[Satellite OTDAY 05-08-13] In one of the highlights of its most recent financial results, Eutelsat announced strong revenue performance for the nine months to March 31, with revenues of €956.5 million ($1.25 billion) – an increase of 5 percent compared to the same period last year. Video revenues for these nine months reached €647.1 million ($846.75 million), an increase of more than 5 percent. Video accounts for around 70 percent of Eutelsat’s overall revenues.

 

However, Eutelsat has been hit by the U.S. market and the decline in defense budgets, which caused decrease of multi-usage revenues for a total of €108.1 million ($141.45 million). This represented a 3 percent decline compared to the same stage last year. Multi-usage revenues account for just more than 11 percent of Eutelsat’s overall revenues. In a recent research note, Paul Sidney, a satellite equity analyst at Credit Suisse said, “Eutelsat generates around 10 percent of Group revenues from government and militarywith the majority of this from the United States. With U.S. DoD budget cuts 6 percent in 2013, we reduce our estimates for Eutelsat multi-usage revenues by 4 percent for FYJune13 to reflect lower volume requirements and future pricing pressure in negotiations with the U.S. government and military.”

 

Sarah Simon, a media equity analyst at Berenberg also highlighted the U.S. government business as a near term concern. “Sequestration is leading to automatic budget cuts of some $47 billion across the U.S. defense industry and the commercial satellite industry may not be immune. This, coupled with a reduction in demand due to personnel and troop drawdowns in the Middle East and Africa, could result in material reductions in Eutelsat’s multi-usage revenues. However, it is not all bad news as the removal of troops is leading to an uptick in demand for bandwidth-intensive UAVs as the U.S. DoD seeks to replace the monitoring role of the ground troops. In addition, the U.S. government suspending capital projects could result in it pursuing more lease agreements with commercial operators, which could actually benefit the likes of Eutelsat and SES. Our estimates currently assume that Eutelsat is successful in returning the multi-usage business to growth, with normalized expansion in line with management’s guidance,” she said in a recent research note.

 

In other recent Eutelsat news, the company announced that Rawafed Libya for Telecommunications & Technology, a Libyan ISP, has sealed a multi-year agreement with the company for capacity on the Ka-Sat satellite to support IP trunking services to its new wireless broadband network in the country. Rawafed Libya has concluded a wholesale agreement with Eutelsat enabling it to use up to 1.6 Gbps of capacity on two Ka-Sat spot beams that provide premium reach of Tripoli, Benghazi and surrounding regions.