are
not able to attract and retain such personnel, we may face
difficulties in sustaining our business and implementing our
business strategy, which could negatively impact our revenue and
profitability.

We may become subject to unanticipated tax
liabilities that may have a material adverse effect on our
results of operations.

We are a Bermuda-based company and believe that a
significant portion of the income derived from our
communications network will not be subject to tax in Bermuda,
which currently has no corporate income tax, or in other
countries in which we conduct activities or in which our
customers are located, including the United States. However,
this belief is based on the anticipated nature and conduct of
our business, which may change. It is also based on our
understanding of our position under the tax laws of the
countries in which we have assets or conduct activities. This
position is subject to review and possible challenge by taxing
authorities and to possible changes in law that may have
retroactive effect. For example, we and our non-U.S.
subsidiaries intend to conduct our operations so that we and our
non-U.S. subsidiaries are not engaged in a trade or business
within the United States and therefore do not earn income
effectively connected with such a business that would be subject
to U.S. federal income tax. However, the U.S. Internal Revenue
Service may not agree that we and our non-U.S. subsidiaries have
not engaged in a trade or business within the United States. The
extent to which certain taxing jurisdictions may require us to
pay tax or to make payments in lieu of tax cannot be determined
in advance. In addition, our operations and payments due to us
may be affected by changes in taxation, including retroactive
tax claims or assessments of withholding on amounts payable to
us or other taxes assessed at the source, in excess of the
taxation we anticipate based on business contacts and practices
and the current tax regimes. If we become subject to a
significant amount of unanticipated tax liabilities, it could
have a material adverse effect on our results of operations.

We are dependent on distributions from our
subsidiaries to make payments on Intelsat, Ltd.s
outstanding debt. All of Intelsat, Ltd.s outstanding debt
will be effectively subordinated to all existing and future
liabilities and other obligations of Intelsat, Ltd.s
subsidiaries and will be effectively subordinated to any and all
of Intelsat, Ltd.s future indebtedness that is
secured.

Intelsat, Ltd. is a holding company and therefore
depends on dividends, distributions and other payments from its
subsidiaries to fund all payments on its debt obligations,
including its obligations to make payments on its $600.0 million
7 5/8% Senior Notes due 2012, its $200.0 million
Dragon bond 6 5/8% Notes due 2004, its $200.0 million
Eurobond 8 3/8% Notes due 2004 and its $200.0 million
Eurobond 8 1/8% Notes due 2005. Intelsat, Ltd.s
subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any amounts due
on the indebtedness of Intelsat, Ltd. or to make any funds
available to Intelsat, Ltd. to do so. Intelsat, Ltd.s
subsidiaries may in the future become parties to credit
agreements that contain various financial and operating
covenants that restrict the payment of dividends or other
distributions. Moreover, Intelsat, Ltd.s right to
participate in a distribution of assets of any of its
subsidiaries, whether in liquidation, reorganization or
otherwise, will be subject to the prior claims of the creditors
of that subsidiary. The ability of holders of Intelsat,
Ltd.s outstanding debt to benefit from distributions of
assets from Intelsat,

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Ltd.s subsidiaries will also be subject to
those prior claims. Thus, if any subsidiary of Intelsat, Ltd.
becomes bankrupt or insolvent, its assets would be used to
satisfy its own liabilities and obligations before Intelsat,
Ltd. could use those assets to make payment on its liabilities
and obligations, including the outstanding public indebtedness
of Intelsat, Ltd. noted above. Consequently, Intelsat,
Ltd.s outstanding indebtedness will be effectively
subordinated to all existing and future liabilities and
obligations of Intelsat, Ltd.s subsidiaries. To the extent
that Intelsat, Ltd. is a creditor of a subsidiary, its claims
would be effectively subordinated to any security interest in
the assets of that subsidiary and any indebtedness of that
subsidiary senior to that held by Intelsat, Ltd. Intelsat,
Ltd.s outstanding indebtedness will also be subordinated
to any of its future indebtedness that is secured by its assets
or property to the extent of these assets or property.


Our business, including the operation of
our satellites, may be vulnerable to acts of
terrorism.

Our network may be vulnerable to acts of
terrorism. If the facilities we use for operating our satellite
fleet and managing the communications services that we provide
to our customers become disabled, it would be necessary for us
to move personnel to our back-up facility, which is unmanned, in
order to control our satellites and continue providing service
to our customers. We may not be able to avoid interruption of
service if the facilities we use to operate our system are
disabled by a terrorist attack. In addition, acts of terrorism
could occur that might temporarily or permanently disable our
system from operating altogether. Any acts of terrorism that
substantially or totally disable our system would cause a loss
of revenue, reducing our profitability, and would result in the
recognition of a loss for any uninsured assets that are
substantially or totally disabled.

We are subject to risks due to the unique
international nature of our operations.

We provide communications services in over 200
countries and territories, and we believe that this
distinguishes us from our competitors. Accordingly, we may be
subject to greater risks than our competitors as a result of the
international nature of our business operations. We could be
harmed financially and operationally by tariffs, taxes and other
trade barriers that may be imposed on our services, or by
political and economic instability in the countries in which we
provide service. If we ever need to pursue legal remedies
against our customers or our business partners located outside
of Bermuda, the United States or the United Kingdom, it may be
difficult for us to enforce our rights against them.

Most of our customers are required to pay for our
services in U.S. dollars. Fluctuations in the value of non-U.S.
currencies may make payment in U.S. dollars more expensive for
our non-U.S. customers. In addition, our non-U.S. customers may
have difficulty obtaining or exporting U.S. currency due to
currency exchange controls. For example, because of the current
uncertainty in the Argentine economy, the Argentine government
has from time to time imposed restrictions on the remittance of
payments abroad. Any such restrictions could put some of our
backlog represented by contracts with Argentine customers at
risk.

Risk Factors
Relating to Our Privatization

The amendments to the INTELSAT Agreement
necessary to enable the IGO to privatize have not been formally
ratified and are being provisionally applied pending
ratification.

The INTELSAT Agreement, the international treaty
that formally created the IGO, was required to be amended in
order for the IGO to privatize. Formal ratification of the
amendments to the INTELSAT Agreement has not yet occurred. Until
these amendments are formally ratified, there is a risk that the
legal validity of our privatization could be challenged.

Formal entry into force of the amendments to the
INTELSAT Agreement requires approval by the IGOs Assembly
of Parties, a governing body of the IGO, which has been
obtained. It also requires formal ratification by the IGOs
member states, referred to as the Parties. Formal ratification
of the amendments by a Party is carried out in accordance with
the domestic laws of that Party. In many cases, this process
requires legislative or comparable action by the applicable
governmental body and may be lengthy. Because the ratification
process was expected to be lengthy and the Assembly of Parties
wanted to proceed with the IGOs privatization, the
Assembly of Parties decided to provisionally apply, or rapidly
implement, the amendments to

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the INTELSAT Agreement with effect from
July 18, 2001, pending formal entry into force of these
amendments. Provisional application is an accepted principle of
international law permitting rapid implementation of a treaty or
other intergovernmental agreement pending its formal
ratification.


Until the amendments to the INTELSAT Agreement
are formally ratified, there is a risk that a Party or another
person or entity might attempt to challenge the provisional
application of the amendments. Based on legal opinions that we
received in connection with our privatization and based on prior
use of the principle of provisional application in international
law, we believe that provisional application is a legally valid
and sustainable method of implementing our privatization pending
formal ratification of the amendments. Nevertheless, if a
challenge were to occur, a tribunal could determine that the
principle of provisional application was not a legally valid
method of implementing our privatization. If it was determined
by a tribunal that provisional application was not legally
valid, we believe that the tribunal would uphold the
privatization on other legal grounds, including that the
Assembly of Parties, acting within its authority, validly
authorized the transfer of the IGOs assets to us. However,
we cannot be certain that a tribunal would either uphold
provisional application or uphold our privatization on other
legal grounds.

If a tribunal did not uphold the provisional
application of the amendments to the INTELSAT Agreement, we
believe, based on legal opinions that we have received as well
as the provisions of the INTELSAT Agreement, that the only
remedy available in the event of such a challenge would be for a
challenging Party to withdraw from the IGO, which is referred to
post-privatization as ITSO. In this event, we believe that the
withdrawing Party might be entitled to some portion of the
assets of ITSO at the time of withdrawal but would not be
entitled to any portion of our assets. However, we cannot be
certain that a successful challenge to provisional application
would not have a material adverse effect on our business overall.

We believe that our business may have
realized certain advantages as a result of being operated by the
IGO. Our business no longer enjoys these advantages following
the privatization. In addition, we have a limited operating
history as a private company and may not develop the
capabilities needed to operate effectively as a private
company.

Prior to July 18, 2001, our business was
operated by the IGO. We believe that our business may have
realized advantages as a result of being operated by the IGO.
The loss of these advantages upon our privatization may
adversely affect our business.

The IGOs owners held investment share in
the IGO and were also the IGOs principal customers. Our
shareholders, who were the IGOs owners before
privatization, accounted for approximately 88% of our
telecommunications revenue in 2000 and 89% in 2001. Because the
IGOs owners received investment share in the IGO based on
their percentage use of the IGOs satellite system, many of
our customers had an incentive to use the IGOs system. As
a result, being operated as an IGO may have provided a
competitive advantage to our business. Because our
customers ownership of our ordinary shares is no longer
connected to their use of our system, our customers may increase
their use of the systems of other telecommunications services
providers. In 2002, our shareholders accounted for approximately
78% of our telecommunications revenue. We believe that the
decline in the percentage of our telecommunications revenue
attributable to our shareholders is based on a number of
factors. These factors include the fact that some entities have
sold their shares in us and are no longer our shareholders even
though they are still our customers, the transfers by our
shareholder customers of traffic to the systems of our
competitors or to ground-based communications alternatives, and
the decrease in the capacity requirements of our shareholder
customers due to the general downturn in the telecommunications
sector and the optimization of their own networks. We do not
know the extent to which this decline is attributable to our
shareholders usage of the systems of our competitors, and
we do not know the extent to which this trend will negatively
impact our future revenue and profitability.

As a public intergovernmental organization, the
IGO also enjoyed privileges, exemptions and immunities when
operating in many of its member states, including the United
States. The privileges, exemptions and immunities enjoyed by the
IGO included immunity from government regulation and from
competition laws, as well as tax exemptions. In addition, in
many of the IGOs member states, officers and employees of
the

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IGO had immunity from suit and legal process
relating to acts performed by them in their official capacities.
Our business benefited from these privileges, immunities and
exemptions and, following our privatization on July 18,
2001, we are no longer entitled to these benefits.


In addition to the loss of these advantages as a
result of our privatization, we no longer enjoy the financial
backing of holders of investment share in the IGO, which
virtually ensured the IGOs ability to access the capital
markets. The IGO also acted as trustee of its owners
investment share, which served as collateral for
telecommunications services fees owed to us by these owners. We
no longer have the benefit of this collateral.

We have been operating our business as a private
company for a limited period of time. It is uncertain whether we
will be able to develop the capabilities needed to operate
effectively as a private company. Since as the IGO we were
prohibited from engaging in activities that we are now pursuing
or plan to pursue as a private company and since as the IGO we
enjoyed privileges, exemptions and immunities from government
regulation, in order to operate effectively as a private
company, we must develop organizational capabilities that were
not required of us as an intergovernmental organization. If we
are not able to make a successful transition from operating our
business as an intergovernmental organization to operating as a
private company, it may have a material adverse effect on our
business.

Some provisions of the service agreements
we entered into with customers as part of our privatization are
unfavorable to us.

In connection with our privatization, we entered
into various contractual arrangements with our customers that
contain provisions that are unfavorable to us. These contractual
arrangements may limit our flexibility in marketing our services
and introducing new service offerings.

We have agreed to provide most favored customer,
or MFC, protection for the customer service commitments that
were transferred from the IGO to our Intelsat Global Sales
subsidiary pursuant to novation agreements. If we offer another
customer a price on substantially similar satellite services
that is more than 5% lower than the price the customer with MFC
protection is currently paying for those services, then we are
required to offer that lower price on like terms to the customer
with MFC protection. Satellite services are considered to be
substantially similar if they have the same or comparable nine
contract parameters, including service term and bandwidth.
Approximately 49% of the outstanding customer commitments
represented in our December 31, 2002 backlog are entitled
to MFC protection. MFC protection continues for up to five years
after July 18, 2001. Accordingly, the MFC protection
provision restricts our ability to set prices freely over the
five-year period starting July 18, 2001 and may inhibit us
from reducing the prices that we charge to our customers. This
limitation could materially adversely affect our ability to
respond to competition in a particular geographic or service
area.

We have also agreed to provide price protection
for some of our customers, primarily those from low income or
low teledensity countries, pursuant to lifeline connectivity
obligation, or LCO, contracts. These customers have elected to
have LCO protection instead of MFC protection with respect to
particular service commitments. Approximately 23% of the
outstanding customer commitments represented in our
December 31, 2002 backlog are LCO-protected. LCO protection
provides a customer the right to renew a covered service
commitment at a price no higher than the price charged for that
service on the privatization date. In some circumstances, we may
be required by an LCO contract to reduce our prices for a
covered service commitment. LCO protection can continue until
July 18, 2013. Until LCO protection expires, it may
adversely affect our revenue.

We also agreed to enter into non-exclusive
service distribution agreements, referred to as the Distribution
Agreements, with our customers who wanted to be authorized
distributors of services ordered from us after privatization.
The Distribution Agreements place conditions on our ability to
engage in some types of retail activities during the initial
five-year term of the agreements. These retail business
restrictions could hinder or delay our ability to provide new
types of services to our customers, to pursue strategic
transactions or to implement our other business strategies. The
Distribution Agreements also contain a non-discriminatory
treatment provision that requires us to treat all of our
similarly situated distributors in a non-discriminatory fashion
with respect to our services. Accordingly, the Distribution
Agreements restrict our ability to offer

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services to our customers at different prices or
according to different terms and conditions. Because customers
have the option of renewing the initial five-year term of the
Distribution Agreement for another five years, we may be subject
to these restrictions for up to ten years after July 18,
2001.


Because the contractual restrictions described
above limit our flexibility in the operation of our business and
the execution of our business strategy, they could have a
material adverse effect on our ability to compete effectively
and to implement our business strategies, as described above.

Risk Factors
Relating to Regulation

Successful deployment of our satellites
depends upon our ability to obtain final regulatory
authorization to operate our satellites at certain locations. If
we do not obtain all of the final authorizations necessary to
complete our satellite deployment plans on schedule, we will not
be able to implement our business strategy and expand our
operations as we currently plan.

The operation of our existing and currently
planned satellites is regulated by the U.S. Federal
Communications Commission, referred to as the FCC. We have
obtained conditional authorization from the FCC to operate our
existing satellites and to construct, launch and operate our
planned additional satellite. Our ability to successfully deploy
our satellites according to our plans depends on our ability to
obtain final authorization from the FCC in connection with our
existing and planned satellites. Final FCC authorization for our
satellites is conditioned on our compliance with the initial
public offering requirements of the Open-Market Reorganization
for the Betterment of International Telecommunications Act,
known as the ORBIT Act, described in the risk factor below. If
we do not obtain final FCC authorization for our existing
satellites and for the construction, launch and operation of our
future planned satellites, we would not be able to operate our
satellites unless we obtained authorization from another
licensing jurisdiction and therefore may not be able to continue
as a going concern.

The FCC reserves the right to require a satellite
to be relocated to a different orbital location if it determines
that relocation is in the public interest. In addition, if we do
not place a satellite into service in a designated orbital
location by the deadline set by the FCC, our rights to this
orbital location could expire or be revoked by the FCC. The
satellites in our fleet receive and transmit signals using two
portions of the electromagnetic spectrum, called the C-band and
the Ku-band. The C-band refers to a range of frequencies in this
spectrum from approximately 3,625 MHz to 6,425 MHz, and the
Ku-band refers to frequencies from approximately 10,950 MHz to
14,500 MHz. If we lose our rights to any of our current 22 C-
and Ku-band orbital locations, the location would be returned to
the International Telecommunication Union and would become
available for use by another satellite operator. We cannot
operate our satellites without a sufficient number of suitable
orbital locations in which to place the satellites. The loss of
one or more of our C-band or Ku-band orbital locations could
significantly affect our plans and our ability to implement our
business strategy. Loss of an orbital location could cause us to
lose the revenue from services located at that orbital location
to the extent these services cannot be provided by satellites at
other orbital locations.

We may not be able to complete an initial
public offering of equity securities on the terms or schedule
that meet the requirements of the ORBIT Act. Failure to comply
with the ORBIT Act could limit the types of services we are
permitted to provide to U.S. customers.

Under the ORBIT Act, we are required to make an
initial public offering of equity securities by no later than
December 31, 2003 that substantially dilutes
the ownership interest in our company held by the IGOs
former Signatories, which were its primary owners. Pursuant to
its authority under the ORBIT Act, the FCC will review our
initial public offering of equity securities and make a
determination as to whether it complies with the requirements of
the ORBIT Act.

The ORBIT Acts criteria for our initial
public equity offering are subject to interpretation by the FCC,
and we cannot be certain how the FCC will interpret these
criteria. For example, the ORBIT Act does not provide the FCC
with any specific guidance of what would constitute a
substantial dilution, and therefore we cannot be
certain of what level of dilution the FCC will deem sufficiently
substantial.

18



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The ORBIT Act sets a deadline for our initial
public offering of equity securities of December 31, 2003.
This deadline was extended from the prior deadline of
December 31, 2002 pursuant to an amendment to the ORBIT Act
enacted on October 1, 2002. The current December 31,
2003 deadline may be extended to June 30, 2004 by the FCC.
Because of the deadline imposed by the ORBIT Act, we may be
required to conduct our initial public equity offering at a time
when market conditions for the offering are unfavorable.

Even if we complete our initial public equity
offering prior to the ORBIT Acts deadline, the FCC may
determine after completion of the offering that it has not
resulted in a substantial dilution of the former
Signatories ownership in our company, or that it has
failed to comply with the requirements of the ORBIT Act in some
other way. If the FCC determines that we have failed to conduct
our initial public equity offering with the results and by the
time required by the ORBIT Act, the ORBIT Act directs the FCC to
impose limitations on or deny our applications for satellite
licenses and for the renewal thereof. The FCC could also
restrict our ability to provide non-core services to
customers in the United States. Non-core services
are defined in the ORBIT Act as any services other than
public-switched voice telephony and occasional use television.
Accordingly, we could be prevented from providing services such
as Internet access, high-speed data transmission and video
services to our U.S. customers. If we were prevented from
providing these services, it would have a significant impact on
our revenue and the value of our business. In 2002, revenue
derived from our provision of services to the U.S. market that
we believe would be characterized as non-core
services for purposes of the ORBIT Act were approximately
$125.0 million. We would also be unable to implement
important aspects of our business strategy, including our
strategy to expand our customer base for video applications.
Finally, we may not obtain the final FCC authorization for our
existing satellites, as described in the preceding risk factor.

The results of any International
Telecommunication Union coordination process may interfere with
our use of orbital locations for our future satellites or
prevent us from operating satellites in those orbital locations
as contemplated by our business plan. Also, our rights to
orbital locations may change or expire.

We are required to coordinate the use of our
satellites at particular orbital locations through the
International Telecommunication Union coordination process in
order to prevent interference between our satellite system and
other existing or planned satellite systems. The coordination
process may result in modifications of our proposed coverage
areas or satellite deployment plans. We may be required to
accept modifications that significantly restrict our use of a
particular orbital location, possibly to the extent that our use
of the orbital location would no longer be financially viable.
Moreover, the coordination of our future satellites may not be
successful and may not allow us to operate our satellites in
accordance with our desired satellite deployment plans.

In accordance with the Radio Regulations of the
International Telecommunication Union, the FCC has reserved on
our behalf rights to 22 C-band and Ku-band orbital locations.
Our in-orbit satellites do not currently occupy all of these
orbital locations. If we are unable to place satellites into
currently unused orbital locations by specified deadlines
imposed by the International Telecommunication Union or the FCC,
or if we are unable to maintain satellites at the orbital
locations that we currently use, we may lose our rights to use
these orbital locations and the locations could become available
for other satellite operators to use. As noted above, we cannot
operate our satellites without a sufficient number of suitable
orbital locations in which to place the satellites. The loss of
one or more of our C-band or Ku-band orbital locations could
significantly affect our plans and impact our ability to
implement our business strategy. Such a loss could therefore
have a material adverse effect on our revenue and profitability,
as well as on the value of our business.

The Radiocommunications Agency of the U.K.s
Department of Trade and Industry has reserved on our behalf the
rights to nine Ka-band orbital locations. We currently do not
have any Ka-band satellites, and therefore we are not currently
utilizing any of these orbital locations. Under the Radio
Regulations of the International Telecommunication Union, which
the Radiocommunications Agency applies to satellite operators
subject to its jurisdiction, we must use these orbital locations
by specified deadlines or we will lose our rights to them. We
are required to use eight of our Ka-band orbital locations by
2005. If we do not deploy any Ka-band satellites by that time,
we may lose our rights to these eight Ka-band orbital locations.
We filed for our ninth Ka-band location in August 2001 and must
occupy this location by 2006. We have not at this time

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entered into any contracts for the manufacture of
a Ka-band satellite. We may decide not to deploy any Ka-band
satellites at all. Even if we do decide to deploy one or more
Ka-band satellites, we may not be able to manufacture and launch
any of them before the expiration of our rights to the Ka-band
orbital locations. If we lose our rights to these Ka-band
orbital locations, the locations would then become available for
other satellite operators to use.


We are subject to regulatory and licensing
requirements in each of the countries in which we provide
services, and our business is sensitive to regulatory changes in
those countries.

The telecommunications industry is highly
regulated, and, in connection with operating our business, we
need to obtain various local, national and international
regulatory approvals from time to time. If we cannot comply with
the laws and regulations that apply to us, we will lose our
revenue from services provided to the countries and territories
covered by these laws and regulations.

Before privatization, our operations were limited
primarily to providing wholesale satellite capacity to our
customers, and we did not provide any ground network uplinks,
downlinks or other value-added services. Pursuant to our
business strategy, we are expanding our operations to provide
these services for some of our customers. As we expand our
operations in these areas, we become subject to additional
regulatory requirements. If we cannot obtain the regulatory
approvals needed to provide new services to our customers and to
engage in these operations, we may not be able to implement
important elements of our business strategy. If we experience
difficulty or delay in obtaining these approvals, we may not be
able to implement our business strategy according to our current
schedule. If we are not able to expand into new services and
operations, or are significantly delayed in doing so, the
revenue associated with these new services will also be delayed
or may not be realized at all.

We also need to maintain our existing regulatory
approvals, and from time to time obtain new regulatory
approvals, in connection with the satellite services that we
currently provide to our customers. We are subject to the
regulatory and licensing requirements of each of the countries
in which we provide our services, as well as to certain
international regulatory regimes. For example, we are subject to
and need to comply with:



|  |                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------
| | the laws and regulations administered by the FCC;                                                                               
| 
| | other U.S. laws and regulations, including U.S.
    export control laws and U.S. sanctions regulations;                         
| 
| | regulation by the Bermuda Monetary Authority and
    the Bermuda Minister of Finance and other Bermuda laws and
    regulations;
| 
| | regulation by the Radiocommunications Agency of
    the U.K.s Department of Trade and Industry;                                
| 
| | the economic sanctions imposed by the United
    Nations;                                                                       
| 
| | the International Telecommunication Union
    coordination process; and                                                         
| 
| | the laws and regulations of the over 200
    countries and territories in which we provide our services.                        

Obtaining and maintaining these approvals can
involve significant time and expense. If we fail to obtain
particular regulatory approvals, this failure may delay or
prevent our ability to provide services to our customers. In
addition, the laws and regulations to which we are subject could
change at any time. The countries, territories and institutions
that regulate us could adopt new laws, policies or regulations
or change their interpretation of existing laws, policies or
regulations at any time. Any of these changes could make it more
difficult for us to obtain or maintain our regulatory approvals
or could cause our existing authorizations to be revoked or
terminated. If we fail to obtain regulatory authorizations
important to our current business or our business strategy, this
failure would likely result in decreased revenue, increased
costs, a decline in our profitability and a reduction in the
value of our business.

20



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If we do not maintain our existing
authorizations or obtain necessary future authorizations under
the export control laws of the United States, we may be unable
to export technical information or equipment that we are
required to provide to non-U.S. persons and companies under our
contracts, including our satellite construction and launch
contracts. Failure to obtain authorizations under the U.S.
export control laws or revocation of any of these authorizations
could have a material adverse effect on our
business.

As a company with subsidiaries located in the
United States, we are required to comply with U.S. export
control laws in the operation of our business. If we do not
maintain our existing authorizations or obtain necessary future
authorizations under these export control laws, we may be unable
to export technical information or equipment as required under
our satellite construction, launch and insurance contracts.

Satellites and related equipment, as well as
technical information relating to satellites, are regulated
under U.S. export control laws as defense items. Many of our
current contracts for the manufacture, launch, operation and
insurance of our satellites require the export of satellite
hardware or technical information to locations outside of the
United States or to non-U.S. persons or companies. U.S. export
control laws require that we obtain a license from the U.S.
Department of States Office of Defense Trade Controls in
order to export any satellites or related equipment or technical
information to non-U.S. persons or to locations outside of the
United States. We also have to obtain licenses from the U.S.
Department of Commerces Bureau of Industry and Security,
formerly the Bureau of Export Administration, in connection with
the export of some of the equipment relating to our satellite
network. We have obtained the licenses we currently need in
order to export the equipment and information required by our
contracts and by our current operations, but these licenses
could be revoked. In addition, we may not be able to obtain the
licenses we may require in the future. If we cannot obtain these
licenses in the future, or if any of the licenses already
granted to us are revoked, it could have a significant negative
impact on our ability to acquire new satellites, launch new
satellites, insure our satellites or operate the satellites in
our network, all of which would have a material adverse effect
on our revenue and profitability. It would also increase our
risk, as insurance may be unavailable to us.

We have many non-U.S. national employees. Access
to technical information relating to our satellites by these
non-U.S. national employees is also regulated by U.S. export
control laws. We have obtained export authorization from the
Office of Defense Trade Controls to allow all necessary non-U.S.
national employees to have access to our technical information
that is subject to U.S. export control laws. However, this
authorization could be revoked for cause, which could prevent us
from obtaining a new authorization in the future. In addition,
the authorization requires us to maintain certain internal
controls relating to this technical information. If we do not
properly manage our internal compliance or if any of our
employees violates applicable laws or regulations, it could
expose us to civil and criminal liability.

In addition, because we conduct management
activities from Bermuda, our U.S. suppliers must comply with
U.S. export control laws in connection with their export of
satellites and related equipment and technical information to
us. Our ability to acquire new satellites, launch new satellites
or operate our satellites could also be negatively affected if
our suppliers do not obtain needed authorizations from the
Office of Defense Trade Controls or the Bureau of Industry and
Security.

ITEM
4.     INFORMATION ON THE
COMPANY

A. History and Development of the
Company

Intelsat, Ltd. is a limited liability company
incorporated under the laws of Bermuda. Intelsat, Ltd. was
incorporated on December 14, 1999 and operates pursuant to
the Bermuda Companies Act 1981. Our principal executive offices
are located at Dundonald House, 14 Dundonald Street West,
Hamilton HM 09, Bermuda, and our telephone number is
(441) 294-1650.

We are the successor entity to the International
Telecommunications Satellite Organization. The IGO was a public
intergovernmental organization created on an interim basis by
its initial member states in 1964 in order to establish and
operate a global satellite system that would provide, on a
commercial basis, the space segment required for international
public telecommunications services. These services were to be
available on

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a global and non-discriminatory basis. The IGO
was formally established in February 1973 upon entry into force
of an intergovernmental agreement.


Immediately before the privatization, the IGO had
148 member states, known as the Parties. The Parties designated
certain entities, known as the Signatories, to market and use
the IGOs communications system within their territories
and to hold investment share in the IGO. Signatories were either
private telecommunications entities or governmental agencies of
the applicable Partys country or territory. Some
Signatories authorized certain other entities located within
their territories that used the IGOs satellite system,
known as the Investing Entities, to invest in the IGO as well.
Both Signatories and Investing Entities made capital
contributions to the IGO and received capital repayments from
the IGO in proportion to their investment share in the IGO.
Signatories and Investing Entities were also the IGOs
principal customers. Each Signatorys and Investing
Entitys investment share in the IGO was based on its
annual level of use of the IGOs satellite system as
compared to the use by other Signatories and Investing Entities.

As a public intergovernmental organization, the
IGO was exempt from various taxes and enjoyed privileges,
exemptions and immunities in many of its member states. However,
due to its status as an intergovernmental organization, the
IGOs business was subject to certain operating
restrictions. The IGO could not own or operate its own earth
stations or provide retail services directly to end users in
certain countries. It also could not set market-based pricing
for its services or engage in business relationships with
non-Signatories without first obtaining Signatory approval.

Our management began contemplating privatization
in the mid-1990s in order to be able to operate our business
free of the restrictions described above and to better position
us to be responsive to a number of commercial, competitive and
regulatory forces. On November 30, 1998, as a precursor to
the privatization, the IGO transferred a portion of its assets
and liabilities to New Skies. The assets and liabilities
transferred to New Skies consisted of five in-orbit satellites,
an additional satellite under construction, a related launch
contract, associated contracts for the provision of satellite
capacity and other related assets and liabilities. After the New
Skies transaction, upon our managements recommendation,
the IGOs Assembly of Parties made the initial decision in
October 1999 to transform the IGO into a private company. On
November 17, 2000, the Assembly of Parties unanimously
approved our managements specific plan for our
privatization and set the date of privatization for
July 18, 2001. As a result, on July 18, 2001,
substantially all of the assets and liabilities of the IGO were
transferred to us.

The privatization required the amendment of the
two formal agreements establishing the IGO. These two agreements
are the Agreement Relating to the International
Telecommunications Satellite Organization INTELSAT,
known as the INTELSAT Agreement, and the Operating Agreement
Relating to the International Telecommunications Satellite
Organization INTELSAT, known as the Operating
Agreement, both of which entered into force in February 1973.
Because the process to formally ratify the amendments to the
INTELSAT Agreement was expected to be lengthy, the IGOs
Assembly of Parties decided to provisionally apply, or rapidly
implement, the amendments on a consensus basis with effect from
July 18, 2001, pending their formal ratification. See Item
3.D  Risk Factors for a discussion of the
risks associated with this decision.

Upon our privatization, the IGOs
Signatories and Investing Entities became the shareholders of
all of the outstanding ordinary shares of Intelsat, Ltd. Each
Signatory and Investing Entity that had executed and delivered
the required privatization agreements, including a shareholders
agreement, received shares in Intelsat, Ltd. in proportion to
its investment share in the IGO. The shares allocated to those
Signatories and Investing Entities that had not executed and
delivered the required privatization agreements by July 18,
2001 were transferred to a trust. These former Signatories and
Investing Entities generally may receive their shares in
Intelsat, Ltd. once they execute and deliver the required
agreements and related documentation.

The IGO, referred to post-privatization as ITSO,
will continue to exist as an intergovernmental organization for
a period of at least 12 years after July 18, 2001, and then
may be terminated by a decision of the Assembly of Parties.
Pursuant to an agreement among ITSO and Intelsat, Ltd. and
certain of our subsidiaries, we have an obligation to provide
our services in a manner consistent with the core principles of
global coverage and connectivity, lifeline connectivity and
non-discriminatory access, and ITSO monitors our

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implementation of this obligation. These core
principles are described under Item 4.B 
Business Overview  Certain Customer Service
Agreements  Novation Agreements  Lifeline
Connectivity Obligation Contracts.


See also Item 4.B  Business
Overview and Item 5  Operating and
Financial Review and Prospects for information regarding
our capital expenditures and our history and development
generally.

B. Business Overview

We are a leading global communications services
provider, supplying voice, data, video and Internet backbone
connectivity in over 200 countries and territories. Since our
inception in 1964, we have provided the satellite communications
links for events that were milestones in 20th century
history  from broadcasting the video signals for the
first moon walk, to providing the direct communications link
connecting the White House and the Kremlin, to broadcasting the
events of every Olympics since 1968. Our goal is to be a global
connectivity leader connecting people and businesses around the
world with high-quality, flexible and innovative communications
services.

Our
Strengths

Global
Communications Network

We have developed our own communications network,
which covers over 99% of the worlds populated regions. Our
network includes 24 satellites in orbit and leased capacity on 2
satellites owned by strategic partners in the Asia-Pacific
region. Our network also includes ground facilities relating to
the operation and control of our satellites and selected
ground-based communications assets. We have market access to
provide satellite capacity in the C- and Ku-bands in over 200
countries and territories. We believe our satellite
infrastructure provides us with an important competitive
advantage given the scarcity of prime orbital locations and the
relatively high costs of, and long lead time involved in,
designing, building, launching and operating satellites.

Established
Customer Base

Our customer base includes over 500
communications providers, including many of the worlds
leading carriers, Internet service providers, network
integrators and broadcasting companies. We have served many of
our largest customers for over 30 years. Customers that use
our capacity and services include:

|                                 |  |                                
|-------------------------------- |  | -------------------------------
| British Telecommunications plc |  |  WorldCom, Inc.               
| Cable and Wireless plc         |  |  Telenor Broadband Services AS
| China Telecom                  |  |  Videsh Sanchar Nigam Limited 

Users of our system also include AT&T Corp.,
CNN International and the World Bank, as well as defense and
other agencies of various governments. We believe our existing
customer base provides us with a competitive advantage in local
markets around the world and credibility as we introduce new
services.

Operational
Excellence

Our customers rely on our operational and
engineering leadership, gained through our over 38-year
operating history and pioneering achievements in space
communications. Our network has been designed to provide a high
level of redundancy and flexibility for our customers. Our
engineering and operations staff participates in every stage of
the lifecycle of each of our satellites, from the initial stages
of development and construction through the end of a
satellites orbital life. We measure the reliability of our
network over a given period of time by calculating the total
transponder hours in service for satellites owned and operated
by us as a percentage of the total number of potential
transponder hours during that time period, including hours
during which transponders were not in service due to
interruption or other outage. We exclude from this calculation
the transponders on our satellites that are unusable due to
satellite orbital location, inter-system coordination issues or
beam configurations or that are permanently unusable due to the
impact of certain anomalies. See
 Network  Our Satellites 
In-Orbit Satellites below for a discussion of the most
notable anomalies,

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losses and risks to our fleet at this time. For
the year ended December 31, 2002, our transponder
availability rate was nearly 99.998%, with availability rates
averaging over 99.997% since 1985. We believe our long history
of high-quality, reliable service is a leading contributing
factor to our ability to attract and retain our customers.


Balanced
Geographic and Service Application Mix

We operate our business on a global basis. We
believe that one of our strengths is our well-balanced
geographic and service application mix. We derive a significant
share of our revenue from almost every region of the world. We
distinguish ourselves by the balanced and diverse range of
applications for which our services are used, including voice
and data, corporate network, video and Internet applications.
Each of these service applications contributes importantly to
our revenue. This balanced geographic and service application
mix contributes to the relatively high level of stability of our
business.

Solid
Financial Performance

Our business is well established. We compete in
the fixed satellite services sector, which has a history of
consistent and stable growth. We have generated net income every
year since 1973. In 2002, we had telecommunications revenue of
$992.0 million, net income of $274.1 million and
EBITDA, as adjusted, of $713.6 million. A reconciliation of
EBITDA to net income and information regarding the reasons why
we present EBITDA and how we use EBITDA are provided in
Item 5  Operating and Financial Review and
Prospects. We believe our competitive position is enhanced
by our strong balance sheet relative to our competitors.

We intend to leverage these strengths and our
leadership position in our industry to grow our business.

Our
Strategy

Our goal is to be a global connectivity leader
connecting people and businesses around the world with
high-quality, flexible and innovative communications services.
We intend to sustain our leadership position in the fixed
satellite services sector by building on our existing
capabilities to grow our business and pursuing strategic
transactions. Specifically, we intend to:



|  |                                                                                                                                                                                                                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | sustain and grow our core voice and data business
    by providing new services to existing customers and targeting
    new customers in the carrier, corporate network and Internet
    customer segments;                                                                                                   
| 
| | establish strategic business units to focus on
    growing our business in the video and government/military
    customer segments;                                                                                                                                                                           
| 
| | make incremental investments that will position
    us for leadership in potential growth markets related to the
    fixed satellite services sector and will further enhance our
    integrated global connectivity service offerings; and                                                                   
| 
| | pursue strategic transactions that, among other
    things, could enable us to diversify our service application mix
    further, enhance the geographic coverage of our network,
    particularly in North America and Europe, and achieve
    operational efficiencies to improve our financial performance.

We believe that these strategies will allow us to
strengthen our core operations and maximize our ability to
capitalize on new and emerging growth trends in our industry.

Sustain
and Grow Our Core Voice and Data Business

We intend to sustain and build upon our
leadership position in the fixed satellite services sector by
leveraging our well-established customer relationships to offer
new services to our existing customers and to broaden the scope
of the customers we serve. Our customer base is an asset we have
built over many years of providing high-quality, reliable
satellite communications services on a global basis. Our
customers use our satellite capacity in their own networks, use
our capacity to provide services to their own customers and
resell

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our satellite capacity to third-party service
providers. The trend toward deregulation in many local markets
and the removal of restrictions on our business as a result of
our privatization provide us with opportunities to:




|  |                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------
| | leverage our existing customers to accelerate the
    introduction of new services;                                                  
| 
| | develop new relationships with systems
    integrators and value-added resellers to create expanded markets
    for our services; and
| 
| | build additional sales channels for our services
    in regions where distribution of our services was previously
    limited.       

We will use these opportunities to implement
specific initiatives for the carrier, corporate network and
Internet service applications discussed below in order to
sustain and build upon our core business and expand our customer
base.

Carrier

We intend to leverage our lead in providing voice
and data services for carriers by increasing our focus on
customers utilizing capacity for thin-route and middle-mile
applications. Thin-route applications are point-to-point
connections between low-traffic communications hubs in smaller
cities. Middle-mile applications are point-to-point connections
from cable interconnects or communications hubs to
telecommunications central offices in remote or unserved areas.
In addition to focusing on customers using capacity for
thin-route and middle-mile applications, we intend to:



|  |                                                                                                                                                                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | increase our regional sales presence and target
    customers in newly deregulated markets, where new carrier
    companies are seeking to introduce their services quickly and
    independently of the local established carriers;                                                                                                                              
| 
| | support customers providing alternatives to
    traditional voice and data services, such as the transmission of
    voice traffic using Internet protocol, which is a communications
    protocol used in the transmission of information over the
    Internet, and the provision of mobile voice and data services
    using terrestrial wireless networks; and
| 
| | introduce new, more cost-effective technologies
    and new integrated connectivity services to our existing
    customers, which we believe will enhance our retention rates and
    provide our customers with more efficient use of our network.                                                                                                               

Corporate
Network

We believe that the provision of satellite
capacity for corporate networks is a growing market in which we
enjoy a solid position. We intend to broaden our customer base
by establishing relationships with satellite-oriented service
providers that are not already represented in our significant
customer base for corporate network services and by targeting
general integrators with less experience in satellite services.
Specifically, as a leading provider of satellite-based corporate
network services, we believe we are well positioned to work with
regional and global private network providers, offering
satellite and hybrid services, including network design,
hardware coordination and testing assistance, to increase the
use of satellite services as extensions of and overlays to the
networks of these providers. We expect to develop the capability
to provide flexible end-to-end services through partnerships
with hardware providers, network integrators and network
services providers. We intend to use this capability to expand
our service offerings to address the needs of customers in the
maritime, oil and gas, manufacturing, mining and finance and
banking industries.

Internet

We have been providing transmission capacity for
the Internet since its inception in the 1970s. We provide
point-to-point, also referred to as trunking, services to
Internet service providers establishing high-speed Internet
backbone connections to remote locations. We will seek to
further penetrate this segment by offering integrated satellite/
fiber services to our Tier 1 Internet service provider
customers, which are carriers whose Internet traffic is
sufficiently large that they exchange traffic at no cost with
other carriers or peers of similar size. In addition, we are
expanding our marketing directly to local Tier 2 and
Tier 3 Internet service

25



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providers, which must pay Tier 1 providers
to exchange their traffic. We are providing these Internet
service providers with complete Internet backbone access
services, including hardware from third-party resellers,
satellite capacity, Internet backbone connections and network
management.


Grow
Our Business Among Video and Government/ Military
Customers

We believe that the provision of satellite
capacity to video and government/ military customers represents
an opportunity for stable growth over the long term for
operators in the fixed satellite services sector. We intend to
dedicate resources to further penetrate these customer segments
in order to increase our market share in these segments and to
further diversify our customer base.

Video

We will allocate resources to retain our current
customer base and focus on growing our video business. In
February 2003, we introduced an end-to-end contribution service
to address the needs of broadcasters and video programmers
around the world. Contribution refers to the transmission of
news, entertainment and other video programming from various
locations to a central video production studio where the
programming is consolidated and assembled for distribution. Our
end-to-end contribution service provides customers with the
ability, on demand, to move video content around the world using
a cost-effective infrastructure that leverages the global
coverage of our satellite fleet and our network of teleports and
fiber interconnections to major video exchange points. In
addition, we are developing a broadcast distribution community
in Latin America and intend to build new broadcast communities
in Africa, the Asia-Pacific region and certain areas in Europe.
Distribution refers to the transmission of television
programming to television station affiliates, cable systems,
subscribers of direct-to-home services and other redistribution
systems. By attracting the broadcasters of popular television
programming to selected satellites in our fleet, we hope to
build broadcast communities on those satellites. Because cable
systems and other redistribution systems install antennas in
order to be able to access popular programming for their
subscribers, the use of our satellites by a popular broadcaster
could attract other broadcasters to distribute their programming
using the same satellites. Although we have historically served
only a small fraction of the video segment, we intend to focus
on expanding our customer base and market share in this segment
and have created a strategic business unit that will be
responsible for achieving this goal.

Government/Military

We believe that intergovernmental organizations
and the defense and other agencies of various governments are
experiencing an increased need for communications services,
creating demand for both government- and military-owned
satellite capacity and commercial satellite capacity. This trend
is creating opportunities for satellite providers, particularly
those with the network reliability required for mission-critical
communications and the network flexibility needed to provide
customized managed services for users in this segment. A number
of intergovernmental, governmental and military entities are
current users of our system. We intend to leverage our
relationships with these customers, our operational excellence
and the flexibility of our network to strengthen our position in
this customer segment. See  Network 
Our Satellites below for a discussion of our operational
excellence and the design flexibility of some of our satellites.
We are creating a strategic business unit to ensure that our
corporate structure and sales capabilities enable us to address
government/military opportunities and to continue our work with
customers in this segment to create services that satisfy their
security needs and mission-critical communications requirements.

Position
for Growth in Related Businesses and Make Incremental
Investments to Support Integrated Services

We believe there are businesses related to the
fixed satellite services sector that represent longer-term
opportunities for growth. We intend to make incremental
investments in these businesses to position ourselves for
leadership as next-generation services are developed and the
market for satellite services evolves. As part of this strategy,
we plan to invest both in related segments of the satellite
industry, such as broadband access and direct-to-home services,
and in expanding our hybrid service capabilities within the
fixed satellite services segment.

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Broadband
Access Services

We believe that the evolution of the Internet and
the digitization of media and entertainment properties have
increased demand for broadband connectivity. Satellite broadband
connectivity can bypass any intermediate network nodes to
establish a connection directly with the end user. Based on
discussions with customers in our distribution network and
industry market research, we believe that there is sizable
demand for satellite broadband services. We also believe that
small- and medium-sized enterprises, particularly in developing
regions, have broadband service requirements that currently are
not being met. We believe that satellite connectivity is well
positioned to fill this gap, offering a ubiquitous service that
can be implemented quickly in locations where terrestrial
alternatives are not available, are unreliable or are too
expensive.

To address opportunities in the satellite
broadband access market, we are using an incremental approach
that leverages our existing infrastructure to gain experience
and build strategic relationships with customers and service
partners. For example, after conducting trials to establish
technical and market feasibility, we have initiated commercial
broadband service in selected markets around the world using our
existing satellite infrastructure. We will defer making
significant investments in dedicated multi-beam custom satellite
facilities until we are convinced that the market for these
services is sufficiently defined. We are also analyzing various
partnering and alliance strategies in this area to minimize
business risks. For example, in December 2002, we entered into
an agreement to acquire a minority stake in Wildblue
Communications, Inc., which plans to offer broadband Internet
access services in the continental United States via Ka-band
satellite. For further information regarding this agreement, see
Item 7.B  Related Party
Transactions  Wildblue Subscription Agreement.
Through this progressive strategy, we plan to be positioned for
leadership when this market develops.

Direct-to-Home
Services

In addition to satellite broadband access, we
believe that the direct-to-home transmission of television
programming via satellite could contribute to future growth in
the demand for satellite services in certain markets. To
position ourselves for growth in one such market, in February
2003 we made an indirect investment in Galaxy Satellite
Broadcasting Limited, a company that plans to provide a pay
television service in Hong Kong. See Item 10.C 
Material Contracts  Investment in Galaxy
Satellite Broadcasting for further information regarding
this agreement. In connection with this agreement, we intend to
move one of our satellites to the 85.0° East orbital
location to distribute programming for the pay television
service upon its launch and expect to build on this distribution
agreement to create a broadcast community at 85.0° East.

Integrated
Global Connectivity Services

Our customers offer advanced services to their
end users and increasingly require integrated and managed
services that we believe are best addressed by a hybrid network
that combines space and terrestrial infrastructure. As we
further extend our marketing reach to medium-sized and smaller
carriers, we expect to be serving a customer base that requires
outside expertise to integrate and manage the many
communications media that comprise a high-performance network.
Because satellite capacity is often the most strategic and
complex part of a communications network, we believe we are well
positioned as compared with ground-based service providers to
offer cost-effective global connectivity services.

Our network of satellites provides our customers
with global coverage. However, in some instances, the
point-to-point connections provided by our satellites could be
delivered more efficiently by combining our satellite capacity
with undersea cable or fiber. Although as the IGO we were
restricted from owning or operating communications
infrastructure complementary to our satellite system, our
privatization has permitted us to expand our infrastructure
capabilities. We have built our network platform incrementally,
through a series of carefully selected investments in basic
fiber connections, teleports and earth stations. In November
2002, we completed an acquisition of two earth stations and a
teleport in the United States. See Item 7.B 
Related Party Transactions  COMSAT Asset
Purchase Agreement for a description of this acquisition.
We have also established points of presence connected by leased
fiber at key traffic exchange points around the world and have
acquired other teleports or have leased teleport services in
Germany, the

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United States and China. This expanded
terrestrial infrastructure in combination with our satellite
fleet has enabled us to create an integrated network that can
provide a portfolio of new services, including:




|  |                                                                                                                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | connectivity to major exchange points together
    with customized end-to-end services; for example, we could use
    fiber to carry content from Europe to the United States and then
    use satellites to broadcast the content from the United States
    to multiple locations in the Asia-Pacific region;
| 
| | critical network management and monitoring
    functions for medium and small carriers in newly deregulated
    markets where high-quality and controlled connectivity to the
    public switched telephony network and the Internet backbone are
    required; and                                            
| 
| | a valuable middle-mile service that uses
    satellite capacity to complete a fiber-based connection, beaming
    transmissions by satellite from a fiber landing point into
    interior locations of infrastructure-poor countries.                                                                          

We have introduced a portfolio of services,
called GlobalConnexSM Solutions, that includes
services combining satellite capacity, teleport facilities,
cable and other ground facilities. We offer services in this
portfolio for a variety of applications, including Internet,
video and government/military applications. As we continue to
introduce new hybrid network services, we expect to make
investments in terrestrial assets and new technologies as
necessary to provide services tailored to the needs of our
customers.

Pursue
Strategic Transactions

We intend to continue to evaluate and pursue
strategic transactions, including acquisitions, partnerships,
joint ventures, alliances and other transactions. We intend to
pursue acquisitions of satellite capacity and satellite
operators and strategic transactions with complementary
businesses. We will evaluate these types of transactions in the
context of our strategic position and financial condition. We
believe the entry into strategic transactions could:



|  |                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provide us with complementary technical and
    commercial capabilities, including a video or a
    government/military business complementary to the businesses we
    are seeking to grow organically;
| 
| | provide enhanced landmass coverage of strategic
    geographic regions;                                                                                                                                 
| 
| | create operational efficiencies;                                                                                                                                                                        
| 
| | reduce new market entry risk by enabling us to
    work with partners on new service offerings; and                                                                                                     
| 
| | broaden our customer base.                                                                                                                                                                              

Our ability to complete any strategic transaction
will depend on a number of factors that are not entirely within
our control, including our ability to negotiate terms and
conditions, conclude agreements and obtain necessary regulatory
approvals, in each case on terms acceptable to us. In addition,
if we require financing for any strategic transaction, we may be
unable to obtain such financing on acceptable terms or within
the timeframe that would permit the transaction to proceed.
Depending on how any such strategic transaction is structured,
there may be an impact on our capital structure. See
Item 3.D  Risk Factors for a
discussion of the risks and uncertainties associated with our
strategy to complete strategic transactions.

Industry
Overview

General

We compete in the global telecommunications
market for the provision of voice, data, video and Internet
backbone connectivity. Communications services are provided
using various communications technologies, including terrestrial
and submarine fiber optic networks, terrestrial wireless
networks and fixed satellite services networks. We currently
provide our services primarily using our fixed satellite
services network infrastructure.

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Satellite
Communications

Commercial communications satellites are used for
a variety of global communications applications, either as a
substitute for or as a complement to the capabilities of
terrestrial networks. The satellite industry is traditionally
divided into several segments, each of which has its own
customer base and business model. These segments include:

Fixed Satellite
Services.Fixed satellite services,
the most established sector in the satellite industry, provide
communications links between fixed points on the earths
surface. These services include the provision of satellite
capacity between two fixed points, referred to as point-to-point
services, and the simultaneous provision of satellite capacity
from one fixed point to multiple fixed points, referred to as
point-to-multipoint services. Point-to-point applications
include telephony, video contribution and data transmission,
such as Internet backbone connectivity. Point-to-multipoint
applications include broadcast television and private data
networks. Fixed satellite services are our principal source of
revenue.

Direct Broadcast Services/Direct-To-Home
Services.Direct broadcast services,
or direct-to-home services, broadcast a television signal
directly to consumers homes and permit a high-quality
broadcast of a large number of channels. Due to the
point-to-multipoint capabilities of satellite, direct broadcast
services have a competitive advantage in areas that do not have
access to digital cable or high-quality terrestrial
infrastructure. We provide satellite capacity to providers of
direct broadcast services, such as Telenor Satellite
Broadcasting, which supports the Canal Digital direct-to-home
network in the Nordic region.

Digital Audio Radio
Service.Satellite radio, or digital
audio radio service, offers programmers a national distribution
platform for digital quality sound and up to 100 channels of
programming. This service offers greater coverage, better signal
quality and fewer advertisements than traditional radio service
and allows advertisers to target specific demographic groups on
a national basis. We do not support digital audio radio services
on our network.

Mobile Satellite
Services.Mobile satellite services
provide voice, data, geographical positioning and radio
broadcasting services to mobile terminals. Recent efforts to
develop mass market mobile satellite telephony systems using
customized satellites have been largely unsuccessful due to
problems with technology and slow customer uptake. We neither
provide mobile satellite services nor provide mobile satellite
services companies with satellite capacity.

Broadband Services.Broadband satellite services can provide last-mile, high-speed
Internet access to customers in areas unserved or underserved by
terrestrial alternatives. As described in  Our
Strategy  Position for Growth in Related Businesses
and Make Incremental Investments to Support Integrated
Services  Broadband Access Services, we are
exploring opportunities in the satellite broadband access market
and intend to use an incremental approach to enter this market.

Competitive
Advantages of Satellites

Satellites provide a number of advantages over
competing terrestrial communications systems, including cable
and microwave systems. We believe that these factors will result
in the continued use of fixed satellite services as an integral
part of the global communications network. These aspects of
satellite networks are:

Ubiquitous Coverage.Satellites provide connectivity across broad regions, allowing
equal access to bandwidth regardless of location, density of
population or availability of terrestrial transmission.
Satellites offer a cost-efficient means of providing
connectivity where cable and fiber deployment would not be cost
effective. These areas include rural neighborhoods where low
household density makes digital upgrades of cable infrastructure
economically unattractive and remote regions where telephony or
internal network services are difficult to provide due to
terrain or population density factors.

Point-to-Multipoint Transmission
Capabilities.A geosynchronous
communications satellite can broadcast signals to an area as
large as one third of the earths surface. Geosynchronous
satellites are well suited for transmissions, such as
point-to-multipoint transmissions, that must reach
simultaneously many locations that

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cannot be connected efficiently or
cost-effectively by terrestrial transmission systems. These
applications include corporate networks and direct-to-home and
other video distribution.


Seamless
Transmission.Existing terrestrial
networks suffer from the cost and congestion associated with the
multiple connections necessary to deliver content from the
source to the user. Satellites can broadcast directly to
telecommunications services providers and other users, bypassing
points of congestion. As a result, customers can potentially
reduce transmission delay, avoid bottlenecks resulting from peak
usage and enhance transmission speed.

Independence from Terrestrial
Infrastructure.Satellite-based
networks operate independently of other telecommunications
infrastructures. In some developing regions, the existing
telecommunications infrastructure can be unreliable and, as a
result, the availability of telecommunications services remains
low. In many cases, satellite-based networks are used instead of
or in addition to ground-based networks to provide businesses,
governments and financial institutions with high-quality,
reliable communications services. In addition, terrestrial
telecommunications providers can utilize satellite services for
redundancy or emergency planning in the event of a malfunction
or other disruption in their ground-based networks.

Rapid Deployment.Todays global satellite services providers have capacity
available to deliver communications connections quickly almost
anywhere on earth. The terrestrial hardware necessary to access
existing satellite capacity can be installed in a matter of
days, connecting remote locations to the public switched
telephony network or to the Internet. Satellite providers with
specialized mobile equipment can establish links from mobile or
changing locations such as boats, on-site trucks providing news
coverage or crews traveling along an oil pipeline. In contrast,
unless terrestrial communications are already established in an
area, it may take months or years to build out the ground
connection to remote areas, given the significant effort and
expense required to lay cables.

Challenges
for New Entrants

There are significant challenges for new entrants
into the global satellite communications industry, including the
limited number of orbital locations and frequencies that can be
coordinated for use, the approvals from numerous national
telecommunications authorities required to operate a global
satellite communications system, and the significant time, large
capital investment and high level of technical expertise
required to design, construct, launch and operate a satellite.
These factors lead us to believe that the number of new entrants
to the sector will remain low in the next decade.

Key
Trends

We believe that a number of trends that have
developed over the past several years will continue to have a
positive impact on the fixed satellite services sector. These
trends include the globalization of business, the deregulation
of telecommunications markets and the growth in data traffic.
These trends also include demand for integrated communications
services and the evolution of satellite-based broadband systems.
However, fixed satellite services operators are facing
competition from providers of ground-based communications
capacity, and there is excess supply in the telecommunications
industry. In addition, the telecommunications industry has been
experiencing a downturn that has reduced the demand for fixed
satellite services, and it is possible that the market for fixed
satellite services over the next several years may not grow or
may shrink, as described in Item 3.D  Risk
Factors. We also believe that consolidation is an
important trend impacting the fixed satellite services sector.

Globalization.The
growth in the global telecommunications market reflects the
increasingly international nature of business, the significant
growth of emerging and newly industrialized economies and the
continued expansion in international trade. As multinational
corporations globalize and expand into new markets, we believe
their demand for diverse and customized telecommunications
services should continue to grow.

Deregulation.Many
countries are in the process of deregulating their
telecommunications markets in response to growing business and
consumer demands, technological developments and international

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competition. Deregulation has created new
competitors to national telecommunications monopolies and
traditional primary telephone companies, and has opened markets
to new services and service providers. We believe that these new
telecommunications operators represent potential additional
customers for our services, and that deregulation presents new
opportunities for us, especially in markets such as China,
India, Latin America, Africa and the Middle East.


Growth of Data
Traffic.Data traffic, including use
of the Internet, has grown in recent years, driven in part by
technological advances and the increasing information
orientation of the global economy. We believe that the expected
future growth of data applications holds potential for the
satellite industry. However, we expect any demand for satellite
services created by data applications to be partially offset by
the migration of point-to-point services to fiber optic cable.
See Item 3.D  Risk Factors for a
discussion of the migration to fiber optic cable.

Integrated Services.Customers are increasingly demanding more sophisticated
communications services to optimize their networks, while at the
same time focusing their resources on their core competencies to
create more efficient business operations. Service providers who
are able to offer comprehensive, managed services can increase
value to these customers by providing them access to complete
solutions on a turn-key basis. These customers will not then
need to acquire or maintain the extensive expertise required to
integrate a number of communications media into a seamless
network.

Broadband.We
believe that the evolution of the Internet and the digitization
of media and entertainment properties have increased the demand
for broadband connectivity. As Internet applications begin to
include large file transfers and high-bandwidth applications
such as video, and as corporations increase their use of
web-based applications, we believe the demand for high-speed,
last-mile connections will grow. Because nearly all existing
terrestrial infrastructures must be upgraded to support
broadband communications, satellite-based broadband services are
well positioned to supply access to customer sites in locations
where it is economically or geographically not feasible to
upgrade the terrestrial infrastructure. See
Item 3.D  Risk Factors for a
discussion of the present uncertainty of future growth in the
demand for broadband connectivity.

Competition from Other Communications
Technologies.Fixed satellite services
operators face competition from providers of other
communications capacity. Other forms of communications
technology may have cost advantages as compared to satellites,
especially on point-to-point routes. For example, fiber optic
cable capacity is available at substantially lower prices than
satellite capacity for the same routes, and competition from
fiber optic cable continues to result in the migration of
point-to-point traffic from satellite to fiber optic cable on
certain routes. This trend is expected to continue to negatively
impact the fixed satellite services sector. See
Item 3.D  Risk Factors for a
discussion of the migration to fiber optic cable.

Excess Supply.The
increasing availability of satellite capacity and competition
from other forms of communications technology are creating an
excess supply of communications capacity. The reduced demand for
fixed satellite services resulting in part from the downturn in
the telecommunications industry has also contributed to this
excess supply. This excess supply of communications capacity is
contributing to reduced growth rates in the fixed satellite
services sector, which is currently expected to experience a
flat growth rate in 2003 and to grow modestly over the next few
years.

Industry
Consolidation.The fixed satellite
services sector has experienced some consolidation, with some of
our competitors announcing mergers or alliances designed to
create a global network. This consolidation is the result of the
increasing globalization of the telecommunications market,
economies of scale that can be achieved through consolidation
and the desire of some fixed satellite services operators to
secure and improve their market access and coverage in key
regions. It is also the result of the scarcity of desirable
orbital locations. We expect consolidation in our industry to
continue.

Our Customers
and the Service Applications Supported by Our
Network

Our customers are often among the largest and
most established providers of telecommunications services in
their geographic markets. Although we believe that our global
communications network is used to

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support a wide range of service applications,
substantially all of our revenue is currently generated by the
sale of our satellite transmission capacity to our customers on
a wholesale basis. Some of our customers then resell this
capacity to end users of our system. We believe that in 2002 our
satellite capacity was used for four principal service
applications: carrier, corporate network, video and Internet
applications.


The following table summarizes some of the
service applications supported by our network, the types of end
users that rely on these applications and the percentage of our
telecommunications revenue generated by the sale of capacity for
each service application category. The breakdown of our revenue
by service application is based on our analysis of transmission
plans and other information supplied to us by our customers.
While we believe the information provided to us is reliable, it
has not been verified by any independent sources and we cannot
assure you as to its accuracy. The illustrative applications and
end users for our service application categories are based on
general information about the telecommunications industry.

|                     |  |                    |     |                       |  |      |     |              |  |                    |     |           |  |                                                                                         |  |                                                                                                       |  |                                                                                        
|-------------------- |  | ------------------ | --- | --------------------- |  | ---- | --- | ------------ |  | ------------------ | --- | --------- |  | --------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------
|                     |  |                    |     |                       |  |      |     |             
|                     |  | Percentage of      |     |                       |  |      |     |             
|                     |  | Telecommunications |     |                       |  |      |     |             
|                     |  | Revenue for the    |     |                       |  |      |     |             
|Service              |  | Year Ended         |     |                      
|Application Category |  | December 31,       |     | Illustrative Examples
|                     |  |                    |     |                      
|                     |  | 2000               |     | 2001                  |  | 2002 |     | Applications |  | Types of End Users |     | End Users
|                     |  |                    |     |                       |  |      |     |              |  |                    |     |          
|Carrier              |  |                    | 42% |                       |  |      | 38% |              |  |                    | 37% |           |  | International  telephony
    Domestic telephony
    Cable restoration
    Data circuits |  | Incumbent telephone  companies
    Competitive  telephone  companies
    Long haul service  providers |  | AT&T Corp.
    British Telecommunications plc
    China Telecom
    Deutsche Telekom AG
|                    
|Corporate Network    |  |                    | 25% |                       |  |      | 27% |              |  |                    | 30% |           |  | Corporate WANs
    Intranets/extranets
    Videoconferencing
    Distance learning      |  | Corporations
    Organizations
    Intergovernmental  agencies                                        |  | Central Bank of the  Russian
    Federation
    United Nations
    World Bank          
|                    
|Video                |  |                    | 19% |                       |  |      | 19% |              |  |                    | 17% |           |  | Video signal  transport
    Remote news  gathering
    Video distribution               |  | Media  conglomerates
    News organizations
    DTH system  operators
    Cable broadcast  networks   |  | BBC World
    Canal Digital
    CNN International
    MTV3                             
|                    
|Internet             |  |                    | 14% |                       |  |      | 16% |              |  |                    | 15% |           |  | Internet backbone  connectivity                                                         |  | Tier 1 and Tier 2  Internet
    service  providers                                                    |  | Cable and Wireless plc
Sprint Corporation                                              

In 2002, we estimate that nearly 10% of our
revenue was attributable to the use of our system for
government/military applications, including the transmission of
command and control data for troops and civilian support and
related military activities such as the Armed Forces Television
Network. The revenue from these uses is included in the table
above primarily in the corporate network category. Given the
emphasis of our business strategy on customers in the
government/military segment, we have determined that going
forward we will include government/military as a fifth category
in the breakdown of our revenue by service application.

