U.S. Markets close in 6 hrs 11 mins

Edited Transcript of I earnings conference call or presentation 30-Apr-19 12:30pm GMT

Q1 2019 Intelsat SA Earnings Call

LUXEMBOURG May 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Intelsat SA earnings conference call or presentation Tuesday, April 30, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Dianne VanBeber

Intelsat S.A. - VP of IR & Corporate Communications

* Jacques D. Kerrest

Intelsat S.A. - Executive VP & CFO

* Stephen Spengler

Intelsat S.A. - CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Anthony Francis Klarman

Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research

* Arun A. Seshadri

Crédit Suisse AG, Research Division - Analyst

* Christopher David Quilty

Quilty Analytics, Inc., Research Division - Founder & Partner

* David Lawrence Phipps

Citigroup Inc, Research Division - Director and Senior Industry Analyst

* James Maxwell Ratcliffe

Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst

* Jason K. Kim

Goldman Sachs Group Inc., Research Division - Senior Analyst

* Lance William Vitanza

Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst

* Michael Vincent Pace

JP Morgan Chase & Co, Research Division - MD and Senior Research Analyst

* Richard Hamilton Prentiss

Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research

* Simon William Flannery

Morgan Stanley, Research Division - MD

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q1 2019 Intelsat Earnings Conference Call. (Operator Instructions)

It is now my pleasure to hand the conference over to Dianne VanBeber, Vice President, Investor Relations. Ma'am, you may begin.

--------------------------------------------------------------------------------

Dianne VanBeber, Intelsat S.A. - VP of IR & Corporate Communications [2]

--------------------------------------------------------------------------------

Welcome, everyone, and thank you for joining Intelsat's First Quarter 2019 Earnings Conference Call. Earlier this morning, we issued our earnings release and published a quarterly commentary, both of which are available at www.intelsat.com. The quarterly commentary supplements are released in our 6-K filing and provides information and context that you need to analyze our results in advance of our earnings call.

During today's call, we will discuss adjusted EBITDA and other financial metrics not prepared in accordance with U.S. generally accepted accounting principles, including EBITDA, related margins and free cash flow from operations. We provide reconciliations of these metrics to the most directly comparable U.S. GAAP measures in the earnings release and on our website. Earlier today -- later today, we expect to file our quarterly report and Form 6-K with the SEC. You can find the link to the filing on our website.

Additionally, our conversation today will include forward-looking statements that reflect our current expectations for future industry conditions as well as our business strategy, market trends and positioning and expected future financial performance. These forward-looking statements are subject to risks and uncertainties, many of which are outside of our control. Please refer to the safe harbor statement included in our quarterly report on Form 6K for the quarter ended March 31, 2019, once filed, and our other SEC filings for information about some of the factors that could cause our actual results to differ materially from our expectations.

Finally, be aware that our conference call today is open to the investment community and media, with the media invited to participate in listen-only mode. Members of the media are not authorized to quote either directly or in substance any participant in the call who is not a representative of Intelsat.

Our call today is hosted by our CEO, Steve Spengler; and our Executive Vice President and CFO, Jacques Kerrest. Following opening remarks by Steve, we'll open the call for questions.

Steve?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, Dianne. Our first quarter activities reflect the increasing role of managed services and our go-to-market strategy. In the first few months of this year, we advanced the commercialization of our managed services offerings for maritime, aeronautical and enterprise applications. Working with our partners, we introduced managed services for wireless infrastructure. We expect these sectors to provide $4 billion of increased revenue opportunity industry-wide through 2023.

In the past few weeks, we introduced a new managed service for the media sector. It is a blended, satellite, wireless Internet service that provides reliable cloud access regardless of location to give content owners the confidence to implement cloud-based applications for content delivery. Managed services are embedded in our high-throughput offerings and embed us in our customer service delivery chains. Managed services will be an operational priority throughout 2019.

To briefly highlight Intelsat's financial performance. In the first quarter, we generated revenue of $528 million, a decline of $16 million or 3% as compared to the prior year period. Our revenue in the quarter included the benefit of an additional $14 million related to accounting for leases under ASC 842, which we describe fully in the quarterly commentary.

Adjusted EBITDA declined 9% to $380 million or 72% of revenue. The adjusted EBITDA margin percentage trend primarily reflects 2 elements increasing our operating costs, which we discussed in the year-end call. First, our cost base is increasing because we're investing in our managed services delivery chain. As we enhance our service infrastructure, we will commission new sites more quickly. We will also operate our managed services more cost effectively as they grow into larger and more complex networks. Second, adjusted EBITDA reflects higher direct cost of revenue from our 2 newest satellites entering service. We use alternative commercial structures for these 2 satellites, avoiding capital expenditures and increasing OpEx instead.

Turning to our operations. On April 18, we reported a loss of a satellite. The quarterly commentary provides as much detail on the financial impact as we can provide at this time. Losing a healthy satellite in orbit is an extremely rare occurrence. We are fortunate that out of the last 92 satellites placed in the service, we've only experienced 3 unexpected complete losses of otherwise healthy satellites, including the recent loss of Intelsat 29e.

The protocol for satellite failures is to rely upon a comprehensive analysis of a Failure Review Board, comprising members of our company; our manufacturer, Boeing; and independent experts. We will not speculate about the nature of the anomaly until the Board has done its work. This could take several months, so we must ask for your patience on this front. That said, we note that the previously reported thruster anomaly on Intelsat 33e satellite was due to the failure of the main engine thruster used only for orbit raising. This is a different system than that involved in the Intelsat 29e event. Thus, we believe there to be no relationship between the 2 anomalies.

Following the anomaly, we immediately implemented our network continuity plan. We set into motion the actions necessary to restore customer traffic on our fleet as well as on third-party satellites for which we had prearranged reciprocal terms. Although the restoration is not yet fully complete, we are satisfied that we have done our best on the most important task. We have identified capacity that is technically comparable, getting our customers' networks back on the air as quickly as possible. This is a testament to the depth and robustness of the global Ku-band ecosystem. We've been able to restore the majority but not all the services on this satellite. Today, we are providing our best estimate of the financial impact of the satellite loss.

