SES under pressure over CBA tax threat

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The potential freeing of C-band spectrum by Intelsat and SES over the US for use by 5G has been well covered in recent times. With a Federal Communications Commission (FCC) probably only weeks away, the temperature is rising amongst supporters and objectors.

Some Capital Hill lawmakers are advocating the introduction of a special ‘windfall’ tax on the revenues likely to be generated by the ‘market-based approach’ being sought by the C-Band Alliance (of Intelsat, SES, Eutelsat and Telesat).

Not helping matters was the March 5th resignation of Preston Padden, head of advocacy at the CBA, citing family reasons. “Since mid-September I have been in D.C. full time working for the C-Band Alliance – 1661 miles from my home and family in Colorado. Because my family and I simply cannot maintain that schedule anymore, and because my position requires a full-time presence in D.C., I have decided to step down from my position as Head of Advocacy and Government Relations for the CBA effective today.”

Padden stressed that he will continue to advise the CBA, and help to “silence our critics” of the scheme.

Investment bank Exane/BNPP, in a note, confirmed that the political lobbying over the matter is becoming more intense. Analyst Sami Kassab, states: “Comcast, Charter, T-Mobile have much to lose from the satellite proposal and are pushing for the FCC not to support the CBA proposal. We continue to believe that the satellite proposal is the only proposal that would get 5G in the US in a timely manner. Without satellite operators on board, the US is unlikely to have 5G spectrum before the mid-2020s. Consequently, we continue to believe that the FCC will vote in favour of the CBA proposal and will adopt a regulatory framework conducive of our price expectations. Our target price assumes pricing of $0.25 per Mhz POP and a 20 per cent tax rate. We believe this is towards the lower end of market expectations. We also note that every additional 10%-pt of tax knocks off around €1 per share of spectrum value for SES.”

“While SES shares are likely to be volatile as we near the FCC decision due in Q2, we continue to believe that the current share price is not fully capturing the C band opportunity,” added Kassab.


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