SES gets uplift on results
April 29, 2019
Satellite operator SES gained a very useful 8.3 per cent (€1.16) share price gain on April 26th following mostly favourable comments from analysts reporting on the company’s results, and in particular CEO Steve Collar’s comments on the C-Band Alliance’s plan to restructure some capacity over the US.
Collar told the market analysts that there was no friction or disagreement between SES and Intelsat, its major partner in the Alliance, over strategy. SES and Intelsat between them account for more than 90 per cent of the capacity to be supplied to help the advancement of 5G over the US.
The Alliance wants to use a ‘market-based’ approach to selling off 180 MHz of capacity. To date the Alliance has been firm that it is only that 180 MHz which will be up for action. However, many observers suggest that this amount of bandwidth could be increased, to perhaps 300 MHz or even 500 MHz over time.
Questioned as to whether the four partners in the Alliance (including Eutelsat and Telesat) are still unified, Collar told analysts that the CBA has been very united since the forming of the Alliance (there had been some disquiet ahead of the Alliance’s forming). “Not just SES and Intelsat, but also Eutelsat and Telesat have all been of the same mind on pretty much every topic. We haven’t seen any difference of views, whether it’s related to our financial position or untying else. It’s a really unique example of the satellite industry coming together and the four players in the US coming together.”
The Alliance’s proposal is with the FCC for approval, and while the ‘mid-year’ decision has now slipped Collar told analysts: “The [FCC] Chairman was on record relatively recently of saying he’s focused on getting it right and we’re focused on that as well. Speed to 5G is pretty critically important and a key part of that and what we’re focused on is making sure that we’re ready to go. And I think that’s underscored by the good work we’ve done on the technical side, worked with our customers’ sort of and building consensus around a plan. Ultimately, the FCC and the Chairman control the timing. I think sitting where we are Q2 [now] seems unrealistic. But again, I wouldn’t speculate much beyond that. What is clear is that there’s a lot of focus on this and increasing focus and I think that’s good news with respect to the market-based proposal.”
Collar said that the Alliance’s proposal was to get this 180 MHz (plus 20 MHz of a safety band] cleared for re-use within 36 months. He added: “Now if we look at 5 – 7 years in the development of HEVC and different technology then, who knows…. But [we are focused] essentially to get cleared 200 MHz for C-band in the next 18 to 36 months. It’s absolutely important that we’re focused on this 200 MHz clearing and nothing beyond.”
“I do think that what we’ve seen over the last month or two suggests that this strategic importance is now recognized [by the FCC] and is increasing and my hope and expectation is that we’ll see this moving forward over the course of the next few weeks and months,” added Collar.
One report from investment bank Exane/BNPP was optimistic that eventually 250 MHz – or even 300 MHz – could be cleared by the Alliance (and the FCC has spoken of 200-300 MHz being cleared).
The bank’s estimates that ordering and launching up to 6 new satellites to serve the North American market, plus the costs of funding re-pointing and adding filters to its ground-based cable clients, could impact the gross revenues of any sale/auction of spectrum. Nevertheless, Exane/BNPP place the value to SES of cleared spectrum at €8.6 per share, even after paying a 30 per cent tax bill to the US Treasury (and assessed a $0.30 per MHz/pop).
The bank reminds investors that recent spectrum auctions have generated that sort of sum ($0.30 per MHz/pop, for T-Mobile in US, $0.42 per MHz/pop in Italy, $0.19 per MHz/pop in South Korea).