SES Declares Victory in Dispute with Eutelsat over Ku-band Frequencies

by

PARIS — Satellite fleet operator SES appears to have won its long-running battle with European rival Eutelsat over access to 500 megahertz of Ku-band broadcast frequencies over the heart of Europe following separate rulings of a German court and the International Chamber of Commerce, the two companies announced Sept. 16.

In dueling statements released within minutes of each other, SES announced victory and Eutelsat announced that it had lost a round but would continue the fight.

Luxembourg-based SES said it expects to begin broadcasting in the frequencies at 28.5 degrees east as of Oct. 4 on its own satellite and to stop leasing them from Paris-based Eutelsat.

Paris-based Eutelsat appeared to concede part of SES’s analysis but said it would appeal the Aug. 30 ruling of the Regional Court of Bonn, which bars Eutelsat from using the frequencies if Eutelsat’s use interferes with the use of them by Germany’s Media Broadcast. 

Media Broadcast holds the satellite frequency rights formerly held by Deutsche Telekom AG. The German telecommunications operator transferred its satellite business to Media Broadcast in 2002 via T-Systems Business Services, a Deutsche Telekom subsidiary.

With SES now preparing broadcast in these frequencies as of Oct. 4, it is difficult to see how interference can be avoided. Also unclear is what Eutelsat is challenging in its announced appeal.

The Aug. 30 ruling was not made public by SES before Sept. 16. Neither SES nor Eutelsat disclosed the International Chamber of Commerce ruling of Sept. 4, which also signaled support of SES’s position and undermined Eutelsat’s claims, until Sept. 16.

Until Oct. 4, SES will continue to pay Eutelsat to use the 500 megahertz in question and to resell it to SES customers. After Oct. 4, SES will operate the frequencies on its own. It will not generate more revenue to SES, but by eliminating the Eutelsat payments it will reduce SES’s costs.

For Eutelsat, the revenue hit from losing the SES business has been variously estimated at between 30 million and 40 million euros ($39 million to $53 million) per year.

In its statement, Eutelsat said it is “inappropriate to quantify the potential impact” of the loss of the SES revenue on Eutelsat’s financial forecasts, which were given to stock market analysts on July 30 as Eutelsat published its annual results.

The dispute between the two operators came to a head in October 2012 when SES announced that it had acquired — seven years earlier — the rights to the frequencies after an agreement with Media Broadcast.

SES said then that its Media Broadcast contract would take effect on Oct. 4, 2013.

Eutelsat, apparently caught by surprise, said it would attempt to block the transfer of frequencies on two fronts. First, it would challenge the validity of the SES-Media Broadcast contract. Second, it would challenge whether the contract should not be voided by a 1999 agreement between Eutelsat and SES called the Intersystem Coordination Agreement (ICA).

The ICA was an attempt by the two operators to remove conflicts over the use of Ku-band frequencies over Europe and to promote a competitive market in satellite bandwidth.

Eutelsat has said that the ICA, and an accompanying text called the Framework for Agreement signed by Eutelsat, SES and Deutsche Telekom, continues the frequency agreement among them with no end date.

One official knowledgeable about the issue said the Eutelsat argument is that while a no-end-date agreement does not imply perpetuity, it cannot be breached unilaterally by one of the parties.

SES said it will start broadcasting in the affected frequencies using its Astra 2F satellite, in orbit since 2012, while awaiting the launch of Astra 2E, scheduled for later this month, and Astra 2G, scheduled for 2014.