Eutelsat Reviews Orders, Seeks Acquisitions

By | February 13, 2002 | Feature

Paris-based satellite operator Eutelsat says it is unhappy with current satellite prices, which it says are around 20 percent higher than two years ago. As a result, the operator may delay ordering at least one and possibly two satellites this year unless prices come down.

Eutelsat CEO Giuliano Berretta says that he wants to order Hot Bird 8 this year and had issued a request for proposal (RFP) last year “but we may have to reconsider. Prices are simply too high, and they rise too fast. Launchers are continually falling in real terms. Eighteen months ago, the cost of satellites and launchers were more or less in balance. Launch costs have fallen, but [the cost of] satellites have grown too much.”

He emphasises that “we are not going to buy anything that’s currently on the market. We will only buy competitively.” He also warns that U.S. satellite builders are currently not best placed to win European contracts. “They are at a disadvantage due to the crazy policy of giving control to the State Department for [export] permission. We have a serious problem, and I’d like to buy anywhere in the world.”

Berretta makes no secret of Eutelsat’s wish to expand outside its core business. The company has recently boosted its stake in Madrid-based Hispasat to 27.65 percent, and is still talking with Hispasat about their Amazonas joint venture. The venture is likely to be separately funded by the two players, probably on or near a 50/50 basis.

Next on Berretta’s agenda could well be Dutch-based New Skies Satellite, which has made no secret of its plans to seek a consolidation partner. However, a similar argument could be placed at the feet of Europe*Star, which has also publicly stated it is looking for an inward investor. A recent report on the satellite sector from investment banker Morgan Stanley says, “We believe [satellite] is likely to become a more attractive investment opportunity.” It goes on to say that Inmarsat and Eutelsat are likely will hold IPOs during the next year or so. So market awareness of the sector will increase and “we think that longer-term investors should start to do their homework on the FSS [fixed satellite service] industry, in preparation for a period of intense capital market activity.”

Eutelsat wants a global footprint. While having access to the Amazonas’ slot at 61 degrees West helps in that strategy, especially as far as Latin American connectivity is concerned, the company needs to move even further West to bring Pacific Ocean region coverage under its influence. With SES Global making no secret of its wishes to absorb the 50 percent it does not already own in Americom Asia Pacific (AAP) and its existing 34 percent stake in AsiaSat, the Pacific pickings for Eutelsat are slim.

Morgan Stanley notes that with many country-specific satellite players in the Far East, only AsiaSat, PanAmSat and APT offering a regional service. With AsiaSat under the influence of SES, PanAmSat under the influence of EchoStar (at the very least until the deal for Hughes’ closes) the most likely target for Berretta is New Skies. Picking up a stake in New Skies gives Berretta the oceanic coverage he wants plus valuable coverage of Africa, the Middle East and Asia. Eutelsat also has some spare satellites to find suitable homes for. The upcoming launch of Hot Bird 6 replaces two craft (Hot Bird 5 and HB3), and co-location with some of the New Skies fleet would make sense.

–Chris Forrester

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