• Intelsat’s Q1 earnings down 50% year over year despite higher revenue due to Gogo acquisition
  • COVID-19 drags down SES Q1 revenue; operator says video decline is slowing
  • Intelsat and SES C-band legal battle rages on

TAMPA, Fla. — Satellite operators Intelsat and SES say they are on track to meet a key C-band spectrum clearing deadline this year, despite ongoing COVID-19 disruption.

The pandemic has been slowing supply chains for delivering upgrades and filters needed to clear the frequencies for terrestrial 5G wireless operators — and limiting access to sites to install them.

But Intelsat and SES, which hold the lion’s share of C-band in the United States and will get around $9 billion combined if they clear their part of the 300 megahertz of auctioned spectrum in time, said during financial results they are on track for the first big deadline Dec. 5.

That is when a portion of the spectrum currently being used to provide TV and radio to nearly 120 million U.S. homes must be available for 5G mobile.

Intelsat and SES will get $1.2 billion and $1 billion, respectively, if they meet the Dec. 5 deadline for clearing the first 120 megahertz of C-band the U.S. Federal Communications Commission began auctioning off late last year.

Clearing all the spectrum before the end of 2023 releases the rest of the payments, which aim to reimburse operators for the costs of clearing C-band while incentivizing them to accelerate the process.

Intelsat and SES ordered 13 new C-band satellites combined which will be reimbursed by the auction’s winning bidders. The satellites are designed to make more efficient use of the operators’ remaining 200MHz slice of North American C-band.

Verizon bought the largest share of the spectrum in the auction that wrapped up in February, spending about $45 billion in a sale that reaped more than $81 billion in total.

The wireless operator said May 5 it achieved speeds of 4.3 gigabits per second in trials combining C-band with its higher frequency mmWave spectrum.

Verizon expects to cover 100 million people with the new 5G C-band spectrum in the first quarter of 2022. More than 175 million people will be covered over 2022 and 2023, expanding to over 250 million by 2024 and beyond as all the frequencies are cleared.

In-flight connectivity lifts Intelsat

Intelsat, which filed for Chapter 11 bankruptcy protection in May 2020 to tackle a debt mountain of nearly $15 billion, said it incurred $58.4 million of C-band clearing-related expenses for the three months ended March 31. 

Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, fell to $130.5 million compared with $263.3 million for the first quarter of 2020.

An ongoing decline in media sales, partly derived from C-band operations and representing 37% of Intelsat’s total revenue, dragged on its financial results.

Media revenue fell 10% to $185 million compared with last year, primarily driven by a customer moving from Intelsat’s network to its infrastructure.

Total revenue for the first quarter of 2021 increased 10% compared with the same period last year to $502.8 million.

This was mainly because of the addition of in-flight connectivity provider Gogo’s commercial aviation business that Intelsat recently acquired, boosting network services revenue 43% to $214 million.

Gogo’s assets contributed $56.2 million in revenues and a $39.4 million net loss for the three months to March 31.

Without the acquired business Intelsat’s revenue dropped 2.66% to $446.6 million for the first quarter of 2021, compared with the same period in 2020.

Revenues for Intelsat’s government services edged up 2% to $97.9 million for the three months to the end of March 2021, compared with the same period last year, as its Galaxy-30 satellite entered service.

“We see increased signs of economic activity across our business sectors as COVID-19 restrictions ease,” Intelsat CEO Stephen Spengler said in a May 5 statement.

“Passenger traffic at airports is increasing in key markets, including the U.S. Global uncertainty about the pandemic remains so we continue to closely engage with our customers as they anticipate their service needs in advance of a potential economic recovery.”

SES getting handle on broadcast decline

SES recorded 34 million euros ($41 million) in C-band operating expenses for the first three months of 2021.

Adjusted EBITDA fell to 268 million euros for the first quarter of 2021, compared with 288 million euros for the same period in 2020.

Total revenues declined 4.3% to 436 million euros at a constant foreign exchange rate, with its video segment falling 4.6% to 263 million euros.

However, SES CEO Steve Collar said the video business, which represents 60% of total revenue, is showing signs of resilience as its decline slows. The video segment declined 8% year-on-year for 2020.

The company pinned a 3.8% drop in its networks business to the challenging COVID-19 environment.

Collar pointed to how satellites it plans to launch in the second half of this year — SES-17 and the first batch for its O3b mPOWER constellation — are timed for when much of the world will emerge from the pandemic.

SES-17 and O3b mPOWER secured $180 million worth of backlog in 2021, according to SES, increasing their gross backlog to $740 million.

The company said these satellite launches had been pushed from the third quarter to the fourth quarter of this year, adding that it does not expect a significant change in operational service date as a result.

“These important growth investments allow us to offer a significantly expanded set of low latency products and solutions to the market as the world emerges from the COVID environment and demand for connectivity increases exponentially,” Collar said in a statement.

The company launched a 100 million euro program to buy back its shares because it believes the market is undervaluing them. SES shares (SESG) closed at 6.09 euros May 5.

Battle at the bankruptcy court

The two satellite operators remain locked in a legal dispute taking place in Intelsat’s bankruptcy court. 

SES is seeking at least $1.8 billion in damages following Intelsat’s withdrawal from their C-Band Alliance partnership, set up to split the C-band proceeds evenly.

Intelsat argues the agreement was invalidated when the FCC decided not to pursue an auction process run by C-Band Alliance members, which had also included Canada’s Telesat and France’s Eutelsat.

With a hearing on the legal dispute slated for June 28, it is unclear when Intelsat’s bankruptcy court will make a decision on whether to accept its plan to exit Chapter 11.

“The Bankruptcy Court is currently scheduled to determine the adequacy of the Disclosure Statement in the second quarter of 2021,” Intelsat said in a May 5 SEC filing.

Meanwhile, a similar C-band monetization process could come to Canada, which will decide this year whether to follow the U.S. Telesat would be the main beneficiary.

Jason Rainbow writes about satellite telecom, space finance and commercial markets for SpaceNews. He has spent more than a decade covering the global space industry as a business journalist. Previously, he was Group Editor-in-Chief for Finance Information...