Berenberg: Eutelsat ‘preferred’ to SES as video business faces decline

Satellite operators Eutelsat remains in a stronger position than its competitor SES after posting solid fiscal first half numbers, according to an analysis by Berenberg.

According to the bank’s analysts, said the latest results and the raising of the bottom end of the company’s guidance suggested it was “still on track to return to growth” in the next financial year.

Berenberg said that while Eutelsat had delivered “better than expected momentum” in data and professional video, SES was suffering from a decline in mobility revenues, partly as a result of COVID-19, to which Eutelsat had less exposure.

Berenberg also made the case that Eutelsat was to be preferred as an investment because of its strong cash flows compared with SES, which had higher capex.

“Continued uncertainty surrounding the long-term future of video leads us to prefer cash flows now than later,” Berenberg said.

Regarding SES, the bank noted an outlook that included a 6-9% decline in the video business this year, following an 8% decline in 2020. It pointed to Nordic pay TV consolidation as one immediate factor, but pointed to improved and more affordable high-speed broadband coverage over the next six to seven years – the average duration of SES’s backlog – likely leading to a sustained decline in satellite video in western markets.

Eutelsat posted overall revenues of €628.5 million for the six months to December, down 1.3%, or 2.1% on a like-for-like basis. The company raised its fiscal full-year objective to between €1.19 billion and €1.122 billion as a result.

Core broadcast revenue was down only 1.8% on a like-for-like basis to €378.9 million, with the decline attributed to the renegotiation of the company’s contract with Greek pay TV operator Forthnet.

Total number of channels broadcast fell by 3.9% year-on-year but the number of HD channels rose by 10%. Eutelsat saw its video business in Africa expand thanks to an expanded contract with MultiChoice and an extended agreement with Zap.

Eutelsat said that progress in its fixed broadband strategy would meanwhile pave the way for a return to growth. Fixed broadband revenue grew by 2.3% on a like-for-like basis and 7.6% on a reported basis to €42.1 million.