WASHINGTON — Satellite fleet operator SES has selected Thales Alenia Space to build two C-band satellites, making the Franco-Italian manufacturer the first European company to win one of nine replacement satellite orders placed this year as a result of the U.S. Federal Communications Commission’s upcoming C-band spectrum auction.
Thales Alenia Space said it will build the SES-22 and SES-23 television broadcast satellites using its Spacebus 4000 B2 platform. The geostationary satellites will weigh roughly 3,500 kilograms each, and are the last of six satellites SES says it needs in order to vacate a swath of C-band the United States has decided to repurpose for 5G cellular networks.
The Aug. 7 contract announcement follows a flurry of satellite manufacturing and launch deals Luxembourg-based SES has signed with U.S. companies in recent weeks as it races to clear 300 megahertz of C-band spectrum over the next 40 months in order to earn nearly $4 billion in incentive payments.
Under the FCC’s rules for the public C-band auction set for December, the winning bidders are required to reimburse satellite operators for certain costs incurred vacating the spectrum. The majority of those costs, expected to total hundreds of millions of dollars, stem from replacement satellites needed to continue telecommunications services with less spectrum.
With SES, along with competitors Intelsat and Eutelsat, poised to receive millions in reimbursements on top of billions in incentive fees available for clearing the spectrum early, the FCC faced political pressure to require the satellite operators to order their C-band replacement satellites exclusively from U.S. companies, something the FCC lacks the authority to do.
Still, SES highlighted the benefits to the U.S. space industry in announcing contracts earlier this summer with Northrop Grumman and Boeing for two C-band satellites apiece, and earlier this week in announcing the launches it ordered from SpaceX and United Launch Alliance.
SES said that the satellites ordered from Thales Alenia Space are “contingency satellites” that will ensure SES can clear 300 megahertz of auctioned spectrum two years ahead of the FCC’s December 2025 deadline, earning up to $3.97 billion in “accelerated clearing” incentive payments covered by the auction’s winners.
If SES can clear at least 120 megahertz by December 2021, the company stands to receive the first tranche of incentive payments, worth $977 million, in early 2022, SES Chief Financial Officer Sandeep Jalan said during an Aug. 7 earnings call.
SES would use the money to pay down its $4 billion debt, he said.
The later $2.99 billion tranche would go toward a variety of purposes, Jalan said, potentially including returning cash to shareholders, strengthening the company’s balance sheet, and “value accretive investments.” In order to receive that second and final tranche, SES must clear the remaining 180 megahertz by Dec. 5, 2023. If SES is late, the incentive payments progressively shrink and disappear entirely after 180 days.
SES CEO Steve Collar said SES has a team of “70 full-time equivalents” managing the C-band spectrum transition. “We couldn’t be more focused on this as a business,” he said during the Aug. 7 earnings call.
Of the three satellite operators who say they need replacement spacecraft to continue U.S. C-band service as they vacate the auctioned spectrum, SES is the first to have ordered all of its satellites.
Luxembourg and U.S.-based Intelsat — which says it needs seven replacement satellites — has ordered just four, selecting Maxar Technologies and Northrop Grumman to each build two satellites.
Paris-based Eutelsat says it needs a single replacement satellite, which it has not yet ordered.
Canada-based Telesat and Brazil’s Claro (formerly Embratel Star One), the only other operators deemed eligible by the FCC to receive reimbursement for C-band clearing costs, say the number of C-band customers they have in the United States is small enough for them to adjust their services to use less spectrum without needing replacement satellites.