FCC Signaling Low Payout for Intelsat and SES at Auction (2)

Regulators are signaling that they plan to limit payments to satellite providers including Intelsat SA and SES SA for giving up airwaves that will be redeployed for mobile broadband, people briefed on the matter said.

Staff of the U.S. Federal Communications Commission has privately said current plans call for payments of less than $10 billion to be shared by the satellite providers, according to three people who asked not to be named because the matter hasn’t been made public.FCC Chairman Ajit Pai declined to comment on the agency’s plan at a news conference following a monthly meeting of the agency. He said he intends to seek a vote at the FCC’s meeting on Feb. 28.

Other reports have suggested the FCC payment could be lower, in the “low single-digit-billion dollar” range to $5 billion.

Concerns about the ultimate payday for satellite operators have erased 45% from Intelsat’s market value over the past three days. The stock has dropped 87% since the beginning of November. SES sank 10% Thursday and has fallen 18% over the past two days. Intelsat shares were down 21% to $3 at 1:16 p.m. in New York, after earlier falling as much as 28%.

Intelsat and SES have said they want to split a total of almost half of airwaves sales that could reach $77 billion.

The plan could change as lobbying continues. Pai earlier rejected a proposal by satellite providers to conduct the airwaves sale privately, and said he favors a public auction run by the FCC.

Intelsat’s Bond-Market Outlook Darkens on Lower C-Band Payout

The satellite companies have proposed vacating part of the airwaves they use to beam TV and radio programs to stations and continue serving customers on airwaves they retain.

Mobile providers are expected to bid for the freed frequencies, for use in high-speed 5G service that will underpin such uses as autonomous vehicles and remote surgery. Pai has said he wants the auction to begin this year.

The figures said to be under discussion are well below the sum needed for Intelsat to tame its $14 billion debt load to a more sustainable level, given its share of the proceeds, according to Bloomberg Intelligence. Intelsat needs at least $5.5 billion to get its leverage to around six times debt to a measure of earnings, according to BI telecom analyst Stephen Flynn.

(Updates second paragraph with FCC planning February vote.)

--With assistance from Joshua Fineman.

To contact the reporter on this story:
Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net

Elizabeth Wasserman

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