Other than COMSAT, none of our direct customers
accounted for 5% or more of our telecommunications revenue in
2002. Although we do not know the extent to which our customers
resell the capacity they purchase from us, with the exception of
WorldCom, Inc., AT&T Corp. and Verestar, Inc., we do not
believe that a significant portion of our 2002
telecommunications revenue was attributable to any one end user
through the purchase of our capacity from our direct customers.
Had our November 2002 acquisition of COMSAT World Systems
contracts for the sale of our capacity occurred as of
January 1, 2002, and assuming that we had received from
COMSATs customers the revenue that COMSAT received from
these customers in 2002, WorldCom, Inc. and its affiliates would
have accounted for approximately 6% of our revenue in 2002, and
WorldCom, Inc., AT&T Corp. and Verestar, Inc. would have
been among our ten largest direct customers.

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We refer in this annual report to a number of our
customers and end users. Our customers and the end users of our
system are important to us from a business development
perspective, but references to them in this annual report are
for illustrative purposes only and are not intended to suggest
that these customers and end users are necessarily material to
us from a financial perspective.

Carrier
Applications

Carrier applications include the use of our
satellite capacity by telecommunications carriers for the
transmission of voice and data traffic over point-to-point
connections, referred to as trunking, between major
telecommunications hubs. However, we do not include trunking to
the Internet backbone and private network applications in our
carrier service application, because we consider them to be
separate applications. Customers in this segment use our
capacity for the transmission of international and domestic
telephony and traditional data traffic. These customers use our
capacity either as their primary transmission medium, for path
diversity or network overflow or, from time to time, for cable
restoration services while their cable operations are under
repair or experiencing outage. Our customers for carrier
applications are primarily large, established telecommunications
services providers and post, telephone and telegraph
administrations around the world. These customers include China
Telecom, France Telecom, Videsh Sanchar Nigam Limited and
T-Systems International GmbH, a subsidiary of Deutsche Telekom
AG.

Because the IGO was created to provide capacity
for international public telecommunications services for its
owners, this segment has historically been our largest source of
revenue. However, the market for satellite-based voice and data
services has faced, and is expected to continue to face,
competition from fiber optic cable. See
Item 3.D  Risk Factors above for a
discussion of the competition from fiber optic cable. Despite
fibers increasing share of the overall market for voice
and data applications, we believe we will continue to earn a
significant portion of our revenue from our carrier application.
For a discussion of our strategy with respect to carrier
services, see  Our Strategy  Sustain
and Grow Our Core Voice and Data Business 
Carrier above.

Corporate
Network Applications

Our corporate network applications are used
primarily by telecommunications providers that sell capacity to
corporate end users. Corporate network applications include the
use of our capacity for private communications networks using
VSATs, or very small aperture terminals. VSATs are devices with
small antennas that can receive and transmit communications
signals to and from a satellite transponder. A network of VSATs
can be used for such point-to-multipoint applications as
corporate wide area networks, intranets and extranets. Other
point-to-multipoint corporate network applications include
videoconferencing, telemedicine and distance learning, as well
as traditional voice and data services.

Our customers in this segment include a limited
number of satellite-savvy end users but are primarily
satellite-savvy integrators, such as Verestar, Inc., Plenexis
Gesellschaft fur Satellitenkommunikation mbH, and Data Marine
Systems Ltd. These integrators combine satellite capacity and
other communications services to create customized networks that
respond to specific customer needs. End users can use these
services to satisfy needs that include credit card verification,
inventory control and management and oil pipeline monitoring and
control. End users of our network for these applications include
the United Nations, the Central Bank of the Russian Federation
and the World Bank. For a discussion of our strategy with
respect to corporate network applications, see
 Our Strategy  Sustain and Grow Our
Core Voice and Data Business  Corporate Network
above.

Video
Applications

We have been providing capacity to customers in
the video services segment since our first satellite commenced
operations in 1965. Users in this segment use our satellite
capacity for the contribution of video feeds to video production
studios and the distribution of television programming to
television station affiliates, cable operators and subscribers
of direct-to-home services. We have a small share of the total
market for satellite-based video distribution services but are
focused on building our position in the video distribution

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services market in the future, as discussed in
 Our Strategy  Grow Our Business
Among Video and Government/ Military Customers 
Video.


Over 100 customers use our satellite capacity for
video services. Our video services customers include
telecommunications providers and television broadcasters
throughout the world, including Telenor Satellite Broadcasting,
which uses our capacity to distribute television and radio
programming directly to homes in the Nordic region. End users of
our video services include CNN, Reuters and BBC World.

Internet
Applications

Our satellite capacity is used for point-to-point
connections to the Internet backbone. The availability of
Internet backbone connectivity via satellite allows our
customers to bypass congested terrestrial networks and connect
directly to the Internet backbone. Our users in this segment
include more than 150 Tier 1 and Tier 2 Internet service
providers and other telecommunications services providers that
require backbone connectivity and that market Internet-related
services to their customers.

Among our Internet trunking customers are SingTel
Optus Ltd. and Embratel Participaçöes S.A. End users
of our network for Internet trunking applications include Tier 1
Internet service providers such as Cable and Wireless plc and
Sprint Corporation. For a discussion of our strategy with
respect to Internet applications, see  Our
Strategy  Sustain and Grow Our Core Voice and Data
Business  Internet.

Other
Services

We provide tracking, telemetry and command
services for satellites owned by other satellite operators. Our
personnel maintain the proper orbital location of these
satellites and monitor the satellites on-board systems. We
also provide commercial launch support services for satellites
owned by other satellite operators, including in-orbit testing
and launch and early orbit phase support.

Geographic
Distribution of Our Revenue

Our revenue is derived from almost every region
of the world. Our historical revenue broken down by geographic
region is approximately as follows:

|                                |  |              |    |      |  |      |    |   |  |  |    |  
|------------------------------- |  | ------------ | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                |  |             
|                                |  | Year Ended  
|                                |  | December 31,
|                                |  |             
|Geographic Region               |  | 2000         |    | 2001 |  | 2002
|                                |  |              |    |      |  |     
|Europe                          |  |              | 28 | %    |  |      | 29 | % |  |  | 29 | %
|North America and the Caribbean |  |              | 23 | %    |  |      | 24 | % |  |  | 24 | %
|Asia Pacific                    |  |              | 19 | %    |  |      | 18 | % |  |  | 17 | %
|Latin America                   |  |              | 14 | %    |  |      | 13 | % |  |  | 13 | %
|Sub-Saharan Africa              |  |              | 8  | %    |  |      | 9  | % |  |  | 11 | %
|Middle East and North Africa    |  |              | 8  | %    |  |      | 7  | % |  |  | 6  | %

We determine the geographic location of a
customer based on the customers billing address. We
recognize revenue based upon customer location. However, in most
cases our customers use the services that we provide to either
send or receive information to areas outside of the country or
territory in which they are located.

Sales,
Marketing and Distribution Channels

Our customer base includes over 500
communications providers, including many of the worlds
leading carriers, Internet service providers, network
integrators and broadcasting companies. We consider our customer
relationships to be among our most important strategic assets.
We support our customers business strategies by providing
global, high-quality and reliable satellite-based services at
competitive prices. In addition, we believe we provide our
customers with a superior level of satellite expertise. For
these reasons, we believe our business relationships with our
current customers generally are good.

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We sell our services to customers who use our
satellite capacity themselves for providing services to their
own customers as well as to customers who resell our satellite
capacity to third-party service providers. Our current wholesale
market orientation is largely the result of operational
restrictions that were placed on us as an intergovernmental
organization. While we will continue to leverage our existing
distribution relationships and provide wholesale satellite
capacity to our customers, now that we are a private company we
are also taking advantage of our increased ability to sell
directly to certain sectors of the market to attract new
customers to our business.

Our sales and marketing effort is designed to
build long-term relationships with our customers, with the
objectives of sustaining and growing our core fixed satellite
services business, diversifying our service portfolio and
expanding our customer base. As a customer-focused organization,
we work with our customers to ensure that we provide services
responsive to their needs.

Our Intelsat Global Sales subsidiary, located in
London, England, is our global sales and marketing headquarters.
In addition, we have established local sales and marketing
support offices in the following locations around the world:

|                                                                                                                             |  |                                                                                                      
|---------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------
| Australia;           Brazil;           China;           Norway;           Singapore;           the
    United States; |  |  France;
     Germany;
     India;
     South Africa;
     Peru; and
     United Arab Emirates.

By establishing local offices closer to our
customers and staffing those offices with experienced personnel,
we believe that we are able to provide flexible and responsive
service and technical support to our customers.

We believe that we enjoy significant brand
recognition with current and potential users of our satellite
services and expect to develop further customer awareness
through our marketing and promotion efforts. We use our brand
name, superior network performance and technical support to
market our services to a broad spectrum of customers seeking to
communicate globally.

We have begun the process of establishing
customer relationships with some of our end users, such as the
World Bank. In addition, on November 25, 2002 we completed
a transaction with COMSAT and COMSAT Digital Teleport, Inc.
pursuant to which we acquired substantially all of COMSAT World
Systems service contracts for the sale of our capacity,
thereby establishing direct customer relationships with most of
our North American end users. See Item 7.B 
Related Party Transactions  COMSAT Asset
Purchase Agreement for a more detailed description of this
transaction. These North American end users include WorldCom,
Inc., AT&T Corp., Verestar, Inc. and Sprint Corporation.

Backlog

As of December 31, 2001, we had a backlog of
approximately $5.0 billion in future revenue for services
to be provided on our satellites. As of December 31, 2002, our
backlog decreased to approximately $4.0 billion, with a
weighted average remaining contract duration of approximately
4.4 years. Approximately half of the decrease in our
backlog was due to three factors: the cancellation of our
service contracts with COMSAT World Systems upon our November
2002 acquisition of most of the assets of COMSAT World Systems,
the exclusion from our previously reported backlog of amounts
associated with a Brazilian customer that has been experiencing
financial difficulties and the termination of certain service
orders by Teleglobe Inc. and one of its affiliates. The decrease
in our backlog also reflects the continuing trend of customers
seeking shorter-term contracts due to the rapidly changing
telecommunications market. We expect to deliver services
associated with $820.7 million, or 20%, of our
December 31, 2002 backlog by December 31, 2003. See
Item 5  Operating and Financial Review and
Prospects  Backlog for a further discussion of
our backlog, including a discussion of how our acquisition of
COMSAT World Systems customer contracts, bankruptcy
filings by

35



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WorldCom, Inc. and Teleglobe Inc., the financial
difficulties of the Brazilian customer mentioned above and
events in Argentina have impacted or may impact our backlog.


Telenor
Agreement

We have entered into an agreement with Telenor
Satellite Services AS, referred to as Telenor, for the sale of
transponders on the 10-02 satellite to be deployed at the
359°E orbital location. Telenor currently has operating
leases on our 707 satellite at the 359°E orbital location
that support its direct-to-home and business networks in Europe.
The 10-02 satellite will replace the 707 satellite at this
orbital location. Pursuant to our agreement with Telenor,
Telenor has agreed to purchase 24 Ku-band transponders, measured
in terms of 36 MHz equivalent units, on the 10-02 satellite. We
will retain ownership of the satellites C-band
transponders, all remaining Ku-band transponders and most of the
remainder of the satellite. We expect to launch the 10-02
satellite in the fourth quarter of 2003 or the first quarter of
2004. After the successful launch and in-orbit testing of the
10-02 satellite, title to, and risk of loss with respect to,
Telenors 24 Ku-band transponders on the satellite will
transfer to Telenor. At the time of this transfer, Telenor will
be required to pay the purchase price for the transponders. We
will operate the 10-02 satellite and remain the licensed user of
our satellite network filing at the 359°E orbital location.
Once title to these transponders has been transferred to
Telenor, all of Telenors service commitments for capacity
on the 707 satellite will be terminated. Under the agreement,
Telenor has the right to purchase and own equivalent Ku-band
transponders and capacity on any replacement or follow-on
satellite at the 359°E orbital location.

Network

Our customers depend on our global communications
network and our operational and engineering leadership,
including our:



|  |                                                                                                  
|- | -------------------------------------------------------------------------------------------------
| | over 38-year operating history and pioneering
    achievements in satellite communications;      
| 
| | highly redundant network, resulting from our
    overlapping satellite coverage areas;           
| 
| | ability to relocate or reconfigure many
    satellites to cover different geographic regions; and
| 
| | consistently high transponder availability levels.                                               

Our network is currently comprised of 24
Intelsat-owned and -operated satellites in orbit, leased
capacity on 2 satellites owned by strategic partners in the
Asia-Pacific region and ground facilities related to the
operation and control of our satellites. One additional
satellite, with an expected launch date in late 2003 or early
2004, is currently under construction. Our network also includes
ground network assets consisting of teleports or leased teleport
facilities in Germany, the United States and China and points of
presence in New York, Hong Kong, Frankfurt, Los Angeles and
London.

We believe that our operational and engineering
achievements are due primarily to our satellite procurement and
operations philosophy, which we believe has been different from
that of other satellite operators. Our operations and
engineering staff is involved from a satellites design to
its decommissioning. With our own staff working on site to
monitor progress, we maintain close technical collaboration with
our contractors during the process of designing, manufacturing
and launching a satellite. We continue our engineering
involvement throughout the operating lifetime of each satellite.
Extensive monitoring of earth station operations and
around-the-clock satellite control and network operations
support ensure our consistent operational quality, as well as
timely corrections when problems occur. In addition, we have in
place contingency plans for any foreseeable technical problems
that may occur during the lifetime of a satellite. Despite these
plans, however, we may experience technical difficulties in the
future that will impair the performance of one or more of our
satellites. See Item 3.D  Risk
Factors for a description of the types of technical
difficulties that could affect our satellites.

36



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Satellite
Systems

There are three primary types of commercial
communications satellite systems: low-earth orbit systems,
medium-earth orbit systems and geosynchronous systems.
Geosynchronous communications satellites are located
approximately 22,300 miles, or 35,700 kilometers, above the
equator. These satellites can receive radio frequency
communications from an origination point, relay those signals
over great distances and distribute those signals to a single
point or multiple receivers within the transmission range of the
satellites beams.

Geosynchronous satellites send these signals
using various parts of the electromagnetic spectrum. Our fleet
is designed to provide capacity using the C-and Ku-bands of this
spectrum. A third frequency, the Ka-band, is not widely used at
this time, but is being considered for use in broadband
projects. A Ka-band satellite may be accessed by a smaller
antenna, which is an important consideration for residential and
small business markets. We do not have any Ka-band satellites
and have not at this time entered into any contract for the
manufacture of a Ka-band satellite. However, as part of our
broadband strategy, in 2002 we entered into an agreement to
acquire a minority stake in Wildblue Communications, Inc.
Wildblue Communications, Inc. plans to offer broadband Internet
access services in the continental United States via Ka-band
satellite.

A geosynchronous satellite is referred to as
geostationary, or station-kept, when it is operated within an
assigned orbital control, or station-keeping, box, which is
defined by a specific range of latitudes and longitudes.
Geostationary satellites appear to remain above a fixed point on
the earths surface at all times. Geosynchronous satellites
that are not station-kept are in inclined orbit, which means
that, in order to save fuel, we do not control their north-south
position within their assigned orbital control boxes.

Our
Satellites

Our fleet of 24 of our own satellites and leased
capacity on 2 satellites owned by strategic partners currently
covers almost all of the earths surface and has been
designed to provide a high level of redundancy for our
customers. The features of our network that provide this
redundancy are as follows:



|  |                                                                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | most places on the surface of the earth are
    covered by more than one satellite;                                                                              
| 
| | many of our satellites have flexible design
    features that include the ability to be reconfigured or
    relocated to provide different areas of coverage; and
| 
| | subject to availability, our in-orbit fleet
    includes sparing capacity on operational satellites.                                                             

Each of these features enables us in the event of
a malfunction on a given satellite to move customers to other
capacity on the same satellite or to other satellites.

In addition to enhancing our network redundancy,
the design flexibility of some of our satellites enables us to
meet customer demand and respond to changing market conditions.
However, the exact location and intended use of each of our
satellites are subject to various governmental approvals,
coordination issues and other regulatory requirements. See
 Regulation below for a description of
these regulatory requirements.

For the year ending December 31, 2002, the
transponder availability rate on satellites owned and operated
by us was nearly 99.998%. This availability rate was achieved by
accumulating nearly 7.8 million transponder hours in
service, with approximately 172 hours of accumulated transponder
outage. Our transponder availability rates have averaged over
99.997% since 1985.

Our system fill factor represents the percentage
of our total available station-kept transponder capacity,
including the capacity that we lease, that is in use or reserved
at a given time. As of February 21, 2003, we had an average
system fill factor, including guaranteed reservations and rights
of first refusal for service, of nearly 63.6%. As of that date,
our average system fill factor did not include capacity on the
907 satellite, which had not yet commenced in-orbit operations,
or on the 702 satellite, which had recently arrived at another
orbital location. We estimate that our achievable system fill
factor is approximately 90%.

There are a number of elements that affect our
achievable system fill factor. First, traffic on our satellite
network is asymmetrical, generally reflecting the higher demand
to move data from developed to developing regions. Second, our
satellites are designed with a greater number of zone beams, as
opposed to hemispheric

37



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beams, than is typical in the industry to
accommodate the needs of our customers for space segment
connectivity spanning multiple continents. Third, our current
satellite fleet consists primarily of satellites of generic
design, which offer more flexibility and can be easily deployed
into other orbital locations within our satellite network, but
which are not optimized for a specific location. In combination,
these practical and technical aspects of our satellite system
result in a lower achievable system fill factor than that of
some other satellite services providers that have a higher
concentration of region- or role-specific satellites.


We expect our average system fill factor to
decline as a result of the increase in our systems
available transponder capacity after the launch of our
additional planned satellite and our expansion into new orbital
locations. Over the long run, we expect our achievable system
fill factor to increase slightly, reflecting the deployment of
satellites that are more specifically tailored to the expected
traffic patterns of their orbital locations. Although achieving
a high system fill factor enables us to generate more revenue
than we otherwise would, it may be an indication of unmet demand
at key orbital locations and may limit restoration capability in
the event of a malfunction of a satellite in our system.

In-Orbit
Satellites

The satellites that make up our existing fleet
include 24 satellites owned and operated by us and leased
capacity on 2 additional satellites owned by strategic partners
in the Asia-Pacific region. With our satellites located in all
of the principal ocean regions  the Atlantic, Pacific
and Indian  and leased capacity available in the
Asia-Pacific region, we provide coverage to nearly every
landmass.

One of the two satellites on which we lease
capacity is the INSAT 2E, leased pursuant to an agreement with
the Government of India, Department of Space, INSAT Programme
Office. Under this agreement with the Government of India, we
have leased eleven 36 MHz equivalent transponders on INSAT 2E
through May 30, 2009. We have the right to extend this
lease term until the INSAT 2E has reached the end of its orbital
maneuver life, which is currently expected to be May 2012. The
other satellite on which we lease capacity is the SINOSAT-1,
which we lease pursuant to an agreement with Chinas SINO
Satellite Communications Company Limited, referred to as
SINOSAT. Under this agreement with SINOSAT, we have the option
to lease, on a space-available basis, up to six 36 MHz
transponders on the SINOSAT-1 satellite. We may exercise this
option at any time and from time to time during the option term,
which expires in April 2005. Two of the transponders may be
leased through April 2005, while four of the transponders may be
leased through April 2007. No lease may exceed five years. Under
this option agreement with SINOSAT, we have leased capacity
under one lease agreement through December 31, 2004 and
under another lease agreement through August 31, 2006.

As of February 21, 2003, our in-orbit fleet
had 892 transponders available for transmitting in the C-band
and 339 transponders available for transmitting in the Ku-band.
These totals measure transponders on station-kept satellites,
including the transponders that we lease from INSAT and SINOSAT.
However, these totals do not include transponders on the 907
satellite, which had not yet begun its in-orbit testing period
as of that date, and on the 702 satellite, which had recently
arrived at another orbital location. In each case, these numbers
refer to usable 36 MHz equivalent transponders.

The table below provides a summary of our
in-orbit satellite fleet as of February 21, 2003. The
transponder numbers are based on the original design
capabilities of the satellites. The actual number of available
transponders on a satellite can vary from its original design
capabilities due to its orbital location, inter-system
coordination issues, its beam configurations and the impact of
certain anomalies.

38



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##### 



|                    |  |                                             |  |                  |  |                |  |                 |    |                |  |                |    |                  |  |                |  |  |               | 
|------------------- |  | ------------------------------------------- |  | ---------------- |  | -------------- |  | --------------- | -- | -------------- |  | -------------- | -- | ---------------- |  | -------------- |  |  | ------------- | 
|                    |  |                                             |  |                  |  |                |  |                 |    |                |  |               
|                    |  |                                             |  |                  |  |                |  | Transponders(1) |    |                |  | Estimated     
|                    |  |                                             |  | Orbital Location |  |                |  |                 |    | End of Orbital |  | End of Orbital
|Satellite           |  | Manufacturer                                |  | (East Longitude) |  | Launch Date    |  | C               |    | Ku             |  | Design Life    |    | Maneuver Life(2)
|                    |  |                                             |  |                  |  |                |  |                 |    |                |  |                |    |                 
|Geostationary Orbit |  |                                             |  |                  |  |                |  |                 |    |                |  |                |    |                  |  |                |  |  |               | 
|601                 |  | Hughes Aircraft Company (Hughes)            |  | 64.0°            |  | October 1991   |  |                 | 64 |                |  |                | 24 |                  |  | October 2001   |  |  | April 2004    | 
|605                 |  | Hughes                                      |  | 332.5°           |  | August 1991    |  |                 | 64 |                |  |                | 24 |                  |  | August 2001    |  |  | February 2006 | 
|701                 |  | Space Systems/ Loral                        |  | 180.0°           |  | October 1993   |  |                 | 42 |                |  |                | 20 |                  |  | August 2004    |  |  | June 2011     | 
|702                 |  | Space Systems/ Loral                        |  | 55.0°(3)         |  | June 1994      |  |                 | 42 |                |  |                | 20 |                  |  | April 2005     |  |  | February 2012 | 
|704                 |  | Space Systems/ Loral                        |  | 66.0°            |  | January 1995   |  |                 | 42 |                |  |                | 20 |                  |  | November 2005  |  |  | November 2010 | 
|705                 |  | Space Systems/ Loral                        |  | 310.0°           |  | March 1995     |  |                 | 42 |                |  |                | 20 |                  |  | January 2006   |  |  | June 2009     | 
|706                 |  | Space Systems/ Loral                        |  | 307.0°           |  | May 1995       |  |                 | 42 |                |  |                | 28 |                  |  | March 2006     |  |  | July 2012     | 
|707                 |  | Space Systems/ Loral                        |  | 359.0°           |  | March 1996     |  |                 | 42 |                |  |                | 28 |                  |  | January 2007   |  |  | November 2012 | 
|709                 |  | Space Systems/ Loral                        |  | 304.5°           |  | June 1996      |  |                 | 42 |                |  |                | 20 |                  |  | April 2007     |  |  | October 2011  | 
|801                 |  | Martin Marietta Overseas Corporation (MMOC) |  | 328.5°           |  | March 1997     |  |                 | 64 |                |  |                | 12 |                  |  | March 2007     |  |  | March 2009    | 
|802                 |  | MMOC                                        |  | 174.0°           |  | June 1997      |  |                 | 64 |                |  |                | 12 |                  |  | June 2007      |  |  | April 2015    | 
|804                 |  | MMOC                                        |  | 176.0°           |  | December 1997  |  |                 | 64 |                |  |                | 12 |                  |  | December 2007  |  |  | December 2014 | 
|805                 |  | MMOC                                        |  | 304.5°           |  | June 1998      |  |                 | 36 |                |  |                | 6  |                  |  | June 2008      |  |  | December 2016 | 
|901                 |  | Space Systems/ Loral                        |  | 342.0°           |  | June 2001      |  |                 | 72 |                |  |                | 22 |                  |  | June 2014      |  |  | October 2017  | 
|902                 |  | Space Systems/ Loral                        |  | 62.0°            |  | August 2001    |  |                 | 76 |                |  |                | 22 |                  |  | August 2014    |  |  | March 2018    | 
|903                 |  | Space Systems/ Loral                        |  | 325.5°           |  | March 2002     |  |                 | 76 |                |  |                | 22 |                  |  | March 2015     |  |  | May 2017      | 
|904                 |  | Space Systems/ Loral                        |  | 60.0°            |  | February 2002  |  |                 | 76 |                |  |                | 22 |                  |  | February 2015  |  |  | April 2018    | 
|905                 |  | Space Systems/ Loral                        |  | 335.5°           |  | June 2002      |  |                 | 76 |                |  |                | 22 |                  |  | June 2015      |  |  | April 2019    | 
|906                 |  | Space Systems/ Loral                        |  | 64.0°            |  | September 2002 |  |                 | 72 |                |  |                | 22 |                  |  | September 2015 |  |  | October 2019  | 
|907(4)              |  | Space Systems/ Loral                        |  | 332.5°           |  | February 2003  |  |                 | 76 |                |  |                | 22 |                  |  | March 2016     |  |  | April 2019    | 
|APR-1(5)            |  | Indian Space Research Organization          |  | 83.0°            |  | N/A            |  |                 | 11 |                |  |                | 0  |                  |  | N/A            |  |  | May 2012      | 
|APR-2(5)            |  | Alcatel                                     |  | 110.5°           |  | N/A            |  |                 | 6  |                |  |                | 0  |                  |  | N/A            |  |  | N/A           | 
|Inclined Orbit      |  |                                             |  |                  |  |                |  |                 |    |                |  |                |    |                  |  |                |  |  |               | 
|511                 |  | Ford Aerospace                              |  | 330.5°           |  | June 1985      |  |                 | 42 |                |  |                | 12 |                  |  | June 1992      |  |  | March 2005    | 
|602                 |  | Hughes                                      |  | 33.0°            |  | October 1989   |  |                 | 64 |                |  |                | 24 |                  |  | October 1999   |  |  | June 2007     | 
|603                 |  | Hughes                                      |  | 340.0°           |  | March 1990     |  |                 | 64 |                |  |                | 24 |                  |  | March 2000     |  |  | June 2008     | 
|604                 |  | Hughes                                      |  | 157.0°           |  | June 1990      |  |                 | 64 |                |  |                | 24 |                  |  | June 2000      |  |  | April 2006    | 



---



|    |                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on satellite design capabilities (or, for
    APR-1 and APR-2, available capacity for lease) and measured in
    36 MHz equivalent transponders.
|   
|(2) | Assuming no relocation of the satellite.                                                                                                              
|   
|(3) | Rights to use this orbital location are held by
    one of our customers.                                                                             
|   
|(4) | In transit to a temporary orbital location for
    in-orbit testing. To be redeployed to 332.5°E after
    completion of in-orbit testing.            
|   
|(5) | Operated by strategic partners with capacity
    leased by us.                                                                                        

The design life of a satellite is the length of
time that the satellites hardware is guaranteed by the
manufacturer to remain operational under normal operating
conditions. In contrast, a satellites orbital maneuver
life is the length of time the satellite is actually expected to
remain operational within its assigned station-keeping box, as
determined by remaining fuel levels, fuel consumption rates and
the status of the satellites health. Although the orbital
maneuver lives of our satellites have historically extended
beyond their contractual design lives, this trend may not
continue.

In order to extend the orbital maneuver lives of
our 511, 602, 603 and 604 satellites beyond our original
estimates, we are operating these satellites in inclined orbit.
By operating a satellite in inclined orbit, we are able to save
significant amounts of fuel and thereby substantially extend its
useful life. Extending the lives of our inclined orbit
satellites allows us to continue to earn revenue beyond our
original estimates for these satellites. However, the types of
services that can be provided using inclined orbit satellites
are limited, and we typically offer capacity on inclined orbit
satellites at a discount.

We have experienced no catastrophic in-orbit loss
throughout our history, and our current satellite fleet is
generally healthy. We have experienced some technical problems
with our current fleet but have been able to

39



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minimize the impact of these problems on our
customers, our operations and our business. Most of these
problems have been component failures and anomalies that have
had little long-term impact on transponder availability to date.
All of our satellites have been designed to accommodate an
anticipated rate of equipment failures with adequate redundancy
to meet or exceed their orbital design lives. To date, this
redundancy design scheme has proven effective, although this
trend may not continue. The most notable anomalies, losses and
risks to our fleet at this time are described below.


Our 605 satellite has experienced problems with
its primary and redundant central telemetry units. These units
transmit information regarding the performance and status of a
satellites on-board systems to ground facilities and
thereby enable satellite operators and engineers to track the
health and configuration of a satellite. The 605
satellites primary telemetry unit failed in 1992, and the
redundant unit failed in 1997. Less than three months after its
failure, the redundant unit began transmitting information again
and has been transmitting properly since that time. However, we
do not know whether the redundant telemetry unit will continue
to function properly in the future. During the short period in
which both units had failed, we were able to operate the
satellite normally using a ground-based simulator to track the
status of the satellite. In addition, we developed a
ground-based system that allowed us to verify the
satellites orientation in space, referred to as its
attitude, without telemetry information from the satellite. We
would use these ground-based systems to operate the 605
satellite in the event the redundant telemetry unit fails again,
although it is possible that we may not be able to operate the
satellite through its remaining useful life if this failure
occurs.

Our 701, 702, 704 and 709 satellites have been
experiencing higher than normal friction torque on some of their
momentum wheel assemblies. Each of these satellites includes
three momentum wheel assemblies, any two of which must be
operating at all times in order for the satellite to function
properly. These wheel assemblies are used to control the
satellites attitude. Higher than normal friction torque
degrades the performance of the momentum wheels and increases
the risk of wheel failure. The failure of one of these wheels
could result in dynamic changes in the satellites
orientation, referred to as attitude transients, and possible
temporary loss of earth lock. Even though the primary wheels
have not failed, we are currently using the redundant momentum
wheel assemblies on the 701, 702 and 704 satellites in order to
minimize the risk of attitude transients. We have developed an
alternative control system that utilizes thrusters instead of
momentum wheels that could provide long-term attitude control
for each of the affected satellites in the event that two of its
three wheels fail. These measures are expected to permit the
701, 702, 704 and 709 satellites to achieve and exceed their
orbital design lives, despite any potential wheel failures. Our
702 satellite also has an anomaly with a switch that is used to
move uplink transmissions between two zone beams. However, our
use of a redundant switch has prevented any loss of capability.

Our 706 satellite has experienced battery cell
failures that have reduced the energy available for operating
the satellite during eclipse periods when the sun is not visible
to the satellite. A satellite relies on its battery power during
these periods, which occur twice per year near the solar equinox
and can last up to 72 minutes per day over a period of
45 days. Due to these battery cell failures, the ability of
the 706 satellite to carry a full traffic load during solar
eclipse periods has been negatively impacted. We are continuing
to explore operational and commercial options that allow us to
reduce the capacity in use during these periods and thereby to
minimize the stress on the remaining battery cells.

Our 709 satellite has experienced a similar type
of battery cell failure involving fewer cells. It would take
additional battery cell failures on the 709 satellite to impact
our operation of the satellite. As a result, we do not at this
time consider the 709 battery cell failures to be as significant
as the battery cell failures on our 706 satellite. However,
additional cell failures of this type could impact our ability
to operate this satellite. In addition, the 709 satellite has a
radio frequency output power instability in the downlink of one
hemispheric beam. The anomaly, which was detected in 1996
shortly after the satellites launch, resulted in the loss
of nine 36 MHz equivalent transponders of the satellites
capacity.

In March 1997, before being put into service, our
801 satellite went into an uncontrolled spin that resulted in
its loss of earth lock. We were able to recover attitude control
within two days. However, the satellites north solar array
structure was damaged during this period. The damage has limited
our use of certain control equipment on the satellite required
for station-keeping maneuvers. We have implemented alternative

40



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operational measures using a set of thrusters on
the satellite that allow us to continue station-keeping
maneuvers. However, the satellites orbital maneuver life
has been reduced. As described in
 Network  Sparing;
Insurance  Insurance below, the 801 anomaly
resulted in a settlement with our insurers. Although there is
currently no evidence of further damage to the 801
satellites array structure, it is possible that the
damaged array may not continue to perform as it has over the
past six years. In addition, the thrusters that are part of our
alternative operational measures on the satellite are being used
for continuous attitude corrections. These thrusters are not
designed for this operation, and accordingly their use for
continuous attitude corrections may result in premature failure.
One of these thrusters has already experienced degraded
performance that may be a result of this type of operation of
the thruster. We are now using a redundant thruster in place of
the thruster experiencing degraded performance and have made
other changes in our operation of the 801 satellite to minimize
the impact on the remaining thrusters.


Our 801 satellite has also experienced failures
resulting in degraded performance on four of its nine C-band
hemispheric and zone beam receivers. As a result, only five
receivers are operating at full performance. There are six
hemispheric and zone beams on the satellite, each of which
requires a receiver. The late 2002 failure of the fourth
receiver has created a situation in which one of the beams must
be configured to use a receiver experiencing degraded
performance. Although this beam is still capable of carrying our
current traffic, it is possible that the beam may not be able to
carry new traffic. We would need to conduct analysis and testing
to assess the feasibility of carrying any new traffic on the
affected beam before we could add new traffic on the beam.

The spare attitude system processor on our 802
satellite has failed, resulting in the loss of redundancy for
the attitude control system used to maintain the
satellites orientation in space. This failure has not
resulted in the loss of any revenue or available transponder
capacity. We are currently deploying a back-up system for
controlling the attitude of the 802 satellite from the ground
that should allow us to continue operating the satellite for its
full orbital maneuver life in the event the remaining processor
fails.

Our 804 satellite has experienced some
degradation of performance on one zone beam and one hemispheric
beam that we believe is caused by an obstruction affecting the
antenna shared by these beams. This problem could result in the
loss of some of the satellites capacity. However, because
of the way we have allocated capacity and the locations of our
customers, this degradation has had no significant impact on our
operations or the availability of capacity on our 804 satellite
to date.

Our 901 satellite has experienced an anomaly in
one of the feed horns of its receive hemispheric/zone beam feed
array. This anomaly can result in interference among the three
beams that share the affected feed array only if uplinks are
transmitted to the satellite from a particular region between
the areas covered by the affected zone beams. Because the
impacted region is covered by other beams on the satellite and
because we have no customers in the impacted region, this
problem has had no impact on our operations or the availability
of capacity on our 901 satellite to date.

See Item 3.D  Risk
Factors for a discussion of the impact of various
technical anomalies on our business.

Planned
Satellites

We began a nine-satellite launch program in 2001.
Seven of these satellites have been successfully launched. On
November 21, 2002, we terminated our order for one of the
satellites in our launch program due to the manufacturers
significant postponement in the delivery date of the satellite.
We expect that the remaining satellite in our launch program
will be launched by the end of 2003 or early 2004. By the middle
of 2004, we expect to occupy 22 orbital locations and will
continue to have the ability to lease satellite capacity from
strategic partners at 2 additional orbital locations. See Item
3.D  Risk Factors for a discussion of the
impact on our business of problems or delays in the manufacture
or launch of our satellite under construction. The seven
satellites that we have launched and the eighth satellite to be
launched in this launch program have, on average, more power,
more transponders and a larger coverage area than many of our
other satellites.

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By replacing satellites that have reached the end
of their commercial lives with higher-powered satellites
featuring enhanced technologies, we have been able both to
continue providing capacity to well-established orbital
locations and to offer current customers at these locations
growth capacity. The added transmission power of our newer
satellites allows our customers to use smaller antennas, reduce
ground segment costs and use our system for an expanded variety
of applications. In addition, our newer satellites have been
designed with the flexibility to respond effectively to emerging
or changing patterns of communications traffic. We expect to
continue to replace existing satellites, as necessary, with more
technologically advanced satellites that meet customer needs. We
periodically conduct evaluations to determine the current and
projected strategic value of our existing and any planned
satellites and to guide us in redeploying satellite resources as
appropriate.

The remaining satellite in our launch program is
the 10-02 satellite, which is being manufactured by Astrium SAS.
We expect to launch this satellite in late 2003 or early 2004
and expect to deploy it at 359.0° East longitude. However,
we are regularly monitoring market conditions, and our satellite
deployment plan changes from time to time to optimize our
overall satellite system. The 10-02 satellite is designed to
have 70 C-band and 36 Ku-band transponders, measured in 36 MHz
equivalent units. Of the 36 Ku-band transponders, 24
transponders have been sold to Telenor. See
 Telenor Agreement for a description of
our agreement with Telenor. The actual number of usable
transponders on the 10-02 satellite will depend on a number of
factors, including the satellites operational
configuration at its specified orbital location. The 10-02
satellite is expected to reach the end of its orbital design
life in the first quarter of 2017. Assuming no relocation of the
satellite from the orbital location to which it is initially
deployed, the 10-02 satellite is expected to reach the end of
its orbital maneuver life in the second quarter of 2021.

Construction Agreement.We entered into an agreement with
Astrium SAS for the manufacture of two Intelsat X series
satellites, the 10-01 and 10-02 satellites. As described below,
we have terminated this agreement with respect to the 10-01
satellite. Under this agreement, we are required to pay the
majority of the total contract price for a satellite in the form
of progress payments during the period of the satellites
construction. The remainder of the price is payable in the form
of incentive payments based on orbital performance over the
design life of the satellite following launch, as well as in the
form of a significant payment due only when the satellite has
successfully completed in-orbit testing. Our agreement with
Astrium SAS provides for price reductions or payments by the
manufacturer in the event of late delivery due to the fault of
the manufacturer.

Our agreement with Astrium SAS for the
manufacture of our 10-02 satellite includes provisions that
enable us to terminate with or without cause. If we terminate
the agreement without cause, we are subject to substantial
termination liabilities that escalate with the passage of time.
If we terminate for cause, we are entitled to take over any work
remaining, with the manufacturer paying any additional costs.
Alternatively, we can recover payments we have made if the
delivery date for the satellite has been delayed by more than a
specified period of time. We would also be entitled to receive
additional specified damages. The risk of loss of a satellite
manufactured under this agreement passes to us at launch.

In November 2002, we notified Astrium SAS of our
termination of our construction agreement with respect to the
10-01 satellite due to the manufacturers significant
postponement in the delivery date of the satellite by more than
the period of time specified in the agreement. We have not
terminated the portion of our agreement with Astrium SAS
relating to the 10-02 satellite. For a discussion of the impact
of the termination of our order for the 10-01 satellite on our
financial condition and results of operations, see
Item 5  Operating and Financial Review and
Prospects.

Our agreement with Astrium SAS gives us the
option until February 2005 to order additional satellites at
fixed prices identified in the agreement.

Launch Services Agreements.We have entered into launch services
agreements with Sea Launch Company LLC and Lockheed Martin
Commercial Launch Services for the Intelsat X series satellites.
These agreements provide that we may terminate at our option,
subject to the payment of specified termination fees that
increase as a given launch date approaches.

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At the time we entered into our launch services
agreements with Sea Launch Company LLC and Lockheed Martin
Commercial Launch Services, we had two Intelsat X series
satellites on order. However, as indicated above, we have since
terminated our order for the Intelsat 10-01 satellite. In
connection with the termination of our order for the 10-01
satellite, we have agreed in principle with Sea Launch Company
LLC to amend our launch services agreement to provide for the
launch of an unspecified future satellite. See
Item 5  Operating and Financial Review and
Prospects  Termination of Our Order for the Intelsat
10-01 Satellite for a discussion of the impact of this
agreement on our financial condition and results of operations.
We intend to use a Proton M/ Breeze M launch vehicle under our
agreement with Lockheed Martin Commercial Launch Services for
the launch of our 10-02 satellite.

We have negotiated postponement terms in both
agreements in order to allow for reasonable delays in the
delivery of our satellites. In one of these agreements, we also
have the ability to terminate the agreement if specific launch
vehicle upgrade milestones are not met. In the event of a launch
failure, both agreements give us the option to launch a
replacement satellite at a cost specified under the agreement.
See Item 7.B  Related Party
Transactions below for information regarding our agreement
with Lockheed Martin Commercial Launch Services.

See Item 5  Operating and
Financial Review and Prospects  Liquidity and Capital
Resources  Capital Expenditures for information
regarding our plans for our satellites.

Network
Operations and Current Ground Facilities

We control and operate each of our satellites and
manage the communications services for which it is used from the
time of its initial deployment through the end of its
operational life. We provide most of these services from our
Washington, D.C.-based satellite control center and network
management center. We also provide tracking, telemetry and
command services for our 24 satellites and for satellites owned
by other satellite companies. We provide these services from
ground facilities located around the world.

The satellite control center is responsible for
the monitoring and control of our satellite fleet 24 hours per
day, 365 days per year. Utilizing sophisticated satellite
command and control hardware and software, the satellite control
center analyzes telemetry from our satellites in order to
monitor the status and track the location of our satellites. As
necessary, the satellite control center sends commands to the
satellites for station-keeping maneuvers and equipment
reconfigurations. Our satellite control center currently manages
a complex and dynamic operations environment. It manages the
daily operation of our satellites and those satellites we
operate for other satellite companies, while concurrently
supporting our launch schedule. We perform all of these
functions from one facility, with one group of employees.
Centralizing these functions enables our staff to become
proficient in the management of multiple satellite series,
thereby improving our operational redundancy and response times
and increasing the cost-efficiency of our satellite operations.

Our network management center is responsible for
managing the communications services that we provide to our
customers, and is the first point of contact for customers
needing assistance in using our network. Daily tasks include
monitoring customer traffic and the quality of our customer
communications services. Our network management center also
conducts measurements of transponder performance and
transmission power and resolves interference issues and other
customer concerns. The network management center coordinates
satellite configuration changes and satellite transitions, as
well as back-up operations for customers cable failures.
The various monitoring systems that the network management
center uses to perform these functions are in continuous,
remote-controlled operation 24 hours per day. Our network
management center also monitors the end-to-end services that we
provide to our customers, including the terrestrial
infrastructure used to provide these services.

We also maintain a back-up operations facility,
deployed during the early 1990s, a relatively short distance
from our Washington, D.C. facility. This facility provides
back-up emergency operational services in the event that our
Washington, D.C. operations areas experience interruption. In
January 2003, we acquired 55 acres of unimproved land a
relatively short distance from our Washington, D.C. facility. We
intend to use this property for, among other things, a back-up
facility and data center for our operations. See
Item 4.D  Property, Plants and
Equipment for a description of this property.

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Our satellite control center and network
management center use a network of ground facilities to perform
their functions. This network includes six tracking, telemetry,
command and monitoring, or TTC&M, stations and various other
earth stations worldwide. Refer to Item 4.D 
Property, Plants and Equipment below for information
regarding the location of our ground network facilities.

Due to the limitations on our activities as the
IGO prior to privatization, we do not own most of the earth
stations and other facilities that comprise our ground network,
including four of our six primary TTC&M stations. Rather, we
contract with the owners of the TTC&M stations and other
facilities for the provision of certain monitoring and control
services. The contracts with the owners of these four TTC&M
stations have expiration dates ranging from November 30,
2005 to August 31, 2007. On November 25, 2002, we
completed a transaction with COMSAT and COMSAT Digital Teleport,
Inc. pursuant to which we acquired two of the six primary
TTC&M stations in our ground network. See
Item 7.B  Related Party
Transactions  COMSAT Asset Purchase Agreement
for more information about this acquisition.

Sparing;
Insurance

Both in-orbit sparing capability and insurance
are important components of our risk mitigation strategy for
satellite-related malfunctions. While insurance provides cash
proceeds in the event of an insured loss, in-orbit sparing
provides capacity to meet customers needs in the event of
a launch failure or an in-orbit failure.

Sparing

We believe that the availability of spare
capacity, together with the overlapping coverage areas of our
satellites and flexible satellite design features described in
 Network  Our Satellites
above, are important aspects of our ability to provide reliable
service to our customers. In addition, these factors would
enable us to mitigate the financial impact to our operations
attributable to the loss of a satellite. Our system accommodates
in-orbit sparing through the use of capacity on satellites that
are less than fully utilized. In addition, we sell some capacity
on a preemptible basis and could preempt the use of this
capacity in the event of a loss of a satellite. This approach
enables us to optimize our fleet and to minimize potential
revenue loss. See Item 3.D  Risk
Factors for a discussion of the impact of a launch or
in-orbit failure on our business.

Insurance

Historically, and under our contract for the
manufacture of the Intelsat X series satellite, the
manufacturers of our satellites bear the risk of loss of the
satellites up to launch, at which time title and risk of loss
pass to us. At that point, we have generally obtained insurance
for the launch and, in most cases, some limited period of time
of in-orbit operations for satellites owned by us. Prior to
November 2001, we generally did not obtain in-orbit insurance
beyond the first year of in-orbit operations. This assumption of
in-orbit operations risk was supported in part by the IGOs
ability to call capital from its owners and in part by the
generally healthy operating history of the IGOs
satellites. With the manufacture of our Intelsat IV-A series of
satellites beginning in the early 1970s, we began our policy of
maintaining a program office at each satellite
manufacturers site where our engineers could monitor our
contractors during the construction and testing of our
satellites. Since that time, 45 satellites have been placed into
orbit, and we have experienced no catastrophic in-orbit loss
throughout our history. Please refer to
 Network  Our Satellites 
In-Orbit Satellites above for a description of notable
anomalies, losses and risks to our fleet at this time.

Launch Insurance.We
obtained insurance for the launch and first year of in-orbit
operations of our seven Intelsat IX series satellites, all of
which have been launched. The 901, 902 and 904 satellites have
already been in orbit for more than one year and therefore are
no longer covered under this policy. The 903 satellite is
covered under this policy through March 29, 2003. The first
year after launch is the period that includes the deployment and
in-orbit testing of a satellite and is considered to be the time
of greatest in-orbit risk. Subject to customary exclusions, our
insurance covers losses to the Intelsat IX series satellites
occurring during a satellites launch, or after lift-off,
and during its first year of in-orbit operations. These
customary exclusions, such as losses relating to acts of war,
are described in Item 3.D  Risk
Factors. The launch insurance on each of the Intelsat IX
series satellites is in an amount approximately equal to the net
book value

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of the satellite. Launch coverage under this
policy includes catastrophic loss of a satellite during launch,
as well as the failure of a satellite to obtain a proper orbit.
In-orbit coverage under this policy includes a satellites
failure to perform in accordance with contractual design
specifications once in orbit and during the first year of
operations. In-orbit coverage under this policy does not contain
a co-insurance requirement but also does not include capitalized
performance incentives for the period of in-orbit operations. If
50% or more of a satellites capability is lost, then we
may declare a constructive total loss, and the insurers would be
required to pay the full insured value and would obtain salvage
in return. If the satellite is able to achieve more than 50% but
less than 100% of its performance specifications, we will be
entitled to a pro rata portion of the amount of the insured
value.


In-Orbit Insurance.We currently have insurance in place
through November 8, 2003 for the in-orbit operations of our 706,
707, 802, 805, 901, 902 and 904 satellites. In addition, the 903
satellite will be insured under this policy beginning
March 30, 2003, and the other Intelsat IX series satellites
that complete their first year of in-orbit operations before
November 8, 2003 will be insured under this policy. Under
the terms of this policy, we chose to co-insure
$100.0 million of the net book value of each covered
satellite, and insurers cover the balance of the net book value
of each satellite, excluding capitalized performance incentives
relating to the satellites. Two of the satellites covered by
this policy are expected to have their net book values fall
below $100.0 million before the expiration of the policy on
November 8, 2003. Our decision to assume some risk for each
satellite was based in part on our favorable in-orbit
experience, as described above, and in the context of our
current sound financial condition. For satellites with net book
values of $100.0 million or less, we bear all loss. For
satellites with net book values of over $100.0 million, we
bear a percentage of the loss equal to the percentage of the
total net book value of the applicable satellite represented by
the $100.0 million that we co-insure. Coverage under this
policy recognizes losses based on a satellites failure to
perform in accordance with contractual design specifications. If
80% or more of a satellites capability is lost, then a
constructive total loss may be declared by us, and the insurers
would pay the full insured value determined as described above.
If 5% or more but less than 80% of a satellites capability
is lost, we will be entitled to a pro rata portion of the amount
of the full insured value determined as described above. There
are a number of customary exclusions to our coverage under this
policy, as well as exclusions relating to existing anomalies.
The customary exclusions are described in
Item 3.D  Risk Factors. The other
exclusions relate to problems we have experienced on our 706,
802 and 901 satellites. See
 Network  Our Satellites 
In-Orbit Satellites above for a discussion of these
anomalies. There are also deductibles for any two battery cell
failures on the 805 satellite and approximately 5% of the solar
array output power on the Intelsat IX series satellites.

As our remaining satellites individually have
values of approximately or less than $100.0 million, we
have not obtained, and do not intend to obtain, in-orbit
insurance coverage for them. The aggregate net book value of
these 13 satellites as of December 31, 2002 was
$586.6 million, which includes 6 satellites with no book
value.

As the insurance currently in place for our
satellites expires, our decision to purchase additional in-orbit
insurance will depend on a number of factors. These factors
include the cost and availability of insurance in the market and
the exclusions to coverage, if any, required by insurers. We
would also consider the other terms and conditions upon which
insurance is available and our historical experience with launch
and in-orbit malfunctions. We may decide not to obtain any
additional in-orbit insurance. Even if we decide to seek
additional insurance, we may not be able to obtain additional
in-orbit insurance on reasonable terms and conditions, if at
all. Our current intention is to obtain launch insurance and
insurance for the first years in-orbit operations for our
Intelsat X series satellite under construction. However, we may
not be able to obtain insurance for this satellite on reasonable
terms and conditions, and we may not be able to obtain insurance
at all. See Item 3.D  Risk Factors
for a description of the risks to our business associated with
not having in-orbit or launch insurance for our satellites.

We also have insurance in place through
March 31, 2005 for losses to our 801 satellite if the cause
is related to the satellites north solar array. On
March 18, 1997, the 801 satellite was damaged, causing a
reduction in the satellites orbital life. The IGO
subsequently entered into settlement agreements with insurers in
which an aggregate amount of approximately $33.0 million in
compensation was agreed upon. The

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agreements also provided that the insurers would
insure the satellite for any losses associated with the
satellites north solar array.


In addition to the satellite insurance described
above, we currently maintain third-party liability insurance up
to a limit of $500.0 million per occurrence or in the
aggregate per year for damages for physical injury and property
damage to third parties caused by our satellites. Our current
policy expires in early June 2003.

We do not insure against lost revenue in the
event of a total or partial loss of a satellite. For additional
information on insurance matters, see Item 3.D 
Risk Factors.

Competition

We are a global satellite operator. Our
competitors include global providers of fixed satellite
services, as well as regional satellite operators. We also face
significant competition from suppliers of terrestrial
communications capacity. We compete with other satellite
operators for both point-to-multipoint, or broadcast, services
and point-to-point services. We compete with fiber optic cable
operators principally for point-to-point services.

Prior to our privatization, most of our customers
held investment share in the IGO in proportion to their usage of
our system. As a result, our business may have realized some
competitive advantages. See Item 3.D  Risk
Factors for a discussion of the potential effects of the
privatization on our business and competitive position.

Satellite
Operators

We compete with other large satellite operators
based on several factors, including price, access, coverage,
availability of service and service quality and reliability. Our
largest competitors currently include PanAmSat Corporation, SES
GLOBAL S.A., Eutelsat S.A., Loral Space and Communications Ltd.
and New Skies.

PanAmSat.PanAmSat
Corporation operates a network of 21 geosynchronous satellites
that provide global coverage primarily for video distribution
services. It is a leading provider of satellite capacity for
television program distribution to network and cable systems in
North and South America, Africa, South Asia and the Asia-Pacific
region. PanAmSat has a particularly strong presence in North and
South America.

SES GLOBAL.SES
GLOBAL owns and operates a fleet of 28 geosynchronous satellites
and owns minority interests in several regional satellite
services providers that together operate 13 additional
satellites. SES GLOBAL primarily provides cable video, broadcast
video and direct-to-home video services in the North American
and European markets. It also provides Internet, broadband and
private data network services. SES GLOBAL has a presence in Asia
and Latin America due to its minority interests in regional
satellite services providers, including Asia Satellite
Telecommunications Holdings Limited, referred to as AsiaSat, and
Star One S.A., which owns and operates the BrasilSat satellite
fleet in South America. SES GLOBAL also owns a strategic
interest in Nordic Satellite A.B., which operates satellites
serving Scandinavia.

Eutelsat.Eutelsat
S.A. operates a fleet of 20 geosynchronous satellites primarily
providing broadcast video and radio services across its core
market of Europe and into parts of the Middle East, Africa,
Southwest Asia and North and South America. Eutelsat also leases
capacity on four satellites operated by other companies.
Eutelsat has a minority interest in HISPASAT, Spains
national satellite operator, which gives Eutelsat a presence in
Latin America.

Loral.Loral Space
and Communications Ltd. is a diversified satellite company with
substantial activities in satellite manufacturing and
satellite-based communications. With respect to its fixed
satellite services operations, Loral has entered into joint
marketing arrangements with other regional and national
satellite operators under the umbrella of the Loral Global
Alliance. The Loral Global Alliance includes Loral Skynet,
Satelites Mexicanos, S.A. de C.V., referred to as Satmex,
Europe*Star Limited, which is a joint venture of Loral and
Alcatel Space Industries, and Loral Skynet do Brasil. The Loral
Global Alliance operates

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a fleet of 13 geosynchronous satellites and
provides services primarily to broadcasters. Its services are
offered across North America, the Caribbean, and parts of South
America and Europe.


New Skies.New
Skies, which was spun off from the IGO in 1998, owns a fleet of
six geosynchronous satellites. New Skies offers video, voice,
data and Internet communications services to a range of
customers.

While these companies offer services similar to
those that we offer, all of these competitors derive a greater
share of their total revenue from the provision of video
services than we do. However, we believe that our long history
of high-quality, reliable service and the redundancy and
flexibility of our network distinguish us from our competitors.
In addition, we provide substantial technical assistance to our
customers in connection with the provision of our service,
especially to customers in developing countries.

We also compete with a number of regionally
focused satellite operators. Some of these entities provide
international connections to supplement their domestic services.
These entities include, among others:



|  |                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------
| | Europe*Star Limited in Europe;                                                                                                        
| 
| | the Arab Satellite Communications Organization,
    referred to as Arabsat, in the Middle East and sub-Saharan
    Africa;            
| 
| | Telesat in North America;                                                                                                             
| 
| | AsiaSat, APT Satellite Telecommunications Ltd.,
    MEASAT Networks Limited and Shin Satellite Public Limited
    Company in Asia; and
| 
| | Satmex and Star One S.A. in Latin America.                                                                                            

A number of other countries have domestic
satellite systems that also compete with us to some extent,
although most of our business is international in scope. These
regional and national operators compete with us primarily on
price. In addition, some countries limit our access in order to
protect their satellite systems.

We expect consolidation in the industry to
continue, resulting in more intense competition from larger
competitors with global systems. See  Industry
Overview  Key Trends  Industry
Consolidation and Item 3.D  Risk
Factors for information on the consolidation in our
industry and its effect on our competitive environment.

Fiber
Optic Cables

We face significant competition from providers of
fiber optic cable capacity. The primary use of fiber optic
cables is carrying high-volume communications traffic from point
to point, and we compete with fiber optic cable providers
principally for these point-to-point services. The growth in the
capacity of fiber optic cable on point-to-point transoceanic
routes, particularly across the Atlantic Ocean, has led some
services between major city hubs to migrate from satellite to
fiber optic cable. For example, most voice and data traffic and
video contribution traffic between major city hubs has migrated
to fiber optic cable. The availability of fiber optic cables
between medium-sized and smaller city hubs has also resulted in
the migration of traffic from satellite to fiber optic cable in
certain regions. The reduction in prices of capacity on fiber
optic cables has also contributed to this migration. Because
fiber capacity is available at substantially lower prices than
satellite capacity for point-to-point services, satellite
capacity remains competitive for signals that need to be
transmitted beyond the main termination points of fiber optic
cables, for point-to-multipoint transmissions and for signals
seeking to bypass congested terrestrial networks. Satellite
capacity is also competitive in parts of the world where
providing fiber optic cable capacity is not yet cost-effective
or is physically not feasible. We believe we compete with fiber
optic cable companies primarily on coverage.

Regulation

We are regulated by the U.S. Federal
Communications Commission, referred to as the FCC, under the
Communications Act of 1934, as amended. We also must comply with
the requirements of the Open-Market Reorganization for the
Betterment of Telecommunications Act, referred to as the ORBIT
Act. We are also subject to the export control laws, sanctions
regulations and other laws and regulations of governmental

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entities in the countries in which we operate. In
addition, we are subject to the frequency coordination process
of the International Telecommunication Unions Radio
Regulations provisions.


Regulation
by the FCC

All of our currently operating satellites are
licensed in the United States. Our operation and ownership of
these satellites is regulated by the FCC, the government agency
with primary authority in the United States over commercial use
of satellite radio communications. We currently must comply with
FCC regulations with respect to obtaining and retaining our
satellite licenses and avoiding harmful interference with or to
other users of radio frequencies. We also must comply with other
FCC regulations governing U.S.-licensed satellite systems and
must obtain FCC licenses for the operation of earth stations in
the United States. Our Intelsat USA License Corp. subsidiary is
subject to regulation as a common carrier, as discussed in more
detail below. Violations of the FCCs rules may result in
various sanctions, including fines, loss of authorizations or
the denial of applications for new authorizations or the renewal
of existing authorizations.

Authorization
to Launch and Operate Satellites

The FCC issues licenses to launch and operate
satellites to satellite operators who meet its legal, technical
and financial qualification requirements. The FCC requires
applicants for satellite licenses, as part of the application
process, to demonstrate that their proposed satellites would be
compatible with the operations of adjacent satellites. The FCC
expects U.S.-licensed satellite operators to coordinate with
other domestic and foreign operators to avoid harmful
interference, and it does not become involved unless the
operators are unable to resolve their conflicts.

On August 8, 2000, the FCC provided our
Intelsat LLC subsidiary with conditional authorization to
operate the IGOs 17 C-band and Ku-band satellites existing
at that time and to construct, launch and operate our planned
satellites. These authorizations are conditioned on our
compliance with the privatization and initial public offering
requirements of the ORBIT Act, which are discussed below under
 Regulation  Regulation by the
FCC  The ORBIT Act. These conditional
authorizations provided Intelsat LLC with access to a total of
22 orbital locations and granted multiple waivers of the
FCCs technical rules to accommodate the existing design
and operations of our satellite system. For example, the FCC
waived its two-degree spacing requirement to allow continued
operation of our existing and planned satellites at spacing
greater than two degrees from non-Intelsat satellites. The FCC
also waived certain financial requirements. The FCCs
waivers with respect to a particular satellite will apply for
the entire term of the satellite license. However, the FCC is
not required to grant additional waivers to us in connection
with our future satellite applications.

Intelsat LLCs conditional authorizations
became effective on July 18, 2001, the date on which the
IGO, in connection with the privatization, transferred ownership
of its 18 satellites to Intelsat LLC. This was also the date on
which the IGO transferred its International Telecommunication
Union network filings for 22 orbital locations associated with
the operation of these satellites to the United States national
registry. Pursuant to these conditional FCC licenses, and
consistent with FCC rules, Intelsat LLC may use its orbital
locations and satellites to provide services on a private
carrier basis in the United States and internationally.

