Satellite operator Eutelsat is undergoing a significant strategic realignment, with its growth engine increasingly powered by Low Earth Orbit (LEO) services. The company’s latest half-year results highlight this shift, revealing robust expansion in its connectivity business while the traditional video segment continues to act as a drag on overall performance. The central question for investors now is whether the momentum in LEO can offset persistent weaknesses elsewhere over the medium term.
Financial Performance: A Mixed Picture
For the first half of the fiscal year, Eutelsat reported group revenue of €591.6 million. On a reported basis, this represented a decline of 2.4%, although revenues were stable on a currency-adjusted basis. The company’s profitability metrics faced pressure, with adjusted EBITDA falling 8.0% to €308.2 million. Consequently, the adjusted EBITDA margin contracted to 52.1%, down from 55.2% in the prior-year period. Management attributed this margin compression to the impact of sanctions in the video division and the initial mix effects from ramping up LEO operations.
At the bottom line, the net loss narrowed substantially to €236.5 million, a significant improvement from the €873.2 million loss recorded a year earlier. The previous period’s result had been heavily impacted by impairment charges totaling €650 million related to goodwill and satellites.
Connectivity Segment Soars on LEO Strength
The connectivity business unit emerged as the clear standout, posting 11.8% growth to reach €307.3 million in revenue. This performance was buoyed by advances across all sub-divisions: Fixed Connectivity revenue increased 17.2% to €132.1 million, Government Services rose 7.7% to €98.6 million, and Mobile Connectivity grew 8.5% to €76.6 million.
The driving force within this segment was the explosive growth of LEO-based services. Revenue from LEO operations surged 59.7% to €110.5 million, now accounting for approximately 20% of Eutelsat’s total revenue. Within the connectivity division alone, LEO now represents more than one-third of the business. In contrast, revenue from traditional Geostationary Orbit (GEO) connectivity services declined by 4.5% to €196.8 million.
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Video Division Remains a Headwind
The video segment continued its downward trajectory, with revenue falling 12.3% to €266.5 million. Eutelsat cited additional sanctions against Russian broadcasters as a primary factor, estimating an annualized revenue impact of approximately €16 million. On a more positive note, the company secured contract renewals with key customers, including beIN for the MENA region and Polsat Plus for the HOTBIRD orbital position.
Fortified Balance Sheet and Strategic Adjustments
Eutelsat made considerable progress in strengthening its financial position. The company successfully placed a capital increase raising over €1.5 billion and secured an additional €1 billion through Export Credit Agency financing. These moves were followed by credit rating upgrades from agencies Moody’s and Fitch. As a result, net debt was reduced to €1.3 billion, and the leverage ratio (Net Debt/EBITDA) improved markedly to 2.0x from 3.92x a year ago.
On the strategic front, Eutelsat confirmed the procurement of 440 next-generation LEO satellites to ensure the long-term sustainability of its OneWeb constellation. It also signed a multi-launch agreement with MaiaSpace for missions commencing in 2027. However, the company halted the planned divestment of its passive ground infrastructure to EQT after the French government denied the necessary authorization at the end of January. Furthermore, the Flexsat Americas project has been discontinued, a move expected to generate savings exceeding €100 million.
Outlook: Confirmed Targets
Management reaffirmed its financial objectives for the 2025-26 period. These targets include maintaining revenue for the operational segments at prior-year levels, achieving LEO revenue growth of approximately 50%, delivering an adjusted EBITDA margin slightly below the previous year’s figure, and executing capital expenditures of around €900 million.
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