Fresh off a better-than-expected 2007 second quarter, Eutelsat has revealed plans to take its Ka-band strategy to the next level.

The operator intends to launch a dedicated Ka-band satellite with multiple spot beams to 13° East by 2010, hoping to nudge the market to make the jump from Ku- to Ka-band.
“We think we can deploy an infrastructure for broadband services and for local television, as is already the case in the [United States], as well as other professional applications like contribution, point-to-point, etc.,” Eutelsat CEO Giuliano Berretta said during the operator’s July 26 results conference call.

Eutelsat’s Hot Bird 6 and W3A satellites have some Ka-band capacity, but this new satellite would be the first dedicated entirely to Ka-band.

“Ka-band offers the possibility for a substantial rationalization of costs in the space segment for transport of signals,” said Berretta. “It is not the idea to have wide coverage like a HotBird broadcast satellite, so we are talking about two separate markets. Ka-Band will be good for broadband services, for triple play and for video to local communities with a substantial reduction of costs.  In terms of geographic markets, we are looking at Ka-band in our main areas of interest, namely [European countries].”

In terms of its results, Eutelsat enjoyed a number of positives. The operator posted net profits of 170 million euros ($231.9 million) for the 12 month-period that closed at the end of June, a 325 percent increase compared to the same period a year ago, when the figure was only 40 million euros ($54.6 million). Eutelsat credited the net profit improvement to the absence of a non-recurring net charge related to debt and restructuring recorded in the previous year as well as lower interest charges related to the refinancing of debt.

The operator recorded revenues of 829.1 million euros ($1.1 billion) for the most recent 12 months, up nearly 5 percent compared to a year ago. Video applications continue to be the main driver of Eutelsat’s business, generating 590.4 million euros ($805.3 million) of revenues, a 12 percent increase compared to last year. Data and value added services, which accounted for 19 percent of Eutelsat’s revenues, were 159 million euros ($216.9 million), a fall of more than 10 million euros ($13.6 million) compared to the same stage last year.

The numbers were met positively by analysts.

“The results are solid and above the initial guidance,” Mathieu Robilliard, a satellite equity analyst at Exane BNP Paribas, said. “ The numbers are strong and slightly ahead of everybody’s estimates. In terms of the guidance afterwards, it is actually quite good. I don’t think there will be a lot of people raising the numbers because of the guidance. The consensus is probably slightly higher than the guidance but these guys are generally quite conservative. I think the business is going very well.”

Eric Beaudet, a satellite equity analyst at Natixis Securities, said he expects the company’s growth to pick up after 2008. “The group is admittedly expecting a slowdown in growth in 2007-2008 (2.5 to 4 percent vs. 5.7 percent this year), but this slowdown is entirely a result of the absence of new satellite launches,” he wrote in a research note. “The group was still conservative on its estimates. We expect turnover for 2007-2008 of 853 million euros ($1.2 billion), slightly ahead of guidance. … Over the following two years, sales growth should step up a pace (6.9 percent on average) as a result of the launch of five new satellites.”

One issue facing Eutelsat is whether its relationship with Spanish satellite operator Hispasat will become closer. Spanish infrastructure company Abertis completed a deal earlier this year to acquire a 32 percent stake in Eutelsat, and with Eutelsat holding nearly a 30 percent stake in Hispasat, what will happen next is unclear.

Robilliard envisions Abertis buying Hispasat but not being able to merge with Eutelsat, leaving them as separate entities. “There are clearly some strong political barriers coming from the Spanish side for [Eutelsat and Hispasat] not to merge,” he said. “The Spanish consider Hispasat to be strategic. I don’t know how that is going to be solved. I don’t expect that to be solved in the next month or two.
It is probably a [fourth quarter] event. The scenario could even see it not happening for a longer period of time.”