5G spectrum value worries for Intelsat, SES

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The world’s two largest satellite operators, Intelsat and SES, have enjoyed remarkable valuations of their US-focused C-band spectrum, and the prospects of the FCC permitting a restructuring of that spectrum in favour of 5G.

However, the prospective valuations depend on US wireless telcos paying reasonably competitive prices for the spectrum on offer.

The formula to be applied is generally taken to be at around $0.50 (€0.43) per MHz ‘pop’, where one MHz of bandwidth passing one person in the coverage area. Other suggestions range from $0.17-$0.38 and even as high as $1 per MHz ‘pop’. Recent valuations place the potential benefit to Intelsat and SES (and to a lesser extent Eutelsat) overall of some $60 billion, or more.

But an auction last Friday in Spain saw Masmovil acquire 40 MHz of C-band spectrum in the 3.5 GHz band for just $0.019 per MHz-pop. Bankers at Exane/BNPP had assumed a level ten-times that achieved in the valuation of the benefits to SES and Eutelsat.

Equity analysts at the bank say: “Note that the seller (Eurona Wireless) has balance sheet problems and may have been under pressure to sell. Note also that Spanish mobile ARPU are below EUR20 or less than half the US market average. However, with Masmovil having now 80MHz, the 200MHz 5G spectrum that the Spanish government is currently auctioning (auction started July 18th) will face a lower number of bidders and is likely to result in low prices.”

The bank gives some positive news, saying that the cellular industry has seen South Korea sell spectrum at $0.2, UK on $0.15 and Spain on $0.02, “we can conclude that spectrum value differs a lot by country and probably reflect local market conditions and licensing terms. Historically US spectrum has tended to sell at higher prices than elsewhere, in our view.”

However, investors didn’t much care for the news. SES’s share price crashed 4.61 per cent to €15.30 on July 23rd. Ten days ago, on July 13th, they were at €18.07.


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