Eutelsat's Revenues Growth in 3Q Below Expectations

Paris, France, May 12, 2016-- Eutelsat Communications (ISIN: FR0010221234 - Euronext Paris: ETL) today reported revenues for the third quarter and the nine months ended 31 March 2016.  Revenue growth in the Third Quarter was below expectations, reflecting a worse than expected environment in several emerging markets, in particular in Latin America, where much of our new capacity is targeted and the spread of tough competitive conditions in Data Services to all markets. 

Revenue growth in the Third Quarter was below expectations, reflecting a worse than expected environment in several emerging markets, in particular in Latin America, where much of our new capacity is targeted and the spread of tough competitive conditions in Data Services to all markets. As a result, Eutelsat now expects Full Year Revenues 2015-16 to be broadly flat (versus bottom-end of the 2-3% range previously). These headwinds will continue to impact Full Year 2016-17 revenues. In consequence, revenues are now expected in the region of -3% to -1% (versus the previous +4-6% range). Eutelsat is adapting to slowing industry-wide momentum, undertaking a wide-ranging review of its organization and priorities with an emphasis on cash-flow generation and margin support. A detailed update will be provided in July.

Total revenues for the Third Quarter ending 31 March 2016 stood at US$ 383.0 million, up 1.1% at constant currency and by 4.2% in actual terms, the appreciation of the dollar relative to the euro adding some three points to top-line growth.

Video Applications amounted to US$ 239.1 million, up 4.9% at constant currency. This rise mainly reflected the entry into service of EUTELSAT 8 West B in October 2015 and EUTELSAT 36C mid-February 2016, as well as higher revenues at Fransat on the back of the transition to High Definition in France, which is now nearing completion. 

Data Services stood at US$ 54.4 million, down 12.6% year-on-year at constant currency and by circa 8% excluding the impact of reclassifications to Government Services. This reflected on one hand the ramp-up of capacity on EUTELSAT 115 West B (serving the Americas) which started operations in October 2015, and on the other, headwinds including the termination of the contract for Ka-band capacity on EUTELSAT 3B in December, and a decline in revenues at 53° East following the rationalization of capacity at this position in May 2015.

Value-Added Services amounted to US$ 25.3 million, up 7.7% year-on-year at constant currency. 185,000 terminals were activated on KA-SAT at 31 March 2016, compared with 190,000 at end December 2015 and 180,000 a year earlier, reflecting high loading of beams in markets such as France and the UK which were previously strong contributors to growth.The quarter-on-quarter decrease in subscribers reflected notably a rationalization of their customer base by certain distributors. However ARPU trends are well-oriented notably thanks to proactive yield management underpinning revenues.

Government Services stood at US$ 49.7 million. At constant currency this represented a decline of 7.4%, and circa 13% excluding the reclassifications from Data Services mentioned above. This reflected the early termination of a contract with a distributor in the first quarter as well as the ongoing impact of lower renewals with the US Department of Defense in the last 12 months, which were not offset by new business.The latest round of contract renewals with the US administration resulted in an estimated renewal rate around 65%, reflecting a tougher procurement process and strong competition. 

Total revenues for the nine-month period ending 31 March 2016 stood at US$ 1,157.4 million, up 1.3% at constant currency and 6.1% on a reported basis. The appreciation of the dollar relative to the euro added 4.8 points to top-line growth, particularly represented in Government Services and to a lesser extent in Data Services.

Rodolphe Belmer, Chief Executive Officer commented: “Our business is strong and highly resilient. We are adjusting our strategy in the face of slowing industry-wide growth and we are committed to maximizing cash and protecting our profitability during this cycle. Our industry continues to offer long-term growth levers and we are confident we can position ourselves to capture these opportunities and generate value for our stakeholders.”

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