NSR analysis says the companies stand to benefit greatly from the sale of 500MHz of C-band spectrum

An analysis of C-band spectrum reallocation from Northern Star Research published today finds a limited sale of mid C-band spectrum is the best way for Intelsat and SES to pay down or even eliminate debt and begin investing in video and data distribution based upon hybrid satellite architectures, constellations and consumer broadband.

The analysis, “C-Band Spectrum Reallocation: Too Lucrative To Ignore?” by NSR analyst Gagan Agrawal, examines the economic ramifications of the sale of 500MHz of spectrum between 3.7 and 4.2GHz in the United States to wireless companies for deployment of their 5G network.

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According to the author, several factors over the next few years will contribute to a decline in C-band-derived revenues for Intelsat and SES, which together account for about 90 percent of the C-band spectrum in the United States. Declining revenues from this spectrum mean continued use C-band satellite service will not make “economic sense,” writes Agawal, referencing NSR’s “Global Satellite Capacity Supply & Demand, 15th Edition” report.

Based on the anticipated value of the spectrum in an auction to wireless companies, selling the spectrum appears to be the wisest choice. Taking into account a 50 to 100MHz guard band to protect against interference, the value of 400MHz based on a U.S. population of 330 million people theoretically falls between $60 billion and $75 billion, based on a conservative estimate of $0.5 to $0.6 MHz-pop.

“And with Intelsat and SES approximately possessing 45 percent of the spectrum each, both could (again theoretically) net at least $20 - $25 billion in proceeds after tax,” writes Agawal.

The author, however, lists several caveats that impact the true value of the proceeds--for instance, higher costs than reimbursements to broadcasters and cable providers because Intelsat and SES may need to launch a new satellite, costing them around $200 million to keep their customers. However, Agawal points out that new HEVC compression as part of DVB-S2X could make it possible to fit all video distribution channels into less than 30 percent of capacity.

Regardless of economic and regulatory factors, however, both companies “have a great opportunity to offset their complete debts with the spectrum sales,” he writes, adding “Intelsat and SES each may gain between mid to high single-digit billion dollars (considering Intelsat’s >6B tax losses), wiping [sic] of 70-100 percent of their debt.”

To read the full analysis, visit the NSR website.