Following a Moody's downgrade of its outlook from stable to negative, SES moved swiftly to reassure investors about its financial health. While Moody's affirmed SES’s Baa3 long-term issuer rating, the agency cited competitive pressures and uncertainty regarding future revenue streams as key factors. In response, SES preemptively released a financial update projecting that full-year 2024 results will surpass expectations, with revenue at the high end of its predicted 1.94-2 billion euro ($2-2.1 billion) range. Adjusted EBITDA is also expected to exceed its 950 million to 1 billion euro forecast.
The planned $3.1 billion acquisition of Intelsat, slated to close in the second half of 2025, remains on track. SES anticipates that the combined entity will achieve low- to mid-single-digit annual revenue growth from 2024 to 2028, alongside mid-single-digit EBITDA growth and robust free cash flow. “SES remains committed to maintaining Investment Grade metrics,” the company emphasized.
Moody's, however, pointed to the Intelsat acquisition as a contributing factor to the negative outlook revision, highlighting the anticipated increase in net debt to fund the deal. Moody’s Ratings vice president Ernesto Bisagno stated, “The outlook change to negative reflects the increased risk in terms of operating performance and deleveraging path of the combined SES and Intelsat entity, owing to growing competition and higher innovation risk in the satellite industry.” He noted that deleveraging could commence in 2026, contingent upon the merged group realizing synergies and earnings growth. Potential sales of additional C-band spectrum assets could further accelerate this process.
The acquisition of Intelsat is viewed by SES as crucial for boosting its connectivity business. Intelsat's partnership with Eutelsat’s OneWeb, a significant competitor to SpaceX’s Starlink in the LEO market, further highlights this strategy. While Moody’s anticipates growth in demand for connectivity services, they also cautioned about potential oversupply due to the expansion of NGSO satellites, particularly in the consumer broadband sector – a market neither SES nor Intelsat directly targets. However, Moody’s acknowledges that some sectors, such as government, maritime, and aviation, have stringent regulatory requirements, making them less susceptible to excess capacity from other markets.
To navigate competitive pressures, the merged SES-Intelsat entity plans to differentiate itself by offering multi-orbit solutions, leveraging SES’s established expertise in this field. This strategy aligns with ongoing U.S. and European efforts to establish resilient space connectivity. The recent Moody's downgrade of Eutelsat to B2 further underscores the competitive landscape. Bisagno attributed this downgrade to Eutelsat’s underperformance, citing slower-than-expected contributions from OneWeb due to ground segment delays.