EUTELSAT COMMUNICATIONS Investor Presentation … · Investor Presentation March 2018. Agenda 2 3 5...

EUTELSAT COMMUNICATIONSInvestor PresentationMarch 2018

Agenda

2

3

5

1 FSS Industry

Eutelsat in a snapshot

H1 2017-18 performance

Appendix

4 Outlook

2

The satellite value chain

Satellitemanufacturers

Satellitelaunchers

Satelliteoperators

TVbroadcasters,

Telecoms,Governments

Consumersand businesses

3

Business characteristics

► High barriers to entry

• Finite resource of orbital positions and frequencies, heavily regulated at international level with key commercial orbital positions have already been developed

• High upfront CAPEX before operations

• High technology & technical expertise through satellite lifecycle

► Profitable business model

• Significant backlog with long term contracts

• Economies of scale

• High operating margins

• Predictable operating cash flow

4

Trends in our core businesses

► Sustained growth in emerging markets• Robust channel growth• Increasing HD penetration• MENA and SSA leading

growth• Prices well-oriented

► Broad stability in Europe• Broadly stable channel

count• HD and UHD ramp-up • Improving encoding

and compression

VIDEO: MODEST DEMAND GROWTH FIXED DATA: STRUCTURALLY

CHALLENGED

► Global demand driven by increasing connectivity needs

► Large HTS systems adding to existing overcapacity

► Ongoing severe pricing pressure

► More stickiness in certain segments

► US DoD demand stabilizing, albeit at lower prices

► Slower migration to HTS than Data Services

► Opportunities in Europe, Asia and MENA and in non-military

GOVERNMENT SERVICES: POCKETS OF OPPORTUNITY

Low growth In declineBroad stability

5

Longer-term potential in Video and Connectivity

6

► Satellite and IPTV set to dominate global video distribution in the longer term

► Opportunity to enhance satellite value proposition by offering IP-like viewerexperience

► Outsourcing of services by broadcasters will create additionalsources of demand

VIDEO FIXED AND MOBILE CONNECTIVITY

► Nascent markets with huge potential

► Massive growth in bandwidth usage per consumer

► Medium-term potential in Aero

► Long-term potential in land Mobility

► VHTS and VVHTS satellites are pre-requisites in terms of volume and pricing for mass-market adoption

Video drivers: Channel growth and image quality

Source: Euroconsult 2017

CHANNEL GROWTH INCREASED IMAGE QUALITY

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

~20,500

CAGR: +1.5%

Predominantly driven by emerging Video markets

TV Channels in EMEA and LATAM

~24,000

38%

29%

19%

24%

16%

4%

11%

19%

81%

74%

50%

50%

38%

19%

36%

43%

NorthAmerica

WesternEurope

CentralEurope

LATAM

MENA

SSA

Russia andCentral Asia

ETL footprint

2026 2016

HD penetration rate by major region

Everywhere, including mature Video markets

7

Video drivers: Capacity requirements versus compres sion technology

8

EVOLUTION OF IMAGE QUALITY (NUMBER OF CHANNELS)

NUMBER OF CHANNELS PER 36 MHZ TRANSPONDER

Source: Euroconsult 2017, EMEA and LATAM

Format Modulation MPEG-2 MPEG-4 HEVC

SDDVB-S ~12 - -

DVB-S2 - ~26 -

HDDVB-S - - -

DVB-S2 - ~9 ~15

UHD DVB-S2 - - ~30

5 000

10 000

15 000

20 000

25 000

2016 2018 2020 2022 2024 2026

Standard Definition High Definition Ultra High Definition and 3D

Video: Satellite’s competitive advantage over OTT / IP

Source: Eutelsat analysis, European Commission - Broadband Coverage in Europe 2016, CISCO VNI 2017

► Satellite a fraction of TV platforms operating costs

► CDN costs rise in line with audience growth

► For a large Pay-TV platform, OTT distribution would be much more expensive than satellite

