The news came the day after the Federal Communications Commission approved the bid, saying it would not reduce industry-wide competition.

"The Comsat-Lockheed Martin partnership is a strong pro-competitive merger that will increase competition in the global telecommunications market by giving consumers an additional choice," Comsat president and CEO Betty Alewine said in a statement.

The second stage of the deal, a one-for-one exchange of shares, requires Congress to alter a 1962 law which created Comsat and which prevents it from merging with another company.

News of the decision was met by hearty appluase by Comsat officials. The FCC action fulfills a major regulatory requirement necessary to conclude Lockheed Martin's tender offer. Comsat is also working to secure Department of Justice anti-trust clearance, the final regulatory condition necessary to complete the tender offer by September 18, 1999.

"The Commission's action today is an important step forward," said Comsat President and Chief Executive Officer, Betty C. Alewine. "The proposed merger of Comsat and Lockheed Martin would establish a stronger American company to compete in the international telecommunications market."

In reply, James Cuminale, Panamsat's general counsel said, "we believe the FCC disregarded key evidence that this transaction will give Lockheed Martin de facto control of Comsat in violation of the Communications Act, the Communications Satellite Act and the FCC's own rules and policies.

"In addition, the FCC's action may compromise efforts by Congress to enact comprehensive satellite reform legislation that would ensure the pro-competitive approach to Intelsat privatization.

The merger agreement between Comsat and Lockheed Martin outlines a two-step transaction. Under terms of the agreement, Lockheed Martin's cash tender offer to acquire 49% of Comsat stock at a price of $45.50 per share is scheduled to expire at noon on September 18.

The transaction's second phase, the merger of a Lockheed Martin subsidiary and Comsat, is contingent upon the satisfaction of certain conditions including enactment of federal legislation to remove the existing restrictions on authorized carrier ownership of Comsat voting stock.

Legislation addressing the ownership cap has passed the Senate unanimously (S.376), but has yet to be introduced in the House of Representatives. This phase of the transaction will be accomplished in a 1-for-1 exchange of Lockheed Martin common stock for Comsat stock. In August, Comsat shareholders voted overwhelmingly in favor of the proposed merger.

In a related action, the FCC authorized satellite users to directly access Intelsat, an action that would end Comsat's role as an exclusive provider of Intelsat access in the United States. The FCC action would also require users to pay a signatory surcharge of 5.58 percent to cover Comsat's costs as the U.S. participant in Intelsat.

The level of the surcharge by itself, which is paid to Comsat, is not expected to have a material adverse effect on Comsat's financial performance during the period leading up to Intelsat privatization. Comsat cannot assess the full impact of direct access until it reviews the text of the FCC's report and order which is not as yet available.

"The real answer to ensure fair and open competition in the international telecommunications market is privatization of Intelsat, rather than an interim direct access scheme," Mrs. Alewine said. "Comsat is committed to achieving a pro-competitive privatization of Intelsat in the near term. That is the best result for Comsat's shareholders, competition policy, and Intelsat itself." The privatization of Intelsat is currently scheduled to conclude in the first quarter of 2001. Panamsat's Cuminale said, "as a long-time proponent of direct access, PanAmSat is gratified that some very modest steps have been taken to chip away at Comsat's monopoly status in the United States.

"However, it is unfortunate that the FCC has placed several constraints on direct access, such as requiring companies that access Intelsat directly to pay Comsat a fee, that will substantially reduce the economic benefits to the U.S. consumer and the potential for increased competition. "PanAmSat will continue to work closely with the FCC and Congress to achieve fairness and open competition in all issues related to Intelsat and its U.S. signatory."

AFP wire services contributed to this report.

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