In a context of slowing industry-wide momentum, Eutelsat Communications is announcing a review of its strategic priorities and financial objectives.
Eutelsat will adopt a two-step strategy, based around the following priorities: Immediately implement measures to maximize free-cash-flow generation of our core businesses (Video, Data and Government Services); And at the same time prepare for a return to growth by building on our core Video business and capturing the longer-term potential in Connectivity.
“It has become clear in recent months that the traditional businesses within the Fixed Satellite Services sector are facing a context of slowing industry-wide momentum. To face this lower growth environment, we are implementing an adaptation of our strategic priorities and financial objectives. Our immediate priority will be to maximize the free-cash-flow generation of our core businesses,” commented Rodolphe Belmer, CEO.
“We are confident in our ability to generate a level of discretionary free cash flow in the next three years, which will enable us to serve a stable to progressive dividend and reduce leverage, in line with our commitment to our investment grade rating. We will continue to invest selectively to prepare for a return to growth by building on our core Video business and capturing the longer term opportunities in Connectivity. Our objective is to return to broad top line stability as early as FY 2017-18.”
The operator expects demand in the Video segment to rise modestly over the next five years. It should see continued growth in emerging markets, in particular MENA and Sub-Saharan Africa where Eutelsat has a strong footprint, notably driven by increasing channel count. The trend in Europe is expected to be broadly stable with HD and Ultra HD ramp-up broadly offsetting improving encoding and compression techniques.
Against this backdrop, Eutelsat’s strategy in developed markets “will be to optimize value, notably by increasing direct access to customers by integrating or reorganizing indirect distribution, stimulating HD and Ultra HD take-up and implementing more segmented pricing strategies.
“At the same time Eutelsat will continue to capture growth in emerging markets, benefiting from recent investments at the 7/8°West and 36°East positions, and investing selectively notably at 7 degrees East.
“Video by satellite will continue to grow and our expectation is that in the longer term, video distribution will be globally mostly split between satellite and IPTV.
“Additional sources of demand will be created as broadcasters increase the level of outsourced services. In this context, deeper integration within the IP ecosystem and harnessing existing IP-based technologies will enable satellites to enhance the end-viewer experience, further increasing customer adhesion and generating opportunities to sell additional services for broadcasters, Pay-TV operators and advertisers.”