COST-EFFICIENCY UNIVERSAL REACH

► High cost of fibre roll-out

► Terrestrial networks cannot reach entire population

• Lower image quality

• Or even no service

SERVICE QUALITY

BROADBAND COVERAGE

► Higher quality of image leadingto increased bandwidth usage

► Congestion of terrestrial networks

• Video will represent >80% of IP traffic in 2021

72%64%

75%

19% 17%24%

Italy Poland EU Average

> 30 Mbps of which FTTP

3

7

20

1 SD channel in MPEG 2

1 HD channel in MPEG 4

1 UHD channel in HEVC

BANDWIDTH REQUIREMENT (Mbps)

Cost

Satellite

OTT

# viewers

Satellite more cost efficient >50k viewers in Western Europe

Satellite provides full coverage of a market

Satellite and hybrid solutions give unimpaired viewing experience

9

Video: Satellite resilience in Western Europe

► Slight increase in total number of TV homes 175 million

► Satellite reception broadly stable just below 50 million homes

► Satellite market share of 28%

► IP gaining share against terrestrial, not satellite

MILLION TV HOMES BY DISTRIBUTION MODE IN WESTERN EUROPE

51 50 47

44 43 43

28 31 36

49 49 48

172 173 175

2016 2017 2022

Source: Digital TV Research, 2017

Terrestrial Cable SatelliteIP

IP GAINING SHARE VS. TERRESTRIAL, NOT SATELLITE

10

Video: Satellite gaining market share worldwide

► Total number of TV homes to increase by 95 million to 1.7 bn by 2022

► Satellite reception to grow by 50 million homes to 475 million by 2022

► Satellite market share to rise from26% to 28%

MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL

Source: Digital TV Research, 2017

Terrestrial Cable SatelliteIP

456 448 439

566 555 560

171 195 247

411 426475

1604 1624 1720

2016 2017 2022

11

Agenda

2

3

5

1 FSS Industry



Appendix

4 Outlook

2

12

64%12%

12%

7%5%

Video

Fixed Data

Government Services

Fixed Broadband

Mobile Connectivity


Data as of 31 Dec. 2017 except for revenues which are at 30 June 2017.

► Revenues of € 1.48bn

► Fleet of 38 satellites; global coverage

► Operating >1,400 transponders

► Broadcasting >6,800 channels

► Backlog of €4.7bn, representing3.2 years of revenues

KEY DATA REVENUE BREAKDOWN BY APPLICATION

31%

8%

23%

5%

10%

11%

7%5% Western Europe

Central Europe

MENA

RCA

SSA

Americas

APAC

Unallocated and others

By geography

By application

13

Breakdown of revenues by Application

Video 66%

Fixed Data 11%

GovernmentServices 12%

FixedBroadband 6%

Mobile Connectivity 5%

CO

RE

BU

SIN

ES

SE

SC

ON

NE

CT

IVIT

Y

Direct-to-Home (DTH)Cable headendsProfessional Video

Mobile backhaulCorporate networks

MilitarySecurity

Internet access for households and corporates

In-flight ConnectivityMaritime Connectivity

As of 31 December 2017. % of revenues excluding Other revenues 14

Eutelsat’s global network

15

March 2018

Financial structure

► Net Debt/EBITDA ratio reduced to 3.3x

• versus 3.4x at 31 Dec. 2016

► Average cost of debt after hedging reduced to 2.9%

• versus 3.1% in H1 2016-17

NET DEBT / EBITDA RATIO 1

3.4x 3.3x

31 Dec. 2016 31 Dec. 2017

1Based on net debt at the end of the period and last twelve months’ EBTIDA

16

Bond and Bank Debt maturity schedule

1With 2 possible extension facility of one year subject to lenders agreement

2019 2020 2021 2022

ONGOING DEBT OPTIMISATION BOND AND BANK DEBT MATURITY SCHEDULE

► One year extension of €600m term loanand €200m revolving credit facility

► Refinancing of €450m revolving facility

► 2019 and 2020 bonds mid-swaps pre-hedged

► Average debt maturity of 2.5 years

Note: Maturities are provided on a calendar year

Term loan / undrawn line of creditsof Eutelsat Communications

Undrawn lines of credit(Eutelsat S.A)

