Eutelsat downgraded by bank

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Eutelsat has been downgraded from ‘Buy’ to ‘Neutral’ by analysts at investment bank Exane/BNPP with the satellite operator’s ‘top line’ trends remaining under pressure.

The FCC is set to reveal details of its C-band restructuring plan today (February 6th).

Analyst Sami Kassab, in a 27-page report, reminds investors that Eutelsat’s share price has fallen 25 per cent of the past 12 months, and that this current year is unlikely to bring much relief. “We expect Video Broadcast revenues to further deteriorate while the transition from Video to Connectivity could be long and bumpy. We are cautious ahead of H1 results on 14 Feb and downgrade to Neutral.”

The bank’s ‘Satellite Monitor’ indicates that satellite video usage – Eutelsat’s 60 per cent revenue stream – is not just declining but that the rate of that decline is accelerating.

“We analyse Sky Italia’s transponder characteristics and argue that moving to more efficient modulation techniques could see Eutelsat’s largest client reduce capacity demand by 20 per cent when it renews its contract later this year. We also see risk at 7/8 West with the launch of Nilesat 301. We cut our Video Broadcast revenue CAGR 2019-2023 from -1.2 per cent to -3.5 per cent,” says the bank’s note to investors.

“In 2017, Eutelsat HotBird volume trends were impacted by the ‘purge’. In 2018, the satellite reverted to good growth driven by the take up of HD channels but trends have returned into negative territory in H2/19 and remain challenging in January 2020,” adds the bank.

Eutelsat has no major plans to enter the LEO market (SES already has its mPower MEO fleet orbiting and working). This, says the bank, places Eutelsat at a further competitive disadvantage.


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