For years, Eutelsat repeated the same mantra to investors: Organic growth will do.
And it did. The Paris-based company, dividing the world’s most-lucrative major satellite bandwidth market with rival SES of Luxembourg, used its video revenue to grow very profitably. When needed, partnerships — with Nilesat of Egypt, Russian Satellite Communications Co. of Russia — were added to extend coverage eastward from Europe.
Then Eutelsat picked up a little-used satellite over the Pacific Ocean whose orbital slot is extremely well-placed to capture the growing aeronautical and maritime mobility markets. Panasonic recently purchased the majority of Ku-band capacity on a new, large satellite for the orbital slot that Eutelsat announced in June.
Finally, in 2013, Eutelsat pulled the trigger on a major transaction in buying Satmex. Rivals will argue whether $831 million plus the assumption of the Mexican operator’s debt constituted a good deal, but the transaction puts Eutelsat into the still-growing Latin American market in a big way.
It also gives Eutelsat access to the Satmex contract with satellite builder Boeing and launch service provider Space Exploration Technologies Corp. for two all-electric satellites and two launches immediately, plus options, at prices of less than $150 million per satellite, including launch.
The Satmex purchase was not applauded by Hispasat of Spain, in which Eutelsat has a large minority equity stake. Hispasat views Latin America as its growth vector in the coming years and now faces heightened competition from one of its shareholders.
Eutelsat’s success with the U.S. Defense Department, which used Eutelsat’s fleet over the Middle East for the wars in Iraq and Afghanistan, is now facing a drop in satellite bandwidth demand following troop withdrawals.
The drop in revenue from the U.S. military is beyond Eutelsat’s control. But within its control is its Ka-band broadband offer from the Ka-Sat satellite, which has been operational since 2011. Ka-Sat looked like a liability for a couple of years, but Eutelsat has revamped the business approach and now sees growth.
More recently, the company announced an agreement with satellite broadband provider ViaSat Inc. of the United States under which ViaSat and Eutelsat would provide roaming capabilities to their customers when they move from Ka-Sat coverage into ViaSat’s ViaSat-1 satellite Ka-band satellite coverage in North America. The deal will take on much more value if, as expected, it is extended to include the future ViaSat-2 satellite, with North Atlantic air corridor coverage.
