EUTELSAT COMMUNICATIONS Investor Presentation May 2016
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot Q3 2015-16 4 Outlook 5 Appendix 2
The satellite value chain Satellite manufacturers Satellite launchers Satellite operators TV broadcasters, Telecoms, Governments Consumers and businesses 3
A robust business model with high barriers to entry Robust business model Significant backlog with long term contracts generating revenue visibility Economies of scale High operating margins Predictable operating cash flow High barriers to entry Finite resource of orbital positions and frequencies, heavily regulated at international level with key commercial orbital positions have already been developed High upfront capex before operations High technology & technical expertise through satellite lifecycle 4
Video drivers: Channel growth and image quality CHANNEL GROWTH INCREASED IMAGE QUALITY TV Channels in EMEA and LATAM HD penetration rate by major region CAGR: +2.7% Europe: -0.1% Others: +3.9% ~25,000 Russia and Central Asia 10% 32% SSA 5% 21% 2024 2014 MENA 12% 31% ~19,000 LATAM 15% 38% Central Europe 14% 47% Western Europe 20% 67% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 North America 37% 76% Predominantly driven by emerging Video markets Everywhere, including mature Video markets Source: Euroconsult 2015 5
Video drivers: Capacity requirements versus compression technology EVOLUTION OF IMAGE QUALITY (NUMBER OF CHANNELS) NUMBER OF CHANNELS PER 36 MHZ TRANSPONDER 25 000 20 000 Rampup Format Modulation MPEG-2 MPEG-4 HEVC 15 000 10 000 1990s- 2000s SD DVB-S 12 20 - DVB-S2-26 - 5 000 2000s- 2010s HD DVB-S 2 to 3 5 - DVB-S2 3 to 4 6 to 8 12 to 15 0 2012 2014 2016 2018 2020 2022 2024 2020s UHD DVB-S2 1 to 2 3 to 4 Standard Definition High Definition Ultra High Definition and 3D Source: Euroconsult 2015, EMEA and LATAM Source: Euroconsult 2015, EMEA and LATAM, Eutelsat 6
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot Q3 2015-16 4 Outlook 5 Appendix 7
Eutelsat in a snapshot KEY DATA REVENUE BREAKDOWN By geography Revenues of 1.48bn Fleet of 40 satellites; global coverage Operating >1,260 transponders 10% 8% 6% 9% 3% Western Europe Central Europe 36% MENA RCA SSA Americas APAC 9% 19% Unallocated and others Broadcasting >6,000 channels By application Backlog of 5.8bn, representing 3.9 years of revenues 7% 14% Video Data services 16% 63% Value-Added Services Government Services Data as of 31 December 2015, except revenues which are as of 30 June 2015 8
Breakdown of revenues by Application Video: 63% Video 63% Direct-to-Home (DTH) Cable headends Professional Video Data: 37% Data Services 16% Value-Added Services: 7% Government Services: 14% Mobile backhaul Corporate networks Broadband Internet Mobility (aircraft, ships) Government and administration Departments of Defense As of 30 June 2015. % of revenues excluding Other revenues and Non-recurring revenues 9
Eutelsat s global network 10
Sound financial structure NET DEBT / EBITDA RATIO 1 Improving Net Debt /EBITDA ratio Average weighted maturity of 3.6 years (vs. 4.1 years at end-dec. 2014) Average cost of debt after hedging: 3.6% (vs. 3.8% one year ago) 3.5 3.4 3.2 Strong liquidity Cash of 563m 650m revolving lines of credit available 31 Dec. 2014 30 June 2015 31 Dec. 2015 1 Based on net debt at the end of the period and last twelve months EBTIDA 11
Shareholder structure EUTELSAT SHAREHOLDING STRUCTURE AS OF 8 MARCH 2016 Bpifrance 26.4% Free float and others 59.9% CIC 1 6.7% FSP 2 7.0% 1 China Investment Corporation 2 Fonds Stratégique de Participations 12
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot Q3 2015-16 4 Outlook 5 Appendix 13