The license term for each of our 17 satellites
that were in operation on the date of the FCCs
August 8, 2000 licensing order is 10 years or end of
life, whichever comes first, with the license term commencing on
July 18, 2001. The license term for each of the planned
satellites that were not yet in operation on August 8, 2000
is 10 years from the date that Intelsat LLC certifies to
the FCC that the particular satellite has been successfully
placed into orbit and that the satellites operations
conform to the requirements of the FCC licenses. Intelsat LLC
has certified that the 902 satellite became fully operational in
conformity with the requirements of the FCC license on
October 15, 2001. Intelsat LLC has certified that the 901
satellite became fully operational on November 21, 2001,
that the 904 satellite became fully operational on
March 27, 2002 and that the 903 satellite became fully
operational on May 22, 2002. Intelsat LLC also has
certified that the 905 satellite became fully operational on
July 18, 2002 and that the 906 satellite became fully
operational on

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October 19, 2002. Intelsat LLC has certified
that the 907 satellite became fully operational on
March 25, 2003.


At the end of a license term, Intelsat LLC can
request special temporary authorization to continue operating a
satellite. The FCC generally grants such authorization after the
expiration of the initial license term. However, such
authorization is not guaranteed. Intelsat LLC can also request
licenses to launch and operate replacement satellites. The
FCCs rules do not guarantee that it will grant licenses
for replacement satellites. In practice, however, the FCC
generally grants requests for replacement satellites. If the FCC
does not issue Intelsat LLC a license to launch and operate a
replacement satellite in any of its 22 orbital locations, the
FCC must return the particular orbital location to the
International Telecommunication Union, at which time the orbital
location would become available for use by other satellite
operators.

Any changes to Intelsat LLCs licensed
satellite system require FCC approval. The FCC, at Intelsat
LLCs request, has approved modifications to Intelsat
LLCs conditional licenses to operate its in-orbit
satellites and to launch and operate additional satellites in
the future. The modifications to the licenses included changes
in the orbital locations of certain satellites and revised
orbital relocation dates for certain satellites. The FCC has
also granted periodic requests by Intelsat LLC for special
temporary authority to conduct in-orbit testing of newly
launched satellites and to operate its licensed satellites in
different orbital locations on a temporary basis. The FCC is
currently considering requests by Intelsat LLC for modifications
to its licenses to operate the 602, 605, 805 and 709 satellites.

In addition to the 2 satellites on which we lease
satellite capacity, Intelsat LLC now owns and operates 24 C-band
and Ku-band satellites and has plans to construct, launch and
operate one additional satellite. See
 Network  Our Satellites 
Planned Satellites for a description of the planned
addition to our satellite system. Intelsat LLC must construct,
launch and operate this additional satellite by specified target
dates, referred to as milestones. The failure to meet these
milestones for a satellite will render our FCC license for that
satellite null and void and could result in our losing access to
the orbital location associated with that satellite. The FCC
imposes these milestones on all U.S.-licensed satellite
operators in order to prevent the warehousing of orbital
locations. If we experience delays in meeting a milestone, we
can apply to the FCC for an extension of the milestone. The FCC
will generally grant an extension if the delays are due to
circumstances outside of a satellite operators control,
such as the late delivery of a satellite by a satellite
manufacturer.

Other
FCC Authorizations

As a public intergovernmental organization, the
IGO was not permitted to hold earth station licenses. As a
result, four earth station licenses and one experimental earth
station license associated with technical facilities located at
our Washington, D.C. building and at the Clarksburg, Maryland
earth station facility were held by COMSAT on the IGOs
behalf. On April 23, 2001, in anticipation of the
IGOs privatization, Intelsat LLC and COMSAT jointly filed
an application to assign these earth station licenses to
Intelsat LLC. The FCC accepted these applications for filing and
made them available for public comment on May 16, 2001. No
comments were filed with respect to the applications, and the
FCC granted the applications on October 25, 2002.

On November 25, 2002, we completed a
transaction pursuant to which we acquired most of the assets of
COMSAT World Systems and COMSAT Digital Teleport, Inc. The
assets that we acquired in this transaction include
substantially all of COMSAT World Systems service
contracts for the sale of our capacity, two TTC&M earth
station facilities located in the United States and a teleport
facility located in the United States. We received the
FCCs approval for the transfer of FCC licenses held by
COMSAT relating to the transferred assets on October 25,
2002. The FCC approved the transfer of 36 Title III operating
licenses to our Intelsat LLC subsidiary and the transfer of 32
Title II common carrier authorizations to our Intelsat USA
License Corp. subsidiary, which acquired COMSAT World
Systems customer contracts. See Item 7.B 
Related Party Transactions  COMSAT Asset
Purchase Agreement for a description of the COMSAT
transaction. As a result of this transaction, we became subject
to FCC reporting and record-keeping requirements applicable to
U.S. international common carriers. These requirements include
traffic and

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revenue reporting, international circuit status
reporting and international interconnected private line
reporting. Other requirements we are now subject to as a result
of the COMSAT acquisition are notification of, and approval for,
foreign carrier affiliations and filing of contracts with
international carriers. We are also required to make annual
financial reports and equal employment opportunity reports.
Finally, we are required to provide communications assistance
for law enforcement and to maintain customer billing records for
18 months.


FCC
Fees

We must pay FCC application fees in connection
with modifying or renewing our satellite and earth station
licenses and requesting additional or special temporary
authority to operate satellites or earth stations. We must also
pay annual regulatory fees to the FCC for our satellites, for
our earth stations located in the United States and for our use
of capacity over international bearer circuits. We are required
to provide information to the FCC on the services that we
provide to our customers. The FCC uses this information to
calculate our universal service contribution or to determine
that we are exempt from the contribution requirement because our
contribution would be de minimis. Universal service
contributions are fees paid by domestic interstate
telecommunications providers to finance the availability of
affordable telecommunications services to low-income consumers,
high-cost and rural areas, and schools, libraries and
health-care providers. There are certain limited types of
domestic interstate telecommunications services, for example,
services provided to the U.S. Government, that we could provide
without becoming subject to universal service contributions.

The
ORBIT Act

We are required to comply with the requirements
of the ORBIT Act, which entered into force in March 2000. The
stated purpose of the ORBIT Act is to promote a fully
competitive global market for satellite communication services
for the benefit of consumers and providers of satellite services
and equipment by fully privatizing the intergovernmental
satellite organizations, INTELSAT and Inmarsat. The ORBIT
Act also requires us to conduct an initial public offering of
equity securities.

The FCC has the authority to determine whether we
are in compliance with ORBIT Act requirements. If the FCC
determines that we have failed to privatize or to conduct our
initial public equity offering in a manner consistent with the
ORBIT Act, the ORBIT Act directs it to limit through conditions
or deny our applications for satellite licenses, satellite
construction permits or the renewal of these licenses and
permits. The FCC could also elect to impose restrictions on us
that limit our ability to provide non-core services,
which are defined by the ORBIT Act as any services other than
public switched voice telephony and occasional use television.
The imposition of these restrictions would limit our ability to
provide services such as Internet access, high-speed data
transmission and video services, each of which is a key
application in terms of our revenue and is part of our strategy
to grow our business. Refer to Item 3.D 
Risk Factors for a discussion of the risks
associated with a determination by the FCC that we are not in
compliance with the ORBIT Act.

The ORBIT Act sets forth specific criteria
relating to the privatization of the IGO, including target dates
for the privatization and requirements designed to ensure that
our directors, officers and managers are independent from former
Signatories and intergovernmental organizations. For example, a
majority of the members of our board of directors must be
unaffiliated with any former Signatory of the IGO, no member of
our board of directors may be affiliated with any
intergovernmental organization and none of our officers or
managers may at the same time be officers or managers of a
former Signatory or have a financial relationship with a former
Signatory. On May 29, 2001, the FCC issued an order finding
that the IGOs privatization plan met the ORBIT Acts
criteria for ensuring a pro-competitive privatization. As
required by that order, Intelsat LLC filed supplemental
information with the FCC relating to the privatization and the
directors, officers and managers of Intelsat, Ltd., Intelsat LLC
and our other subsidiaries.

The ORBIT Act also requires us to conduct an
initial public offering of equity securities by
December 31, 2003, unless the date is extended by the FCC
to no later than June 30, 2004. This deadline was extended
from the prior deadline of December 31, 2002, pursuant to
an amendment to the ORBIT Act enacted on October 1,

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2002. The criteria imposed by the ORBIT Act for
our initial public equity offering include that the offering
substantially dilute the aggregate ownership in our
company of former Signatories of the IGO. In addition, our
shares must be listed for trading on one or more major stock
exchanges with transparent and effective securities regulations.
The ORBIT Act also requires that we have a fiduciary board of
directors. Within 30 days of our initial public equity
offering, we must file information with the FCC demonstrating
that the offering complied with these ORBIT Act requirements.


The ORBIT Act does not provide the FCC with any
specific guidance as to what would constitute a substantial
dilution. However, the ORBIT Act specifies that the FCC, in
determining whether the initial public equity offering attains
substantial dilution, shall take into account the purposes and
intent, privatization criteria and other provisions of the ORBIT
Act, as well as market conditions. The FCC has interpreted the
substantial dilution requirement of the ORBIT Act in
the case of New Skies initial public offering. The FCC
determined that New Skies initial public offering of
30,120,000 shares, which amounted to 23% of New Skies
total issued share capital, was a substantial dilution of New
Skies former Signatory ownership in view of market
conditions existing at that time. Other factors cited by the FCC
in determining that the New Skies initial public offering
achieved substantial dilution include that 6.3% of New
Skies shares were held by non-Signatories before the
offering and that 84% of New Skies non-public shareholders
each held less than 0.5% of New Skies outstanding shares.
The FCC has indicated that it will make a determination as to
whether our initial public equity offering complies with the
ORBIT Act following our offering. If the FCC makes a
determination that our offering complies with the requirements
of the ORBIT Act, Intelsat LLCs satellite authorizations
will no longer be conditional and will be considered final
30 days after the date of the FCCs order, provided no
petitions for administrative or judicial reconsideration or
review of the order are filed.

U.S.
Export Control Requirements

As a company with subsidiaries located in the
United States, we must comply with U.S. export control laws,
specifically the Arms Export Control Act and the Export
Administration Act, in the operation of our business. The export
of satellites, satellite hardware, defense services and
technical information relating to satellites to non-U.S.
satellite manufacturing firms, launch services providers,
insurers, customers, employees and other non-U.S. persons is
regulated by the U.S. Department of States Office of
Defense Trade Controls under the International Traffic in Arms
Regulations. Many of our current contracts for the manufacture,
launch, operation and insurance of our satellites involve the
export to non-U.S. persons of technical data or hardware
regulated by the International Traffic in Arms Regulations. For
example, our contract with Astrium SAS for the manufacture of
the Intelsat X series satellite is regulated by the
International Traffic in Arms Regulations. Our U.S. subsidiaries
were required to obtain specific authorizations from the Office
of Defense Trade Controls in order for work to proceed under
these contracts. Our U.S. subsidiaries have obtained all of the
specific Office of Defense Trade Controls authorizations
currently needed in order to fulfill their obligations under
their contracts with non-U.S. entities. If these subsidiaries
have difficulty in obtaining needed authorizations from the
Office of Defense Trade Controls in the future, or if the Office
decides to revoke any of the authorizations that it has granted,
our business would be negatively affected. For example, it could
delay or otherwise impede our ability to manage the manufacture
and launch of our satellites.

Because of our history as a public international
organization, many of our employees are non-U.S. nationals. Our
provision of technical information relating to our satellites to
these non-U.S. national employees is also regulated by the
International Traffic in Arms Regulations. We have obtained a
license from the Office of Defense Trade Controls to allow most
of our non-U.S. national employees access to our technical
information that is controlled under the International Traffic
in Arms Regulations. If we do not properly manage our internal
compliance or if one of our foreign national employees were to
violate applicable laws or regulations, it could have an adverse
effect on our business and expose us to civil and criminal
liability.

Because Intelsat, Ltd. is based in Bermuda and
because our upcoming satellite launch is scheduled to take place
outside of the United States, some of our suppliers located in
the United States must also comply with U.S. export control laws
in order to provide to us technical data or hardware regulated
by the International Traffic in Arms Regulations. As a result,
our business could also be negatively affected if any of

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these contract counterparties cannot obtain
needed authorizations from the Office of Defense Trade Controls
or if they violate U.S. export control laws or regulations
during the contract term.


The U.S. Department of Commerces Bureau of
Industry and Security, formerly the Bureau of Export
Administration, also regulates some of our activities under the
Export Administration Act. The Bureau regulates our export of
equipment to earth stations in our ground network located
outside of the United States. It is our practice to obtain all
licenses necessary for the furnishing of original or spare
equipment for the operation of our TTC&M earth station
facilities in a timely manner in order to facilitate the
shipment of this equipment when needed.

U.S.
Authorizations to Serve Embargoed Countries

Before privatization, as an intergovernmental
organization with privileges and immunities, we were not subject
to U.S. trade restrictions and therefore could provide space
segment capacity to some countries that are subject to U.S.
trade sanctions. Now, as a private company with U.S.
subsidiaries fully subject to U.S. laws, we cannot provide any
services to sanctioned countries unless we first obtain the
necessary authorizations from the U.S. Department of the
Treasurys Office of Foreign Assets Control. The Office of
Foreign Assets Control has granted our U.S. subsidiaries the
authorizations needed to provide space segment capacity and
related administrative services to U.S.-sanctioned countries.
However, these licenses are strictly limited and do not
authorize our U.S. subsidiaries to provide telecommunications
services directly to end users in these countries. The provision
of these services would require separate authorizations from the
Office of Foreign Assets Control. In order to serve Iraq, in
addition to obtaining authorization from the Office of Foreign
Assets Control, it was necessary for us to obtain approval from
the United Nations and the United Kingdom, and we obtained these
approvals.

U.K.
Regulation

The United Kingdom is the licensing jurisdiction
for our orbital registrations in the Ka-band and V-band and in
the spectrum allocated for BSS in the applicable International
Telecommunication Union plans. We currently have filings for
nine Ka-band orbital locations, 18 V-band orbital locations and
nine BSS orbital locations. We currently do not operate any
satellites in the Ka-band or V-band, nor will our satellite
currently under construction be operated in any of these bands.
We currently use BSS on one of our satellites to provide fixed
satellite services. Satellite operators in the United Kingdom
are regulated by the U.K. Department of Trade and Industry and
by the Radiocommunications Agency, an executive agency of the
Department of Trade and Industry. The Radiocommunications Agency
has reserved our Ka-band, V-band and BSS orbital registrations
for our benefit and use and has indicated that the existing
satellite class licenses held by the IGO before privatization
continue to apply to us after privatization.

Regulation
by Other Countries

As a provider of space segment capacity to
entities in over 200 countries and territories, we are subject
to the national communications and broadcasting laws and
regulations of many countries. Before the privatization, we
dedicated substantial resources to the study of these laws and
regulations in order to ensure our continued market access after
privatization to all of the countries and territories that we
serve. Specifically, we focused on the requirements for
providing space segment capacity to authorized entities in these
countries and territories. Space segment capacity
consists solely of capacity on a given satellite without any
ground network uplink, downlink or other value-added services.

Most countries that we serve do not impose
licensing requirements on satellite capacity providers, although
we are required to obtain various forms of written authorization
in many cases. In some countries, however, a license is required
to provide space segment capacity. We have obtained these
licenses in all countries requiring such a license in which we
provide satellite capacity.

Many countries have liberalized their regulations
to permit multiple entities to seek licenses to provide voice,
data or video services. They also increasingly permit multiple
entities to seek licenses to own and operate earth station
equipment and to choose their provider of satellite capacity. We
believe that this trend

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should continue due to commitments by many World
Trade Organization members, in the context of the WTO Agreement
on Basic Telecommunications Services, to open their satellite
markets to competition. Most countries allow authorized
telecommunications providers to own their own transmission
facilities and to purchase satellite capacity without
restriction, facilitating customer access to our services.


Other countries, however, have maintained strict
monopoly regimes or otherwise regulate the provision of our
services. In these countries, a single entity, often the
government-owned posts, telephone and telegraph authority, may
hold a monopoly on the ownership and operation of
telecommunications facilities or on the provision of
communications or broadcasting services to, from or within the
country, including via satellite. As a result, end users may be
required to access our services through this monopoly entity. In
order to provide services in these countries, we may need to
negotiate an operating agreement with that monopoly entity that
covers the types of services to be offered by each party, the
contractual terms for service and each partys rates.
Depending on the national regulatory requirements, operating
agreements between us and the applicable service provider may
require end users to obtain our services through the monopoly
entity, with all associated ground services provided by that
entity. Alternatively, these operating agreements may allow
customers to own and operate their own facilities but require
them to purchase our services through the monopoly entity.

As we expand into new service offerings beyond
providing space segment capacity, we may need to obtain
additional licenses and authorizations. Depending on the type of
service provided and the extent to which we own and operate our
own ground network infrastructure, the type of authorization
needed, if any, will vary. As we have developed our global
communications network and expanded our service offerings, we
believe we have identified and complied with all of the
regulatory requirements applicable to us.

Notwithstanding the wide variety of regulatory
regimes existing in the over 200 countries and territories to
which we provide our services, we believe that we fully comply
in all material respects with all applicable laws and
regulations governing our operations.

International
Telecommunication Union Regulation

Our use of our orbital locations is subject to
the frequency coordination and registration process of the
International Telecommunication Union. In order to protect
satellite systems from harmful radio frequency interference from
other satellite systems, the International Telecommunication
Union maintains a Master International Frequency Register of
radio frequency assignments and their associated orbital
locations. Each International Telecommunication Union notifying
administration is required by treaty to give notice of,
coordinate and register its proposed use of radio frequency
assignments and associated orbital locations with the
International Telecommunication Unions Radiocommunication
Bureau. After a notifying administration gives notice to the
Radiocommunication Bureau of its intent to use particular
frequencies relating to an orbital location, the
Radiocommunication Bureau publishes the information on the
intended use in its Weekly Circular. Other administrations that
consider their existing or planned satellite systems with
priority over the proposed system to be affected by the newly
proposed use may then give notice to the initiating
administration. The initiating administration must take this
notice into consideration when initiating coordination
proceedings. The nations involved are then obligated to
coordinate the proposed uses and resolve any interference
concerns. In our case, the U.S. Government has responsibility
for filing and coordinating our C-band and Ku-band orbital
locations with the International Telecommunication Unions
Radiocommunication Bureau and the national administrations of
other countries. The government of the United Kingdom has
responsibility for filing and coordinating our Ka-band, V-band
and BSS orbital locations.

When the coordination process is completed, the
International Telecommunication Union formally notifies all
proposed users of the frequencies and orbital location in order
to protect the registered user of the orbital location from
subsequent or nonconforming interfering uses by other nations.
The International Telecommunication Unions Radio
Regulations do not contain mandatory dispute resolution or
enforcement mechanisms. The Radio Regulations arbitration
procedure is voluntary and neither the International
Telecommunication Union specifically, nor international law
generally, provides clear remedies if this voluntary process
fails. Only nations have full standing as International
Telecommunication Union members. Therefore, we must rely on the
governments of the United States and the United Kingdom to
represent our

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interests before the International
Telecommunication Union, including obtaining new rights to use
orbital locations and resolving disputes relating to the
International Telecommunication Unions rules and
procedures.


Certain
Customer Service Agreements

Our Intelsat Global Sales subsidiary is the
contracting party for most of our customer service agreements.
For regulatory reasons, our Brazilian customers contract with
Intelsat Brasil Ltda., a Brazilian subsidiary. Our U.S.
customers enter into agreements with Intelsat USA Sales Corp., a
wholly owned U.S. subsidiary of Intelsat Global Sales.
References to our, we and us
below in our discussion of our service agreements are to the
Intelsat entities that are the actual contracting parties to the
service agreements.

Our customers obtain satellite capacity from us
by placing an order pursuant to one of several master customer
service agreements. These agreements offer five different
service commitment types: lease service commitments; channel and
carrier service commitments; demand-based service commitments;
occasional use service commitments; and cable restoration
service commitments. For a breakdown of our telecommunications
revenue by service commitment type, see Item 5 
Operating and Financial Review and Prospects. We
also now offer our customers integrated global connectivity
services, such as our end-to-end video contribution service, and
commercial broadband services. See  Our
Strategy  Position for Growth in Related Businesses
and Make Incremental Investments to Support Integrated
Services above for a discussion of our strategies with
respect to integrated global connectivity and broadband access
services.

Lease service commitments are commitments by our
customers to lease capacity on particular designated
transponders according to specified technical and commercial
terms. Channel and carrier service commitments are commitments
by our customers to purchase an overall amount or level of
service, without committing themselves to particular designated
transponders for a specified term. The technical terms of
satellite capacity ordered as a channel and carrier service
commitment are not specially tailored to the customer. Rather,
we offer channel and carrier service commitments to our
customers off the shelf and they are considered
managed services. Both lease service commitments and
channel and carrier service commitments can be as short as one
day or as long as fifteen years.

Demand-based service commitments permit our
customers to obtain capacity on our satellite system on
demand and to pay only for the capacity that they actually
use. Occasional use service commitments are discrete commitments
for short-term use of particular transponders and capacity.
Occasional use service commitments may be ordered for periods as
short as ten minutes and as long as 24 hours. Cable restoration
services are services that we provide to our customers while
their cable systems are under repair. We offer cable restoration
services on a lease and channel and carrier commitment basis.

Most customer service commitments entered into
prior to our privatization were transferred to us from the IGO
pursuant to novation agreements. Since the privatization, our
customers order services from us pursuant to master service
agreements. The novation agreements and master service
agreements entered into with our customers in connection with
our transition to a private company contain provisions that
restrict certain aspects of our business. These provisions and
certain other terms and conditions of the agreements entered
into in connection with our privatization are described below.
Following our privatization, we have entered into master service
agreements that do not contain these types of restrictions.

Novation
Agreements

The IGO transferred its existing customer service
commitments to us primarily by entering into a novation
agreement with us and each customer. Each novation agreement
sets forth the terms and conditions upon which these services
will be provided. The same form of novation agreement was
offered to all customers. Accordingly, the same set of terms and
conditions generally applies to all customer service commitments
transferred by the IGO pursuant to a novation agreement. Most of
the outstanding customer commitments represented in our
December 31, 2002 backlog are either MFC- or LCO-protected
and therefore are covered by novation agreements. The principal
terms and conditions of the novation agreements are described
below.

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Most
Favored Customer Protection

Customer commitments covered by a novation
agreement are eligible either for MFC protection for up to
5 years after July 18, 2001 or for LCO protection for
up to 12 years after that date, as described further below.
Subject to limited exceptions and a materiality threshold of 5%,
MFC protection entitles the customer to the lowest rate on like
terms that we charge after July 18, 2001 for satellite
capacity having the same or comparable nine contract parameters,
including service term and bandwidth. If it is determined that
we have not complied with our MFC protection obligations, we
would have to offer the customer service at the applicable rate
on like terms. If the customer accepts this offer, we would have
to credit the customer for any overcharge, including interest,
and also pay a penalty of 20% of the amount overcharged, plus
interest. See Item 3.D  Risk Factors
for a description of the risks to our business relating to our
obligation to provide MFC protection.

Withholding
Tax Obligation

Before privatization, because of our status as
the IGO, we provided services to our customers without our
customers incurring any withholding tax obligations on the
amounts paid to us. Now that we are a private company, our
customers may have to pay withholding taxes in connection with
their procurement of satellite services from us. Accordingly,
under the terms and conditions of the novation agreements, our
customers have the right to reduce any amounts owed to us under
their service commitments by the amount of any withholding taxes
that have been imposed on these amounts owed. This right does
not extend to any extensions of customers service
commitments or to any new contracts with these or any other
customers. Customers have an obligation under the novation
agreements to cooperate with us to reduce the amount of any
withholding taxes imposed. If a customer does not comply with
this obligation, it will not be entitled to reduce any amounts
owed to us by the amount of withholding taxes imposed.

Pricing

Before privatization, the pricing of our services
was set by a tariff schedule. All of the service commitments
transferred to us pursuant to the novation agreements were
priced using the tariff schedule in effect at the time the IGO
and the applicable customer entered into each commitment, as
subsequently modified in some cases. We cannot vary the prices
of the service commitments covered under the novation
agreements, other than to reduce the prices as may be required
by our MFC obligations discussed above or by our LCO obligations
described below.

Right
to Extend Service Commitments on Original Terms

Customers with novated lease service commitments
are entitled to a one-time extension of each lease for a period
no longer than the original term of the lease, subject to the
availability of satellite capacity. Customers may exercise this
extension at any time prior to the earlier of the expiration of
their lease commitment or July 18, 2006. During the
extended lease term, the terms and conditions of the original
lease term, including the price of the service, will remain in
effect until the earlier of the expiration of the extended lease
term or July 18, 2006. Customers have the option of
extending their lease commitments after July 18, 2006 at
then-current market rates.

Lifeline
Connectivity Obligation Contracts

In connection with our privatization, customers
novating service commitments that met specified eligibility
criteria had the option of entering into LCO contracts with
Intelsat Global Sales. A customer that has entered into an LCO
contract with us with respect to a particular service commitment
is not simultaneously entitled to MFC protection with respect to
that commitment.

An LCO contract provides price and capacity
protection for a covered service commitment until the earlier of
the commitments expiration, if not renewed by the
customer, or July 18, 2013. The LCO contract provides the
customer with the right to renew an LCO service commitment at a
price no higher than the price charged for that service on the
privatization date. LCO customers may continue to renew their
service

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commitments until July 18, 2013, the date on
which LCO protection expires. LCO customers may choose to
terminate their LCO protection at any time before July 18,
2013, in which case their novated commitments could benefit from
the MFC protections of the novation agreement if the LCO
protection was terminated prior to July 18, 2006. Our
customers cannot elect to receive LCO protection on contracts
effective after the privatization date, except in limited
circumstances described further below.


The LCO contract obligates us, in some
circumstances, to reduce the prices we charge for covered
service commitments. On each anniversary of the privatization
date until July 18, 2013, we are obligated to compare the
cumulative price increases and decreases of our non-LCO
protected service commitments against the pricing index
specified in the LCO contract, which is based on prices charged
for specified service commitments. If the weighted average price
charged to non-LCO customers for these specified service
commitments decreases by a cumulative amount of 15% or more, the
LCO contract obligates us to reduce the prices for LCO-protected
service commitments by the same percentage. However, effective
on July 18, 2005, the amount of the price reductions
applicable to all LCO service commitments with a particular
customer is capped at approximately $11 million. Customer
service commitments for lease services or channel and carrier
services that are 10 years or longer are not eligible for
any price reductions.

Only customers meeting specified eligibility
criteria were eligible to enter into an LCO contract. Customers
from low income or low teledensity countries were the primary
group of customers that were offered the option of entering into
an LCO contract. A customer also could have petitioned the
IGOs Assembly of Parties prior to July 18, 2001 for
LCO protection on the basis that there was no cost-effective
alternative provider of an equivalent service in its country. A
customer participating in a specified service link with a
customer that was granted LCO protection for that link was also
permitted to enter into an LCO contract.

Because such a customers LCO protection is
tied to the maintenance of a service link with an LCO customer,
the customer may not renew its service commitments at
LCO-protected price levels once it no longer has a service link
with an LCO customer.



|  |                                                                                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A customer will only be permitted to enter into
    an LCO contract with us after the privatization date if the
    customer falls within one of the following two categories:                                                                               
| 
| | the customer is using an earth station located
    within a country experiencing a temporary emergency, such as an
    earthquake, and as a result of this emergency has lost
    telecommunications connectivity except through our satellite
    system; or
| 
| | the customer is using an earth station in a
    country that was created after July 18, 2001 and would
    otherwise meet one of the low income, low teledensity or no
    available alternative provider criteria described above.                          

LCO protection for a customer using an earth
station located within a country experiencing a temporary
emergency may continue for no longer than six months after the
effective date of its LCO contract with us.

Pursuant to an agreement, known as the Public
Services Agreement, that we entered into with the ITSO in
connection with the privatization, the ITSO monitors our
implementation of these LCO protections. Under the Public
Services Agreement, we are obligated to provide our services in
a manner consistent with the core principles of global coverage
and connectivity, lifeline connectivity and non-discriminatory
access. Global coverage and connectivity refers to the principle
that our satellite system should provide the maximum coverage of
the earth available from satellites in geostationary orbit. It
also refers to the principle that our satellite system should
have sufficient interconnection capabilities to make
communication possible within and between all five International
Telecommunication Union regions. These regions are Africa, Asia,
Europe, North America and South America. Lifeline connectivity
refers to the principle that we should make our satellite system
available at protected price levels to users in low income
countries, countries with low teledensity and other countries
that are dependent on our satellite system for access to
international telecommunications services. Non-discriminatory
access refers to the principle that all entities should have a
fair and equal opportunity to access our satellite system. We
are also required by our bye-laws to provide our services in a
manner consistent with these core principles and to honor our
obligations under the LCO contracts.

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After July 18, 2013, we will no longer be
obligated to provide LCO protection to any of our customers. See
Item 3.D  Risk Factors for a
description of the risks to our business associated with our
obligation to provide LCO protection.

Assigned
Service Commitments

Most of the IGOs customers entered into
novation agreements. The service commitments of those customers
that did not enter into novation agreements were transferred to
Intelsat Global Sales by assignment in connection with our
privatization. Assigned service commitments are covered by the
same terms and conditions as those set forth in the novation
agreement, except that assigned service commitments are not
entitled either to MFC or to LCO protection.

Distribution
Agreements

We have entered into non-exclusive service
distribution agreements, which we refer to as the Distribution
Agreements, with many of our customers. The Distribution
Agreement is a master agreement that gives customers the right
to order capacity, subject to availability, on the terms and
conditions set forth in the agreement. The Distribution
Agreement authorizes our customers to act as distributors of our
services.

Contract
Period

Each Distribution Agreement provides for an
initial term of five years and may be renewed at the
customers option for an additional five years. However,
service commitments ordered under a Distribution Agreement may
have terms that are shorter or longer than five years and that
vary according to the type of service ordered.

Contract
Scope

Customers may use the Distribution Agreement to
order any of the service commitment types that we currently
offer, which are lease, channel and carrier, demand-based,
occasional use and cable restoration service commitment types.
Customers may also use the Distribution Agreement to order
integrated global connectivity services in our
GlobalConnexSM Solutions portfolio and other new
services. If we choose to offer new service commitment types
relating to C- or Ku-band transponder capacity in the future in
addition to the types that we currently offer, our distributor
customers are also entitled to order these new service
commitment types in accordance with the general terms and
conditions of the Distribution Agreement, subject to the
availability of satellite capacity.

Applicable
Terms and Conditions, Including Pricing

The Distribution Agreement provides that, unless
expressly modified by the parties, standard terms and conditions
will apply to the service commitments ordered under the
agreement. We have the right to revise pricing under the
Distribution Agreement without the customers consent at
any time. We also can amend the standard terms and conditions of
the services offered under the Distribution Agreement without
the customers consent at any time. Any new terms and
conditions or prices would apply only to future service
commitments ordered by the customer and would not affect the
pre-existing service commitments of the customer. In contrast to
the novation agreements, customers ordering services under a
Distribution Agreement do not have the right to reduce the
amounts paid to us by the amount of any withholding taxes.
Customers are required to make all required payments to us in
full, free and clear of any taxes.

Retail
Business Requirement

The Distribution Agreement restricts the manner
in which we can engage in some types of retail
activities  such as establishing, acquiring or
operating an earth station  during the initial
five-year term of the agreement. We are required to engage in
these types of retail activities only through a separate
business division of our company. This separate retail business
division must maintain an arms-length relationship with
us. We may not provide satellite capacity to our retail business
division on terms and conditions more

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favorable than those made available to our
distributor customers for comparable services. However, no
restrictions apply to activities that are required in order to
develop a service that will be made available to our distributor
customers on a non-discriminatory basis. In addition, pursuant
to the Restructuring Agreement we entered into in connection
with our privatization, we agreed to cause each of our
majority-owned subsidiaries to comply with these requirements.
See Item 3.D  Risk Factors for a
description of the risks to our business associated with the
retail business requirements of the Distribution Agreement.


Non-Discrimination
Provision

The Distribution Agreements require us to treat
all similarly situated distributors of the company in a
non-discriminatory fashion with respect to our services, subject
to commercial considerations and applicable laws and
regulations. We are required to provide all of our distributor
customers with comparable opportunities to distribute our
services on a non-exclusive basis and to distribute services in
any geographic region. We are also required to provide our
distributor customers with comparable opportunities to
participate with us in promotional and cooperative marketing
activities and with comparable access to our information and
support services. If we establish a separate retail business
division, we are required to treat it in the same way as any
other distributor customer for the purposes of these
non-discrimination principles. If we choose to offer new types
of services in the future utilizing C-band or Ku-band
transponders in addition to the types of services that we
currently offer, we must offer all of our distributor customers
the opportunity to distribute these services in accordance with
the general terms and conditions of the Distribution Agreements.
See Item 3.D  Risk Factors for a
description of the risks to our business associated with the
non-discrimination principles of the Distribution Agreement.

Right
to Extend Service Commitments

The Distribution Agreement provides customers
with the right to a one-time extension of each lease service
commitment on the original terms and conditions, including
price. This right can be exercised on the same terms applicable
to one-time extensions of leases covered by a novation
agreement, as described above.

Wholesale
Customer Agreements

We have entered into non-exclusive wholesale
customer agreements, which we refer to as the Wholesale Customer
Agreements, with a number of our customers. The terms and
conditions of the Wholesale Customer Agreement are generally
similar to the terms and conditions of the Distribution
Agreement described above, except that customers are not
authorized, as they are under the Distribution Agreement, to
engage resellers to distribute our services. In addition, the
Wholesale Customer Agreement does not restrict our ability to
engage in retail activities.

C. Organizational Structure

Intelsat, Ltd. is a holding company. The
principal subsidiaries of Intelsat, Ltd. are as follows:

Intelsat (Bermuda), Ltd., a limited liability
company incorporated under the laws of Bermuda, is a wholly
owned subsidiary of Intelsat, Ltd. Intelsat (Bermuda), Ltd. is
responsible for the oversight of satellite procurement and
operational matters. This subsidiary contracts with Intelsat LLC
to buy all of Intelsat LLCs satellite capacity and sells
satellite capacity to Intelsat Global Sales.

Intelsat Holdings LLC, a limited liability
company organized under the laws of Delaware, is a wholly owned
subsidiary of Intelsat (Bermuda), Ltd. that in turn holds all of
the membership interests in Intelsat LLC.

Intelsat LLC, a limited liability company
organized under the laws of Delaware, holds our satellites,
satellite licenses, rights to use orbital locations and other
related assets and sells all of its satellite capacity to
Intelsat (Bermuda), Ltd. Intelsat LLC is wholly owned by
Intelsat Holdings LLC.

Intelsat Global Sales & Marketing Ltd., a
company organized under the laws of England and Wales, buys all
of the satellite capacity that it requires from Intelsat
(Bermuda), Ltd. Intelsat Global Sales, as the

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contracting party to most of our customer
contracts, sells this satellite capacity directly to our
customers and also sells satellite capacity to Intelsat USA
Sales Corp. and one of our other regional subsidiaries. Intelsat
Global Sales is a wholly owned subsidiary of Intelsat (Bermuda),
Ltd.


Intelsat Global Service Corporation, a
corporation organized under the laws of Delaware, provides
technical, marketing and business support services to Intelsat,
Ltd. and its subsidiaries pursuant to intercompany contracts.
Intelsat Global Service Corporation is a wholly owned subsidiary
of Intelsat (Bermuda), Ltd.

Intelsat USA Sales Corp., a corporation organized
under the laws of Delaware, is the contracting party with our
U.S. customers. Intelsat USA Sales Corp. is a wholly owned
subsidiary of Intelsat Global Sales.

Intelsat Government Solutions Corporation, a
corporation organized under the laws of Delaware, will be the
contracting party for our government customers in North America
and Europe. Intelsat Government Solutions Corporation is a
wholly owned subsidiary of Intelsat USA Sales Corp.

D. Property, Plants and
Equipment

Most of our employees and our satellite
operations and control facilities are located in Washington,
D.C. Our Intelsat Global Service Corporation subsidiary owns the
building in Washington, D.C. in which our satellite operations
and control facilities are located. However, Intelsat Global
Service Corporation leases the land underlying the building from
the U.S. Government pursuant to a 99-year lease. Our lease with
the U.S. Government expires in 2081 and at that time we have the
option to renew the lease for an additional 99-year term. Rental
payments under the land lease, which are calculated pursuant to
a formula based on the appraised value of the land, are
approximately $449,000 per year. We must also pay an additional
annual management and parking fee of approximately $265,000 to
the U.S. Government.

We have an option to purchase the land underlying
the building that may be exercised on or after July 18,
2005, provided that the U.S. Congress authorizes legislation to
enable the conveyance of the land to us. The option price to
purchase the land underlying the building is equal to the
appraised value of the land at the time we exercise the option,
less approximately $8.3 million in payments that we have
already made to the U.S. Government under our land lease and the
amount of all additional rental payments that we make to the
U.S. Government in the future. The appraised value of the land
as of November 2000 was $27.0 million. The appraised value
of the land used to calculate the option price is capped at
$30.0 million if we exercise our option prior to July 18,
2007. The building has approximately 917,000 gross square feet,
of which approximately 546,500 square feet houses office space,
our main operations center and our satellite control center. As
described under Item 4.B  Business
Overview  Network  Network Operations and
Current Ground Facilities, our network management center
is responsible for managing customer communications services and
our satellite control center is responsible for operating our
satellite fleet. The building also houses the majority of our
sales and marketing support staff and other administrative
personnel. Approximately 90% of our employees work in the
building. We also lease approximately 27,000 square feet of
additional office space at another location in Washington, D.C.

We lease a back-up operations facility that is
located within a relatively short distance from our Washington,
D.C. facility. The facility provides back-up emergency
operational services in the event that our Washington, D.C.
buildings operational areas are interrupted.

We use a worldwide ground network to operate our
satellite fleet and to manage the communications services that
we provide to our customers. This network is comprised of 33
earth station facilities, including six primary earth stations
that perform TTC&M services, located around the world. Our
network also consists of the communications links that connect
the earth stations to our satellite control center located at
our Washington, D.C. building and to our back-up operations
facility.

The six TTC&M earth stations in our ground
network are located in Australia, China, Germany, Italy and two
U.S. locations  Maryland and Hawaii. In November
2002, we acquired the two U.S. earth stations from COMSAT. We
have also entered into a contract for a TT&C station in the
Republic of Korea. We expect that KT Corporation will begin
providing TT&C services under the contract in the third
quarter of

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2003. KT Corporation is currently working on
upgrades to the facilities to prepare them to provide the
services required under the contract. We expect to terminate
TT&C operations in China once the KT Corporation facilities
are operational. Other earth stations in our ground network
include earth stations located in Argentina, Australia, Bahrain,
the Caribbean, China, Colombia, Costa Rica, France, Germany,
India, Italy, Russia, South Africa, Tahiti, the United Arab
Emirates, the United Kingdom and other U.S. locations.


In addition to our satellite fleet and related
ground network, we own three teleports, two of which are in the
United States and one of which is in Germany. We also lease
teleport services at a fourth teleport in China. We have also
established points of presence connected by leased fiber at key
traffic exchange points around the world, including Los Angeles,
New York, Hong Kong, Frankfurt and London. We lease our
facilities at these traffic exchange points. We use our
teleports and points of presence in combination with our
satellite network to provide our customers with integrated and
end-to-end services.

In January 2003, we purchased 55 acres of
unimproved land a relatively short distance from our Washington,
D.C. facility, upon which we are constructing an approximately
39,000 square foot facility that will include a back-up facility
and data center and a teleport with six antennas. We plan to use
the back-up facility and data center as back-up for our
satellite and other business operations. We plan to use the
teleport facilities and antennas for the provision of our
GlobalConnexSM Solutions services. Construction on
the property began in the fourth quarter of 2002 and is expected
to be completed in the second quarter of 2003. The cost of
building out the first phase of this project is expected to be
approximately $33 million, of which we have already spent
approximately $25 million. We may in the future build out
additional facilities at this location. We have also leased
approximately 18,000 square feet of office space and 9,300
square feet of storage space at this location.

We lease office space in Hamilton, Bermuda and in
London, England. Our Bermuda office was established in 2001 and
serves as the headquarters for Intelsat, Ltd. Our Bermuda office
also houses the employees of Intelsat (Bermuda), Ltd. Our London
office was significantly expanded in 2001 to become the center
of our sales and marketing subsidiary, Intelsat Global Sales.
Our London office houses the employees of Intelsat Global Sales
and functions as our global sales headquarters. We also lease
office space in Australia, Brazil, China, France, Germany,
India, Peru, Singapore, South Africa and the United Arab
Emirates for our local sales and marketing support offices.

See Item 5  Operating and
Financial Review and Prospects  Liquidity and Capital
Resources  Capital Expenditures for information
regarding our plans for our property and equipment.

ITEM 5.     OPERATING
AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read
together with Item 3.A  Selected Financial
Data and our consolidated financial statements and the
accompanying notes appearing elsewhere in this annual report.
Our consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United
States. See Item 3.D  Risk Factors
and Forward-Looking Statements for a discussion of
factors that could cause our future financial condition and
results of operations to be different from those discussed
below.

Overview

We are a leading global communications services
provider, supplying voice, data, video and Internet backbone
connectivity in over 200 countries and territories. Our
satellite network includes 24 satellites in orbit and leased
capacity on 2 additional satellites owned by strategic partners
in the Asia-Pacific region. This network is supported by ground
facilities, which are required for the operation and control of
our satellites. We are a Bermuda holding company and conduct our
operations through our wholly owned sales, service and license
subsidiaries, supported by our regional sales and marketing
support offices.

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Our
Business

Telecommunications
Revenue

We earn revenue primarily by selling satellite
transponder capacity to our customers. Communications satellites
generally, including the satellites in our fleet, have
components referred to as transponders that receive
communications signals from the ground, convert signal frequency
and amplify and retransmit signals back to earth. The number of
transponders on a satellite can be used as a measure of the
communications capacity of that satellite.

Our customers obtain satellite capacity from us
by placing an order for one of five different service commitment
types. These service commitment types are: lease, channel and
carrier, demand-based, occasional use and cable restoration. In
addition, we earn a small amount of revenue from providing
commercial satellite services, such as operating satellites for
other fixed satellite services companies.

According to transmission plans and traffic
information supplied by our customers, our satellite capacity is
used by our customers for four main service applications:
carrier services, corporate network services, video services and
Internet services. See Item 4.B  Business
Overview  Our Customers and the Service Applications
Supported by Our Network for descriptions of these four
service applications and the percentage of our revenue we
believe each represents. Going forward, we have determined that
we will include government/military services as a fifth service
application category.

We sell our services under various customer
agreements that specify, among other things, the amount of
satellite capacity to be provided, whether service will be
preemptible or non-preemptible and the service term. The service
term can vary from occasional use service measured in minutes to
periods ranging from one day to as long as 15 years. See
Item 4.B  Business Overview 
Certain Customer Service Agreements for a discussion of
the customer agreements entered into in connection with our
privatization.

We believe our geographically diverse revenue
base provides some protection from adverse regional economic
conditions, although not from a general global economic
downturn. See Item 4.B  Business
Overview  Geographic Distribution of Our
Revenue for a discussion of our revenue by geographic
region.

Our revenue growth at any given time is partially
dependent on the telecommunications capacity supply available in
the market, including capacity from other satellite providers
and from competitive technologies such as fiber optic cable
networks, and the level of demand for that capacity. Revenue
growth is generally more rapid when new satellites are launched
and brought into operation. At the same time, however, the
increase in supply that comes with the launch of a new satellite
can exceed the increase in demand.

There are a number of trends affecting our
revenue. For example, revenue from carrier applications, which
are primarily point-to-point services, has been declining
gradually in recent years. This trend is due to the build-out of
fiber optic cable capacity, which is generally less expensive
than satellite capacity when it is available to provide service
between two points. We expect revenue from our carrier
applications in affected routes to continue to decline in the
near term because of the competition from fiber optic cable. See
Item 3.D  Risk Factors for a
discussion of the potential impact of this competition on our
revenue. Despite the decline in revenue on affected routes, we
believe we will continue to earn a significant percentage of our
revenue from carrier applications in the near term. We believe
we will generate this revenue by, among other things, servicing
our backlog, serving customers using capacity for thin-route and
middle-mile applications, and developing relationships with new
customers in deregulating markets. We also believe that we will
generate this revenue by supporting customers providing
alternatives to traditional voice and data services and by
introducing new, more cost-effective technologies and integrated
connectivity services. See Item 4.B 
Business Overview  Our Strategy 
Sustain and Grow Our Core Voice and Data Business 
Carrier for a discussion of our strategy with respect to
carrier services.

Another trend affecting our revenue is the
general downturn in the telecommunications sector that has
primarily impacted incumbent telecommunications providers, many
of which are our customers. We believe that the market and
financial pressures faced by incumbent telecommunications
providers have resulted in these providers seeking to optimize
their networks, in part by consolidating their use of our
capacity into

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service commitments that are more economical to
them and that reduce our revenue. Our business strategy includes
marketing services to competitive providers in deregulating
markets to mitigate the risks associated with reduced revenue
from incumbent providers and to diversify our customer base. See
Item 3.D  Risk Factors for a
description of the risks associated with our customers who are
telecommunications services providers.


Another factor affecting our revenue is the
growth of data traffic and the Internet in recent years. Our
revenue has been affected by increased demand for trunking to
the Internet backbone resulting from the growth in use of the
Internet. However, continued growth of the Internet is uncertain
and some Internet services are also susceptible to increased
competition from fiber optic cable. For a further discussion of
the impact of the competition we face from fiber optic cable,
see Item 3.D  Risk Factors. See
Item 4.B  Business Overview 
Our Strategy  Sustain and Grow Our Core Voice and
Data Business  Internet for a discussion of our
strategy with respect to Internet services.

We believe that the new flexibility we have as a
private company in pricing our services and in offering new
products and services should also positively affect our revenue.
As the IGO, our services were priced solely on the basis of the
amount of capacity obtained, whether the services were
preemptible or non-preemptible, and the duration of the
commitment. Although the pricing of our services is fixed for
the duration of existing service commitments, we will seek to
price new service commitments competitively to reflect regional
demand and other differentiating factors to the extent
permissible under the contractual restrictions noted in the
paragraph below. Also, as the IGO, we were restricted solely to
providing satellite capacity to our customers to the exclusion
of other service offerings. As a private company, we have no
such restrictions. We believe that this flexibility in pricing
our services and in offering new services will have a positive
effect on our revenue over the long term. See
Item 4.B  Business Overview 
Our Strategy  Position for Growth in Related
Businesses and Make Incremental Investments to Support
Integrated Services for a discussion of our strategy for
new service offerings.

Although as a private company we are no longer
subject to the restrictions on pricing our services that we were
subject to as the IGO, we are subject to contractual
restrictions that constrain our ability to price services in
some circumstances. These contractual restrictions include the
MFC protection provisions of the novation agreements. MFC
protection entitles the customer to the lowest rate that we
charge after July 18, 2001 for satellite capacity having
substantially the same technical and commercial terms, subject
to limited exceptions. We do not believe our MFC terms
significantly restrict our ability to price our services
competitively. MFC protection continues until July 18,
2006. Similarly, our LCO contracts require us to provide
customers with the right to renew their service commitments
covered by the LCO contract at a price no higher than the price
charged for that service on the privatization date. Under some
circumstances, we may also be required by an LCO contract to
reduce our prices for a service commitment covered by the
contract. LCO protection can continue until July 18, 2013.
See Item 4.B  Business
Overview  Certain Customer Service Agreements
for a description of these contractual restrictions and
Item 3.D  Risk Factors for a
description of risks relating to these restrictions.

Our revenue may also be affected by the ORBIT
Act, which requires us to make an initial public offering of
equity securities by no later than December 31, 2003, with
a possible extension of this deadline to June 30, 2004 by
the FCC. If the FCC determines that we have failed to comply
with the provisions of the ORBIT Act, the FCC may impose
limitations on or deny our applications for satellite licenses
and satellite construction permits and for the renewal of these
licenses and permits. The FCC could also restrict our ability to
provide non-core services to customers in the United
States. Non-core services are defined in the ORBIT
Act as any services other than public-switched voice telephony
and occasional use television. Our revenue would be
significantly affected if we were prevented from providing these
services to U.S. customers.

Finally, the regulatory requirements to which we
are subject in each of the countries in which we provide
services is another factor affecting our revenue. The
telecommunications industry is highly regulated, and, in
connection with operating our business, we need to obtain
various local, national and international regulatory approvals
from time to time. If we fail to obtain particular regulatory
approvals, this failure may delay or prevent our ability to
provide services to our customers, thereby impacting our revenue.

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Expenses

Our on-going operating expenses include direct
costs of revenue (exclusive of depreciation and amortization);
selling, general and administrative expenses; and depreciation
and amortization. With the exception of depreciation and
amortization, these operating expenses have increased
substantially in recent years. The increases reflect our
transition from the IGO, which was restricted solely to
providing satellite capacity and which benefited from certain
privileges, exemptions and immunities, including exemption from
taxation, to a private company capable of offering expanded
services and addressing new customers and market segments. These
new activities require a higher level of operating expenses than
those required by our historical business. We also have been
required to develop new staff capabilities as a private company,
particularly in areas such as sales and marketing, legal, tax
and administration, to ensure that we have the appropriate staff
to market our services and to ensure that we are compliant with
the regulatory and legal requirements to which we are now
subject. In addition, certain of our employee-related expenses
have increased due to the change in our status to a private
company. For example, we have made gross salary adjustments for
employee income taxes and we now incur employer payroll taxes
for our employees who are non-U.S. citizens and who were
previously exempt from these income and payroll taxes.
Year-to-year comparisons of operating expenses reflect increased
expenses in 2002 as compared to 2001, as a result of the effect
of our privatization occurring in the second half of 2001. We
expect that, going forward, our operating expenses will remain
relatively constant from year to year, unless we engage in a
major strategic transaction or make a significant change in the
way we conduct our business. However, our direct costs of
revenue (exclusive of depreciation and amortization) could
increase as we develop new services.

Upon privatization, we also became subject to
corporate income and other taxes in the jurisdictions in which
we operate. In addition, some of our customers became subject to
withholding taxes in their local jurisdictions on payments made
to us. These customers may deduct these withholding taxes from
payments made to us in connection with service orders existing
prior to the privatization date.

Had we privatized on January 1, 2001 instead
of July 18, 2001, on a pro forma basis, our recurring
expenses would have been approximately $35.9 million higher
and our provision for income taxes would have been approximately
$69.3 million higher in 2001. We believe we have substantially
completed our transition from the IGO to a private company and
expect that future expense increases will result from the need
to expand our business and react to market opportunities.

Direct
Costs of Revenue (Exclusive of Depreciation and
Amortization)

Direct costs of revenue (exclusive of
depreciation and amortization) relate to costs associated with
the operation and control of our satellites, our communications
network operations and engineering support. These costs also
include costs related to the expansion of our services, such as
our new global connectivity services. Our direct costs of
revenue consist principally of salaries and related employment
costs, in-orbit insurance premiums, earth station operating
costs and facilities costs.

Our direct costs of revenue fluctuate based on
the number and type of services offered and under development.
In connection with our transition to a private company, our
direct costs of revenue have grown recently because of increased
spending on the development of new services, such as our
end-to-end broadband access and Internet trunking services, and
the purchase of in-orbit insurance. We also have incurred other
incremental expenses in connection with our operations as a
private company, as discussed above.

Selling,
General and Administrative Expenses

Selling, general and administrative expenses
relate to costs associated with our sales and marketing staff
and our administrative staff, which includes legal, finance and
human resources staff, as well as bad debt expense. These staff
expenses consist primarily of salaries and related employment
costs, travel costs and office occupancy costs. Other costs
include advertising expenses and third-party consultant costs
associated with sales and marketing and administrative
activities.

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Selling, general and administrative expenses
fluctuate with the number of customers served and the number and
type of services offered. These costs also fluctuate with the
number of jurisdictions and markets in which we operate, as well
as the number of regional offices we operate. However,
fluctuations in these expenses are not always directly
proportional to changes in these factors, because our systems
have been designed to accommodate some level of growth.

Selling, general and administrative expenses have
increased substantially over the last two years. The increases
primarily resulted from our efforts to improve our competitive
position as a private company and changes in our legal
structure. These increases were driven by the objectives of
decentralizing our marketing activities by expanding regional
support offices, expanding the core skill sets of our marketing
team by recruiting new marketing staff and enhancing brand
awareness by engaging in new promotional activities. This
decentralization included establishing additional offices, and
we now have sales-related offices in 13 different countries. We
also have added product management capabilities in order to
accelerate the introduction of new services and entry into new
markets. In addition, we incurred higher levels of spending on
marketing, advertising and other promotional activities. We also
have incurred other incremental expenses in connection with our
operations as a private company, as discussed above.

Depreciation
and Amortization

Depreciation and amortization includes the costs
associated with the depreciation and amortization of capital
assets. Our capital assets consist primarily of our satellites
and associated ground network infrastructure. Included in
capitalized satellite costs are the costs for satellite
construction and launch services and the insurance premiums for
satellite launch and the satellite in-orbit testing period.
These costs also include the net present value of satellite
performance incentives payable to satellite manufacturers, as
described under  Liquidity and Capital
Resources. Other expenses directly associated with
satellite construction and interest incurred during the period
of satellite construction are also included in these costs.

Capital assets are depreciated or amortized on a
straight-line basis over their estimated useful lives. These
estimates are subject to change. In 2001, we changed our
estimate of the useful lives for most of our satellites
effective January 1, 2001. Previously, our estimate of a
satellites depreciable life was generally between 10 and
11 years. Based on experience with our fleet, as well as
engineering estimates of the remaining useful lives and
calculations of fuel requirements, we extended the useful lives
of most of our Intelsat VII and VIII series satellites to
between 12 and 13 years. The effect of this change in
estimate was to decrease depreciation and amortization by
approximately $60.5 million for the year ended
December 31, 2001. Additionally, we have estimated the
depreciable lives of six of our seven Intelsat IX series
satellites to be 15 years and the depreciable life of the
seventh to be 14 years.

Insurance

As the IGO, we typically obtained insurance for
the launch, the in-orbit testing period and a limited period of
in-orbit operations for satellites in our fleet. Upon the
expiration of this coverage, we generally self-insured our
satellite fleet for anomalies that could arise during in-orbit
operations by assuming the remaining in-orbit operations risk.
This policy was supported in part because of the generally sound
health and operating history of our satellite fleet and in part
because of the financing mechanism we had in place as the IGO,
under which we called capital from the Signatories and Investing
Entities to cover capital expenditures.

Upon privatization, we lost our ability to call
capital from our owners to cover the costs of any losses.
Because of this change in our ownership structure and based upon
our evaluation of then current commercial practices, we elected
to obtain in-orbit insurance beyond the first year for certain
of our satellites. We obtained insurance for the launch and
first year of in-orbit operations of our seven Intelsat IX
series satellites, all of which have been launched. The 901, 902
and 904 satellites have been in orbit longer than one year and
are no longer covered under this policy. The 903 satellite is
covered under this policy through March 29, 2003. We
currently have insurance in place through November 8, 2003
for the in-orbit operations of the 706, 707, 802, 805, 901, 902
and 904 satellites. In addition, the Intelsat IX series
satellites, including the 903 satellite, that complete their
first year of in-orbit operations before November 8, 2003
will be insured under this policy.

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Under the terms of this policy, we co-insure
$100.0 million of the net book value of each covered
satellite, and the insurers cover the balance of the net book
value of each satellite, excluding capitalized performance
incentives relating to the satellites. Insurance premiums
related to satellite launches and subsequent in-orbit testing
are capitalized and amortized over the lives of the related
satellites. We do not have in-orbit insurance for our other 13
satellites. For a further discussion of the insurance we have
relating to our satellites, see Item 4.B 
Business Overview  Network  Sparing;
Insurance.


Over the past three years, premiums in the
satellite insurance market for in-orbit insurance have ranged
from 1.5% to 3.5% of the net book value of the satellites
covered. However, the September 11, 2001 terrorist attacks
in the United States have had a severe impact on the insurance
industry as a whole. In addition, launch vehicle failures and
in-orbit satellite failures experienced by some of our
competitors have had a significant impact on the satellite
insurance market. As a result, these insurance premiums may
increase in the future. See Item 3.D  Risk
Factors for a further discussion of our expected insurance
costs.

Backlog

Our backlog represents expected future cash
payments to be received from customers under our various
customer service agreements. As of December 31, 2001, our
backlog was approximately $5.0 billion and as of
December 31, 2002 our backlog was approximately
$4.0 billion. Approximately half of the decrease in our
backlog was due to three factors: the cancellation of our
service contracts with COMSAT World Systems upon our November
2002 acquisition of most of the assets of COMSAT World Systems,
the exclusion from our previously reported backlog of amounts
associated with a Brazilian customer that has been experiencing
financial difficulties and the termination of certain service
orders by Teleglobe Inc. and one of its affiliates. The decrease
in our backlog also reflects the continuing trend of customers
seeking shorter-term contracts due to the rapidly changing
telecommunications market. As of December 31, 2002, the
weighted average remaining duration of the outstanding customer
agreements included in our backlog was approximately
4.4 years. We expect to deliver services associated with
$820.7 million, or 20%, of our December 31, 2002
backlog by December 31, 2003.

Backlog includes both non-cancelable contracts
and contracts that are cancelable upon payment of early
termination penalties. Backlog does not include contracts that
may be canceled by a customer without penalty. The amount
included in backlog represents the full service charge for the
duration of the contract and does not include termination fees.
As of December 31, 2002, 87% of the customer contracts
included in our backlog, representing approximately
$3.5 billion in future revenue, were non-cancelable and 13%
of the customer contracts included in our backlog, representing
approximately $510.0 million in future revenue, could be
canceled by the customer upon the payment of early termination
penalties. With respect to our customer contracts that are
cancelable upon payment of penalties or that are non-cancelable,
we have not experienced any cancellations that have resulted in
material losses of revenue, except as disclosed below with
regard to Teleglobe Inc. This is due in part to our termination
penalties for cancelable contracts, which generally require
customers that cancel within the first two years of their
contracts to pay termination fees equal to any remaining charges
due during the two-year period plus 25% of any charges due under
the balance of the contracts. Customers that cancel after the
first two years of a contract must still pay 25% of any
remaining charges due under the contract.

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The future minimum payments under contract and
due from customers as of December 31, 2002 were
approximately as follows:

|                    |  |               |       | 
|------------------- |  | ------------- | ----- | 
|Period              |  | (in millions)
|                    |  |              
|2003                |  | $             | 821   | 
|2004                |  |               | 743   | 
|2005                |  |               | 493   | 
|2006                |  |               | 383   | 
|2007                |  |               | 310   | 
|2008 and thereafter |  |               | 1,271 | 
|                    |  |               |       | 
|Total               |  | $             | 4,021 | 
|                    |  |               |       | 

Most of our backlog as of December 31, 2002
was eligible for either MFC protection or LCO protection. MFC
and LCO protection are described under Item 4.B 
Business Overview  Certain Customer Service
Agreements. The revenue backlog figures set forth above
could potentially be reduced if our MFC or LCO protection
obligations are triggered and we are required to lower the
prices for certain of our existing customer service commitments.

In connection with our acquisition on
November 25, 2002 of COMSAT World Systems service
contracts for our capacity, we terminated our associated
customer contracts with COMSAT. Our contracts with COMSAT World
Systems were generally longer-term contracts than the customer
contracts that we acquired. As a result, our backlog decreased
by $263.1 million in connection with the COMSAT
transaction. While our overall backlog declined as a result of
the acquisition, our backlog of contracts to be performed in
2003 increased slightly on a net basis because the contracts
that COMSAT World Systems assigned to us, although for shorter
durations than our contracts with COMSAT World Systems, were for
higher values. See  Related Party
Transactions  COMSAT Asset Purchase Agreement
below for further information about this transaction.

Upon the closing of the COMSAT transaction
described above, WorldCom, Inc. became our largest customer. On
July 21, 2002, WorldCom, Inc. filed a voluntary petition
for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. As of December 31, 2002, WorldCom, Inc. and its
affiliates accounted for $101.2 million, or 2.5%, of our
backlog. The loss of WorldCom, Inc. as a customer would reduce
our revenue and backlog and could materially adversely affect
our business.

One of our Brazilian customers has been
experiencing financial difficulties. As a result of these
difficulties, we decided at the end of 2002 to exclude from our
backlog the amounts associated with this customer. The reduction
in our December 31, 2002 backlog associated with this
customer was $206.2 million.

