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Eutelsat adjusts projections despite resilience of core business

Eutelsat’s core broadcast business is well-placed to withstand the coronavirus crisis but there is likely to be a negative impact on its occasional use, mobile connectivity and fixed broadband businesses and two key projects are likely to be pushed back because of supply chain problems, the satellite operator has said.

Eutelsat said that the OU business, representing about 1% of the total, would be impacted bythe postponement or cancellation of sports and other events.

Mobile connectivity, which represents 6%, will meanwhile be affected by the impact on airline and maritime traffic, while fixed broadband, also representing 6%, will be hit by a slowdown in gross additions.

Eutelsat said that the effects would be felt in its financial third and fourth quarters.

The operator’s Quantum satellite, planned for the third quarter, will likely be delayed because of supply chain issues related to the virus, while the deployment of ground gateways supporting the operations of Eutelsat Konnect is likely to be partially delayed. Both of these delays will likely have an impact on Eutelsat’s 2020-21 figures.

The operator said that this year’s top line would be hit to the tune of €20 million.

CEO Rodolph Belmber said that Eutelsat’s business was “resilient compared with many industries, in particular our core Broadcast business”, but that “certain verticals, notably Mobility, Professional Video and to a lesser extent Fixed Broadband are feeling the effects of the containment measures, and we are adjusting our current year revenue expectations in consequence”.

He said that Eutelsat was temporarily suspending its 2022 free cash flow objective and that the board would recommend a 30% cut to this year’s dividend.

Analysts at Berenberg said that it appeared that “ the effects are very manageable and that Eutelsat’s share price is thus far too cheap”. They nevertheless cut future forecasts largely as a result of launch/ground station delays.

Berenberg said that mobility would likely be the most negatively impacted segment from the coronavirus crisis.