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Edited Transcript of I earnings conference call or presentation 20-Feb-19 1:30pm GMT

Q4 2018 Intelsat SA Earnings Call

LUXEMBOURG Feb 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Intelsat SA earnings conference call or presentation Wednesday, February 20, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dianne VanBeber

Intelsat S.A. - VP of IR

* Jacques D. Kerrest

Intelsat S.A. - Executive VP & CFO

* Stephen Spengler

Intelsat S.A. - CEO & Director

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Conference Call Participants

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* 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. - Founder & Partner

* David Lawrence Phipps

Citigroup Inc, Research Division - Director and Senior Industry Analyst

* Giles Thorne

Jefferies LLC, Research Division - Equity Analyst

* Jason Bernstein

Cantor Fitzgerald

* 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

* Nicholas Michael Edward Dempsey

Barclays Bank PLC, Research Division - Research Analyst

* Sami Kassab

Exane BNP Paribas, Research Division - Media Research Director, Co-Head of the European Media Team & Analyst of Media

* Sebastiano Carmine Petti

JP Morgan Chase & Co, Research Division - Analyst

* Simon William Flannery

Morgan Stanley, Research Division - MD

* Timothy Valz

Jefferies

* Wilton George Fry

RBC Capital Markets, LLC, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Q4 2018 Intelsat's Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

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

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

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Good morning, everyone. Welcome, and thank you for joining Intelsat's Fourth Quarter and Year-End 2018 Earnings Conference Call.

Earlier this morning, we issued our earnings release and published a quarterly commentary, both of which are available on our website.

The quarterly commentary provides the investment community with the information and context that you need to analyze our results in advance of our earnings call, maximizing the time with -- for Q&A with management.

During today's call, we'll 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.

Later today, we expect to file our annual report on form 20-F with the SEC and once filed, 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 on our Annual Report on Form 20-F for the year ended December 31, 2018, 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, please 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, Stephen Spengler; and our Executive Vice President and CFO, Jacques Kerrest. Following opening remarks by Steve, we'll open the call for questions. Steve?

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

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Thanks, Dianne. Our fourth quarter performance was in line with our financial guidance for 2018.

During the quarter, we announced our new commercial and government aeronautical managed services. We also named our strategic distributors who will market those services to the business jet and government sectors.

In our media business, we renewed long-term contracts with customers for distribution services throughout the next decade.

Across the business, we achieved the operational priorities that support our business goals for 2019.

Since our last call, we've advanced our C-band spectrum initiative. With several substantive, technical and regulatory filings with the FCC. These filings detail our proposal and support our leadership position on this important national priority.

To briefly highlight our financial performance. Our total year 2018 post-ASC 606 results were $2.161 billion in revenue and $1.668 billion of adjusted EBITDA.

Excluding ASC 606, as compared to 2017, our 2018 revenue declined by 4% to $2.058 billion, and adjusted EBITDA declined 6% to $1.565 billion.

Our full year results are in line with the indications discussed last quarter.

Our earnings release and quarterly commentary include our financial guidance for 2019.

Measuring from the midpoint, our guidance for revenue is a decline of roughly 3% as compared to 2018. The decline reflects nonrenewals and some pricing pressure in our core media and network services businesses.

New revenues from mobility and other Intelsat Epic based services are growing but they are not yet sufficient to offset these declines.

Our government business is stable.

Our guidance for adjusted EBITDA, again, as measured from the midpoint is a decline of roughly 7% as compared to 2018.

In addition to the impact of lower revenue, our adjusted EBITDA guidance reflects our increased direct cost of revenue from the 2 new satellites just entering service. These satellites did not require capital expenditure but do incur operating expenses.

The adjusted EBITDA guide also reflects increased staff and marketing costs as we further invest in our new managed services offerings that will drive new growth.

Our 2019 operational plan is built on 5 priorities. The first is to fully leverage our strong core assets and space in on the ground. Our focus is to attain greater stability in our core business by capitalizing on the value of our networking and services, advancing our yield management initiatives and going to market with key distribution partners.

The second priority is to grow our new managed services business, powered by the Intelsat Epic HTS fleet and the investments in our terrestrial service delivery platforms. These investments will well position the company for the efficient expansion of high-value data networks and mobility services.

We enter 2019 with strong momentum on this priority.

Our third priority is to continue to lead the industry in innovation and adoption of standards-based technology.

Our goal is to increase the flexibility of our network and to expand our market opportunity by seamlessly interfacing with a broader telecom sector.

5G standards, software-based defined satellites and modems and simplified antenna technology will enable a new set of integrated and complementary satellite-based network services. Our fourth priority is to maintain a disciplined stance on cash flow management. As we pursue the use of flexible standards and software-based technology, we will reduce our capital intensity and moderate capital expenditures over time.

Our fifth priority, optimizing our spectrum rights is in the spotlight because of our C-band proposal to the Federal Communications Commission.

Our FCC proposal outlines a market-based framework for clearing a portion of the C-band spectrum, working with other satellite operators in the U.S. through the C-band alliance.

Our proposal protects our current C-band user's networks in all respects.

It enables the U.S. to accelerate the technical innovation and economic benefits that will accompany the 5G era.

Clearing C-band spectrum is a complex endeavor. This complexity is what gives us confidence in the strength of our proposal. The CBA proposal is the only one before the FCC that includes an interference mitigation plan. This key element of our proposal is supported by detailed cross sector technical analysis demonstrating the feasibility of 5G satellite services coexistence.

Our proposal is the only one that commits to launching satellites to replace capacity lost to clearing, ensuring all incumbent services can continue uninterrupted.

Lastly, our proposal is the only one featuring a commitment to clear spectrum with an 18 to 36 months following an order, essential if the U.S. is to win the race for 5G.

In short, our proposal is the only one that can be implemented the moment the FCC issues an order. We will be ready to go.

Let's move forward to Q&A, so we can discuss this topic and talk more about our business.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from the line of Philip Cusick with JPMorgan.

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Sebastiano Carmine Petti, JP Morgan Chase & Co, Research Division - Analyst [2]

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This is Sebastiano on for Phil. Just a couple of quick things. On the last comment, they are implemented when FCC issues an order, I mean what are the, I guess, level of conversations you're having with interested parties. I think there's been a lot of talk about there -- out there about some interesting things you could potentially do before an order. So just an update on that, if anything you can say? The next question I do have is also, what is -- has the government shutdown in any way? Delayed the pace of conversations with the FCC and regulators? I mean what is your expected anticipated date of a final order at this time?

