Satellite operators set to rebound, says Moody’s

Satellite operators should return to growth this year, boosting their creditworthiness, according to a report by credit ratings agency Moody’s.

Moody’s expects aggregate organic revenue growth of 3% at constant currency for major satellite players Eutelsat, SES and Inmarsat. It also expects a higher growth rate for emerging markets broadband specialist Avanti Communications Group.

The rebound follows a year of stagnation in the satellite business, according to Moody’s. The agency says that over the near to medium term, operators exposed to fixed and mobile data services, particularly for enterprise networks and consumer broadband, and to emerging markets will experience the strongest growth.

Major operators’ position should also improve as a result of reduced capital expenditure according to Moody’s, which predicts the sector’s capex as a percentage of revenues, excluding Avanti, to be in the range of 32%-34% in 2015-16, moderating toward its long-term average of 34%, declining in 2017 to under 30%.

In 2016, SES’s and Eutelsat’s EBITDA margins will likely remain in the 74%-77% range and Inmarsat’s will stay between 52% and 55%, according to Moody’s, which gives Eutelsat a credit rating of Baa3 positive and SES a Baa2 stable rating.

“In 2016, we expect stable credit metrics for the larger European satellite service operators, with revenue growth set to rebound in the coming year after stagnating in 2015 and capex growth to slow,” says Alejandro Nunez, a Moody’s vice-president, senior analyst and author of the report.