Advanced Television

Eutelsat to trim distributors

June 28, 2016

By Chris Forrester

Eutelsat is to increasingly take over sales from its wholesalers and distributors in order to improve its profit margins. It currently charges around €3.9 million a year for a 36 MHz transponder on its flagship Hot Bird orbital location.

But CEO Rodolphe Belmer told analysts at a special meeting in Paris June 27th that it was prepared to buy some of these contracts back in order to allow Eutelsat to deal directly with customers. He said that on Hot Bird some 30 percent of its capacity is leased to these wholesale distributors, but they were mostly selling FTA channels with low (5 per cent) HDTV penetration. Collectively, the unsold capacity on Hot Bird was equivalent to 4-5 transponders.

Major third-party wholesalers of Eutelsat capacity include Arqiva in the UK, and France Telecom-backed Globecast. But there are many others.  He stressed Eutelsat was seeking to streamline its wholesale customers by using “fewer and more specialised” distributors.

Belmer also said Eutelsat would be creating a new ‘segmented pricing strategy” rate-card for clients, saying that a broadcaster in Slovenia, for example, with just 1 million subscribers would not pay the same fees as a major German broadcaster with – he said – 20 million customers.

He added that Eutelsat would now “favour pricing flexibility over contract length”. Eutelsat, in dealing directly with broadcasters, would “stimulate transition to HD and Ultra-HD, and also develop services such as Smart LNBs and IP Multiscreen”.

Belmer pointed out that Eutelsat channel count was fairly robust. Two full years ago at the Hot Bird spot it was carrying 1080 channels. That has declined slightly to today’s 1036, of which 468 are transmitting in MPEG4 compressed format.

He added that in some markets there was good demand, with a growth in HD transition.

However, the news did not go down well with investors. Eutelsat’s share price crashed some 6.2 per cent (as part of the day’s general slump in stock prices over post-Brexit uncertainty) during June 27th (to €15.82), which means it has now fallen some 48.69 per cent in the past year.

Giles Thorne, equity analysts at investment bank Jefferies, was not entirely complementary. He welcomed the strategy update (“finally”) and cited Eutelsat’s “badly worded” Q3 profit warning statement made in May as being responsible for an industry-wide share price crash.

His criticism was directed at Eutelsat for – at last – catching up with the rest of the industry’s realisations made some time ago that there was – and is – an oversupply problem. “This is no more or less than what the industry has suggested for years, but in the meantime share prices have plummeted.”

Thorne described two recently acquired satellites (E-West 115B and E-West 117B), the SatMex fleet expensively bought in January 2014, as “white elephants” and that in general Eutelsat, with its presentation, felt like [it was] “finally winding forward the clock”.

Categories: Articles, Business, DTH/Satellite