Eutelsat Sees Revenue Take Slight Dip in H1, Pushes Back 3 Satellite Launches

Artist rendition of the Eutelsat KONNECT VHTS satellite. Photo: Eutelsat

Eutelsat Communications saw revenues and profits fall slightly in the six months to the end of December 2020, and pushed back the launch of several satellites in its First Half (H1) financial results released Feb. 12.

Eutelsat said the pandemic has continued to affect operations for satellite manufacturers and launchers. QUANTUM is now expected to launch in the Second Quarter (Q2) of 2021, pushed back from Q1 2021. HOTBIRD 13G is now expected to launch in H1 of 2022, pushed back from H2 2021, and KONNECT VHTS is now expected to launch in H1 2022, pushed back from the very end of H2 2021.

For the six months to the end of December, Eutelsat achieved revenues of 628.5 million euros ($762.2 million), a 1.3% decrease compared to the same stage last year. The company reported profits of 137.4 million euros ($166.7 million), a 2.3% decrease compared to the same stage last year.

However, despite the fall in revenues and profits, there were some encouraging signs. Fixed Broadband revenues, for example, in the six-month period went over 42 million euros, a 7.6% increase compared to the same stage last year. However, and perhaps unsurprisingly, Mobile Connectivity revenues saw a fairly dramatic fall, only reaching 33.9 million euros ($41.1 million) in the six months to the end of December, a 17.9% fall compared to the same stage last year. Broadcast revenues, still the key driver for Eutelsat, remained relatively flat coming in at 378.9 million euros ($459.5 million), a 2.7% decrease compared to the same stage last year.

In H1, Broadcast made up 62% of Eutelsat’s revenues, followed by both Data and Professional Video and Government Services at 13% each, Fixed Broadband at 7%, and Mobile Connectivity at 5%.

Eutelsat also raised the low end of its full year revenue objective to between 1.19 billion euros and 1.22 billion euros ($1.44 billion – $1.48 billion), up from a range of 1.18 billion euros to 1.22 billion euros previously ($1.43 billion – $1.48 billion).

Commenting in the press release, CEO Rodolphe Belmer highlighted commercial milestones from the past six months, of the award of a further EGNOS payload to fly on EUTELSAT HOTBIRD 13G, a wholesale agreement with Telecom Italia for the Italian capacity on EUTELSAT KONNECT and KONNECT VHTS following a similar agreement with Orange in France, and several renewal and new deals in Sub-Saharan African broadcast.

“From an operational point of view, we have made significant headway on our Broadband strategy with the entry into service of EUTELSAT KONNECT and the reorganization of our retail arm, where the integration of Bigblu Broadband is progressing smoothly,” Belmer said. “In view of this solid start to the year, we are in a position to absorb the negative perimeter effect linked to Broadband transactions and to raise the low end of our full year 21 revenue objective.”

Despite the headwinds, the results have been met quite favorably. Giles Thorne, a satellite equity analyst at Jefferies said in a research report, “We would draw out three things from today’s results. Firstly, across the three main wholesale contracts for KONNECT/KONNECT VHTS capacity, Eutelsat has secured 450 million euros ($545.8 million) in contract value with Orange/TIM/Thales with an average contract life of c.12-years. Secondly, management reiterated the addressable market at c.4 million/5 million premises in Europe/Africa, while the production capacity of its satellites is far too low to address all this demand. And thirdly, the integration of BigBlu is on track and the retail proposition supported via survey feedback. A wrinkle in the message is the launch of VHTS has moved back to H1 ‘22.”

Thorne said he was impressed overall by the results. He added, “The second quarter came in well: Q2 ‘21 operating vertical revenue was up 1.7% ahead of company-compiled consensus, Q2 ‘21 total revenue was up 3.5% ahead and H1 ‘21 EBITDA was up 2.8% ahead. Within the mix, really only mobility disappointed, reflecting the known impact on variable revenue within the aviation segment (60% of total) and the news of renegotiated contracts with re-sellers impacting fixed revenue elements.”

Roshan Ranjit, a satellite equity analyst at Deutsche Bank, said in a research note, “Eutelsat reported Q2 headline group revenues +3% vs. company-compiled consensus and vs Deutsche Bank estimates. The core video broadcast business was in line vs consensus. The government business was again supported by the EGNOS payload this quarter (Year-over-Year impact will wash out in H2) as well as new business with Q2 revenues, up 5% vs. consensus. Data and professional video business was supported by more occasional use sports events and Q2 revenues were up 9% vs. consensus. H1 ‘21 EBITDA was 3% ahead of consensus and 1% ahead of Deutsche Bank estimates, given tight cost control.”