C-band is back and too big to ignore. As is the EUR800bn ReArm Europe plan, with its focus on satellite communications. Geopolitical tailwinds are supportive. But amid these positive catalysts, we believe new entrants will increase competitive pressure. We also think a dilutive capital increase for ETL is increasingly likely. With its more solid balance sheet, we prefer SES (+) over ETL (-).
Starlink V3 and new US/Chinese entrants to increase competitive/pricing pressure
We expect a significant increase in capacity and competition from the launch of Amazon Kuiper, China GuoWang and G60 LEO constellations in the next 18-24 months. When ready, each Starship launch of Starlink V3 satellites will add c50 Tbps of capacity, equivalent to the total currently in orbit.
Favorable geopolitical factors improve competitive positioning
Increased European defense spending is likely to support SES/Eutelsat revenues as governments increasingly prioritize commercial satellite communications (SATCOM). With 30% of group revenues exposed to Government services, SES stands to benefit more than Eutelsat (c16% exposure).
C-band valuation should enhance SES balance sheet; dilutive capital increase likely at ETL
Our review of comments on the FCC docket has us include a EUR771m and EUR77m C-band valuation for SES and ETL respectively. With EUR6.5bn of investment and refinancing requirements by 2030, we now see a higher chance of a potentially dilutive c. EUR2bn capital increase at Eutelsat.
Attractive valuation and better exposure: prefer SES (+) over ETL (-)
SES (+, TP unchanged) trades on 5.3x EV/EBITDA26e proforma for Intelsat and offers a 10% dividend yield, while Eutelsat (-, TP unchanged) is on 5.1x. SES has more Government exposure and less Video/Russia risk with stronger technology infrastructure, a more solid balance sheet and significant C-band upside potential (we estimate worth 39% of market cap). On Eutelsat, we see a potential capital increase as an...
