HomeNewsEutelsat and OneWeb can be global contender - Berneke

    Eutelsat and OneWeb can be global contender – Berneke


    The union of LEO and GEO has strong synergy

    Eutelsat beat the odds with double-digit growth in fixed broadband and mobile connection, CEO Eva Berneke has told investors. The CEOs of Eutelsat and OneWeb told the congregation at Capital Markets Day that their union would inspire ‘double digit revenue growth’ and that living in synergy for the medium to long-term will produce €2bn revenue and EBITDA of €1.4bn by 2027. However, analysts at the event have said it will change Eutelsat for the worse and that OneWeb will stop its stakeholders from seeing their dividends.  

    Eva Berneke, CEO of Eutelsat and Neil Masterson, CEO of OneWeb, have claimed that the proposed combination between Eutelsat and OneWeb is a ‘decisive leap forward for satellite connectivity’. Eutelsat’s initial investment in OneWeb was underpinned by a strong belief that the future growth in connectivity will be driven by both GEO and LEO capacity. “The merger will create a powerful global player,” they said in a joint statement, “with the financial strength, and technical expertise, to accelerate OneWeb’s commercial deployment and Eutelsat’s pivot to connectivity”.

    Analysts at Berenberg were sceptical about the impact of the merger, reported Digital TV Europe. “It completely changes the investment case and risk profile of Eutelsat,” said Berenberg. The French satellite operator will change from a highly cash-generative, dividend-paying value stock to a non-cash-generative, non-dividend-paying growth company, said the analyst.

    Berenberg said the scale of near-term earnings and cash-flow dilution, alongside the increase in the risk profile, will immediately dissuade most traditional satellite and telecoms investors. Eutelsat has backing from a number of French institutions, including Bpifrance, CMA CGM and Fonds Stratégique de Participations.

    The idea of ‘very strong growth in the satellite connectivity market’, the main argument given for the proposed merger, is neutralised by Eutelsat’s possibly “overly conservative” revenue projections, said Berenberg. The case for OneWeb to be a commercial success is “compelling” but analysts at the bank were unconvinced about the value of revenue synergies from the deal. Future capital expenditure would be needed, despite Eutelsat’s claim that further technology upgrades beyond a second-generation of the platform are not a worry.

    The update came as Eutelsat released its results yesterday for Q1 2022-2023. Total revenues were €290.5 million, up 2% on last year, but down 4.3% on a like for like basis. Most of this total came from Broadcast Services rather than connectivity, with the former accounting for €170.1m (58.5%). This was down 4.2% year on year, and down 7.4% like for like.

    Eutelsat CEO Eva Berneke pointed out the dynamics at play. “Despite limited available capacity at this stage, we [recorded] strong double-digit growth in fixed broadband and mobile connectivity,” said Berneke, “there is the massive long-term potential for both applications, while our mature broadcast activities declined in line with expectation.”