Yahoo Finance Why Shares of Intelsat Plunged on Thursday
What happened
Shares of Intelsat (NYSE: I) traded down more than 12% on Thursday morning after a key government official said the Federal Communications Commission will take its time figuring out how to proceed on a wireless spectrum auction that could generate upward of $40 billion for Intelsat and other satellite providers.
So what
Intelsat, along with three other satellite companies authorized to use the C-band airwaves, has proposed selling access to the 200 megahertz range to wireless telecom companies including Verizon. The spectrum could be valued at about $40 billion, but the proposal faces pushback from some lawmakers who would like to nationalize the spectrum, or at least sequester some of the proceeds to promote broadband access in rural areas.
Image source: Getty Images.
Intelsat hopes to use the cash it would generate from a sale to pay down some of the $14 billion total debt on its balance sheet.
FCC Chairman Ajit Pai, speaking at the America's Communications Association summit in Washington, D.C., made it clear that the potential auction would not slide through as easily as some Intelsat investors would like.
Pai said the commission would be "deliberating as vigorously as we can and hope to reach a resolution at some point in the future," adding, "it's important for us to make the right decision, not the right now decision."
Now what
Thursday's trading continues a volatile pattern for Intelsat, which has doubled over the past year but is down 30% year to date. It's important to remember that this is all just talk at the moment, and investors should have been well aware by now that the FCC is in no hurry to get a decision out the door.
It seems apparent that Intelsat investors should expect the government to take some sort of toll from an eventual sale. How much of a take, and what it will mean for Intelsat's long-term outlook, is going to take some time to sort out.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
