Eutelsat shareholders unhappy

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Eutelsat’s CEO Rodolphe Belmer, in his results discussion with analysts, stressed again that the operator’s business was healthy. At one stage, and grumbling about the company’s low share price, he rhetorically asked one analyst why would Eutelsat be continuing to invest long-term in replacement satellites if its overall business was in decline.

“Our Video Broadcast business is very resilient. Not all Video segments are the same for all the companies operating in our sector. We are very stable because we are DTH mostly and because we are [busy in] emerging markets,” said Belmer.

·     Revenues*: €636.6 million (down 3.3%)

·     Backlog*: $4.3 billion (down 5.7%)

·     Broadcast*: €389.4 million (down 1.8%)

·     Channels*: 6879  (down 2.7%)

*For 6-months to Dec 31st

Eutelsat’s average yearly capital investment mostly in new satellites over the past 5 years has been about €280 million. That annual average would fall to an average of €220 million in the period 2023-2028, thus lowering CapEx significantly.

Despite these arguments it seemed shareholders failed to get the message. By the end of February 14th, Eutelsat’s shares had crashed 5.7 per cent. At one point the fall was even worse, tumbling from €13.65 to €12.24 per share.

Indeed, an early-morning report on February 17th from investment bank Berenberg said: “We continue to believe Eutelsat is materially undervalued. We reiterate our Buy rating with a modestly lower price target of €18.00.”

Belmer also addressed the C-band draft proposals now in its final stages prior to a Feb 28th decision from the FCC, saying that he had mixed feelings on the proposals and that the $468 million likely to flow to Eutelsat was significantly higher than that suggested by the C-Band Alliance (which it withdrew from). “But we still feel we deserve more, and the amount is a source of dissatisfaction to us.”

He explained that the C-band payout would go to Eutelsat Americas which were Mexican licensed and while it was as yet unclear as to the tax that would be payable on the payment it would not be more than 30 per cent.

Belmer said the plans for the company to move its HQ were on track and would happen by June this year. Meanwhile the global hiring freeze remained in place. The second phase of its cost-saving plan (LEAP-2) was only just kicking in from its November 2019 start date. It was in the process of buying back €100 million-worth of shares.

One of his key points concerned the company’s Dividend policy, which is now stated to be “stable and progressive”. Belmer amplified this by outlining the cash-flow cover that was coming into the company. Indeed, he commented that with increasing cash-flow the current €1.27 per share dividend could benefit by being increased in the future.

Belmer was questioned on the upcoming renewal of Sky Italy’s contracts on Eutelsat’s Hot Bird. He said he didn’t doubt that the contract renewal discussions would be “intense and difficult” but that Sky Italia’s 7 million homes represented considerable value to Sky.

He also discussed the relationship with Nilesat which now has its own replacement satellite (301) on order and due to launch in 2022 and where Nilesat’s contractual ties with Eutelsat were up for renegotiation later this year. Belmer said Eutelsat’s business with Nilesat was, for example, more valuable than Sky Italia, but that Eutelsat had been very prudent in its assumptions and its overall financial guidance should not be affected.


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