Bullish Eutelsat Plans To Boost Spending on New Satellites

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PARIS — Satellite fleet operator Eutelsat on July 29 reconfirmed its status as the fastest-growing of the world’s major operators and said it remains so optimistic about prospects in Russia, Central Europe, the Middle East and Africa that it is raising, not lowering, its investment in new satellites in the next three years.

Bucking the trend of its fellow major operators, Paris-based Eutelsat said it now expects to spend 550 million euros ($788 million) per year through 2014 on spacecraft to capture the demand that the company says remains dynamic in these regions, which are still sometimes referred to as emerging markets. The company had previously told investors it would be spending 450 million euros annually on new satellites.

All of Eutelsat’s target regions have been emerging for some time now and have been the focus of major satellite investment by numerous global and regional operators. In Africa especially, both SES and Intelsat of Luxembourg — the world’s two biggest commercial satellite fleet operators, ahead of Eutelsat — have cautioned that demand could slacken given the amount of satellite bandwidth arriving over the region.

Eutelsat disagrees. In a July 29 conference call on the company’s financial results, Eutelsat officials said that annual demand for satellite bandwidth in sub-Saharan Africa should increase by 7.4 percent. In the Middle East and North Africa, demand will increase by 4.1 percent a year, they said; in Russia and Central Asia, 7.3 percent; and in Central Europe, 6 percent.

Eutelsat Deputy Chief Executive Jean-Paul Brillaud said during the conference call that Eutelsat has seen no slackening of demand in Africa despite the arrival of several large fiber optic cables on the African coast. As Intelsat has noted, these cables may weaken demand for point-to-point satellite capacity, Brillaud said. But Eutelsat’s core video broadcast business has remained almost untouched, he said.

For the 12 months ending June 30, when its fiscal year ends, Eutelsat reported revenue of 1.17 billion euros, up 11.5 percent from the previous year. Its EBITDA, or earnings before interest, taxes, depreciation and amortization, was up 11.9 percent and equivalent to 79.3 percent of revenue.

The company said that while it is conservatively promising no more than a 5.7 percent revenue increase in the coming 12 months, it will average a 7 percent annual increase in revenue for the next three years.

Eutelsat spent most of the past year with a fleetwide fill rate of over 90 percent, in part because of the failure shortly after launch of its W3B satellite, whose Ku-band capacity would have reduced the fill rate. Even when adding the huge Ka-Sat Ka-band satellite into the mix — the satellite became operational May 31 — the fill rate is currently 79.2 percent.

Backlog stood at 5 billion euros as of June 30, some 91 percent of it from video customers.

Ka-Sat is designed to offer broadband links to corporate networks and to consumers in Europe and northern Africa. It has a throughput estimated at 70 gigabits per second, making it the first of a new generation of so-called high-throughput satellites.

Brillaud said Ka-Sat will be counted in Eutelsat’s books as having 82 transponders. The satellite has 82 spot beams, each with some 500 megahertz of capacity, making it difficult to compare with the standard 36-megahertz transponders in C- and Ku-band that constitute most of the rest of the fleet.

With each spot beam being considered as a transponder, Brillaud said, Eutelsat will consider the satellite “full” when 70 percent of its capacity is booked. This may mean that some beams are only 50 percent full while others are 90 percent full.

Starting up the Ka-Sat business this year will likely cost more than the revenue the satellite generates, Eutelsat said. But Eutelsat Chief Executive Michel de Rosen reiterated the company’s belief that Ka-band represents a large opportunity that, up to now, Eutelsat is the only one in Europe to fully seize.

Over time, de Rosen said, Ka-Sat revenue is likely to come more or less equally from consumer broadband and corporate network customers.

Eutelsat satellites’ orbital locations over the Middle East, North Africa and Central Asia have made them particularly attractive to the U.S. Defense Department and allied governments during the wars in Iraq and Afghanistan.

The government business is labeled “multi-usage” by Eutelsat, and its performance in recent years has been remarkable even when set alongside the growth in Eutelsat’s core television broadcast market.

For the 12 months ending June 30, the multi-usage business grew by 28 percent, to 126 million euros — this following a growth of 30 percent last year.

Eutelsat said all multi-usage contracts that expired in the past year were renewed, and new ones were signed. De Rosen pointed to the fact that there are limited orbital slots in the region of most interest to these government users, and a limited amount of available capacity, creating an environment in which transponder prices are high.

 

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