On May 15, 2002, one of our largest
customers, Teleglobe Inc., filed for creditor protection under
the Companies Creditors Arrangement Act in the Ontario
Superior Court of Justice. As of December 31, 2002,
Teleglobe Inc. accounted for approximately $131.7 million,
or 3%, of our backlog. As a result of Teleglobe Inc.s
financial difficulties, the backlog related to those contracts
is at risk. On August 21, 2002, our Intelsat Global Sales
subsidiary entered into a share purchase agreement with
Teleglobe Inc. The closing of the share purchase transaction
took place on September 20, 2002. In connection with the
share purchase transaction, Teleglobe Inc. agreed to retain
nearly 75% of its service orders with us. The remaining service
orders, which represented approximately $47.4 million, or
1%, of our backlog as of the closing date of the share purchase
transaction, were terminated in connection with the transaction.
For a description of the share purchase transaction with
Teleglobe Inc., see  Related Party
Transactions  Teleglobe Share Purchase
Agreement below.

Approximately $121.1 million of our backlog
as of December 31, 2002 is with customers located in
Argentina. Because of the current uncertainty in the Argentine
economy and restrictions imposed from time to time by the
Argentine government on the remittance of payments abroad, some
of the backlog represented by contracts with our Argentine
customers is potentially at risk.

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Results of
Operations for the Years Ended December 31, 2002, 2001 and
2000

The following table sets forth the statements of
operations data.

|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |         | 
|-------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------- | --------- | ------- |  | ---- | --------- | ------- |  | - | ------- | ------- | 
|                           |                                                                                                 |                        
|                           |                                                                                                 | Year Ended December 31,
|                           |                                                                                                 |                        
|                           |                                                                                                 | 2000                    |           | 2001    |  | 2002
|                           |                                                                                                 |                         |           |         |  |     
|                           |                                                                                                 |                        
|                           |                                                                                                 | (in thousands)         
|Telecommunications revenue |                                                                                                 | $                       | 1,099,751 |         |  | $    | 1,084,009 |         |  | $ | 991,956 |        
|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        
|Operating expenses:        |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        
|                           | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                         |           | 93,162  |  |      |           | 101,985 |  |   |         | 117,405 | 
|                           | Selling, general and administrative                                                             |                         |           | 61,900  |  |      |           | 95,600  |  |   |         | 121,077 | 
|                           | Depreciation and amortization                                                                   |                         |           | 414,250 |  |      |           | 340,449 |  |   |         | 361,322 | 
|                           | Privatization initiative                                                                        |                         |           | 21,575  |  |      |           | 33,576  |  |   |         |        | 
|                           | Intelsat 10-01 contract termination cost                                                        |                         |           |        |  |      |           |        |  |   |         | 34,358  | 
|                           | Restructuring costs                                                                             |                         |           |        |  |      |           | 7,300   |  |   |         | 5,522   | 
|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        
|Total operating expenses   |                                                                                                 |                         | 590,887   |         |  |      | 578,910   |         |  |   | 639,684 |        
|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        
|Income from operations     |                                                                                                 |                         | 508,864   |         |  |      | 505,099   |         |  |   | 352,272 |        
|Interest expense           |                                                                                                 |                         | (24,859   | )       |  |      | (13,050   | )       |  |   | (55,053 | )      
|Other income               |                                                                                                 |                         | 20,885    |         |  |      | 12,293    |         |  |   | 9,942   |        
|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        
|Income before income taxes |                                                                                                 |                         | 504,890   |         |  |      | 504,342   |         |  |   | 307,161 |        
|Provision for income taxes |                                                                                                 |                         |          |         |  |      | 5,359     |         |  |   | 33,021  |        
|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        
|Net income                 |                                                                                                 | $                       | 504,890   |         |  | $    | 498,983   |         |  | $ | 274,140 |        
|                           |                                                                                                 |                         |           |         |  |      |           |         |  |   |         |        

The following table sets forth revenue by service
commitment type and the percentage of total telecommunications
revenue represented by each service commitment type.

|                    |  |                                    |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------- |  | ---------------------------------- | --------- | ---- |  | ---- | ----- | - |  | - | --------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                    |  |                                   
|                    |  | Year Ended December 31,           
|                    |  |                                   
|                    |  |                                    |           |      |  |     
|                    |  | 2000                               |           | 2001 |  | 2002
|                    |  |                                    |           |      |  |     
|                    |  |                                    |           |      |  |      |       |   |  |   |           | 
|                    |  |                                   
|                    |  | (in thousands, except percentages)
|Lease               |  | $                                  | 619,104   |      |  |      | 56.3  | % |  | $ | 669,648   |  |  |  | 61.8  | % |  | $ | 643,428 |  |  |  | 64.9  | %
|Channel and carrier |  |                                    | 445,587   |      |  |      | 40.5  | % |  |   | 395,971   |  |  |  | 36.5  | % |  |   | 334,372 |  |  |  | 33.7  | %
|Demand-based        |  |                                    | 4,341     |      |  |      | 0.4   | % |  |   | 5,673     |  |  |  | 0.5   | % |  |   | 5,220   |  |  |  | 0.5   | %
|Occasional use      |  |                                    | 19,988    |      |  |      | 1.8   | % |  |   | 9,394     |  |  |  | 0.9   | % |  |   | 4,654   |  |  |  | 0.5   | %
|Cable restoration   |  |                                    | 8,276     |      |  |      | 0.8   | % |  |   | 1,753     |  |  |  | 0.2   | % |  |   | 2,012   |  |  |  | 0.2   | %
|Other               |  |                                    | 2,455     |      |  |      | 0.2   | % |  |   | 1,570     |  |  |  | 0.1   | % |  |   | 2,270   |  |  |  | 0.2   | %
|                    |  |                                    |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total               |  | $                                  | 1,099,751 |      |  |      | 100.0 | % |  | $ | 1,084,009 |  |  |  | 100.0 | % |  | $ | 991,956 |  |  |  | 100.0 | %
|                    |  |                                    |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |         |  |  |  |       |  

Telecommunications
Revenue

Telecommunications revenue decreased
$92.0 million, or 8%, to $992.0 million for the year ended
December 31, 2002 from $1,084.0 million for the year
ended December 31, 2001. The decrease was primarily
attributable to lower revenue from channel and carrier based
services of $61.6 million, which consisted of a
$66.5 million decrease in revenue from channel and carrier
services, partially offset by $4.9 million in termination
fees received. The decline in channel and carrier based services
was primarily due to a decrease in the volume of capacity sold
as channel and carrier based services, which reflects the
migration of point-to-point satellite traffic to fiber optic
cables across transoceanic routes, the reduction in the capacity
requirements of our customers due to the general economic
downturn and the optimization of their own networks, and a
reduction in the amount of capacity held in inventory by
distributors for future sale. Because fiber connectivity on
major point-to-point routes is generally more cost-effective
than satellite connectivity, we expect this trend

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in our carrier business to continue. However,
based on the recent reduction in capital investments being made
in the deployment of fiber networks, we expect this trend to be
somewhat mitigated. We also expect we will be able to mitigate
this trend by taking certain actions. For example, we are
targeting customers requiring capacity for thin-route and
medium-route applications and emerging carriers in deregulating
markets. See Item 3.D  Risk Factors
for a discussion of the factors impacting our revenue, such as
competition from fiber optic cable. Another factor in the
decline in revenue from channel and carrier based services was a
reduction in the level of services provided to Teleglobe Inc. as
a result of Teleglobe Inc.s filing for creditor protection
and our subsequent share purchase agreement with Teleglobe Inc.,
pursuant to which Teleglobe Inc. and one of its affiliates
terminated some of their service orders with us. The share
purchase transaction with Teleglobe Inc. and its impact on our
consolidated financial statements are discussed further below
under  Related Party Transactions 
Teleglobe Share Purchase Agreement. Contributing to the
overall decline in revenue was a decrease in revenue from lease
services of $26.2 million due to the non-renewal of several
video services leases at their expiration dates and a reduction
in the level of services provided to Teleglobe Inc. A decrease
in occasional-use broadcast services of $4.7 million also
contributed to the overall decrease in revenue during this
period. This decline in revenue was primarily attributable to a
decline in the volume of capacity sold as a result of lower
demand for these services.


From a geographic perspective, the percentage of
revenue recognized from each of the regions we serve was
relatively consistent in 2002 with the revenue recognized in
these regions in 2001. See Item 4.B 
Business Overview  Geographic Distribution of
Our Revenue for a breakdown of revenue by geographic
region for 2001 and 2002.

Telecommunications revenue decreased
$15.7 million, or 1%, to $1,084.0 million for the year
ended December 31, 2001 from $1,099.8 million for the
year ended December 31, 2000. The decrease was primarily
attributable to a decrease in revenue from channel and carrier
based services of $49.6 million. This decline was due to a
decrease in the volume of capacity sold for channel and carrier
services, which reflects the migration of satellite traffic to
fiber optic cables across transoceanic point-to-point routes and
the reduction in the amount of capacity held in inventory by
distributors for future sale. Revenue from occasional use and
cable restoration services also decreased by $17.2 million
during this period. This decline in revenue was due to the
higher volume of capacity sold for occasional use services in
2000, which was related to the 2000 Olympics and other special
events, and a lower volume of capacity sold in 2001 for
restoration services due to increased self-restoration of these
facilities by our customers. The decrease in revenue from the
services described above was partially offset by an increase in
revenue from lease services of $50.6 million in 2001 from
2000. This increase was attributable to an increase in the
volume of capacity sold as leases for business and specialized
networks for applications such as Internet backbone
connectivity, multimedia services and video services.

From a geographic perspective, revenue recognized
from each of the regions we serve was relatively consistent in
2001 with the revenue recognized in these regions in 2000. See
Item 4.B  Business Overview 
Geographic Distribution of Our Revenue for a breakdown of
revenue by geographic region for 2000 and 2001.

Operating
Expenses

Direct costs of revenue (exclusive of
depreciation and amortization) increased $15.4 million, or
15%, to $117.4 million for the year ended December 31, 2002
from $102.0 million for the year ended December 31,
2001. This increase was due primarily to an increase in in-orbit
insurance premiums of $18.8 million incurred during this
period, which was partially offset by reductions in a
non-recurring charge to terminate a satellite construction
contract of $4.8 million and incentive payments on leased
satellite capacity of $1.4 million. Also contributing to
the increase was an increase in staff costs of
$1.5 million, which was largely due to gross salary
adjustments for employee income taxes and employer payroll taxes
associated with our employees who are non-U.S. citizens and who
were exempt from these taxes prior to privatization. These gross
salary adjustments and employer payroll taxes were partially
offset by reductions in staff costs primarily resulting from our
workforce reduction in October 2001. Increases in other expenses
of $1.3 million also contributed to the overall increase in
direct costs of revenue.

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Direct costs of revenue (exclusive of
depreciation and amortization) increased $8.8 million, or
9%, to $102.0 million for the year ended December 31, 2001
from $93.2 million for the year ended December 31,
2000. This increase was due to a number of factors, including
higher staff costs of $5.0 million. The increase in staff
costs was primarily associated with new service development
activities and higher benefits costs. We also incurred a
non-recurring charge of $4.8 million for terminating a
satellite construction contract. Incremental recurring expenses
of $6.7 million associated with our operations as a private
company also contributed to this increase. See
 Our Business  Expenses for a
further discussion of the incremental recurring expenses
associated with our operations as a private company. These
increases were partially offset by other expense decreases of
$7.7 million.

Selling, general and administrative expenses
increased $25.5 million, or 27%, to $121.1 million for
the year ended December 31, 2002 from $95.6 million
for the year ended December 31, 2001. This increase was
largely attributable to an increase in the provision for
uncollectible accounts of $9.5 million, which we did not
incur in 2001, and professional fees of $8.6 million
related primarily to activities associated with our strategic
initiatives. We also incurred increases in marketing and
promotional activities of $5.2 million and other expenses
of $2.2 million. An increase in staff costs, largely due to
gross salary adjustments for employee income taxes and employer
payroll taxes associated with our employees who are non-U.S.
citizens and who were exempt from these taxes prior to
privatization, was offset by reductions in staff costs resulting
from our workforce reduction in October 2001.

Selling, general and administrative expenses
increased $33.7 million, or 54%, to $95.6 million for
the year ended December 31, 2001 from $61.9 million
for the year ended December 31, 2000. This increase was
attributable to a number of factors, including higher staff
costs of $9.8 million. The majority of the staff cost
increase was due to an increase in our sales and marketing
staff. We also experienced increased spending on marketing and
promotional activities of $8.1 million. Incremental
recurring expenses of $10.5 million associated with our
operations as a private company also contributed to this
increase. See  Our Business 
Expenses for a further discussion of the incremental
recurring expenses associated with our operations as a private
company. Finally, we incurred other general cost increases of
$5.3 million.

Depreciation and amortization increased
$20.9 million, or 6%, to $361.3 million for the year ended
December 31, 2002 from $340.4 million for the year
ended December 31, 2001. This increase was due primarily to
depreciation of $72.5 million recorded on Intelsat IX
series satellites that either were not in service in 2001 or
were only in service during the fourth quarter of 2001. An
increase in depreciation of $4.6 million on information
systems and ground infrastructure assets, due to the placement
in service of several assets in 2001 and 2002, and an increase
in depreciation of $1.4 million on other satellites,
property and equipment also contributed to the increase. These
increases were partially offset by a decrease in depreciation
attributable to the completion of depreciation on two Intelsat
VI series satellites in 2001 of $57.6 million.

Depreciation and amortization decreased
$73.8 million, or 18%, to $340.4 million for the year ended
December 31, 2001 from $414.3 million for the year
ended December 31, 2000. This decrease was due both to a
change in the estimate of the useful lives for most of the
satellites in our fleet and to the completion of depreciation
for one of our satellites during 2000. Of this decrease,
$60.5 million was attributable to the change in the
estimate of the useful lives of our satellites.

In November 2002, we exercised our right to
terminate the portion of our satellite construction contract
with Astrium SAS relating to the Intelsat 10-01 satellite, due
to Astrium SAS significant postponement in the delivery
date of the satellite. As a result of this termination, we
recorded a non-recurring charge to our consolidated statement of
operations of $34.4 million, representing the write-off of
capitalized satellite program costs, including satellite
construction costs, launch vehicle costs, program office costs,
capitalized interest and ground network costs. See
 Termination of Our Order for the
Intelsat 10-01 Satellite for further discussion of
the termination of our order for the 10-01 satellite.

In December 2002, we reduced the size of our
workforce by 130 employees, or approximately 12%, reflecting
efforts to streamline our operations in response to market and
industry conditions. As a result of this reduction in force, we
incurred restructuring expenses of $5.5 million for
severance and related benefit costs. We believe these actions
have improved our competitive position by reducing our cost base
and aligning the

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capabilities of our staff to our business
strategy. These amounts are expected to be fully paid by the end
of the first quarter of 2003. No further costs are expected to
be incurred in connection with this workforce reduction.


We also incurred restructuring expenses of
$7.3 million in October 2001 as a result of reducing the
size of our workforce by 105 employees, or 11%. The workforce
reduction initiative was required to eliminate positions that we
no longer needed as a private company and to streamline
operations in response to market and industry conditions.

Privatization initiative expenses refer to the
non-recurring costs associated with our privatization in July of
2001. For the year ended December 31, 2001, privatization
initiative expenses increased $12.0 million, or 56%, to
$33.6 million from $21.6 million for the year ended
December 31, 2000. The increase was primarily attributable
to the settlement of a contractual dispute related to our
privatization, professional fees associated with legal due
diligence and regulatory and human resources compliance
activities and a one-time payroll tax adjustment payment made to
our employees.

Interest
Expense and Other Income

Interest expense consists of the gross interest
costs we incur less the amount of interest we capitalize related
to capital assets under construction. Interest expense increased
$42.0 million, or 321%, to $55.1 million for the year
ended December 31, 2002 from $13.1 million for the
year ended December 31, 2001. This increase was due to an
increase in gross interest of $18.9 million, resulting
primarily from the issuance of our 7 5/8% Senior Notes due
2012 in April 2002, and a decrease in interest capitalized
during 2002 of $23.1 million as compared to the amount
capitalized in 2001. The decrease in interest capitalized was
attributable to lower construction in progress balances in 2002
as compared to those balances in 2001. The decrease in
construction in progress balances in 2002 was principally due to
the placement into service during 2002 of four Intelsat IX
series satellites that were under construction during 2001.

Interest expense decreased $11.8 million, or
48%, to $13.1 million for the year ended December 31,
2001 from $24.9 million for the year ended
December 31, 2000. This decrease was principally due to
higher levels of construction in progress in 2001, which led to
an increase in capitalized interest of $19.7 million. The effect
of the higher capitalized interest was partially offset by an
increase in gross interest costs of $7.9 million over the
same period due to higher commercial paper borrowings
outstanding.

Other income decreased $2.4 million, or 20%,
to $9.9 million for the year ended December 31, 2002
from $12.3 million for the year ended December 31,
2001. This decrease was principally attributable to a reduction
in the level of satellite support services provided to New Skies
of $5.6 million. Services provided to New Skies will
continue to decline in the future, and the related income is
expected to become insignificant. Also contributing to the
decrease in other income during 2002 was an increase in foreign
currency exchange losses of $4.1 million, which were
primarily attributable to transactions entered into with our
customers in Brazil under contracts denominated in Brazilian
reais. These decreases were partially offset by other income
increases of $7.3 million, of which $6.1 million was due to
other income recorded in connection with a decrease in the
amount due to Teleglobe Inc. See  Related Party
Transactions  Teleglobe Share Purchase
Agreement for a discussion of our transaction with
Teleglobe Inc. and the accounting for this transaction.

Other income decreased $8.6 million, or 41%,
to $12.3 million for the year ended December 31, 2001
from $20.9 million for the year ended December 31,
2000. This decrease was principally attributable to a reduction
in the level of satellite support services provided to New Skies.

Income
Taxes

We became subject to certain income taxes in the
various jurisdictions in which we operate when we became a
private company on July 18, 2001. For the year ended
December 31, 2002, our provision for income taxes totaled
$33.0 million. For the year ended December 31, 2001, our
provision for income taxes of $5.4 million consisted of
income tax expense of $29.9 million for the period in 2001
subsequent to privatization and an offsetting deferred tax
benefit of $24.5 million related to the recording of a net
deferred tax asset that

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arose from our change in taxable status on the
privatization date. The decrease in the effective tax rate in
2002 as compared to 2001 was due to the difference between
actual and estimated results for 2001, which principally related
to withholding taxes.


Because Bermuda does not currently impose an
income tax, our statutory tax rate was zero. The difference
between tax expense reported in our statements of operations and
tax computed at statutory rates was attributable to the
provision for foreign taxes, which were principally U.S. and
U.K. taxes.

Net
Income

Net income decreased $224.9 million, or 45%,
to $274.1 million for the year ended December 31, 2002
from $499.0 million for the year ended December 31, 2001.
The reduction in net income during the period was due
principally to lower revenue and higher total operating expenses
recorded, as compared to the same period in 2001, as described
above. Also contributing to the decrease during the period was
an increase in interest expense of $42.0 million and an increase
in the provision for taxes of $27.6 million, as compared to
the same period in 2001.

Net income decreased $5.9 million, or 1%, to
$499.0 million for the year ended December 31, 2001
from $504.9 million for the year ended December 31,
2000. This decrease was due principally to lower revenue and
higher operating expenses, excluding depreciation and
amortization, during 2001 as compared to 2000, which were offset
somewhat by lower depreciation and amortization over the same
period.

EBITDA,
As Adjusted

EBITDA, as adjusted, consists of earnings before
interest, other income, taxes and depreciation and amortization.
We use EBITDA as one criteria for evaluating our companys
performance relative to that of our peers. We believe that
EBITDA provides investors and analysts with a measure of
operating results that is unaffected by differences in capital
structures, capital investment cycles and ages of related assets
among otherwise comparable companies. Additionally, EBITDA is a
widely accepted measure of performance in the fixed satellite
services sector. However, EBITDA is not a measurement of
financial performance under generally accepted accounting
principles and may not be comparable to other similarly titled
measures of other companies. EBITDA should not be considered as
an alternative to operating or net income as an indicator of our
performance, or as an alternative to cash flows from operating
activities as an indicator of cash flows or any other measure of
performance determined in accordance with generally accepted
accounting principles, or as a measure of liquidity. For the
year ended December 31, 2002, EBITDA, as adjusted,
decreased $131.9 million, or 16%, to $713.6 million
from $845.5 million for the year ended December 31, 2001.
The principal causes of the decrease were lower revenue coupled
with higher operating expenses during 2002 as compared to the
same period in 2001, as discussed above. The trends we have
experienced in EBITDA, as adjusted, are a direct result of the
trends we have experienced in telecommunications revenue and
expenses. See  Our Business 
Telecommunications Revenue for a further explanation of
trends in our revenue and  Our
Business  Expenses for a further explanation of
trends in our operating expenses. We expect EBITDA, as adjusted,
to continue to be directly impacted by the trends that we
experience in telecommunications revenue and operating expenses.

EBITDA, as adjusted, decreased
$77.6 million, or 8%, to $845.5 million for the year
ended December 31, 2001 from $923.1 million for the
year ended December 31, 2000. The principal causes of the
decrease were higher direct costs of revenue (exclusive of
depreciation and amortization); selling, general and
administrative expenses; and privatization initiative expenses
in 2001, as well as lower revenue in 2001, as discussed above.

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A reconciliation of net income to EBITDA, as
adjusted, for the three-year period ended December 31,
2002, is as follows:

|                    |                               |                         |         |         |   |      |         |         |   |   |         |         |  
|------------------- | ----------------------------- | ----------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                    |                               |                        
|                    |                               | Year Ended December 31,
|                    |                               |                        
|                    |                               | 2000                    |         | 2001    |   | 2002
|                    |                               |                         |         |         |   |     
|Net income          |                               | $                       | 504,890 |         |   | $    | 498,983 |         |   | $ | 274,140 |        
|Add:                |                               |                         |         |         |   |      |         |         |   |   |         |        
|                    | Interest expense              |                         |         | 24,859  |   |      |         | 13,050  |   |   |         | 55,053  |  
|                    | Provision for income taxes    |                         |         |        |   |      |         | 5,359   |   |   |         | 33,021  |  
|                    | Depreciation and amortization |                         |         | 414,250 |   |      |         | 340,449 |   |   |         | 361,322 |  
|Subtract:           |                               |                         |         |         |   |      |         |         |   |   |         |        
|                    | Other income                  |                         |         | (20,885 | ) |      |         | (12,293 | ) |   |         | (9,942  | )
|                    |                               |                         |         |         |   |      |         |         |   |   |         |        
|EBITDA, as adjusted |                               | $                       | 923,114 |         |   | $    | 845,548 |         |   | $ | 713,594 |        
|                    |                               |                         |         |         |   |      |         |         |   |   |         |        

Liquidity and
Capital Resources

Our most significant liquidity requirements arise
from the funding of capital expenditures related to our
satellite fleet and related ground infrastructure and the
payment of operating expenses. Other liquidity requirements
arise in connection with expanding our business, meeting our
working capital requirements and servicing our debt obligations.
In addition, we may have liquidity requirements in connection
with financing any potential strategic transactions.

Cash
Flow Items

Our net cash provided by operating activities has
exceeded our payments for satellites and other property and
equipment in each year since 1995. For the year ended
December 31, 2002, net cash provided by operating
activities was $658.0 million and payments for satellites
and other property and equipment were $616.8 million. Net cash
provided by operating activities for the year ended December 31,
2002 was comprised principally of $274.1 million in net
income and $361.3 million in depreciation and amortization. In
addition, an increase in non-cash items of $46.8 million
offset by a decrease in operating assets and liabilities of
$24.3 million contributed to the net cash provided by
operating activities in 2002. For the year ended
December 31, 2001, net cash provided by operating
activities was $856.4 million and payments for satellites
and other property and equipment were $663.7 million. Net
cash provided by operating activities in 2001 was comprised
principally of $499.0 million in net income and $340.4
million in depreciation and amortization. In addition, an
increase in operating assets and liabilities of
$47.5 million offset by the recording of deferred taxes of
$30.6 million contributed to the net cash provided by
operating activities in 2001. For the year ended
December 31, 2000, net cash provided by operating
activities was $933.0 million and payments for satellites
and other property and equipment were $546.0 million. Net
cash provided by operating activities in 2000 was comprised of
$504.9 million in net income, $414.3 million in
depreciation and amortization, and an increase in operating
assets and liabilities of $13.9 million.

During the year ended December 31, 2002, we
recorded a foreign currency exchange loss of $4.1 million.
The loss was primarily attributable to the conversion of our
Brazilian real cash balances held in Brazil and other working
capital account balances to U.S. dollars at the exchange rate in
effect on December 31, 2002 or, with respect to exchange
transactions effected during the period, at the time the
exchange transactions occurred. Because of continuing business
in Brazil under customer contracts denominated in Brazilian
reais, our exposure to foreign exchange fluctuations is ongoing.
For the year ended December 31, 2002, our Brazilian
customers represented approximately 2% of our telecommunications
revenue.

Net cash used in investing activities increased
$14.5 million, or 2%, to $678.2 million for the year
ended December 31, 2002 from $663.7 million for the
year ended December 31, 2001. Our investing activity in
2002 consisted of $467.4 million of capital expenditures
for satellites and associated launch services,
$97.0 million of

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capital expenditures for infrastructure projects
and other ground network costs, $52.4 million of
capitalized interest and $61.4 million for payments on asset
acquisitions.


Net cash used in investing activities increased
$117.7 million, or 22%, to $663.7 million for the year
ended December 31, 2001 from $546.0 million for the
year ended December 31, 2000. Our investing activity in
2001 consisted of $522.5 million of capital expenditures
for satellites and associated launch services,
$65.0 million of capital expenditures for infrastructure
projects and other ground network costs, and $76.2 million
of capitalized interest. Our investing activity in 2000
consisted of $425.4 million of capital expenditures for
satellites and associated launch services, $64.1 million of
capital expenditures for infrastructure projects and other
ground network costs, and $56.5 million of capitalized
interest.

Net cash provided by financing activities
increased $222.7 million to $31.5 million for the year
ended December 31, 2002 from $191.2 million used in
financing activities for the year ended December 31, 2001.
Our financing activity in 2002 principally consisted of
$595.8 million in net proceeds received from the issuance
of our 7 5/8% Senior Notes due 2012, offset by repayment of
commercial paper borrowings of $266.1 million, repayment of
our $200.0 million Eurobond 7.375% notes due 2002, and
payment of $65.0 million for the purchase of our ordinary
shares from Teleglobe Inc. At December 31, 2002, commercial
paper borrowings outstanding totaled $44.0 million.

Net cash used in financing activities decreased
$220.6 million, or 54%, to $191.2 million for the year
ending December 31, 2001 from the $411.8 million for
the year ending December 31, 2000. Our financing activities
in 2001 consisted primarily of $293.5 million in borrowings
from commercial paper and a final pre-privatization cash
distribution to the IGOs Signatories and Investing
Entities in the amount of $425.0 million. Our financing
activities in 2000 consisted primarily of $580.0 million in
capital contributions from shareholders, $855.1 million in
distributions to shareholders and a $150.0 million repayment of
notes payable.

Long-Term
Debt and Other Liabilities

At December 31, 2002, we had long-term debt,
including the current portion of such debt, of
$1,308.5 million. This debt consisted of
$600.0 million of U.S. dollar denominated bonds issued in
the European and Asian capital markets, $600.0 million of
U.S. dollar denominated 7 5/8% Senior Notes due 2012 offset
by an unamortized discount of $4.0 million, a
$48.5 million capitalized lease obligation,
$44.0 million in commercial paper borrowings and a
$20.0 million note payable to Lockheed Martin Corporation.
We incurred gross interest costs of $107.5 million for the
year ended December 31, 2002.

The 7 5/8% Senior Notes due 2012 were issued
in April 2002. Proceeds received from the issuance of the notes
were used to repay commercial paper borrowings outstanding at
the time of receipt of those proceeds, for general corporate
purposes and to repay on August 6, 2002 our
$200.0 million principal amount of Eurobond 7 3/8%
Notes due 2002 that had been outstanding. The discount on the
7 5/8% Senior Notes due 2012 represents the difference
between the issue price and the face value of the notes at
December 31, 2002. In addition, we incurred debt issuance
costs of $7.6 million. Both the discount and the debt issuance
costs are amortized as interest expense over the life of the
Senior Notes utilizing the effective interest method.

Of our notes outstanding, $400.0 million
matures in 2004, $200.0 million matures in 2005,
$20.0 million matures in $5.0 million annual
installments between 2007 and 2010, and the remaining
$600.0 million matures in 2012. Our capitalized lease
obligation matures in 2009.

At December 31, 2001, we had long-term debt,
including the current portion of such debt, of
$1,163.7 million. This debt consisted of
$800.0 million of U.S. dollar denominated bonds issued in
the European and Asian capital markets, $310.1 million in
commercial paper borrowings and a $53.6 million capitalized
lease obligation. We incurred gross interest costs of
$89.3 million for the year ended December 31, 2001.

Our cost of satellite construction includes an
element of deferred consideration to satellite manufacturers
referred to as satellite performance incentives. We are
contractually obligated to make these payments over the lives of
the satellites, provided the satellites continue to operate in
accordance with contractual specifications. These satellite
performance incentive payments typically represent between 2%
and 6% of the

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overall satellite construction contract price. We
capitalize the present value of these payments as part of the
cost of the satellites and record a corresponding liability to
the satellite manufacturers. This asset is amortized over the
useful lives of the satellites and the liability is reduced as
the payments are made. Our total satellite performance incentive
payment liability was $144.6 million as of December 31,
2002 and $100.4 million as of December 31, 2001.


Receivables

Our receivables, net totaled $265.8 million
at December 31, 2002 and $265.2 million at
December 31, 2001. Of these amounts, our trade receivables
were $227.4 million at December 31, 2002 and
$253.3 million at December 31, 2001. The remaining
balance in both years represents other receivables. The trade
receivables balance at December 31, 2001 represented
approximately three months of operations, principally because
our pre-privatization billing policy required payments from
customers to be made quarterly in arrears. Our new billing
policy, applicable to service agreements entered into after
privatization, generally requires payments to be made monthly in
arrears. Consequently, at December 31, 2002, nearly 50% of
our trade receivables are billed monthly in arrears or monthly
in advance.

In addition to our billing policy, our collateral
profile has also changed as a result of the privatization.
Previously, the investment share of the Signatories and
Investing Entities, who were also our principal customers, was
considered to be collateral for services provided. As a result
of the privatization, we no longer hold this investment share as
collateral, although some of our customers have pledged our
ordinary shares held by them as collateral for services provided.

Capital
Expenditures

The expected capital expenditures that we
describe below are based on our capital commitments to date and
our current business plans. As we pursue our business strategies
and seek to respond to opportunities and trends in our industry,
our actual capital expenditures may differ from the expected
capital expenditures described below. In addition, levels of
capital spending from one year to the next are influenced both
by the nature of the satellite life cycle and by the
capital-intensive nature of the satellite industry. As a result,
we frequently experience significant variances in our capital
expenditure outlays from year to year.

Our capital expenditures totaled
$616.8 million in 2002 and are expected to be approximately
$350 million in 2003. Total capital expenditures in 2002
consisted of $564.4 million of asset costs and
$52.4 million of capitalized interest. Total expected
capital expenditures in 2003 consist of approximately
$327 million of asset costs and approximately
$23 million of capitalized interest. Our largest capital
expenditures are expected to be associated with the construction
and launch of our Intelsat X series satellite. We are currently
evaluating our need for, and may in the next year start making
capital expenditures for, additional satellites.

With respect to the Intelsat IX series
satellites, the total costs for the five satellites launched in
2002 and in February 2003 were approximately $1,257 million,
which includes the costs of satellite construction, launch
services, insurance and capitalized performance incentives. Of
this amount, $402.1 million was spent in 2002 and approximately
$49 million is expected to be spent in 2003, in each case
excluding capitalized interest. Our deployment of the Intelsat
IX series satellites was completed in February 2003 when we
successfully launched the 907 satellite. As of December 31,
2002, $147.2 million of expected costs for the Intelsat IX
series satellites were covered by contractual commitments.

We estimate the total costs for our Intelsat X
series satellite to be approximately $288 million, which
includes the costs of satellite construction, launch services,
insurance and capitalized performance incentives. Of this
amount, $105.8 million was spent in 2002 and approximately
$145 million, excluding capitalized interest, is expected
to be spent in 2003. We expect to launch our Intelsat X series
satellite in late 2003 or early 2004. As of December 31,
2002, $212.1 million of expected costs for the Intelsat X
series satellite were covered by contractual commitments.

Infrastructure and other projects during 2002
consisted primarily of projects designed to expand our ground
communications network facilities and develop new bundled
services. We invested $97.0 million in

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2002 for ground facilities and other
infrastructure to support our satellite network and for our
global connectivity services and broadband services initiatives,
excluding capitalized interest. We intend to invest
approximately $123 million, excluding capitalized interest,
in 2003 for ground facilities and other infrastructure, such as
a back-up facility for our mission-critical operations, to
support our satellite network and for our global connectivity
services and broadband services initiatives. See
Item 4.B  Business Overview 
Our Strategy for a discussion of our planned services and
market plans. As of December 31, 2002, we had
$30.7 million in contractual commitments with respect to
these infrastructure and other project initiatives.


As of December 31, 2002, we had other
contractual commitments of $153.8 million, including satellite
performance incentives obligations related to satellites in
orbit and lease payment obligations for one of the two
satellites on which we lease capacity. Of this amount, we expect
to spend approximately $30 million in 2003.

Capital
Resources

We expect that our future working capital,
capital expenditures, planned strategic initiatives and debt
service will be satisfied by cash generated from our operations
and, if necessary, by the issuance of commercial paper. However,
even though we expect that a majority of our revenue in 2003
will be generated from existing customer service contracts, we
cannot be assured of generating our expected revenue in the
event of an unforeseen decrease in the demand for our services.

We used the net proceeds of $588.2 million
from the issuance and sale in April 2002 of our 7 5/8%
Senior Notes due 2012 to repay commercial paper borrowings
outstanding at the time of receipt of those proceeds, for
general corporate purposes and to repay on August 6, 2002
our $200.0 million principal amount of Eurobond 7 3/8%
Notes due 2002 that had been outstanding.

To support our commercial paper program and to
provide funding for general corporate purposes, we entered into
two agreements on March 21, 2002 with a group of financial
institutions for a $500.0 million unsecured 364-day
revolving credit facility, which expired in March 2003, and a
$500.0 million 3-year unsecured revolving credit facility,
which expires in March 2005. At our option, borrowings under the
3-year revolving credit facility will bear, and borrowings under
the 364-day revolving credit facility would have borne, interest
either at the banks base rate or at the Eurodollar rate
plus an applicable margin. The 3-year facility contains, and the
364-day facility contained, certain financial and operating
covenants, including a covenant requiring us to maintain a ratio
of EBITDA, as defined in the facility, to gross interest expense
of at least 4 to 1 as of the last day of any fiscal quarter for
the four fiscal quarters ending on that day. The 3-year
revolving credit facility contains an additional covenant
requiring that the ratio of our debt to EBITDA, as defined in
the facility, not exceed 2.5 to 1 at any time. Both the facility
fee and the margin over the Eurodollar rate at which we can
borrow under the 3-year facility, and at which we could borrow
under the 364-day facility, increase incrementally if there is a
downgrade in our credit rating by Standard & Poors or
Moodys Investors Service, Inc. As of December 31,
2002, we were in compliance with these covenants and there were
no borrowings outstanding under either revolving credit
facility. Our policy is to classify commercial paper borrowings
supported by our revolving credit facilities as long-term debt
if we have both the ability and the intent to maintain these
obligations for longer than one year. At December 31, 2002,
our outstanding commercial paper balance of $44.0 million
was classified as a current liability.

These two credit facilities replaced a 364-day
credit facility that was in place at December 31, 2001. The
agreement for the replaced facility contained terms and
conditions similar to those of the credit agreements for the
364-day and the 3-year revolving credit facilities. Under the
terms of this credit facility, we were required to satisfy
certain financial and operating covenants, including an interest
coverage ratio. As of December 31, 2001, we were in
compliance with these covenants and there were no borrowings
outstanding under the credit facility.

If we were to consummate any strategic
transactions or undertake other projects requiring significant
capital expenditures, we may be required to seek additional
financing. A number of factors would influence our ability to
obtain such financing, including general market conditions over
which we have no control. Both our credit rating and our ability
to obtain financing may be influenced by the supply and demand
characteristics of

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the telecommunications sector in general and of
the fixed satellite services sector in particular. Our customer
relations as well as our backlog are considered when evaluating
our credit. Other factors that could impact our credit rating
include the amount of debt in our capital structure, activities
associated with our strategic initiatives, our expected future
cash flows and the capital expenditures required to execute our
business strategy.


The following table sets forth our contractual
obligations and capital commitments as of December 31, 2002
and our planned capital expenditures for 2003.

|                                |                               |               |       |           |  |           |   |         |  |       |   |       |  |  |   |       |  |  |   |         | 
|------------------------------- | ----------------------------- | ------------- | ----- | --------- |  | --------- | - | ------- |  | ----- | - | ----- |  |  | - | ----- |  |  | - | ------- | 
|                                |                               | Less than     |       |           |  |           |   | After   |  |      
|                                |                               | 1 year        |       | 1-3 years |  | 4-5 years |   | 5 years |  | Total
|                                |                               |               |       |           |  |           |   |         |  |      
|                                |                               |              
|                                |                               | (in millions)
|Contractual obligations:        |                               |               |       |           |  |           |   |         |  |       |   |       |  |  |   |       |  |  |   |        
|                                | Long-term debt(1)             |               | $     | 148.2     |  |           | $ | 748.1   |  |       | $ | 117.2 |  |  | $ | 825.2 |  |  | $ | 1,838.7 | 
|                                | Capital commitments(2)(3)     |               |       | 219.0     |  |           |   | 134.8   |  |       |   | 44.4  |  |  |   | 84.9  |  |  |   | 483.1   | 
|                                | Operating leases              |               |       | 18.3      |  |           |   | 21.0    |  |       |   | 5.8   |  |  |   | 10.4  |  |  |   | 55.5    | 
|                                | Investment(4)                 |               |       | 58.0      |  |           |   |        |  |       |   |      |  |  |   |      |  |  |   | 58.0    | 
|                                |                               |               |       |           |  |           |   |         |  |       |   |       |  |  |   |       |  |  |   |        
|                                | Total contractual obligations |               | $     | 443.5     |  |           | $ | 903.9   |  |       | $ | 167.4 |  |  | $ | 920.5 |  |  | $ | 2,435.3 | 
|                                |                               |               |       |           |  |           |   |         |  |       |   |       |  |  |   |       |  |  |   |        
|Planned capital expenditures(5) |                               | $             | 350.0 |           |  |           |   |         |  |       |   |       |  |  |   |       |  |  |   |        
|                                |                               |               |       |           |  |           |   |         |  |       |   |       |  |  |   |       |  |  |   |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes principal and interest on long-term debt.                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | Includes contractual commitments for satellites
    and principal and interest on deferred satellite performance
    incentives.                                                                                                                                                                                                                                                                  
|   
|(3) | Capital commitments in years 1-3 include the cash
    deposit related to termination of our order for the 10-01
    satellite that will be applied against the cost of a future
    launch, or will be forfeited if we do not place a launch order
    by July 31, 2005. See  Termination of Our
    Order for the Intelsat 10-01 Satellite for further
    information regarding this deposit.
|   
|(4) | Does not include indirect investment in Galaxy
    Satellite Broadcasting Limited, which was made subsequent to
    December 31, 2002.                                                                                                                                                                                                                                                            
|   
|(5) | Includes capitalized interest.                                                                                                                                                                                                                                                                                                                                                                    

Currency and
Exchange Rates

Substantially all of our customer contracts,
capital expenditure contracts and operating expense obligations
are denominated in U.S. dollars. Consequently, we are not
exposed to material currency exchange risk. However, our service
contracts with our Brazilian customers provide for payment in
Brazilian reais. Accordingly, we are subject to the risk of a
reduction in the value of the Brazilian real as compared to the
U.S. dollar in connection with payments made by Brazilian
customers, and our exposure to fluctuations in the exchange rate
for Brazilian reais is ongoing. However, the rates payable under
our service contracts with Brazilian customers are adjusted
annually to account for inflation in Brazil, thereby mitigating
our risk. For the year ended December 31, 2002, our
Brazilian customers represented approximately 2% of our
telecommunications revenue. Transactions in other currencies are
converted into U.S. dollars using rates in effect on the dates
of the transactions.

Disclosures
about Market Risk

We have existing obligations related to our
long-term debt agreements. These financial instruments are
discussed further in Note 7 to our consolidated financial
statements appearing elsewhere in this annual report. We do not
have significant cash flow exposure to changing interest rates
on our long-term debt because the interest rates of those
securities are fixed. However, the estimated fair value of the
fixed-rate debt is subject to market risk. As of
December 31, 2002, we had approximately $1.3 billion
in fixed-rate debt and $44.0 million in commercial paper
borrowings outstanding. To the extent that we fund working
capital needs or our capital

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expenditures using commercial paper, we will be
subject to interest rate and related cash flow risk. We are not
currently engaged in the use of off-balance sheet derivative
financial instruments to hedge or partially hedge interest rate
exposure arising from changes in interest rates. To the extent
that we make significant borrowings under our existing credit
facility, we will evaluate the appropriateness of using various
hedging instruments.


Presented below is an analysis of our financial
instruments as of December 31, 2002 that are sensitive to
changes in interest rates. The tables demonstrate the change in
market value of the instruments calculated for an instantaneous
parallel shift in interest rates, plus or minus 50 basis points,
or BPS, 100 BPS and 150 BPS. With respect to our fixed rate
debt, the sensitivity table below illustrates market
values, or the price at which the debt would trade should
interest rates fall or rise in the range indicated, assuming
similar terms and similar assessment of risk by our lenders.
Market values are determined using market rates on comparable
instruments as of December 31, 2002.

|                                                                 |  |                                                          |       |             |  |                                 |       |            |  |          |       |           |  |           |       |  |  |   |       |  |  |   |       |  |  |   |       | 
|---------------------------------------------------------------- |  | -------------------------------------------------------- | ----- | ----------- |  | ------------------------------- | ----- | ---------- |  | -------- | ----- | --------- |  | --------- | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                                                 |  |                                                         
|                                                                 |  | Interest Rate Risk (in millions) as of December 31, 2002
|                                                                 |  |                                                         
|                                                                 |  |                                                          |       |             |  |                                
|                                                                 |  | Valuation of Securities                                  |       | No Change   |  | Valuation of Securities        
|                                                                 |  | Given an Interest Rate Decrease                          |       | in Interest |  | Given an Interest Rate Increase
|                                                                 |  | of X Basis Points                                        |       | Rates       |  | of X Basis Points              
|                                                                 |  |                                                          |       |             |  |                                
|                                                                 |  | (150 BPS)                                                |       | (100 BPS)   |  | (50 BPS)                        |       | Fair Value |  | (50 BPS) |       | (100 BPS) |  | (150 BPS)
|                                                                 |  |                                                          |       |             |  |                                 |       |            |  |          |       |           |  |          
|$600 million principal 7.625% senior notes
    due 04/15/12      |  | $                                                        | 642.5 |             |  | $                               | 621.6 |            |  | $        | 601.6 |           |  | $         | 582.5 |  |  | $ | 564.1 |  |  | $ | 546.5 |  |  | $ | 529.7 | 
|$200 million principal Eurobond 8.125% notes
    due 02/28/05    |  | $                                                        | 212.4 |             |  | $                               | 210.4 |            |  | $        | 208.3 |           |  | $         | 205.8 |  |  | $ | 204.3 |  |  | $ | 202.3 |  |  | $ | 200.4 | 
|$200 million principal Eurobond 8.375% notes
    due 10/14/04    |  | $                                                        | 212.3 |             |  | $                               | 210.5 |            |  | $        | 208.8 |           |  | $         | 206.7 |  |  | $ | 205.4 |  |  | $ | 203.8 |  |  | $ | 202.1 | 
|$200 million principal Dragon bond 6.625%
    notes due 03/22/04 |  | $                                                        | 205.5 |             |  | $                               | 204.3 |            |  | $        | 203.1 |           |  | $         | 201.7 |  |  | $ | 200.8 |  |  | $ | 199.6 |  |  | $ | 198.5 | 

|                 |  |                                                          |     |                |  |                                 |     |  |  |          |     |           |  |           |     |  |  |   |     |  |  |   |     |  |  |   |     | 
|---------------- |  | -------------------------------------------------------- | --- | -------------- |  | ------------------------------- | --- |  |  | -------- | --- | --------- |  | --------- | --- |  |  | - | --- |  |  | - | --- |  |  | - | --- | 
|                 |  |                                                         
|                 |  | Interest Rate Risk (in millions) as of December 31, 2002
|                 |  |                                                         
|                 |  |                                                          |     |                |  |                                
|                 |  | Annual Interest Expense                                  |     | No Change      |  | Annual Interest Expense        
|                 |  | Given an Interest Rate Decrease                          |     | in             |  | Given an Interest Rate Increase
|                 |  | of X Basis Points                                        |     | Interest Rates |  | of X Basis Points              
|                 |  |                                                          |     |                |  |                                
|                 |  | (150 BPS)                                                |     | (100 BPS)      |  | (50 BPS)                        |     |  |  | (50 BPS) |     | (100 BPS) |  | (150 BPS)
|                 |  |                                                          |     |                |  |                                 |     |  |  |          |     |           |  |          
|Commercial paper |  | $                                                        | 0.1 |                |  | $                               | 0.4 |  |  | $        | 0.6 |           |  | $         | 0.8 |  |  | $ | 1.0 |  |  | $ | 1.2 |  |  | $ | 1.5 | 

These sensitivity analyses provide only a
limited, point-in-time view of the market risk sensitivity of
certain of our financial instruments. The actual impact of
market interest rate changes on the financial instruments may
differ significantly from the impact shown in the sensitivity
analyses.

Critical
Accounting Policies

Our significant accounting policies are described
fully in Note 2 to our consolidated financial statements
appearing elsewhere in this annual report. We consider a number
of accounting policies to be critical to the understanding of
our results of operations. These accounting policies relate to
revenue recognition, our satellites and other property and
equipment, business combinations, goodwill, impairment of
long-lived and amortizable intangible assets, income taxes,
deferred satellite performance incentives and retirement plans
and other postretirement benefits. The impact of any associated
risks related to these policies on our business operations is
discussed in this Item 5  Operating and
Financial Review and Prospects where such policies affect
our reported and expected financial results. Our preparation of
financial statements in accordance with accounting principles
generally accepted in the United States requires us to make
estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Revenue
Recognition

We recognize telecommunications revenue primarily
from satellite utilization charges, which are recognized as
revenue over the period during which the satellite services are
provided. This revenue is recognized provided that collection of
the related receivable is probable. We make estimates regarding
the

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probability of collection based upon an
evaluation of the customers creditworthiness, the
customers payment history and other conditions or
circumstances that may affect the likelihood of payment. When we
have determined that the collection of payments for satellite
utilization is not probable at the time the service is provided,
we defer recognition of the revenue until such time that
collection is believed to be probable or the payment is
received. We also maintain an allowance for doubtful accounts
for customers receivables where the collection of these
receivables is uncertain. If our estimate of the probability of
collection is not accurate, we may experience lower revenue or
an increase in our bad debt expense.


We receive payments for satellite utilization
charges from some customers in advance of our providing
services. Amounts received from customers pursuant to satellite
capacity prepayment options are recorded in the financial
statements as deferred revenue. These deferred amounts are
recognized as revenue on a straight-line basis over the
agreement terms.

Our revenue recognition policy as described above
complies with the criteria set forth in Staff Accounting
Bulletin No. 101. We have entered into agreements with our
customers under which we provide them with telecommunications
services at prices and on the other terms and conditions
provided under those agreements. Furthermore, as stated above,
our telecommunications revenue is recognized over the period
during which services are provided to our customers, and we
account for amounts received from our customers pursuant to
satellite capacity prepayment options as described above.
Additionally, we recognize revenue only when collection is
reasonably assured.

Satellites
and Other Property and Equipment

Satellites and other property and equipment are
stated at cost. These costs consist primarily of the cost of
satellite construction and launch, including insurance premiums,
the net present value of performance incentives payable to the
satellite manufacturers, costs directly associated with
satellite construction and interest costs incurred during the
period of satellite construction. Satellite construction and
launch services are generally procured under long-term,
multi-satellite contracts that provide for payments over the
contract periods. Satellite construction and launch services
costs are capitalized to reflect progress toward completion,
which typically coincides with contract milestone payment
schedules. Insurance premiums related to satellite launches and
subsequent in-orbit testing are capitalized and amortized over
the lives of the related satellites. Insurance premiums
associated with in-orbit operations are expensed as incurred.
Performance incentives payable in future periods are dependent
on the continued satisfactory performance of the satellites in
service.

Satellites and other property and equipment are
depreciated and amortized on a straight-line basis over their
estimated useful lives. The depreciable lives of our satellites
range from 10 years to 15 years. We make estimates of
the useful lives of our satellites for depreciation and
amortization purposes based upon an analysis of each
satellites performance, including its orbital design life
and its estimated orbital maneuver life. The orbital design life
of a satellite is the length of time that the satellites
hardware is guaranteed by the manufacturer to remain operational
under normal operating conditions. In contrast, a
satellites orbital maneuver life is the length of time the
satellite is expected to remain operational as determined by
remaining fuel levels and consumption rates. Our in-orbit
satellites generally have orbital design lives ranging from
10 years to 13 years and orbital maneuver lives as
high as 17 years. Although the orbital maneuver lives of
our satellites have historically extended beyond their
contractual design lives, this trend may not continue. We
periodically review the remaining estimated useful lives of our
satellites to determine if any revisions to our estimates are
necessary based on the health of the individual satellites. For
example, as of January 1, 2001, we revised the estimated
useful lives for substantially all Intelsat VII and VIII series
satellites based on our review of the performance of our
satellite fleet. The effect of this change in estimate was to
increase the useful lives of these satellites by approximately
two years, and thereby decrease depreciation and amortization
expense by approximately $60.5 million for the year ended
December 31, 2001. As a result of this change, the useful
lives of our satellites generally exceed the orbital design
lives and are less than the orbital maneuver lives. Additional
changes in our estimate of the useful lives of our satellites
could have a material effect on our financial position or
results of operations.

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Business
Combinations

Our business combinations are accounted for in
accordance with the provisions set forth in Statement of
Financial Accounting Standards, referred to as SFAS,
No. 141, Business Combinations, whereby the net
tangible and separately identifiable intangible assets acquired
and liabilities assumed are recognized at their estimated fair
market values at the acquisition date. The purchase price in
excess of the estimated fair market value of the net tangible
and separately identifiable intangible assets acquired
represents goodwill. The allocation of the purchase price
related to our business combinations involves estimates and
judgments by our management that may be adjusted during the
allocation period, but in no case beyond one year from the
acquisition date.

Goodwill

Goodwill arising from our acquisitions represents
the excess of cost over the fair value of tangible and
separately identifiable intangible assets acquired. On
January 1, 2002, we adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS
No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized and that they
instead be tested for impairment at least annually by applying a
fair value-based test.

As of December 31, 2002, there was no
impairment charge recorded as the goodwill we recorded in
connection with our acquisition of certain assets and
liabilities of COMSAT World Systems was not impaired. We will
perform the impairment analysis as required under SFAS
No. 142, on an annual basis or more frequently if
circumstances indicate a possible impairment has occurred, by
assessing the fair value of our acquired assets using a
discounted cash flow approach. If we are required to record an
impairment charge in the future, it could have an adverse impact
on our results of operations.

Impairment
of Long-Lived and Amortizable Intangible Assets

We review our long-lived and amortizable
intangible assets to assess whether an impairment has occurred
using the guidance established under SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets,whenever events or changes in circumstances indicate,
in our judgment, that the carrying amount of an asset may not be
recoverable. The recoverability of an asset to be held and used
is measured by a comparison of the carrying amount of the asset
to the estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of the asset
exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the
asset exceeds its fair value.

At December 31, 2002, there was no
impairment charge recorded with respect to any of our long-lived
and amortizable intangible assets.

Income
Taxes

We account for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. Under
SFAS No. 109, deferred tax assets and liabilities are
computed based on the difference between the financial statement
and income tax bases of assets and liabilities using the enacted
marginal tax rate. SFAS No. 109 requires that the net deferred
tax asset be reduced by a valuation allowance if, based on the
weight of available evidence, it is more likely than not that
some portion or all of the net deferred tax asset will not be
realized.

Deferred
Satellite Performance Incentives

Our cost of satellite construction includes an
element of deferred consideration to satellite manufacturers
referred to as satellite performance incentives. We are
contractually obligated to make these payments over the lives of
the satellites, provided the satellites continue to operate in
accordance with contractual specifications. These satellite
performance incentive payments typically represent between 2%
and 6% of the overall satellite construction contract price.
Historically, the satellite manufacturers have earned 100% of
these payments. Therefore, we view these payments as a financing
mechanism. Consequently, we capitalize the

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present value of these payments as part of the
cost of the satellites and record a corresponding liability to
the satellite manufacturers. These costs are amortized over the
useful lives of the satellites and the liability is reduced as
the payments are made.


Retirement
Plans and Other Postretirement Benefits

Defined
Benefit Plan

We maintain a noncontributory defined benefit
retirement plan called the Intelsat Staff Retirement Plan. This
plan covers, among others, substantially all of our employees
hired before July 19, 2001. See Item 6.B 
Compensation  Pension Benefits for information
regarding the individuals covered by this plan. The cost under
this plan is calculated using a formula that is based on
employees remuneration, dates of hire and years of
service. In 2001 and 2002, global capital market conditions
resulted in negative returns on the plans assets.
Primarily due to this occurrence and to a reduction in the
discount rate assumption for our plan as discussed further
below, the plans accumulated benefit obligation at
September 30, 2002 exceeded the fair value of its assets,
which required us to record an additional minimum pension
liability in accordance with SFAS No. 87,
Employers Accounting for Pensions. The effect of
this non-cash adjustment was to increase accrued retirement
benefits by $23.8 million, increase other assets by
$2.3 million and increase other comprehensive loss by
$21.5 million, or $12.9 million after tax. We have
historically funded the plan based on actuarial advice using the
projected unit credit cost method. Our contributions to the plan
over the last 10 years have averaged $3.2 million
annually. Concurrent with our privatization in 2001, our plan
became subject to the provisions of the Employee Retirement
Income Security Act of 1974, and as such, we expect that our
contributions to the plan will be based on the minimum
requirements of the Internal Revenue Service. As a result, we
made no contribution to the plan in 2002 and do not expect that
we will be required to make a contribution to this plan until
2004.

The amounts provided above for our
noncontributory defined benefit retirement plan include amounts
for the Intelsat Restoration Plan, which is a non-qualified
pension plan. See Item 6.B  Compensation 
Pension Benefits for information regarding the Intelsat
Restoration Plan.

Other
Postretirement Benefits Plan

We provide health benefits for employees who
retire at or after age 60 with five years of consecutive service
or after age 55 with ten years of consecutive service. We
provide these benefits under a plan that is unfunded. Benefits
are paid as they become due.

Defined
Contribution Plans

We maintain two defined contribution retirement
plans. One of these plans provides benefits to employees who
were hired before July 19, 2001, and the other plan
provides benefits to individuals who have been hired on or after
July 19, 2001. We also maintain an unfunded supplemental
pension plan for executives. However, benefit accruals under
this plan were discontinued during 2001. See Item 6.B
 Compensation  Defined Contribution
Plans for information regarding these plans.

Key
Plan Assumptions

Net periodic pension and other postretirement
benefits costs under our defined benefit and other
postretirement benefit plans, as well as the related plan
liabilities, are determined each year on an actuarial basis. As
part of this process, we review our plans actual
experience and make adjustments to key plan assumptions, if
necessary. In 2002, we made a change to a key plan assumption.
Specifically, we lowered the discount rate applicable to both
our defined benefit plan and our other postretirement benefit
plan to 6.75% from 7.25% in order to reflect the decline in
long-term interest rates that occurred during the year. Our
discount rates are based upon an expected benefit payments
duration analysis and the equivalent average yield rate for
high-quality, fixed-income investments. For our defined benefit
plan, we elected to maintain the expected rate of return on
pension assets at 9%. Our expected rates of return are based on
historical capital market performance and on our anticipated
investment policy philosophy. Notwithstanding the negative

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returns on plan assets that we have experienced
in 2001 and 2002, we believe that the historical performance of
the capital markets indicates that 9% remains a reasonable
expectation for long-term returns. For our other postretirement
benefits plan, we elected to maintain the health care cost trend
rate at 7% because our review of recent claims data indicates
that this assumption remains valid over the long term. As a
result of electing these assumptions for our plans in 2002,
including the change in the discount rate, we expect our pension
expense as measured in accordance with SFAS No. 87,
Employers Accounting for Pensions, to increase by
approximately $2.9 million, or 263.6%, to approximately
$4.0 million in 2003 from $1.1 million in 2002. In
addition, we expect our other postretirement benefits expense as
measured in accordance with SFAS No. 106,
Employers Accounting for Postretirement Benefits Other
Than Pensions, to increase by $1.2 million, or 17.6%,
to $8.0 million in 2003 from $6.8 million in 2002. We
estimate that a change in the assumed discount rate of 25 basis
points would increase or decrease our pension expense and other
postretirement benefits expense by approximately
$0.8 million and $0.4 million, respectively, in 2003.
Also, we estimate that a change in the expected return of plan
assets of 1% would increase or decrease pension expense by
approximately $2.3 million in 2003. Further, we estimate
that a change in the assumed health care cost trend rate of 1%
would increase or decrease other postretirement benefits expense
by approximately $1.4 million in 2003.


Under the accounting guidance for pension plans
and other postretirement benefit plans just described, the
effects of revisions to assumptions or differences between
assumed and actual experience are not immediately recognized in
expense in the year of occurrence. Instead, both the favorable
and unfavorable effects of these revisions and differences that
fall within an acceptable range are reflected as unrecognized
net gains and losses and are amortized into pension expense and
other postretirement benefits expense over a predetermined
amortization period. For our defined benefit pension plan, we
had an unrecognized net loss of $60.1 million at
December 31, 2002, compared to an unrecognized net loss of
$23.2 million at December 31, 2001. For our other
postretirement benefit plan, we had an unrecognized net gain of
$12.1 million at December 31, 2002, compared to an
unrecognized net gain of $9.8 million at December 31,
2001. A portion of the unrecognized net loss and unrecognized
net gain will be amortized into pension expense and other
postretirement benefits expense, respectively, in 2003. However,
the impact of the amortization on expense in future years will
depend in large part on the actual experience of the plans in
those years and, consequently, cannot be estimated.

Related Party
Transactions

Our
Shareholder Relationships

Because of our history as a privatized
intergovernmental organization, a significant percentage of our
customers are also shareholders in our company. Our
shareholders, formerly the IGOs Signatories and Investing
Entities, accounted for approximately 88% of revenue in 2000,
89% of revenue in 2001 and 78% of revenue in 2002. These
Signatories and Investing Entities received investment share in
the IGO based on their percentage use of the IGOs
satellite system. Additionally, they made capital contributions
to the IGO and received capital repayments from the IGO in
proportion to their investment share in the IGO. Prior to
privatization, prices for our services were set by a tariff
schedule and determined on a non-discriminatory basis. As a
private company, we are now able to set new, market-based prices
for new services ordered by our customers.

At privatization, the IGOs Signatories and
Investing Entities received shares in our company in proportion
to their ownership in the IGO on the privatization date and
became shareholders of 100% of the outstanding ordinary shares.
Because our customers ownership of our ordinary shares is
no longer connected to their use of our system, our customers
may increase their use of the systems of other
telecommunications services providers. However, we believe that
some of our customers could not move all of their business with
us to another satellite services provider without incurring high
costs, due in part to technical differences between our network
and the networks of most of our competitors. See Item 3.D
 Risk Factors for a discussion of the
potential impact of the privatization on our customer base.

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COMSAT
Asset Purchase Agreement

On November 25, 2002, we acquired most of
the assets and certain liabilities of COMSAT World Systems, a
business unit of COMSAT Corporation, and of COMSAT Digital
Teleport, Inc., a subsidiary of COMSAT Corporation. COMSAT
Corporation is a wholly owned subsidiary of Lockheed Martin
Corporation, which is our largest shareholder. COMSAT World
Systems was a reseller of our capacity to customers located in
the United States. The assets that we acquired include
substantially all of COMSAT World Systems customer
contracts for the sale of our capacity, two TTC&M stations
located in Clarksburg, Maryland and Paumalu, Hawaii and a
digital teleport facility located in Clarksburg, Maryland. The
purchase price for this transaction totaled $120.8 million,
consisting of $55.0 million in cash, the assumption of
$45.8 million in net liabilities subject to net working
capital adjustments and a $20.0 million 7% note payable due
in four installments of $5.0 million each on
January 1, 2007, 2008, 2009 and 2010. In the event that we
are not operating TTC&M facilities at the Clarksburg,
Maryland location and certain triggering events described in the
asset purchase agreement have occurred, up to $15.0 million
under the $20.0 million note payable would not be due. In
addition, we incurred approximately $1.0 million in
transaction costs in connection with this acquisition.

