Eutelsat Reports 37% Increase in Tooway Broadband Subscriptions

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PARIS — Satellite fleet operator Eutelsat said Feb. 8 its Tooway consumer broadband service had increased its subscriber count by 37 percent, to 72,000 active terminals, in the six months ending Dec. 31 and that a more aggressive Tooway commercial strategy is showing results.

Eutelsat also said its agreement to increase its ownership stake in Spanish satellite fleet operator Hispasat to 33.7 percent from 27.7 percent was done irrespective of whether the Spanish government will ever let Eutelsat take control of the Spanish operator.

Paris-based Eutelsat has agreed to pay 56 million euros ($76 million) for the increased Hispasat share, which it is buying from Spanish telecommunications operator Telefonica. The transaction is expected to clear Spanish government approvals by this spring.

“We do not know the intentions of the Spanish state with respect to their own Hispasat shares,” Eutelsat Chief Executive Michel de Rosen said during a conference call with investors on Eutelsat’s half-year financial results. “They are the third-largest [Hispasat] shareholder after Abertis and Eutelsat. We became a shareholder in 2001, and we intend to remain a shareholder.”

De Rosen said Eutelsat, which had expressed interest in purchasing Greek satellite operator HellasSat, had set a ceiling price for the transaction and is not overly surprised to have lost out to Arabsat of Saudi Arabia.

“When you are in the inorganic-growth game, these things happen,” de Rosen said, reiterating that Eutelsat’s coming growth will be from the expansion of its own business, not through acquisitions.

Eutelsat’s all-Ka-band Ka-Sat high-throughput satellite has struggled to find its commercial footing. The company reorganized the Tooway service’s management and is tinkering with the data packages offered to consumers and professional users.

Eutelsat Deputy Chief Executive Michel Azibert said the company’s reorganization of its Tooway service, made possible by Ka-Sat, is paying off.

Eutelsat has lowered Tooway prices, added unlimited data packages and begun marketing entire beams to telecommunications operators, Azibert said. A fresh approach to local governments seeking to use monies allocated to connect rural populations to the broadband grid will include offering six months of Tooway service free of charge.

Eutelsat — the world’s third-largest commercial satellite fleet operator and among the top players — is the one most concentrated on television broadcasting.

Video accounted for 68 percent of Eutelsat’s total revenue of 633.6 million euros for the six months ending Dec. 31. The video business grew 6.8 percent from the same period a year ago, with the number of channels carried on Eutelsat satellites growing, especially in the Middle East, North Africa, Central Africa and the Indian Ocean islands. Total channels were up 7.5 percent, to 4,485, as of Dec. 31.

In addition to increasing the number of channels, Eutelsat is boosting the number of high-definition channels carried by the fleet. High-definition broadcasts require as much as 2.5 times the satellite bandwidth as standard-definition. HDTV channel count increased by nearly 41 percent, to 398, over the past year and they now account for 8.9 percent of Eutelsat’s total channels.

Eutelsat reported an EBITDA, or earnings before interest, taxes, depreciation and amortization, margin of 79.2 percent of revenue and said it is on track to reach its forecasted growth of 5 to 6 percent for the year ending June 30, and 6 to 7 percent per year, on average, through June 2015.

Much of the growth will come from adding new satellites. As of Dec. 31, Eutelsat’s 30 satellites had 850 operational transponders, up 6.1 percent from 12 months earlier.

Two satellites were launched in December and January, with seven more scheduled for launch by late 2015.

The expansion program will have enlarged Eutelsat’s fleet capacity by 30 percent between mid-2012 and mid-2015.

De Rosen and Azibert said pressure on services in Africa and in the Balkans remained because of competition from terrestrial and regional satellite operators, but that both regions are considered good long-term growth prospects.

The two latest Eutelsat launches — Eutelsat 21B for 21.5 degrees east and Eutelsat 70B for 70.5 degrees east — are expected to help the company as it enters negotiations with the U.S. Defense Department in the coming weeks over capacity renewal.

Eutelsat’s government services business, which is mainly with the U.S. government, is part of what the company calls its Multi-usage division. For this business, revenue in the six months ending Dec. 31 dropped by 2.4 percent, to 72.7 million euros, following a weak U.S. government renewal rate in February and March 2012.

The two new satellites, plus Eutelsat’s cash purchase of the GE-23 satellite over the Pacific — now called Eutelsat 172A — will make the company more attractive to the U.S. Defense Department in this year’s contract renewal negotiations, Azibert said.