Congressional hurdle for C-band proposal

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Specialist financial news publication CTFN is reporting that Doris Matsui (Democrat/California) is expected to commence formal legislation in the US House of Representatives which would have the effect of allowing the Federal Communications Commission (FCC) to receive proceeds from any repurposing of the C-band spectrum above the US.

She is not arguing – as some are – that the FCC use their own auction process to sell off satellite spectrum, but that any potential windfall from the sale of bandwidth is shared between the government and the satellite operators.

Matsui is expected to introduce legislation before Congress recesses in April, CTFN reported, citing a person close to the matter. Her proposal is an incentive-based auction where proceeds are split between the satellite operators and the US Treasury.

A note to investors from investment bank Exane/BNPP says that they continue to believe that the satellite operator’s proposals for a ‘market-based approach’ “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 US$0.25 per Mhz POP and a 20 percent tax rate. We believe this is towards the lower end of market expectations. We also note that every additional 10 per cent of tax knocks off around 1euro per share of spectrum value for SES.”

The bank adds that following the share price decline, “we estimate that the market currently assumes price realisation of cUS$0.15 at a 50 per cent tax rate. This looks very low even if we assume a 50 percent tax charge. After 3 years of decline SES returned to top line growth last year and guided for further growth in years ahead with double digit growth in Networks offsetting low single digit declines in Video. 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.”


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