SES May Miss Growth Target But Says Long-term Outlook Strong

by

PARIS Satellite fleet operator SES said Nov. 11 it may fall just shy of its forecasted 4 to 5 percent annual growth target between 2010 and 2012 because of satellite launch delays and a further degradation of capacity on an in-orbit satellite but that the business is otherwise set for long-term growth.

Luxembourg-based SES said it is likely to order two new satellites in 2012 to serve the Indian Ocean and East Asian markets and that any market softness in sub-Saharan Africa is a short-term phenomenon that will soon give way to a renewed surge in demand.

In conference calls with journalists and investors, SES Chief Executive Romain Bausch said the company’s Astra2Connect consumer broadband service, which currently uses Ku-band available on SES satellites but is migrating to Ka-band on future spacecraft, has surpassed 80,000 paid subscribers.

Bausch said Astra2Connect, which recently increased the amount of throughput available to subscribers, is not feeling pressure from the large all-Ka-band Ka-Sat spacecraft owned by rival Eutelsat of Paris that entered service earlier this year.

SES is in the middle of the largest satellite investment program in company history. When it is done in 2014, it will have added more than 20 percent to its existing in-orbit capacity. More than three-quarters of the new bandwidth will be over the emerging markets of Asia, Africa and Latin America.

Two additional satellites to meet the demand for direct-broadcast television service in India may be ordered in 2012, Bausch said. In Africa, where SES and other satellite fleet operators are investing heavily, Bausch conceded that satellite lease prices have been stagnant.

Fill rates on satellites over sub-Saharan Africa likely will dip for a couple of years until demand catches up with supply. But Bausch said he had no doubt that the region’s economic dynamism will extend from the coasts to the interior, where fiber does not reach and where satellite capacity will find a ready market.

Several SES satellites in recent months have been late in launching because of rocket delays, especially the August failure of a Russian Proton vehicle that grounded that rocket, one of the principal carriers of commercial satellites.

Delayed launches mean delayed revenue. For SES, the revenue loss for 2011 will be about 10 million euros ($14 million). The company will see the same effect in 2012.

In addition to the rocket delays, SES’s AMC-15 satellite, a Lockheed Martin Space Systems A2100 model that has suffered previous solar array circuit failures, lost more capacity because of the same issue. The satellite is wholly leased to EchoStar Corp. of Englewood, Colo.

EchoStar and SES are negotiating how the power drop translates to a capacity decrease, and how that will affect their contract. Bausch said he expected EchoStar in 2012 to pay about 5 million euros less than it would have without the new AMC-14 issue.

These two phenomena and their total revenue consequence of between 10 million and 15 million euros for 2012 would not appear dramatic for a company that expects to report around $2.4 billion in revenue in 2011.

But depending on whether its upcoming launches are on schedule and successful, and the company’s ability to sell 23 transponders to be vacated when German television broadcasters move from analog to digital broadcasts next April, the revenue loss may force SES to revise its three-year forecast.

SES Chief Financial Officer Andrew Browne said during the conference call that the company will make its forecasted 4 to 5 percent average annual growth target between 2010 and 2012 if the launch delays and the AMC-14 problem are left out of the equation. Including them, he said, could push the company to the lower end of the forecast, and possibly below it.

SES reported Nov. 11 that for the nine months ending Sept. 30, revenue increased by 3 percent, to 1.28 billion euros. Removing the effects of the U.S. dollar’s change in value against the euro would show a revenue increase of 3.8 percent, the company said.