Eutelsat Group Credit Analysis: GEO/LEO Pivot with Elevated Execution and Leverage Risk

Background

• • Eutelsat Group, Satellite Communications, HQ Paris, France, LTM EBITDA €676 mm and TNL 3.88x
• • Global fixed and mobile satellite operator providing video distribution, broadband connectivity and government services via 34 GEO satellites and a 650-satellite LEO constellation acquired through OneWeb.
• – FY-25 EBITDA €676 mm, down 5.9 % YoY; EBITDA margin 54.4 % on revenues of €1.244 bn.
• – CEO: Jean-François Fallacher (since Nov-23). CFO: Christophe Caudrelier (since Jan-24). Rapid C-suite turnover following OneWeb merger – execution risk.
• • Segmental breakdown (FY-25 revenue share; EBITDA contribution loosely tracks revenue given high satellite depreciation):
• – Video 50 % – long-term capacity leases to TV broadcasters; legacy cash cow but –6.5 % YoY revenue decline, margin pressured by HD compression and shift to streaming.
• – Fixed Connectivity 20 % – wholesale Ka-band broadband (Konnect), enterprise backhaul; +4.3 % YoY but still sub-scale.
• – Government Services 17 % – mainly US DoD, French MoD, ESA; +24 % YoY on geopolitical demand.
• – Mobile Connectivity 13 % – aero & maritime IFC; flat YoY, volatile and hardware-heavy.
• • Geographic breakdown (revenue): Europe 48 %, Americas 22 %, MENA 16 %, Africa 9 %, Asia 5 %. EBITDA concentration mirrors revenue; Europe is largest cash contributor and most exposed to streaming disruption.
• • Revenue model and contractual structure
• – Predominantly multi-year (3-15 yr) capacity leases priced in €, $ and £. Inflation pass-through exists in a minority of video contracts; connectivity deals often include CPI-linked escalators but price renegotiation risk remains.
• – Backlog €3.5 bn (2.8x FY-25 revenue) but concentrated in declining Video vertical. Churn undisclosed; loss of Russian channels cost c.€16 mm revenue FY-26.
• • Cost structure FY-25:
• – COGS €242 mm (19 % of sales) largely fixed in-orbit costs and gateway OPEX; variable element limited to ground-segment power and bandwidth leases.
• – Opex €240 mm (19 % of sales). Personnel costs €123 mm (~10 % of revenue); headcount 1,578. SG&A flexibility low once staff costs stripped out.
• – Overall cost base about 70 % fixed, reflecting capital-intensive model.
• • Shareholders and valuation
• – Post-raise pro-forma: French State (APE) 29.6 %, Bharti 17.9 %, HMG UK 10.9 %, CMA-CGM 7.5 %, Fonds Stratégique de Participations 5.0 %, free float/balance 29.1 %.
• – Market cap €4.0 bn (Oct-25). Net debt €2.6 bn → EV €6.6 bn. Trades at 9.7x FY-25 reported EBITDA, a premium to SES (7x) and Intelsat (6x) despite sharper structural decline.
• • Strategy
• – Pivot away from GEO video to integrated GEO/LEO connectivity. Capital raise €1.5 bn funds Gen-1 LEO replenishment, European IRIS² PPP and Konnect VHTS rollout.
• – Target 50 %+ LEO revenue CAGR to FY-29; aspire to 60 % EBITDA margin long term via operating leverage and US$180 mm synergy capture. Ambitious given high bandwidth price deflation in LEO.
• • Corporate actions
• – FY-25: dividend cut to nil; share buyback halted. Announced disposal of passive ground infrastructure to EQT for €790 mm EV (closing 1Q-26).
• – €1.5 bn equity injection split between €0.8 bn reserved placement to core shareholders and €0.7 bn rights issue. Proceeds earmarked for capex not deleveraging.
• • Current trading Q4-25
• – Revenue €338 mm flat YoY; EBITDA margin 54 %. Sequential stability driven by LEO ramp while Video slipped 7 %. Hardware sales flattered Fixed Connectivity.
• – FX tailwind neutral; no evidence yet of sustainable growth.

