Advanced Television

Optimism under threat at SES

April 19, 2024

April 18th saw satellite operator issue its annual dividend payments (of €0.50 per share) to shareholders. That’s the good news. The bad news is that there was the usual post-dividend share sell-off, but this year’s decline was significant. SES’s Paris bourse share price has fallen 12.5 percent over the past week to €5.53 and at one point to just €5.33. In August 2023, SES shares were almost at €7 per share.

To be clear SES is in perfect health. It is sitting on sizeable unspent cash – largely as a result of the FCC compensation for the transfer of C-band frequencies – and it is perhaps this very warchest that is worrying investors.

On April 17th it confirmed a test with the US Army (and conducted with Kratos Defense & Security Solutions) using SES O3b fleet satellites. “In an industry first, the demonstration showed seamless operation supporting satellites in Medium Earth Orbit (MEO) on a ‘make-before-break’ mode over SES’s O3b MEO satellite network. Make-before-break is an essential capability for MEO and LEO satellite constellations referring to the ability to transfer communication sessions while the user transverses the coverage areas of different satellites,” said a joint statement.

The announcement is very useful and an indication of how the mPOWER fleet can find additional business.

Fitch Ratings has maintained a ‘BBB’ overview of SES debt with an “outlook stable” which translates as “indicating that expectations of default risk are currently low.” Fitch’s opinion is that SES is likely to retain strong underlying free cash flow (FCF) generation over the next four to five years, despite structural and competitive pressures in its core markets.

Fitch adds that SES now has headroom for Merger & Acquisition opportunities, shareholder returns and management of medium-to-long-term operational risks from heightened competition.

Investors and the market in general are paying particular attention to SES’s new CEO Adel Al-Saleh, appointed in October 2023 and now expected to make some key decisions for the company’s future. Al-Salah has some headaches, not least handling the less than perfect mPOWER satellite fleet.

Speaking at the Satellite 2024 show in Washington he gave a few hints, saying that his six years at Deutsche Telecom were a period of innovation every day and new solutions coming up every month. Now he was ready at SES to start thinking of accelerating progress, thinking in periods of weeks and not quarters or years and becoming faster and more agile. “I believe this is a challenge the whole industry has. In order to adjust and survive, we need to change and be faster,” said Al-Salah.

A year or so ago SES was close to merging with arch-rival Intelsat. It failed to happen, but Al-Salah admits that the industry still needs scale. “I believe consolidation and M&A activity will be quite active in the few years to come,” he stated.

SES already has a commercial relationship with Starlink, and Al-Saleh says that Starlink’s low Earth orbiting fleet, plus the SES fleet of MEO and geostationary satellites makes a compelling and formidable offering for the operator and the company is well-placed to compete aggressively in all markets..

This month will see the SES mPOWER satellites become fully operational. Later this summer it will launch its latest heavyweight geostationary satellite, Astra 1P and which will replace four existing satellites at its European ‘hot spot’ of 19.2 degrees. That news should boost investor confidence.

SES will unveil its Q1 2024 trading update numbers on May 2nd.

Categories: Blogs, Business, Inside Satellite, Satellite

Tags: , , ,