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Eutelsat CEO “prudent” on C-band windfall

August 2, 2018

Eutelsat’s CEO Rodolph Belmer told analysts on August 1st that he was staying the view to be “more prudent than most of estimates made at the moment” of the potential revenue gains from the reassignment of C-band spectrum over the US.

Eutelsat has only around 5 per cent of the C-band market over the US and this is via their Eutelsat Americas satellites (the former SatMex satellites). However, Eutelsat is a member of the Intelsat and SES consortium looking to exploit their C-band assets over the US in favour of 5G’s speedy adoption.

By and large Eutelsat’s end of year numbers, or at least the better-than-expected guidance for the upcoming financial year (12 months to June 30th) went down well with the market, and investors saw an instant uplift to Eutelsat’s share price, up an impressive 6.2 per cent (€1.13 to €19.47) in early trading August 1st, but still well down on the €25 position in June 2017 and the €30+ value in April 2015.

Giles Thorne, an equity analyst at investment bank Jefferies, said that Eutelsat’s results were “strong at the headline, and solid underlying”. He even praised Eutelsat’s video strategy, which was “behaving itself”.

One worry that emerged during the results presentation concerned its already troubled relationship with ViaSat of California and their joint-venture to push satellite-delivered broadband to European subscribers. The joint venture is using Eutelsat Ka-Sat craft, and Eutelsat confirmed that to date progress is slower than hoped for. For the full year revenues were just €87 million, down from €96 million in the previous year. Moreover, revenues on a quarterly basis are also falling steadily to €21-€22 million from last year’s €23-€25 million.

Eutelsat’s own Africa Broadband efforts should start flowing this month with its Konnect Africa capacity (leased from the UAE’s Al Yah-3 craft) comes into operation.

Indeed, Giles Thorne, in his note on Aug 1st questioned Eutelsat’s strategy over broadband, saying the company would face persistent questions around broadband. Eutelsat says that, with ViaSat, it is targeting around 5 million potential users.

Eutelsat’s active fleet has grown y-o-y from 1372 transponders to 1427, and with a fill rate up marginally from 67.9 per cent to 68.1 per cent (931 to 971 transponder-equivalents).

Two major orders are also in the pipeline. First, is the replacement of the fleet’s ‘cash cow’, the venerable Hot Bird satellites. Eutelsat has signed a MoU with Airbus Defense & Space for two new birds (to replace 3 existing satellites) which should launch in 2021.

Also launching in 2021 is Konnect VHTS (for Very High Throughput Satellite), which Thales Alenia is building. “It will bring 500 Gb/s of Ka-Band capacity over Europe to support the development of European Fixed Broadband and in-flight Connectivity businesses. Significant firm multi-year distribution commitments have been signed with Orange to address the Fixed Broadband market in European countries where the Group has a retail presence and Thales to serve notably the government market.”

At June 30th the operator’s backlog was down 12 percent from €5.2 billion to €4.6 billion “reflecting mainly the impact of the integration of Noorsat (-€0.4 billion). Contracts added to the backlog during the year included notably renewals with Cyfrowy Polsat and TVN at HOTBIRD, the new contract with UnicomAirNet at 172°East as well as the new contract with [Saudi Arabia’s] Taqnia at several orbital slots.”

Eutelsat is also raising its shareholder dividend 5 per cent from €1.21 to €1.27 per share, which will be paid during November.

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