Eutelsats new CEO, Michel de Rosen, is settling in well in his new role. Former CEO Giuliano Berretta is now the Paris-based satellite operators non-executive chairman following his retirement from the companys day to day responsibilities. Mr. de Rosen, who enjoyed a long career in the pharmaceutical sector, stressed that in some way he is at a disadvantage compared with incoming chief execs.
They are usually hired because the company is in bad shape. Well, that absolutely isnt the case here at Eutelsat. Giuliano has left us a strong company. But a companys never good enough. My role and the management teams role is to seek what we can do better, for instance, where customer service and operational excellence can be further improved and what new partnerships can be initiated. Our task is also to look to the future. Our challenge is to find ways to continue the great momentum we have built for the short and medium term and make decisions now in 2010 that will lead to revenue generators in 2025.
He outlined a series of possibilities, although being global or not was a topic he returned to more than once, of which hell address more later. One of his priorities is Solaris Mobile, Eutelsats joint-venture with SES, to see S-band exploited over Europe. The jvs satellite payload is working aboard Eutelsats W2A satellite, although with some limitations.
Solaris has banked an insurance cheque for some 133 million euros as compensation for the payloads S-band antenna failure to meet its specifications. Solaris Mobile is, says Mr. de Rosen, looking closely at its options but now that the payloads problems are fully understood they have been able to implement some impressive work-arounds, and thus have time to fully consider options.
What happened with the satellite was obviously a disappointment. It took time to fully understand the situation and clearly expose it to the insurance community for the claim. The agreement is that they will share a percentage of revenues that may flow from the S-band payload. Our short term intention is to showcase the system, and to continue working with regulators at national and European level to see the licences fully developed. Our friends at Inmarsat, to my knowledge, have yet to be active in the field. Obviously regulators want to know what Inmarsat and Solaris are doing and going to do. It is our common duty to answer clearly and convincingly these legitimate requests.
Mr. de Rosen said that Solaris is now re-addressing the whole market, especially in regard to potential partners. The rate of development of mobile video services in Europe has been slower than anticipated, and the fact that we ourselves have not moved faster than the market is not a handicap.
But the technical result is now a tangible reality. The transmission system is beaming S-band/DVB-SH video and audio signals to some test vehicles. Customers or more accurately, potential customers have already seen the snazzy set-up, and the vehicle is now on a true road show to most of Europes major cities, which will include Barcelona for the upcoming 3G Global Forum, showcasing what a real system can look and sound like.
And it is impressive. A test drive offered up a half-dozen video channels, a few radio services, and most importantly rock-solid images with zero video drop-out or other troubling artefacts.
Moreover, Solaris clever technical solution beams a mini-WiFi signal into the car, enabling up to three different images to be viewed (including your authors iPhone). It was seamless to set up.
Solaris Mobiles next iteration will be a more powerful chip-set allowing potentially dozens of different users (on a bus or a train, for example) to pick and choose their own channel, or data stream. Indeed, it will be obvious to any operator that the concepts ability to handle data and other vehicle-based telematics is a key advantage.
Currently, the scheme assumes the satellite will beam its couple of Muxes to Europes major regions with terrestrial repeaters filling in the local urban gaps but also complementing the core channel offerings with, perhaps, local traffic, weather or other personalized information.
Solaris is also working on a battery-driven dongle receiver that will have a similar chip-based battery driven device that will transmit content to mobiles without an on-board receiver. The Paris test uses four, 30-Watt transmitters to cover the city. Solaris key target markets, remembering the problems with the antenna, are currently France, Germany, Italy and Spain.
Ondas Media is seen by most as being a strong contender in this space and already has contracts signed with Renault, BMW and Nissan. Interestingly, the specification also allows SMS-type short messages to be sent directly from a vehicle up to the satellite. Transmission power is just 1-Watt, but the technicians say it all works fine. Solaris is looking to see standards body ETSI establish an open standard for this aspect of the technology.
Mr. de Rosen has strong praise for former CEO Berrettas time at Eutelsat. My first steps into this building were in June last year, and it didnt feel in any way like a bureaucracy. I commend [former CEO] Jean Grenier and Giuliano for their work in transforming Eutelsats culture. They were really able to transcend the old vision focused on telephony into a vibrant, video-focused business with high productivity. Not all companies have this enterprising spirit and it is a remarkable achievement. The commercial, financial and operational metrics of a private company are well anchored at Eutelsat. Who would ever have spoken about debt/equity ratios all those years ago?
