NEW YORK (Bloomberg) ? Intelsat Ltd. agreed to buy PanAmSat Holding Corp. for $3.2 billion in cash to form the world's largest commercial satellite operator and gain broadcasting customers including Time Warner Inc.'s CNN and MTV.

Intelsat, owned by four private equity firms including Apollo Management LP, will pay $25 a share for PanAmSat, the world's largest distributor of satellite-based television channels. That's 26 percent more than the closing price of $19.80 on August 26 in New York Stock Exchange composite trading. Intelsat said in a statement yesterday it also will assume $3.2 billion of PanAmSat's debt.

The purchase will create a company with more than $1.9 billion in sales and may help Bermuda-based Intelsat compete with SES Global SA, the current No. 1 satellite operator. The companies are fighting to cut costs and win broadcasting customers as demand for high-definition TV and fast Internet service increases.

"Eliminating a competitor should be good for the pricing environment of the entire industry, and Intelsat can run their satellites more efficiently than before," said Thijs Berkelder, an Amsterdam-based analyst at Petercam, an independent Belgian brokerage. Berkelder recommends investors buy SES Global shares. "You can expect much more consolidation to take place."

The value of mergers involving satellite telecommunications companies tripled last year to $13.9 billion, data compiled by Bloomberg show. Of the 270 commercial satellites circling around the globe, about 70 percent are owned by the biggest operators, Berkelder estimates.

Shares of PanAmSat surged $4.30, or 22 percent, to $24.10 at 9:42 a.m. on the NYSE. The company sold shares at $18 each in a March initial public offering to become the first satellite company to trade on the New York exchange.

Intelsat will increase the number of satellites it has to 53 from 28, offering coverage in more than 220 countries. The company currently ranks second among satellite operators and PanAmSat is third. SES Global operates 35 satellites.

The purchase needs regulatory approval. Wilton, Connecticut- based PanAmSat, whose satellites transmit Cable News Network and Viacom Inc.'s MTV, had sales of $827.1 million in 2004.

PanAmSat this month said it plans to launch one and a half satellites a year on average to replace and upgrade its fleet. Last month, it bought a satellite and two orbital slots from France's Alcatel SA to expand in the Middle East, Africa and Asia.

"They may be able to save some cash, they may be able to rationalize some assets," said Peter Jackson, chief executive of Hong Kong-based competitor Asia Satellite Telecommunications Holdings Ltd. "It could mean better pricing for everyone."

Asia Satellite is controlled by Luxembourg-based SES Global and Beijing-based China International Trust & Investment Corp., owned by the nation's Cabinet. The company last week said profit fell 27 percent as overcapacity forced operators to cut prices.

Intelsat's 7.625 percent notes maturing in 2012 fell as much as 3.25 cents to 87.5 cents on the dollar to yield 10.3 percent on Trace, the bond price reporting service of the NASD. The extra yield investors demand to hold Intelsat's notes over comparable US Treasuries widened by 73 basis points to 621 basis points. A basis point is 0.01 percentage point.

Frankfurt-based Deutsche Bank AG, Credit Suisse First Boston as well as Citigroup Inc. and Lehman Brothers Inc., which are both based in New York, will provide financing for the acquisition. Zurich-based Credit Suisse First Boston advised Intelsat on the deal, and PanAmSat was advised by Morgan Stanley of New York.

David McGlade, chief executive officer of Intelsat, will be CEO. Joseph Wright, currently CEO of PanAmSat, will be chairman.

Intelsat was sold last year to a group of four buyout firms including New York-based Apollo and Apax Partners Worldwide LLP of London, for $5 billion including debt. SES was created when it bought GE American Communications for $4.3 billion in November 2001 to help it expand in the US market.

Satellite companies are attractive investments for buyout firms because of their ability to generate cash, which can be used to repay debt assumed in the purchases.

The combination also lets Intelsat, which sends voice, video and data feeds, expand into "emerging nations and remote areas" that have no access to fixed-line networks, the company said.

"Clients today demand a global reach," said Dirk Saelens, an analyst at KBC Securities in Brussels, who rates SES "underperform" because he finds the stock too expensive.

SES Global CEO Ferdinand Kayser this month said he plans to set up a satellite-based phone service in Africa by next year. Other satellite operators that SES may consider buying include Eutelsat SA or New Skies Satellites Holdings Ltd., Saelens said. Private equity firm Blackstone Group LP bought New Skies 14 months ago and sold 39 percent of it to the public in May.