[Satellite News 11-12-12] SES continues to perform strongly with its latest numbers showing increases in revenues and profits. In the first nine months of this year, the operator generated revenues of 1.36 billion euros ($1.73 billion), an increase of over six percent compared to the same stage last year. Its profits for the nine months to the end of September were 456.4 million euros ($580.06 million), an increase of just under 10 million euros ($12.71 million) compared to the same stage last year.
   Analysts’ who cover the stock said SES’ results were better than their consensus expectations. “SES’s third quarter results were materially better than expected, with recognition of a U.S. Ka-band capacity contract, and the U.S. government business being largely responsible for the revenue and EBITDA beat. Revenues came in at 468 million euros ($594.81 million) versus our 460 million euros estimate (consensus: 452 million euros), and EBITDA at 347 million euros (Berenberg: 341 million euros, consensus: 332 million euros). The EBITDA margin of 74.2 percent was broadly flat year on year, despite the higher services revenue component (lower margin business),” Sarah Simon, a satellite equity analyst at Berenberg said in a research note.
   Eric Beaudet, a satellite equity analyst at Natixis Securities said in a research note that SES’s results were “re-assuring” He said, “In the end, these results are reassuring as the sharp slowdown expected by the end of the analog swith-off in Germany is no worse than anticipated and does not weigh on margins. A stronger dollar should also lead to slight upward revisions to published numbers. On the other hand, FY guidance will hardly be met (2 percent organic growth targeted vs 1.6 percent after 9 months) and 3-year guidance is already factored in by consensus.” Simon believes the company’s latest guidance represents good news. She adds, “Long-time SES watchers will remember that its guidance has been wobbly in recent years, due to a combination of solar array issues that have affected revenues being generated on certain satellites, as well as launch delays. To have reconfirmation of both full and three-year guidance is therefore good news, particularly given that SES-5 was delayed by three months: management appears confident of absorbing the revenue shortfall in that respect, so as to meet full-year numbers.”
   With the U.S. presidential election recently taking place, Simon believes the Occasional Use (OU) market could be a good one for SES over the next few months. She adds, “OU was also highlighted as a source of potential growth – we note the company’s press release regarding the huge amount of capacity that it provided for the OU market in respect of the recent U.S. presidential elections. We estimate that this could provide c.$2 million in incremental revenues in the fourth quarter.”
   SES continues to place great faith in its strategy in deriving revenues from developing markets such as Africa and Latin America. The African opportunity is an interesting one for the company. “In Africa, more than on other continents, you have the opportunity for satellites to replace the existing terrestrial analog TV network, by a combination of digital terrestrial and digital satellite. In 2015, analog TV on the UHF frequencies should be switched off, in order to become available for mobile communications. In particular, many countries in Africa will not be able to invest in a fully fledged digital terrestrial network,” Romain Bausch, SES CEO says. “So, we are making very strong inroads with our ‘Caravan’ strategy, where we are going into many of the African markets, and basically position satellite as a complement to terrestrial for the roll-out of digital TV. You have seen a similar dynamic in Europe in countries like France and the United Kingdom, where people are watching a Freeview type service on satellite. We are making business propositions to the African governments, regulators and broadcasters in order to allow them to efficiently provide 100 percent coverage of their national territories with a digital alternative.”
   The VSAT market is also presenting an opportunity for the company. “The other growth drivers (in developing markets) are VSATs. There is need for broadband communication in these countries and satellite can address these needs. You also have all the applications where broadband is promoted by the government for education programs. In Latin America for example, you have these types of programs in Colombia and Mexico. They are using a lot of transponder capacity in order to have broadband connections to schools and allow pupils/students to have good broadband connections while they are at school,” comments Bausch. “National broadband programs are driving demand. Then you have verticals like oil and gas, where you have the need to connect offshore activities. You have other activities in remote regions of the world such as mining, where you don’t have good communications networks either. In general, the growth of the economies in the emerging markets is automatically leading to growth in demand for satellite capacity.”