Intelsat SA (NYSE: I) shares are down 38% in the past two sessions. The stock got a high-profile downgrade Wednesday on concerns about Intelsat’s proposed private spectrum auction proposal.
Luxembourg-based Intelsat and SES have partnered with Canadian company Telesat to propose a private auction for the three companies’ C-Band radio spectrum, which is used for radio and TV broadcast in the U.S. With 5G wireless network launched imminent, however, some politicians are pushing back against the private auction proposal.
“Don’t give away $60 billion that belongs to the people of America to two companies in Luxembourg and one other one in Canada,” Republican Sen. John Kennedy said in a recent speech.
Analysts Weigh In
The complications regarding the potential auction prompted JPMorgan analyst Philip Cusick to downgrade Intelsat from Overweight to Neutral and cut his price target from $34 to $22.
In the note, Cusick said Intelsat’s ability to fully monetize its spectrum in a timely manner is now up in the air.
“In particular we believe that as pushback for a public rather than private auction of the airwaves from Senator Kennedy (R-Louisiana) has gained momentum, and while an order could come in the next couple of months it may not be a clean win for the C-Band satellite companies,” Cusick said.
But while Cusick and the market are clearly having doubts about the auction, Evercore ISI analysts are reportedly defending Intelsat and have said they expect the U.S. Federal Communications Commission will likely accept a proposal mostly in-line with the one offered by Intelsat and its three partners by January.
The uncertainty surrounding the spectrum auction is certainly a near-term headwind for Intelsat, but there’s no doubt the company will ultimately fetch a high price for its quality assets. JPMorgan lowered its projected proceeds from $10 billion to $8 billion. But the stock’s $1.8 billion market cap following this week’s sell-off suggests patient Intelsat investors may ultimately get rewarded.
Intelsat's stock traded around $12.24 per share at time of publication.
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