Eutelsat Sees Steady Growth as Consumer Broadband Service Gains Traction

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PARIS — Satellite fleet operator Eutelsat on Feb. 14 said its consumer broadband service in Europe has maintained market traction and that the company is cautiously optimistic about satellite capacity-lease renewals in the coming weeks from the U.S. Defense Department.

Paris-based Eutelsat, which in the past year has extended its reach over the Pacific and in the Americas, reaffirmed its forecast that it will grow its revenue — aside from acquisition-related revenue — by 2.5 percent in the fiscal year ending next June 30, and 5 percent per year for the two subsequent years.

The growth forecast does not include revenue contributions from Satmex of Mexico, whose purchase by Eutelsat closed in January. Eutelsat said Satmex will add about $70 million to Eutelsat’s revenue between January and June of this year. Satmex’s growth in the coming years should be between 5 percent and 9 percent annually, Eutelsat said — particularly starting in 2016, when its new Satmex 7 and Satmex 9 spacecraft should be operational, Eutelsat said.

Eutelsat’s consumer broadband service using Eutelsat’s Ka-Sat high-throughput satellite over Europe reported 124,000 subscribers as of Dec. 31, up from 91,000 subscribers as of June 30.

In a Feb. 14 conference call with investors, Eutelsat Deputy Chief Executive Michel Azibert said an improved distribution network and a retooled customer-service offer are maintaining the growth of the Ka-Sat service, called Tooway, after a slow start in 2011-2012.

With Ka-Sat’s core consumer business on a growth track, he said, the next target market will be mobile broadband services using Ka-band. Eutelsat has begun initial aeronautical-mobile service trials with Aer Lingus of Ireland. Azibert said relationships with other airlines would follow.

Eutelsat’s Multi-Usage service leases capacity to military and other government services. With the decline in military activity in Iraq and Afghanistan, the U.S. Defense Department has reduced the amount of capacity it uses under short-term leases that are typically renewed once or twice a year.

The principal transponder-lease renewal periods are in February-March and September-October. Only 80 percent of contracts were renewed in the February 2013 period, but 90 percent were renewed in September, Eutelsat Chief Executive Michel de Rosen said during the conference call. The company has added capacity over the Pacific and over Central Asia and expects that renewal rates during this year’s February-March cycle will be around 85 percent.

For the six months ending Dec. 31, Eutelsat reported Multi-Usage revenue of 74 million euros ($100 million), up slightly from the 72 million euros reported in the six-month period ending June 30.

Aside from its acquisition of Satmex, Eutelsat is expanding its fleet with five Eutelsat-owned satellites to be launched by early 2016, mainly over the Middle East, North Africa, Russia and other parts of Africa. 

In addition to these five launches, the company has purchased Ku-band capacity scheduled for launch in March aboard the AT1 and AT2 satellites owned by the Russian Satellite Communications Co. (RSCC), Russia’s largest telecommunications satellite fleet operator. The satellites will be launched aboard Russian Proton rockets as part of Russia’s government launch program.

The company’s revenue targets for the year ending June 30 will depend on these satellites — plus the Eutelsat 3B scheduled for launch in April aboard a Sea Launch AG rocket — being launched and put into operations on schedule.

Azibert said 10 of the 19 Ku-band transponders Eutelsat has leased on AT1, and six of the eight leased on AT2, have already been sold.

Eutelsat and its competitor, SES of Luxembourg, in January sold their Solaris Mobile joint venture to introduce S-band mobile broadband in Europe. Eutelsat’s share of the proceeds was 16 million euros. The company said it booked a capital gain of 12.4 million euros in the Solaris sale.

Eutelsat’s net income for the six months ending Dec. 31 reflects higher French government taxes, plus the company’s payment of 5.6 million following a tax audit. Eutelsat said the rise in French corporate taxes — 108.6 million euros for the six months ending Dec. 31, versus 104 million euros for the same period a year ago — reflects the new 42.6 percent effective tax rate. A year ago, the rate was 36.6 percent.

Eutelsat is the world’s third-largest commercial satellite fleet operator. Its two larger competitors, Intelsat and SES, are both legally domiciled in tax-friendlier Luxembourg, just two hours by train from Paris. 

 

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