Outstanding Bonds

€800m

Pre-hedge: €800m at c. 1.45%ex. spread

Pre-hedge: €500m at c. 1.12% ex. spread

€930m

€500m

€300m

€450m1

€600m

€200m

2.625%

3.125%

1.125%

5.0 %

17

Shareholder structure

EUTELSAT SHAREHOLDING STRUCTURE AS OF 30 JUNE 2017

Bpifrance26.4%

CIC1

6.7%

FSP2

7.5%

Free float and

others59.4%

1 China Investment Corporation

2 Fonds Stratégique de Participations18

Agenda

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3

5

1 FSS Industry



Appendix

4 Outlook

2

3

19

Key data

REVENUES

1 At constant currency and perimeter. Revenues down 7.7% on a reported basis.2 At constant currency. EBITDA margin up 0.3 pts on a reported basis. Discretionary Free cash-flow up 4% on a reported basis. 3 3-Year CAGR between FY 16 and FY 19. Discretionary Free Cash-flow defined as Net cash-flow from operating activities less Cash Capexless Interest and Other fees paid net of interest received.

Financial outlook

First Half 2017-18

Underlyingperformance

Revenues-2 to -1%

(at constant currency and perimeter)

€697m -5.7%1

(vs. H1 16-17 )

EBITDA margin Above 76%(at constant currency)

78.4%2 +0.5 pts 2

(vs. H1 16-17)

DiscretionaryFree Cash-flow

Mid-single digit3-year CAGR 3

(at constant currency)€339m +8%2

(vs. H1 16-17)

Net Debt / EBITDA Below 3.0x 3.3x -0.1x(vs. Dec. 16)

20

755697

(13) (3)

(29)(13)

ReportedH1 2016-17

Currency Perimeter Change inOther

Revenues

Operationaltrend

ReportedH1 2017-18

H1 revenues analysis

H1 Y-O-Y REVENUE BRIDGE (€M)

► H1 revenues of €697m• -7.7% reported• -5.7% at constant perimeter and

currency

► Underlying businesses down 1.8% excluding ‘Other’ revenues

-1.8%

1 Net of Hedging revenues

1

21

H1 operating Highlights

Solid commercial performance to support revenues in the second half

Acquisition and smooth integration of Noorsat to opt imise Video distribution in the MENA region

Entry into service and ramp-up of EUTELSAT 172B wit h incremental capacity contracted

LEAP cost-savings program ahead of plan

MoU with China Unicom to address satellite communic ations market in the framework of the “Belt and Road” initia tive

Efficient capex containment underpinning 8% 1 rise in DFCF

1 At constant currency. 22

Solid commercial performance

► HOTBIRD• Positive outcome

of contract renewal with Cyfrowy Polsat

• New contract with Mediaset for HD channels

► Contract at 5° West with Altice-SFR

► Multi-year agreements for new DTH platforms in emerging broadcast markets • Fiji on ETL 172B • Caribbean region on ETL 117 WB

IN VIDEO IN OTHER VERTICALS

► Favourable outcome of US Government Autumn renewals

► Incremental business in Government Services at 174° East

► Multi-transponder agreement with Colombian Ministry of Defence for capacity on ETL 115WB

► Incremental capacity for in-flight Mobility at 172 ° East

23

H1 2017-18 Revenues by application

Video

REVENUECONTRIBUTION1

REVENUES2

(€m)LIKE-FOR-LIKE 3

CHANGE

66% 449 -1.2%

1 The share of each application as a percentage of total revenues is calculated excluding “Other revenues”.2 Total revenues of €697m also include Other revenues of €12m. 3At constant currency and perimeter.

Fixed Data 11% 73 -10.6%

GovernmentServices 12% 81 -0.1%

FixedBroadband 6% 44 -8.1%

Mobile Connectivity 5% 37 +20.6%

CO

RE

BU

SIN

ES

SE

SC

ON

NE

CT

IVIT

Y

24

Video

1.

