##### 









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 20-F


|           |  |                                                                                                       
|---------- |  | ------------------------------------------------------------------------------------------------------
|(Mark One)
|o          |  | REGISTRATION STATEMENT PURSUANT TO SECTION
    12(b) OR
    (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,
    2003                                                       
|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 000-50262

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)

North Tower, 2nd Floor

90 Pitts Bay Road


Pembroke HM 08, 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:

Options to purchase Ordinary Shares

(Title of Class)


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

N/A

(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, 2003, 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 for 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                                            |           |  | 4                                                                                |     
|                                                  | ITEM 1.   |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS                        |      |  | 4   | 
|                                                  | ITEM 2.   |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                          |      |  | 4   | 
|                                                  | ITEM 3.   |  | KEY INFORMATION                                                                  |      |  | 4   | 
|                                                  | ITEM 4.   |  | INFORMATION ON THE COMPANY                                                       |      |  | 24  | 
|                                                  | ITEM 5.   |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                     |      |  | 62  | 
|                                                  | ITEM 6.   |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                       |      |  | 97  | 
|                                                  | ITEM 7.   |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                |      |  | 109 | 
|                                                  | ITEM 8.   |  | FINANCIAL INFORMATION                                                            |      |  | 111 | 
|                                                  | ITEM 9.   |  | THE OFFER AND LISTING                                                            |      |  | 111 | 
|                                                  | ITEM 10.  |  | ADDITIONAL INFORMATION                                                           |      |  | 111 | 
|                                                  | ITEM 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                   |      |  | 132 | 
|                                                  | ITEM 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES                       |      |  | 132 | 
|PART II                                           |           |  | 132                                                                              |     
|                                                  | ITEM 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                  |      |  | 132 | 
|                                                  | ITEM 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS |      |  | 132 | 
|                                                  | ITEM 15.  |  | CONTROLS AND PROCEDURES                                                          |      |  | 132 | 
|                                                  | ITEM 16.  |  | [RESERVED]                                                                       |      |  | 132 | 
|                                                  | ITEM 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT.                                                |      |  | 132 | 
|                                                  | ITEM 16B. |  | CODE OF ETHICS                                                                   |      |  | 132 | 
|                                                  | ITEM 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                           |      |  | 133 | 
|                                                  | ITEM 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES                   |      |  | 134 | 
|                                                  | ITEM 16E. |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASERS       |      |  | 134 | 
|PART III                                          |           |  | 134                                                                              |     
|                                                  | ITEM 17.  |  | FINANCIAL STATEMENTS                                                             |      |  | 134 | 
|                                                  | ITEM 18.  |  | FINANCIAL STATEMENTS                                                             |      |  | 134 | 
|                                                  | ITEM 19.  |  | EXHIBITS                                                                         |      |  | 134 | 
|SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES |           |  | 138                                                                              |     
|SIGNATURES                                        |           |  | 139                                                                              |     
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS        |           |  | F-1                                                                              |     
|EXHIBIT INDEX                                     |           |  |                                                                                  |     



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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 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 to establish and operate a global
satellite system and was formally established in February 1973.
On July 18, 2001, the IGO privatized by transferring
substantially all of its assets and liabilities 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
subsidiaries subsequent to the privatization.

Our principal executive offices are located at
North Tower, 2nd Floor, 90 Pitts Bay Road, Pembroke HM 08,
Bermuda. Our telephone number is (441) 294-1650.

OUR BUSINESS

We are a leading provider of satellite
communications services worldwide, supplying voice, data and
video connectivity in over 200 countries and territories.
Founded in 1964, we have provided communications capacity for
events that were milestones in 20th century history 
from broadcasting the video signals of the first moon walk, to
providing the hot line connecting the White House
and the Kremlin, to broadcasting live television coverage of
every Olympics since 1968.

We currently provide services that are utilized
by leading multinational corporations, the U.S. government
and major communications providers around the world. Our goal is
to be a global connectivity leader connecting people and
businesses around the globe with high-quality, flexible and
innovative communications services. We intend to sustain our
leadership position in the fixed satellite services sector and
maintain our profitability by:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | focusing on growing our business in the video,
    government/military and corporate network customer segments;                                                                                                                                                                                                                                                                                                                                                         
|
| |  | expanding our managed service offerings,
    developing new applications and focusing on niche markets in the
    voice and data customer segments; and                                                                                                                                                                                                                                                                                                                 
|
| |  | pursuing strategic transactions, such as our
    proposed acquisition as described below of satellites and other
    related assets from Loral Space & Communications Corporation
    and certain of its affiliates, referred to together as Loral or
    the Sellers, to further diversify our service application mix,
    enhance the geographic coverage of our network and achieve
    operational efficiencies to improve our long-term financial
    performance.

FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated, all references to
dollars and $ in this annual report are
to, and 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
certain 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.

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.





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##### 



FORWARD-LOOKING STATEMENTS

Some of the statements in this annual report
constitute forward-looking statements that do not directly or
exclusively relate to historical facts. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor
for certain forward-looking statements as long as they are
identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could
cause actual results to differ materially from the expectations
expressed or implied in the forward-looking statements.

When used in this annual report, the words
may, will, should,
expect, plan, anticipate,
believe, estimate, predict,
intend, potential and
continue, and the negative of these terms, and other
similar expressions are intended to identify forward-looking
statements. Examples of these forward-looking statements
include, but are not limited to, statements regarding the
following: our intent to leverage our solid financial position
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 belief that corporate and
broadband data and government/military applications represent
opportunities 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 belief that we can use strategic
transactions to achieve our strategic objectives; our belief
that the globalization of business will result in increased
demand for communications capacity; our belief that our customer
base provides us with a competitive advantage in local markets
around the world and credibility as we introduce new services;
our belief that our customers increasingly require integrated
and managed services best addressed by a hybrid network that
combines space and terrestrial infrastructure; our expectation
that the fixed satellite services sector will experience
relatively flat to moderate growth over the next few years; our
belief that deregulation will present additional opportunities
for us; our expectation that the introduction of high definition
television, or HDTV, in developed markets will increase demand
for wholesale satellite capacity; the trends that we believe
will impact our revenue and operating expenses in the future;
statements about our expectations regarding the proposed
acquisition of satellites and other related assets from Loral;
our belief that the proposed Loral transaction could increase
our revenue from broadcasting, cable television, private data
networking and other point-to-multipoint traffic and enable us
to maintain our global leadership position in the fixed
satellite services sector; our belief that the proposed Loral
transaction could enhance our service application mix and
geographic coverage; our belief that the proposed Loral
transaction could expand our market share in the video business
segment; our belief that the proposed Loral transaction could
increase our operating expenses; our expectation that the
proposed Loral transaction could positively impact our revenue;
our expectation that, although the proposed Loral transaction
will positively impact our revenue, the transaction will
negatively impact our net income in the near term; our
expectation that the Loral transaction will have a positive
impact on our net income in the medium term as a result of the
expected positive impact on our revenue, our expectation that
the increase in our operating costs as a result of the
transaction will be incremental in nature and our expectation
that the transition costs in connection with the transaction
will be short-term in nature; our expectation that our capital
expenditures will increase if the proposed Loral transaction is
completed; our expectation that, if the proposed Loral
transaction is completed, our most significant liquidity
requirements will arise in connection with the transaction; our
expected capital expenditures in 2004; our expectation that our
most significant liquidity requirements in 2004, excluding
expenditures relating to the proposed Loral transaction, will
arise from the payment of $400.0 million in debt maturing
in 2004 and the funding of capital expenditures.

The forward-looking statements made in this
annual report reflect our intentions, plans, expectations,
assumptions and beliefs about future events. These
forward-looking statements are not guarantees of future
performance or results and are subject to risks, uncertainties
and other factors, many of which are outside of our control.
These factors could cause actual results or developments to
differ materially from the expectations expressed or implied in
the forward-looking statements and include known and unknown
risks. Known risks include, among others, the risks discussed in
Item 3.D  Risk Factors.

2



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##### 



Other factors that may cause results or
developments to differ materially from the forward-looking
statements made in this annual report include, but are not
limited to:



| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the quality and price of comparable
    communications services offered or to be offered by our
    competitors;                                                 
|
| |  | the perceptions of our business, operations and
    financial condition and the industry in which we operate by the
    financial community and ratings agencies;
|
| |  | 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
    communications business in particular.            

In connection with the proposed acquisition of
satellites and other related assets from Loral Space &
Communications Corporation and certain of its affiliates as
described in this annual report under Item 4.B 
Business Overview  Agreement to Purchase the
North American Satellite Assets of Loral, factors that may
cause results or developments to differ materially from the
forward-looking statements made in this annual report include,
but are not limited to, the failure to complete the proposed
transaction and the failure to achieve our strategic and
financial objectives for the proposed transaction.

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. Because actual results could differ
materially from our intentions, plans, expectations, assumptions
and beliefs about the future, you are urged not to rely on
forward-looking statements in this annual report and to view all
forward-looking statements made in this annual report with
caution. We do not undertake any obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.

3



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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 included
elsewhere in this annual report. The consolidated statement of
operations data for each of the years in the five-year period
ended December 31, 2003 and the consolidated balance sheet
data for the years ended December 31, 2000, 2001, 2002 and
2003 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, 1999 and 2000 and the consolidated balance
sheet data as of December 31, 1999, 2000 and 2001 have been
derived from financial statements that are not included in this
annual report.

|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |         |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------- | ------- |  | ---- | ----------- | ------- |  | ---- | ----------- | ------- |  | - | ----------- | ------- |  | - | ----------- | ------- | -
|                                                                      |                                                                                                 |                                                
|                                                                      |                                                                                                 | Year Ended December 31,                        
|                                                                      |                                                                                                 |                                                
|                                                                      |                                                                                                 | 1999                                            |             | 2000    |  | 2001 |             | 2002    |  | 2003
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |     
|                                                                      |                                                                                                 |                                                
|                                                                      |                                                                                                 | (in thousands, except share and per share data)
|Consolidated Statement of Operations
    Data:                        |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Revenue                                                               |                                                                                                 | $                                               | 979,032     |         |  | $    | 1,099,751   |         |  | $    | 1,084,009   |         |  | $ | 991,956     |         |  | $ | 952,781     |        
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Operating expenses:                                                   |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|                                                                      | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                                                 |             | 93,180  |  |      |             | 93,162  |  |      |             | 101,985 |  |   |             | 117,405 |  |   |             | 136,223 |  
|                                                                      | Selling, general and administrative                                                             |                                                 |             | 47,362  |  |      |             | 61,900  |  |      |             | 95,600  |  |   |             | 121,077 |  |   |             | 132,750 |  
|                                                                      | Depreciation and amortization(1)                                                                |                                                 |             | 441,183 |  |      |             | 414,250 |  |      |             | 340,449 |  |   |             | 361,322 |  |   |             | 403,234 |  
|                                                                      | Privatization initiative                                                                        |                                                 |             | 11,433  |  |      |             | 21,575  |  |      |             | 33,576  |  |   |             |        |  |   |             |        |  
|                                                                      | IS-10-01 contract termination costs                                                             |                                                 |             |        |  |      |             |        |  |      |             |        |  |   |             | 34,358  |  |   |             | (3,000  | )
|                                                                      | Restructuring costs                                                                             |                                                 |             |        |  |      |             |        |  |      |             | 7,300   |  |   |             | 5,522   |  |   |             | (837    | )
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Total operating expenses                                              |                                                                                                 |                                                 | 593,158     |         |  |      | 590,887     |         |  |      | 578,910     |         |  |   | 639,684     |         |  |   | 668,370     |        
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Income from operations                                                |                                                                                                 |                                                 | 385,874     |         |  |      | 508,864     |         |  |      | 505,099     |         |  |   | 352,272     |         |  |   | 284,411     |        
|Interest expense, net                                                 |                                                                                                 |                                                 | (59,263     | )       |  |      | (24,859     | )       |  |      | (13,050     | )       |  |   | (55,053     | )       |  |   | (97,789     | )      
|Other income, net                                                     |                                                                                                 |                                                 | 29,561      |         |  |      | 20,885      |         |  |      | 12,293      |         |  |   | 9,942       |         |  |   | 20,626      |        
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Income before income taxes                                            |                                                                                                 |                                                 | 356,172     |         |  |      | 504,890     |         |  |      | 504,342     |         |  |   | 307,161     |         |  |   | 207,248     |        
|Provision for income taxes(2)                                         |                                                                                                 |                                                 |            |         |  |      |            |         |  |      | 5,359       |         |  |   | 33,021      |         |  |   | 26,129      |        
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Net income                                                            |                                                                                                 | $                                               | 356,172     |         |  | $    | 504,890     |         |  | $    | 498,983     |         |  | $ | 274,140     |         |  | $ | 181,119     |        
|                                                                      |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Basic and diluted net income per ordinary share
    (3)               |                                                                                                 | $                                               | 2.14        |         |  | $    | 3.03        |         |  | $    | 2.99        |         |  | $ | 1.66        |         |  | $ | 1.13        |        
|Dividends per ordinary share                                          |                                                                                                 |                                                 |            |         |  |      |            |         |  |      |            |         |  |   |            |         |  |   |            |        
|Basic and diluted weighted average ordinary
    shares outstanding(3) |                                                                                                 |                                                 | 166,666,755 |         |  |      | 166,666,755 |         |  |      | 166,666,755 |         |  |   | 164,893,283 |         |  |   | 160,382,120 |        
|Consolidated Statement of Cash Flow
    Data:                         |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|Net cash provided by operating activities                             |                                                                                                 | $                                               | 820,886     |         |  | $    | 933,048     |         |  | $    | 856,388     |         |  | $ | 657,985     |         |  | $ | 604,605     |        
|Net cash used in investing activities                                 |                                                                                                 |                                                 | (330,327    | )       |  |      | (546,020    | )       |  |      | (663,671    | )       |  |   | (678,222    | )       |  |   | (968,317    | )      
|Net cash (used in) provided by financing
    activities               |                                                                                                 |                                                 | (464,855    | )       |  |      | (411,828    | )       |  |      | (191,161    | )       |  |   | 31,504      |         |  |   | 956,425     |        
|Other Data (unaudited):                                               |                                                                                                 |                                                 |             |         |  |      |             |         |  |      |             |         |  |   |             |         |  |   |             |        
|EBITDA, as adjusted(4)                                                |                                                                                                 | $                                               | 827,057     |         |  | $    | 923,114     |         |  | $    | 845,548     |         |  | $ | 713,594     |         |  | $ | 687,645     |        



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(Footnotes on following page)

4



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|                                                         |                               |                         |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |         | 
|-------------------------------------------------------- | ----------------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                         |                               |                        
|                                                         |                               | Year Ended December 31,
|                                                         |                               |                        
|                                                         |                               | 1999                    |         | 2000    |  | 2001 |         | 2002    |  | 2003
|                                                         |                               |                         |         |         |  |      |         |         |  |     
|                                                         |                               |                        
|                                                         |                               | (in thousands)         
|Reconciliation of Net Income to EBITDA, As
    Adjusted: |                               |                         |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|Net income                                               |                               | $                       | 356,172 |         |  | $    | 504,890 |         |  | $    | 498,983 |         |  | $ | 274,140 |         |  | $ | 181,119 |        
|Add:                                                     |                               |                         |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                         | Interest expense, net         |                         |         | 59,263  |  |      |         | 24,859  |  |      |         | 13,050  |  |   |         | 55,053  |  |   |         | 97,789  | 
|                                                         | Provision for income taxes(2) |                         |         |        |  |      |         |        |  |      |         | 5,359   |  |   |         | 33,021  |  |   |         | 26,129  | 
|                                                         | Depreciation and amortization |                         |         | 441,183 |  |      |         | 414,250 |  |      |         | 340,449 |  |   |         | 361,322 |  |   |         | 403,234 | 
|Subtract:                                                |                               |                         |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|                                                         | Other income, net             |                         |         | 29,561  |  |      |         | 20,885  |  |      |         | 12,293  |  |   |         | 9,942   |  |   |         | 20,626  | 
|                                                         |                               |                         |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        
|EBITDA, as adjusted(4)                                   |                               | $                       | 827,057 |         |  | $    | 923,114 |         |  | $    | 845,548 |         |  | $ | 713,594 |         |  | $ | 687,645 |        
|                                                         |                               |                         |         |         |  |      |         |         |  |      |         |         |  |   |         |         |  |   |         |        

|                                 |  |                                       |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|-------------------------------- |  | ------------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                 |  |                                      
|                                 |  | As of December 31,                   
|                                 |  |                                      
|                                 |  | 1999                                  |           | 2000 |  | 2001 |           | 2002 |  | 2003
|                                 |  |                                       |           |      |  |      |           |      |  |     
|                                 |  |                                      
|                                 |  | (in thousands, except per share data)
|Consolidated Balance Sheet Data: |  |                                       |           |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|Total assets                     |  | $                                     | 3,164,089 |      |  | $    | 3,199,163 |      |  | $    | 3,576,135 |  |  | $ | 3,965,432 |  |  | $ | 5,072,717 | 
|Total liabilities                |  |                                       | 1,612,682 |      |  |      | 1,497,523 |      |  |      | 1,580,309 |  |  |   | 1,815,198 |  |  |   | 2,713,202 | 
|Total shareholders equity       |  |                                       | 1,551,407 |      |  |      | 1,701,640 |      |  |      | 1,995,826 |  |  |   | 2,150,234 |  |  |   | 2,344,400 | 
|Book value per ordinary share    |  | $                                     | 9.31      |      |  | $    | 10.21     |      |  | $    | 11.97     |  |  | $ | 13.41     |  |  | $ | 14.62     | 



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|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(2) | 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, 2003 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(3) | Basic and diluted net income per ordinary share
    for each of the three 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 four 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, 2003, we had, for
    accounting purposes, 160,382,120 ordinary shares outstanding and
    no preference shares outstanding. This number of ordinary shares
    outstanding excludes the 6,284,635 ordinary shares purchased
    from Teleglobe Inc. by our subsidiary, Intelsat Global
    Sales & Marketing Ltd., referred to in this annual
    report as Intelsat Global Sales.                                                                                                                                                                                                                                                                                                                                                                    
|   
|(4) | EBITDA, as adjusted, consists of earnings before
    interest, other income (expense), taxes and depreciation and
    amortization. We adjust EBITDA, or earnings before interest,
    taxes and depreciation and amortization, to exclude other income
    (expense) in order to segregate our operating results from
    non-operating income (expense), such as the non-operating income
    (expense) recorded in 2002 and 2003 related to an obligation
    payable by us to Teleglobe Inc. 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 performance. We use EBITDA, as adjusted, as one
    criterion for evaluating our performance relative to that of our
    peers. We believe that EBITDA, as adjusted, is an operating
    performance measure, and not a liquidity measure, that provides
    investors and analysts with a measure of operating results
    unaffected by differences in capital structures, capital
    investment cycles and ages of related assets among otherwise
    comparable companies. However, EBITDA, as adjusted, is not a
    measurement of financial performance under U.S. generally
    accepted accounting principles and may not be comparable to
    other similarly titled measures of other companies. You should
    not consider EBITDA, as adjusted, as an alternative to operating
    or net income, determined in accordance with generally accepted
    accounting principles, as an indicator of our operating
    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.

5



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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 capacity. 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. Because some of our competitors may
have greater financial resources than we do, they may be able to
respond more quickly to industry trends.

The fixed satellite services sector is subject to
consolidation and to competition from other forms of
communications technology, such as fiber optic cable. The
increasing availability of satellite capacity and capacity from
other forms of communications technology has created 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
relatively flat to moderate growth over the next few years.

We face challenges to our business apart from
these industry trends 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 routes for which fiber optic cable capacity is
available, 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. We have experienced erosion
in our revenue from point-to-point services in recent years due
to the build-out of fiber optic cable capacity, and we expect
this erosion to continue. 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 serve
only a small portion of the video segment, and we may not be
able to increase our share of this market.

Our ability to increase our share of the video
market will depend in part on our ability to complete the
proposed Loral transaction and successfully integrate the
acquired assets. Risks relating to the proposed Loral
transaction are discussed in later risk factors. Our ability to
increase our share of this market will also depend on our
ability to attract customers that do not currently use our
system. Because some of our 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
historically 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 do not complete the proposed Loral transaction
or if we are unable to create new 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 providing point-to-point services in areas of the world
where fiber optic cable does not yet exist or for

6



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which fiber optic cable is believed to be
unsuitable and offering integrated satellite/ fiber and managed
services. However, we may not be able to further penetrate the
point-to-point services market in the regions we are targeting.
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 market for point-to-multipoint services
such as video or fail to increase our revenue by providing
point-to-point services in regions where fiber optic cable
capacity is unavailable and by offering integrated and managed
services, our business could further shrink and our future
revenue and profitability would be materially adversely affected.


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.

The market for fixed satellite services may
not grow or may shrink and therefore we may not be able to
attract new customers, retain our existing customers or realize
the strategic and financial benefits we expect to obtain from
the proposed Loral transaction.

The fixed satellite services sector is currently
expected to experience relatively flat to moderate growth over
the next few years. However, the market for fixed satellite
services may not grow or may shrink. The development of
competing 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, the transition of video traffic
from analog to digital and continuing improvements in
compression technology have negatively impacted demand for
certain fixed satellite services. Developments that we expect to
support the growth of the satellite services industry, such as
continued growth in data traffic and the proliferation of HDTV
and niche programming, may fail to materialize or may not occur
in the manner or to the extent that we anticipate.

Because the market for fixed satellite services
may not grow or may shrink, we may not be able to attract
customers for the integrated and managed services that we are
providing as part of our strategy to sustain our business. In
addition, reduced growth in the fixed satellite services market
may adversely affect our ability to utilize the assets that we
intend to acquire from Loral to achieve our strategic goals of
developing a North American franchise and increasing our
customer base in the cable television, broadcasting and private
data networking segments. As a result, the financial benefits
that we expect to obtain from the proposed Loral transaction may
not materialize. Moreover, reduced growth in the fixed 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 business and results of operations. In
addition, there could 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 2003, our ten largest customers and their
affiliates represented approximately 35% of our revenue. The
loss of any of these customers could significantly affect our
revenue and profitability.

Most of our customers are telecommunications
companies, and the telecommunications sector has experienced a
downturn. To the extent the credit quality of our customers that
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 that are experiencing financial difficulties may be at
risk.

For example, WorldCom, Inc., Teleglobe Inc. and
Verestar, Inc. are customers of ours that have experienced
financial difficulties. On July 21, 2002, WorldCom, Inc.
filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. On April 14,
2003, WorldCom, Inc. announced that it had changed its

7



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brand name to MCI, and, on the effective date of
WorldCom, Inc.s reorganization, its corporate name is
expected to be changed to MCI, Inc. Our revenue generated from
WorldCom, Inc. and its affiliates as direct customers was
$10.7 million, or 1.1%, in 2002 and $43.2 million, or
4.5%, in 2003. Prior to our November 2002 acquisition of COMSAT
Corporations World Systems business unit, WorldCom, Inc.
purchased our capacity primarily from COMSAT Corporation,
referred to as COMSAT. We understand from Lockheed Martin
Corporation, COMSATs parent company, that WorldCom, Inc.
accounted 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 for the year ended December 31, 2002 had the COMSAT
transaction occurred as of January 1, 2002. We experienced
a decline in revenue during the year ended December 31,
2003 that was due in part to a decline in the level of services
provided to WorldCom, Inc. As of December 31, 2003,
WorldCom, Inc. and its affiliates accounted for
$73.5 million, or 2.1%, of our backlog. As of
December 31, 2003, we had receivables of $13.0 million
due from WorldCom, Inc. and its affiliates, of which
$6.7 million was reserved for in our allowance for doubtful
accounts and $8.4 million related 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.


On May 15, 2002, Teleglobe Inc. filed for
creditor protection under the Companies Creditors
Arrangement Act in the Ontario Superior Court of Justice.
Revenue generated from Teleglobe Inc. and its affiliates was
approximately $35.1 million in 2002 and $28.1 million
in 2003. 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
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. The reduction in our backlog due to the termination
of service orders pursuant to the share purchase transaction has
had a negative impact on our profitability.

Verestar, Inc., one of our largest customers,
filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code on December 22,
2003. Our revenue generated from Verestar, Inc. and its
affiliates was approximately $19.8 million in 2002 and
$24.9 million in 2003. As of December 31, 2003,
Verestar, Inc. and its affiliates accounted for
$53.9 million, or 1.5%, of our backlog. As of
December 31, 2003, we had receivables of $7.9 million
due from Verestar, Inc. and its affiliates. The loss of
Verestar, Inc. as a customer would reduce our revenue and
backlog and could significantly adversely affect our business.

If our backlog is reduced due to the financial
difficulties of other customers, our revenue and profitability
would be further negatively impacted.

On May 31, 2002 StarBand Communications
Inc., which has been one of Lorals largest customers,
filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. StarBand emerged
from bankruptcy protection in November 2003. In February 2004,
Loral and StarBand entered into a new transponder capacity
agreement, amending and restating their prior contractual
relationship, and we will assume this new contract in connection
with the closing of the proposed Loral transaction. StarBand and
several other Loral customers that have been or are significant
in terms of Lorals revenue or future minimum lease
receipts due from customers under long-term operating leases are
experiencing financial difficulties or are not current on
amounts owed to Loral. Financial difficulties experienced by
Lorals customers could negatively impact Lorals
revenue or future minimum lease receipts due from customers
under long-term operating leases, which could limit our ability
to realize the full expected benefits of the proposed Loral
transaction.

We may not be able to complete strategic
transactions, such as the proposed Loral transaction, or
integrate new businesses successfully into our business, which
may prevent us from implementing our current strategies to grow
our business. In addition, investments that we have made in
potential growth businesses related to the fixed satellite
services sector may not succeed if the businesses in which we
invest fail to perform as expected.

Our ability to complete strategic transactions,
such as the proposed Loral transaction, 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.
Acquisitions, joint ventures,

8



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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 complete strategic
transactions or to integrate new businesses successfully into
our business or if investments we have made 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. Moreover, 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. In
addition, we may need to finance any strategic transaction that
we identify. If so, we may not be able to obtain the necessary
financing on satisfactory terms and within the timeframe that
would permit a transaction to proceed. If any of these factors
prevents us from completing strategic transactions, 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 returns that we realize from a given transaction.
Moreover, these expenditures may not result in the successful
completion of a transaction.

Even if we do complete one or more strategic
transactions, we may be unable to integrate successfully the
personnel and operations of a new business. In addition, we may
be unable to achieve the operational synergies or other benefits
that we had anticipated. 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. In addition, depending on how any such transaction
is structured, there may be an adverse impact on our capital
structure.

With respect to our investments in potential
growth businesses related to the fixed satellite services
sector, businesses in which we have invested may not perform as
expected. For example, we have acquired a minority stake in
WildBlue Communications, Inc., referred to as WildBlue, which
plans to offer broadband Internet access services in the
continental United States via Ka-band satellite capacity, and
have made an indirect investment in Galaxy Satellite
Broadcasting Limited, referred to as Galaxy, now a consolidated
subsidiary that provides 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 the proposed Loral transaction or other
aspects of our currently planned business strategy, or we may be
able to do so only on terms that significantly restrict our
ability to operate our business.

Implementation of our business strategy,
including our plans to enter into strategic transactions such as
the proposed Loral transaction, will require a substantial
outlay of capital. For example, we have agreed to pay a base
purchase price of $1.025 billion, subject to adjustment,
under the asset purchase agreement relating to the proposed
Loral transaction. Excluding the purchase price to be paid for
the assets to be acquired from the Sellers, we expect our
capital expenditures in 2004 to include approximately
$170 million in expenditures relating to the proposed Loral
transaction and approximately $300 million in other capital
expenditures. In terms of other cash outlays, we also expect to
repay $400.0 million in outstanding bonds in 2004. As we
pursue our business strategies and seek to respond to
opportunities and trends in our industry, our actual capital
expenditures may differ from our expected capital expenditures.
We expect that the majority of our liquidity requirements in
2004 will be satisfied by cash on hand and cash generated from
our operations. However, if we determine we need to

9



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obtain additional funds through external
financing and are unable to do so, we may be prevented from
fully implementing our business strategy.


We intend to use the net proceeds from our sale
in November 2003 of $400.0 million in aggregate principal
amount of 5 1/4% Senior Notes due 2008 and
$700.0 million in aggregate principal amount of 6 1/2%
Senior Notes due 2013 to finance the proposed Loral transaction.
However, if, among other things, the proposed Loral transaction
fails to close on or prior to April 30, 2004, we will be
required to redeem $700.0 million in aggregate principal
amount of these notes at 102% of the principal amount of the
notes being redeemed, plus accrued and unpaid interest, if any,
and any other amounts due to the date of redemption. We have
also entered into an $800.0 million credit agreement with a
group of banks pursuant to which those banks have agreed to
provide financing in connection with the proposed Loral
transaction and to provide sufficient liquidity following the
closing of the transaction, to pay our near-term debt
obligations as they become due and for working capital
requirements. However, the banks agreement to make funds
available to us is subject to the satisfaction of specified
conditions, none of which we can be assured of satisfying. If we
are not able to satisfy these conditions or there is a delay in
the completion of the proposed Loral transaction, we may be
required to seek alternative financing for the proposed
transaction. In addition, we may be required to seek financing
for any other strategic transaction requiring significant
capital expenditures that we pursue and for general corporate
purposes.

The availability and cost to us of external
financing depend on a number of factors, including our credit
rating and financial performance and general market conditions.
Both our credit rating and our ability to obtain financing
generally may be influenced by the supply and demand
characteristics of the telecommunications sector in general and
of the fixed satellite services sector in particular. Declines
in our expected future revenue under contracts with customers
and challenging business conditions faced by our customers are
among the other factors that may adversely affect 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. While the proposed Loral transaction would result in
an increase in our assets, the overall impact of the proposed
transaction on our financial condition may be negative or may be
negatively perceived by the financial markets and ratings
agencies and may result in adverse rating agency actions with
respect to our credit rating. A credit rating downgrade or
deterioration in our financial performance could limit our
ability to obtain financing or could result in any such
financing being available only at greater cost or on more
restrictive terms than might otherwise be available.

The agreements we enter into to obtain external
financing may impose restrictions on us that limit our
flexibility in conducting our business and implementing our
strategies. For example, our existing $500.0 million credit
facility and the new $800.0 million credit facility we
entered into in December 2003 contain financial and operating
covenants that, among other things, require us to maintain
financial coverage ratios and limit our ability to pledge our
assets as security for additional borrowings. These restrictions
will likely make it more difficult for us to obtain further
external financing if we require it and could significantly
restrict our ability to operate our business.

Our substantial indebtedness could
adversely affect our financial condition.

We have a significant amount of indebtedness. As
of December 31, 2003, our total indebtedness was
approximately $2.4 billion. In addition, in December 2003,
we entered into a credit agreement with a group of banks for an
$800.0 million three-year unsecured credit facility.

Our substantial indebtedness could:



| |   |                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make it more difficult for us to service our debt
    payments;                                                                                                                                                                                                            
|
| |  | increase our vulnerability to, or limit our
    flexibility in responding to, changes in economic or industry
    conditions;                                                                                                                                              
|
| |  | require us to dedicate a substantial portion of
    our cash flow from operations for payments on our indebtedness,
    thereby reducing the availability of our cash flow to fund
    working capital or capital expenditures or for other general
    corporate purposes;

10



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| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | place us at a competitive disadvantage compared
    to some of our competitors that may have less debt;
|
| |  | limit our ability to engage in strategic
    transactions or implement our business strategy; or       
|
| |  | limit our ability to borrow additional funds.                                                          

Our ability to make payments on and to refinance
our indebtedness and to fund planned capital expenditures will
depend on our ability to generate cash in the future. This
ability is, to a certain extent, subject to general economic,
financial, competitive and other factors that are beyond our
control.

In spite of our current indebtedness levels, we
may incur additional debt. If we incur additional indebtedness,
these risks will be magnified.

We may not be able to meet our planned
schedule for launching or commencing operations of our new
satellite, and the launch or commencement of operations of the
Telstar 8 satellite to be acquired from Loral may be
delayed. 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 our new IS-10-02
satellite 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
launch dates. We may also experience delays or be unable to
deploy new satellites as a result of delays in obtaining
necessary regulatory approvals or 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 have experienced delays
in the manufacture of the IS-10-02 satellite we currently have
on order, and the provider of launch services for this satellite
has postponed the launch date due to a delay in the manufacture
of the launch vehicle. Any prolonged inability to launch this
new satellite may adversely affect our ability to generate
revenue.

As part of the proposed Loral transaction, we
expect to acquire a satellite, Telstar 8, that is currently
under construction. Telstar 8 is expected to be launched in
the third quarter of 2004. If there is a significant delay in
the manufacture or launch of Telstar 8, we are unlikely to
realize the full expected benefits of the proposed Loral
transaction in the timeframe we currently expect.

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. Any such loss of a satellite 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, our IS-10-02 satellite, in the second quarter of
2004. In addition, one of the satellites that we expect to
acquire from Loral, Telstar 8, is expected to be launched
in the third quarter of 2004. 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 IS-10-02
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.

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The loss of a satellite due to a launch failure
could result in significant delays in revenue anticipated to be
generated by the satellite. 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
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. Any launch failure with respect to
Telstar 8 could prevent us from achieving the full expected
benefits of the proposed Loral transaction. Delay caused by
launch failures may also preclude us from pursuing new business
opportunities and undermine our ability to implement our
business strategy.

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 or the
satellites that we expect to acquire from Loral 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. 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 or the satellites that we expect to acquire from
Loral as a result of any of these or other events.

We have experienced some technical problems with
our current satellite fleet. Most of these problems have been
component failures and anomalies, such as the failure of several
battery cells on our IS-706 and IS-709 satellites and damage to
the north solar array structure of our IS-801 satellite
described elsewhere in this annual report. Because our
satellites are designed to accommodate an anticipated rate of
equipment failure, the technical problems experienced with the
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 IS-10-02 satellite, which will be the first in our
Intelsat X 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 IS-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, as well as through thorough on-site monitoring of
the construction and testing of the IS-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.

The satellites that we expect to acquire from
Loral may also experience technical problems. For example, in
September 2003, one of the satellites that we had originally
agreed to acquire, Telstar 4, experienced an anomaly in its
primary power bus that resulted in the total loss of
Telstar 4. As a result of the loss of Telstar 4, as of
December 31, 2003, the Sellers customers have
canceled contracts representing approximately $47 million
of future minimum lease receipts due to the Sellers from
customers under long-term operating leases.

Other satellites covered by our asset purchase
agreement with the Sellers have experienced technical problems
as well. For example, Telstar 5 has experienced the failure
of 12 strings on its north solar array and 2 strings on its
south solar array. A solar array string is a collection of solar
cells that generates power from sunlight. These strings are
combined in groups of two or three to create circuits, each of
which then contributes to the power needed to operate the
equipment and transponders on a satellite. The solar array
string failures experienced by Telstar 5 have to date
resulted in only a slight reduction in the number of active
Ku-band transponders that the solar panels on Telstar 5 can
support. A small number of additional transponders are scheduled
for deactivation in the future as normal solar array degradation
occurs. Additional string failures on

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Telstar 5 could have a significant impact on
the number of transponders that can be operated on the satellite
and as a result could significantly impact the revenue that can
be generated from the satellite.


Telstar 6 has experienced solar array
problems that appear to be different than those experienced on
Telstar 5. Due to the solar array problems on
Telstar 6, there is a risk that there could be a permanent
short on one of the solar arrays, making some portion of the
array unavailable to the satellite and thereby impacting the
power available to operate active transponders. Telstar 6
has experienced the failure of nine solar array strings, which
to date has not resulted in the need to reduce the number of
active transponders. However, a small number of transponders are
scheduled for deactivation in the future as normal solar array
degradation occurs. Additional string failures on Telstar 6
could have an impact on the number of transponders that can be
operated on the satellite and as a result could impact the
revenue that can be generated from the satellite. In addition to
the string failures, Telstar 6 has experienced the failure
of several traveling wave tubes, or TWTs, in its Ku-band
transponders, and, as a result, there is no redundancy in the
satellites East and West Ku-band beams. Additional TWT
failures in these beams would result in the loss of active
transponders at the rate of one transponder for each TWT failure
and could impact the revenue that can be generated from the
satellite. The Telstar 6 satellite has also experienced
recurring failures of one of its two central processing units,
or CPUs, including most recently in January 2004. A
satellites CPU is responsible for operation and control of
the satellite. Since the initial failures of the first CPU, the
satellite has been operated using its second CPU. No anomalies
have been experienced to date on the second CPU. In each case
where the first CPU has failed, it has eventually been restarted
and, with software patches, has assumed a back-up role for
operations. However, there can be no assurance that the first
CPU will be able to resume operations after the most recent
failure or will continue to function properly in the future if
it is restarted. If anomalies were to impact both CPUs, the
useful life of the Telstar 6 satellite could be negatively
impacted and our ability to generate revenue from the satellite
could be reduced or eliminated. The Telstar 6 satellite has
also experienced the failure of one of its two command
receivers. The satellite is fully capable of operating on the
one remaining receiver, and back-up commanding capability has
been restored by utilizing the limited remaining functionality
of the failed receiver and a software patch. As a result, we do
not consider this anomaly to be significant. However, the
Sellers insurance policy for the Telstar 6 satellite
excludes losses that may arise out of a command receiver
anomaly. If the proposed Loral transaction is completed and any
of the satellites to be acquired thereafter suffers a total or
partial loss, our ability to generate revenue from the affected
satellite may be permanently reduced or eliminated, which would
prevent us from receiving the full expected benefits of the
proposed Loral transaction.

Insurance for the in-orbit operations of
our satellites and the satellites we expect to acquire from
Loral 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
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 choose to insure the
in-orbit operations of 7 of our 23 satellites. Accordingly, we
would have to bear the entire cost of any loss to the 16
satellites for which we do not have in-orbit insurance coverage.
The net book value of these 16 satellites as of
December 31, 2003 was $888.7 million. In addition,
under the terms of our insurance policy for the satellites that
we currently insure, which expires in November 2004, we
co-insure $150.0 million of the net book value of each
satellite. The insurers cover the balance of the net book value
of each satellite, excluding capitalized performance incentives
relating to the satellites. Accordingly, if any significant loss
occurred to one of these satellites, we would bear up to
$150.0 million of the cost. The satellites covered under
this policy are the IS-901, IS-902, IS-903, IS-904, IS-905,
IS-906 and IS-907 satellites.

The in-orbit operations of the four satellites in
orbit that we expect to acquire from Loral are currently
insured. The Telstar 6 satellite is covered under a policy
that expires in May 2004 that covers the net book value of the
satellite. The Telstar 5 satellite is covered under a
policy that expires in May 2004, the Telstar 7 satellite is
covered under a policy that expires in September 2004 and the
Telstar 13 satellite is covered under a policy that expires
in August 2004. Each of these satellites is insured for an
amount in excess of its current net book value.

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Loral is required to maintain insurance on all
four of these satellites at certain prescribed levels set forth
in the asset purchase agreement until the closing of the
proposed Loral transaction.


We may determine not to obtain replacement
insurance when the in-orbit insurance coverage for any of our
satellites expires. In addition, we may determine not to extend
coverage or obtain additional coverage after the closing of the
Loral transaction relating to the satellites to be acquired from
Loral. We may also decide not 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 existing in-orbit
insurance coverage or seek to obtain new in-orbit insurance
coverage in the future, 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. In the
past three years, in-orbit insurance costs in general have
ranged from 1.60% to 3.25% of the insured value of a satellite
per year. The cost of insurance may increase or its terms may
become disadvantageous with respect to exclusions and
deductibles as a result of several factors, including the
failure or degradation of performance of one of our in-orbit
satellites or the failure of a similar satellite owned by
another operator.

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 covering the
Intelsat IX series satellites and Lorals policies
covering the Telstar 5, Telstar 6 and Telstar 13
satellites contain exclusions for losses relating to acts of
terrorism. Our in-orbit insurance policy covering the
Intelsat IX series satellites also contains exclusions
relating to existing anomalies on some of the satellites covered
by the policy. Lorals policies covering the Telstar 5
and Telstar 6 satellites contain exclusions relating to
specified problems experienced on those satellites. In addition,
our insurance does not protect us against lost or delayed
revenue, business interruption or lost business opportunities
and some of Lorals policies cover losses only after a
significant amount of the insured satellites capability
has been lost. 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 fixed satellite
services sector and the global telecommunications market 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 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

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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.


In connection with the proposed Loral
transaction, we will need to attract qualified personnel to sell
and market satellite capacity directly to customers that provide
cable programming distribution, video broadcasting services and
private data networking services in North America. We will also
need to attract qualified personnel to provide technical support
for the assets that we have agreed to acquire. If we have
difficulties in attracting and retaining, or are not able to
attract and retain, qualified personnel for these purposes, we
may not realize the full expected benefits of the proposed Loral
transaction as quickly as we currently expect, or at all.

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

Intelsat, Ltd. is a Bermuda-based company, and we
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 and the
United Kingdom. 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 conclude that we and our non-U.S. subsidiaries have
engaged in a trade or business within the United States.
Furthermore, Intelsat, Ltd. has obtained an assurance from the
Minister of Finance of Bermuda under the Exempted Undertakings
Tax Protection Act 1966 of Bermuda that, in the event that any
legislation is enacted in Bermuda imposing any tax computed on
profits, income or 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 it or
to any of its operations or to its shares, debentures or other
obligations except insofar as such tax applies to persons
ordinarily resident in Bermuda or to any taxes payable by it in
respect of real property or leasehold interests in Bermuda held
by it. However, Intelsat, Ltd. may become subject to Bermuda tax
after that date.

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. For example,
the telecommunications regulatory authority in one of the Latin
American countries we serve has indicated that, as a result of
our privatization, it believes that we are subject to taxation
on revenue generated from services provided to customers in that
jurisdiction. If the taxing authority in that jurisdiction
asserts that we are so subject to taxation, we intend to contest
that assertion. Although we believe that we have a reasonable
basis for contesting such assertion, we may not be successful.
If it is ultimately determined that we should have been paying
taxes with respect to this revenue, we could be required to pay
an amount equal to such taxes, together with interest and
penalties. Revenue generated from services provided to customers
located in that jurisdiction were approximately $20 million
in each of 2002 and 2003. In India, we have been contesting a
$1.7 million income tax assessment for 1996 and a
$3.9 million assessment for 1997. The assessments were
based on payments made to the IGO by one of its owners, which
was also a customer of the IGO, that were made in connection
with the customers use and resale in India of the
IGOs satellite capacity. We believe with respect to both
years that, for a number of reasons including the IGOs
status as a public intergovernmental organization, the IGO was
exempt from the obligation to pay income taxes in India. In each
case, the tax commissioner has found in favor of our position,
but the taxing agency has appealed the

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commissioners rulings. A hearing regarding
the 1996 tax assessment has been held before an appellate
tribunal, and in February 2004 this tribunal issued an order in
our favor. However, this order could be subject to further
appeal, and the taxing authoritys appeal relating to the
1997 tax assessment has not yet been heard. If it is ultimately
determined that we must pay either of the assessed amounts, we
believe we will also owe a significant amount of accrued
interest. In addition, there can be no assurance that we will
not face tax assessments in India for other periods prior to
privatization. Our results of operations could be materially
adversely affected if we become subject to a significant amount
of unanticipated tax liabilities.


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 or inaccessible, it would be
necessary for us to assume operations from our back-up facility
in order to control our satellites and continue providing
service to our customers. We may not have the personnel
available to assume operations from our back-up facility. If the
facilities we use to operate our system are disabled by or made
inaccessible because of a terrorist attack, or if we do not have
the personnel available to assume operations from our back-up
facility in the event of another emergency situation, we may not
be able to avoid interruption of service. 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 could
result in the recognition of an uninsured loss for any 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 fact
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 or any events relating to
political uncertainty in Argentina could put some of our backlog
represented by contracts with Argentine customers or receivables
due from Argentine customers at risk.

Risk Factors
Relating to the Proposed Acquisition of Satellites and Other
Related Assets from Loral

The proposed Loral transaction may not
occur on a timely basis or at all, as the required conditions to
the closing of the transaction may not be satisfied on a timely
basis or at all.

The asset purchase agreement contains several
conditions to closing that may not be satisfied or waived in the
time required under the asset purchase agreement or at all.
These conditions include conditions relating to the financial
performance of the assets to be acquired. A delay in satisfying
any of these conditions may prevent the proposed transaction
from being completed. If the closing of the proposed transaction
does not occur on or prior to April 12, 2004, we and the
Sellers each have the right to terminate the asset purchase
agreement. In addition, we and the Sellers have executed an
amendment to the asset purchase agreement that will become
effective upon the later of the approval of the bankruptcy court
and the consent of the required lenders under our new credit
facility. If the bankruptcy court does not approve the amendment
or the required lenders do not provide their consent, we and the
Sellers have the right to terminate the amendment and the
transaction may not occur. If the proposed Loral transaction is
terminated or is not completed prior to April 30, 2004 for
any reason,

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$700.0 million of the $1.1 billion in
senior notes we issued in November 2003 will be mandatorily
redeemed at a redemption price of 102% of the principal amount
of the notes being redeemed, plus accrued and unpaid interest,
if any, and any other amounts due to the date of redemption.


The purchase price for the assets is
subject to adjustment and, therefore, the final purchase price
cannot be determined at this time.

Under the asset purchase agreement, the base
price for the purchase of the assets to be acquired is
$1.025 billion. However, the purchase price is subject to
adjustment both upward and downward depending upon the
occurrence of specified events. In addition, some of the terms
of our agreement relating to purchase price adjustments were
agreed to with the Sellers in an amendment to the asset purchase
agreement referred to in the prior risk factor. This amendment
is subject to the approval of the bankruptcy court and the
consent of the required lenders under our new credit facility;
therefore, some of these terms may change. As a result, it is
not possible to ascertain the final purchase price as of the
date of this annual report.

The proposed transaction may not be as
financially or operationally successful as originally
contemplated.

In agreeing to the terms and conditions of the
asset purchase agreement, we made certain business assumptions
and determinations based on our investigation of the assets, the
Sellers and the business they conduct on the satellites to be
acquired, as well as other information then available. However,
these assumptions and determinations involve certain risks and
uncertainties that may cause these assumptions and
determinations to be inaccurate. As a result, we may not realize
the full benefits that we expect from the proposed transaction.

For example, our assumptions as to future revenue
in connection with the assets may prove to be incorrect. In
addition, if some or all of the customers that we expect to
continue to lease transponder capacity on the satellites to be
acquired fail to renew their commitments as they expire or
terminate their commitments early, the satellites to be acquired
could generate substantially less revenue than anticipated.
Total revenues generated by these satellites have been trending
downward. In addition, our license to provide certain services
to the Sellers customers following the closing of the
transaction is conditioned on our compliance with the
Open-Market Reorganization for the Betterment of International
Telecommunications Act, known as the ORBIT Act, which requires
that we conduct an initial public offering by June 30,
2004. Accordingly, if we do not conduct an initial public
offering by the ORBIT Act deadline, we may not be able to retain
the Sellers customers for the specified services following
the completion of the proposed Loral transaction. If our
assumptions, including those relating to the revenue generating
potential of the satellites to be acquired, prove to be
inaccurate, then the financial success of the proposed
transaction may be materially adversely affected.

We will be dependent on services provided
by the Sellers and Space Systems/ Loral, Inc., referred to as
SS/L, and their ability to retain highly skilled employees in
order to integrate and operate the satellites as part of our
business and operations and to complete construction of
Telstar 8 and an additional satellite that we have agreed
to order from SS/L.

We will rely, at least initially, on the training
and technical services provided by the Sellers under transition
services agreements in order to integrate and operate the
satellites as part of our business and operations. In addition,
we are relying on SS/L to complete construction of
Telstar 8. Any failure of the Sellers or SS/L to provide
these services in accordance with their obligations or at all
may increase the costs of integrating the Sellers assets
or prevent us from realizing the benefits that we expect from
the proposed Loral transaction.

If the Sellers fail to comply with the transition
services agreements or if they fail to provide the required
training and services in a timely, professional, workmanlike and
consistent manner, the satellites to be acquired may not be
properly and effectively integrated into our business and
operations. Similarly, if SS/L fails to comply with the
procurement agreement relating to Telstar 8 or if SS/L
fails to perform its obligations thereunder in a timely,
professional, workmanlike and consistent manner, construction of
the satellite may not be completed on a timely basis or at all.
These failures may result from the pending bankruptcy
proceedings relating to the Sellers and SS/L. For example, the
bankruptcy proceedings may make it difficult for the Sellers or
SS/L to maintain the highly skilled workforce that will be
necessary to provide services under the transition services
agreements or

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complete construction of Telstar 8. In
addition, the Sellers and SS/L may fail to emerge from
bankruptcy protection. If for either of these reasons SS/L fails
to deliver Telstar 8, we are unlikely to achieve the full
expected benefits of the proposed Loral transaction. If for
either of these reasons the Sellers fail to provide the services
as required under the transition services agreement, given the
complexity of the services to be provided under those
agreements, it could be difficult to engage an alternative
service provider to mitigate the effect of this failure. If an
alternative service provider could not be engaged on a timely
basis or at all, we may incur unexpected costs in connection
with integrating and operating the satellites as part of our
business and operations, and we may not realize the full
benefits that we expect from the proposed Loral transaction.


Pursuant to our asset purchase agreement with the
Sellers, we have agreed to enter into a procurement agreement
with SS/L for a new satellite upon the closing of the proposed
Loral transaction. We will make a deposit of $50.0 million
as prepayment for a portion of the purchase price of this new
satellite. SS/Ls obligations under this procurement
agreement are expected to be secured by SS/Ls and its
affiliates interests in an in-orbit satellite, insurance
proceeds relating to the satellite and other collateral that are
not included in the assets to be acquired from the Sellers. This
satellite has experienced technical problems that may not allow
us to realize the full expected value of the collateral if we
are required to foreclose. Our obligation to make the
$50.0 million prepayment is conditioned on our receiving
the required security interest. If we enter into this
procurement agreement and SS/L fails to perform its obligations
thereunder in a timely, professional, workmanlike and consistent
manner, construction of this new satellite may not be completed
on a timely basis or at all. In addition, if SS/L fails to
perform its obligations under this procurement agreement, we may
not be able to recover our cash deposit and may be forced to
foreclose on the collateral.

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 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
have received 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,

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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 realized
certain advantages as a result of being operated by the IGO. Our
business no longer enjoys these advantages following the
privatization.

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

As a public intergovernmental organization, the
IGO 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 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 service fees
owed to us by these owners. We no longer have the benefit of
this collateral.

Also, the IGOs owners held investment share
in the IGO and were the IGOs principal customers. Our
shareholders, who were the IGOs owners before
privatization, accounted for approximately 89% of our revenue in
2001, 78% in 2002 and 53% in 2003. 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 ownership of our ordinary
shares is no longer connected to our customers use of our
system, our customers may increase their use of the systems of
other telecommunications services providers, which could
negatively impact our future revenue and profitability.

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 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 39% of the outstanding customer commitments
represented in our December 31, 2003 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.

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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 18% of the
outstanding customer commitments represented in our
December 31, 2003 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 ability to set prices freely.

We also agreed to enter into non-exclusive
service 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 or to implement
our 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 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 a distribution
agreement for another five years, we may be subject to these
non-discriminatory treatment 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.

Risk Factors
Relating to Regulation

Successful deployment of our satellites
depends upon our ability to maintain existing regulatory
authorizations to operate our satellites at certain locations
and to obtain any required authorizations in the future. If we
do not obtain all of the 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, with one
exception. Specifically, the BSS portion of our Ku-band
operations on one satellite is regulated by the U.K. Office of
Communications, referred to as Ofcom. We have obtained
authorizations from the FCC to operate our existing satellites
and to construct, launch and operate our planned additional
satellite. FCC authorization for our existing and currently
planned satellites is conditioned on our compliance with the
requirements of the ORBIT Act, described in the risk factor
below. If we do not maintain FCC authorizations for our existing
and currently planned satellites or do not obtain any required
authorizations in the future, 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 3,420 MHz to 6,650 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 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.

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We may not be able to complete an initial
public offering on terms that meet the requirements of the ORBIT
Act. If we fail to meet the requirements of the ORBIT Act, the
FCC could withhold authorization for our pending applications or
could limit the use of our satellite capacity for certain types
of services. Moreover, because FCC authorizations for our
existing satellites are conditional, our failure to complete an
initial public offering on terms that meet the requirements of
the ORBIT Act could result in the breach of covenants contained
in our debt instruments.

The ORBIT Act sets forth criteria that the FCC
must evaluate in considering our license and renewal
applications, and in connection with customer requests for
authorization to use our satellite capacity to provide
non-core services to, from or within 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. One of the statutory criteria
requires us to make an initial public offering that will
substantially dilute the ownership interest in our
company held by the IGOs former Signatories, which were
its primary owners. The ORBIT Act, as amended, sets a deadline
for us to conduct an initial public offering of
December 31, 2003, which may be extended to June 30,
2004 by the FCC. On December 17, 2003, the FCC extended
this deadline to June 30, 2004. This deadline cannot be
further extended unless the ORBIT Act is amended.