Today, we updated our 2019 revenue guidance to a range of $2 billion to $2.06 billion. This reduction primarily reflects the multiple revenue impacts of the satellite loss, which we describe in detail in the quarterly commentary. The revenue guidance update also reflects a downward adjustment due to first quarter 2019 nonrenewals in our Media and Government businesses.

Our updated adjusted EBITDA guidance is a range of $1.43 billion to $1.48 billion. This reflects the impact of the lower revenues as well as the increased cost of sale related to third-party services needed for service restoration. It also reflects 2 accounting changes related to the Horizons 3e satellite and a new accounting standard for leases. The updated guidance is described fully in the quarterly commentary, but we know you will have some questions, which we will get to in a moment.

Before we move to Q&A, just a few words on the C-band Alliance proposal to the Federal Communications Commission. Our FCC proposal outlines a market-based framework for clearing a portion of the C-band spectrum within 18 to 36 months following receipt of a final order from the FCC. Since our last call, we continue to build consensus with the various stakeholders who are party to the C-band proposal. We are also collaborating with those in the U.S. government to understand the critical role of C-band clearing to 5G. Our filings at the FCC in the past month increased transparency on 2 important fronts. The first was increased detail on our ongoing commitment to our customers in the C-band ecosystem. The second was our transition implementation plan. This plan details the sequence of actions required to clear spectrum within 18 to 36 months from a final order from the FCC. We believe that timing is the differentiating feature of our proposal and one that creates great benefit for the U.S. government in its goal to win the race for 5G. The sooner the U.S. service providers have access to cleared spectrum, the sooner the wheels of economic development and innovation will begin to turn. This will increase capital investments in the U.S. and create high-technology jobs. The era of 5G will unlock significant GDP growth and innovation as the Internet of Things becomes a reality.

Based upon comments made by the FCC, accelerating the deployment of 5G remains a top priority for the administration. The FCC controls the timing of the order, be it a month from now or later this year. Regardless, we're completing all the work necessary to implement our proposal the moment the FCC issues an order. As we said in our last quarter call, we will be ready to deliver on our commitment.

So let's move to Q&A so we can discuss this topic and address your questions on the business.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question will come from the line of Jason Kim with Goldman Sachs.

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [2]

--------------------------------------------------------------------------------

To start off, on the revenue guidance change first, can you help us bridge the guidance change to both the revenue and EBITDA for this year? And if you don't mind, maybe we can start with the revenue guidance. So the revenue guidance change, it's a $60 million reduction, but of that, you called out $45 million to $50 million in terms of impact from IS-29e. And then the rest seems like a mixed impact from lower core business trends, on the one hand, and positive accounting benefits from ASC 842. So I was hoping you can provide some incremental color on those items, core business and accounting impact.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [3]

--------------------------------------------------------------------------------

Yes. Thank you, Jason. This is Jacques. As you noted, it's -- we've said the impact of 29e is between $45 million and $50 million for the year. And this is made up of a number of items. One is the current loss of revenue on the satellite itself. Also, we had anticipated a new revenue on the satellite, which we won't be able to deliver this year, as well as the capacity that we anticipated to sell on other satellites on the Intelsat fleet. Added to this, as you know, we have some repointing costs. And in that case, we count that as a credit so it's a decrease in revenue. And I think the last item on this to make up the $45 million to $50 million is the balance sheet acceleration of the straight-line balances that we have. Now you also pointed out that we had some nonrenewals in a couple of our customers set for the first quarter. So if you add all this, it's basically a number between $60 million to $70 million. And this is why if you look at the midpoint of our new range compared to the midpoint of the old range, it's about $60 million in terms of revenue.

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [4]

--------------------------------------------------------------------------------

So I was wondering what the positive impact would be from the accounting change.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [5]

--------------------------------------------------------------------------------

Yes, the accounting change, you mean on the lease and the 842?

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [6]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [7]

--------------------------------------------------------------------------------

Yes. So we obviously benefited from $14 million of extra revenue in the first quarter, which will not be repeated for the rest of the year. It's just anticipated revenue that we were planning on recording over the life of the contract. Obviously, if you look at EBITDA, we are also getting a cost of that lease acceleration. And besides this, we had a change in accounting in the joint venture that we have on these 3 with our partner, JSAT. Added to that, in terms of the costs, I could also add that we have extra direct cost of revenue associated with third-party costs obviously for restoring some of our customers on some of our friendly operators.

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [8]

--------------------------------------------------------------------------------

Got it. And then moving on to the EBITDA side of things. So there seems to be some accounting impact that, again, looks like noncash in nature. But when we look at the -- when you look at the IS-29e impact, how much of the costs are there that are transitory in nature versus ongoing? And by that, I mean other costs associated with issuing credits to customers and just repointing the beams that hit your costs right now but is more of a onetime in nature versus having to pay third-party operators to move customer traffic over but those costs are ongoing. Just trying to figure out what sort of the ongoing impact on EBITDA will be from IS-29e versus sort of the short-term impact.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [9]

--------------------------------------------------------------------------------

Yes. So I think the nonrecurring costs, the one that you mentioned, the credit issue for repointing costs but also the second one might be the balance sheet acceleration of the straight-line balances because that will not occur since we have basically written down these numbers. So -- that's the rest of it...

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [10]

--------------------------------------------------------------------------------

Can you quantify the number?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [11]

--------------------------------------------------------------------------------

The rest of -- sorry?

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [12]

--------------------------------------------------------------------------------

Can you quantify the number?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [13]

--------------------------------------------------------------------------------

It's maybe 10% of the total, of the $45 million to $50 million.