► H1 revenues of €449m, down 1.2% like-for-like

► Broadcast revenues up 0.3% excluding end of TV d’Orangeat HOTBIRD at end-Dec 2016

► Mid-single digit decline in Professional Video

► 6,810 channels at end-Dec 2017• +7.4% y-o-y• HD channels up 28%• 18.7% HD penetration (vs 15.7%

a year earlier)

REPORTED REVENUES1 (€M)

227 228 223

229 224 226

455 452 449

H1 2016-17 H2 2016-17 H1 2017-18

66%

1 Including the contribution of Noorsat

1

Q3

Q4

Q1

Q2

Q1

Q2

25

Fixed Data


► Ongoing pricing pressure in all geographies

► Not offset by additional volumes

REPORTED REVENUES (€M)

11%

43 42 37

41 4136

85 8373

H1 2016-17 H2 2016-17 H1 2017-18

Q3

Q4

Q1

Q2

Q1

Q2

26

Government Services

► H1 17 revenues of €81 million, stable like-for-like

► Solid levels of renewals with the US DoD in the last 12 months

► Incremental business secured at 174° E covering APAC• Multi-transponder contracts

► Multi-transponder agreement with Colombian Ministry of Defence


12%

42 45 41

44 4540

86 9081

H1 2016-17 H2 2016-17 H1 2017-18

Q3

Q4

Q1

Q2

Q1

Q2

27

Fixed Broadband


► Down 5% excluding positive one-off in Q1 last year

► Underlying decline in Europe

► Revenue trend set to improve in H2 with Retail JV up and running• Pricing, products and marketing strategy

defined• Offers launched in Norway, Poland (Dec.),

Sweden and Finland (Jan.); other markets to follow

► Initiatives in wholesale• Plan to address low-fill beams• Ongoing yield management in high-fill areas


6%

25 24 22

24 2322

49 4744

H1 2016-17 H2 2016-17 H1 2017-18

Q3

Q4

Q1

Q2

Q1

Q2

28

Mobile Connectivity

► H1 revenues of €37m, up 20.6% like-for-like

► Agreement with Taqnia on the HTS payload of EUTELSAT 3B

► Growing wide-beam capacity sales at several orbital positions:• 172° East• 115° West• 117° West

► EUTELSAT 172B bringing additional dedicated capacity in FY 2017-18• HTS Payload fully contracted • Incremental wide-beam capacity contracted

for in-flight Mobility.

REVENUES1 (€M)

1 Proforma revenues reflecting new applications as well as thedisposal of Wins for H1 2016-17

5%

215 17 19

1819 19

3336 37

H1 2016-17 H2 2016-17 H1 2017-18

Q3

Q4

Q1

Q2

Q1

Q2

29

Backlog and Fill Rate

BACKLOG (€BN) OPERATIONAL AND LEASED TRANSPONDERS

4.5 4.3

4.0

0.8 0.80.7

5.3 5.24.7

31 Dec.2016

30 June 2017 31 Dec. 2017

Video Others

► Backlog evolution reflecting mainly the impact of the integration of Noorsat

► 3.2 years of revenues

► Video accounting for 85%

1,326 1,372 1,416

940 931 949

31 Dec. 16 30 Jun. 2017 31 Dec. 17

Operational transponders

Based on 36 MHz-equivalent transponders (TPE), excluding HTS capacity

70.9% 67.9% 67.0%Fillrate

► OSD of ETL117 WB in Jan 17 and ETL 172B end-Nov 17

► 18 incremental TPE leased since June 17

(0.4)

Noorsat

30

Agenda

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3

5

1 FSS Industry



Appendix

4 Outlook

2

3

4

31

Reminder: Our strategic roadmap

GROW CASH-FLOW

STEP 1 STEP 2

GROW TOPLINE

2017-19

2019-2025+

Maximise Free Cash-Flow generation

Build on our core video business

to accelerate growth

Capture longerterm potentialin Connectivity

2016-2019

32

Maximize free cash-flow: Financial measures

1 Savings vs. FY 2015-16 basis

► Implement ‘design to cost’ approach

► Ground capex under strict control

CAPEX REDUCTION

► €500m bond issue at 1.125% coupon• Refinancing of €850m Mar. 2017 Bond (4.125% coupon)

► Swap-lock ahead of 2019 €800m bond• Locked at c. 145 bps, (-90 bps)

► Swap-lock ahead of 2020 €930m bond • €500m locked at c. 112 bps

► Streamlining the asset portfolio: agreement reached with Abertis for Hispasat stake (€302m)

► Improving working capital through DSO optimization

► Launch of « LEAP », a wide-ranging cost-savings plan with a focus on external costs

