Eutelsat prospects increasingly bleak, says Berenberg

Satellite operator Eutelsat faces further decline of its broadcast business and an uncertain prospect for investors following its planned merger with low-Earth orbit outfit OneWeb, according to analysts at Berenberg.

Following Eutelsat’s first half results announcement on February 17, Berenberg said that the numbers offered “little reason for excitement”.

The analysts noted that the core broadcast business is expected to preform worse in the second half “as the impact of sanctions against certain Russian and Iranian channels becomes visible in financials”.

The extension of sanctions against Russian channels broadcast by Eutelsat as a result of their being visible in the occupied territories of eastern Ukraine led the satellite operator to issue a revenue warning in December.

Moreover, prospects for the broadcast business overall look increasingly bleak, according to the analysts.

“Broadcast still forms 58% of Eutelsat’s sales and expectations for this segment’s revenue have fallen by nearly 25% over the past three years, with further decline anticipated, whereas three years ago it had been expected to be stable,” they said.

Berenberg also reiterated its view that Eutelsat’s merger with OneWeb “changes Eutelsat’s investment case from a highly cash-generative, dividend-paying value stock to a non-cash-generative, non-dividend-paying growth company”, a move likely to “put off most traditional satellite and telecoms investors in the near term”, despite support from key French institutions.

Berenberg reduced its price target on Eutelsat’s stock from €11.60 to €7.10.

Eutelsat recorded a like-for-like decline of 6.7% in broadcast revenues for the first half, down to €338.5 million, with overall revenues falling by 6.1% on a comparable basis to €573.8 million.