In connection with our authorization from the FCC
relating to the proposed Loral transaction, in February 2004,
the FCC interpreted the ORBIT Act to authorize it to take action
to preclude us from providing certain defined additional
services that we did not provide prior to March 17,
2000, the effective date of the ORBIT Act. Additional
services are direct-to-home or direct broadcast satellite
video services and services in the Ka- or V- band. Consequently,
the FCCs authorization relating to the Loral transaction
prohibits our Intelsat North America LLC subsidiary from using
the Loral satellites following the closing of the Loral
transaction to provide direct-to-home video services, referred
to as DTH services, for Lorals customers or for new
customers until we have completed an initial public offering
that meets the requirements of the ORBIT Act. Nevertheless, the
FCC granted special temporary authority to Intelsat North
America LLC to provide DTH services to existing customers of
Loral for 180 days commencing on the closing date of the
Loral transaction. The FCC has also required Intelsat North
America LLC to notify Lorals DTH customers of this special
temporary authority within 30 days of the closing date of
the Loral transaction.

In considering our applications and customer
requests as described above, the FCC is required to determine
whether we have complied with the criteria set forth in the
ORBIT Act, including the criteria relating to our initial public
offering. The ORBIT Acts criteria for our initial public
offering are subject to interpretation by the FCC, and we cannot
be certain how the FCC will interpret these criteria. Even if we
complete our initial public 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 comply with the criteria set forth in the ORBIT Act,
including the criteria relating to our initial public offering,
the ORBIT Act directs the FCC to impose limitations on or deny
our applications for satellite licenses and for the renewal of
satellite licenses, as well as to limit or revoke previous
authorizations to use our satellite capacity to provide
non-core services, as defined above, to, from or
within the United States. The FCC may also deny licensing for
additional services, as described above.
Accordingly, we could be prevented from providing capacity for
services such as Internet access and high-speed data and video
transmission. If we were prevented from providing capacity for
these services, our revenue and the value of our business would
be significantly impacted, and we could fail to realize almost
entirely the positive impact on our revenue that we expect as a
result of the proposed Loral transaction. In 2003, revenue
derived from U.S. customers for the use of our capacity for
services that we believe would be characterized as
non-core services or additional services
was approximately $154.9 million. In addition, over 90% of
revenue from the assets we expect to acquire pursuant to the
proposed Loral transaction is generated by services that we
believe could be deemed non-core services under the
ORBIT Act. We would also be unable to implement important
aspects of our business strategy, including our strategy to
expand our customer base for video applications. Our failure to
complete an initial public offering on terms that meet the
requirements of the ORBIT Act could result in the breach of
covenants that are contained in our existing debt instruments
and that may be contained in our future debt instruments, such
as covenants to comply with applicable laws.

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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 negatively impact our ability to provide the
services we intend to provide using a satellite located at a
given orbital location. In addition, 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.

Ofcom has made filings on our behalf with the
International Telecommunication Union for the rights to use a
number of Ka-band orbital locations. We currently do not have
any Ka-band satellites, and therefore we are not currently
utilizing any of these filings. Under the Radio Regulations of
the International Telecommunication Union, which Ofcom applies
to satellite operators subject to its jurisdiction, we must
bring into use these filings by specified deadlines or we will
lose our rights to the associated orbital locations. We are
required to use all but one 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 Ka-band orbital locations. We
must occupy the remaining Ka-band location by 2008. We have not
at this time 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 use the
Ka-band orbital locations. If we lose our rights to use these
Ka-band orbital locations, the locations would then become
available for use by other satellite operators.

In addition, in connection with an International
Telecommunication Union priority issue relating to one of the
orbital locations to which we will be acquiring rights from the
Sellers, our ability to operate a satellite in this location may
be limited. If the priority issue is not resolved and we are not
able to devise a satisfactory alternative, we may not realize
the full expected benefits of the Loral transaction. In
addition, we may be required to make a cash payment in
connection with resolving the priority issue that could increase
the purchase price for the assets to be acquired from the
Sellers or otherwise impact our results of operations for future
periods.

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 could 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.

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Pursuant to our business strategy, we have
expanded our operations to provide these services for some of
our customers, and accordingly have become subject to additional
regulatory requirements. If we cannot obtain or are delayed in
obtaining the regulatory approvals needed to provide new
services to our customers and to engage in these operations, we
may not be able to implement elements of 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 and other services
that we 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 Minister of Finance of Bermuda and other Bermuda laws and
    regulations;
|
| |  | regulation by the U.K.s Office of
    Communications;                                                                             
|
| |  | 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 could result in decreased revenue, increased costs and a
decline in our profitability.

Finally, we are subject to fees associated with
the regulatory and licensing requirements discussed above. The
countries, territories and institutions that regulate us could
change these fees at any time. Significant increases in the fees
to which we are subject in a particular jurisdiction could
negatively impact our plans to provide services in that
jurisdiction or our profitability.

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

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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, 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.


Many of our employees are non-U.S. nationals.
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, we could be exposed 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 is subject to the
Companies Act 1981 of Bermuda. Our principal executive offices
are located at North Tower, 2nd Floor, 90 Pitts Bay Road,
Pembroke HM 08, Bermuda, and our telephone number is
(441) 294-1650.

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 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. For example, 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. In November 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. On July 18, 2001, substantially all of
the assets and liabilities of the IGO were transferred to us.

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The privatization required the amendment of the
two formal agreements establishing the IGO. These two agreements
were 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, which both 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 our privatization.

Formal entry into force of the amendments to the
INTELSAT Agreement will occur 90 days after the depositary
to the INTELSAT Agreement notifies all of the Parties that it
has received formal notice of approval, acceptance or
ratification of the amendments from the required number of
Parties. At that time, the amendments will formally enter into
force for all Parties that have not withdrawn from the IGO,
including those that have not yet accepted, approved or ratified
the amendments. The required approval will be obtained once two
thirds of the Parties that were parties to the INTELSAT
Agreement on November 17, 2000, or 96 Parties, have
notified the depositary of their formal approval, provided that
those Parties or the Signatories they designated to hold an
investment share in the IGO held at least two thirds of the
total investment share of the IGO as of that date. As of
January 16, 2004, the depositary to the INTELSAT Agreement
had received formal notice of ratification from 87 Parties,
representing over two thirds of the total investment share of
the IGO as of November 17, 2000.

Upon our privatization, the IGOs
Signatories and Investing Entities became the shareholders of
all of the outstanding ordinary shares of Intelsat, Ltd.
Ordinary shares were allocated among the IGOs Signatories
and Investing Entities in proportion to their investment share
in the IGO. Each Signatory and Investing Entity that 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 ordinary
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 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 4B  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 provider of satellite
communications services worldwide, supplying voice, data and
video connectivity in over 200 countries and territories.
Founded in 1964, we have provided communications capacity for
events that were milestones in 20th century history 
from broadcasting the video signals of the first moon walk, to
providing the hot line connecting the White House
and the Kremlin, to broadcasting live television coverage of
every Olympics since 1968.

We currently provide services that are utilized
by leading multinational corporations, the U. S. government and
major communications providers around the world. Our goal is to
be a global connectivity leader connecting people and businesses
around the globe with high-quality, flexible and innovative
communications services.

As described in  Agreement to
Purchase the North American Satellite Assets of Loral
below, we have entered into an asset purchase agreement to
acquire satellites and related assets, including customer
contracts, from Loral Space & Communications Corporation and
certain of its affiliates. Except as specifically indicated
otherwise, the discussion in this section does not give effect
to the proposed Loral transaction.

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Our
Strengths

Solid
Financial Performance

We compete in the fixed satellite services
sector, which has a history of solid performance characterized
by financial consistency and predictability. We have generated
net income every year since 1973. As of December 31, 2003,
we had a backlog of approximately $3.6 billion. In 2003, we
had revenue of $952.8 million, net income of $181.1 million
and EBITDA, as adjusted, of $687.6 million. A reconciliation of
EBITDA, as adjusted, to net income and information regarding the
reasons why we present EBITDA, as adjusted, and how we use
EBITDA, as adjusted, are provided in Item 5 
Operating and Financial Review and Prospects 
Results of Operations  Years Ended December 31,
2003, 2002 and 2001  EBITDA, As Adjusted. We
believe that our competitive position is enhanced by our solid
balance sheet and strong cash flow from operations.

Diversified
Geographic and Service Application Mix

We operate our business on a global basis. We
believe that one of our strengths is our diversified geographic
and service application mix. Almost every populated region of
the world contributes significantly to our revenue. We
distinguish ourselves by the diverse range of applications that
our services support, including voice and data communications,
corporate networking, video broadcasting and Internet
connectivity. Each of these service applications contributes
meaningfully to our revenue. This diversified geographic and
service application mix contributes to the relatively high level
of stability of our business and allows us to selectively target
growing markets.

Established
Customer Base

We provide satellite services to over 600
customers, including many of the worlds leading
communications carriers, broadcasting companies, network
integrators and Internet service providers. We have served many
of our largest customers for over 30 years and have
well-established relationships with the dominant communications
services providers in many countries. Customers that use our
capacity include:

|                                 |  |                  
|-------------------------------- |  | -----------------
| AT&T Corp.                     |  |  France Telecom 
| British Telecommunications plc |  |  U.S. Government
| China Telecom                  |  |  United Nations 
| CNN International              |  |  World Bank     

We believe that our existing customer base
provides us with a competitive advantage in local markets around
the world and with credibility as we introduce new services.

Global
Network

Our global communications network includes 23
satellites in orbit and leased capacity on 2 additional
satellites owned by other satellite operators in the
Asia-Pacific region, as well as ground facilities related to the
operation and control of our satellites. We also have
terrestrial assets consisting of teleports, points of presence
and fiber connectivity that complement our satellite network and
that we use to provide integrated end-to-end services. Our
satellite network covers over 99% of the worlds populated
regions, and we have market access to provide satellite capacity
in the C- and Ku-bands in over 200 countries and territories.
Our network enables us to provide services, such as the
distribution of television content, that require the ubiquity
and point-to-multipoint capability of satellite communications.
In addition, we provide GlobalConnexSM Solutions
services, which combine satellite capacity, teleport facilities,
satellite communications hardware and fiber optic cable and
other ground facilities, and other managed services. Managed
services include monitoring the performance of our
customers networks as part of the service. We offer
services in our GlobalConnexSM Solutions portfolio
for a variety of applications, including government/military,
video contribution and Internet.

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We believe that the global coverage provided by
our satellite network distinguishes us from most of our
competitors and 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. The
size and coverage of our network allow us to provide
high-quality, reliable service worldwide. Due to the extensive
scope of our network, we believe we can provide critical
connectivity to communications carriers and other communications
providers that are not effectively served by fiber optic cable.

Solid
Positioning in Growing Customer Segments

We believe that corporate and broadband data and
government/military applications represent opportunities for
stable growth over the long term for operators in the fixed
satellite services sector. We expect very small aperture
terminal, or VSAT, networks, to continue to grow as corporations
and value-added network services providers seek to connect
thousands of locations across a region or across several
countries into a single, managed network. As a result of our
existing relationships with corporate end users and network
services providers, we believe we are well positioned in the
global satellite-based data services market.

As a result of the current geopolitical
environment and the increasing homeland security requirements of
the U.S. government, we believe that government/military
customers will require greater communications capacity for
defense and civilian agency service applications. Customers in
the government/military segment currently rely on commercial
satellite capacity for a substantial portion of their
mission-critical communications and customized managed services.
We believe that we are a leader in the sale of satellite
capacity to the U.S. government. We intend to leverage our
well-established customer relationships, our global reach and
our operational excellence to strengthen our position in this
customer segment.

Operational
Excellence

We believe that the reliability and integrity of
our network is critical to our customers and end users, since
our capacity is used for applications ranging from command and
control of military operations to worldwide links for embassies
and financial institutions. Our customers rely on our
operational experience, gained through our nearly 40-year
operating history, and our engineering leadership, demonstrated
by our 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 life cycle
of each of our satellites, from the initial stages of
development and construction through the end of a
satellites orbital life. For the year ended
December 31, 2003, our transponder availability rate was
99.997%, with the availability rate averaging 99.997% since
1985. See  Network  Our
Satellites below for a discussion of how we calculate our
transponder availability rate. We believe that our long history
of high-quality, reliable service is a leading contributing
factor to our ability to attract and retain our customers.

We intend to leverage our solid financial
position 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:



| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | focus on growing our business in the video,
    government/military and corporate network customer segments by,
    among other things, expanding our managed service offerings;                                                                                                                                                                                  
|
| |  | sustain our leadership position in the voice and
    data customer segments by, among other things, expanding our
    managed service offerings, developing new applications such as
    voice over Internet protocol, referred to as VoIP, and focusing
    on niche markets, such as connectivity services for wireless
    operators in developing regions; and

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| |   |                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pursue strategic transactions, such as the
    proposed Loral transaction, to further diversify our service
    application mix, enhance the geographic coverage of our network
    and achieve operational efficiencies to improve our long-term
    financial performance.

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

Grow
Our Business in the Video, Government/ Military and Corporate
Network Customer Segments

We believe that video, government/military and
corporate network applications represent opportunities for
revenue growth over the long term for operators in the fixed
satellite services sector. We intend to focus our resources on
further penetrating these customer segments in order to increase
our market share in these segments and to further diversify our
customer base.

Video

We offer two types of services to video
customers: distribution and contribution. Distribution refers to
the transmission of television programming for broadcasters,
cable networks, direct-to-home service providers and other
redistribution systems. 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.

We are currently developing broadcast
neighborhoods in Latin America and Africa. By attracting
additional broadcasters of popular television programming to
selected satellites in our fleet, we plan to expand the
broadcast communities on those satellites. Because cable systems
and other television content redistribution systems install a
large number of fixed 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.

We also intend to build new direct-to-home video
broadcast communities in areas of Eastern Europe, Africa and the
Asia-Pacific region. Our satellite system currently distributes
direct-to-home programming for a number of regional providers,
and we are focused on growing our share of the distribution
market for direct-to-home service providers. 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.

With respect to video contribution, we intend to
leverage our hybrid infrastructure and use strategic
transactions to grow our business. In February 2003, we
introduced an end-to-end, managed contribution service to
address the needs of broadcasters and video programmers around
the world. Our end-to-end, managed 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.

Although we currently serve only a small fraction
of the video segment, we intend to focus on expanding our
customer base and market share in this segment as described
above and through the proposed Loral transaction. We believe
that the proposed Loral transaction, if consummated, will permit
us to provide enhanced services to customers in the broadcasting
segment worldwide by enabling us to offer content distribution
services into and throughout the continental United States. We
have created a strategic business unit that will be responsible
for achieving these goals.

Government/
Military

We believe that the defense and civilian agencies
of various governments are experiencing an increased need for
communications services, creating demand for both government-
and military-owned satellite capacity as well as commercial
satellite capacity. This trend is creating opportunities for
satellite providers, particularly those with the global coverage
and 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 governmental and military entities are current users of our
system.

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We intend to leverage our customer relationships,
our operational excellence and the flexibility of our hybrid
network to strengthen our position in this customer segment. We
have created a strategic business unit to ensure that our
corporate structure and sales capabilities enable us to respond
quickly to government/military opportunities. We believe that
our expanded service capability, including our emphasis on
managed services, will attract additional government business
and enable us to work with a broader scope of government
contractors and integrators.

Corporate
Network

We believe that the provision of satellite
capacity for corporate networks is a growing market in which we
enjoy a solid position. Corporate networks carry
point-to-multipoint traffic, utilizing the broadcasting
capabilities of satellites to communicate to different locations
simultaneously, as well as point-to-point traffic. We intend to
broaden our customer base by establishing relationships with
satellite-oriented service providers that are not already our
customers and by marketing our managed services to general
integrators with less experience in satellite services. To
increase the use of satellite services as extensions of and
overlays to the networks of private network providers, we expect
to use partnerships to develop the capability to provide
flexible end-to-end services, including network design, hardware
coordination and testing assistance. 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.

Our corporate network 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 small distributors, we expect to be serving a
customer base that requires our external expertise to integrate
and manage the many communications media that comprise a
high-performance network.

We believe that broadband access is a corporate
network application that represents a long-term opportunity for
growth. We believe that the evolution of the Internet and the
digitization of media and entertainment properties have
increased the demand for broadband connectivity. Based on
discussions with customers in our distribution network and
market research, we believe that small- and medium-sized
enterprises, particularly in developing regions, have broadband
service requirements that are currently not being met. We
believe that VSAT and other satellite-based networks are 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 direct 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. We are also analyzing various partnering and
alliance strategies in this area to gain access to
next-generation technology while limiting our business risks.
For example, in April 2003, we acquired a minority stake in
WildBlue, which plans to offer broadband Internet access
services in rural and suburban areas of the continental United
States via Ka-band capacity. For information regarding our
investment in WildBlue, see Item 5 
Operating and Financial Review and Prospects 
Related Party Transactions  WildBlue Subscription
Agreement. We will defer making significant investments in
broadband access services until we are convinced that the market
for these services is sufficiently defined. Through this
progressive strategy, we plan to be positioned for leadership
when this market develops.

Sustain
Our Leadership Position in the Voice and Data Customer
Segments

We intend to sustain our leadership position in
the voice and data customer segments by leveraging our global
network, technical expertise and well-established customer
relationships to offer new services, including managed services,
to our existing customers and to broaden the scope of the
customers we serve for carrier and Internet applications. We
expect that our achievement of these goals will be facilitated
by the trend toward deregulation of telecommunications services
in many markets and the removal of restrictions on our business
as a result of our privatization, which provide us with
opportunities to: build additional sales channels for our
services

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in regions or markets where distribution of our
services was previously limited, and utilize terrestrial-based
facilities to complement our global satellite network and
provide managed and integrated, end-to-end services.


We intend to leverage our leadership in providing
voice and data services for carriers by expanding our managed
service offerings and developing new applications, such as VoIP.
We are also focusing on niche markets in the voice and data
customer segment, such as connectivity services for wireless
operators in developing regions. In addition, we intend to
increase our focus on customers utilizing satellite capacity for
thin-route and middle-mile applications, which include
point-to-point and managed services. Thin-route applications are
connections between low-traffic communications hubs in smaller
cities. Middle-mile applications are connections from cable
interconnects or communications hubs to telecommunications
central offices in remote or unserved areas. We are also
planning to increase our regional sales presence and target
customers in newly deregulated markets, where new carrier
companies and providers of competitive services, such as
wireless communications, are seeking to introduce their services
quickly and independently of the local established carriers. In
addition, we intend to introduce new, more cost-effective
technologies and new integrated services to our existing
customers, which we believe will enhance our retention rates and
provide our customers with more efficient use of our network.

We have been providing transmission capacity for
the Internet since its inception in the 1970s and intend to
sustain our leadership position in this segment. 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 managed services, as
well as offering integrated services to our Tier 1 Internet
service provider customers. Tier 1 Internet service
providers are carriers whose Internet traffic is sufficiently
large that they exchange traffic at no cost with other carriers
of similar size. In addition, we are expanding our marketing
directly to regional Tier 2 and Tier 3 Internet
service 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.
For information regarding our initiatives for broadband Internet
direct access services, see  Our
Strategy  Grow Our Business in the Video,
Government/ Military and Corporate Network Customer
Segments  Corporate Network above.

Because satellite capacity is often the most
strategic and complex part of a communications network, we
believe that we are well positioned as compared with
ground-based communications services providers to offer
cost-effective global connectivity services. We will use our
global network, technical expertise and established customer
relationships, as well as the opportunities resulting from
deregulation and from our privatization, to implement the
specific initiatives for the carrier and Internet applications
discussed above in order to sustain our leadership in voice and
data services.

Pursue
Strategic Transactions

The fixed satellite services sector is
experiencing consolidation, and a key component of our strategy
is to evaluate and pursue strategic transactions that we believe
could:



| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | broaden our customer base, including in the
    video, government/military and corporate network customer
    segments;                                                                                 
|
| |  | provide enhanced landmass coverage of strategic
    geographic regions, including regions experiencing growth;                                                                                          
|
| |  | 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;
|
| |  | further leverage our existing hybrid
    infrastructure;                                                                                                                                                
|
| |  | enable us to shift our service application mix to
    include more point-to-multipoint traffic; and                                                                                                     
|
| |  | create operational efficiencies.                                                                                                                                                                        

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Our ability to complete any strategic
transaction, such as the proposed Loral 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 adverse impact on our capital structure. See
Item 3.D  Risk Factors for a general
discussion of the risks and uncertainties associated with
strategic transactions and for a discussion of the risks and
uncertainties associated with the proposed Loral transaction.

Our Customers
and Service Applications

We provide satellite services to over 600
customers, including many of the worlds leading
communications carriers, broadcasting companies, network
integrators and Internet service providers. We consider our
customer relationships to be among our most important strategic
assets. We support our customers business strategies by
providing high-quality, reliable satellite-based services
worldwide at competitive prices. In addition, we believe that we
provide our customers with a superior level of satellite
expertise. For these reasons, we believe that our business
relationships with our current customers are generally good.

Based on information available to us, our ten
largest customers and their affiliates, and their approximate
contributions to our 2003 revenue, were as follows:

|                                                         |  |                   |                |           |  |  |      | 
|-------------------------------------------------------- |  | ----------------- | -------------- | --------- |  |  | ---- | 
|                                                         |  |                   |                | % of 2003
|Customer                                                 |  | Customer Location |                | Revenue  
|                                                         |  |                   |                |          
|British Telecommunications plc and its affiliates        |  |                   | United Kingdom |           |  |  | 4.8% | 
|WorldCom, Inc. and its affiliates                        |  |                   | United States  |           |  |  | 4.5% | 
|COMSAT Corporation and its affiliates                    |  |                   | United States  |           |  |  | 4.4% | 
|Videsh Sanchar Nigam Limited                             |  |                   | India          |           |  |  | 4.2% | 
|Telenor Satellite Broadcasting AS and its
    affiliates |  |                   | Norway         |           |  |  | 4.1% | 
|AT&T Communications and its affiliates                   |  |                   | United States  |           |  |  | 3.2% | 
|Teleglobe Canada Inc. and its affiliates                 |  |                   | Canada         |           |  |  | 2.9% | 
|Telkom SA Limited                                        |  |                   | South Africa   |           |  |  | 2.8% | 
|Verestar Inc. and its affiliates                         |  |                   | United States  |           |  |  | 2.6% | 
|Cable and Wireless plc and its affiliates                |  |                   | United Kingdom |           |  |  | 1.9% | 

See Item 3.D  Risk
Factors for a discussion of risks if we are unable to
retain our customers or if our customers experience financial
difficulties.

Under the terms of the asset purchase agreement
relating to the proposed Loral transaction, service contracts to
be assigned to us include contracts with CBS Broadcasting Inc.
and Hughes Network Systems, Inc. For information about financial
difficulties experienced by several of the Sellers
customers, see Item 3.D  Risk
Factors.

Substantially all of our revenue has historically
been generated by the sale of our satellite transmission
capacity to our customers on a wholesale basis. Some of our
customers resell our capacity to end users of our system. None
of our direct customers accounted for 5% or more of our revenue
in 2003.

We believe that our global communications network
is used to support a wide range of service applications. In
2003, we believe that our satellite capacity was used for five
principal service applications: carrier, corporate network,
video, government/military and Internet. Given the emphasis of
our business strategy on customers in the government/military
segment, we determined that from January 1, 2003 we would
include government/military as a category in the breakdown of
our revenue by service application, but this service application
is not included as a separate category for prior periods.

The following table summarizes the service
applications supported by our network, the types of end users
that rely on these applications and the percentage of our
revenue generated by the sale of capacity for each

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service application category. The breakdown of
our revenue by service application category is based on our
analysis of transmission plans and other information supplied to
us by our customers. While we believe that the information
provided to us is reliable, it has not been verified by us or
any independent sources and we cannot assure you as to its
accuracy. The illustrative examples in the table below are based
on general information about the telecommunications industry.


|                     |          |                           |     |                       |  |      |     |              |  |                    |     |           |  |                                                                                                               |                                     |                                                                                                               |                                |                                                                                                            |                                                                                                                     
|-------------------- | -------- | ------------------------- | --- | --------------------- |  | ---- | --- | ------------ |  | ------------------ | --- | --------- |  | ------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------------------------------------------------------------------------------- | ------------------------------ | ---------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------
|                     |          |                           |     |                       |  |      |     |             
|                     |          | Percentage of Revenue for |     |                       |  |      |     |             
|Service              |          | the Year Ended            |     |                      
|Application Category |          | December 31,              |     | Illustrative Examples
|                     |          |                           |     |                      
|                     |          | 2001                      |     | 2002                  |  | 2003 |     | Applications |  | Types of End Users |     | End Users
|                     |          |                           |     |                       |  |      |     |              |  |                    |     |          
|Carrier              |          |                           | 38% |                       |  |      | 37% |              |  |                    | 37% |           |  | International telephony
    Domestic telephony
    Cable restoration
    Data circuits                        |                                     | Incumbent telephone  companies
    Competitive telephone  and data companies
    Long haul service  providers |                                | AT&T Corp.
    British Telecommunications plc
    China Telecom
    Global Crossing
    Vodacom (Pty) Ltd.
|                    
|Corporate Network    |          |                           | 27% |                       |  |      | 30% |              |  |                    | 26% |           |  | Corporate WANs
    Intranets/extranets Videoconferencing
    Distance learning
    Credit card  authorization |                                     | Corporations
    Organizations
    Intergovernmental  agencies                                                |                                | Central Bank of the
    Russian  Federation
    Schlumberger Ltd.
    World Bank                          
|                    
|Video                |          |                           | 19% |                       |  |      | 17% |              |  |                    | 16% |           |  | Broadcast network  distribution
    Cable network content  distribution
    Remote news gathering             |                                     | Media conglomerates
    News organizations
    DTH system operators
    Cable broadcast  networks             |                                | BBC World
    Canal Digital
    CNN International
    MTV3
    TIBA S.A.                                  
|                    
|Government/          |          |                           |     |                       |  |      |     |              |  |                    |     |           |  |                                                                                                               |                                     |                                                                                                               |                                |                                                                                                           
|                     | Military |                           |     |                      |  |      |     |             |  |                    |     | 11%       |  |                                                                                                               | Internet, video and  data transport |                                                                                                               | Governments
    Military users |                                                                                                            | Armed Forces Television  Network
    U.S. Navy National Oceanic  and Atmospheric Admin.
    U.S. Department of State
|                    
|Internet             |          |                           | 16% |                       |  |      | 15% |              |  |                    | 10% |           |  | Internet backbone  connectivity                                                                               |                                     | Tier 1 and Tier 2 Internet
    service  providers                                                             |                                | Cable and Wireless plc
    UUNet
    Sprint Corporation                                                   

We refer in this annual report to a number of our
customers and end users. Our customers and the end users of our
network 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 each of these customers and end users is 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 between major telecommunications hubs. However, we
do not include trunking to the Internet backbone and
point-to-point corporate network applications in our carrier
service application, because we consider them to be separate
applications. Our customers for carrier applications are
primarily large, established communications services providers
and post, telephone and telegraph administrations around the
world.

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
the migration to fiber of our point-to-point carrier customers
on certain routes, we believe that we will continue to earn a
significant portion of our revenue from our carrier applications
in the near term. For a discussion of our

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strategy with respect to carrier services, see
 Our Strategy  Sustain Our
Leadership Position in the Voice and Data Customer
Segments above.


Corporate
Network Applications

Corporate network applications include the use of
our capacity for private communications networks using VSATs.
VSATs are devices with small antennas that can receive and
transmit communications signals to and from a satellite. A
network of VSATs can be used for such point-to-multipoint
applications as those noted in the table above, as well as for
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 Schlumberger Ltd., British
Telecommunications plc, Equant N.V. and Maritime
Telecommunications Network, Inc. These integrators combine
satellite capacity and other communications services to create
customized networks that respond to specific customer needs. For
a discussion of our strategy with respect to corporate network
applications, see  Our Strategy 
Sustain Our Leadership Position in the Voice and Data Customer
Segments 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 both video contribution and video distribution. 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 services market in the future, as
discussed in  Our Strategy  Grow Our
Business in the Video, Government/ Military and Corporate
Network Customer Segments  Video.

Government/Military
Applications

Government/military applications include the use
of our satellite capacity by the U.S. government, including
defense and civilian agencies, as well as NATO users, for
communications services that include Internet, data and video
transmission. Customers in this segment use our capacity for
communications and customized managed services. See
 Our Strategy  Grow Our Business in
the Video, Government/ Military and Corporate Network Customer
Segments  Government/ Military for information
regarding how we are addressing opportunities in this segment.

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 Tier 1 and Tier 2 Internet service providers and other
communications services providers that require backbone
connectivity and that market Internet-related services to their
customers. For a discussion of our strategy with respect to
Internet applications, see  Our
Strategy  Sustain Our Leadership Position in the
Voice and Data Customer Segments.

33



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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               |  | 2001         |    | 2002 |  | 2003
|                                |  |              |    |      |  |     
|Europe                          |  |              | 29 | %    |  |      | 29 | % |  |  | 25 | %
|North America and the Caribbean |  |              | 24 | %    |  |      | 24 | % |  |  | 27 | %
|Asia Pacific                    |  |              | 18 | %    |  |      | 17 | % |  |  | 17 | %
|Latin America                   |  |              | 13 | %    |  |      | 13 | % |  |  | 11 | %
|Sub-Saharan Africa              |  |              | 9  | %    |  |      | 11 | % |  |  | 13 | %
|Middle East and North Africa    |  |              | 7  | %    |  |      | 6  | % |  |  | 7  | %

If the proposed Loral transaction is completed,
we expect that a greater portion of our revenue in future
periods will be derived from North America and the Caribbean.

We determine the geographic location of a
customer based on the customers billing address. 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 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;           Singapore;           the
    United States; |  |  France;
     Germany;
     India;
     South Africa; 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 promotional 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 understand that satellite capacity on the
in-orbit satellites proposed to be acquired from Loral is
distributed primarily by direct sales to customers. We intend to
build the direct sales capabilities of our sales and marketing
staff, particularly in North America, in order to integrate
effectively the assets proposed to be acquired from Loral.

Backlog

As of December 31, 2003, we had a revenue
backlog of approximately $3.6 billion. Our backlog as of
December 31, 2002 was approximately $4.0 billion. See
Item 5  Operating and Financial Review and
Prospects  Backlog for a discussion of our
backlog, including a discussion of how our acquisition of

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COMSAT World Systems customer contracts,
bankruptcy filings by WorldCom, Inc., Teleglobe Inc. and
Verestar, Inc. and events in Argentina have impacted or may
impact our backlog. We expect to deliver services associated
with $775.2 million, or 22%, of our December 31, 2003
backlog by December 31, 2004.


Industry
Overview

General

We compete in the global communications market
for the provision of voice, data, video and wholesale Internet
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.

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

Operators in the fixed satellite services sector,
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 corporate
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 as well as distribute direct-to-home programming for a
number of regional providers.

Digital
Audio Radio Service

Satellite radio, or digital audio radio service,
offers programmers a national distribution platform for digital
quality sound and over 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  Grow Our
Business in the Video, Government/ Military and Corporate
Network Customer Segments  Corporate Network,
we are exploring

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opportunities in the satellite broadband access
market and intend to use an incremental approach to enter this
market as it develops. Next generation broadband satellite
providers, such as WildBlue, are expected to create demand in
the market through, among other things, the introduction of less
expensive consumer hardware.


Competitive
Advantages of Satellites

Satellites provide a number of advantages over
terrestrial communications systems that we believe will result
in the continued use of fixed satellite services as an integral
part of the global communications network. These advantages of
satellites are:

Ubiquitous Coverage:Satellites provide connectivity across
broad regions, allowing equal access to bandwidth regardless of
location, density of population or availability of terrestrial
infrastructure.

Point-to-Multipoint Transmission Capabilities:Because geosynchronous satellites can
each broadcast signals to an area as large as one third of the
earths surface, they are well suited for transmissions
that must reach many locations simultaneously.

Seamless Transmission:Satellites can broadcast directly to
telecommunications services providers and other users, bypassing
points of congestion.

Independence from Terrestrial Infrastructure:Satellite-based networks can operate
independently of other telecommunications infrastructures and
can be used instead of, in addition to or as back-up for
ground-based networks to provide customers with high-quality,
reliable communications services.

Rapid Deployment:The terrestrial hardware necessary to
access existing satellite capacity can be installed in a matter
of days. 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.

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 and the approvals from numerous national
telecommunications authorities required to operate a global
satellite communications system. These challenges also include
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 near
future.

Key
Trends

We believe that a number of trends will have a
positive impact in the future on the fixed satellite services
sector, including the globalization of business, which we
believe will result in increased demand for communications
capacity from global operators, including us. We also believe
that the continued deregulation of telecommunications markets
will present us with new customer and new market opportunities.
In addition, a recent trend in the television broadcast services
market has been the introduction of HDTV in developed markets.
We believe that, as consumers increasingly seek HDTV services,
the demand for satellite capacity for video applications in
developed markets will increase.

Trends also include the demand for integrated
communications services as customers seek to optimize their
networks while at the same time focusing resources on their core
competencies. In addition, we believe that the evolution of the
Internet and the digitization of media and entertainment content
have increased the demand for broadband connectivity as
corporations and business users increasingly use converged data
and video applications. We also believe that 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. Finally, we believe that the expected future
growth of data applications is another trend that holds
potential for the fixed satellite services sector.

Despite the positive impact that we believe these
trends will have, there is excess supply in the
telecommunications industry, and fixed satellite services
operators are facing competition from providers of

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##### 



ground-based communications capacity. We expect
any demand for satellite services created by the trends
described above 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. In addition,
the telecommunications industry has experienced a downturn that
has reduced the demand for fixed satellite services, broadcaster
demand for capacity may decline in the short term as
broadcasters complete the migration of their transmission
signals from analog to digital and it is possible that the
market for fixed satellite services over the next several years
may not grow or may shrink. See Item 3.D 
Risk Factors for a discussion of the competition we
face from other providers of communications capacity and the
risk that the market for fixed satellite services may not grow
or may shrink.


In addition to the trends described above, the
fixed satellite services sector has experienced some
consolidation. We believe that this consolidation is the result
of the increasing globalization of the telecommunications market
and the desire of some fixed satellite services operators to
secure and improve their market access and coverage in key
regions. In addition, the scarcity of desirable orbital
locations may lead operators to seek to acquire other operators
with specific coverage or capacity capabilities. Consolidation
may also result from the economies of scale from operational,
capital expenditure and marketing efficiencies that can be
achieved by consolidation.

Network

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



| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | nearly 40-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 23
satellites owned by us and leased capacity on 2 satellites owned
by other satellite operators in the Asia-Pacific region, as well
as ground facilities related to the operation and control of our
satellites. One additional satellite, with an expected launch
date in the second quarter of 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.

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.

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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, one of the
satellites we expect to acquire as part of the proposed Loral
transaction, Telstar 8, is expected to have transponders
available for transmitting in the Ka-band. In addition, as part
of our incremental approach to entering the satellite broadband
access market, in April 2003, we acquired a minority stake in
WildBlue. WildBlue plans to offer broadband Internet access
services in the continental United States via Ka-band capacity.

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 revolve around the earth with a speed
that corresponds to that of the earths rotation and 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. The daily north-south motion of a satellite
in inclined orbit exceeds the specified range of latitudes of
its assigned station-keeping box, and the satellite appears to
oscillate slowly above and below the equator. An operator will
typically operate a satellite in inclined orbit toward the end
of its useful life because the operator is able to save
significant amounts of fuel by not controlling the north-south
position of the satellite and is thereby able to extend
substantially the useful life of the satellite. However, the
types of services and customers that can access an inclined
orbit satellite are limited due to the daily variations in the
satellites footprint.

Our
Satellites

Our fleet 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 of our satellites;                                                                      
|
| |  | 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.                                                             

These features generally enable 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.

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  In-Orbit Satellites below and
Item 3.D  Risk Factors above for a
discussion of anomalies. For the year ending December 31,
2003, the transponder availability rate on satellites owned and
operated by us was 99.997%. This availability rate was achieved
by accumulating nearly 7.6 million transponder hours in
service, with approximately 216 hours of accumulated transponder
outage. Our transponder availability rate has averaged 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 that is
reserved at a given time. As of January 22, 2004, we had an
average system fill factor, including guaranteed reservations
for service, of nearly 60%. We estimate that

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our achievable system fill factor is
approximately 85% to 90%. There are several elements that affect
our achievable system fill factor. First, our satellites have
historically been designed with a greater number of zone beams
than is typical in the industry in order to accommodate the
needs of our carrier and other customers for two-way space
segment connectivity spanning multiple continents. More
recently, however, some of the traffic carried on our satellite
network, and particularly the video and Internet traffic on our
network, has been asymmetrical. Second, most of the satellites
in our current fleet have generic designs. Although these
designs enhance our flexibility by enabling us to move
satellites into different orbital locations within our network,
the satellites with generic designs are not optimized for
specific orbital locations. In combination, the practical and
technical aspects of our fleet result in a lower achievable
system fill factor than the achievable fill factors of other
satellite services providers with higher concentrations 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. Over the long run, we expect our
achievable system fill factor to increase slightly, reflecting
the addition of satellites to our system that are more
specifically tailored to the expected traffic patterns of their
orbital locations.

In-Orbit
Satellites

The satellites that make up our existing fleet
include 23 satellites owned by us and leased capacity on 2
additional satellites owned by other satellite operators 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 of 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. Under this option agreement with
SINOSAT, we have leased capacity under one agreement through
December 31, 2004 and under another agreement through
August 31, 2006. If we enter into any additional agreements
to lease capacity under this option agreement, the term of any
such lease agreement may not extend beyond April 2005.

As of January 22, 2004, our in-orbit fleet
had 998 transponders available for transmitting in the C-band
and 371 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.
In each case, these numbers refer to usable 36 MHz equivalent
transponders.

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The table below provides a summary of our
in-orbit satellite fleet as of January 22, 2004.

|                    |  |                                                    |  |                  |        |             |  |                |  |                  |  |  |                | 
|------------------- |  | -------------------------------------------------- |  | ---------------- | ------ | ----------- |  | -------------- |  | ---------------- |  |  | -------------- | 
|                    |  |                                                    |  |                  |        |             |  |                |  | Estimated       
|                    |  |                                                    |  |                  |        |             |  | End of Orbital |  | End of Orbital  
|Satellite           |  | Manufacturer                                       |  | Orbital Location |        | Launch Date |  | Design Life    |  | Maneuver Life(1)
|                    |  |                                                    |  |                  |        |             |  |                |  |                 
|Geostationary Orbit |  |                                                    |  |                  |        |             |  |                |  |                  |  |  |                | 
|IS-601              |  | Hughes Aircraft
    Company (Hughes)(2)            |  |                  | 64.0E  |             |  | October 1991   |  | October 2001     |  |  | January 2005   | 
|IS-605              |  | Hughes                                             |  |                  | 33.0E  |             |  | August 1991    |  | August 2001      |  |  | September 2005 | 
|IS-701              |  | SS/ L                                              |  |                  | 180.0E |             |  | October 1993   |  | August 2004      |  |  | April 2011     | 
|IS-702              |  | SS/ L                                              |  |                  | 55.0E  | (3)(6)      |  | June 1994      |  | April 2005       |  |  | November 2011  | 
|IS-704              |  | SS/ L                                              |  |                  | 66.0E  |             |  | January 1995   |  | November 2005    |  |  | October 2010   | 
|IS-705              |  | SS/ L                                              |  |                  | 310.0E |             |  | March 1995     |  | January 2006     |  |  | May 2009       | 
|IS-706              |  | SS/ L                                              |  |                  | 307.0E |             |  | May 1995       |  | March 2006       |  |  | May 2012       | 
|IS-707              |  | SS/ L                                              |  |                  | 359.0E |             |  | March 1996     |  | January 2007     |  |  | June 2012      | 
|IS-709              |  | SS/ L                                              |  |                  | 85.0E  |             |  | June 1996      |  | April 2007       |  |  | August 2011    | 
|IS-801              |  | Martin Marietta Overseas Corporation
    (MMOC)(4) |  |                  | 328.5E |             |  | March 1997     |  | March 2007       |  |  | September 2009 | 
|IS-802              |  | MMOC                                               |  |                  | 174.0E |             |  | June 1997      |  | June 2007        |  |  | August 2015    | 
|IS-804              |  | MMOC                                               |  |                  | 176.0E |             |  | December 1997  |  | December 2007    |  |  | March 2015     | 
|IS-805              |  | MMOC                                               |  |                  | 304.5E |             |  | June 1998      |  | June 2008        |  |  | July 2016      | 
|IS-901              |  | SS/ L                                              |  |                  | 342.0E |             |  | June 2001      |  | June 2014        |  |  | August 2017    | 
|IS-902              |  | SS/ L                                              |  |                  | 62.0E  |             |  | August 2001    |  | August 2014      |  |  | April 2018     | 
|IS-903              |  | SS/ L                                              |  |                  | 325.5E |             |  | March 2002     |  | March 2015       |  |  | July 2017      | 
|IS-904              |  | SS/ L                                              |  |                  | 60.0E  |             |  | February 2002  |  | February 2015    |  |  | June 2018      | 
|IS-905              |  | SS/ L                                              |  |                  | 335.5E |             |  | June 2002      |  | June 2015        |  |  | February 2019  | 
|IS-906              |  | SS/ L                                              |  |                  | 64.0E  |             |  | September 2002 |  | September 2015   |  |  | November 2019  | 
|IS-907              |  | SS/ L                                              |  |                  | 332.5E |             |  | February 2003  |  | March 2016       |  |  | October 2019   | 
|APR-1(5)            |  | Indian Space Research Organization                 |  |                  | 83.0E  |             |  | N/A            |  | N/A              |  |  | N/A            | 
|APR-2(5)            |  | Alcatel                                            |  |                  | 110.5E |             |  | N/A            |  | N/A              |  |  | N/A            | 
|Inclined Orbit      |  |                                                    |  |                  |        |             |  |                |  |                  |  |  |                | 
|IS-602              |  | Hughes                                             |  |                  | 50.5E  | (3)(7)      |  | October 1989   |  | October 1999     |  |  | October 2006   | 
|IS-603              |  | Hughes                                             |  |                  | 340.0E |             |  | March 1990     |  | March 2000       |  |  | April 2009     | 
|IS-604              |  | Hughes                                             |  |                  | 157.0E |             |  | June 1990      |  | June 2000        |  |  | September 2006 | 



---



|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(1) | Assuming no relocation of the
    satellite.                                                                    
|   
|(2) | Now Boeing Satellite Systems, Inc.                                                                              
|   
|(3) | Rights to use these orbital locations are held
    by our customers.                                            
|   
|(4) | Now part of Lockheed Martin
    Corporation.                                                                    
|   
|(5) | Operated by other satellite operators with
    capacity leased by us.                                           
|   
|(6) | Request for authorization to operate on a
    permanent basis at this orbital location is currently
    pending.
|   
|(7) | Authorization to operate at this location is
    limited to operation on a non-interference basis.              

The design life of a satellite is the length of
time that the satellites hardware is designed 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 has enough fuel to
remain operational. 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 IS-602, IS-603 and IS-604 satellites, we are operating these
satellites in inclined orbit and, as a result, are continuing to
earn revenue beyond our original estimates for these satellites.
However, the types of services and customers that can access
inclined orbit satellites are limited, and we typically offer
capacity on these satellites at a discount.

Our IS-511 satellite, which had been operated in
inclined orbit at the 330.5 East orbital location licensed to us
by the FCC, experienced a failure due to electrostatic discharge
in August 2003 that caused the satellite to move to an orbit
above the geosynchronous orbit. Following recovery from the
anomaly, insufficient fuel remained to return the satellite to
its operating orbit. As a result, the IS-511 satellite was
decommissioned. The IS-511 satellite was launched in June 1985
and had exceeded its end of design life date of June 1992. We

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relocated traffic on the 18-year-old satellite to
other satellites in our system. At this time, we have not
determined whether to place another satellite at the 330.5 East
orbital location.


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 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 to date on
overall transponder availability in our satellite fleet. 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 IS-605 satellite lost its primary central
telemetry unit in 1992 and is currently operating on its
redundant unit. A central telemetry unit transmits information
regarding the performance and status of a satellites
on-board systems. For a three-month period during 1997, the
redundant unit on the IS-605 satellite had also failed. During
that time, we developed a ground-based system that we were able
to use to operate the satellite normally. We do not know whether
the redundant telemetry unit will continue to function properly
in the future. If this unit fails again, we would use the
ground-based system that we developed to operate the satellite,
although it is possible that we may not be able to operate the
satellite through its remaining useful life if this failure
occurs.

Our IS-701, IS-702, IS-704 and IS-709 satellites
have been experiencing higher than normal friction torque on
some of their momentum wheel assemblies. These wheel assemblies
are used to control a satellites attitude, or orientation
in space, and have built-in redundancy such that two of a
satellites three assemblies must be operating in order for
the satellite to function properly. Higher than normal friction
torque degrades the performance of the momentum wheels and
increases the risk of wheel failure. Even though the primary
wheels have not failed, we are currently using the redundant
momentum wheel assemblies on each of these satellites in order
to minimize the risk of wheel failure. We have developed an
alternative control system that would use thrusters instead of
momentum wheels to maintain attitude control in the event that
two of a satellites three wheels fail. These measures are
expected to permit the IS-701, IS-702, IS-704 and IS-709
satellites to achieve and exceed their orbital design lives,
despite any potential wheel failures.

Our IS-706 and IS-709 satellites have experienced
battery cell failures that have reduced the energy available for
operating the satellites during eclipse periods when the sun is
not visible to the satellites. A satellite relies on its battery
power during these periods, which occur twice per year and can
last up to 72 minutes per day over a period of 45 days.
Additional battery cell failures could lead to the affected
satellite being able to support only half of its nominal traffic
load during solar eclipse periods.

As a result of electrostatic discharge, four
receivers on our IS-709 satellite have failed. These failures
have not impacted the availability of transponders on the
satellite but have reduced the ability of the satellite to
receive global and spot beam signals simultaneously in the
C-band from four beams to two. If an additional receiver fails,
there will be further reduction in the satellites ability
to receive signals and three transponders will be lost. In
addition, the IS-709 satellite has a radio frequency output
power instability in the downlink of one hemispheric beam. The
anomaly, which was detected in 1996 during testing following the
satellites launch, resulted in the loss of nine 36 MHz
equivalent transponders of the satellites capacity.

Our IS-801 satellite experienced an anomaly after
its launch and before being put into service that resulted in
damage to the satellites north solar array structure. The
damage has limited our use of certain control equipment on the
satellite and necessitated the use of thrusters for continuous
attitude corrections. As described in  Sparing;
Insurance  Insurance below, the north solar
array damage reduced the orbital maneuver life of the IS-801
satellite and resulted in a settlement with our insurers.
Although there is currently no evidence of further damage to the
IS-801 satellites solar array structure, it is possible
that the damaged array may not continue to perform as it has
since the anomaly. In addition, the use of thrusters for
continuous attitude corrections may result in premature failure,
as they are not designed for this operation. We have made
changes in our operation of the IS-801 satellite to minimize the
impact on the thrusters and the satellites propulsion
system.

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Our IS-801 satellite has also experienced
failures resulting in degraded performance on four of its nine
C-band hemispheric and zone beam receivers, such that only five
receivers are operating at full performance. There are six
hemispheric and zone beams on the satellite, each of which
requires a receiver. As a result, one of the beams has been
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
failure of an additional receiver would result in the loss of
five or six transponders depending on which receiver fails.

The spare attitude system processor on our IS-802
satellite has failed, resulting in the loss of redundancy. We
have deployed a back-up system for controlling the attitude of
the IS-802 satellite from the ground that should allow us to
continue operating the satellite in the event the remaining
processor fails.

Our IS-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 IS-804 to date.

Our IS-901 satellite has experienced an anomaly
in one of its feed horns that could result in interference among
the hemispheric and zone beams that share the affected feed horn
depending on how we load traffic onto the satellite. 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 IS-901 satellite to date.

Our IS-904 satellite has experienced the failure
of one of its two earth sensors, which are used by the
satellites on-board control system to keep the satellite
pointed in the proper direction. Should the second earth sensor
fail, we may not be able to keep the IS-904 satellite pointed
properly toward the earth. We are developing a ground-based
system that we believe will provide adequate capability to keep
the satellite pointed properly should the redundant earth sensor
fail.

See Item 3.D  Risk
Factors for a discussion of the impact of various
satellite 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 2001 launch
program, the IS-10-02 satellite, will be launched in the second
quarter of 2004. 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 larger coverage
areas than many of our other satellites.

We expect 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 2001 launch
program, the IS-10-02 satellite, is being manufactured by EADS
Astrium. We expect to launch this satellite in the second
quarter of 2004 and expect to deploy it at the 359.0° East
orbital location. The IS-10-02 satellite is designed to have 70
C-band and 36 Ku-band transponders, measured in 36 MHz
equivalent units. The actual number of usable transponders on
the IS-10-02 satellite will depend on a number of factors,
including the satellites operational configuration at its
specified orbital location. The IS-10-02 satellite is expected
to reach the end of its orbital design life in the second
quarter of 2017. Assuming no relocation of the satellite from
the orbital location to which it is initially deployed, the
IS-10-02 satellite is expected to reach the end of its orbital
maneuver life in the third quarter of 2021.

We have entered into an agreement with Telenor
for the sale of 18 Ku-band transponders, measured in terms of 36
MHz equivalent units, on the IS-10-02 satellite. We will retain
ownership of the satellites C-band

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transponders, the remaining Ku-band transponders
and most of the remainder of the satellite. After the successful
launch and in-orbit testing of the IS-10-02 satellite, title to,
and risk of loss with respect to, Telenors 18 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. One of Telenors
affiliates currently has operating leases on the IS-707
satellite, which is the satellite that will be replaced by
IS-10-02. Once title to the IS-10-02 transponders purchased by
Telenor has passed to it, all of its affiliates service
commitments for capacity on IS-707 will be terminated.


Construction Agreement.We entered into an agreement with EADS
Astrium for the manufacture of two Intelsat X series satellites,
the IS-10-01 and IS-10-02 satellites. As described below, we
have terminated this agreement with respect to the IS-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 EADS
Astrium 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 EADS Astrium 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 EADS Astrium of our
termination of our construction agreement with respect to the
IS-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 EADS Astrium
relating to the IS-10-02 satellite. For a discussion of the
impact of the termination of our order for the IS-10-01
satellite on our financial condition and results of operations,
see Item 5  Operating and Financial Review
and Prospects  IS-10-01 Contract Termination
Costs.

Our agreement with EADS Astrium 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 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.

At the time we entered into our launch services
agreements with Sea Launch 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 IS-10-01 satellite. In connection with the termination
of our order for the IS-10-01 satellite, we have amended our
launch services agreement with Sea Launch to provide for the
launch of an unspecified future satellite. We and Sea Launch
agreed that we would treat most of the payments made for the
launch vehicle that could have been used for the launch of the
IS-10-01 satellite as a credit for the future launch and that
the price of the launch vehicle would remain fixed. We also
agreed, however, that Sea Launch has the right to terminate our
launch services agreement if we do not place an order for a
future launch by July 31, 2005. If Sea Launch terminates
our agreement, we will incur a termination liability of up to
$19.1 million and will forfeit our credit for a future
launch. See Item 5  Operating and
Financial Review and Prospects  Results of
Operations  Operating Expenses  IS-10-01
Contract Termination Costs 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 IS-10-02 satellite.

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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.

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 primary tracking, telemetry
and command services, referred to as TT&C services, for our
satellites and for satellites owned by other satellite
companies. We provide these services from ground facilities
located around the world.

Our 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, our satellite control center sends commands to the
satellites for station-keeping maneuvers and equipment
reconfigurations. The satellite control center currently manages
a complex and dynamic operations environment. It manages the
daily operation of our satellites 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 maintain a back-up operations facility 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. See Item 4.D  Property,
Plants and Equipment for a description of this property.

Our satellite control center and network
management center use a network of ground facilities to perform
their functions. This network includes six primary earth
stations that provide TT&C services for our satellites,
referred to as our TT&C stations, and various other earth
stations worldwide. See Item 4.D  Property,
Plants and Equipment 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 TT&C stations. Rather, we
contract with the owners of the TT&C stations and other
facilities for the provision of certain control and monitoring
services. The contracts with the owners of these four TT&C
stations have expiration dates ranging from November 30,
2005 to October 23, 2008. 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
TT&C stations in our ground network. See
Item 5  Operating and Financial Review and
Prospects  Related Party Transactions 
COMSAT Asset Purchase Agreement for more information about
this acquisition.

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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 our IS-10-02 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 and Item 3.D
 Risk Factors above for a description of
notable anomalies, losses and risks to our fleet at this time.

We currently have in place an insurance policy
expiring in November 2004 that covers the in-orbit operations of
our Intelsat IX series satellites. Under the terms of this
policy, we chose to co-insure $150.0 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.
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 over $150.0 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 $150.0 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
90% 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 90% 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 three of
our satellites. See  Network  Our
Satellites  In-Orbit Satellites and
Item 3.D  Risk Factors above for a
discussion of anomalies on our satellites.

