PARIS — Intelsat expects to order a replacement for its failed IS-29e satellite before the end of the year and will choose a one of the new-generation, flexible, lighter-weight designs being offered by multiple manufacturers.
Intelsat Chief Executive Steve Spengler said that the company is sticking with previous estimates that it will take a $70 million hit to its EBITDA this year, with a $50 million impact on revenue, as a result of the sudden failure of IS-29e in April.
In a Sept. 18 presentation to a Goldman Sachs investor conference, Spengler also discussed — as he must every time he speaks in public — the status of the C-band spectrum auction proposal now before the U.S. Federal Communications Commission (FCC).
Intelsat is drifting one of its own satellites to the North American arc as part of what Spengler called a “multi-pronged” strategy to compensate for the loss of the $400 million IS-29e at 50 degrees west. A second Intelsat satellite will be relocated to the region as well as part of the effort: http://bit.ly/2GzIRK8
Longer term, Intelsat will replace the high-throughput capacity of IS-29e, Intelsat’s first Epic-class satellite, with a new-generation flexible payload that several manufacturers are offering in hopes of luring operators of geostationary-orbit satellites back to the market.
In recent weeks, Boeing Satellite Systems International has introduced its 702X, Thales Alenia Space has showcased its Space Inspire product. Earlier this year, Airbus Defence and Space made the first sale of is OneSat design as part of a three-satellite contract with Inmarsat of London.
“The good news is that we are going to be able to acquire an Epic-class-type satellite to give us excellent economics in a short time frame,” Spengler said.
The new designs are being pitched as offering similar economics, measured by the cost per delivered megabit, as the current generation of much larger Ka- and Ku-band broadband satellites, but for much lower capital cost and, because of their lower weight, much less costly to launch.
Spengler said Intelsat and the other two members of the C-Band Alliance coordinating the cession and proposed auction of 180 MHz of C-band spectrum, plus a 20-MHz guard band, still expect an FCC decision this year. The other two members are SES and Telesat.
He reiterated earlier comments that the departure of fleet operator Eutelsat from the C-Band Alliance — http://bit.ly/2lAKnU1 — has had no effect on the FCC’s treatment of the auction proposal.
Eutelsat’s share of the estimated proceeds from the auction have been estimated at around 5%, following the agreed-to formula of using each company’s 2017 U.S.-based C-band review as the yardstick.
Eutelsat has not been clear about what it hopes to gain from quitting the alliance, leaving industry observers to speculate that the company is seeking a better split of the revenue than would be warranted by its 5% share of the market.
Eutelsat: Our share of the C-band auction proceeds needs to be discussed
Eutelsat Chief Executive Rodolphe Belmer’s Sept. 9 explanation for his company’s move, made here during Euroconsult’s World Satellite Business Week, appeared to give weight to this idea.
“It’s true that most probably, the CBA will be the best possible, as the FCC calls it, ‘position facilitator’,” Belmer said. “That means it will be the best organization to organize and expedite as much as possible the C-band process in the U.S.
“That doesn’t mean that the rights of other players, which are legitimate, should be ignored. As for ourselves, we are not against CBA at all. We are not against the fact that ultimately CBA stays the facilitator. We don’t dispute that.
“The only thing is, we think some rights, including ours, are very important. This needs to be recognized in many different aspects — proceeds, decision-making process, the size of the bandwidth, contribution to the U.S. Treasury — all those elements should be taken into consideration.”
Spengler said that the FCC remains focused on getting a deal done quickly and that this overwhelms whatever complications might arise from Eutelsat’s departure. He said the C-Band Alliance would welcome Eutelsat back to its ranks.
“It is an international competitive issue for the United States,” Spengler said. “5G services are operating today in Korea in the mid-band spectrum, the same 3GHz spectrum [being discussed with the FCC]. China is about to roll out the same services in the same spectrum, very soon. There is an ecosystem of equipment and technologies being formed around it, so the US has to satay with that game and compete.”
Intelsat has estimated that the cost to all C-Band Alliance members of adjusting making sure their customers will not suffer from the loss of 200 MHz will be between $1 billion and $2 billion.
The cost includes building eight relatively small C-band satellites — four each for Intelsat and SES — and launching six of them to provide more orbital slots to compensate for the loss of spectrum to 5G terrestrial operators. Other costs include providing what Spengler estimated will be 90,000 filters for C-band receive-only Earth stations at 35,000 locations.
Intelsat: We’ll owe taxes on C-band proceeds in both US and Luxembourg
Wall Street is awash in estimates ranging from $2 billion to $50 billion and more on the gross proceeds likely from the C-band auction. The C-Band Alliance, in a move that Eutelsat opposed, has offered to make a voluntary contribution to the U.S Treasury of part of the proceeds.
Spengler said Intelsat, with headquarters in Luxembourg but is main operational facility in the United States, expected to owe taxes in both jurisdictions as a result of the auction. “Of course, we have some NOLs [net operating losses] in Luxembourg that we will be able to take advantage of in terms of this transaction.”