Intelsat Could Get $4.85 Billion Under FCC’s C-Band Proposal

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(Bloomberg) -- Intelsat SA could receive as much as $4.85 billion for giving up airwaves to be used for fast 5G networks, according to details released Friday of the Federal Communications Commission’s proposal for the transition.

Fellow satellite provider SES SA could receive about $4 billion, according to the plan, which was posted online by the FCC.

The proposal, announced by Chairman Ajit Pai on Thursday, envisions as much as $14.9 billion in payments to satellite companies including compensation for their switching costs.

The prospective payout to heavily indebted Intelsat “helps a lot,” said Stephen Flynn, a senior credit analyst with Bloomberg Intelligence. “But the company most likely will remain highly leveraged” with a declining core business.

The companies have proposed giving up part of the airwaves they use to beam TV and radio programs to stations, and to continue serving customers on airwaves they retain. The swath at issue is known as the C-band, and regulators are eager to free it to carry traffic for 5G networks.

Many Uses

Mobile providers such as Verizon Communications Inc. and T-Mobile US Inc. are expected to bid for the freed frequencies for the 5G networks that will underpin a variety of uses -- from autonomous vehicles to remote surgery.

Intelsat’s 9.5% bonds due in 2023 rallied the most in the high-yield market after the news, gaining 9.5 cents on the dollar to 76.5 cents. Its 8.125% notes due in 2023 rose 4.5 cents on the dollar to 53 cents. Intelsat shares erased losses, with the stock trading up 1.5% at one point after plunging as much as 16% earlier.

Intelsat has enough cash on hand to fund the company through 2021, according to Flynn.

There is “no reason for bankruptcy in the near-term” given the magnitude of the payments in Pai’s plan, JPMorgan Chase & Co. said in a note Friday.

Pai’s proposal faces a Feb. 28 vote at the FCC, where he’s gained the support of a majority of commissioners.

The plan would provide $9.7 billion in compensation to satellite providers if they hit deadlines for leaving the airwaves quickly. Separately, the companies could share in another $3.3 billion to $5.2 billion to reimburse them for costs of making the switch.

In addition to Intelsat and SES, Eutelsat SA, Telesat Canada and Star One SA stand to receive payments under the plan.

Intelsat, saddled with $14 billion in debt, was considering entering Chapter 11 bankruptcy if the U.S. offer wasn’t large enough, a person familiar with the matter said before Pai’s announcement.

After the announcement, Dianne VanBeber, an Intelsat spokeswoman, thanked Pai in a tweet and said his plan “ensures fast #5G for our country.” Steve Collar, the chief executive officer of SES, in a tweet called Pai’s plan “a win for #5Gleadership in the US.”

President Donald Trump has endorsed the plan, Vice President Mike Pence said on CNBC.

©2020 Bloomberg L.P.

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