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

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Okay. Thanks for those questions. And let me start with the commercial progress that we've made. I think you may know that, and we've issued this publicly, that the CBA issued letters in December to a wide range of potential interested parties that may be interested in engaging with the CBA on the C-band topic. These letters were sent out and there's been a receipt of interest from quite a few parties. There's been ongoing discussions by the CBA with those interested parties. So there's been interaction with them to understand what their needs are, what their requirements are, the types of structures that they would be interested in terms of band plans, et cetera. And of course, that's being worked within the CBA with CBA's advisers to design a band plan, an approach that addresses a wide variety of potential users of the C-band and the wireless spectrum. So we're seeing market interests, and we're seeing very clear market requirements from big and small players, and we're ready, as I said earlier, we're ready to proceed once the FCC makes a decision and issues an order. In terms of FCC conversations, I think you can see in the public record ex partes for our engagement with the FCC over recent months. We have issued some ex partes describing the precedents for our approach. We talked about the Communications Act and the fact that our proposal is fully compliant with The Communications Act. We share with the FCC our customer grooming plans to indicate where our customers would move when we clear the 200 megahertz of spectrum. In terms of the shutdown, what that did affect is that conversations directly with the FCC stopped during that time period, because the FCC was affected by the government shutdown. So we weren't able to engage with them directly, but we have been in direct engagement with the FCC since that point in time. And finally, regarding timing, we are still expecting the timing to be roughly the middle of the year, as the last word from the FCC was they wanted to get an order out in the second quarter of 2019. But of course, they control the process, they control the timing and so there's no guarantee that they'll stay to that early indication.

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Sebastiano Carmine Petti, JP Morgan Chase & Co, Research Division - Analyst [4]

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And then just a quick follow up. So if the final order in 2Q '19 hasn't been out there yet, do you expect interim potential further notices of proposed rulemaking, potentially following up on, first, an initial 180 to be cleared or 200 and then maybe subsequent NPRM's or a final order is probably going to be the next thing we see from the FCC? Just any thoughts you have on that.

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Stephen Spengler, Intelsat S.A. - CEO & Director [5]

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Yes. Well there are no indications that there would be any interim orders or directives from the FCC. Everything that we understand is that they're working towards issuing an order on this whole process by midyear.

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Operator [6]

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And our next question will come from the line of Wilton Fry with Royal Bank of Canada.

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Wilton George Fry, RBC Capital Markets, LLC, Research Division - Equity Analyst [7]

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Two questions please. Firstly, how should we think about the $40 million to $50 million of costs related to the new satellite service? Should we assume the underlying margin on the managed services business should be 76% if you exclude those? If you could just touch on that. Secondly, I should chance my arm on the spectrum of C-band. But 180 megahertz, should we assume that all comes in at the same time by 1 satellite that's launched or is it possible that you can clear a portion of that spectrum ahead of the rest of it, say, 50, 100 megahertz ahead of 180, making that sort of super prime spectrum.

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Stephen Spengler, Intelsat S.A. - CEO & Director [8]

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Okay. Thanks, Wilton. And Jacques, can you take the first question?

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

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Yes. Thank you. Thank you, Wilton. So let's just go through the increase in OpEx. We said that $25 million of the increase is related to the direct cost of revenue for Horizons 3e and Intelsat 38. Also MEV costs will begin towards the end of 2019 and will mostly effect 2020. But you see these are fleet decisions we have taken to reduce CapEx a few years ago and therefore, the offset now is higher OpEx. In addition to that $25 million, we have approximately $15 million to $20 million increasing OpEx related to our managed services strategy and other costs related to this and also compared to the 2018 actual numbers. So hence, we move forward. As you know, we will have more terrestrial infrastructure expenses and also staff and costs related to the -- to deliver the service that we've talked about in terms of the managed services. So you can expect that overall, EBITDA margin could be impacted in the future because of higher OpEx going forward.

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Stephen Spengler, Intelsat S.A. - CEO & Director [10]

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And Wilton, to your second question. As we talked before, clearing the spectrum is very complex on our part. It's quite a complicated endeavor. And so we've been doing all the planning work within the CBA and the partners in the CBA to determine the timing of satellite launches, the timing of filter installations across all these types. And so we have not been more specific at this time, beyond our ability to clear within 18 to 36 months, and we haven't indicated whether we can accelerate parts of that spectrum or not. Where -- but that's still to be determined.

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Wilton George Fry, RBC Capital Markets, LLC, Research Division - Equity Analyst [11]

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Is that, sort of, something you're working on at the moment? It's one possibility?

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Stephen Spengler, Intelsat S.A. - CEO & Director [12]

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Well, I think it's fair to say we're looking at all possibilities. If it's attractive to potential users of spectrum, to try to accelerate part of it. We will try to do that, but we don't have plans for that yet.

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Operator [13]

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And our next question we will come from the line of Jason Kim with Goldman Sachs.

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

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On the C-band process, there's still a few who oppose the CBA's approach with T-Mobile being one of the more vocal ones out there. We just filed another ex parte letter yesterday with an incentive auction proposal. I'm curious to hear your thoughts on where things stand in the process with respect to the opposition? And in that ex parte filing, T-Mobile mentioned that in one of the slides that they think the entire 500 megahertz of C-band can be worth $0.30 per megahertz per pop to the wireless industry. I was wondering if you had other view on the valuation.

