Intelsat Still Burdened With Debt Even if FCC Boosts Payout

(Bloomberg) -- Satellite provider Intelsat SA will still face a steep pile of debt even if it wins bigger payouts for giving up spectrum in a vote Friday by U.S. regulators that want the frequencies for fast 5G mobile networks.

The Federal Communications Commission is scheduled to vote on Chairman Ajit Pai's plan to pay satellite providers as much as $9.7 billion for leaving the airwaves, with 50% of that, or $4.85 billion, potentially going to Intelsat.

Luxembourg-based Intelsat in a filing asked for 60% or more of the pot. Fellow satellite provider SES SA, which also would give up airwaves, in a filing said it should get as much as Intelsat, compared with 41% as proposed by the FCC.

Intelsat's finances “may remain stressed even with a large relocation payment” because core portions of its business are deteriorating, Stephen Flynn, a Bloomberg Intelligence analyst, said in a Feb. 27 note. Earnings may decline next year, as some customers flee and others renew contracts at lower rates, Flynn said.

The satellite companies are seeking to give up part of the airwaves they use to beam TV and radio programs to stations, and to continue serving customers on frequencies they retain.

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The FCC on Feb. 7 released its plan that would pay the $9.7 billion to Intelsat, SES and other companies if they hit deadlines for leaving the airwaves, and another $3.3 billion to $5.2 billion in reimbursement for costs of making the switch.

Under the FCC's plan as announced Feb. 7, SES would get about $4 billion, and Paris-based Eutelsat Communications SA could receive $468 million.

The frequencies in question are in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum, known as the C-band. Intelsat and SES dominate that patch of airwaves, which are considered well-suited for 5G networks. Proponents say the frequencies are needed to help the U.S. beat China in the race to 5G, the next-generation of wireless technology that promises to transform everything from robotic surgery to autonomous vehicles.

David Tepper's Appaloosa hedge fund took an activist stake of 7.4% in Intelsat and has called for the company to reject the FCC's plan.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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