Risks and mitigants

• • Customer concentration: Top-10 account for 33 % revenue; Sky Italia renewal de-risked but loss of Russian broadcasters highlights exposure.
• • EBITDA adjustments negligible (<€2 mm), transparency good.
• • Cyclicality: Video stable but declining; Connectivity ramps with macro-sensitive aviation and maritime end-markets.
• • Litigation: €100 mm tax disputes open in France and Brazil; no major provisions booked.
• • Cash flow risk: FY-25 FCF (post-interest, pre-capex) €(110) mm due to €450 mm gross capex and €201 mm net interest. FCF negative until at least FY-27 absent further asset sales.
• • Regulatory: Spectrum filings, ITU coordination and government export controls. EU IRIS² PPP approval still pending.
• • Geopolitics: Russian sanctions removed 40 channels; emerging-market demand vulnerable to FX.
• • Accounting: No red flags; IFRS. Pillar 2 top-up tax immaterial (<€0.1 mm).
• • Historical distress: Never restructured, but leverage covenant waived twice (FY-22, FY-24) indicating tight headroom.
• • Other: Execution risk on LEO constellation CAPEX (€4 bn FY-26-29) and integration of OneWeb ground network.

Capital structure

• • Gross debt €3.0 bn consists of €1.98 bn unsecured bonds (2025-2029 maturities), €0.4 bn term loan (2027), €0.2 bn EIB loan (2028), €0.28 bn export credit facilities and €0.06 bn Exim India loan; plus €0.47 bn lease liabilities all-in. Net debt €2.63 bn.
• – WACD 4.37 % post-hedging.
• – Near-term maturities: €177 mm bond Oct-25, €232 mm capex lines Jul-25-26, €90 mm Exim/operating lines 2025-26. Management plans to refinance via ECA loans, disposal proceeds and new bank RCF – execution risk if credit spreads widen.
• – Contingent liabilities: €20 mm provisions for satellite deorbiting; no supply-chain financing disclosed.
• • Liquidity: €518 mm cash plus €550 mm undrawn bilateral and revolving lines. Headroom thin relative to €450-600 mm annual capex.

Financial modelling

• • Revenue assumed CAGR 3 % FY-26-30 driven by 19 % LEO growth offsetting 4 % annual Video erosion.
• • EBITDA margin modelled declining to 52 % FY-26 given LEO ramp costs then recovering to 55 % FY-30 after synergies.
• • Capex forecast €1.0-1.1 bn FY-26 then tapering to €0.6 bn FY-29 once Gen-1 replenishment complete.
• • Result: FCF remains negative FY-26-27 (~€(500) mm) before turning positive €200 mm FY-29. Net debt peaks €4.1 bn FY-27 (5.7x) then trends to €3.8 bn FY-30 (4.0x) – leverage still high.
• • Model assumes €790 mm ground asset sale closes FY-26 and equity raise completes; downside risk if either delayed.

Conclusion

• • FCF outlook: Cash burn persists near term as €4 bn LEO capex outweighs EBITDA; FCF breakeven hinges on aggressive revenue growth assumptions and timely asset sale.
• • Valuation: EV €6.6 bn comprises 60 % equity (€4.0 bn) and 40 % net debt (€2.6 bn). Equity cushion modest given high execution risk and asset ageing.
• • Sustainability: Capital structure stretched; debt represents 4.3x FY-25 EBITDA and will exceed 5x during peak spend. Refinancing needs cluster 2025-27. Liquidity adequate for 12-18 months but contingent on capital markets access.
• • Indicative ratings excluding adjustments: Debt/EBITDA 3.9x and EBITDA/interest 3.4x place the company in Moody’s Ba2 and S&P BB territory, reflecting weakening metrics and execution risk.