Bank: “EU LEO decision to impact satellite share prices”

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Analysts at investment bank BNP/Paribas, in a report on the media sector and satellite activity, suggest that the existing market (notably Europe’s two satellite giants SES and Eutelsat) could be affected by the EU’s decision on plans for a European-financed Low Earth orbiting constellation.

The bank says: “In 2022, the EU is likely to make progress on its LEO broadband satellite project. We believe that the road Europe takes to foster its space policy and industry could have an impact on Eutelsat and SES share prices. Building a competitive new system from scratch could prove a negative. Announcing the procurement of a large chunk of mPOWER or OneWeb could prove respectively strong positives for SES or Eutelsat. We expect more newsflow on that front in late February, early March.”

“In 2022, OneWeb and [Elon Musk’s] Starlink are likely to launch global services while SES mPOWER is expected to enter into service towards year end. 2022 will mark the first year in the age of mega constellations. Key questions will include the pricing levels of these new constellations. Will they charge low-latency services at a premium or will they deflate the market the further? We expect further pressure on incumbent operators, especially for non-HTS GEO systems. We continue to believe that SES mPOWER offers some of the most attractive technological characteristics and bandwidth economics amongst new satellite systems,” adds the bank.

The BNP/Paribas report says: “With Elon Musk revealing at the end of November 2021 that the Raptor engine production crisis was much worse than expected, the financial sustainability of Starlink has been thrown into doubt. Musk and SpaceX past engineering prowess have us argue that this technological issue is likely to be resolved but as discussed [in the report: Eutelsat, SES: Beyond the final frontier], we note that Starlink financial profile is dependent on the ability to operate Starship on a nominal cadence of two launches a month. If SpaceX tech issues were to turn into an –at this stage unlikely – loss of confidence amongst investors, incumbent operators could regain some appeal with financial investors.”

However, the report says that LEO constellations are likely to have no impact on Satellite video revenue trends. adding: “We expect some continuous pressure in that segment but also note that our proprietary tracking points to some recent improvements in satellite video capacity consumption by broadcasters. Investors remain bearish on SES and Eutelsat video revenue trends at a time when volume consumption trends are improving. While it looks premature to make a strong call on any turnaround, we see video revenue trends in 2022 as a potential share price mover when company guides [are issued] in coming weeks.”


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