August 7, 2003 12:19 PM PDT

Satellite network gets insurance static

Insurers won't pay to repair problems threatening XM Satellite Radio's constellation of satellites, XM executives disclosed on Thursday.

XM and several other satellite radio providers use Boeing 702 satellites, which have a well-known problem with their solar arrays, which supply their power. XM stressed Thursday that the problems haven't yet affected the company's 700,000 subscribers.

But they have been the source of several financial headaches, including Thursday's disclosure that insurers won't let XM draw from a $400 million policy on the satellites, XM Chief Executive Hugh Panero said on Thursday.

An XM representative did not disclose the insurers' names. According to an XM statement, the insurance companies believe "the satellites are still performing above the insured levels."

"We've said all along this will be a protracted type of process," Panero said during a conference call with analysts. He vowed "litigation if necessary" to resolve the insurance dispute.

XM's insurance problems are not isolated. Other Boeing 702 owners, including first-ever commercial satellite operator PanAmSat, are going through the same insurance hassles, Panero said. A PanAmSat representative could not immediately be reached for comment Thursday.

The insurance policy problems were disclosed in a conference call to discuss XM's second-quarter loss of $161.9 million, or $1.38 per share. That compares with a $117.2 million loss reported from the same period a year ago.

XM sells a variety of subscriptions, including a $10-a-month plan for unlimited access to 101 radio stations and exclusive musical content.


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