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

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Let me just say on the second part. I don't have a view on what T-Mobile has put in there at this point in time. But I can comment on that proposal in general and talk about our assessment of it. First of all, the overall view is that the T-Mobile proposal is extremely complicated and we don't view it as workable. It has technical flaws in it, in that they're proposing differing amounts of spectrum be made available by PEA and as a reminder, there's 416 PEAs. This approach would result in massive interference between 5G and satellite. And just -- it shows a -- maybe a lack of understanding about how satellite works and satellite spectrum works. It can't be cleared by PEA, these are nationwide or very wide beam signals, using all the spectrum. Also, they proposed an incentive auction, which we don't believe can be effectively implemented. Again, each satellite operator has access to the entire 500 megahertz of spectrum over the country, over wide areas of the country. For an incentive auction to work, it would require all those satellite operators to volunteer to participate, and if one does not participate you would have a blocking situation or a holdout issue present. In addition, they want to expand the process to 17,000 receiver stations. This is really unworkable. It's adding huge amount of complexity and would result in effectively having thousands of auctions for this. From a regulatory standpoint, the proposal extends spectrum rights to 17,000 receiver station registrants. We view this as being against FCT -- FCC statutory authority because the Communications Act requires the FCC to license satellite operators and not receiver stations. Another point is that the incumbent customers, and this is very important, the incumbent customers on the service will not be protected in the T-Mobile proposal. The approach would certainly require eviction of incumbent C-band users, including TV programmers and broadcasters from the spectrum that is something that we completely protect in our proposal. It is essential that those incumbent operators and users are protected. Overall, the proposal delays the process. The proposal -- proposed approach is so complex it appears to be written for this exact purpose, to delay the process. And we assume that, that's done for competitive reasons, related to the Sprint T-Mobile merger, to protect their position in C-band spectrum. And finally, the delay that this create really ignores the fundamental priority of the FCC, which is to bring 5G deployment to the U.S. as fast as possible, to reflect its importance to the U.S. economy in development, technology, connectivity, broadband to the rural areas, et cetera. And so that's kind of a comprehensive view of what we see. Just, again, in contrast to that, we believe the -- our CBA proposal can be implemented, we have a plan ready to go. It protects incumbent users and it includes an element of speed that is critically important, which is to make this spectrum available as fast as possible.

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Jason K. Kim, Goldman Sachs Group Inc., Research Division - Senior Analyst [16]

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And then my next question is, my understanding is that you utilized a good chunk of your U.S. NOLs as part of your internal reorganization last year in response to the task reform. What's the NOL balance at year-end and how quickly does that recharge going forward. And that -- to the extent that this is a taxable event in the U.S., should we be thinking that -- should we be using a gross proceeds number or net proceeds at the clearance?

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Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [17]

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Jason, this is Jacques. I think the NOL issue is a very complex issue. You will see some explanation in the 20-F, when we file this at the end of the day. I don't think you're right in terms of using U.S. NOLs. It's lacks NOLs, really. But we not -- I think it would be too long a discussion here to go through this, but we can take it offline and discuss it with you.

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Operator [18]

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

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Simon William Flannery, Morgan Stanley, Research Division - MD [19]

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So assuming we do get a report in order midyear that essentially accepts the C-band alliance proposal, what happens next? How long do you think it takes for you to run the process? I know you've worked with a number of auction experts. Is that sort of a 6 to 9 month process to get to a -- kind of a sale agreement and then get that blessed by the FCC? What are the things we should be watching for their? And then we got Mobile World Congress next week, what's going on, on the C-band ecosystems side? What sort of conversations are you having with the equipment vendors, with the device manufacturers, with other carriers around commercializing C-band on a more global basis?

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

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Sure. Thanks, Simon. So in terms of timing, we're positioning to be ready to start the clock on our clearing process, our investments in satellites and to really get moving, so that we're able to deliver in 18 to 36 months once that order comes. So that would commence immediately after that order whenever it may come. We're also working with our advisers to construct a commercial approach to engage interested parties, to initiate a transaction with them for the spectrum as quickly as possible. What we haven't shared yet, and we will at the appropriate time, is how this process would work, this commercial process, there may be multiple phases to it, but our view is we could commence immediately with some initial engagement with parties and move towards a transaction pretty quickly, certainly within 2019. In terms of Mobile World Congress, our focus at Mobile World Congress and our participation there is really focused on our mobile network operator customers from around the world. It's a great sector for us, we're doing a lot of different things and delivering new services into that sector. Helping them reach new communities in remote and rural areas that are operating areas. So that's really a key part of our participation. It also ties to our work around 5G and the development of future hybrid networks. And so our engagement with equipment manufacturers at Mobile World Congress is primarily centered around that, but most of it -- most of the work there is going to be with our customers. But to your core question, we've been engaged with equipment manufacturers for months now with the CBA, and so we've had a lot of work going on with Nokia and Ericsson, specifically. They've been engaging and testing with us and verifying our technical approach to manage the guard band and the interference that could potentially be present. And so that work has been very active and ongoing, and it's really not the focus of Mobile World Congress. The Mobile World Congress is our customers and then potentially other partners on the equipment side that tied to our strategy to develop services for those customers.

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Simon William Flannery, Morgan Stanley, Research Division - MD [21]

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Great. And just one last thing, there's a lot of numbers running around on clearing costs in the, kind of, $1 billion to $2 billion range. You have any more clarity for us on that?

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

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That's still the number to use. We still believe it's in that range. And remember, that's focused on the satellites we have to build and launch and put in to operation, the filters that have to be installed in all the downlink earth stations, the labor required to manage all of that and to manage the grooming of the satellite services for our customers. It reflects all of our out of pocket costs. It does not include any prior investments or any opportunity costs. So that's still a good range for our estimated cost.

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

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And that's not in guidance, right?

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

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No.

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Operator [25]

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

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Michael Vincent Pace, JP Morgan Chase & Co, Research Division - MD and Senior Research Analyst [26]

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Just a couple of follow-ups on C-band and one on CapEx, and I'll do one at a time if that's okay?

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Stephen Spengler, Intelsat S.A. - CEO & Director [27]

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Sure.

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

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But I guess back to the update on conversations with folks on C-band, I guess, where have you been spending or either the CBA or your partners been spending, I guess, the greatest amount of time or explanation, right? What's the biggest need here? Is it protecting existing users? Is it potential buyers around auction, potential auction structure, clearing your timing. And then on this topic, I guess, what is the latest count on earth stations here that impacted?

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Stephen Spengler, Intelsat S.A. - CEO & Director [29]

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Dianne, the last one, it's about 16,000. Is that the correct number right now?

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Dianne VanBeber, Intelsat S.A. - VP of IR [30]

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Those are the locations that have been registered but keep in mind that you could have more than 10 antennas in a location, it was basically you could register a 2 block area and only have to register 1 antenna for any antennas that would be in that 2 block area. So it's practically speaking much larger than this 17,000.

