July 27, 2018 / 6:27 AM / 23 days ago

Satellite company SES beats forecasts on strong networks growth

(Reuters) - Satellite company SES SESFg.LU beat core profit forecasts for the second quarter in a row on Friday thanks to strong growth in its networks business, sending its shares up over 7 percent.

Faced with challenges in its core video business as a result of the increasing popularity of online streaming services such as Netflix, SES has been expanding fast into mobility, providing connectivity services such as Wi-Fi to planes and ships.

“We’re seeing the benefits of the decisions we’ve made and the investments we’ve made, particularly in our Networks business,” Chief Executive Steve Collar told Reuters in a telephone interview.

Collar pointed to the recently-launched satellites SES-14 and SES-15, which were designed around providing internet for planes, as examples of this investment push.

SES had timed its investment in the airborne internet business, known as aeromobility, “just right as that market is taking off,” he said.

The Luxembourg-based company’s first-half earnings before interest, tax, depreciation and amortization (EBITDA) fell 4.4 percent at constant exchange rates to 621.1 million euros ($723.5 million). Analysts polled for the company had on average expected EBITDA of 610.1 million euros.

The company confirmed its guidance for 2018 revenue and EBITDA, saying revenue was expected in the top half of the range of 1.990-2.035 billion euros previously given.

However, it cut its 2020 revenue guidance to 2.110-2.210 billion euros from its previous target of over 2.235 billion euros, reflecting a more cautious outlook for its Video business.

Despite the prudence over the outlook for Video, Collar said it will continue to be the company’s core business.

“I think of Video as pretty stable...it’s the bedrock of everything that we do’” he said.

“Networks on the other hand is a very exciting growth business and it will be the engine of growth for many years to come.”

UNIQUE OPPORTUNITY

SES and rivals Intelsat (I.N) and Eutelsat (ETL.PA) have made a joint proposal to the U.S. Federal Communications Commission to free up space on the C-band spectrum for the rollout of high-speed 5G mobile networks.

SES’s shares have seen a string of broker upgrades, as analysts bet their proposal will be accepted and they will profit from the sale of spectrum to mobile operators.

“I think we really have a unique opportunity here, I think that the satellite industry and the mobile industry have been somewhat at war over spectrum for a decade,” said Collar.

While saying it was too early to speculate on the financial implications for SES, he said there would have to be “appropriate consideration” for satellite companies’ investments to make freeing up space possible.

Reporting by Alan Charlish in Gdynia; Editing by Gopakumar Warrier and Adrian Croft

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