We accounted for the acquisition under the
purchase method of accounting, whereby the purchase price was
allocated to the assets acquired and liabilities assumed based
on their estimated fair market values at the date of
acquisition. Independent third-party appraisers were engaged to
perform valuations of certain of the tangible and intangible
assets acquired. Based upon the preliminary appraisals received
and our estimates, the purchase price was preliminarily
allocated to the assets and liabilities acquired as follows (in
millions):

|                                                         |  |   |       |  
|-------------------------------------------------------- |  | - | ----- | -
|Receivables, net of allowance of $18.6                   |  | $ | 8.2   |  
|Property and equipment                                   |  |   | 26.8  |  
|Other assets                                             |  |   | 8.3   |  
|Goodwill and other intangible assets                     |  |   | 84.2  |  
|Accounts payable and accrued expenses                    |  |   | (51.5 | )
|                                                         |  |   |       |  
|Total cash consideration, net of assumed
    liabilities |  | $ | 76.0  |  
|                                                         |  |   |       |  

The asset purchase agreement provides for the
transaction purchase price to be finalized upon agreement
between us and Lockheed Martin Corporation on the amounts
reflected in the closing balance sheet, which is expected to
occur in the second quarter of 2003. Consequently, some
adjustments to these balances could occur. These adjustments, if
any, are not expected to have a material impact on our results
of operations or financial position.

We believe that this transaction was completed on
arms-length terms. The service contracts assigned to us in
connection with the COMSAT transaction include contracts with
WorldCom, Inc., which became our largest customer upon the
closing of the COMSAT transaction. On July 21, 2002,
WorldCom, Inc. filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. For a further
description of the asset purchase agreement with COMSAT, see
Item 7.B  Related Party Transactions 
COMSAT Asset Purchase Agreement. For a description of our
revenue from WorldCom, Inc., see  WorldCom
Reorganization below.

TTC&M
Contracts

Some of our customers also provide TTC&M
services for our ground network or provide us with host station
facilities and services. We believe that these transactions are
on arms-length terms and are not significant to our
results of operations.

Teleglobe
Share Purchase Agreement

On May 15, 2002, one of our largest
customers and one of our shareholders, Teleglobe Inc., filed for
creditor protection under the Companies Creditors
Arrangement Act in the Ontario Superior Court of Justice. As a
result, we recorded a reserve of $12.8 million against all
of our accounts receivable from

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Teleglobe Inc. as of March 31, 2002, and did
not recognize any revenue from Teleglobe Inc. from April 1,
2002 through May 15, 2002 because collection was not
ensured. We have continued to provide services to Teleglobe Inc.
for which payment in advance has been received since
May 16, 2002. Telecommunications revenue generated from
Teleglobe Inc. and its affiliates was $41.7 million in
2000, $47.8 million in 2001 and $35.1 million in 2002
and accounted for approximately 4% of our telecommunications
revenue in each of those years.


On September 20, 2002, our Intelsat Global
Sales subsidiary acquired Teleglobe Inc.s 6,284,635 shares
in Intelsat, Ltd. for $65.0 million. Pursuant to the share
purchase agreement and a related escrow agreement, title to the
shares acquired from Teleglobe Inc. was transferred to an escrow
agent, who holds the shares in trust for Intelsat Global Sales,
subject to specified limited rights of Teleglobe Inc. Teleglobe
Inc. is entitled to certain limited voting and dividend rights
in the shares held by the escrow agent. The share purchase
agreement contemplates that the escrow agent will sell the
shares in our contemplated initial public offering or in another
manner set forth in the agreement and will subsequently deliver
the proceeds of any such sale to Intelsat Global Sales and, in
some cases, to Teleglobe Inc. If all of the shares held in
escrow are sold and the sale proceeds exceed $90.1 million,
Intelsat Global Sales will receive $90.1 million, and
Teleglobe Inc. will receive the portion of the sale proceeds
that exceeds $90.1 million. If only a portion of the shares
held in escrow are sold, Intelsat Global Sales will receive the
portion of the sale proceeds equal to the percentage of
$90.1 million that is equal to the percentage the sold
shares represent of the total number of shares originally held
in escrow, and Teleglobe Inc. will receive any remaining sale
proceeds. If we have not conducted a registered offering of our
ordinary shares by December 31, 2003, or if we have
conducted such an offering by that time but some of the escrowed
shares remain unsold as of December 31, 2004, the share
purchase agreement provides for the unsold shares and any cash
held as escrow property to be distributed to Intelsat Global
Sales up to the amount that would result in Intelsat Global
Sales having received a total amount of cash and shares under
the agreement valued at $90.1 million. If there are any
shares or cash remaining after this distribution to Intelsat
Global Sales, these shares and cash will be transferred to
Teleglobe Inc.

In connection with the share purchase
transaction, Teleglobe Inc. agreed to retain nearly 75% of its
service orders with us, which represent approximately
$131.7 million, or 3%, of our backlog as of
December 31, 2002. The remaining service orders, which
represented approximately $47.4 million, or 1%, of our
backlog as of the closing date of the share purchase
transaction, were terminated in connection with the transaction.
Teleglobe Inc. also agreed to provide payment semi-monthly in
advance for the service orders it has with us that were not
terminated, as opposed to the quarterly in arrears payment terms
originally applicable to those service orders. Upon the
assignment of Teleglobe Inc.s service orders to another
person, the service orders will be amended to provide for
payment monthly in arrears. The assignment of these service
orders is subject to the consent of Intelsat Global Sales, which
has agreed not to unreasonably withhold its consent as long as
the service orders are assigned to persons that Intelsat Global
Sales considers in its reasonable opinion to be creditworthy in
accordance with its credit criteria. All other terms and
conditions of these service orders will remain unchanged.

The closing of the share purchase transaction was
subject to, among other things, the approval of the monitor of
the Canadian insolvency proceedings and the approval of the
Ontario Superior Court of Justice, both of which were obtained.
All rights of appeal from the Courts decision to approve
the transaction have expired. In connection with the share
purchase transaction, Intelsat Global Sales released Teleglobe
Inc. from claims with respect to all service fees payable for
services provided to Teleglobe Inc. prior to May 15, 2002
and with respect to all termination fees payable pursuant to the
service orders being terminated.

We have accounted for the share purchase
transaction similar to an acquisition of treasury stock. Under
Financial Accounting Standards Board Technical Bulletin
No. 85-6, amounts paid for treasury stock above fair value
and additional rights and consideration received are allocated
to the various components received. The estimated aggregate
market value of the shares acquired by us exceeded the cash
payments made to Teleglobe Inc. on September 20, 2002 by more
than the amounts due to us. As a result, we were able to recover
approximately $16.0 million of receivables owed by
Teleglobe Inc., consisting of the $12.8 million that was
fully reserved in the first quarter of 2002 as well as
$3.1 million related to telecommunications revenue that had
not been previously recognized since the collection of those
amounts was not ensured. We believe

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that the closing of the share purchase
transaction enabled us to change our estimated reserve for
uncollectible accounts and recognize the previously unrecognized
service fees for which collection was uncertain, in accordance
with Accounting Principles Board Opinion No. 20,
Accounting Changes. The shares acquired by Intelsat
Global Sales are deemed not to be outstanding for the purposes
of our consolidated financial statements.


Teleglobe Inc.s remaining interest in the
shares is deemed to be a free-standing derivative in accordance
with Emerging Issues Task Force, referred to as EITF, 00-19,
Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock. This
resulted in our recording of an obligation to Teleglobe Inc. on
September 20, 2002 of $25.9 million, which reflected
the estimated fair value of this derivative on that date. Any
future changes that occur in our obligation to Teleglobe Inc.
will be recorded as an additional expense or as additional
income on our consolidated statement of operations. On
December 31, 2002, we reduced our obligation to Teleglobe
Inc. to $19.8 million based on a valuation of the
underlying shares and recorded other income of $6.1 million
for the amount of the adjustment.

We believe that the share purchase transaction
between Teleglobe Inc. and Intelsat Global Sales was executed on
arms-length terms. The share purchase agreement and
related escrow agreement, including the transaction price and
other terms, were negotiated extensively by the parties to the
agreements. The share purchase transaction provided Teleglobe
Inc. with the ability to liquidate its investment in Intelsat,
Ltd. and receive needed cash. The transaction also permitted
Teleglobe Inc. to cancel some of its service orders with us
without penalty. The share purchase transaction provided us with
an opportunity to continue an important customer relationship
with Teleglobe Inc. in which Teleglobe Inc. agreed not to
repudiate nearly 75% of its service orders with us and agreed to
pay for services semi-monthly in advance. The transaction also
allowed us to purchase outstanding Intelsat, Ltd. shares at what
we estimate to be a reduction from the market value of these
shares. The transaction price was determined by a combination of
factors, including market conditions, the lack of a public
market for the shares and the commercial relationship among the
parties. Other relevant factors included the uncertainty as to
when Intelsat Global Sales will have the opportunity to
liquidate its investment in the shares, uncertainty as to the
amount that it will receive for the shares and Teleglobe
Inc.s desire in connection with its insolvency proceeding
to preserve the potential for additional payments from resale of
the shares.

Wildblue
Subscription Agreement

On December 9, 2002, we entered into an
agreement with Wildblue Communications, Inc. to acquire a
minority stake in Wildblue for a purchase price of
$58.0 million. Wildblue plans to provide broadband Internet
access services via Ka-band satellite to homes and small
business users in the continental United States beginning in
2004. The closing of this transaction is subject to, among other
things, FCC and other governmental approvals and the
satisfaction of other closing conditions. We have agreed to
provide Wildblue with up to $2.0 million in interim funding
before the closing of the acquisition, which will be repaid upon
closing. As of December 31, 2002, we had a loan receivable
of $0.7 million from Wildblue with respect to interim
funding provided on December 20, 2002. In connection with
this agreement, we have agreed to purchase 50% of any shares
sold by one of the minority investors, at the investors
option, up to a maximum purchase price of $5.0 million.
Other investors in this round of financing, which totals
$156.0 million including our investment, include the
National Rural Telecommunications Cooperative and Liberty
Satellite & Technology, Inc. One of our directors is a
director of Liberty Media Corporation, which indirectly owns a
minority interest in Wildblue and owns a majority of the
outstanding stock of Liberty Satellite & Technology, Inc.

New
Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board, or FASB, issued SFAS No. 143, Accounting for
Asset Retirement Obligations. This statement requires an
entity to recognize the fair value of an asset retirement
obligation in the period in which it is incurred, if a
reasonable estimate of fair value can be made. If a reasonable
estimate of fair value cannot be made in the period the asset
retirement is incurred, the liability should be recognized when
a reasonable estimate of fair value can be made. This new
standard will become

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effective in the first quarter of 2003. We do not
believe that the adoption of SFAS No. 143 will have a
significant impact on our results of operations or financial
position.


In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 clarifies guidance related to
the reporting of gains and losses from extinguishment of debt
and resolves inconsistencies related to the required accounting
treatment of certain lease modifications. The provisions of this
statement relating to the extinguishment of debt are effective
for financial statements issued for fiscal years beginning after
May 15, 2002. The provisions of this statement relating to lease
modifications are effective for transactions occurring after
May 15, 2002. The adoption of SFAS No. 145 did not
have a material impact on our results of operations or financial
position.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nullifies previous guidance on
this issue and requires a liability for a cost associated with
an exit or disposal activity to be recognized and measured at
its fair value in the period in which the liability is incurred.
The provisions of this statement relating to exit or disposal
activities are effective for activities initiated after
December 31, 2002. We do not believe that the adoption of
SFAS No. 146 will have a material impact on our results of
operations or financial position.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No.
5, 57 and 107 and a rescission of FASB Interpretation
No. 34.This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability
for the fair value of the obligation undertaken. The disclosure
requirements are effective for financial statements of interim
or annual periods ending after December 15, 2002. The
initial recognition and measurement provisions of the
Interpretation are applicable to guarantees issued or modified
after December 31, 2002 and are not expected to have a
material effect on our financial statements.

In November 2002, the EITF reached a consensus on
Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables. EITF Issue No. 00-21 provides guidance on
how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply
to revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. We have not yet determined the impact
that adoption of EITF Issue No. 00-21 will have on our
results of operations or financial position.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock Based Compensation,
Transition and Disclosure. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 also requires that disclosures
of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed
more prominently and in a tabular format. Additionally, SFAS
No. 148 requires disclosure of the pro forma effect in
interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for
fiscal years ending after December 15, 2002. The interim
disclosure requirements become effective in the first quarter of
2003. The adoption of SFAS No. 148 did not have a material
impact on our results of operations or financial position.

In January 2003, the FASB issued FASB
Interpretation No. 46, referred to as FIN 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51.FIN 46 requires certain
variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity
do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated
financial support from other parties. FIN 46 is effective for
all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN
46 must be applied for the first interim or annual period
beginning after June 15, 2003. We do not believe that the
adoption of FIN 46 will have a material impact on our results of
operations or financial position.

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Dividend
Policy

Since our formation in connection with the
privatization of the IGO, we have not declared or paid cash
dividends on our ordinary shares. The declaration of dividends
by Intelsat, Ltd. is subject to the discretion of our board of
directors. Our board of directors will review our dividend
policy from time to time in light of the conditions existing at
the time, including our financial condition, results of
operations, capital requirements, contractual and other relevant
legal and regulatory restrictions, general business conditions
and such other factors as our board of directors deems relevant.
Under Bermuda law, a Bermuda company may not declare or pay
dividends if there are reasonable grounds for believing that the
company is or, after the payment, would be unable to pay its
liabilities as they become due or that the realizable value of
the companys assets would be less than the aggregate of
its liabilities and issued share capital and share premium
accounts.

WorldCom
Reorganization

Upon the closing of the COMSAT transaction
described above, WorldCom, Inc. became our largest customer. On
July 21, 2002, WorldCom, Inc., filed a voluntary petition
for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Telecommunications revenue generated from WorldCom, Inc.
and its affiliates as direct customers was $7.3 million, or
0.7%, for the year ended December 31, 2001 and
$10.7 million, or 1.1%, for the year ended
December 31, 2002. Based on information provided by
Lockheed Martin Corporation, WorldCom, Inc. accounted for
approximately $60 million of COMSATs revenue from the
sale of our capacity for the year ended December 31, 2001
and for approximately $47.8 million of COMSATs
revenue from the sale of our capacity for the period from
January 1, 2002 to the date of closing of the COMSAT
transaction. On a pro forma basis, WorldCom, Inc. and its
affiliates would have accounted for approximately 6% of our
revenue in each of the years ended December 31, 2001 and
2002 had the COMSAT transaction occurred as of January 1,
2001. We cannot predict the effect that WorldCom, Inc.s
bankruptcy proceedings will have on future revenue. However, the
loss of WorldCom, Inc. as a customer would reduce our revenue
and backlog and could materially adversely affect our business.
At December 31, 2002, we had receivables of
$10.1 million due from WorldCom, Inc. and its affiliates,
of which $9.8 million was reserved for in the allowance for
doubtful accounts. Of the $10.1 million in receivables due
from WorldCom, Inc. and its affiliates, $8.6 million
relates to pre-petition receivables.

Termination
of Our Order for the Intelsat 10-01 Satellite

In November 2002, we exercised our right to
terminate the portion of our satellite construction contract
with Astrium SAS relating to the Intelsat 10-01 satellite, due
to Astrium SAS significant postponement in the delivery
date of the satellite. As a result of this termination, we
recorded a charge to our consolidated statement of operations of
$34.4 million, representing the write-off of capitalized
satellite program costs, including satellite construction costs,
launch vehicle costs, program office costs, capitalized interest
and ground network costs. Pursuant to our contract with Astrium
SAS, we are entitled to receive repayment of most of the amounts
that we have paid to Astrium SAS under the contract. We received
this payment, amounting to $47.9 million, in February 2003.
Additionally, as a result of this termination, we expect to
reduce our planned capital expenses by approximately
$165.0 million. We have not terminated the portion of our
contract with Astrium SAS relating to the 10-02 satellite
currently on order.

In connection with the decision to terminate our
order for the 10-01 satellite, we have reached an agreement in
principle with one of our launch vehicle providers to treat most
of the payments made for the launch vehicle that could have been
used for the launch of the 10-01 satellite as a credit for a
future launch. Accordingly, we have recorded a net deposit of
$23.2 million, which is included in other assets as of
December 31, 2002. Under the terms of this agreement, the
price of the launch vehicle remains fixed. However, we will
incur a termination liability of $44.1 million if we do not
place an order for a future launch by July 31, 2005.

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Subsequent
Events

Launch
of 907 Satellite

On February 15, 2003, we launched the 907
satellite, increasing to 24 the number of satellites in our
fleet that we own and operate.

Investment
in Galaxy Satellite Broadcasting

On February 20, 2003, we entered into an
agreement to acquire an indirect 51% stake in Galaxy Satellite
Broadcasting Limited, referred to as Galaxy, for approximately
U.S.$70 million in cash and in-kind contributions. Galaxy
is licensed to provide pay television and teleport services in
Hong Kong, and expects to launch its pay television service in
late 2003 or early 2004. See Item 10.C 
Material Contracts  Investment in Galaxy Satellite
Broadcasting for further information regarding this
agreement.



|        |                                               
|------- | ----------------------------------------------
|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND
    EMPLOYEES

A. Directors and Senior
Management

Set forth below is information concerning our
executive officers and directors:

|                          |  |     |    |          |  |                                                                                                                                                
|------------------------- |  | --- | -- | -------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Name                      |  | Age |    | Position
|                          |  |     |    |         
|Conny Kullman             |  |     | 52 |          |  | Chief Executive Officer, Intelsat, Ltd.; Director                                                                                              
|Joseph Corbett            |  |     | 43 |          |  | Executive Vice President and Chief Financial
    Officer, Intelsat, Ltd.                                                                       
|Ramu Potarazu             |  |     | 41 |          |  | Chief Operating Officer, Intelsat, Ltd.;
    President, Intelsat (Bermuda), Ltd.; Managing Director, Intelsat
    Global Sales & Marketing Ltd.
|Kevin Mulloy              |  |     | 44 |          |  | President, Intelsat Global Service Corporation                                                                                                 
|David Meltzer             |  |     | 43 |          |  | General Counsel and Senior Vice President for
    Regulatory Affairs, Intelsat Global Service Corporation                                      
|Tony Trujillo, Jr.        |  |     | 45 |          |  | Senior Vice President and Chief Administrative
    Officer, Intelsat Global Service Corporation                                                
|Noah Asher                |  |     | 41 |          |  | Vice President, Finance, Intelsat Global Service
    Corporation                                                                               
|Ken Bianchi               |  |     | 45 |          |  | Vice President and Controller, Intelsat Global
    Service Corporation                                                                         
|Wenn Smith                |  |     | 39 |          |  | Vice President, Audit, Intelsat Global Service
    Corporation                                                                                 
|G. Randall Bonney, Jr.    |  |     | 48 |          |  | Treasurer, Intelsat Global Service Corporation                                                                                                 
|John Sponyoe              |  |     | 64 |          |  | Director and Chairman                                                                                                                          
|Wolfgang Wagner           |  |     | 48 |          |  | Director and Deputy Chairman                                                                                                                   
|Brian Dailey              |  |     | 51 |          |  | Director                                                                                                                                       
|Herbert Baptista Fiuza    |  |     | 67 |          |  | Director                                                                                                                                       
|Hans Fjosne               |  |     | 63 |          |  | Director                                                                                                                                       
|Serge Fortin              |  |     | 50 |          |  | Director                                                                                                                                       
|Neal Freeman              |  |     | 62 |          |  | Director                                                                                                                                       
|Shailendra Kumar Gupta    |  |     | 60 |          |  | Director                                                                                                                                       
|Gary Howard               |  |     | 52 |          |  | Director                                                                                                                                       
|Carlos Alberto Killian    |  |     | 69 |          |  | Director                                                                                                                                       
|Matthew Luhanga           |  |     | 55 |          |  | Director                                                                                                                                       
|Cheikh Tidiane Mbaye      |  |     | 46 |          |  | Director                                                                                                                                       
|Philippe-Olivier Rousseau |  |     | 46 |          |  | Director                                                                                                                                       
|Robin Turner              |  |     | 60 |          |  | Director                                                                                                                                       
|Christopher Vonwiller     |  |     | 60 |          |  | Director                                                                                                                                       

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A brief biography of each executive officer and
director follows:

Mr. Kullmanhas been Chief Executive Officer and a director of Intelsat,
Ltd. since July 2001, and was Chief Executive Officer of the IGO
from October 1998 to July 2001. He has been a director of Galaxy
Satellite Broadcasting Limited and Galaxy Satellite TV Holdings
Limited since February 2003 and a director of U.S. Friends of
Chalmers University of Technology, Inc. since April 2002.
Mr. Kullman previously served as Vice President of
Operations and Engineering of the IGO from December 1997 to
October 1998, Vice President of Operations of the IGO from April
1996 to December 1997, Vice President and Chief Information
Officer of the IGO from September 1994 to April 1996, Director
of Operations Plans/ Sales Operation of the IGO from July 1992
to September 1994, Director of Systems Operation of the IGO from
August 1990 to July 1992 and a systems engineer for the IGO from
August 1983 to August 1990. Mr. Kullmans business
address is Dundonald House, 14 Dundonald Street West, Hamilton
HM 09, Bermuda.

Mr. Corbetthas been Executive Vice President and Chief Financial Officer of
Intelsat, Ltd. since September 2001, Chief Financial Officer of
Intelsat, Ltd. from July 2001 to September 2001 and Vice
President of Finance and Chief Financial Officer of the IGO from
March 1999 to July 2001. He served as Acting Vice President of
Finance of the IGO from October 1998 to March 1999 and as
Controller of the IGO from March 1995 to October 1998. Prior to
that time, he served in senior manager positions at NVR, Inc.
and KPMG Peat Marwick. Mr. Corbetts business address is
Dundonald House, 14 Dundonald Street West, Hamilton HM 09,
Bermuda.

Mr. Potarazuhas been Chief Operating Officer of Intelsat, Ltd., President of
Intelsat (Bermuda), Ltd. and Managing Director of Intelsat
Global Sales & Marketing Ltd. since March 2003. He
previously served as President and Chief Operating Officer of
Intelsat Global Service Corporation from July 2001 to March
2003; Vice President, Global Operations and Chief Technical
Officer of the IGO from November 2000 to July 2001; Vice
President, Commercial Restructuring of the IGO from December
1999 to November 2000; Vice President, Operations and Chief
Information Officer of the IGO from December 1998 to December
1999; Director of Information Systems of the IGO from April 1996
to December 1998; and Manager of Business Systems of the IGO
from July 1995 to April 1996 and was a satellite software
engineer for the IGO from May 1990 to July 1995. Prior to that
time, Mr. Potarazu served in a senior technical consultant
role with Contel Business Networks, Inc.
Mr. Potarazus business address is Dundonald House, 14
Dundonald Street West, Hamilton HM 09, Bermuda.

Mr. Mulloyhas been President of Intelsat Global Service Corporation since
March 2003. He previously served as Senior Vice President,
Strategy and Business Development of Intelsat Global Service
Corporation from September 2001 to March 2003; Vice President,
Strategy and Business Development of Intelsat Global Service
Corporation from July 2001 to September 2001; and Vice
President, Strategy and Business Development of the IGO from May
2001 to July 2001. Prior to joining Intelsat Global Service
Corporation, Mr. Mulloy was a partner at McKinsey &
Company, Inc. from April 1996 to April 2001. Mr. Mulloys
business address is 3400 International Drive, N.W., Washington,
D.C. 20008, United States.

Mr. Meltzerhas been General Counsel and Senior Vice President for
Regulatory Affairs of Intelsat Global Service Corporation since
October 2001. He previously served as Senior Vice President and
General Counsel of Intelsat Global Service Corporation from
September 2001 to October 2001; Vice President and General
Counsel of Intelsat Global Service Corporation from July 2001 to
September 2001; Vice President and General Counsel of the IGO
from September 2000 to July 2001; Acting General Counsel of the
IGO from December 1999 to September 2000; Senior Director for
Corporate Restructuring of the IGO from February 1999 to
December 1999; Director of Procurement of the IGO from February
1997 to February 1999 and was a lawyer in the Office of the
General Counsel of the IGO from February 1989 to February 1997.
Prior to joining the IGO, he was an attorney in private
practice. Mr. Meltzers business address is 3400
International Drive, N.W., Washington, D.C. 20008, United States.

Mr. Trujillohas been Senior Vice President, Corporate Services and Chief
Administrative Officer of Intelsat Global Service Corporation
since March 2003. He previously served as Senior Vice President,
Corporate Services of Intelsat Global Service Corporation from
September 2001 to March 2003; Acting Vice President, Corporate
Services of Intelsat Global Service Corporation from June 2001
to September 2001;

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Senior Director of the Corporate Communications
and Government Affairs Department of the IGO from December 2000
to June 2001; and Director of Corporate Communications of the
IGO from June 1997 to December 2000. Mr. Trujillos
business address is 3400 International Drive, N.W., Washington,
D.C. 20008, United States.


Mr. Asherhas been Vice President, Finance of Intelsat Global Service
Corporation since August 2002. Prior to joining Intelsat Global
Service Corporation, Mr. Asher was Vice President, Finance
at America Online Inc. from January 2001 through August 2002. He
was Chief Financial Officer for RMH Teleservices, Inc. from
February 1999 to January 2001. Mr. Asher was Vice
President, Latin America Operations at Bell Atlantic
International Wireless from September 1996 to February 1999.
Mr. Ashers business address is 3400 International
Drive, N.W., Washington, D.C. 20008, United States.

Mr. Bianchihas been Vice President and Controller of Intelsat Global
Service Corporation since April 2002. He previously served as
Controller of the IGO and Intelsat Global Service Corporation
from November 1999 to April 2002. Prior to joining the IGO,
Mr. Bianchi was Deputy Director of Audit at Computer
Sciences Corporation from August 1996 to September 1999. Mr.
Bianchis business address is 3400 International Drive,
N.W., Washington, D.C. 20008, United States.

Mr. Smithhas been Vice President, Audit of Intelsat Global Service
Corporation since November 2002. Prior to joining Intelsat
Global Service Corporation, Mr. Smith was Vice President,
Finance and Controller of Velocita Corp. from February 2002 to
November 2002 and was Controller of Velocita Corp. from
September 2000 to February 2002. On May 30, 2002, Velocita
Corp. filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Mr. Smith was
an Audit Director at Deloitte & Touche L.L.P., an
international public accounting firm, from August 1999 until
September 2000 and an Audit Senior Manager at Deloitte &
Touche L.L.P. from November 1997 until August 2000.
Mr. Smiths business address is 3400 International
Drive, N.W., Washington, D.C. 20008, United States.

Mr. Bonneyhas been Treasurer of Intelsat Global Service Corporation since
July 2001. He previously served as Treasurer of the IGO from
June 1997 to July 2001, Head of Treasury Operations of the IGO
from July 1995 to May 1997 and Assistant Treasurer of the IGO
from October 1992 to June 1995. Mr. Bonneys business
address is 3400 International Drive, N.W., Washington, D.C.
20008, United States.

Mr. Sponyoehas been a consultant to Lockheed Martin Corporation since
February 2002. He previously served as Chief Executive Officer
of Lockheed Martin Global Telecommunications from August 1998 to
February 2002, and was President of Lockheed Martin Electronics
Platform Integration Group from April 1997 to July 1998.
Mr. Sponyoes business address is c/o Intelsat, Ltd.,
Dundonald House, 14 Dundonald Street West, Hamilton HM 09,
Bermuda.

Mr. Wagnerhas been a director of Global Radio Participations S.A.
(Luxembourg) since December 2001. He was Chairman of Global
Radio S.A. (Luxembourg) and Chairman and General Manager of
Global Radio Participations S.A. from December 2001 to February
2003. He was President, Teleport Operations, of ESATEL
Communications, Inc. from September 2001 to April 2002.
Mr. Wagner was employed by Deutsche Telekom, Inc. as
Director, International Networks from February 1994 to July
2001. Mr. Wagners address is 12230 St. James Road,
Potomac, Maryland 20854, United States.

Dr. Daileyhas been Senior Vice President of Washington Operations for
Lockheed Martin Corporation since August 1999, and was Vice
President and Chief Operating Officer for Lockheed Martin Global
Telecommunications from August 1998 to August 1999, Vice
President of Strategic Development for Lockheed Martin
Corporation from May 1997 to August 1998, and Vice President of
Business Development for Lockheed Martin Space and Strategic
Missiles from April 1994 to May 1997. Dr. Dailey is
currently a director of the Congressional Sportsmans
Foundation, International Launch Services and
Lockheed-Khrunichev-Energia International, Inc. He is also
director and deputy chairman of Lockheed Martin Space and
Communications Ventures, LLC. Dr. Daileys business
address is Lockheed Martin Corporation, 1725 Jefferson Davis
Highway, Crystal Square 2, Suite 300, Arlington, Virginia
22202, United States.

Mr. Fiuzahas been a consultant for SKY Brasil Servicos Ltda. since May
1999, and was a consultant for Distel Holding SA from May 1999
to February 2003, Director of Technology of Globo Cabo S.A. from

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September 1996 to May 1999 and Director of
Technology of Net Brasil from July 1994 to September 1996. Mr.
Fiuzas business address is SKY Brasil Servicos Ltda., Rua
Itapirú 1209, 5th Floor, Rio de Janeiro-RJ 20251-032,
Brazil.


Dr. Fjosnehas been Chief Technical Officer of Telenor Broadcast, formerly
Telenor Plus, since January 2002 and of Telenor Broadband
Services A.S. from January 2000 to December 2001. He is also a
director of Telenor Satellite Broadcasting AS. He was Director
of Strategy and Technology for Telenor Satellite Services A.S.
from September 1996 to December 1999 and Director for Satellite
Broadcasting for Telenor Satellite Services A.S. from July 1993
to September 1996. Dr. Fjosnes business address is
Telenor Broadcast, Snaroyveien 30, No-1331, Fornebu, Norway.

Mr. Fortinhas been Chief Operating Officer of Teleglobe Inc. since May
2002. Mr. Fortin was President of Global Markets for
Teleglobe Communications Corporation from May 2000 to May 2002,
President and Chief Executive Officer of Bell Actimedia from
July 1998 to May 2000 and President and Chief Executive Officer
of TATA Teleservices (India) from July 1996 to June 1998.
Mr. Fortins business address is Teleglobe Inc., 1000
rue de la Gauchetière Ouest, Montreal, Que. H3B 4X7, Canada.

Mr. Freemanhas been the Chairman and Chief Executive Officer of The
Blackwell Corporation since October 1981. He is also chairman of
the Foundation Management Institute. Mr. Freemans
business address is The Blackwell Corporation, P.O. Box 2169,
Vienna, Virginia 22183, United States.

Mr. Guptahas been Managing Director of Videsh Sanchar Nigam Limited
(VSNL) since February 2002. Mr. Gupta was Chairman and
Managing Director of VSNL from September 1999 through February
2002, at which time VSNL was privatized. He was Chief General
Manager of Telecommunications for Gujarat Telecom Circle from
October 1997 to September 1999, Principal General Manager of
Operations of Mahanagar Telephone Nigam Limited (MTNL) from
March 1997 to October 1997, General Manager of Operations of
MTNL from September 1996 to March 1997 and Group General Manager
of Operations of MTNL from August 1994 to September 1996.
Mr. Guptas business address is Videsh Sanchar Nigam
Limited, Lokmanya Videsh Sanchar Bhawan, Kashinath Dhuru Marg,
Prabhadevi, Mumbai, 400 028, India.

Mr. Howardhas served as Executive Vice President, Chief Operating Officer
and a director of Liberty Media Corporation since July 1998.
Mr. Howard served as Chief Executive Officer of Liberty
Satellite & Technology, Inc. from December 1996 until
April 2000. Mr. Howard also served as Executive Vice
President of Tele-Communications, Inc. (TCI) from December
1997 to March 1999; as Chief Executive Officer, Chairman of the
Board and a director of TV Guide, Inc. from June 1997 to March
1999; and as President and Chief Executive Officer of TCI
Ventures Group, LLC from December 1997 to March 1999. Mr. Howard
is a director of Ascent Media Group, Inc., Liberty
Satellite & Technology, Inc., On Command Corporation,
SpectraSite, Inc. and UnitedGlobalCom, Inc. Mr. Howard
serves as Chairman of the Board of Liberty Satellite &
Technology, Inc. and On Command Corporation.
Mr. Howards business address is Liberty Media
Corporation, 12300 Liberty Blvd., Englewood, Colorado 80112,
United States.

Mr. Killianhas been an advisor to Comisión Nacional de Comunicaciones
(CNC) since April 2002 and was First Vice President of CNC
from December 1999 to April 2002. He was Vice Chairman of the
Permanent Executive Committee of the Inter-American
Telecommunication Commission from January 2000 to December 2001,
a telecommunications consultant from January 1998 to December
1999, Vice President of the Board of the Argentine Chamber of
Satellite Applications from November 1996 to July 1998 and Head
of Institutional Relations at IMPSAT Argentina, S.A. from
November 1996 to November 1997. Mr. Killians business
address is Freire 2457, 5 Piso, Buenos Aires CP 1428, Argentina.

Professor
Luhangahas been Vice Chancellor
of the University College of Dar es Salaam, Tanzania since April
1991 and a Full Professor of Telecommunications Engineering at
the University of Dar es Salaam since July 1990. Professor
Luhangas business address is University of Dar es Salaam,
P.O. Box 35091, Dar es Salaam, Tanzania.

Mr. Mbayehas been Chief Executive Officer of Sonatel S.A., the Senegalese
telecommunications operator, since April 1988. Mr. Mbaye is
currently a director and Chairman of the Board of Sonatel
Mobiles and Sonatel Multimedia, which are both subsidiaries of
Sonatel S.A. He is also a director of Canal Plus

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Horizon Senegal, a subsidiary of Vivendi
Universal. Mr. Mbayes business address is Sonatel, 6,
rue Wagane Diouf, BP 69, Dakar, Senegal.


Mr. Rousseauhas been Executive Director for BNP Paribas Media & Telecoms
Finance Group, a division of BNP Paribas Group, since November
2001. He is also a director of Music Choice Europe plc. He was
Global Head of Media & Telecommunications for BNP Paribas
Corporate Finance from January 2000 to November 2001. He was
Executive Vice President of Banexi (Group BNP) from July 1998 to
December 1999 and Commissioner of Conseil supérieur de
laudiovisuel (CSA) from January 1993 to July 1998.
Mr. Rousseaus business address is BNP Paribas, 3 Rue
dAntin, 75078, Paris Cedex 02, France.

Mr. Turnerhas been a Director of BH-SAT Limited since January 2003. He was
the General Manager and Director of Satellite Investment for
Cable and Wireless plc from September 2000 to January 2003 and
the General Manager and Head of Satellite Services for Cable and
Wireless plc from January 1993 to August 2000.
Mr. Turners business address is BH-SAT Limited, Birch
Hill House, Clumps Road, Lower Bourne, Farnham, Surrey GU10 3HF,
United Kingdom.

Mr. Vonwillerhas been a Director of Appen Pty Limited since August 1999, and
was Chief Executive Officer of Atlas Travel Technologies Pty
Limited from January 1997 to August 1999 and Managing Director
of Multimedia Products for Telstra Multimedia Pty Limited from
July 1994 to December 1996. Mr. Vonwiller is currently a
director of Quantum Financial Services Australia Pty Limited and
a director of the Warren Centre for Advanced Engineering.
Mr. Vonwillers business address is Appen Pty Limited,
Level 5, North Tower, Chatswood Central, 1-5 Railway Street,
Chatswood, NSW 2067, Australia.

B. Compensation

Executive
Officer and Director Compensation

The aggregate amount of compensation paid by us
to our executive officers in 2002 was approximately
$4.5 million, excluding compensation paid in the form of
share options. This amount includes compensation paid by us to
an executive officer who retired effective as of January 1,
2003 and to two individuals who are no longer our executive
officers. This amount also includes compensation paid to
executive officers as part of the incentive bonus program. Under
our bonus program, a bonus pool is created each year based on
results achieved relative to corporate performance targets, with
bonuses paid to individuals from the pool based on both
individual and corporate performance.

In 2002, the aggregate amount of compensation
paid by us to our non-management directors was approximately
$1.4 million, excluding compensation paid in the form of
share options. This amount includes compensation paid to a
director who retired from our board effective as of
December 31, 2002. Compensation for our directors,
including members of the Compensation Committee, is determined
by the Compensation Committee of our board of directors.

In addition to the compensation paid by us to our
directors and executive officers as described above, in 2002 our
executive officers and directors, including the executive
officer and the director who have retired and the two
individuals who are no longer our executive officers, were
granted in the aggregate options to purchase 120,745 of our
ordinary shares. Including the options granted in 2002, these
individuals hold in the aggregate options to purchase 747,299 of
our ordinary shares. Of this amount, options to purchase 604,518
of our ordinary shares are held by individuals who are currently
serving as our executive officers and directors. The options
granted to our directors and executive officers in 2002 are
exercisable at a price of $16.17 per ordinary share and will
expire in 2012. The options granted to our directors and
executive officers prior to 2002 are exercisable at a price of
$19.05 per ordinary share and will expire in 2011.

The Compensation Committee of our board of
directors has adopted a resolution providing for each director
to be awarded options valued at $22,500 using the Black-Scholes
valuation method, to be granted annually beginning on
July 19, 2002 and to be vested immediately upon grant. The
Compensation Committee decided in June 2002 that directors would
not receive the annual option grant for July 2002. In September
2002, the Compensation Committee approved the grant to our
directors and executive officers of the options described above
to purchase an aggregate of 120,745 of our ordinary shares.

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The options granted to our directors vested
immediately upon date of grant. The options granted to our
executive officers vest in equal one-third installments on each
of the first, second and third anniversaries of the date of
grant. In general, with respect to the options granted to date,
once vested, the options may be exercised only after the earlier
of the first anniversary of our initial public equity offering
and the third anniversary of the date of grant.

Pension
Benefits

We and our subsidiary, Intelsat Global Service
Corporation, maintain a tax-qualified defined benefit pension
plan called the Intelsat Staff Retirement Plan, which we refer
to as the Pension Plan. In addition, we and our subsidiary
maintain a non-qualified pension plan called the Intelsat
Restoration Plan, which we refer to as the Restoration Plan.
Prior to July 18, 2001, the Pension Plan and the
Restoration Plan were maintained by the IGO, which transferred
the plans to us as part of the privatization. At this time, the
only individuals covered by the Pension Plan and the Restoration
Plan are:



|  |                                                                                                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | employees and officers of Intelsat, Ltd.,
    Intelsat (Bermuda), Ltd., Intelsat USA Sales Corp., Intelsat
    Global Service Corporation and our government/military services
    subsidiary Intelsat Government Solutions Corporation who were
    hired before July 19, 2001; and
| 
| | those individuals whom we hired from COMSAT World
    Systems and COMSAT Digital Teleport, Inc. in connection with our
    November 2002 acquisition of most of the assets of COMSAT World
    Systems and COMSAT Digital Teleport, Inc.                                            

See Item 7.B  Related Party
Transactions  COMSAT Asset Purchase Agreement
for a description of this acquisition.

The aggregate amount accrued by us in 2002 to
provide for annual pension benefits under the Pension Plan and
the Restoration Plan for our current executive officers was
$142,641.

Pension
Plan

The Pension Plan is a tax-qualified, defined
benefit pension plan for eligible individuals who were employed
before July 19, 2001. In general, benefits under the
Pension Plan are based on a participants years of service
and base salary, with differing benefit formulas and vesting
schedules which vary depending upon a participants date of
hire. Benefits payable under the Pension Plan may also be
adjusted to reflect amounts transferred from our Supplemental
Retirement Income Plan described below and for other
adjustments, including after-tax employee contributions and
cost-of-living adjustments.

All employees who were participants in the
Pension Plan as of July 18, 2001 automatically became
participants in the Pension Plan as of July 19, 2001. All
other eligible employees became participants in the Pension Plan
on the first day of the calendar month coinciding with or
following their completion of one year of service. The normal
retirement date for a participant under the Pension Plan is the
first date of the calendar month next following the date the
participant attains the age of 65, although participants become
fully vested in their accrued benefits by the age of 60.
However, a participant may receive a reduced benefit upon his
early retirement if he has completed at least three years of
service and has attained the age of 55.

The Pension Plan is funded through contributions
made to a trust fund held by SEI Private Trust Company. As of
December 31, 2002, we recorded accrued benefit costs of
$96.7 million on our consolidated balance sheet relating to
the Pension Plan and the Restoration Plan discussed below.

Restoration
Plan

Additional pension benefits are provided to
eligible participants under the Restoration Plan. The
Restoration Plan is a non-qualified plan that provides
supplemental benefits to employees whose benefits under the
Pension Plan are limited by the provisions of Section 415
and/or Section 401(a)(17) of the Internal

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Revenue Code. The benefit payable to a
participant under the Restoration Plan is equal to the
difference between:




|  |                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the amount of benefit that would have been
    payable to the participant under the Pension Plan had the
    applicable Internal Revenue Code limitations not applied; and
| 
| | the benefit actually paid under the Pension Plan.                                                                                                                         

In addition, retirees who had retired from the
IGO prior to July 19, 2001 and who receive benefits from
the Restoration Plan because they are affected by one or both of
these limitations will receive an additional
gross-up payment, which is intended to cover the
retirees share of Medicare and Social Security taxes due
on Restoration Plan benefits, plus any income and employment
taxes due on such gross-up payment.

The Restoration Plan is an unfunded plan, and it
is intended that benefits will be paid from our general assets,
or from the assets of Intelsat Global Service Corporation for
participants who are employees of that subsidiary.

Defined
Contribution Plans

We and our subsidiary, Intelsat Global Service
Corporation, maintain two tax-qualified, defined contribution
plans. The first plan is called the Intelsat Supplemental
Retirement Income Plan, referred to as the Supplemental
Retirement Income Plan. The second plan is called the Intelsat
Retirement Savings Plan, referred to as the Retirement Savings
Plan.

Supplemental
Retirement Income Plan

The Supplemental Retirement Income Plan provides
benefits only to:



|  |                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | individuals who are employed by us or our
    Intelsat (Bermuda), Ltd., Intelsat USA Sales Corp., Intelsat
    Global Service Corporation or Intelsat Government Solutions
    Corporation subsidiaries and who were hired before July 19,
    2001; and
| 
| | those individuals whom we hired from COMSAT World
    Systems and COMSAT Digital Teleport, Inc. in connection with our
    November 2002 acquisition of most of the assets of COMSAT World
    Systems and COMSAT Digital Teleport, Inc.                

A participant can elect to defer, on a before- or
after-tax basis, up to 16% of his base salary. We, or one of our
subsidiaries in the case of employees of that subsidiary, will
match 50% of a participants deferrals, up to 3% of his
base pay, regardless of whether those deferrals were made
before- or after-tax. These matching contributions become vested
after the employee completes one year of service. We also have
the right to make additional, discretionary contributions.

Retirement
Savings Plan

The Retirement Savings Plan provides benefits to
individuals who have been hired on or after July 19, 2001.
A participant can elect to defer, on a before- or after-tax
basis, up to 15% of his base salary. We, or one of our
subsidiaries in the case of employees of that subsidiary, will
match 100% of a participants deferrals, up to 5% of the
participants base salary, regardless of whether those
deferrals were made before- or after-tax. These matching
contributions are fully vested. In addition, we, or one of our
subsidiaries in the case of employees of that subsidiary, will
make an automatic contribution each year equal to 4% of base pay
for each participant who is employed on the last day of the
year. These automatic company contributions vest gradually over
a three-year period. Our Intelsat USA Sales Corp., Intelsat
Global Service Corporation and Intelsat Government Solutions
Corporation subsidiaries have employees who are participants in
this plan.

Non-Qualified
Supplemental Executive Plan

Supplemental benefits were formerly provided to
certain designated executives under a non-qualified deferred
compensation plan called the Intelsat Supplemental Executive
Retirement Plan. This plan provided

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supplemental benefits based on the average
compensation received over a specified period and the number of
years of service by such participant. Participants in the
Supplemental Executive Plan ceased accruing benefits under this
plan as of July 19, 2001.


C. Board Practices

Our bye-laws provide that our initial board of
directors shall consist of 17 directors, one of whom shall be
the chief executive officer. Eight of the other sixteen
directors of our initial board of directors must be independent
directors. Following the expiration of the term of our initial
board of directors, a majority of our directors must be
independent directors and the person appointed as our chief
executive officer must be nominated to stand for election as a
director. Our bye-laws also provide that our board of directors
shall at all times consist of between 11 and 17 directors. We
currently have 16 directors. Each of our current 16 directors,
with the exception of Mr. Kullman, was elected by our
shareholders at the special general meeting of our shareholders
held on July 19, 2001. An additional director was also
elected at this shareholders meeting but retired from
membership on our board as of December 31, 2002.
Mr. Kullman was appointed as a director by the board on
July 25, 2001. His appointment as director was ratified by
our shareholders at a special general meeting held on
June 4, 2002. Our bye-laws provide for the term of office
of the current directors to expire at the 2003 annual general
meeting of shareholders, which is currently expected to be held
in June 2003, and when their successors are elected and
qualified.

Beginning with the 2003 annual general meeting of
shareholders, we will have a classified board of directors
consisting of three classes:



|  |                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | one class to hold office for a term expiring at
    the first annual general meeting of shareholders following the
    2003 annual general meeting of shareholders,
| 
| | one class to hold office for a term expiring at
    the second annual general meeting of shareholders following the
    2003 meeting, and                          
| 
| | a third class to hold office for a term expiring
    at the third annual general meeting of shareholders following
    the 2003 meeting; and                       

in each case, until their successors have been
elected and qualified.

At each annual general meeting of shareholders
following the 2003 annual general meeting of shareholders, the
successors to the class of directors whose terms expire at that
meeting will be elected for a three-year term and until their
successors have been elected and qualified. Other than members
of the initial board, the persons nominated to stand for
election as directors shall be nominated by the nominating
committee of the board of directors. Shareholders also have the
right to nominate candidates to stand for election as long as
advance notice of this nomination is delivered to the secretary
of Intelsat, Ltd. in accordance with our bye-laws. Our bye-laws
provide that this advance notice must be delivered at least
14 days and not more than 90 days prior to the date of
the meeting. A director may be removed only for cause by a
majority of the directors then in office at a meeting of the
directors duly called and held. Our board of directors can fill
any vacancy occurring as a result of the death, disability,
disqualification, removal or resignation of any director, as
long as advance notice of any such meeting is given to the
director in accordance with our bye-laws. Our board of directors
does not currently intend prior to the 2003 annual general
meeting of shareholders to fill the vacancy created by the
individual who retired from our board as of December 31,
2002.

Except as described in this paragraph, none of
our directors has a contract with us or any of our subsidiaries
providing for benefits upon termination of employment.
Mr. Kullman, who is also our Chief Executive Officer, has
an agreement with us which provides that if he is directly or
indirectly involuntarily terminated as Chief Executive Officer,
including as a result of a change in control, as defined in the
share option plan described below, he will receive a lump sum
payment equivalent to the greater of six months base
salary or one months base salary for every year of service
up to a maximum of eight months. Accordingly, this lump sum
payment would range from a minimum of $275,000 to a maximum of
$366,667. The agreement also provides that he would receive
executive outplacement assistance and continuation of health
benefits throughout the severance pay period, unless comparable
benefits become available from another employer, at

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which point these benefits would end. The
agreement provides that an indirect involuntary termination will
be deemed to have occurred if Mr. Kullmans base
salary is reduced without his consent, unless a class of other
similarly situated executives are likewise affected due to our
financial or operating performance, or if his job
responsibilities are substantially reduced without his consent.
An indirect involuntary termination will also be deemed to have
occurred if, without his consent, Mr. Kullmans
resident office is relocated more than 50 miles away from its
current location. Notwithstanding the above, if
Mr. Kullmans employment is involuntarily terminated
for reasons of willful misconduct or gross negligence, the
agreement provides that he will have no right to receive any
compensation, benefits or severance pay, other than as required
by law or by the terms of a pension or benefit plan. However,
under these circumstances, Mr. Kullman would still be
entitled to amounts accrued or earned prior to his termination,
including earned but unpaid salary, accrued vacation and
unreimbursed expenses. Mr. Kullmans share option
award agreement with us also provides that, upon our termination
of his employment without cause, as defined in the share option
award agreement, or upon his voluntary termination of employment
for good reason, also as defined in the share option award
agreement, 100% of his unvested options will immediately vest.
In addition, each of our other directors has a share option
award agreement which provides that upon our termination of his
directorship for reasons other than death, disability or
retirement, the director may exercise any vested options for a
period of one month from the date of termination.


Our board of directors has an Audit Committee, at
least a majority of the members of which are required to be
independent directors. Pursuant to its charter and authority
delegated by the board of directors, the Audit Committee has
sole authority for the engagement, compensation and oversight of
our independent auditors, subject to the approval of our
shareholders as required under Bermuda law. In addition, the
Audit Committee reviews the results and scope of the audit and
other services provided by our independent auditors, and also
reviews our accounting and control procedures and policies.
Currently, the Audit Committee consists of Mr. Gary Howard,
Mr. Philippe-Olivier Rousseau, Mr. Robin Turner and
Mr. Christopher Vonwiller. The Audit Committee meets at
least eight times per year.

Our board of directors has a Compensation
Committee, at least a majority of the members of which are
required to be independent directors. Pursuant to its charter,
the Compensation Committee oversees the compensation and
benefits of our management and our employees, including
incentive plans and share option plans, and oversees our
management succession plan. Currently, the Compensation
Committee consists of Mr. Serge Fortin, Mr. Neal
Freeman and Mr. Wolfgang Wagner.

Bermuda law permits a Bermuda company to
indemnify its directors and officers, except in respect of their
fraud or dishonesty. We have provided in our bye-laws that our
directors and officers and their heirs, executors and
administrators will be indemnified and held harmless to the full
extent permitted by law out of our assets for all actions,
costs, charges, losses, damages and expenses incurred by them in
connection with any act done, concurred in or omitted to be done
in the execution of their duties, other than in the case of
their fraud or dishonesty. In addition, we have provided in our
bye-laws that each of our shareholders agrees to waive any claim
or right of action, individually or in the right of Intelsat,
Ltd., against any director or officer of Intelsat, Ltd. on
account of any action taken by such director or officer, or the
failure of such director or officer to take any action, in the
performance of his duties with us, other than with respect to
any matter involving any fraud or dishonesty by the director or
officer. The indemnification provided for in the bye-laws is not
exclusive of other indemnification rights to which a director or
officer may be entitled, provided that these rights do not
extend to his fraud or dishonesty.

Bermuda law also permits us to purchase insurance
for the benefit of our directors and officers against any
liability incurred by them for the failure to exercise the
requisite care, diligence and skill in the exercise of their
powers and the discharge of their duties, or indemnifying them
in respect of any loss arising or liability incurred by them by
reason of negligence, default, breach of duty or breach of
trust, as long as this indemnification does not extend to their
fraud or dishonesty. Our insurance policy indemnifying our
directors and officers as described above does not extend to
their fraud or dishonesty.

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At present, there is no pending material
litigation or proceeding involving a director or officer of
Intelsat, Ltd. where indemnification will be required or
permitted. In addition, we are not aware of any threatened
material litigation or proceeding that may result in a claim for
such indemnification.

D. Employees

As of December 31, 2002, we and our
subsidiaries had a total of 905 employees. These employees
consisted of:



|  |                                                                                                     
|- | ----------------------------------------------------------------------------------------------------
| | 235 employees in sales and marketing;                                                               
| 
| | 458 employees in engineering and operations; and                                                    
| 
| | 212 employees in finance, strategy and business
    development, and other administrative functions.

As of December 31, 2002, approximately 858
of our employees were located in the United States, 23 were
located in London, England and 6 were located in Bermuda. The
remainder of our employees were in various other locations
around the world.

As of December 31, 2001, we and our
subsidiaries had a total of 875 employees. These employees
consisted of:



|  |                                                                                                    
|- | ---------------------------------------------------------------------------------------------------
| | 224 employees in sales and marketing;                                                              
| 
| | 429 employees in engineering and operations; and                                                   
| 
| | 222 employees in finance, strategy and business
    development and other administrative functions.

As of December 31, 2001, approximately 828
of our employees were located in the United States, 16 were
located in London, England and 6 were located in Bermuda. The
remainder of our employees were in various other locations
around the world.

As of December 31, 2000, our predecessor,
the IGO, had a total of 792 employees.

On October 9, 2001, we reduced our staff by
105 employees, or approximately 11%, reflecting the elimination
of positions that were no longer required after our
privatization. We also reorganized some areas of our business to
streamline our operations. See Item 5 
Operating and Financial Review and Prospects for a
discussion of the impact of this staff reduction on our
operating expenses and results of operations. The number of
employees described above as of December 31, 2001 reflects
this workforce reduction.

Effective December 3, 2002, we reduced our
staff by 130 employees, or approximately 12%, reflecting the
reorganization of our business to streamline operations in
response to market and industry conditions. See Item 5
 Operating and Financial Review and Prospects
for a discussion of the impact of the December 2002 staff
reduction on our operating expenses and results of operations.
The number of employees described above as of December 31,
2002 reflects this reduction.

We believe our relations with our employees are
good. None of our employees are represented by unions or covered
by any collective bargaining agreements.

E. Share Ownership

We have established a share option plan for our
management and employees, the reservation of shares for which
was approved by our shareholders at a special general meeting
held on July 19, 2001. The share option plan enables us to
make awards of share options to our and our subsidiaries
eligible employees, directors, independent contractors, advisors
and consultants. Subject to adjustment for share splits and
similar events, we may grant options to purchase a maximum of
3,333,333 of our ordinary shares under the share option plan.

Pursuant to our share option plan, options for
our ordinary shares have been granted to our directors and to
our executive officers and other employees. As of March 12,
2003, options to acquire 2,899,007 of our ordinary shares were
outstanding in total. Of this total, options to purchase an
aggregate 120,745 ordinary shares were granted in 2002 to our
directors and executive officers. This amount includes options
to purchase

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our ordinary shares that were granted to an
executive officer who retired as of January 1, 2003, two
individuals who are no longer our executive officers and a
director who retired from our board as of December 31,
2002. All of the options granted in 2002 are exercisable at a
price of $16.17 per ordinary share and will expire in 2012. All
options granted prior to 2002, including those granted to our
directors and to our executive officers and other employees, are
exercisable at a price of $19.05 per ordinary share and will
expire in 2011.


Including the options granted to them in 2002,
those individuals currently serving as our directors and
executive officers hold options to purchase an aggregate 604,518
of our ordinary shares. None of our directors or executive
officers has been granted options to purchase 1% or more of our
ordinary shares. One of our directors has beneficial ownership
of less than 1% of our shares. Other than this director, none of
our directors or executive officers has any share ownership
other than the share options granted to him.

In general, options that have already been
granted to our directors will be fully vested on the date of
grant. The options that have been granted to our executive
officers and other participants to date will vest in equal
one-third installments on each of the first, second and third
anniversaries of the date of grant. In general, with respect to
the options granted to date, once vested, the options may be
exercised only after the earlier of the first anniversary of our
initial public equity offering and the third anniversary of the
date of grant. The specific vesting and exercise provisions
applicable to an award are set forth in the participants
award agreement.

The effect that a termination of employment will
have on a holders awards is set forth in his or her award
agreement. We expect that most terminations of employment will
result in the forfeiture of unvested options. However, we expect
that certain terminations of employment, such as the involuntary
or constructive termination of a holder who is an executive
officer or the termination of a holder due to the holders
death, disability or retirement, may result in full vesting of
unvested options. However, these options may be subject to
reduced exercise periods.

Our board of directors or its delegate(s) may at
any time discontinue granting awards under the share option plan
or amend or terminate the share option plan as to any further
grants of awards. However, none of these actions may, without
the approval of our shareholders, increase the maximum number of
ordinary shares available under the share option plan, except in
case of adjustments for share splits and similar events, nor may
any of these actions materially adversely affect the rights of a
holder of any previously granted award without such
holders consent.



|        |                                                      
|------- | -----------------------------------------------------
|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS

A. Major Shareholders

Our current shareholders consist primarily of
former Signatories and Investing Entities in the IGO. These
Signatories and Investing Entities include public and private
communications companies and national governments from around
the world.

The following table sets forth information
regarding the beneficial ownership of our ordinary shares at
March 12, 2003 by each person known by us to own
beneficially more than 5% of our outstanding ordinary shares.

Beneficial ownership is determined in accordance
with the rules and regulations of the Securities and Exchange
Commission, referred to as the SEC, pursuant to which a person
or group of persons is deemed to have beneficial
ownership of any ordinary shares that this person or group
has the right to acquire within 60 days after the date of
this annual report. Any ordinary shares that a person or group
has the right to acquire within 60 days after the date of
this annual report are deemed to be outstanding for purposes of
computing the percentage of outstanding ordinary shares held by
this person or group of persons, but are not deemed to be
outstanding for purposes of computing the percentage ownership
of any other person.

Except as otherwise indicated, each shareholder
identified by name has sole voting and investment power with
respect to its shares and record and beneficial ownership with
respect to its shares.

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Our principal shareholders do not have different
voting rights than our other shareholders.

|                                                                                                              |  |                      |                       |            |  |       |  | 
|------------------------------------------------------------------------------------------------------------- |  | -------------------- | --------------------- | ---------- |  | ----- |  | 
|Name and Address of                                                                                           |  | Amount and Nature of |                       | Percent of
|Beneficial Owner                                                                                              |  | Beneficial Ownership |                       | Class(1)  
|                                                                                                              |  |                      |                       |           
|Lockheed Martin Corporation
    6801 Rockledge Drive
    Bethesda, MD 20817
    United States                 |  |                      | 40,084,692 shares (2) |            |  | 24.1% | 
|Tata Sons Limited
    Bombay House
    24 Homi Mody Street
    Fort, Mumbai 400 001
    The Republic of India |  |                      | 9,015,314 shares(3)   |            |  | 5.4%  | 
|France Telecom FTLD/ DFI
    246 rue de Bercy
    Paris Cedex 12, 75584
    France                            |  |                      | 8,491,981 shares(4)   |            |  | 5.1%  | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated on the basis of 166,666,755 ordinary
    shares issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) | This includes 38,101,541 ordinary shares held by
    COMSAT Corporation; 1,983,149 ordinary shares held by Comsat
    General Corporation; and 2 ordinary shares held by Comsat
    International Ventures, a business unit of COMSAT Corporation.
    Each of these entities is a wholly owned, direct or indirect
    subsidiary of Lockheed Martin Corporation. Lockheed Martin
    Corporation disclaims that it is a control person of Intelsat,
    Ltd.                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(3) | Tata Sons Limited is the beneficial owner of the
    9,015,314 ordinary shares of Intelsat, Ltd. held of record by
    Videsh Sanchar Nigam Limited. On February 13, 2002, Tata
    Sons Limited, through Panatone Finvest Limited, acquired 25% of
    the outstanding shares of Videsh Sanchar Nigam Limited. On
    May 9, 2002, Tata Sons Limited, through Panatone Finvest
    Limited, completed a tender offer pursuant to which it increased
    its stake in Videsh Sanchar Nigam Limited to 45%. Panatone
    Finvest Limited has the right to nominate eight of the twelve
    members of the board of directors of Videsh Sanchar Nigam
    Limited. Tata Sons Limited disclaims beneficial ownership of the
    Intelsat, Ltd. ordinary shares held by Videsh Sanchar Nigam
    Limited, except to the extent of its pecuniary interests in such
    shares.
|   
|(4) | This includes 404,209 shares held by
    Telekomunikacja Polska (the Polish Telecommunication Company);
    380,349 ordinary shares held by Societe Nationale des
    Telecommunications (SONATEL); 316,027 ordinary shares held by
    Mauritius Telecom Limited; 184,002 ordinary shares held by Cote
    dIvoire Telecom (CI-Telecom); 98,305 ordinary shares held
    by Compania de Telecommunicaciones de El Salvador, S.A. de C.V.;
    and 59,855 ordinary shares held by GlobeCast Northern Europe
    Ltd. Each of these entities is partially owned by France Telecom.                                                                                                                                                                                                                                                                                       

The combined shareholding of COMSAT Corporation
and its affiliates has increased over the last three years from
approximately 22.5% of the IGOs total investment share as
of March 1, 2000 to approximately 24.1% of current
shareholdings in Intelsat, Ltd. The combined shareholding of
France Telecom and its affiliates has increased over the last
three years from approximately 3.0% of the IGOs total
investment share as of March 1, 2000 to approximately 5.1%
of current shareholdings in Intelsat, Ltd.

