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Intelsat S.A. (I) Q1 2019 Earnings Call Transcript

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Intelsat S.A.  (NYSE: I)
Q1 2019 Earnings Call
April 30, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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 -- Vice President, Investor Relations

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'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. Earlier today -- later today, we expect to file our quarterly report on 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 6-K 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, Stephen 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 -- Chief Executive Officer

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, 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 described fully in the quarterly commentary.

Adjusted EBITDA declined 9% to $380 million or 72% of revenue. The adjusted EBITDA margin percentage trend primarily reflects two 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 services 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 costs of revenue from our two newest satellites entering service. We use alternative commercial structures for these new satellites avoiding capital expenditures, but increasing OpEx instead.

Turning to our operations. On April 18th, 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 have only experienced three 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 two 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've done our best on the most important task. We've 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 have 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 described in detail in the quarterly commentary. The revenue guidance update also reflects a downward adjustment due to first quarter 2019 non-renewals 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 two 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 months to 36 months following the 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 who understand the critical role of C-band clearing to 5G.

Our filings at the FCC in the past month increase transparency on two 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 months to 36 months from a final order from the FCC. We believe the timing is the differentiating feature of our proposal and one that creates great benefit for the US 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 investment 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 of the work necessary to implement our proposal the moment the FCC issues an order. As we said in our last quarter call, we'll 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

Thank you, sir. (Operator Instructions) And our first question will come from the line of Jason Kim with Goldman Sachs. Your line is now open.

Jason Kim -- Goldman Sachs -- Analyst

Hey, good morning. 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, we can start with the revenue guidance. So the revenue guidance change, it's $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 benefit from ASC 842, so I was hoping you can provide some incremental color on those items, core business and the accounting impact.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Yeah. Thank you, Jason. This is Jack. 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 new revenue on this 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 non-renewals in a couple of our customer 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 Kim -- Goldman Sachs -- Analyst

And then -- sorry go ahead.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

No go ahead, if you have a question on this.

Jason Kim -- Goldman Sachs -- Analyst

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

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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

Jason Kim -- Goldman Sachs -- Analyst

Correct.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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 beside this, we had a change in accounting in the joint venture that we have on H3e with our partner JSAT. Added to that, in terms of the cost 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 Kim -- Goldman Sachs -- Analyst

Got it. And then moving on to the EBITDA side of things, so there seems to be some accounting impact, that's again looks like a non-cash 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 it's more of a one-time 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 the sort of the ongoing impact on EBITDA will be from IS-29E versus sort of a short-term impact.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Yeah. So I think the non-recurring cost, the one that you mentioned, the credit issue for repointing cost, but also the second one might be to balance the balance sheet acceleration of the straight line balances because that will not occur since we have basically written down these numbers. But the rest of it --

Jason Kim -- Goldman Sachs -- Analyst

Can you quantify the number?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Sorry.

Jason Kim -- Goldman Sachs -- Analyst

Can you quantify the number?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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

Jason Kim -- Goldman Sachs -- Analyst

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

Stephen Spengler -- Chief Executive Officer

Yeah. 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 that we could do that in a 18-month 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 in 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 have not proceeded to implement this technology yet. When that does happen there would be further compression in the networks and we could look at the potential to clear more, but we're talking about a time frame past the 36 months that we've noted and it's more in the five-year plus time range for that to happen.

Jason Kim -- Goldman Sachs -- Analyst

Thank you very much.

Stephen Spengler -- Chief Executive Officer

You're welcome.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Jason, maybe a clarification, if you're still on the phone. When I was talking about the 10% of the total cost, I was referring to the balance sheet acceleration of the straight line balances. But if you look at the total non-recurring, it's about one-third of the total of the revenue impact.

Operator

Thank you. And our next question will come from the line of Simon Flannery with Morgan Stanley. Your line is now open.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thank you. Good morning. On the 29e, could you just talk about the orbital slot and what are your plans and what the timeline 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 the band plan? One of your discussions being with the CBA, with the FCC and are you likely to propose a band plan to the FCC in the coming weeks and months? Thanks.