OTHER MEASURES

“LEAP” COST-SAVINGS PLAN

Average annual cash Capex reduced by >€80m 1

Annual savings of c.€30m from 2017 onwards, c.€50m

from 2019 1

Annualised savings of €30m by FY 2019 of which €15m in FY 2018 1

OPTIMIZATION OF COST OF DEBT

33

Build on our core Video business to accelerate grow th; capture longer term potential in Connectivity

► Optimize existing assets within a limited current addressable market

► Progress on prerequisites for scalability

► Decide on scale and location of investments

► Use existing assetsto anchor footholdin the market

► Selectively investin capacity to improve coverage

► Pave the wayfor Mass market

► Growth potential of Video

► Opportunity for further value creation

► Harnessing technology

VIDEOFIXEDBROADBAND

MOBILECONNECTIVITY

MEDIUM TERM(FROM FY 2019)

LONG TERM(FROM FY 2021)

Build on our core business to accelerate growth

Preparefor scalability

From nicheto mass market

34

Video: Build on our core business to accelerate gro wth

35

► Video via satellite will continue to grow

► Distribution will be split between satellite and IPTV longer term

► Outsourcing of services by broadcasterswill create additionalsources of demand

GROWTH POTENTIAL OF VIDEOOPPORTUNITY FOR FURTHERVALUE CREATION

► Greater integrationwithin the IP ecosystem

► Enhance viewerexperience

► Add new servicesfor broadcasters, advertisersand consumers

► Develop connectedterminals

► Improve efficiency• Compression• Encription• Security

► Increase revenue• Metadata management• Targeted advertising• Payment

► Enhance loyalty• Multiscreen• Smart EPG• TV everywhere

HARNESSING EXISTING TECHNOLOGY

Enhance end-viewer experience to reinforce customer loyaltyand generate additional revenue opportunities

Connectivity: Agreement with ViaSat…

► Combining Eutelsat’s European broadband business with ViaSat’sexpertise

► Two entities:

• Infrastructure (51% Eutelsat)• Retail (51% ViaSat)

► ViaSat paid €132.5m for 49% of European Broadband business

CLOSING OF JV AGREEMENT WHAT’S NEW?

► Initial JV perimeter extended to include both Fixed Broadband AND in-flight Mobility

► Initial technical assessment of Viasat3 VHTS technology successfullycompleted

► ViaSat-3 EMEA satellite expected to be added to the joint venture

► Platform to drive growth acceleration in Connectivity vertical from early 2020s

36

…paving the way for the longer-term opportunity

► Core market for Fixed Broadband via satellite estimated atc.5m households in Europe in 2030 1

► Global revenues for in-flight Connectivity capacity expec ted toexceed €1bn in 2025

Significant long-term potential

VHTS game-changing

technology

Springboard for growth rebound

from 2020

Managed withincurrent capex and

profitabilityframework

► Provision of fibre-like service

► Production costs enabling transition from niche to mass market

► Early mover advantage

► Strong technology partner

► Combining ViaSat’s distribution know how and Eutelsat ’sestablished positions and ‘go-to-market’ experience

► Shared Investment with ViaSat

► KA-SAT funds earmarked for VHTS investment

► Eutelsat retains an infrastructure business model with noimpact on margins

1 Households with Fixed Broadband connection below 10 Mbps and no indoor LTE coverage 37

Y-o-Y revenue trend to improve in the Second Half

► 2017-18 revenue path back-end loaded

► Comparison base to ease in H2• Lower ‘Other’ revenues• End of TV d’Orange on 31 Dec. • Easier comps for Fixed Data

► H2 benefiting from:• Entry into service of ETL 172B• New business secured at the end of

calendar year 2017

HALF-YEAR PROFORMA REVENUES IN FY 2016-17 AT H1 2017-18 EUR/USD RATE (1.17)

693 686

4113

734

699

H1 H2

Other revenues

Revenues excluding Wins/DHI and DSAT Cinéma at 1.17 EUR/USD rate

38

Financial outlook

391 Based on Proforma revenues of €1472m for FY 2016-17 excluding the contributions of Wins/DHI and DSAT; 2 Inc. cash outflows related to ECA loan repayments and capital lease payments; 3 Net cash-flow from operating activities less Cash Capex less Interestand Other fees paid net of interest received. Three year CAGR calculated on the period FY 2016-17 to FY 2019-20 .