We do not have, and do not intend to obtain,
in-orbit insurance coverage for the 16 satellites not covered by
the insurance policy described above. These satellites
individually have net book values of less than
$150.0 million. The aggregate net book value of these 16
satellites as of December 31, 2003 was $888.7 million,
which includes 5 satellites with no book value.

We have obtained launch insurance for the book
value of our IS-10-02 satellite under construction. For the
period from the satellites separation from the launch
vehicle through in-orbit testing, we have obtained insurance

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covering the book value of the satellite,
excluding capitalized performance incentives. After completion
of the in-orbit testing period, we will co-insure approximately
$53 million of the net book value of our IS-10-02 satellite
through its first year of in-orbit operations, with insurers
covering the balance of the net book value, excluding
capitalized performance incentives.


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. See Item 3.D  Risk Factors for
a description of the risks to our business associated with not
having insurance for our satellites.

We also have insurance in place through
March 31, 2005 for losses to our IS-801 satellite if the
cause is related to the satellites north solar array. On
March 18, 1997, the IS-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 $33.3 million in
compensation was agreed upon. This compensation amount was based
on an estimated orbital life that we currently expect the IS-801
satellite to exceed. If the IS-801 satellite exceeds this
estimated orbital life, we will be required to pay insurers 10%
of our gross revenue from the satellite, up to the approximately
$33.3 million in compensation agreed upon, for the period
from the end of orbital life estimated in connection with the
settlement agreements to the satellites actual end of
orbital maneuver life.

In addition to the satellite insurance described
above, we currently maintain third-party liability insurance up
to a limit of $300.0 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 2004.

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.

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 global competitors are SES GLOBAL S.A. and PanAmSat
Corporation. Other competitors include Eutelsat S.A., Loral
Space & Communications Ltd. and New Skies.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SES GLOBAL. SES
    GLOBAL S.A. owns and operates a fleet of 30 satellites and owns
    interests in several regional satellite services providers that
    together operate 11 additional satellites. SES GLOBAL primarily
    provides cable video, broadcast video and direct-to-home video
    services in the North American and European markets. 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, Star One S.A., which owns and operates the BrasilSat
    satellite fleet in South America, and Nahuelsat in Argentina.
    SES GLOBAL also owns a strategic interest in Nordic Satellite
    A.B., which operates satellites serving Scandinavia.
|
| | PanAmSat. PanAmSat
    Corporation manages a network of 30 satellites, 25 of which are
    wholly owned by the company, that provide global coverage
    primarily for video distribution services. PanAmSat is a leading
    provider of satellite capacity for television program
    distribution to network and cable systems in North and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | South America, Africa, South Asia and the
    Asia-Pacific region. It also provides Internet and private data
    networking services. PanAmSat has a particularly strong presence
    in North and South America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | Eutelsat. Eutelsat
    S.A. operates a fleet of 19 satellites primarily providing
    broadcast video and radio services across its core market of
    Europe and into parts of the Middle East, Africa, South Asia and
    North and South America. Eutelsat also leases capacity on three
    satellites operated by other companies. Eutelsat has a minority
    interest in HISPASAT, Spains national satellite operator.
    HISPASAT provides coverage over Spain, Portugal and Latin
    America, so the interest gives Eutelsat a presence in Latin
    America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | Loral. Loral Space
    & Communications Ltd. is a diversified satellite company
    with substantial activities in satellite manufacturing and
    satellite-based communications. Although its fixed satellite
    services operations do not provide full global coverage, Loral
    Space & Communications Ltd. 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
    and Satelites Mexicanos, S.A. de C.V., referred to as Satmex.
    Loral operates a fleet of eight satellites and provides services
    primarily to broadcasters. On July 15, 2003, Loral Space
    & Communications Ltd. and several of its subsidiaries each
    filed a voluntary petition for reorganization under
    Chapter 11 of the U.S. Bankruptcy Code. We have entered
    into an asset purchase agreement with subsidiaries of Loral
    Space & Communications Ltd. to acquire specified satellites
    and other related assets in the North American region. See
     Agreement to Purchase the North American
    Satellite Assets of Loral above for further information
    about the proposed transaction.
|
| | New Skies. New
    Skies, which was spun off from the IGO in 1998, owns a fleet of
    five 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.
In addition, a number of countries have domestic satellite
systems that 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 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 have been experiencing a decline in our
revenue from carrier applications in recent years due to the
build-out of fiber optic cable capacity, and the decline in
future years could be significant. The primary use of fiber
optic cables is carrying high-volume communications traffic from
point to point. 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 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 the
routes for which fiber is available, most satellite companies
generally do not focus on these routes. However, 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.

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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
that any competition we face from fiber optic cable companies is
likely to be based primarily on price.

Regulation

We are regulated by the FCC under the
Communications Act of 1934, as amended. We also are subject to
the requirements of the ORBIT Act and the export control laws,
sanctions regulations and other laws and regulations of
governmental 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

Except for our use of the BSS portion of the
Ku-band on one satellite, which is subject to U.K. regulation as
described below, 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 will issue 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 conditionally
authorized our Intelsat LLC subsidiary 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  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 equal to or 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 in the United
States and internationally.

The license term for each of our 17 satellites
that was in operation on the date of the FCCs
August 8, 2000 licensing order is 15 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

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15 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.


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 International Telecommunication Union
network filing for a particular orbital location to the
International Telecommunication Union, at which time the orbital
location would become available for use by other satellite
operators.

Changes to Intelsat LLCs licensed satellite
system generally 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 a number of satellites.

Intelsat LLC owns and operates 23 C-band and
Ku-band satellites and has plans for one additional satellite.
See  Network  Our Satellites 
Planned Satellites for a description of the planned
additions 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. The FCC is currently considering a request by
Intelsat LLC for a milestone extension.

In February 2004, the FCC conditionally approved
the transfer to our Intelsat North America LLC subsidiary of
five space station licenses from the Sellers. This approval is
conditioned on our compliance with the requirements of the ORBIT
Act, which are discussed below under   The
ORBIT Act. In addition, this approval is conditioned on
our compliance with our security-related commitments to the
Department of Justice, Department of Homeland Security and
Federal Bureau of Investigation, including our commitment to
establish a Security Committee of the board of directors of our
Intelsat Global Service Corporation subsidiary to establish and
oversee policies relating to U.S. national security and law
enforcement concerns. In connection with the FCCs approval
of the transfer of the Loral licenses to us, we also voluntarily
committed to ensure continuity of broadband service now
available to certain areas and customers in Alaska and Hawaii.
In March 2004, SES AMERICOM, Inc., referred to as SES,
filed an application for review of the FCCs order relating
to the Loral transaction. SES application requests that
the FCC vacate the special temporary authority to provide DTH
services to Lorals customers and requests that the FCC
reconsider its decision not to impose conditions on our ability
to provide services to the U.S. government using the
satellites to be acquired. See  The ORBIT
Act for a description of the special temporary authority.
Our opposition to SES application for review is due
March 31, 2004 and SES reply is due in
mid-April 2004.

Other
FCC Authorizations

Intelsat LLC holds several earth station and
experimental earth station licenses associated with technical
facilities located at our Washington, D.C. building and at our
earth station facilities in Maryland, Hawaii and California.

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In connection with the assets that we acquired
from COMSAT World Systems and COMSAT Digital Teleport, Inc. in
November 2002, Intelsat LLC holds Title III operating licenses
and our Intelsat USA License Corp. subsidiary holds Title II
common carrier authorizations. See Item 5 
Operating and Financial Review and Prospects 
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 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 subject to requirements to make annual
financial reports and equal employment opportunity reports.
Finally, we are subject to requirements 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

The stated purpose of the ORBIT Act, which
entered into force in March 2000, 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. In order
to obtain required authorizations from the FCC and to avoid
limitations on the types of services for which our capacity may
be used, we must comply with certain privatization criteria in
the ORBIT Act that the FCC must evaluate in considering our
license and renewal applications and in connection with customer
requests for authorization to use our satellite capacity to
provide non-core services to, from or within 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.

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. 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.

The ORBIT Act also requires us to conduct an
initial public offering by June 30, 2004. In December 2003,
the FCC extended the deadline by which we must conduct an
initial public offering from December 31, 2003 to the new
deadline of June 30, 2004. The June 30, 2004 deadline
cannot be further extended unless the ORBIT Act is amended.

The criteria imposed by the ORBIT Act for our
initial public offering include that the offering
substantially dilute the aggregate ownership in our
company of former Signatories of the IGO. The ORBIT Act does not
provide the FCC with any specific guidance as to what would
constitute substantial dilution. However, the ORBIT Act
specifies that the FCC, in determining whether the initial
public 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

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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.


In addition, the ORBIT Act requires that our
shares 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 after the completion of our
initial public offering, we must file information with the FCC
demonstrating that the offering complied with these ORBIT Act
requirements.

In connection with our obtaining authorization
from the FCC relating to the proposed Loral transaction, in
February 2004, the FCC interpreted the ORBIT Act to authorize it
to take action to preclude us from providing certain defined
additional services that we did not provide prior to
March 17, 2000, the effective date of the ORBIT Act.
Additional services are direct-to-home or direct
broadcast satellite video services or services in the Ka- or V-
band. Consequently, the FCCs authorization relating to the
Loral transaction prohibits our Intelsat North America LLC
subsidiary from using the Loral satellites following the closing
of the Loral transaction to provide DTH services for
Lorals customers or for new customers until we have
completed an initial public offering that meets the requirements
of the ORBIT Act, which are described above. Nevertheless, the
FCC granted special temporary authority to Intelsat North
America LLC to provide DTH services to existing customers of
Loral for 180 days commencing on the closing date of the
Loral transaction. The FCC has also required Intelsat North
America LLC to notify Lorals DTH customers of this special
temporary authority within 30 days of the closing date of
the Loral transaction.

The FCC has the authority to determine whether we
are in compliance with the ORBIT Acts requirements. If the
FCC determines that we have failed to comply with the criteria
set forth in the ORBIT Act, including the criteria relating to
our initial public offering, the ORBIT Act directs the FCC to
limit through conditions or deny our applications for satellite
licenses or the renewal of these licenses, and to limit or
revoke previous authorizations to use our capacity for
non-core services, as defined above, to, from or
within the United States. The FCC may also deny licensing for
additional services, as defined above. The
imposition of these restrictions would limit the use of our
capacity for services such as Internet access and high-speed
data and video transmission, each of which is a key service
application in terms of our revenue and is part of our strategy
to grow our business. See 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.

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 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 EADS Astrium for the manufacture of the IS-10-02
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 this contract. 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 of Defense Trade Controls
decides to revoke any of the authorizations that it has granted,
our business could be negatively affected.

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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, our business could be
adversely affected and we could be exposed 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 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 TT&C 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

With U.S. subsidiaries subject to U.S. laws, we
cannot provide services to countries subject to U.S. trade
sanctions 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.

U.K.
Regulation

The United Kingdom is the licensing jurisdiction
for our orbital registrations in the Ka-band and in the Ku-band
spectrum allocated for BSS in the applicable International
Telecommunication Union plans. We currently have filings for
Ka-band orbital locations and BSS orbital locations. We
currently do not operate any satellites in the Ka-band. We
currently use the BSS portion of the Ku-band on one of our
satellites to provide fixed satellite services. Satellite
operators in the United Kingdom are regulated by the U.K.s
Office of Communications. Ofcom has reserved our Ka-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 satellite capacity in over 200
countries and territories, we are subject to the national
communications and broadcasting laws and regulations of many
countries. 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 satellite 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 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

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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.

As we expand into new service offerings beyond
providing satellite 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 that 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 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. 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 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 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.,
Canadian and Caribbean customers enter into agreements with
certain of our U.S. subsidiaries. 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 different service
commitment types, including lease,

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channel and carrier, and managed services. For a
breakdown of our revenue by service commitment type, see
 Our Customers and Service Applications.


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 specified terms within the commitment period.
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. Both
lease service commitments and channel and carrier service
commitments can be as short as one day or as long as fifteen
years. Managed services combine satellite capacity, teleport
facilities, satellite communications hardware and fiber optic
cable and other ground facilities to provide bundled, broadband
and private network services to our customers. Managed services
include monitoring the performance of our customers
networks as part of the service.

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 the master service
agreements entered into with our customers in connection with
the privatization 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

Each novation agreement sets forth the terms and
conditions upon which the service commitments entered into prior
to the privatization will be provided. The same form of novation
agreement was offered to all of the IGOs 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. A majority of the
outstanding customer commitments that are represented in our
December 31, 2003 backlog are covered by novation
agreements and, therefore, are either MFC- or LCO-protected. The
principal terms and conditions of the novation agreements are
described below.

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. As of December 31,
2003, our MFC terms had resulted in total reductions in our
backlog of less than $200,000. 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.

Lifeline
Connectivity Obligation Contracts

In connection with our privatization, customers
that novated service commitments and 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. See Item 3.D 
Risk Factors for a description of the risks to our
business associated with our obligation to provide LCO
protection.

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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
commitments until July 18, 2013. 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.


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 a pricing index determined
in accordance with 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 of less than 10 years at
the time of our privatization by the same percentage. We
calculated the price increases and decreases of our non-LCO
protected service commitments as of July 18, 2002 and
July 18, 2003 in accordance with the LCO contract and found
that the weighted average price charged to non-LCO customers for
the specified service commitments had decreased. However,
because the cumulative decrease through July 18, 2003 was
less than 15%, we were not required to reduce prices for our
LCO-protected service commitments.

Pursuant to an agreement that we entered into
with ITSO in connection with the privatization, known as the
Public Services Agreement, ITSO monitors our implementation of
the 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.

Distribution
Agreements

In connection with the privatization, we entered
into non-exclusive service 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. 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.

Retail
Business Requirement

The distribution agreement restricts the manner
in which we can engage in some types of retail activities 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
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. 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.

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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.

Agreement to
Purchase the North American Satellite Assets of
Loral

On July 15, 2003, Intelsat, Ltd., our
Intelsat (Bermuda), Ltd. subsidiary, referred to as Intelsat
Bermuda, and Loral Space & Communications Corporation and
certain of its affiliates entered into an asset purchase
agreement relating to the proposed acquisition by Intelsat
Bermuda of certain of the Sellers satellites and other
assets related to the satellites and the business that the
Sellers conduct on those satellites.

We believe that the proposed transaction, if
completed, would further our strategic objectives of:



| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | maintaining a global leadership position in a
    consolidating market for satellite operations;
|
| |  | enhancing our service application mix and
    geographic coverage; and                          
|
| |  | expanding our market share in the video business
    segment.                                   

We believe that the proposed transaction presents
an important strategic business opportunity because it would
enable us to expand our global network to include a North
American franchise. Given the scarcity of orbital locations, a
North American franchise would be difficult to build by other
means. The transaction would also enable us to increase our
customer base for point-to-multipoint video and data
applications. Specifically, we believe that the transaction
would:



| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increase our revenue from broadcasting, cable
    television, private data networking and other
    point-to-multipoint traffic that we believe are the leading
    service applications for satellite capacity; and                                            
|
| |  | permit us to provide enhanced services to
    customers in the broadcasting segment worldwide by enabling us
    to offer content distribution services into and throughout the
    continental United States, the largest broadcasting market in
    the world.

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The following diagram illustrates the expected
regional coverage of the satellites in the Loral fleet to be
acquired along with our existing fleet of 23 satellites and
leased capacity on 2 additional satellites owned by other
satellite operators.

(MAP)

The primary assets that we expect to acquire from
the Sellers include the Telstar 5, Telstar 6 and
Telstar 7 satellites in orbit. We also expect to acquire
the C-band payload and a portion of the common elements of the
Telstar 13 satellite, which was launched on August 7,
2003. The remainder of Telstar 13 is owned by EchoStar
Communications Corporation. In addition, we expect to acquire
the Telstar 8 satellite, which is currently under
construction. Under the original terms of the asset purchase
agreement, we had also agreed to acquire the Telstar 4
satellite, which was declared a total loss in September 2003 due
to a significant anomaly. In October 2003, we and the Sellers
amended the asset purchase agreement to provide that we will not
acquire ownership of Telstar 4. As a result of the loss of
Telstar 4, as of December 31, 2003, customers have
cancelled contracts representing approximately $47 million
of the Sellers future minimum lease receipts due from
customers under long-term operating leases. The Sellers have
announced that Telstar 4 was insured for
$141.0 million, and we understand that the Sellers have
filed an insurance claim for that amount. The purchase price for
the assets to be acquired from the Sellers will be reduced by
the amount of any insurance proceeds that the Sellers receive
prior to the completion of the proposed Loral transaction, and
we will be entitled to any of such proceeds received after
completion of the transaction, in each case net of specified
warranty payments to customers made by the Sellers. If warranty
claims are made after we receive these insurance proceeds, we
will be required to reimburse the Sellers for payments made in
respect of these claims. To the extent the insurance proceeds in
respect of Telstar 4 are less than $141.0 million, not
taking into account warranty payments, we will receive a credit
in the amount of such shortfall for payments we are required to
make under the new procurement agreement with SS/ L described
further below. We understand that the Sellers currently expect
the warranty payments owed to customers to be approximately
$1.2 million. These warranty payments may increase should
customers that previously leased capacity on the Telstar 4
satellite exercise termination rights.

Satellites in the North American orbital arc are
used primarily to provide cable programming distribution, video
broadcasting services and private data networking services.
Satellites in the 121°W to 139°W orbital locations
typically are used for the distribution of cable programming,
with C-band capacity on satellites in those orbital locations
being used primarily by cable content providers for distribution
to cable head-ends. Satellites in

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the 72°W to 103°W orbital locations
typically are used for video broadcasting, private data
networking and video contribution, with C- and Ku-band capacity
on satellites in those orbital locations being used primarily by
major broadcast networks to deliver content to affiliates across
the United States.


The in-orbit satellites that we expect to acquire
from the Sellers are used for cable programming distribution
from the 121°W and 129°W orbital locations and for
video broadcasting from the 93°W orbital location. The
Sellers satellite in the 97°W orbital location is
used by broadcasters and content providers for the
direct-to-home broadcasting of specialty ethnic and regional
programming. Together, the satellites we expect to acquire carry
traffic for broadcasters, cable operators and private data
network operators, including CBS Broadcasting Inc. and the
Hughes Network Systems, Inc. division of Hughes Electronic
Corporation. The in-orbit satellites to be acquired had an
estimated weighted average remaining orbital maneuver life of
16.6 years as of March 1, 2004. In addition, as of
December 31, 2003, the satellites to be acquired had future
minimum lease receipts due from customers under long-term
operating leases of approximately $446 million. We
understand that, in calculating future minimum lease receipts
due from customers under long-term operating leases, the Sellers
do not separately track what percentage is attributable to
cancelable and non-cancelable contracts. Future minimum lease
receipts due from the Sellers customers under long-term
operating leases have been declining, and, as discussed in
Item 3.D  Risk Factors, portions of
these future minimum lease receipts may be at risk as a result
of financial difficulties experienced by several of the
Sellers customers.

Telstar 8 is expected to be launched into the
89°W orbital location, which had been occupied by
Telstar 4, in the third quarter of 2004. Telstar 4 had been
scheduled to move to the 77°W orbital location at that
time. Under the terms of the asset purchase agreement, we will
acquire the rights to the 77°W orbital location, but no
satellite is currently scheduled to be moved or launched into
that orbital location.

The following table provides summary information
for each of the in-orbit and under-construction satellites to be
acquired from the Sellers, including:



| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | orbital location or, for Telstar 8, expected
    orbital location;               
|
| |  | launch dates or, for Telstar 8, expected launch
    date; and                    
|
| |  | service segments and markets served or, for
    Telstar 8, expected to be served.

|                 |                    |             |  |                             |  |                                                                                                                                                               
|---------------- | ------------------ | ----------- |  | --------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|Satellite and    |                    |             |  |                            
|Orbital Location |                    | Launch Date |  | Services/Markets           
|                 |                    |             |  |                            
|                 | Telstar 5 at 97°W  |             |  | May 1997                    |  |  Broadcasting and syndication
     Digital data applications
     Transmission of ethnic programming                                                       
|                 | Telstar 6 at 93°W  |             |  | February 1999               |  |  Broadcasting and syndication
     Satellite news gathering
     Digital data applications
     Transmission of niche direct-to-home (DTH)
    programming
|                 | Telstar 7 at 129°W |             |  | September 1999              |  |  Cable programming distribution
     Internet/private data networking applications
     Transmission to very small aperture terminals (VSATs)              
|                 | Telstar 13 at 121° |             |  | August 2003                 |  |  Cable programming distribution
     Video distribution/contribution                                                                                        
|                 | Telstar 8 at 89°W  |             |  | Expected Third Quarter 2004 |  |  Broadcasting
     Multimedia/private data networking/government
    service applications                                                                   

In addition to these satellites, we have agreed
to acquire various assets relating to the satellites and the
business that the Sellers conduct on these satellites. These
assets include customer contracts, ground encryption units,
ground control systems, software and satellite restoration
plans. They also include FCC licenses, rights to

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the use of the orbital locations associated with
the satellites and other governmental authorizations relating to
the satellites, as well as related insurance policies.


Total revenues generated by the in-orbit
satellites to be acquired and Telstar 4 were, in the aggregate,
$227.4 million for the year ended December 31, 2001,
$200.1 million for the year ended December 31, 2002
and $143.6 million for the year ended December 31,
2003. Total revenues refers to the aggregate revenues recognized
by the Sellers for the periods indicated in accordance with U.S.
generally accepted accounting principles, consistently applied,
for services rendered under customer service contracts and on an
incremental or short-term basis.

Pursuant to the asset purchase agreement, we have
agreed, upon the closing of the proposed transaction, to enter
into a procurement agreement with SS/ L for a new satellite to
be launched into one of our existing orbital locations. We have
agreed to make a deposit of $50.0 million as prepayment for
a portion of the purchase price of the new satellite, provided
that SS/ Ls obligations under the procurement agreement
have been secured by SS/ Ls and its affiliates
interests in an in-orbit satellite, insurance proceeds relating
to the satellite and other collateral that are not included in
the assets to be acquired from the Sellers. SS/ L manufactured
the last seven of our satellites.

The base purchase price for the assets to be
acquired is $1.025 billion, subject to adjustment. Among
other things, the base purchase price will be:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | subject to a maximum purchase price decrease of
    $100.0 million, decreased by an amount calculated by
    reference to decreases in the recurring revenues of the business
    being acquired, determined as specified in the asset purchase
    agreement, for a three-month measurement period prior to the
    closing or by reference to decreases in backlog, as defined in
    the asset purchase agreement, as of a date prior to the closing;                  
|
| |  | decreased by $25.0 million if the Sellers
    have not delivered a specified launch insurance commitment for
    Telstar 8 by the closing;                                                                                                                                                                                                                                                                                                                                
|
| |  | increased by the amount of specified deposits,
    prepaid expenses, such as in-orbit insurance premiums, and
    specified taxes and regulatory fees relating to the post-closing
    period;                                                                                                                                                                                                                                                                            
|
| |  | increased by $12.5 million if SS/ L executes
    and delivers at the closing amended procurement agreements
    relating to the satellites to be acquired eliminating all
    orbital incentive payment obligations under those contracts; and                                                                                                                                                                                                                            
|
| |  | increased by $50.0 million if the Sellers
    enter into a specified customer service contract or by
    $100.0 million if the Sellers enter into a new customer
    service contract providing for the lease of a substantial number
    of transponders on the satellites to be acquired that we, in our
    sole discretion, find satisfactory and elect to assume, in each
    case subject to available capacity and if this contract meets
    specified conditions.

In addition to the adjustments to the purchase
price described above, after the closing of the proposed Loral
transaction, we will be entitled to any insurance proceeds
received by the Sellers in respect of the Telstar 4
satellite, not of specified warranty payments to customers.
Telstar 4 was insured for $141.0 million.

We have also agreed to assume specified
contractual commitments of the Sellers under contracts relating
to the satellites to be acquired. For example, we have agreed to
pay up to $130.0 million under the procurement agreement
relating to Telstar 8 and have agreed to assume specified
contractual commitments under other procurement agreements. The
assumed liabilities also generally include liabilities arising
under the customer contracts and other contracts relating to the
satellites to be acquired, warranty claims made after the
closing and other specified contractual commitments relating to
the satellites arising after the closing in connection with the
operation of the satellites.

There are several conditions that must be
satisfied before we and the Sellers are required to complete the
transaction. These conditions include that:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the backlog, as defined in the asset purchase
    agreement and which includes backlog associated with contracts
    executed with StarBand and Loral Skynet Network Services, Inc.
    in February 2004 as if such

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| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | contracts had been in effect since
    January 1, 2004, relating to the assets to be acquired as
    of a calendar month end no more than 60 days prior to the
    closing shall not be less than a specified amount;
|
| |  | recurring revenues relating to the assets to be
    acquired for a three calendar month period ended no more than
    60 days prior to the closing shall not be less than a
    specified amount; and                
|
| |  | the Sellers must perform in all material respects
    their obligations under the transition services agreements.                                                                                                    

The Sellers have filed for bankruptcy protection
under Chapter 11 of the U.S. Bankruptcy Code and will
continue to operate as debtors in possession. Prior to the
Sellers emergence from bankruptcy protection, the
Sellers assets may only be sold in accordance with, among
other things, the requirements of Section 363 and
Section 365 of the U.S. Bankruptcy Code, which govern sales
of assets by a trustee or debtor in possession outside of the
ordinary course of business.

Pursuant to a bankruptcy court order, the sale of
the Sellers assets that are the subject of the asset
purchase agreement was conducted pursuant to a bankruptcy
court-authorized auction that afforded other interested parties
the opportunity to make higher or better offers for the assets.
At the auction, it was concluded that we were the highest and
best bidder for the Sellers assets that are the subject of
the asset purchase agreement. The sale of those assets to us was
approved by the bankruptcy court on October 24, 2003. The
bankruptcy courts sale order relating to the decision was
entered on October 30, 2003. The bankruptcy courts
order contains findings including, among others, that the sale
is in the best interests of the Sellers, that we acted in
good faith as purchaser and that the assets will be
transferred to us free and clear of liens, claims and
encumbrances and other interests, except with respect to
liabilities that we expressly agreed to assume in the asset
purchase agreement.

On March 5, 2004, we, Intelsat Bermuda and
the Sellers entered into an amendment to the asset purchase
agreement relating to, among other things, the amount of the
deposit to be made under the new procurement agreement with
SS/L, certain adjustments to the purchase price and the waiver
of specified conditions to closing. This amendment will become
effective upon the later of the approval of the bankruptcy court
and the consent of the lenders under our new credit facility
that represent more than 50% of the lending commitments under
the facility. If the bankruptcy court does not approve the
amendment by April 12, 2004 or the required lenders do not
provide their consent by the earlier of April 12, 2004 and
the date the bankruptcy court has approved the amendment, we and
the Sellers are each entitled to terminate the amendment. The
descriptions in this annual report of our agreement with the
Sellers give effect to the terms of the amendment. If the
bankruptcy court does not approve the amendment or the required
lenders do not provide their consent, some of the terms of the
asset purchase agreement as described in this annual report may
change or the transaction may not occur.

The asset purchase agreement contains provisions
pursuant to which it may be terminated prior to the closing.
These provisions provide, among other things, that we or the
Sellers may elect to terminate the agreement if the closing of
the transactions contemplated by the asset purchase agreement
does not occur on or prior to April 12, 2004. If the
proposed Loral transaction is terminated or is not completed on
or prior to April 30, 2004 for any reason, we will be
required to redeem $700.0 million of the $1.1 billion
in senior notes we issued in November 2003 at a redemption price
of 102% of the principal amount of the notes being redeemed,
plus accrued and unpaid interest, if any, and any other amounts
due to the date of redemption.

If we are successful in our effort to acquire the
Sellers assets, we will account for the acquisition under
the purchase method of accounting in accordance with accounting
principles generally accepted in the United States. Therefore,
the total consideration paid, together with the direct costs of
the transaction, will be allocated to the acquired tangible and
identifiable intangible assets and liabilities based on their
estimated fair market values, with any excess being treated as
goodwill. The assets, liabilities and results of operations of
the acquired business will be consolidated into our assets,
liabilities and results of operations beginning on the date the
Loral transaction is completed.

See Item 3.D  Risk
Factors for a discussion of risks relating to the proposed
Loral transaction.

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C. Organizational Structure

Intelsat, Ltd., a limited liability company
incorporated under the laws of Bermuda, 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 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 and Intelsat
Government Solutions Corporation.

Intelsat Holdings LLC, a limited liability
company organized under the laws of Delaware, is a wholly owned
subsidiary of Intelsat Bermuda 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. Intelsat LLC sells all of its satellite capacity
to Intelsat Bermuda. If the proposed Loral transaction is
consummated, we expect that the satellites we acquire from the
Sellers will be held by Intelsat LLC. 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. Intelsat Global Sales, as the contracting party to most
of our customer contracts, sells this satellite capacity
directly to our customers and also sells satellite capacity to
certain of our subsidiaries. Intelsat Global Sales is a wholly
owned subsidiary of Intelsat Bermuda.

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.

Intelsat USA Sales Corp., a corporation organized
under the laws of Delaware, is the contracting party with our
U.S., Canadian and Caribbean customers. If the proposed Loral
transaction is consummated, we expect that the customer
contracts we acquire from the Sellers will be held by Intelsat
USA Sales Corp. 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, is 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 $8.8 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 network management center and our satellite
control center. As described under 
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

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satellite fleet. The building also houses the
majority of our sales and marketing support staff and other
administrative personnel. As of December 31, 2003,
approximately 82% of our employees work in the building. We also
lease approximately 25,000 square feet of additional office
space at another location in Washington, D.C.


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 a
number of earth station facilities, including six primary earth
stations that perform TT&C and other 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 primary TT&C earth stations in our
ground network are located in Australia, Germany, Italy, Korea
and two U.S. locations  Maryland and Hawaii. Other
earth stations in our ground network include earth stations
located in Argentina, Australia, Bahrain, the Caribbean, China,
Colombia, Costa Rica, Germany, India, Italy, Russia, South
Africa, Tahiti, the United Arab Emirates and other U.S.
locations.

In addition to our satellite fleet and related
ground network, we own four teleports, three of which are in the
United States and one of which is in Germany. We lease teleport
services at a fifth 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.

We have an approximately 39,000 square foot
facility that includes a back-up facility and data center
located a relatively short distance from our Washington, D.C.
facility. We have also leased approximately 18,000 square feet
of office space and 9,300 square feet of storage space at this
location. We use the back-up facility and data center as back-up
for our satellite and other business operations.

In connection with the proposed Loral
transaction, we intend to use existing antennas at our two
primary earth stations in the United States and are building new
antennas at a third U.S. location to provide TT&C services
for the satellites to be acquired from the Sellers. To support
commercial services for the North American satellite services
business to be acquired pursuant to the proposed Loral
transaction, we are also building antennas at one of our
teleports in the United States.

We lease office space in Hamilton, Bermuda and
London, England. Our Bermuda office was established in 2001 and
serves as the headquarters for Intelsat, Ltd. and Intelsat
Bermuda. Our London office houses the employees of Intelsat
Global Sales, our sales and marketing subsidiary, and functions
as our global sales headquarters. We also lease office space in
New York, Australia, Brazil, China, France, Germany, India,
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 the Item 3.A  Selected
Financial Data and our consolidated financial statements
and their notes included 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 provider of satellite
communications services worldwide, supplying voice, data and
video connectivity in over 200 countries and territories. Our
global communications network includes 23 satellites in orbit,
leased capacity on 2 additional satellites owned by other
satellite operators in the Asia-Pacific region and ground
facilities related to the operation and control of our
satellites. Our network also includes ground network assets
consisting of teleports, points of presence and fiber
connectivity in locations around the world that we are

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using to provide integrated end-to-end services.
We are a Bermuda holding company and conduct our operations
through our sales, service and license subsidiaries, supported
by our regional sales and marketing support offices. We have
entered into an asset purchase agreement to acquire the North
American satellite assets of Loral Space & Communications
Corporation and certain of its affiliates. For information about
the proposed Loral transaction, see Item 4.B 
Business Overview  Agreement to Purchase the
North American Satellite Assets of Loral.


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. We also earn revenue
by providing managed services to our customers.

According to transmission plans and traffic
information supplied by our customers, we believe that our
satellite capacity is used by our customers for five main
service applications: carrier services, which are primarily
point-to-point services; corporate network services; video
services; Internet services; and government/military services.
We have included government/military services as a fifth service
application category since January 1, 2003. See
Item 4.B  Business Overview 
Our Customers and Service Applications for descriptions of
these five service applications and the percentage of our
revenue we believe each represents.

Our customers obtain satellite capacity from us
by placing an order pursuant to one of several master customer
service agreements. These agreements offer different service
commitment types, including lease, channel and carrier, and
managed services.

The various master customer agreements and
related service orders under which we sell our services 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
1 day to as long as 15 years.

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 at any given time is partially
dependent on the communications capacity supply available in the
market, including capacity from other satellite providers and
from competing technologies such as fiber optic cable networks,
and the level of demand for that capacity. The launch of new
satellites can enhance revenue when these satellites are placed
into orbital locations where demand for communications capacity
exceeds the supply. However, the expected positive impact on
revenue will not be realized fully when the increase in supply
that comes with the launch of a new satellite exceeds the
increase in demand.

There are a number of trends affecting our
revenue. For example, revenue from carrier applications has been
declining in recent years, and the decline in future years could
be significant. This trend is principally 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 fixed points. We expect revenue from our carrier
applications to continue to decline 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 satellite 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 offering integrated and
managed services. See Item 4.B  Business
Overview  Our Strategy  Sustain Our
Leadership Position in the Voice and Data Customer
Segments for a discussion of our strategy with respect to
carrier services.

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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. The financial difficulties of some
of our customers such as WorldCom, Inc., Teleglobe Inc. and
Verestar, Inc. have had a negative impact on our revenue. 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, particularly their
traditional carrier service commitments, into service
commitments that are more economical to them and that reduce our
revenue. Our business strategy includes offering a more diverse
portfolio of services, including integrated and managed
services. It also includes marketing services to competitive
providers, including wireless service 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 that are
telecommunications services providers.

We believe that the flexibility we have as a
private company in pricing our services and in offering new
services should positively affect our revenue from certain
geographic regions over the long term. As the IGO, we priced our
services solely on the basis of three factors: 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 have sought 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
and currently provide a number of integrated and managed
services. We believe that this flexibility in pricing our
services and in offering new services will have a positive
effect on our revenue from certain geographic regions over the
long term. See Item 4.B  Business
Overview  Our Strategy for a discussion of our
strategy for new service offerings. However, we have recently
been experiencing pricing pressure for services in the Asian and
Latin American markets that has negatively impacted our revenue
in these markets. Pricing for our services has also been
negatively impacted by consolidation among users of our
satellite capacity. Mergers in the telecommunications industry
have contributed to reduced demand for wholesale satellite
capacity, which has triggered price competition among fixed
satellite services providers.

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 eligible customers 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. As of December 31, 2003, our MFC
terms had resulted in total reductions in our backlog of less
than $200,000. We do not believe that 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 LCO contracts at prices no higher than the prices
charged for those services on the privatization date. Under some
circumstances, we may also be required by an LCO contract to
reduce our price for a service commitment covered by the
contract. As of December 31, 2003, we had not been required
to reduce prices for our LCO-protected service commitments. LCO
protection may 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 sets forth criteria that the FCC must evaluate in
considering our license and renewal applications, and in
connection with customer requests for authorization to use our
satellite capacity to provide non-core services to,
from or within the United States and to provide additional
services. Non-core services are defined in the
ORBIT Act as any services other than public-switched voice
telephony and occasional use television. The FCC defines
additional services as direct-to-home or direct
broadcast satellite video services or services in the Ka- or
V-band. One of the statutory criteria requires us to make an
initial public offering by no later than June 30, 2004. If
the FCC determines that we have failed to comply with the
requirements of the ORBIT Act, the FCC may impose limitations on
or deny our applications for

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satellite licenses and for the renewal of these
licenses and may limit or revoke previous authorizations to
provide non-core services to, from or within the
United States. The FCC may also deny licensing for
additional services. Over 90% of revenue from the
assets to be acquired pursuant to the proposed Loral transaction
is generated by services that we believe could be deemed
non-core services or additional
services. Accordingly, if the FCC were to limit or revoke
previous authorizations to provide non-core services to, from or
within the United States and were to deny licensing for
additional services, we could fail to realize almost entirely
the positive impact on our revenue that we expect as a result of
the proposed Loral transaction. Pending our completion of an
initial public offering that complies with the requirements of
the ORBIT Act, the FCC granted special temporary authority to
Intelsat North America LLC to provide DTH services to existing
customers of the Sellers for 180 days commencing on the
closing date of the Loral transaction.


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.

If we are able to reposition our business toward
providing more video services, we may benefit from the
introduction of HDTV services in developed markets, which is
expected to increase demand for wholesale satellite capacity.
However, short-term demand for HDTV services has been lower than
anticipated. Moreover, increased demand for wholesale satellite
capacity may be offset in the near term as broadcasters complete
the migration of their transmission signals from analog signals
to digital signals, which require less satellite capacity than
analog signals to transmit a given amount of content. However,
approximately 90% of the channels on the Loral satellites to be
acquired have completed the migration from analog to digital, as
have virtually all of the channels on our satellite system.

We expect that the proposed Loral transaction, if
completed, will positively impact our revenue from lease
services. First, the transaction will enable us to expand our
customer base in North America, thereby enhancing the geographic
diversity of our revenue base. We believe that our balanced
geographic mix provides some protection from adverse regional
economic conditions. Second, the transaction will enable us to
increase the use of our system for broadcasting, cable
television, private data networking and other
point-to-multipoint applications. We believe that enhancing our
service application mix to include more point-to-multipoint
traffic will have a positive impact on our revenue, as this
traffic is less susceptible to competition from fiber optic
cable than point-to-point traffic and as certain
point-to-multipoint applications are expected to increase demand
for wholesale satellite capacity in the future. Third, the
assets to be acquired from the Sellers will enable us to expand
our coverage of the continental United States. This expanded
coverage will enhance our ability to provide customers with the
integrated and managed services described above. However, we may
not realize the positive impact on our revenue that we expect
from the proposed Loral transaction for a number of reasons, as
described in Item 3.D  Risk Factors.

Moreover, although we expect that the proposed
Loral transaction will positively impact our revenue, the
transaction is expected to negatively impact our net income in
the near term, principally due to the interest expense
associated with the financing of the transaction and the
depreciation expense of the satellites to be acquired from the
Sellers.

Operating
Expenses

Our ongoing operating expenses include direct
costs of revenue (exclusive of depreciation and amortization);
selling, general and administrative expenses; and depreciation
and amortization. Direct costs of revenue (exclusive of
depreciation and amortization) and selling, general and
administrative 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 and regulatory oversight, 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 have also been
required to develop new staff

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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. Upon privatization,
we also became subject to license fees and other duties in the
jurisdictions in which we operate.


Depreciation and amortization has also increased
in recent years due primarily to depreciation expense associated
with the seven Intelsat IX series satellites that we have
launched during the period from June 2001 through February 2003.

We expect that our operating expenses will
increase in the future as we expand our business and react to
market opportunities. For example, we expect to incur additional
costs associated with providing managed services, as discussed
further below under  Direct Costs of Revenue
(Exclusive of Depreciation and Amortization). We also
expect that costs incurred by Galaxy, our consolidated
affiliate, associated with its pay television service in Hong
Kong will contribute significantly to future increases in our
operating expenses.

If the proposed Loral transaction is completed,
we believe that our operating expenses will increase in the
future as a result of the transaction. However, we already
perform many of the functions required to operate and generate
revenue from the Loral satellites, and SS/ L is the manufacturer
of both the Loral satellites to be acquired as well as our 14
Intelsat VII/ VIIA and IX series satellites. We anticipate that
these factors will facilitate our integration of the Loral
satellites and that any increase in our operating costs
following the completion of the proposed Loral transaction will
be incremental in nature. However, we expect to incur other
additional costs related to integration of the assets to be
acquired into our business, and the increase in our expenses as
a result of the proposed Loral transaction may be greater than
we anticipate.

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, as
described below. 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 grew because of increased spending on
the development of new services, such as our
GlobalConnexSM Solutions services. In connection with
the development of new services, we acquired three teleport
facilities in 2002 and built an additional teleport facility in
2003. We have also leased fiber capacity to connect these
teleports with our satellite network and to provide network
connectivity to our managed services customers. During 2003, we
incurred additional personnel, maintenance and other
infrastructure costs associated with operating these facilities.
We have also incurred costs in connection with designing and
implementing customized communications services for our managed
services customers, such as establishing a customized broadband
service platform for a direct-to-home service provider in the
Middle East.

In addition, we have expanded our managed
services by entering into joint marketing, sales referral and
other types of sales alliance agreements. Under these
arrangements, we pay our marketing and alliance partners a
percentage of the revenue we earn from new customer
relationships established under these agreements. We incurred
additional costs associated with these arrangements during 2003
and expect to incur additional costs in the future as we expand
our alliance programs and add new customers pursuant to these
arrangements.

We expect this trend of higher direct costs of
revenue to continue as we add customers, expand our portfolio of
managed services and provide customized communications services
to our customers. Due to the higher costs of providing managed
services to our customers, managed services typically have lower
revenue margins than the

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other services we provide. Accordingly, to the
extent that we are successful in our strategy to replace part of
our declining carrier business with our new managed services
business, we expect our revenue margins to decrease in the
future.


In addition, we have incurred other incremental
expenses in connection with our operations as a private company,
as discussed above, and have incurred additional costs
associated with the business we acquired from COMSAT World
Systems in November 2002, which we expect to be recurring.

If the proposed Loral transaction is completed,
we will require staff increases, incrementally increasing our
direct costs of revenue, and will incur additional direct costs
of revenue in order to operate the acquired satellites and
manage customer transmissions on the acquired satellites. As
described above, this increase in our direct costs of revenue
may be greater than we anticipate.

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. Selling, general and administrative
expenses also include building maintenance and rent expenses,
and the provision for uncollectible accounts. The 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.

Selling, general and administrative expenses
fluctuate with the number of customers served and the number and
types 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 significantly following privatization. The increases
primarily resulted from our efforts to improve our competitive
position as a private company and from 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, including staff acquired
in connection with our November 2002 acquisition of COMSAT World
Systems, and enhancing brand awareness by engaging in new
promotional activities. This decentralization included
establishing additional offices, and we now have sales-related
offices in 11 different countries. We have also 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 have also incurred other
incremental expenses in connection with our operations as a
private company, as discussed above. If the proposed Loral
transaction is completed, we expect to add sales staff and incur
other sales and marketing costs as a result of the increased
level of activity in the North American region. We also expect
to add staff in various administrative areas to meet the
increased administrative requirements of the new business. As
described above, the increase in our selling, general and
administrative expenses if the proposed Loral transaction is
completed may be greater than we anticipate.

Depreciation
and Amortization

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  Critical
Accounting Policies  Satellites and Other Property
and Equipment. 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

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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 6 of our 7 Intelsat IX series satellites to
be 15 years and the depreciable life of the seventh
satellite to be 14 years. If the proposed Loral transaction
is completed, we expect that our depreciation and amortization
costs will increase in the future, principally due to
depreciation costs we will incur on the acquired satellites and
the amortization of acquired intangible assets. Actual costs
will depend on the estimated useful lives of the acquired
satellites, the price paid for the satellites and the allocation
of the purchase price between the acquired assets and goodwill.


Liquidity
and Capital Resources

We expect that our most significant liquidity
requirements in 2004 will arise in connection with the proposed
Loral transaction. We intend to finance the proposed transaction
with cash on hand from our sale in November 2003 of
$400.0 million in aggregate principal amount of 5 1/4%
Senior Notes due 2008 and $700.0 million in aggregate
principal amount of 6 1/2% Senior Notes due 2013. Other
significant liquidity requirements in 2004 will arise in
connection with the payment of $400.0 million in debt
maturing in 2004 and the funding of capital expenditures. We
expect cash on hand and cash provided by operating activities in
2004 to be adequate to fund the majority of these liquidity
requirements. We intend to borrow $200.0 million under our
$800.0 million three-year unsecured credit facility
obtained in December 2003 for the repayment of our Dragon bonds
or, if these notes have been repaid prior to the closing of the
facility, to replenish cash on hand or repay borrowings used to
repay these notes. If additional cash is needed, we may borrow
additional amounts under our new credit facility. In particular,
an additional $200.0 million is available under this new
facility for the repayment of our Eurobond notes maturing in
2004 and $400.0 million is available under a revolving
credit facility. As described under  Liquidity
and Capital Resources  Capital Resources
below, the closing of this new credit facility is subject to the
satisfaction of specified conditions, including the completion
of the proposed Loral transaction. In addition to the sources of
funding described above, we expect to receive cash in 2004 in an
amount equal to the net proceeds from our sale of ordinary
shares in our initial public offering. However, the exact amount
and timing of our receipt of proceeds from the sale of shares in
our initial public offering cannot be known at this time.

In addition to our liquidity requirements
described above, in the event that, among other things, the
proposed Loral transaction fails to close on or prior to
April 30, 2004, we will be required to redeem
$700.0 million in aggregate principal amount of the 2008
Senior Notes and 2013 Senior Notes we issued in November 2003 at
a redemption price of 102% of the principal amount of the notes
being redeemed, plus accrued and unpaid interest, if any, and
any other amounts due to the date of redemption. The mandatory
redemption events relating to these notes are described under
Item 10.C  Material Contracts 
Senior Notes due 2008 and Senior Notes due 2013 below. If
a mandatory redemption event occurs, cash on hand from our sale
of the notes in November 2003, currently classified as
restricted cash on our balance sheet, would be used to redeem
the notes subject to mandatory redemption. Other significant
liquidity requirements in 2004 would still arise in connection
with the $400.0 million in debt maturing in 2004, as described
above, and the funding of our capital expenditures. We still
expect that cash on hand and cash provided by operating
activities in 2004 would be adequate to fund these requirements.
Additional cash, if required, would be available under our
existing $500.0 million three-year unsecured revolving credit
facility that expires in March 2005. In addition to the sources
of funding described above, we expect to receive cash in 2004 in
an amount equal to the net proceeds from our sale of ordinary
shares in our initial public offering.

We also may require funding for currently
unplanned strategic acquisitions. To the extent these
requirements could not be met with the sources of funding
described above, we could use our ordinary shares as part or all
of the purchase price or, to the extent necessary, obtain
additional external financing. We may be required to obtain
additional financing for any strategic transactions that we
pursue to the extent that cash, rather than our ordinary shares,
is used to fully or partially finance any such transaction. In
addition, we may be required to seek external financing for
other projects requiring significant capital expenditures or if
our capital requirements are greater

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than we currently anticipate as a result of other
unanticipated expenses. A number of factors would influence our
ability to obtain any such financing, including our credit
rating and financial performance and general market conditions.
Both our credit rating and our ability to obtain financing
generally may be influenced by the supply and demand
characteristics of the telecommunications sector in general and
of the fixed satellite services sector in particular. Our
backlog and the business conditions faced by our customers are
among the factors 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.
A credit rating downgrade or deterioration in our financial
performance could limit our ability to obtain financing or could
result in any such financing being available only at greater
cost or on more restrictive terms than might otherwise be
available.


Insurance

We currently have in place an insurance policy
expiring in November 2004 that covers the in-orbit operations of
our seven Intelsat IX series satellites. Under the terms of this
policy, we co-insure $150.0 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. The net book
value of the seven satellites covered under this policy was
$1.7 billion as of December 31, 2003. We do not have
in-orbit insurance coverage for the 16 satellites not covered
under this insurance policy. These 16 satellites individually
have net book values of less than $150.0 million and in the
aggregate have a net book value of $888.7 million. For a
further discussion of the insurance we have relating to our
satellites, see Item 4.B  Business
Overview  Network  Sparing;
Insurance.

Insurance premiums related to satellite launches
and subsequent in-orbit testing are capitalized and amortized
over the lives of the related satellites.

The in-orbit operations of the four satellites in
orbit that we expect to acquire from Loral are currently
insured. Loral is required to maintain insurance on these
satellites at certain prescribed levels set forth in the asset
purchase agreement until the closing of the proposed transaction.

In the past three years, in-orbit insurance costs
in general have ranged from 1.60% to 3.25% of the insured value
of a satellite per year. These insurance premiums may increase
in the future as a result of future launch vehicle failures or
in-orbit satellite failures or due to other factors. See
Item 3.D  Risk Factors for a further
discussion of our insurance and a discussion of insurance
matters relating to the satellites to be acquired from Loral.

Backlog

Our expected future revenue under our various
customer service agreements, referred to in the fixed satellite
services sector as backlog, was approximately $4.0 billion
as of December 31, 2002 and approximately $3.6 billion
as of December 31, 2003. The primary reasons for the
decrease in our backlog are the renewal of expiring contracts
under different terms and conditions, including shorter contract
durations, the expiration of contracts that were not renewed due
to our customers optimization of their networks and the
migration of our point-to-point customers from satellite to
fiber optic cable on certain routes as their contracts expire.
As of December 31, 2003, 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 $775.2 million, or 22%, of our
December 31, 2003 backlog by December 31, 2004.

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, 2003, 88% of the customer contracts
included in our backlog, representing approximately
$3.2 billion in future revenue, were non-cancelable and 12%
of the customer contracts included in our backlog, representing
approximately $435 million in future revenue, could be canceled
by the customer upon the payment of early termination penalties.
Our termination penalties generally require customers that
cancel within the first two years of their contracts to pay
termination fees equal to any remaining

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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.


Our expected future revenue under contracts with
customers as of December 31, 2003 was approximately as
follows:

|                    |  |               |       | 
|------------------- |  | ------------- | ----- | 
|Period              |  | (in millions)
|                    |  |              
|2004                |  | $             | 775   | 
|2005                |  |               | 583   | 
|2006                |  |               | 449   | 
|2007                |  |               | 345   | 
|2008                |  |               | 294   | 
|2009 and thereafter |  |               | 1,138 | 
|                    |  |               |       | 
|Total               |  | $             | 3,584 | 
|                    |  |               |       | 

A majority of our backlog as of December 31,
2003 was eligible for either MFC protection or LCO protection.
See Item 4.B  Business
Overview  Certain Customer Service Agreements
for a description of MFC and LCO protections. The 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 the sale of our capacity, we terminated our
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. 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 one of our largest
customers. 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, 2003,
WorldCom, Inc. and its affiliates accounted for
$73.5 million, or 2.1%, of our backlog. The loss of
WorldCom, Inc. as a customer would reduce our revenue and
backlog and could materially adversely affect our business.

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. 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, Intelsat Global Sales
agreed to terminate some of Teleglobe Inc.s and its
affiliates service orders with us. The terminated service
orders represented approximately $47.4 million, or 1%, of
our backlog as of the closing date of the share purchase
transaction. For a description of the share purchase transaction
with Teleglobe Inc., see  Related Party
Transactions  Teleglobe Share Purchase
Agreement below.

Verestar, Inc., one of our largest customers,
filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code on December 22,
2003. As of December 31, 2003, Verestar, Inc. and its
affiliates accounted for $53.9 million, or 1.5%, of our
backlog. The loss of Verestar, Inc. as a customer would reduce
our revenue and backlog and could significantly adversely affect
our business.

Approximately $112.0 million of our backlog
as of December 31, 2003 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, as
well as other events that may occur as a result of political
uncertainty in Argentina, some of the backlog represented by
contracts with our Argentine customers is potentially at risk.

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For information about the future minimum lease
receipts from customers under long-term operating leases
relating to the satellites to be acquired from the Sellers, see
Item 4.B  Business Overview 
Agreement to Purchase the North American Satellite Assets of
Loral. For information about financial difficulties
experienced by several of the Sellers customers, see
Item 3.D  Risk Factors.

