SES files $1.8 billion claim against Intelsat over splitting C-Band Alliance

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GLASSBORO, N.J. — Fleet operator SES filed a claim July 14 against Intelsat seeking at least $1.8 billion in damages for Intelsat’s withdrawal from the C-Band Alliance. 

The claim, filed with the U.S. Bankruptcy Court for the Eastern District of Virginia — the same court handling Intelsat’s chapter 11 bankruptcy protection — centers on Intelsat’s alleged breach of a consortium agreement where it and SES had agreed to evenly split proceeds the C-Band Alliance was poised to collect from auctioning C-band spectrum. 

Intelsat reversed course in February after the U.S. Federal Communications Commission announced a $9.7 billion incentive program, with money allocated to C-band operators on an individual basis if they can clear enough of the spectrum by December 2023. Intelsat is eligible for $4.87 billion under the program, while the maximum SES can earn is $3.97 billion. 

Intelsat, as part of an unsuccessful attempt to convince the commission to award it more money, told the FCC that it should consider the C-Band Alliance dissolved. 

SES said the minimum $1.8 billion it is seeking includes compensatory and punitive damages. The company accuses Intelsat of breach of contract, breach of fiduciary duties, and unjust enrichment. 

Intelsat, SES, Eutelsat and Telesat formed the C-band Alliance in 2018 to convince the FCC to let them privately auction C-band spectrum to cellular networks eager to use the airwaves for bandwidth-hungry 5G services. Analysts estimated the auction could have netted as much as $60 billion for the operators. Intelsat and SES would have kept the vast majority of the proceeds, while dividing a smaller amount between Eutelsat, Telesat and the administrative costs of the C-Band Alliance. 

The FCC ultimately chose to run its own public auction, now scheduled for December, directing the proceeds to the U.S. Treasury. The $9.7 billion accelerated clearing program will be funded by winning bidders on top of their spectrum payments to the FCC. 

Intelsat filed for Chapter 11 bankruptcy protection in May, saying upfront costs the operator must pay for replacement infrastructure to clear its portion of C-band by the FCC’s 2023 deadline were too much to bear with its $15 billion debt load. The FCC is requiring winning bidders to reimburse operators for replacement satellites and associated infrastructure, but that reimbursement won’t be ready until at least 2021, Intelsat said at the time of its bankruptcy filing. 

Intelsat spokesperson Meghan Macdonald said the C-Band Alliance was established to pursue a private spectrum auction that is no longer feasible. 

“The [FCC’s] final order provides for a public auction, run by the FCC, which treats each satellite operator individually based on their utilization of the spectrum,” she said by email July 15. “Intelsat is currently the largest operator in the U.S., utilizing more than 60% of the C-band spectrum in the continental U.S. (so, it would logically follow that we stand to gain more).”

SES, in its complaint, said Intelsat continued to affirm and work with the C-Band Alliance for months after the FCC announced intent to pursue a public auction. It was only after the FCC spelled out individual funding amounts that Intelsat “repudiated its obligations under the Consortium Agreement, including its obligations to split the proceeds received by Intelsat and SES evenly,” SES said.