Eutelsat C-Band proposals would hurt SES
November 12, 2019
Last week Eutelsat and the C-Band Alliance (CBA) submitted fresh filings to the Federal Communications Commission (FCC). Eutelsat’s was a radical series of suggestions, while the CBA gave further comprehensive details of how they would handle their $2.5 billion – $3.5 billion transition plan.
However, Eutelsat’s dramatic intervention would – if accepted by the FCC – see each C-band satellite operator enters into binding bilateral commitments with the FCC. This would make the CBA redundant. Eutelsat proposes an alternative proceeds distribution plan which would double their revenue from an auction.
Eutelsat also proposes a voluntary 50 per cent ‘windfall’ payment to the US Treasury. The rest is to be distributed to operators on a formula based on revenue and capacity share and remaining satellite asset lives. The CBA formula only uses the 2017 C-band revenue share.
Sami Kassab, a media analyst at investment bank Exane/BNPP, has analysed the impact of the Eutelsat proposals.
“We have analysed the remaining asset life of each C-band satellite and looked at C-band capacity share,” says Kassab. “According to this formula we estimate that Eutelsat would earn 9-10 per cent of proceeds (vs. c4-5 per cent on the CBA plan), Intelsat would earn 43-48 per cent (vs c45 per cent) and SES 35-38 percent (vs c45 per cent). Assuming a 25 per cent US Treasury take, this would suggest €4 per shares for Eutelsat (vs. €2 in our ‘Sum of the Parts’ calculation) and $8 (vs. €9) for SES.”
Kassab summarises his findings, saying: “Eutelsat main winner of the proposed formula, SES main loser.”
Eutelsat, in its submission, argues for a December 12th order from the FCC to free up the agreed 300 MHz of spectrum, but then to request further comments on the overall process. Kassab warns that the “value crystallisation” would be postponed by a few months if the FCC selects this route.