Eutelsat Raises Revenue Growth Projections

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  Space News Business

Eutelsat Raises Revenue Growth Projections

By PETER B. de SELDING
Space News Staff Writer
posted: 05 August 2008
03:02 pm ET






PARIS
— Satellite-fleet operator Eutelsat said it sees no hint of an economic slowdown in its business prospects in
Europe
,
Africa
, the
Middle East
and
Asia
as demand for fresh television programming and the arrival of high-definition broadcasts continue to fuel growth in satellite-transponder demand.

The Paris-based operator is so confident of its near-term prospects that it raised its growth estimates despite acknowledging that almost all the growth will need to come from satellites not yet in orbit.

Eutelsat’s
current 24-satellite fleet was 93.4 percent full – a company record – as of June 30, which for satellite fleets is approaching a “No Vacancy” status. Eutelsat has seven satellites on order and scheduled for launch in the next three years and it is these spacecraft that will give the company room to extend its reach into new markets and deepen its penetration of current ones, Eutelsat Chief Executive Giuliano Berretta said in a July 31 conference call with investors.

With these new satellites, Berretta said, Eutelsat can expect an annual growth rate of 6 percent between now and 2011, when it forecasts annual revenue will surpass 1 billion euros ($1.57 billion). He nonetheless cautioned that the commercial launch services market remains tight. A failure of any of the principal commercial launch vehicles could threaten Eutelsat’s planned launch schedule – and thus its revenue growth forecast.

“Satellites are on time, launchers are not,” Berretta said.

Eutelsat
is spending on average 450 million euros per year on new capacity including spacecraft that will replace those nearing the end of their service lives.

Eutelsat
reported revenue of 877.8 million euros for the 12 months ending June 30, up 5.9 percent from the year earlier. The company’s EBITDA – earnings before taxes, interest, depreciation and amortization – was 79.3 percent of revenue, which Eutelsat says is the best gross profit margin among the world’s major satellite operators.

Eutelsat
is raising its revenue targets despite the fact that it now is removing from its forecasts any revenue associated with a mobile satellite television joint venture it is planning with rival SES of Luxembourg.

Berretta said evolving financial accounting rules argue against consolidating revenue from the Solaris Mobile joint venture because Eutelsat has a 50 percent stake. Solaris will be accounted for separately.

The increased fill rate is in part a reflection of the fact that Eutelsat recently removed from service four transponders on its W5 satellite over
East Asia
following a partial onboard power failure, resulting in some of the affected customers being moved to unused capacity on other satellites.

Independent of that incident, however, Eutelsat during the past 12 months booked new capacity on 64 transponders, bringing the total to 468 leased transponders as of June 30.

Video distribution represents 75 percent of Eutelsat’s revenue base, with surging demand in
Eastern Europe
,
Russia
and
South Asia
adding to Eutelsat’s core market of
Western Europe
.

Eutelsat
Deputy Chief Executive Jean-Paul Brillaud said the company was broadcasting 49 high-definition television (HDTV) channels as of June 30, compared to 17 channels a year earlier. That number should more than double by 2010, he said.

HDTV is considered a godsend for satellite operators because each HDTV channel requires around three times the bandwidth of a standard-definition channel, meaning more demand for satellite capacity per channel even after advances in signal compression technology.

Berretta said Eutelsat has opened negotiations with ViaSat Inc. of
Carlsbad
,
Calif.
, on a joint venture to deepen their existing collaboration in offering Ka-band broadband service in
Europe
and the
United States
.

ViaSat
is under contract to supply Eutelsat with consumer-broadband terminals for Eutelsat’s new Tooway broadband service, which will accelerate in 2010 with the launch of a large all-Ka-band satellite called Ka-Sat.

Berretta said the joint venture the two companies are discussing would include a Eutelsat role in ViaSat’s planned ViaSat-1 Ka-band broadband project. He did not elaborate the size or kind of investment Eutelsat might make in the
U.S.
business.

Berretta said Eutelsat’s cash flow and modest debt give it room to consider acquisitions but added that he sees little of interest on that front in the
United States
.

Eutelsat
in the past had expressed an interest in purchasing
Mexico
‘s Satmex satellite operator, but backed off – as did other prospective Satmex buyers – when Satmex’s owners insisted on a price substantially higher than what Eutelsat was willing to pay.