Recent highlights Q3 revenues up 4.2% reported and 1.1% at constant currency Launch of EUTELSAT 9B (Europe) in January and EUTELSAT 65 West A (LATAM) in March Entry into service of EUTELSAT 36C (Russia and SSA) in February, EUTELSAT 9B in March and EUTELSAT 65 West A in April Procurement of all-electric EUTELSAT 7C satellite covering MENA, Turkey and strengthening resources over Africa Procurement of Ground network infrastructure for Russian and African broadband projects Current and next year objectives adjusted to reflect tougher industry conditions Adaptation of strategy to face lower growth environment 14
Q3 Revenues: 383m, +4.2% reported, +1.1% like-for-like 1 REVENUE CONTRIBUTION 2 REVENUES 3 ( m) AT CONSTANT CURRENCY CHANGE (%) REPORTED Video 65% 239 +4.9% +6.1% Data Services 15% 54-12.6% -6.3% Value-Added Services 7% 25 +7.7% +8.0% Government Services 13% 50-7.4% +0.5% 1 At constant currency and excluding non-recurring revenues. 2 The share of each application as a percentage of total revenues is calculated excluding Other revenues and Non-recurring revenues. 3 Total revenues of 383m also include Other revenues of 14m. 15
Video REVENUES ( M) Q3 Revenues of 239m, up 4.9% at constant currency 1 Entry into service of: EUTELSAT 8 West B in October EUTELSAT 36C mid-february Higher revenues at Fransat Lower revenues at HOT BIRD and for Professional Video 6,156 channels at end-march 2016 +7.1% y-o-y Increased HD penetration at 13.1% Q4 Q3 Q2 Q1 235 225 Q3 239 225 Q2 240 228 Q1 229 FY 2014-15 FY 2015-16 1 + 6.1% at actual rate 16
Data Services REVENUES ( M) Q3 Revenues of 54m, down 12.6% y-o-y at constant currency 1-8% excluding reclassification of revenues to Government Services End of contract for Ka-band on EUTELSAT 3B in December Lower revenues at 53 East post rationalisation of capacity in May 2015 Q4 Q3 Q2 61 58 56 Q3 Q2 54 59 Ramp-up of capacity on EUTELSAT 115 West B Negative pricing trends impacting all geographies Q1 Q1 51 59 FY 2014-15 FY 2015-16 1-6.3% at actual rate 17
Value-Added Services REVENUES ( M) Q3 Revenues of 25m, up 7.7% y-o-y at constant currency 1 Positive contribution from KA-SAT 185,000 terminals activated on KA-SAT at 31 March 2016 Continued high loading of some beams. Proactive yield management Q4 Q3 28 23 Q3 25 Rationalization of customer base by certain distributors Q2 25 Q2 25 B2B remains well oriented Q1 26 Q1 30 ARPU trends positive FY 2014-15 FY 2015-16 1 + 8.0% at actual rate 18
Government Services Q3 Revenues of 50m, down 7.4% y-o-y at constant currency 1 Impact of reclassifications from Data Services REVENUES ( M) Early termination of a contract with a distributor in Q1 Q4 55 Ongoing impact of lower renewals with US DoD Q3 49 Q3 50 Re-compete of task orders placed five years ago now mostly completed Attendant downward pricing reset Estimated renewal rate of around 65%, for February-March round Q2 Q1 48 Q2 53 45 Q1 53 FY 2014-15 FY 2015-16 1 +0.5% at actual rate 19
Backlog BACKLOG ( BN) Backlog of 5.9bn, slightly up on end-december New contracts more than offsetting backlog consumption Multi-year renewal of capacity at 36 East with Russian customers 6.4 5.8 5.9 4.0 years of revenues Video stable, accounting for 83% Video 84% 83% 83% 31 March 2015 31 Dec. 2015 31 March 2016 The backlog represents future revenues from capacity lease agreements (including contracts for satellites not yet delivered). These capacity lease agreements can be for the entire operational life of the satellites. 20
Fill rate OPERATIONAL AND LEASED TRANSPONDERS Operational transponders up by 17 Q-o-Q Entry into service of EUTELSAT 9B and EUTELSAT 36C Leased transponders down by 9 Q-o-Q Contract with Multichoice in SSA Reduction of capacity on Telstar 12 Non-renewal of a contract in Professional Video at 10 East 1,181 1,268 1,285 916 938 929 Fill rate diluted to 72.3% reflecting new capacity Fill rate 31 March 2015 31 Dec. 2015 31 March 2016 77.6% 73.9% 72.3 % Operational transponders leased transponders Based on 36 MHz-equivalent transponders (TPE), excluding HTS capacity (KA-SAT 82 spot-beams and EUTELSAT 3B s 5 Ka-band spot beams) 21
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot Q3 2015-16 4 Outlook 4 5 Appendix 22
