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Airwaves

13 November 2019 by jbchevrel

SES SA (SESGFP) offers global satellite broadband communication services and is a leading provider to customers in television (broadcast and pay-TV), enterprise and government. Recently the company has focused on becoming more vertically integrated in Video by increasing its presence there, while still differentiating its offerings with the acquisition of O3b Networks Ltd, in particular. Another area of focus for them is satellite-based mobile connectivity, especially for air travel. SESGFP has been an iTraxx Main constituent in series 19-21 and 29-32. Today SESGFP 5y CDS widened 9bp, underperforming any other single-name CDS (-2/+5) in the Main. In cash, the SES 1.625% 03/2026 bonds were ~stable despite the steep move richer in core € rates (3/5bp in the belly). This is after an analyst at the US bank I won’t name wrote the US may be leaning more toward a public auction of C-band airwaves. This could lead to lower proceeds for satellite companies. Including SESGFP. The FCC may be shifting away from the proposal offered by the CBA (C-Band Alliance). For context, SESGFP had said on the occasion of their Q3 results release that the CBA remained proactively engaged with all stakeholders for its proposal to repurpose C-Band spectrum for 5G services in the US, with an aim to deliver fair value for all involved. S&P had also commented on the potential for ratings upside for SESGFP depending on the amount of proceeds potentially raised via C-Band restructuring. This had contributed to SESGFP CDS. For context, in October, the CBA announced it joined several national, regional, and rural wireless operators in an FCC filing detailing a set of principles to guide a process for auctioning off terrestrial rights to C-band spectrum. Consistent with the goal of clearing spectrum and completing the auction efficiently, the CBA then proposed to clear a first tranche of 120 MHz of spectrum, including the 20-MHz guard band, in 46 top metropolitan zones within 18 months of an FCC order. The 2nd tranche of the remaining spectrum would be made available within 3y of the C-Band auction, providing cleared spectrum throughout the entire continental US. Announced last oct 25, SESGFP Q3 results showed slower declines in sales & EBITDA at Video arm and stable growth at Networks arm. Back then, SESGFP had reiterated its FY targets, incl. leverage 3x-3.5x, on which the risk now seems skewed to the upside.