Eutelsat Confident of Retaining Disputed Satellite Bandwidth

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PARIS — Satellite fleet operator Eutelsat told investors Oct. 25 that rival SES will not be able to make good on plans to wrest control of 500 megahertz of Ku-band capacity now on a Eutelsat satellite in October 2013.

In a conference call with investors, Paris-based Eutelsat also said its $228 million purchase of the GE-23 satellite over the Pacific Ocean will boost the company’s revenue growth in the next three years by a full percentage point.

Eutelsat, which had been forecasting annual growth of between 5 percent and 6 percent through mid-2015, said the new satellite, renamed Eutelsat 172A, will raise growth to between 6 percent and 7 percent per year.

The company said that after appointing new management for its Tooway consumer broadband business in July and revamping the commercial offer, it is already seeing an effect on revenue growth. “These actions have started to bear fruit,” Eutelsat Chief Operating Officer Michel Azibert said during the call.

For the three months ending Sept. 30, Eutelsat said its value-added services, which are mainly related to the Ka-band consumer broadband business, grew by nearly 44 percent, to 16.2 million euros ($21.1 million).

This figure also includes “a few million euros” in revenue from Eutelsat’s maritime broadband offer. Azibert declined to specify the revenue from Tooway/Ka-Sat, saying the company would provide more details when it publishes its half-year results in January.

Eutelsat operates on a fiscal year that begins July 1.

Meanwhile, Eutelsat and its principal European satellite rival, SES of Luxembourg, are battling over rights to 500 megahertz of Ku-band frequency now carried by a Eutelsat satellite at 28.5 degrees east longitude. SES has said this capacity will shift to an SES satellite in October 2013 under a contract with Media Broadcast of Germany that takes effect then.

Eutelsat has opened two separate arbitration proceedings, saying first that Media Broadcast did not have a right to enter into the SES contract, and second that SES’s attempt to take control of the 500 megahertz violates a broad bandwidth and orbital-slot coordination agreement the two companies signed in 1999.

The capacity is equivalent to at least 14 transponders, and potentially much more given how it is used.

Eutelsat Chief Executive Michel de Rosen said investors need not fear the loss of that business come October 2013. “SES cannot operate in these frequencies in October 2013, while Eutelsat can and will,” de Rosen said. “We do not believe SES will use the capacity in October 2013 as that would pre-empt decisions now in arbitration” at the International Chamber of Commerce.

In an Oct. 26 statement, SES said it “strongly disagrees with Eutelsat’s position and will vigorously defend its right to use these frequencies from Oct. 4, 2013, on the basis that Eutelsat’s rights expire Oct. 3.”

To bolster its position at 28.5 degrees east, Eutelsat recently moved an aging in-orbit satellite, the Eutelsat 48B, to that slot.

Azibert said the move was intended not so much to strengthen its rights there against the SES challenge as to capture commercial demand outside Europe from that orbital position. He said the Eutelsat 48B has eight Ku-band transponders available for service.

Eutelsat has removed several Iranian broadcasters from its Hot Bird satellites following what the company said were demands from the European Union and from the French broadcast regulatory agency.

The resulting revenue loss, Azibert said, will in principle be no more than 3.5 million euros per year — the average transponder price of the Hot Bird fleet — and is likely to be much less given demand for Hot Bird satellite access. A replacement customer is almost certain to be found in short order, he said.

As expected, Eutelsat’s business selling capacity to the U.S. Defense Department over the Middle East, North Africa and Central and South Asia has slipped, in part because Eutelsat has not had available capacity where the military customers wanted it. Several contracts that came up for renewal early this year were not renewed as a result.

The company plans the launch of two satellites — Eutelsat 21B and Eutelsat 70B — in November and December, and expects that once they are in service the decline in what Eutelsat calls its “Multi-Usage” services will cease.

Some 70 percent of Eutelsat’s business is providing video to commercial broadcasters. This business continues to grow, especially with the market’s appetite for high-definition television, which takes more satellite capacity per channel than standard-definition digital video.

Eutelsat’s video applications business grew by 9.1 percent in the three months ending Sept. 30 compared to the same period a year ago, mainly because of new satellite capacity launched in September and October 2011.

The company’s satellite fleet beamed 4,402 television channels as of Sept. 30, an 11 percent increase over last year. Of these, high-definition channels numbered 379, up 59 percent.

Eutelsat’s total revenue for the three months ending Sept. 30 was 314.4 million euros, up 6.4 percent from a year ago. The company said its 6-7 percent annual growth through mid-2015 would be accompanied by an EBITA — earnings before interest, taxes, deprecation and amortization — margin of 77 percent.

Eutelsat has seven satellites on order and expects its capital investment to average 500 million euros per year during the period.