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Eutelsat’s 2019 forecast looks positive

The ‘big three’ satellite operators (SES, Intelsat and Eutelsat) have had a torrid couple of years, with margins squeezed and competition for business fierce. Indeed, that competition saw Eutelsat’s CEO Rodolphe Belmer complain to French financial newspaper Les Echoes that rival Inmarsat is not playing fair and is using S-band frequencies to deliver broadband to aircraft, and that such use has led to a “distortion of competition” in the market.

Eutelsat is taking its complaint to the European Court of Justice, and says it is also in talks with UK regulator Ofcom and the French wireless regulator ARCEP.

Belmer also addressed the Exane/BNP-Paribas 19th CEO Conference in Paris on June 12th, and telling delegates that the overall industry outlook is difficult given the over-supply of capacity which is putting a downward pressure on pricing of satellite capacity. As Eutelsat proceeds Belmer says the company is focused on improve its return on capital employed (ROCE) and optimising Free Cash Flow.

As the bank says, in a note issued to investors: “In line with previous guidance, top line growth is expected to return in FY19 and accelerate thereafter towards historic levels as mobility and broadband revenue growth more than compensates shrinking fixed data revenues. EBITDA margin are guided to increase by around 100bps by FY19. This should support over 10% FCF growth p.a and a stable to growing dividend per share.”

The bank adds that it is staying ‘Neutral’ as far as buying/investment advice is concerned, because of uncertainties in regard to the changing habits of viewers and the long-term impact on video satellite demand. “However, we expect the recent positive share price momentum to continue in the short term,” adds the bank’s report.

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