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Stephen Spengler, Intelsat S.A. - CEO & Director [31]

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So to your other questions, Mike. The engagement with customers is primarily led by the individual companies, SES and Intelsat in particular, because that's where -- they are our customers, we have a commercial and contractual relations with them, and so that's where we are spending a lot of the time directly with those customers. But the CBA is involved when we talk to the customer associations. And so we're engaging with the customer associations as well through the CBA. The engagement with potential users of the spectrum has been ongoing. It ranges from large mobile operators to smaller and regional mobile carriers around the country. It includes interaction with cable and other interested parties. And so we're trying to be as broad as possible to understand the entire landscape of potential interested parties. And the last thing where the CBA is focused is in general and advocacy, making sure that we're engaging, informing, discussing status and giving information to the FCC. Sharing what our objectives are and the benefits we are going to bring to the country, to players on Capitol Hill and within the various associations here in Washington.

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

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And then back to, maybe, competing proposals. I guess you guys have been in the C-band business for a very long time in North America, right? Where -- C-band and spectrum is the issue here. And I'm wondering, in other proposals there's a call for fibering, I guess, more rural earth stations. And I'm curious your thoughts on the complexity and cost of that to replace satellite, if possible? And then one follow-up.

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Stephen Spengler, Intelsat S.A. - CEO & Director [33]

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Sure. When you think about fiber to rural locations, its complexity, cost and quality and reliability, okay? So it is really not feasible to connect all the headends across the country by fiber. It would be extremely costly. You'd be running a lot of those connections on single thread fiber, which creates a liability in the network in terms of reliability and quality. So it really isn't a feasible approach or else it would have been done long ago. The real advantage of C-band, and it's been there for a long time, is that we're able to deliver a very high quality television signal, in particular, to every single headend across the country, regardless of its geographic location. It's very high quality, it's very efficient and it delivers content to over 100 million households across the country. And so it is critical. And just to add on, there's been also comment to why can't it move to Ku-band? Well, it can't move to Ku-band because there isn't any available capacity, number one, and spectrum for those services and the quality level isn't quite the same as C-band when it comes to rain fade network spheres.

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

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And then just one for Jacques on the -- on your CapEx guidance, just eyeballing it. It looks like down $50 million to $100 million versus prior guidance in the 3-year period time, maybe more in '19 if we were assuming '18 moves into '19 as well? So any of these are not new idea to you guys, so I'm just wondering what's really driving that, that delta there.

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

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Well, I think this is what Steve had indicated before. We have started an emphasis on software defined satellites for the last 18 months. And that obviously lower our capital intensity and then we'll be working over the long term. And obviously, our current plan a little bit below the expected life cycle average, if you want to talk about this. But we are still emphasizing what we want to -- the markets that we want to attack, and we're going to take advantage going forward of our new manufacturing and faster deployment of satellites. And as I said before and as we indicated, over the last year, emphasizing software defined satellite going forward. So I think it's a combination of all this and I think you've seen it in some of our competitors too. It's a reflection of this. And I think we will benefit from it going forward.

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Operator [36]

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And our next question will come from the line of Giles Thorne with Jefferies.

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Giles Thorne, Jefferies LLC, Research Division - Equity Analyst [37]

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I had a couple of questions. The first one was on -- inevitably, I'm afraid on C-band. I think we're all aware that you've engaged a number of advisers to advise you on this process. And a particular aspect, it'd be interesting to get some color on is just the early learnings or early findings or early conclusions around how to construct the licenses for sale to a potentially interested party. And the dimension that'd be interesting to hear you talk on are geographic scope of the licenses and then block sizes. I'm fully prepared for you to say you're not going to comment because it might comprise your negotiating leverage, but any color would be very useful. And then not to forget that you're also a satellite operator, had a question on the business. Eutelsat's made a lot of noise over the past week or so about a big win in mobility in maritime and the capacity that's going to procure it is actually good old Ku-band wide beam capacity. And one other thing they've highlighted is how their reseller is very interested in being able to provision their own service rather than having to buy, yet again, a managed solution. Given you're one of the leading protagonists at selling managed solutions for mobility, do you see this as a long-running theme or is that such a lack of Ku-band wide beam around that. You said it's just going to be a bit of a blip along the road in mobility? Any -- your perspective on that would be interesting.

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

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Sure. Let me -- Giles, if you don't mind let me answer your second question first and I'll come back to the C-band question. We are, as you know, very active in the mobility space, and the maritime mobility, in particular, has been a focus of our company for a decade or more in delivering broadband services to ships that have here before been using L-band and narrowband services. So there's a real opportunity to upgrade those services across those service provider fleets. We're working with a number of service providers in that space, in some cases we're providing capacity and teleport services, in other cases we're delivering our Flex maritime managed service. And so it depends. So we're positioned to deliver what that customer may need that fits their business model and it allows them to deliver the best differentiated service to their customer set. But let me clarify something on our IntelsatOne Flex maritime service. It is a fully managed platform and that it is managed by Intelsat. It uses platforms that we have installed around the world that are teleports. It interfaces within virtually the entire Intelsat fleet, Intelsat Epic satellites as well as wide beam satellites. And we provide the services on a aggregate package basis to our customers, which are service providers and distribution players in the marketplace. Those distribution partners can then determine how they want to provision that service to individual ships. So we still give that service partner the ability to determine the quality of service they deliver to individual customers or individual ships in their network. So it kind of is perceived as the best of both worlds for many. It gives them the efficiency of leveraging a global network, leveraging a shared infrastructure, leveraging a CapEx model that other people pay for us, but it also gives them the control and ability to package their services the way they see fit for their particular markets and customers. And we've seen a great deal of success over the course of 2018 for those services and we expect more next year, or this year I should say and next year. So in terms of your first question on C-band, we are in the process to defining block sizes. The block sizes will be different depending on different potential users. There may be some users that want very large block sizes, others that may want smaller block sizes, some may be nationwide, some may be more regional or PEA based. And so we're going through that entire process with our advisers, taking input in from those potential users of the spectrum. But we have not defined that publicly and how we would go out because we're still finalizing that work. As far as licensing go, the FCC will be the licensing authority. We are not transferring licenses. What we are asking is, in part of our proposal to the FCC, is to allow wireless to use this 200 megahertz of spectrum, but once we transact with a wireless user they would still have to go to the FCC to get their license for use of that spectrum. So we look into the spectrum business from a licensing standpoint, it's only the commercial transaction that we would engage with these parties.