Results of
Operations

The following table sets forth our comparative
statements of operations data for the years ended
December 31, 2002 and 2003, and the increase or decrease
and percentage change between the periods presented.

|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |      |  
|-------------------------- | ----------------------------------------------------------------------------------------------- | -------------- | ------- | ----------------- |  | ----------------- | ------- | ------- | - |  | -------- | ------- | - |  | --- | ---- | -
|                           |                                                                                                 |                |         |                   |  |                  
|                           |                                                                                                 |                |         |                   |  | Year Ended       
|                           |                                                                                                 |                |         |                   |  | December 31, 2003
|                           |                                                                                                 |                |         |                   |  | Compared to      
|                           |                                                                                                 |                |         | Year Ended       
|                           |                                                                                                 | Year Ended     |         | December 31, 2002
|                           |                                                                                                 | December 31,   |         |                  
|                           |                                                                                                 |                |         | Increase          |  | Percentage       
|                           |                                                                                                 | 2002           |         | 2003              |  | (Decrease)        |         | Change 
|                           |                                                                                                 |                |         |                   |  |                   |         |        
|                           |                                                                                                 |                |         |                   |  |                  
|                           |                                                                                                 | (in thousands) |         |                   |  |                  
|Revenue                    |                                                                                                 | $              | 991,956 |                   |  | $                 | 952,781 |         |   |  | ($39,175 | )       |   |  | (4  | %)  
|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     
|Operating expenses:        |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     
|                           | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                |         | 117,405           |  |                   |         | 136,223 |   |  |          | 18,818  |   |  |     | 16   |  
|                           | Selling, general and administrative                                                             |                |         | 121,077           |  |                   |         | 132,750 |   |  |          | 11,673  |   |  |     | 10   |  
|                           | Depreciation and amortization                                                                   |                |         | 361,322           |  |                   |         | 403,234 |   |  |          | 41,912  |   |  |     | 12   |  
|                           | IS-10-01 contract termination costs                                                             |                |         | 34,358            |  |                   |         | (3,000  | ) |  |          | (37,358 | ) |  |     | (109 | )
|                           | Restructuring costs                                                                             |                |         | 5,522             |  |                   |         | (837    | ) |  |          | (6,359  | ) |  |     | (115 | )
|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     
|Total operating expenses   |                                                                                                 |                | 639,684 |                   |  |                   | 668,370 |         |   |  | 28,686   |         |   |  | 5   |     
|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     
|Income from operations     |                                                                                                 |                | 352,272 |                   |  |                   | 284,411 |         |   |  | (67,861  | )       |   |  | (19 | )   
|Interest expense, net      |                                                                                                 |                | (55,053 | )                 |  |                   | (97,789 | )       |   |  | 42,736   |         |   |  | 78  |     
|Other income, net          |                                                                                                 |                | 9,942   |                   |  |                   | 20,626  |         |   |  | 10,684   |         |   |  | 107 |     
|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     
|Income before income taxes |                                                                                                 |                | 307,161 |                   |  |                   | 207,248 |         |   |  | (99,913  | )       |   |  | (33 | )   
|Provision for income taxes |                                                                                                 |                | 33,021  |                   |  |                   | 26,129  |         |   |  | (6,892   | )       |   |  | (21 | )   
|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     
|Net income                 |                                                                                                 | $              | 274,140 |                   |  | $                 | 181,119 |         |   |  | ($93,021 | )       |   |  | (34 | %)  
|                           |                                                                                                 |                |         |                   |  |                   |         |         |   |  |          |         |   |  |     |     

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The following table sets forth our comparative
statements of operations data for the years ended
December 31, 2001 and 2002, and the increase or decrease
and percentage change between the periods presented.

|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |     |  
|-------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------- | --------- | ----------------- |  | ---------------------- | ------- | ------- |  |  | --------- | ------- | - |  | ---- | --- | -
|                           |                                                                                                 |                         |           |                   |  |                       
|                           |                                                                                                 |                         |           |                   |  | Year Ended            
|                           |                                                                                                 |                         |           |                   |  | December 31, 2002     
|                           |                                                                                                 |                         |           |                   |  | Compared to Year Ended
|                           |                                                                                                 |                         |           | December 31, 2001
|                           |                                                                                                 | Year Ended December 31, |           |                  
|                           |                                                                                                 |                         |           | Increase          |  | Percentage            
|                           |                                                                                                 | 2001                    |           | 2002              |  | (Decrease)             |         | Change 
|                           |                                                                                                 |                         |           |                   |  |                        |         |        
|                           |                                                                                                 |                         |           |                   |  |                       
|                           |                                                                                                 | (in thousands)          |           |                   |  |                       
|Revenue                    |                                                                                                 | $                       | 1,084,009 |                   |  | $                      | 991,956 |         |  |  | ($92,053  | )       |   |  | (9   | %) 
|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    
|Operating expenses:        |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    
|                           | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                         |           | 101,985           |  |                        |         | 117,405 |  |  |           | 15,420  |   |  |      | 15  |  
|                           | Selling, general and administrative                                                             |                         |           | 95,600            |  |                        |         | 121,077 |  |  |           | 25,477  |   |  |      | 27  |  
|                           | Depreciation and amortization                                                                   |                         |           | 340,449           |  |                        |         | 361,322 |  |  |           | 20,873  |   |  |      | 6   |  
|                           | Privatization initiative                                                                        |                         |           | 33,576            |  |                        |         |        |  |  |           | (33,576 | ) |  |      |    |  
|                           | IS-10-01 contract termination costs                                                             |                         |           |                  |  |                        |         | 34,358  |  |  |           | 34,358  |   |  |      |    |  
|                           | Restructuring costs                                                                             |                         |           | 7,300             |  |                        |         | 5,522   |  |  |           | (1,778  | ) |  |      | (24 | )
|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    
|Total operating expenses   |                                                                                                 |                         | 578,910   |                   |  |                        | 639,684 |         |  |  | 60,774    |         |   |  | 11   |    
|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    
|Income from operations     |                                                                                                 |                         | 505,099   |                   |  |                        | 352,272 |         |  |  | (152,827  | )       |   |  | (30  | )  
|Interest expense, net      |                                                                                                 |                         | (13,050   | )                 |  |                        | (55,053 | )       |  |  | 42,003    |         |   |  | (322 | )  
|Other income, net          |                                                                                                 |                         | 12,293    |                   |  |                        | 9,942   |         |  |  | (2,351    | )       |   |  | (19  | )  
|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    
|Income before income taxes |                                                                                                 |                         | 504,342   |                   |  |                        | 307,161 |         |  |  | (197,181  | )       |   |  | (39  | )  
|Provision for income taxes |                                                                                                 |                         | 5,359     |                   |  |                        | 33,021  |         |  |  | 27,662    |         |   |  | 516  |    
|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    
|Net income                 |                                                                                                 | $                       | 498,983   |                   |  | $                      | 274,140 |         |  |  | ($224,843 | )       |   |  | (45  | %) 
|                           |                                                                                                 |                         |           |                   |  |                        |         |         |  |  |           |         |   |  |      |    

As described above, our customers obtain
satellite capacity from us by placing an order pursuant to one
of several master customer service agreements. These agreements
offer different service commitment types, including lease,
channel and carrier, and managed services commitments. The
following table sets forth our revenue by service commitment
type and the percentage of our total revenue represented by
each. The other category below includes revenue from
demand-based and other service commitment types, as well as
revenue that we record as a result of our consolidation of
Galaxy.

|                                                                |  |                                    |           |      |  |      |     |   |  |   |         |  |  |  |     |   |  |   |         |  |  |  |     |  
|--------------------------------------------------------------- |  | ---------------------------------- | --------- | ---- |  | ---- | --- | - |  | - | ------- |  |  |  | --- | - |  | - | ------- |  |  |  | --- | -
|                                                                |  |                                   
|                                                                |  | Year Ended December 31,           
|                                                                |  |                                   
|                                                                |  |                                    |           |      |  |     
|                                                                |  | 2001                               |           | 2002 |  | 2003
|                                                                |  |                                    |           |      |  |     
|                                                                |  |                                    |           |      |  |      |     |   |  |   |         | 
|                                                                |  |                                   
|                                                                |  | (in thousands, except percentages)
|Lease services                                                  |  |                                    | $669,648  |      |  |      | 62  | % |  | $ | 640,157 |  |  |  | 64  | % |  | $ | 596,302 |  |  |  | 63  | %
|Channel and carrier services                                    |  |                                    | 395,971   |      |  |      | 36  |   |  |   | 334,466 |  |  |  | 34  |   |  |   | 302,278 |  |  |  | 32  |  
|GlobalConnexSMSolutions services and
    other managed services |  |                                    | 9,394     |      |  |      | 1   |   |  |   | 8,068   |  |  |  | 1   |   |  |   | 34,579  |  |  |  | 3   |  
|Other services                                                  |  |                                    | 8,996     |      |  |      | 1   |   |  |   | 9,265   |  |  |  | 1   |   |  |   | 19,622  |  |  |  | 2   |  
|                                                                |  |                                    |           |      |  |      |     |   |  |   |         |  |  |  |     |   |  |   |         |  |  |  |     |  
|Total                                                           |  | $                                  | 1,084,009 |      |  |      | 100 | % |  | $ | 991,956 |  |  |  | 100 | % |  | $ | 952,781 |  |  |  | 100 | %
|                                                                |  |                                    |           |      |  |      |     |   |  |   |         |  |  |  |     |   |  |   |         |  |  |  |     |  

Years
Ended December 31, 2003, 2002 and 2001

Revenue

Revenue decreased $39.2 million, or 4%, for
the year ended December 31, 2003 from the year ended
December 31, 2002. Of this decrease in revenue, lease
services revenue decreased by $43.9 million during the year
as compared to the same period in 2002. The decrease was
primarily due to the expiration of lease service agreements
since December 31, 2002, lower prices due to price pressure
in the Asian and Latin American markets and a decrease in the
volume of capacity sold as leases, reflecting the reduced
capacity requirements of

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our customers due to the optimization of their
networks. Also contributing to the overall decline was a
decrease in revenue from channel and carrier services of
$32.2 million. This decrease in revenue from channel and
carrier services was primarily due to a decline in the volume of
capacity sold as channel and carrier services, which reflects
the continued migration of point-to-point satellite traffic to
fiber optic cables across transoceanic routes, the reduced
capacity requirements of our customers due to the general
economic downturn and the optimization of their 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 in our carrier
business to continue. However, we believe that we will be able
to mitigate this trend by taking certain actions. For example,
we are targeting customers requiring capacity for thin-route and
middle-mile 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. Partially offsetting the
overall decline in our revenue during the year ended
December 31, 2003 was a $26.5 million increase in
revenue from our GlobalConnexSM Solutions services,
which are part of our managed services offerings, an increase in
revenue of $6.8 million as a result of our consolidation of
Galaxy and an increase in revenue relating to the COMSAT World
Systems transaction. The increase in revenue relating to the
COMSAT transaction is due to the fact that 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  Overview 
Revenue above for a discussion of the factors expected to
impact our revenue in the future.


Revenue decreased $92.1 million, or 9%, for
the year ended December 31, 2002 from the year ended
December 31, 2001. The decrease was primarily attributable
to lower revenue from channel and carrier services of $61.5
million, which consisted of a $66.4 million decrease in
revenue from channel and carrier services, partially offset by
$4.9 million in termination fees received. The decline in
revenue from channel and carrier services was primarily due to a
decrease in the volume of capacity sold as channel and carrier
services, which reflects the factors discussed above relating to
the decrease in the volume of capacity sold as channel and
carrier services during 2003 as compared to 2002. Another factor
in the decline in revenue from channel and carrier services for
the year ended December 31, 2002 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 $29.5 million due to a decrease in the volume
of capacity sold as lease services as a result of the expiration
of several video services leases and a reduction in the level of
services provided to Teleglobe Inc. A decrease in occasional-use
video services of $5.6 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 as
customers optimize their networks.

Operating
Expenses

Direct
Costs of Revenue (Exclusive of Depreciation and
Amortization)

Direct costs of revenue (exclusive of
depreciation and amortization) increased $18.8 million, or
16%, for the year ended December 31, 2003 from the year
ended December 31, 2002. The increase was principally due
to increases in costs of services of $6.4 million, facility
and operational costs of $4.3 million, staff costs of
$3.0 million and other expenses of $5.1 million. The
increase in costs of services was primarily due to costs
relating to our lease of communications capacity from
third-party providers, as well as expenses incurred during the
year for customer incentives and promotional equipment that we
did not incur during the year ended December 31, 2002. The
increase in facility and operational costs during 2003 are
associated primarily with our GlobalConnexSM
Solutions services and other managed services initiatives, as
discussed above under  Overview 
Operating Expenses  Direct Costs of Revenue
(Exclusive of Depreciation and Amortization). These
facility and operational costs include the personnel cost of
technical support contractors who support these communications
services, the cost of operating two tracking, telemetry, command
and monitoring stations, referred to as TTC&M stations, and
a teleport facility that we acquired during the fourth quarter
of 2002 and the

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cost of activating an additional teleport. The
increase in facility and operational costs for the year ended
December 31, 2003 from the year ended December 31,
2002 was also due in part to our acquisition of the business of
COMSAT World Systems in November 2002. We incurred a full twelve
months of operating and maintenance expense during the year
ended December 31, 2003 for the facilities we acquired in
the COMSAT transaction. This expense was partially offset by the
elimination after the closing of the COMSAT transaction of the
amounts that we incurred in connection with COMSATs
provision to us of certain services and its lease to us of
certain facilities. The increase in staff costs is due in large
part to an increase in the number of our employees to support
our new service initiatives, as well as higher employee benefit
costs associated with these employees. In addition, we incurred
increased staff costs due to the completion of our Intelsat IX
satellite construction program in 2003. In prior years, some of
our employees were directly involved in on-site supervision of
the construction of the Intelsat IX satellites, and the costs
associated with these employees were considered part of the cost
of the satellites and included in the depreciation and
amortization expense relating to these satellites. Following the
completion of the Intelsat IX satellite construction program in
2003, the role of these employees changed to the maintenance of
the satellites operations and accordingly costs associated
with these employees are now categorized as direct costs of
revenue.


We anticipate that our direct costs of revenue
(exclusive of depreciation and amortization) will continue to
increase as we continue to develop and invest in our
GlobalConnexSM Solutions and other managed services
initiatives. See  Overview 
Operating Expenses  Direct Costs of Revenue
(Exclusive of Depreciation and Amortization) above for a
discussion of the expected impact of our provision of managed
services on our direct costs of revenue (exclusive of
depreciation and amortization), as well as other factors
expected to impact our direct costs of revenue (exclusive of
depreciation and amortization) in the future.

Direct costs of revenue (exclusive of
depreciation and amortization) increased $15.4 million, or
15%, for the year ended December 31, 2002 from 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 the
elimination in 2002 of non-recurring charges we incurred in 2001
of $4.8 million to terminate a satellite construction
contract and of $1.6 million as incentive payments on
leased satellite capacity. 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 our 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 $1.5 million
also contributed to the overall increase in direct costs of
revenue.

Selling,
General and Administrative

Selling, general and administrative expenses
increased $11.7 million, or 10%, for the year ended
December 31, 2003 from the year ended December 31,
2002. The increase was due primarily to increases in staff costs
of $10.8 million, the provision for uncollectible accounts of
$4.4 million, other expenses of $0.8 million and a
$2.5 million charge related to the resolution of a contract
dispute. The increase in staff costs was due primarily to an
increase in our sales and marketing staff, as we continue to
deploy additional sales staff to regional offices to provide
increased customer contact, and higher employee benefit costs.
In addition, in connection with the COMSAT World Systems
acquisition, we added 64 employees to our payroll in 2002
following the closing of the acquisition, for whom we incurred a
full twelve months of personnel and benefits costs during the
year ended December 31, 2003, as compared to only one month
of these expenses during the year ended December 31, 2002.
Offsetting these increases in selling, general and
administrative expenses was a decrease in professional fees of
$6.8 million. The higher professional fees in the year
ended December 31, 2002 were due to fees associated with,
among other things, merger and acquisition activities and our
share purchase agreement with Teleglobe Inc.

We anticipate that our selling, general and
administrative expenses will continue to increase as we add
sales staff and incur other sales and marketing costs as a
result of the proposed Loral transaction. We also expect to add
staff in various administrative areas to meet the increased
administrative requirements of the new business to be

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acquired. See  Overview 
Operating Expenses  Selling, General and
Administrative Expenses above for a discussion of the
other factors expected to impact our selling, general and
administrative expenses in the future.


Selling, general and administrative expenses
increased $25.5 million, or 27%, for the year ended
December 31, 2002 from 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 our privatization, was offset by reductions in staff
costs resulting from our workforce reduction in October 2001.

Depreciation
and Amortization

Depreciation and amortization increased
$41.9 million, or 12%, for the year ended December 31,
2003 from the year ended December 31, 2002. This increase
was primarily due to depreciation of $46.2 million recorded
on Intelsat IX series satellites that were not in service during
the comparable period in 2002. Partially offsetting this
increase was a decrease of $18.1 million attributable to
two Intelsat VI series satellites being fully depreciated during
2002. Also contributing to the increase during the period was a
net increase in depreciation and amortization expense relating
to the ground segment and infrastructure to support our Intelsat
IX series satellites and managed services and other satellites
and intangible assets totaling $13.8 million.

For a discussion of factors expected to impact
depreciation and amortization expense in the future, see
 Overview  Depreciation and
Amortization.

Depreciation and amortization increased
$20.9 million, or 6%, for the year ended December 31,
2002 from 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.

Privatization
Initiative

For the year ended December 31, 2001, we
incurred privatization initiative expenses of
$33.6 million. Privatization initiative expenses refer to
the non-recurring costs associated with our privatization in
July of 2001. Accordingly, we incurred no privatization
initiative expenses after the year ended December 31, 2001.

IS-10-01
Contract Termination Costs

In November 2002, we terminated our order for the
IS-10-01 satellite, due to the manufacturers 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 approximately $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, net of the refund due from the manufacturer of
the satellite and the launch vehicle deposit described below. In
connection with our decision to terminate our order for the
IS-10-01 satellite, we agreed with one of our launch vehicle
providers, Sea Launch Limited Partnership, referred to as Sea
Launch, to treat most of the payments made for the launch
vehicle that could have been used for the launch of the IS-10-01
satellite as a credit for a future launch. Our agreement with
Sea Launch provided that this credit would decrease over time
until we or another entity placed an order for a future launch
with Sea Launch. Based on our estimate of when we might place
such an order, we recorded a deposit of the minimum possible
credit under our agreement with Sea Launch, net of certain
expenses, of approximately $23.2 million. During 2003, we
were notified by Sea Launch that another entity had placed a
launch order and therefore that the credit to which we are
entitled under our agreement with Sea Launch will not be subject
to further reduction. Because our credit with

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Sea Launch was fixed at an amount greater than
the expected credit based on which we recorded our
$23.2 million deposit, during the year ended
December 31, 2003, we reversed $3.0 million of the
$34.4 million charge recorded for the year ended
December 31, 2002. However, if we do not place an order for
a future launch by July 31, 2005, Sea Launch has the right
to terminate the agreement, in which case we will incur a
termination liability of up to $19.1 million, in addition
to forfeiture of our deposit. We currently expect that we will
place an order for a launch by July 31, 2005.


Restructuring
Costs

In December 2002, we incurred restructuring costs
of $5.5 million for severance and related benefit costs as
a result of reducing the size of our workforce by 130 employees,
or approximately 12%. Due to a change in estimate of our
restructuring costs, during the year ended December 31,
2003, we reversed $0.8 million of the $5.5 million
accrued in 2002. All costs were substantially paid by the end of
the second quarter of 2003. We believe these actions have
improved our competitive position by better aligning the
capabilities of our staff to our business strategy.

We also incurred restructuring costs 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.

Interest
Expense, Net

We incurred $115.7 million of gross interest
costs during 2003. Interest expense, net consists of the gross
interest costs we incur less the amount of interest we
capitalize related to capital assets under construction.
Interest expense, net increased $42.7 million, or 78%, for
the year ended December 31, 2003 from the year ended
December 31, 2002. This increase was principally due to a
$34.5 million decrease in interest capitalized during the
year ended December 31, 2003 as compared to the amount
capitalized during the year ended December 31, 2002. The
decrease in interest capitalized was attributable to lower
construction-in-progress balances in 2003 as compared to those
balances in 2002, principally due to the placement into service
during 2002 and 2003 of five Intelsat IX series satellites that
were under construction during the year ended December 31,
2002. Also contributing to the increase in interest expense, net
in 2003 was $11.1 million in interest costs associated with
the 2008 Senior Notes and 2013 Senior Notes sold in November
2003.

We anticipate that interest expense will increase
significantly as a result of the proposed Loral transaction, as
we have incurred additional indebtedness in order to purchase
the assets. Additionally, we expect the amount of interest
capitalized to decrease as a result of our expected lower
construction-in-progress activity.

Interest expense, net increased
$42.0 million, or 322%, for the year ended
December 31, 2002 from the year ended December 31,
2001. This increase was due to an increase in gross interest
costs 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.

Other
Income, Net

Other income, net consists of non-operating
income less non-operating expenses. Other income, net increased
$10.7 million, or 107%, for the year ended
December 31, 2003 from the year ended December 31,
2002. The increase was principally due to an increase in other
income of $13.7 million during the year ended
December 31, 2003 in connection with a reduction in an
obligation payable by us under our share purchase agreement with
Teleglobe Inc. At December 31, 2003, we have no further
obligation payable by us to Teleglobe Inc. under the share
purchase agreement.

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Other income, net decreased $2.4 million, or
19%, for the year ended December 31, 2002 from the year
ended December 31, 2001. This decrease was principally
attributable to a reduction of $5.6 million in other income
from satellite support services we provided to New Skies
Satellites, N.V., referred to as New Skies, to which the IGO
transferred a portion of its assets and liabilities in November
1998. Also contributing to the decrease in other income during
2002 was an increase in foreign currency exchange losses of $3.4
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 $6.6 million,
of which $6.1 million was due to other income recorded in
connection with a decrease in an obligation payable by us under
our share purchase agreement with Teleglobe Inc. See
 Related Party Transactions 
Teleglobe Share Purchase Agreement for a discussion of our
transaction with Teleglobe Inc. and Note 21(b) to our audited
consolidated financial statements included elsewhere in this
annual report for a discussion of the accounting for this
transaction.

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. Our provision for income
taxes totaled $26.1 million for the year ended
December 31, 2003 and $33.0 million for the year ended
December 31, 2002. Our effective tax rate was approximately
13% for the year ended December 31, 2003 and approximately
11% for the year ended December 31, 2002. This increase in
our effective tax rate for 2003 as compared to 2002 was due to
the proportion of our income taxable in higher rate
jurisdictions.

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 arose from our change in taxable status
on the privatization date.

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 by $93.0 million, or
34%, for the year ended December 31, 2003 from the year
ended December 31, 2002. The decrease in net income during
the year ended December 31, 2003 was primarily due to lower
revenue, higher total operating expenses and higher interest
expense as compared to the same period in 2002, as discussed
above.

We expect that the Loral transaction, if
completed, will negatively impact our net income in the near
term, principally due to the interest expense associated with
the financing of the transaction and the depreciation expense of
the satellites to be acquired from the Sellers. However, we
expect that the Loral transaction will have a positive impact on
our net income in the medium term as a result of the expected
positive impact on our revenue, the expected incremental nature
of increases in our operating costs and the expected short-term
nature of transition costs in connection with the transaction.
The impact on our results of operations that we anticipate in
connection with the transaction are described above.

Net income decreased $224.8 million, or 45%,
for the year ended December 31, 2002 from 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 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.

EBITDA,
As Adjusted

EBITDA, as adjusted, consists of earnings before
interest, other income (expense), taxes and depreciation and
amortization. We adjust EBITDA, or earnings before interest,
taxes and depreciation and amortization, to

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exclude other income (expense) in order to
segregate our operating results from non-operating income
(expense), such as the non-operating income
(expense) recorded in 2002 and 2003 related to an
obligation payable by us to Teleglobe Inc. 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 performance. We use EBITDA, as adjusted, as one
criterion for evaluating our performance relative to that of our
peers. We believe that EBITDA, as adjusted, is an operating
performance measure, and not a liquidity measure, that provides
investors and analysts with a measure of operating results
unaffected by differences in capital structures, capital
investment cycles and ages of related assets among otherwise
comparable companies. However, EBITDA, as adjusted, is not a
measurement of financial performance under U.S. generally
accepted accounting principles and may not be comparable to
similarly titled measures of other companies. You should not
consider EBITDA, as adjusted, as an alternative to operating or
net income, determined in accordance with generally accepted
accounting principles, as an indicator of our operating
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.


EBITDA, as adjusted, decreased
$25.9 million, or 4%, for the year ended December 31,
2003 from the year ended December 31, 2002. The decrease
was primarily due to lower revenue and higher total operating
expenses, excluding depreciation and amortization, during the
year ended December 31, 2003 as compared to the same period
in 2002, as discussed above.

EBITDA, as adjusted, decreased
$131.9 million, or 16%, for the year ended
December 31, 2002 from 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 revenue and operating expenses. See
 Overview  Revenue for a
further explanation of trends in our revenue and
 Overview  Operating 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 revenue and
operating expenses.

A reconciliation of net income to EBITDA, as
adjusted, for the three-year period ended December 31,
2003, is as follows (in thousands):

|                    |                               |                         |         |         |  |      |         |         |  |   |         |         | 
|------------------- | ----------------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                    |                               |                        
|                    |                               | Year Ended December 31,
|                    |                               |                        
|                    |                               | 2001                    |         | 2002    |  | 2003
|                    |                               |                         |         |         |  |     
|Net income          |                               | $                       | 498,983 |         |  | $    | 274,140 |         |  | $ | 181,119 |        
|Add:                |                               |                         |         |         |  |      |         |         |  |   |         |        
|                    | Interest expense, net         |                         |         | 13,050  |  |      |         | 55,053  |  |   |         | 97,789  | 
|                    | Provision for income taxes    |                         |         | 5,359   |  |      |         | 33,021  |  |   |         | 26,129  | 
|                    | Depreciation and amortization |                         |         | 340,449 |  |      |         | 361,322 |  |   |         | 403,234 | 
|Subtract:           |                               |                         |         |         |  |      |         |         |  |   |         |        
|                    | Other income, net             |                         |         | 12,293  |  |      |         | 9,942   |  |   |         | 20,626  | 
|                    |                               |                         |         |         |  |      |         |         |  |   |         |        
|EBITDA, as adjusted |                               | $                       | 845,548 |         |  | $    | 713,594 |         |  | $ | 687,645 |        
|                    |                               |                         |         |         |  |      |         |         |  |   |         |        

Liquidity and
Capital Resources

We have historically had and currently have a
substantial backlog, which provides some assurance regarding our
future revenue expectations. In addition, the capital-intensive
nature of the fixed satellite services business produces a
relatively predictable level of non-cash depreciation expense,
especially in the near term. These factors taken together reduce
the volatility of the net cash provided by operating activities
more than would otherwise be the case. On the other hand, the
construction period for satellites and the long
revenue-producing lifetime of a satellite, which may exceed
15 years, can lead to significant volatility in capital
expenditures from year to year and for periods that may last
several years, making it more difficult to forecast liquidity
needs. In

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addition, the anticipated consolidation in the
fixed satellite services sector may require that we obtain
funding for currently unplanned strategic transactions.


We expect that our most significant liquidity
requirements in 2004 will arise in connection with the proposed
Loral transaction, as described under Item 4.B 
Business Overview  Agreement to Purchase the
North American Satellite Assets of Loral. Other than in
connection with the proposed Loral transaction, our most
significant liquidity requirements in 2004 will arise from the
payment of $400.0 million in debt maturing in 2004 and the
funding of capital expenditures.

Cash
Flow Items

Net
Cash Provided By Operating Activities

Net cash provided by operating activities
decreased $53.4 million, or 8%, to $604.6 million for
the year ended December 31, 2003 from $658.0 million
for the year ended December 31, 2002. The decrease was
primarily due to a $40.0 million payment we made to our
defined benefit retirement plan in 2003 and reduced customer
payments associated with our $39.2 million reduction in
revenue during the year ended December 31, 2003 as compared
to the prior year. For the year ended December 31, 2003,
net cash provided by operating activities was principally
comprised of $181.1 million in net income and
$403.2 million in depreciation and amortization, partially
offset by non-cash other income of $19.8 million recorded
in connection with a decrease in the amount due to Teleglobe
Inc. and a $40.0 million contribution to our defined
benefit retirement plan.

For the year ended December 31, 2002, net
cash provided by operating activities decreased
$198.4 million, or 23%, to $658.0 million from
$856.4 million for the year ended December 31, 2001.
The decrease was primarily due to reduced customer payments
associated with our $92.1 million reduction in revenue
during the year ended December 31, 2002 as compared to the
prior year. Net cash provided by operating activities for the
year ended December 31, 2002 was principally comprised 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. Net cash provided by operating activities in 2001 was
principally comprised 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.

During the year ended December 31, 2003, we
recorded a foreign currency exchange loss of $0.9 million.
During the year ended December 31, 2002, we recorded a
foreign currency exchange loss of $4.1 million. The loss in
each period was primarily attributable to the conversion of our
Brazilian reaiscash balances held in Brazil and other
working capital account balances to U.S. dollars at the exchange
rate in effect on the last day of the applicable period 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. In each of the years ended
December 31, 2003 and 2002, our Brazilian customers
represented approximately 2% of our revenue.

Net
Cash Used In Investing Activities

Net cash used in investing activities increased
$290.1 million, or 43%, to $968.3 million for the year
ended December 31, 2003 from $678.2 million for the
year ended December 31, 2002. The increase was primarily
due to the inclusion of $700.0 million in restricted cash
relating to the portion of our senior notes issued in November
2003 that is subject to mandatory redemption. Our investing
activities during the year ended December 31, 2003
consisted of $72.9 million of capital expenditures for
satellites and associated launch services, $131.7 million
of capital expenditures for infrastructure projects and other
ground network costs, $17.9 million of capitalized
interest, $700.0 million of restricted cash and a
$58.0 million investment in WildBlue, offset by
$17.9 million of cash acquired as a result of the
consolidation of our indirect investment in Galaxy.

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. This increase was primarily
due

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to satellite construction payments made pursuant
to our Intelsat IX satellite construction program. Our investing
activity in 2002 consisted of $467.4 million of capital
expenditures for satellites and associated launch services,
$97.0 million of 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. 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.


Net
Cash Provided By Financing Activities

Net cash provided by financing activities
increased $924.9 million to $956.4 million for the
year ended December 31, 2003 from $31.5 million for
the year ended December 31, 2002. This increase was
principally due to our issuance of a greater amount of
indebtedness during the year ended December 31, 2003 as
compared to the prior year, together with the payment during the
prior year of $200.0 million in outstanding bonds upon
their maturity and $266.1 million in commercial paper
borrowings. Our financing activities for the year ended
December 31, 2003 consisted primarily of the receipt of
$1,097.8 million in net proceeds from the issuance of our
5 1/4% Senior Notes due 2008 and 6 1/2% Senior Notes
due 2013, repayments of commercial paper borrowings of
$44.0 million and principal payments on deferred satellite
performance incentives of $65.8 million. These payments on
deferred satellite performance incentives of $65.8 million
consisted primarily of a $60.0 million cash payment made
under an agreement to extinguish a portion of our deferred
satellite performance incentive liability, as discussed below.

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.
This increase was primarily due to a final pre-privatization
distribution in 2001 to the IGOs Signatories and Investing
Entities of $425.0 million. Our financing activity in 2002
principally consisted of $595.8 million in proceeds, net of
discount, 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 3/8% Notes due 2002, payment
of $65.0 million for the purchase of our ordinary shares
from Teleglobe Inc. and principal payments on deferred satellite
performance incentives of $15.3 million. At
December 31, 2002, commercial paper borrowings outstanding
totaled $44.0 million. Our financing activities in 2001
consisted primarily of $293.5 million in commercial paper
borrowings and the final pre-privatization distribution to the
IGOs Signatories and Investing Entities noted above.

Debt
and Other Liabilities

At December 31, 2003, we had debt, including
the current portion of such debt, of $2,369.2 million. Our
total debt at December 31, 2003 consisted of
$600.0 million of U.S. dollar denominated bonds issued in
the European and Asian capital markets, $400.0 million of
U.S. dollar denominated 5 1/4% Senior Notes due 2008 offset
by an unamortized discount of $0.1 million,
$600.0 million of U.S. dollar denominated 7 5/8%
Senior Notes due 2012 offset by an unamortized discount of
$3.7 million, $700.0 million of U.S. dollar
denominated 6 1/2% Senior Notes due 2013 offset by an
unamortized discount of $2.1 million, $45.6 million in
capital lease obligations, a $20.0 million note payable to
Lockheed Martin Corporation and a $14.9 million note
payable to TVB Holdings, which holds an indirect minority
interest in Galaxy. The note payable to TVB Holdings is a note
payable by Galaxy that is included in our consolidated balance
sheet because Galaxy is a consolidated affiliate. We incurred
gross interest costs of $115.7 million for the year ended
December 31, 2003. We expect our gross interest costs to
increase, primarily as a result of our issuance of
$1.1 billion in debt in connection with the proposed Loral
transaction.

In November 2003, we issued and sold in a private
placement $400.0 million in aggregate principal amount of
5 1/4% Senior Notes due 2008 and $700.0 million in
aggregate principal amount of 6 1/2% Senior Notes due 2013.
The proceeds from the sale of the 2008 Senior Notes and the 2013
Senior Notes, net of discount and after deducting
$23.6 million of debt issuance costs, were approximately
$1,074.1 million. The discount on each of the 5 1/4% Senior
Notes due 2008 and the 6 1/2% Senior Notes due 2013
represents the difference between the issue price and the face
value of the notes on the date of issuance. Both the discount
and the debt issuance costs are amortized as interest expense
over the life of each of the 2008 Senior Notes and 2013 Senior
Notes utilizing the

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effective interest method. As described above, we
intend to use the net proceeds from the sale of the 2008 Senior
Notes and the 2013 Senior Notes to finance the proposed Loral
transaction and for general corporate purposes. If our
$200.0 million in principal amount of Dragon bond
6 5/8% Notes due March 22, 2004 becomes due prior to
completion of the proposed Loral transaction, we intend to use a
portion of the net proceeds from the sale of the 2008 Senior
Notes and the 2013 Senior Notes to pay the Dragon bonds. An
aggregate of $700.0 million in principal amount of the 2008
Senior Notes and 2013 Senior Notes is subject to mandatory
redemption at a redemption price of 102% of the principal amount
of the notes being redeemed, plus accrued and unpaid interest,
if any, and any other amounts due to the date of redemption. At
December 31, 2003, the $700.0 million was restricted
and was classified as a current liability. In February 2004, we
completed an exchange offer pursuant to which we exchanged
substantially all of the 2008 Senior Notes and the 2013 Senior
Notes for newly issued 2008 Senior Notes and 2013 Senior Notes
that are registered under the Securities Act of 1933, as
amended, referred to as the Securities Act.


Of our notes outstanding as of December 31,
2003, $400.0 million mature in 2004, $200.0 million
mature in 2005, $400.0 million mature in 2008,
$600.0 million mature in 2012 and $700.0 million
mature in 2013. In addition, $20.0 million matures in
$5.0 million annual installments between 2007 and 2010, and
$14.9 million matures in two payments of $6.6 million
in 2007 and $8.3 million in 2008. Our capital lease
obligations mature in 2009.

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 on the
date of issuance. 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
2012 Senior Notes utilizing the effective interest method.

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. Historically, the
satellite manufacturers have earned substantially all of these
payments. Therefore, we account for these payments as deferred
financing. 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. These costs are
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
$52.4 million as of December 31, 2003 and
$144.6 million as of December 31, 2002.

On June 26, 2003, our Intelsat LLC
subsidiary entered into amendments to its satellite construction
agreements with SS/ L, pursuant to which we extinguished a
portion of our liability to SS/ L to make satellite performance
incentive payments for the Intelsat VII/ VIIA and IX series
satellites manufactured by SS/ L in exchange for a total cash
payment of $60.0 million. In connection with this
transaction, we recorded a $95.0 million reduction in our
total satellite performance incentive payment liability. This
transaction with SS/ L is discussed further in Note 11 to our
audited consolidated financial statements included elsewhere in
this annual report.

Receivables

Our receivables, net totaled $203.6 million
at December 31, 2003 and $265.8 million at
December 31, 2002. Of these amounts, our gross trade
receivables, consisting of total billed and unbilled satellite
utilization charges, were $223.1 million at
December 31, 2003 and $227.4 million at
December 31, 2002. The remaining balance in both periods
represented the allowance for doubtful accounts and other
receivables. Other receivables as of December 31, 2002
included $47.8 million due from EADS Astrium as a result of
our decision to terminate our order for the IS-10-01 satellite
as described above. This amount was collected during the year
ended December 31, 2003.

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Our pre-privatization billing policy required
payments from customers to be made quarterly in arrears. Our
billing policy applicable to service agreements entered into
after privatization generally requires payments to be made
monthly in arrears. We expect a continued downward trend in
receivables as the portion of our services being provided under
service agreements with monthly, as compared to quarterly, in
arrears payment terms increases. In addition to our billing
policy, our collateral profile has changed as a result of the
privatization. Previously, the investment share of the
Signatories and Investing Entities, which 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

Excluding the purchase price to be paid for the
satellites and related assets to be acquired from the Sellers,
we expect our capital expenditures in 2004 to be approximately
$470 million. This amount includes approximately
$170 million in expenditures relating to the proposed Loral
transaction and approximately $300 million in other capital
expenditures. In 2004 and future years, our actual capital
expenditures may differ from our expected capital expenditures
as we pursue our business strategies and seek to respond to
opportunities and trends in our industry. In addition, our
actual capital expenditures may differ from our expected capital
expenditures if, among other things, the transactions
contemplated by our asset purchase agreement with Loral are not
completed. Levels of capital spending from one year to the next
are also influenced by the nature of the satellite life cycle
and by the capital-intensive nature of the satellite industry.
For example, we incur significant capital expenditures during
the years in which we determine to procure new satellites and
have satellites under construction. We typically procure a new
satellite within a timeframe that would allow the satellite to
be deployed at least one year prior to the end of the
operational life of the satellite to be replaced. As a result of
these factors, we frequently experience significant variances in
our capital expenditure outlays from year to year.

Our capital expenditures totaled
$222.5 million in 2003 and consisted of $204.6 million
of asset costs and $17.9 million of capitalized interest.

With respect to the Intelsat IX series
satellites, the total costs for the five satellites launched in
2002 and in February 2003 were approximately
$1,248 million, which includes the costs of satellite
construction, launch services, insurance and capitalized
performance incentives. Of this amount, $49.8 million was
spent in 2003, excluding capitalized interest. Our deployment of
the Intelsat IX series satellites was completed in February 2003
when we successfully launched the IS-907 satellite. As of
December 31, 2003, $40.6 million of expected costs for the
Intelsat X series satellites were covered by contractual
commitments.

We estimate the total costs for our IS-10-02
satellite to be approximately $330 million, which includes
the costs of satellite construction, launch services, insurance
and capitalized performance incentives. In 2003, we spent
approximately $33.0 million, excluding capitalized
interest, on the IS-10-02 satellite. We expect to launch our
IS-10-02 satellite in the second quarter of 2004. As of
December 31, 2003, $136.1 million of expected costs
for the IS-10-02 satellite were covered by contractual
commitments.

Infrastructure and other projects during 2003
consisted primarily of projects relating to our back-up facility
and data center for our satellite and other business operations,
as well as teleport and other facilities for our
GlobalConnexSM Solutions services and other managed
services. These projects also included acquiring ground network
infrastructure in connection with integrating the assets to be
acquired from the Sellers. Spending for these projects,
excluding capitalized interest, for the year ended
December 31, 2003 was $131.7 million. These
expenditures are expected to decrease in 2004. See
Item 4.B  Business Overview 
Our Strategy for a discussion of our strategic plans
relating to our service offerings and the markets we serve. As
of December 31, 2003, we had $59.3 million in
contractual commitments with respect to these infrastructure and
other project initiatives.

As of December 31, 2003, we had other
contractual commitments of $105.9 million, including cash
contributions required in connection with our investment in
Galaxy, satellite performance incentive obligations related to
satellites in orbit and lease payment obligations for one of the
two satellites on which we lease capacity.

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Expected capital expenditures in 2004 relating to
the proposed Loral transaction include expenditures for launch
services and launch insurance for the Telstar 8 satellite
currently under construction and in connection with integration
of the assets to be acquired. Capital expenditures relating to
Telstar 8 may be higher than we currently anticipate if there is
a delay in the expected schedule for the launch of Telstar 8.
Capital expenditures relating to integration of the assets to be
acquired include expenditures for the terrestrial infrastructure
and software required to support the transition and ongoing
operation of the satellites to be acquired and for associated
business functions, including provisioning and billing. These
expenditures may be higher than we anticipate if integration of
the Loral satellites is more difficult or time-consuming than we
currently expect.

Pursuant to the asset purchase agreement relating
to the Loral transaction, we have agreed, upon the closing of
the proposed transaction, to enter into a procurement agreement
with SS/ L for a new satellite to be launched into one of our
existing orbital locations. This satellite is expected to
replace a satellite in our fleet that is nearing the end of its
orbital maneuver life. We have agreed to make a deposit of
$50.0 million upon the closing of the Loral transaction as
prepayment for a portion of the purchase price of this
satellite, provided that SS/ Ls obligations under the
procurement agreement have been secured. This deposit will be
accounted for in our financial statements in other assets, and
will only be treated as a capital expenditure to the extent that
we actually incur costs under the agreement. We expect to incur
approximately $25 million in costs under the agreement in
2004 and have included this amount in the $300 million in
expected other capital expenditures described above. For more
information about the asset purchase agreement and the
transactions that it contemplates, see Item 4.B 
Business Overview  Agreement to Purchase the
North American Satellite Assets of Loral.

Capital
Resources

We intend to finance the proposed Loral
transaction, including the $50.0 million deposit we have
agreed to make to SS/ L as prepayment for a portion of the
purchase price of a new satellite, with the proceeds from our
sale in November 2003 of our 5 1/4% Senior Notes due 2008
and 6 1/2% Senior Notes due 2013. We expect that our other
liquidity requirements in 2004, including the repayment of
$400.0 million in outstanding bonds, will be met with cash
on hand, cash provided by operating activities and
$200.0 million in borrowings under our new
$800.0 million credit facility, which is described below.
Other sources of funding, if needed, include proceeds from our
sale of ordinary shares in our initial public offering and, if
necessary, commercial paper borrowings or borrowings under our
new $800.0 million credit facility. However, any credit
rating downgrade that we may experience could limit our ability
to issue commercial paper, although in that event we believe our
existing credit facility or new credit facility would provide us
with sufficient liquidity.

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

|                         |                                                |               |   |           |  |           |   |         |  |       |   |       |  |  |   |         |  |  |   |         | 
|------------------------ | ---------------------------------------------- | ------------- | - | --------- |  | --------- | - | ------- |  | ----- | - | ----- |  |  | - | ------- |  |  | - | ------- | 
|                         |                                                | Less than     |   |           |  |           |   | After 5 |  |      
|                         |                                                | 1 year        |   | 1-3 years |  | 3-5 years |   | years   |  | Total
|                         |                                                |               |   |           |  |           |   |         |  |      
|                         |                                                |              
|                         |                                                | (in millions)
|Contractual obligations: |                                                |               |   |           |  |           |   |         |  |       |   |       |  |  |   |         |  |  |   |        
|                         | Long-term debt(1)                              |               | $ | 555.1     |  |           | $ | 450.8   |  |       | $ | 667.4 |  |  | $ | 1,686.1 |  |  | $ | 3,359.4 | 
|                         | Capital commitments(2)                         |               |   | 154.5     |  |           |   | 22.9    |  |       |   | 16.5  |  |  |   | 37.9    |  |  |   | 231.8   | 
|                         | Operating leases and other expense commitments |               |   | 62.3      |  |           |   | 119.0   |  |       |   | 170.5 |  |  |   | 220.9   |  |  |   | 572.7   | 
|                         | Investment                                     |               |   | 20.4      |  |           |   | 10.4    |  |       |   |      |  |  |   |        |  |  |   | 30.8    | 
|                         |                                                |               |   |           |  |           |   |         |  |       |   |       |  |  |   |         |  |  |   |        
|                         | Total contractual obligations                  |               | $ | 792.3     |  |           | $ | 603.1   |  |       | $ | 854.4 |  |  | $ | 1,944.9 |  |  | $ | 4,194.7 | 
|                         |                                                |               |   |           |  |           |   |         |  |       |   |       |  |  |   |         |  |  |   |        



---



|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes principal and interest on long-term debt.                                                                              
|   
|(2) | Includes contractual commitments for satellites
    and principal and interest on deferred satellite performance
    incentives.

To support our commercial paper program and to
provide funding for general corporate purposes, we entered into
an agreement with a group of financial institutions for a
$500.0 million three-year unsecured revolving credit
facility, which expires in March 2005. Upon the completion of
the proposed Loral transaction, we expect to replace this
revolving credit facility with a new revolving credit facility,
as described below. See also Item 10.C 
Material Contracts  New Credit Facility.
At our option, borrowings under the revolving credit facility
will bear interest either at Citibank, N.A.s base rate or
at the Eurodollar rate plus an applicable

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margin. The revolving credit facility contains
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 and a covenant requiring that at no time
shall the ratio of our debt to EBITDA, as defined in the
facility, for the then most recently concluded four consecutive
fiscal quarters exceed 2.5 to 1. Both the facility fee and the
margin over the Eurodollar rate at which we can borrow under the
facility increase incrementally if there is a downgrade in our
credit rating by Standard & Poors or Moodys
Investors Service, Inc. In connection with our issuance and sale
in November 2003 of $400.0 million in aggregate principal
amount of 5 1/4% Senior Notes due 2008 and
$700.0 million in aggregate principal amount of 6 1/2%
Senior Notes due 2013, we received waivers from the lenders
under the revolving credit facility from compliance with the
financial covenants described above in respect of the
indebtedness that we incurred by issuing the senior notes. The
waivers are effective until the earlier to occur of
April 30, 2004 or the completion of the proposed Loral
transaction. Excluding the financial covenants for which we
received waivers, at December 31, 2003, we were in
compliance with the covenants under this facility. At
December 31, 2003, there were no borrowings outstanding
under the revolving credit facility. Our policy is to classify
commercial paper borrowings supported by our revolving credit
facility 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, 2003, there were no commercial paper
borrowings outstanding.


In December 2003, we entered into a credit
agreement with a group of banks for an $800.0 million
three-year unsecured credit facility, consisting of a
$400.0 million term loan facility and a $400.0 million
revolving facility. The closing of the new credit facility is
subject to the satisfaction of specified conditions, including
the completion of the Loral transaction. Upon the closing of our
new credit facility, the $400.0 million revolving facility
will replace our existing $500.0 million three-year
unsecured revolving credit facility. Except as provided below,
we may only use the $400.0 million term loan portion of the
facility to repay our $200.0 million in principal amount of
Dragon bond 6 5/8% Notes due March 22, 2004 and our
$200.0 million in principal amount of Eurobond 8 3/8%
Notes due October 14, 2004. If the closing of the new
credit facility does not occur until after the maturity date of
our Dragon bond 6 5/8% Notes due March 22, 2004 and
cash on hand, commercial paper borrowings or revolving credit
loans are used to repay the Dragon bond notes, we may use
$200.0 million of the term loan facility to replenish such
cash on hand or to repay any such borrowings. We intend to use
the new revolving facility to finance the proposed Loral
transaction to the extent that the proceeds from our November
2003 sale of senior notes are not sufficient for this purpose
and for working capital requirements. In addition, we intend to
use the term loan portion of the new credit facility for the
repayment of our Dragon bond notes or, if these notes have been
repaid prior to the closing of the facility, to replenish cash
on hand or repay borrowings used to repay these notes. In
addition, we may use the term loan portion of the new credit
facility to pay other of our near-term debt obligations as they
become due. We expect that the new revolving credit facility
will also be used to support our commercial paper program. Our
new credit facility contains financial and operating covenants
that, among other things, require us to maintain financial
coverage ratios and limit our ability to pledge assets as
security for additional borrowings. In addition, our new credit
facility will, upon its closing, limit our ability to pay
dividends on our ordinary shares, as described further below
under Item 10.C  Material
Contracts  New Credit Facility.

We may be required to seek external financing if
our capital requirements are greater than we currently
anticipate as a result of unplanned strategic transactions or
other unanticipated expenses.

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 realas
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 reaisis 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, 2003, our Brazilian customers represented
approximately 2% of our revenue.

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Galaxys functional currency is the Hong
Kong dollar and our future cash and in-kind contribution
commitments to Galaxy are denominated in Hong Kong dollars. As a
result, we are subject to exposure with regard to changes in the
value of the Hong Kong dollar as compared to the U.S. dollar. To
date, the cumulative foreign currency translation adjustment has
been insignificant.

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 12 to our audited consolidated
financial statements included 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, 2003, we had approximately $2.4 billion
in fixed-rate debt. To the extent that we fund working capital
needs or our capital 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 or any future 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, 2003 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, 2003.

|                                                                 |  |                                                          |       |                |  |                                 |       |            |  |          |       |           |  |           |       |  |  |   |       |  |  |   |       |  |  |   |       | 
|---------------------------------------------------------------- |  | -------------------------------------------------------- | ----- | -------------- |  | ------------------------------- | ----- | ---------- |  | -------- | ----- | --------- |  | --------- | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                                                 |  |                                                         
|                                                                 |  | Interest Rate Risk (in millions) as of December 31, 2003
|                                                                 |  |                                                         
|                                                                 |  |                                                          |       |                |  |                                
|                                                                 |  | Valuation of Securities                                  |       |                |  | Valuation of Securities        
|                                                                 |  | Given an Interest Rate Decrease                          |       | No Change in   |  | Given an Interest Rate Increase
|                                                                 |  | of X Basis Points                                        |       | Interest Rates |  | of X Basis Points              
|                                                                 |  |                                                          |       |                |  |                                
|                                                                 |  | (150 BPS)                                                |       | (100 BPS)      |  | (50 BPS)                        |       | Fair Value |  | (50 BPS) |       | (100 BPS) |  | (150 BPS)
|                                                                 |  |                                                          |       |                |  |                                 |       |            |  |          |       |           |  |          
|$700 million principal 6.5% senior notes due
    11/01/13        |  | $                                                        | 818.8 |                |  | $                               | 789.1 |            |  | $        | 760.7 |           |  | $         | 734.0 |  |  | $ | 707.8 |  |  | $ | 683.2 |  |  | $ | 659.6 | 
|$600 million principal 7.625% senior notes
    due 04/15/12      |  | $                                                        | 745.0 |                |  | $                               | 721.7 |            |  | $        | 699.3 |           |  | $         | 678.7 |  |  | $ | 657.1 |  |  | $ | 637.2 |  |  | $ | 618.2 | 
|$400 million principal 5.25% senior notes
    due 11/01/05       |  | $                                                        | 436.7 |                |  | $                               | 427.5 |            |  | $        | 418.5 |           |  | $         | 410.0 |  |  | $ | 401.3 |  |  | $ | 393.0 |  |  | $ | 384.9 | 
|$200 million principal Eurobond 8.125% notes
    due 02/28/05    |  | $                                                        | 216.1 |                |  | $                               | 214.9 |            |  | $        | 213.7 |           |  | $         | 211.8 |  |  | $ | 211.3 |  |  | $ | 210.1 |  |  | $ | 208.9 | 
|$200 million principal Eurobond 8.375% notes
    due 10/14/04    |  | $                                                        | 211.5 |                |  | $                               | 210.6 |            |  | $        | 209.8 |           |  | $         | 209.0 |  |  | $ | 208.2 |  |  | $ | 207.4 |  |  | $ | 206.6 | 
|$200 million principal Dragon bond 6.625%
    notes due 03/22/04 |  | $                                                        | 202.6 |                |  | $                               | 202.4 |            |  | $        | 202.1 |           |  | $         | 201.9 |  |  | $ | 201.6 |  |  | $ | 201.4 |  |  | $ | 201.2 | 

This sensitivity analysis provides 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 our financial instruments may
differ significantly from the impact shown in the sensitivity
analysis.

As of December 31, 2002, we did not have
significant cash flow exposure to changing interest rates on our
long-term debt because the interest rates of those securities
were fixed. As of December 31, 2003, we had approximately
$1.1 billion more in long-term fixed-rate debt than we had
as of December 31, 2002. Accordingly, any changes in
interest rates would be more significant as of December 31,
2003 in comparison to December 31, 2002.

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Critical
Accounting Policies

Our significant accounting policies are described
fully in Note 2 to our audited consolidated financial statements
included 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, investments in affiliated companies, 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 risks related to these policies on
our business operations is discussed in this
Item 5  Operating and Financial Review and
Prospects where these 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 revenue primarily from satellite
utilization charges and, to a lesser extent, from providing
managed services to our customers. We recognize revenue over the
period during which services are provided, as long as collection
of the related receivable is reasonably assured. We make
estimates regarding the likelihood 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, such as
political and economic conditions in the country in which the
customer is located. When we have determined that the collection
of payments for satellite utilization is not reasonably assured
at the time the service is provided, we defer recognition of the
revenue until such time that collection is believed to be
reasonably assured 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 likelihood 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, Revenue Recognition,as amended by
Staff Accounting Bulletin No. 104.

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 premiums for launch
insurance and insurance during the period of in-orbit testing,
the net present value of performance incentives payable to the
satellite manufacturers, costs directly associated with the
monitoring and support of satellite construction, and interest
costs incurred during the period of satellite construction.
Satellite construction and launch services are generally
procured under long-term contracts that provide for payments by
us 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 11 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

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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
depreciable 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.


We would charge to operations the carrying value
of any satellite lost as result of a launch or in-orbit failure
upon the occurrence of the loss. In the event of a partial
failure, we would record an impairment charge to operations upon
the occurrence of the loss if the undiscounted future cash flows
were less than the carrying value of the satellite. We would
measure the impairment charge as the excess of the carrying
value of the satellite over its estimated fair value as
determined by the present value of estimated expected future
cash flows using a discount rate commensurate with the risks
involved. We would reduce the charge to operations resulting
from either a complete or a partial failure by the amount of any
insurance proceeds that were either due and payable to or
received by us. We would record any insurance proceeds received
in excess of the carrying value of the satellite 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.

