Eutelsat HQ

Eutelsat and Sky Italia have reached a deal to renew Sky’s capacity contract at Eutelsat’s HOTBIRD position. The Monday announcement was light on details, but Eutelsat said the multi-year contract represents a secured backlog of about 450 million euros ($532 million) and guarantees “broadly stable annual revenues for Eutelsat in the medium term.” It also includes extension options. 

The deal was highly anticipated, as Sky is the leading customer on HOTBIRD and has been with the satellites in Eutelsat’s premium 13 degree East position since 2003. The HOTBIRD fleet will be upgraded with the entry into service of two HOTBIRD new generation satellites, to be launched in 2021, that will replace the current spacecraft. Eutelsat says the new satellites will deliver improved performance over the European footprint reinforced by a powerful European super-beam.

Eutelsat CEO Rodolphe Belmer commented: “This agreement ensures long term service continuity for the millions of households in Italy which depend on satellite to receive television, and highlights the key role of satellite for broadcast distribution in Western Europe, today and in the future, by providing reach beyond the limits of terrestrial networks. It also reflects the unmatched coverage of the 13 degree East orbital position for Europe, and the general resilience of Eutelsat’s broadcast revenues.”

Jefferies analysts Giles Thorne and Sebastian Patulea put out a research note on the deal, writing that Eutelsat’s description of “broadly stable annual revenue” suggests low-mid single digit group revenue declines. 

“With the revenue impact no worse than we anticipated, management must now remind the market that it has renewed a ‘broadly stable’ revenue stream at a significantly lower input cost, and its strategy to maximise Video IRRs has therefore now been achieved, with positive implications for the stock,” the analysts wrote.