Focus on three market opportunities VIDEO BROADBAND GEOGRAPHIC FOOTPRINT New platforms in developing markets Higher definition New services to address changing customer usages Acceleration of Investments in HTS Grasping the Internet Broadband opportunity Development of Mobility Investments geared towards highest growth markets Underpinned by innovation to drive growth and efficiency and a solid financial structure 23
Video: Structural growth drivers in fast-growing markets VIDEO ESTIMATED RISE IN MIDDLE-CLASS BY GEOGRAPHY 1 (MILLION OF POP) CHANNELS PER M INHABITANT 2 313 251 234 181 165 31 105 107 57 32 2009 2020 2030 LATAM MENA SSA 2 6 8 8 SSA MENA LATAM Russia Central Asia North America Rise of middle-class with increased spending power Underpenetration of television in fast-growing markets (1) Source: OECD working paper - the emerging middle-class in developping countries (2) Source: Euroconsult 2015, Eutelsat analysis 24
Channel growth in Fast Growing markets VIDEO CHANNELS BROADCAST BY SATELLITE ~12,500 CAGR: 4.0% ~16,200 ~18,500 +4% +6% +3% +4% 2014 2019 2024 HD penetration 11% 20% 32% Russia MENA SSA LATAM Source Euroconsult 2015 25
Satellite Broadband opportunity BROADBAND Internet broadband via satellite a new growth driver for Eutelsat Ka-band HTS already delivering DSL-like quality today and fiber-like quality tomorrow 4.3 Significant future demand both in mature and fast growing markets 4.4 JV with ViaSat to give new impetus to European Broadband; Plans for additional capacity under joint consideration Launch of African broadband strategy; dedicated payloads for LATAM and Russia; other opportunities under consideration 26
Satellite Broadband in Europe: Significant addressable market BROADBAND WESTERN EUROPE: ESTIMATED MARKET FOR SATELLITE BROADBAND IN 2025 (M households) Total residential and business premises in Europe Broader market Available download speeds < 30 Mpbs 4m Core market Available download speeds <8Mpbs 4G networks capacity-constrained Significant addressable market long-term, even larger today Source: Analysys Mason Based on 12 European markets : UK, Ireland, France, Belgium, Netherlands, Luxembourg, Switzerland, Germany, Austria, Italy, Spain and Portugal Estimated market taking into account Governments and Operators announcements 27
Satellite Broadband: Strong potential in developing regions BROADBAND SIZE OF OFFLINE POPULATION (2013, in million) Turkey 40m Russia 55m USA 50m Mexico 69m Iran 53m Egypt 41m Ethiopia 92m China 736m Vietnam 50m Thailand 48m Brazil 97m 0 1,200 Nigeria 108m Congo DR 64m Tanzania 47m Pakistan 162m India 1,063m Bangladesh 146m Myanmar 53m Philippines 62m Indonesia 210m Source: McKinsey offline and falling behind, 2014 28
Fleet plan Name EUTELSAT 36 C EUTELSAT 9B EUTELSAT 65 WA EUTELSAT 117 WB EUTELSAT 172 B EUTELSAT 7C AFRICAN BBAND. SATELLITE Position 36 East 9 East 65 West 116.8 West 172 East 7 East TBD TBD Launch Launched Launched Launched Q2 2016 H1 2017 Q3 2018 2019 2019 Manufacturer Launcher Federal Proton TBD TBD TBD Coverage Russia SSA Europe LATAM LATAM Asia-Pacific MENA SSA Flexible SSA Applications Video Data Broadband Video Video Data Broadband Video Data GS Data GS Mobility Video Data GS Mobility Broadband Total Capacity (TPE/Spotbeams) 48 Ku 18 Ka / 11.6 Gbps 47 Ku 24 Ku 15 C 24 Ka / 37.5 Gbps 48 Ku 42 Ku 24 C 11 Ku / 1.8 Gbps 49 Ku N/A 65 Ka / 75 Gbps 2 Expansion Capacity 1 19 Ku 18 Ka / 11.6 Gbps 12 Ku 24 Ku 15 C 24 Ka / 37.5 Gbps 48 Ku 19 Ku 11 Ku / 1.8 Gbps 19 Ku N/A 65 Ka / 75 Gbps 2 Electrical propulsion HTS Payload 1 Excludes unannounced redeployments 2 Baseline mission. Option to double the capacity 29
Progressive deployment of capacity 31/12/2015 31/12/2016 31/12/2017 EUTELSAT 115 WB October EUTELSAT 8 WB October EUTELSAT 36C EUTELSAT 9 B February March EUTELSAT 65 WA April EUTELSAT 117 WB Q2 +c.7m EUTELSAT 172B H1 +c.4m Eutelsat FY 2015-16 2016-17 2017-18 In service Upcoming launch X Approx launch date X Approx. entry into in service 30