--------------------------------------------------------------------------------

Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [14]

--------------------------------------------------------------------------------

Got it. Then one question on the C-band side. From what we can read, it appears that the 300 megahertz number keeps coming out in terms of what others would like to see free up. We saw the ex parte filings from CBA detailing its plans for vacating 200. But if you were to go for 300, theoretically, what are the practical issues you will need to deal with versus 200? And how much more time will be required?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [15]

--------------------------------------------------------------------------------

Yes. Thanks, Jason. So, yes, I mean it's pretty clear -- it should be clear to everyone that we have proposed clearing 200 megahertz, and we said we could do that in an 18- to 36-month time frame. We have not done any analysis or extra work to see what we can do beyond that, but we do know that there is a potential path to clearing more in the future. That path requires that new technology be implemented in our customers' networks, specifically HEVC, which is a higher efficiency coding method for television and content transmission. That technology is not necessarily viewed mature, and we understand that there are also some intellectual property challenges with its implementation. So programmers, broadcasters are looking at this technology, but they had not proceeded to implement this technology yet. When that does happen, there would be further compression in the networks, and we can look at the potential to clear more. But we're talking about the time frame past the 36 months that we've noted. It is more in the 5-year-plus time range for that to happen.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [16]

--------------------------------------------------------------------------------

Jason, maybe a clarification, if you're still on the phone. When I was talking about the 10% of the total costs, I was referring to the balance sheet acceleration of the straight-line balances. But if you look at the total nonrecurring, it's about 1/3 of the total, of the revenue impact.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

And our next question will come from the line of Simon Flannery with Morgan Stanley.

--------------------------------------------------------------------------------

Simon William Flannery, Morgan Stanley, Research Division - MD [18]

--------------------------------------------------------------------------------

On the 29e, could you just talk about the orbital slot and what your plans and what the time line is related to that? And how should we think about any of the potential causes and what the impact or the risk might be to the other Epic satellites? And then on C-band, where are we on a band plan? What have your discussions been with the CBA, with the FCC? And are you likely to propose a band plan to the FCC in the coming weeks and months?

--------------------------------------------------------------------------------

Dianne VanBeber, Intelsat S.A. - VP of IR & Corporate Communications [19]

--------------------------------------------------------------------------------

To other satellites.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [20]

--------------------------------------------------------------------------------

Thank you, Simon. First of all, the slot is 310 degrees east, which is a long-term Intelsat slot. We have the ability to continue to develop that slot. There's not an unlimited time, but we're working on plans right now to see how we bring some additional capacity or satellites or capabilities to that slot to protect it for the long term. So we understand very clearly what the rules of the ITU are and the FCC in this regard, and we're working towards actions to make sure that we comply with those rules.

--------------------------------------------------------------------------------

Dianne VanBeber, Intelsat S.A. - VP of IR & Corporate Communications [21]

--------------------------------------------------------------------------------

Second, on effects to other satellites.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [22]

--------------------------------------------------------------------------------

Yes. In terms of effects on other satellites, at this point in time, Simon, it's too early to say anything really about whether there's any impact on any other satellite or any other satellite manufactured by our manufacturer of this 29e satellite. It's just too early to tell. Right now there are no indications that would tell us that there would be some other effects, but we really can't confirm any of that until we get through the failure review process.

In terms of the band plan status, you're right. This was one of 3 transparency filings that we have said that we will be filing with the FCC. The first 2 that relate to our customer commitment in terms of supporting them over the long term, covering their costs and getting the job done has been filed. The second one related to our transition plan, the details, how we would actually free up the capacity, in what sequence, launching the new satellites, implementing the filters, that has been filed. The third one, that sequence is intended to be the band plan itself. So that effort is being refined right now. We're engaged with various participants and stakeholders in that effort. We are seeking to develop a band plan that's inclusive, that's fair, that's transparent to make sure that the various market participants have the opportunity to compete. And we believe these are characteristics that are important to the FCC as well. So we're trying to complete that work as quickly as possible with dialogue with the FCC to make sure that we've approached this the correct way. And so that should be coming in future weeks.

--------------------------------------------------------------------------------

Simon William Flannery, Morgan Stanley, Research Division - MD [23]

--------------------------------------------------------------------------------

And just to be clear on that, I think you already, in some of your prior filings, suggested you might be able to make 60 megahertz available within the 18-month market. Is that still the plan?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [24]

--------------------------------------------------------------------------------

That's correct. That was in our transition plan filing a few weeks ago where we have indicated that we believe we can clear an early tranche of spectrum, 60 megahertz, at the early end of our time frame, yes.

--------------------------------------------------------------------------------

Simon William Flannery, Morgan Stanley, Research Division - MD [25]

--------------------------------------------------------------------------------

Okay. So that might be packaged into the band plan as a -- you think that would be one particular block? Or that would be each block would have a piece that would come early?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [26]

--------------------------------------------------------------------------------

Those are the exact questions we're examining with different parties.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

And our next question will come from the line of Mike Pace with JPMorgan.

--------------------------------------------------------------------------------

Michael Vincent Pace, JP Morgan Chase & Co, Research Division - MD and Senior Research Analyst [28]

--------------------------------------------------------------------------------

Just some follow-ups from earlier questions and apologies with the math here. Some of them might be simple, but I'm trying to understand it. So to get back to the revenue guidance, you said $45 million to $50 million is from 29e. I think, Jacques, you also said that the 842 accounting benefit would be $14 million in Q1 and for the full year. So is that math implying that there is roughly $30 million to $35 million of core business pressure versus your prior expectations?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [29]

--------------------------------------------------------------------------------

If you add all the numbers, you can see that we have been a little bit more conservative on the guidance range because -- in fact, we are not completely finished with the numbers on 29e, as you can imagine. It only happened 2.5 weeks ago. So I think we are going to be off by $5 million or so maybe at the end of the day. But the difference between -- as I indicated, between the midpoints of the 2 guidance is $60 million so -- because we wanted to give ourselves a little bit of room here.

