Eutelsat feels heat, sees growth in Mideast

PARIS Thu Dec 1, 2011 11:33am EST

Eutelsat CEO Michel de Rosen addresses the Reuters Global Media Summit in Paris, December 1, 2011.     REUTERS/Mal Langsdon

Eutelsat CEO Michel de Rosen addresses the Reuters Global Media Summit in Paris, December 1, 2011.

Credit: Reuters/Mal Langsdon

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PARIS (Reuters) - Europe's biggest satellite operator Eutelsat (ETL.PA) is more accustomed to staking out territory in outer space than worrying about earthly politics, but this year it was plunged into the thick of the Arab Spring.

The company has benefited as populations clamor for news coverage from its customers in the Middle East, in particular fast-growing broadcaster Al Jazeera.

At the same time, it has faced pressure from European governments for carrying Libyan state-owned TV channels during the uprising against Muammar Gaddafi, and from Iran, which has scrambled its transmissions of the BBC, Voice of America and Deutsche Welle.

The developments have put Chief Executive Michel de Rosen in the position of having to negotiate with heads of state and diplomats to assert Eutelsat's independence and neutrality as a wholesaler of satellite capacity.

"We receive a lot of pressure, a lot of letters, a lot of demands to police the content on our satellites," said Michel de Rosen at the Reuters Global Media Summit on Thursday. "But we cannot respond to such pressure, nor discriminate against some content and not others."

The debates are an unwelcome consequence of Eutelsat's strength in the Middle East where it has seen demand for its satellite services boom in recent years with the proliferation of new TV channels and increasing wealth of the region.

Eutelsat's recently launched AB7 satellite has become "one of the hottest positions in the Middle East" with some 30 million households tuned into it, a number that is growing rapidly, he said.

Eutelsat's strength in these emerging markets give it an edge over competitors in a business where farsightedness about the next hotspot is crucial since it takes up to three years and 250 million euros ($337 million) to launch a single satellite.

De Rosen said the fact that Eutelsat was publicly listed with a supportive major shareholder in the French state meant it had been able to invest more aggressively to upgrade its fleet of 29 satellites than private equity-owned rivals.

Eutelsat was founded in 1977 when European countries pooled their licenses to orbital positions to create a regional satellite operator, and was publicly listed in 2005.

It competes with market leader Intelsat, which has a fleet of 50 satellites and is private equity owned, and the Luxembourg-based SES (SESFd.PA), which has 49 satellites and is publicly traded.

Today Eutelsat has become an unexpected stock market darling appreciated for the defensive nature of its business, increasing dividend, and sky-high operating margins of 77 percent.

With the business ticking along, de Rosen has had to work on thornier diplomatic issues in the Middle East.

In the run-up to the war in Libya, the United Nations included measures in their resolutions authorizing military action to allow for attacks on Qaddafi's communications infrastructure, on the basis that the state-owned channels were inciting violence against the rebels.

Once the legal measures were in place, Eutelsat complied with an order from the French broadcast regulator and worked with its partners in the region to remove Libyan state-owned television stations from distribution.

"Those decisions had the force of international law, so... we decided to comply," explained de Rosen.

In Iran, Eutelsat has come under fire from both the government and the opposition.

Some of its signals have been jammed by Iran since May 2009 because they carry Farsi versions of foreign news channels like the BBC, while opposition figures like Iranian Nobel Prize winner Shirin Ebadi have slammed the company for carrying the state-run Iranian channels.

De Rosen said the company was cooperating with the BBC and Voice of America to look for solutions to the jamming, including tweaking the satellite's position and lobbying various national governments for support.

Eutelsat has also searched for technological remedies and has identified the location in Iran from which the jamming was occurring.

De Rosen said he hoped to raise the issue at an upcoming meeting of the ITU, the Geneva-based United Nations telecoms agency, and has filed an official complaint to the body.

"Jamming is in fact a political issue that needs a political answer. We seem to be getting more traction from governments on the issue," he said, adding that France and the U.K. wanted to see the issue discussed at the ITU.

But de Rosen acknowledged that Eutelsat was in uncharted territory on an issue with more than business at stake: "There is clearly a lot of emotion on issues around Iran.

($1 = 0.7429 euros)

(Additional reporting by Gwenaelle Barzic and Marie Mawad; Editing by Elaine Hardcastle)

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