Depressed satellite operators grasp at C-Band spectrum straw

The third quarter of 2017 delivered some record results for many in the video technology space, notably Amazon’s massive $11bn revenue growth over last year to $43.7bn, but an area consistently failing to perform is the satellite industry – which is why stock prices crashed across the big three fleet operators last week.

Luxembourg’s SES, the largest of three, saw a five-year stock price low of $16.82, falling from $19.37 after it reported a 3.8% fall in video revenues and a profit decline of 5.4%. Eutelsat posted revenues down 9.3% to $405.2m, with its video sector slipping 0.8%, leading to stock sliding 14% to $23.19. Intelsat, which is perhaps the most troubled of the trio, actually grew revenues by 9% in its media sector, but with total revenues down 0.9% and a net loss of $30.4m, it triggered a 19.36% tumble after trading on October 26, at one point going as low as $4.44.

There are several silver linings for the satellite industry in the form of emerging technologies enabling cost savings and new revenue streams, but the truth of the matter is these will not plug the overall shrinkage of the satellite business.

We recently discussed the immense cost savings that electric propulsion technologies could save satellite firms, but Intelsat issued some fresh words of reassurance to investors during its analyst call last week, as CEO Stephen Spengler talked up the opportunity for using its C-band frequencies in the US, reallocated for 5G applications, in partnership with Intel. News of the concept somewhat cushioned the blow to Intelsat’s stock price, but the technique is a long way from fruition and relies solely on the FCC approving the sale or leasing of this spectrum.

Intelsat actually raised the idea for the first time in early October when the FCC caused commotion among the satellite community with its plans to get better use out of a portion of C-band spectrum from 3.7 GHz to 4.2 GHz. Intelsat was the only satellite firm in favor of the proposal, resulting in it being branded a traitor, and the company elaborated on its plans this week, with Spengler stating, “We’ve been allocated rights for decades now, we are not selling the spectrum, we are making arrangements for joint use, we’ve madebns of dollars of investment in this orbital arc and we may have to relocate earth stations and invest in new types of satellites.”

Spengler defended the company’s plans further by saying it is a US-specific issue, but whatever the FCC concludes, the rest of the world will naturally follow suit, and this is a key concern for pay TV operators and broadcasters.

Google also weighed in with an opinion recently, claiming that a third of all FCC-registered C-band satellite dishes are abandoned, suggesting the reliance of the satellite industry on C-band spectrum is not as great as the challengers to Intelsat want us to believe. Outside of the US, however, the critical nature of C-band frequency to operators in delivering broadcast TV is higher, particularly in Latin America and MENA.

SES has a large C-band footprint in the US, with smaller operations in MENA and Latin America, but is wholly against the idea of telcos getting in on the act, as the move to free up C-band for terrestrial use could potentially cripple the fixed satellite services industry, should the rest of the world end up taking a leaf out of the US regulator’s book.

Google’s spectrum engineering lead, Andrew Clegg, said in a presentation at the Americas Spectrum Management Conference, “We looked at all 4,700 registered earth stations using Google Earth imagery and found in 29% of the cases, the registered dishes aren’t even there. If we looked at historical imagery, we could see that in some cases those dishes used to be there and were taken out, with the registration never taken off the books. In some cases we saw that the dishes never existed at all, but they are still on the books.”

Equity analyst at investment back Jefferies, Giles Thorne, commented in response to Intelsat’s Spengler: “The C-band exposition on the call was useful, but incidental to what will be a long and drawn upside; if any upside at all. As the first set of results since Intelsat announced its C-band sharing plans, there was inevitably a huge amount of focus on this topic. We are still very early in the process, hard to talk definitively to any scenario; the FCC received 80 submissions to its July Notice of Inquiry – there is a final submission date of November 15 – precedent suggests that any rulemaking would be two years at the earliest; Intelsat’s plan would not in any way compromise current revenue; this proactive approach is not an implicit statement on the future of cable head-end distribution in the US.”

He  added: “Indeed, an aspect of the plan is to get investment certainty around this application; management believes it has a creative and pragmatic solution to meet all stakeholders needs, and in a way that all precedent attempts to reallocate satellite spectrum lack; on its rights to monetize spectrum it doesn’t own.”