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Giles Thorne, Jefferies LLC, Research Division - Equity Analyst [39]

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Understood. Sorry, that was my mistake. I should have said agreement rather than licensing.

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

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Okay. All right. Did I answer the question then?

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Giles Thorne, Jefferies LLC, Research Division - Equity Analyst [41]

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Yes, that'll do.

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Operator [42]

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Our next question will come from the line of Arun Seshadri with Crédit Suisse.

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Arun A. Seshadri, Crédit Suisse AG, Research Division - Analyst [43]

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I'll try to stay away from C-band. Just a little bit of a sense on mobility. I think you said it's 14% of revenue for the full year. Do you have a sense of where that is on Q4 and what -- kind of what growth you're expecting in 2019?

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Stephen Spengler, Intelsat S.A. - CEO & Director [44]

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I'm sorry, what?

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Dianne VanBeber, Intelsat S.A. - VP of IR [45]

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What mobility was as a percentage of business in the fourth quarter?

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Arun A. Seshadri, Crédit Suisse AG, Research Division - Analyst [46]

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In Q4, yes, and then sort of what kind of growth rates you're expecting in 2019 in mobility?

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

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So I think you can probably appreciate that mobility is one of the stronger growing parts of our business. We have indicated that it's been in the low double digits over the course of 2018, and we're doing everything possible to maintain that position going forward. So we don't give specific guidance on growth rates, but we're doing what we can in the launch of our managed services across mobility to keep that sector moving forward as we expect.

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Dianne VanBeber, Intelsat S.A. - VP of IR [48]

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And the 14%, it's in the range for the total year, so it's -- and the quarter. So that's a good percentage to look at as you move forward.

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Arun A. Seshadri, Crédit Suisse AG, Research Division - Analyst [49]

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Got it. And then as far as the nonrenewals in network services, wanted to get a sense for some of the -- any things you can call out in terms of where the nonrenewals are going. Is it pretty much the same as we've talked about before on the legacy side and on the HTS side? Just any color on sort of what's happening to the nonrenewals.

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Stephen Spengler, Intelsat S.A. - CEO & Director [50]

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Yes, the nonrenewals in the networks area are still very much what we've talked about in the past. These are services that are legacy services that are more point-to-point in nature that are moving to fiber. And so we're still working our way through that. And it affects both our business with mobile operators and enterprise network operators as well. So that's primarily where we're seeing it. The nonrenewals are not really occurring on the Intelsat Epic fleet. That's not where it's happening. It's happening on the wide beam historical fleet.

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Arun A. Seshadri, Crédit Suisse AG, Research Division - Analyst [51]

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Got it. Lastly for me is MEV costs, I think you said the second half of the year is the mission and then you've got another one in 2019. Any way -- I'm sorry, 2020. Any way you can kind of quantify what the incremental MEV costs will be for 2020 versus 2019?

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

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Yes. Thank you. Obviously, we said the last part of 2019 for MEV 1. And obviously, for 2020, we will have MEV 1 and MEV 2 together. I think roughly MEV 2 is about 20% more than MEV 1, and it's about $13 million on an annual basis for MEV 1. And so you can -- 20% more for MEV 2 for the full year next year.

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Operator [53]

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

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Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [54]

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Most questions have been asked, but I just had maybe 2 follow-ups. First, you mentioned in the 2019 priorities, obviously, you've already achieved a lot in the capital markets in 2018, but Jacques, I was wondering if you can maybe give us any insights you have as to how the company is thinking about perhaps leverage targets as a result of potential deleveraging -- further deleveraging catalysts from C-band. And then as an adjacency to that, I guess maybe for Steve, I was wondering -- you talked about the transformation plan in that point, and I was wondering if thought had been given about how you potentially transform the company's positioning from a core business perspective, whether you might take some proceeds and reinvest in the core business.

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Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [55]

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Okay. Let me just take the first one. Thank you, Anthony. As you know, this will depend on the quantum, obviously, to be received from the C-band, but we have talked publicly about -- again, depending on where and when we will get the proceeds, we have talked about going down to a leverage between 5 and 6x overall leverage. So it's very difficult at this time to obviously comment on this since we are speculating in a couple of years down the road here.

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Stephen Spengler, Intelsat S.A. - CEO & Director [56]

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And the -- yes, Anthony, on your question about transformation and investments required, we've been balancing our investments and focusing on how do we invest for the future of this company in ways that will aid this transformation. And so you've seen us make some external investments in different companies like Kymeta, like Dejero, like AMN in Africa over time. These are based on how do we bring technology or capabilities or market approaches into the company through a network of partners to do that. That's part of the investments we've been making. We've been investing heavily in our terrestrial network and our managed service platforms and our service delivery capabilities. And so if you look at our CapEx going forward, that is becoming a larger part of our CapEx, critically importance. We've talked about -- or Jacques talked earlier about our OpEx this year having an element that's related to our sales and marketing and product development for those future managed services. And so we will continue to invest in the new services and capabilities that will take us into the future, including the work we're doing on 5G and enabling greater integration with the wireless sector in our services. So that will continue. How we use any potential proceeds, we'll determine at that time, but I think it's correct to assume that we're going to have to keep investing a portion of our assets or our capital to keep this transformation moving forward.

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Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [57]

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Can I just make a slight correction in the answer that I gave to Arun in terms of the MEV 2? We will have full year in 2020 of MEV 1, but only 0.5 year of MEV 2 because it's only starting in the third quarter of 2020. So, sorry.

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Stephen Spengler, Intelsat S.A. - CEO & Director [58]

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Okay. Anthony?

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Anthony Francis Klarman, Deutsche Bank AG, Research Division - MD and Global Head of High Yield Research [59]

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My follow-up, Steve, just quickly was the investments previously that you mentioned like Kymeta or maybe the investment you're talking about this year in the managed services platform, those are all relatively smaller. But I guess I was just sort of confirming that as you think about potential ways to change the dynamic of the core business, that one of the potentials for C-band is that you can perhaps take a bigger bite at some potential investment opportunities to sort of help offset the headwinds that are perhaps persisting in the core businesses.

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

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Yes. I think that's a fair thing to raise and it's something that we'll certainly look at depending on what our proceeds are and what's possible at the time to support our strategy.