Deteriorating market conditions H1 2015-16 affected by Loss of the HTS contract on EUTELSAT 3B Slowdown of growth on KA-SAT H2 impacted by recent development of several headwinds Slower ramp-up of new capacity as a result of worse than expected environment in LATAM where much of the recently launched capacity has been targeted Intensifying competitive pressure for Data Applications in all geographies exacerbated by arrival of incremental HTS capacity Deteriorated economic context in several emerging markets notably due to declining oil price, geopolitical unrest and currency volatility leading to contracts postponements and terminations Lower renewals in Government Services FY 2016-17 to reflect above elements as well as lower revenues at HOT BIRD Carry-forward effect of return of capacity by some distributors Termination of certain contracts by some end-users (Orange, SRG) Proactive rationalization of contracts with distributors to enhance the commercial model in the longer term 31
Financial outlook adjusted in consequence REVENUES (At constant currency, excl. non recurring revenues) EBITDA MARGIN CAPEX 2015-16: Broadly flat (versus +2%) 2016-17: between -3% and -1% (versus +4-6%) 2015-16: around 76% 2016-17: around 75% (versus above 76.5% for both years) Under review (versus average of 500m 1 per year to June 2018) LEVERAGE Investment grade rating Target net debt / EBITDA below 3.3x (Unchanged) DISTRIBUTION Payout ratio of 65-75% of net income (Unchanged) 1 Inc. cash outflows related to ECA loan repayments and capital lease payments 32
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot Q3 2015-16 4 Outlook 5 Appendix 33
Appendix 5.1 Video 5.2 Broadband 5 5.3 Miscellaneous / Industry information 5.4 H1 2015-16 financials 34
Eutelsat Video hotspots VIDEO EUTELSAT 7 WEST A EUTELSAT 8 WEST B EUTELSAT 115 WEST A** EUTELSAT 115 WEST B EUTELSAT 117 WEST A EUTELSAT 12 WEST B EUTELSAT 36 WA EUTELSAT 10 A EUTELSAT 3B HOT BIRD 13B, 13C, 13D EUTELSAT 21B EUTELSAT 25B EUTELSAT 28E* EUTELSAT 28F* EUTELSAT 28G* EUTELSAT 48A EUTELSAT 48D EUTELSAT 53A* EUTELSAT AT1* (56 E) EUTELSAT 70B EXPRESS AT2* (140 E) TELSTAR 12* 15* W EUTELSAT 5 WEST A EUTELSAT 7A EUTELSAT 7B EUTELSAT 16A EUTELSAT 16C EUTELSAT 31A EUTELSAT 36B EUTELSAT 36C EUTELSAT 33C EUTELSAT 33D EUTELSAT 172A EUTELSAT 9B EUTELSAT FLEET MAY 2016 Stable orbit Inclined orbit * Capacity on third-party satellites Key Video Neighborhoods (>170 channels) 35
Continued audience growth at Eutelsat Video neighbourhoods VIDEO AUDIENCE GROWTH AT EUTELSAT S TOP 8 VIDEO NEIGHBOURHOODS GROWTH IN DTH HOUSEHOLDS DTH IS LEADING TV RECEPTION MODE IN WESTERN EUROPE Audience (M homes) DTH households (M homes) Reception modes in 2014 207 + 32% 274 + 44% 111 160 With the exception of DTT, all other reception modes are not exclusive 27% 32% 53% 58% 16% 25% 2010 2014 13 East 7 East 9 East 16 East 28 East 36 East % 2010 2014 Share of DTH at Eutelsat s top 8 Video neighbourhoods DTH Cable (-3 pts) IP TV (+10 pts) DTT / Analogue (+1 pts vs. 2010) (-8 pts) 5 West 7/8 West Source: Eutelsat TV Observatory 36
Satellite gaining market share worldwide VIDEO MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL 1800 Total number of TV homes to increase by 140 million to 1.7 bn by 2020 Satellite reception to grow by 80 million homes to 440 million by 2020 1600 1400 1200 1000 800 600 362 378 393 407 420 431 442 102 118 134 150 165 177 188 563 561 565 575 583 591 599 Satellite market share to rise from 23% to 26% Growth of satellite in fastgrowing markets, resilience in mature markets 400 200 0 528 520 507 490 478 470 465 2014 2015 2016 2017 2018 2019 2020 Terrestrial Cable IP Satellite Source: Euroconsult, Digital TV Research 37