Investments
in Affiliated Companies

We apply the equity method to account for
investments in entities that are not variable interest entities
under Financial Accounting Standards Board Interpretation
No. 46, Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51, as revised in December
2003 and referred to as FIN 46, and in which we have an
ownership interest of between 20% and 50% and exercise
significant influence over operating and financial policies.
FIN 46 is described under  New Accounting
Pronouncements below. Under the equity method, we record
our share of an affiliates net income or loss in our
consolidated financial statements.

We consolidate the financial statements of our
affiliates in which we have an ownership stake of greater than
50% and exercise control over operating and financial policies,
or which are variable interest entities in which we are the
primary beneficiary. We record the minority shareholders
interests in the net assets of a consolidated affiliate as a
minority interest in our consolidated financial statements. We
recognize the minority interests share of losses in our
consolidated financial statements if the minority shareholders
have made a commitment to fund the affiliates operations.

In accordance with Statement of Financial
Accounting Standards, referred to as SFAS, No. 142,
Goodwill and Other Intangible Assets,any goodwill
arising from the excess of the cost of our investment over the
fair value of net assets acquired at the acquisition date is not
amortized. Any decline in value in the investment that is deemed
to be other than a temporary decline would result in the
recognition of a loss during the period in which the decline in
value occurs.

Business
Combinations

Our business combinations are accounted for in
accordance with the provisions set forth in 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 portion of 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

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period, but in no case beyond one year from the
acquisition date. These allocations are made on the basis of
appraisals prepared by independent third-party appraisers.


Goodwill
and Other Intangible Assets

Goodwill arising from our acquisitions represents
the excess of costs over the estimated fair value of net
tangible and separately identifiable intangible assets acquired.
Our goodwill and other intangible assets are accounted for in
accordance with the provisions set forth in SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142
requires that goodwill and other 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. SFAS No. 142 also requires that
intangible assets with estimable useful lives be amortized over
their respective estimable useful lives to their estimated
residual values and reviewed for impairment in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.

As of December 31, 2003, there had been no
circumstances indicating a possible impairment of the goodwill
we recorded in connection with our acquisition of certain assets
and liabilities of COMSAT World Systems. 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. An
impairment loss would be recognized to the extent that the
carrying amount of the assets exceeds the amount of the
assets fair value. We have determined that we have one
reporting unit, the enterprise level, under the criteria set
forth by SFAS No. 142. If we are required to record an
impairment charge in the future because of changes to the
acquired business, 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.

As of December 31, 2003, there had been no
circumstances indicating a possible impairment 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. Historically, the
satellite manufacturers have earned substantially all of these
payments. Therefore, we account for these payments as deferred
financing. Consequently, 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. These
costs are amortized over the useful lives of the satellites and
the liability is reduced as the payments are made.

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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 by an actuary 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. During
2003, we made $40.0 million in cash contributions to the
plan, which were reflected as reductions in accrued retirement
benefits in our consolidated balance sheet at December 31,
2003, to improve the plans funded position. However, the
plans accumulated benefit obligation at the end of the
plan year in 2003 still exceeded the fair value of its assets.
As a result, we adjusted the minimum pension liability such
that, as of December 31, 2003, $19.5 million of the
net additional minimum pension liability of $21.5 million
was reversed along with the $2.3 million recorded in other
assets. The effect of this adjustment resulted in us having an
additional minimum pension liability of $2.1 million, or
$1.3 million after tax, recorded as other comprehensive
loss at December 31, 2003. This additional minimum pension
liability relates to our unfunded non-qualified pension plan,
referred to as the Intelsat Restoration Plan. See
Item 6.B  Compensation  Pension
Benefits for information regarding the Intelsat
Restoration Plan. The amounts provided above and below for our
noncontributory defined benefit retirement plan include amounts
for the Intelsat Restoration Plan.

We have historically funded the plan based on
actuarial advice using the projected unit credit cost method.
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 future
contributions to the plan will be based on the minimum
requirements of the Internal Revenue Service and on the
plans funded position.

Other
Postretirement Benefits

We provide health benefits for employees hired
prior to January 1, 2004 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 other specified factors. A
governing body of the IGO adopted a resolution prior to
privatization stating that the retirees eligible for these
benefits as of the date of privatization, as well as an
additional number of named employees, would continue to receive
the level of health benefits provided as of January 1,
2001. We provide these benefits under a plan that is unfunded.
Benefits are paid as they become due. During 2003, we recorded a
curtailment gain related to our December 2002 workforce
reduction as discussed in Note 19 to our audited
consolidated financial statements, which resulted in a
$2.6 million reduction in our accrued retirement benefits.

Defined
Contribution Plans

We maintain two defined contribution retirement
plans in the United States, one such plan in Bermuda and one
such plan in the United Kingdom. One of the U.S. plans provides
benefits to, among others, employees based in the United States
hired before July 19, 2001, and the other U.S. plan
provides benefits to employees based in the United States hired
on or after July 19, 2001. The Bermuda plan provides
benefits to most of our employees based in Bermuda. The U.K.
plan provides benefits to our employees based in the United
Kingdom. We also maintain an unfunded deferred compensation 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.

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Key
Plan Assumptions

Net periodic pension and other postretirement
benefits costs under our defined benefit and other
postretirement benefits 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, as of September 30, 2002, we lowered the
discount rate applicable to both our defined benefit plan and
our other postretirement benefits plan to 6.75% from 7.25% in
order to reflect the decline in long-term interest rates that
had occurred since October 1, 2001. On September 30,
2003, we again lowered the discount rate applicable to both our
defined benefit plan and our other postretirement benefits plan
to 6.00% to reflect further declines in long-term interest
rates. 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% for the plan year that began
October 1, 2002. Our expected rates of return are based on
historical capital market performance and on our investment
policy. Notwithstanding the negative returns on plan assets that
we experienced in 2001 and 2002, we believed at October 1,
2002 that the historical performance of the capital markets
indicated that 9% was 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% for the plan
year that began October 1, 2002 because our review of
claims data and expectations for the future indicated that this
assumption was valid. As a result of our assumptions for the
plan year ended September 30, 2003, including the change in
the discount rate, our pension expense as measured in accordance
with SFAS No. 87, Employers Accounting for
Pensions,increased by $2.3 million, or 209%, to
$3.4 million in 2003 from $1.1 million in 2002. In
addition, our other postretirement benefits expense as measured
in accordance with SFAS No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions,increased by $1.3 million, or 19%, to $8.1 million
in 2003 from $6.8 million in 2002 and is expected to
increase further in 2004. We estimate that a change in the
assumed discount rate of 25 basis points would have increased or
decreased 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 have
increased or decreased pension expense by approximately
$2.5 million in 2003. Further, we estimate that a change in
the assumed health care cost trend rate of 1% would have
increased or decreased other postretirement benefits expense by
approximately $2.0 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 as
expense in the year of occurrence. Instead, both the favorable
and the 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
retirement plan, we had an unrecognized net loss of
$56.8 million at December 31, 2003, compared to an
unrecognized net loss of $60.1 million at December 31,
2002. For our other postretirement benefits plan, we had an
unrecognized net loss of $7.6 million at December 31,
2003, compared to an unrecognized net gain of $12.1 million
at December 31, 2002. A portion of these unrecognized net
losses has been 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

Prior to privatization, the IGOs owners
made capital contributions to and received capital repayments
from the IGO in proportion to their ownership in the IGO. The
IGOs owners were also its principal customers, and they
received ownership interests in the IGO based on their
percentage use of the IGOs satellite system. As we are the
successor entity to the IGO, a significant percentage of our
customers are also shareholders in our company.

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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 our 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.

Our shareholders, formerly the IGOs owners,
accounted for approximately 53% of revenue in 2003 and 78% of
revenue in 2002. See Item 3.D  Risk
Factors for a discussion of the potential impact of the
privatization on our customer base.

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, and of COMSAT Digital Teleport, Inc., a
subsidiary of COMSAT. COMSAT 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
included substantially all of COMSAT World Systems
customer contracts for the sale of our capacity, two earth
stations located in Clarksburg, Maryland and Paumalu, Hawaii
that provide tracking, telemetry, command and monitoring
services for our satellites, and a digital teleport facility
located in Clarksburg, Maryland. The purchase price for this
transaction consisted of $56.0 million in cash, the
assumption of $57.7 million in liabilities 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 tracking,
telemetry, command and monitoring 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. The purchase price allocation was finalized
during the fourth quarter of 2003. Based upon the appraisals
received and our estimates, the purchase price was allocated to
the assets and liabilities acquired as follows (in millions):

|                                                |  |   |       |  
|----------------------------------------------- |  | - | ----- | -
|Receivables, net of allowance of $13.7          |  | $ | 13.1  |  
|Property and equipment                          |  |   | 26.8  |  
|Deferred tax asset                              |  |   | 8.2   |  
|Other assets                                    |  |   | 1.6   |  
|Goodwill                                        |  |   | 57.6  |  
|Intangible assets                               |  |   | 27.5  |  
|Accounts payable and accrued expenses           |  |   | (57.7 | )
|                                                |  |   |       |  
|Total consideration, net of assumed liabilities |  | $ | 77.1  |  
|                                                |  |   |       |  

We believe that this transaction was completed on
arms-length terms. For a further discussion of the asset
purchase agreement with COMSAT, see Item 7.B 
Related Party Transactions.

The service contracts assigned to us in
connection with the COMSAT transaction included contracts with
WorldCom, Inc. and Verestar, Inc., which became two of our
largest customers 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 description of our revenue from WorldCom, Inc., see
 WorldCom Reorganization. On
December 22, 2003, Verestar, Inc. filed a voluntary
petition for reorganization under

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Chapter 11 of the U.S. Bankruptcy Code. For
a description of our revenue from Verestar, Inc., see
 Verestar, Inc. Reorganization.


TT&C
Contracts

Some of our customers also provide tracking,
telemetry and command services, referred to as TT&C
services, for our ground network or provide us with monitoring
or 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 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. Revenue generated from
Teleglobe Inc. and its affiliates was $35.1 million in 2002
and $28.1 million in 2003.

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, which holds the shares in trust for Intelsat Global
Sales, subject to specified limited voting and dividend rights
of Teleglobe Inc. The share purchase agreement provides 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 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. We did not conduct a registered offering of our
ordinary shares by December 31, 2003 and, pursuant to an
amendment to the share purchase agreement, the shares held in
escrow will be valued pursuant to a formula based on the range
for the initial public equity offering price set forth on the
cover page of the prospectus used in connection with the initial
public equity offering. Based on this amendment, we expect that
all of the shares held in escrow will be distributed to Intelsat
Global Sales.

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, Accounting for a Purchase of Treasury Shares
at a Price Significantly in Excess of the Current Market Price
of the Shares and the Income Statement Classification of Costs
Incurred in Defending against a Takeover Attempt, 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 $12.8 million that was fully
reserved in the first quarter of 2002 as well as
$3.1 million related to revenue that had not been
previously recognized since the collection of those amounts was
not certain. We believe 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.

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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, Issue
No. 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock. As a result, we recorded 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. On December 31, 2002, we
reduced our obligation to Teleglobe Inc. to $19.8 million
based on a valuation of the derivative on that date. At
December 31, 2003, we no longer had an obligation to
Teleglobe Inc. based on a valuation of the derivative on that
date and recorded other income of $19.8 million, for the
amount of the adjustment, on our consolidated statement of
operations. We do not currently expect that the distribution of
the shares held in escrow as provided under the share purchase
agreement with Teleglobe Inc. will impact our accounting for the
share purchase transaction as of December 31, 2003.

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
payment terms more favorable to us. 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

In December 2002, we entered into an agreement to
acquire a minority stake in WildBlue for a purchase price of
$58.0 million. On April 21, 2003, we contributed
$56.5 million in cash to WildBlue. This amount represented
the $58.0 million purchase price net of a loan receivable
for interim funding to WildBlue, plus accrued interest, and net
of certain expenses we incurred that were reimbursable by
WildBlue. In connection with this investment, 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 totaled $156.0 million including
our investment, included 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 is the
parent company of Liberty Satellite & Technology, Inc. Two
of our executive officers are directors of WildBlue.

Galaxy
Note Payable to TVB Holdings

Galaxy, our consolidated affiliate, has a note
payable to TVB Holdings for $14.9 million. See
 Investment in Galaxy below for a further
description of our investment in Galaxy.

New
Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board, referred to as 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 became effective during the first quarter of
2003. The adoption of SFAS No. 143 did not have a material
impact on our results of operations or financial position.

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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 are effective for exit or
disposal activities initiated after December 31, 2002 and
could affect the timing of recognizing costs on future
restructuring activities. The adoption of SFAS No. 146 did
not have a material impact on our results of operations or
financial position.

In November 2002, the FASB issued Interpretation
No. 45, referred to as FIN 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. FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. FIN 45 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 FIN 45 are applicable to guarantees
issued or modified after December 31, 2002 and the
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 did not have a material impact on
our results of operations or financial position.

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 apply to
revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The adoption of EITF Issue
No. 00-21 did not have an impact on our results of
operations or financial position as of December 31, 2003.
However, it could impact future revenue arrangements.

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 became effective during 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 FIN 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51. FIN 46 was revised in
December 2003 to clarify the characteristics of a variable
entity. 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.
The adoption of FIN 46 in 2003 did not have a material impact on
our results of operations or financial position as of
December 31, 2003. However, we will continue to evaluate
the impact that FIN 46 will have on our results of operations
and financial position in future periods.

In April 2003, the FASB issued SFAS No. 149,
Amendment to Statement 133 on Derivative Instruments and
Hedging Activities.SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is
applied prospectively and is effective for contracts entered
into or modified after June 30, 2003, except for SFAS
No. 133 implementation issues that have been effective for
fiscal quarters that began prior to June 15, 2003 and
certain provisions relating to forward purchases and sales on
securities that do not yet exist. The adoption of SFAS
No. 149 did not have a material impact on our results of
operations or financial position.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. SFAS
No. 150 establishes standards for how certain free-standing
financial instruments with characteristics of both liabilities
and equity are classified and measured. Financial instruments
within the scope of SFAS No. 150 are required to be
recorded as liabilities, or assets in certain circumstances,
that may require reclassification of amounts previously reported
in equity. SFAS No. 150 is

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effective for financial instruments entered into
or modified after May 31, 2003 and otherwise is effective
at the beginning of the first interim period beginning after
June 15, 2003. The cumulative effect of a change in
accounting principle should be reported for financial
instruments created before the issuance of this statement and
still existing at the beginning of the period of adoption. The
adoption of SFAS No. 150 did not have an impact on our
results of operations or financial position.


In December 2003, the Securities and Exchange
Commission, referred to as the SEC, issued Staff Accounting
Bulletin No. 104, Revenue Recognition,referred to as
SAB 104. SAB 104 revises or rescinds portions of the
interpretive guidance included in Topic 13 of the codification
of staff accounting bulletins in order to make this interpretive
guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The adoption of
SAB 104 did not have a material effect on our results of
operations or financial position. However, it could impact
future revenue arrangements.

In December 2003, the FASB issued a revision of
SFAS No. 132, Employers Disclosures about Pensions
and Other Postretirement Benefits, an amendment of FASB
Statements No. 87, 88, and 106. The revision of SFAS
No. 132 requires additional disclosures about plan assets,
investment strategy, measurement dates, plan obligations, cash
flows and components of net periodic benefit cost recognized in
interim periods. The revision of SFAS No. 132 is effective
for financial statements with fiscal years ending after
December 15, 2003 and interim periods beginning after
December 15, 2003. The adoption of the revised SFAS
No. 132 did not have a material impact on our results of
operations or financial position.

WorldCom
Reorganization

Upon the closing of the COMSAT transaction
described above, WorldCom, Inc. became one of our largest
customers. On July 21, 2002, WorldCom, Inc., filed a
voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. On April 14, 2003, WorldCom, Inc.
announced that it had changed its brand name to MCI. On the
effective date of WorldCom, Inc.s reorganization, its
corporate name is expected to be changed to MCI, Inc. As of
December 31, 2003, WorldCom, Inc. and its affiliates
accounted for $73.5 million, or 2.1%, of our backlog.
Revenue generated from WorldCom, Inc. and its affiliates as
direct customers was $10.7 million, or 1.1%, for the year
ended December 31, 2002 and $43.2 million, or 4.5%,
for the year ended December 31, 2003. Based on information
provided by Lockheed Martin Corporation, WorldCom, Inc.
accounted 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 for the year ended December 31, 2002 had the COMSAT
transaction occurred as of January 1, 2002. Although the
bankruptcy court in October 2003 approved WorldCom, Inc.s
plan of reorganization, we cannot predict the effect that
WorldCom, Inc.s bankruptcy proceedings will have on future
revenue. The loss of WorldCom, Inc. as a customer would further
reduce our revenue, would reduce our backlog and could
materially adversely affect our business. At December 31,
2003, we had receivables of $13.0 million due from
WorldCom, Inc. and its affiliates, of which $6.7 million
was reserved for in our allowance for doubtful accounts and
$8.4 million related to pre-petition receivables.

Verestar,
Inc. Reorganization

On December 22, 2003, Verestar, Inc., one of
our largest customers, filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy
Code. As of December 31, 2003, Verestar, Inc. and its
affiliates accounted for $53.9 million, or 1.5%, of our
backlog. Revenue generated from Verestar, Inc. and its
affiliates was $24.9 million, or 2.6%, for the year ended
December 31, 2003. As of December 31, 2003, we had
receivables of $7.9 million due from Verestar, Inc. and its
affiliates. We believe we have adequate reserves to cover our
exposure. We cannot predict the effect that Verestar,
Inc.s bankruptcy proceedings will have on future revenue.
The loss of Verestar, Inc. as a customer would reduce our
revenue and backlog and could adversely affect our business.

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Investment in
Galaxy

In February 2003, we entered into an agreement to
acquire an indirect 51% stake in Galaxy for approximately
U.S.$69.5 million in cash and in-kind contributions. Galaxy
is licensed to provide pay television and teleport services in
Hong Kong and launched a pay television service in February
2004. TVB Holdings indirectly holds the remaining 49% interest
in Galaxy.

Under the terms of the agreement, our cash
contribution is payable in installments in 2003, 2004 and 2005.
Our required cash contribution for 2003 was
HK$173.9 million, or approximately U.S.$22.3 million.
Our required cash contribution for 2004 was
HK$158.3 million, or approximately U.S.$20.4 million,
and our required cash contribution for 2005 will be
HK$81.1 million, or approximately US$10.4 million.
Under certain conditions, we and TVB Holdings could be required
to make additional cash contributions to Galaxy up to an
aggregate of HK$170.1 million, or approximately
U.S.$21.8 million. The amount of any such additional cash
contributions that we and TVB Holdings each would be required to
make would be based on our and TVB Holdings ownership
interests in Galaxy at the time of the contributions. Our
agreement relating to Galaxy is discussed further in Note 9 to
our audited consolidated financial statements included elsewhere
in this annual report.

Agreement to
Purchase the North American Satellite Assets of
Loral

On July 15, 2003, Intelsat, Ltd. and
Intelsat Bermuda entered into an asset purchase agreement with
Loral Space & Communications Corporation and certain of its
affiliates to acquire specified satellites and related assets.
Under the terms of the asset purchase agreement, as amended, the
base purchase price of the assets to be acquired is
$1.025 billion, subject to adjustment. The assets to be
acquired include four in-orbit satellites, one satellite under
construction, the rights to orbital locations and various assets
relating to the satellites and the business that the Sellers
conduct on the satellites, including customer contracts. In
addition, we have agreed to assume specified contractual
commitments of the Sellers relating to the assets to be acquired.

Under the terms of the asset purchase agreement,
we had agreed to acquire the Telstar 4 satellite, which was
declared a total loss in September 2003 due to a significant
anomaly. In October 2003, we and the Sellers amended the asset
purchase agreement to provide that we will not acquire ownership
of Telstar 4. The Sellers have announced that Telstar 4 was
insured for $141.0 million, and we understand that the
Sellers have filed an insurance claim for that amount. The
purchase price for the assets to be acquired from the Sellers
will be reduced by the amount of any insurance proceeds that
they receive prior to the completion of the proposed Loral
transaction, and we will be entitled to any insurance proceeds
received after completion of the transaction, in each case net
of warranty payments to customers made by the Sellers. To the
extent the insurance proceeds in respect of Telstar 4 are less
than $141.0 million, not taking into account warranty
payments, we will receive a credit in the amount of such
shortfall for payments we are required to make under the new
procurement agreement with SS/ L. We understand that the Sellers
currently expect the warranty payments owed to customers to be
approximately $1.2 million. These warranty payments may
increase should customers that previously leased capacity on the
Telstar 4 satellite exercise termination rights.

The Sellers have filed for bankruptcy protection
under Chapter 11 of the U.S. Bankruptcy Code and, prior to
the Sellers emergence from bankruptcy protection, their
assets may only be sold in accordance with the U.S. Bankruptcy
Code. The sale to us of the assets subject to the asset purchase
agreement was approved by the bankruptcy court on
October 24, 2003. See Item 4.B 
Business Overview  Agreement to Purchase the
North American Satellite Assets of Loral for further
information about the proposed transaction.

Subsequent
Event

2004
Share Incentive Plan

Subject to the approval of our shareholders, in
January 2004, our board of directors approved a 2004 share
incentive plan and the reservation of ordinary shares for
issuance under the plan. We intend to hold a special general
meeting of our shareholders in the first half of 2004 in order
to obtain approval of the 2004 share incentive plan, the
reservation of shares for issuance under the plan and the
issuance of shares under the plan. See Item 6.E 
Share Ownership  2004 Share Incentive
Plan.

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

A. Directors and Senior
Management

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

|                          |  |     |    |          |  |                                                                                                                                                 |  |  |   | 
|------------------------- |  | --- | -- | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  |  | - | 
|Name                      |  | Age |    | Position |  | Class                                                                                                                                          
|                          |  |     |    |          |  |                                                                                                                                                
|Conny Kullman             |  |     | 53 |          |  | Chief Executive Officer, Intelsat, Ltd.; Director                                                                                               |  |  | 1 | 
|Joseph Corbett            |  |     | 44 |          |  | Executive Vice President and Chief Financial
    Officer, Intelsat, Ltd.                                                                        |  |  |   | 
|Ramu Potarazu             |  |     | 42 |          |  | Chief Operating Officer, Intelsat, Ltd.;
    President, Intelsat (Bermuda), Ltd.; Managing Director, Intelsat
    Global Sales & Marketing Ltd. |  |  |   | 
|Kevin Mulloy              |  |     | 45 |          |  | President, Intelsat Global Service Corporation                                                                                                  |  |  |   | 
|David Meltzer             |  |     | 43 |          |  | General Counsel and Senior Vice President for
    Regulatory Affairs, Intelsat Global Service Corporation                                       |  |  |   | 
|Tony Trujillo, Jr.        |  |     | 46 |          |  | Senior Vice President and Chief Administrative
    Officer, Intelsat Global Service Corporation                                                 |  |  |   | 
|Noah Asher                |  |     | 42 |          |  | Vice President, Finance, Intelsat Global Service
    Corporation                                                                                |  |  |   | 
|G. Randall Bonney, Jr.    |  |     | 49 |          |  | Treasurer, Intelsat Global Service Corporation                                                                                                  |  |  |   | 
|John Sponyoe              |  |     | 65 |          |  | Director and Chairman                                                                                                                           |  |  | 3 | 
|Carlos Adamo              |  |     | 60 |          |  | Director                                                                                                                                        |  |  | 3 | 
|Fabiola Arredondo         |  |     | 37 |          |  | Director                                                                                                                                        |  |  | 3 | 
|William Boardman          |  |     | 62 |          |  | Director                                                                                                                                        |  |  | 3 | 
|Brian Dailey              |  |     | 52 |          |  | Director                                                                                                                                        |  |  | 3 | 
|Didier Delepine           |  |     | 56 |          |  | Director                                                                                                                                        |  |  | 2 | 
|Herbert Fiuza             |  |     | 68 |          |  | Director                                                                                                                                        |  |  | 1 | 
|Hans Fjøsne               |  |     | 64 |          |  | Director                                                                                                                                        |  |  | 1 | 
|Gary Howard               |  |     | 53 |          |  | Director                                                                                                                                        |  |  | 1 | 
|Boon Hwee Koh             |  |     | 53 |          |  | Director                                                                                                                                        |  |  | 2 | 
|Cheikh-Tidiane Mbaye      |  |     | 47 |          |  | Director                                                                                                                                        |  |  | 2 | 
|Ken Miller                |  |     | 61 |          |  | Director                                                                                                                                        |  |  | 2 | 
|Paul Pizzani              |  |     | 44 |          |  | Director                                                                                                                                        |  |  | 3 | 
|Philippe-Olivier Rousseau |  |     | 47 |          |  | Director                                                                                                                                        |  |  | 1 | 
|Robin Turner              |  |     | 61 |          |  | Director                                                                                                                                        |  |  | 2 | 
|Christopher Vonwiller     |  |     | 61 |          |  | Director                                                                                                                                        |  |  | 1 | 

A brief biography of each of our current
executive officers and directors 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 North Tower, 2nd Floor, 90 Pitts Bay Road, Pembroke
HM 08, Bermuda.

Mr. Corbetthas been Executive Vice President and Chief Financial Officer of
Intelsat, Ltd. since September 2001 but will resign from this
position within the next two months. After his resignation, it
is anticipated that he

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will serve as senior advisor to Intelsat, Ltd.
for an interim period. Mr. Corbett previously served as 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 is currently a
director of WildBlue. Mr. Corbetts business address
is North Tower, 2nd Floor, 90 Pitts Bay Road, Pembroke HM 08,
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 is
currently a director of WildBlue. Mr. Potarazus
business address is North Tower, 2nd Floor, 90 Pitts Bay Road,
Pembroke HM 08, 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 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; 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. 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

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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. Sponyoeserved as a consultant to Lockheed Martin Corporation from
February 2002 to February 2004, as Chief Executive Officer of
Lockheed Martin Global Telecommunications from August 1998 to
February 2002, and as President of Lockheed Martin Electronics
Platform Integration Group from April 1997 to July 1998.
Mr. Sponyoes business address is c/o Intelsat, Ltd.,
North Tower, 2nd Floor, 90 Pitts Bay Road, Pembroke HM 08,
Bermuda.

Mr. Adamohas been Partner, Proyecto Carlos Pellegrini S.A. since February
1999, and Partner, Merchant Bankers Asociados S.A. since May
2002. He was Executive Director of Argencard S.A. from April
1996 to December 1999. He is a director of Merchant Bankers
Asociados S.A., America Latina Logística S.A. and Proyecto
Carlos Pellegrini S.A. He is the President of the Universidad de
San Andrés, Argentina. Mr. Adamos business
address is Carlos Pellegrini, 1427, 3rd Floor, 1011 Buenos
Aires, Argentina.

Ms. Arredondohas been the Managing Partner of FRA Holdings llc since November
2001 and was previously the Managing Director of Yahoo! Europe
from 1997 to 2001 and an Executive Board member of BBC Worldwide
from 1995 to 1997. She is a director of the BOC Group plc and
Bankinter SA, and is a Board Trustee of the World Wildlife Fund
U.K. Ms. Arredondos business address is FRA Holdings
llc, 6 Robert S Drive, Menlo Park, California 94025, United
States.

Mr. Boardmanwas Vice Chairman and Director of Bank One, and Chairman and
Chief Executive Officer of First USA, Inc., from October 1999 to
March 2001. From November 1984 until October 1999 he held
various officer positions within Bank One. Mr. Boardman is
Chairman of the Board and is currently serving as interim
President and Chief Executive Officer of Visa International. He
is also a director and former Chairman of Visa USA, a director
of Checkfree Holdings Corporation and a director of Ohio
Casualty Group. Mr. Boardmans business address is c/o
Intelsat, Ltd., North Tower, 2nd Floor, 90 Pitts Bay Road,
Pembroke HM 08, Bermuda.

Mr. Delepinehas been a member of the Board of Advisors of ADVENTIS
Corporation since March 2003 and expects to become a director of
Eircom Ltd. in 2004. He was President and Chief Executive
Officer and Chairman of the Management Board of Equant N.V. from
January 1998 to July 2003, and was President and Chief Executive
Officer of Equant Network Services from 1995 through 1997.
Mr. Delepines business address is c/o Intelsat, Ltd.,
North Tower, 2nd Floor, 90 Pitts Bay Road, Pembroke HM 08,
Bermuda.

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 International Launch Services and
Lockheed-Khrunichev-Energia International, Inc.
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
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. Fjøsnehas 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. 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. Fjøsnes business address
is Telenor Broadcast, Snaroyveien 30, No-1331, Fornebu, Norway.

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Mr. Howardhas served as a director of Liberty Media Corporation since July
1998. Mr. Howard served as Executive Vice President and
Chief Operating Officer of Liberty Media Corporation from July
1998 until his retirement from those positions in January 2004.
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 SpectraSite, Inc. and UnitedGlobalCom, Inc.
Mr. Howards address is 9 Waterside Terrace, Cherry
Hill Village, Colorado 80113, United States.

Mr. Kohis Executive Director of Mediaring Ltd. and Tech Group Asia Ltd.
He has served as Chairman of Singapore Airlines since July 2001
and as director since March 2001. Mr. Koh is also a
director of BroadVision, Inc., Innovalues Precision Ltd. and
Norelco Centreline Holdings Ltd. He was previously Chairman of
Singapore Telecommunications Ltd. from 1986 to 2001, Chairman of
Omni Industries Ltd. from 1996 to 2001, Chairman of Internet
Technology Group Ltd. from 2000 to 2001 and Executive Chairman
of the Wuthelam Group of Companies from 1991 to 2000.
Mr. Kohs business address is c/o Wuthelam Holdings
Pte Ltd., 1 Kim Seng Promenade, #10-06 Great World City East
Tower, Singapore 237994.

Mr. Mbayehas been Chief Executive Officer of Sonatel S.A., the Senegalese
telecommunications operator, since April 1988. Mr. Mbaye is
currently a director of Sonatel Multimedia and Chairman of the
Board of Sonatel Mobiles and Ikatel, all of which are
subsidiaries of Sonatel S.A. He is also a director of Canal Plus
Horizon Senegal, a subsidiary of Vivendi Universal, and Mandri
Senegal. Mr. Mbayes business address is Sonatel, 6,
rue Wagane Diouf, BP 69, Dakar, Senegal.

Mr. Millerserved as a consultant to Intelsat, Ltd. from March 2003 to May
2003, and has been Chief Executive Officer of Ken Miller
Capital, LLC since November 2002. He was an independent
financial advisor from January 2002 to August 2002, and served
as Vice Chairman of Credit Suisse First Boston Corporation from
1995 to July 2001 and thereafter as Senior Advisor to Credit
Suisse through December 2001. Mr. Miller is a director of
CNA Surety, Inc., Global Kids and the United Nations
Association. Mr. Millers business address is Ken
Miller Capital, LLC, c/o The Associated Group, 650 Madison
Avenue, New York, New York 10022, United States.

Mr. Pizzanihas been a partner of Pizzani Hamlin Capital, L.L.C., which is
an advisor to AIG Capital Partners, an indirect wholly owned
subsidiary of American International Group, Inc., since April
1999. Prior to forming Pizzani Hamlin Capital, L.L.C., from
November 1997 to March 1999, Mr. Pizzani was a Managing
Director of Wasserstein Perella Emerging Markets, where he
specialized in private equity investments and debt transactions.
Prior to joining Wasserstein Perella, Mr. Pizzani served as
Treasurer of COMSAT Corporation, an international communications
company. Mr. Pizzani is a director of Primus
Telecommunications Group, Incorporated and Sportsvision, Inc.
Mr. Pizzanis business address is Pizzani Hamlin
Capital, L.L.C., 1266 East Main Street, 4th Floor, Stamford,
Connecticut 06902-3546, United States.

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

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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.


Change in CFO
Position

Mr. William Atkins will be assuming the
position of chief financial officer of Intelsat, Ltd. within the
next two months. Since March 1, 2004, Mr. Atkins has
served as an advisor to Intelsat, Ltd.

B. Compensation

Executive
Officer and Director Compensation

The aggregate amount of compensation paid by us
to our executive officers in 2003 was approximately
$3.1 million, excluding compensation paid in the form of
share options. This amount includes compensation paid by us 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 2003, the aggregate amount of compensation
paid by us to those individuals who served as our non-management
directors during 2003 was approximately $1.4 million,
excluding compensation paid in the form of share options.
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, the
individuals who served as our executive officers and directors
during 2003 were granted in the aggregate options to purchase
221,770 of our ordinary shares in 2003. As of January 15,
2004, options to purchase 729,780 of our ordinary shares were
held by individuals serving as our executive officers and
directors as of that date. These options granted to directors
and executive officers in 2003 are exercisable at a price of
$14.90 per ordinary share and will expire in 2013. The options
held by our directors and executive officers that were granted
in 2002 are exercisable at a price of $16.17 per ordinary share
and will expire in 2012. The options held by our directors and
executive officers that were granted prior to 2002 are
exercisable at a price of $19.05 per ordinary share and will
expire in 2011. In addition, in February 2004, pursuant to our
2004 share incentive plan, the Compensation Committee of our
board of directors authorized the issuance of options to acquire
1,457,398 of our ordinary shares to our executive officers and
authorized the issuance of 586,305 restricted shares to our
executive officers and other employees. The Compensation
Committee also authorized the issuance of 100,000 restricted
share units to our non-employee directors. The exercise price of
the options authorized to be granted in February 2004 will equal
the initial public offering price of our ordinary shares and
will expire ten years from their grant date. These options to
acquire ordinary shares, restricted shares and restricted share
units and our share incentive plans are described further below
under Item 6.E  Share Ownership.

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 of Intelsat, Ltd., Intelsat USA Sales
    Corp., Intelsat Global Service Corporation and Intelsat
    Government Solutions Corporation based in the United States or
    on assignment outside of the United States who were hired before
    July 19, 2001, as well as an employee of our Intelsat
    Bermuda subsidiary

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| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | who was formerly an employee of Intelsat Global
    Service Corporation hired by that company 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 5  Operating and
Financial Review and Prospects  Related Party
Transactions  COMSAT Asset Purchase Agreement
for a description of this acquisition.

The estimated aggregate amount accrued by us in
2003 to provide for annual pension benefits under the Pension
Plan and the Restoration Plan for our current executive
officers, excluding an individual who was not an executive
officer as of the date the actuarial valuation, was $155,488.

Pension
Plan

The Pension Plan is a tax-qualified, defined
benefit pension plan for eligible individuals. 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 that 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, provided they
were hired before July 19, 2001 or were hired in connection
with our November 2002 acquisition of most of the assets of
COMSAT World Systems and COMSAT Digital Teleport, Inc. 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.

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 individuals whose benefits under the
Pension Plan are limited by the provisions of Section 415
and/or Section 401(a)(17) of the Internal 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, individuals 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.

Although the Restoration Plan is an unfunded
plan, assets have been set aside in a rabbi trust
fund held by UBS Trust Company. It is intended that benefits due
under the Restoration Plan will be paid from this rabbi trust or
from the general assets of the Intelsat entity that employs the
participants in the Restoration Plan.

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Other
Postretirement Benefits

We provide health benefits for employees hired
prior to January 1, 2004 who retire at or after age 60 with
five years of consecutive service or after age 55 with ten years
of consecutive service. A governing body of the IGO adopted a
resolution prior to privatization stating that the retirees
eligible for these benefits as of the date of privatization, as
well as an additional number of named employees, would continue
to receive the level of health benefits provided as of
January 1, 2001. We provide these benefits under a plan
that is unfunded. Benefits are paid as they become due.

Defined
Contribution Plans

We and our subsidiary, Intelsat Global Service
Corporation, maintain two tax-qualified, defined contribution
plans that provide benefits generally to employees based in the
United States or on assignment outside of the United States.
They are the Intelsat Supplemental Retirement Income Plan,
referred to as the Supplemental Retirement Income Plan, and the
Intelsat Retirement Savings Plan, referred to as the Retirement
Savings Plan. Our Intelsat Bermuda subsidiary maintains one
defined contribution plan for most of our employees based in
Bermuda. It is called the Golden Accumulator Retirement Plan.
Our Intelsat Global Sales subsidiary maintains one defined
contribution plan for our employees based in the United Kingdom.
It is called the Intelsat Global Sales & Marketing Ltd.
Stakeholder Pension Plan, referred to as the Stakeholder Pension
Plan.

The estimated aggregate amount contributed by us
in 2003 under our defined contribution plans for our current
executive officers was $53,050.

Supplemental
Retirement Income Plan

The Supplemental Retirement Income Plan provides
benefits only to:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | employees of Intelsat, Ltd., Intelsat USA Sales
    Corp., Intelsat Global Service Corporation and Intelsat
    Government Solutions Corporation based in the United States or
    on assignment outside of the United States who were hired before
    July 19, 2001, as well as an employee of our Intelsat
    Bermuda subsidiary who was formerly an employee of Intelsat
    Global Service Corporation hired by that company 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. All funds
under the Supplemental Retirement Income Plan are held in trust
by T. Rowe Price Trust Company.

Retirement
Savings Plan

The Retirement Savings Plan provides benefits to
employees and officers of Intelsat USA Sales Corp., Intelsat
Global Service Corporation and Intelsat Government Solutions
Corporation based in the United States or on assignment outside
of the United States 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 additional contribution each year equal to 4% of
base pay for each participant who is employed on the last day of
the year. These additional 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

103



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##### 



employees who are participants in this plan. All
funds under the Retirement Savings Plan are held in trust by T.
Rowe Price Trust Company.


Golden
Accumulator Retirement Plan

The Golden Accumulator Retirement Plan provides
benefits to individuals employed by our Intelsat Bermuda
subsidiary. Intelsat Bermuda contributes 10% of each covered
employees salary, and employees are 100% vested in the
employers contribution after two years of membership in
the plan. The plans funds are invested by the plan
administrator, BF&M Life Insurance Company Limited.

Stakeholder
Pension Plan

The Stakeholder Pension Plan provides benefits to
individuals employed by our Intelsat Global Sales subsidiary who
have completed at least three months service and who elect
to participate. The plan is a collection of individual policies,
and each employee has his own pension policy within the plan,
which he may be able to transfer to a job with a different
employer. A participant may defer a percentage of gross
earnings, which varies depending upon the participants
age, up to the earnings cap established by law. Intelsat Global
Sales makes a core contribution of 6% of each participating
employees salary and matches the employees
contributions, if any, up to 3% of his salary. All employer
contributions vest immediately and are invested by the plan
administrator, Norwich Union Life and Pensions Limited.

Non-Qualified
Deferred Compensation Plan

Supplemental benefits were formerly provided to
certain designated executives under a non-qualified deferred
compensation plan called the Intelsat Supplemental Executive
Retirement Plan, which was redesignated through amendment as the
Intelsat Deferred Compensation Plan. This plan provided
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 Deferred Compensation Plan
ceased accruing benefits under this plan as of July 19,
2001. Although the Deferred Compensation Plan is unfunded,
assets have been set aside in a rabbi trust fund held by UBS
Trust Company. It is intended that the benefits due under the
Deferred Compensation Plan will be paid from this rabbi trust or
from the general assets of the Intelsat entity that employs the
participants in this plan.

C. Board Practices

Our board of directors currently consists of 17
directors. Except for Mr. Pizzani, who was appointed as a
director in December 2003 by our board of directors in order to
fill a vacancy on the board, each of our current directors was
elected by our shareholders at the annual general meeting of our
shareholders held on June 4, 2003. Our bye-laws provide
that at least a majority of our directors must be independent
directors. We currently have 12 independent directors serving on
our board of directors.

We have a classified board of directors
consisting of three classes:



| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | one class to hold office for a term expiring at
    the 2004 annual general meeting of shareholders (Class 1),
    and     
|
| |  | a second class to hold office for a term expiring
    at the 2005 annual general meeting of shareholders
    (Class 2), and
|
| |  | a third class to hold office for a term expiring
    at the 2006 annual general meeting of shareholders
    (Class 3), and 

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

At each 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. 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 the nomination is
delivered to the secretary of Intelsat, Ltd. in accordance with
our bye-laws.

104



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Our bye-laws provide that this advance notice
must be delivered not less than 14 days, or after the date
of our initial public equity offering, not less than
60 days nor more than 90 days prior to the date of our
annual general meeting or not more than 7 days after notice
of a special general meeting has been given by us. 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 advance notice of any such meeting is given to
the director being removed in accordance with our bye-laws. Our
board of directors may fill any vacancy occurring as a result of
the death, disability, disqualification, removal or resignation
of any director in accordance with our bye-laws.


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 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. In addition,
Mr. Kullmans share option award agreement with us
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 and the full exercise
period for these options will remain in effect. With respect to
our directors other than Mr. Kullman, each share option
award agreement provides that upon our termination of an
individuals 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,
each member of which is required to be independent. Pursuant to
its charter and the authority delegated to it 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 Messrs. Adamo, Delepine,
Pizzani and Vonwiller. Our board of directors has designated
Mr. Pizzani as an audit committee financial expert. 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 and the composition of
which is required to comply with applicable law and listing
exchange rules. Pursuant to its charter and the authority
delegated to it by the board of directors, the Compensation
Committee oversees the compensation and benefit policies of our
management and our employees, including incentive plans and
share option plans, and oversees our management succession plan.
In addition, the Compensation Committee approves goals and
objectives relevant to our chief executive officers
compensation, evaluates this officers performance relative
to these goals and objectives and approves the chief executive
officers compensation based on this evaluation. Currently,
the Compensation Committee consists of Messrs. Boardman,
Fiuza, Fjøsne and Rousseau.

105



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##### 



Our board of directors has a Strategic Affairs
and Finance Committee, which consists of Messrs. Sponyoe,
Dailey, Miller and Howard and Ms. Arredondo. Our chief
executive officer serves as an ex officio member of this
committee. Pursuant to its charter and the authority delegated
to it by the board of directors, the Strategic Affairs and
Finance Committee has responsibility for reviewing and
recommending our long-term strategy to the board of directors,
including reviewing and making recommendations with respect to
strategic acquisitions and joint ventures. The Strategic Affairs
and Finance Committee also has responsibility for reviewing and
making recommendations to the board of directors regarding
proposed changes to our capital structure, including the
incurrence of long-term debt and the issuance of equity
securities.

Our board of directors also has a Nominating
Committee, which consists of Messrs. Koh, Mbaye and Turner.
A majority of the members of the Nominating Committee are
required to be independent directors, and the committees
composition is required to comply with applicable law and
listing exchange rules.

Our board of directors may from time to time
establish other committees to facilitate our management.

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.

D. Employees

As of December 31, 2003, we and our
subsidiaries had a total of 934 employees. These employees
consisted of:



| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 252 employees in sales and marketing;                                                               
|
| |  | 488 employees in engineering and operations; and                                                    
|
| |  | 194 employees in finance, strategy and business
    development, and other administrative functions.

As of December 31, 2003, approximately 849
of our employees were located in the United States, 27 were
located in London, England and 9 were located in Bermuda. The
remainder of our employees were in various other locations
around the world.

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.

106



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##### 



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.

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. 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. The number of
employees described above as of December 31, 2002 reflects
this reduction.

We believe that our relations with employees are
good. None of our employees is represented by a union or covered
by a collective bargaining agreement.

E. Share Ownership

None of our directors or executive officers has
any share ownership other than the share options granted to him.
One of our directors, Paul Pizzani, is a partner in Pizzani
Hamlin Capital, L.L.C. Pizzani Hamlin Capital, L.L.C. is an
advisor to AIG Global Sports and Entertainment Fund, L.P., a
private equity fund that indirectly holds less than 1% of our
ordinary shares. Mr. Pizzani disclaims beneficial ownership
of these shares. A member of the household of one of our
executive officers, Tony Trujillo, Jr., currently serves as the
manager of FHF Holding, L.L.C., which holds less than 1% of our
ordinary shares, and as the trustee of a trust that holds
membership interests in FHF Holding, L.L.C. Mr. Trujillo,
Jr. disclaims beneficial ownership of these shares.

We have established two share incentive plans for
our management and employees, referred to as the 2001 share
option plan and the 2004 share incentive plan.

2001 Share
Option Plan

We established the 2001 share option plan after
our privatization in 2001. The issuance of our ordinary shares
under our 2001 share option plan was approved by our
shareholders at a special general meeting of our shareholders
held on July 19, 2001. The 2001 share option plan enables
us to make awards of share options to our directors and our and
our subsidiaries eligible employees, 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
2001 share option plan.

Pursuant to our 2001 share option plan, options
for our ordinary shares have been granted to our directors and
to our executive officers and other employees. As of
January 15, 2004, options to acquire 3,199,104 of our
ordinary shares were outstanding in total. All of the options
granted in 2003 are exercisable at a price of $14.90 per
ordinary share and will expire in 2013. 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 are exercisable at a price of $19.05 per ordinary
share and will expire in 2011.

107



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Those individuals serving as our directors and
executive officers as of January 15, 2004 held options to
purchase an aggregate of 729,780 of our ordinary shares as of
that date. None of our directors or executive officers has been
granted options to purchase 1% or more of our ordinary shares.

In general, options that have already been
granted to our directors were fully vested on the date of grant.
The options that have been granted to our executive officers and
other participants to date pursuant to the 2001 share option
plan will vest in equal one-third installments on each of the
first, second and third anniversaries of the date of grant, with
100% vesting upon the occurrence of a change in control of
Intelsat, Ltd. 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 and in shortened
exercise periods for vested 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 2001 share option
plan or amend or terminate the 2001 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 2001 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. We do not intend to grant additional
options under our 2001 share option plan after we have obtained
shareholder approval of our 2004 share incentive plan.

2004 Share
Incentive Plan

In January 2004, our board of directors approved
and adopted our 2004 share incentive plan, subject to the
approval of our shareholders. We intend to hold a special
general meeting of our shareholders to obtain approval of the
2004 share incentive plan in the first half of 2004. The 2004
share incentive plan provides for the granting of share options,
restricted shares, restricted share units, share appreciation
rights, phantom shares and performance awards, referred to
collectively in this annual report as awards, to our and our
subsidiaries and specified affiliates employees,
officers and directors. Subject to adjustment for share splits
and similar events, under our 2004 share incentive plan, we may
grant awards for up to a maximum of 6,720,000 of our ordinary
shares. In addition, there will be carried over to the 2004 plan
any of the up to 3,333,333 of our ordinary shares that remain
available for issuance under our 2001 share option plan,
including any ordinary shares covered by options issued under
the 2001 plan that expire or are terminated or forfeited without
being exercised.

Our 2004 share incentive plan contains
limitations on specified types of awards that may be granted
under the plan. No more than 30% of the ordinary shares
available for awards under the 2004 plan may be issued in the
form of restricted shares, restricted share units or phantom
shares, or any combination of these awards. The 2004 plan also
contains limits on awards that may be granted to executive
officers who are subject to a limitation on the amount of
deductible compensation under section 162(m) of the Internal
Revenue Code of 1986, as amended.

In February 2004, the Compensation Committee of
our board of directors authorized the issuance to our employees
of options to acquire 3,120,449 of our ordinary shares,
including options to acquire 1,457,398 of our ordinary shares
approved for grant to our executive officers. These awards are
subject to both the approval of the 2004 plan by our
shareholders and the consummation of our initial public offering
of equity securities. The exercise price of these options will
equal the initial public offering price of our ordinary shares.
These options will expire ten years from their grant date. These
options will vest in equal one-third installments on each of the
first, second and third anniversaries of the date of grant, with
100% vesting upon the occurrence of a change in control of
Intelsat, Ltd. Vested options cannot be exercised until the
earlier of the first anniversary of our initial public equity
offering and the third anniversary of the grant date. In
addition, the Compensation Committee authorized the issuance in
February 2004 of 686,305 restricted shares, of which 586,305
shares have been

108



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##### 



authorized for issuance to our executive officers
and other employees. These awards are also subject to the
approval of the 2004 plan by our shareholders and the
consummation of our initial public offering. The restricted
shares granted to our executive officers and other senior
employees will vest based upon the achievement of specified
performance measures. The restricted shares granted to all other
employees will vest on the third anniversary of the grant date,
with pro rata accelerated vesting based on retirement within
three years. All of the restricted shares will vest upon a
change in control of Intelsat, Ltd.


In February 2004, the Compensation Committee also
authorized the issuance to our non-employee directors of
restricted share units for a total of 100,000 of our ordinary
shares, subject to the approval of the 2004 plan by our
shareholders and the consummation of our initial public equity
offering. The 2004 share incentive plan provides for annual
grants to non-employee directors of restricted share units
having a fair market value as of the grant date of $22,500. In
addition, the plan provides for a one-time grant to each of our
non-employee directors, other than the chairman of the board of
directors, of 6,000 restricted share units. The plan also
provides for a one-time grant of 10,000 restricted share units
to the chairman of the board of directors. In general, these
restricted share unit grants will vest on the earlier to occur
of the first anniversary of the grant date and the date of a
change in control of Intelsat, Ltd. Ordinary shares will be
issued with respect to vested restricted share units on the date
that the directorship of a grantee terminates.

The terms and conditions of each award will be
set forth in a grant agreement. Each grant agreement will set
forth, among other things, the specified vesting and exercise
provisions applicable to the award and the effect that a
termination of employment will have on the award. We expect that
most terminations of employment will result in the forfeiture of
unvested awards and in the curtailment of the exercise periods
of vested awards.

Our board of directors or its delegate(s) may at
any time discontinue granting awards under the 2004 share
incentive plan or amend or terminate the 2004 plan. However, no
amendment may become effective without the approval of our
shareholders if such approval is required by applicable law,
rule or regulation or if the amendment increases the maximum
number of ordinary shares available under the 2004 plan, except
in case of adjustments for share splits and similar events.
Shareholder approval is also required to re-price any share
options granted pursuant to the 2004 share incentive plan. In
addition, no amendment to the plan or any award pursuant to the
plan may be made if it would 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
January 22, 2004 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 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.

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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                             |  |                      | 8,393,676 shares(4   | )          |  |  | 5.0%  | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Calculated on the basis of 166,666,755 ordinary
    shares issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | This amount 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%. Tata Sons
    Limited is also the registered owner of an additional 1.3% of
    the outstanding shares of Videsh Sanchar Nigam Limited. 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 interest in these
    shares.
|   
|(4) | This amount includes 404,209 shares held by the
    Polish Telecommunication Company (Telekomunikacja Polska);
    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); and 59,855 ordinary shares
    held by GlobeCast UK Ltd. Each of these entities is partially
    owned by France Telecom.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Three 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 was a consultant to Lockheed Martin Corporation from
February 2002 to February 2004. Dr. Dailey, a member of our
board of directors, is Senior Vice President of Washington
Operations for Lockheed Martin Corporation. Mr. Mbaye,
another member of our board of directors, is Chief Executive
Officer of Sonatel S.A., which is affiliated with France Telecom.

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 January 22, 2004, approximately 26% of
our ordinary shares, or 44,020,004 ordinary shares, were held of
record in the United States by approximately 12 holders.

B. Related Party Transactions

Summarized below are contracts with Lockheed
Martin Commercial Launch Services, WildBlue and Galaxy. We
believe that, in all cases, these contracts were entered into on
an arms-length basis and on normal commercial terms.

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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 IS-10-02 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.

WildBlue
Subscription Agreement

On April 21, 2003, we acquired a minority
stake in WildBlue for a purchase price of $58.0 million.
For more information about the WildBlue transaction, see
Item 5  Operating and Financial Review and
Prospects  Related Party Transactions 
WildBlue Subscription Agreement.

Galaxy Note
Payable to TVB Holdings

Galaxy, our consolidated affiliate, has a note
payable to TVB Holdings for $14.9 million. See
Item 5  Operating and Financial Review and
Prospects  Investment in Galaxy for a further
description of our interest in Galaxy.

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.

See Item 10.F  Dividends
and Paying Agents for information relating to our dividend
policy and restrictions on our ability to declare dividends.



|        |                      
|------- | ---------------------
|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 rights
of the holders of our shares. These rights are set out in our
memorandum of association and bye-laws or are provided under
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 incorporated by
reference as exhibits to this annual report.

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General

Intelsat, Ltd. is incorporated as a limited
liability company under the Companies Act 1981 of Bermuda,
referred to in this annual report 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 11, 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 and
carrying on business as a holding company. We also have the
power according to our memorandum of association to conduct
activities that are incidental to the furtherance of our
objects, such as borrowing money 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. Pursuant to our
bye-laws, this bye-law provision relating to our public service
obligations does not create any right of enforcement by our
shareholders.

Share
Capital

As of December 31, 2003, our authorized
share capital consisted 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. Our authorized preference shares can be
issued by our board of directors in accordance with the Member
Protection Rights Agreement, which is more fully explained below
under  Member Protection Rights
Agreement, or by resolution of our shareholders. Pursuant
to a shareholder resolution and upon the passing of a resolution
by our board of directors, 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 equity
offering.

On July 18, 2001, we issued 500,000,000
ordinary shares, par value $1.00 per share, in connection with
our privatization. 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. Accordingly, after our share
consolidation we had 166,666,755 ordinary shares, par value
$3.00 per share, issued and outstanding.

Pursuant to our bye-laws, and subject to the
requirements of any stock exchange on which our ordinary shares
are listed and 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 of our authorized but 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 by 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.

