For Intelsat, Bankruptcy May Be Way to Slow C-Band Deal

The Federal Communications Commission’s push to free up 5G-friendly airwaves may be slowed if Intelsat decides to file for bankruptcy protection, a move that potentially would buy the company time to negotiate concessions from the agency.

The Luxembourg-based satellite operator is said to be considering Chapter 11 bankruptcy if the FCC does not offer it enough money to vacate some of its C-band airwaves, according to a person close to the company who spoke on condition of anonymity. An Intelsat spokeswoman declined to comment.

FCC Chairman Ajit Pai is set to announce Thursday his plans to publicly auction the airwaves. That could include information on offering Intelsat and other satellite license holders some compensation.

If Intelsat were to file a bankruptcy petition, it would trigger an automatic stay that would block any action to collect a debt against the bankrupt debtor or its property.

The prohibition would cover any act to gain possession or control over the bankruptcy estate’s property—a category that would generally include interest in a license.

That could complicate or slow the FCC’s efforts to transition spectrum rights from Intelsat to wireless carriers like Verizon Communications Inc. for 5G network development, because some actions would require a bankruptcy court’s approval, Blair Levin, a policy advisor at New Street Research, said.

“The transition will require Intelsat to do a number of things,” Levin said. “Some number of those things the company would not be able to act on without the approval of the bankruptcy court.”

FCC spokeswoman Tina Pelkey declined to comment.

There are exceptions to who is barred by the automatic stay, including governments exercising their “police and regulatory powers.”

A government unit, however, can’t enforce a money judgment without bankruptcy court permission.

If Intelsat does file for bankruptcy, it may fall to a bankruptcy judge to determine if the automatic stay applies to block the FCC from seizing its spectrum holdings—or, if it does apply, whether the agency should be granted relief from the stay to acquire some of Intelsat’s C-band holdings.

Intelsat may be mulling a bankruptcy filing as part of a negotiating tactic to get a larger payout from the spectrum transition, Levin said. Pai decided on a public auction amid concern from Congress that a private sale would enrich the foreign-owned satellite companies instead of the U.S. Treasury.

The satellite companies’ consortium, known as the C-Band Alliance, has already argued in a filing with the FCC that the agency is constitutionally prohibited by the Takings Clause from authorizing any new terrestrial mobile operations in the C-band without obtaining its members’ cooperation “through fair and proper incentives.”

“Right now what is going on is everybody is playing hardball with everybody else,” Levin said.

—With assistance from Todd Shields (Bloomberg)