SES searching for cost savings to tackle video woes

SES is seeking ways to cut costs as the loss of revenues from a bankrupt broadcast customer in Brazil deals a blow to the satellite operator’s declining video business.

While SES said Aug. 1 it has secured revenues from this customer for the rest of the year, the Luxembourg-based operator is bracing for a 5% hit to annual media revenue in 2025. This is on top of an ongoing single-digit decline as satellite TV customers switch to online streaming services.

SES declined to disclose the broadcast customer, which is likely Oi, one of the largest telcos in Latin America.

In an earnings call with analysts, SES CEO Adel Al-Saleh said the operator will first look to mitigate the loss of the long-term broadcast contract through a cost-saving drive that he did not detail.

SES will also seek more revenues from its sports and events broadcasting business, where growth partially offset the video division’s 6.7% year-on-year decline to 453 million euros ($489 million) for the first six months of 2024, when adjusted for foreign exchange rates.

Al-Saleh said the multi-orbit operator will also lean on a networks division that grew 5% over the same period to 523 million euros, representing 54% of total revenues.

The networks growth was driven by the company’s mobile broadband services business, where revenues jumped more than 11% amid strong demand in the maritime and aviation markets.

Government connectivity revenues also soared 8.4% following initial services in April from O3b mPower, the operator’s next-generation constellation in medium Earth orbit (MEO).

Al-Saleh hinted at several more contracts in the near term with government customers, which SES is prioritizing as power issues limit capacity on initial O3b satellites.

“[O3b] mPower is seeing a very strong demand from the governments,” he said, adding he was “hoping to announce a contract this call, but we will be announcing several contracts over the next several months” that underline this demand.

SES, which also operates geostationary spacecraft, has six O3b mPower satellites in MEO and expects SpaceX to launch another two toward the end of this year, followed by three more satellites in 2025. The company plans to deploy the final two satellites in the 13-strong Boeing-built constellation in 2026.

Fixed trouble
Although the networks division was a bright spot in the earnings results, SES also reported an 8.1% drop in fixed data revenues.

One-off deals from the previous year were the main driver for this decline, according to SES, adding that it also experienced challenging conditions in Europe.

“That is a segment that we are looking very, very hard at,” Al-Saleh said, including efforts to focus capacity away from highly price-sensitive areas.

Overall, SES reported 978 million euros in group revenue, down 0.6% year-on-year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) slipped 0.9% to 525 million euros.

SES still expects to report between 1.94 billion euros and 2 billion euros in annual revenue for 2024, and said it is tracking toward the upper half of a previously forecasted EBITDA of between 950 million euros to 1 billion euros.

The company also said its proposed $3.1 billion acquisition of geostationary connectivity operator Intelsat remains on track to closing in the second half of 2025, subject to regulatory approval, after recently securing debt to support the deal. Space News