Eutelsat exits CBA; confusion reigns

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Eutelsat, a minor player in the C-Band Alliance (CBA), has quit the grouping and in doing so has thrown into confusion the Alliance’s united front of dealing with the Federal Communications Commission (FCC).

The CBA had been dealing with the FCC over a scheme to re-allocate 180 MHz of C-band satellite spectrum over the US for repurposing for 5G usage.

The Eutelsat statement was extremely brief, and simply said it was quitting the Alliance and had formally notified the other members (Intelsat, SES and Telesat of Canada).

The key phrase in the Eutelsat statement said: “Eutelsat wishes to take a direct active part in the discussions on C-band clearing and repurposing.”

This suggests it wants direct engagement with the FCC, and potentially a larger share of any windfall that could accrue to the repurposing.

Sami Kassab, an analyst at investment bank Exane/BNPP, in a note to clients, said: “We believe that there is no longer an alignment between Eutelsat and other CBA members in particular on the breakdown of proceeds and possibly the amount of spectrum to free up. Eutelsat says it continues to support a market-based approach for spectrum reallocation.”

The bank’s note continued: “At this stage we see this announcement as a negotiation tactic for Eutelsat to increase its share of proceeds from the CBA. We also believe it may reflect management belief that it may maximise its economic interest by going alone (rather than in the CBA) given its expectations of the regulatory framework the FCC might ultimately adopt. We do not believe that this decision will delay the FCC final order (US 5G roll-out has precedent over satellite C band proceed allocation).”

“Overall, we see this news as complexifying the C Band situation. We think it is a negative for SES and Intelsat as it makes their position more complex to defend in front of the FCC and makes their share of proceeds more uncertain. This development also increases the likelihood that Eutelsat makes more out of C-band than currently expected.”

Giles Thorne, from Jefferies investment bank, described the move as a “high level of brinkmanship”. His note to clients said: “Evident frustration: We were all privy to Eutelsat’s frustration on the C-band situation when the CEO took the occasion of the FY18 results on 31-Jul to comment on the procrastination that was taking place at the CBA as to the division of proceeds and the approach to a voluntary contribution to the FCC (which was / is something outside the scope of the consortium agreement, and therefore up for debate by the operators). ”

He mentioned that the audit of Eutelsat’s share of proceeds had not been completed “for reasons that are difficult to understand” and that a view on its exact amount would be given “by the end of August”. The methodology was to look at each operator’s C-band revenue in 2017 – it looks like that view was given and Eutelsat didn’t like what it was told, though the exact issues Eutelsat had with the consortium terms has not been disclosed. To date, the consensus had been that Eutelsat would receive c.5% of proceeds, though this was never official guidance.”

Jefferies said it doesn’t see the move as de-railing the C-band process. “On the one hand, the forces of fate are far too powerful for Eutelsat’s brinkmanship to disrupt them (i.e. at root, this entire process is about US national interests) but on the other hand, what makes the CBA proposal so politically palatable (and therefore the C-band trade so investable) is that the CBA is the only stakeholder that can clear this critical band quickly and studiously (i.e. while protecting the incumbent use case) because the four CBA operators own the assets and the spectrum and have elected to work voluntarily and in cooperation – with today’s news, that cooperation point is diminished.”

SES saw it share price crash more than 7 percent on the news. Eutelsat’s share price initially fell on the news (from €15.95 to €15.67) although it later recovered somewhat to €15.87.


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