I have some management principles which include a strong belief in drawing on the skills and experience of people in the company. We are lean, dynamic and creative and I know already we can move fast to adopt a good idea. Unless you are Giuliano, whom I call the Leonardo da Vinci of the satellite world, you are better to build and rely on a strong team of professionals who are both experts in their field and leaders. And you want this group of people to be a real team, that is to say to work together like a rugby team.
I do not want people to start focusing on us being the biggest. Thats not necessary and can be a distraction. But I want us to be the best. Bankers often visit us and say you must become global and we can help you make that happen. I can see why that would be good for bankers, but in my six months at Eutelsat I have yet to hear a compelling reason for Eutelsat to be global in terms of creating real value for the company and its shareholders.
He said Eutelsat would stay Number 1 in its large region and he wanted to remain as number one, even super number one. So I say to myself, beyond our core regions of western, central and Eastern Europe, the Middle East and Africa, where we are present, active and ambitious, where else should we go? We look at size of the market, growth rates, current prices, potential price evolution, competitive landscape and of course realistic opportunities. With such an approach, the East looks more interesting than the West. Obviously, we have more homework to do.
De Rosen emphasized that Eutelsats number one business is and will be video, where he sees significant growth potential going forward with existing customers, new customers and new technologies such as HD and 3D. However, he spoke enthusiastically about the upcoming launch of Ka-Sat, later this year. He said what Eutelsat was increasingly hearing from the market is to believe in the potential of the Ka-band. He said their discussions with Tooway distributors and clients and governments show clear evidence that people need satellite resources for broadband.
We know we have to be excellent technically and commercially with Ka-Sat. When I look at our situation today, I can tell you we are exactly where we wanted to be at this time. We are active in all our key markets, but I intend to increase the pressure on our colleagues to do more, so that we are fully ready operationally when the satellite becomes available.
While being perhaps deliberately vague about his immediate plans geographically, De Rosen spoke enthusiastically about China, India and the Asian region generally. He and Mr. Berretta had recently visited China together and been very well received, he added.
He commented this is the result of years of efforts and collaboration between Eutelsat top management and Chinese authorities. But he said there is more work to do to in order to decide what is the best way for Eutelsat to build a real presence in Asia and to then implement a plan. Eutelsat, amongst many, was interested in the ProtoStar-1 auction, for example. He also anticipated consolidation from Asia, notwithstanding the sluggishness in many individual markets and surplus of capacity leading to low transponder rental prices.
Mr. de Rosen enters 2010 with Eutelsat in good shape. Last years 940 million euros of revenues looks certain to pass through the 1 billion euros mark this year. Video revenues, as well as helping provide juicy 79.9 percent EBITDA margins, also represent almost 700 million euros of revenues and are still growing at 4.7 percent.
But data and broadband traffic is also steaming ahead, with 13.4 percent growth last year, helping bring in revenues of 173 million euros. From a more modest base the companys multi-usage clients-generated revenues of 75.5 million euros and an impressive 30 percent growth rate.
But it is video that represents Eutelsats core business, some 3,200 channels and growing by around 200 a year. That growth looks certain to continue, helped by HDTV and new hot topic 3DTV.
The number of HDTV channels grew 76 percent over the year. With the diversity of our businesses and geographic presence, we have many engines for growth. Eutelsats current guidance is that its EBITDA margin would be above 77 percent for the next 3 years, to 2012. Further updated guidance is due next month.
Questioned on his optimism for Ka-band business ahead of the launch of Ka-Sat later this year to Eutelsats hot bird position, he remained firmly of the opinion that it would work in terms of business and generate solid revenues by the mid-term life of the satellite. Mr. de Rosen interestingly joked that even some of Eutelsats rivals were privately more interested in Ka-band than they publicly admit. He is on record as saying that, as with Solaris Mobile, there would be times when there was no need to own 100 percent of a satellite, and his statement included Ku-band as well as Ka-band.
(Editors Note: The March issue of SatMagazine will offer a number of articles dealing with SatBroadcasting, including 3DTV, and Chris exam of the latest 3D happenings at CES, which occurred earlier this year in Las Vegas.)