[Satellite News 01-19-10] Michel de Rosen took over the role of CEO of Eutelsat Communications from Giuliano Berretta in November.
    For most of the previous decade, de Rosen had been chairman and CEO of ViroPharma, a U.S. pharmarceutical company. He returned to France in 2008 to be chairman and CEO of SGD, a French glass bottle manufacturing company and now is responsible for leading Eutelsat in its next growth phase.
    “I do not believe this company needs a radically different vision. What I do believe is that like any successful company in any field, things change. I am sure that new technologies will appear, new customer needs will emerge, new challenges and opportunities will grow, and that by bundling these developments, our vision will evolve. When and how it will evolve is an open question. It won’t be tomorrow. Our job is to be ahead of this evolution, to do what we do as long as it’s good and grab the new as soon as it is better.”
    In part one of an exclusive with Satellite News, de Rosen discussed his new role, the challenges ahead and his plans in areas such as mobile and broadband services.

de Rosen: Firstly, it is an extremely exciting and attractive industry. Secondly, Eutelsat is a vibrant company with a remarkable track record over the last 10 years and a great combination of growth with financial performance. At the same time, there are interesting questions and challenges to be addressed so that the past 10 years can be followed by another 20 years of success. Finally, there is no company in our industry with more expert professionals and international diversity than Eutelsat, and this wealth of talent is what attracted me most. It will be fundamental for carrying us forward and, frankly, I can’t think of one reason why I would have passed up the opportunity of heading Eutelsat.
   What do I bring? I believe that my record of leading international companies and talented teams can be an asset to Eutelsat. I bring experience of an industry (pharmaceutical) that is similar in some ways and different in others. The main common feature is that you work in long cycles. You have to think both in terms of mid- and long-term. If you focus only on the coming months or next year, you are dead. When we decide a satellite in 2010, we know it will take three years before it is launched, and then it will be in space for 15-plus years. This imposes the discipline of having to think of the needs of our customers in 2015 through 2025. I am used to this forward-thinking attitude, which is an overall trait of our industry, and of Eutelsat.
    Risk management is another common feature. In the biotech/pharmaceutical industry, you have to take huge risks. You work on thousands of molecules and only one of them makes it to the market, and even when it makes it to the market as an effective compound, there could be side effects. In the satellite industry, there are fewer risks, but you have to map them, understand them in terms of relative importance for stakeholders, and manage them with rigor and common sense.

de Rosen: I believe that Eutelsat articulated a strong vision for its future under Giuliano’s leadership. We sit at the heart of the digital revolution, and we have multiple engines for growth. Our number one engine is, of course, video, which we think will continue to develop going forward, spurred by HD, 3-D, and so on. We are also convinced broadband is a growing revenue generator. Geographically, we are at the center of a world that comprises Europe, the Middle East and Africa, each region representing significant growth potential. Eutelsat’s approach has been to maximize revenue and value per transponder and to create new sources of growth by moving into frequency bands beyond the Ku-band, as exemplified by the Ka-Sat and Solaris Mobile initiatives. I believe this mix of maximizing value from existing assets and generating new growth engines can continue a track of success and value for shareholders.
 

de Rosen: We have a double privilege in comparison to many companies in other industries. Firstly, this is a sector that continues to expand and has done so for a number of years. Secondly, Eutelsat has an exceptional record of uninterrupted growth since privatization in 2001, and it has ensured it has the capacity needed to continue to grow. We are halfway through a capacity increase initiative which started in 2008 and will continue through to the end of 2011, with four further satellites to be launched. This programme will increase our resources by 30 percent, without including Ka-Sat.
    Of course, there are challenges, and some clients are facing issues which we cannot ignore. However, the fundamentals of our business remain rock solid, and 90 percent of our revenues are derived from broadcast and broadband services, which are the fastest growing applications in the FSS sector. The fact that the number of HD channels broadcasting through our fleet went beyond the 100 barrier in November last year underlines real commitment by broadcasters to generate new premium content.
    Even during the economic downturn there was clear evidence of new green shoots that will benefit the satellite sector. It is good news for us to hear DreamWorks, Sony, BSkyB and Intel executives get excited on the potential of 3-D for cinemas, pubs and in the home, because satellites will naturally play their role in secure and cost-effective multi-casting of content. It’s motivating for an innovative company like Eutelsat to see European rail companies, who are beginning to compete for business, invest in new passenger broadband services which use satellites for ubiquitous coverage.