--------------------------------------------------------------------------------

Michael Vincent Pace, JP Morgan Chase & Co, Research Division - MD and Senior Research Analyst [30]

--------------------------------------------------------------------------------

And I'm sorry, the $5 million off, what does that mean? I'm sorry.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [31]

--------------------------------------------------------------------------------

No. I mean that it's very hard today to estimate exactly the costs related to the 29e until we have all the customer contracts and amendment re-signed and in place. And as you know, we've been working on this. And it's a matter of daily work, and we don't have all the contracts yet in place. So...

--------------------------------------------------------------------------------

Michael Vincent Pace, JP Morgan Chase & Co, Research Division - MD and Senior Research Analyst [32]

--------------------------------------------------------------------------------

And to get back to 29e, and I get that this happened just weeks ago. I guess the $45 million to $50 million revenue impact estimate was a little more than just I was thinking. And I guess can you just walk us through -- is this just really a timing issue? And I guess the way I think about it, there's kind of 3 sets of customers. There's one set that you're able to transfer over to your other satellites. Does that take time? How quickly can customers be restored on third-party satellites over SES? Again, does that just take time? And then do you have an estimate yet on what percentage of revenues or customers that are just -- would be unable to get services back?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [33]

--------------------------------------------------------------------------------

Yes. Well, I'm going to give you a general answer because we can't give you the exact answer of how many of the customer will not be restored anywhere. But there's a couple of buckets that I indicated before. One, we are losing current customer on the 29e satellites. Two, we have some revenue -- new revenue expectation on that satellite. So that's the second bucket of loss. And the third bucket of loss is we are obviously using capacity on our own satellites to restore our customers, and therefore, we will not be able to sell this, and that was in the plan. So these are the 3 big buckets of revenue. The other one that I mentioned a few minutes ago is the credits that we have to give for repointing our customer to a different satellite. And finally, again, there was -- there is a balance sheet impact on the fact that we have to accelerate some of the straight-line balances that we have outstanding. So these are the buckets. And as I indicated a few minutes ago, we estimate today that the nonrecurring part of that will be about 1/3 of that total cost. And you have to obviously annualize the rest of the costs if you take that 1/3 out because the numbers that we gave you are only for 9 months.

--------------------------------------------------------------------------------

Michael Vincent Pace, JP Morgan Chase & Co, Research Division - MD and Senior Research Analyst [34]

--------------------------------------------------------------------------------

Understood. And then just a follow-up on the cost side of the equation. I guess the $20 million to $25 million of changes to accounting for Horizons 3e and ASC 842, is this all noncash OpEx? And then maybe just explain the difference in H3e accounting now versus what I thought was just a 50% kind of gross margin.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [35]

--------------------------------------------------------------------------------

Good question. This is in addition -- on H3e, this is in addition. It's an accounting change that has to do with H3e but not related to the 50% of the sales. In terms of cash and noncash, it's not noncash, a big part of it. So that's the answer.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

And our next question will come from the line of Anthony Klarman with Deutsche Bank.

--------------------------------------------------------------------------------

Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [37]

--------------------------------------------------------------------------------

A couple of questions. In the section of the quarterly commentary on Media, one of the issues that you cite were reduced collections on services primarily in the Middle East and Asia. And I guess I was wondering if you could talk a little bit about whether that was actually bad debt that you were seeing and if the bad debt provision has gone up. And then further in Media, if you could just remind us on what the renewal headwind looks like as we proceed through the rest of the year and we think about the cadence of the revenue in Media for the remainder of 2019.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [38]

--------------------------------------------------------------------------------

So thank you, Anthony. The first question related to our media customers and collections. We refer to collections here, we're primarily talking about delayed revenues. These are customers that are on a -- call it, a cash basis payment scheme, and so we don't recognize those revenues until they pay. So we do expect those revenues to come in, but they're delayed. We also mentioned some foreign exchange challenges, and that's -- sometimes it shows up in the revenue side because it relates to contractual or statutory adjustments to pricing based on particular countries and markets, based on changes of exchange rates, et cetera.

The second question related to the quarters and the nonrenewals. We're seeing pretty much the same trends that we have seen across the media sector in recent quarters. Our customers across the globe are looking for economies and ways of operating the networks more economically. So they've moved in some places to implement some compression technologies. In other cases, they are reducing their transmission of standard definition channels. They're moving to more variable cost models, in some cases, instead of fixed cost, meaning instead of buying a full transponder, they'll buy services from us on-demand. When there's been some M&A, there's been some consolidation of traffic and capabilities. And so all those things are occurring. I would just say the one other outside trend to that is, in some cases, some of our free-to-air DTH platforms are under some pressure. And that's probably the only place that we've seen a real impact on over-the-top delivery of some of these free-to-air either religious or ethnic content neighborhoods in, again, a couple of spots in the world. So we do expect that these trends will continue throughout the year. And that's why we made some adjustments in the revenue guidance as a result of this to take that into consideration. So it's a little bit softer than we anticipated when we built the guidance several months ago.

--------------------------------------------------------------------------------

Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [39]

--------------------------------------------------------------------------------

And then similar line of questioning. On the Government side, I think you had previously called out some renewals that were happening in the first quarter of '19, but you mentioned 2 sizable contracts that did not renew. Were those things that were in the guidance that you actually had expected to be renewed so those were surprises to the original guidance build in terms of what you called out in the Government section?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [40]

--------------------------------------------------------------------------------

Yes, that's correct. And these are 2 off-net contracts, meaning we're using third-party capacity for these contracts. We did not lose it competitively. The end customer decided that they wanted to change their mission, and they didn't need this particular capacity in that part of the world anymore. So this happens from time to time. It's not always -- with government customers, you don't always get visibility on when they're going to make these decisions. Sometimes it benefits us with new services that pop up quickly. In other cases like this, it causes some nonrenewals that weren't expected. So because of those 2 contracts and the year -- the full year impact of those not renewing, we felt it best to incorporate this impact into our revenue guidance change as well.