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Operator [61]

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

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [62]

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On the C-band side, could you talk about how many parties have actually signed NDAs access to data room? Or did you mention that? If you called it out earlier, I apologize I missed it. And I'm also wondering if you could clarify why you feel you'll be able to commence clearing immediately upon an order being approved. Have you begun -- I mean, I assume that's because of the conversations that you have been having and perhaps there are agreements, at least in principle, on the important terms and so forth.

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Stephen Spengler, Intelsat S.A. - CEO & Director [63]

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So to your first question, I don't have an answer to that question in terms of how many parties came back. It's a reasonable number that we've received in terms of interest. I just don't have that data on hand, and I'm not sure I would've shared it anyways. Regarding why we think we can start immediately, it relates to the fact that we've been doing a lot of work over the past months with our customers in terms of how we would manage the relocation of their services. We've gone into great detail with those customers on how to do this. We have engaged, as I said earlier, with the industry in understanding the technical aspects of implementing our plan. And so we know how to manage interference. We've interfaced and worked with the equipment manufacturers. We've done testing. We've actually designed a filter and tested that filter in front of our customers and with our industry partners. And so we've done a lot of the work upfront to be ready for a quick start once that order comes. And so that's why we're confident that as soon as that order comes along, we'll be able to move pretty quickly and start the clock on that 18 to 36 months.

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

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Okay. So with respect to the T-Mobile -- the most recent filing, I agree with you completely. I mean, having read dozens of comments on behalf of cable distributors, networks, TV, radio broadcasters, they've all said that C-band is the only means they have to distribute their signals that's really viable for them. So clearly, T-Mobile is trying to gum up the works here. They have no interest in adding constructively to the process. My question is, does the FCC know -- do they see what's going on here? And is there any evidence that you could point to us, whether it's comments or public statements that commissioners have mentioned, that would sort of give us some comfort that they view it the same way that at least you and I do?

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Stephen Spengler, Intelsat S.A. - CEO & Director [65]

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Yes. I -- we don't have any specific feedback from the FCC on this alternative proposal. And the FCC is very careful about keeping their thoughts to themselves until the right point in time to share them. So there really isn't much more to say than that. I do think -- as I went through some of the issues, I do think that some of the points in their proposal should stand out to the FCC in terms of being unworkable from a regulatory standpoint or even implementation standpoint.

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

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One last question just on the business, and I know this was touched on briefly earlier, the question about mobility, growth rates. Understanding that you don't want to talk about that going forward, but could you sort of flesh out -- you did mention in the commentary that while mobility is still growing, the growth rate is decelerating. Could you flesh that out a bit in terms of what you saw that growth rate in 2017 versus what you observed in 2018? And then perhaps we can make our own assumptions about what we think it's going to be in 2019.

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Stephen Spengler, Intelsat S.A. - CEO & Director [67]

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I think one of the challenges in mobility from a growth standpoint is that sometimes it comes in spurts. You have big commitments from Internet article provider or a cruise line provider and that sort of thing, and so it moves in jumps. And so there's some timing issues in those incremental growth areas. And so while it may be a little bit slower than maybe you've seen in the past, we're not concerned that this isn't a long-term important and viable growth market for us across maritime, aeronautical. And we think that as we ramp up our new services over the course of 2019, we're going to be even more well positioned for 2020 and beyond.

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Dianne VanBeber, Intelsat S.A. - VP of IR [68]

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And part of it is just as a business of scale, Lance, right? So it's a lot larger business than it was a couple of years ago. So...

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Operator [69]

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And our next question will come from the line of Nick Dempsey with Barclays.

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Nicholas Michael Edward Dempsey, Barclays Bank PLC, Research Division - Research Analyst [70]

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I've got 2 questions. So in your quarterly commentary, you talked about the pricing declines having eased in the industry and you referred to 2016/'17 as a period where those declines were heavier. Can you give us some help on how much more revenue you need to reprice at lower rate based around those heavier price declines back then? Or put another way, when can we see the kind of current stabilization of prices actually within your numbers? And second question, how do you respond to suggestion that there could be a string of court cases delaying the C-band process as floated out there by Google and Java?

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Stephen Spengler, Intelsat S.A. - CEO & Director [71]

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So on the first point, in terms of our pricing, we have estimated there's about $150 million of backlog, that's pre-2015, that has not been repriced to the current market rates. And so that's predominantly in our networks business, and we expect that we're going to see that flow through the system in 2019 and that's built into our guidance. And so while we're seeing improvement throughout 2018, we still have some backlog to reprice. We've talked about some of the new services or renewals that occur in our government sector that haven't been priced for 5 years, those will also have to be repriced. And so we still have that pressure in our -- in those 2 sectors. I think from -- your second point about potential legal challenges, I think, just in general, whenever you're in a regulatory proceeding, there's always the possibility of legal challenges from all parties if the process is viewed to be done incorrectly or unfairly or people have a concern about it. So it's not a given that it will happen, but it's a possibility.

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Nicholas Michael Edward Dempsey, Barclays Bank PLC, Research Division - Research Analyst [72]

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I'm sorry, just a follow-up then. I mean, the FCC wants to do all this quickly. Of course, they don't want to be delayed by court cases, but do they have the power to go ahead while the court cases are running concurrently? To what extent can they gum up the process?

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

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Well, I'm not a lawyer, but I would guess unless there's an injunction, they wouldn't be able to proceed with their plans. And so that would be the key question as whether that would be granted by a court to stop the FCC's works. But you're absolutely right. I think speed is important, and it gets back to what we believe to be an important aspect of our proposal and how we we've addressed really all the constituents to address speed and to get things moving as fast as possible as opposed to a longer FCC process that may potentially result in some litigation.

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Operator [74]

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

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Christopher David Quilty, Quilty Analytics, Inc. - Founder & Partner [75]

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I've got 2 questions, one on the mobility business and one on media. I'll start on the mobility side, specifically, aviation, 2 of your customers in Gogo that's been having some problems in Panasonic, which seem to have made a shift towards Ka as their go-forward strategy. Can you talk about whether there's something specific you need to do, either in terms of your managed services or the amount of available capacity in order to retain and grow the Ku portion of the market relative to the growth that we've seen in Ka?

