Booming Eutelsat Raises 3-year Growth Forecast, Eyes Asia

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PARIS — Satellite fleet operator Eutelsat of Paris, which already shares dominance with SES of Luxembourg of the world’s most profitable region for satellite-service providers, in recent months has been able to raise prices for capacity offered in the Middle East, Africa and Russia, company officials said Feb. 18.

Presenting the company’s results for the six months ending Dec. 31, Eutelsat raised its forecasted growth rate for the next three years to more than 7 percent on average and said it is setting its sights on a further expansion into Asia.

Eutelsat’s new chief executive, Michel de Rosen, said neither Asia nor North America is as profitable as Europe, the Middle East, Africa and Russia. But he said Asia offers room for substantial growth, which is why Eutelsat will be more active in that part of the world.

There was a time when analysts, and Eutelsat itself, wondered whether the company would regret its near-total absence from the North American market. Those days are gone.

“I don’t think there is any gap we have [in our satellite fleet’s coverage] that is a problem for Eutelsat,” de Rosen said in a Feb. 18 conference call. “We are demonstrating the growth potential in Europe, meaning to the Urals, as well as the Middle East and Africa. We are not looking to be the biggest satellite operator, so don’t think we will focus less on organic growth. Outside our core region, we are looking east more than west.”

As is the case with SES, Eutelsat is in the middle of the biggest fleet-expansion program in its history. Also like SES, Eutelsat has been able to maintain a high level of spending on new satellites it will be averaging 450 million euros ($611 million) per year through 2012. But it promised investors that it would fund the spending from free cash flow and would maintain what the company has long said is the highest gross-profit margin among major satellite operators at nearly 80 percent.

For 2009 to 2012, Eutelsat is promising that earnings before interest, taxes, depreciation and amortization (EBITDA) will average 77 percent of revenue each year.

For the six months ending Dec. 31, the company reported an EBITDA margin of 81 percent. Revenue increased by 9.6 percent, to 508 million euros. For its full fiscal year, which ends June 30, Eutelsat forecasts it will top 1 billion euros in revenue for the first time.

Its backlog, of which more than 90 percent is from long-term video customers, stood at 4.2 billion euros at Dec. 31, up 19 percent from a year earlier, and de Rosen said the average contract had more than eight years remaining.

Eutelsat has boosted by about 30 percent its available satellite capacity in the past 12 months more than 150 new commercially available transponders. The rapid expansion was needed because Eutelsat’s fleet at the end of 2008 was operating at a fill rate of more than 97 percent, leaving the company exposed to possible difficulties if any of its satellites had problems in orbit.

Two Eutelsat satellites did encounter in-orbit failures, forcing the company to redeploy spacecraft so as not to lose customers. By Dec. 31, with the new satellite expansion plan bearing fruit, the fill rate on Eutelsat’s fleet was down to a more-manageable 87.4 percent even though the total number of satellite transponders under lease had increased from 489 to 532.

While Eutelsat’s expansion in the past year has been outside Western Europe where prevailing satellite-transponder prices for video customers are the envy of any satellite operator not in that market it has nonetheless been able to raise the average price per new transponder leased in the past year across its entire fleet.

Eutelsat Deputy Chief Executive Jean-Paul Brillaud said the average price per transponder under lease fleet-wide not including satellites in inclined orbit, which are less attractive for video customers was 2 million euros per year as of Dec. 31. That is an increase from 1.9 million euros a year earlier.

For Brillaud, the uptick in average per-transponder prices “despite the fact that a significant part of this growth is coming from emerging markets” shows the continued health of the satellite television sector.

While Eutelsat has grown gradually and cautiously in recent years it is now the world’s third-largest operator by revenue, after SES and Intelsat of Washington and Bermuda  it is betting heavily that the new market of offering broadband links to consumers will be just as dynamic as satellite television.

Eutelsat’s large Ka-Sat satellite is scheduled for launch by an International Launch Services Proton rocket either late this year or early in 2011. The company is offering an early version of its Tooway broadband service on the limited Ka-band capacity it has in orbit now. Brillaud said the company cannot satisfy the demand for Ka-band broadband now and has had to offer Ku-band links while waiting for Ka-Sat to arrive.

Brillaud said the more than 50 Tooway distributors lined up to sell Ka-Sat capacity nonetheless are waiting for the satellite to launch before entering into contracts.