The past few weeks has seen the share prices of the two main satellite operators – Intelsat and SES – hammered by the market, anxious that an FCC-controlled auction of C-band spectrum is going to mean minimum revenue benefits for the operators.
Bloomberg, in a report, says that a “catastrophic” November which led to Intelsat losing three-quarters of its recent value is too pessimistic. Intelsat was trading at around $25 a month ago. Now its share price is around $6.
There are plenty of analysts who still believe that the windfall rewards for the satellite players will be meaningful. As Bloomberg reminds readers: “At the heart of their optimism is a belief the market is taking too dim a view of the company’s prospects to cash in on the sale of so-called C-band radio spectrum, which it controls — or thought it did. Satellite operators suffered an interstellar sucker punch last month when the FCC got in the way of their plan to sell the bandwidth directly to mobile phone operators, raising the prospect of a public auction process in which the government gets almost all the money.”
Bloomberg quotes Vivek Stalam, a New Street Research analyst whose $34 price target is the highest on Wall Street, saying: “We think the spectrum is going to go for a much higher price than folks realize. “Some folks think in a public auction process the majority of the proceeds go to the government. We simply think that’s not the case.”
Another analyst, Adrian Keevil from Plustick Management, also firmly believes Intelsat’s price has suffered too much. He argues that the US needs 5G (which is the destination for the re-allocated C-band frequencies) and unless the satellite operators get reasonable fees they will not cooperate in the FCC auction.
Keevil said that handing over the satellite frequencies was an enormously complex undertaking, especially when there were obligations to keep services alive without interruptions.
Carrying out the transition without the help of Intelsat and SES was “impossible to imagine” added Keevil.