SES Posts Record-High Profit In Capacity-Leasing Business

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PARIS — Satellite fleet operator SES of Luxembourg on April 24 reported record-high gross-profit margins for its core satellite capacity-leasing business and said that it continues to see no indication of a slowdown in its business.

SES, which in terms of revenue is the world’s largest commercial satellite operator, said it sees no sign of any reduction in prices it charges for satellite capacity and is continuing full-speed ahead with its capital investment program, in which nine satellites are to be launched in the next three years.

In addition to replacing existing spacecraft, the new satellites will result in a net 19 percent addition to SES’s total commercially available transponder fleet.

“Our engine for growth is still working at full speed,” SES Chief Executive Romain Bausch said in a conference call on the company’s first-quarter financial results. “We are seeing no direct negative impact from the recession.”

To finance its growth, SES secured two lines of credit the week of April 23. The first, for 200 million euros ($261 million), was with the European Investment Bank. The second, valued at 2 billion euros, was syndicated to a group of 23 banks in what SES Chief Financial Officer Mark Rigolle said highlighted the company’s reputation as a solid investment for bankers in an unusually troubled credit market.

Rigolle said SES originally had sought 1.5 billion euros from 10 banks, but the offer was oversubscribed and later extended to 13 new banks. The three-year loan means SES no longer has a heavy debt-refinancing deadline facing it in 2012. “This gives us added liquidity assurance, which in this climate is a good thing,” Rigolle said.

For the first time ever, all three of SES’s main satellite operating divisions – Astra, Americom and New Skies – reported EBITDA, or earnings before interest, taxes, depreciation and amortization, margins of 84 percent. Americom, which focuses on the United States and Latin America, posted the biggest EBITDA margin gains and Rigolle said that, absent a surprise, the 84 percent average should be sustained in the immediate future. “The high-70s EBITDA [margin] days for Americom are behind us,” Rigolle said.

Bausch nonetheless said that if the global recession persists well into 2010, some SES customers could cut back on their expansion plans and reduce or delay their transponder-lease requirements.

Bausch also said that during the telecommunications bust in 2001 following the Internet-related bubble, the satellite telecommunications sector did not feel the effects until about 18 months after the broader telecommunications industry. At the time, SES was forced to cancel several satellite orders.

But Bausch insisted that, except for several pockets where overcapacity is an issue – areas such as Eastern Europe, where SES does not venture except with solid, long-term anchor customers as partners – the global satellite telecommunications industry today remains robust.

SES’s 1,105 commercially available transponders were 79.6 percent occupied as of March 31 despite the addition of new satellites. The NSS-12 spacecraft, which entered operations in late 2008, is fully booked, Bausch said.

SES is retaining its forecast that it will average 5 percent revenue growth between 2008 and 2010. For the three months ending March 31, the company reported revenue of 423.4 million euros after subtracting for the effects of the U.S. dollar’s higher exchange rate, for a 3.1 percent increase over the same period a year earlier.