Investors Grow Bearish on Fixed Satellite Services

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PARIS—Large institutional investors have begun to sell their holdings in the stock of the large satellite fleet operators out of fear of an impending oversupply that will be exacerbated by high-throughput satellites, investment bankers said Sept. 14.

Speaking at the World Satellite Business Week conference here organized by the Euroconsult space industry consultancy, the bankers said that a sector once considered safe is now viewed as risky.

“Institutional investors are voting with their feet and leaving the FSS sector,” said Romeo A. Reyes of Jeffries & Co., referring to fixed satellite services fleet operators. “Everyone is worried that the bottom is going to fall out of the market.”

The share prices of the world’s four largest fleet operators have not done well through August.

Paris-based Eutelsat is up 1.3 percent and is the only one to have gained ground since January. SES of Luxembourg is down 12 percent. Loral Space and Communications of New York, which owns a majority of fleet operator Telesat of Canada, is down 30 percent. U.S.- and Luxembourg-based Intelsat has been the hardest hit; its stock dropped more than 40 percent.

“Private equity sees the sector as too rich – the prices are too high,” said Scott Matlock of PJT Partners. “The market valuations are really quite robust and people are worried about the future-proof nature of the traditional operators. There is more risk in the sector now.”

Market analysts had been concerned about the supply/demand balance in the satellite telecommunications sector well before the Brazilian economy softened, China’s growth slowed and the Russian currency tanked.

It’s not just the amount of conventional capacity that is coming into the market, it’s also high-throughput satellites [HTS], each carrying many times the total throughput of a conventional satellite.

Pacome Revillon, chief executive of Paris-based Euroconsult, said conventional satellite capacity in premium direct-to-home television markets in the past has sold for $6,000-$10,000 per month per megahertz. More-recent prices in those same premium markets have fallen to $4,000-$5,000.

In the emerging markets, similar capacity that sold for between $3,000 and $4,000 per megahertz per month between 2009 and 2012 has more recently been selling for less than $3,000, Revillon said. For a high-throughput satellite, he said, a megahertz is selling for $500-$1,000 per megahertz per month.

“We’re going into a world with lower pricing,” Revillon said.