NEW YORK, June 27, 2018 /PRNewswire/ -- Kerrisdale Capital, a private investment manager, has published a report explaining its long position in Intelsat S.A. (NYSE: I) and SES S.A. (EPA: SESG), two of the world's largest satellite service providers, which collectively account for more than 90 percent of the revenue generated by the C band in the US. Kerrisdale believes that Intelsat and SES are worth much more than their current share prices – 9x more and 3x more, respectively – as the FCC will likely approve their proposal for repurposing parts of their spectrum for 5G mobile use in the near future.
The full report can be found at https://kerr.co/i-ses.
A proposal to re-allocate some of the downlink portion of the C band – frequencies between 3.7GHz and 4.2GHz – for wireless usage is currently progressing through the Federal Communication Commission's rulemaking process. Intelsat and SES have filed a proposal on how best to conduct this re-allocation, espousing a market-based approach that would allow a consortium of incumbent C band users to put the spectrum up for sale, and maintain responsibility for transitioning their customers out of the band.
"The private market approach set forth in the Intelsat/SES plan is the most sensible way to make this spectrum available for 5G use while still accommodating current incumbent users of the band," said Sahm Adrangi, chief investment officer of Kerrisdale Capital. "Without cumbersome regulatory intervention, spectrum will naturally migrate to its highest and best use."
Kerrisdale expects the Intelsat/SES concept to form the core of the FCC's final order, expected to arrive in the second half of 2019. The Intelsat/SES proposal offers the fastest and most practical option for bringing 5G to the C band because it ensures the cooperation of the satellite operators themselves, who can then bring their customers along for the ride; it's a win-win that can bear fruit both in the short term (100 MHz within 18-36 months) and the longer term (at least 300 additional megahertz over time).
The newly cleared up C band will prove to be a valuable asset in the nation's transition to 5G. Because the frequencies provide a significant amount of available mid-band spectrum that is not encumbered with LTE subscribers, they can enable revolutionary capacity and speed improvements for wireless customers. By combining large bandwidths (hundreds of megahertz), 5G spectral efficiency, and healthy propagation, C-band spectrum can enable radical improvements in network quality. Additionally, because many other developed countries are at various stages of repurposing portions of the C band (and the adjacent extended C band) as prime spectrum for 5G, there will be a rich, global ecosystem of network equipment and user devices available from the start.
Over time, FCC rulemaking under both Democrats and Republicans has shifted towards flexible licensing, under which licensees are free to do what they wish with their spectrum, including selling it, leasing it, and subdividing it, as long as they comply with certain basic rules intended to protect other entities from harmful interference.
"The core idea of the Intelsat/SES proposal – give the incumbent licensees the right to repurpose the band and sell some or all of it – fits squarely with the current thinking of FCC spectrum policy," Adrangi said.
Kerrisdale has a long position in securities of Intelsat and SES and stands to benefit if their share prices rise.
Conference Call Schedule
Kerrisdale will host a conference call on Wednesday, June 27 at 1:00pm ET to discuss the Intelsat and SES report.
To participate in the conference call, dial 866-834-3313 (domestic) or 409-981-0700 (international) and reference conference ID 9798589.
About Kerrisdale Capital
Kerrisdale Capital Management, LLC, is a fundamentally-oriented investment manager that focuses on long-term value investments and event-driven special situations.
Kerrisdale Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 160804.
SOURCE Kerrisdale Capital Management, LLC