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Stephen Spengler, Intelsat S.A. - CEO & Director [76]

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Sure. I've talked about this in past calls, and let me reiterate a couple of points. We view the aero broadband market as a large, large segment. And there are going to be multiple solutions to providing services into the sector. Ku-band is well established. There is a very large installed base. There's a global capacity that is -- that provides redundancy and resiliency across the globe. There's an ecosystem of equipment and solutions to install on aircraft. And it delivers a high-performance broadband solutions. So we're very confident about the quality of services that we can deliver on a global basis, which you cannot do on Ka-band. And we expect that the service providers will continue to use both. And so we just announced a large renewal with Gogo, and so our work with them is continuing well into the future on our wide beam fleet as well as our Intelsat Epic fleet across the globe. You may have also read about Global Eagle announcing a service with Air France on Intelsat 37e, one of our Intelsat Epic satellites. That's a service where there were Ka-band options for them to consider, but Ku-band went out because of the performance in the global reach. So our feeling is that there's still a lot of opportunity, a lot of growth here. Ku-band is very well positioned on a global basis in particular, and there's going to continue to be service options available to customers and we're going to have a very good solution for them.

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Christopher David Quilty, Quilty Analytics, Inc. - Founder & Partner [77]

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Fair enough. And shifting to the media business. Back in December, AT&T said that they bought their last satellite for DTH services. Can you comment on whether you think that represents an opportunity for Intelsat down the road to maybe be a third-party supplier of capacity if needed or whether that's a broader statement about the potential growth or lack of growth in that market on a go-forward basis?

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Stephen Spengler, Intelsat S.A. - CEO & Director [78]

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Yes. I think there are a couple of aspects to this. I mean, the U.S. is different than the rest of the world when it comes to DTH. The rest of the world, the DTH operators do not own their own satellites. They utilize resources and capacity from satellite operators all around the world, and we provide services directly to DTH operators outside the U.S. And so it does create a situation where if they do need to add more capacity and expand their network, they could do that incrementally with other satellite operators, including ourselves, in the future. I think they probably are also reflecting on how they're rebalancing their business. I don't want to speak for them, but they have a satellite fleet that lasts well into -- through the next decade. They're going to be providing these DTH services for a long time. I think they don't need to make a launch decision for their current customer base for quite a while. And so I think it's not a near-term decision for them to make one way or another.

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Operator [79]

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And our next question will come from the line of Sami Kassab with Exane.

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Sami Kassab, Exane BNP Paribas, Research Division - Media Research Director, Co-Head of the European Media Team & Analyst of Media [80]

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It's Sami at Exane BNP Paribas. I have 3 questions, please. Firstly, at the time when there seems to be clear demands from telcos for more than a 180 megahertz, can you elaborate on what is your economic incentive to protect incumbent use in the medium to long term? Or put another way, at this stage, do you expect to renew incumbent users' contracts when they expire? That would be my first one, please.

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Stephen Spengler, Intelsat S.A. - CEO & Director [81]

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Sure. Well, just this quarter, we announced a long-term renewal for AMC Networks that goes well into the next decade, into the end of next decade essentially. So we're still getting long-term commitments from customers in North America, and it is still a critical piece of their distribution of their content. So we do expect that we're going to continue to renew and expand those customer services in the North American fleet. And if you look back at our previous announcements over the course of 2018, there are several other North American media customers that were renewed and extended well into the next decade as well. So our objective here is to make sure that we have enough capacity, enough spectrum to serve these customers as they renew and to give them the possibility of expanding in the future as well. And that's how we've reached this conclusion that to protect those services, we could clear 200 megahertz but not more.

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Sami Kassab, Exane BNP Paribas, Research Division - Media Research Director, Co-Head of the European Media Team & Analyst of Media [82]

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And do you think that the C-band monetization will have an impact on the pricing levels that you can renew those incumbent contracts at? Do you expect pricing to go up for AMC or in the others?

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Stephen Spengler, Intelsat S.A. - CEO & Director [83]

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Look, the pricing is a commercial matter between us and our customers. It has been relatively stable across North America for some time now. And as an example, they are able to lock in pricing with term as we just saw with some of our more recent deals, so they have price assurance when they commit for those long period of time.

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Sami Kassab, Exane BNP Paribas, Research Division - Media Research Director, Co-Head of the European Media Team & Analyst of Media [84]

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My second question is in your grooming plans that you made to the FCC, what modulation and compression techniques are you assuming? Is it all dealing with S2 and HEVC? Or is it a combination of various modulation and compression techniques?

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Stephen Spengler, Intelsat S.A. - CEO & Director [85]

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It's a combination based on what the customers are using and based on what the customers' plans are.

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Sami Kassab, Exane BNP Paribas, Research Division - Media Research Director, Co-Head of the European Media Team & Analyst of Media [86]

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And lastly, can you elaborate on the 3% to 6% revenue decline that you're expecting in media for 2019? Is it largely driven by volume reductions on the compression improvement? Or is it pricing? Or any comment on the 3% to 6%, please?

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Stephen Spengler, Intelsat S.A. - CEO & Director [87]

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Sure. The media guide is really focused on volume reduction, and it relates to something we talked about last quarter in that our media customers in various parts of the world are looking to control their costs and manage their costs better. They're facing greater content costs and they have to distribute now, both in linear format as well as over-the-top. So they're trying to find ways to be more efficient and more cost effective. And they do that in a number of ways. In some cases, they're reducing their SD transmissions. They will continue to transmit an HD, but SD may be discontinued. They may use on-demand OU services as opposed to buying full-time capacity. They may implement compression in some cases. Other cases, it's consolidation when they have made some acquisitions. And so it's overall operational efficiencies that they're seeking across the board that's affecting volume.

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Operator [88]

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And our next question comes from David Phipps with Citi.

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David Lawrence Phipps, Citigroup Inc, Research Division - Director and Senior Industry Analyst [89]

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Could you give us an update on the CFO search?

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Stephen Spengler, Intelsat S.A. - CEO & Director [90]

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Sure. So the search is underway. We have commenced it, commenced our work. Our objective is to have a new CFO in place in the springtime. We want to find, obviously, the best person possible to lead our financial organization for the long term because this is obviously a key member of the team. But we're very appreciative that Jacques will be here until that new CFO is in place later in the spring.

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David Lawrence Phipps, Citigroup Inc, Research Division - Director and Senior Industry Analyst [91]

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And then sorry, I've got a couple of questions during the conference call. In the third quarter, you talked about you felt confident you were going to run a co-process and be able to monetize some of the spectrum in the second quarter. And you've seemed to have backed off that a little bit potentially because of timing from an FCC review. So just -- can you clarify, do you still expect things to occur in the second quarter? Or should we think that will happen sometime later in 2019?