Dianne VanBeber -- Vice President, Investor Relations

To other satellite.

Stephen Spengler -- Chief Executive Officer

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 toward actions to make sure that we comply with those rules.

Dianne VanBeber -- Vice President, Investor Relations

Second, knock-on (ph) effects for other satellites.

Stephen Spengler -- Chief Executive Officer

Yeah, 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 manufacturer 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 three transparency filings that we have said that we will be filing with the FCC. The first two 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 that details how we would actually free up the capacity and what sequence, launching the new satellites, implementing the filters, that has been filed. The third one in 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 you know that should be coming in future weeks.

Simon Flannery -- Morgan Stanley -- Analyst

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 -- at the 18-month mark, is that still the plan?

Stephen Spengler -- Chief Executive Officer

Yeah, 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 Flannery -- Morgan Stanley -- Analyst

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

Stephen Spengler -- Chief Executive Officer

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

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thanks a lot.

Stephen Spengler -- Chief Executive Officer

You're welcome.

Operator

Thank you. And our next question will come from line of Mike Pace with J.P. Morgan. Your line is now open.

Michael Pace -- J.P. Morgan -- Analyst

Thank you. Just some follow-ups from earlier questions, and apologies with the math here, some of them might be simple, but trying to understand it. So to get back to the revenue guidance, you said $45 million to $50 million is from 29e. I think Jack, 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's roughly $30 million to $35 million of core business pressure versus your prior expectations?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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 two-and-a-half weeks ago. So I think, you know, 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 midpoint of the two guidance is $60 million. So you know because we wanted to give ourselves a little bit of room here.

Michael Pace -- J.P. Morgan -- Analyst

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

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

No, I mean that it's very hard today to estimate exactly the cost related to the 29e until we have all the customer contracts and amendment resigned 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.

Michael Pace -- J.P. Morgan -- Analyst

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 three sets of customers. There's one set that you were 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 be unable to get services back?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Yeah, 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 -- exist on the 29e customer -- 29e satellites. Two, we had some revenue -- new revenue expectation on that satellite. So that's the second bucket of loss. Then the third bucket of losses, 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 three 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 different satellites. 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 non-recurring part of that will be about a third of that total cost. And you have to obviously annualize the rest of the cost if you take that one-third out because the numbers that we gave you are only for nine months.

Michael Pace -- J.P. Morgan -- Analyst

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 non-cash 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 -- Executive Vice President and Chief Financial Officer

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% cost of sales. In terms of cash and non-cash, it's not non-cash, a big part of it. So that's the answer.

Michael Pace -- J.P. Morgan -- Analyst

Okay. Thank you.

Operator

Thank you. And our next question will come from the line of Anthony Klarman with Deutsche Bank. Your line is now open.

Anthony Klarman -- Deutsche Bank -- Analyst

Hi, thanks. 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 -- Chief Executive Officer

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 on 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 in the non-renewals, 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 their networks more economically. So they've moved in some places to implement some compression technologies, in other cases, they're reducing their transmission of standard definition channels. They're moving to more variable cost models, in some cases that have fixed costs 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 or some of these free-to-air either religious or ethnic content neighborhoods and 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 adjustment 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 Klarman -- Deutsche Bank -- Analyst

Thanks. 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 2019. But you mentioned two 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 -- Chief Executive Officer

Yes, that's correct. And these are two 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 non-renewals that weren't expected. So because of those two contracts in 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 Klarman -- Deutsche Bank -- Analyst

Thanks. And then just a question on the EBITDA guidance. So obviously, Jack, 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 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 -- Executive Vice President and Chief Financial Officer

The margin off-net is obviously minimal compared to the margin on-net. We don't want to give exactly the number, but 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 going to be impacted.