REVENUES(At constant currency, and perimeter)

EBITDA MARGIN(At constant currency)

CAPEX

LEVERAGE

► -1% to -2% in FY 2017-18 1

► Return to slight growth from FY 2018-19

► Above 76% in FY 2017-18 ► Above 77% from FY 2018-19

► FY 2017-18 to FY 2019-20: average of €420m 2 per yearFY 2017-18 expected below €420m average

► Investment grade rating► Net debt / EBITDA below 3.0x

DISTRIBUTION ► Stable to progressing dividend

DISCRETIONARY FREE CASH FLOW 3

(At constant currency)

► FY 2016-17 to FY 2019-20: mid-single digit CAGR

Future launches

40

NameEUTELSAT

7CEUTELSAT5 WEST B

AFRICAN BROADBANDSATELLITE

OrbitalPosition

7° East 5° West TBD TBD

Launch date 1 H2 2018 H2 2018 2019 2019

Manufacturer

Launcher

CoverageMENASSA

EuropeNorth Africa Flexible SSA

Applications Video Video Government Services Broadband

Total Capacity (TPE/Spotbeams)

49 Ku 35 Ku N/A 65 Ka / 75 Gbps

o/w ExpansionCapacity 2

19 Ku - N/A 65 Ka / 75 Gbps

1 Calendar year2 Excludes unannounced redeploymentsElectrical propulsion HTS Payload

Agenda

2

3

5

1 FSS Industry


Q1 2017-18 performance

Appendix

4 Outlook

2

3

541

Appendix

5

H1 2017-18 financials5.1

Miscellaneous5.2

42

Profitability

► Rise in EBITDA margin to 78.4% at constant currency despite lower ‘Other revenues’• Favourable phasing of certain

operating costs

► Positive impact of “LEAP” cost saving plan• Ahead of plan at the Half Year

EBITDA (€M)

77.4 77.4 77.5

Margin at constant

currency (%)

588 545

H1 2016-17 H1 2017-18

77.9 78.41

1 Reported EBITDA marging stood at 78.2%

43

Net income

44

1Rounded to closest million2EBITDA defined as operating income before depreciation, amortisation, impairments and other operating income/(expenses)

H1 2016-17

H1 2017-18 Change

Revenues

EBITDA2

Operating income

Financial result

Income tax

Group share of net income

Extracts from the consolidated income statement in €m 1

755 697 -7.7%

588 545 -7.4%

337 280 -16.9%

(60) (56) -6.4%

(78) (61) -22.5%

192 157 -18.6%

► Lower D&A reflecting end of life / full depreciatio n of several satellites

► Capital gain on Wins/DHI last year ; negative account ingone-off this year related to Noorsat acquisition

► Lower cost of debt following reimbursement of Mar’ 17 bond

► Negative variation in Forex gains and losses

► Non-cash positive one-off related to future reducti on in French tax rate

► Net margin of 22.5%

Discretionary free cash flow up 8% At constant currency

1

(1) Cash Capex includes capital expenditure and payments under existing export credit facilitiesand long-term lease agreements on third party capacity.

(1)

412339

(53)(21)

(13)

Net cash Flow from operations

Cash Capex Interest and Other fees paid net of

interests received

Discretionary Free Cash-flow

In €m

(1)

482 (130) (27) 325H1 2016-17

-70 +77 +6 +14Change

+8%at constant

currencyCurrency

impact

45

Net debt stable after dividend payment and Noorsat acqui sition

3,641 3,630

(339) 295

89(32) (24)

-€10m

Net Debt at end- June 17

Net Debt at end-Dec. 17

DiscretionaryFree Cash Flow

Dividendspaid

Change in fin. leases /

ECA and Others

In €m

Equity investments

FX portion of CC Swap

46

Appendix

5

H1 2017-18 financials5.1

Miscellaneous5.2

47

502 548

Dec. 16 Dec. 17

247304

Dec. 16 Dec. 17

HOTBIRD: HD ramp-up continues to outpace MPEG 4 transition ra te

1,0121,002

Dec. 16 Dec. 17

Resilientchannel count

-43

Accelerationin HD ramp-up

+23%

MPEG-4 still risingbut at a lesserpace than HD

+9%

-1%

Figures at end Dec. 16 exclude Orange TV 48

Evolution of used capacity at HOTBIRD

► Positives

• HD penetration to reach 50%

(vs. c. 25% today)

