Aiming to fight back against the headwinds of slowing industry-wide momentum and return to broad top-line stability in FY 2017-18, Eutelsat is to maximise cash flow of its core businesses, of which video will play a crucial part.
Only days ago, the satellite operator issued five-year senior unsecured bonds for a total of €500 million, taking advantage of the current competitive market environment to raise long-term financing with a five-year maturity at attractive conditions. Eutelsat reported that the issue had been ‘significantly’ over-subscribed, and that the move would reduce financial charges by circa €30 million before tax on an annualised basis from March 2017 onwards.
Yet according to recently appointed CEO Rodolphe Belmer, more action is required as it has become clear in recent months that the traditional businesses within the fixed satellite services sector are facing a context of slowing industry-wide momentum and that the company is facing a lower growth environment.
Belmer said: “We are implementing an adaptation of our strategic priorities and financial objectives. Our immediate priority will be to maximise the free-cash-flow generation of our core businesses. We are confident in our ability to generate a level of discretionary free cash flow in the next three years, which will enable us to serve a stable to progressive dividend and reduce leverage, in line with our commitment to our investment grade rating. We will continue to invest selectively to prepare for a return to growth by building on our core video business ... Our objective is to return to broad top line stability as early as FY 2017-18.”
Indeed, Eutelsat sees demand in its video segment rising over the next five years, albeit moderately. Eutelsat’s strategy in developed markets will be to optimise value, notably by increasing direct access to customers by integrating or reorganising indirect distribution, stimulating HDTV and Ultra HD take-up and implementing more segmented pricing strategies.
The company expects to see continued growth in emerging markets, in particular MENA and Sub-Saharan Africa, where Eutelsat claims a strong footprint, notably driven by increasing channel count. Key to this plan will be to take advantage of satellite neighbourhoods at 7/8° West and 36° East, and investing selectively, notably at 7° East. By contrast, it sees the trend in Europe to be broadly stable with HD and Ultra HD ramp-up broadly offsetting improving encoding and compression techniques.
