Eutelsat crashes to all-time low
February 20, 2023
By Chris Forrester
Investors didn’t much care for Eutelsat’s half-year financials issued on February 17th. Eutelsat’s share price fell 8.95 per cent on the day to €6.46 per share, a worrying low-point for the past 12-months and a 64.99 per cent collapse on the past five years. It is also an all-time low for the company’s shares. The collapse takes Eutelsat’s market capital to just €1.77 billion.
Eutelsat had previously said that it would not be paying shareholders a dividend for the next three trading years, and CEO Eve Berneke confirmed the dividend plan – or lack of – remained the company’s intention. Perhaps this is seen as not helpful when Europe is suffering around 10 per cent annual inflation.
Other tough news which emerged from the post-results analysts’ call was that the satellite operator had suffered on four key commercial fronts: It had lost revenues as a result of the curtailing of its long-standing relationship with Nilesat. Also a loss of revenues from a similar parting with DigiTurk was impacting broadcast income, while the Russia/Ukraine war mean a loss of revenue from Russian channels such as RT (the former Russia Today) and similar channels and Russian platform operators. Eutelsat had also curtailed transmissions of channels from Iran (via state broadcaster IRIB). The Russian and Iranian losses were down to government interventions.
The Russian move was only implemented on December 21st 2022 so those ‘missing’ revenues will also impact its H2 trading, and likely to overall cost Eutelsat €10 million-€15 million in its full-year.
Not helping matters as far as the Iranian channels are concerned is that Iran is not now paying its bills and is considered by the operator to be a “bad debt”.
Berneke updated analysts on the OneWeb relationship where Eutelsat is already an investor but is working towards a complete merger between itself and OneWeb. She explained that OneWeb’s final two batches of satellites would launch at the end of February/early March and complete Phase 1 of the OneWeb 648 satellite scheme.
The merger deal is likely to wrap by the middle of 2023 and was progressing smoothly.
However, there’s more expense now likely with planning about to start on OneWeb’s Generation 2 craft, and with a €4 billion cost implication. Berneke said that a modest start to that expenditure would happen in Fiscal 2023. An RFP would be issued in Q2 this calendar year for OneWeb’s Gen 2 satellites. Launches of Gen 2 satellites would start around 2027-2028 “when Gen-1 craft started to be needing replacement”. Launches of the more powerful craft would likely start happening around 2025.
Currently OneWeb has a contracted order backlog of some $800 million, up from $600 million in October 2022. Some $275 million of that backlog comes from Eutelsat itself.
Eutelsat is budgeting revenues from OneWeb of $50 million June 30th 2023. The OneWeb constellation will be fully operational by the end of 2023. But perhaps worrying would-be investors and existing shareholders are the costs now piling up on OneWeb. Berneke said that she expected OneWeb’s future investment and financing to be around €4 billion.
Berneke spoke enthusiastically about the planned European Commission-backed low Earth orbiting IRIS2 constellation confirmed by the EU Parliament last week. “We are actually super-supportive of the EU getting involved in the space area,” Berneke said. “In mid-March we will know exactly what the EU is thinking, and what the criteria are for eligibility to tender and what the content is of the RFP.”
She said she expected Eutelsat to be a member of one of the bidding consortia. “I doubt anybody would want to bid this as a single, stand-alone company. We are also preparing the eventual eligibility criteria, especially after the combination with OneWeb. We want to make sure Eutelsat continues to be an eligible and highly relevant partner for the IRIS2 project,” she added.