SES remains on track as it posts rise in reported revenue

Following the boost of its successful lofting of two O3b MEO satellites this week, Luxembourg-based operator SES saw revenues for the first quarter rise by 9.6% on a reported basis, including the impact of a contribution from new acquisition DRS Global Enterprise Solutions and a strong US dollar.

Video sales declined by 8.3%, or 5% excluding periodic revenue, to €242 million for the quarter, meaning that the networks business accounted for over half of the group’s revenues for the quarter – up 2.9% to 248 million – with SES’s mobility business contributing the growth, more than offsetting modes dips in government and fixed data. Total revenue was down 3% on a like-for-like basis to €490 million.

SES turned in adjusted EBITDA of €265 million, down 3.2% as reported and down 7.3% on a like-for-like basis.

CEO Steve Collar said that the group’s year had “started well with solid Q1 results and excellent progress on both O3b mPOWER and our US C-band project”, referring to the withdrawal of the gerop from C-b and spectrum in the US, for which it is being compensated significantly.

“With the successful launch of the two remaining C-band satellites, our project to clear C-band spectrum to support 5G services across the US is entering its final phase, and we remain fully on track to earn $3 billion in accelerated clearing payments before year-end.,” said Collar.

Collar said the remaining two O3b satellite launches remain scheduled for June, which could go some way to allay investor concerns about the delay of the MEO broadband project, on which much is riding.

Analysts at Berenberg had earlier noted that SES had “disappointed” on the timing of the O3b constellation, with multiple delays in the past, and had failed to achieve a return to revenue and EBITDA growth.

However, the analysts said the remained “supportive of the shares on a  six- to 12-month view, given the transformative C-band proceeds that will be received around the end of the year”.

Berenberg noted that SES is due to receive US$3 billion in C-band proceeds over the remainder of this year, with proceeds no representing about 90% of the cnopany’s market value, creating “significant optionality for shareholder returns, balance sheet repair and disciplined investment”.

However, the analysts cautioned that “a key pushback from investors is the risk that SES reinvests C-band proceeds, be this is into M&A or the European Union’s IRIS project” and added that “SES has done little to downplay talk of M&A, having repeatedly argued the case for consolidation, and indeed confirmed merger talks with Intelsat on 29 March”.

Downgrading the stock based on “disappointing 2023 guidance” and a weakening of the US dollar, Berenberg nevertheless said that a merger with Intelsat could deliver “significant, albeit long-dated, synergies”.

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