--------------------------------------------------------------------------------

Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [41]

--------------------------------------------------------------------------------

And then just a question on the EBITDA guidance. So obviously, Jacques, you walked us through a bunch of the puts and takes with the EBITDA guidance for Jason and Mike on H3e and ASC 842. I guess the other impact sounds like it's going to be in terms of the provisioning of off-net services from other carriers to support customers who you've transitioned to an off-net solution. Can you remind us of what the margin differential kind of looks like there? Obviously, we're familiar with what sort of the on-net looks like. And I think in the past, you've seen some EBITDA margin dilution as you've provisioned off-net. But can you give us a quantum as to what you would expect the mix to be in terms of customers who will be on-net versus off-net and then just what that margin differential looks like on an off-net basis?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [42]

--------------------------------------------------------------------------------

So margin off-net is obviously minimal compared to the margin on-net. We don't want to give exactly the number. As you know, we have agreement with some of our friendly operators, and that's pretty well spelled out in these agreements. So -- and I think it's reciprocal anyway and everybody does it over time. So -- but it's -- our margin obviously is going to be impacted.

--------------------------------------------------------------------------------

Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [43]

--------------------------------------------------------------------------------

Do you have a sense or an understanding yet as to what the ultimate mix will be in terms of customers who are transitioned to one of your other 2 primary satellites that took some capacity versus SES-type capacity solutions? Just wanted to get an understanding. We can make our own estimates as to what the potential margin impact will be.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [44]

--------------------------------------------------------------------------------

Yes. The thing that we can say today, and Steve will add something, I'm sure, the majority of our customers have been restored on our fleet. But to go beyond that, it's difficult.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [45]

--------------------------------------------------------------------------------

Yes. I think once all the restorations are done, it may not be the majority, but it may be slightly less, to give you an indication, but there's still a lot of work to be done. In getting back to one of your earlier questions, these transitions and restoration efforts are very complex. In some cases, if the customer is either -- has a small network or mobility network, the switchover to another satellite can be rather quick. In other cases, it requires some pretty extensive engineering, moving from one high-throughput solution to another or a high-throughput solution on Intelsat 29e to a wide beam solution, or when a customer has hundreds or thousands of sites in very remote areas, that takes some time for repoints. So that's why it's hard for us right now to be definitive about a lot of this. It's still very much in process. We're working with our customers round the clock to get these transitions and restorations completed. And then we'll be able to understand the impact on contracts and amendments that we need to execute with them through this process.

--------------------------------------------------------------------------------

Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [46]

--------------------------------------------------------------------------------

And final for me. I was wondering if you could give a sense as to what the time frame is around when you will make a decision on potential for a 29e replacement and if that would potentially include things like hosted payloads or other things that could be faster than just the greenfield build or whether there was the potential that perhaps you would maybe do nothing at all and just sort of go with the current on-net and off-net setup that you have in place for the customers.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [47]

--------------------------------------------------------------------------------

I think it's a little bit early to say anything definitive regarding that. We're assessing all the options, and you touched upon a number of them. Whether we can do things within our fleet in terms of moving satellites is under study. Can we work with more third-party off-net-type solutions as part of that, that's also under study. What options we have to assess replacement capacity that is new, we're looking at that as well. And obviously, on that last point, we want to be able to take advantage of technological advancements in the spacecraft that are under development today versus timing and all of that, so we want to look at all of those options. So it's probably going to be a combination of all of those, but we're too early to make any specific comments. We'll have to update you later on the plan.

--------------------------------------------------------------------------------

Operator [48]

--------------------------------------------------------------------------------

And our next question will come from the line of James Ratcliffe with Evercore.

--------------------------------------------------------------------------------

James Maxwell Ratcliffe, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [49]

--------------------------------------------------------------------------------

A couple, if I could. First of all, just housekeeping. Jacques, did you say that the bulk of the H3e and 842 impact was noncash? Or that was not noncash? And secondly, on the...

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [50]

--------------------------------------------------------------------------------

It's noncash.

--------------------------------------------------------------------------------

Dianne VanBeber, Intelsat S.A. - VP of IR & Corporate Communications [51]

--------------------------------------------------------------------------------

It's not noncash.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [52]

--------------------------------------------------------------------------------

That's what I said, not noncash. I apologize.

--------------------------------------------------------------------------------

James Maxwell Ratcliffe, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [53]

--------------------------------------------------------------------------------

Okay. It is not noncash. Okay. And the -- for the 29e migration, in the near term, how do we think about this from the revenue front if traffic has migrated over to friendly provider and the like? Does that stay as a revenue and then much higher OpEx for you folks? Or does it just disappear off the income statement?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [54]

--------------------------------------------------------------------------------

Yes, it will.

--------------------------------------------------------------------------------

Dianne VanBeber, Intelsat S.A. - VP of IR & Corporate Communications [55]

--------------------------------------------------------------------------------

We retain the business.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [56]

--------------------------------------------------------------------------------

Yes, that's right.

--------------------------------------------------------------------------------

James Maxwell Ratcliffe, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [57]

--------------------------------------------------------------------------------

So it basically becomes low-margin revenue as comparing to -- compared to...

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [58]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

James Maxwell Ratcliffe, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [59]

--------------------------------------------------------------------------------

Great. And just third, it looks like the first MEV deployment may have been pushed back a little bit. Just give a little color on that. And is the plan still to deploy 2 of those?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [60]

--------------------------------------------------------------------------------

Yes, sure. The plan is still to deploy 2. The program is going well but taking a little bit longer than planned. And so we also have to sync it up with a launch vehicle. So we have pushed that into the future a little bit, and we don't expect to have MEV expenses in 2019.