Anthony Klarman -- Deutsche Bank -- Analyst

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 two primary satellites that took some capacity versus SES type capacity solutions? Just to get an understanding we can make our own estimates as to what the potential margin impact will be.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Yeah, 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 is difficult.

Stephen Spengler -- Chief Executive Officer

Yeah, I think once the -- 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 the earlier questions, you know, these transitions and restoration efforts are very complex. In some cases, if the customer is -- either has a small network or a mobility network, the switch over 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 repoint. 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 around 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 Klarman -- Deutsche Bank -- Analyst

Thanks. And the final for me, I was wondering if you could give us a sense as to what the time frame is around when you will make a decision on the potential for a 29e replacement and if that would potentially include things like hosted payloads or other things that could be faster than just a 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 -- Chief Executive Officer

Yeah, 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 that as well. And obviously on that last point, you know, 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 those options. So it's probably going to be a combination of all those, but we're too early to make any specific comments. We'll have to update you later on, on the plan.

Anthony Klarman -- Deutsche Bank -- Analyst

All right. Thanks very much.

Stephen Spengler -- Chief Executive Officer

You're welcome.

Operator

Thank you. And our next question will come from the line of James Ratcliffe with Evercore. Your line is now open.

James Ratcliffe -- Evercore -- Analyst

Thanks. A couple if I could. First of all, just housekeeping. Jack, did you say that the bulk of the H3e and 842 impact was non-cash or that was not non-cash? And secondly --

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

It's non-cash.

James Ratcliffe -- Evercore -- Analyst

It's non-cash, OK.

Dianne VanBeber -- Vice President, Investor Relations

It's not non-cash.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Sorry, that's what I said. Not non-cash. Apologize.

James Ratcliffe -- Evercore -- Analyst

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

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Yes, it will.

Dianne VanBeber -- Vice President, Investor Relations

If we retain the business.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Yes, that's right.

James Ratcliffe -- Evercore -- Analyst

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

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Absolutely, that's correct.

James Ratcliffe -- Evercore -- Analyst

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 this plan still to deploy two of those? Thanks.

Stephen Spengler -- Chief Executive Officer

Yeah, sure. The plan is still to deploy two. The program is going well, but taking a little bit longer than planned and so we also had 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 Ratcliffe -- Evercore -- Analyst

And were there any expected expenses in the prior EBITDA guidance for 2019?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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

James Ratcliffe -- Evercore -- Analyst

Great. Thank you.

Stephen Spengler -- Chief Executive Officer

You're welcome.

Operator

Thank you. And our next question will come from line of Lance Vitanza with Cowen. Your line is now open.

Lance Vitanza -- Cowen -- Analyst

Hey, thanks guys. I mean, 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 -- Executive Vice President and Chief Financial Officer

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

Lance Vitanza -- Cowen -- Analyst

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 non-renewals and so forth?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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

Lance Vitanza -- Cowen -- Analyst

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 -- Executive Vice President and Chief Financial Officer

Well, yeah, I think we've talked about that non-renewables in a couple of our customer set. So you have the impact of that directly and you have the impact of the third-party cost.

Lance Vitanza -- Cowen -- Analyst

So it would be about $30 million, $35 million, is that sort of the rate -- sort of ballpark?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

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 because we want to be a little bit (inaudible).

Lance Vitanza -- Cowen -- Analyst

Okay. Thank you. So on the CBA process, if I -- Steve, if I heard you right, going to -- you know, 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 just generally lower revenue from the media segment today, did I interpret that correctly?

Stephen Spengler -- Chief Executive Officer

Not necessarily. I mean, I think that we -- this is predicting what they're going to need in the future. And it could be this efficiency allows -- sorry media companies to add in Ultra HD type content, 4-K type content, for example, much more efficiency -- efficiently. You need to have HEVC to do 4-K. So there would be compression and more efficiencies for these customers, but it would provide more capability for 4-K. 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 Vitanza -- Cowen -- Analyst

Understood. 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 you know that the sort of the phasing, if you will, of the -- 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 concern -- 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 concern sort of pop up in its place. Is that -- could you give us any color on that?

