SES files $1.8 billion claim against Intelsat over C-Band Alliance split

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GLASSBORO, NJ — Fleet operator SES filed a lawsuit on July 14 against Intelsat seeking at least $1.8 billion in damages for Intelsat’s withdrawal from the C-Band Alliance.

The lawsuit, filed in the U.S. Bankruptcy Court for the Eastern District of Virginia – the same court charged with Intelsat’s Chapter 11 bankruptcy protection – centers on Intelsat’s alleged breach of a consortium agreement where it and SES had agreed to equitably distribute the proceeds of the C-Band alliance was set to collect auctioned C-band spectrum.

Intelsat reverse course in February after the US Federal Communications Commission announced a $9.7 billion incentive program, with funds allocated to C-band operators on an individual basis if they can clear enough spectrum by December 2023. Intelsat is eligible for $4.87 billion under the program, while the maximum SES can earn $3.97 billion.

Intelsat, in an unsuccessful attempt to convince the commission to give it more money, told the FCC that it should consider disbanding the C-Band Alliance.

SES said the $1.8 billion minimum sought includes compensatory and punitive damages. The company accuses Intelsat of breach of contract, breach of fiduciary duty and unjust enrichment.

Intelsat, SES, Eutelsat and Telesat formed the C-band Alliance in 2018 to convince the FCC to let them privately auction C-band spectrum to cellular networks willing to use the airwaves for bandwidth-hungry 5G services . Analysts have estimated that the auction could have brought operators up to $60 billion. Intelsat and SES would have retained the vast majority of the revenue, while dividing a lesser amount between Eutelsat, Telesat and the administrative costs of the C-Band Alliance.

The FCC ultimately opted to hold its own public auction, now scheduled for December, paying the proceeds to the US Treasury. The $9.7 billion accelerated compensation program will be funded by successful bidders in addition to their spectrum payments to the FCC.

Intelsat filed for Chapter 11 bankruptcy in May, saying the upfront costs the operator must pay for replacement infrastructure to clear its portion of the C-band before the 2023 deadline from the FCC were too much to bear with its $15 billion debt. The FCC requires winning bidders to reimburse operators for replacement satellites and associated infrastructure, but that reimbursement won’t be ready until at least 2021, Intelsat said at the time of its bankruptcy filing.

Intelsat spokeswoman Meghan Macdonald said the C-Band Alliance was created to pursue a private auction of spectrum that is no longer feasible.

“The [FCC’s] The final order includes a public auction, administered by the FCC, that treats each satellite operator individually based on their spectrum usage,” she said via email on July 15. “Intelsat is currently the largest operator in the United States, using over 60% of the C-band spectrum in the continental United States (so it would logically follow that we have more to gain).

SES, in its complaint, said Intelsat continued to assert and work with the C-Band Alliance for months after the FCC announced its intention to pursue a public auction. Only after the FCC clarified the individual funding amounts did Intelsat “waive its obligations under the Consortium Agreement, including its obligations to fairly distribute the proceeds received by Intelsat and SES”, said SES.

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