--------------------------------------------------------------------------------

James Maxwell Ratcliffe, Evercore ISI Institutional Equities, Research Division - MD & Senior Analyst [61]

--------------------------------------------------------------------------------

And were there any expected expenses in the prior EBITDA guidance for '19?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [62]

--------------------------------------------------------------------------------

No. I think we've mentioned that in the last call. We had anticipated just a month of expenses in our guidance anyway, and so we have pushed this out now to 2020.

--------------------------------------------------------------------------------

Operator [63]

--------------------------------------------------------------------------------

And our next question will come from the line of Lance Vitanza with Cowen.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [64]

--------------------------------------------------------------------------------

If we could start -- I just wanted to go back to the guidance for a second. Revenue guidance down $60 million. $45 million to $50 million related to the satellite failure. Is there any variable cost that goes along with that $45 million to $50 million? Or should we assume that, that particular revenue decline falls straight to the EBITDA line?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [65]

--------------------------------------------------------------------------------

I think you have to anticipate the whole number going straight to the EBITDA line.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [66]

--------------------------------------------------------------------------------

Okay. Great. So then if we turn to the $100 million reduction in the EBITDA guidance, we can assume that, that $60 million -- the $45 million to $50 million from the satellite and then roughly -- I mean I guess then the other half would just sort of be the organic pressure from the nonrenewals and so forth.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [67]

--------------------------------------------------------------------------------

Yes. That's correct. And also the increase in third-party costs, as we discussed, and the 2 accounting changes that we talked about in terms of the H3e joint venture. And obviously, we have now the ASC 842 for the full year.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [68]

--------------------------------------------------------------------------------

Well, I guess what I'm trying to get at is of that $100 million reduction, how much of that pressure is really the organic pressure that you're seeing as opposed to the accounting change and the satellite-related issues, meaning both the revenue loss but also the -- replacing the revenues with the lower-margin revenues?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [69]

--------------------------------------------------------------------------------

Well, yes, I think we've talked about the nonrenewals in a couple of our customer sets. So you have the impact of that directly and you have the impact of the third-party costs.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [70]

--------------------------------------------------------------------------------

So it would be about $30 million, $35 million. Is that sort of the right sort of ballpark?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [71]

--------------------------------------------------------------------------------

That's high but -- because, again, we wanted to be -- if you add all these numbers, it's a little more than this. But we have a midpoint, as I indicated, of $100 million, the same way we have a midpoint of $60 million on the revenue side as we wanted to be a little bit conservative.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [72]

--------------------------------------------------------------------------------

Okay. So on the CBA process, if I -- Steve, if I heard you right, going to -- eventually going to 300 megahertz would not only take another couple of years beyond the 36 months that we need for the existing 200 megahertz plan, but it sounds like it would also correspond with this generally lower revenue from the Media segment. Did I interpret that correctly?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [73]

--------------------------------------------------------------------------------

Not necessarily. I mean I think that we -- this is predicting what they're going to need in the future. And it could be the sufficiency allows media companies to add in Ultra HD-type content, 4K-type content, for example, much more efficiency -- efficiently. You need to have HEVC to do 4K. So there would be compression and more efficiencies for these customers, but it would provide more capability for 4K. Those are the conversations that we would have to have with all of our media customers to determine what is their timeline for implementing this next generation of compression and encoding technology and what the impact will be for their channel distribution at that point in time and their channel plans. So I think we will cross that bridge when we come to it. But it is going to be a number of years before this technology is fully implemented in a way that the customers are comfortable with.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [74]

--------------------------------------------------------------------------------

Understood. So back to the here and now. I was encouraged to see you recently amend your plan such that you could get the 60 megahertz out more quickly than the balance. But what did you make of Ericsson's recent filing where they basically -- they complained that the sort of the phasing, if you will, of making the spectrum available would cause problems with filtering and so forth. I couldn't tell if that was sort of a strawman filing or if that's a real -- I mean I'm sure it's a real concern, but it seems like it's a little bit of a whack-a-mole, right, where you try to address one constituent's concerns and then another constituent's concerns sort of pop up in its place. Is that -- could you give us any color on that?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [75]

--------------------------------------------------------------------------------

Well, look, we've been spending a lot of time, months, months and months, working on the engineering and the technology required to implement this transition and to create an interference-free environment once it is implemented. And we've actually done extensive testing with the wireless equipment companies to prove out this particular fact. So we would not have come forward with this early tranche of 60 megahertz if we weren't confident that this can be done safely, interference-free and can be implemented as well as can be.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [76]

--------------------------------------------------------------------------------

Okay. My last question is just on the satellite failure. Could you discuss the decision to not maintain in-orbit insurance on the Epic class satellites in particular? Let me just play devil's advocate for a second. Those satellites are not really interchangeable with the other 45 to 50 satellites that you have. You only have a handful of the Epic class. There have -- the 2 failures there have been recently were both in that class. And then at least if I remember correctly, in-orbit insurance is typically much less expensive than launch insurance. So I'm just wondering what sort of the thought process was there and if that might change going forward given the recent events.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [77]

--------------------------------------------------------------------------------

Well, the answer to the last part of your question is we will obviously be looking at this going forward. We have looked at this and we review this on an annual basis, as you can imagine. Just want to remind you, this is only a third failure that we have seen in 92 launches since 1992. I understand you're specifically mentioning the Epic satellites as opposed to the others, but analysis so far has shown that it was not cost-effective to buy in-orbit insurance. Again, as I said, when I started to answer your question, we're obviously going to look at this going forward.

--------------------------------------------------------------------------------

Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [78]

--------------------------------------------------------------------------------

Will Boeing provide any compensation for your loss? I mean it seemed -- warranty is probably -- is that the right term [of art]? But it seems like there should be some make-good there given that they've had some problems and it was relatively early in the life of the satellite. But what's that arrangement look like, if any?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [79]

--------------------------------------------------------------------------------

I think it's probably not appropriate to comment on that at this point in time. We're in the failure review process to assess this. And it's really a contractual item between us and our manufacturer.

