New C-Band Alliance Plan For 300MHz Positive For Intelsat

What’s New:  The C-Band Alliance released a new plan to re-allocate 300MHz of the C-Band for terrestrial use (LINK).  Other aspects of the CBA proposal, such as auction structure, were largely left unchanged, and we expect further filings to address some of the technical details around the transition.  The new plan for 300MHz is a positive step for the CBA as it further solidifies its position at the FCC by making a “significant amount” of spectrum available (one of FCC Chairman Ajit Pai’s four principles as detailed HERE).  We remain buyers of Intelsat on the deeply under-valued C-Band opportunity (as laid out HERE).

Details: The plan released by the CBA would clear 300MHz of the C-Band, with 280MHz coming available for mobile terrestrial use.  The first 120MHz (100MHz net of guard-band) would be made available in major markets within 18 months after an auction, while the remaining 180MHz would be made available throughout the continental US within 36 months.  Specifically, the plan calls for launching eight satellites (similar to the number of satellites needed to clear 200MHz), and using technologies such as advanced modulation, single format transport, and HEVC in order to improve the spectral efficiency of satellite video delivery.  The CBA has committed to bearing the costs of upgrading certain media customers, and now estimates clearing costs of $2.5-3.5BN (a touch above our estimate of $2.5BN – see slide 52 HERE).  The CBA also suggested that they will make additional filings on the exact timeline, cost schedule, and other details for the transition process; they did not offer any changes to their FUEL auction proposal.

 Thesis impact: Our bullish view on Intelsat rests (1) on the amount of proceeds a C-Band auction will generate in an auction (see slides 12-50 HERE), and (2) the ability of the CBA (and Intelsat) to capture the majority of that value (see slides 51-75 HERE).   The new proposal should help the CBA capture the value associated with a C-Band auction; one of the common criticisms of the prior CBA proposal was the relatively small amount of spectrum made available for terrestrial use (180MHz), which looked especially paltry when compared to alternative proposals to clear 350MHz.  With the new proposal to clear 280MHz, we think this key point of criticism falls away, making it easier for the FCC ultimately to adopt the CBA plan.