Shares in satellite communication firm Intelsat (NYSE:I) are tanking today after the US Senate introduced the final draft of the C-Band auction bill, which would cap satellite incentive payments at US$1 billion were it to be passed. This would require Satcom firms to hold a public auction allowing 5G internet providers to bid on about 300 megahertz of their current C-band satellite spectrum and has made Intelsat stock the worst-performing stock on the NYSE this week.
Officially titled the Spectrum Management and Reallocation for Taxpayers (SMART) Act, this would deprive major Satcom companies such as Intelsat of as much as US$60 billion, which is how much the C-band spectrum could be worth at auction. The bill is intended to free up 300 megahertz of spectrum, auctioning 280 MHz, and using the rest as a guard band against interference. This draft is meant to further clarify how the raised funds will be distributed, and it clearly spells bad news for Intelsat stock, which is down 85% in the last three months.
According to Multichannel News, the remainder of the funds raised at auction would go to various other beneficiaries, including US$5 billion to the US Treasury, a potential US$12.5 billion for a next-generation 911 trust fund, and an unspecified remainder will be paid into a Digital Divide Trust Fund, which will be used to improve broadband infrastructure in underserved areas.
With Intelsat stock down 30% today alone, the C-Band Alliance of which it is a leading member has said that the US$1 billion payment to get Satcom firms off the bandwidth doesn’t even come close to their expectations.
“Over the last 40 years we have invested approximately $50 billion to develop video and radio distribution infrastructure on our FCC licenses,” said Intelsat VP of communications, Dianne J. VanBebe. “As a public company, we cannot agree to surrender any rights in which we have invested and built a business unless we could represent to our shareholders that the offer is fair.”
Intelsat stock is currently trading for $3.85, with the bill still needing to pass votes in both the Senate and the House.
Earlier this month, shares in rival satellite firm Maxar Technologies (TSX:MAXR) (NYSE:MAXR) rocketed up after it agreed to sell its MDA division for C$1 billion.
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