--------------------------------------------------------------------------------

Operator [80]

--------------------------------------------------------------------------------

And our next question will come from the line of Chris Quilty with Quilty Analytics.

--------------------------------------------------------------------------------

Christopher David Quilty, Quilty Analytics, Inc., Research Division - Founder & Partner [81]

--------------------------------------------------------------------------------

Just wanted to follow up. There was some commentary -- or within the commentary in Network Services, there was a discussion there about nonrenewal of contracts due to fiber, but there was also language about other satellite services, which is new language, I don't recall. Are those just lost competition? And was that based on price? Or were there other factors at play?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [82]

--------------------------------------------------------------------------------

Well, we've been talking for a while about our point-to-point services moving to fiber. So that particular point, as you know, is pretty consistent with what we've been talking about in the past. There are some other impacts that we occasionally see in Network Services and other places. One of those is a situation where in some countries, they have a domestic satellite network, and by decree almost, they mandate some of our customers to move onto those fleets. It's something that we are always trying to resist and to help our customers avoid that because we can deliver very high-quality service, and that's why they're on our network. But that occurs from time to time as well. So that's probably the other factor that's referenced in that commentary.

--------------------------------------------------------------------------------

Christopher David Quilty, Quilty Analytics, Inc., Research Division - Founder & Partner [83]

--------------------------------------------------------------------------------

I understand. And also during the quarter, it looks like OneWeb got another funding round done. You're an investor in there. Can you talk about how that funding round might impact your sort of intermediate to longer-term planning for capacity and other issues?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [84]

--------------------------------------------------------------------------------

Well, I think there are a couple of milestones with OneWeb. One was that funding round that they announced, which was a good boost for them because it allowed them to continue their network build and the construction of the satellites, which is an important milestone. The other key event for them is that they had a successful launch of their first 6 satellites. And so those satellites are operating now and are moving to their operating orbit as we speak. So these are 2 important milestones for OneWeb. I think it demonstrates that by far, they're in the lead of all of the LEO players in terms of building a network and bringing it into reality in space. And so we applaud them for all their efforts in that regard. We still very much believe that our services in the future will be a multilayered infrastructure, multi-band infrastructure. And so having the capability and our partnership with OneWeb to provide our customers LEO services as well as hybrid LEO geo services, we believe, is very important. So we're pleased to see the progress they've made, and we continue our engagement with our customers in OneWeb on the commercial side.

--------------------------------------------------------------------------------

Christopher David Quilty, Quilty Analytics, Inc., Research Division - Founder & Partner [85]

--------------------------------------------------------------------------------

Got you. And final question related to the CapEx plan. I think you mentioned that there's an expectation that you could order your first software-defined satellite this year. Presumably, that's in the CapEx guidance. But can you talk about both costs and capability, obviously not specifics but sort of ballpark of what you would expect from those satellites as compared to perhaps the current Epic fleet?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [86]

--------------------------------------------------------------------------------

This is the next generation of spacecrafts that we're very excited about. A number of the manufacturers have development programs underway and are moving towards being able to take commercial orders for this next generation of capability. They are, by definition, high-throughput satellites that are very flexible from an operating standpoint. We would have the ability through the software on these satellites to reconfigure beam coverage, power, bandwidth to places on the earth that have the demand and the need for growth, and we can change that over the life of the satellite. So it creates incredible operational flexibility for us and for our customers. At the same time, the design of these satellites are such that we can get sizable capacity in space at a lower CapEx cost per bit. So it's a lower CapEx investment for each individual unit of capacity, and it allows us to stay competitive from a cost basis as well for the delivery of services. So we are working with the manufacturers now. And if all plans continue as we expect, we hope to be able to embark on that later in the year.

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

(Operator Instructions) And our next question will come from the line of Ric Prentiss with Raymond James.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [88]

--------------------------------------------------------------------------------

A couple of questions. '19 guidance has been a pretty common theme. First, just want to triple check, I guess. The ASC 842 impact of $14 million, that had not been in the previous revenue guidance, right? So that's one of the changes, the positive $14 million?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [89]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [90]

--------------------------------------------------------------------------------

Okay. And then when we think about -- you laid out nicely the big buckets of the I 29e issue, current customer loss, new revenue opportunity loss, other satellite capacity loss. Can you kind of help us frame how big those buckets are, not with dollars, but maybe just rough percentages, how much are in each of those buckets?

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [91]

--------------------------------------------------------------------------------

Okay. I would say about -- since we said -- I said before that 1/3 is nonrecurring out of the $40 million to $45 million. The rest is recurring, and that's the 3 buckets that you just mentioned. And it's about -- obviously, the growth capacity that we are now using on our other satellite for restoration is the biggest bucket of that 2/3.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [92]

--------------------------------------------------------------------------------

Okay. And obviously then, it also is just 9 months impacts when we think forward to 2020.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [93]

--------------------------------------------------------------------------------

That's correct. That's correct.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [94]

--------------------------------------------------------------------------------

And then also, in the previous guidance you had provided, Network Services would be down 3% to 6% year-over-year, Media down 3% to 6% year-over-year, Government down 1% to up 2%. Have you updated the Media and Government portions of the guidance so we can kind of understand what the core business impact was?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [95]

--------------------------------------------------------------------------------

So Ric, that guidance by customers that we do once a year at the beginning of the year as an indication of how we expect those business units to perform over the course of the year, we don't update that on an interim basis. But I think it's correct to assume given that we've mentioned here some softness in our Media business and softness in our Government business that the expectations for those 2 customer sets are lower than we had originally anticipated when we started the year, and we decided to incorporate that in this guidance adjustment as a result.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [96]

--------------------------------------------------------------------------------

Got you. Okay. And then maybe an update. Good talking with Jacques, but I think the CFO transition role as you had originally thought maybe in the spring, there would be a successor appointed. You're in Florida heading into the summer, but you guys still got the cherry blossoms. But just wondering what the update is on CFO search.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [97]

--------------------------------------------------------------------------------

Well, we have springtime until mid- to late June, so that was the time frame. So we're still on track and working through that process. I would say that we're probably closer to the end of the process than the beginning at this point.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [98]

--------------------------------------------------------------------------------

And what are the key features you're looking for in a new CFO? What do you think are the top 2 or 3 items that, that person would bring to the role that would be important?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [99]

--------------------------------------------------------------------------------

Well, I'm not going to give you the entire spec, but I think there's obvious -- a couple of obvious ones. One is we have a very complex capital structure. We certainly need someone that is comfortable with managing that, has the experience and that can help us continue to execute on that. The second part is growth. Our business needs top line growth, as we all know, and we're working hard to generate that. Having a CFO in the seat that is in support of that and is part of the team to make that happen is the other priority.

