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Intelsat Hits Back at SES’s $1.8B Claim Over CBA Dispute

By Rachel Jewett | October 20, 2020
      Intelsat's North America headquarters. Photo: Intelsat

      Intelsat’s North America headquarters. Photo: Intelsat

      Intelsat has hit back at SES for a claim filed in its bankruptcy case earlier this year that Intelsat owes SES $1.8 billion for an alleged breach of contract, arguing that SES’s claims have no merit.

      In July, SES asked the court for no less than $1.8 billion in damages, claiming Intelsat breached fiduciary duties as part of the C-Band Alliance (CBA) and “unjust enrichment at SES’s expense and other related tortious conduct by Intelsat.” 

      The CBA was formed in 2018 by Intelsat, SES, Eutelsat, and Telesat to facilitate the FCC C-band spectrum clearing process. The group pushed for a private spectrum auction, but the FCC voted in February to go with a public auction and accelerated relocation payments to satellite operators. After that decision, Intelsat petitioned the FCC for adjustments to its proposed payout plan, asking for 60% to 70% of the accelerated relocation payments. SES issued a heated response, calling it an “egregious attempt to capture a greater share of the proposed accelerated relocation payments,” and this led to SES’s claim against Intelsat.  

      In Intelsat’s Oct. 19 filing, the operator argues SES’s claims have no merit because the CBA agreement does not govern the companies conduct under the FCC’s public auction, as the CBA was formed only to manage C-band clearing under a market-based approach. “The simple fact is that the [CBA’s] agreement’s payment scheme does not work outside the private market-based approach, because the agreement was only intended to cover, and only covers, a private market-based approach. The shoe will not fit the approach adopted by the FCC,” Intelsat wrote. 

      Intelsat also argued that the accelerated relocation payments it may receive are due to its own spectrum clearing efforts and its own share of the service market, unrelated to any work done in the CBA. “SES has not, will not, and cannot play any role in whether Intelsat receives a payment or how much it will receive,” Intelsat wrote. 

      Further, Intelsat asks that if any of SES’s claims are accepted, that SES be put to the back of the line of creditors because of “inequitable conduct,” that SES improperly disclosed information about Intelsat’s supposed market share in an ex parte submission made to the FCC. Intelsat argues that SES’s “bad faith disclosure” may cause Intelsat to receive $1.634 billion less from the FCC’s public auction process. 

      “We believe that SES’s claims have no merit and have objected on numerous legal grounds,” Melissa Longo, Intelsat media relations manager said in a statement. “To the extent that any portion of the claims are allowed, we have asked the court to ‘equitably subordinate’ such claims – effectively putting SES behind other Intelsat creditors for purposes of recovery – based on SES’s conduct in matters related to the former C-Band Alliance.” 

      The claims will likely be addressed at Intelsat’s next court hearing set for Nov. 23. This dispute can not impact the C-band clearing process as both operators along, with Telesat and Eutelsat, have agreed to clear the C-band, and submitted relocation plans. The auction will commence Dec. 8.