Satellite coverage over North America is dominated by Intelsat and SES, and last October Intelsat proposed a joint initiative with chip-maker Intel to permit some C-band satellite frequencies to be used in built-up metropolitan areas to help boost 5G’s roll-out and deployment.
SES was initially cool on the idea, but has now thrown its hat into the ring, perhaps motivated by the revenue prospects that could well flow from the well-heeled cellular operators wanting improved coverage for their 5G services.
A report from equity analyst Giles Thorne at investment bank Jefferies says that the concept now protects current services and also gives them the chance to make some money along the way. “Positive news for both names, but not something that should (yet) be reflected in the share prices given the evident uncertainties.” The scheme needs FCC approval.
Jefferies adds: “The fact Intelsat has now secured SES’s support is a coup for both companies. It adds weight to their machinations with FCC given that between them they control effectively all the C-band in the US and therefore have the keys to a deliverable solution. While the [press] release does touch upon the prospect of a “market-based” model for compensating SES / Intelsat for vacating a segment of the band (and we note 100 MHz of spectrum is now be actively targetted and SES / Intelsat are planning a consortium JV structure to interface with MNOs) the main thrust of the release is on the protection of existing C-band satellite services (i.e. distribution of TV content to cable head-ends). For an equity that has been so beaten up on the video secular decline theme, it’s noteworthy that SES keeps standing up and taking action to protect the longevity of what we believe the share price implies is a business in death spiral. We’d like to be optimistic around the idea of a spectrum lease revenue stream (let’s not forget that Inmarsat theoretically gets c.$140m per annum from Ligado for leasing 40 MHz of L-band in the US) but, frankly, the graveyard of spectrum plays and the difficulty of putting a price on spectrum stays our hand.”