In a double whammy for the global content connectivity services provider, SES has struck major deals to support the rapid deployment of 5G services at leading US communications provider Verizon, and has signed a definitive agreement to buy the global enterprise solutions (GES) business of Leonardo DRS.
The deal with Verizon is designed to expand the US-based mobile carrier’s access to a portion of the C-band (3700-3800 MHz) in important regions across the US, earlier than the relocation deadlines set out in the US Federal Communication Commission’s (FCC’s) C-Band Report and Order.
SES completed its Phase I accelerated C-band clearing ahead the first FCC deadline on 5 December 2021, what it regards as a critical step in meeting the commission’s objectives to rapidly roll out 5G services across the US, and as a result earned almost $1bn in accelerated relocation payments.
To meet the Phase II deadline of 5 December 2023, SES is working to relocate its existing services from the 3700-4000 MHz band and complete equipment changes for Incumbent Earth Stations across the entire contiguous US, a move that it expects to see it earn an additional $3bn in accelerated relocation payments.
The agreement will see SES expand Verizon’s access to the 3700-3800 MHz block in certain markets beyond the 46 Partial Economic Areas cleared in Phase I and earlier than the Phase II accelerated relocation deadline.
SES will install filters and other ancillary equipment at about 500 sites in 2022, comparable to the activities executed during Phase I, and will earn up to an additional $170m from Verizon, subject to delivering the clearing on a timeline agreed to by the parties. SES, though, will incur additional costs to perform this clearing, thought to be in the region of $100m to reflect the magnitude of the agreement with Verizon.
“Providing 5G services to as many Americans as soon as possible supports the US economy and enables the delivery of valuable services to the population,” said SES CEO Steve Collar. “We will leverage the experience we have gained over the past year and shorten the clearing timeline for Verizon’s spectrum.”
Finalisation of the deal with Leonardo DRS, valued at $450m, is targeted for the second half of 2022 subject to regulatory approvals. The transaction has been approved by the boards of directors of Leonardo DRS and of SES. The DRS GES business is a provider of commercial satellite communications to the US government, in particular the Department of Defense (DoD), and delivers mission-critical satellite communications and security services to customers around in the world.
SES plans to organise the DRS GES business unit under SES Government Solutions (SES GS), a wholly owned subsidiary of the satellite operator. SES GS delivers satellite communication services using SES’s 70 satellites at geostationary and medium earth orbits and supporting ground, and has for more than 40 years supported the mission-essential operations of Combatant Command (COCOM), Military Services and other US government customers.
Offering background to the sale, Leonardo DRS said it regularly assesses its portfolio to ensure strong alignment with customers’ needs and priorities. It added that as it continued to focus on transforming to meet the DoD’s priorities, the divestiture would allow the company to consider larger potential acquisitions that would strengthen core capabilities and open new market opportunities.
“The DRS GES business is well-respected by its customers and within the satellite communications (SATCOM) provider services market, and we are very pleased with the agreement reached with SES,” said Leonardo DRS CEO Bill Lynn.
“While the DRS GES business has flourished, Leonardo DRS has shifted its portfolio focus, and selling it now makes the most business sense. As we enter a new and exciting phase at Leonardo DRS, we are investing in our strengths to improve our core capabilities. We are looking beyond incremental technology advances and moving towards a larger role in producing groundbreaking, market-disruptive technologies for our customer needs today, and well into the future.”