Eutelsat Communications full-year results have been greeted positively by the analyst community, as the operator announced that revenues for the year ending June 30 were 791.1 million euros ($1 billion), an increase of nearly 5.5 percent over the previous year. In terms of video applications, full year revenues were 528.6 million euros ($668.6 million), up from 511.3 million euros ($646.7 million), the company reported July 20.

"Eutelsat delivered very strong revenue growth in "the fourth quarter of 6.7 percent," Sarah Simon, a media equity analyst at Morgan Stanley said in a research note. "Revenues for FY 2006 were 791.1 million euros, well ahead of our estimate, 777 million euros ($982.82 million), and that of consensus, 780 million euros ($986.62 million). Revenue growth for 2006 was 5.4 percent comfortably exceeding company guidance of ‘more than 3.5 percent.’"

Eutelsat’s performance in the video services arena was the subject of much debate among analysts. Henrik Nyblom, a satellite equity analyst at Lehman Brothers hailed the company’s recent performance in the video services sector. "Video services revenues were the biggest surprise in the quarter, reporting revenues of 141 million euros ($178.35 million), a striking 11 percent growth [year-over-year] and an impressive 7.8 percent ahead of our expectations," he said. "However, this included a 4 million euro ($5.1 million) late payment from a customer, but even adjusted for that a 6.2 percent growth [year-over-year] in [the fourth quarter] means a significant acceleration versus previous quarters. The positive impact from the World Cup on professional video revenues was just under 2 million euros ($2.5 million) and in line with our expectations. Instead, the outperformance is encouragingly related to a strong demand in the broadcasting segment. Eutelsat increased the number of TV channels broadcast via its satellites by 262 to 2,121 channels, which, when put in perspective, can be compared to 161 channels in total being added in the first nine months of FY06. We believe this is very promising for the future as these contracts are of long-term nature."

Simon was also positive about the company’s performance in the video arena. Simon said the company was benefiting from increased demand from existing customers (Sky Italia, TPS) and new contracts, particularly in Eastern Europe and the Middle East.

Eutelsat’s revenue performance in the data services was not as impressive as its video sector. The company reported 12 month revenues for data and value-added services of 169.1 million euros ($214 million), an increase of 4.5 percent compared to last year. However, in the three months to the end of June, the operator recorded revenue gains of only 40.2 million euros ($50.9 million), a 13 percent decrease compared to the same quarter last year, a "somewhat disappointing" result, Nyblom said. "… Eutelsat reported total data revenues of 40.2 million euros and 3.6 percent below our expectations. Professional data networks revenues of 32 million euros ($40.5 million) were down 16.2 percent [year-over- year] and were 4.7 percent below our forecasts. Adjusting for a 2.9 million euros ($3.7 million) early termination fee that positively impacted [the fourth quarter] last year, the underlying decline was ‘only’ 9.3 percent. Value-added services revenues of 8.2 million euros ($10.4 million) were 1 percent ahead of our expectations."

Eutelsat’s multi-usage leases also performed strongly, generating revenues for the year of 69.7 million euros ($88.2 million), an increase of close to 15 percent compared to the previous year. "Leasing surprised positively for the third consecutive quarter. Revenues of 18.3 million euros ($23.2 million) were as much as 13.3 percent ahead of our expectations. With a slowdown versus the 27.9 percent [year-over-year] growth seen in the last quarter, we note that [the third quarter] was helped by an 8 percent stronger U.S. dollar compared to last year, whilst [the fourth quarter] saw very little currency impact. It is, however, important to emphasize that multi-usage leasing contracts are short term with a large proportion has to be renewed annually."

Overall, Eutelsat remains an attractive investment pick in the satellite sector. Simon believes it is more attractive than SES Global. "Importantly, we continue to see downside risk to forecasts at SES Global. We believe that SES is entering an investment phase for the group in its lower margin services division and this reduces confidence in medium term forecasts."

–Mark Holmes Contact, Vanessa O’Connor, Eutelsat, e-mail, Vo’[email protected] Sarah Simon, Morgan Stanley, e-mail, [email protected] Henrik Nyblom, Lehman Brothers, e-mail, [email protected]