Tuesday, March 6, 2018

Eutelsat seeks new opportunities - part 2

In the first half of this article, we looked at the recent financial performance of Eutelsat, the Paris-based satellite operator known for its pioneering video distribution services and global reach. Currently, the Eutelsat fleet of satellites is carrying 6,810 TV channels, of which 1,275 channels are HD – a penetration rate of only 19%, which seems low in this era when 4K television screens are now widely available in many markets at declining prices.

As the video market continues to shift toward over-the-top services, and as fibre reaches many of the locations which were previously the exclusive domain of satellites, Eutelsat will seek new opportunities, such as in-flight mobile connectivity -- its only segment that is currently growing. Eutelsat also has interesting ventures underway in Africa, and recently in the "Belt and Road" countries in partnership with China Unicom.

Upcoming satellite launches

Unlike some of its industry rivals that have drawn up plans for dozens, hundreds or even thousands of new satellites in the coming decade, Eutelsat seems to be taking a conservative CAPEX approach with regards to the orders book. While current shareholders may appreciate keeping a healthy dividend, the space business is inherently a costly one. Eventually, satellites get old and must be replaced. Newer technology means that the current assets in orbit can depreciate quite quickly.

As in the case of current satellites not optimized for 100% HD or even 4K video. There will also be the need to defend against the ultra-aggressive business plans of SpaceX and others, who could conceivably push an established company such as Eutelsat into irrelevancy quite quickly. Here is a list of upcoming Eutelsat satellite launches:

A Vision for Africa

In September 2016, Eutelsat suffered a major setback in its vision to deliver broadband connectivity to Africa in partnership with Facebook when SpaceX experienced a launch pad anomaly during a pre-launch test at Cape Canaveral, Florida, leading to the explosion of a Falcon 9 rocket and the destruction of its payload, Eutelsat's AMOS-6 satellite.

AMOS-6 was a Ka-band geostationary satellite configured with high gain spot beams for covering large parts of West, EAast and Southern Africa. The satellite was designed for community and Direct-to-User Internet access using affordable, off-the-shelf customer equipment.
The partnership with Facebook was announced in October 2015 with a mission to reach large parts of sub-Saharan Africa.

Eutelsat’s upcoming African Broadband Satellite looks to be a replacement for this lost bird. The new satellite t has ordered from Thales Alenia Space for possible launch in 2019. The all-electric satellite will be the first to use Thales Alenia Space's new Spacebus Neo platform. And it will offer 75 Gbps of capacity across a network of 65 spotbeams, which together provide quasi-complete coverage of Sub-Saharan Africa. The satellite will address direct-to-user consumer and enterprise broadband services using dishes from approximately 75 cm.  Villages could use the satellite connectivity for Wi-Fi hotspots and mobile phone backhauling.  No word on whether Facebook will play a role in the renewed project.

There are two other past regional expansions for Eutelsat that should be noted. In October 2017, Eutelsat acquired Noorsat, one of the leading satellite service providers in the Middle East, from Bahrain’s Orbit Holding Group. In 2013, Eutelsat acquired Satélites Mexicanos, for $831 million in cash plus assumption of $311 million in Satmex debt. Satmex operates three satellites that cover 90% of the population of the Americas.

Finally, Eutelsat and China Unicom signed a memorandum of understanding to address satellite communications market in the framework of China’s “Belt and Road” initiative. The agreement builds on in-flight connectivity deal formed between Eutelsat and UnicomAirNet (UAN), which was recently formed by China Unicom's broadband network unit and Hangmei, a Chinese Wi-Fi service and content provider for railways and buses, to provide IFC services to Chinese commercial airlines.

The Belt and Road Initiative is the development strategy proposed by the Chinese government that focuses on connectivity and cooperation between Eurasian countries. The idea is to build a 21st century Silk Road linking more than 68 countries, equivalent to 65% of the world's population and 40% of the global GDP as of 2017. The Belt and Road Initiative has the support of President Xi and the highest levels of his administration, leading some analysts to call it the largest organised development in history.

China's leading IT players, including China Telecom, China Unicom, and China Mobile, are being encouraged to pursue an overseas expansion strategy. As such, Eutelsat makes an interesting partner for China Unicom in that it already has the satellite coverage, and the local TV broadcast partners), in the regions that China Unicom wishes to expand. Likewise, if Eutelsat is looking for a partner with the financial resources, scale, and ambition to cover Asia, the Middle East and Africa, China Unicom presents many possibilities. Global politics, of course, would play a role, with government contracts and national security interests as top concerns if this partnership were to deepen.

See also