Investors Punish Eutelsat for Not Divulging Tooway Numbers

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PARIS — Satellite fleet operator Eutelsat modestly lowered its forecast for full-year revenue and profit but saw its stock tumble by some 11 percent as the company declined to discuss the performance of its Tooway consumer broadband service.

Paris-based Eutelsat said it will wait until its annual results are published in July before discussing Tooway and the overall market reaction to the Ka-Sat Ka-band satellite, which entered service in May 2011.

Eutelsat’s silence on Ka-Sat stood in stark contrast to Carlsbad, Calif.-based ViaSat, which in addition to having its own consumer broadband satellite service, called Exede, is a supplier of Tooway consumer terminals.

Exede is made possible by the ViaSat-1 Ka-band satellite, which entered service in January, more than six months after Ka-Sat. ViaSat nonetheless provided detailed subscription and revenue information on Exede and ViaSat-1 in a May 17 presentation to investors.

Eutelsat Chief Executive Michel de Rosen, in his company’s May 10 investor call, declined to reiterate Eutelsat’s long-held forecast that Ka-Sat would generate 100 million euros ($130 million) in incremental revenue by 2014.

“This is the first year of Ka-Sat,” de Rosen said during the call, held after the stock market’s close on May 10. “The ramp-up we have is promising.”

Eutelsat’s stock on the NYSE Euronext exchange dropped 11 percent the following day and did not recover in the following week.

Eutelsat had warned investors earlier this year that its Multi-Usage division, which sells commercial satellite bandwidth to the U.S. Department of Defense (DoD) and other governments, would no longer see the spectacular growth it has witnessed in recent years.

For the three months ending March 30, the Multi-Usage division nonetheless grew revenue by 13.3 percent, to 37 million euros. Eutelsat Chief Financial Officer Catherine Guillouard said during the conference call that Eutelsat is lacking sufficient capacity over Afghanistan to satisfy U.S. defense authorities.

The growth in the quarterly revenue was mainly due to the backlog of existing contracts. Contracts coming up for renewal in February were not renewed at previous levels because of the mismatch “between available capacity and what DoD wants,” Guillouard said. “The two new satellites [to be launched in 2012] are better fitted for U.S. DoD.”

Eutelsat has scheduled the launch of the Eutelsat 70B and Eutelsat 21B satellites this autumn. Eutelsat 70B will carry 48 Ku-band transponders and operate at 70 degrees east. Eutelsat 21B, with 40 Ku-band transponders, will be operated at 21.5 degrees east.

The expected downdraft, even if of short duration, in the Multi-Usage business caused Eutelsat to reduce its forecast for revenue for the year ending June 30 to 1.22 billion euros from more than 1.235 billion euros. The forecast for full-year EBITDA, or earnings before interest, taxes, depreciation and amortization, was reduced to around 955 million euros from more than 955 million euros previously.

De Rosen urged investors not to read too much into the Multi-Usage picture, saying the 20 percent-plus annual growth rates could not continue as the business reached a certain size.

The Ka-Sat/Tooway issue is a different matter. Eutelsat Deputy Chief Executive Michel Azibert said Ka-band professional services have been delayed but Tooway terminal sales more than made up for this during the three-month period.

De Rosen said a year ago that the company would be ordering a second Ka-Sat to provide backup to the original once the early returns were in from Ka-Sat’s market performance. In March, he said Eutelsat saw no urgent need for a backup satellite and would purchase a second Ka-band spacecraft only if it had secured partners in advance.

Eutelsat’s Value-Added Services division reported a 12 percent increase in revenue, to 13 million euros, for the three months ending March 30 compared with the previous year.

Eutelsat said its total revenue for the three months ending March 30 was 308.7 million euros, up 4.6 percent from the same period a year ago.

Video applications, Eutelsat’s core market, were up 6.3 percent, to 211 million euros. The company grew the total number of television channels carried on its fleet by 11 percent, to 4,252 as of March 30. Of these, 7.8 percent were high-definition television channels.

HDTV uses more satellite capacity per channel than standard digital transmissions and despite the advance of signal compression technology is viewed as the principal growth driver in the coming years for fixed satellite services fleet operators like Eutelsat.