Eutelsat Sees Opportunities in Video Market Despite Delays in Ka-band Rollout

[Satellite News 05-11-12] Increased competition in key markets, partial delays in the rollout of Ka-band professional services and a significant slowdown in multi-usage activity have forced FSS operator Eutelsat to downgrade its 2012 full-year revenue projections from 1.235 billion euros ($1.598 billion) to approximately 1.22 billion euros ($1.57 billion).

   The operator’s EBITDA, however, was projected to reach about 955 million euros ($1.236 billion), implying a robust EBITDA margin of 78 percent, according to its revised financial forecast and 2012 third quarter fiscal report issued May 10.
   Eutelsat CEO Michel de Rosen said that despite the setbacks, the company’s third quarter produced some positives for its long-term health. “Third quarter revenues were up 4.6 percent, with growth underpinned by a strong performance from our largest business, video applications, which rose 6.3 percent,” de Rosen noted in the report. “Eutelsat continues to benefit from a resilient business model, while at 5.36 billion euros ($6.937 billion), our order backlog assures our long-term visibility.”
Analysts had estimated Eutelsat’s full-year sales to total approximately 1.24 billion euros ($1.6 billion) and EBITDA of 966.5 million euros ($1.26 billion), according to Nomura Holdings Analyst Henrik Nyblom.
   Nomura downgraded Eutelsat’s stock from a buy rating to a neutral rating and reduced the target price from 36 euros to 32.5 euros, citing disappointing third-quarter revenue and the company’s lower adjusted full-year guidance.
   “Lower-than-expected near-term growth and lower visibility justifies a more cautious stance,” Nyblom said in a research note issued May 11. “Our cuts reflect a more prolonged period of competitive pressure in certain geographies as the industry continues to add capacity and a more cautious view on the growth potential in multi-usage leasing.”
   The main factors that proved more challenging for Eutelsat’s growth strategy were, “notably a more competitive environment in the Balkans and in Africa and partial delays in the rollout of Ka-band professional services,” according to de Rosen.
   But Eutelsat said it also expects its video applications to continue benefiting from positive long-term global trends, including continuous take-up of satellite TV channels and the increase in HD penetration.
   Eutelsat’s satellites were broadcasting 4,252 channels at the end of March, representing an 11 percent increase from the 3,835 channels it was broadcasting a year earlier. The number of Eutelsat’s HD channels reached 333 at the end of the 2012 third quarter, up 59 percent from 210 in the same period in 2011. Eutelsat’s third quarter HD penetration rate of 8 percent was also an improvement from its 6 percent penetration rate in 2011.
   “The quarter also reflected the limited availability of capacity allocated to data services at established orbital positions following the successful ramp up of capacity on Eutelsat 10A and Eutelsat 36B in the 2009 and 2010 period, which contributed to double digit growth of data services over several consecutive quarters,” de Rosen said. “This activity will benefit from the arrival of two satellites delivering replacement and expansion capacity [Eutelsat 21B and Eutelsat 70B] to be launched by the end of 2012.”
   Eutelsat’s third-quarter backlog represented a weighted average residual life on contracts at seven years. De Rosen said the operator’s backlog is equivalent to approximately 4.6 times its annual revenues reported for the full-year period between 2010-2011.

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