Abertis Awaiting Spain’s OK

by

Still Hopes To Purchase Large Stake in Hispasat

PARIS — Abertis Telecom of Spain remains interested in purchasing a large stake in satellite-fleet operator Hispasat but has received no signal, positive or negative, from the Spanish government as to whether such a purchase will be allowed, Abertis officials said.

Abertis purchased a 32 percent stake in satellite-fleet operator Eutelsat of Paris in January for 1.07 billion euros ($1.53 billion). Eutelsat, the world’s third-largest commercial satellite operator in terms of revenues, owns 27.7 percent of Madrid-based Hispasat but has been blocked by the Spanish government from taking a controlling stake.

Hispasat satellites carry both military and commercial telecommunications payloads, and the company is a shareholder in Hisdesat, which operates Spain’s Spainsat military telecommunications satellite.

Abertis officials, who made their Hispasat intentions known to the Spanish government earlier this year, had hoped for a clear response this fall. “That’s what we are waiting for,” Abertis Telecom managing director Tobias Martinez told an Abertis shareholders meeting Oct. 1. “That’s all we can do.”

Abertis has said it would like to buy a 46.6 percent stake in Hispasat.

Abertis, which operates highway and airport concessions in Europe, also owns television broadcast networks in Spain and is a major customer for Hispasat. Martinez sidestepped a question on whether Abertis would end its relationship with the Spanish operator and use all-Eutelsat capacity if the Spanish government does not approve its Hispasat share purchase. The two issues, he said, are not related.

Abertis officials have said repeatedly that they did not become Eutelsat’s largest single shareholder just to receive the annual dividend and watch the stock rise. They intend to be active investors involved in Eutelsat’s future direction, Martinez said.

But these officials also have said they can pursue their strategy without owning a controlling stake in Eutelsat, and without merging Eutelsat and Hispasat even if they secured a large Hispasat stake.

“We don’t think the merger of the two companies is value-creating,” Abertis Telecom Finance Director Carlos Sagasta said Sept. 5 at Euroconsult’s satellite-finance conference here. “We don’t want to make Eutelsat Spanish, or to make Hispasat French. The relationships we have with them will help the two work better together, but they will remain independent on a country basis and a national basis.”

Sagasta told the Abertis investor conference that the company already has identified 10 million euros in annual revenues that it will be able to capture because of its Eutelsat share purchase. He said the new revenues will come from better use of so-called crossover technologies exploiting satellite and terrestrial links to provide universal coverage for mobile television.

In a series of presentations, Abertis officials said they expected to reap further benefits from the Eutelsat stake in the coming years from delivery of mobile television via combined satellite and terrestrial networks. Eutelsat and satellite operator SES Astra of Luxembourg have formed a joint venture to offer mobile television in S-band using a satellite under construction and scheduled for launch in 2009.

Eutelsat in July reported improved sales, operating profit and net profit and said it expected to continue to grow in the financial year ending in June 2008. The company perhaps has the highest gross profit margin of any of the major satellite operators, mainly because it has focused on high-margin satellite-television distribution to a greater extent.

Eutelsat Chief Executive Giuliano Berretta, in a presentation to the Abertis investor conference, said transmitting a television channel to 4 million viewers by satellite costs an operator less than 1 cent per viewer per month, a figure no other transmission technology can match.

Eutelsat is eyeing new niche markets including mobile telephone links to ferries and other maritime vessels, Internet service to commercial rail passengers starting in France, and what Berretta called “electronic cinema,” meaning satellite delivery to cinemas of special-events broadcasts and certain motion pictures.

Eutelsat, which trades on the Paris-based Euronext market, will distribute 50-75 percent of its net income in the coming years to shareholders in the form of dividends, Berretta said. With a relatively low debt load, he said, Eutelsat is well-placed to make acquisitions if it sees opportunities.