• >20 UHD channels (vs. <5)

► Negatives

• Reduction in simulcast

(from 10% to 5% of total channels)

• Efficiency gains

(coding, modulation, compression)

KEY TRENDS BY FY 2021 EVOLUTION OF CAPACITY USED

100 109(20)

(17)

+37

+9

FY 17 SD channelreduction

Efficiencygains

HD channelincrease

UHDchannelincrease

FY 21

► New pricing model based on ‘Mbps’

Increase in Mbps used => revenues at least stable

Sensitivity: a variation of 10 channels wouldhave a 1 point impact on capacity used

In Mbps (base 100 in FY 2017)

49

Acquisition of Noorsat: Streamlining Video distributi on

1 annualized basis net of capacity purchased by Noorsat from Eutelsat

► Increase our control over the commercial development of MENA Hotspots

► Increase our direct access to the end clients: • Boost HD adoption • Upsell incremental Video Services

► Leverage on salesforces for cross-selling

► Internalize the distribution margin

Noorsat in a snapshot

INCREASE DIRECT CUSTOMER ACCESS BY INTEGRATING DISTRIBUTION

► One of the largest distributors of video in MENA

► c. 300 channels

► Blue chip customers

Financial impacts

► Acquisition price of c. 75 M$► > $15m on revenues 1

► Slightly dilutive margin impact absorbed within objectives

► -€0.4bn on backlog

50

Video Case study: Development of hybrid offer in South Korea

Source: Eutelsat analysis, company reports

KT MEDIA SUBSCRIBERS (M)

► South Korea is one of the countrieswith the highest fiber penetration

► KT Telecom hybrid offer launched in August 2009 combining IPTV with DTH

• Part of a triple play offer including broadband and Voice over IP

► Differentiated services offering

• Wide range of linear channels including HD channels (from satellite TV)

• Significant VOD contents (from IP offer )

► After adopting the hybrid platform KT was perceived to be superior to cable TV or competitor IPTV

• Became a leading IPTV player

2.15

0.84

1.55

9.71

2.43

1.94

5.35

2011

4.55

2017

Olleh TV(IPTV)

Skylife TV(satellite)

Olleh TV Skylife(hybrid) Satellite

Satellite prospering in the land of fiber

VIDEO

51

► Eutelsat’s number one Video market

► Unrivalled distribution cost

• Eg: Sky It is paying c.€90m /year to distribute260 channels to 4.8 M households

• This represents c.7 cents per channel per household per year

► Low terrestrial infrastructure penetration

► Sky Italia available via Telecom Italiaterrestrial since 2015

► Sky Satellite subscribers have risensince then

SKY ITALIA SATELLITE SUBSCRIBER DEVELOPMENT

Source: OECD, Sky reports

Sky Italia retail customers, in ‘000 subs

Video via satellite: Italian market focus

4,833 4,760 4,734 4,700 4,809 4,768

Dec12 Dec13 Dec14 Dec15 Dec 16 Dec 17

Launch of OTT

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Fixed Broadband: Preparing for mass market adoption

BRIDGE DIGITAL DIVIDE

IN-MARKET PROPOSITION INDUSTRIAL TRANSLATION TIMING

Use the time to VHTS to prepare for mass market: op timize existing or committed assets(KA-SAT, Russian and African Broaband) and validate go-to-market models

► Deliver fiber-like capacity (30 Mbps)

► Reach fiber-like pricing (€40 / month)

► Lower barrers to adoption

► Assess adressable market

► Develop appropriatedistribution

► VHTS satellites€1m / Gbps

► Terminals < $200

► Refine assessmentof fiber deployment

► Test and validatebusiness models

► 2020-21

► C.2019

► 2018 onwards

► 2016-18

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Mobile Connectivity: M arket foothold with existing assets