Ordinary
Shares

We have 176,720,088 ordinary shares of $3.00 par
value each issued and outstanding or reserved for issuance. Of
this amount, 166,666,755 ordinary shares are issued and
outstanding, and up to 10,053,333 are reserved for issuance
pursuant to our share incentive plans, as described under
Item 6.E  Share Ownership.

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##### 



As of December 31, 2003, we had 170,000,088
ordinary shares of $3.00 par value each issued and outstanding
or reserved for issuance. Of this amount, 166,666,755 ordinary
shares were issued and outstanding and up to 3,333,333 were
reserved for issuance pursuant to our 2001 share option plan.

Holders of our ordinary shares are entitled to
one vote per share held of record on all matters submitted to a
vote of the shareholders. Holders of our ordinary shares have no
preemptive, redemption, conversion or sinking fund rights.

Preference
Shares

We have 2,500,000 preference shares of $3.00 par
value each authorized for issuance pursuant to our bye-laws and
board of director and shareholder resolutions. No preference
shares are currently issued or outstanding. Our preference
shares are issuable by our board of directors pursuant to the
Member Protection Rights Agreement described below under
 Member Protection Rights Agreement, or
by resolution of our shareholders.

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 issued and 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, unless otherwise provided for by the terms
of issue of the shares of that class, may be varied by the
written consent of holders 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 completing an instrument of transfer
substantially in the form set out in our bye-laws or in such
other common form as our board of directors may accept. The form
must be signed by the transferor and transferee. However, 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 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 at a
general meeting of shareholders change the currency of our share
capital or increase, alter or reduce our share capital in
accordance with Sections 45 and 46 of the Companies Act and
as provided in our bye-laws.

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Rights Upon
Dissolution

Our bye-laws state that in the event of Intelsat,
Ltd.s dissolution or winding up, the holders of our
ordinary shares are entitled to share in our surplus assets, if
any, remaining after the payment of all of our debts and
liabilities, subject to any liquidation preference on any issued
and outstanding preference shares. Our bye-laws state that if we
are wound up, the liquidator may, upon the approval 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, but not more than
60 days, notice of an annual general meeting and at
least 14 days, but not more than 60 days,
notice of a special general meeting called by the chairman, the
deputy chairman or our board of directors. Our bye-laws permit
an annual general meeting to be called on shorter than
30 days notice if all of the shareholders entitled to
attend and vote at the meeting agree to such shorter notice. Our
bye-laws also permit a special general meeting to be called on
shorter than 14 days notice if a majority of the
shareholders entitled to attend and vote at the meeting agree to
such shorter notice, provided that these shareholders hold at
least 95% of the shares entitled to vote at the meeting.

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.

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.

However, prior to the date of our initial public
offering, our bye-laws may only be amended by a supermajority
vote and, from and after the date of our initial public equity
offering, some provisions of our bye-laws can be amended only by
a majority vote of our shareholders at a meeting where a quorum
representing a supermajority of our shareholders is present, as
described below under  Amendment of Memorandum
of Association and Bye-laws  Supermajority Voting and
Quorum Requirements. In addition, before the date of our
initial public equity offering, we may not take any of the
following actions or transactions, described generally below,
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;                                                                                                                                                                                                         
|
| |  | the incurrence by us or our subsidiaries of
    indebtedness for borrowed money which would result in the total
    indebtedness of us and our subsidiaries exceeding 75% of the
    total consolidated shareholders equity and long-term debt of us
    and our subsidiaries;

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | 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.                                                                                                                                                        

From and after the date of our initial public
equity offering, certain actions or transactions involving us
must be approved by a majority of the votes cast at a general
meeting of our shareholders at which a quorum of at least two
persons present in person or by proxy representing not less than
two thirds of our total issued and outstanding voting shares is
present, if the actions or transactions relate to, in general
terms:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | 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 as reflected on our
    consolidated financial statements as of the most recent
    practicable date prior to the earlier of the consummation of
    that transaction or the execution of a definitive agreement with
    respect to that transaction, such portion of our assets being
    referred to as a Material Portion of Consolidated Assets;
|
| |  | 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 an amount equal to a Material
    Portion of Consolidated Assets;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | 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 an amount equal to a
    Material Portion of Consolidated Assets;                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | 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 an amount equal to a Material Portion of
    Consolidated Assets; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 an amount equal to a Material Portion of Consolidated
    Assets to any such partnership, venture or similar entity.

From and after the date of our initial public
equity offering, special approval requirements apply to
specified business combinations, as set forth under
 Mergers, Consolidations, Amalgamations and
Business Combinations.

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.

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.

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 Bermuda law and as provided by 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 special approval
requirements for certain mergers, consolidations or
amalgamations of us or any of our subsidiaries with or into any
other entity, other than in an intercompany transaction. Under
our bye-laws, from and after the date of our initial public
equity offering, there are also special approval requirements
for specified business combinations involving us and an
interested party, as described below. Any other amalgamation
involving us will require the approval set forth under the
Companies Act, which is the approval of our board of directors
and the approval of at least 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.

Generally and except as described below, from and
after the date of our initial public equity offering, a business
combination involving us and an interested party or any of its
affiliates requires the approval of at least 75% of the total
voting power of all of our issued and outstanding voting shares,
voting as a single class,

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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 us, any of our
subsidiaries or any 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, in
general terms:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as of July 18, 2001, individually or
    collectively with its affiliates, beneficially owned or
    possessed the right to vote or the right to direct the voting of
    more than 15% of our total issued and outstanding voting shares,
    such person being referred to as a Grandfathered Member,
    provided that such Grandfathered Member does not have or acquire
    beneficial ownership of any further voting shares in addition to
    what such Grandfathered Member owned as of July 18, 2001,
    except in specified limited circumstances;
|
| |  | is affiliated with a Grandfathered Member or is
    the successor to a Grandfathered Member; or                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | beneficially owns not more than 20% of our issued
    and 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 any voting shares,
    except in an issuance made on a pro rata basis to all holders of
    our ordinary shares, an issuance that is approved by our
    disinterested directors, as defined in our bye-laws, or an
    issuance that is pursuant to the 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.                                                                                                                                                                                                                                                                                                                  

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



| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a merger, consolidation, amalgamation or binding
    share exchange of us or any of our subsidiaries with an
    interested party or any of its affiliates;                                                                                                                                                                                            
|
| |  | a sale, lease, exchange, charge, mortgage,
    pledge, transfer or other disposition 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 for the
    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 or any of our
    subsidiaries issued and 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 may be subject
to the other amalgamation, merger or consolidation approval
requirements described above, if, in general terms:



| |   |                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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                                                       

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| |  |                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

Repurchase
Rights

Under Bermuda law, a company may repurchase its
issued and outstanding shares out of funds legally available for
the repurchase of shares. No repurchase may be effected if there
are reasonable grounds for believing that the company is, or
after effecting the share repurchase would be, unable to pay its
liabilities as they become due or if as a result of the
repurchase, the issued share capital of the company would be
reduced below the minimum capital specified for the company in
its memorandum of association. In general, a repurchase of our
securities can be authorized by our board of directors. However,
under our bye-laws a repurchase of our securities by us that has
the effect, directly or indirectly, of increasing the
proportionate share of the issued and outstanding shares of any
class of equity securities or securities convertible into equity
securities of us or any of our subsidiaries that is directly or
indirectly beneficially owned by an interested party or any
affiliate of any interested party requires the approval of our
board of directors and the affirmative vote of the holders of at
least 75% of the total voting power of all the voting shares
then issued and outstanding, voting as a single class, which
shall include the affirmative vote of at least two-thirds of the
total voting power of the voting shares issued and outstanding
held by shareholders other than the interested party.

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 of our bye-laws shall be effective with the
approval of our board of directors and by a resolution passed,
prior to the date of our initial public equity offering, by
shareholders representing at least 60% of our total, issued and
outstanding shares, and from and after the date of our initial
public equity offering, by a majority of the votes cast at a
general meeting of our shareholders.

Supermajority
Voting and Quorum Requirements

Some provisions of our bye-laws cannot be amended
or waived without the approval either by a supermajority vote of
our shareholders or by a majority vote of our shareholders at a
meeting where a quorum representing a supermajority of our
shareholders is present. For example, until the later to occur
of July 18, 2013 and the date the public service agreement
referred to in our bye-laws ceases 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 the voting power
of all of our issued and outstanding voting shares.

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



| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | the procedures for nominating candidates to stand
    for election as directors;   
|
| |  | the division of our directors into three classes
    and the term of our directors;

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| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the procedure for removing directors;                                                                                                                                                                                                                                                                                                                          
|
| |  | the procedure for filling vacancies on our board
    of directors;                                                                                                                                                                                                                                                                                             
|
| |  | the prohibition on shareholders taking actions by
    written consent;                                                                                                                                                                                                                                                                                         
|
| |  | the requirement for advance notice of shareholder
    proposals;                                                                                                                                                                                                                                                                                               
|
| |  | voting by shareholders at general meetings,
    except with respect to votes related to certain 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 Agreement; and                                                                                                                                                                                                                                                      
|
| |  | business combinations involving interested
    parties, as generally described under  Mergers,
    Consolidations, Amalgamations and Business Combinations.                                                                                                                                                                                                 

From and after the date of our initial public
equity offering, other provisions of our bye-laws may be amended
or waived upon the approval of a simple majority of the votes
cast at a meeting of our shareholders, but the quorum
requirement at such a meeting is that at least two persons
representing not less than two thirds of our total issued and
outstanding voting shares must be present either in person or by
proxy. These special quorum requirements apply to any vote to
amend or waive our bye-laws relating generally to:



| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the size of our board of directors;                                                                                                                                                                                                 
|
| |  | the term of office of our initial board of
    directors;                                                                                                                                                                           
|
| |  | the allocation of independent directors among the
    three classes of directors;                                                                                                                                                   
|
| |  | the procedure for nominating directors and the
    right of shareholders to nominate candidates to stand for
    election as directors in accordance with our bye-laws;                                                             
|
| |  | the appointment of our chief executive officer to
    our board of directors and the requirement that a majority of
    the directors on our board of directors be independent;                                                     
|
| |  | the requirement that each of our directors must
    be able and willing to serve as a director and to meet his or
    her fiduciary obligations in such capacity;                                                                   
|
| |  | the restriction on directors affiliations
    with competitor intergovernmental telecommunications
    organizations;                                                                                                              
|
| |  | the quorum for board of directors meetings;                                                                                                                                                                                         
|
| |  | the appointment of officers by the board of
    directors;                                                                                                                                                                          
|
| |  | our indemnification of our board of directors and
    officers;                                                                                                                                                                     
|
| |  | the quorum requirements for general meetings of
    our shareholders;                                                                                                                                                               
|
| |  | the procedures for conducting a poll at any
    general meeting of our shareholders;                                                                                                                                                
|
| |  | the voting, dividend, liquidation and other
    rights attaching to our ordinary shares; and                                                                                                                                        
|
| |  | the amendment of the quorum and voting
    requirements and other matters described in this paragraph or
    under the matters described in Item 10.B
     Memorandum and Articles of
    Association  Meetings of Shareholders.

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 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

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##### 



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 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.

Compulsory
Acquisition of Shares Held by Minority Holders

Under Bermuda law, minority shareholders can be
compelled, in some circumstances, to sell their shares under
statutory procedures under the Companies Act. These
circumstances include, in general terms, the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pursuant to a specified scheme of
    arrangement under the Companies Act. The scheme of
    arrangement must be effected by obtaining the agreement of the
    Bermuda company and the holders of shares representing in the
    aggregate a majority in number and at least 75% in value of the
    shares held by shareholders present and voting in a court
    ordered meeting held to consider the scheme of arrangement. In
    addition, the scheme of arrangement must receive all necessary
    approvals, including the approval, by court order, of the
    Bermuda Supreme Court. Upon the filing of such court order with
    the Registrar of Companies in Bermuda, all holders of shares
    could be compelled to sell their shares under the terms of the
    scheme of arrangement.                                                                                                     
|
| |  | If an acquiring party has, within four months
    after the making of a tender offer for all of the shares or
    class of shares not owned by it, or any of its subsidiaries or
    any of their respective nominees has obtained the approval of
    the holders of 90% or more of all of the shares or class of
    shares to which the offer relates, the acquiring party may, at
    any time within two months beginning with the date on which the
    approval was obtained, require by notice any nontendering
    shareholder to transfer its shares on the same terms as the
    original offer. In those circumstances, nontendering
    shareholders will be compelled to sell their shares unless the
    Bermuda Supreme Court, on application made within a one-month
    period from the date of the acquiring partys notice of its
    intention to acquire such shares, orders otherwise.
|
| |  | Where the acquiring party or acquiring parties
    hold not less than 95% of the shares or any class of shares of a
    Bermuda company, such acquiring party or acquiring parties may
    acquire, pursuant to a notice given to the remaining
    shareholders or class of shareholders, the shares of such
    remaining shareholders or class of shareholders on the same
    terms. The acquiring party is entitled and bound to acquire the
    shares of the                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |  |                                                                                                                                                                                                                                                                   
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | remaining shareholders or class of shareholders
    on the terms set out in the notice, unless a remaining
    shareholder, within one month of receiving such notice, applies
    to the Bermuda Supreme Court for an appraisal of the value of
    their shares.

Certain
Provisions of Bermuda Law

See Item 10.D  Exchange
Controls for information regarding exchange controls.

The Bermuda Monetary Authority has given its
consent for the issue and free transferability of all of our
outstanding ordinary shares up to the amount of our authorized
share capital from time to time and between 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. In some cases,
issuances and transfers of ordinary shares involving persons
deemed resident in Bermuda for exchange control purposes require
the specific consent of the Bermuda Monetary Authority.

In accordance with Bermuda law, share
certificates are generally issued only in the names of
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 Agreement

We have entered into a member protection rights
agreement with The Bank of New York, as rights agent under the
agreement. Our board of directors has not yet declared a
distribution of any rights under this member protection rights
agreement. If the board of directors declares a distribution of
rights under the agreement, these rights may result in
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. Accordingly, if
the board of directors declares a distribution of rights under
the member protection agreement, the rights agreement may deter
a takeover of us.

Certain
Anti-Takeover Matters

Our memorandum of association and 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

Our bye-laws provide for a board of directors
divided into three classes. Each class of directors is elected
for a separate term, but the terms are staggered so that the
term of only one class of directors expires at each annual
general meeting of our shareholders. As a result, 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, provided the notice
required by our bye-laws is given to the director being removed.
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. For more information on our
classified board of directors, see Item 6.C 
Board Practices.

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##### 



Advance
Notice Requirements

Our bye-laws set forth 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. Notice must be received at our
principal executive offices in Bermuda not less than
14 days, or from and after the date of our initial public
equity offering, 60 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. Prior to the date of our initial public equity
offering, a proposal may only be made by shareholders
collectively owning at least 0.05% of our issued and outstanding
voting shares. No such requirement applies from and after the
date of our initial public equity offering.

No
Written Consent of Shareholders

From and after the date of our initial public
equity offering, our bye-laws require all shareholder actions to
be taken by a vote of the shareholders at an annual or special
general meeting, and do not permit our shareholders to act by
written consent without a meeting.

15%
Limit

Prior to the date of our initial public equity
offering, subject to specified exceptions set forth in our
bye-laws, including exceptions relating to grandfathered
members, no shareholder may beneficially own or acquire more
than 15% of the total voting power of our issued and outstanding
voting shares.

Amendment
of Bye-Laws

Our bye-laws require the approval of at least 75%
of the voting power of all of our 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

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 earth stations located in Clarksburg, Maryland and Paumalu,
Hawaii that provide tracking, telemetry, command and monitoring
services for our satellites.

We have also entered into contracts with other
Lockheed Martin Corporation entities relating to the provision
to these entities of tracking, telemetry, command and monitoring
and other services that had been previously provided to these
entities by COMSAT or COMSAT Digital Teleport, Inc.

We agreed under the asset purchase agreement to
pay a total purchase price of approximately $110.0 million
for the assets we acquired. 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. See
Item 5  Operating and Financial Review and
Prospects  Related Party Transactions  COMSAT Asset
Purchase Agreement for information regarding the total
purchase price upon closing and our accounting for the
transaction. We will not be required to pay installments of the
$15.0 million contingent payment if we are not operating
tracking, telemetry, command and monitoring 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

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relocate a substantial portion of our tracking,
telemetry, command and monitoring 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 our 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 earth stations that we have acquired are
two of the six primary TT&C 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 earth
station, which expires in 2012.

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 set forth in the share purchase
agreement. Teleglobe Inc. is both our shareholder and one of our
largest customers. In addition, at the time the share purchase
agreement was entered into, one of our directors was an
executive officer of Teleglobe Inc. For a detailed description
of the Teleglobe transaction, see Item 5 
Operating and Financial Review and Prospects 
Related Party Transactions  Teleglobe Share Purchase
Agreement.

Revolving
Credit Facility

On March 21, 2002, we entered into a credit
agreement with certain lenders that established a
$500.0 million three-year unsecured revolving credit
facility that expires in March 2005.

Borrowings under this revolving credit facility
are subject to customary conditions for similar credit
facilities and customary events of default. Borrowings under
this facility are senior unsecured obligations of Intelsat, Ltd.

We will pay interest on any borrowings under the
facility that will vary with Citibank, N.A.s base rate,
the Federal Funds Rate as published by the Federal Reserve Bank
of New York and the interest rate on three-month certificates of
deposit or the Eurodollar rate. In the case of borrowings where
we pay interest based on the Eurodollar rate, we will also pay
an additional amount that will vary depending on our long-term
unsecured bond ratings. In addition, we are obligated to pay a
fee to the lenders on the average daily amount of the
lenders commitments under the revolving credit facility
equal to a percentage per year that will vary depending on our
long-term unsecured bond ratings.

The credit agreement establishing the facility
contains covenants customary to similar credit agreements,
including, among others:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a limitation on liens, applicable to us and our
    subsidiaries;                                                                                                                                                                                                            
|
| |  | a limitation on merger, consolidation and sale of
    assets, applicable to us and our subsidiaries;                                                                                                                                                                         
|
| |  | a requirement that we maintain, as of the last
    day of each fiscal quarter, a ratio of EBITDA (as defined in the
    credit agreement) for the four fiscal quarters ending on such
    day to interest expense for those four fiscal quarters of at
    least four to one;
|
| |  | a requirement that we maintain at all times a
    ratio of debt to EBITDA (as defined in the credit agreement) for
    the then most recently concluded four consecutive fiscal
    quarters of no greater than two and one half to one;                                     
|
| |  | a limitation on our and our subsidiaries
    ability to enter into new lines of business;                                                                                                                                                                                   

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| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | a limitation on our subsidiaries ability to
    incur indebtedness; and   
|
| |  | a limitation on our and our subsidiaries
    ability to dispose of assets.

We received waivers from the lenders under this
credit facility from compliance with the financial covenants
described above in respect of the indebtedness that we incurred
by issuing our 2008 Senior Notes and our 2013 Senior Notes. The
waivers are effective until the earlier to occur of April 30,
2004 or the completion of the proposed Loral transaction and
apply only to the aggregate principal amount of the senior notes
that would be redeemed if a mandatory redemption event occurs.
Excluding the financial covenants for which we received waivers,
at December 31, 2003 we were in compliance with the
covenants under this facility. At December 31, 2003, there
were no outstanding borrowings under this facility.

New Credit
Facility

On December 17, 2003, we entered into a
credit agreement with a group of banks that have agreed to
provide us with an $800.0 million three-year unsecured
credit facility, consisting of a $400.0 million term loan
facility and a $400.0 million revolving facility. The
closing of the new credit facility is subject to the
satisfaction of specified conditions, including the completion
of the proposed Loral transaction. Upon the closing of this new
credit facility, the $400.0 million revolving facility will
replace our existing $500.0 million three-year unsecured
revolving credit facility described above. Except as provided
below, we may only use the $400.0 million term loan portion
of the facility to repay our $200.0 million in principal
amount of Dragon bond 6 5/8% Notes due March 22, 2004
and our $200.0 million in principal amount of Eurobond
8 3/8% Notes due October 14, 2004. If the closing of
the new credit facility does not occur until after the maturity
date of our Dragon bond 6 5/8% Notes due March 22,
2004 and cash on hand, commercial paper borrowings or revolving
credit loans are used to repay the Dragon bond notes, we may use
$200.0 million of the term loan facility to replenish such
cash on hand or to repay any such borrowings.

Borrowings under the term loan facility and the
revolving facility are subject to customary conditions for
similar credit facilities and customary events of default.
Borrowings under the term loan facility and revolving facility
are senior unsecured obligations of Intelsat, Ltd.

We will pay interest on any borrowings under the
term loan facility or the revolving facility that will vary with
Citibank, N.A.s base rate, the Federal Funds Rate as
published by the Federal Reserve Bank of New York or the
Eurodollar rate. In each case, we may also be required to pay an
additional amount that will vary depending on our long-term
senior unsecured non-credit enhanced debt ratings. In addition,
we are obligated to pay a fee to the lenders on the undrawn
portion of the lenders commitments under the term loan
facility and the revolving facility equal to a percentage per
year that will vary depending on our long-term senior unsecured
non-credit enhanced debt ratings.

The credit agreement establishing the term loan
facility and the revolving facility contains covenants customary
for similar credit agreements, including, among others:



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a limitation on sale and leaseback transactions,
    applicable to us and some of our subsidiaries;                                                     
|
| |  | a limitation on liens, applicable to us and some
    of our subsidiaries;                                                                               
|
| |  | a limitation on merger, consolidation,
    amalgamation, liquidation, dissolution and sale of assets,
    applicable to us and some of our subsidiaries;
|
| |  | a limitation on our and some of our
    subsidiaries ability to enter into new lines of business;                                                      
|
| |  | a limitation on investments in entities in which
    we or some of our subsidiaries own more than 5% of the voting
    stock;                           
|
| |  | a limitation on our and some of our
    subsidiaries ability to make specified payments, including
    dividends;                                      
|
| |  | a limitation on transactions with affiliates,
    applicable to us and some of our subsidiaries;                                                        

124



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| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | a limitation on our and some of our
    subsidiaries ability to enter into agreements containing
    specified restrictive covenants; and
|
| |  | a limitation on some of our subsidiaries
    ability to incur indebtedness.                                                              

In addition, the credit agreement establishing
the term loan facility and the revolving facility contains the
following financial covenants:



| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a requirement that we maintain at all times a
    specified ratio of debt to EBITDA (as defined in the credit
    agreement) for the then most recently concluded four consecutive
    fiscal quarters, which ratio will adjust periodically after
    June 29, 2004 and will range from a ratio of no more than
    3.60 to 1 to a ratio of no more than 2.75 to 1; and
|
| |  | a requirement that we maintain at all times a
    ratio of EBITDA (as defined in the credit agreement) for the
    then most recently concluded four consecutive fiscal quarters to
    interest expense for those four fiscal quarters of at least 3.5
    to 1.                                                                                                       

As of December 31, 2003, we were in
compliance with these covenants and there were no outstanding
borrowings under the facility. We intend to use the proceeds of
our new revolving facility to provide financing for the proposed
Loral transaction to the extent that the proceeds from our sale
in November 2003 of $1.1 billion in senior notes are not
sufficient for this purpose and for working capital
requirements. In addition, we intend to use the term loan
portion of the new credit facility for the repayment of our
Dragon bond notes or, if such notes have been repaid prior to
the closing of the facility, to replenish cash on hand or repay
borrowings used to repay such notes. In addition, we may use the
term loan portion of the new credit facility to pay other of our
near-term debt obligations as they become due.

Senior Notes
due 2008 and Senior Notes due 2013

On November 7, 2003, we issued
$400.0 million in aggregate principal amount of our
5 1/4% Senior Notes due 2008, referred to as the Original
2008 Senior Notes, and $700.0 million in aggregate
principal amount of our 6 1/2% Senior Notes due 2013,
referred to as the Original 2013 Senior Notes, in each case in a
private placement to initial purchasers who resold the notes
pursuant to Rule 144A in the United States and in
accordance with Regulation S outside of the United States.
In February, we exchanged substantially all of these notes for
notes registered under the Securities Act, referred to as the
2008 Senior Notes and the 2013 Senior Notes, respectively, after
an exchange offer conducted pursuant to a registration rights
agreement we entered into with the initial purchasers of the
Original 2008 Senior Notes and the Original 2013 Senior Notes.
Interest is payable on the 2008 Senior Notes and the 2013 Senior
Notes semi-annually on May 1 and November 1 of each year. We may
redeem some or all of the 2008 Senior Notes and the 2013 Senior
Notes at any time at the redemption prices set forth in the 2008
Senior Notes and the 2013 Senior Notes, respectively. We may
also redeem the outstanding 2008 Senior Notes and the 2013
Senior Notes in whole in the event of certain tax changes
affecting the Senior Notes, as set forth in the indenture to the
2008 Senior Notes and the 2013 Senior Notes.

A portion of the 2008 Senior Notes and the 2013
Senior Notes are subject to mandatory redemption upon the
occurrence of any of the following events:



| |   |                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the asset purchase agreement relating to the
    proposed Loral transaction is terminated;                                                                                                                                                                                                                                                   
|
| |  | our new $800.0 million credit agreement is
    terminated on or prior to April 30, 2004, or we fail to
    meet any condition required for the extension of loans under the
    $800.0 million credit agreement on or prior to
    April 30, 2004 that is required to be satisfied, and has
    not been waived, on or prior to that date; or
|
| |  | the proposed Loral transaction is not completed
    on or prior to April 30, 2004.                                                                                                                                                                                                                                                           

If one of these events were to occur,
$700.0 million in aggregate principal amount of the 2008
Senior Notes and 2013 Senior Notes will be subject to mandatory
redemption at a redemption price of 102% of the principal amount
of the notes being redeemed, plus accrued and unpaid interest,
if any, and any other amounts due to the date of redemption.

The 2008 Senior Notes and the 2013 Senior Notes
are senior unsecured obligations of Intelsat, Ltd. and rank
equally with our other senior unsecured indebtedness.

125



---



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Covenants

The terms of the 2008 Senior Notes and the 2013
Senior Notes each include the following covenants:



| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a limitation on merger, consolidation and sale of
    our assets, applicable to us and some of our subsidiaries;                                                                                                                  
|
| |  | a limitation on our and some of our
    subsidiaries ability to incur liens on any of our assets
    securing other indebtedness, unless the 2008 Senior Notes and
    the 2013 Senior Notes are equally and ratably secured; and
|
| |  | a limitation on sale leaseback transactions,
    applicable to us and some of our subsidiaries.                                                                                                                                   

Events
of Default

The 2008 Senior Notes and the 2013 Senior Notes
each contain events of default with respect to:



| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | default in payments of interest after a 30-day
    grace period or a default in the payment of principal when due;                                                                                                     
|
| |  | default in the performance of any covenant in the
    indenture that continues for more than 90 days after notice
    of default has been provided to us;                                                              
|
| |  | failure to make any payment when due, including
    applicable grace periods, under any indebtedness for money
    borrowed by us or a significant subsidiary having a principal
    amount in excess of $50.0 million;
|
| |  | the acceleration of the maturity of any
    indebtedness for money borrowed by us or significant subsidiary
    having a principal amount in excess of $50.0 million; or                                               
|
| |  | insolvency or bankruptcy of us or one of our
    significant subsidiaries.                                                                                                                                             

If any of these events of default occurs and is
continuing with respect to the 2008 Senior Notes, the trustee or
the holders of not less than 25% in principal amount of the 2008
Senior Notes may declare the entire principal amount of the 2008
Senior Notes to be immediately due and payable. If any event of
default with respect to the 2008 Senior Notes occurs because of
events of bankruptcy, insolvency or reorganization, the entire
principal amount of the 2008 Senior Notes will be automatically
accelerated, without any action by the trustee or any holder.
Similarly, if any of these events of default occurs and is
continuing with respect to the 2013 Senior Notes, the trustee or
the holders of not less than 25% in principal amount of the 2013
Senior Notes may declare the entire principal amount of the 2013
Senior Notes to be immediately due and payable. If any event of
default with respect to the 2013 Senior Notes occurs because of
events of bankruptcy, insolvency or reorganization, the entire
principal amount of the 2013 Senior Notes will be automatically
accelerated, without any action by the trustee or any holder.

Senior Notes
due 2012

On April 15, 2002, we issued
$600.0 million in aggregate principal amount of our
7 5/8% Senior Notes due April 15, 2012, referred to as
the Original 2012 Senior Notes, in a private placement to
initial purchasers who resold the notes pursuant to
Rule 144A in the United States and in accordance with
Regulation S outside of the United States. In January 2003
we exchanged these notes for notes registered under the
Securities Act, referred to as the 2012 Senior Notes, after an
exchange offer conducted pursuant to a registration rights
agreement we entered into with the initial purchasers of the
Original 2012 Senior Notes. Interest is payable on the 2012
Senior Notes semi-annually on April 15 and October 15
of each year. We may redeem some or all of the 2012 Senior Notes
at any time at the redemption prices set forth in the 2012
Senior Notes. We may also redeem the outstanding 2012 Senior
Notes in whole in the event of certain tax changes affecting the
2012 Senior Notes, as set forth in the indenture to the 2012
Senior Notes.

The 2012 Senior Notes are senior unsecured
obligations of Intelsat, Ltd. and rank equally with our other
senior unsecured indebtedness.

126



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##### 



Because the 2012 Senior Notes were issued under
the same indenture as the 2008 Senior Notes and the 2013 Senior
Notes noted above, the terms of the 2012 Senior Notes include
substantially the same covenants and events of default as noted
above with respect to the 2008 Senior Notes and the 2013 Senior
Notes.

Eurobonds and
Dragon Bonds

We currently have three separate series of
outstanding U.S. dollar denominated bonds that were issued in
the European and the Asian capital markets: the
$200.0 million Dragon bond 6 5/8% Notes due 2004, the
$200.0 million Eurobond 8 3/8% Notes due 2004 and the
$200.0 million Eurobond 8 1/8% Notes due 2005. The IGO
assigned its rights and obligations under these bonds to us
pursuant to two Assignment, Assumption and Amendment Agreements.
The Assignment, Assumption and Amendment Agreements require us
to perform all of the IGOs payment obligations under these
bonds and to comply with all of the other covenants set forth in
these bonds, to the extent applicable. The IGO, referred to
post-privatization as ITSO, continues to be a joint and several
obligor under these bonds.

Covenants

The terms of our Eurobonds and Dragon bonds limit
our ability to incur liens on any of our assets securing any
other indebtedness unless the bonds are equally secured under
the liens. In addition, these bonds contain covenants requiring
us to conduct and operate our business diligently and in the
ordinary manner in compliance with our memorandum of association
and bye-laws and to use all reasonable efforts to maintain in
full force and effect our existing international registrations
of orbital locations and frequency spectrum. However, we may
make changes in our business that, in our judgment, are
desirable if the changes do not materially impair our ability to
perform our obligations under these bonds.

Events
of Default

The Eurobonds and Dragon bonds contain events of
default with respect to:



| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | default in payments of interest after a 30-day
    grace period or a default in the payment of principal when due;                                       
|
| |  | default in the performance of any covenant or
    breach of any warranty under the Eurobonds or Dragon bonds or
    the related Fiscal Agency Agreements;
|
| |  | the acceleration of the maturity of other
    indebtedness for money borrowed with a maturity of one year or
    more in excess of $50.0 million; or     
|
| |  | insolvency or bankruptcy of us or one of our
    subsidiaries.                                                                                           

If any of these events of default occurs and is
continuing, the holders of the Eurobonds and Dragon bonds may
declare all of the applicable bonds to be immediately due and
payable.

As of December 31, 2003, the aggregate
principal amount of Eurobonds and Dragon bonds outstanding was
$600.0 million.

For further information regarding our debt and
other financing arrangements, see Item 5 
Operating and Financial Review and Prospects 
Liquidity and Capital Resources and Note 12 to our audited
consolidated financial statements included elsewhere in this
annual report.

Commercial
Paper

We also have a commercial paper program providing
for the issuance of up to $500.0 million in notes having a
maturity not exceeding 270 days. As of December 31,
2003, we had no commercial paper borrowings outstanding. For
further information regarding our commercial paper program, see
Item 5  Operating and Financial Review and
Prospects  Liquidity and Capital Resources and
Note 12 to our audited consolidated financial statements
included elsewhere in this annual report.

127



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##### 



See also Item 5  Operating
and Financial Review and Prospects  Related Party
Transactions, Item 7.B  Related
Party Transactions and other items in 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 6 1/2% Senior Notes due 2013, our
5 1/4% Senior Notes due 2008, 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 and our Eurobond 8 1/8%
Notes due 2005.

E. Taxation

Bermuda
Taxation of Holders

This section describes the current material
Bermuda tax consequences of owning our ordinary shares. At the
date of this annual report, there is no Bermuda income or
profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable by our
shareholders in respect of our ordinary shares. At the present
time, we are not subject to stamp duty on the issue, transfer or
redemption of our ordinary shares. Intelsat, Ltd. has obtained
an assurance from the Minister of Finance of Bermuda under the
Exempted Undertakings Tax Protection Act 1966 of Bermuda that,
in the event that any legislation is enacted in Bermuda imposing
any tax computed on profits, income or 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 it or to any of its operations or to its
shares, debentures or other obligations except insofar as such
tax applies to persons ordinarily resident in Bermuda or to any
taxes payable by it in respect of real property or leasehold
interests in Bermuda held by it.

As an exempted company, we are liable to pay an
annual fee to the Bermuda government which is based upon the
aggregate of our authorized share capital and share premium
account. Currently such annual fee payable is $27,825.

United States
Taxation of Holders

This section describes the material United States
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 your 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 our 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

128



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##### 



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 ordinary shares that is:



| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a citizen or resident of the United States,                                                                                                                                                                          
|
| |  | a domestic corporation,                                                                                                                                                                                              
|
| |  | an estate whose income is subject to United
    States 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 United States persons are authorized to control all
    substantial decisions of the trust.

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

Taxation
of Dividends

Under the United States federal income tax laws,
and subject to the passive foreign investment company, or PFIC,
rules discussed below, the gross amount of any dividend paid to
a U.S. holder by Intelsat, Ltd. out of its current or
accumulated earnings and profits (as determined for United
States federal income tax purposes) is subject to United States
federal income taxation. Dividends paid to a noncorporate U.S.
holder in taxable years beginning before January 1, 2009
that constitute qualified dividend income will be taxable to the
noncorporate U.S. holder at a maximum tax rate of 15% provided
that the noncorporate U.S. holder holds the ordinary shares for
more than 60 days during the 120-day period beginning
60 days before the ex-dividend date and meets other holding
period requirements. On February 19, 2004, the IRS
announced that it will permit taxpayers to apply a proposed
legislative change to the holding period requirement described
in the preceding sentence as if such change were already
effective. This legislative technical correction
would change the minimum required holding period, retroactive to
January 1, 2003, to more than 60 days during the
121-day period beginning 60 days before the ex-dividend
date. Dividends paid by Intelsat, Ltd. with respect to the
ordinary shares generally will be qualified dividend income.

The dividend is taxable to a U.S. holder when the
dividend, actually or constructively, is received by the U.S.
holder. The dividend will not be eligible for the
dividends-received deduction generally allowed to United States
corporations in respect of dividends received from other United
States corporations. Distributions in excess of current and
accumulated earnings and profits, as determined for United
States 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 U.S. holders.

Taxation
of Capital Gains

Subject to the PFIC rules discussed below, a U.S.
holder that sells or otherwise disposes of its ordinary shares
will recognize capital gain or loss for United States federal
income tax purposes equal to the difference between the amount
realized by it and its tax basis in its ordinary shares. Capital
gain of a noncorporate U.S. holder that is recognized before
January 1, 2009 is generally taxed at a maximum rate of 15%
where the holder has a holding period greater than one year. 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 United States
federal income tax purposes, but this conclusion is a factual
determination that is made annually and thus may be

129



---



##### 



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 a
U.S. holder would in general not be treated as capital gain.
Instead, a U.S. holder would be treated as if it had realized
such gain and certain excess distributions ratably
over their holding period for the ordinary shares of Intelsat,
Ltd. 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.


In addition, notwithstanding any election you
make with regard to the ordinary shares, dividends that you
receive from Intelsat, Ltd. will not constitute qualified
dividend income to you if we are a PFIC either in the taxable
year of the distribution or the preceding taxable year.
Dividends that you receive that do not constitute qualified
dividend income are not eligible for taxation at the 15% maximum
rate applicable to qualified dividend income. Instead, you must
include the gross amount of any such dividend paid by Intelsat
Ltd. out of our accumulated earnings and profits (as determined
for U.S. federal income tax purposes) in your gross income, and
it will be subject to tax at rates applicable to ordinary income.

F. Dividends and Paying Agents

Since our formation in connection with the
privatization of the IGO, we have not declared or paid cash
dividends on our ordinary shares. The holders of ordinary shares
will share proportionately on a per share basis in all dividends
and other distributions, if any, declared by our board of
directors. The declaration of dividends by Intelsat, Ltd. is
subject to the discretion of our board of directors. Our board
of directors currently intends to pay regular quarterly
dividends on our ordinary shares following our initial public
equity offering. The first dividend is expected to be declared
in the first full fiscal quarter following the consummation of
such offering. Our board of directors will determine the exact
amount of any such dividend, and 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, any 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. In addition, upon the closing of our new
$800.0 million credit facility, we will be restricted from
paying any cash dividend if we are in default under the credit
facility or if the aggregate amount of cash dividends we have
paid from the period commencing on the first day of the first
fiscal quarter falling soonest after the date of the closing of
the credit facility through and including the last day of the
fiscal quarter most recently ended prior to the dividend payment
date exceeds the sum of 50% of the consolidated net income of us
and some of our subsidiaries for such period plus
$200.0 million.

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 those requirements, we file reports and
other information with the SEC. We are currently a foreign
private issuer and therefore 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, more than 50% of our
outstanding voting securities may be held by residents of the
United States upon the completion of our initial public
offering. In that event, we would no longer be a foreign private
issuer as defined by the Securities Exchange Act of 1934, as
amended. If we lose our

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##### 



foreign private issuer status, we would be
subject to the same information reporting requirements as a U.S.
company whose securities are registered under the Securities
Exchange Act of 1934, as amended.


You can read our SEC filings at the SECs
website at www.sec.gov. You may also read and copy, at
prescribed rates, any document we file with the SEC at its
public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference
facilities.

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.



|         |                                                           
|-------- | ----------------------------------------------------------
|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 THE 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]



|          |                                 
|--------- | --------------------------------
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has designated
Mr. Pizzani as an audit committee financial expert.



|          |               
|--------- | --------------
|ITEM 16B. | CODE OF ETHICS

We have adopted a code of ethics that applies to
our employees, including our principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of
our code of ethics may be obtained without charge, upon request.
To request a copy of our code of ethics, please contact the
Director of Corporate Affairs, Intelsat Global Service
Corporation, Box 10, 3400 International Drive, N.W.,
Washington, D.C. 20008, U.S.A.

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##### 



ITEM
16C.     PRINCIPAL ACCOUNTANT FEES AND
SERVICES

Audit
Fees

Our audit fees for 2003 were $936,553, and our
audit fees for 2002 were $804,287.

Audit-Related
Fees

Our 2003 audit-related fees included services
performed for audits of employee benefit plans, due diligence
associated with the Loral transaction, accounting research
associated with proposed transactions, and agreed-upon
procedures related to our MFC contractual obligations entered
into at privatization. Our 2002 audit-related fees included
services for agreed-upon procedures related to MFC contractual
obligations entered into at privatization and assistance
provided in reviewing the net assets and liabilities acquired in
our acquisition of COMSAT Corporations World Systems
business unit. Our audit-related fees for 2003 were $114,845,
and our audit-related fees for 2002 were $39,300.

Tax
Fees

Our tax fees during 2003 and 2002 related to the
preparation or review of U.S. federal, state and statutory tax
returns and miscellaneous research related to these tax returns.
Our tax fees for 2003 were $99,585, and our tax fees for 2002
were $98,169.

All Other
Fees

Not applicable.

Audit
Committee Pre-Approval Policies and Procedures

Consistent with SEC requirements regarding
auditor independence, the Audit Committee has adopted a policy
to pre-approve services prior to commencement of the specified
service. Under the policy, the Audit Committee must pre-approve
the provision of services by our principal auditor under
arrangements not in existence on May 6, 2003 prior to
commencement of the specified service. The requests for
pre-approval are submitted to the Audit Committee by the Chief
Financial Officer of Intelsat, Ltd., the Vice President of
Internal Audit of Intelsat Global Service Corporation, or a
designate of either, and the Audit Committee Chairman executes
engagement letters from the principal auditor following approval
by committee members.

All services performed by KPMG LLP following the
May 6, 2003 requirement were pre-approved by the Audit
Committee.

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##### 



ITEM
16D.     EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES

Not applicable.



|          |                                                                           
|--------- | --------------------------------------------------------------------------
|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER
    AND AFFILIATED PURCHASERS

Not applicable.

PART III

ITEM
17.     FINANCIAL STATEMENTS

Not applicable.

ITEM
18.     FINANCIAL STATEMENTS

See pages F-1 to F-33.

ITEM 19. EXHIBITS

(a) Index to consolidated financial
statements:

|                                                                                                                         |  |      |      | 
|------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---- | 
|                                                                                                                         |  | Page
|                                                                                                                         |  |     
|Independent Auditors Report                                                                                             |  |      | F-2  | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2003                                                         |  |      | F-3  | 
|Consolidated Statements of Operations for the
    Years Ended December 31, 2001, 2002 and 2003                           |  |      | F-4  | 
|Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December 31,
    2001, 2002 and 2003. |  |      | F-5  | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2001, 2002 and 2003                           |  |      | F-6  | 
|Notes to Consolidated Financial Statements                                                                               |  |      | F-7  | 
|Schedule II  Valuation and
    Qualifying Accounts for the Years Ended December 31, 2001,
    2002 and 2003             |  |      | F-36 | 



| |     |                                
| | --- | -------------------------------
| | (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).

133



---



##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ------- | ---- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 2.3  |         |  | Officers Certificate dated November 7,
    2003 relating to Intelsat, Ltd.s 5 1/4% Senior Notes
    due 2008 and its 6 1/2% Senior Notes due 2013, including
    the forms of Notes (incorporated by reference to
    Exhibit 4.2 of the Registration Statement on Form F-4,
    File No. 333-110671, filed on November 21, 2003).                                                                                                                                                                                  
| |  |         | 2.4  |         |  | 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).                                                                                                                                                                                                                                                                                                                                
| |  |         | 2.5  |         |  | 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).                                                                                                                                                                                        
| |  |         | 2.6  |         |  | Registration Rights Agreement, dated as of
    November 7, 2003, among Intelsat, Ltd., Morgan
    Stanley & Co. Incorporated, Citigroup Global Markets
    Inc. and BNP Paribas Securities Corp. (incorporated by reference
    to Exhibit 4.7 of the Registration Statement on
    Form F-4, File No. 333-110671, filed on
    November 21, 2003).                                                                                                                                                                   
| |  |         | 2.7  |         |  | 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).                                                                                                                                            
| |  |         | 2.8  |         |  | 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).                                                                                                                           
| |  |         | 2.9  |         |  | 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).                                                                                                                           
| |  |         | 2.10 |         |  | 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).                                                                                                                                                                           
| |  |         | 2.11 |         |  | 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).
| |  |         | 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).                                                                                                                                                                                                                            

134



---



##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ------- | ---- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 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 |         |  | $800,000,000 Credit Agreement, dated as of
    December 17, 2003, among Intelsat, Ltd., Citigroup Global
    Markets Inc., BNP Paribas, Morgan Stanley Senior Funding, Inc.,
    ABN AMRO Bank N.V., Credit Lyonnais, New York Branch, Citicorp
    North America, Inc. and the lenders named therein.*                                                                                                                                                                           
| |  |         | 4.12 |         |  | Headquarters Land Lease, dated as of June 8,
    1982, 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).                                                                                                                                                            
| |  |         | 4.13 |         |  | 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)                                                                                                                                        
| |  |         | 4.14 |         |  | 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)                                                                                                                                           
| |  |         | 4.15 |         |  | 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)                                                                                                                                                        
| |  |         | 4.16 |         |  | 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)                                                                                                                                                 
| |  |         | 4.17 |         |  | 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)

135



---



##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ------- | ---- | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 4.18 |         |  | 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)                     
| |  |         | 4.19 |         |  | Amendment No. 8, dated March 5, 2004,
    to Contract No. INTEL-824, between Intelsat Global Service
    Corporation and China National Instruments Import and Export
    Corporation, on behalf of Beijing Communications Corporation
    (Beijing TTC&M). (3)*                                                                                                                                                                                                                                                                                                                                            
| |  |         | 4.20 |         |  | 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 and to Exhibit No. 10.21 of the
    Registration Statement on Form F-4, File
    No. 333-110671, filed on November 21,
    2003). (1) (2)                                                                                                                                                                           
| |  |         | 4.21 |         |  | 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)                                                                                                                                                                                                                                                               
| |  |         | 4.22 |         |  | 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 and
    Exhibit 1 of Intelsat, Ltd.s Quarterly Report on
    Form 6-K for the period ended March 31, 2003, File
    No. 000-50262, submitted on May 14, 2003). (1)                                                                                                               
| |  |         | 4.23 |         |  | 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 and to Exhibit No. 10.25 of the
    Registration Statement on Form F-4, File
    No. 333-110671, filed on November 21,
    2003). (1) (2)                                                                                                                                                                                     
| |  |         | 4.24 |         |  | 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, Exhibit 10.32 of Amendment
    No. 1 to the Registration Statement on Form F-4, File
    No. 333-99189, filed on October 15, 2002 and
    Exhibit 2 of Intelsat, Ltd.s Quarterly Report on
    Form 6-K for the period ended June 30, 2003, File
    No. 000-50262, submitted on August 14, 2003). (1)
| |  |         | 4.25 |         |  | 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)                                                                                                                                                                                                                                                                                          
| |  |         | 4.26 |         |  | 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 and Exhibits 4.25 and 4.26 of
    Intelsat, Ltd.s Annual Report on Form 20-F for the
    year ended December 31, 2002, File No. 333-99189,
    filed on March 28, 2003). (1)                                                                                                                    
| |  |         | 4.27 |         |  | 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 (incorporated by reference to
    Exhibit 4.25 of Intelsat, Ltd.s Annual Report on
    Form 20-F for the year ended December 31, 2002, File
    No. 333-99189, filed on March 28, 2003). (2)                                                                                                                                                                                                                  

136



---



##### 



| |  |         |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | ------- | ---- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 4.28 |         |  | 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 (incorporated by reference to
    Exhibit 4.26 of Intelsat, Ltd.s Annual Report on
    Form 20-F for the year ended December 31, 2002,
    File No. 333-99189, filed on March 28,
    2003). (2)                                                                                                                                                                                                                 
| |  |         | 4.29 |         |  | 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
    and Exhibits 3 and 4 of Intelsat, Ltd.s Quarterly
    Report on Form 6-K for the period ended June 30, 2003,
    File No. 000-50262, submitted on August 14,
    2003). (1)                                                                                                        
| |  |         | 4.30 |         |  | 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).                                                                                                                                                                                                                                                                                                                           
| |  |         | 4.31 |         |  | 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)                                                                                                                                         
| |  |         | 4.32 |         |  | 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).                                                                                                                                                                                                                                                                                                
| |  |         | 4.33 |         |  | 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. (incorporated by reference to Exhibit 4.31 of
    Intelsat, Ltd.s Annual Report on Form 20-F for the
    year ended December 31, 2002, File No. 333-99189,
    filed on March 28, 2003). (2)                                                                                                                                                                     
| |  |         | 4.34 |         |  | Asset Purchase Agreement, dated as of
    July 15, 2003, among Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Loral Space & Communications Corporation, Loral
    SpaceCom Corporation and Loral Satellite, Inc., as amended
    (incorporated by reference to Exhibit 1 of Intelsat,
    Ltd.s Quarterly Report on Form 6-K for the period
    ended June 30, 2003, File No. 000-50262,
    submitted on August 14, 2003 and Exhibits 1, 2 and 3
    of Intelsat, Ltd.s Quarterly Report on Form 6-K for
    the period ended September 30, 2003,
    File No. 000-50262, submitted on October 29,
    2003).
| |  |         | 4.35 |         |  | Amendment No. 4, dated as of March 5, 2004,
    to Asset Purchase Agreement among Intelsat, Ltd., Intelsat
    (Bermuda), Ltd., Loral Space & Communications Corporation,
    Loral SpaceCom Corporation and Loral Satellite, Inc. (3)*                                                                                                                                                                                                                                                                                                                                                                        
| |  |         | 4.36 |         |  | Purchase Agreement, dated as of October 31,
    2003, among Intelsat, Ltd., Morgan Stanley & Co.
    Incorporated, Citigroup Global Markets Inc. and BNP Paribas
    Securities Corp. (incorporated by reference to
    Exhibit 10.32 of the Registration Statement on
    Form F-4, File No. 333-110671, filed on
    November 21, 2003).                                                                                                                                                                                                                                                                     
| |  |         | 4.37 |         |  | Amending Agreement to Share Purchase Agreement,
    dated as of March 11, 2004, between Teleglobe, Inc. and
    Intelsat Global Sales & Marketing Ltd.*                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |         | 6.1  |         |  | Statement re computation of per share earnings.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |         | 8.1  |         |  | List of subsidiaries.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |         | 12.1 |         |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

137



---



##### 



| |  |         |      |         |  |                                                                                                                                                            
| |  | ------- | ---- | ------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |        
| |  | Number  |      | Exhibit
| |  |         |      |        
| |  |         | 12.2 |         |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                   
| |  |         | 13.1 |         |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002.*
| |  |         | 13.2 |         |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 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
    November 21, 2003.
|   
|(3) | 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
LIABILITIES

We are incorporated under the laws of Bermuda. In
addition, certain of our directors and officers reside outside
of the United States and most of our assets and some of their
assets are located outside of the United States. As a result, it
may be difficult for investors to effect service of process on
those persons in the United States or to enforce in the United
States judgments obtained in U.S. courts against us or those
persons based on the civil liability provisions of the U.S.
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.

138



---



##### 



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 12, 2004

139



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##### 






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
INTELSAT, LTD.

|                                                                                                                        |  |      |      | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                        |  | Page
|                                                                                                                        |  |     
|Independent Auditors Report                                                                                            |  |      | F-2  | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2003                                                        |  |      | F-3  | 
|Consolidated Statements of Operations for the
    Years Ended December 31, 2001, 2002 and 2003                          |  |      | F-4  | 
|Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December 31,
    2001, 2002 and 2003 |  |      | F-5  | 
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2001, 2002 and 2003                          |  |      | F-6  | 
|Notes to Consolidated Financial Statements                                                                              |  |      | F-7  | 
|Schedule II  Valuation and
    Qualifying Accounts for the Years Ended December 31, 2001,
    2002 and 2003            |  |      | F-37 | 

F-1



---



##### 



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, 2002 and 2003, 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, 2003. 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 each of the years in the
three-year period ended December 31, 2003. 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, 2002 and 2003, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2003 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

March 1, 2004


F-2



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED BALANCE SHEETS

|                                                                      |                                                                                                      |                                            |           |         |           |  |           |           |           | 
|--------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------- | --------- |  | --------- | --------- | --------- | 
|                                                                      |                                                                                                      |                                           
|                                                                      |                                                                                                      | As of December 31,                        
|                                                                      |                                                                                                      |                                           
|                                                                      |                                                                                                      | 2002                                       |           | 2003   
|                                                                      |                                                                                                      |                                            |           |        
|                                                                      |                                                                                                      |                                           
|                                                                      |                                                                                                      | (in thousands, except share               
|                                                                      |                                                                                                      | and per share amounts)                    
|ASSETS                                                               
|Current assets:                                                       |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      | Cash and cash equivalents                                                                            |                                            | $         | 9,466   |           |  | $         | 601,296   |          
|                                                                      | Restricted cash                                                                                      |                                            |           |        |           |  |           | 700,000   |          
|                                                                      | Receivables, net of allowance of $24,823 and
    $32,110, respectively                               |                                            |           | 265,781 |           |  |           | 203,647   |          
|                                                                      | Deferred income taxes                                                                                |                                            |           | 5,679   |           |  |           | 14,524    |          
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      |                                                                                                      | Total current assets                       |           |         | 280,926   |  |           |           | 1,519,467 | 
|Satellites and other property and equipment, net                      |                                                                                                      |                                            | 3,478,055 |         |           |  | 3,293,008 |          
|Goodwill                                                              |                                                                                                      |                                            | 56,799    |         |           |  | 58,202    |          
|Intangible assets, net                                                |                                                                                                      |                                            | 27,462    |         |           |  | 25,205    |          
|Deferred income taxes                                                 |                                                                                                      |                                            | 29,260    |         |           |  | 1,943     |          
|Investment in affiliate                                               |                                                                                                      |                                            |          |         |           |  | 56,916    |          
|Other assets                                                          |                                                                                                      |                                            | 92,930    |         |           |  | 117,976   |          
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      |                                                                                                      | Total assets                               |           | $       | 3,965,432 |  |           | $         | 5,072,717 | 
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|LIABILITIES AND SHAREHOLDERS
    EQUITY                             
|Current liabilities:                                                  |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      | Commercial paper                                                                                     |                                            | $         | 43,978  |           |  | $         |          |          
|                                                                      | Notes payable                                                                                        |                                            |           |        |           |  |           | 1,098,591 |          
|                                                                      | Accounts payable and accrued liabilities                                                             |                                            |           | 219,344 |           |  |           | 207,941   |          
|                                                                      | Deferred satellite performance incentives                                                            |                                            |           | 19,459  |           |  |           | 7,118     |          
|                                                                      | Deferred revenue                                                                                     |                                            |           | 18,252  |           |  |           | 28,635    |          
|                                                                      | Capital lease obligations                                                                            |                                            |           | 6,618   |           |  |           | 5,290     |          
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      |                                                                                                      | Total current liabilities                  |           |         | 307,651   |  |           |           | 1,347,575 | 
|Long-term debt, net of current portion                                |                                                                                                      |                                            | 1,257,870 |         |           |  | 1,265,349 |          
|Deferred satellite performance incentives, net of
    current portion |                                                                                                      |                                            | 125,161   |         |           |  | 45,296    |          
|Deferred revenue, net of current portion                              |                                                                                                      |                                            | 8,052     |         |           |  | 6,801     |          
|Due to Teleglobe Inc.                                                 |                                                                                                      |                                            | 19,780    |         |           |  |          |          
|Accrued retirement benefits                                           |                                                                                                      |                                            | 96,684    |         |           |  | 48,181    |          
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      |                                                                                                      | Total liabilities                          |           |         | 1,815,198 |  |           |           | 2,713,202 | 
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|Minority interest in consolidated affiliate                           |                                                                                                      |                                            |          |         |           |  | 15,115    |          
|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                                                     |                                                                                                      |                                            | 468,080   |         |           |  | 649,199   |          
|Accumulated other comprehensive
    (loss) income:                    |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      | Minimum pension liability, net of tax                                                                |                                            |           | (12,914 | )         |  |           | (1,270    | )        
|                                                                      | Unrealized gain on available-for-sale securities,
    net of tax                                     |                                            |           |        |           |  |           | 1,403     |          
|Ordinary shares purchased by subsidiary,
    6,284,635 shares         |                                                                                                      |                                            | (106,818  | )       |           |  | (106,818  | )        
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      |                                                                                                      | Total shareholders equity                 |           |         | 2,150,234 |  |           |           | 2,344,400 | 
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          
|                                                                      |                                                                                                      | Total liabilities and shareholders equity |           | $       | 3,965,432 |  |           | $         | 5,072,717 | 
|                                                                      |                                                                                                      |                                            |           |         |           |  |           |          

See accompanying notes to consolidated financial
statements.