Stephen Spengler -- Chief Executive Officer

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 a interference free environment once it is implemented. And we've actually done extensive testing with the wireless equipment companies to prove out the -- 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 it can be.

Lance Vitanza -- Cowen -- Analyst

Okay, thank you. My last question -- sorry, go ahead. Yeah, 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? I mean, let me just play devil's advocate for a second. You know, 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 two failures that 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 the sort of the thought process was there and if that might change going forward given the recent events?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Well, the answer to the last part of your question is obvious, 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. You know, just want to remind you this is only the third failure that we've seen in 92 launches since 1992. I understand you're specifically mentioning the Epic satellites as opposed to the others. But you know, an 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 Vitanza -- Cowen -- Analyst

Will Boeing provide any compensation for your loss? I mean, it seems -- I mean, warranty is probably not the right the 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 does that arrangement look like if any?

Stephen Spengler -- Chief Executive Officer

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.

Lance Vitanza -- Cowen -- Analyst

Okay. Thanks guys. I very much appreciate it.

Stephen Spengler -- Chief Executive Officer

Okay. You're welcome.

Operator

Thank you. And our next question will come from line of Chris Quilty with Quilty Analytics. Your line is now open.

Chris Quilty -- Quilty Analytics -- Analyst

Thanks. Just wanted to follow up, there was some commentary or within the commentary -- in network services, there was a discussion there about non-renewal 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 -- Chief Executive Officer

Well, I mean, we've been talking for a while about our point-to-point services moving to fiber. So you know, 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. You know, 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 on to 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 been -- that's referenced in that commentary.

Chris Quilty -- Quilty Analytics -- Analyst

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 -- Chief Executive Officer

Well, I think there are 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 six satellites. And so those satellites are operating now and are moving to their operating orbit as we speak. So you know, these are two 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 you know, we applaud them for all their efforts in that regard. We still very much believe that our services in the future will be a multi-layered infrastructure, multi-band infrastructure. And so having the capability in 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.

Chris Quilty -- Quilty Analytics -- Analyst

Got you. And final question related to the CapEx plan, I think you mentioned that there is 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 cost 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 -- Chief Executive Officer

This is the next generation of spacecrafts that we're very excited about. A number of the manufacturers have development programs under way and are moving toward 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 bid, 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 manufacturers now, and if all plans continue as we expect, we hope to be able to embark on that later in the year.

Chris Quilty -- Quilty Analytics -- Analyst

Great. Thank you.

Stephen Spengler -- Chief Executive Officer

You're welcome.

Operator

Thank you. (Operator Instructions) And our next question will come from the line of Ric Prentiss with Raymond James. Your line is now open.

Ric Prentiss -- Raymond James -- Analyst

Thanks. Good morning.

Stephen Spengler -- Chief Executive Officer

Good morning.

Ric Prentiss -- Raymond James -- Analyst

Hey, couple of questions, on 2019 guidance has been 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 -- Executive Vice President and Chief Financial Officer

Correct.

Ric Prentiss -- Raymond James -- Analyst

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 -- Executive Vice President and Chief Financial Officer

Okay. I would say about -- since we said -- I said before that one-third is non-recurring out of the $40 million to $45 million, the rest is recurring and that's the three buckets that you just mentioned. And it's about -- you know, obviously the growth capacity that we are now using on our other satellite for restoration is the biggest bucket of that two-third.

Ric Prentiss -- Raymond James -- Analyst

Okay. And obviously then it also is just nine months impact, so we take (ph) forward into 2020.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

That's correct. That's correct.

Ric Prentiss -- Raymond James -- Analyst

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 could kind of understand what the core business impact was?