Four of our directors are affiliated with our
principal shareholders. Mr. Sponyoe, the chairman of our board
of directors, was Chief Executive Officer of Lockheed Martin
Global Telecommunications, which is a wholly owned subsidiary of
Lockheed Martin Corporation, until February 2002, and since
February 2002 has been a consultant to Lockheed Martin
Corporation. Dr. Dailey, a member of our board of
directors, is Senior Vice President of Washington Operations for
Lockheed Martin Corporation. Another member of our board of
directors, Mr. Gupta, is Managing Director of Videsh
Sanchar Nigam Limited. Mr. Mbaye, another member of our
board of directors, is Chief Executive Officer of Sonatel S.A.,
which is affiliated with France Telecom.

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On December 7, 2001, Lockheed Martin
Corporation announced its intention to position its equity
investment in us for monetization as part of its announced
strategy to exit the telecommunications business.

As of March 12, 2003, approximately 27.4% of
our ordinary shares, or 45,639,500 ordinary shares, were held of
record in the United States by approximately 13 holders.

B. Related Party Transactions

We have entered into several agreements with
COMSAT Corporation and other subsidiaries of Lockheed Martin
Corporation. Some of these contracts are summarized below. Also
summarized below is an agreement entered into with Teleglobe
Inc., one of our shareholders, and an agreement entered into
with Wildblue Communications, Inc. We believe that, in all
cases, these contracts were entered into on an arms-length
basis and on normal commercial terms.

COMSAT Asset
Purchase Agreement

On March 15, 2002, we entered into an asset
purchase agreement with COMSAT Corporation and COMSAT Digital
Teleport, Inc. On November 25, 2002, pursuant to this
agreement, we purchased most of the assets of COMSAT World
Systems, a business unit of COMSAT, and of COMSAT Digital
Teleport, Inc., a subsidiary of COMSAT. The assets that we
acquired in this transaction include substantially all of COMSAT
World Systems customer contracts for the sale of our
capacity, a digital teleport facility in Clarksburg, Maryland,
and two TTC&M stations located in Clarksburg, Maryland and
Paumalu, Hawaii.

We have also entered into contracts with other
Lockheed Martin entities relating to the provision to these
entities of TTC&M and other services that had been
previously provided to these entities by COMSAT or COMSAT
Digital Teleport, Inc. COMSAT has not transferred its ownership
interest in Intelsat, Ltd. as part of this transaction and
therefore continues to be our largest shareholder.

We agreed under the asset purchase agreement to
pay a total purchase price of approximately $110.0 million
for the assets we acquired in this transaction. This purchase
price was comprised of cash, the assumption of net liabilities,
a $5.0 million payment due in 2007 and a contingent payment
of $15.0 million, payable in three installments of
$5.0 million per year in 2008, 2009 and 2010. Upon the
closing of this transaction, the purchase price totaled $120.8
million. See Item 5  Operating and Financial
Review and Prospects for information regarding this total
purchase price, our accounting for the transaction and possible
adjustments to the purchase price. We will not be required to
pay installments of the $15.0 million contingent payment if
we are not operating TTC&M facilities at the Clarksburg
location and potential local development initiatives have
occurred that have had or are reasonably expected to have a
material adverse effect on our use of the Clarksburg facilities.
However, if we relocate a substantial portion of our TTC&M
operations conducted at Clarksburg to another location and no
such local development initiatives have occurred, then any
unpaid installments of this contingent payment become payable
immediately. We have assumed most of the liabilities, including
contingent liabilities, relating to the assets we have acquired.
These contingent liabilities include potential regulatory fee
payment obligations imposed by the FCC and potential liabilities
arising out of claims initiated by several of COMSATs
customers in an FCC administrative proceeding in which the FCC
found that these customers had insufficient opportunity to
obtain direct access to Intelsat capacity. Lockheed Martin
Corporation has provided a guarantee of COMSATs and COMSAT
Digital Teleport, Inc.s obligations under the asset
purchase agreement.

The two TTC&M stations that we have acquired
are two of the six primary TTC&M stations currently used in
our ground network. In addition, we have assumed from COMSAT the
lease for the building and the land for the Clarksburg TTC&M
station, which expires in 2012. Pursuant to the asset purchase
agreement, we have also acquired the lease for our back-up
operations facility in the Washington, D.C. region.

We agreed in the asset purchase agreement to
complete the acquisition based on receiving an initial order of
the FCC approving the transfer of the required FCC licenses. In
the event that the FCCs final order or the order of a
court of competent jurisdiction withdraws this initial approval,
the asset purchase agreement

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provides that COMSAT and COMSAT Digital Teleport,
Inc. are required to repurchase the assets that we acquired from
them at the same purchase price paid by us.


We financed the transaction through the issuance
of commercial paper.

Lockheed
Launch Services Agreements

We have entered into an agreement with Lockheed
Martin Commercial Launch Services, a wholly owned subsidiary of
Lockheed Martin Corporation, pursuant to which Lockheed Martin
Commercial Launch Services will provide launch and related
services to Intelsat LLC for our Intelsat X series satellite on
order. We entered into this contract after engaging in a
competitive bidding process. Lockheed Martin Corporation has
provided a payment guarantee in connection with this contract.
For a general description of our launch contracts, see
Item 4.B  Business Overview 
Network  Our Satellites Planned
Satellites.

Lockheed
Launch Support Agreement and Other Lockheed
Agreements

On February 13, 2002, we entered into a
master ordering agreement with Lockheed Martin Commercial Space
Systems, referred to as LMCSS, for our provision to LMCSS of
commercial launch support systems, referred to as CLASS,
services. Under this agreement, we will provide in-orbit testing
and launch and early orbit phase support of LMCSS
missions. The agreement will be in effect for four years,
through February 12, 2006, and offers a menu of CLASS
services at predetermined rates. Our first service order under
the agreement was for payload in-orbit testing services for a
New Skies satellite built by Lockheed Martin Corporation.
In-orbit testing under this service order was completed on
May 23, 2002, and final documentation was delivered and
accepted.

We have also entered into other agreements with
subsidiaries of Lockheed Martin Corporation pursuant to which
these subsidiaries provide services to us, including lifecycle
testing of some of the batteries used in our satellites and the
development and installation of new infrastructure relating to
our time division multiple access services.

Teleglobe
Share Purchase Agreement

On August 21, 2002, our Intelsat Global
Sales subsidiary entered into a share purchase agreement with
Teleglobe Inc. Pursuant to this agreement, on September 20,
2002, Intelsat Global Sales acquired Teleglobe Inc.s
6,284,635 shares in Intelsat, Ltd. for $65.0 million in
accordance with the terms described below. Teleglobe Inc. is
both our shareholder and one of our largest customers.
Telecommunications revenue generated from Teleglobe Inc. and its
affiliates accounted for approximately 4% of our
telecommunications revenue in each of 2000, 2001 and 2002. On
May 15, 2002, Teleglobe Inc. filed for creditor protection
in Ontario, Canada.

Pursuant to the share purchase agreement and a
related escrow agreement, title to the shares acquired from
Teleglobe Inc. was transferred to an escrow agent, who holds the
shares in trust for Intelsat Global Sales, subject to specified
limited rights of Teleglobe Inc. Teleglobe Inc. is entitled to
certain limited voting and dividend rights in the shares held by
the escrow agent. The share purchase agreement contemplates that
the escrow agent will sell the shares in our contemplated
initial public equity offering or in another manner set forth in
the agreement and will subsequently deliver the proceeds of any
such sale to Intelsat Global Sales and, in some cases, to
Teleglobe Inc. If all of the shares held in escrow are sold and
the sale proceeds exceed $90.1 million, Intelsat Global
Sales will receive $90.1 million, and Teleglobe Inc. will
receive the portion of the sale proceeds that exceeds
$90.1 million. If only a portion of the shares held in
escrow are sold, Intelsat Global Sales will receive the portion
of the sale proceeds equal to the percentage of
$90.1 million that is equal to the percentage the sold
shares represent of the total number of shares originally held
in escrow, and Teleglobe Inc. will receive any remaining sale
proceeds. If we have not conducted a registered offering of our
ordinary shares by December 31, 2003, or if we have
conducted such an offering by that time but some of the escrowed
shares remain unsold as of December 31, 2004, the share
purchase agreement provides for the unsold shares and any cash
held as escrow property to be distributed to Intelsat Global
Sales up to the amount that would result in Intelsat Global
Sales having received a total amount of cash and shares under the

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agreement valued at $90.1 million. If there
are any remaining shares or cash after this distribution to
Intelsat Global Sales, these shares and cash will be transferred
to Teleglobe Inc.


In connection with the share purchase
transaction, Teleglobe Inc. agreed to retain nearly 75% of its
service orders with us, which represent approximately
$131.7 million, or 3%, of our backlog as of
December 31, 2002. The remaining service orders, which
represented approximately $47.4 million, or 1%, of our
backlog as of the closing date of the share purchase
transaction, were terminated in connection with the transaction.
Teleglobe Inc. also agreed to provide payment semi-monthly in
advance for the service orders it has with us that were not
terminated, as opposed to the quarterly in arrears payment terms
originally applicable to those service orders. Upon the
assignment of Teleglobe Inc.s service orders to another
person, the service orders will be amended to provide for
payment monthly in arrears. The assignment of these service
orders is subject to the consent of Intelsat Global Sales, which
has agreed not to unreasonably withhold its consent as long as
the service orders are assigned to persons that Intelsat Global
Sales considers in its reasonable opinion to be creditworthy in
accordance with its credit criteria. All other terms and
conditions of these service orders will remain unchanged.

The closing of the share purchase transaction was
subject to, among other things, the approval of the monitor of
the Canadian insolvency proceedings and the approval of the
Ontario Superior Court of Justice, both of which were obtained.
All rights of appeal from the Courts decision to approve
the transaction have expired. In connection with the share
purchase transaction, Intelsat Global Sales released Teleglobe
Inc. from claims with respect to all service fees payable for
services provided to Teleglobe Inc. prior to May 15, 2002
and with respect to all termination fees payable pursuant to the
service orders being terminated, as described above.

Wildblue
Subscription Agreement

On December 9, 2002, we entered into an
agreement with Wildblue Communications, Inc. to acquire a
minority stake in Wildblue for a purchase price of
$58.0 million. Wildblue plans to provide broadband Internet
access services via Ka-band satellite to homes and small
business users in the continental United States beginning in
2004. The closing of this acquisition is subject to, among other
things, FCC and other governmental approvals and the
satisfaction of other closing conditions. We have agreed to
provide Wildblue with up to $2.0 million in interim funding
before the closing of the acquisition, which will be repaid upon
closing. As of December 31, 2002, we had a loan receivable
of $0.7 million from Wildblue with respect to interim
funding provided on December 20, 2002. In connection with
this agreement, we have agreed to purchase 50% of any shares
sold by one of the minority investors in Wildblue, at the
investors option, up to a maximum purchase price of $5.0
million. Other investors in this round of financing, which
totals $156.0 million including our investment, include the
National Rural Telecommunications Cooperative and Liberty
Satellite & Technology, Inc. One of our directors is a
director of Liberty Media Corporation, which indirectly owns a
minority interest in Wildblue and owns a majority of the
outstanding stock of Liberty Satellite & Technology, Inc.

C. Interests of Experts and
Counsel

Not applicable.

ITEM 8.     FINANCIAL
INFORMATION

See Item 18  Financial
Statements for our consolidated financial statements and
other financial information, as well as for information
regarding changes since the date of our consolidated financial
statements.

There are no pending or threatened material legal
actions against us. We are subject to litigation in the normal
course of business, but we do not believe that the resolution of
any pending proceedings will have a material impact on our
financial position or profitability.

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Since the privatization in July 2001, we have not
declared or paid cash dividends on our ordinary shares. The
declaration of dividends by Intelsat, Ltd. is subject to the
discretion of our board of directors. Our board of directors
will review our dividend policy from time to time in light of
the conditions existing at the time, including our financial
condition, results of operations, capital requirements,
contractual and other relevant legal and regulatory
restrictions, general business conditions and such other factors
as our board of directors deems relevant. Under Bermuda law, a
Bermuda company may not declare or pay dividends if there are
reasonable grounds for believing that the company is or, after
the payment, would be unable to pay its liabilities as they
become due or that the realizable value of the companys
assets would be less than the aggregate of its liabilities and
issued share capital and share premium accounts.

ITEM 9.     THE OFFER
AND LISTING

Not applicable.

ITEM
10.     ADDITIONAL
INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of
Association

The following is a summary of some of the current
rights of the holders of our shares. These rights are set out in
our memorandum of association and bye-laws or are provided by
applicable Bermuda law and may differ from those typically
provided to shareholders of U.S. corporations under the
corporations laws of some states of the United States. This
summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all of the
provisions of our memorandum of association and bye-laws. For
more information, you should read our memorandum of association
and bye-laws, copies of which have been filed as exhibits to our
Registration Statement on Form F-4, File
No. 333-99189, filed on September 5, 2002.

General

Intelsat, Ltd. is incorporated as a limited
liability company under the Bermuda Companies Act 1981, referred
to as the Companies Act. We are registered with the Registrar of
Companies in Bermuda under registration number 27484. Our
registered office in Bermuda is located at Clarendon House, 2
Church Street, Hamilton HM CX, Bermuda. The objects of our
business are set out in paragraph six of our memorandum of
association. These objects include providing telecommunications
services of all kinds, carrying on business as a holding company
and providing financing and financial services to any entity in
our group.

Our bye-laws also specify that we shall provide
international public telecommunication services on a commercial
basis. Specifically, we will maintain global connectivity and
coverage and serve our lifeline connectivity customers, honor
our obligations under our LCO contracts and provide
non-discriminatory access to our system. This bye-law provision
relating to our public service obligations does not create any
right of enforcement by our shareholders.

Share
Capital

Our authorized capital consists of
216,666,666 2/3 ordinary shares, par value $3.00 per share,
and 2,500,000 preference shares, par value $3.00 per share.
Under our bye-laws, our authorized ordinary shares will increase
to 250,000,000 ordinary shares, par value $3.00 per share, as of
the closing date of our initial public offering of ordinary
shares.

We have 166,666,755 ordinary shares issued and
outstanding, of which 6,284,635 ordinary shares are held by our
Intelsat Global Sales subsidiary, and 3,333,333 ordinary shares
reserved for issuance under our share option plan. Our share
option plan is described in Item 6.E 
Share Ownership above. Holders of our ordinary
shares are generally entitled to one vote per share held of
record on all matters submitted to a vote of the shareholders.
However, with respect to the election of any of our directors
prior to the date of our initial

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public equity offering, our bye-laws provide that
each holder of our ordinary shares will be entitled to cast a
number of votes equal to the number of directors to be elected
multiplied by the number of shares held by this holder, and that
the votes cast by this holder may be divided among any number of
candidates up to a maximum number equal to the number of
directors to be elected. Other than pursuant to the Member
Protection Rights Agreement discussed below under
 Member Protection Rights, holders of our
ordinary shares have no preemptive, redemption, conversion or
sinking fund rights. We have no preference shares outstanding.


On June 4, 2002, our shareholders approved a
share consolidation that became effective on that date. Pursuant
to the share consolidation, every three of our ordinary shares
of $1.00 par value each were consolidated into one ordinary
share of $3.00 par value and every three of our preference
shares of $1.00 par value each were consolidated into one
preference share of $3.00 par value. To reflect the share
consolidation, we amended our bye-laws to decrease the number of
authorized ordinary shares from 650,000,000 ordinary shares with
a par value of $1.00 per share to 216,666,666 2/3 ordinary
shares with a par value of $3.00 per share, and to decrease the
number of authorized preference shares from 7,500,000 preference
shares with a par value of $1.00 per share to 2,500,000
preference shares with a par value of $3.00 per share. Any
holder who would have held a fraction of an ordinary share after
the share consolidation was issued an additional fraction of an
ordinary share so as to round such holders shareholding up
to the next whole number.

Pursuant to our bye-laws, and subject to any
resolution by our shareholders to the contrary and without
prejudice to the rights of holders of any existing shares or
class of shares, our board of directors may issue any unissued
ordinary shares on terms and conditions that it determines.
Preference shares may be issued by our board of directors
pursuant to our Member Protection Rights Agreement under the
terms and conditions contemplated under our bye-laws authorizing
the issuance of such shares, or by resolution of our
shareholders. There are no limitations under Bermuda law on the
rights of persons who are non-residents of Bermuda to hold or
vote our ordinary shares.

Dividend
Rights

Under Bermuda law, a companys board of
directors may declare and pay dividends from time to time unless
there are reasonable grounds for believing that the company is
or, after the payment, would be unable to pay its liabilities as
they become due or that the realizable value of the
companys assets would thereby be less than the aggregate
of its liabilities and issued share capital and share premium
accounts. Under our bye-laws, each ordinary share is entitled to
dividends if, as and when dividends are declared by our board of
directors, subject to any preferred dividend right of the
holders of any outstanding preference shares. There are no
restrictions on our ability to transfer funds, other than funds
denominated in Bermuda dollars, in or out of Bermuda or to pay
dividends to U.S. residents who are holders of our ordinary
shares.

Any cash dividends payable to holders of our
ordinary shares will be paid to Codan Services Limited, which is
our transfer agent, for disbursement to those holders.

Modifications
of Shareholder Rights

Our bye-laws provide that if our share capital is
divided into different classes of shares, the rights attached to
any class of shares may be varied by the written consent of
three fourths of the issued shares of that class or by a
resolution passed by a majority of the votes cast at a separate
general meeting of the holders of the shares of that class in
accordance with Section 47(7) of the Companies Act. Our
bye-laws specify that the creation or issue of shares ranking
equally with existing shares will not, unless expressly provided
by the terms of issue of those existing shares, vary the rights
attached to existing shares.

Transfers of
Shares

A holder of our ordinary shares may transfer
shares to another person by an instrument of transfer
substantially in the form set out in our bye-laws. The form must
be signed by the transferor and transferee. In the case of fully
paid shares, our board of directors may accept a form signed
only by the transferor. The transferor will remain the holder of
the shares until the transfer has been recorded in our register
of

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shareholders. Our board of directors may refuse
to recognize an instrument of transfer unless it is accompanied
by the certificate for the shares to which it pertains and by
such other evidence the board of directors may reasonably
require to evidence the transferors right to make the
transfer.


Changes in
Capital

We may from time to time by shareholder
resolution passed by a simple majority of the votes cast change
the currency of our share capital or increase, alter or reduce
our share capital as permitted by the provisions of
Sections 45 and 46 of the Companies Act and as provided in
our bye-laws.

Rights Upon
Liquidation

Our bye-laws state that in the event of Intelsat,
Ltd.s liquidation, dissolution or winding up, the holders
of our ordinary shares are entitled to share in our assets, if
any, remaining after the payment of all of our debts and
liabilities, subject to any liquidation preference on any
outstanding preference shares. Our bye-laws state that if we are
wound up, the liquidator may, upon the resolution of the
shareholders, divide all or any part of our assets among our
shareholders. The liquidator may, for the purpose of
distributing our assets to our shareholders, set the value of
our assets and determine how the division of our assets shall be
carried out as between our shareholders or any different classes
of our shareholders.

Meetings of
Shareholders

Under Bermuda law, we are required to convene at
least one general shareholders meeting per calendar year.
Under Bermuda law and under our bye-laws, general meetings of
our shareholders may be either annual or special. Bermuda law
and our bye-laws provide that special general meetings may be
called if requested by shareholders holding not less than 10% of
the paid-up share capital of the company carrying the right to
vote at general meetings. Under our bye-laws and in accordance
with Bermuda law, the chairman, the deputy chairman or our board
of directors may convene a special general meeting whenever in
their judgment it is deemed necessary.

Our bye-laws require that shareholders be given
at least 30 days, and not more than
60 days, notice of an annual general meeting and at
least 14 days, and not more than 60 days,
notice of a special general meeting called by the chairman, the
deputy chairman or our board of directors. In general, our
bye-laws provide that the quorum requirement for a
shareholders meeting will be satisfied if at least two
persons are present in person and represent in person or by
proxy in excess of 50% of our total issued and outstanding
voting shares.

Unless required by Bermuda law or specifically
provided in our bye-laws, voting at any general meeting of
shareholders is generally decided by a simple majority of the
votes cast at a meeting at which a quorum is present. If an
equal number of votes are cast for and against a resolution, the
resolution will fail.

However, with respect to the election of any of
our directors prior to the date of our initial public equity
offering, our bye-laws provide that each holder of our ordinary
shares will be entitled to cast a number of votes equal to the
number of directors to be elected multiplied by the number of
shares held by this holder, and that the votes cast by this
holder may be divided among any number of candidates up to a
maximum number equal to the number of directors to be elected.

Before the date of our initial public equity
offering, we may not take any of the following actions without
the approval of shareholders representing at least 60% of our
total issued and outstanding voting shares:



|  |                                                                                                                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the creation of any class of shares not already
    provided for in our bye-laws;                                                                                                                                                                                                                                    
| 
| | any change in our authorized shares as set forth
    in our bye-laws;                                                                                                                                                                                                                                                
| 
| | any dissolution, liquidation or winding-up of us,
    other than any transaction in which our shareholders at the time
    of the transaction become shareholders on the same proportionate
    basis in an entity which succeeds to all of our assets
    distributed in the dissolution, liquidation or winding-up;
| 
| | the commencement of any voluntary bankruptcy or
    similar insolvency proceeding with respect to us;                                                                                                                                                                                                                

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a transaction, other than an intercompany
    transaction or the creation of a pledge or other security
    interest in connection with indebtedness for borrowed money,
    involving the disposition of our or a subsidiarys assets
    or the share capital of a subsidiary, if the value of the assets
    or shares represents more than 25% of the total consolidated
    assets of us and our subsidiaries prior to the earlier of the
    consummation of that transaction or the execution of a
    definitive agreement with respect to that transaction;
| 
| | an amalgamation, merger or consolidation
    involving us or any of our subsidiaries, other than an
    intercompany transaction, if the value of the business or assets
    acquired or disposed of exceeds $1.0 billion;                                                                                                                                                                                                                                                                                                                                          
| 
| | the acquisition by us or any of our subsidiaries
    of any class of securities of any person, other than our
    securities or the securities of any of our subsidiaries or
    securities issued or guaranteed by the U.S. federal government,
    if the value of those securities exceeds $1.0 billion;                                                                                                                                                                                                                                                         
| 
| | the acquisition by us or any of our subsidiaries
    of substantially all of the assets of any other person or
    entity, other than us or any of our subsidiaries, if the value
    of those assets exceeds $1.0 billion; or                                                                                                                                                                                                                                                                                                                                      
| 
| | the entry by us or any of our subsidiaries into
    any partnership, joint venture, strategic alliance or profit
    sharing agreement with any person, other than us or any of our
    subsidiaries, if that transaction involves the contribution or
    other transfer by us or a subsidiary of assets with a value in
    excess of $1.0 billion to any such partnership, venture or
    similar entity.                                                                                                                                                        

In addition to these supermajority vote
requirements, our bye-laws require a supermajority vote of our
shareholders for amendments to our bye-laws or other actions by
us. For information regarding these matters, see
 Mergers, Consolidations, Amalgamations and
Business Combinations and  Amendment of
Memorandum of Association and Bye-laws. Our bye-laws also
provide for different supermajority vote requirements and for
certain supermajority quorum requirements from and after the
date of our initial public equity offering.

Every holder of ordinary shares present in person
and every person holding a valid proxy is entitled to vote at a
general meeting of our shareholders.

Our bye-laws provide that a shareholder that is a
corporation may, by written instrument, authorize any person to
act as its representative at any meeting of the shareholders and
that this authorized person will be entitled to exercise the
same powers on behalf of the corporation as that corporation
could exercise if it were an individual shareholder. However,
the chairman of the shareholders meeting may require those
assurances that he deems sufficient as to the right of any
person to attend and vote at a general meeting on behalf of a
shareholder that is a corporation.

Access to
Books and Records and Dissemination of Information

Members of the general public have the right to
inspect the public documents of a Bermuda company, which are
available at the office of the Registrar of Companies in
Bermuda. These documents include the companys memorandum
of association, including its objects and powers, and any
alterations to its memorandum of association. The shareholders
have the additional right to inspect the bye-laws of the
company, minutes of general meetings of the company and the
companys audited financial statements, which must be
presented at the annual general meeting. The register of
shareholders of a company is also open to inspection by
shareholders without charge and by members of the general public
on the payment of a fee. The register of shareholders is
required to be open for inspection for not less than two hours
in any business day. However, companies are entitled to close
their register of shareholders for up to 30 days in a year. A
company is required to maintain its share register in Bermuda
but may, subject to the provisions of the Companies Act,
establish a branch register outside Bermuda. A company is
required to keep at its registered office a register of
directors and officers that is open for inspection for not less
than two hours in any business day by members of the public
without charge. Bermuda law does not, however, provide a general
right for shareholders to inspect or obtain copies of any other
corporate records.

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Proceedings
of Board of Directors

Our bye-laws provide that our business is to be
managed and conducted by our board of directors. The board of
directors management authority includes full borrowing
authority. Bermuda law requires that our directors be
individuals, but there is no requirement in our bye-laws or
Bermuda law that our directors hold any of our shares.

As required by the Companies Act and as provided
in our bye-laws, a director who is directly or indirectly
interested in a contract or proposed contract or arrangement
with us must declare the nature of the interest. Following this
declaration, and unless disqualified by the chairman of the
relevant board meeting, a director may vote in respect of any
contract or proposed contract or arrangement in which that
director is interested and may be counted in the quorum at the
meeting of directors.

Mergers,
Consolidations, Amalgamations and Business
Combinations

Unless a companys bye-laws provide
otherwise, Bermuda law imposes specified director and
shareholder approval requirements in connection with the
amalgamation of a Bermuda company with an unaffiliated company.
In our case, as described above under  Meetings
of Shareholders, our bye-laws provide that, prior to our
initial public equity offering, a merger, consolidation or
amalgamation of us or any of our subsidiaries with or into
another entity, other than in an intercompany transaction, in
which the value of the business or assets acquired by us or
disposed of by us exceeds $1.0 billion must be approved by
shareholders representing not less than 60% of our total issued
and outstanding voting shares. Under our bye-laws, there are
also special approval requirements for a business combination
with an interested party, as described below. Any other
amalgamation will require the approval set forth under the
Companies Act, which is the approval of 75% of the votes cast at
a meeting at which there must be a quorum of at least two
persons holding or representing at least one third of our issued
and outstanding voting shares.

Except as described below, a business combination
with an interested party or any of its affiliates requires the
approval of at least 75% of our total issued and outstanding
voting shares, including at least two thirds of the voting
shares held by shareholders other than the interested party. The
purpose of this requirement is to ensure that in any business
combination with an interested party, all shareholders receive a
price per share equal to the highest price paid by the
interested party for any shares.

An interested party according to our bye-laws is
a person who beneficially owns more than 15% of our total issued
and outstanding voting shares, other than our subsidiaries or an
employee benefit plan of us or our subsidiaries. In addition,
our bye-laws provide that a person will not be deemed to be an
interested party if that person:



|  |                                                                                                                                                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | as of July 18, 2001, individually or with
    its affiliates, beneficially owned or controlled the voting
    power of more than 15% of our issued and outstanding ordinary
    shares, if all of those shares were owned as of that date, such
    person being referred to as a Grandfathered Member;
| 
| | is affiliated with a Grandfathered Member or is
    the successor to a Grandfathered Member; or                                                                                                                                                                                                        
| 
| | beneficially owns not more than 20% of our
    outstanding voting shares that were acquired, directly or
    indirectly, from a Grandfathered Member, if:                                                                                                                                              



| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that person did not beneficially own any other
    voting shares at the time of the acquisition and does not
    thereafter acquire beneficial ownership of voting shares, except
    in an issuance made on a pro rata basis to all shareholders that
    is approved by our disinterested directors, as defined in our
    bye-laws, or that is pursuant to our Member Protection Rights
    Agreement; and
|
| |  | that person acquired the voting shares in a
    transaction that received the prior approval of a majority of
    our disinterested directors, as defined in our bye-laws.                                                                                                                                                                                                                                   

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A business combination with an interested party
will be subject to the supermajority vote requirements described
above if it is:



|  |                                                                                                                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a merger, consolidation, amalgamation or binding
    share exchange with an interested party or any of its affiliates;                                                                                                                                                                                                   
| 
| | a sale, pledge or other transfer to or with an
    interested party or any of its affiliates of our assets or any
    of our subsidiaries assets having a fair market value of
    $25.0 million or more;                                                                                                               
| 
| | the issuance or transfer of our securities or
    those of any of our subsidiaries to an interested party or any
    of its affiliates in exchange for consideration of
    $25.0 million or more, other than issuances upon conversion
    of convertible securities in the circumstances set forth in our
    bye-laws;
| 
| | the adoption of a plan or proposal of liquidation
    or dissolution of us proposed by or on behalf of an interested
    party or any of its affiliates; or                                                                                                                                                              
| 
| | any other transaction involving us or any of our
    subsidiaries that has the effect, directly or indirectly, of
    increasing the proportionate share of our outstanding equity
    securities or securities convertible into equity securities held
    by an interested party or any of its affiliates.             

Even if an interested party is involved in a
transaction, the special vote requirement for interested party
transactions may be avoided, and the transaction will be subject
to the general amalgamation and merger approval requirements
described above, if:



|  |                                                                                                                                                                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the business combination does not involve
    shareholders receiving any consideration and the business
    combination is approved by a majority of the disinterested
    directors or an officer appointed by the disinterested directors
    to approve any such transactions; or                                                                           
| 
| | the business combination involves shareholders
    receiving consideration, and either the business combination is
    approved by a majority of the disinterested directors or an
    officer appointed by the disinterested directors to approve any
    such transactions or the transaction satisfies conditions set
    forth in our bye-laws relating to:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | the consideration to be received in the
    transaction;                                                                                   
|
| |  | the involvement of the interested party in the
    transaction and our affairs;                                                            
|
| |  | the payment by us of dividends; and                                                                                                        
|
| |  | whether a proxy statement, including a fairness
    opinion by an investment bank, has been circulated with respect
    to the transaction.

Amendment of
Memorandum of Association and Bye-laws

Bermuda law provides that the memorandum of
association of a company may be amended by a resolution passed
at a general meeting of shareholders of which due notice has
been given. An amendment to the memorandum of association that
alters the companys business objects may require the
approval of the Bermuda Minister of Finance, who may grant or
withhold approval at his or her discretion. Our bye-laws provide
that no bye-law shall be rescinded, altered or amended, and no
new bye-law shall be made, unless it shall have been approved by
a resolution of our board of directors and by a resolution of
the shareholders. Except as described below, an amendment or
waiver of any bye-law shall be effective with the approval of a
majority of the votes cast at a general meeting of our
shareholders.

Supermajority
Voting Requirements

Some provisions of our bye-laws cannot be amended
or waived without approval by a supermajority vote of our
shareholders. For example, until the later to occur of
July 18, 2013 or the date the public service obligations
included in our bye-laws cease to be in effect, no amendment to
or waiver of our bye-law relating to our public service
obligations shall be effective without the approval of
shareholders representing not less than 100% of our total issued
and outstanding voting shares.

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In addition, the affirmative vote of shareholders
representing at least 75% of our total issued and outstanding
voting shares is required to amend or waive our bye-laws
relating to the following:



|  |                                                                                                                                                                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the procedures for the nomination of candidates
    to the board of directors to be elected at the 2003 annual
    general meeting of shareholders;                                                                                                                                                                                                
| 
| | the classification of our board of directors into
    three classes beginning in 2003;                                                                                                                                                                                                                                                             
| 
| | the term of our directors once our board of
    directors is classified;                                                                                                                                                                                                                                                                           
| 
| | the procedure for removing directors;                                                                                                                                                                                                                                                                                                              
| 
| | the procedure for filling vacancies on our board
    of directors;                                                                                                                                                                                                                                                                                 
| 
| | the prohibition on shareholders taking actions by
    written consent from and after the date of our initial public
    equity offering;                                                                                                                                                                                                           
| 
| | the requirement for advance notice of shareholder
    proposals;                                                                                                                                                                                                                                                                                   
| 
| | the majority vote required by shareholders at
    general meetings and votes related to bye-laws or actions
    covered by a separate supermajority vote or quorum requirement
    under our bye-laws, such as those described in the paragraph
    below and under  Mergers, Consolidations,
    Amalgamations and Business Combinations above;
| 
| | the limitations on the beneficial ownership of
    our voting shares;                                                                                                                                                                                                                                                                              
| 
| | the authorization of our board of directors to
    enter into the Member Protection Rights Plan; and                                                                                                                                                                                                                                               
| 
| | business combinations involving interested
    parties, as described under  Mergers,
    Consolidations, Amalgamations and Business Combinations.                                                                                                                                                                                               

Our bye-laws also contain supermajority quorum
requirements from and after the date of our initial public
equity offering. Specifically, there are other provisions of our
bye-laws that may be amended or waived upon the approval of a
simple majority of the votes cast at a meeting of our
shareholders as long as at least two persons representing not
less than two thirds of our total issued and outstanding voting
shares are present either in person or by proxy at such a
meeting.

Annulment
of Amendments of the Memorandum of Association

Under Bermuda law, the holders of an aggregate of
not less than 20% in par value of a companys issued share
capital or any class of a companys share capital have the
right to apply to the Bermuda courts for an annulment of any
amendment of the memorandum of association adopted by
shareholders at any general meeting, other than an amendment
that alters or reduces a companys share capital as
provided in the Companies Act. Where such an application is
made, the amendment becomes effective only to the extent that it
is confirmed by the Bermuda court. An application for an
annulment of an amendment of the memorandum of association must
be made within 21 days after the date on which the
resolution altering the companys memorandum of association
is passed and may be made on behalf of persons entitled to make
the application by one or more of their number as they may
appoint in writing for the purpose. No application may be made
by shareholders voting in favor of the amendment.

Appraisal
Rights and Shareholder Suits

Under Bermuda law, in the event of an
amalgamation of a Bermuda company with another company or
corporation, a shareholder of the Bermuda company who is not
satisfied that fair value has been offered for that
shareholders shares may apply to a Bermuda court within
one month of notice of the shareholders meeting to
appraise the fair value of those shares.

Class actions and derivative actions are
generally not available to shareholders under Bermuda law. The
Bermuda courts, however, would ordinarily be expected to permit
a shareholder to commence an action in the name of a company to
remedy a wrong to the company where the act complained of is
alleged to be beyond

108



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##### 



the corporate power of the company or is illegal
or would result in the violation of the companys
memorandum of association or bye-laws. Furthermore,
consideration would be given by a Bermuda court to acts that are
alleged to constitute a fraud against the minority shareholders
or, for instance, where an act requires the approval of a
greater percentage of the companys shareholders than that
which actually approved it.


When the affairs of a company are being conducted
in a manner that is oppressive or prejudicial to the interests
of some part of the shareholders, one or more shareholders may
apply to a Bermuda court. The court may then make such order as
it sees fit, including an order regulating the conduct of the
companys affairs in the future or ordering the purchase of
the shares of any shareholders by other shareholders or by the
company.

Certain
Provisions of Bermuda Law

We have been designated by the Bermuda Monetary
Authority as a non-resident for Bermuda exchange control
purposes. This designation allows us to engage in transactions
in currencies other than the Bermuda dollar, and there are no
restrictions on our ability to transfer funds, other than funds
denominated in Bermuda dollars, in and out of Bermuda or to pay
dividends to United States residents who are holders of our
ordinary shares.

The Bermuda Monetary Authority has given its
consent for the issue and free transferability of our
outstanding ordinary shares up to the amount of our authorized
share capital from time to time to and between persons who are
non-residents of Bermuda for exchange control purposes.
Approvals or permissions given by the Bermuda Monetary Authority
do not constitute a guarantee by the Bermuda Monetary Authority
as to our performance or our creditworthiness. Accordingly, in
giving such consent or permissions, the Bermuda Monetary
Authority shall not be liable for the financial soundness,
performance or default of our business or for the correctness of
any opinions or statements expressed in this annual report.
Issuances and transfers of ordinary shares involving persons
deemed resident in Bermuda for exchange control purposes in some
cases require the specific consent of the Bermuda Monetary
Authority. We have obtained the permission of the Bermuda
Monetary Authority for the issuance and subsequent transfer of
up to 20% of our ordinary shares to persons who are resident in
Bermuda for exchange control purposes.

In accordance with Bermuda law, share
certificates are issued only in the names of governments,
companies, partnerships or individuals. In the case of a
shareholder acting in a special capacity, such as a trustee,
certificates may, at the request of the shareholder, record the
capacity in which the shareholder is acting. Notwithstanding the
recording of any special capacity, we are not bound to
investigate or see to the execution of any such trust. We will
take no notice of any trust applicable to any of our shares,
whether or not we have been notified of such trust.

Member
Protection Rights

Each ordinary share has attached to it a member
protection right pursuant to the Member Protection Rights
Agreement. The member protection rights initially are
represented only by the certificates for the shares and will not
trade separately from the shares unless and until:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ten business days, or any shorter or longer
    period that our board of directors may fix by resolution, after
    the earlier of the date we announce that a person or group,
    referred to as an acquiring person, has become the beneficial
    owner of 15% or more of the outstanding ordinary shares, or the
    date that such person or group becomes the beneficial owner of
    more than 25% of our ordinary shares; this date is referred to
    as the flip-in date; or
| 
| | ten business days, or such later date as our
    board of directors may fix by resolution, after the date a
    person or group commences a tender or exchange offer that would
    result in such person or group becoming an acquiring person.                                                                                                                                                                                                                                       

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For the purposes of the Member Protection Rights
Agreement, an acquiring person does not include any person who:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | as of July 18, 2001, individually or with
    its affiliates, beneficially owned or controlled the voting
    power of 15% or more of the issued and outstanding ordinary
    shares, if all of those shares were owned as of that date, such
    person being referred to as a Grandfathered Member;                                                                                                                                                             
| 
| | is a party that is affiliated with a
    Grandfathered Member or is the successor to a Grandfathered
    Member in the circumstances specified in the Member Protection
    Rights Agreement; or                                                                                                                                                                                                                                                                  
| 
| | becomes the beneficial owner of 15% or more of
    our issued and outstanding ordinary shares but who acquired
    beneficial ownership without any intention of gaining control of
    us, if that person promptly divests, or promptly enters into an
    agreement with us that is satisfactory to us to divest,
    sufficient ordinary shares so that the person ceases to be the
    beneficial owner of 15% or more of the outstanding ordinary
    shares;
| 
| | beneficially owns ordinary shares consisting
    solely of one or more of ordinary shares:                                                                                                                                                                                                                                                                                                                                                                        



| |   |                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | beneficially owned pursuant to the grant or
    exercise of an option granted to that person, whom we refer to
    as an option holder, by us in connection with an agreement to
    merge with or acquire us, unless those shares were acquired
    after the flip-in date;
|
| |  | beneficially owned by an option holder or its
    affiliates at the time of grant of that option; and                                                                                                                                                                       
|
| |  | acquired by affiliates of an option holder after
    the time of the grant which, in the aggregate, amount to less
    than 1% of the outstanding ordinary shares;                                                                                                          



|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | beneficially owns not more than 20% of our
    outstanding ordinary shares, which were acquired, directly or
    indirectly, from a Grandfathered Member, if



| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that person did not beneficially own any other
    ordinary shares at the time of acquisition and does not
    thereafter acquire beneficial ownership of ordinary shares,
    except in an issuance made on a pro rata basis to all
    shareholders that is approved by our disinterested directors, as
    defined in our bye-laws, or that is pursuant to our Member
    Protection Rights Agreement; and
|
| |  | that person acquired the ordinary shares in a
    transaction which received the prior approval of a majority of
    our disinterested directors.                                                                                                                                                                                                                                                            

If and when the member protection rights separate
and prior to the date of the announcement by us that any person
has become an acquiring person, each member protection right
will entitle the holder to purchase 1/100 of a preference share
for an exercise price equal to four times the initial public
offering price of the ordinary shares. Each 1/100 of a
preference share would have economic and voting terms equivalent
to one ordinary share.

On the flip-in date, each member protection
right, other than member protection rights beneficially owned by
the acquiring person or its transferees, which become void, will
entitle its holder to purchase, for the exercise price, a number
of ordinary shares having a market value of twice the exercise
price. Also, if, after the flip-in date, the acquiring person:



|  |                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------
| | controls our board of directors and we are
    involved in a merger or similar form of business combination and:



| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any term of the transaction provides for
    different treatment of the shares of capital stock held by the
    acquiring person as compared to the shares of capital stock held
    by all other shareholders; or
|
| |  | the person with whom such transaction occurs is
    the acquiring person or an affiliate thereof; or                                                                                                              



|  |                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | controls our board of directors and we sell or
    transfer assets representing more than 50% of our assets or
    generating more than 50% of our operating income or cash flow to
    any person other than one of our wholly owned subsidiaries; or
| 
| | engages in transactions with us relating to the
    purchase or sale of assets with an aggregate market value of
    more than $25.0 million, engages in other transactions with
    us that are not on arms-length terms or                         

110



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##### 



| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | increases its proportionate share of our equity
    securities by more than 1% as a result of specified transactions
    involving our securities;

then each member protection right will entitle
its holder to purchase, for the exercise price, a number of
ordinary shares with the greatest voting power in respect of the
election of directors of either the acquiring person or the
other party to that transaction, depending on the circumstances
of the transaction, having a market value of twice the exercise
price. If any person or group acquires from 15% to and including
50% of our ordinary shares, our board of directors may, at its
option, exchange each outstanding member protection right,
except for those held by an acquiring person or its transferees,
for one ordinary share or 1/100 of a preference share.

The member protection rights may be redeemed for
$0.0001 per member protection right prior to the flip-in date.
Our bye-laws permit this redemption right to be exercised by our
board of directors.

The member protection rights will not prevent a
takeover of us. However, these rights may cause substantial
dilution to a person or group that acquires 15% or more of our
ordinary shares unless the member protection rights are first
redeemed by our board of directors.

Certain
Anti-Takeover Matters

In addition to our Member Protection Rights
Agreement, our bye-laws include a number of provisions that may
have the effect of encouraging persons considering unsolicited
tender offers or other unilateral takeover proposals to
negotiate with our board of directors rather than pursue
non-negotiated takeover attempts. These provisions include:

Classified
Board of Directors

As described under Item 6.C 
Directors, Senior Management and Employees 
Board Practices, our bye-laws provide for our board of
directors to be divided into three classes, beginning with the
directors elected at the 2003 annual general meeting. As a
result, after the classified board of directors is elected, at
least two annual meetings of shareholders may be required for
the shareholders to change a majority of our board of directors.
In addition, although shareholders may nominate candidates for
election to our board of directors, vacancies on our board of
directors may be filled only by our board of directors. Our
bye-laws also state that a director may be removed only for
cause by a majority of the directors then in office at a meeting
of the directors duly called and held, as long as the director
being removed is given notice of the meeting in accordance with
our bye-laws. Pursuant to our bye-laws, our board of directors
can fill any vacancy occurring as a result of the death,
disability, disqualification, removal or resignation of any
director. The classification of directors and the inability of
shareholders either to remove directors or to fill vacancies on
the board of directors will make it more difficult to change the
composition of our board of directors but will promote a
continuity of existing management.

Advance
Notice Requirements

Our bye-laws establish advance notice procedures
with regard to shareholder proposals relating to the nomination
of candidates for election as directors or new business to be
brought before meetings of our shareholders. These procedures
provide that notice of shareholder proposals must be timely
given in writing to our Secretary prior to the meeting at which
the action is to be taken. Prior to the date of our initial
public equity offering, notice must be received at our principal
executive offices in Bermuda not less than 14 days nor more than
90 days prior to the date of the meeting. In the case of a
special general meeting called by the chairman, the deputy
chairman or the board of directors, notice of a shareholder
proposal also must be delivered not more than seven days after
notice of the meeting has been provided. The notice must contain
information specified in our bye-laws.

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Amendment
of Bye-Laws

Our bye-laws require the approval of at least 75%
of our total issued and outstanding voting shares to amend or
waive any of the bye-laws described in this section
 Certain Anti-Takeover Matters. This
requirement will make it more difficult to dilute the
anti-takeover effects of our bye-laws.

C. Material Contracts

Privatization
Agreements

We entered into a number of agreements with our
shareholders in connection with the privatization, including a
Restructuring Agreement, a Shareholders Agreement and a
Registration Rights Agreement.

We entered into the Restructuring Agreement with
most of the IGOs former Signatories and Investing Entities
on July 17, 2001. The Restructuring Agreement provided for
the transfer by the IGO of substantially all of its assets and
liabilities to us and our subsidiaries. In consideration for the
transfer of these assets, we issued ordinary shares directly to
each former Signatory or Investing Entity that was a party to
the Restructuring Agreement in an amount proportional to its
investment share in the IGO. Under the terms of the
Restructuring Agreement, each Signatory and Investing Entity
party thereto agreed to release and discharge us, the IGO and
our affiliates from all obligations relating to the
Signatorys or Investing Entitys investment share and
related obligations. In addition, we agreed in the Restructuring
Agreement to indemnify each Signatory and Investing Entity party
thereto for any liability arising out of any activity conducted
or authorized by the IGO prior to July 18, 2001.

On July 18, 2001, we entered into the
Shareholders Agreement with most of the IGOs former
Signatories and Investing Entities. The Shareholders Agreement
includes an agreement by each shareholder to vote in favor of
any action requiring a shareholder vote that is reasonably
necessary in connection with the implementation of a timely
initial public offering that has been recommended by our board
of directors. The Shareholders Agreement also contains
restrictions on our shareholders ability to transfer their
ordinary shares and an agreement by the shareholders not to sell
or otherwise transfer their ordinary shares for a
lock-up period of 180 days following the
effective date of the registration statement filed in connection
with our initial public offering. In addition, the Shareholders
Agreement regulates certain other matters of corporate
governance, including the composition of our initial board of
directors following the privatization, and provides our
shareholders with certain information rights, including the
right to receive periodic reports from management on the
business and quarterly and annual financial reports. In
addition, under the terms of the Shareholders Agreement, we have
agreed to provide our services in a manner consistent with the
core public service principles of global coverage and
connectivity, lifeline connectivity and non-discriminatory
access. See Item 4.B  Business
Overview  Certain Customer Service
Agreements  Novation Agreements  Lifeline
Connectivity Obligation Contracts for a description of
these core public service principles. The Shareholders
Agreement, except for the provisions relating to the
restrictions on transfer, will terminate upon the earlier of
July 18, 2011 or the consummation of our initial public
offering.

We also entered into an equity Registration
Rights Agreement with many of the IGOs former Signatories
and Investing Entities on July 18, 2001. This Registration
Rights Agreement grants to each former Signatory and Investing
Entity that is a party to the agreement certain rights that
facilitate its ability to offer and sell its ordinary shares on
a securities exchange or in a public offering. The rights
provided under this agreement, however, are not applicable to
any ordinary shares held by a party that can otherwise freely
sell its shares. Specifically, no registration rights are
available with respect to ordinary shares held by a party that
holds, together with its affiliates, less than 5% of the
ordinary shares then outstanding and which shares are eligible
for sale pursuant to Rule 144(k) under the United States
Securities Act of 1933, as amended, referred to as the
Securities Act of 1933. In addition, no registration rights are
available with respect to ordinary shares held by a party that
holds, together with its affiliates, less than 1% of the
ordinary shares then outstanding and which shares have been held
by such party for at least one year.

112



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Under the terms of this Registration Rights
Agreement, a party can request that we list ordinary shares held
by it on a securities exchange outside of the United States
where we have chosen to list the ordinary shares for trading. In
addition, such party can request that we facilitate a public
offering of its ordinary shares in any jurisdiction where such
an exchange on which we have listed the ordinary shares is
located, including a request that we register its ordinary
shares for offer and sale in an underwritten or non-underwritten
offering and list its shares on such an exchange. However, these
rights are subject to specified blackout periods and specified
cutback provisions if marketing factors require a limit on the
number of shares included. Starting six months after our initial
public equity offering, one or more such parties holding in the
aggregate at least 3% of the total number of ordinary shares
then outstanding can demand up to five registrations for an
underwritten offering on a long-form registration statement or
on a short-form registration statement, or for a
non-underwritten offering on a long-form registration statement,
but in each case can only make such a demand once in any
12-month period. Starting one year after the initial public
equity offering, one or more such parties holding in the
aggregate at least 3% of the total number of ordinary shares
then outstanding can also demand up to five registrations for a
non-underwritten offering on a short-form registration
statement, but can only make such a demand once in any
nine-month period. Any such demand must relate to ordinary
shares with a market value of at least $250.0 million or,
in the case of a non-underwritten offering on a short-form
registration statement, $50.0 million. Such party can also
request that we include its ordinary shares in certain public
offerings of equity securities that we initiate. These rights
are also subject to specified blackout periods and are subject
to cutback provisions if marketing factors require a limit on
the number of shares included. All of the shares we are seeking
to register will be included in any such offering before the
shares of any such party are included.

A party can transfer its registration rights
under this agreement in connection with a transfer of its
ordinary shares to an affiliate or other persons if specified
requirements are satisfied. Under the terms of the agreement, we
have agreed to indemnify, to the extent permitted by law, each
such party and certain of its agents against any claim arising
out of or based on any untrue statements or omissions of
material facts made in any offering document prepared in
connection with the public offering of our equity securities,
except to the extent that any such claim arises out of or is
based on any untrue statements or omissions made in reliance
upon information provided to us by such party. Each such party
also agreed to indemnify us and certain of our agents for any
similar claims to the extent any such claim arises out of or is
based on any untrue statements or omissions made in reliance
upon information provided by such party. The Registration Rights
Agreement will terminate when there are no ordinary shares that
may be registered pursuant to the agreement, and will terminate
with respect to any particular party when such party ceases to
have rights under the agreement.

Investment in
Galaxy Satellite Broadcasting

On February 20, 2003, our Intelsat Hong Kong
LLC subsidiary entered into a subscription and shareholders
agreement with TVB Satellite TV Holdings Limited and Galaxy
Satellite TV Holdings Limited, referred to as Galaxy Holdings,
pursuant to which we acquired a 51% stake in Galaxy Holdings for
approximately U.S.$70 million in cash and in-kind
contributions. In connection with the agreement, Galaxy Holdings
acquired the outstanding shares of Galaxy Satellite Broadcasting
Limited, referred to as Galaxy, which holds licenses to provide
pay television and teleport services in Hong Kong. Galaxy
expects to launch its pay television service in late 2003 or
early 2004. TVB Satellite TV Holdings Limited, referred to as
TVB Holdings, holds the remaining 49% stake in Galaxy Holdings.

Pursuant to the agreement, we have agreed to
contribute total consideration valued at $542.0 million in
Hong Kong dollars, or approximately $70 million in U.S.
dollars. Our contribution is comprised of HK$413.3 million
in cash, payable in installments in 2003, 2004 and 2005, and
HK$128.7 million in kind in the form of satellite capacity
to be provided to Galaxy. TVB Holdings has agreed to contribute
total consideration valued at approximately
HK$520.8 million, consisting of HK$196.6 million in
cash, payable in installments in 2003, 2004 and 2005, and
approximately HK$324.2 million in kind in the form of
programming to be provided to Galaxy by Television Broadcasts
Limited, which is the parent company of TVB Holdings. In
February 2003, we and TVB Holdings each made the required 2003
cash contribution. Our required cash contribution for 2003 was
HK$173.9 million, or approximately U.S.$22 million.
Under the agreement, if the

113



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##### 



board of directors of Galaxy Holdings determines
that the aggregate amount of our and TVB Holdings cash
contributions in 2003, 2004 and 2005 as set forth above is
insufficient to fund Galaxys start-up and initial
operational costs, then we and TVB Holdings are required to make
additional cash contributions up to an aggregate of
HK$170.1 million. The amount of any such contributions that
we and TVB Holdings each would be required to make would be
based on percentage ownership in Galaxy Holdings at the time of
the contributions.


Under the subscription and shareholders
agreement, we and TVB Holdings each have the right to appoint
three of the seven members of the board of directors of Galaxy
Holdings. The seventh member of the board of directors is
nominated by a nominating committee consisting of two directors
appointed by us and one director appointed by TVB Holdings, and
TVB Holdings has certain approval rights relating to the
individual nominated by the nominating committee. The
subscription and shareholders agreement also provides that
certain matters relating to Galaxy Holdings and Galaxy require
the approval of both us and TVB Holdings until such time as
either we hold or TVB Holdings holds less than a specified
percentage of the outstanding shares of Galaxy Holdings. We and
TVB Holdings have agreed to restrictions on the transfer of
shares of Galaxy Holdings, including that any such transfer is
subject to the right of first refusal of the other party and
that until February 20, 2008 any such transfer is, in most
cases, subject to the prior consent of the other party.

In connection with this agreement, we intend to
move one of our satellites to the 85.0° East orbital
location to distribute programming for Galaxys pay
television service upon its launch and expect to build on this
distribution agreement to create a broadcast community at
85.0° East. See Item 4.B  Business
Overview  Our Strategy  Position for
Growth in Related Businesses and Make Incremental Investments to
Support Integrated Services for information regarding how
this transaction relates to our business strategy.

See also the other items of this annual report
for information regarding our material contracts.

D. Exchange Controls

We have been designated by the Bermuda Monetary
Authority as a non-resident for Bermuda exchange control
purposes. This designation allows us to engage in transactions
in currencies other than the Bermuda dollar, and there are no
restrictions on our ability to transfer funds, other than funds
denominated in Bermuda dollars, in and out of Bermuda, to pay
dividends to United States residents who are holders of our
ordinary shares or to pay interest to United States residents
who are holders of our 7 5/8% Senior Notes due 2012, our
Dragon bond 6 5/8% Notes due 2004, our Eurobond 8 3/8%
Notes due 2004 or our Eurobond 8 1/8% Notes due 2005.

E. Taxation

Bermuda
Taxation of Shareholders

This section describes the current material
Bermuda tax consequences of owning our ordinary shares.

There is currently no Bermuda income or profits
tax, withholding tax, capital gains tax, capital transfer tax,
estate duty or inheritance tax payable by our shareholders not
ordinarily resident in Bermuda in respect of our shares.
Furthermore, we have obtained an assurance from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax
Protection Act 1966 that, in the event that any legislation is
enacted in Bermuda imposing any tax computed on profits or
income or on any capital asset, gain or appreciation or any tax
in the nature of estate duty or inheritance tax, such tax shall
not until March 28, 2016 be applicable to us or to any of
our operations or to our shares, debentures or other obligations
except insofar as such tax applies to persons ordinarily
resident in Bermuda or to any taxes payable by us in respect of
real property or leasehold interests in Bermuda held by us.

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United States
Taxation of Shareholders

This section describes the material U.S. federal
income tax consequences of owning ordinary shares. It applies to
a U.S. holder, as defined below, that holds the shares as
capital assets for tax purposes. This section does not apply to
a U.S. holder that is a member of a special class of holders
subject to special rules, including:



|  |                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------
| | a dealer in securities,                                                                                         
| 
| | a trader in securities that elects to use a
    mark-to-market method of accounting for its securities holdings,
| 
| | a tax-exempt organization,                                                                                      
| 
| | a life insurance company,                                                                                       
| 
| | a person liable for alternative minimum tax,                                                                    
| 
| | a person that actually or constructively owns 10%
    or more of Intelsat, Ltd. voting shares,                  
| 
| | a person that holds ordinary shares as part of a
    straddle or a hedging or conversion transaction, or        
| 
| | a person whose functional currency is not the
    U.S. dollar.                                                  

This section is based on the Internal Revenue
Code of 1986, as amended, its legislative history, existing and
proposed regulations, published rulings and court decisions, all
as currently in effect. These laws are subject to change,
possibly on a retroactive basis. There is currently no
comprehensive income tax treaty between the United States and
Bermuda.

For purposes of this discussion, a U.S. holder is
a beneficial owner of shares that is:



|  |                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a citizen or resident of the United States,                                                                                                                                                                 
| 
| | a domestic corporation,                                                                                                                                                                                     
| 
| | an estate whose income is subject to U.S. federal
    income tax regardless of its source, or                                                                                                               
| 
| | a trust if a United States court can exercise
    primary supervision over the trusts administration and one
    or more U.S. persons are authorized to control all substantial
    decisions of the trust.

U.S. holders should consult their own tax
advisors regarding the U.S. federal, state and local and the
Bermuda and other tax consequences of owning and disposing of
shares in their particular circumstances.

Taxation
of Dividends

Under the U.S. federal income tax laws, and
subject to the passive foreign investment company, or PFIC,
rules discussed below, a U.S. holder must include in gross
income the gross amount of any dividend paid by Intelsat, Ltd.
out of its current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes. The dividend is
ordinary income that the U.S. holder must include in income when
the dividend is actually paid or constructively received. The
dividend will not be eligible for the dividends received
deduction generally allowed to U.S. corporations in respect of
dividends received from other U.S. corporations. Distributions
in excess of current and accumulated earnings and profits, as
determined for U.S. federal income tax purposes, will be treated
as a non-taxable return of capital to the extent of the U.S.
holders basis in the ordinary shares and thereafter as
capital gain.

Dividends will be income from sources outside the
United States, but generally will be passive income
or financial services income which is treated
separately from other types of income for purposes of computing
the foreign tax credit allowable to the U.S. holder.

Taxation
of Capital Gains

Subject to the PFIC rules discussed below, upon
the sale or other disposition of shares, a U.S. holder will
recognize capital gain or loss for U.S. federal income tax
purposes equal to the difference between the U.S. dollar value
of the amount realized and the U.S. holders tax basis,
determined in U.S. dollars, in these shares.

115



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##### 



Capital gain of a non-corporate U.S. holder is
generally taxed at a maximum rate of 20% where the property is
held more than one year, and 18% where the property is held for
more than five years. The gain or loss will generally be income
or loss from sources within the United States for foreign tax
credit limitation purposes.


PFIC
Rules

Intelsat, Ltd. believes that its ordinary shares
should not be treated as stock of a PFIC for U.S. federal income
tax purposes, but this conclusion is a factual determination
that is made annually and thus may be subject to change. If
Intelsat, Ltd. were to be treated as a PFIC, unless a U.S.
holder elects to be taxed annually on a mark-to-market basis
with respect to the ordinary shares of Intelsat, Ltd., gain
realized on the sale or other disposition of the ordinary shares
of Intelsat, Ltd. held by the U.S. holder would in general not
be treated as capital gain. Instead, a U.S. holder would be
treated as if such holder had realized such gain and certain
excess distributions ratably over the holders
holding period for the shares and would be taxed at the highest
tax rate in effect for each such year to which the gain was
allocated, together with an interest charge in respect of the
tax attributable to each such year.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

We are subject to the information reporting
requirements of the Securities Exchange Act of 1934, as amended,
and in accordance with these requirements file reports and other
information with the SEC. However, as a foreign private issuer,
we are exempt from the rules under the Securities Exchange Act
of 1934, as amended, relating to the furnishing and content of
proxy statements and relating to short swing profits reporting
and liability. In addition, we are not required to file annual,
quarterly or current reports and financial statements as
frequently or as promptly as U.S. companies whose securities are
registered under the Securities Exchange Act of 1934, as
amended. However, we will file, as long as we are required to do
so, within 180 days after the end of each fiscal year, an
annual report on Form 20-F containing consolidated
financial statements audited by an independent public
accountant. We also intend to file quarterly reports on
Form 6-K with the SEC.

You may inspect copies of the reports and other
information that we file with the SEC without charge at the
SECs Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of all or any part of these
materials may be obtained from the Public Reference Room upon
payment of fees prescribed by the SEC. You may obtain
information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a
website that contains registration statements, reports and other
information regarding registrants that file electronically with
the SEC at <http://www.sec.gov>.

I. Subsidiary Information

Not applicable.

ITEM
11.     QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

See the information set forth in
Item 5  Operating and Financial Review and
Prospects for quantitative and qualitative disclosures
about market risk.

116



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##### 



ITEM
12.     DESCRIPTION OF SECURITIES OTHER
THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM
13.     DEFAULTS, DIVIDEND ARREARAGES
AND DELINQUENCIES

Not applicable.

ITEM 14.     MATERIAL
MODIFICATIONS TO RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS

Not applicable.

ITEM 15.     CONTROLS
AND PROCEDURES

Within the 90 days prior to the date of this
report, our Chief Executive Officer and our Executive Vice
President and Chief Financial Officer, with the participation of
our management, carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and
procedures. Based on that evaluation, which disclosed no
significant deficiencies or material weaknesses, our Chief
Executive Officer and our Executive Vice President and Chief
Financial Officer concluded that our disclosure controls and
procedures are effective. There were no significant changes in
our internal controls or in other factors that could
significantly affect internal controls subsequent to the
evaluation.

ITEM
16.     [RESERVED]

PART III

ITEM
17.     FINANCIAL STATEMENTS

Not applicable.

ITEM
18.     FINANCIAL STATEMENTS

See pages F-1 to F-29.