F-3



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |         |  
|------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------- | ------- |  | ---- | ----------- | ------- |  | - | ----------- | ------- | -
|                                                                   |                                                                                                 |                                                   
|                                                                   |                                                                                                 | Years Ended December 31,                          
|                                                                   |                                                                                                 |                                                   
|                                                                   |                                                                                                 | 2001                                               |             | 2002    |  | 2003
|                                                                   |                                                                                                 |                                                    |             |         |  |     
|                                                                   |                                                                                                 |                                                   
|                                                                   |                                                                                                 | (in thousands, except share and per share amounts)
|Revenue                                                            |                                                                                                 | $                                                  | 1,084,009   |         |  | $    | 991,956     |         |  | $ | 952,781     |        
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Operating expenses:                                                |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|                                                                   | Direct costs of revenue (exclusive of
    depreciation and amortization shown separately below) |                                                    |             | 101,985 |  |      |             | 117,405 |  |   |             | 136,223 |  
|                                                                   | Selling, general and administrative                                                             |                                                    |             | 95,600  |  |      |             | 121,077 |  |   |             | 132,750 |  
|                                                                   | Depreciation and amortization                                                                   |                                                    |             | 340,449 |  |      |             | 361,322 |  |   |             | 403,234 |  
|                                                                   | Privatization initiative                                                                        |                                                    |             | 33,576  |  |      |             |        |  |   |             |        |  
|                                                                   | IS-10-01 contract termination costs                                                             |                                                    |             |        |  |      |             | 34,358  |  |   |             | (3,000  | )
|                                                                   | Restructuring costs                                                                             |                                                    |             | 7,300   |  |      |             | 5,522   |  |   |             | (837    | )
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|                                                                   | Total operating expenses                                                                        |                                                    |             | 578,910 |  |      |             | 639,684 |  |   |             | 668,370 |  
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Income from operations                                             |                                                                                                 |                                                    | 505,099     |         |  |      | 352,272     |         |  |   | 284,411     |        
|Interest expense, net                                              |                                                                                                 |                                                    | (13,050     | )       |  |      | (55,053     | )       |  |   | (97,789     | )      
|Other income, net                                                  |                                                                                                 |                                                    | 12,293      |         |  |      | 9,942       |         |  |   | 20,626      |        
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Income before income taxes                                         |                                                                                                 |                                                    | 504,342     |         |  |      | 307,161     |         |  |   | 207,248     |        
|Provision for income taxes                                         |                                                                                                 |                                                    | 5,359       |         |  |      | 33,021      |         |  |   | 26,129      |        
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Net income                                                         |                                                                                                 | $                                                  | 498,983     |         |  | $    | 274,140     |         |  | $ | 181,119     |        
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Basic and diluted net income per ordinary share                    |                                                                                                 | $                                                  | 2.99        |         |  | $    | 1.66        |         |  | $ | 1.13        |        
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Pro forma income data (unaudited):                                 |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|                                                                   | Historical income before income taxes as reported                                               |                                                    | $           | 504,342 |  |      |             |         |  |   |             |         |  
|                                                                   | Pro forma provision for income taxes                                                            |                                                    |             | 75,651  |  |      |             |         |  |   |             |         |  
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|                                                                   | Pro forma net income                                                                            |                                                    | $           | 428,691 |  |      |             |         |  |   |             |         |  
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|                                                                   | Tax effected pro forma basic and diluted net
    income per ordinary share                      |                                                    | $           | 2.57    |  |      |             |         |  |   |             |         |  
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        
|Basic and diluted weighted average ordinary
    shares outstanding |                                                                                                 |                                                    | 166,666,755 |         |  |      | 164,893,283 |         |  |   | 160,382,120 |        
|                                                                   |                                                                                                 |                                                    |             |         |  |      |             |         |  |   |             |        

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         |           | Purchased     |  | Total         |         | Total        
|                                                                 |  |                                      |             | Paid-in |  | Retained |         | Shareholders |  | Comprehensive |           | By            |  | Shareholders |         | Comprehensive
|                                                                 |  | Shares                               |             | Amount  |  | Capital  |         | Earnings      |  | Equity        |           | Income (Loss) |  | Subsidiary    |         | Equity        |  | Income
|                                                                 |  |                                      |             |         |  |          |         |               |  |               |           |               |  |               |         |               |  |       
|                                                                 |  |                                     
|                                                                 |  | (in thousands, except share amounts)
|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, net of tax                            |  |                                      |            |         |  |          |        |               |  |               |          |               |  |               |        |               |  |        |           |   |  |   | (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 |   |  |   |         |  
|Net income                                                       |  |                                      |            |         |  |          |        |               |  |               |          |               |  |               | 181,119 |               |  |        |           |   |  |   |        |   |  |    |         |   |  |   | 181,119   |   |  | $ | 181,119 |  
|Change in minimum pension liability, net of tax                  |  |                                      |            |         |  |          |        |               |  |               |          |               |  |               |        |               |  |        |           |   |  |   | 11,644  |   |  |    |         |   |  |   | 11,644    |   |  |   | 11,644  |  
|Unrealized gain on available-for-sale securities,
    net of tax |  |                                      |            |         |  |          |        |               |  |               |          |               |  |               |        |               |  |        |           |   |  |   | 1,403   |   |  |    |         |   |  |   | 1,403     |   |  |   | 1,403   |  
|                                                                 |  |                                      |             |         |  |          |         |               |  |               |           |               |  |               |         |               |  |        |            |   |  |   |         |   |  |    |          |   |  |   |           |   |  |   |         |  
|Total comprehensive income                                       |  |                                      |            |         |  |          |        |               |  |               |          |               |  |               |        |               |  |        |           |   |  |   |        |   |  |    |         |   |  |   |          |   |  | $ | 194,166 |  
|                                                                 |  |                                      |             |         |  |          |         |               |  |               |           |               |  |               |         |               |  |        |            |   |  |   |         |   |  |    |          |   |  |   |           |   |  |   |         |  
|Balance, December 31, 2003                                       |  |                                      | 166,666,755 |         |  | $        | 500,000 |               |  | $             | 1,301,886 |               |  | $             | 649,199 |               |  | $      |           |   |  | $ | 133     |   |  | ($ | 106,818  | ) |  | $ | 2,344,400 |   |  |   |         |  
|                                                                 |  |                                      |             |         |  |          |         |               |  |               |           |               |  |               |         |               |  |        |            |   |  |   |         |   |  |    |          |   |  |   |           |   |  |   |         |  

See accompanying notes to consolidated financial
statements.

F-5



---



##### 



INTELSAT

(SEE NOTE 1)


CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |           |         |  
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----- | -------- | ------- | ---- | ----- | -------- | ------- | - | ------- | --------- | ------- | -
|                                                                            |                                                                                                                               |                                                 
|                                                                            |                                                                                                                               | Years Ended December 31,                        
|                                                                            |                                                                                                                               |                                                 
|                                                                            |                                                                                                                               | 2001                                             |       | 2002     |         | 2003
|                                                                            |                                                                                                                               |                                                  |       |          |         |     
|                                                                            |                                                                                                                               |                                                 
|                                                                            |                                                                                                                               | (in thousands)                                  
|Cash flows from operating activities:                                       |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Net income                                                                                                                    |                                                  | $     | 498,983  |         |      | $     | 274,140  |         |   | $       | 181,119   |        
|                                                                            | Adjustments to reconcile net income to net cash
    provided by operating activities:                                         |                                                  |       |          |         |      |       |          |         |   |         |           |        
|                                                                            |                                                                                                                               | Depreciation and amortization                    |       |          | 340,449 |      |       |          | 361,322 |   |         |           | 403,234 |  
|                                                                            |                                                                                                                               | IS-10-01 contract termination costs              |       |          |        |      |       |          | 34,358  |   |         |           | (3,000  | )
|                                                                            |                                                                                                                               | Provision for doubtful accounts                  |       |          |        |      |       |          | 9,472   |   |         |           | 13,897  |  
|                                                                            |                                                                                                                               | Foreign currency transaction loss                |       |          |        |      |       |          | 4,113   |   |         |           | 883     |  
|                                                                            |                                                                                                                               | Deferred income taxes                            |       |          | (30,587 | )    |       |          | 4,257   |   |         |           | 18,041  |  
|                                                                            |                                                                                                                               | Amortization of bond discount and issuance costs |       |          |        |      |       |          | 658     |   |         |           | 1,372   |  
|                                                                            |                                                                                                                               | Decrease in amount due to Teleglobe Inc.         |       |          |        |      |       |          | (6,080  | ) |         |           | (19,780 | )
|                                                                            |                                                                                                                               | Minority interest in consolidated affiliate      |       |          |        |      |       |          |        |   |         |           | (2,038  | )
|                                                                            |                                                                                                                               | Equity in losses of affiliate                    |       |          |        |      |       |          |        |   |         |           | 1,084   |  
|                                                                            |                                                                                                                               | Net gain from curtailment of benefit plans       |       |          |        |      |       |          |        |   |         |           | (2,315  | )
|                                                                            | Changes in operating assets and liabilities, net
    of effects of acquisitions and investment in consolidated
    affiliate: |                                                  |       |          |         |      |       |          |         |   |         |           |        
|                                                                            |                                                                                                                               | Receivables                                      |       |          | 34,160  |      |       |          | (13,465 | ) |         |           | 54,110  |  
|                                                                            |                                                                                                                               | Other assets                                     |       |          | (29,983 | )    |       |          | (12,978 | ) |         |           | 1,227   |  
|                                                                            |                                                                                                                               | Accounts payable and accrued liabilities         |       |          | 45,264  |      |       |          | (3,886  | ) |         |           | (20,785 | )
|                                                                            |                                                                                                                               | Deferred revenue                                 |       |          | (4,780  | )    |       |          | 1,629   |   |         |           | 9,132   |  
|                                                                            |                                                                                                                               | Accrued retirement benefits                      |       |          | 2,882   |      |       |          | 4,445   |   |         |           | (31,576 | )
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Net cash provided by operating activities                                                                                     |                                                  |       | 856,388  |         |      |       | 657,985  |         |   |         | 604,605   |        
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|Cash flows from investing activities:                                       |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Payments for satellites and other property and
    equipment                                                                  |                                                  |       | (663,671 | )       |      |       | (616,806 | )       |   |         | (222,505  | )      
|                                                                            | Increase in restricted cash                                                                                                   |                                                  |       |         |         |      |       |         |         |   |         | (700,000  | )      
|                                                                            | Investment in and advances to affiliate                                                                                       |                                                  |       |         |         |      |       |         |         |   |         | (58,000   | )      
|                                                                            | Cash acquired from investment in consolidated
    affiliate                                                                   |                                                  |       |         |         |      |       |         |         |   |         | 17,932    |        
|                                                                            | Payments for asset acquisitions                                                                                               |                                                  |       |         |         |      |       | (61,416  | )       |   |         |          |        
|                                                                            | Other                                                                                                                         |                                                  |       |         |         |      |       |         |         |   |         | (5,744    | )      
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Net cash used in investing activities                                                                                         |                                                  |       | (663,671 | )       |      |       | (678,222 | )       |   |         | (968,317  | )      
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|Cash flows from financing activities:                                       |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Distributions to shareholders                                                                                                 |                                                  |       | (425,000 | )       |      |       |         |         |   |         |          |        
|                                                                            | Repayment of long-term debt                                                                                                   |                                                  |       |         |         |      |       | (200,000 | )       |   |         |          |        
|                                                                            | Proceeds from (repayments of) commercial paper
    borrowings, net                                                            |                                                  |       | 293,534  |         |      |       | (266,144 | )       |   |         | (43,978   | )      
|                                                                            | Proceeds from bond issuance, net                                                                                              |                                                  |       |         |         |      |       | 595,788  |         |   |         | 1,097,758 |        
|                                                                            | Bond issuance costs                                                                                                           |                                                  |       |         |         |      |       | (7,621   | )       |   |         | (23,308   | )      
|                                                                            | Payments to shareholders                                                                                                      |                                                  |       | (34,509  | )       |      |       | (5,170   | )       |   |         |          |        
|                                                                            | Purchase of ordinary shares by subsidiary                                                                                     |                                                  |       |         |         |      |       | (65,000  | )       |   |         |          |        
|                                                                            | Principal payments on deferred satellite
    performance incentives                                                           |                                                  |       | (21,275  | )       |      |       | (15,271  | )       |   |         | (65,814   | )      
|                                                                            | Principal payments on capital lease obligations                                                                               |                                                  |       | (3,911   | )       |      |       | (5,078   | )       |   |         | (8,233    | )      
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Net cash (used in) provided by financing
    activities                                                                       |                                                  |       | (191,161 | )       |      |       | 31,504   |         |   |         | 956,425   |        
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            |                                                                                                                               | Effect of exchange rate changes on cash          |       |          |        |      |       |          | (4,500  | ) |         |           | (883    | )
|                                                                            |                                                                                                                               | Net increase in cash and cash equivalents        |       |          | 1,556   |      |       |          | 6,767   |   |         |           | 591,830 |  
|Cash and cash equivalents, beginning of year                                |                                                                                                                               |                                                  | 1,143 |          |         |      | 2,699 |          |         |   | 9,466   |          
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|Cash and cash equivalents, end of year                                      |                                                                                                                               | $                                                | 2,699 |          |         | $    | 9,466 |          |         | $ | 601,296 |          
|                                                                            |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|Supplemental cash flow information:                                         |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Interest paid, net of amount capitalized                                                                                      |                                                  | $     | 9,569    |         |      | $     | 40,560   |         |   | $       | 91,401    |        
|                                                                            | Income taxes paid                                                                                                             |                                                  | $     | 15,125   |         |      | $     | 25,902   |         |   | $       | 8,931     |        
|Supplemental disclosure of non-cash investing and
    financing activities: |                                                                                                                               |                                                  |       |          |         |      |       |          |         |   |         |          
|                                                                            | Capitalization of deferred satellite performance
    incentives                                                               |                                                  | $     | 25,784   |         |      | $     | 57,019   |         |   | $       | 10,063    |        
|                                                                            | Receivables recovered in purchase of ordinary
    shares by subsidiary                                                        |                                                  | $     |         |         |      | $     | 15,958   |         |   | $       |          |        
|                                                                            | Obligation to Teleglobe Inc. arising in
    consideration of ordinary share purchase                                          |                                                  | $     |         |         |      | $     | 25,860   |         |   | $       |          |        
|                                                                            | Net liabilities assumed in investment in
    consolidated affiliate, net of cash                                              |                                                  | $     |         |         |      | $     |         |         |   | $       | 1,373     |        
|                                                                            | Minority interest in consolidated affiliate at
    the date of acquisition                                                    |                                                  | $     |         |         |      | $     |         |         |   | $       | 17,153    |        
|                                                                            | Net asset reduction on termination of deferred
    satellite performance incentive liability                                  |                                                  | $     |         |         |      | $     |         |         |   | $       | 36,455    |        
|                                                                            | Receivables arising from termination of IS-10-01
    satellite construction contract                                          |                                                  | $     |         |         |      | $     | 47,828   |         |   | $       |          |        
|                                                                            | Other asset arising from termination of IS-10-01
    satellite construction contract                                          |                                                  | $     |         |         |      | $     | 23,150   |         |   | $       |          |        
|                                                                            | Minimum pension liability, net of tax                                                                                         |                                                  | $     |         |         |      | $     | 12,914   |         |   | $       | 1,270     |        
|                                                                            | Assets acquired in acquisition                                                                                                |                                                  | $     |         |         |      | $     |         |         |   | $       | 4,061     |        
|                                                                            | Liabilities assumed in acquisition                                                                                            |                                                  | $     |         |         |      | $     | 51,541   |         |   | $       | 4,870     |        
|                                                                            | Note payable arising from acquisition                                                                                         |                                                  | $     |         |         |      | $     | 20,000   |         |   | $       |          |        
|                                                                            | Unrealized gain on available-for-sale securities,
    net of tax                                                              |                                                  | $     |         |         |      | $     |         |         |   | $       | 1,403     |        

See accompanying notes to consolidated financial
statements.

F-6



---



##### 



INTELSAT

(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except percentages and 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 the
telecommunications entities they designated to market and use
the IGOs communications system within their territories
and to invest in the IGO. 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 as well. 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 to New
Skies working capital, five in-orbit satellites with rights to
their associated orbital locations, and a sixth satellite under
construction. 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 2001 and 2002, $7,824 and $2,250, respectively, was
recognized as other income for these services in the
accompanying statements of operations. During the year ended
December 31, 2003, no income was recognized for these
services.

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 holders 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 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 communications network of 23
satellites in orbit, leased capacity on 2 additional satellites
owned by other satellite operators in the Asia-Pacific region
and ground facilities related to the operation and control of
its satellites and the provision of teleport and related traffic
management services, Intelsat provides satellite communications
services worldwide. These satellite communications services
include voice, data and video connectivity 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)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)



|    |                            
|--- | ---------------------------
|(b) | Principles of consolidation

The consolidated financial statements include the
accounts of Intelsat, Ltd., its wholly owned subsidiaries and
its affiliates in which the Company has an ownership stake
greater than 50% and has the ability to exercise control over
operating and financial policies, or which are variable interest
entities in which Intelsat is the primary beneficiary. All
significant intercompany account balances and transactions have
been eliminated in consolidation.



|    |                    
|--- | -------------------
|(c) | Revenue recognition

Revenue results primarily from satellite
utilization charges and, to a lesser extent, from providing
managed services to Intelsats customers. Managed services
combine satellite capacity, teleport facilities, satellite
communications hardware and fiber optic cable and other ground
facilities to provide bundled, broadband and private network
services to Intelsats customers. Revenue is recognized
over the period during which services are provided as long as
collection of the related receivable is reasonably assured.
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. Cash equivalents consist of investments in
treasury bills. Carrying amounts approximate market value.



|    |            
|--- | -----------
|(e) | Investments

The Company accounts for its investments in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. All investments
have been classified as available-for-sale securities as of
December 31, 2003 and are included in other assets in the
accompanying consolidated balance sheets. Available-for-sale
securities are stated at fair value, with the unrealized gains
and losses reported as accumulated other comprehensive income
(loss). Realized gains and losses and declines in fair value
that are determined to be other than temporary on
available-for-sale securities are included in other income, net.
The cost of securities sold is based on the specific
identification method. Interest and dividends on
available-for-sale securities are included in interest expense,
net and other income, net, respectively. As of each of
December 31, 2002 and 2003, the cost basis of
available-for-sale securities was $10,203. As of
December 31, 2002 and 2003, the fair value of
available-for-sale securities was $10,203 and $12,466,
respectively.



|    |                                                
|--- | -----------------------------------------------
|(f) | Satellites and other property and
    equipment

Satellites and other property and equipment are
stated at cost and consist primarily of the costs of satellite
construction and launch, including premiums for launch insurance
and insurance during the period of in-orbit testing, the net
present value of performance incentives payable to the satellite
manufacturers, costs directly associated with the monitoring and
support of satellite construction, and interest costs incurred
during the period of satellite construction.

Satellite construction and launch services are
generally procured under long-term contracts that provide for
payments by Intelsat over the contract periods. Satellite
construction and launch services costs are capitalized to

F-8



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)

reflect progress toward completion. Capitalizing
these costs 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 and are accounted for as described in Note 2(w).

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                             |  |       | 11-15 | 
|Ground segment equipment and software                    |  |       | 10    | 
|Furniture, equipment, computer hardware and
    software |  |       | 3-12  | 
|Buildings                                                |  |       | 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.

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.
During 2003, the Company decommissioned the last of the Intelsat
V series satellites and removed from the accounts $558,495 of
satellites and related assets and $558,495 of related
accumulated depreciation.

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 its estimated fair
value as determined by 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.



|    |                      
|--- | ---------------------
|(g) | Business combinations

The Companys business combinations are
accounted for in accordance with the provisions set forth in
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 portion of 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 a business combination involves estimates and
judgments made by management that may be adjusted during the
allocation period, but in no case beyond one year from the date
of the business combination.

F-9



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)



|    |                                         
|--- | ----------------------------------------
|(h) | Goodwill and other intangible
    assets

Goodwill represents the excess of costs over the
estimated fair value of net tangible and separately identifiable
intangible assets of businesses acquired. Intelsat accounts for
goodwill and other intangible assets in accordance with the
provisions of SFAS No. 142, Goodwill and Other
Intangible Assets.Goodwill and other intangible assets
acquired in a business combination and determined to have an
indefinite useful life are not amortized, but are 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 the Impairment or Disposal
of Long-Lived Assets.



|    |                                                               
|--- | --------------------------------------------------------------
|(i) | Impairment of long-lived and amortizable
    intangible assets

Intelsat accounts for long-lived and amortizable
intangible assets in accordance with SFAS No. 144, which
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, 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.

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 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 other 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. Intelsat has determined it has one reporting unit, the
enterprise level, under the criteria set forth by SFAS No. 142.
During the fourth quarter of 2003, the Company completed its
annual required assessment and determined no impairment of
goodwill existed.



|    |                    
|--- | -------------------
|(j) | 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 in these notes and the accompanying consolidated
financial statements have been retroactively adjusted to reflect
the share consolidation.



|    |                     
|--- | --------------------
|(k) | 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

F-10



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)

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.



|    |             
|--- | ------------
|(l) | Income taxes

The IGO was exempt from U.S. 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 the various jurisdictions in which
it operates. Intelsats headquarters are in Bermuda, where
there is currently no income tax imposed.

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.



|    |                                        
|--- | ---------------------------------------
|(m) | 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 12.



|    |                             
|--- | ----------------------------
|(n) | Concentration of credit risk

Intelsat provides satellite services and extends
credit to numerous customers in the telecommunications industry,
which has experienced a downturn, including a significant number
of bankruptcies. 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.
Management believes it has adequate reserves to cover its
exposure.



|    |                            
|--- | ---------------------------
|(o) | Currency and exchange rates

Substantially all customer contracts, capital
expenditure contracts and operating expense obligations are
denominated in U.S. dollars. Consequently, Intelsat does not
believe that it is exposed to material currency exchange risk.
However, contracts with our customers in Brazil are denominated
in Brazilian reais.

F-11



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)

The functional currency of Intelsats
consolidated affiliate is the Hong Kong dollar and the future
cash and in-kind contribution commitments to this affiliate are
denominated in Hong Kong dollars. As a result, the Company is
subject to exposure with regard to changes in the value of the
Hong Kong dollar as compared to the U.S. dollar. As of
December 31, 2003, the cumulative foreign currency
translation adjustment has been insignificant.

Transactions in other currencies are converted
into U.S. dollars using rates in effect on the dates of the
transactions.



|    |                     
|--- | --------------------
|(p) | Comprehensive income

SFAS No. 130, Reporting Comprehensive
Incomeestablished standards for the reporting and
displaying of comprehensive income and its components. Total
comprehensive income for the year ended December 31, 2003
consisted of the Companys net income, the change in the
market value of available-for-sale securities, and changes in
the minimum pension liability.



|    |                         
|--- | ------------------------
|(q) | Stock-based compensation

The Company has a stock-based employee
compensation plan, which is described more fully in
Note 14. 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, Accounting for Stock Issued to
Employees. Consequently, no stock-based employee
compensation cost is reflected in net income, as all options
granted under the plan had an exercise price equal to the
estimated fair 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.

|                                                                                                                                           |                               |                          |         |      |  |      |         |      |  |   |         |      | 
|------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------- | ------------------------ | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | ---- | 
|                                                                                                                                           |                               |                         
|                                                                                                                                           |                               | Years Ended December 31,
|                                                                                                                                           |                               |                         
|                                                                                                                                           |                               | 2001                     |         | 2002 |  | 2003
|                                                                                                                                           |                               |                          |         |      |  |     
|Net income, as reported                                                                                                                    |                               | $                        | 498,983 |      |  | $    | 274,140 |      |  | $ | 181,119 |     
|Deduct: total stock-based compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                               |                          | (439    | )    |  |      | (2,567  | )    |  |   | (2,709  | )   
|                                                                                                                                           |                               |                          |         |      |  |      |         |      |  |   |         |     
|Pro forma net income                                                                                                                       |                               | $                        | 498,544 |      |  | $    | 271,573 |      |  | $ | 178,410 |     
|                                                                                                                                           |                               |                          |         |      |  |      |         |      |  |   |         |     
|Earnings per share:                                                                                                                        |                               |                          |         |      |  |      |         |      |  |   |         |     
|                                                                                                                                           | Basic and diluted-as reported |                          | $       | 2.99 |  |      | $       | 1.66 |  |   | $       | 1.13 | 
|                                                                                                                                           |                               |                          |         |      |  |      |         |      |  |   |         |     
|                                                                                                                                           | Basic and diluted-pro-forma   |                          | $       | 2.99 |  |      | $       | 1.65 |  |   | $       | 1.11 | 
|                                                                                                                                           |                               |                          |         |      |  |      |         |      |  |   |         |     



|    |                  
|--- | -----------------
|(r) | Reclassifications

Certain prior year amounts have been reclassified
to conform to the current year presentation.



|    |                                                                  
|--- | -----------------------------------------------------------------
|(s) | Unaudited pro forma information and income
    per ordinary share

The accompanying unaudited pro forma income data
for the year ended December 31, 2001 includes a provision
for income taxes as if Intelsat had been subject to such taxes
for the period presented. Basic and diluted

F-12



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)

net income per ordinary share data for the year
ended December 31, 2001 assumes that the 166,666,755
ordinary shares issued in connection with the privatization had
been outstanding for this period.

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.



|    |                         
|--- | ------------------------
|(t) | 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.



|    |                         
|--- | ------------------------
|(u) | Research and development

Research and development costs are expensed as
incurred. These costs were insignificant in 2001, 2002 and 2003.



|    |                  
|--- | -----------------
|(v) | Advertising costs

Advertising costs are expensed as incurred. These
costs were insignificant in 2001, 2002 and 2003.



|    |                                              
|--- | ---------------------------------------------
|(w) | 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. Historically, the
satellite manufacturers have earned substantially all of these
payments. Therefore, the Company accounts for these payments as
deferred financing. 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.



|    |                              
|--- | -----------------------------
|(x) | New accounting pronouncements

In June 2001, the Financial Accounting Standards
Board (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 became effective during the first quarter of 2003. The
adoption of SFAS No. 143 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

F-13



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)

is incurred. The provisions of this statement are
effective for exit or disposal activities initiated after
December 31, 2002 and could affect the timing of
recognizing costs on future restructuring activities. The
adoption of SFAS No. 146 did not have a material impact on
Intelsats results of operations or financial position.

In November 2002, the FASB issued Interpretation
No. 45 (FIN 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. FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. FIN 45 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 FIN 45 are applicable to guarantees
issued or modified after December 31, 2002 and the
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 did not have a material impact on
Intelsats results of operations or financial position.

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 apply to revenue
arrangements entered into in fiscal periods beginning after
June 15, 2003. The adoption of EITF Issue No. 00-21
did not have an impact on Intelsats results of operations
or financial position as of December 31, 2003. However, it
could impact future revenue arrangements.

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 became 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 Interpretation
No. 46 (FIN 46), Consolidation of
Variable Interest Entities, an Interpretation of ARB
No. 51. This interpretation was revised in December
2003 (FIN 46R) to clarify the characteristics
of a variable entity. FIN 46R 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. The adoption of FIN 46R in 2003 did not
have a material impact on Intelsats results of operations
or financial position as of December 31, 2003. However,
management will continue to evaluate the impact that
FIN 46R will have on Intelsats results of operations
and financial position in future periods.

In April 2003, the FASB issued SFAS No. 149,
Amendment to Statement 133 on Derivative Instruments and
Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is
applied prospectively and is effective for contracts entered
into or modified after June 30, 2003, except for SFAS
No. 133 implementation issues that have been effective for
fiscal quarters that began prior to June 15,

F-14



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




|       |                                                             
|------ | ------------------------------------------------------------
|Note 2 | Summary of significant accounting
    policies  (Continued)

2003 and certain provisions relating to forward
purchases and sales on securities that do not yet exist. The
adoption of SFAS No. 149 did not have a material impact on
Intelsats results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.SFAS
No. 150 establishes standards for how certain free-standing
financial instruments with characteristics of both liabilities
and equity are classified and measured. Financial instruments
within the scope of SFAS No. 150 are required to be
recorded as liabilities, or assets in certain circumstances,
that may require reclassification of amounts previously reported
in equity. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS
No. 150 did not have an impact on Intelsats results
of operations or financial position.

In December 2003, the Securities and Exchange
Commission (the SEC) issued Staff Accounting
Bulletin No. 104 (SAB 104), Revenue
Recognition. SAB 104 revises or rescinds portions of
the interpretive guidance included in Topic 13 of the
codification of staff accounting bulletins in order to make this
interpretive guidance consistent with current authoritative
accounting and auditing guidance and SEC rules and regulations.
The adoption of SAB 104 did not have a material effect on
the Companys results of operations or financial position.
However, it could impact future revenue arrangements.

In December 2003, the FASB issued a revision of
SFAS No. 132, Employers Disclosures about Pensions
and Other Postretirement Benefits, an amendment of FASB
Statements No. 87, 88, and 106. The revision of SFAS
No. 132 requires additional disclosures about plan assets,
investment strategy, measurement dates, plan obligations, cash
flows and components of net periodic benefit cost recognized in
interim periods. The revision of SFAS No. 132 is effective
for financial statements with fiscal years ending after
December 15, 2003 and interim periods beginning after
December 15, 2003 and has been reflected in Note 13.
The adoption of the revised SFAS No. 132 did not have a
material impact on Intelsats results of operations or
financial position.

Note 3     Acquisitions



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | (a) Agreement to purchase the North
    American satellite assets of Loral Space &
    Communications Corporation

On July 15, 2003, Intelsat, Ltd. and
Intelsat (Bermuda), Ltd. entered into an asset purchase
agreement with Loral Space & Communications Corporation
and certain of its affiliates (together, the
Sellers) to acquire certain of the Sellers
satellites and related assets (the Loral
transaction). Under the asset purchase agreement, as
amended, the base purchase price for the assets to be acquired
is $1,025,000, subject to adjustment. The assets to be acquired
include four in-orbit satellites, one satellite under
construction, the rights to orbital locations and various assets
relating to the satellites and the business that the Sellers
conduct on the satellites, including customer contracts. In
addition, Intelsat has agreed to assume certain liabilities of
the Sellers relating to the assets to be acquired. Under the
terms of the asset purchase agreement, Intelsat had also agreed
to acquire the Telstar 4 satellite, which was declared a total
loss in September 2003. In October 2003, Intelsat and the
Sellers amended the asset purchase agreement to provide that
Intelsat will not acquire ownership of Telstar 4. The
Sellers have announced that the Telstar 4 satellite was
insured for $141,000 (unaudited), and Intelsat understands that
the Sellers have filed an insurance claim for that amount.

Under the asset purchase agreement, the purchase
price for the assets to be acquired from the Sellers would be
reduced by the amount of any insurance proceeds that the Sellers
receive prior to the completion of the proposed Loral
transaction, and Intelsat would be entitled to any insurance
proceeds received after completion of the transaction, in each
case net of warranty payments to customers made by the Sellers.

F-15



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 3     Acquisitions 
(Continued)


The Sellers have filed for bankruptcy protection
under Chapter 11 of the U.S. Bankruptcy Code and,
prior to the Sellers emergence from bankruptcy protection,
their assets may only be sold in accordance with the
U.S. Bankruptcy Code. The sale of the assets subject to the
asset purchase agreement to the Company was approved by the
bankruptcy court on October 24, 2003.

As discussed in Note 12, the Company intends to
finance the proposed Loral transaction with the proceeds from
its sale in November 2003 of the 5.25% Senior Notes due 2008 and
the 6.50% Senior Notes due 2013. In addition, in December 2003,
the Company entered into an $800,000 credit agreement, a portion
of which the Company may use to finance the proposed Loral
transaction to the extent that the proceeds from the sale of the
Senior Notes are not sufficient for this purpose.

The closing of the proposed Loral transaction is
subject to the satisfaction or waiver of several conditions,
including the existence, for a period or as of a date prior to
the closing, of specified amounts of recurring revenues and
backlog relating to the assets to be acquired. As discussed in
Note 4, if the proposed Loral transaction fails to close on
or prior to April 30, 2004, the Company will be required to
redeem $700,000 in aggregate principal amount of the
Companys 5.25% Senior Notes due 2008 and 6.50% Senior
Notes due 2013, and the Companys new $800,000 credit
agreement described in Note 12 would be terminated.

Pursuant to the asset purchase agreement, the
Company has agreed, upon the closing of the proposed
transaction, to enter into a procurement agreement with Space
Systems/Loral, Inc. (SS/L), an affiliate of the
Sellers, for a new satellite to be launched into one of the
Companys existing orbital locations. The Company has
agreed to make a deposit of $100,000 as prepayment for a portion
of the purchase price of the new satellite, provided that SS/
Ls obligations under the procurement agreement have been
secured by SS/ Ls and its affiliates interests in an
in-orbit satellite, insurance proceeds relating thereto and
other collateral that is not included in the Sellers
assets to be acquired by the Company.



| |                                         
| | ----------------------------------------
| | (b) COMSAT World Systems
    acquisition

On November 25, 2002, Intelsat acquired most
of the assets and certain liabilities of COMSAT World Systems, a
business unit of COMSAT Corporation (COMSAT), and of
COMSAT Digital Teleport, Inc., a subsidiary of COMSAT. COMSAT is
a wholly owned subsidiary 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 included substantially all of COMSAT
World Systems customer contracts for the sale of
Intelsats capacity; two tracking, telemetry, command and
monitoring (TTC&M) stations located in Clarksburg, Maryland
and Paumalu, Hawaii; and a digital teleport facility in
Clarksburg, Maryland. The purchase price for this transaction
consisted of $56,033 in cash, the assumption of $57,687 in
liabilities and a $20,000 7% note payable due in four
installments of $5,000 each on January 1, 2007, 2008, 2009,
and 2010. In the event Intelsat is not operating TTC&M
facilities at the Clarksburg, Maryland location and certain
triggering events described in the purchase agreement have
occurred, up to $15,000 of the $20,000 note payable would not be
due. Additionally, Intelsat incurred $1,047 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 tangible and intangible
assets acquired. The purchase price allocation was finalized
during the fourth quarter of 2003.

F-16



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 3     Acquisitions 
(Continued)


Based upon the appraisals received and
managements estimates, the purchase price was allocated to
the assets and liabilities acquired as follows:

|                                                |  |   |         |  
|----------------------------------------------- |  | - | ------- | -
|Receivables, net of allowance of $13,734.       |  | $ | 13,069  |  
|Property and equipment                          |  |   | 26,812  |  
|Deferred tax asset                              |  |   | 8,236   |  
|Other assets                                    |  |   | 1,580   |  
|Goodwill                                        |  |   | 57,608  |  
|Intangible assets                               |  |   | 27,462  |  
|Accounts payable and accrued expenses           |  |   | (57,687 | )
|                                                |  |   |         |  
|Total consideration, net of assumed liabilities |  | $ | 77,080  |  
|                                                |  |   |         |  

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 each period presented, nor are
they necessarily indicative of future operating results.

|                                                |  |              |           |      |  |   |           | 
|----------------------------------------------- |  | ------------ | --------- | ---- |  | - | --------- | 
|                                                |  |             
|                                                |  | Years Ended 
|                                                |  | December 31,
|                                                |  |             
|                                                |  | 2001         |           | 2002
|                                                |  |              |           |     
|                                                |  |             
|                                                |  | (unaudited) 
|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      | 



| |                       
| | ----------------------
| | (c) Other acquisitions

During 2002, the Company 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     Restricted
cash

Restricted cash relates to $700,000 of the
$1,100,000 in aggregate principal amount of Intelsats
Senior Notes issued in November 2003 that mature in 2008 and
2013. An aggregate of $700,000 in principal amount of the 2008
notes and 2013 notes is subject to mandatory redemption at a
redemption price of 102% of the principal amount of the notes
being redeemed, plus accrued and unpaid interest, if any, and
any other amounts due to the date of redemption. Mandatory
redemption of these notes is required within 10 business
days of the earliest to occur of any of the following events:
1) the asset purchase agreement relating to the proposed
Loral transaction, described in Note 3(a), is terminated;
2) the Companys new $800,000 credit agreement, as
described in Note 12, is terminated on or prior to
April 30, 2004, or the Company fails to meet any condition
required for the extension of loans under the credit agreement
on or prior to April 30, 2004 that is required to be
satisfied, and has not been waived, on or prior to that date; or
3) the proposed Loral transaction, described in
Note 3(a), is not completed on or prior to April 30,
2004. The remaining $400,000 in aggregate principal amount of
the 2008 notes and 2013

F-17



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 4     Restricted
cash  (Continued)


notes is not subject to mandatory redemption and
would remain outstanding following the occurrence of any
mandatory redemption event.

Note 5     Receivables

Receivables were comprised of the following:

|                                |          |                    |         |         |  |   |         |         | 
|------------------------------- | -------- | ------------------ | ------- | ------- |  | - | ------- | ------- | 
|                                |          |                   
|                                |          | As of December 31,
|                                |          |                   
|                                |          | 2002               |         | 2003   
|                                |          |                    |         |        
|Service charges:                |          |                    |         |         |  |   |         |        
|                                | Unbilled |                    | $       | 121,293 |  |   | $       | 88,821  | 
|                                | Billed   |                    |         | 106,136 |  |   |         | 134,234 | 
|Other                           |          |                    | 63,175  |         |  |   | 12,702  |        
|Allowance for doubtful accounts |          |                    | (24,823 | )       |  |   | (32,110 | )      
|                                |          |                    |         |         |  |   |         |        
|Total                           |          | $                  | 265,781 |         |  | $ | 203,647 |        
|                                |          |                    |         |         |  |   |         |        

Unbilled satellite utilization charges represent
amounts earned and accrued as receivable from customers for
their usage of the Intelsat satellite system 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 EADS Astrium as a result of the
Companys decision to terminate its order for the
IS-10-01 satellite, as discussed further in Note 7.

Note 6     Satellites
and other property and equipment

Satellites and other property and equipment were
comprised of the following:

|                                         |            |                    |            |           |  |   |            |           | 
|---------------------------------------- | ---------- | ------------------ | ---------- | --------- |  | - | ---------- | --------- | 
|                                         |            |                   
|                                         |            | As of December 31,
|                                         |            |                   
|                                         |            | 2002               |            | 2003     
|                                         |            |                    |            |          
|Satellites, launch vehicles and services |            | $                  | 6,820,485  |           |  | $ | 6,329,749  |          
|Information systems and ground segment   |            |                    | 598,248    |           |  |   | 710,265    |          
|Washington, D.C. building and other      |            |                    | 197,704    |           |  |   | 229,275    |          
|                                         |            |                    |            |           |  |   |            |          
|                                         | Total cost |                    |            | 7,616,437 |  |   |            | 7,269,289 | 
|Less: accumulated depreciation           |            |                    | (4,138,382 | )         |  |   | (3,976,281 | )        
|                                         |            |                    |            |           |  |   |            |          
|Total                                    |            | $                  | 3,478,055  |           |  | $ | 3,293,008  |          
|                                         |            |                    |            |           |  |   |            |          

Satellites and other property and equipment as of
December 31, 2002 and 2003 included
construction-in-progress of $359,009 and $197,228, respectively.
These amounts relate primarily to satellites under construction
and related launch services. Interest costs of $76,240, $52,406,
and $17,912 were capitalized in 2001, 2002 and 2003,
respectively.

Note 7     Termination
of Intelsats order for the IS-10-01 satellite

In November 2002, Intelsat terminated its order
for the IS-10-01 satellite, due to the manufacturers
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

F-18



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 7     Termination
of Intelsats order for the
IS-10-01 satellite  (Continued)


program costs, including satellite construction
costs, launch vehicle costs, program office costs, capitalized
interest and ground network costs, net of the refund due from
the manufacturer of the satellite and the launch vehicle deposit
described below. In connection with its decision to terminate
its order for the IS-10-01 satellite, Intelsat agreed with one
of its launch vehicle providers, Sea Launch Limited Partnership
(Sea Launch), to treat most of the payments made for
the launch vehicle that could have been used for the launch of
the IS-10-01 satellite as a credit for a future launch.
Intelsats agreement with Sea Launch provided that this
credit would decrease over time until Intelsat or another entity
placed an order for a future launch with Sea Launch. Based on
Intelsats estimate of when it might place such an order,
Intelsat recorded a deposit of the minimum possible credit under
its agreement with Sea Launch, net of certain expenses, of
$23,150. During 2003, Intelsat was notified by Sea Launch that
another entity had placed a launch order and therefore that the
credit to which Intelsat is entitled under the agreement with
Sea Launch will not be subject to further reduction. Because
Intelsats credit with Sea Launch was fixed at an amount
greater than the expected credit based on which Intelsat
recorded the $23,150 deposit, during the year ended
December 31, 2003, Intelsat reversed $3,000 of the $34,358
charge recorded for the year ended December 31, 2002,
resulting in a deposit of $26,150 as of December 31, 2003.
However, if Intelsat does not place an order for a future launch
by July 31, 2005, Sea Launch has the right to terminate the
agreement, in which case Intelsat will incur a termination
liability of up to $19,125, in addition to forfeiture of the
$26,150 deposit.

Note 8     Investment
in affiliate

In December 2002, Intelsat entered an agreement
with WildBlue Communications, Inc. (WildBlue) to
acquire a minority stake in WildBlue for a purchase price of
$58,000. WildBlue is a company that plans to offer broadband
Internet access services in the continental United States via
Ka-band satellite capacity. The transaction closed on
April 21, 2003, following the receipt of regulatory
approvals and the satisfaction of other closing conditions. At
the closing of the transaction, the Company contributed $56,513
in cash to WildBlue. This amount represented the $58,000 total
purchase price for the Companys investment in WildBlue net
of a loan receivable for interim funding to WildBlue, plus
accrued interest, and net of certain expenses incurred by
Intelsat that were reimbursable by WildBlue. Intelsat applies
the equity method to account for its investment in WildBlue.
Therefore, Intelsats share in the losses of WildBlue,
which were not significant to the Companys consolidated
results of operations for the year ended December 31, 2003,
are included in other income, net in Intelsats
consolidated statements of operations. Intelsats
consolidated balance sheet at December 31, 2003 reflects
the investment in WildBlue and the Companys share of the
results of operations of WildBlue from the date of
Intelsats initial investment through December 31,
2003 as an investment in affiliate.

Note 9     Investment
in consolidated affiliate

In February 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 agreed to contribute a total
consideration valued at $542,000 in Hong Kong dollars
(HK$), or approximately $69,500 in U.S. dollars
at the date of the agreement, to acquire a 51% stake in Galaxy
Holdings. 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 and launched a
pay television service in February 2004. TVB Holdings holds
the remaining 49% interest in Galaxy Holdings.

Intelsat Hong Kongs total contribution of
HK$542,000 (approximately U.S. $69,500 at the date of the
agreement) is comprised of HK$413,300 (approximately
U.S. $53,000 at the date of the agreement) in cash,

F-19



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 9     Investment
in consolidated affiliate  (Continued)


payable in installments in 2003, 2004 and 2005,
and HK$128,700 (approximately U.S.$16,500 at the date of the
agreement) in kind in the form of satellite capacity to be
provided to Galaxy. TVB Holdings agreed to contribute a
total consideration valued at HK$520,750, consisting of
HK$196,600 in cash, payable in installments in 2003, 2004 and
2005, and HK$324,150 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, Intelsat
Hong Kong and TVB Holdings each made its required 2003 cash
contribution. For Intelsat Hong Kong, this cash contribution was
HK$173,900, or approximately U.S.$22,300. Under the agreement,
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 as set forth
above is insufficient to fund Galaxys start-up and initial
operational costs, then Intelsat Hong Kong and TVB Holdings
are required to make additional cash contributions up to an
aggregate of HK$170,100, or approximately U.S.$21,800 at the
date of the agreement. The amount of any such contributions that
Intelsat Hong Kong and TVB Holdings would be required to
make would be based on their percentage ownership interests in
Galaxy Holdings at the time of the contributions.

Intelsats consolidated financial statements
include the assets and liabilities of Galaxy Holdings and Galaxy
as of December 31, 2003, as well as the results of
operations of Galaxy Holdings and Galaxy from the date of
Intelsats initial investment in Galaxy Holdings through
December 31, 2003. The results of operations of Galaxy
Holdings and Galaxy were not significant to the Companys
consolidated results of operations for the twelve months ended
December 31, 2003. TVB Holdings interest in the net
assets of Galaxy Holdings and Galaxy as of December 31,
2003 is reflected in the consolidated financial statements as a
minority interest in consolidated affiliate. Intelsat reflects
the minority interests share of losses as a component of
other income, net in its consolidated financial statements. The
amount of the minority interests share of losses is
insignificant to Intelsats results of operations for all
periods presented.

The pro forma results of operations for
Intelsats investment in Galaxy Holdings, had the
investment occurred at the beginning of 2002 or 2003, are not
significant, and accordingly have not been provided.

Note 10     Goodwill
and other intangible assets

The carrying amount and accumulated amortization
of acquired intangible assets subject to amortization consisted
of the following:

|                               |          |                    |        |        |  |   |        |        | 
|------------------------------ | -------- | ------------------ | ------ | ------ |  | - | ------ | ------ | 
|                               |          |                   
|                               |          | As of December 31,
|                               |          |                   
|                               |          | 2002               |        | 2003  
|                               |          |                    |        |       
|Customer relationships         |          | $                  | 26,824 |        |  | $ | 26,824 |       
|Business application software  |          |                    | 638    |        |  |   | 638    |       
|                               |          |                    |        |        |  |   |        |       
|                               | Subtotal |                    |        | 27,462 |  |   |        | 27,462 | 
|Less: accumulated amortization |          |                    |       |        |  |   | (2,257 | )     
|                               |          |                    |        |        |  |   |        |       
|                               | Total    |                    | $      | 27,462 |  |   | $      | 25,205 | 
|                               |          |                    |        |        |  |   |        |       

During the year ended December 31, 2002, the
Company acquired $26,824 of customer relationships and $638 of
business application software in the acquisition of most of the
assets and certain liabilities of COMSAT World Systems as
described in Note 3(b). The customer relationships have an
average life of fourteen years and the business application
software has an average life of two years. The Company recorded
no amortization expense for the year ended December 31,
2002. The Company recorded amortization expense of $2,257 for
the year ended December 31, 2003.

F-20



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 10     Goodwill
and other intangible assets  (Continued)


Scheduled amortization charges for the intangible
assets as of December 31, 2003 are as follows:

|                    |  |                               |        | 
|------------------- |  | ----------------------------- | ------ | 
|                    |  | Customer Relationships and   
|                    |  | Business Application Software
|                    |  |                              
|2004                |  | $                             | 2,373  | 
|2005                |  | $                             | 1,916  | 
|2006                |  | $                             | 1,916  | 
|2007                |  | $                             | 1,916  | 
|2008                |  | $                             | 1,916  | 
|2009 and thereafter |  | $                             | 15,168 | 

The carrying amount of acquired intangible assets
not subject to amortization consisted of the following:

|         |  |                    |        |      |  |   |        | 
|-------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|         |  |                   
|         |  | As of December 31,
|         |  |                   
|         |  | 2002               |        | 2003
|         |  |                    |        |     
|Goodwill |  | $                  | 56,799 |      |  | $ | 58,202 | 
|         |  |                    |        |      |  |   |        | 

The change in the carrying amount of goodwill for
the year ended December 31, 2003 of $1,403 is comprised of
$594 of goodwill associated with the consolidation of Galaxy, as
described in Note 9, and $809 resulting from finalizing the
COMSAT World Systems acquisition purchase price allocation
during the fourth quarter of 2003, as described in
Note 3(b).

On January 1, 2002, the Company adopted SFAS
No. 142, which provides that intangible assets with finite
useful lives be amortized and that goodwill and other intangible
assets with indefinite lives not be amortized but rather be
tested for impairment annually or when a change in circumstances
occurs. Intelsat has determined under the criteria set forth by
SFAS No. 142 that, for such impairment testing, the Company
has only one reporting unit, which is at the enterprise level.

During the fourth quarter of 2003, the Company
completed its required annual assessment of any potential
goodwill impairments and determined that no goodwill was
impaired. As of December 31, 2002 and 2003, the Company did
not have any acquired other intangible assets with indefinite
useful lives.

Note 11     Termination
of portion of deferred satellite performance incentive
liability

In June 2003, Intelsat LLC entered into
amendments to its satellite construction agreements with SS/ L,
pursuant to which Intelsat terminated a portion of its liability
to SS/ L to make satellite performance incentive payments for
the Intelsat VII/ VIIA and IX series satellites
manufactured by SS/ L in exchange for a total cash payment of
$60,000. Intelsats obligation to pay the portions of these
incentive payments that are payable by SS/ L to its
subcontractors has not been terminated, and Intelsat will
continue to be required to make payments as due with respect to
these portions.

The amendments provide for SS/ L to remain liable
under its satellite construction agreements with Intelsat LLC
for amounts that may become due in connection with SS/ Ls
failure to provide satellite anomaly support as requested by
Intelsat or in connection with other specified matters. As
security for SS/ Ls obligation to pay any such amounts
that become due, $5,000 of the $60,000 cash payment is being
held in escrow, and SS/ L is obligated to maintain a minimum
balance of $5,000 in the escrow account until the orbital design
lives of all of the Intelsat VII/ VIIA and IX series
satellites have ended. Other than with respect to the specified
situations in which SS/ L remains liable, Intelsat has no
further financial recourse to SS/ L under the terms of the
amended satellite construction agreements.

F-21



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 11     Termination
of portion of deferred satellite performance incentive
liability  (Continued)


On June 30, 2003, Intelsat paid $53,351 of
the $60,000 cash payment due in connection with the amendments
to the satellite construction agreements. At the time that this
payment was made, Intelsat recorded a $95,051 reduction in its
total satellite performance incentive payment liability, a
$36,455 net reduction in the cost of its satellites and other
property and equipment and a $1,404 reduction in accrued
interest. In July 2003, Intelsat paid the $6,649 remaining to be
paid of the $60,000 total cash payment.

This accounting treatment reflects the
renegotiation of a contract pursuant to which a portion of
Intelsats existing satellite performance incentive
liability was terminated, the portion of the Companys
satellite costs that was attributable to these performance
incentives was written off and the amount of the Companys
payment was treated as the renegotiated value of these
performance incentives and capitalized as part of the cost of
the satellites.

