Abertis of Spain will not use its sizable equity stakes in Eutelsat and Hispasat to merge the two satellite-fleet operators, in part because of national-security concerns, Abertis Chief Executive Salvador Alemany said April 1.
Addressing Barcelona-based Abertis’ annual shareholder meeting, Alemany said the company, whose Abertis Telecom subsidiary has become the biggest corporate shareholder in both Paris-based Eutelsat and Hispasat of Madrid, can effectuate the needed economies of scale between the two without combining them.
“There have been suspicions that we might have vested interests in the possibility of merging the two companies,” Alemany said. “Well let me make it quite clear: We have no intention of merging Eutelsat and Hispasat. We want to keep them clearly separated. They have clearly separate markets. They may work together in some [markets], but they are distinct in others.”
The Abertis-Eutelsat-Hispasat relationship has been a source of speculation for well over a year.
Eutelsat is a longstanding shareholder in Hispasat, with a 27.67 percent ownership. Eutelsat in the past has signaled its interest in increasing its role in the Spanish operator, but has been rebuffed by the Spanish government – much as Intelsat’s earlier attempt to purchase Eutelsat was opposed by Eutelsat management and by some in the French government.
Abertis purchased a 31.6 percent share of Eutelsat in January 2007, becoming Eutelsat’s largest investor. Speculation immediately began over whether Abertis would leverage its Eutelsat presence, and Eutelsat’s Hispasat stake, to effect a merger of the two.
That speculation only increased when Abertis, after long negotiations with the Spanish government, purchased most of the Hispasat shares held by private-sector companies. That purchase, which gives Abertis a 28.4 percent Hispasat ownership stake, is awaiting approval by Spanish government regulators but is expected to be concluded soon, Alemany said.
But he made clear that Abertis would face an uphill battle with the Spanish government if it sought to take a controlling share of Hispasat.
That being the case, the company has settled on maximizing its influence on the two satellite fleets from its minority-shareholder position.
“We have a stable situation [in Hispasat] between the public and private shareholders,” Alemany said. “That stability is the basis of an agreement on how decisions are made, with certain prerogatives given to the public shareholder.”
Alemany said friction between Eutelsat and the Spanish government over control of Hispasat had been “holding things up” at Hispasat but that the arrival of Abertis as an owner of both operators has clarified the two companies’ relationship.
“What this means is that we have an ownership in both Hispasat and Eutelsat,” Alemany said. “We will try and get the best commercial synergies from the specific orbital licenses of the two companies, but each will have its own strategic plan. Our aim is to be the benchmark, the major shareholder in both, to help benefit both countries.”
In addition to its commercial operations, Hispasat is a 43 percent shareholder in Hisdesat Servicios Estrategicos S.A., which with Loral Space and Communications of New York owns the Xtar LLC joint venture to provide X-band military satellite communications via two satellites in orbit. The Spanish Defense Ministry is Xtar’s biggest customer.
In a presentation to shareholders, Abertis defended the idea of sizable minority positions not just in its satellite telecommunications business, but in general. The company is a major operator of toll highways and airports.
Both satellite operators are healthy and profitable. Eutelsat, whose fiscal year ends June 30, reported that revenue for the six months ending Dec. 30 was 429.4 million euros, or $678.5 million at current exchange rates.
Hispasat, which is expected to report its 2007 financial results in the coming weeks, reported revenue of 62.6 million euros for the six months ending June 30.
Eutelsat and Hispasat both reported high levels of earnings before interest, taxes, depreciation and amortization, or EBITDA – around 80 percent of revenue for each company.