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.
Contact
Agnes Cao
Kerrisdale Capital
acao@kerrisdalecap.com
212-257-4385
Sahm Adrangi
Kerrisdale Capital
sadrangi@kerrisdalecap.com
212-792-9148
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SOURCE Kerrisdale Capital Management, LLC