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Intelsat revenue warning

June 19, 2017

Major satellite operator Intelsat has cautioned the market that revenue and income for this year will be lower than expected. Intelsat cites a slower-than-anticipated take-up of capacity on its new ‘Epic’ fleet of High Throughput Satellites.

Intelsat says it expects EBITDA to fall by $23 million to around $1.655 billion. Revenue expectations are trimmed to the range of $2.15-$2.18 billion. To help compensate Intelsat will trim capital expenditure for 2017 by $138 million (and down to $525 million). CapEx for 2018 is also to fall by $38 million from its previous forecast to $437.5 million.  Intelsat has also issued market guidance for 2019’s CapEx saying it should be about $450 million.

As well as a slowness in leasing capacity on its ‘Epic’ fleet, of which 5 satellites will be in service by 2019, Intelsat says it is witnessing lower contract renewals in its important Network Services division. However, importantly Intelsat says that pricing trends are stable.

Analyst comment from Sami Kassab at Exane/BNP-Paribas said that the Intelsat warning could be “negative” for SES and Eutelsat, with SES “most at risk”. Kassab says Intelsat’s warning is likely to reinforce investors’ concerns on technology obsolescence across the industry. “SES recently reported a sequential slowdown on O3B and delivered the lower end of its revenue per satellite forecast for 2016. Intelsat warning is likely to add concerns to the sustainability of the performance of this recently acquired asset. Eutelsat also recently argued that despite price deflation, volumes in Data were not increasing.”

The bank’s note adds that “Satellites shares have rebounded in recent weeks. Intelsat warning is likely to put some pressure on European names in our view. We see SES most at risk.”

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