FCC/CBA: Further detail emerges
March 5, 2020
Analyst Sami Kassab at investment bank Exane/BNPP has reported more details on the FCC’s March 3rd Order regarding the reallocation of C-band frequencies over the US.
Kassab has ploughed through the 220 pages, plus endless footnotes, and says there are other benefits for the key satellite operators. As this is written, however, there remains uncertainty as to Intelsat’s intentions.
One important item to note is that under the FCC’s Order Intelsat is to receive an addition $20 million (from $4.85 billion to $4.87 billion) under the Phase I and Phase II incentive payments. It is a modest sum, but every little helps.
The key (new) FCC elements are:
- The Phase I and Phase II deadlines have been extended by three months to December 2021 (Phase I) and December 2025 (Phase II). “This gives more time to satellite operators for completing the accelerated repacking and hence a higher likelihood of earning the cash payment,” adds Kassab.
- Kassab points out that the FCC has moved away from its ‘claw back’ clauses and letter of credit requirements. In its initial draft order, the FCC had suggested that satcos would have to repay Phase I receipts if they failed to meet Phase II deadlines. This is no longer the case. Timely completion of Phase I will entitle operators to the Phase I payment regardless of the Phase II outcome.
- The satellite operators could earn more cash via a direct contract with a bidding telco. Kassab says: “Footnote 691 suggests the FCC acknowledges the possibility that bidders (eg Verizon) negotiates additional payments with satellite companies for a quicker clearing than the accelerated clearing proposed by the FCC. Footnote 691 reads: ‘To the extent overlay licensees negotiate to clear incumbents from the band earlier than any deadlines, they may deploy service with the consent of affected incumbent earth stations earlier than the deadline-but only so long as they make all required payments to the Clearinghouse in a timely manner ‘. We believe this opens the door for additional payments from telcos to satellite companies. These may amount to a few more millions rather than billions but still are a positive for satellite operators, Intelsat in particular.”
- Kassab notes that if consensus cannot be reached, Intelsat and SES (together) can set up the Relocation Coordinator and ask for cash payments from all satellite operators. This suggests Intelsat and SES are in the driving seats in contrast to what Eutelsat had asked for. It perhaps explains why the FCC has increased cash payments to Eutelsat by 8 percent more than in the FCC’s draft order.
- “Perhaps the main negative is that the 80% acceptance rule is still in place. In other words Intelsat and SES must both accept the terms of the accelerated relocation payments for any player to be entitled to receive anything. If Intelsat says no, SES gets nothing. SES did provide positive comments last Monday. Intelsat has not yet,” says Kassab’s note.
Tthere has so far been no public decision by Intelsat on whether it would accept the FCC’s terms. SES and Telesat are supporting the FCC’s formal Order.