Intelsat files for Chapter 11 Bankruptcy

Intelsat has announced it will restructure its finances as it files for Chapter 11 Bankruptcy in the US Bankruptcy Court for the Eastern District of Virginia.

Although it sounds very pessimistic, Chapter 11 Bankruptcy is not the end of the world. It is very expensive, thanks to hefty legal and administrative fees, but it allows an organisation to reorganise debts. It allows a business to survive, albeit with some very long-term debts.

It is not ideal of course, effectively admitting that the business model has failed, or a company has not been able to keep pace with the market, but companies can emerge the other side. General Motors and United Airlines both filed for Chapter 11 Bankruptcy in 2009 and 2002 respectively.

Another satellite company, OneWeb, also filed for Chapter 11 Bankruptcy in recent months, suggesting this is a segment of the telco industry which is struggling.

“This is a transformational moment in the history of our company,” said Stephen Spengler, CEO of Intelsat. “Intelsat is the pioneer and foundational architect of the satellite industry. For more than 50 years, we have been respected for quality, innovation, sector leadership, and premium services. Our success has come despite being burdened in recent years by substantial legacy debt. Now is the time to change that.

“We intend to move forward with the accelerated clearing of C-band spectrum in the United States and to achieve a comprehensive solution that would result in a stronger balance sheet. This will position us to invest and pursue our strategic growth objectives, build on our strengths, and serve the mission-critical needs of our customers with additional resources and wind in our sails.”

The FCC has said it will reimburse satellite companies who assist in clearing the C-Band airwaves, but it is an expensive job. Intelsat would be eligible for $4.87 billion from the FCC, however, these funds will drip feed into bank accounts over a long period of time. $1 billion will have to be spend up front, cash which Intelsat clearly does not have, hence the current bureaucratic process.

It does appear the satellite industry is one which is struggling for cash and one which could look very different over the next few years.

Telcos have repeatedly said satellite is an important component of the industry, an element of the connectivity patchwork. To deliver the digital economy, different technologies will have to work seamlessly alongside each other, as there are pros and cons to every aspect.

However, despite the proclamation of importance it appears cash is not flowing through to the satellite segment of the industry. It might well at some point, but who can wait that long? Musk and Bezos probably can.

With Elon Musk and Jeff Bezos investing in this segment, there are two technology titans on the scene who can probably outwait the traditional satellite companies. With big bank accounts fuelling these ventures, these businesses can be patient in the pursuit of profits. This advantage might make this segment look very different in a few years, as some succumb to the pressures of time, while others bask in the ray of financial security.

Don’t let satellite get lost in the 5G buzz – Intelsat`

With 5G plastered on every wall, floor and door in the Fira, it can be easy to forget there are other important components in the connectivity mix.

Speaking to Jean-Philippe Gillet, GM of Intelsat’s network business, the message is relatively straight-forward; don’t forget about us, don’t forget about satellites.

“Does satellite play a prominent role in the developed markets? No,” said Gillet. “But it is important in the developing markets. We are trying to show people success in developing markets can be translated into the developed one.”

With all the euphoria surrounding 5G at this years’ event, and more generally across the last couple of years, satellite is often seen as a fall-back option, not necessarily a useful component of the connectivity mix. This is the perception which Gillet and Intelsat is attempting to change.

The idea of tomorrows digital society is one which is defined by 5G and fibre. Few other conversations are given a suitable amount of attention with these two bully boys grabbing the headlines, but satellite needs to be a consideration.

“It’s about creating a hybrid connectivity model which positions the right medium for the right application,” said Gillet.

While Gillet suggests there are eager listeners for anyone who is facing the connectivity conundrum, there are sceptics. There is somewhat of a lazy stereotype that satellite’s function should be limited to the developing markets, but Gillet is working to change this perception.

Alongside the incremental but promising progress in terms of satellite technology, the team has recently launched its next generation of satellites, EPIC. These six assets offer worldwide coverage, and the team have already signed up two prominent Asian telcos as customers, as well as one in the US. The next generation of satellites will be software defined, allowing Intelsat to move around capacity, while the company is now a fully-fledged member of the GSMA.

“We want to be sat at the table to help make connectivity decisions,” said Gillet.

Justifying the inclusion of satellite as a genuine component of the hybrid connectivity mix might be an uphill battle but considering the demands which are being placed on telcos to bridge the digital divide, there is hope.