Eutelsat delivers Viasat “coup-de-grâce”

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The news that Eutelsat is completely ending its already strained relationship with Viasat prompted one analyst to update clients on the position. Viasat will now own 100 per cent the Euro Broadband Infrastructure (EBI).

Giles Thorne (media analyst at Jefferies) was blunt: “The curtain comes down on Viasat’s disastrous first steps into European broadband. Eutelsat had been aggressively pulling the carpet out from underneath its once JV partner for several years now. In this final coup de grâce, Eutelsat has managed to get Viasat to pay €140-160m (€50-70m, ex-cash) for a controlling stake in j-v vehicle that owns a technologically obsolete Ka-Sat (and associated revenue streams, which will imminently migrate to Konnect). Such terms are a testament to how well Eutelsat had boxed Viasat into a corner. It now has the funding to hammer home its first-mover / technology / distribution advantages over Viasat.”

Thorne adds: “There will be several transition agreements given EBI uses Eutelsat ground infrastructure and Eutelsat’s BigBlu has customers on Ka-Sat. EBI sits on €90m of cash currently (presumably once earmarked for the now aborted Viasat-3 Europe co-investment).”

Jefferies rates Eutelsat a ‘BUY’ and with a share target price of €18.50.

With Viasat buying out the stake for some €140 million, the California-based company has a quite different view as to the prospects for the business.

Viasat already has an extremely successful broadband-by-satellite international business that’s grown out of its North American base of 630,000 subs and now has a near-global presence. It is also active in some key European countries (including Spain, Norway and Poland). Viasat says it also serves seven European airlines, including KLM, with high-speed satellite connectivity as well as serving international airlines flying into and over North America and elsewhere. It supplies aircraft connectivity to some 1,390 active aircraft.

Viasat says it will add services to home customers as well as corporates and SMEs using the former Eutelsat-owned KA-SAT satellite at 9 degrees East. Viasat will now operate KA-SAT although the orbital slot will revert to Eutelsat at the end of the satellite’s life. These services will be added in readiness for the launch of one of its ‘next-generation’ Viasat-3 satellites covering Europe, the MENA regions and Africa in 2022.

Viasat’s key corporate message is “We think big, we act intelligently, and we’re not done…we’re just beginning”.

At its November 5th Q2 financial report, Viasat reported a contracted backlog of some $2.3 billion and added more than 5000 net new subscribers during the quarter (with a monthly ARPU of just over $100).

“[The] transaction accelerates Viasat’s European broadband objectives by strengthening our services footprint and facilitating further market penetration,” said Keven Lippert, CCO, Viasat. “By gaining full control of KA-SAT, Viasat can further expand its growing mobility business as well as establish operations and market presence ahead of our ViaSat-3 service launch, including the introduction of new capabilities enabling high-speed, high-bandwidth ‘ViaSat-3-like’ home internet service plans in select European markets. This earlier market roll-out will enable Viasat to build awareness and market knowledge ahead of the European service launch of the ViaSat-3 satellite platform. Additionally, through 100 per cent ownership of EBI, Viasat will be better equipped to execute its distribution strategy ahead of the ViaSat-3 services launch by onboarding new local partners.”

There will be a transition period. Viasat explains: “Under the agreement, Eutelsat and its subsidiaries will continue to provide transitional services for a limited period of time to Viasat’s EBI business, including the operation of the ground network for KA-SAT, while Viasat/EBI will provide service continuity to the KA-SAT subscriber base of Eutelsat’s Bigblu Broadband Europe division.

Meanwhile, Eutelsat is switching on its initial Eutelsat Konnect service ahead of the launch of its larger Konnect Very High Throughout craft and a promised 500 Gb/s capacity. Viasat’s new craft is promising 1 Tb/s of capacity. KA-SAT, already some 10 years old, has some 90 Gb/s of capacity.

 


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