The proposed realignment of some C-band frequencies over the US in order to boost 5G take-up has seemingly “lost lustre” these past few months as investors saw the FCC withdrawing into its ivory tower as reason to take profits after an electric year of out-performance [by the two main backers of the scheme: Intelsat and SES]. “We still see the C-Band Alliance’s (CBA) proposal, despite all the mud thrown at it, as the least imperfect way to clear the band,” argues investment bank Jefferies in a note to clients on January 23rd.
The bank rightly reminds clients that it is not a question of ‘when’ will the FCC will make its order, but what will the decision look like? It is expected that the FCC will issue its ruling later this spring or early summer.
The report says observers – including Intelsat, SES and the two other satellite operators with vested interests, Telesat and Eutelsat – are now forced to wait patiently “as the FCC mulls expanded C-band use in its ivory tower. As we look back at the FCC docket, what started out as a linear record of stakeholder views has now become a rather tangled mess, with counter-arguments layered upon arguments, layered upon basic facts. Among all the noise, it’s our view that an FCC Order to proceed will come forward in the coming weeks / months – the real debate is what will that Order look like. The CBA’s proposal has retained its position as nexus for FCC adulation but has frankly also been the target for ever more curt opprobrium. This was always to be expected given the FCC’s ‘notice and comment’ rulemaking approach is a zero stakes poker game for all involved, in our view.”
Jefferies urges everyone to look past the “clamouring”, and that despite two very loud objectors – in the shape of T Mobile US and Comcast – and “stay focus on the core quid pro quo that made the CBA’s proposal an investable event: We think the investment community should remain focused on the core arguments we put forward at the point we became optimistic on a favourable C-band outcome: the mobile industry values access to mid-band spectrum; globally, the C-band is being harmonised for 5G, increasing dramatically its relevance to US wireless; the CBA has brought forward a proposal that can clear a large amount of spectrum in a very short period of time whilst protecting the incumbent users; the CBA doesn’t have to do anything it doesn’t want to; and the FCC can’t reasonably act unilaterally on the band. The CBA proposal is not perfect, but policymaking never is – pragmatism should rule, and the CBA’s merits far outweigh its imperfections. We expect the CBA to at any moment decisively influence the FCC with the pre-emptive announcement of secondary market agreements for the spectrum with interested parties. This will be too hard for the FCC to ignore, in our view.”
Consequently, Jefferies says that “fatigue” in the market has created a new window for investors, and repeat their “Buy” advice on Intelsat, SES and Eutelsat.