(Bloomberg) -- An alliance between satellite companies over payments for freeing airwaves is looking shaky a week before the U.S. Federal Communications Commission is scheduled to vote on the compensation plan.
Intelsat SA said in a filing with the agency that it believes it should get a greater share of payments than the FCC has proposed. SES SA, another satellite provider, called it an “egregious attempt” that was “both disappointing and legally indefensible.”
Intelsat rose as much as 19% in New York trading after reporting fourth-quarter sales that exceeded analyst expectations.The satellite companies have proposed giving up part of the airwaves they use to beam TV and radio programs to stations, and to continue serving customers on airwaves they retain. The swath at issue is known as the C-band, and regulators are eager to free it to carry traffic for fast new 5G networks.
The FCC has announced a plan that would provide $9.7 billion in compensation to Intelsat, SES and other companies if they hit deadlines for leaving the airwaves quickly, and another $3.3 billion to $5.2 billion to pay for costs of making the switch.
The agency is scheduled to vote on the plan Feb. 28. The FCC can change a proposal until the agency votes on it, and modifications at times are made in the final hours beforehand.
“We believe this rift between the two most important companies could potentially allow the FCC to play the companies off of each other in negotiating the contents of the final order,” said Height Capital Markets analyst Chase White wrote in a client note.
While White said it could mean a “less favorable outcome” for Intelsat, he nonetheless called the company’s FCC filing “most likely benign.”
The argument highlights how the exact amount and timing of the money they will get is still uncertain, John Davies, an analyst with Bloomberg Intelligence, said in a note.
Under the FCC’s plan, Intelsat could receive as much as $4.85 billion, while SES would get about $4 billion.
The airwaves in question are in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum, known as the C-band. Intelsat and SES dominate that patch of airwaves, which are considered well-suited for 5G networks. Proponents say the frequencies are needed to help the U.S. beat China in a so-called race to 5G, the next-generation of wireless technology that promises to transform everything from robotic surgery to autonomous vehicles.
The FCC has assigned a 50% share to Intelsat, but the Luxembourg-based company said it should get between 60% to 67% based on its “contribution to clearing C-band services to the contiguous 48 states.” Intelsat also said that the C-Band Alliance -- the lobbying group formed by the satellite companies, won’t be needed under the FCC plan, so it, SES and Ottawa-based Telesat Canada should be treated as individual companies.SES disagreed.
“SES believes that there remains an important role for the C-Band Alliance, and that the CBA’s collaborative clearing plan is the most efficient path to clear the spectrum,” the company said in a statement. “That said, SES is prepared to act on its own in the clearing process if necessary, while protecting its customers.”
This isn’t the first wedge between members of the alliance. Paris-based Eutelsat Communications SA dropped out of the group in January.
David Tepper’s Appaloosa hedge fund took an activist stake of 7.4% in Intelsat and has called for the company to reject the FCC’s plan.
--With assistance from Cristin Flanagan, Joshua Fineman and Jonathan Reid.
To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net;Todd Shields in Washington at tshields3@bloomberg.net
To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman
©2020 Bloomberg L.P.
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