Intelsat stock is sinking today after the Federal Communications Commission voted 3-2 in favor of a plan to pay satellite companies to give up airwaves so they can be redeployed for the rollout of 5G.
Revised C-Band Bill
When the final draft of the C-Band auction bill was brought to the Senate in January, it said it would cap satellite incentive payments at US$1 billion and require Satcom firms such as Intelsat (NYSE:I) to hold a public auction, allowing 5G internet providers to bid on about 300 megahertz of their current C-band satellite spectrum. The move was first announced back in November and has sparked a massive decline in Intelsat stock of over 85% since.
The revised FCC terms will see the payment cap raised to a maximum of US$9.7 billion, which is still well off Intelsat’s valuation of its investment into the infrastructure, which it says stands at around US$50 billion over the last 40 years. Alarmingly, the company is also heavily indebted to the tune of US$14 billion, and should the FCC ruling be upheld, the company may only receive a maximum payment of US$4.85 billion. Intelsat stock is down 6.5% today.
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An Opportunity for Intelsat Stock?
However, Intelsat shares could rebound after the firm said it is “weighing all its options,” having heard FCC Chairman Ajit Pai say that the commission saw no case to “significantly” increase Intelsat’s pay-out from the auction. The bill has also sparked resistance on both sides of the political divide, with Senator John Kennedy saying, “Shelling out billions for airwaves we already own is no way to handle taxpayer money. These foreign satellite firms want all four feet and their snout in the taxpayer trough.” There’s now potential for Congress to overrule the decision.
Intelsat stock is currently trading for just $3.61, having been valued at over $25 a little over three months ago. The controversy surrounding the C-Band bill has actually created an opportunity for some speculators, with billionaire investor David Tepper snapping up almost three million shares last month.
What do you think?
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