BRING FIBER-LIKE CONNECTIVITY IN MOBILITY

IN-MARKET PROPOSITION INDUSTRIAL TRANSLATION TIMING

Pave the way by leveraging our existing assets in A ero (172° East, 10° East, 117° East, KA-SAT),selectively invest to improve coverage, and seek pa rtnership deals with stakeholders for each vertical

► Deliver streaming-like experience for IFEC

► 1 Mbps / passengerfor 50% of passengers

► Deliver on-the-movefiber-like Connectivityfor ground transportation

► VHTS satellites1 Terabyte satellite

► VVHTS

► Flat terminals

► 2020-21

► 2025-2035+

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Strong pipeline for in-flight Connectivity

► Several contracts signedusing capacity on KA-SAT over Europe• Finnair

• SAS

• El Al

• Icelandair

► Eutelsat providessatellite capacity, ViaSatis the prime contractor

KA-SAT EUTELSAT 172B

► Customised HTS payload to support IFEC growth over APAC

► Fully sold to 2 major customers• Panasonic• China Unicom

► Panasonic to use alsowidebeam capacity to deliver live TV to aircrafts

► Contract with Taqnia for four HTS Ka-band spotbeams on ETL 3B • Capacity to be used for 100

medium / long-haul aircraft of Saudi Arabian Airlines

► Several contracts for the use of widebeam capacity by major service providers

OTHER RESOURCES

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Stepping up cooperation with China Unicom

► Historic and strong partner in the region

► New MoU addressing satellite communications market in the framework of the ‘Belt and Road’ initiative

► Remaining HTS capacity on ETL 172B contracted for in-flight Connectivity

► Considering further joint-development of satellite communication services

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Eutelsat Quantum: Cutting-edge technology

► Software-defined class of satellites

► First satellite to be launched in 2019

• Manufactured by Airbus Defence and Space

► Incomparable flexibility in terms of:• Coverage

• Bandwidth

• Power and frequency configurability

► Premium capacity through footprint shaping and stee ring, power and frequency band pairing that customers will be able to actively define

► Targeting for users operating in Government and Mob ility markets

Most of the capacity is devoted to Cairo, during day-time in Africa

Most of the capacity is devoted to NYC,during day-time in Americas

Example of a coverage hopping between 2 markets

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Satellite programme capex profile

TYPICAL TIMING OF CAPEXPAYMENTS

► Capex generally split equally over three years prior to launch

► Insurance paid in year three

BREAKDOWN OF CAPEX

30% 30% 40%

YEAR 1 YEAR 2 YEAR 3

Launcher

Insurance

Others

Satellite

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>30%1 in capex savingsImproved IRREnhanced performance

Design-to-cost: EUTELSAT 5 West B case study

DESIGN-TO-COST

Improved match of coverage with

customer requirements

Lower cost of payload

Smaller platform

Lower launch cost

Lower insurance cost

LAUNCH

Shared launch in a stacked

configuration on a Proton rocket

(1) relative to the theoretical cost of replicating EUTELSAT 5 West A’s Ku band mission 59

Satellite economic model 1: Regular capacity

1 For a greenfield satellite, using chemical propulsion 60

LEAP Programme: €30m cost-savings by 2019

1At constant currency

► EBITDA margin above 75%• Scope for improvement relative to

best-in class

► c.€140m of adressable costsidentifed• Out of total opex base of c.€340m

► Target of >20% reduction• Based on granular internal analysis

and benchmarking

► Cost savings target attributed to each manager with attendant incentivisation

LAUNCH OF LEAP WITH IDENTIFIEDSAVINGS TIMING AND IMP ACT OF LEAP

FY 2016-17 FY 2017-18 FY 2018-19

Launchand

quick wins

€15m savings

€30msavings

EBITDA margin 1 target raised*

>76%>76%

*from >75% previously for the three years

>77%

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IR Contacts

Joanna DARLINGTONT: +33 1 53 98 31 07 E: [email protected]

Cédric PUGNIT: +33 1 53 98 31 54 E: [email protected]

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EUTELSAT COMMUNICATIONS Investor Presentation … · Investor Presentation March 2018. Agenda 2 3 5...

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Transcript of EUTELSAT COMMUNICATIONS Investor Presentation … · Investor Presentation March 2018. Agenda 2 3 5...