F-22



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)


Note 12     Notes
payable, long-term debt and other financing
arrangements

The carrying amounts and estimated fair values of
notes payable and long-term debt were as follows:



|                                                                                                                              |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |           | 
|----------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------ | --------- | ---------- |  | ------ | --------- | ---------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                                                                                                                              |                                              |                   
|                                                                                                                              |                                              | As of December 31,
|                                                                                                                              |                                              |                   
|                                                                                                                              |                                              |                    |           |           
|                                                                                                                              |                                              | 2002               |           | 2003      
|                                                                                                                              |                                              |                    |           |           
|                                                                                                                              |                                              | Amount             |           | Fair Value |  | Amount |           | Fair Value
|                                                                                                                              |                                              |                    |           |            |  |        |           |           
|Commercial paper                                                                                                              |                                              | $                  | 43,978    |            |  | $      | 43,978    |            |  | $ |          |           |  | $ |          |          
|Dragon bond 6.625% Notes due March 22, 2004.                                                                                  |                                              |                    | 200,000   |            |  |        | 201,738   |            |  |   | 200,000   |           |  |   | 201,872   |          
|Eurobond 8.375% Notes due October 14, 2004.                                                                                   |                                              |                    | 200,000   |            |  |        | 206,728   |            |  |   | 200,000   |           |  |   | 209,000   |          
|Eurobond 8.125% Notes due February 28, 2005.                                                                                  |                                              |                    | 200,000   |            |  |        | 205,808   |            |  |   | 200,000   |           |  |   | 211,832   |          
|5.25% Senior Notes due November 1, 2008.                                                                                      |                                              |                    |          |            |  |        |          |            |  |   | 400,000   |           |  |   | 409,968   |          
|Discount, net of amortization, on the 5.25%
    Senior Notes due November 1, 2008.                                            |                                              |                    |          |            |  |        |          |            |  |   | (98       | )         |  |   |          |          
|7.625% Senior Notes due April 15, 2012.                                                                                       |                                              |                    | 600,000   |            |  |        | 582,528   |            |  |   | 600,000   |           |  |   | 678,660   |          
|Discount, net of amortization, on the 7.625%
    Senior Notes due April 15, 2012.                                             |                                              |                    | (4,007    | )          |  |        |          |            |  |   | (3,700    | )         |  |   |          |          
|6.50% Senior Notes due November 1, 2013.                                                                                      |                                              |                    |          |            |  |        |          |            |  |   | 700,000   |           |  |   | 734,020   |          
|Discount, net of amortization, on the 6.50%
    Senior Notes due November 1, 2013.                                            |                                              |                    |          |            |  |        |          |            |  |   | (2,117    | )         |  |   |          |          
|Note payable to Lockheed Martin Corporation, 7%,
    payable in annual installments of $5,000, beginning
    January 1, 2007. |                                              |                    | 20,000    |            |  |        | 20,000    |            |  |   | 20,000    |           |  |   | 20,000    |          
|Note payable to TVB Holdings, 8%, $6,598 and
    $8,284 payable in 2007 and 2008, respectively                                |                                              |                    |          |            |  |        |          |            |  |   | 14,882    |           |  |   | 14,882    |          
|Capital lease obligations                                                                                                     |                                              |                    | 48,495    |            |  |        | 48,495    |            |  |   | 40,263    |           |  |   | 40,263    |          
|                                                                                                                              |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |          
|Total long-term debt                                                                                                          |                                              | $                  | 1,308,466 |            |  | $      | 1,309,275 |            |  | $ | 2,369,230 |           |  | $ | 2,520,497 |          
|                                                                                                                              |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |          
|Less:                                                                                                                         |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |          
|                                                                                                                              | Commercial paper                             |                    |           | 43,978     |  |        |           | 43,978     |  |   |           |          |  |   |           |          | 
|                                                                                                                              | Current portion of capital lease obligations |                    |           | 6,618      |  |        |           | 6,618      |  |   |           | 5,290     |  |   |           | 5,290     | 
|                                                                                                                              | Notes payable                                |                    |           |           |  |        |           |           |  |   |           | 1,098,591 |  |   |           | 1,140,156 | 
|                                                                                                                              |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |          
|Total current portion                                                                                                         |                                              | $                  | 50,596    |            |  | $      | 50,596    |            |  | $ | 1,103,881 |           |  | $ | 1,145,446 |          
|                                                                                                                              |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |          
|Total long-term debt, excluding current portion                                                                               |                                              | $                  | 1,257,870 |            |  | $      | 1,258,679 |            |  | $ | 1,265,349 |           |  | $ | 1,375,051 |          
|                                                                                                                              |                                              |                    |           |            |  |        |           |            |  |   |           |           |  |   |           |          

The fair value of the note payable to Lockheed
Martin Corporation and the note payable to TVB Holdings is in
each case assumed to be equal to the book value of such note.
The payment of up to $15,000 of the $20,000 note payable to
Lockheed Martin Corporation is contingent upon the
non-occurrence of certain events that are outside the control of
the Company, such as certain governmental actions relating to
use of the Clarksburg, Maryland facility that the Company
acquired in connection with the COMSAT transaction (see
Note 3(b)). The note payable to TVB Holdings is a note
payable by Galaxy, a company that has limited operations, to a
party related to it, TVB Holdings, which owns a 49% interest in
Galaxy. Because of the contingency associated with the note
payable to Lockheed Martin Corporation and the factors described
above with respect to the note payable to TVB Holdings, the
Company does not believe that it is practicable to determine the
fair value of these notes.

F-23



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 12     Notes
payable, long-term debt and other financing
arrangements  (Continued)


During 2002, the average daily balance of
commercial paper borrowings outstanding was approximately
$137,528, at an average effective borrowing rate of 2.0% per
annum. During 2003, the average daily balance of commercial
paper borrowings outstanding was approximately $17,884 at an
average effective borrowing rate of 1.4% per annum.

To support Intelsats commercial paper
program and to provide funding for general corporate purposes,
the Company has in place a $500,000 three-year unsecured
revolving credit facility, which the Company entered into on
March 21, 2002 with a group of financial institutions. At
Intelsats option, borrowings under the revolving credit
facility will bear interest either at Citibank, N.A.s base
rate or at the Eurodollar rate plus an applicable margin. Under
the terms of the credit facility, Intelsat is required to
satisfy certain financial and operating covenants, including an
interest coverage ratio and a ratio of debt to EBITDA (as
defined in the credit agreement). Prior to Intelsats
issuance in November 2003 of an aggregate of $1,100,000 in
Senior Notes, the lenders under Intelsats revolving credit
facility waived the inclusion of the mandatorily redeemable
portion of the Senior Notes (see Note 4) as debt for
purposes of calculating the financial ratios under the credit
facility. The waivers are effective until the earlier to occur
of April 30, 2004 or the completion of the proposed Loral
transaction. Giving effect to the waivers, as of
December 31, 2003, Intelsat was in compliance with its
covenants under the revolving credit facility. In addition, at
December 31, 2003, there were no borrowings outstanding
under the revolving credit facility.

In April 2002, Intelsat issued $600,000 in
aggregate principal amount of 7.625% Senior Notes due 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.

In November 2003, Intelsat issued $400,000 in
aggregate principal amount of 5.25% Senior Notes due 2008 and
$700,000 in aggregate principal amount of 6.50% Senior Notes due
2013. Intelsat intends to use the net proceeds from the sale of
such notes to finance the proposed Loral transaction and for
general corporate purposes. If the Companys $200,000 in
aggregate principal amount of Dragon bond 6.625% Notes due
March 22, 2004 becomes due prior to completion of the
proposed Loral transaction, the Company intends to use a portion
of the net proceeds from the sale of the Senior Notes to pay the
Dragon bonds. The discount on the Senior Notes represents the
difference between the issue price and the face value of the
notes. Additionally, the Company incurred debt issuance costs of
approximately $23,600. 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. The
Company will be required to redeem $700,000 in aggregate
principal amount of the Senior Notes at a redemption price of
102% of the principal amount of the notes being redeemed, plus
accrued and unpaid interest, if any, and any other amounts due
to the date of redemption if any of the following mandatory
redemption events occur: (1) the asset purchase agreement
relating to the proposed Loral transaction, discussed in
Note 3(a), is terminated, (2) the Companys new
$800,000 credit agreement is terminated on or prior to
April 30, 2004 or the Company fails to meet any condition
required for the extension of loans under the credit agreement
on or prior to April 30, 2004 that is required to be
satisfied, and has not been waived, on or prior to that date or
(3) the proposed Loral transaction, discussed in
Note 3(a), is not completed on or prior to April 30,
2004. A portion of the proceeds from the sale of the Senior
Notes in November 2003 would be used for this purpose and
accordingly have been classified as a current liability in
Intelsats consolidated balance sheet as of
December 31, 2003.

F-24



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 12     Notes
payable, long-term debt and other financing
arrangements  (Continued)


In December 2003, Intelsat entered into a credit
agreement with a group of banks for an $800,000 three-year
unsecured credit facility, consisting of a $400,000 term loan
facility and a $400,000 revolving facility. The closing of the
new facility is subject to the satisfaction of specified
conditions, including the completion of the proposed Loral
transaction. Upon the closing of the new credit facility, the
$400,000 revolving facility will replace Intelsats
existing $500,000 three-year unsecured revolving credit
facility. Intelsat intends to use the new revolving facility to
finance the proposed Loral transaction to the extent that the
proceeds from its sale in November 2003 of $400,000 and $700,000
in Senior Notes are not sufficient for this purpose and for
working capital requirements. In addition, Intelsat may use the
new term loan facility to pay its near-term debt obligations as
they become due. Intelsat expects that the new revolving credit
facility will also be used to support its commercial paper
program. Intelsats new credit facility contains financial
and operating covenants that, among other things, require the
Company to maintain financial coverage ratios and limit the
Companys ability to pledge its assets as security for
additional borrowings. In addition, Intelsats new credit
facility will, upon its closing, limit the Companys
ability to pay dividends on its ordinary shares. If the proposed
Loral transaction is not completed and the new credit facility
does not close, Intelsat expects to use proceeds from the
issuance of the 5.25% Senior Notes due 2008 and the 6.50% Senior
Notes due 2013 to repay the Dragon bond 6.625% Notes due
March 22, 2004 and the $200,000 Eurobond 8.375% Notes due
October 14, 2004.

As described in Note 9 above,
Intelsats consolidated balance sheet includes
Galaxys assets and liabilities as of December 31,
2003. The note payable to TVB Holdings for $14,882 is a note
payable by Galaxy.

Of Intelsats two capital leases, one had an
obligation of $65,757, incurred in 1999, in connection with a
lease agreement to acquire additional satellite capacity. The
remaining capital lease is insignificant to the consolidated
financial statements. As of December 31, 2003, the
remaining capital lease obligations amounted to $40,263, of
which $34,973 was long-term and $5,290 was current.

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.

Note 13     Retirement
plans and other retiree benefits



| |                                                       
| | ------------------------------------------------------
| | (a)     Pension
    and other post-retirement benefits

Intelsat maintains a noncontributory defined
benefit retirement plan covering substantially all employees
hired prior to July 19, 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 has historically funded the plan
based on actuarial advice using the projected unit credit cost
method. Concurrent with Intelsats privatization in 2001,
the plan became subject to the provisions of the Employee
Retirement Income Security Act of 1974, and, as such, Intelsat
expects that its future contributions to the plan will be based
on the minimum requirements of the Internal Revenue Service and
on the plans funded position. Employees hired on or after
July 19, 2001 are eligible to participate in a defined
contribution plan (see Note 13(b)).

In addition, Intelsat provides health benefits
for employees hired prior to January 1, 2004 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-25



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 13     Retirement
plans and other retiree benefits 
(Continued)


The following tables provide summaries of the
projected benefit obligations, plan assets and funded status of
the plans as of December 31, 2002 and 2003 based on
valuation dates of September 30, 2002 and 2003.

|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|--------------------------------------------- |  | ---------------- | -------- | --------------------- |  | ---- | ------- | ---- |  | -- | ------- | - |  | -- | ------- | -
|                                              |  |                  |          |                       |  |     
|                                              |  |                  |          | Other Post-retirement
|                                              |  | Pension Benefits |          | Benefits             
|                                              |  |                  |          |                      
|                                              |  | 2002             |          | 2003                  |  | 2002 |         | 2003
|                                              |  |                  |          |                       |  |      |         |     
|Change in benefit obligation                  |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Benefit obligation, October 1,                |  | $                | 265,769  |                       |  | $    | 280,269 |      |  | $  | 52,335  |   |  |    | $54,389 |  
|Service cost                                  |  |                  | 4,002    |                       |  |      | 5,765   |      |  |    | 3,647   |   |  |    | 5,177   |  
|Interest cost                                 |  |                  | 18,943   |                       |  |      | 19,030  |      |  |    | 3,706   |   |  |    | 3,780   |  
|Benefits paid                                 |  |                  | (16,126  | )                     |  |      | (18,056 | )    |  |    | (2,450  | ) |  |    | (2,515  | )
|Plan amendments                               |  |                  |         |                       |  |      |        |      |  |    |        |   |  |    | (1,733  | )
|Acquisitions                                  |  |                  |         |                       |  |      | 7,149   |      |  |    |        |   |  |    | 5,154   |  
|Curtailment                                   |  |                  |         |                       |  |      |        |      |  |    |        |   |  |    | (2,584  | )
|Actuarial (gain)/loss                         |  |                  | 7,681    |                       |  |      | 13,969  |      |  |    | (2,849  | ) |  |    | 18,870  |  
|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Benefit obligation, September 30,             |  | $                | 280,269  |                       |  | $    | 308,126 |      |  |    | $54,389 |   |  |    | $80,538 |  
|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Change in plan assets                         |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Plan assets at fair value October 1,          |  | $                | 234,442  |                       |  | $    | 211,939 |      |  | $  |        |   |  | $  |        |  
|Actual return on plan assets                  |  |                  | (7,146   | )                     |  |      | 38,671  |      |  |    |        |   |  |    |        |  
|Acquisitions                                  |  |                  |         |                       |  |      | 6,031   |      |  |    |        |   |  |    |        |  
|Contributions by Intelsat                     |  |                  |         |                       |  |      | 40,000  |      |  |    |        |   |  |    |        |  
|Benefits paid                                 |  |                  | (15,357  | )                     |  |      | (17,607 | )    |  |    |        |   |  |    |        |  
|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Plan assets at fair value September 30,       |  | $                | 211,939  |                       |  | $    | 279,034 |      |  | $  |        |   |  | $  |        |  
|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Funded status of the plans                    |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Funded status of the plans                    |  |                  | ($68,330 | )                     |  | ($   | 29,092  | )    |  | ($ | 54,389  | ) |  | ($ | 80,538  | )
|Unrecognized net (gain)/loss                  |  |                  | 60,072   |                       |  |      | 56,827  |      |  |    | (12,070 | ) |  |    | 7,609   |  
|Unrecognized prior service cost               |  |                  | 1,533    |                       |  |      | 1,216   |      |  |    |        |   |  |    | (1,733  | )
|Unrecognized transition obligation            |  |                  | 366      |                       |  |      | 326     |      |  |    |        |   |  |    |        |  
|Fourth-quarter contributions to the plans     |  |                  | 110      |                       |  |      | 114     |      |  |    | 839     |   |  |    | 699     |  
|Intangible asset                              |  |                  | (2,340   | )                     |  |      |        |      |  |    |        |   |  |    |        |  
|Amount included in other comprehensive income |  |                  | (21,524  | )                     |  |      | (2,067  | )    |  |    |        |   |  |    |        |  
|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Accrued benefits costs, December 31,          |  |                  | ($30,113 | )                     |  | $    | 27,324  |      |  | ($ | 65,620  | ) |  | ($ | 73,963  | )
|                                              |  |                  |          |                       |  |      |         |      |  |    |         |   |  |    |         |  
|Discount rate                                 |  |                  | 6.75     | %                     |  |      | 6.00    | %    |  |    | 6.75    | % |  |    | 6.00    | %
|Expected rate of return on plan assets        |  |                  | 9.00     | %                     |  |      | 9.00    | %    |  |    |        |   |  |    |        |  
|Rate of compensation increase                 |  |                  | 4.50     | %                     |  |      | 3.75    | %    |  |    |        |   |  |    |        |  

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.

During 2003, the Company made $40,000 in cash
contributions to the retirement plan. However, the plans
accumulated benefit obligation at September 30, 2003 still
exceeded the fair value of its assets. As a result, the Company
adjusted the minimum pension liability such that as of
December 31, 2003, $19,457 of the net additional minimum
pension liability of $21,524 was reversed along with the $2,340
previously recorded in other

F-26



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 13     Retirement
plans and other retiree benefits 
(Continued)


assets. The effect of this adjustment resulted in
the Company having an additional minimum pension liability of
$2,067, or $1,270 after tax, recorded as accumulated other
comprehensive loss as of December 31, 2003.

Plan assets include investments in equity and
bond funds, U.S. government securities and liquid reserve funds.

The weighted-average asset allocation of our
pension plan assets at September 30 were:

|                  |  |      |     |      |  |  |     |  
|----------------- |  | ---- | --- | ---- |  |  | --- | -
|Asset Category    |  | 2002 |     | 2003
|                  |  |      |     |     
|Equity securities |  |      | 58  | %    |  |  | 63  | %
|Debt securities   |  |      | 41  |      |  |  | 33  |  
|Real estate       |  |      | 1   |      |  |  |    |  
|Cash equivalents  |  |      |    |      |  |  | 4   |  
|                  |  |      |     |      |  |  |     |  
|Total             |  |      | 100 | %    |  |  | 100 | %
|                  |  |      |     |      |  |  |     |  

The Companys pension plan assets are
managed in accordance with an investment policy adopted by the
pension committee. The investment policy currently includes
target allocation percentages of 65% for investments in equity
securities and 35% for investments in fixed income securities.
There is typically no allocation to cash but there was a cash
contribution made on September 30, 2003 to the pension plan
assets that had yet to be invested as of that date. There are
restrictions on investment managers to prevent the concentration
of investments in the securities of any one company or industry,
the purchase of tax-exempt securities, direct investments in
commodities and short sales and to impose other restrictions.
The expected long-term rate of return on plan assets was based
on historical returns.

The Company expects to contribute $456 to its
pension plan during 2004 and it does not expect to make any
contributions to its post-retirement health insurance plan,
which is an unfunded plan.

Net periodic pension and other post-retirement
benefits costs include the following components for 2001, 2002
and 2003:

|                                                |  |                  |         |                       |  |      |         |      |  |      |         |      |  |   |        |   |  |   |       |   |  |   |       |  
|----------------------------------------------- |  | ---------------- | ------- | --------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ----- | - |  | - | ----- | -
|                                                |  |                  |         |                       |  |      |         |     
|                                                |  |                  |         | Other Post-retirement
|                                                |  | Pension Benefits |         | Benefits             
|                                                |  |                  |         |                      
|                                                |  | 2001             |         | 2002                  |  | 2003 |         | 2001 |  | 2002 |         | 2003
|                                                |  |                  |         |                       |  |      |         |      |  |      |         |     
|Service cost                                    |  | $                | 7,682   |                       |  | $    | 4,002   |      |  | $    | 5,765   |      |  | $ | 2,761  |   |  | $ | 3,647 |   |  | $ | 5,177 |  
|Interest cost                                   |  |                  | 16,999  |                       |  |      | 18,943  |      |  |      | 19,030  |      |  |   | 3,315  |   |  |   | 3,706 |   |  |   | 3,780 |  
|Expected return on plan assets                  |  |                  | (22,358 | )                     |  |      | (22,179 | )    |  |      | (22,054 | )    |  |   |       |   |  |   |      |   |  |   |      |  
|Amortization of unrecognized transition asset   |  |                  | 41      |                       |  |      | 41      |      |  |      | 41      |      |  |   |       |   |  |   |      |   |  |   |      |  
|Amortization of unrecognized prior service cost |  |                  | (170    | )                     |  |      | 66      |      |  |      | 49      |      |  |   |       |   |  |   |      |   |  |   |      |  
|Amortization of unrecognized net loss (gain)    |  |                  | (868    | )                     |  |      | 181     |      |  |      | 595     |      |  |   | (1,221 | ) |  |   | (531  | ) |  |   | (809  | )
|                                                |  |                  |         |                       |  |      |         |      |  |      |         |      |  |   |        |   |  |   |       |   |  |   |       |  
|Total costs                                     |  | $                | 1,326   |                       |  | $    | 1,054   |      |  | $    | 3,426   |      |  | $ | 4,855  |   |  | $ | 6,822 |   |  | $ | 8,148 |  
|                                                |  |                  |         |                       |  |      |         |      |  |      |         |      |  |   |        |   |  |   |       |   |  |   |       |  

Depending upon actual future health care claims
experience, Intelsats actual costs may vary significantly
from those projected above. As of September 30, 2002 and 2003,
the assumed health care cost trend rate was a constant 7%.

F-27



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 13     Retirement
plans and other retiree benefits 
(Continued)


Increasing the assumed health care cost trend
rate by 1% each year would increase the other post-retirement
benefits obligation as of September 30, 2003 by $11,355.
Decreasing this trend rate by 1% each year would reduce the
other post-retirement benefits obligation as of
September 30, 2003 by $9,526. 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 post-retirement benefits cost for 2003 by
$1,721 and $1,409, respectively.



| |                                   
| | ----------------------------------
| | (b)     Other
    retirement plans

Intelsat maintains two defined contribution
retirement plans in the United States. One of these plans
provides benefits to employees based in the United States who
were hired before July 19, 2001, and the other plan
provides benefits to employees based in the United States hired
on or after July 19, 2001. The Company recognized
compensation expense of $1,750, $2,167 and $2,666 during 2001,
2002 and 2003 related to these defined contribution retirement
plans. Intelsat also maintains an unfunded deferred compensation
plan for executives; however, benefit accruals under the plan
were discontinued during 2001. The accrued liability for the
deferred compensation plan for executives was $951 and $1,542 as
of December 31, 2002 and 2003, respectively. Intelsat
maintains other defined contribution retirement plans in several
non-U.S. jurisdictions.

Note 14     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.

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 Intelsats initial public equity offering
and the third anniversary of the date of grant.

A summary of the share option activity is
presented below:

|                                         |  |               |           |                  |  |   |       | 
|---------------------------------------- |  | ------------- | --------- | ---------------- |  | - | ----- | 
|                                         |  | Share Options |           | Weighted-Average
|                                         |  | Outstanding   |           | Exercise Price  
|                                         |  |               |           |                 
|Options outstanding at January 1, 2001   |  |               |          |                  |  |   |      | 
|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 | 
|Options granted                          |  |               | 397,564   |                  |  | $ | 14.90 | 
|Options canceled                         |  |               | (76,523   | )                |  | $ | 18.76 | 
|                                         |  |               |           |                  |  |   |       | 
|Options outstanding at December 31, 2003 |  |               | 3,228,386 |                  |  | $ | 18.32 | 
|                                         |  |               |           |                  |  |   |       | 

F-28



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 14     Share
option plan  (Continued)


The following table summarizes information about
share options outstanding at December 31, 2003:

|                       |  |               |           |               |  |                       |   |  |  |  |     | 
|---------------------- |  | ------------- | --------- | ------------- |  | --------------------- | - |  |  |  | --- | 
|                       |  |               |           |               |  | Weighted-Average     
|                       |  | Share Options |           | Share Options |  | Remaining Contractual
|Option Price Per Share |  | Outstanding   |           | Exercisable   |  | Life (years)         
|                       |  |               |           |               |  |                      
|$19.05.                |  |               | 2,588,171 |               |  |                       |  |  |  |  | 7.8 | 
|$16.17.                |  |               | 246,463   |               |  |                       |  |  |  |  | 9.0 | 
|$14.90.                |  |               | 393,752   |               |  |                       |  |  |  |  | 9.6 | 
|                       |  |               |           |               |  |                       |   |  |  |  |     | 
|                       |  |               | 3,228,386 |               |  |                       |  |  |  |  | 8.1 | 
|                       |  |               |           |               |  |                       |   |  |  |  |     | 

SFAS No. 123, Accounting for Stock-Based
Compensation,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 estimated 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, 2002 and 2003 was $4.21, $2.26 and
$2.78 at the respective grant dates. 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.
During the years ended December 31, 2001, 2002 and 2003,
Intelsat used the minimum value method for the expected
volatility assumption. In addition, the following
weighted-average assumptions were used for grants made during
the years ended December 31, 2001, 2002 and 2003:

|                        |  |              |         |      |  |      |         |   |  |  |         |  
|----------------------- |  | ------------ | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                        |  |             
|                        |  | Years Ended 
|                        |  | December 31,
|                        |  |             
|                        |  | 2001         |         | 2002 |  | 2003
|                        |  |              |         |      |  |     
|Risk-free interest rate |  |              | 5.0     | %    |  |      | 3.0     | % |  |  | 4.2     | %
|Expected term           |  |              | 5 years |      |  |      | 5 years |   |  |  | 5 years |  
|Dividend yield          |  |              |        |      |  |      |        |   |  |  |        |  
|Expected volatility     |  |              |        |      |  |      |        |   |  |  |        |  

Subject to the approval of Intelsats
shareholders, in January 2004, the Companys board of
directors approved a 2004 share incentive plan and the
reservation of 6,720,000 ordinary shares for issuance under the
plan. The Company intends to hold a special general meeting of
its shareholders in the first half of 2004 in order to obtain
approval of the 2004 share incentive plan, the reservation of
shares for issuance under the plan and the issuance of shares
under the plan.

F-29



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)


Note 15     Income
taxes

The provision for income taxes consisted of the
following:

|         |                                  |              |         |       |  |      |        |        |  |   |        |        | 
|-------- | -------------------------------- | ------------ | ------- | ----- |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|         |                                  |             
|         |                                  | Years Ended 
|         |                                  | December 31,
|         |                                  |             
|         |                                  | 2001         |         | 2002  |  | 2003
|         |                                  |              |         |       |  |     
|Current  |                                  | $            | 35,946  |       |  | $    | 28,764 |        |  | $ | 8,088  |       
|Deferred |                                  |              | (30,587 | )     |  |      | 4,257  |        |  |   | 18,041 |       
|         |                                  |              |         |       |  |      |        |        |  |   |        |       
|         | Total provision for income taxes |              | $       | 5,359 |  |      | $      | 33,021 |  |   | $      | 26,129 | 
|         |                                  |              |         |       |  |      |        |        |  |   |        |       

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, which were
principally U.S. and U.K. taxes.

The components of Intelsats net deferred
tax asset were as follows:

|                          |                                                  |                              |   |        |        |  |   |         |        | 
|------------------------- | ------------------------------------------------ | ---------------------------- | - | ------ | ------ |  | - | ------- | ------ | 
|                          |                                                  |                             
|                          |                                                  | Years Ended                 
|                          |                                                  | December 31,                
|                          |                                                  |                             
|                          |                                                  | 2002                         |   | 2003  
|                          |                                                  |                              |   |       
|Deferred tax assets:      |                                                  |                              |   |        |        |  |   |        
|                          | Accrued liabilities                              |                              | $ | 5,679  |        |  | $ | 8,705   |       
|                          | Bad debt reserve                                 |                              |   |       |        |  |   | 5,446   |       
|                          | Accrued retirement benefits                      |                              |   | 38,356 |        |  |   | 18,315  |       
|                          | Net operating loss carry forward                 |                              |   |       |        |  |   | 3,176   |       
|                          | Alternative minimum tax credit carry forward     |                              |   |       |        |  |   | 745     |       
|                          | Other                                            |                              |   |       |        |  |   | 379     |       
|                          |                                                  |                              |   |        |        |  |   |        
|                          |                                                  | Total deferred tax assets    |   |        | 44,035 |  |   |         | 36,766 | 
|Deferred tax liabilities: |                                                  |                              |   |        |        |  |   |        
|                          | Basis difference of depreciation                 |                              |   | (9,096 | )      |  |   | (17,898 | )     
|                          | Basis difference of intangibles                  |                              |   |       |        |  |   | (1,541  | )     
|                          | Unrealized gain on available-for-sale securities |                              |   |       |        |  |   | (860    | )     
|                          |                                                  |                              |   |        |        |  |   |        
|                          |                                                  | Total net deferred tax asset |   | $      | 34,939 |  |   | $       | 16,467 | 
|                          |                                                  |                              |   |        |        |  |   |        

Note 16     Contractual
commitments

In the further development and operation of
Intelsats commercial global communications satellite
system, significant additional expenditures are anticipated.

F-30



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)


Note 16     Contractual
commitments  (Continued)

The portion of these additional expenditures
represented by contractual commitments as of December 31,
2003 and the expected year of payment are as follows:

|                                                                                                                  |  |         |        |                |  |         |         |       |  |   |         |  |  |   |         |  
|----------------------------------------------------------------------------------------------------------------- |  | ------- | ------ | -------------- |  | ------- | ------- | ----- |  | - | ------- |  |  | - | ------- | -
|                                                                                                                  |  |         |        | Satellite      |  |         |         |      
|                                                                                                                  |  |         |        | performance    |  |         |         |      
|                                                                                                                  |  | Capital |        | incentives and |  |         |         |      
|                                                                                                                  |  | leases  |        | other capital  |  | Expense |         | Total
|                                                                                                                  |  |         |        |                |  |         |         |      
|2004                                                                                                              |  | $       | 7,827  |                |  | $       | 174,849 |       |  | $ | 62,341  |  |  | $ | 245,017 |  
|2005                                                                                                              |  |         | 9,200  |                |  |         | 22,682  |       |  |   | 56,458  |  |  |   | 88,340  |  
|2006                                                                                                              |  |         | 9,200  |                |  |         | 10,741  |       |  |   | 62,537  |  |  |   | 82,478  |  
|2007                                                                                                              |  |         | 9,200  |                |  |         | 9,129   |       |  |   | 79,289  |  |  |   | 97,618  |  
|2008                                                                                                              |  |         | 9,200  |                |  |         | 7,405   |       |  |   | 91,213  |  |  |   | 107,818 |  
|2009 and thereafter                                                                                               |  |         | 3,756  |                |  |         | 37,895  |       |  |   | 220,868 |  |  |   | 262,519 |  
|                                                                                                                  |  |         |        |                |  |         |         |       |  |   |         |  |  |   |         |  
|                                                                                                                  |  | $       | 48,383 |                |  | $       | 262,701 |       |  | $ | 572,706 |  |  | $ | 883,790 |  
|                                                                                                                  |  |         |        |                |  |         |         |       |  |   |         |  |  |   |         |  
|Less: amount representing interest on capital
    lease obligations and deferred satellite performance incentives |  |         | (8,120 | )              |  |         | (23,113 | )     |  |   |        |  |  |   | (31,233 | )
|                                                                                                                  |  |         |        |                |  |         |         |       |  |   |         |  |  |   |         |  
|Total net commitments                                                                                             |  | $       | 40,263 |                |  | $       | 239,588 |       |  | $ | 572,706 |  |  | $ | 852,557 |  
|                                                                                                                  |  |         |        |                |  |         |         |       |  |   |         |  |  |   |         |  

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 IS-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 7 for further discussion.

Intelsat leases space in its Washington, D.C.
building to various tenants. As of December 31, 2003, the
minimum rental income anticipated with respect to these leases
is approximately $16,031, of which $8,924 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 17     Contingencies



| |                  
| | -----------------
| | (a)     Insurance

At December 31, 2003, Intelsat had insurance
covering the in-orbit operations of six Intelsat IX series
satellites. Under the terms of this policy, Intelsat co-insures
$150,000 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. This insurance policy expires in November
2004. Intelsat does not have in-orbit insurance coverage for the
16 satellites not covered under this insurance policy.
These 16 satellites individually have a net book value of
less than $150,000.

At December 31, 2003, a seventh
Intelsat IX series satellite, the IS-907 satellite, was
insured under a policy covering its launch and first year of
in-orbit operations in an amount equal to its cost, excluding
satellite performance incentives. This policy expired on
February 14, 2004, and IS-907 then became insured under the
policy covering the other Intelsat IX series satellites
with Intelsat co-insuring $150,000 of the net book value of

F-31



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 17     Contingencies 
(Continued)


the satellite and the insurers covering the
balance of the net book value, excluding capitalized performance
incentives.

Intelsat has obtained launch insurance for the
book value of the IS-10-02 satellite under construction. For the
period from the satellites separation from the launch
vehicle through in-orbit testing, Intelsat obtained insurance
covering the book value of the satellite, excluding capitalized
performance incentives. After completion of the in-orbit testing
period, Intelsat will co-insure approximately $53,000 of the net
book value of the IS-10-02 satellite through its first year of
in-orbit operations, with insurers covering the balance of the
net book value, excluding capitalized performance incentives.



| |                                  
| | ---------------------------------
| | (b)     Litigation
    and claims

The Company is subject to litigation in the
normal course of business, but management does not believe that
the resolution of any pending proceedings would have a material
adverse effect on the Companys financial position or
results of operations.



| |                                    
| | -----------------------------------
| | (c)     MFC and
    LCO protections

Most of the customer service commitments entered
into prior to the privatization were transferred to Intelsat
pursuant to novation agreements. These agreements contain
provisions, including provisions for most favored customer
(MFC) and lifeline connectivity obligation
(LCO) protections, that constrain Intelsats
ability to price services in some circumstances. MFC protection
entitles eligible customers to the lowest rate Intelsat charges
after July 18, 2001 for satellite capacity having
substantially the same technical and commercial terms, subject
to limited exceptions. MFC protection continues until
July 18, 2006. Intelsat management does not believe that
the MFC terms significantly restrict the Companys ability
to price services competitively. Intelsats LCO contracts
require the Company to provide customers with the right to renew
their service commitments covered by LCO contracts at prices no
higher than the prices charged for those services on the
privatization date. Under some circumstances, Intelsat may also
be required by an LCO contract to reduce the price for a service
commitment covered by the contract. LCO protection may continue
until July 18, 2013. As of December 31, 2003, Intelsat
had not been required to reduce prices for its LCO-protected
service commitments.



| |                      
| | ---------------------
| | (d)     ORBIT
    Act

Intelsat is subject to the requirements of the
Open-Market Reorganization for the Betterment of International
Telecommunications Act (the ORBIT Act), which sets
forth criteria that the U.S. Federal Communications Commission
(the FCC) must evaluate in considering
Intelsats license and renewal applications and in
connection with customer requests for authorization to use
Intelsats satellite capacity to provide non-core
services to, from or within the United States and to
provide additional services. Non-core
services are defined in the ORBIT Act as any services
other than public-switched voice telephony and occasional use
television. The FCC defines additional services as
direct-to-home or direct broadcast satellite video services or
services in the Ka- or V-band. One of the statutory criteria
requires Intelsat to make an initial public offering by no later
than June 30, 2004. If the FCC determines that Intelsat has
failed to comply with the requirements of the ORBIT Act, the FCC
may impose limitations on or deny Intelsats applications
for satellite licenses and for the renewal of these licenses and
may limit or revoke previous authorizations to provide
non-core services to, from or within the United
States. The FCC may also deny licensing for additional
services.

F-32



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)


Note 18     Business
segment and geographic information

Intelsat operates in a single industry segment,
in which it provides satellite services to its communications
customers around the world. Intelsats shareholders
generated approximately 89%, 78% and 53% of revenue in 2001,
2002 and 2003, respectively.

The geographic distribution of Intelsats
revenue was as follows:

|                                |  |              |    |      |  |      |    |   |  |  |    |  
|------------------------------- |  | ------------ | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                |  |             
|                                |  | Years Ended 
|                                |  | December 31,
|                                |  |             
|                                |  | 2001         |    | 2002 |  | 2003
|                                |  |              |    |      |  |     
|Europe                          |  |              | 29 | %    |  |      | 29 | % |  |  | 25 | %
|North America and the Caribbean |  |              | 24 | %    |  |      | 24 | % |  |  | 27 | %
|Asia Pacific                    |  |              | 18 | %    |  |      | 17 | % |  |  | 17 | %
|Latin America                   |  |              | 13 | %    |  |      | 13 | % |  |  | 11 | %
|Sub-Saharan Africa              |  |              | 9  | %    |  |      | 11 | % |  |  | 13 | %
|Middle East and North Africa    |  |              | 7  | %    |  |      | 6  | % |  |  | 7  | %

Approximately 15%, 12%, and 5% of Intelsats
revenue was derived from its largest customer in 2001, 2002 and
2003, 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 2001, approximately 36% of Intelsats revenue in
2002, and approximately 35% of Intelsats revenue in 2003.
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 19     Restructuring
costs

|                                                   |  |   |        |  
|-------------------------------------------------- |  | - | ------ | -
|Accrued restructuring costs, January 1, 2001       |  | $ |       |  
|Restructuring costs charged                        |  |   | 7,300  |  
|Amounts paid                                       |  |   | (3,600 | )
|                                                   |  |   |        |  
|Accrued restructuring costs, December 31,
    2001 |  |   | 3,700  |  
|Restructuring costs charged                        |  |   | 5,522  |  
|Amounts paid                                       |  |   | (4,598 | )
|                                                   |  |   |        |  
|Accrued restructuring costs, December 31,
    2002 |  |   | 4,624  |  
|Amounts paid                                       |  |   | (3,787 | )
|Reversal of accrual                                |  |   | (837   | )
|                                                   |  |   |        |  
|Accrued restructuring costs, December 31,
    2003 |  | $ |       |  
|                                                   |  |   |        |  

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.

F-33



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 19     Restructuring
costs  (Continued)


In December 2002, Intelsat reduced the size of
its workforce by 130 employees, or approximately 12%, reflecting
efforts to 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 restructuring costs of $4,624
were included in accounts payable and accrued liabilities
reflected in the accompanying consolidated balance sheet. Due to
a change in estimate of the restructuring costs accrued during
2002, the Company reversed $837 during 2003. All costs were paid
by the end of 2003.

Note 20     Customer
reorganizations



| |                                    
| | -----------------------------------
| | (a)     WorldCom
    reorganization

Upon the closing of the COMSAT acquisition
described in Note 3, WorldCom, Inc. became one of
Intelsats largest customers. On July 21, 2002,
WorldCom, Inc. filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. 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. Although the bankruptcy court
in October 2003 approved WorldCom, Inc.s plan of
reorganization, management cannot predict the effect that
WorldCom, Inc.s bankruptcy proceedings will have on future
revenue. For the year ended December 31, 2003, revenue
generated from WorldCom, Inc. and its affiliates was
approximately $43,200. At December 31, 2003, Intelsat had
receivables of $13,021 due from WorldCom, Inc. and affiliates,
of which $6,676 was reserved for in the allowance for doubtful
accounts and $8,416 related to pre-petition receivables.



| |                                          
| | -----------------------------------------
| | (b)     Verestar,
    Inc. reorganization

Verestar, Inc., one of Intelsats largest
customers, filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code on December 22,
2003. Revenue generated from Verestar, Inc. and its affiliates
for the years ended December 31, 2002 and 2003, was
approximately $19,800 and $24,900, respectively. As of December
31, 2003, Intelsat had receivables of $7,867 due from Verestar,
Inc. and its affiliates. The Company believes it has adequate
reserves to cover its exposure. Management cannot predict the
effect that Verestar, Inc.s bankruptcy proceedings will
have on future revenue.

Note 21     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 that are also
shareholders in the amounts of $20,646 and $18,976 at
December 31, 2002 and 2003, respectively. Collateral
generally represents cash balances held in accordance with
service 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.

F-34



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 21     Related
party transactions  (Continued)




| |                                                              
| | -------------------------------------------------------------
| | (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 of financial difficulties experienced by
Teleglobe Inc., 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, because collection was not ensured. Revenue generated from
Teleglobe Inc. and its affiliates was approximately $47,800 in
2001, $35,100 in 2002 and $28,100 in 2003.

On September 20, 2002, Intelsat Global
Sales & Marketing Ltd. (Intelsat Global
Sales) 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,
which holds the shares in trust for Intelsat Global Sales,
subject to specified limited voting and dividend rights of
Teleglobe Inc. The share purchase agreement provides that the
escrow agent will sell the shares in Intelsats
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 $90,139, Intelsat Global Sales
will receive $90,139, and 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. Intelsat did not conduct an initial public offering of its
ordinary shares by December 31, 2003 and is currently in
discussions with Teleglobe Inc. regarding the valuation of the
shares held in escrow. Based on valuations performed by the
Company and its financial advisors, the company currently
expects that all shares held in escrow will be distributed to
Intelsat Global Sales.

Intelsat has accounted for the share purchase
transaction similar to an acquisition of treasury stock. Under
FASB Technical Bulletin No. 85-6, Accounting for a
Purchase of Treasury Shares at a Price Significantly in Excess
of the Current Market Price of the Shares and the Income
Statement Classification of Costs Incurred in Defending against
a Takeover Attempt, 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 Global
Sales exceeded the cash payments made to Teleglobe Inc. on
September 20, 2002 by more than the amounts due to Intelsat
Global Sales. 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 revenue that had not been previously
recognized since its collection was not certain. 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.

F-35



---



##### 



INTELSAT


(SEE NOTE 1)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(in thousands, except percentages and share
and per share amounts)




Note 21     Related
party transactions  (Continued)


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. On December 31, 2002, the
Company reduced its obligation to Teleglobe Inc. to $19,780
based on a valuation of the derivative on that date. At
December 31, 2003, Intelsat no longer had an obligation to
Teleglobe Inc. based on a valuation of the derivative on that
date, and recorded other income of $19,780 for the year ended
December 31, 2003, for the amount of the adjustment, in the
accompanying consolidated statement of operations. Intelsat does
not currently expect that the distribution of the shares held in
escrow as provided under the share purchase agreement with
Teleglobe Inc. will impact the Companys accounting for the
share purchase transaction as of December 31, 2003.

Note 22     Subsequent
events (unaudited)



| |                                                        
| | -------------------------------------------------------
| | (a)     Amendment
    to Loral Asset Purchase Agreement

In March 2004, the Company, Intelsat Bermuda
and the Sellers entered into an amendment to the asset purchase
agreement relating to the proposed Loral transaction, which is
described in Note 3(a). The amendment related to, among other
things, certain adjustments to the purchase price and the waiver
of specified conditions to the closing of the transaction. The
amendment also reduced the amount of the deposit to be made
under the Companys new procurement agreement with SS/L,
described in Note 3(a), from $100,000 to $50,000. The amendment
also provides that, to the extent the insurance proceeds in
respect of Telstar 4 are less than $141,000, not taking
into account warranty payments, the Company will receive a
credit in the amount of such shortfall for payments the Company
is required to make under its new procurement agreement with
SS/L described above. This amendment will become effective upon
the later of the approval of the bankruptcy court and the
consent of the lenders under the Companys new $800,000
credit facility that represent more than 50% of the lending
commitments under the facility. If the bankruptcy court does not
approve the amendment by April 12, 2004 or the required
lenders do not provide their consent by the earlier of
April 12, 2004 and the date the bankruptcy court has
approved the amendment, the Company and the Sellers are each
entitled to terminate the amendment. If the bankruptcy court
does not approve the amendment or the required lenders do not
provide their consent, some of the terms of the asset purchase
agreement may change or the transaction may not occur.



| |                                                            
| | -----------------------------------------------------------
| | (b)     Amendment
    to Teleglobe Share Purchase Agreement

In March 2004, Intelsat Global Sales and
Teleglobe Inc. entered into an amendment to the Teleglobe share
purchase agreement, which is described in Note 21(b). The
amendment provides that the shares held in escrow will be valued
pursuant to a formula based on the range for the initial public
offering price of the Companys ordinary shares. Based on
this amendment, the Company expects that all of the shares held
in escrow will be distributed to Intelsat Global Sales.

F-36



---



##### 



SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

|                              |                                 |                |   |            |  |          |   |            |  |             |   |            |     |  |   |        |     |  |   |         |       |  |   |        | 
|----------------------------- | ------------------------------- | -------------- | - | ---------- |  | -------- | - | ---------- |  | ----------- | - | ---------- | --- |  | - | ------ | --- |  | - | ------- | ----- |  | - | ------ | 
|                              |                                 | Balance at     |   | Charged to |  | Charged  |   |            |  |             |   | Balance at
|                              |                                 | Beginning of   |   | Costs and  |  | to Other |   |            |  |             |   | End of    
|Description                   |                                 | Period         |   | Expenses   |  | Accounts |   | Deductions |  | Adjustments |   | Period    
|                              |                                 |                |   |            |  |          |   |            |  |             |   |           
|                              |                                 |               
|                              |                                 | (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     | (1) |  |   | $3,277 | (2) |  | $ |        |       |  | $ | 24,823 | 
|                              | Other                           |                | $ |           |  |          | $ |           |  |             | $ |           |     |  | $ |       |     |  | $ | 3,277   | (2)   |  | $ | 3,277  | 
|                              | Restructuring reserve           |                | $ | 3,700      |  |          | $ | 5,522      |  |             | $ |           |     |  | $ | 4,598  |     |  | $ |        |       |  | $ | 4,624  | 
|                             
|Year ended December 31, 2003: |                                 |                |   |            |  |          |   |            |  |             |   |            |     |  |   |        |     |  |   |         |       |  |   |       
|                              | Allowance for doubtful accounts |                | $ | 24,823     |  |          | $ | 13,897     |  |             | $ |           |     |  | $ | 1,716  |     |  |   | ($4,894 | ) (3) |  | $ | 32,110 | 
|                              | Other                           |                | $ | 3,277      |  |          | $ |           |  |             | $ |           |     |  | $ | 3,277  | (4) |  | $ |        |       |  | $ |       | 
|                              | Restructuring reserve           |                | $ | 4,624      |  |          | $ |           |  |             | $ |           |     |  | $ | 3,787  |     |  | $ | 837     | (5)   |  | $ |       | 



---



|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Allowance for doubtful accounts recorded in
    connection with the acquisition of assets of COMSAT World
    Systems.                                  
|   
|(2) | Represents reclassification.                                                                                                                            
|   
|(3) | Adjustment to reflect finalization of the
    allocation of the purchase price in connection with the
    acquisition of assets of COMSAT World Systems.
|   
|(4) | Represents asset written off against reserve.                                                                                                           
|   
|(5) | Reversal of 2002 restructuring costs due to a
    change in estimate.                                                                                   

F-37



---



##### 



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  |         |  | Officers Certificate dated November 7,
    2003 relating to Intelsat, Ltd.s 5 1/4% Senior Notes
    due 2008 and its 6 1/2% Senior Notes due 2013, including
    the forms of Notes (incorporated by reference to
    Exhibit 4.2 of the Registration Statement on Form F-4,
    File No. 333-110671, filed on November 21, 2003).                                                       
|        | 2.4  |         |  | 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).                                                                                                                                                                                                     
|        | 2.5  |         |  | 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).                                                             
|        | 2.6  |         |  | Registration Rights Agreement, dated as of
    November 7, 2003, among Intelsat, Ltd., Morgan
    Stanley & Co. Incorporated, Citigroup Global Markets
    Inc. and BNP Paribas Securities Corp. (incorporated by reference
    to Exhibit 4.7 of the Registration Statement on
    Form F-4, File No. 333-110671, filed on
    November 21, 2003).                                        
|        | 2.7  |         |  | 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).                 
|        | 2.8  |         |  | 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).
|        | 2.9  |         |  | 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).
|        | 2.10 |         |  | 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).                                                
|        | 2.11 |         |  | 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).                                          



---



##### 



|        |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ---- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 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).
|        | 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 |         |  | $800,000,000 Credit Agreement, dated as of
    December 17, 2003, among Intelsat, Ltd., Citigroup Global
    Markets Inc., BNP Paribas, Morgan Stanley Senior Funding, Inc.,
    ABN AMRO Bank N.V., Credit Lyonnais, New York Branch,
    Citicorp North America, Inc. and the lenders named therein.*                                                                                                                                                                                                               
|        | 4.12 |         |  | Headquarters Land Lease, dated as of June 8,
    1982, 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).                                                                                                                                                                                                
|        | 4.13 |         |  | 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)                                                                                                                                                                                
|        | 4.14 |         |  | 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)                                                                                                                                                                                   



---



##### 



|        |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | ---- | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 4.15 |         |  | 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)                                                                                                                                                                                                                                                                                      
|        | 4.16 |         |  | 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)                                                                                                                                                                                                                                                                           
|        | 4.17 |         |  | 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)                                                                                                                          
|        | 4.18 |         |  | 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)                 
|        | 4.19 |         |  | Amendment No. 8, dated March 5, 2004,
    to Contract No. INTEL-824, between Intelsat Global Service
    Corporation and China National Instruments Import and Export
    Corporation, on behalf of Beijing Communications Corporation
    (Beijing TTC&M). (3)*                                                                                                                                                                                                                                                                                                                                            
|        | 4.20 |         |  | 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 and to Exhibit No. 10.21 of the
    Registration Statement on Form F-4, File
    No. 333-110671, filed on November 21,
    2003). (1) (2)                                                                                                                                                                           
|        | 4.21 |         |  | 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)                                                                                                                                                                                                                                                               
|        | 4.22 |         |  | 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, and Exhibit 1 of Intelsat,
    Ltd.s Quarterly Report on Form 6-K for the period
    ended March 31, 2003, File No. 000-50262, submitted on
    May 14, 2003). (1)                                                                                                          
|        | 4.23 |         |  | 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 and to Exhibit No. 10.25 of the
    Registration Statement on Form F-4, File
    No. 333-110671, filed on November 21,
    2003). (1) (2)                                                                                                                                                                                     
|        | 4.24 |         |  | 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, Exhibit 10.32 of Amendment
    No. 1 to the Registration Statement on Form F-4, File
    No. 333-99189, filed on October 15, 2002 and
    Exhibit 2 of Intelsat, Ltd.s Quarterly Report on
    Form 6-K for the period ended June 30, 2003, File
    No. 000-50262, submitted on August 14, 2003). (1)
|        | 4.25 |         |  | 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)                                                                                                                                                                                                                                                                                          



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##### 



|        |      |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ---- | ------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 4.26 |         |  | 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 and
    Exhibits 4.25 and 4.26 of Intelsat, Ltd.s Annual
    Report on Form 20-F for the year ended December 31,
    2002, File No. 333-99189, filed on March 28,
    2003). (1)                                                                                                               
|        | 4.27 |         |  | 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 (incorporated by reference to
    Exhibit 4.25 of Intelsat, Ltd.s Annual Report on
    Form 20-F for the year ended December 31, 2002,
    File No. 333-99189, filed on March 28,
    2003). (2)                                                                                                                                                                                                             
|        | 4.28 |         |  | 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 (incorporated by reference to
    Exhibit 4.26 of Intelsat, Ltd.s Annual Report on
    Form 20-F for the year ended December 31, 2002,
    File No. 333-99189, filed on March 28,
    2003). (2)                                                                                                                                                                                                             
|        | 4.29 |         |  | 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 and Exhibits 3 and 4 of Intelsat,
    Ltd.s Quarterly Report on Form 6-K for the period
    ended June 30, 2003, File No. 000-50262, submitted on
    August 14, 2003). (1)                                                                                                   
|        | 4.30 |         |  | 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).                                                                                                                                                                                                                                                                                                                       
|        | 4.31 |         |  | 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)                                                                                                                                     
|        | 4.32 |         |  | 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).                                                                                                                                                                                                                                                                                            
|        | 4.33 |         |  | 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. (incorporated by reference to Exhibit 4.31 of
    Intelsat, Ltd.s Annual Report on Form 20-F for the
    year ended December 31, 2002, File No. 333-99189,
    filed on March 28, 2003). (2)                                                                                                                                                                 
|        | 4.34 |         |  | Asset Purchase Agreement, dated as of
    July 15, 2003, among Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Loral Space & Communications Corporation, Loral
    SpaceCom Corporation and Loral Satellite, Inc., as amended
    (incorporated by reference to Exhibit 1 of Intelsat,
    Ltd.s Quarterly Report on Form 6-K for the period
    ended June 30, 2003, File No. 000-50262, submitted on
    August 14, 2003 and Exhibits 1, 2 and 3 of Intelsat,
    Ltd.s Quarterly Report on Form 6-K for the period
    ended September 30, 2003, File No. 000-50262,
    submitted on October 29, 2003).
|        | 4.35 |         |  | Amendment No. 4, dated as of March 5,
    2004, to Asset Purchase Agreement among Intelsat, Ltd., Intelsat
    (Bermuda), Ltd., Loral Space & Communications
    Corporation, Loral SpaceCom Corporation and Loral Satellite,
    Inc. (3)*                                                                                                                                                                                                                                                                                                                                                                
|        | 4.36 |         |  | Purchase Agreement, dated as of October 31,
    2003, among Intelsat, Ltd., Morgan Stanley & Co.
    Incorporated, Citigroup Global Markets Inc. and BNP Paribas
    Securities Corp. (incorporated by reference to
    Exhibit 10.32 of the Registration Statement on
    Form F-4, File No. 333-110671, filed on
    November 21, 2003).                                                                                                                                                                                                                                                                 
|        | 4.37 |         |  | Amending Agreement to Share Purchase Agreement,
    dated as of March 11, 2004, between Teleglobe, Inc. and Intelsat
    Global Sales & Marketing Ltd.*                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 6.1  |         |  | Statement re computation of per share earnings.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 8.1  |         |  | List of subsidiaries.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



---



##### 



|        |      |         |  |                                                                                                                                                            
|------- | ---- | ------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |        
|Number  |      | Exhibit
|        |      |        
|        | 12.1 |         |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                   
|        | 12.2 |         |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                   
|        | 13.1 |         |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*
|        | 13.2 |         |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 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
    November 21, 2003.
|   
|(3) | 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.