Stephen Spengler -- Chief Executive Officer

So Ric, that guidance by customer set, 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 interim basis. But you know, 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 two customer sets are lower than we had originally anticipated when we started the year and we had to -- we decided to incorporate that in this guidance adjustment as a result.

Ric Prentiss -- Raymond James -- Analyst

Got you. Okay. And then maybe an update. Good talking with Jack. But I think the CFO transition roles, you originally thought maybe in the spring there would be a successor appointed here in Florida (inaudible) in the summer, but you guys are still -- got the cherry blossoms, but just wondering what's the update around CFO search.

Stephen Spengler -- Chief Executive Officer

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.

Ric Prentiss -- Raymond James -- Analyst

And what are the key features you're looking forward in the new CFO? What do you think the top two or three items that that person would bring to the role that would be important?

Stephen Spengler -- Chief Executive Officer

Well, I'm not going to give you the entire spec, but I think there's obvious -- couple 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. You know, 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 supportive of that and is part of the team to make that happen is the other priority.

Ric Prentiss -- Raymond James -- Analyst

Okay. And the final one on the C-Band Alliance you mentioned you're ready to go as soon as you get the final word from the FCC, whether it's one 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 -- Chief Executive Officer

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 timeline. You know, 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 -- 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 toward the end of the process. But it's hard to say when it would be.

Ric Prentiss -- Raymond James -- Analyst

Okay. Very good (ph). We'll keep our eyes out. Thanks so much.

Stephen Spengler -- Chief Executive Officer

Okay. You're welcome.

Operator

Thank you. And our next question will come from the line of David Phipps with Citi. Your line is now open.

David Phipps -- Citigroup -- Analyst

Hi, thanks for taking my question. And Jack, if this is your last call, it's been a memorable one, 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 guide?

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

No, it's incorporated in the guidance and it's part of the credit that we issue for repointing basically. And it's cost 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 Phipps -- Citigroup -- Analyst

Another thing 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 Horizons 3e could have some benefits that might help the year be a little bit better than the midpoint of the guidance.

Stephen Spengler -- Chief Executive Officer

So Horizons 3e is obviously in-orbit and operating. We're -- 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 later 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 two assets as well as our entire fleet as we go through the year.

David Phipps -- Citigroup -- Analyst

Those were all my questions. Thank you.

Stephen Spengler -- Chief Executive Officer

Okay, you're welcome.

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. And our last question will come from the line of Arun Seshadri with Credit Suisse. Your line is now open.

Arun Seshadri -- Credit Suisse -- Analyst

Hi. Thanks for sneaking me in here. Just one question from 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 two parts to it. One is simply in terms of opportunity for potential claw back, 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? Thanks.

Stephen Spengler -- Chief Executive Officer

Arun, on the first topic, I mean, you know, like, we don't obviously look so far into 2020 and share that information publicly yet, because we're still a ways off. But you know, 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 and media and networks, you know, 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.

Arun Seshadri -- Credit Suisse -- Analyst

Got it. Fair enough. Thank you very much.

Stephen Spengler -- Chief Executive Officer

Okay. You're welcome.

Operator

Thank you. 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 -- Chief Executive Officer

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

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.

Duration: 61 minutes

Call participants:

Dianne VanBeber -- Vice President, Investor Relations

Stephen Spengler -- Chief Executive Officer

Jason Kim -- Goldman Sachs -- Analyst

Jacques D. Kerrest -- Executive Vice President and Chief Financial Officer

Simon Flannery -- Morgan Stanley -- Analyst

Michael Pace -- J.P. Morgan -- Analyst

Anthony Klarman -- Deutsche Bank -- Analyst

James Ratcliffe -- Evercore -- Analyst

Lance Vitanza -- Cowen -- Analyst

Chris Quilty -- Quilty Analytics -- Analyst

Ric Prentiss -- Raymond James -- Analyst

David Phipps -- Citigroup -- Analyst

Arun Seshadri -- Credit Suisse -- Analyst

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