--------------------------------------------------------------------------------

Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [100]

--------------------------------------------------------------------------------

Okay. And the final one, on the C-Band Alliance. You mentioned you're ready to go as soon as you get the final order from the FCC, whether it's 1 month or later this year. Are there any firm dates on the calendar we can watch and point to as we kind of monitor the process?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [101]

--------------------------------------------------------------------------------

It's very hard to do. We -- the FCC itself has not stated -- and the Chairman's office, in particular, who sets the agenda, has not stated a specific time line. All we do know is that the Chairman wants to get this right. I think he recognizes the importance of this. And he said they're deliberating as fast as they can within the FCC to move this forward. So I think, like us, we monitor what the FCC, the commissioners, in particular, are saying, get some indication as we build consensus across the sector. I think that will help bring things more towards the end of the process, but it's hard to say when it would be.

--------------------------------------------------------------------------------

Operator [102]

--------------------------------------------------------------------------------

And our next question will come from the line of David Phipps with Citi.

--------------------------------------------------------------------------------

David Lawrence Phipps, Citigroup Inc, Research Division - Director and Senior Industry Analyst [103]

--------------------------------------------------------------------------------

Jacques, this is your last call. It's been memorable, and good luck in your new life. Coming back to the 2019 guidance. So the guidance range is wide, and then there was another line in there you talked about potential field service expenses that you're unclear on. So I'm not sure if that's incorporated in the wide guidance for 2019 or if that could be another impact to 2019 guidance.

--------------------------------------------------------------------------------

Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [104]

--------------------------------------------------------------------------------

No, it's incorporated in the guidance, and it's part of the credit that we issue for repointing basically. And it's costs that we're going to incur in terms of field services and things like this. So it will be all in there, and it was already incorporated in.

--------------------------------------------------------------------------------

David Lawrence Phipps, Citigroup Inc, Research Division - Director and Senior Industry Analyst [105]

--------------------------------------------------------------------------------

Another thing that I'm getting asked about is given that you took the reset for IS-29e and you're lowering some of the other items, have you really just taken a very conservative stance on this and potentially the upcoming launch of IS-39 and Horizon 3e could have some benefits that might help the year be a little bit better than the midpoint of the guidance?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [106]

--------------------------------------------------------------------------------

So Horizons 3e is obviously in orbit and operating. We are -- that started service in January, so we've been adding and building customer networks on that satellite. We have a good pipeline and growth expectations. But that, of course, is incorporated into our view of guidance for the year, that pipeline on that satellite. Likewise, for Intelsat 39 that launches by the end of this year, we've incorporated the transition, revenue and growth revenue on that satellite into our revenue as well. Of course, we're going to do everything possible to maximize upside across those 2 assets as well as our entire fleet as we go through the year.

--------------------------------------------------------------------------------

Operator [107]

--------------------------------------------------------------------------------

And our last question will come from the line of Arun Seshadri with Crédit Suisse.

--------------------------------------------------------------------------------

Arun A. Seshadri, Crédit Suisse AG, Research Division - Analyst [108]

--------------------------------------------------------------------------------

Just one question for me. Just wanted to get a sense for mechanically or sort of in terms of upside for next year, 2020, what are you able to say in terms of the ability to claw back some of the EBITDA headwinds for 2019 into 2020? I guess there's 2 parts to it. One is simply in terms of opportunity for potential clawback in terms of either stuff that you can move off-net/on-net. And then secondly, just mechanically speaking, are there certain costs that you'll be carrying this year that will not recur next year in terms of a full year number?

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [109]

--------------------------------------------------------------------------------

Arun, on the first topic, I mean we don't obviously look so far in the 2020 and share that information publicly yet because we're still a ways off. But the key for 2020 and addressing both revenue and EBITDA is having a strong finish to the rest of the year. Intelsat 29e obviously gives us a little bit of a delay and a hit regarding our plans. But building services on our new satellites, focusing on our managed services, in particular, and ramping up the base of terminals that are on those platforms, whether it be maritime or aeronautical or even our new services in Media and Networks, building up the run rate at year-end is absolutely critical so we hit next year as strong as possible. So that's really the focus. And when I touched upon what do we do about the Intelsat 29e slot and what kind of capabilities we bring in, that's all to be determined, the impact of that. But we believe for this year, we've incorporated everything in our guidance, and we'll look at next year later on.

--------------------------------------------------------------------------------

Operator [110]

--------------------------------------------------------------------------------

And this concludes our question-and-answer session for today. So now it is my pleasure to hand the conference back over to Stephen Spengler, Chief Executive Officer, for any closing comments and remarks. Please proceed, sir.

--------------------------------------------------------------------------------

Stephen Spengler, Intelsat S.A. - CEO & Director [111]

--------------------------------------------------------------------------------

Okay. Thank you, everyone, for joining our call today, and thank you for your questions. We look forward to meeting with investors at upcoming investor and industry events occurring over the next several weeks. Thank you.

--------------------------------------------------------------------------------

Operator [112]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program, and we may all disconnect. Everybody, have a wonderful day.