Intelsat shares are tumbling Monday after Federal Communications Commission Chairman Ajit Pai said on Twitter that he supports holding a public auction of C-Band radio spectrum now controlled by a small group of satellite communications firms, including
(ticker: I), SES (SGBAF), and Telesat, a Canadian firm majority-owned by
Loral Space & Communications
The C-Band Alliance, a group formed by the satellite operators, had proposed holding a private auction, arguing that would lead to a speedier transfer of a portion of spectrum they control to carriers seeking to build out 5G networks. But the proposal has faced opposition in Congress, where some members saw the private auction plan as too lucrative for the satellite players.
Intelsat and the other C-Band Alliance partners use the spectrum for transmitting television programming to cable operators. In order to clear the spectrum for 5G use, the satellite companies would need to launch additional satellites and adopt new compression technology to continue serving existing clients. The C-Band Alliance partners have been planning to use the proceeds from the auction to pay for the costs of building and launching additional satellites. Until that happens, the satellite firms argue they can’t give up their spectrum for 5G networks.
Shares of Intelsat are down 16% Monday afternoon, to $11.36. The stock is down 57% over the last month.
“After much deliberation and a thorough review of the extensive record, I’ve concluded that the best way to advance these principles is through a public auction of 280 megahertz of the C-band conducted by the FCC’s excellent staff,” Pai said in a tweet. “With a strong track record of successful auctions, I’m confident they’ll quickly conduct a public auction that will give everyone a fair chance to compete for this 5G spectrum, while preserving availability of the upper 200 MHz of the band for continued delivery of programming.”
LightShed Partners analyst Walter Piecyk asserted in a blog post today that a public auction “is likely to complicate and materially delay the availability of spectrum that has been globally identified as a primary 5G spectrum band.”
He asserts a delayed auction is negative for
(VZ), which has been expected to be a leading bidder for the C-Band spectrum, and that
(TMUS) could be similarly hurt if it can’t close a planned acquisition of spectrum-rich
(S). Piecyk notes that cable operators would benefit from the delays, since C-Band spectrum would likely be used to deliver home broadband, including video delivery.
For highly leveraged Intelsat, auction proceeds would be used in part to pay down debt—and a public auction with a delayed outcome and uncertain terms is bad news.
Write to Eric J. Savitz at email@example.com