Eutelsat has been in headlines this year with a progressive Latin American strategy starting to take shape. via satellite caught up with Michel de rosen to talk all things Latin America, and how his vision for eutelsat is becoming.

Michel de Rosen, Eutelsat’s CEO, is pacing up and down the room in Paris, animated, explaining why the Satmex deal made so much sense to his company. It marked a key point in his tenure and, in the biggest acquisition of the year, made Eutelsat a force to be reckoned with on a global stage and a major player in Latin America. With Satmex costing Eutelsat a cool $1.1 billion, this deal was a top priority for the company.

In 2009, when I did the first interview with de Rosen when he was appointed CEO of Eutelsat, Latin America was not mentioned once as a potential growth opportunity for the company. In fact, when asked about his aspirations for the company internationally, it was clear the initial focus was far more on exploring potential opportunities in Asia.

In fact, in 2012 Asia was the main focus for Eutelsat: First, the launch of a new satellite – the Eutelsat 70B – and then the acquisition of the G23 satellite, which was a pivotal moment for the company, extending reach across the Asia-Pacific region. These two moves enabled Eutelsat to cover the whole Asia region, and create Eutelsat Asia based in Singapore. “We are now closer to customers and we have a platform for growth there. So, that was a double step in 2012, reflecting organic and external initiatives,” de Rosen says.

De Rosen admits that although the company had a sales office in Brazil, back when he started his tenure as CEO, Latin America had “kind of disappeared” within Eutelsat. It wasn’t until 2011, when the company had done more homework and when the conditions for an acquisition had changed in the region, that it really came back into play. But while Latin America suddenly became a key part of the company’s international aspirations, it would take some time for the company to get the foothold it so wanted.

“Lets face it, for Eutelsat, Latin America had been a dream. We were basically an invisible player. We had one sales person and a marginal business,” de Rosen says. “Other options seemed difficult. Abertis-owned Hispasat was not really on the table nor was Star One, the great Brazilian operator.”

Thus, the focus was clearly on Satmex, Mexico’s satellite operator, which had been transformed under the leadership of CEO, Patricio Northland. Even before de Rosen had joined Eutelsat, the company had looked twice at acquiring Satmex, but it wasn’t until the beginning of this year that key obstacles would be removed and Eutelsat was prepared to go for it and finally land its Latin American prize. “The main obstacle previously was there was no path to control for a foreign operator. So, we could have become a significant shareholder, but would not have been able to control or consolidate this acquisition,” de Rosen says. “The other characteristic was that Satmex had a balance sheet then, which is not as healthy as it is now. Then in 2013, came the news that Satmex had launched Satmex 8 and the Mexican constitution was about to change to allow foreign ownership. We then said, let’s work seriously on this. It can give us a great platform in Latin America.”

De Rosen talks of stars being aligned, and that Satmex was the “perfect fit” for Eutelsat. “We were lucky,” he says. Eutelsat was not without other acquisition opportunities in the last couple of years with Telesat, Hellas-Sat, Measat and Optus all coming under consideration. “In M&A, you work on more opportunities than you really execute, as so many things happen. In the case of Telesat, we decided not to participate. In the case of Hellasat, we were interested and wanted to take part but finally, the company went to Arabsat at a price we would not have paid,” he adds.

Satmex Control Center located in Hermosillo, Sonora, Mexico.
Photo courtesy of Satmex.

This year, there was a process for Optus in which Eutelsat participated since it was attracted by the company’s strong video business and leading market share in Australia. “This is a fine company but Satmex was a better fit with our strategic goals,” de Rosen says. With its guns firmly focused on Satmex, the question was could the operator pull off the deal. Like before, there would be competition but De Rosen hints that the key to this acquisition was perhaps that Eutelsat just wanted it that bit more. “In the first round, all of the industry was there but I felt it was more of a priority for us than for other players. Intelsat is already the leader in the market; they have the largest platform. SES has a presence, and Hispasat has a platform with critical mass,” de Rosen says. “For us, it was a perfect fit. For others, it would have been more opportunistic rather than strategic.”

However, despite what seems an obvious need for Eutelsat to do this deal, de Rosen denies that the operator felt pressure. “I would not use the word pressure,” he says. “There are pros and cons to any deal. If you become too enamored with your target, you start forgetting the cons. You must look at both. We did very thorough due diligence.”

As the number one con, de Rosen points to Satmex’s revenue generation from the broadcast business. “The main issue with Satmex was the fact that broadcast currently generates a smaller share of revenues than what we are used to. But, they are already actively growing this business, as well as other parts of the business,” he says.

Other LatAm Moves

Even before the acquisition of Satmex, the company had been making important inroads into Latin America. De Rosen admits that Satmex was “always the most likely acquisition target” as the operator had made other moves in the region based on organic growth. Two years ago, Eutelsat participated in an auction for orbital rights carried out by the Brazilian regulator Anatel. “The prices paid by others were very significant and more than we were willing to pay. We then were very lucky. A few months after the auction we were told that a company that had won one of the auctions decided not to move forward. Anatel then decided to open an auction with the next two companies in line, Eutelsat and Intelsat. We won this new round for $8 million. We got a great deal and secured 65 degrees west, which is an excellent position to cover Brazil,” de Rosen says.

Then in late July this year (ironically just 24 hours before the Satmex deal) Eutelsat announced that it was ordering a new high-capacity satellite designed to serve dynamically-expanding video and broadband markets in Brazil and across Latin America. The Eutelsat 65 West A satellite will likely be launched and operational in early 2016. “We started working on this as soon as we knew we had won the auction. We brought our proposal to the board and recommended we move fast because of key upcoming events including the Olympic Games. So, that was a 2011-2013 initiative,” added de Rosen.

The combination of orbital rights, a new satellite, and the Satmex transaction suddenly transforms Eutelsat into a major player in Latin America. “We now have critical mass and Satmex has market share of 11 percent. As you know, they have business in North America, Central America, Mexico and the Andean part of South America. And we will have the 65 degrees west satellite principally for Brazil,” says de Rosen. “So, the two together put us in the top five players in Latin America. They give us a critical mass in a continent where we were a marginal player.”

Eutelsat 2.0?

Satmex Control Center located in Iztapalapa, Mexico D.F., Mexico.
Photo courtesy of Satmex.

While Eutelsat has no domestic presence to speak of in North America, there is little doubt that it has now become a global player. Under Guiliano Berretta, the company had focused on Europe (West and East), Middle East and Africa, but was selective in which markets it targeted. Now, de Rosen admits that concentrating only on existing regions was “not enough” for the operator. Eutelsat has now opened an office in Asia and moved beyond its “marginal” presence in Latin America. “We had two continents. Continent number one is Western Europe, which is where we have a strong, profitable business but modest growth. The second continent is an arc going from Eastern Europe through the Middle East, Central Asia and Africa where profitability was less but growth was strong. So, we said if there are opportunities in these regions we would look, but it was not enough. We identified the need to be in Asia and Latin America. We don’t plan to be a major player in North America where we have a targeted approach, focusing on well-selected market segments,” says de Rosen.

The operator is now making significant progress under de Rosen, as key parts of a “10-year plan” come to fruition. “I joined the company in 2009. I concluded with the board that organic growth should remain the number one path for Eutelsat going forward for the next 10 years but that we should be mobilized in exploring inorganic growth opportunities. These would not be transformational, but they would either strengthen our presence in what we call our domestic market (Europe, Middle East and Africa) or allow us to create a presence in new regions that are important to us. As you know, we identified two new regions, Asia and Latin America. In 2012 we moved into Asia. In 2013 we made our move into Latin America,” de Rosen added. VS