Intelsat: losing 200 or more megahertz of C-band will require new satellites

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WASHINGTON — Intelsat says some satellite operators will be forced to buy new spacecraft if U.S. telecom regulators demand the transfer of 200 or more megahertz of C-band spectrum from satellite operators to cellular companies.

The Federal Communications Commission’s point person for C-band has said on multiple occasions, including last week, that 5G cellular networks will need at least twice as much satellite spectrum as Intelsat and SES initially said the satellite industry could afford to surrender.

Speaking Oct. 2 at the Americas Spectrum Management Conference here, FCC Commissioner Michael O’Rielly said that upcoming 5G cellular networks need “at least 200 to 300 megahertz” of satellite C-band, and that the spectrum needs to be made available fast, “not in five or 10 years down the road.”

Fleet operators Intelsat and SES, which together control more than 90 percent of the C-band in the United States, had asserted until the past few months that they needed the whole 500-megahertz band, but could find ways to cede 100 megahertz in light of mounting regulatory pressure. More recently the companies have admitted it would be possible to relinquish more of the band, but said every additional megahertz lost causes more difficulty in serving television broadcasters and other customers with fewer resources.

Speaking Oct. 2 at a Deutsche Bank event in Arizona, Intelsat’s vice president of investor relations, Dianne VanBeber, said the satellite operator’s initial C-band proposal for 100 megahertz “didn’t require a major rearchitecting of the band” like the higher proposed amounts will.

“As we start moving beyond our initial range, what really happens is you have to replace the capacity that you are taking away by building new satellites at new orbital locations,” she said.

VanBeber said satellite operators will need to find ways to replace transponders that can no longer be utilized if larger chunks of spectrum are required for 5G.

“The way I’ve been explaining it is if you have a 24-story apartment building, and all of a sudden the government says ‘from now on there’s only 18-story apartment buildings,’ you’ve got to recreate more buildings to pick up your six floors you just lost,” she said.

Intelsat is already at the beginning of a refresh for its North American broadcast fleet, having ordered one new satellite, Galaxy-30, from Orbital ATK (now Northrop Grumman Innovation Systems) in January. Last year the company said it was preparing three new satellites for the region, but it was not clear how big an impact U.S. spectrum policy changes would have on that plan.

Under the satellite operator-led C-band plan, the cost of new satellites resulting from the loss of spectrum would have to be covered by mobile network operators seeking to use the spectrum.

Intelsat, SES, Eutelsat and Telesat announced Oct. 1 the founding of the C-band Alliance — an entity that would oversee the transfer of spectrum and fills the role of a “transition facilitator” as designated by the FCC. O’Rielly said the formation of the C-band Alliance put the satellite operator plan in the lead over alternative spectrum reallocation ideas, such as an auction.

So far, the FCC has voted to open up C-band, but hasn’t decided precisely how it will transition spectrum. VanBeber said an FCC decision is expected in the April to June timeframe.

Satellite operators have not said how much spectrum beyond 100 megahertz they could give up. SES CEO Steve Collar said in July that the company is evaluating ways to yield more of the band.

“We’ve been pretty clear that we have a plan that closes for 100 megahertz,” he said during an earnings call. “We also acknowledge the desire for more spectrum to be freed up and we are working on it.”

SES warned it may need new satellites as a result of any spectrum transfer even before it joined forces with Intelsat in 2017, saying new C-band satellites would likely have “a cost ranging from $150 million to $250 million in capital expenditure per satellite.”

VanBeber said one way satellite operators might be able to clear more spectrum is if someone makes very efficient filtering technology for the transition band that will serve as a buffer between satellite and cellular signals. A “super hot filter” could reduce the size of the transition band, she said, which is presently projected to take up 50 megahertz.

The need for new satellites would likely absorb some of the money fleet operators anticipate receiving from cellular companies taking over swaths of C-band. Satellite operators have refused to quantify the proceeds they might receive, highlighting instead the necessity of an agreeable transition plan to ensure continuity of service to C-band-dependent customers.

Nonetheless, Intelsat’s stock value has soared nearly tenfold from the beginning of the year on optimism around C-band.

Jefferies analyst Giles Thorne wrote Oct. 2 that Intelsat could generate $3.9 billion from transferring C-band. SES could gain 3.6 billion euros ($4.1 billion), and Eutelsat some 395 million euros ($455 million).

“We think a 200 MHz commitment will emerge imminently,” he wrote, highlighting the FCC’s Oct. 29 deadline for comments on its C-band Notice of Proposed Rulemaking.

Jacques Kerrest, Intelsat’s chief financial officer, alluded to using windfall proceeds to pay down Intelsat’s debt, which stood at $14.2 billion as of June 30.

“The real question that the company and the board will have to deal with — and depending on the amount of the proceeds, obviously —  is what kind of leverage we want to live with going forward,” he said.