ITEM
19.     FINANCIAL STATEMENTS AND
EXHIBITS

(a) Index to consolidated financial
statements:

|                                                                                                                        |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                        |  | Page
|                                                                                                                        |  |     
|Independent Auditors Report                                                                                            |  |      | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2001 and 2002                                                        |  |      | F-3 | 
|Consolidated Statements of Operations for the
    Years Ended December 31, 2000, 2001 and 2002                          |  |      | F-4 | 
|Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December 31,
    2000, 2001 and 2002 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2000, 2001 and 2002                          |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                                              |  |      | F-7 | 

117



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##### 



(b) Exhibits to this annual report:

| |  |         |     |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ------- | --- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |     |        
| |  | Number  |     | Exhibit
| |  |         |     |        
| |  |         | 1.1 |         |  | Certificate of Incorporation of Intelsat, Ltd.
    (incorporated by reference to Exhibit 3.1 of Intelsat,
    Ltd.s Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                                                                         
| |  |         | 1.2 |         |  | Memorandum of Association of Intelsat, Ltd.
    (incorporated by reference to Exhibit 3.2 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002).                                                                                                                                                                                                                                                                                                                         
| |  |         | 1.3 |         |  | Bye-laws of Intelsat, Ltd. (incorporated by
    reference to Exhibit 3.3 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                                                                                                                                                                                                          
| |  |         | 2.1 |         |  | Indenture, dated as of April 1, 2002,
    between Intelsat, Ltd. and The Bank of New York, as Trustee
    (incorporated by reference to Exhibit 4.1 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                               
| |  |         | 2.2 |         |  | Officers Certificate dated April 15,
    2002 relating to Intelsat, Ltd.s 7 5/8% Senior Notes
    due 2012 (incorporated by reference to Exhibit 4.2 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002).                                                                                                                                                                                                                                                            
| |  |         | 2.3 |         |  | Form of 7 5/8% Senior Notes due 2012
    (incorporated by reference to Exhibit 4.4 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                                                                                                
| |  |         | 2.4 |         |  | Registration Rights Agreement, dated as of
    April 15, 2002, among Intelsat, Ltd., Lehman Brothers Inc.,
    Salomon Smith Barney Inc. and the other parties named therein
    (incorporated by reference to Exhibit 4.5 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                        
| |  |         | 2.5 |         |  | Fiscal Agency Agreement between the International
    Telecommunications Satellite Organization and Deutsche Bank AG
    (formerly Bankers Trust Company), relating to 6.625% Notes due
    March 2004 and form of Note (incorporated by reference to
    Exhibit 10.1 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                                            
| |  |         | 2.6 |         |  | Fiscal Agency Agreement between the International
    Telecommunications Satellite Organization and Citibank, N.A.
    (formerly Morgan Guaranty Trust Company of New York), relating
    to 8.375% Notes due Oct. 2004 and form of Note (incorporated by
    reference to Exhibit 10.2 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                           
| |  |         | 2.7 |         |  | Fiscal Agency Agreement between the International
    Telecommunications Satellite Organization and Citibank, N.A.
    (formerly Morgan Guaranty Trust Company of New York), relating
    to 8.125% Notes due Feb. 2005 and form of Note (incorporated by
    reference to Exhibit 10.3 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                           
| |  |         | 2.8 |         |  | Assignment, Assumption and Amendment Agreement,
    dated as of July 18, 2001, among the International
    Telecommunications Satellite Organization, Intelsat, Ltd. and
    Citibank, N.A. (incorporated by reference to Exhibit 10.14
    of the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                           
| |  |         | 2.9 |         |  | Assignment, Assumption and Amendment Agreement,
    dated as of July 18, 2001, among the International
    Telecommunications Satellite Organization, Intelsat, Ltd. and
    Deutsche Bank AG (incorporated by reference to
    Exhibit 10.15 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                                     
| |  |         | 4.1 |         |  | Restructuring Agreement, dated as of
    July 17, 2001, among the International Telecommunications
    Satellite Organization, Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Intelsat U.K., Ltd., Intelsat Services Corporation,
    Intelsat Holdings LLC, Intelsat LLC and the Signatories named on
    Schedule I and the Investing Entities named on
    Schedule II (incorporated by reference to Exhibit 2.1
    of the Registration Statement on Form F-4, File No.
    333-99189, filed on September 5, 2002).

118



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##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ------- | ---- | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 4.2  |         |  | Shareholders Agreement, dated as of July 18,
    2001, among Intelsat, Ltd. and the Signatories named on
    Schedule I and the Investing Entities named on
    Schedule II (incorporated by reference to Exhibit 10.5
    of the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                
| |  |         | 4.3  |         |  | Registration Rights Agreement, dated as of
    July 18, 2001, among Intelsat, Ltd. and the parties named
    therein (incorporated by reference to Exhibit 10.6 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002).                                                                                                                                                       
| |  |         | 4.4  |         |  | Member Protection Rights Agreement, dated as of
    July 18, 2001, between Intelsat, Ltd. and The Bank of New
    York, as Rights Agent (incorporated by reference to
    Exhibit 10.7 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                                
| |  |         | 4.5  |         |  | Trust Agreement I, dated as of July 18,
    2001, among Intelsat, Ltd., The Bank of New York, as Trustee,
    and Pakistan Telecommunication Company Limited, as Beneficiary
    (incorporated by reference to Exhibit 10.8 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                           
| |  |         | 4.6  |         |  | Trust Agreement II, dated as of July 18,
    2001, between Intelsat, Ltd. and The Bank of New York, as
    Trustee (incorporated by reference to Exhibit 10.9 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                         
| |  |         | 4.7  |         |  | Novation Agreement, dated as of July 18,
    2001, between Intelsat U.K., Ltd. and Lockheed Martin World
    Systems, including schedule of omitted contracts and differences
    with filed contract (incorporated by reference to
    Exhibit 10.10 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                             
| |  |         | 4.8  |         |  | Transfer Agreement, dated as of July 17,
    2001, among the International Telecommunications Satellite
    Organization, Intelsat, Ltd., Intelsat (Bermuda), Ltd., Intelsat
    U.K., Ltd., Intelsat Services Corporation, Intelsat Holdings LLC
    and Intelsat LLC (incorporated by reference to
    Exhibit 10.11 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).
| |  |         | 4.9  |         |  | $500,000,000 364-Day Credit Agreement, dated as
    of March 21, 2002, among Intelsat, Ltd., Various Banks and
    Citibank, N.A., as Agent (incorporated by reference to
    Exhibit 10.12 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                           
| |  |         | 4.10 |         |  | $500,000,000 3-Year Credit Agreement, dated as of
    March 21, 2002, among Intelsat, Ltd., Various Banks and
    Citibank, N.A., as Agent (incorporated by reference to
    Exhibit 10.13 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                            
| |  |         | 4.11 |         |  | Headquarters Land Lease, dated as of
    February 28, 1985, between the International
    Telecommunications Satellite Organization and the U.S.
    Government, as amended (incorporated by reference to
    Exhibit 10.16 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                           
| |  |         | 4.12 |         |  | Contract No. INTEL-820, dated April 6,
    1989, between the International Telecommunications Satellite
    Organization and COMSAT Corporation (Clarksburg TTC&M), as
    amended (incorporated by reference to Exhibit 10.17 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                    
| |  |         | 4.13 |         |  | Contract No. INTEL-821, dated April 6,
    1989, between the International Telecommunications Satellite
    Organization and COMSAT Corporation (Paumalu TTC&M), as
    amended (incorporated by reference to Exhibit 10.18 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                       
| |  |         | 4.14 |         |  | Contract No. INTEL-825, dated March 27,
    1989, between the International Telecommunications Satellite
    Organization and Xantic (Perth TTC&M), as amended
    (incorporated by reference to Exhibit 10.19 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                                    

119



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##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ------- | ---- | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 4.15 |         |  | Contract No. INTEL-823, dated
    November 18, 1988, between the International
    Telecommunications Satellite Organization and DeTeSat (Raisting
    TTC&M), as amended (incorporated by reference to
    Exhibit 10.20 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                                                                                                                                                                                                                          
| |  |         | 4.16 |         |  | Contract No. INTEL-822, dated
    December 2, 1988, between the International
    Telecommunications Satellite Organization and Telespazio S.p.A.
    (Fucino TTC&M), as amended (incorporated by reference to
    Exhibit 10.21 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002 and Exhibit 10.35 of Amendment
    No. 1 to the Registration Statement on Form F-4, File
    No. 333-99189, filed on October 15, 2002). (1)                                                                                                             
| |  |         | 4.17 |         |  | Contract No. INTEL-824, dated
    February 13, 1989, between the International
    Telecommunications Satellite Organization and China National
    Instruments Import And Export Corporation, on behalf of the
    Beijing Telecommunications Administration (Beijing TTC&M),
    as amended (incorporated by reference to Exhibit 10.22 of
    the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002 and
    Exhibit 10.33 of Amendment No. 1 to the Registration
    Statement on Form F-4, File No. 333-99189, filed on
    October 15, 2002). (1)
| |  |         | 4.18 |         |  | Contract No. Intelsat-2822, dated
    April 26, 2002, between Intelsat Global Service Corporation
    and KT Corporation (Korea TT&C) (incorporated by reference
    to Exhibit 10.23 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                                                                                                                                                                                                                                                              
| |  |         | 4.19 |         |  | Contract No. Intelsat-S-2766, dated
    February 13, 2002, between Intelsat Global Service
    Corporation and Lockheed Martin Commercial Space Systems and
    related service order (incorporated by reference to
    Exhibit 10.24 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002). (1)                                                                                                                                                                                                                                              
| |  |         | 4.20 |         |  | Transponder Purchase Agreement, dated
    September 12, 2000, between the International
    Telecommunications Satellite Organization and Telenor Satellite
    Services AS (incorporated by reference to Exhibit 10.25 of
    the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                                                                                                                                                                                            
| |  |         | 4.21 |         |  | Contract No. Intelsat-2799, dated
    December 12, 2001, between Intelsat LLC and Sea Launch
    Company L.L.C., as amended (incorporated by reference to
    Exhibit 10.26 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002). (1)                                                                                                                                                                                                                                                                                                        
| |  |         | 4.22 |         |  | Contract No. Intelsat-2835, dated
    January 10, 2002, between Intelsat LLC and Lockheed Martin
    Commercial Launch Services, Inc., as amended (incorporated by
    reference to Exhibit 10.27 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002 and Exhibit 10.32 of Amendment
    No. 1 to the Registration Statement on Form F-4, File
    No. 333-99189, filed on October 15, 2002.) (1)                                                                                                                                            
| |  |         | 4.23 |         |  | Contract No. INTEL-2399, dated
    September 26, 2000, between the International
    Telecommunications Satellite Organization and Arianespace, as
    amended (incorporated by reference to Exhibit 10.28 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002). (1)                                                                                                                                                                                                                                                                         
| |  |         | 4.24 |         |  | Contract No. INTEL-2400, dated
    February 2, 2000, between the International
    Telecommunications Satellite Organization and Astrium SAS, as
    amended (incorporated by reference to Exhibit 10.29 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002). (1)                                                                                                                                                                                                                                                                           
| |  |         | 4.25 |         |  | Amendment No. 3, dated January 14,
    2003, to Contract No. INTEL-2400, dated February 2, 2000,
    between the International Telecommunications Satellite
    Organization and Astrium SAS.* (2)                                                                                                                                                                                                                                                                                                                                                                                         
| |  |         | 4.26 |         |  | Amendment No. 4, dated January 30,
    2003, to Contract No. INTEL-2400, dated February 2, 2000,
    between the International Telecommunications Satellite
    Organization and Astrium SAS.* (2)                                                                                                                                                                                                                                                                                                                                                                                         

120



---



##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ------- | ---- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 4.27 |         |  | Contract No. INTEL-1700, dated
    March 18, 1997, between the International
    Telecommunications Satellite Organization and Space Systems/
    Loral, Inc., as amended (incorporated by reference to
    Exhibit 10.30 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                                                                                                     
| |  |         | 4.28 |         |  | Share Purchase Agreement, dated as of
    August 21, 2002, between Teleglobe Inc. and Intelsat Global
    Sales & Marketing Ltd. (incorporated by reference to
    Exhibit 10.31 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                                                  
| |  |         | 4.29 |         |  | Asset Purchase Agreement, dated as of
    March 15, 2002, among COMSAT Corporation, COMSAT Digital
    Teleport, Inc. and Intelsat (Bermuda), Ltd., as amended
    (incorporated by reference to Exhibit 2.2 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002 and Exhibits 2.3 and 2.4 of
    Amendment No. 2 to the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    December 11, 2002). (1)
| |  |         | 4.30 |         |  | Purchase Agreement, dated April 10, 2002,
    among Intelsat, Ltd., Lehman Brothers Inc., Salomon Smith
    Barney, Inc. and the others parties named therein (incorporated
    by reference to Exhibit 10.4 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                      
| |  |         | 4.31 |         |  | Subscription and Shareholders Agreement relating
    to Galaxy Satellite TV Holdings, Ltd., dated as of
    February 20, 2003, among Intelsat Hong Kong, LLC, TVB
    Satellite TV Holdings, Ltd. and Galaxy Satellite TV Holdings,
    Ltd.* (2)                                                                                                                                                                                                                     
| |  |         | 6.1  |         |  | Statement re computation of per share earnings.*                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |         | 8.1  |         |  | List of subsidiaries (incorporated by reference
    to Exhibit 21.1 of the Registration Statement on Form F-4,
    File No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                                                                   



| | 
| | 
| | 



| |     |                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *   | Filed herewith.                                                                                                                                                                                        
|
| | (1) | Portions of this exhibit have been omitted
    pursuant to an order of the Securities and Exchange Commission
    granting confidential treatment with respect thereto.                                
|
| | (2) | Portions of this exhibit have been omitted
    pursuant to an application for confidential treatment filed with
    the Securities and Exchange Commission under separate cover on
    the date hereof.

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL
LIABILITIES

Certain of our directors and officers reside
outside of the United States and some of our assets and their
assets are located outside of the United States. Therefore, it
may be difficult for investors to effect service of process on
those persons in the United States and to enforce U.S. judgments
obtained in U.S. courts against us or those persons based on the
civil liability provisions of the U.S. federal securities laws.
Uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions, including the United
States, against us or our directors or officers under the
securities laws of those jurisdictions or entertain actions in
Bermuda against us or our directors or officers under the
securities laws of other jurisdictions.

121



---



##### 



SIGNATURES

The registrant hereby certifies that it meets all
of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual
report on its behalf.



| |               
| | --------------
| | INTELSAT, LTD.



| |     |                  
| | --- | -----------------
| | By: | /s/ CONNY KULLMAN

| |                        
| | -----------------------
| |                        
| | Conny Kullman          
| | Chief Executive Officer

Date: March 28, 2003

122



---



##### 



CERTIFICATIONS

I, Conny Kullman, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 20-F of Intelsat, Ltd.;                                                                                                                                                                                                                                                                      
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                           



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



| |    |                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



| |    |                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officer
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 28, 2003



| |                        
| | -----------------------
| | /s/ CONNY KULLMAN      
| |                        
| | Conny Kullman          
| | Chief Executive Officer

123



---



##### 



I, Joseph Corbett, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 20-F of Intelsat, Ltd.;                                                                                                                                                                                                                                                                      
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                           



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



| |    |                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



| |    |                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officer
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: March 28, 2003



| |                            
| | ---------------------------
| | /s/ JOSEPH CORBETT         
| |                            
| | Joseph Corbett             
| | Executive Vice President   
| | and Chief Financial Officer

124



---



##### 



INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                        |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                        |  | Page
|                                                                                                                        |  |     
|Independent Auditors Report                                                                                            |  |      | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2001 and 2002                                                        |  |      | F-3 | 
|Consolidated Statements of Operations for the
    Years Ended December 31, 2000, 2001 and 2002                          |  |      | F-4 | 
|Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December 31,
    2000, 2001 and 2002 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2000, 2001 and 2002                          |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                                              |  |      | F-7 | 



---



##### 



INDEPENDENT AUDITORS REPORT

The Board of Directors and Shareholders

Intelsat, Ltd.


We have audited the accompanying consolidated
balance sheets of Intelsat (as defined in Note 1) as of
December 31, 2001 and 2002, and the related consolidated
statements of operations, changes in shareholders equity
and cash flows for each of the years in the three-year period
ended December 31, 2002. In connection with our audits of
the consolidated financial statements, we also have audited the
accompanying financial statement Schedule II 
Valuation and Qualifying Accounts for the years ended
December 31, 2001 and 2002. These consolidated financial
statements and financial statement schedule are the
responsibility of Intelsats management. Our responsibility
is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Intelsat (as defined in Note
1) as of December 31, 2001 and 2002, and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 2002 in conformity
with accounting principles generally accepted in the United
States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.



| |             
| | ------------
| | /s/ KPMG LLP

McLean, Virginia

January 31, 2003, except as to Note 17,
which is as of March 20, 2003


F-2



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED BALANCE SHEETS

|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |         |           | 
|------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | --------- | ------- | --------- |  | --------- | ------- | --------- | 
|                                                                                                        |                                                                                                        |                                           
|                                                                                                        |                                                                                                        | As of December 31,                        
|                                                                                                        |                                                                                                        |                                           
|                                                                                                        |                                                                                                        | 2001                                       |           | 2002   
|                                                                                                        |                                                                                                        |                                            |           |        
|                                                                                                        |                                                                                                        |                                           
|                                                                                                        |                                                                                                        | (US$ in thousands, except                 
|                                                                                                        |                                                                                                        | share and per share amounts)              
|ASSETS                                                                                                 
|Current assets:                                                                                         |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        | Cash and cash equivalents                                                                              |                                            | $         | 2,699   |           |  | $         | 9,466   |          
|                                                                                                        | Receivables, net of allowance of $28,100 as of
    December 31, 2002.                                  |                                            |           | 265,188 |           |  |           | 265,781 |          
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        |                                                                                                        | Total current assets                       |           |         | 267,887   |  |           |         | 275,247   | 
|Satellites and other property and equipment, net                                                        |                                                                                                        |                                            | 3,237,660 |         |           |  | 3,478,055 |        
|Goodwill and other intangible assets                                                                    |                                                                                                        |                                            |          |         |           |  | 84,261    |        
|Deferred income taxes                                                                                   |                                                                                                        |                                            | 30,587    |         |           |  | 34,939    |        
|Other assets                                                                                            |                                                                                                        |                                            | 40,001    |         |           |  | 92,930    |        
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        |                                                                                                        | Total assets                               |           | $       | 3,576,135 |  |           | $       | 3,965,432 | 
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                                               
|Current liabilities:                                                                                    |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        | Commercial paper                                                                                       |                                            | $         |        |           |  | $         | 43,978  |          
|                                                                                                        | Accounts payable and accrued liabilities                                                               |                                            |           | 223,147 |           |  |           | 219,344 |          
|                                                                                                        | Deferred satellite performance incentives                                                              |                                            |           | 15,962  |           |  |           | 19,459  |          
|                                                                                                        | Deferred revenue                                                                                       |                                            |           | 15,374  |           |  |           | 18,252  |          
|                                                                                                        | Capital lease obligation                                                                               |                                            |           | 5,798   |           |  |           | 6,618   |          
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        |                                                                                                        | Total current liabilities                  |           |         | 260,281   |  |           |         | 307,651   | 
|Long-term debt, net of current portion                                                                  |                                                                                                        |                                            | 1,157,897 |         |           |  | 1,257,870 |        
|Deferred satellite performance incentives, net of
    current portion                                   |                                                                                                        |                                            | 84,455    |         |           |  | 125,161   |        
|Deferred revenue, net of current portion                                                                |                                                                                                        |                                            | 9,301     |         |           |  | 8,052     |        
|Due to Teleglobe Inc.                                                                                   |                                                                                                        |                                            |          |         |           |  | 19,780    |        
|Accrued retirement benefits                                                                             |                                                                                                        |                                            | 68,375    |         |           |  | 96,684    |        
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        |                                                                                                        | Total liabilities                          |           |         | 1,580,309 |  |           |         | 1,815,198 | 
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|Commitments and contingencies                                                                           |                                                                                                        |                                            |           |         |           |  |           |        
|Shareholders equity:                                                                                   |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        | Preference shares, $3.00 par value, 2,500,000
    shares authorized, no shares issued or outstanding   |                                            |           |        |           |  |           |        |          
|                                                                                                        | Ordinary shares, $3.00 par value,
    216,666,666 2/3 shares authorized, 166,666,755 shares
    issued |                                            |           | 500,000 |           |  |           | 500,000 |          
|Paid-in capital                                                                                         |                                                                                                        |                                            | 1,301,886 |         |           |  | 1,301,886 |        
|Retained earnings                                                                                       |                                                                                                        |                                            | 193,940   |         |           |  | 468,080   |        
|Accumulated other comprehensive loss 
    minimum pension liability,
    net of tax benefit of $8,610. |                                                                                                        |                                            |          |         |           |  | (12,914   | )      
|Ordinary shares purchased by subsidiary,
    6,284,635 shares as of December 31, 2002.                  |                                                                                                        |                                            |          |         |           |  | (106,818  | )      
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        |                                                                                                        | Total shareholders equity                 |           |         | 1,995,826 |  |           |         | 2,150,234 | 
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        
|                                                                                                        |                                                                                                        | Total liabilities and shareholders equity |           | $       | 3,576,135 |  |           | $       | 3,965,432 | 
|                                                                                                        |                                                                                                        |                                            |           |         |           |  |           |        

See accompanying notes to consolidated financial
statements.

F-3



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |         |         | 
|------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ----------- | ------- | ------- | ---- | ----------- | ------- | ------- | - | ----------- | ------- | ------- | 
|                                                                   |                                                                                                 |                                    
|                                                                   |                                                                                                 | Years Ended December 31,           
|                                                                   |                                                                                                 |                                    
|                                                                   |                                                                                                 | 2000                                |             | 2001    |         | 2002
|                                                                   |                                                                                                 |                                     |             |         |         |     
|                                                                   |                                                                                                 |                                    
|                                                                   |                                                                                                 | (US$ in thousands,                 
|                                                                   |                                                                                                 | except share and per share amounts)
|Telecommunications revenue                                         |                                                                                                 | $                                   | 1,099,751   |         |         | $    | 1,084,009   |         |         | $ | 991,956     |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Operating expenses:                                                |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|                                                                   | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                                     |             | 93,162  |         |      |             | 101,985 |         |   |             | 117,405 |        
|                                                                   | Selling, general and administrative                                                             |                                     |             | 61,900  |         |      |             | 95,600  |         |   |             | 121,077 |        
|                                                                   | Depreciation and amortization                                                                   |                                     |             | 414,250 |         |      |             | 340,449 |         |   |             | 361,322 |        
|                                                                   | Privatization initiative                                                                        |                                     |             | 21,575  |         |      |             | 33,576  |         |   |             |        |        
|                                                                   | Intelsat 10-01 contract termination costs                                                       |                                     |             |        |         |      |             |        |         |   |             | 34,358  |        
|                                                                   | Restructuring costs                                                                             |                                     |             |        |         |      |             | 7,300   |         |   |             | 5,522   |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|                                                                   |                                                                                                 | Total operating expenses            |             |         | 590,887 |      |             |         | 578,910 |   |             |         | 639,684 | 
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Income from operations                                             |                                                                                                 |                                     | 508,864     |         |         |      | 505,099     |         |         |   | 352,272     |        
|Interest expense                                                   |                                                                                                 |                                     | (24,859     | )       |         |      | (13,050     | )       |         |   | (55,053     | )      
|Other income                                                       |                                                                                                 |                                     | 20,885      |         |         |      | 12,293      |         |         |   | 9,942       |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Income before income taxes                                         |                                                                                                 |                                     | 504,890     |         |         |      | 504,342     |         |         |   | 307,161     |        
|Provision for income taxes                                         |                                                                                                 |                                     |            |         |         |      | 5,359       |         |         |   | 33,021      |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Net income                                                         |                                                                                                 | $                                   | 504,890     |         |         | $    | 498,983     |         |         | $ | 274,140     |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Basic and diluted net income per ordinary share                    |                                                                                                 | $                                   | 3.03        |         |         | $    | 2.99        |         |         | $ | 1.66        |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Pro forma income data (unaudited):                                 |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|                                                                   | Historical income before income taxes as reported                                               |                                     | $           | 504,890 |         |      | $           | 504,342 |         |   |             |         |        
|                                                                   | Pro forma provision for income taxes                                                            |                                     |             | 75,734  |         |      |             | 75,651  |         |   |             |         |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|                                                                   | Pro forma net income                                                                            |                                     | $           | 429,156 |         |      | $           | 428,691 |         |   |             |         |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|                                                                   | Tax effected pro forma basic and diluted net
    income per ordinary share                      |                                     | $           | 2.57    |         |      | $           | 2.57    |         |   |             |         |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        
|Basic and diluted weighted average ordinary
    shares outstanding |                                                                                                 |                                     | 166,666,755 |         |         |      | 166,666,755 |         |         |   | 164,893,283 |        
|                                                                   |                                                                                                 |                                     |             |         |         |      |             |         |         |   |             |        

See accompanying notes to consolidated financial
statements.

F-4



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS EQUITY

|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |         | 
|---------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------- | ----------- | ----------- |  | -------- | ------- | ------------- |  | ------------- | --------- | --------- |  | ------------- | ------- | ------------- |  | ------ | --------- | ---------- | - | - | ------- | - |  | - | -------- | - |  | - | --------- | -------- | - | - | ------- | ------- | 
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  | Accumulated   |           | Shares    |  |               |         |              
|                                                                 |                                                  | Ordinary Shares                          |             |             |  |          |         | IGO           |  | Other         |           | Acquired  |  | Total         |         | Total        
|                                                                 |                                                  |                                          |             | Paid-in     |  | Retained |         | Shareholders |  | Comprehensive |           | By        |  | Shareholders |         | Comprehensive
|                                                                 |                                                  | Shares                                   |             | Amount      |  | Capital  |         | Earnings      |  | Equity        |           | Income    |  | Subsidiary    |         | Equity        |  | Income
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |       
|                                                                 |                                                  |                                         
|                                                                 |                                                  | (US$ in thousands, except share amounts)
|Balance, December 31, 1999.                                      |                                                  |                                          |            |             |  | $        |        |               |  | $             |          |           |  | $             |        |               |  | $      | 1,551,407 |            |   | $ |        |   |  | $ |         |   |  | $ | 1,551,407 |          |   |   |         |        
|                                                                 | Capital contributions                            |                                          |             |            |  |          |         |              |  |               |           |          |  |               |         |              |  |        |           | 580,000    |   |   |         |  |  |   |          |  |  |   |           | 580,000  |   |   |         |         | 
|                                                                 | Distributions                                    |                                          |             |            |  |          |         |              |  |               |           |          |  |               |         |              |  |        |           | (863,389   | ) |   |         |  |  |   |          |  |  |   |           | (863,389 | ) |   |         |         | 
|                                                                 | Distribution of shares in New Skies              |                                          |             |            |  |          |         |              |  |               |           |           |  |               |         |              |  |        |           | (71,268    | ) |   |         |  |  |   |          |  |  |   |           | (71,268  | ) |   |         |         | 
|                                                                 | Net income                                       |                                          |             |            |  |          |         |              |  |               |           |          |  |               |         |              |  |        |           | 504,890    |   |   |         |  |  |   |          |  |  |   |           | 504,890  |   |   |         |         | 
|Total comprehensive income                                       |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               |        |               |  |        |          |            |   |   |        |   |  |   |         |   |  |   |          |          |   |   |         |        
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |        
|Balance, December 31, 2000.                                      |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               |        |               |  |        | 1,701,640 |            |   |   |        |   |  |   |         |   |  |   | 1,701,640 |          |   |   |         |        
|                                                                 | Net income through July 18, 2001 (privatization) |                                          |             |            |  |          |         |              |  |               |           |          |  |               |         |              |  |        |           | 305,043    |   |   |         |  |  |   |          |  |  |   |           | 305,043  |   |   |         |         | 
|                                                                 | Distributions                                    |                                          |             |            |  |          |         |              |  |               |           |          |  |               |         |              |  |        |           | (204,797   | ) |   |         |  |  |   |          |  |  |   |           | (204,797 | ) |   |         |         | 
|                                                                 | Privatization                                    |                                          |             | 166,666,755 |  |          |         | 500,000       |  |               |           | 1,301,886 |  |               |         |              |  |        |           | (1,801,886 | ) |   |         |  |  |   |          |  |  |   |           |         |   |   |         |         | 
|                                                                 | Net income from July 19 to December 31, 2001.    |                                          |             |            |  |          |         |              |  |               |           |          |  |               |         | 193,940       |  |        |           |           |   |   |         |  |  |   |          |  |  |   |           | 193,940  |   |   | $       | 193,940 | 
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |        
|Total comprehensive income                                       |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               |        |               |  |        |          |            |   |   |        |   |  |   |         |   |  |   |          |          |   | $ | 193,940 |        
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |        
|Balance, December 31, 2001.                                      |                                                  |                                          | 166,666,755 |             |  |          | 500,000 |               |  |               | 1,301,886 |           |  |               | 193,940 |               |  |        |          |            |   |   |        |   |  |   |         |   |  |   | 1,995,826 |          |   |   |         |        
|Purchase of ordinary shares by
    subsidiary  6,284,635 shares |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               |        |               |  |        |          |            |   |   |        |   |  |   | (106,818 | ) |  |   | (106,818  | )        |   |   |         |        
|Net income                                                       |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               | 274,140 |               |  |        |          |            |   |   |        |   |  |   |         |   |  |   | 274,140   |          |   | $ | 274,140 |        
|Minimum pension liability                                        |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               |        |               |  |        |          |            |   |   | (12,914 | ) |  |   |         |   |  |   | (12,914   | )        |   |   | (12,914 | )      
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |        
|Total comprehensive income                                       |                                                  |                                          |            |             |  |          |        |               |  |               |          |           |  |               |        |               |  |        |          |            |   |   |        |   |  |   |         |   |  |   |          |          |   | $ | 261,226 |        
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |        
|Balance, December 31, 2002.                                      |                                                  |                                          | 166,666,755 |             |  | $        | 500,000 |               |  | $             | 1,301,886 |           |  | $             | 468,080 |               |  | $      |          |            |   | $ | (12,914 | ) |  | $ | (106,818 | ) |  | $ | 2,150,234 |          |   |   |         |        
|                                                                 |                                                  |                                          |             |             |  |          |         |               |  |               |           |           |  |               |         |               |  |        |           |            |   |   |         |   |  |   |          |   |  |   |           |          |   |   |         |        

See accompanying notes to consolidated financial
statements.

F-5



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |          |         |  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------------------------------------- | ------ | -------- | ------- | ---- | ----- | -------- | ------- | - | ----- | -------- | ------- | -
|                                                                                 |                                                                                            |                                                         
|                                                                                 |                                                                                            | Years Ended December 31,                                
|                                                                                 |                                                                                            |                                                         
|                                                                                 |                                                                                            | 2000                                                     |        | 2001     |         | 2002
|                                                                                 |                                                                                            |                                                          |        |          |         |     
|                                                                                 |                                                                                            |                                                         
|                                                                                 |                                                                                            | (US$ in thousands)                                      
|Cash flows from operating activities:                                            |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Net income                                                                                 |                                                          | $      | 504,890  |         |      | $     | 498,983  |         |   | $     | 274,140  |        
|                                                                                 | Adjustments for non-cash items:                                                            |                                                          |        |          |         |      |       |          |         |   |       |          |        
|                                                                                 |                                                                                            | Depreciation and amortization                            |        |          | 414,250 |      |       |          | 340,449 |   |       |          | 361,322 |  
|                                                                                 |                                                                                            | Intelsat 10-01 contract termination costs                |        |          |        |      |       |          |        |   |       |          | 34,358  |  
|                                                                                 |                                                                                            | Provision for doubtful accounts                          |        |          |        |      |       |          |        |   |       |          | 9,472   |  
|                                                                                 |                                                                                            | Foreign currency transaction loss                        |        |          |        |      |       |          |        |   |       |          | 4,113   |  
|                                                                                 |                                                                                            | Deferred income taxes                                    |        |          |        |      |       |          | (30,587 | ) |       |          | 4,257   |  
|                                                                                 |                                                                                            | Amortization of bond discount and issuance costs         |        |          |        |      |       |          |        |   |       |          | 658     |  
|                                                                                 |                                                                                            | Decrease in amount due to Teleglobe, Inc.                |        |          |        |      |       |          |        |   |       |          | (6,080  | )
|Changes in operating assets and liabilities, net
    of effects of acquisitions: |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Receivables                                                                                |                                                          |        | (1,103   | )       |      |       | 34,160   |         |   |       | (13,465  | )      
|                                                                                 | Other assets                                                                               |                                                          |        | 5,539    |         |      |       | (29,983  | )       |   |       | (12,978  | )      
|                                                                                 | Accounts payable and accrued liabilities                                                   |                                                          |        | 14,608   |         |      |       | 45,264   |         |   |       | (3,886   | )      
|                                                                                 | Deferred revenue                                                                           |                                                          |        | (4,836   | )       |      |       | (4,780   | )       |   |       | 1,629    |        
|                                                                                 | Accrued retirement benefits                                                                |                                                          |        | (300     | )       |      |       | 2,882    |         |   |       | 4,445    |        
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Net cash provided by operating activities                                                  |                                                          |        | 933,048  |         |      |       | 856,388  |         |   |       | 657,985  |        
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|Cash flows from investing activities:                                            |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Payments for satellites and other property and
    equipment                               |                                                          |        | (546,020 | )       |      |       | (663,671 | )       |   |       | (616,806 | )      
|                                                                                 | Payments for asset acquisitions                                                            |                                                          |        |         |         |      |       |         |         |   |       | (61,416  | )      
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Net cash used in investing activities                                                      |                                                          |        | (546,020 | )       |      |       | (663,671 | )       |   |       | (678,222 | )      
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|Cash flows from financing activities:                                            |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Capital contributions from shareholders                                                    |                                                          |        | 580,000  |         |      |       |         |         |   |       |         |        
|                                                                                 | Distributions to shareholders                                                              |                                                          |        | (855,114 | )       |      |       | (425,000 | )       |   |       |         |        
|                                                                                 | Repayment of long-term debt                                                                |                                                          |        | (150,000 | )       |      |       |         |         |   |       | (200,000 | )      
|                                                                                 | Proceeds from (repayments of) commercial paper
    borrowings, net                         |                                                          |        | 16,588   |         |      |       | 293,534  |         |   |       | (266,144 | )      
|                                                                                 | Proceeds from bond issuance                                                                |                                                          |        |         |         |      |       |         |         |   |       | 595,788  |        
|                                                                                 | Bond issuance costs                                                                        |                                                          |        |         |         |      |       |         |         |   |       | (7,621   | )      
|                                                                                 | Payments to shareholders                                                                   |                                                          |        | 20,183   |         |      |       | (34,509  | )       |   |       | (5,170   | )      
|                                                                                 | Purchase of ordinary shares by subsidiary                                                  |                                                          |        |         |         |      |       |         |         |   |       | (65,000  | )      
|                                                                                 | Principal payments on deferred satellite
    performance incentives                        |                                                          |        | (18,487  | )       |      |       | (21,275  | )       |   |       | (15,271  | )      
|                                                                                 | Principal payments on capital lease obligation                                             |                                                          |        | (4,998   | )       |      |       | (3,911   | )       |   |       | (5,078   | )      
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Net cash provided by (used in) financing
    activities                                    |                                                          |        | (411,828 | )       |      |       | (191,161 | )       |   |       | 31,504   |        
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 |                                                                                            | Effect of exchange rate changes on cash                  |        |          |        |      |       |          |        |   |       |          | (4,500  | )
|                                                                                 |                                                                                            | Net increase (decrease) in cash and cash
    equivalents |        |          | (24,800 | )    |       |          | 1,556   |   |       |          | 6,767   |  
|Cash and cash equivalents, beginning of year                                     |                                                                                            |                                                          | 25,943 |          |         |      | 1,143 |          |         |   | 2,699 |         
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|Cash and cash equivalents, end of year                                           |                                                                                            | $                                                        | 1,143  |          |         | $    | 2,699 |          |         | $ | 9,466 |         
|                                                                                 |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|Supplemental cash flow information:                                              |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Interest paid, net of amount capitalized                                                   |                                                          | $      | 33,189   |         |      | $     | 9,569    |         |   | $     | 40,560   |        
|                                                                                 | Income taxes paid                                                                          |                                                          | $      |         |         |      | $     | 15,125   |         |   | $     | 25,902   |        
|Supplemental disclosure of non-cash investing and
    financing activities:      |                                                                                            |                                                          |        |          |         |      |       |          |         |   |       |         
|                                                                                 | Receivables recovered in purchase of ordinary
    shares by subsidiary                     |                                                          | $      |         |         |      | $     |         |         |   | $     | 15,958   |        
|                                                                                 | Obligation to Teleglobe Inc. arising in
    consideration of ordinary share purchase       |                                                          | $      |         |         |      | $     |         |         |   | $     | 25,860   |        
|                                                                                 | Capitalization of deferred satellite performance
    incentives                            |                                                          | $      | 3,808    |         |      | $     | 25,784   |         |   | $     | 57,019   |        
|                                                                                 | Distribution of New Skies shares                                                           |                                                          | $      | 71,268   |         |      | $     |         |         |   |       |         |        
|                                                                                 | Receivables arising from termination of Intelsat
    10-01 satellite construction contract |                                                          | $      |         |         |      | $     |         |         |   | $     | 47,828   |        
|                                                                                 | Other asset arising from termination of Intelsat
    10-01 satellite construction contract |                                                          | $      |         |         |      | $     |         |         |   | $     | 23,150   |        
|                                                                                 | Minimum pension liability, net of tax of $8,610.                                           |                                                          | $      |         |         |      | $     |         |         |   | $     | 12,914   |        
|                                                                                 | Liabilities assumed in acquisition                                                         |                                                          | $      |         |         |      | $     |         |         |   | $     | 51,541   |        
|                                                                                 | Note payable arising from acquisition                                                      |                                                          | $      |         |         |      | $     |         |         |   | $     | 20,000   |        

See accompanying notes to consolidated financial
statements.

F-6



---



##### 



INTELSAT

(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(US$ in thousands, except share and per share
amounts)


Note
1     General

The International Telecommunications Satellite
Organization INTELSAT, referred to as the IGO, was
established on an interim basis in 1964. The IGO was formally
established on February 12, 1973 in accordance with the
provisions of an intergovernmental agreement, referred to as the
INTELSAT Agreement, and an Operating Agreement. The parties to
the INTELSAT Agreement were the IGOs 148 member countries,
and the parties to the Operating Agreement, referred to as the
Signatories, were either the member countries or their
designated telecommunications entities. Certain Signatories
authorized other entities within their countries, referred to as
Investing Entities, to access the IGOs space segment and
to invest in the IGO. Signatories and Investing Entities,
referred to collectively as the IGOs shareholders, were
also the IGOs principal customers.

In April 1998, the IGO established a wholly owned
subsidiary called New Skies Satellites, N.V., referred to as New
Skies. On November 30, 1998, the IGO contributed working
capital, five in-orbit satellites with their associated orbital
locations, and the construction-in-progress for a sixth
satellite to New Skies. The assets and associated liabilities
were transferred at their net book values in exchange for all of
the New Skies outstanding common stock. Subsequent to the
transfer, the New Skies shares were distributed to the
IGOs shareholders in proportion to their investments in
the IGO in two separate transactions. In connection with the
transfer of net assets to New Skies, Intelsat entered into
operational services and transition services agreements with New
Skies. During 2000, 2001 and 2002, $11,849, $7,824 and $2,250,
respectively, was recognized as other income for these services
in the accompanying statements of operations.

Substantially all of the IGOs assets,
liabilities, rights, obligations and operations were transferred
to Intelsat, Ltd. and its wholly owned subsidiaries on
July 18, 2001, in a transaction referred to as the
privatization. The IGOs shareholders received shares in
Intelsat, Ltd., a company organized under the laws of Bermuda,
in proportion to their ownership in the IGO on the privatization
date and became shareholders of 100% of the outstanding ordinary
shares of Intelsat, Ltd. Because of the continuity of ownership,
Intelsat, Ltd. accounted for the privatization at historical
cost. The accompanying financial statements include the accounts
of the IGO prior to the privatization and the accounts of
Intelsat, Ltd. and its wholly owned subsidiaries subsequent to
the privatization. The IGO and Intelsat, Ltd. and its
subsidiaries are collectively referred to as Intelsat or the
Company.

Through its global system of 23 owned
geosynchronous satellites, leased capacity on 2 geosynchronous
satellites and related ground segment facilities, Intelsat
provides capacity for telecommunications services in over 200
countries and territories throughout the world. These services
include voice and data services, corporate network services,
Internet services and video services.

Note 2     Summary of
significant accounting policies

(a) Basis
of presentation

The financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of financial statements requires
management to make estimates and assumptions that affect
(1) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and (2) the reported amounts of
revenue and expenses during the reporting period. Examples
include the allowance for doubtful accounts, the estimated
useful lives of satellites and other property and equipment, and
the fair value of Intelsat, Ltd.s ordinary shares. Actual
results could differ from results based on those estimates and
assumptions.

F-7



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


(b) Principles
of consolidation

The consolidated financial statements include the
accounts of Intelsat, Ltd. and its wholly owned subsidiaries.
All significant intercompany account balances and transactions
have been eliminated in consolidation.

(c) Telecommunications
revenue recognition

Telecommunications revenue results primarily from
utilization charges, which are recognized as revenue over the
period during which the services are provided. Such revenue is
recognized provided that collection of the related receivable is
probable. Amounts received from customers pursuant to satellite
capacity prepayment options are recorded in the financial
statements as deferred revenue. These deferred amounts are
recognized as revenue on a straight-line basis over the
respective agreement terms. The Company maintains an allowance
for doubtful accounts for customers receivables where the
collection of such receivables is uncertain.

(d) Cash
and cash equivalents

Cash and cash equivalents include short-term,
highly liquid investments with original maturities of
90 days or less. Carrying amounts approximate market value.

(e) Satellites
and other property and equipment

Satellites and other property and equipment are
stated at cost and consist primarily of the costs of spacecraft
construction and launch, including insurance premiums, the net
present value of performance incentives payable to the
spacecraft manufacturers, costs directly associated with the
monitoring and support of spacecraft construction, and interest
costs incurred during the period of spacecraft construction.

Spacecraft and launch services are generally
procured under long-term, multi-satellite contracts that provide
for payments by Intelsat over the contract periods. Spacecraft
and launch services costs are capitalized to reflect progress
toward completion, which typically coincides with contract
milestone payment schedules. Insurance premiums related to
satellite launches and subsequent in-orbit testing are
capitalized and amortized over the lives of the related
satellites. Insurance premiums associated with in-orbit
operations are expensed as incurred. Performance incentives
payable in future periods are dependent on the continued
satisfactory performance of the satellites in service.

Satellites and other property and equipment are
depreciated and amortized on a straight-line basis over the
following estimated useful lives:

|                                                         |  |       |       | 
|-------------------------------------------------------- |  | ----- | ----- | 
|                                                         |  | Years
|                                                         |  |      
|Satellites and related costs                             |  |       | 10-15 | 
|Ground segment equipment and software                    |  |       | 10    | 
|Furniture, equipment, computer hardware and
    software |  |       | 3-12  | 
|Washington, D.C. building                                |  |       | 40    | 

On January 1, 2001, Intelsat revised the
estimated useful lives for substantially all Intelsat VII and
VIII series satellites based on managements review of the
performance of the satellite fleet. The effect of this change in
estimate was to increase the useful lives of these satellites by
approximately two years, and thereby decrease depreciation and
amortization expense by approximately $60,507 for the year ended
December 31, 2001.

F-8



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


The cost of retired satellites and related assets
and the related accumulated depreciation and amortization are
removed from the accounts as the satellites are decommissioned.

The carrying value of a satellite lost as a
result of a launch or in-orbit failure would be charged to
operations upon the occurrence of the loss. In the event of a
partial failure, an impairment charge would be recorded to
operations upon the occurrence of the loss if the undiscounted
future cash flows were less than the carrying value of the
satellite. The impairment charge would be measured as the excess
of the carrying value of the satellite over the present value of
estimated expected future cash flows using a discount rate
commensurate with the risks involved. The charge to operations
resulting from either a complete or a partial failure would be
reduced by insurance proceeds that were either due and payable
to or received by Intelsat. Insurance proceeds received in
excess of the carrying value of the satellite would be recorded
as a gain and no impairment loss would be recognized. In the
event the insurance proceeds equal the carrying value of the
satellite, neither a gain nor an impairment loss would be
recognized.

(f) Business
combinations

The Companys business combinations are
accounted for in accordance with the provisions set forth in
Statement of Financial Accounting Standards (SFAS)
No. 141, Business Combinations, whereby the net
tangible and separately identifiable intangible assets acquired
and liabilities assumed are recognized at their estimated fair
market values at the acquisition date. The purchase price in
excess of the estimated fair market value of the net tangible
and separately identifiable intangible assets acquired
represents goodwill. The allocation of the purchase price
related to our business combinations involves estimates and
judgments made by management that may be adjusted during the
allocation period, but in no case beyond one year from the
acquisition date.

(g) Goodwill
and other intangible assets

Goodwill represents the excess of costs over fair
value of tangible and separately identifiable intangible assets
of businesses acquired. Intelsat adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets,as of
January 1, 2002. Goodwill and intangible assets acquired in
a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for
impairment at least annually in accordance with the provisions
of SFAS No. 142. SFAS No. 142 also requires that
intangible assets with estimable useful lives be amortized over
their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with
SFAS No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets.

(h) Impairment
of long-lived and amortizable intangible assets

SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, provides a
single accounting model for long-lived assets to be disposed of.
SFAS No. 144 also changes the criteria for classifying an
asset as held for sale; and broadens the scope of businesses to
be disposed of that qualify for reporting as discontinued
operations and changes the timing of recognizing losses on such
operations. Intelsat adopted SFAS No. 144 on
January 1, 2002. The adoption of SFAS No. 144 did not
affect Intelsats financial statements.

In accordance with SFAS No. 144, long-lived
assets, such as property, plant, and equipment, and purchased
intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The
recoverability of an asset to be held and used is measured by a
comparison of the carrying amount of the asset to the estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of the asset

F-9



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


exceeds its estimated future cash flows, an
impairment charge is recognized in the amount by which the
carrying amount of the asset exceeds its fair value. Assets to
be disposed of would be separately presented in the balance
sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and would no longer be depreciated.
The assets and liabilities of a disposed group classified as
held for sale would be presented separately in the appropriate
asset and liability sections of the balance sheet.

Goodwill and intangible assets not subject to
amortization are tested annually for impairment in accordance
with SFAS No. 142, and are tested for impairment more
frequently if events and circumstances indicate that the asset
might be impaired. An impairment loss is recognized to the
extent that the carrying amount exceeds the assets fair
value.

Prior to the adoption of SFAS No. 144,
Intelsat accounted for long-lived assets in accordance with SFAS
No. 121, Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of.

(i) Share
consolidation

On June 4, 2002, Intelsat amended its
bye-laws to decrease the number of authorized ordinary shares
from 650,000,000 ordinary shares with a par value of $1.00 per
share to 216,666,666 2/3 ordinary shares with a par value
of $3.00 per share, and to decrease the number of authorized
preference shares from 7,500,000 preference shares with a par
value of $1.00 per share to 2,500,000 preference shares with a
par value of $3.00 per share. Accordingly, all share and per
share amounts have been retroactively adjusted to reflect the
share consolidation.

(j) Shareholders
equity

Until the date of privatization, the IGO operated
on a commercial basis as a cost-sharing cooperative. Each owner
contributed capital to the IGO and received distributions in
proportion to its investment share. Owners could periodically
elect to change their investment share, subject to certain
limitations and the availability of other owners willing to
increase or decrease their investment share. Adjustments to
investment share were also made at the time of a
Signatorys entry into or withdrawal from the IGO.

Prior to the privatization date, the excess of
the IGOs assets over its liabilities was reflected in the
accompanying financial statements as the IGO shareholders
equity. In connection with the privatization, Intelsat, Ltd.
issued 166,666,755 ordinary shares to the owners of the IGO in
proportion to their investment share in that entity. The
ordinary shares carry a par value of $3.00 per share. The IGO
shareholders equity that existed at the date of
privatization was apportioned to ordinary shares outstanding at
par value and to paid-in capital of Intelsat, Ltd. Retained
earnings consist of accumulated earnings from July 19, 2001.

(k) Income
taxes

The IGO was exempt from United States and
District of Columbia taxes under the terms of the Headquarters
Agreement, dated November 24, 1976, between the government
of the United States and the IGO. Upon privatization, Intelsat
became subject to certain taxes in various jurisdictions in
which it operates.

Intelsat accounts for income taxes in accordance
with SFAS No. 109, Accounting for Income Taxes.
Under SFAS No. 109, deferred tax assets and liabilities are
computed based on the difference between the financial statement
and income tax bases of assets and liabilities using the enacted
marginal tax rate. SFAS No. 109 requires that the net
deferred tax asset be reduced by a valuation allowance if, based
on the weight of available evidence, it is more likely than not
that some portion or all of the net deferred tax asset will not
be realized.

F-10



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


(l) Fair
value of financial instruments

SFAS No. 107, Disclosures About Fair
Value of Financial Instruments,requires management to
disclose the estimated fair value of certain assets and
liabilities defined by SFAS No. 107 as financial
instruments. Financial instruments are generally defined by SFAS
No. 107 as cash, evidence of ownership interest in equity,
or a contractual obligation that both conveys to one entity a
right to receive cash or other financial instruments from
another entity and imposes on the other entity the obligation to
deliver cash or other financial instruments to the first entity.
Management believes that the carrying values of cash and cash
equivalents, accounts receivable, accounts payable and accrued
liabilities, and deferred revenue approximate their fair values
because of the short maturity of these financial instruments.
The fair value of the Companys debt instruments are
determined based on quoted market prices, as shown in Note 7.

(m) Concentration
of credit risk

Intelsat provides satellite services and extends
credit to numerous customers in the telecommunications industry,
which has been experiencing an economic downturn. To the extent
that the credit quality of Intelsats customers
deteriorates, Intelsat may have exposure to credit losses.
Management monitors its exposure to credit losses and maintains
allowances for anticipated losses.

(n) Currency
and exchange rates

Substantially all customer contracts, capital
expenditure contracts and operating expense obligations are
denominated in U.S. dollars. Consequently, Intelsat is not
exposed to material currency exchange risk. However, contracts
with our customers in Brazil are denominated in Brazilian reais.
Transactions in other currencies are generally converted into
U.S. dollars using rates in effect on the dates of the
transactions.

(o) Comprehensive
income

In 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 130, Reporting
Comprehensive Income, which established standards for the
reporting and displaying of comprehensive income and its
components. Total comprehensive income for the year ended
December 31, 2002 consisted of the Companys net
income and the recording of a minimum pension liability.

(p) Stock-based
compensation

The Company has a stock-based employee
compensation plan, which is described more fully in Note 9. As
permitted by SFAS No. 123, Accounting for Stock-Based
Compensation, the Company uses the intrinsic method of
measuring and recognizing employee stock-based transactions
under Accounting Principles Board (APB) Opinion
No. 25. Consequently, no stock-based employee compensation
cost is reflected in net income, as all options granted under
those plans had an exercise price equal to the market value of
the underlying ordinary shares on the date of grant. The
following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to its stock-based
compensation.

F-11



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


|                                                                                                                                           |                               |                         |         |      |  |   |         |      | 
|------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------- | ----------------------- | ------- | ---- |  | - | ------- | ---- | 
|                                                                                                                                           |                               |                        
|                                                                                                                                           |                               | Year Ended December 31,
|                                                                                                                                           |                               |                        
|                                                                                                                                           |                               | 2001                    |         | 2002
|                                                                                                                                           |                               |                         |         |     
|Net income, as reported                                                                                                                    |                               | $                       | 498,983 |      |  | $ | 274,140 |     
|Deduct: Total stock-based compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                               |                         | (439    | )    |  |   | (2,567  | )   
|                                                                                                                                           |                               |                         |         |      |  |   |         |     
|Pro forma net income                                                                                                                       |                               | $                       | 498,544 |      |  | $ | 271,573 |     
|                                                                                                                                           |                               |                         |         |      |  |   |         |     
|                                                                                                                                          
|Earnings per share:                                                                                                                        |                               |                         |         |      |  |   |         |     
|                                                                                                                                           | Basic and dilutedas reported |                         | $       | 2.99 |  |   | $       | 1.66 | 
|                                                                                                                                           |                               |                         |         |      |  |   |         |     
|                                                                                                                                           | Basic and dilutedpro-forma   |                         | $       | 2.99 |  |   | $       | 1.65 | 
|                                                                                                                                           |                               |                         |         |      |  |   |         |     

(q) Reclassifications

Certain prior year amounts have been reclassified
to conform to the current year presentation.

(r) Unaudited
pro forma information and income per ordinary
share

The accompanying unaudited pro forma income data
for the years ended December 31, 2000 and 2001 includes a
provision for income taxes as if Intelsat had been subject to
such taxes for the periods presented. Basic and diluted net
income per ordinary share data for the years ended
December 31, 2000 and 2001 assumes that the 166,666,755
ordinary shares issued in connection with the privatization had
been outstanding for these periods.

Basic net income per ordinary share includes no
dilution and is computed by dividing net income by the weighted
average number of ordinary shares outstanding for the period.
Diluted net income per ordinary share includes potential
dilution that could occur if securities or other contracts to
issue ordinary shares were exercised or converted into ordinary
shares. Basic and diluted net income per ordinary share are
identical for all periods presented as the dilutive effect of
share options outstanding during the respective periods had no
effect on earnings per share.

(s) Privatization
initiative

Privatization initiative expenses consist of
legal and other professional fees associated primarily with
legal due diligence and regulatory and human resource compliance
activities that occurred in preparation for the privatization,
costs incurred for the settlement of a contract dispute related
to the privatization and a one-time payroll tax adjustment
payment to all of Intelsats employees.

(t) Research
and development

Research and development costs are expensed as
incurred. Research and development costs of $5,393, $4,044 and
$2,470 were charged to expense in 2000, 2001 and 2002,
respectively.

F-12



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


(u) Advertising
costs

Advertising costs are expensed as incurred.

(v) Deferred
satellite performance incentives

The cost of satellite construction includes an
element of deferred consideration to satellite manufacturers
referred to as satellite performance incentives. Intelsat is
contractually obligated to make these payments over the lives of
the satellites, provided the satellites continue to operate in
accordance with contractual specifications. These satellite
performance incentive payments typically represent between 2%
and 6% of the overall satellite construction contract price.
Historically, the satellite manufacturers have earned 100% of
these payments. Therefore, the Company views these payments as a
financing mechanism. The Company capitalizes the present value
of these payments as part of the cost of the satellites and
records a corresponding liability to the satellite
manufacturers. These costs are amortized over the useful lives
of the satellites and the liability is reduced as the payments
are made.

(w) New
accounting pronouncements

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This
statement requires an entity to recognize the fair value of an
asset retirement obligation in the period in which it is
incurred, if a reasonable estimate of fair value can be made. If
a reasonable estimate of fair value cannot be made in the period
the asset retirement is incurred, the liability should be
recognized when a reasonable estimate of fair value can be made.
This new standard will become effective in the first quarter of
2003. Management does not believe that the adoption of SFAS
No. 143 will have a significant impact on Intelsats
results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections.SFAS No. 145 clarifies guidance related to
the reporting of gains and losses from extinguishment of debt
and resolves inconsistencies related to the required accounting
treatment of certain lease modifications. The provisions of this
statement relating to the extinguishment of debt are effective
for financial statements issued for fiscal years beginning after
May 15, 2002. The provisions of this statement relating to lease
modifications are effective for transactions occurring after
May 15, 2002. The adoption of SFAS No. 145 did not
have a material impact on Intelsats results of operations
or financial position.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nullifies previous guidance on
this issue and requires a liability for a cost associated with
an exit or disposal activity to be recognized and measured at
its fair value in the period in which the liability is incurred.
The provisions of this statement relating to exit or disposal
activities are effective for activities initiated after
December 31, 2002. Management does not believe that the
adoption of SFAS No. 146 will have a material impact on
Intelsats results of operations or financial position.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No.
5, 57 and 107 and a rescission of FASB Interpretation
No. 34.This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability
for the fair value of the obligation undertaken. The initial
recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after
December 31, 2002 and are not expected to have a material
effect on the Companys financial statements. The

F-13



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


disclosure requirements are effective for
financial statements of interim or annual periods ending after
December 15, 2002.

In November 2002, the Emerging Issues Task Force
(EITF) reached a consensus on Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables.EITF
Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after
June 15, 2003. Management does not believe that the
adoption of EITF Issue No. 00-21 will have a material
impact on Intelsats results of operations or financial
position.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock Based Compensation,
Transition and Disclosure.SFAS No. 148 provides
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 also requires that disclosures
of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed
more prominently and in a tabular format. Additionally, SFAS
No. 148 requires disclosure of the pro forma effect in
interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for
fiscal years ending after December 15, 2002. The interim
disclosure requirements become effective in the first quarter of
2003. The adoption of SFAS No. 148 did not have a material
impact on Intelsats results of operations or financial
position.

In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51.FIN 46 requires certain
variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity
do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated
financial support from other parties. FIN 46 is effective for
all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN
46 must be applied for the first interim or annual period
beginning after June 15, 2003. Management does not believe
that the adoption of FIN 46 will have a material impact on
Intelsats results of operations or financial position.

Note
3     Acquisitions

On November 25, 2002, Intelsat acquired most
of the assets and certain liabilities of COMSAT World Systems, a
business unit of COMSAT Corporation, and of COMSAT Digital
Teleport, Inc., each of which are wholly owned subsidiaries of
Lockheed Martin Corporation, Intelsats largest
shareholder. COMSAT World Systems was a reseller of Intelsat
capacity to customers located in the United States. The assets
acquired include substantially all of the COMSAT World
Systems customer contracts; two tracking, telemetry,
command and monitoring (TTC&M) stations located in
Clarksburg, Maryland and Paumalu, Hawaii; a digital teleport
facility in Clarksburg, Maryland; and the lease for a back-up
operations facility located in the Washington, D.C. region. The
purchase price for this transaction totaled $120,828, consisting
of $55,000 in cash, the assumption of $45,828 in net liabilities
subject to net working capital adjustments, and a $20,000 7%
note payable due in equal installments of $5,000 on
January 1, 2007, 2008, 2009, and 2010. In the event
Intelsat is unable to adequately use the land and related
facility in Clarksburg, Maryland due to certain triggering
events described in the purchase agreement, up to $15,000 of the
note payable would not be due. Additionally, Intelsat incurred
approximately $1,000 in transaction costs in connection with
this acquisition.

The acquisition was accounted for under the
purchase method of accounting, whereby the purchase price was
allocated to the assets acquired and liabilities assumed based
on their estimated fair market values at the date of
acquisition. Independent third-party appraisers were engaged to
perform valuations of certain of the

F-14



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


tangible and intangible assets acquired. Based
upon the preliminary appraisals received and managements
estimates, the purchase price was preliminarily allocated to the
assets and liabilities acquired as follows:

|                                                         |  |   |         |  
|-------------------------------------------------------- |  | - | ------- | -
|Receivables, net of allowance of $18,628                 |  | $ | 8,175   |  
|Property and equipment                                   |  |   | 26,812  |  
|Other assets                                             |  |   | 8,293   |  
|Goodwill and other intangible assets                     |  |   | 84,261  |  
|Accounts payable and accrued expenses                    |  |   | (51,541 | )
|                                                         |  |   |         |  
|Total cash consideration, net of assumed
    liabilities |  | $ | 76,000  |  
|                                                         |  |   |         |  

The purchase agreement provides for the
transaction purchase price to be finalized upon agreement
between the Company and Lockheed Martin Corporation on the
amounts reflected in the closing balance sheet, which is
expected to occur in the second quarter of 2003. Consequently,
some adjustments to these balances could occur. Such
adjustments, if any, are not expected to have a material impact
on the results of operations or financial position of the
Company.

The following unaudited pro forma results of
operations for the years ended December 31, 2001 and 2002
are presented as though the acquisition had occurred at the
beginning of the respective periods presented, after giving
effect to purchase accounting adjustments relating to
depreciation and amortization of assets acquired and other
acquisition-related adjustments. The pro forma results of
operations are not necessarily indicative of the combined
results that would have occurred had the acquisition been
consummated at the beginning of the period, nor are they
necessarily indicative of future operating results.

|                                                |  |                         |           |      |  |   |           | 
|----------------------------------------------- |  | ----------------------- | --------- | ---- |  | - | --------- | 
|                                                |  |                        
|                                                |  | Year Ended December 31,
|                                                |  |                        
|                                                |  | 2001                    |           | 2002
|                                                |  |                         |           |     
|Revenue                                         |  | $                       | 1,142,595 |      |  | $ | 1,031,246 | 
|Net income                                      |  | $                       | 528,266   |      |  | $ | 289,228   | 
|Basic and diluted net income per ordinary share |  | $                       | 3.17      |      |  | $ | 1.75      | 

During 2002, the Company also acquired teleport
operations in Riverside, California and Fuchsstadt, Germany, in
two separate transactions for a total purchase price of $6,416.
In each of these transactions, substantially all of the purchase
price was allocated to property and equipment acquired.