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Stephen Spengler, Intelsat S.A. - CEO & Director [92]

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Yes, I'm sorry, there -- maybe it's a misunderstanding. I think we've been pretty consistent saying that based on what we heard from FCC officials that they were targeting second quarter -- mid- to late second quarter for an order, I think we've been pretty consistent that, that's what we've been targeting. And based on that, we'd assume that we would start a process after that order. And so that really hasn't changed. We don't know what impact, if any, the shutdown had, but it's still looking like second quarter for that start date.

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Operator [93]

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Our next question will come from the line of Giles Thorne with Jefferies.

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Giles Thorne, Jefferies LLC, Research Division - Equity Analyst [94]

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It was a very close question. I don't think you've said on record what MEV 2 is going to be for. Forgive me if you have, but could you be -- or would you ever be using that for the early C-band satellites? I'm thinking of Galaxy 25 or -- well, not 25, but Galaxy 23 or Galaxy 13. That was it.

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

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Okay. Giles, you're right. We have not publicly announced we're going to be using that. And the reason for that is we want to make sure that our customers are fully informed and part of that plan before we go public with what we're going to do with it. But I can say, it is not within the North America CONUS fleet. It is for a satellite in our international fleet.

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Operator [96]

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Our next question will come from Jason Bernstein with Cantor.

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Jason Bernstein, Cantor Fitzgerald [97]

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Just wanted to follow up on the indication of interest. I think the last letter -- last ex parte said 400 letters have been sent out by the CBA. And I know you can't probably comment on the number of interested parties, but what does the process look like after someone indicates they're interested?

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Stephen Spengler, Intelsat S.A. - CEO & Director [98]

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Well, the process is that if they are interested, at the appropriate time, once we have an FCC go-ahead in the form of an order, we would engage with those priorities in terms of -- in detail of how we would proceed with the transaction process. And so I think it's understood that they know that we can't do that until that time comes, but that is what we would do at that point in time.

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Jason Bernstein, Cantor Fitzgerald [99]

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So the ex parte which was filed, I think, in late December that was titled Early Sale Letter, is there any sort of transaction you could contemplate where it's some sort of option contingent on final FCC approval, like can you do a deal prior to FCC approval if someone was interested?

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Stephen Spengler, Intelsat S.A. - CEO & Director [100]

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Those are all things that have been speculated. What we want to make sure of is that whatever we do is the direction that the FCC wants us to go in. We have to follow their lead. And so we're expecting that an order will be the way that, that preference will be defined to us. If there's a way to have some indication from the FCC to do something different, I can't really comment on it. I mean, I guess it's possible, but we really focus on the order.

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Jason Bernstein, Cantor Fitzgerald [101]

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Got it. And also, it seems like some of the opposition members here are playing both sides, like at the New America panel, Preston stood up, and I think Charter indicated that they had taken meetings with the CBA while they were on the panel sort of in the opposition camp. Can -- and I know the degree you can comment, but is it your sense that there are parties out there that are playing both sides sort of favor -- in terms of the opposition but taking meetings with CBA?

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Stephen Spengler, Intelsat S.A. - CEO & Director [102]

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Well, let me just say it this way. As I said, we've had meetings with a wide range of parties the CBA has, including players across the mobile spectrum, big and small, across cable and in the tech sector as well. And so we've had conversations with a lot of those parties, and what we have learned in those discussions don't always match up with the external public comments.

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Jason Bernstein, Cantor Fitzgerald [103]

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Great. And lastly, there's been a lot of sort of volatility on the Oneweb side in terms of their plans. Have there been any sort of follow-up and dialogues since last year in terms of having your strategic investment there or just how their plans are coming into focus?

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Stephen Spengler, Intelsat S.A. - CEO & Director [104]

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Yes. I don't want to speak specifically for Oneweb on their specific plans, but they do have a significant milestone coming up this Friday when they are scheduled to launch their first 6 satellites from French Guiana, and so this is an important milestone. It's the beginning of their network. It's a really exciting step forward for them and for those that are partnered with them. And so I think that you'll hear more from them as progress goes forward with that launch and the work they do after that.

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Operator [105]

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And our next question will come from the line of Tim Valz with Jefferies.

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Timothy Valz, Jefferies [106]

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I just had a quick question for you on the accounting side. So just to make sure I understand, under ASC, you are perpetually required to recognize revenues, so your front-loading a greater portion of contracts. If I think about the delta in 2018, you had $103 million pickup. Am I thinking about it correctly that, let's say, your average contract life is around 5 years, that they would then be a $25 million-a-year EBITDA give back over each of the next 4 years. And just so you know where I'm coming from, if I think about $1.565 billion as being the starting point, minus $25 million, I'm at like $1.54 billion on kind of an ex-ASC adjustment. And then you guys kind of highlighted $40 million of additional OpEx. So that would get me to kind of $1.5 billion starting point versus your guidance. Is that the right way to think about it? Or is there anything that I'm missing there?

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Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [107]

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Thank you for the question, [Timothy]. Let me just give you the number for the ASC 606 for 2019. So 2019 would be about $100 million. In 2020, it would be about $110 million. 2021 would be about $110 million. So that's as far as we can give you the numbers. So you're not right that this number will go down as we go. Remember, part of it is the interest that is calculated for these revenue that were connected before to the business. So...

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Timothy Valz, Jefferies [108]

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So it's purely going to be interest versus noninterest? There's not some kind of giveback?

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Jacques D. Kerrest, Intelsat S.A. - Executive VP & CFO [109]

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Yes, yes. No, that's right.

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Dianne VanBeber, Intelsat S.A. - VP of IR [110]

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And if you need to go over the details, Timothy, we can pick that up later on. No problem.

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Operator [111]

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Ladies and gentlemen, this concludes our question-and-answer session for today. I will now turn the conference back over to Mr. Stephen Spengler, Chief Executive Officer, for any closing comments or remarks. Sir?

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Stephen Spengler, Intelsat S.A. - CEO & Director [112]

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Thanks, everyone, for joining our call today, and thank you for your questions. As we move through 2019, we'll look forward to providing updates on our plan to enhance our business performance, and we also look forward to meeting with investors at upcoming investor and industry events occurring over the next few weeks.

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Operator [113]

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