A month or so from now Europe’s two giant satellite operators will unveil their latest results. Eutelsat’s half-year figures will emerge on February 16th, while SES will publish its full year numbers on February 23rd.
However, equity advisors at investment bank Deutsche Bank have already compiled a ‘state of the industry’ report, and say that the two operators are in a state of “magnificent desolation” with significantly depressed share prices (SES down 37 per cent over the past year, and Eutelsat down 31 per cent over the past two years).
Deutsche Bank advises clients to ‘Sell’ Eutelsat, and while the bank has little enthusiasm for SES, it suggests that Eutelsat could suffer further this year. The bank says: “We highlight 5 worrying data- points on the core Video income stream [for Eutelsat]. Data and Government-based [revenues] have also moved from upside to downside risk.” It further states that it expects Eutelsat to have to cut guidance over the next 12 months, which will further depress its stock market value.
For both SES and Eutelsat the bank’s comprehensive report argues that it expects them to miss their self-proclaimed return to growth during 2018.
“After pressures on SES in 2017, Eutelsat now looks most exposed: two of its Video clients, Polsat & Sky Italia, have recently acquired or explored fibre distribution. Its largest Video client, Multichoice, is reported to be in a sale process with the telco, MTN, a reported likely buyer,” adds the report.
The bank admits that it is not wholly conceivable that pay-TV platforms will abandon DTH distribution in the near term, and broadly agrees that the cost of fibre distribution means that satellite’s position in the Video delivery chain is secure. But it also states that fibre’s penetration and ability to deliver individual – but mass market – coverage will be increasingly cost-effective from about 2020.