Note
4     Receivables

Receivables were comprised of the following:

|                                |          |                    |         |         |  |   |         |         | 
|------------------------------- | -------- | ------------------ | ------- | ------- |  | - | ------- | ------- | 
|                                |          |                   
|                                |          | As of December 31,
|                                |          |                   
|                                |          | 2001               |         | 2002   
|                                |          |                    |         |        
|Satellite utilization charges:  |          |                    |         |         |  |   |         |        
|                                | Unbilled |                    | $       | 210,976 |  |   | $       | 121,293 | 
|                                | Billed   |                    |         | 42,297  |  |   |         | 106,136 | 
|Other                           |          |                    | 11,915  |         |  |   | 66,452  |        
|Allowance for doubtful accounts |          |                    |        |         |  |   | (28,100 | )      
|                                |          |                    |         |         |  |   |         |        
|Total                           |          | $                  | 265,188 |         |  | $ | 265,781 |        
|                                |          |                    |         |         |  |   |         |        

F-15



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


Unbilled satellite utilization charges represent
amounts earned and accrued as receivable from customers for
their usage of the Intelsat space segment in the fourth quarter
of the year. These amounts are billed in January of the
following year.

Other receivables as of December 31, 2002
include $47,828 due from Astrium SAS as a result of the
Companys decision to terminate its order for the Intelsat
10-01 satellite, as discussed further in Note 6.

Note 5     Satellites
and other property and equipment

Satellites and other property and equipment were
comprised of the following:

|                                               |            |                    |            |           |  |   |            |           | 
|---------------------------------------------- | ---------- | ------------------ | ---------- | --------- |  | - | ---------- | --------- | 
|                                               |            |                   
|                                               |            | As of December 31,
|                                               |            |                   
|                                               |            | 2001               |            | 2002     
|                                               |            |                    |            |          
|Satellites, launch vehicles and services       |            | $                  | 6,355,313  |           |  | $ | 6,820,485  |          
|Information systems and ground segment         |            |                    | 517,546    |           |  |   | 598,248    |          
|Washington, D.C. building and other            |            |                    | 205,483    |           |  |   | 197,704    |          
|                                               |            |                    |            |           |  |   |            |          
|                                               | Total cost |                    |            | 7,078,342 |  |   |            | 7,616,437 | 
|Less accumulated depreciation and amortization |            |                    | (3,840,682 | )         |  |   | (4,138,382 | )        
|                                               |            |                    |            |           |  |   |            |          
|Total                                          |            | $                  | 3,237,660  |           |  | $ | 3,478,055  |          
|                                               |            |                    |            |           |  |   |            |          

Satellites and other property and equipment as of
December 31, 2001 and 2002 included
construction-in-progress of $1,049,832 and $359,009,
respectively. These amounts relate primarily to satellites under
construction and related launch services. Interest costs of
$56,501, $76,240 and $52,406 were capitalized in 2000, 2001 and
2002, respectively.

Note
6     Termination of Intelsats
order for the Intelsat 10-01 satellite

In November 2002, Intelsat exercised its right to
terminate the portion of its satellite construction contract
with Astrium SAS relating to the Intelsat 10-01 satellite, due
to Astrium SAS significant postponement in the delivery
date of the satellite. As a result of this termination, Intelsat
recorded a charge to its consolidated statement of operations of
$34,358, representing the write-off of capitalized satellite
program costs, including satellite construction costs, launch
vehicle costs, program office costs, capitalized interest and
ground network costs. Pursuant to Intelsats contract with
Astrium SAS, Intelsat is entitled to receive repayment of most
of the amounts that it has paid to Astrium SAS under the
contract. Intelsat has not terminated the portion of its
contract with Astrium SAS relating to the Intelsat 10-02
satellite currently on order.

In connection with the decision to terminate the
order for the Intelsat 10-01 satellite, Intelsat negotiated an
agreement with its launch vehicle provider to treat most of the
payments made for the launch vehicle that was intended to be
used for the launch of the 10-01 satellite as a deposit for an
order of a future launch vehicle. Accordingly, Intelsat has
recorded a net deposit of $23,150, which is included in other
assets as of December 31, 2002. Under the terms of this
agreement, the price of the launch vehicle remains fixed;
however, a termination liability of $44,125 will be incurred if
Intelsat does not place an order by July 31, 2005.

F-16



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


Note 7     Long-term
debt and other financing arrangements

The carrying amounts and the estimated fair
values of long-term debt were as follows:

|                                                                                                                             |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |        | 
|---------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------ | --------- | ---------- |  | ------ | --------- | ---------- |  | - | --------- | ------ | - | - | --------- | ------ | 
|                                                                                                                             |                                              |                   
|                                                                                                                             |                                              | As of December 31,
|                                                                                                                             |                                              |                   
|                                                                                                                             |                                              |                    |           |           
|                                                                                                                             |                                              | 2001               |           | 2002      
|                                                                                                                             |                                              |                    |           |           
|                                                                                                                             |                                              | Amount             |           | Fair Value |  | Amount |           | Fair Value
|                                                                                                                             |                                              |                    |           |            |  |        |           |           
|Commercial paper                                                                                                             |                                              | $                  | 310,122   |            |  | $      | 310,122   |            |  | $ | 43,978    |        |   | $ | 43,978    |       
|Eurobond 7.375% Notes due August 6, 2002                                                                                     |                                              |                    | 200,000   |            |  |        | 202,582   |            |  |   |          |        |   |   |          |       
|Dragon bond 6.625% Notes due March 22, 2004                                                                                  |                                              |                    | 200,000   |            |  |        | 203,412   |            |  |   | 200,000   |        |   |   | 201,738   |       
|Eurobond 8.375% Notes due October 14, 2004                                                                                   |                                              |                    | 200,000   |            |  |        | 211,054   |            |  |   | 200,000   |        |   |   | 206,728   |       
|Eurobond 8.125% Notes due February 28, 2005                                                                                  |                                              |                    | 200,000   |            |  |        | 209,594   |            |  |   | 200,000   |        |   |   | 205,808   |       
|7.625% Senior Notes due April 15, 2012                                                                                       |                                              |                    |          |            |  |        |          |            |  |   | 600,000   |        |   |   | 582,528   |       
|Discount, net of amortization, on the 7.625%                                                                                 |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       
|                                                                                                                             | Senior Notes due April 15, 2012              |                    |           |           |  |        |           |           |  |   |           | (4,007 | ) |   |           |       | 
|Note payable to Lockheed Martin Corporation, 7%,
    payable in annual installments of $5,000, beginning
    January 1, 2007 |                                              |                    |          |            |  |        |          |            |  |   | 20,000    |        |   |   | 20,000    |       
|Capital lease obligation                                                                                                     |                                              |                    | 53,573    |            |  |        | 53,573    |            |  |   | 48,495    |        |   |   | 48,495    |       
|                                                                                                                             |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       
|Total long-term debt                                                                                                         |                                              | $                  | 1,163,695 |            |  | $      | 1,190,337 |            |  | $ | 1,308,466 |        |   | $ | 1,309,275 |       
|                                                                                                                             |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       
|Less:                                                                                                                        |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       
|                                                                                                                             | Commercial paper                             |                    |           |           |  |        |           |           |  |   |           | 43,978 |   |   |           | 43,978 | 
|                                                                                                                             | Current portion of capital lease obligations |                    |           | 5,798      |  |        |           | 5,798      |  |   |           | 6,618  |   |   |           | 6,618  | 
|                                                                                                                             |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       
|Total current portion                                                                                                        |                                              | $                  | 5,798     |            |  | $      | 5,798     |            |  | $ | 50,596    |        |   | $ | 50,596    |       
|                                                                                                                             |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       
|Total long-term debt, excluding current portion                                                                              |                                              | $                  | 1,157,897 |            |  | $      | 1,184,539 |            |  | $ | 1,257,870 |        |   | $ | 1,258,679 |       
|                                                                                                                             |                                              |                    |           |            |  |        |           |            |  |   |           |        |   |   |           |       

During 2001, the average daily balance of
commercial paper outstanding was approximately $332,151, at an
average effective borrowing rate of 4.1% per annum. During 2002,
the average daily balance of commercial paper outstanding was
approximately $137,528, at an average effective borrowing rate
of 2.0% per annum.

To support the commercial paper program and to
provide funding for general corporate purposes, Intelsat entered
into an agreement on March 22, 2001 with a group of
financial institutions for a $1,000,000 unsecured 364-day
revolving credit facility, referred to as the Credit Facility.
The Credit Facility, which expired on March 21, 2002,
allowed Intelsat to convert any amounts outstanding as of the
expiration date to a one-year term loan. At Intelsats
option, borrowings, including any term loan, would bear interest
either at the banks base rate or at the Eurodollar rate
plus an applicable margin. Under the terms of the agreement,
Intelsat was required to satisfy certain financial and operating
covenants, including an interest coverage ratio. As of
December 31, 2001, Intelsat was in compliance with such
covenants and there were no borrowings outstanding under the
agreement.

On March 21, 2002, Intelsat entered into two
agreements with a group of financial institutions for a $500,000
unsecured 364-day revolving credit facility and a $500,000
unsecured 3-year revolving credit facility. The 364-day
revolving credit facility, which expires on March 20, 2003,
allows Intelsat to convert any amounts outstanding as of the
expiration date to a one-year term loan. At Intelsats
option, borrowings under the facilities, including any term
loan, will bear interest either at the banks base rate or
at the Eurodollar rate plus an applicable margin. Under the
terms of both agreements, Intelsat is required to satisfy
certain financial and

F-17



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


operating covenants, including an interest
coverage ratio. Under the agreement relating to the three-year
credit facility, Intelsat is also required to satisfy a
debt-to-EBITDA ratio. As of December 31, 2002, Intelsat was
in compliance with these covenants and there were no borrowings
outstanding under either agreement.

Intelsats policy is to classify commercial
paper borrowings supported by revolving credit facilities as
long-term debt if Intelsat has the ability and the intent to
maintain these obligations for longer than one year.

In April 2002, Intelsat issued $600,000 in
aggregate principal amount of unsecured Senior Notes, which bear
interest at 7.625% annually and mature in 2012. Proceeds
received from the issuance of the notes were used to repay
commercial paper borrowings outstanding at the time of receipt
of those proceeds, for general corporate purposes and to repay
on August 6, 2002 the $200,000 Eurobond 7.375% Notes that
had been outstanding. The discount on the Senior Notes
represents the difference between the issue price and the face
value of the notes. In addition, the Company incurred debt
issuance costs of approximately $7,600. Both the discount and
the debt issuance costs are amortized as interest expense over
the life of the Senior Notes utilizing the effective interest
method.

As of December 31, 2001, Intelsat had
classified the $200,000 Eurobond 7.375% Notes that were repaid
on August 6, 2002 as long-term debt, as Intelsat had the
ability to repay these notes through a drawing on its 364-day or
3-year revolving credit facilities. However, the Company repaid
the notes using proceeds received from the Senior Notes instead
of drawing on its revolving credit facilities as originally
intended.

During 1999, Intelsat incurred a capital lease
obligation of $65,757 in connection with a lease agreement to
acquire additional satellite capacity. As of December 31,
2002, the remaining capital lease obligation was $48,495, of
which $41,877 was long-term and $6,618 was current.

Note 8     Retirement
plans and other retiree benefits

(a) Pension
and other postretirement benefits

Intelsat maintains a noncontributory defined
benefit retirement plan covering substantially all employees
hired prior to July 18, 2001. The cost under this plan is
calculated by an actuary using a formula based upon
employees remuneration, dates of hire and years of
eligible service. Intelsat funds the plan based on actuarial
advice using the projected unit credit cost method. Employees
hired after July 18, 2001 are eligible to participate in a
defined contribution plan (see Note 8(b)).

In addition, Intelsat provides health benefits
for employees who retire at or after age 60 with five years of
consecutive service or after age 55 with ten years of
consecutive service. The cost under this unfunded plan is
calculated by an actuary based on the level of benefits
provided, years of service and certain other factors.

F-18



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


The following tables provide summaries of the
projected benefit obligations, plan assets and funded status of
the plans as of December 31, 2001 and 2002 based on
valuation dates of September 30, 2001 and 2002.

|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | ---------------- | ------- | -------------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                              |  |                  |         |                      |  |     
|                                              |  |                  |         | Other Postretirement
|                                              |  | Pension Benefits |         | Benefits            
|                                              |  |                  |         |                     
|                                              |  | 2001             |         | 2002                 |  | 2001 |         | 2002
|                                              |  |                  |         |                      |  |      |         |     
|Change in benefit obligation                  |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Benefit obligation, October 1,                |  | $                | 223,090 |                      |  | $    | 265,769 |      |  | $ | 44,815  |   |  | $ | 52,335  |  
|Service cost                                  |  |                  | 7,682   |                      |  |      | 4,002   |      |  |   | 2,761   |   |  |   | 3,647   |  
|Interest cost                                 |  |                  | 16,999  |                      |  |      | 18,943  |      |  |   | 3,315   |   |  |   | 3,706   |  
|Benefits paid                                 |  |                  | (11,268 | )                    |  |      | (16,126 | )    |  |   | (2,326  | ) |  |   | (2,450  | )
|Plan amendment                                |  |                  | 3,146   |                      |  |      |        |      |  |   |        |   |  |   |        |  
|Actuarial (gain)/loss                         |  |                  | 26,120  |                      |  |      | 7,681   |      |  |   | 3,770   |   |  |   | (2,849  | )
|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Benefit obligation, September 30,             |  | $                | 265,769 |                      |  | $    | 280,269 |      |  | $ | 52,335  |   |  | $ | 54,389  |  
|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Change in plan assets                         |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Plan assets at fair value October 1,          |  | $                | 282,436 |                      |  | $    | 234,442 |      |  | $ |        |   |  | $ |        |  
|Actual return on plan assets                  |  |                  | (37,743 | )                    |  |      | (7,146  | )    |  |   |        |   |  |   |        |  
|Contributions by Intelsat                     |  |                  | 929     |                      |  |      |        |      |  |   |        |   |  |   |        |  
|Benefits paid                                 |  |                  | (11,180 | )                    |  |      | (15,357 | )    |  |   |        |   |  |   |        |  
|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Plan assets at fair value September 30,       |  | $                | 234,442 |                      |  | $    | 211,939 |      |  | $ |        |   |  | $ |        |  
|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Funded status of the plans                    |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Funded status of the plans                    |  | $                | (31,327 | )                    |  | $    | (68,330 | )    |  | $ | (52,334 | ) |  | $ | (54,389 | )
|Unrecognized net (gain)/loss                  |  |                  | 23,246  |                      |  |      | 60,072  |      |  |   | (9,753  | ) |  |   | (12,070 | )
|Unrecognized prior service cost               |  |                  | 1,599   |                      |  |      | 1,533   |      |  |   |        |   |  |   |        |  
|Unrecognized transition obligation            |  |                  | 407     |                      |  |      | 366     |      |  |   |        |   |  |   |        |  
|Fourth-quarter contributions to the plans     |  |                  | 274     |                      |  |      | 110     |      |  |   | 787     |   |  |   | 839     |  
|Intangible asset                              |  |                  |        |                      |  |      | (2,340  | )    |  |   |        |   |  |   |        |  
|Amount included in other comprehensive income |  |                  |        |                      |  |      | (21,524 | )    |  |   |        |   |  |   |        |  
|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Accrued benefits costs, December 31,          |  | $                | (5,801  | )                    |  | $    | (30,113 | )    |  | $ | (61,300 | ) |  | $ | (65,620 | )
|                                              |  |                  |         |                      |  |      |         |      |  |   |         |   |  |   |         |  
|Discount rate                                 |  |                  | 7.25    | %                    |  |      | 6.75    | %    |  |   | 7.25    | % |  |   | 6.75    | %
|Expected rate of return on plan assets        |  |                  | 9.00    | %                    |  |      | 9.00    | %    |  |   |        |   |  |   |        |  
|Rate of compensation increase                 |  |                  | 5.00    | %                    |  |      | 5.00    | %    |  |   |        |   |  |   |        |  

Plan
assets include investments in equity and bond funds, U.S.
government securities and liquid reserve funds.

F-19



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


Net periodic pension and other postretirement
benefits costs included the following components for 2000, 2001
and 2002:

|                                                |  |                  |         |                               |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |       |  
|----------------------------------------------- |  | ---------------- | ------- | ----------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ------ | - |  | - | ----- | -
|                                                |  |                  |         |                              
|                                                |  | Pension Benefits |         | Other Postretirement Benefits
|                                                |  |                  |         |                              
|                                                |  | 2000             |         | 2001                          |  | 2002 |         | 2000 |  | 2001 |         | 2002
|                                                |  |                  |         |                               |  |      |         |      |  |      |         |     
|Service cost                                    |  | $                | 8,465   |                               |  | $    | 7,682   |      |  | $    | 4,002   |      |  | $ | 2,294  |   |  | $ | 2,761  |   |  | $ | 3,647 |  
|Interest cost                                   |  |                  | 16,084  |                               |  |      | 16,999  |      |  |      | 18,943  |      |  |   | 2,332  |   |  |   | 3,315  |   |  |   | 3,706 |  
|Expected return on plan assets                  |  |                  | (21,619 | )                             |  |      | (22,358 | )    |  |      | (22,179 | )    |  |   |       |   |  |   |       |   |  |   |      |  
|Amortization of unrecognized transition asset   |  |                  | 41      |                               |  |      | 41      |      |  |      | 41      |      |  |   |       |   |  |   |       |   |  |   |      |  
|Amortization of unrecognized prior service cost |  |                  | (218    | )                             |  |      | (170    | )    |  |      | 66      |      |  |   |       |   |  |   |       |   |  |   |      |  
|Amortization of unrecognized net loss (gain)    |  |                  | (633    | )                             |  |      | (868    | )    |  |      | 181     |      |  |   | (2,029 | ) |  |   | (1,221 | ) |  |   | (531  | )
|                                                |  |                  |         |                               |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |       |  
|Total costs                                     |  | $                | 2,120   |                               |  | $    | 1,326   |      |  | $    | 1,054   |      |  | $ | 2,597  |   |  | $ | 4,855  |   |  | $ | 6,822 |  
|                                                |  |                  |         |                               |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |       |  

Depending upon actual future health care claims
experience, Intelsats actual costs may vary significantly
from those projected above. As of September 30, 2001 and 2002,
the assumed health care cost trend rate was a constant 7%.

Increasing the assumed health care cost trend
rate by 1% each year would increase the other postretirement
benefits obligation as of September 30, 2002 by $6,707.
Decreasing this trend rate by 1% each year would reduce the
other postretirement benefits obligation as of
September 30, 2002 by $5,711. A 1% increase or decrease in
the assumed health care cost trend rate would increase or
decrease the aggregate service and interest cost components of
net periodic other postretirement benefits cost for 2002 by
$1,523 and $932, respectively.

At December 31, 2002, a minimum pension
liability was recorded for $23,864, of which $21,524 and $2,340
were included in accumulated other comprehensive loss and other
assets, respectively, in the accompanying consolidated balance
sheet. The minimum pension liability represents the extent to
which the Plans accumulated benefit obligation exceeded
the Plans assets. The $2,340 recorded in other assets
represents an intangible asset resulting from an unamortized
transition obligation and prior service cost.

(b) Other
retirement plans

Intelsat maintains two defined contribution
retirement plans. One of these plans provides benefits to
employees who were hired before July 19, 2001, and the
other plan provides benefits to individuals who have been hired
on or after July 19, 2001. The Company recognized
compensation expense of $1,495, $1,750 and $2,167 during 2000,
2001 and 2002 related to its defined contribution retirement
plans. Intelsat also maintains an unfunded supplemental pension
plan for executives; however benefit accruals under the plan
were discontinued during 2001. The accrued liability for the
supplemental pension plan for executives was $1,274 and $951 as
of December 31, 2001 and 2002, respectively.

Note 9     Share
option plan

In July 2001, Intelsat established a share option
plan. Under the share option plan, employees, directors,
independent contractors, advisors and consultants are eligible
to receive awards of share options. The maximum number of
ordinary shares that may be issued under the share option plan
is 3,333,333.

F-20



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


The share option plan enables the holder of
options to purchase ordinary shares at a specified exercise
price. The exercise price is established on the date of grant
and may not be less than the fair market value of the ordinary
shares on that date. Options generally vest over a three-year
period, in equal one-third installments on each of the first,
second and third anniversaries of the date of grant, with a term
not to exceed ten years. In general, the options granted, once
vested, may be exercised only after the earlier of the first
anniversary of our initial public equity offering and the third
anniversary of the date of grant.

The Board of Directors has adopted a resolution
providing for each director to be awarded share options valued
at $23. These options are to be granted annually, and vest
immediately upon award.

A summary of the share option activity is
presented below:

|                                         |  |               |           |                  |  |   |       | 
|---------------------------------------- |  | ------------- | --------- | ---------------- |  | - | ----- | 
|                                         |  | Share Options |           | Weighted-Average
|                                         |  | Outstanding   |           | Exercise Price  
|                                         |  |               |           |                 
|Options granted                          |  |               | 2,938,631 |                  |  | $ | 19.05 | 
|Options canceled                         |  |               | (992      | )                |  | $ | 19.05 | 
|                                         |  |               |           |                  |  |   |       | 
|Options outstanding at December 31, 2001 |  |               | 2,937,639 |                  |  | $ | 19.05 | 
|Options granted                          |  |               | 248,739   |                  |  | $ | 16.17 | 
|Options canceled                         |  |               | (279,033  | )                |  | $ | 19.05 | 
|                                         |  |               |           |                  |  |   |       | 
|Options outstanding at December 31, 2002 |  |               | 2,907,345 |                  |  | $ | 18.80 | 
|                                         |  |               |           |                  |  |   |       | 

The following table summarizes information about
share options outstanding at December 31, 2002:

|                |       |               |  |               |           |                  |  |  |   |  |  |  |      | 
|--------------- | ----- | ------------- |  | ------------- | --------- | ---------------- |  |  | - |  |  |  | ---- | 
|                |       |               |  |               |           | Weighted-Average
|                |       |               |  |               |           | Remaining       
|Option          |       | Share Options |  | Share Options |           | Contractual Life
|Price Per Share |       | Outstanding   |  | Exercisable   |           | (years)         
|                |       |               |  |               |           |                 
|$               | 19.05 |               |  |               | 2,658,606 |                  |  |  |  |  |  |  | 8.8  | 
|$               | 16.17 |               |  |               | 248,739   |                  |  |  |  |  |  |  | 10.0 | 
|                |       |               |  |               |           |                  |  |  |   |  |  |  |      | 
|                |       |               |  |               | 2,907,345 |                  |  |  |  |  |  |  | 8.9  | 
|                |       |               |  |               |           |                  |  |  |   |  |  |  |      | 

In October 1995, the FASB issued SFAS
No. 123, Accounting for Stock-Based Compensation.SFAS No. 123 defines a fair value based
method of accounting for stock-based compensation. Under
the fair value based method, compensation cost is measured at
the grant date based on the fair value of the award and is
recognized over the service period. Prior to the issuance of
SFAS No. 123, stock-based compensation was accounted for
under the intrinsic value method as defined by APB
Opinion No. 25, Accounting for Stock Issued to
Employees. Under the intrinsic value method, compensation is
the excess, if any, of the market price of the stock at the
grant date or other measurement date over the amount an employee
must pay to acquire the stock. SFAS No. 123 allows an
entity to continue to use the intrinsic value method. However,
entities electing the accounting in APB Opinion No. 25 are
required to make pro forma disclosures as if the fair value
based method of accounting had been applied. Intelsat applies
APB Opinion No. 25 and the related interpretations in
accounting for its stock-based compensation. Accordingly, no
compensation expense has been recognized, as all of the options
granted had an exercise price equal to the fair value of the
underlying ordinary shares on the date of grant.

The weighted-average fair value per share of the
options granted during 2001 and 2002 was $4.21 and $2.26 at the
respective grant dates. If compensation expense had been
determined based on the fair value of the options at the grant
dates consistent with the method of accounting under SFAS
No. 123, Intelsats pro forma net income and pro forma
net income per ordinary share would have been approximately
$498,544 and

F-21



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


$2.99, respectively, in 2001 and $271,573 and
$1.65, respectively, in 2002. In determining pro forma net
income, the fair value of each option is estimated on the date
of grant using the Black-Scholes option-pricing model. The
following assumptions were used for grants made during the years
ended December 31, 2001 and 2002.

|                        |  |              |         |      |  |  |         | 
|----------------------- |  | ------------ | ------- | ---- |  |  | ------- | 
|                        |  |             
|                        |  | Year Ended  
|                        |  | December 31,
|                        |  |             
|                        |  | 2001         |         | 2002
|                        |  |              |         |     
|Risk-free interest rate |  |              | 5.0%    |      |  |  | 3.0%    | 
|Expected term           |  |              | 5 years |      |  |  | 5 years | 
|Dividend yield          |  |              |        |      |  |  |        | 
|Expected volatility     |  |              |        |      |  |  |        | 

Note 10     Income
taxes

Intelsat became subject to taxes on the date of
privatization. A deferred tax benefit and a related net deferred
tax asset in the amount of $24,536 were recorded as a result of
Intelsats change in taxable status upon privatization.

The provision for income taxes consisted of the
following:

|         |                                  |              |         |       |  |   |        |        | 
|-------- | -------------------------------- | ------------ | ------- | ----- |  | - | ------ | ------ | 
|         |                                  |             
|         |                                  | Year Ended  
|         |                                  | December 31,
|         |                                  |             
|         |                                  | 2001         |         | 2002 
|         |                                  |              |         |      
|Current  |                                  | $            | 35,946  |       |  | $ | 28,764 |       
|Deferred |                                  |              | (30,587 | )     |  |   | 4,257  |       
|         |                                  |              |         |       |  |   |        |       
|         | Total provision for income taxes |              | $       | 5,359 |  |   | $      | 33,021 | 
|         |                                  |              |         |       |  |   |        |       

Because Bermuda does not currently impose an
income tax, Intelsats statutory tax rate is zero. The
difference between tax expense reported in the accompanying
statement of operations and tax computed at statutory rates is
attributable to the provision for foreign taxes.

The components of Intelsats net deferred
tax asset were as follows:

|                          |                             |                              |   |        |        |  |   |        |        | 
|------------------------- | --------------------------- | ---------------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                          |                             |                             
|                          |                             | Year Ended                  
|                          |                             | December 31,                
|                          |                             |                             
|                          |                             | 2001                         |   | 2002  
|                          |                             |                              |   |       
|Deferred tax assets:      |                             |                              |   |        |        |  |   |       
|                          | Accrued liabilities         |                              | $ | 5,186  |        |  | $ | 5,679  |       
|                          | Accrued retirement benefits |                              |   | 28,614 |        |  |   | 38,356 |       
|                          |                             |                              |   |        |        |  |   |       
|                          |                             | Total deferred tax assets    |   |        | 33,800 |  |   |        | 44,035 | 
|Deferred tax liabilities: |                             |                              |   |        |        |  |   |       
|                          | Depreciation                |                              |   | (3,213 | )      |  |   | (9,096 | )     
|                          |                             |                              |   |        |        |  |   |       
|                          |                             | Total net deferred tax asset |   | $      | 30,587 |  |   | $      | 34,939 | 
|                          |                             |                              |   |        |        |  |   |       

Note
11     Contractual
commitments

In the further development and operation of
Intelsats global commercial communications satellite
system, significant additional expenditures are anticipated.

F-22



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


The portion of these additional expenditures
represented by contractual commitments as of December 31,
2002 and the expected year of payment are as follows:

|                                                                                                                |  |         |         |         |  |       |        |  |  |   |         |  
|--------------------------------------------------------------------------------------------------------------- |  | ------- | ------- | ------- |  | ----- | ------ |  |  | - | ------- | -
|                                                                                                                |  | Capital |         | Expense |  | Total
|                                                                                                                |  |         |         |         |  |      
|2003                                                                                                            |  | $       | 229,579 |         |  | $     | 18,383 |  |  | $ | 247,962 |  
|2004                                                                                                            |  |         | 87,385  |         |  |       | 11,188 |  |  |   | 98,573  |  
|2005                                                                                                            |  |         | 65,854  |         |  |       | 9,826  |  |  |   | 75,680  |  
|2006                                                                                                            |  |         | 33,870  |         |  |       | 3,954  |  |  |   | 37,824  |  
|2007                                                                                                            |  |         | 28,720  |         |  |       | 1,790  |  |  |   | 30,510  |  
|Thereafter                                                                                                      |  |         | 97,743  |         |  |       | 10,430 |  |  |   | 108,173 |  
|                                                                                                                |  |         |         |         |  |       |        |  |  |   |         |  
|                                                                                                                |  |         | 543,151 |         |  |       | 55,571 |  |  |   | 598,722 |  
|                                                                                                                |  |         |         |         |  |       |        |  |  |   |         |  
|Less amount representing interest on capital
    lease obligation and deferred satellite performance incentives |  |         | (72,846 | )       |  |       |       |  |  |   | (72,846 | )
|                                                                                                                |  |         |         |         |  |       |        |  |  |   |         |  
|Total net commitments                                                                                           |  | $       | 470,305 |         |  | $     | 55,571 |  |  | $ | 525,876 |  
|                                                                                                                |  |         |         |         |  |       |        |  |  |   |         |  

Due to the nature of its business, Intelsat has
large contracts for satellite construction and launch services
and pays significant amounts to a limited number of suppliers
for assets and services scheduled for future delivery.

In the table above, capital commitments in 2005
include the cash deposit related to termination of
Intelsats order for the Intelsat 10-01 satellite that will
be applied against the cost of a future launch, or will be
forfeited if Intelsat does not place a launch order by
July 31, 2005. See Note 6 for further information.

In addition to the commitments in the table
above, Intelsat has a commitment to Wildblue Communications,
Inc. in connection with Intelsats acquisition of a
minority stake in Wildblue. This transaction is discussed in
Note 16(c).

Intelsat offers its customers long-term
commitments of varying lengths up to 15 years for a range
of services at rates that are progressively lower for longer
commitment periods.

Intelsat leases space in its Washington, D.C.
building to various tenants. As of December 31, 2002, the
minimum rental income anticipated with respect to these leases
is approximately $2,966, of which $2,324 is expected to be
received during the next five years. Rental income is included
in other income in the accompanying consolidated statements of
operations.

Note
12     Contingencies

(a) Insurance

Intelsat has obtained insurance coverage for
possible losses that may occur during the launch of its
satellites and in subsequent periods of in-orbit operations.
Intelsat currently has insurance covering the in-orbit
operations of 10 of its 23 satellites. Six of the satellites,
the Intelsat 706, 707, 802, 805, 901 and 902 satellites, are
covered by an insurance policy that will expire on
November 8, 2003. Under the terms of this policy, Intelsat
co-insures $100,000 of the net book value of each satellite, and
the insurers cover the balance of the net book value of each
satellite, excluding capitalized performance incentives relating
to the satellites. Four additional satellites, the Intelsat 903,
904, 905 and 906 satellites, are covered under a policy that
covers the launch and first year of in-orbit operations for the
Intelsat IX series satellites. This insurance is in an amount
approximately equal to the net book value of each satellite,
excluding capitalized performance incentives relating to the
satellites, and does not have a co-insurance requirement. Upon
the expiration of the current

F-23



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


insurance coverage of each of the Intelsat 903,
904, 905 and 906 satellites, each will then be covered by the
in-orbit insurance policy currently covering the six satellites
noted above until the expiration of the policy on
November 8, 2003.

(b) Privileges
and immunities

As a privatized entity, Intelsat no longer
benefits from certain privileges and immunities that it held as
an intergovernmental organization. As a result, Intelsat may be
a party to disputes arising from normal business activities.
Management believes that the resolution of any such matters
would not have a material adverse effect on the Companys
financial position or future operating results.

Note 13     Business
segment and geographic information

Intelsat operates in a single industry segment,
in which it provides satellite services to its
telecommunications customers around the world. Intelsats
shareholders generated approximately 88%, 89% and 78% of revenue
in 2000, 2001 and 2002, respectively.

The geographic distribution of Intelsats
revenues was as follows:

|                             |  |              |    |      |  |      |    |   |  |  |    |  
|---------------------------- |  | ------------ | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                             |  |             
|                             |  | Year Ended  
|                             |  | December 31,
|                             |  |             
|                             |  | 2000         |    | 2001 |  | 2002
|                             |  |              |    |      |  |     
|Europe                       |  |              | 28 | %    |  |      | 29 | % |  |  | 29 | %
|North America and Caribbean  |  |              | 23 | %    |  |      | 24 | % |  |  | 24 | %
|Asia Pacific                 |  |              | 19 | %    |  |      | 18 | % |  |  | 17 | %
|Latin America                |  |              | 14 | %    |  |      | 13 | % |  |  | 13 | %
|Sub-Saharan Africa           |  |              | 8  | %    |  |      | 9  | % |  |  | 11 | %
|Middle East and North Africa |  |              | 8  | %    |  |      | 7  | % |  |  | 6  | %

Approximately 16%, 15% and 12% of Intelsats
revenue was derived from its largest customer in 2000, 2001 and
2002, respectively. No other single customer accounted for more
than 5% of revenue in any of those years. The ten largest
customers accounted for approximately 43% of Intelsats
revenue in both 2000 and 2001, and approximately 36% of
Intelsats revenue in 2002. Revenue by region is based on
the locations of customers to which services are billed.

Intelsats satellites are in geosynchronous
orbit, and consequently are not attributable to any geographic
location. Of Intelsats remaining assets, substantially all
are located in the United States.

Note
14     Restructuring costs

In October 2001, Intelsat reduced the size of its
workforce by 105 employees, or approximately 11%, reflecting the
elimination of certain positions that were no longer required
after privatization. Operations were also streamlined in order
to respond to market and industry conditions. As a result of
these actions, severance costs of $7,300 were incurred in 2001.
At December 31, 2001, accrued restructuring costs of
approximately $3,700 were included in accounts payable and
accrued liabilities in the accompanying consolidated balance
sheet. These amounts were fully paid in January 2002.

In December 2002, Intelsat reduced the size of
its workforce by 130 employees, or approximately 12%, reflecting
efforts to further streamline operations in response to market
and industry conditions. As a result of the workforce reduction,
severance costs of $5,522 were incurred in 2002. At
December 31, 2002, accrued

F-24



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


restructuring costs of $4,624 were included in
accounts payable and accrued liabilities in the accompanying
consolidated balance sheet. These amounts are expected to be
substantially paid by the end of the second quarter of 2003.

Note 15     WorldCom
reorganization

Upon the closing of the COMSAT acquisition
described in Note 3, WorldCom, Inc. became Intelsats
largest customer. On July 21, 2002, WorldCom, Inc. filed a
voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. Telecommunications revenue generated
from WorldCom, Inc. and its affiliates as direct customers was
$7,325 and $10,715 for the years ended December 31, 2001
and 2002, respectively. Based upon information provided by
Lockheed Martin Corporation, WorldCom, Inc. accounted for
approximately $60,000 (unaudited) of COMSATs revenue
from the sale of Intelsat capacity for the year ended
December 31, 2001 and approximately $47,800
(unaudited) for the period from January 1, 2002 to the
date of closing of the COMSAT acquisition described in
Note 3. On a pro forma basis, WorldCom, Inc. and its
affiliates would have accounted for approximately 6% of revenue
(unaudited) in each of the years ended December 31,
2001 and 2002, had the acquisition of COMSAT World Systems
closed at the beginning of 2001. Management cannot predict the
effect that WorldCom, Inc.s bankruptcy proceedings will
have on future revenue. At December 31, 2002, Intelsat had
receivables of $10,100 due from WorldCom, Inc. and affiliates,
of which $9,814 was reserved for in the allowance for doubtful
accounts.

Note 16     Related
party transactions

(a) Shareholder
collateral and other deposits

Included in accounts payable and accrued
liabilities in the accompanying consolidated balance sheets are
collateral and other deposits held from customers which are also
shareholders in the amounts of $21,728 and $20,646 at
December 31, 2001 and 2002, respectively. Collateral
generally represents cash balances held in accordance with
telecommunications services agreements. Deposits generally
represent cash balances held to secure future capacity under
right of first refusal arrangements. Associated cash balances
contain no restrictions and generally are non-interest bearing.

(b) Teleglobe
insolvency and Share Purchase Agreement

On May 15, 2002, one of Intelsats
largest customers and one of its shareholders, Teleglobe Inc.,
filed for creditor protection under the Companies
Creditors Arrangement Act in the Ontario Superior Court of
Justice. As a result, Intelsat recorded a reserve of $12,836
against all of its account receivable from Teleglobe Inc. as of
March 31, 2002, and did not recognize any revenue from
Teleglobe Inc. from April 1, 2002 through May 15,
2002, since collection was not ensured. Intelsat has continued
to provide services to Teleglobe Inc. for which Intelsat has
been paid in advance since May 16, 2002. Telecommunications
revenue generated from Teleglobe Inc. and its affiliates was
$41,732 in 2000, $47,763 in 2001 and $35,141 in 2002 and
accounted for approximately 4% of Intelsats
telecommunications revenue in each of those years.

On September 20, 2002, Intelsats
Intelsat Global Sales subsidiary acquired Teleglobe Inc.s
6,284,635 shares in Intelsat, Ltd. for $65,000. Pursuant to the
share purchase agreement and a related escrow agreement, title
to the shares acquired from Teleglobe Inc. was transferred to an
escrow agent, who holds the shares in trust for Intelsat Global
Sales, subject to specified limited voting and dividend rights
of Teleglobe Inc. The share purchase agreement contemplates that
the escrow agent will sell the shares in Intelsats
contemplated initial public offering or in another manner set
forth in the agreement and will subsequently deliver the
proceeds of any such sale to Intelsat Global Sales and, in some
cases, to Teleglobe Inc. If all of the shares held in escrow are
sold and the sale proceeds exceed $90,139, Intelsat Global Sales
will receive $90,139, and

F-25



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


Teleglobe Inc. will receive the portion of the
sale proceeds that exceeds $90,139. If only a portion of the
shares held in escrow are sold, Intelsat Global Sales will
receive the portion of the sale proceeds equal to the percentage
of $90,139 that is equal to the percentage the sold shares
represent of the total number of shares originally held in
escrow, and Teleglobe Inc. will receive any remaining sale
proceeds. If Intelsat has not conducted a registered offering of
its ordinary shares by December 31, 2003, or if Intelsat
has conducted such an offering by that time but some of the
escrowed shares remain unsold as of December 31, 2004, the
share purchase agreement provides for the unsold shares and any
cash held as escrow property to be distributed to Intelsat
Global Sales up to the amount that would result in Intelsat
Global Sales having received a total amount of cash and shares
under the agreement valued at $90,139. If there are any shares
or cash remaining after this distribution to Intelsat Global
Sales, these shares and cash will be transferred to Teleglobe
Inc.

In connection with the share purchase
transaction, Teleglobe Inc. agreed to retain nearly 75%
(unaudited) of its service orders with Intelsat, which
represented $131,748, or 3% (unaudited), of Intelsats
backlog as of December 31, 2002. The remaining service
orders, which represented $47,371, or 1% (unaudited), of
Intelsats backlog as of the closing date of the share
purchase transaction, were terminated in connection with the
transaction. Teleglobe Inc. also agreed to provide payment
semi-monthly in advance for the service orders it has with
Intelsat that were not terminated, as opposed to the quarterly
in arrears payment terms originally applicable to those service
orders. Upon the assignment of Teleglobe Inc.s service
orders to another person, the service orders will be amended to
provide for payment monthly in arrears. The assignment of these
service orders is subject to the consent of Intelsat Global
Sales, which has agreed not to unreasonably withhold its consent
as long as the service orders are assigned to persons that
Intelsat Global Sales considers in its reasonable opinion to be
creditworthy in accordance with its credit criteria. All other
terms and conditions of these service orders will remain
unchanged.

The closing of the share purchase transaction was
subject to, among other things, the approval of the monitor of
the Canadian insolvency proceedings and the approval of the
Ontario Superior Court of Justice, both of which were obtained.
All rights of appeal from the Courts decision to approve
the transaction have expired. In connection with the share
purchase transaction, Intelsat Global Sales also released
Teleglobe Inc. from claims with respect to all service fees
payable for service provided to Teleglobe Inc. prior to
May 15, 2002 and with respect to all termination fees
payable pursuant to the service orders being terminated.

Intelsat has accounted for the share purchase
transaction similar to an acquisition of treasury stock. Under
FASB Technical Bulletin No. 85-6, amounts paid for treasury
stock above fair value and additional rights and consideration
received are allocated to the various components received. The
estimated aggregate market value of the shares acquired by
Intelsat exceeded the cash payments made to Teleglobe Inc. on
September 20, 2002 by more than the amounts due to
Intelsat. As a result, Intelsat was able to recover the $15,958
of receivables owed by Teleglobe Inc., consisting of $12,836
that was fully reserved in the first quarter of 2002 as well as
$3,122 related to telecommunications revenue that had not been
previously recognized since the collection of those amounts was
not ensured. Intelsat believes that the closing of the share
purchase transaction enabled it to change its estimated reserve
for uncollectible accounts and recognize the previously
unrecognized service fees for which collection was uncertain, in
accordance with APB Opinion No. 20, Accounting Changes. The
shares acquired by Intelsat Global Sales are deemed not to be
outstanding for the purposes of Intelsats consolidated
financial statements.

Teleglobe Inc.s remaining interest in the
shares is deemed to be a free-standing derivative in accordance
with EITF Issue No. 00-19, Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock. This resulted in Intelsat
recording an obligation to Teleglobe Inc. on September 20,
2002 of $25,860, which reflected the estimated fair value of
this derivative on that date. Any future changes that occur in
Intelsats obligation to Teleglobe Inc. will be recorded as
an additional expense or

F-26



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


as additional income on Intelsats
consolidated financial statement of operations. On
December 31, 2002, Intelsat reduced its obligation to
Teleglobe Inc. to $19,780, based on a valuation of the
underlying shares, and recorded other income of $6,080 for the
amount of the adjustment.

(c) Wildblue
Subscription Agreement

On December 9, 2002, Intelsat entered into
an agreement with Wildblue Communications, Inc. to acquire a
minority stake in Wildblue for a purchase price of $58,000.
Wildblue plans to provide broadband Internet access services via
Ka-band satellite to homes and small business users in the
continental United States beginning in 2004. The closing of this
transaction is subject to, among other things, Federal
Communications Commission and other governmental approvals and
the satisfaction of other closing conditions. Intelsat has
agreed to provide Wildblue with up to $2,000 in interim funding
before the closing of the acquisition, which will be repaid upon
closing. As of December 31, 2002, Intelsat had a loan
receivable of $744 from Wildblue with respect to such interim
funding provided on December 20, 2002. In connection with
this agreement, Intelsat has agreed to purchase 50% of any
shares sold by one of the minority investors, at the
investors option, up to a maximum purchase price of
$5,000. Other investors in this round of financing, which totals
$156,000 including Intelsats investment, include the
National Rural Telecommunications Cooperative and Liberty
Satellite & Technology, Inc. One of Intelsats
directors is a director of Liberty Media Corporation, which
indirectly owns a minority interest in Wildblue and owns a
majority of the outstanding stock of Liberty
Satellite & Technology, Inc.

Note
17     Subsequent events

(a) Launch
of 907 satellite

On February 15, 2003, Intelsat launched the
907 satellite, increasing to 24 the number of satellites in
Intelsats fleet that Intelsat owns and operates.

(b) Insurance

Since the launch of the 907 satellite on
February 15, 2003, the in-orbit operations of the satellite
have been covered under the insurance policy that covers the
launch and first year of in-orbit operations for the
Intelsat IX series satellites. As of February 23,
2003, the 904 satellite had been in orbit for one year and
was no longer covered by the policy covering the launch and
first year of in-orbit operations for the Intelsat IX
series satellites. However, as of February 23, 2003, the
904 satellite is covered by the in-orbit insurance policy
with the $100,000 co-insurance requirement. The 904 satellite
will be covered by that policy until the policys
expiration on November 8, 2003.

(c) Investment
in Galaxy Satellite Broadcasting

On February 20, 2003, Intelsat Hong Kong LLC
( Intelsat Hong Kong) entered into a subscription
and shareholders agreement with TVB Satellite TV Holdings
Limited (TVB Holdings) and Galaxy Satellite TV
Holdings Limited (Galaxy Holdings), pursuant to
which Intelsat Hong Kong acquired a 51% stake in Galaxy Holdings
for approximately U.S.$70,000 in cash and in-kind contributions.
In connection with the agreement, Galaxy Holdings acquired the
outstanding shares of Galaxy Satellite Broadcasting Limited
(Galaxy), which holds licenses to provide pay
television and teleport services in Hong Kong. Galaxy expects to
launch its pay television service in late 2003 or early 2004.
TVB Holdings holds the remaining 49% stake in Galaxy Holdings.

F-27



---



##### 



INTELSAT


(see Note 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(US$ in thousands, except share and per share
amounts)


Pursuant to the agreement, Intelsat Hong Kong
agreed to contribute total consideration valued at $542,000 in
Hong Kong dollars, or approximately $70,000 in U.S. dollars.
Intelsat Hong Kongs contribution is comprised of
HK$413,300 in cash, payable in installments in 2003, 2004 and
2005, and HK$128,700 in kind in the form of satellite capacity
to be provided to Galaxy. In February 2003, Intelsat Hong Kong
made its required 2003 cash contribution of HK$173,900, or
approximately U.S.$22,311. In addition to its HK$542,000 cash
and in-kind contribution, Intelsat Hong Kong is required to
contribute its share, based on percentage ownership in Galaxy
Holdings at the time of contribution, of up to an additional
HK$170,100 if the board of directors of Galaxy Holdings
determines that the aggregate amount of the cash contributions
made by Intelsat Hong Kong and TVB Holdings in 2003, 2004 and
2005 is insufficient to fund Galaxys start-up and initial
operational costs.

(d) Expiration
of the 364-day credit facility

On March 20, 2003, Intelsats 364-day
revolving credit facility expired. As of the date of expiration,
there were no borrowings outstanding under this facility.

F-28



---



##### 



SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS(1)

|                              |                                 |                     |   |                  |  |                |   |            |  |               |   |        |     |  |   |       |  |  |   |        | 
|----------------------------- | ------------------------------- | ------------------- | - | ---------------- |  | -------------- | - | ---------- |  | ------------- | - | ------ | --- |  | - | ----- |  |  | - | ------ | 
|                              |                                 | Balance at          |   | Charged to Costs |  | Charged to     |   |            |  | Balance at   
|Description                   |                                 | Beginning of Period |   | and Expenses     |  | Other Accounts |   | Deductions |  | End of Period
|                              |                                 |                     |   |                  |  |                |   |            |  |              
|                              |                                 |                    
|                              |                                 | (US$ in thousands) 
|Year ended December 31, 2001: |                                 |                     |   |                  |  |                |   |            |  |               |   |        |     |  |   |       |  |  |   |       
|                              | Restructuring reserve           |                     | $ |                 |  |                | $ | 7,300      |  |               | $ |       |     |  | $ | 3,600 |  |  | $ | 3,700  | 
|Year ended December 31, 2002: |                                 |                     |   |                  |  |                |   |            |  |               |   |        |     |  |   |       |  |  |   |       
|                              | Allowance for doubtful accounts |                     | $ |                 |  |                | $ | 9,472      |  |               | $ | 18,628 | (2) |  | $ |      |  |  | $ | 28,100 | 
|                              | Restructuring reserve           |                     | $ | 3,700            |  |                | $ | 5,522      |  |               | $ |       |     |  | $ | 4,598 |  |  | $ | 4,624  | 



---



|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(1) | Not applicable for the year ended
    December 31, 2000.                                                              
|   
|(2) | Allowance for doubtful accounts recorded in
    connection with the acquisition of assets of COMSAT World
    Systems.

F-29



---



##### 



EXHIBIT INDEX

|        |     |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | --- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |        
|Number  |     | Exhibit
|        |     |        
|        | 1.1 |         |  | Certificate of Incorporation of Intelsat, Ltd.
    (incorporated by reference to Exhibit 3.1 of Intelsat,
    Ltd.s Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                                                                         
|        | 1.2 |         |  | Memorandum of Association of Intelsat, Ltd.
    (incorporated by reference to Exhibit 3.2 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002).                                                                                                                                                                                                                                                                                                                         
|        | 1.3 |         |  | Bye-laws of Intelsat, Ltd. (incorporated by
    reference to Exhibit 3.3 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                                                                                                                                                                                                          
|        | 2.1 |         |  | Indenture, dated as of April 1, 2002,
    between Intelsat, Ltd. and The Bank of New York, as Trustee
    (incorporated by reference to Exhibit 4.1 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                               
|        | 2.2 |         |  | Officers Certificate dated April 15,
    2002 relating to Intelsat, Ltd.s 7 5/8% Senior Notes
    due 2012 (incorporated by reference to Exhibit 4.2 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002).                                                                                                                                                                                                                                                            
|        | 2.3 |         |  | Form of 7 5/8% Senior Notes due 2012
    (incorporated by reference to Exhibit 4.4 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                                                                                                
|        | 2.4 |         |  | Registration Rights Agreement, dated as of
    April 15, 2002, among Intelsat, Ltd., Lehman Brothers Inc.,
    Salomon Smith Barney Inc. and the other parties named therein
    (incorporated by reference to Exhibit 4.5 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                        
|        | 2.5 |         |  | Fiscal Agency Agreement between the International
    Telecommunications Satellite Organization and Deutsche Bank AG
    (formerly Bankers Trust Company), relating to 6.625% Notes due
    March 2004 and form of Note (incorporated by reference to
    Exhibit 10.1 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                                            
|        | 2.6 |         |  | Fiscal Agency Agreement between the International
    Telecommunications Satellite Organization and Citibank, N.A.
    (formerly Morgan Guaranty Trust Company of New York), relating
    to 8.375% Notes due Oct. 2004 and form of Note (incorporated by
    reference to Exhibit 10.2 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                           
|        | 2.7 |         |  | Fiscal Agency Agreement between the International
    Telecommunications Satellite Organization and Citibank, N.A.
    (formerly Morgan Guaranty Trust Company of New York), relating
    to 8.125% Notes due Feb. 2005 and form of Note (incorporated by
    reference to Exhibit 10.3 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                           
|        | 2.8 |         |  | Assignment, Assumption and Amendment Agreement,
    dated as of July 18, 2001, among the International
    Telecommunications Satellite Organization, Intelsat, Ltd. and
    Citibank, N.A. (incorporated by reference to Exhibit 10.14
    of the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                                           
|        | 2.9 |         |  | Assignment, Assumption and Amendment Agreement,
    dated as of July 18, 2001, among the International
    Telecommunications Satellite Organization, Intelsat, Ltd. and
    Deutsche Bank AG (incorporated by reference to
    Exhibit 10.15 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                                     
|        | 4.1 |         |  | Restructuring Agreement, dated as of
    July 17, 2001, among the International Telecommunications
    Satellite Organization, Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Intelsat U.K., Ltd., Intelsat Services Corporation,
    Intelsat Holdings LLC, Intelsat LLC and the Signatories named on
    Schedule I and the Investing Entities named on
    Schedule II (incorporated by reference to Exhibit 2.1
    of the Registration Statement on Form F-4, File No.
    333-99189, filed on September 5, 2002).



---



##### 



|        |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ---- | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 4.2  |         |  | Shareholders Agreement, dated as of July 18,
    2001, among Intelsat, Ltd. and the Signatories named on
    Schedule I and the Investing Entities named on
    Schedule II (incorporated by reference to Exhibit 10.5
    of the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                
|        | 4.3  |         |  | Registration Rights Agreement, dated as of
    July 18, 2001, among Intelsat, Ltd. and the parties named
    therein (incorporated by reference to Exhibit 10.6 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002).                                                                                                                                                       
|        | 4.4  |         |  | Member Protection Rights Agreement, dated as of
    July 18, 2001, between Intelsat, Ltd. and The Bank of New
    York, as Rights Agent (incorporated by reference to
    Exhibit 10.7 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                                
|        | 4.5  |         |  | Trust Agreement I, dated as of July 18,
    2001, among Intelsat, Ltd., The Bank of New York, as Trustee,
    and Pakistan Telecommunication Company Limited, as Beneficiary
    (incorporated by reference to Exhibit 10.8 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                           
|        | 4.6  |         |  | Trust Agreement II, dated as of July 18,
    2001, between Intelsat, Ltd. and The Bank of New York, as
    Trustee (incorporated by reference to Exhibit 10.9 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002).                                                                                                                                                         
|        | 4.7  |         |  | Novation Agreement, dated as of July 18,
    2001, between Intelsat U.K., Ltd. and Lockheed Martin World
    Systems, including schedule of omitted contracts and differences
    with filed contract (incorporated by reference to
    Exhibit 10.10 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                             
|        | 4.8  |         |  | Transfer Agreement, dated as of July 17,
    2001, among the International Telecommunications Satellite
    Organization, Intelsat, Ltd., Intelsat (Bermuda), Ltd., Intelsat
    U.K., Ltd., Intelsat Services Corporation, Intelsat Holdings LLC
    and Intelsat LLC (incorporated by reference to
    Exhibit 10.11 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).
|        | 4.9  |         |  | $500,000,000 364-Day Credit Agreement, dated as
    of March 21, 2002, among Intelsat, Ltd., Various Banks and
    Citibank, N.A., as Agent (incorporated by reference to
    Exhibit 10.12 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                           
|        | 4.10 |         |  | $500,000,000 3-Year Credit Agreement, dated as of
    March 21, 2002, among Intelsat, Ltd., Various Banks and
    Citibank, N.A., as Agent (incorporated by reference to
    Exhibit 10.13 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                                                            
|        | 4.11 |         |  | Headquarters Land Lease, dated as of
    February 28, 1985, between the International
    Telecommunications Satellite Organization and the U.S.
    Government, as amended (incorporated by reference to
    Exhibit 10.16 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002).                                                                                           
|        | 4.12 |         |  | Contract No. INTEL-820, dated April 6,
    1989, between the International Telecommunications Satellite
    Organization and COMSAT Corporation (Clarksburg TTC&M), as
    amended (incorporated by reference to Exhibit 10.17 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                    
|        | 4.13 |         |  | Contract No. INTEL-821, dated April 6,
    1989, between the International Telecommunications Satellite
    Organization and COMSAT Corporation (Paumalu TTC&M), as
    amended (incorporated by reference to Exhibit 10.18 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                       
|        | 4.14 |         |  | Contract No. INTEL-825, dated March 27,
    1989, between the International Telecommunications Satellite
    Organization and Xantic (Perth TTC&M), as amended
    (incorporated by reference to Exhibit 10.19 of the
    Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                                    



---



##### 



|        |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ---- | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 4.15 |         |  | Contract No. INTEL-823, dated
    November 18, 1988, between the International
    Telecommunications Satellite Organization and DeTeSat (Raisting
    TTC&M), as amended (incorporated by reference to
    Exhibit 10.20 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                                                                                                                                                                                                                          
|        | 4.16 |         |  | Contract No. INTEL-822, dated
    December 2, 1988, between the International
    Telecommunications Satellite Organization and Telespazio S.p.A.
    (Fucino TTC&M), as amended (incorporated by reference to
    Exhibit 10.21 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002 and Exhibit 10.35 of Amendment
    No. 1 to the Registration Statement on Form F-4, File
    No. 333-99189, filed on October 15, 2002). (1)                                                                                                             
|        | 4.17 |         |  | Contract No. INTEL-824, dated
    February 13, 1989, between the International
    Telecommunications Satellite Organization and China National
    Instruments Import And Export Corporation, on behalf of the
    Beijing Telecommunications Administration (Beijing TTC&M),
    as amended (incorporated by reference to Exhibit 10.22 of
    the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002 and
    Exhibit 10.33 of Amendment No. 1 to the Registration
    Statement on Form F-4, File No. 333-99189, filed on
    October 15, 2002). (1)
|        | 4.18 |         |  | Contract No. Intelsat-2822, dated
    April 26, 2002, between Intelsat Global Service Corporation
    and KT Corporation (Korea TT&C) (incorporated by reference
    to Exhibit 10.23 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                                                                                                                                                                                                                                                              
|        | 4.19 |         |  | Contract No. Intelsat-S-2766, dated
    February 13, 2002, between Intelsat Global Service
    Corporation and Lockheed Martin Commercial Space Systems and
    related service order (incorporated by reference to
    Exhibit 10.24 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002). (1)                                                                                                                                                                                                                                              
|        | 4.20 |         |  | Transponder Purchase Agreement, dated
    September 12, 2000, between the International
    Telecommunications Satellite Organization and Telenor Satellite
    Services AS (incorporated by reference to Exhibit 10.25 of
    the Registration Statement on Form F-4, File
    No. 333-99189, filed on September 5, 2002). (1)                                                                                                                                                                                                                                                            
|        | 4.21 |         |  | Contract No. Intelsat-2799, dated
    December 12, 2001, between Intelsat LLC and Sea Launch
    Company L.L.C., as amended (incorporated by reference to
    Exhibit 10.26 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002). (1)                                                                                                                                                                                                                                                                                                        
|        | 4.22 |         |  | Contract No. Intelsat-2835, dated
    January 10, 2002, between Intelsat LLC and Lockheed Martin
    Commercial Launch Services, Inc., as amended (incorporated by
    reference to Exhibit 10.27 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002 and Exhibit 10.32 of Amendment
    No. 1 to the Registration Statement on Form F-4, File
    No. 333-99189, filed on October 15, 2002.) (1)                                                                                                                                            
|        | 4.23 |         |  | Contract No. INTEL-2399, dated
    September 26, 2000, between the International
    Telecommunications Satellite Organization and Arianespace, as
    amended (incorporated by reference to Exhibit 10.28 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002). (1)                                                                                                                                                                                                                                                                         
|        | 4.24 |         |  | Contract No. INTEL-2400, dated
    February 2, 2000, between the International
    Telecommunications Satellite Organization and Astrium SAS, as
    amended (incorporated by reference to Exhibit 10.29 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002). (1)                                                                                                                                                                                                                                                                           
|        | 4.25 |         |  | Amendment No. 3, dated January 14,
    2003, to Contract No. INTEL-2400, dated February 2, 2000,
    between the International Telecommunications Satellite
    Organization and Astrium SAS.* (2)                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4.26 |         |  | Amendment No. 4, dated January 30,
    2003, to Contract No. INTEL-2400, dated February 2, 2000,
    between the International Telecommunications Satellite
    Organization and Astrium SAS.* (2)                                                                                                                                                                                                                                                                                                                                                                                         



---



##### 



|        |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ---- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 4.27 |         |  | Contract No. INTEL-1700, dated
    March 18, 1997, between the International
    Telecommunications Satellite Organization and Space Systems/
    Loral, Inc., as amended (incorporated by reference to
    Exhibit 10.30 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    September 5, 2002). (1)                                                                                                                                     
|        | 4.28 |         |  | Share Purchase Agreement, dated as of
    August 21, 2002, between Teleglobe Inc. and Intelsat Global
    Sales & Marketing Ltd. (incorporated by reference to
    Exhibit 10.31 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                                                  
|        | 4.29 |         |  | Asset Purchase Agreement, dated as of
    March 15, 2002, among COMSAT Corporation, COMSAT Digital
    Teleport, Inc. and Intelsat (Bermuda), Ltd., as amended
    (incorporated by reference to Exhibit 2.2 of the
    Registration Statement on Form F-4, File No. 333-99189,
    filed on September 5, 2002 and Exhibits 2.3 and 2.4 of
    Amendment No. 2 to the Registration Statement on
    Form F-4, File No. 333-99189, filed on
    December 11, 2002). (1)
|        | 4.30 |         |  | Purchase Agreement, dated April 10, 2002,
    among Intelsat, Ltd., Lehman Brothers Inc., Salomon Smith
    Barney, Inc. and the others parties named therein (incorporated
    by reference to Exhibit 10.4 of the Registration Statement on
    Form F-4, File No. 333-99189, filed on September 5,
    2002).                                                                                                                                                      
|        | 4.31 |         |  | Subscription and Shareholders Agreement relating
    to Galaxy Satellite TV Holdings, Ltd., dated as of
    February 20, 2003, among Intelsat Hong Kong, LLC, TVB
    Satellite TV Holdings, Ltd. and Galaxy Satellite TV Holdings,
    Ltd.* (2)                                                                                                                                                                                                                     
|        | 6.1  |         |  | Statement re computation of per share earnings.*                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 8.1  |         |  | List of subsidiaries (incorporated by reference
    to Exhibit 21.1 of the Registration Statement on Form F-4,
    File No. 333-99189, filed on September 5, 2002).                                                                                                                                                                                                                                                                                                   



---



|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Filed herewith.                                                                                                                                                                                        
|   
|(1) | Portions of this exhibit have been omitted
    pursuant to an order of the Securities and Exchange Commission
    granting confidential treatment with respect thereto.                                
|   
|(2) | Portions of this exhibit have been omitted
    pursuant to an application for confidential treatment filed with
    the Securities and Exchange Commission under separate cover on
    the date hereof.