The demand for the FCC’s allocation of new spectrum in its current Auction 107 has been staggering. The bids and the auction have resulted in the highest-ever payments being made for spectrum.
More than $80 billion has already been tabled in gross payments, and the process fully enabled by the satellite industry freeing up their C-band spectrum.
Sami Kassab, an analyst at investment bank Exane/BNPP, says the high bids could result in extra cash going to the key players, notably Intelsat and SES. He says: “We expect to see increase financial benefits, albeit limited, for satellite operators in particular SES.”
Kassab explains: “As per FCC regulation, the satellite operators’ incentive payment is not linked to the outcome of the C-band auction itself. It is a flat $9.7 billion (overall) payment (in addition to clearing costs). However, the FCC has authorised satellite operators to seek direct agreements with auction winners to clear spectrum faster than regulation requires. Satellite operators would be directly compensated by telcos for this accelerated clearing effort.”
His analysis states: “Based on the current price differential between spectrum that becomes available in December 2023 and spectrum that becomes available in December 2021, we estimate that auction bidders value every month of accelerated clearing at c$310 million (at the aggregate level). If all auction winners were to pay satellite operators to have the spectrum delivered 3 months ahead of schedule in all markets, we estimate satellite operates could make c$930 million more with SES and Intelsat earnings an estimated $380 million (c7 per cent of SES’ current market cap.) and $460 million respectively (based on the FCC proceed allocation key). It is however more likely that only some of the auction winners pay for accelerated spectrum delivery in some of the markets only.”
Kassab cautions that these bilateral agreements have not been announced yet. “We see strong demand for the early C-band blocks as supportive of our view that SES could earn extra money from the C-band auction. The amounts are likely to be limited however.”