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Thursday, February 20, 2020

Intelsat to FCC: C-Band Alliance is dead, we deserve more money

WASHINGTON — Intelsat on Feb. 19 urged the FCC to give the company at least $1 billion more of $9.7 billion in proposed compensation for clearing C-band spectrum for 5G networks and to treat the C-Band Alliance Intelsat formed with rivals SES and Telesat as essentially dead. 


Intelsat said it has more C-band revenue, capacity use and satellite dishes in operation across the continental United States than any other operator, and that it therefore deserves $5.8 billion to $6.5 billion in accelerated clearing payments instead of the $4.85 billion offered under the U.S. Federal Communications Commission’s proposed plan. 


The company’s solo gambit, which earned a sharp rebuke from SES and approval from investors, followed one day after hedge fund Appaloosa of Short Hills, New Jersey, took a 7.4% stake in Intelsat for the express purpose of compelling the company to demand more clearing payments from the FCC. 


Appaloosa said the FCC’s order, which would repurpose 280 megahertz of satellite C-band spectrum for 5G, gives Intelsat only “token compensation” for the high-value spectrum while overloading the debt-riddled satellite operator with costs it may not be able to finance. 


Without better terms, Appaloosa said its conviction is that Intelsat “has no choice but to resort to bankruptcy and litigation in order to protect Intelsat’s valuable license rights from an illegal modification.”


In an earnings call Feb. 20, Intelsat CEO Steve Spengler made no mention of the Appaloosa investment, but defended the satellite operator’s decision to unilaterally lobby the FCC. 


“It was very clear that the FCC was treating each satellite operator individually” following its draft C-band plan released Feb. 7, Spengler said. “Therefore we believe it made sense for each company to respond from its own perspective once the FCC changed that orientation.”


Three out of five FCC commissioners expressed early support for the C-band plan, indicating enough support to pass when they vote on Feb. 28. But that was before Intelsat declared the C-Band Alliance it spearheaded the creation of as defunct. 


In its Feb. 19 letter, Intelsat said the FCC’s order “should reflect that there will be no C-Band Alliance going forward.”


“Where the draft order treats the C-Band Alliance as a single entity, it should instead treat Intelsat, SES, and Telesat as individual companies,” Intelsat wrote. 


SES on Feb. 20 issued a blistering response, asserting the C-Band Alliance’s significance but also threatening to work without, and possibly sue Intelsat. 


“SES is disappointed by Intelsat’s eleventh-hour attempt to renounce its commitments made to other [C-Band Alliance] members and the Commission over the course of this proceeding, in aid of a transparent and egregious attempt to capture a greater share of the proposed accelerated relocation payments,” SES said.


SES is the second largest member of the C-Band Alliance and is eligible to receive $4 billion in accelerated spectrum clearing payments through the FCC’s planned C-band auction. 


“Having worked collaboratively for a long period of time on this project, this sudden and recent change in direction by Intelsat is both disappointing and not legally compliant,” SES said, adding it “will hold Intelsat responsible under its commitments.”


SES didn’t specify what those commitments were, though Intelsat and SES had been working together to jointly establish command and control gateway stations in the U.S. for their satellites. Intelsat told the FCC it now wants separate gateways. 


Lynette Simmons, a spokeswoman for Telesat, said the company would not comment on Intelsat’s actions or SES’s retort. 


The C-Band Alliance began to fray in September when Eutelsat Communications of Paris quit the group over internal disagreements with other members. 


Intelsat stock surges on news


Intelsat’s stock, at $4.38 a share as of 1:00 p.m. Eastern, is up more than 25% from where it was trading last week, a surge that analyst Chris Quilty said reflects investor optimism about Appaloosa’s stake. 


“Investors took heart from that letter that there might be upside that could be negotiated from the FCC order,” he said. 


That optimism overshadowed Intelsat’s 2019 financial troubles. 


Intelsat on Feb. 20 reported $913.6 million in losses on $2.06 billion in revenue for 2019. The firm forecasts 2020 revenues of $1.98 billion to $1.93 billion for 2020. 


David Tolley, Intelsat chief financial officer, said 2020 revenues will likely be 3.5% lower than 2019 due to a continued trend of lower priced capacity renewals and customer losses. Fewer television broadcast customers will cause the bulk of the decline he said, adding the firm expected lighter losses in enterprise broadband service. Satellite mobility, which includes broadband service to airplanes and boats, is projected to grow at double digit rates, and government customer revenues are forecast to remain stable, he said. 


Intelsat is budgeting for five new satellites through 2022, including the already-ordered Galaxy-30 Northrop Grumman is building and the Intelsat-40e under construction at Maxar Technologies. The remaining three are being actively competed, Tolley said. 


“Those three satellites are expected to be the foundational birds for the next generation of our Epic fleet,” he said. “These satellites will be software defined.”


Tolley said the three software-defined satellites will have a lower cost per bit than earlier satellites, and will be able to tailor capacity so that less is “stranded” covering areas without customers. 


Intelsat’s backlog stood at $7 billion, and total debt at $14.7 billion as of Dec. 31, 2019. Intelsat has more than $800 million in unrestricted cash and is not worried about its next debt deadline — a $421 million chunk of debt due in June 2021, Tolley said. 









#Space | https://sciencespies.com/space/intelsat-to-fcc-c-band-alliance-is-dead-we-deserve-more-money/

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