de Rosen: In the short-term, it’s clear that consumers are watching more television. They are manifestly prepared to pay for premium services, including HD, and pay-TV operators seem confident of further driving up ARPU with 3-D TV, which is expected to start to launch in 2010. In the medium-to-long-term, bandwidth-hungry video applications that are both broadcast- and consumer-generated are at the center of a digital revolution that is changing both television and broadband networks. The voice revolution of the 1990s exemplified by mobile phones, followed by the data revolution of the 2000s driven by the Internet, is transforming into an image-based revolution which represents a huge surge of potential value creation and growth. It opens considerable opportunities for our industry, which is capable of connecting main arteries and ensuring that we build an all-inclusive digital environment by directly serving users located beyond range of terrestrial networks. We believe the problem of digital exclusion will be exacerbated by the inevitable and logical move to fiber. Whereas, France, for example, has high ADSL (98 percent) penetration, it is estimated that as much as 30 percent of the population in areas with low population density will be beyond fiber and that wireless technologies, notably satellite, will consequently be core to complementing terrestrial.
 

de Rosen: We are well beyond the phase of assessing whether there is a market for satellite broadband. We are already implementing the most effective and efficient solution. It is well known that Eutelsat believes that satellite broadband needs a fundamental design overview to reach a viable model. In the long term, you cannot reach a viable solution with existing Ku-band capacity providing wide coverage. It is simply a waste of resources adapted for broadcasting. Right now, we are in phase one of consumer broadband deployment, using HotBird 6 and Eurobird 3 to start to build the market, develop distribution networks, raise awareness and convince governments of the need to integrate satellite in national broadband schemes and economic stimulus measures. We will move into phase two later this year with the launch of Ka-Sat that will go into commercial service in the first part of 2011. We are on target with our Tooway roadmap. The service has made significant progress in 2009, the distribution network has been further built up and we are actively working with partners to insert satellite into national broadband schemes.

de Rosen: Our priority in our broadband strategy is first and foremost to ensure that Ka-Sat is a technical, commercial and financial success, but considering the long cycles in our business, we are naturally exploring avenues beyond Ka-Sat as we believe there will be more children in this family. One of the avenues is the MegaSat concept, which we have been analyzing over the last few months with the support of EADS Astrium, Thales Alenia Space and CNES. The MegaSat concept is part of the “grand loan” program initiated to prepare France’s long-term future through investment in universities and fields such as the digital economy. One of the recommendations made in a report commissioned by the French presidency is to develop digital infrastructure that will enable schools, businesses and consumers to access 50 megabits-per-second broadband. It includes funding for MegaSat, which from the middle of the decade would be a very high-throughput satellite targeting rural areas in France beyond range of fiber. Public money in France has now been penciled for the MegaSat program, and we will continue discussions with all the different parties in 2010 to see if we can find the right structure to make this happen. For Eutelsat, a pre-condition for MegaSat is its potential to create value for shareholders, and this will be core to our overall analysis.

de Rosen: There are different ways of doing business and we could miss opportunities if we were to decide, for example, that we systematically have to own a satellite 100 percent. We have to do both. It then becomes a case by case approach. When I look at the level of interest from potential partners and customers in Ka-band, I believe it is likely in the coming years that we shall have some satellites that we will share with partners, not just in Ku-band, but also Ka-band.

de Rosen: First of all, the [Solaris] is a good venture. We are happy to work with SES, and the dialogue between SES, Eutelsat and Solaris management is a professional one. It is when there is a surprise that you can really see if people work well together. It is well known that there have been some surprises, and they have been addressed in a professional way. Secondly, we were clearly disappointed by what happened to the satellite. Thirdly, we concluded the insurance claim in 2009, which was very important. There is still capacity usable by the payload. The question is what is the best use? The short-term plan for us is to execute demonstrations in five locations across Europe of rear-seat entertainment systems for vehicles with relay to other handhelds through Wi-Fi. We are using this time usefully to work with partners and reassess what customers really want. In the first half of 2010, we should have the results of the first demonstrations and a new action plan. Looking at the overall market for mobile services in Europe in terms of networks, hardware and business models, it does not look like Solaris Mobile is out of synch in terms of timing.

Part two of this interview will be published in the Jan. 21 edition of Satellite News.