Italy’s Telecom Italia Mobile (TIM) has signed a “long-term strategic agreement” for significant Italian capacity on Eutelsat’s Konnect ‘broadband-by-satellite’ service.
The TIM agreement is similar in shape to that signed by Orange (of France) and sees TIM contracting the entire Italian capacity on Eutelsat Konnect which started operations this month, as well as the vast majority of the capacity covering Italy on the follow-on satellite, Konnect VHTS, once it enters service later next year. TIM will have exclusive rights for the distribution of satellite broadband in Italy on these satellites during the entire lifetime of the contract.
This is another very useful capacity order for Eutelsat, and the multi-year agreement is expected to represent a total contract value of almost €150 million ($178m) for Eutelsat.
The announcement went down extremely well with the market, and saw Eutelsat’s share price rise to – at one point €10.42 before settling to a 1.58 per cent rise at €10.28.
Giles Thorne, equity analyst at investment bank Jefferies, explained that the capacity deal with TIM does two very important things: “Firstly it boosts Eutelsat’s return to growth credentials (consensus has flat y-o-y revenue in FY21 in Fixed Broadband); and secondly, following the carbon-copy deal with Orange for France (announced in Jul-20) and the acquisition of BigBlu’s European business, Eutelsat is now answering the question as to why “this time will be different” (referencing the mediocre legacy of Ka-sat in fixed broadband).”
Thorne described the deal as “Positive news” for Eutelsat. TIM will initiate its service on January 21st next year.
Sami Kassab, Exane/BNPP’s satellite analyst was also favourable. “Given the average 15-20 year life time of a satellite, we estimate this deal could add €7-10 million of annual revenue at steady state. Eutelsat Konnect VHTS is due to be launched in calendar H2/2021. Eutelsat Konnect entered into service earlier this week. We see this as positive new for Eutelsat. This deal underpins expectations of a return to revenue growth in Fixed Broadband in FY/2021 (Exane at +10 per cent in FY/2021). It also supports the idea that telcos see satellites as an attractive solution to bridge the digital divide. We have raised our EPSfor 2022 and 2023e by 1 percent and 2 percent on the back of this deal.”
There’s likely much more to come. Eutelsat Konnect – either with this current satellite or the follow-on launch of the much more powerful 500 Gb/s Konnect VHTS craft – because of its significant African coverage. TIM Chief Executive Luigi Gubitosi said the Eutelsat agreement will extend his company’s reach into “even the most isolated regions, reinforcing our commitment to reduce the digital divide everywhere in Italy”.
Eutelsat is anticipating service 3-4 million homes by 2030 with broadband.