Draft C-Band Order Terms Made Agreement With SES Moot: Intelsat CEO
Intelsat didn't realize its agreement to split clearing proceeds 50-50 with SES was moot until it saw what was going to be in the FCC's draft C-band clearing order Feb. 6, 2020, testified Intelsat CEO Stephen Spengler Friday in U.S. Bankruptcy Court. With the FCC draft order earmarking specific dollar amounts to each incumbent C-band satellite operator, Spengler said in his mind the collaboration agreement "didn't exist" when he called SES CEO Steve Collar, based in Luxembourg, at 3 a.m. EST Feb. 7 to let him know. Friday was the fifth day of trial in SES' litigation seeking damages from Intelsat for the collapse of their C-band collaboration (see 2007140067). SES argued Intelsat was planning weeks in advance of the draft order's issuance to violate the agreement (see 2202070031).
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Asked why he didn't tell Collar sooner that Intelsat believed it was entitled to more money than a 50-50 split of clearing proceeds, Spengler said he "hadn't come to that conclusion yet definitively that was what we were going to decide to do." He said he told Collar more than once in the days leading up to the draft order being issued on Feb. 7, 2020, that the two companies' interests "could be diverging," that Intelsat might not accept a dollar amount that SES would, and that Intelsat might be more prone to challenge the FCC order in court.
Spengler testified a last-minute push got the FCC to raise the pool of incentive cash for accelerated clearing of the band by $900 million, to $9.7 billion, but “no one [at Intelsat] was congratulating each other" since Intelsat's cut still fell short of the money needed to forestall bankruptcy. "There wasn't congratulations from the board," he said. Spengler testified that Collar told him the additional $900 million "was on you," meaning due to Intelsat efforts.
Under questioning by SES outside counsel Brian Lutz of Gibson Dunn, SES Chief Strategy and Development Officer Christophe De Hauwer said a 50-50 proceeds split principle “was a cornerstone” of the work with Intelsat. He said he had several conversations in 2017 with Intelsat Chief Technology Officer Bruno Fromont that were clear about “a pure 50-50” being table stakes for SES. Until Intelsat agreed to that, there was no collaboration, De Hauwer said. He said it would be "not sensical" to limit that proceeds split to only if there were a private spectrum auction rather than an FCC-run one. Fromont wasn't happy with those terms, De Hauwer said, but "they understood we had leverage."
When the companies discussed amendments to the consortium agreement just before the clearing order came out, "there's no doubt in my mind" the 50-50 terms were in place, but there were concerns about Intelsat living up to them, De Hauwer said. That amendment was never signed because of issues with Telesat, he said.
De Hauwer testified the Feb. 7 draft order didn't automatically preclude all the ways the two companies could have worked together later on such issues as joint FCC advocacy and antenna and filter installation coordination. He said until he heard from Collar after the Feb. 7 Spengler call he had never heard anything from Intelsat that any 50-50 split was conditional. He said he was ready for Intelsat to try to renegotiate the terms of the consortium agreement.