Last week a fresh submission to the Federal Communications Commission (FCC) was made by the C-Band Alliance. Investment bank Exane/BNPP has issued its own review of the action, and says “CBA is back on track” with its new proposal.
Moreover, the bank’s satellite analyst Sami Kassab has rated both SES and Eutelsat as “OUTPERFORM” stock. Kassab says that Eutelsat has a target price of €20 and an upside in the bank’s view of 38 per cent, while SES is also rated as “OUTPERFORM” with a target price of €16 and a 28 per cent upside.
The bank’s report to clients says: “The CBA had remained silent since the FCC’s public auction decision last November. Last Friday, it made public its new proposal. It has proposed that the FCC mandates an ‘accelerated clearing fee’ to be paid by C-band auction winners to satellite operators. The CBA claims this fee should be set at 100 percent of auction winning bids which would equate to a 50 per cent share of total auction proceeds.”
“This proposal meets the twin priorities of the FCC: political and judiciary reviews. It moves the political debate away from sharing auction proceeds of a public good with foreign-owned satellite operators towards compensating and incentivising satellites for their timely spectrum clearing works. It is also consistent with the history and regulatory remits of the FCC and does not increase bidders’ cash outflow profile,” adds the bank.
“Our model assumes operators earn 49 per cent of C-band proceeds and is consistent with a 100 per cent clearing fee. Under this new proposal, SES’s share of proceeds could come closer to 45 per cent rather than the 35 per cent we currently use. This would increase its C-band value from €5 to €6/share. Prices on the recent auction in Taiwan (US$0.51 MHZ POP) are double our US assumption.”
Kassab is leading a visit to Washington DC of investors this week and on Janary 23rd will be meeting FCC Commissioners and political leaders where the proposals will be discussed and – no doubt – generate fresh newsflow.