Eutelsat 3Q Revenues Reaches US$377.6-M, Up by 0.7%

Paris, France, May 14, 2019 – Eutelsat Communications (ISIN: FR0010221234 - Euronext Paris: ETL) today reported slight increase in revenues of US$377.61 million (€337 million), up by 0.7% year-on-year for the third quarter on resilience of broadcast and stable video revenues. Revenues for the five Operating Verticals (ie, excluding ‘Other Revenues’), however, were down by 4%.

Rodolphe Belmer, CEO said the third quarter of 2018-19 saw the return to growth in Broadcast on a quarter-on-quarter basis, an improvement in the US Government renewal rate and commercial wins in Maritime  Mobility.

"The Konnect Africa broadband service is showing positive indications of demand but its ramp-up has been significantly hindered by some short-term operational issues. Moreover, we are experiencing softer conditions in Fixed Data and Professional Video. In consequence, revenues for the Operating Verticals at the nine month stage stood at -3%, and we now expect the outturn for FY 2018-19 to be in a similar range, versus our previous objective of ‘broadly stable’," he said.

He added that the company is encouraged by the resilience of its core Broadcast business, and will continue to target a return to slight revenue growth in FY 2019-20 on the back of the materialization of delayed business, traction in broadband and the availability of incremental capacity with EUTELSAT 7C and EUTELSAT Quantum.

"Market conditions continue to support the pertinence of the focus on Discretionary Free Cash Flow generation implemented three years ago, and on which we continue to draw on all levers. In this context, our strengthened group is well placed to benefit from the next growth cycle in our industry driven notably by Fixed Broadband and Mobility. Finally, the outcome of discussions on tax territoriality treatment will lead to significant reduction in our annual tax burden,” Belmer added.

Quarter-on-quarter, total revenues were up by 4.3%. The revenues of the Operating Verticals were down 1%.

Core businesses

Video Applications (67% of revenues)

Third quarter Video Applications revenues were down by 2.5% to US$241.36 million (€215.4 million), on a year-on-year basis. This reflected mostly an accelerated, double-digit decline in Professional Video in a context of intensifying competitive pressure. Professional Video now accounts for less than 8% of Video revenues. Pure Broadcast revenues were stable.

On a quarter-on-quarter basis, total Video revenues were stable while Broadcast revenues recorded a slight rise.

On the commercial front, a multi-transponder contract was secured for a new DTH platform on EUTELSAT 65 West A. On the other hand, other projects in the pipeline were delayed for non-structural reasons and should materialize in the near future.

At 31 March 2019 the total number of channels broadcast by Eutelsat satellites stood at 7,021, up 2% year-on-year and by 3% stripping out the effect of the disposal of EUTELSAT 25B. HD penetration rose by 11% to 1,509 channels, implying a penetration of 21.5% of channels compared to 19.7% a year earlier.

Government Services (12% of revenues)

Third Quarter Government Services revenues stood at US$44.71 million (€39.9 million), down 1.0% year-on-year. This reflected on one hand the incremental business secured last year at the 174°East orbital position covering Asia-Pacific, and on the other, the low outturn of the Fall 2018 renewal campaign with the US Government (70%). On a quarter-on-quarter basis, revenues were stable (+0.2%).

The outturn of the Spring 2019 renewals with the US Government showed an improvement at 85% in value.

Fixed Data (9% of revenues)

Third Quarter Fixed Data revenues stood at US$34.06 million (€30.4 million), down 17.8% year-on-year. This reflected ongoing pricing pressure in a highly competitive environment as well as softer volumes in Latin America. On a quarter-on-quarter basis, revenues were down 7.3%.

Connectivity

Fixed Broadband (6% of revenues)

Third Quarter Fixed Broadband revenues stood at US$21.4 million (€19.1 million), down 9.7% year-on-year. Excluding the expiry of a contract with a Middle-East customer for a spotbeam on EUTELSAT 3B, re-contracted to Taqnia in the Mobile Connectivity vertical, the underlying performance was -7.7%. This reflected a further decline in European Broadband with scarcity of capacity in certain countries and the transition to a new distribution model (Preferred Partnership Programme) which is leading to a decline in activity with legacy distributors, not yet fully compensated by the new model.

Revenues for Konnect Africa are running behind expectations reflecting temporary operational issues (political situation in DRC, regulatory delays in Ivory Coast and more generally logistical issues). As a result, no material revenues are expected in the current financial year. This reflects mostly rollout issues and does not, however, alter our view of the strong potential of this market where we expect a ramp-up next fiscal year.

Fixed Broadband Revenues declined by 5.3% on a quarter-on-quarter basis.

Mobile Connectivity (6% of revenues)

Third Quarter revenues for Mobile Connectivity stood at US$22.19 million (€19.8 million), up 4.7% year-on-year. They reflected the entry into service of the UnicomAirNet contract on EUTELSAT 172B, the carry-forward impact of the contract with Taqnia at 3°East and 70°East and the ongoing ramp-up of capacity contracts on KA-SAT.

On the commercial front, a multi-year, multi-transponder agreement was signed with Speedcast for capacity dedicated to Maritime Connectivity on EUTELSAT 133 West A, representing another win in this vertical following the conclusion of a multi- satellite deal with Marlink.

Quarter-on-quarter revenues were up 1.3% with the benefit of UnicomAirNet partially offset by the end of a temporary wide- beam contract on EUTELSAT 172B.

Other Revenues

Other Revenues amounted to US$13.56 million (€12.1 million) in the third quarter versus US$0.67 million (€0.6 million) a year earlier and -US$3.92 million (-€3.5 million) in the previous quarter. They included a significant one-off engineering fee and a -US6.39 million (-€5.7 million) impact from hedging.

The number of operational 36 MHz-equivalent transponders stood at 1,418 at 31 March 2019, broadly stable versus end- December and slightly down year-on-year, mainly reflecting the disposal of EUTELSAT 25B in August 2018.

The number of utilized transponders stood at 960, down 10 units versus end-December. Year-on-year they were up by nine units on a reported basis and up by 17 excluding the disposal of EUTELSAT 25B. The evolution versus end-December principally reflects lower Fixed Data volumes in Latin America. On a year-on-year basis this was more than offset by new contracts in Video as well as the ramp-up at 174°East.

As a result the fill rate stood at 67.7% at end-March 2019 compared to 66.8% one year ago and 68.3% at end-December 2018.