Luxembourg-based satellite Internet provider Intelsat filed for Chapter 11 bankruptcy in a Virginia court, a development that could have significant implications for Verizon's 5G ambitions.

That's because Verizon is widely expected to bid for the C-Band spectrum that Intelsat is currently using for its offerings. The FCC has scheduled an auction of that C-Band spectrum for December.

In its bankruptcy announcement, Intelsat said it obtained $1 billion in financing from an unnamed source so that it could participate in the FCC's auction. That money will go toward clearing Intelsat's existing operations out of a portion of the C-Band so that it can be auctioned for 5G in December. The issue is now in the hands of a bankruptcy judge.

If Intelsat is able to get its spectrum cleaned up for the auction, it would be eligible for $4.87 billion in incentive payments from the FCC. The company said it's that incentive payment that's partly driving its desire to clear out its balance sheet through bankruptcy.

"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," Stephen Spengler, Intelsat's CEO, said in a release. "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."

Intelsat said its bankruptcy filing won't impact its employees or its long term strategy, though the company's finances have been hit hard by travel restrictions stemming from COVID-19. Intelsat sells Internet connections to cruise ships and other customers.

Verizon has indicated interest in the C-Band for its 5G network – the spectrum would add a critical midband component to the lowband and highband 5G network Verizon is in the process of building.

However, Verizon will likely face heated competition in the C-Band auction from AT&T and T-Mobile. But analysts widely believe that Verizon will walk away with the bulk of the C-Band spectrum in the FCC's auction due to its desire to bulk up its relatively meager spectrum holdings.

— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano