Eutelsat, the French satellite operator, is facing significant headwinds in its geostationary orbit (GEO) business. The unexpected cancellation of a large U.S. Department of Defense contract has exacerbated existing challenges, prompting a stronger emphasis on its low Earth orbit (LEO) OneWeb constellation. The company's May 15 earnings report for the quarter ending March 31 revealed that total government renewal rates fell below 50%, a significant drop that would have reached 70% without the DoD contract loss. This cancellation, according to Eutelsat, reflects the new U.S. administration's shifting geographic priorities and broader cost-cutting measures. Joanna Darlington, Eutelsat’s chief communications and investor relations officer, attributes the cancellation to a “knee-jerk reaction” by the new administration, suggesting potential for future growth. Despite this setback, government services revenue still reached 49.5 million euros ($55.4 million), a 10.2% year-on-year increase (adjusted for exchange rates), largely driven by increased LEO sales and demand from non-U.S. governments seeking alternatives to U.S.-based providers. “Even with U.S. companies, it’s not certain that anybody wants to be dependent on a monopoly,” Darlington noted.
Further compounding the issue are broader declines in the GEO market. Fixed connectivity sales increased marginally (0.8% to 59.7 million euros), but this was despite challenging conditions for GEO-enabled consumer broadband in Europe, including the loss of revenue from Italian telco TIM. Mobile connectivity revenues also suffered, falling 2.7% to 39.7 million euros. The company's shrinking GEO-enabled video business experienced a significant drop of 6.4% to 151.7 million euros, mirroring the industry-wide shift towards online streaming. Eutelsat also anticipates a 16 million euro annual hit from removing Russia-related channels due to sanctions.
Overall, Eutelsat reported 300 million euros in total revenue for Q3, down 1.9% year-on-year. Despite these challenges, the company maintained its full-year revenue guidance. Christophe Caudrelier, Eutelsat’s chief financial officer, highlighted that while U.S. spending now constitutes 50-60% of the company’s government business, this is partly due to rising demand for OneWeb’s LEO services outside the U.S. To bolster future growth, Eutelsat placed an order for 100 satellites from Airbus, aiming to replenish the OneWeb network by the end of 2026. Discussions are ongoing to secure financing for this replenishment plan (estimated at up to 2.2 billion euros) and Eutelsat’s share of IRIS², Europe’s sovereign broadband constellation. Jean-François Fallacher will take over as CEO from June, succeeding Eva Berneke.