Chris Forrester —
Just before the holiday ratings agency Moody’s downgraded (to ba2 from ba1) the debt obligations of satellite operator SES. SES issued a robust reminder to investors that it was well-placed to reverse the downgrade and move back to investment grade status.
A comprehensive report from analysts at investment bank BNP-Paribas subsequently supported that view. Indeed, the bank gave a share price target for SES of €7.20 (SES shares are currently trading around €5.55) and an “Outperform” overview of SES’s prospects. Moreover, the bank suggested that Europe’s governments are keener than ever about space and space-related developments. “In Europe, we have recently seen the emergence of new projects, and we think that the planned increase in defence spending may benefit the European operators. In the current geopolitical context, the space policy and sovereignty theme in Europe is likely to be a tailwind for European operators Eutelsat and SES. Eutelsat and SES respectively derive c.17 percent (at end June 2025) and 23 percent (pro-forma) of their revenues with Government,” says the bank.
But the bonus for SES is the freeing up of more C-band frequencies. SES says it can manage to unburden 180 MHz of mid-band/upper C-band capacity. The FCC wants every scrap of that spectrum, and will initially absorb 100 MHz and to auction that capacity (3.98-4.2 GHz) no later than July 2027.
The FCC issued its 276-page Public Notice of Proposed Rulemaking of its auction plans on Dec 18. Comments were due by today, January 5.
The bank puts a value of that 100 MHz of more than $1 billion. “We think this represents a material optionality for SES. We assume a value of >€1.0 billion in our Sum of the Parts for SES’s C-band, representing close to 50 percent of the group’s current market cap,” says BNP. “C-band is a major swing factor in SES’s equity value,” adds the bank.
In 2020 the FCC auctioned 280 megahertz in the lower portion of the C-band (3.7-3.98 GHz) for flexible wireless use. “That auction brought enhanced 5G to countless communities, accelerated new builds, and enabled game-changing competitive offerings for in-home broadband,” says the FCC.
The 2020 auction saw SES and Intelsat (which SES now owns) receive 91% of the FCC’s payout worth $4.87 billion for Intelsat and $3.97 billion for SES. Now that SES owns Intelsat it will receive more of the FCC’s compensation although SES is obliged to pay 42.5% of the spectrum sale proceeds to Intelsat’s former shareholders for the sale of the 100 MHz. SES gets 100% of any subsequent auction compensation.
Putting a value on the initial 100 MHz of spectrum is tough. BNP-Paribas has outlined a range stretching from $22 million/MHz up to $38.5 million/MHz. The optimists talk of the increase in potential value since the 2020 auction, while pessimists argue that today’s suppliers of spectrum (Starlink, AST SpaceMobile, Amazon LEO and their rivals) has the effect of lowering geostationary values. Those optimists talk about the record cash sums paid over by AT&T and SpaceX for EchoStar’s terrestrial spectrum.
At the lower end of the bank’s valuations ($22m/MHz) would bring in some $917 million from the FCC, while the higher end ($38.5 million/MHz) would generate $1.6 billion in compensation. As a guide, the bank says that in the 2020 exercise the FCC awarded an “incentive payment” measured at $31.50 million per MHz to SES and Intelsat.
Then there’s the probability of the remaining 80 MHz being auctioned off in the future, and where SES would keep 100% of the FCC’s compensation.
To be deducted from the revenue would be taxes, although the FCC would compensate SES for the actual clearing/filtering costs at head-ends to be incurred. Nevertheless, the bank’s view is that “C-band may represent a significant share of SES equity value”.
Either way, this sort of revenue boost would go a long way to paying down SES’s debt obligations, and helping return SES to an investment grade rating to satisfy the agencies. It would also help fund its investment in the important European IRIS2 highly secure mega-constellation. It would also help reward SES long-suffering shareholders. SES, in its response to Moody’s said: “SES remains committed to a stable-to-progressive dividend”.
SES will make its end-year 2025 results towards the end of February.
