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C-Band Analyst Says Spectrum Auction May Net $50 Billion

Kamaron Leach

(Bloomberg) -- Robust demand for mid-band spectrum across the globe could prove a key indicator that some investors may be undervaluing the C-Band opportunity in the U.S.

According to New Street Research, a domestic C-Band spectrum sale could find satellite operators conservatively netting proceeds of about $50 billion. That positive view stems from Taiwan’s recent auction of the 3.5GHz band, where New Street said the bids were “blowing away expectations.”

At hand is the international race among governmental bodies to become the leader of 5G, and in the U.S. investors backing the C-Band Alliance want top dollar for giving up its frequencies to enable the technology. But when Federal Communications Commission Chairman Ajit Pai rejected the group’s long-sought-after hopes of a private auction in November, investors were left perplexed at what Intelsat SA and SES SA could reap from a public sale of the airwaves.

The Taiwanese bids set a new bar of $0.51 per megahertz pop, which New Street Research analyst Vivek Stalam says is $0.10 above the previous high reached during Italy’s mid-band spectrum sale in 2018. Stalam, who holds a buy rating and $34 price target on Intelsat, believes “the backdrop for the Taiwanese market structure and auction rules are more supportive for U.S. C-Band auction pricing.”

Read more: Intelsat Spectrum Payout Stalls in Congress, Pushing It to FCC

The domestic market structure, with three well-capitalized wireless service providers, will likely find Verizon Communications Inc., AT&T Inc. and T-Mobile U.S. Inc. aggressively bidding for approximately 100MHz each, Stalam wrote in a research note. And new entrants, like Dish Network Corp., and interested cable operators could “drive pricing higher as they seek to enter the industry,” he added.

Intelsat shares have risen 23% since a mid-December bottom, though they remain 73% lower than their yearly high, reached almost three months ago.

While the FCC still can transition the sale of C-band spectrum without Congress, Bloomberg Intelligence litigation and government analyst Matthew Schettenhelm says Republican lawmakers “may be inclined to support a new law because it could clarify the FCC’s power to compensate the satellite incumbents, including Intelsat.” And “without that clarification, the FCC would face a higher risk of lawsuits,” he wrote.

(Adds context in third paragraph, updates share move in sixth graph.)

--With assistance from Joshua Fineman.

To contact the reporter on this story: Kamaron Leach in New York at kleach6@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper, Jeremy R. Cooke

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