Intelsat’s upside: “Let’s talk C-band”

A 75-minute analyst call from Intelsat CEO Steve Spengler on Octber 26th covered all the operator’s bases, but the questioners kept returning to the vexed topic of Intelsat (and Intel’s) hopes to see some of Intelsat’s C-band frequencies over the US reallocated for 5G usage.

The news that this revolutionary concept even exists has helped propel Intelsat’s share price these past few weeks from a typical $3 a share to – at one stage – more than $6. Investors are betting that the Federal Communications Commission will – one day in the future – permit Intelsat to free up this capacity and lease the bandwidth to spectrum-hungry telcos for huge sums of money.

Giles Thorne, equity analyst at Investment bank Jefferies, accurately summed up the position, saying: “The C-band exposition on the call was useful but incidental to what will be a long and drawn upside (if any upside at all).”

Thorne continued: “As the first set of results since Intelsat announced its C-band sharing plans, there was inevitably a huge amount of focus on this topic: we are still very early in the process, hard to talk definitively to any scenario; the FCC received 80 submissions to its July Notice of Inquiry – there is a final submission date on 15 November – precedent suggests that any rulemaking would be 2 years at the earliest; Intelsat’s plan would not in any way compromise current revenue; this proactive approach is not an implicit statement on the future of cable head-end distribution in the US (“there are 5,000 head-ends, we’re successfully renewing with customers, this will be a distribution neighbourhood for the foreseeable future”) – indeed, an aspect of the plan is to get investment certainty around this application; management believes it has a creative and pragmatic solution to meet all stakeholders needs, and in a way that all precedent attempts to reallocate satellite spectrum lack; on its rights to monetise spectrum it doesn’t own.”

Spengler explained this by saying: “We’ve been allocated rights for decades now, we are not selling the spectrum, we are making arrangements for joint use, we’ve made billions of dollars of investment in this orbital arc and we may have to relocate earth stations and invest in new types of satellites.”

Thorne added: “The latter comment implying that the initial revenue opportunity would be compensation for investments – management not keen to be drawn on the scope to lease the spectrum post re-banding of traffic (though in our view, that must surely be the endgame); and that the plan would be a US application, not global.”

Intelsat’s share price tumbled 23 per cent on October 26th.

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