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Eutelsat to focus on video, connectivity as industry momentum slows

Eutelsat will focus on video and connectivity as part of a new strategy designed to address “slowing industry-wide momentum”.

Announcing its new ‘strategic priorities and financial objectives’, Eutelsat said that it will adopt a “two-step strategy”.

Step one will see it bring in immediate measures to maximise free-cash-flow generation in its core businesses of video, data and government services.

Step two will see it prepare for a “return to growth” by building on its core video business and capturing the longer-term potential in connectivity.

Eutelsat said that slowing momentum in the fixed satellite services sector reflects stable demand in developed markets such as Europe, and economic headwinds in economies such as Russia and Latin America that are only partly offset by more robust demand in Sub-Saharan Africa, the Middle-East and North Africa and Asia.

“Competition continues to intensify in the data services segment, where we anticipate ongoing downward pricing pressure,” said Eutelsat.

The company predicted that demand in the video segment should “rise modestly over the next five years” with continued growth in emerging markets, particularly MENA and Sub-Saharan Africa.

“The trend in Europe is expected to be broadly stable with HD and Ultra HD ramp-up broadly offsetting improving encoding and compression techniques,” said Eutelsat.

In the immediate terms it said its strategy for developed markets will be to optimise value by increasing direct access to customers, integrating or reorganising indirect distribution, stimulating HD and Ultra HD take-up and implementing more segmented pricing strategies.

At the same time Eutelsat said it will continue to capture growth in emerging markets following recent investments at the 7/8°West and 36°East positions, and selective investments at 7°East.

Over the longer term, Eutelsat predicted that video distribution across the globe will be mostly split between satellite and IPTV.

“In this context, deeper integration within the IP ecosystem and harnessing existing IP-based technologies will enable satellites to enhance the end-viewer experience, further increasing customer adhesion and generating opportunities to sell additional services for broadcasters, pay TV operators and advertisers.”

The company said that there is “significant” potential for fixed broadband by satellite due to poor infrastructure in emerging and certain developed markets.

It also claimed that satellite-delivered mobility has the potential to evolve from niche to mass-market, driven by an increasing number of connected devices and greater bandwidth requirements.

“Our objective is to return to broad top line stability as early as full year 2017- 18,” said Eutelsat CEO, Rodolphe Belmer. “We are confident in our ability to generate a level of discretionary free cash flow in the next three years, which will enable us to serve a stable to progressive dividend and reduce leverage, in line with our commitment to our investment grade rating.”