Advanced Television

Cautious optimism on satellite’s prospects

June 19, 2018

Investment bank Berenberg held its London satellite conference last week and in a comprehensive report stated that the event presented “an upbeat outlook for the industry”.

“The emphasis at our satellites conference was on data, rather than on video, with all participants in agreement that the demand for bytes is huge, and that the satellite industry has a meaningful role to play in the delivery of that information. With the right kind of infrastructure, the three public companies covered in this report could benefit from this opportunity, while there is also the potential for new business models and players to emerge.”

The bank said that while the event did not dwell on the debate over video, both SES and Eutelsat reiterated their view that satellite-based video remained a robust source of cash flow. “HD penetration in Europe remains low, with this representing a source of upside versus the risks associated with simulcast switch-off and improved compression. Stable pricing and long-term (10 years plus) contracts remain the order of the day,” said the bank.

“Unsurprisingly, given the recent highly preliminary and indicative non-binding proposal from Echostar, Inmarsat presented to a packed room. Management focused on the maritime business, noting that connectivity is also required at sea, with high-end customers looking for faster downloads, and the ability to run software applications that enhance efficiency and/or safety. Meanwhile, smaller players are being driven towards connectivity by changes in regulation, eg the need to register fishing catches.”

But there was a significant warning from Berenberg, saying: “With C-band spectrum speculation driving huge share price moves at Intelsat, and, to a lesser extent at SES, there were obviously questions on this issue. SES maintained its view that it is looking at C-band refarming as an opportunity to secure its substantial C-band revenues, rather than as presenting the group with a huge cash windfall. It noted also that the timeline for refarming is long, so investors betting on C-band could be in for quite a wait. Eutelsat confirmed that it has a small exposure to C-band as well, but that it will be SES and Intelsat that are the drivers of the process of reallocation. We remain of the view that C-band should be viewed as an option for SES and Eutelsat, rather than a driver of a decision to buy or sell the shares of either company.”

Categories: Blogs, Business, Inside Satellite