Brisk merger-and-acquisition activity has made the satellite telecommunications industry as dynamic as any over the years, but until recently one of the more prominent companies, Eutelsat, remained on the sidelines. The Paris-based satellite operator, easily the most profitable of its contemporaries, had long relied exclusively on strong organic growth, driven by a solid presence in white-hot markets in the Middle East and Africa.
But that began to change in June, when Eutelsat announced it had acquired the in-orbit GE-23 satellite from GE Capital for $228 million in cash. The acquisition gave Eutelsat a major footprint in the Asia-Pacific region, well outside its traditional geographic market.
The move might have been driven by a realization that the Middle East telecom boom was coming to an end with anticipated U.S. troop drawdowns in Iraq and Afghanistan. Meanwhile, the U.S. Defense Department is looking to increase its focus in Asia, a move sure to increase demand for satellite capacity in the region.
Just one year later, Eutelsat demonstrated, in an even bigger way, that it is no longer content as a regional satellite operator. In July, the company agreed to acquire Mexican satellite operator Satmex for $831 million in cash and the assumption of $311 million in Satmex debt.
Once finalized, the Satmex acquisition will immediately make Eutelsat a force to be reckoned with in Latin America, a market that many in the satellite industry believe will be the world’s fastest growing in the years ahead. Satmex has had its financial troubles in recent years, operates only three satellites — one of which is well past its prime — and boasts a relatively modest backlog. But the company has two satellites on order, with attractively priced options for more, with Boeing.
At the same time, Eutelsat expanded its presence in Russia by agreeing to lease large amounts of capacity aboard satellites being built for the Russian Satellite Communications Co. Eutelsat’s leases with the Moscow-based operator now total more than $1 billion.
So in the course of just more than a year, Eutelsat has transformed itself from a regional to a global operator with a geographic reach that is on par with that of the world’s largest operators, Intelsat and SES.
Whether or not a global Eutelsat can maintain the double-digit profit margins shareholders have become accustomed to over the years remains to be seen. But if it cannot, it won’t be for lack of boldness in seeking out new markets.
All this has happened under the leadership of Michel de Rosen, who took over at Eutelsat in 2009. De Rosen wasn’t always enthusiastic about acquisition-driven growth, telling investors during the early years of his tenure that he preferred to be the best rather than the biggest. Perhaps market forces beyond his control led to the apparent change of heart, but whatever the reason, the global competitive landscape for satellite operators looks a lot different today than it did four years ago.
