Telesat says it invested “hundreds of millions of dollars” in North American C-band coverage and deserves a place in the Intelsat-SES C-band consortium to negotiate with terrestrial mobile operators — if the FCC OKs the procedure. Intelsat and SES says they have a combined 90-95% of the C-band revenue in the United States. Here’s Telesat’s Anik-F3 satellite footprint. Credit: Telesat

UPDATE May 4: Intelsat and SES, informed of Telesat’s comments, said in separate statements that they don’t know what Telesat’s issue is on the C-band consortium. They reaffirmed is open to all C-band stakeholders, and specifically to Telesat.

PARIS — Satellite fleet operator Telesat on May 3 said it would oppose a plan by Intelsat and SES to decide among themselves how to divvy up proceeds from surrendering a portion of C-band spectrum in the United States to terrestrial operators.

Canada-based Telesat said it too had made substantial investment in C-band in the United States and that disposition of C-band should be decided by an industry-wide group, not just Intelsat and SES.

Telesat Chief Executive Daniel S. Goldberg, in an investor call, said the company had invested “hundreds of millions of dollars” in its Anik satellites covering the United States and that this investment should give Telesat a seat at the table.

In a proposal now before the U.S. Federal Communications Commission (FCC), Intelsat and SES, along with Intel, propose to create a consortium into which the cash compensation from terrestrial operators for their use of C-band between 3.7 and 4.2 GHz would be deposited.

Neither SES nor Intelsat has disclosed whether they have come to an agreement on how the proceeds would be distributed — an assessment of past investment, revenue or EBITDA from C-band use today or some other formula.

Intelsat and SES together have the vast majority of current C-band capacity over the United States, but their exact share relative to Telesat and Paris-based Eutelsat is not clear, especially if the metric is revenue or EBITDA per transponder.

Intelsat has estimated that it and SES combined represent 90-95% of the revenue generated from C-band in the continental U.S. Eutelsat has said it is in third place.

The promise of a huge windfall has caused Intelsat stock to soar in recent weeks; SES’s less so. Telesat is not publicly traded.

“Our observation is that under their proposal, ultimately Intelsat and SES would control this consortium,” Goldberg said. “So they would make judgments, presumably, about what’s equitable.

“From our perspective that doesn’t work. That’s not going to cut it. Unless we can be persuaded that these proceeds are in fact going to be distributed in an equitable way, we’re going to oppose this, and we’ll oppose it vigorously.”

Ericsson is one of the terrestrial mobile network interests that is active in the FCC assessment of the Intelsat-SES-Intel C-band-sharing proposal. Here’s how Ericsson assesses the current satellite C-band landscape. Credit: Ericsson

Goldberg declined to disclose what percent of Telesat’s revenue is from C-band in North America. “But take a look,” he said. “Our Anik satellites have 50-state coverage and we have invested hundreds of millions of dollars. So we have a lot of skin in the game here.”

Intelsat and SES, in announcing their C-band proposal, said the Consortium would be “open to all C-band operators providing service to all or a portion of the lower 48 states pursuant to FCC-issued licenses or grants of market access.” That would include Telesat. Both companies reiterated that on May 3. Intelsat pointed to the original offer of openness.

SES said: “We welcome Telesat’s support for the market based proposal for determining a potential reallocation of a part of the C-band spectrum and we clarify that Telesat has been invited to participate in the consortium as have all FSS incumbent players using the spectrum which will be treated in the same way, without any discrimination.”

In addition to wanting a slice of the eventual pie, Goldberg said his concern is that this kind of procedure — satellite operators opening up spectrum to terrestrial 5G operators where it can be done without damaging their existing businesses — may be tried elsewhere. That makes it all the more important that the United States set an example.

“If these things are going to work, if it’s going to get done on an accelerated and thoughtful basis, you need industry reaching a consensus,” Goldberg said. “To rely on two parties to represent the entire industry that has made the investment, and to rely on them to make judgments about how proceeds can be shared equitably — that would be pretty unprecedented and is not something we’re going to get our heads around.”

Telesat reported revenue of 232 million Canadian dollars for the first three months of 2018, with EBITDA equivalent to 83.9 percent of revenue. Both figures are flat from a year ago after adjusting for foreign-currency fluctuations.

No decision on LEO broadband constellation builder before 2019

Telesat is designing a global constellation of low-orbiting satellites to deliver broadband connectivity. it has received promises of modest capital support from Canadian federal and provincial authorities, but otherwise has announced no partners or investors.

Industry estimates are that the Telesat constellation would require a capital investment of several billion dollars. Telesat won’t disclose its own cost estimates, Goldberg said, until it has completed reviewing offers from prospective contractors.

Telesat issued requests for proposals, or RFPs, from industrial contractors earlier this year. Goldberg said one or two prospective prime contractors will be selected this year, with a final selection and contract to come sometime in 2019.

He said Telesat would be looking for both strategic and financial investors. One industry official whose company responded to the Telesat RFP said Telesat wants substantial vendor investment as well.

Telesat has two satellites on order, both scheduled for launch this year, meaning the capital spending on them is largely completed. The source of cash for the constellation, and how much of it Telesat can provide on its own, is a subject of industry speculation.

As of March 31, Telesat reported a cash-and-equivalents balance of 516.8 million Canadian dollars.

The company’s total liabilities as of March 31 were 4.6 billion Canadian dollars. Telesat in late April refinanced a senior secured credit facility valued at $2.34 billion.

Telesat Chief Financial Officer Michel Cayouette said during the conference call that Telesat’s cash would go first to funding its development plans, starting with the LEO project if it goes through. Next up for cash use would be reducing debt.

Cayouette said Telesat’s debt covenants prohibit any dividends to shareholders until the company’s debt is reduced to below 4.5 times its EBITDA. He did not say what if there are any covenant restrictions on capital spending.