Impact of OTT VIDEO ON VIDEO AUDIENCE DISTRIBUTION OTT ON NUMBER OF CHANNELS ON LEGACY TV PLATFORMS Satellite will maintain critical mass as the only infrastructure able to reach households with insufficient terrestrial connectivity OTT leading to cord-shaving of nonpremium channels in mature markets Western Europe markets differ from the US Over twice as many channels per M inhabitant in North America Lower Pay-TV penetration in a number of countries in Europe Lower price of Pay-TV bundles (less incentive to cut the cord) OTT offer less diversified in Europe Eutelsat main markets, Poland and Italy, affected later and less Fast-growing markets not significantly impacted in foreseeable future 38
Satellite s competitive advantage over OTT / IP VIDEO COST-EFFICIENCY UNIVERSAL REACH SERVICE QUALITY BROADBAND COVERAGE (>30Mbps) BANDWIDTH REQUIREMENT (Mbps) Cost OTT 1 UHD channel in HEVC 20 86% 1 HD channel in MPEG 4 8 Satellite 40% 27% 1 SD channel in MPEG 2 4 # viewers UK France Italy CDN costs rise in line with audience growth Satellite more cost efficient above 50k viewers in Western Europe Satellite a fraction of TV platforms operating costs High cost of fibre roll-out Terrestrial networks cannot reach entire population Lower image quality Or even no service Satellite providing full coverage of a market Higher quality of image leading to increased bandwidth usage Congestion of terrestrial netwoks Video will represent ~80% of consumer internet traffic by 2019 Satellite and hybrid solutions allowing unimpaired viewing experience Source: Eutelsat analysis, European Commission - Broadband Coverage in Europe 2014, CISCO VNI 2015 39
Case study: Development of hybrid offer in South Korea VIDEO South Korea is one of the countries with the highest fiber penetration KT MEDIA SUBSCRIBERS (M) KT Telecom hybrid offer launched in August 2009 combining IPTV with DTH 8.44 Part of a triple play offer including broadband and Voice over IP Differentiated services offering 4.14 Wide range of linear channels including HD channels (from satellite TV) Significant VOD contents (from IP offer) After adopting the hybrid platform KT was perceived to be superior to cable TV or competitor IPTV Became leading IPTV player Olleh TV (IPTV) Olleh TV Skylife (hybrid) Skylife TV (satellite) 4.55 1.55 0.84 2.15 2.27 2.04 Satellite 2011 2015 Satellite prospering in the land of fiber Source: Eutelsat analysis, company reports 40
Satellite replicating experience available through terrestrial networks VIDEO EXPERIENCE SOLUTION STATUS INTERACTIVITY ON-DEMAND Already in production MOBILITY MULTI-DEVICE Native IP Multiscreen Late stage development ERGONOMIC NAVIGATION Smart EPG 1 Work in progress 1 Electronic program guides 41
Smart LNB: Enabling interactivity for end-users VIDEO Low-cost home device, compatible with existing satellite equipment Providing narrow band return on top of regular DTH reception Enables TV platforms to deploy connected TV services via satellite: Push VOD Pay-per-view Social TV Live show participation 'Smart LNB' Viewer intelligence and remote CPE management Mass market production to begin soon Interest notably in fast-growing markets IP IDU TS Video Video TV reception LAN connectivity 42
Multi-screen delivery solution via satellite VIDEO Eutelsat the first enabler for multiscreen delivery via satellite to portable devices Combination of native IP multicast with local WiFi distribution Compatible with all mobile devices No increase in distribution costs as the number of users increases Benefits for broadcasters OTT via satellite in markets underserved by terrestrial networks Increased channel reach with detailed audience measurement Nomadic TV reception in public spaces Formats tailored for smartphones and tablets enabling up to 100 channels per transponder and richness of channel line-up Universal coverage 43
Appendix 5.1 Video 5.2 Broadband 5 5.3 Miscellaneous / Industry information 5.4 H1 2015-16 financials 44
KA-SAT for European broadband market BROADBAND KA-SAT FOOTPRINT First HTS satellite over Europe Operational since mid-2011 covering Europe and the Mediterranean Basin Addressing Internet broadband markets in areas with limited or no Internet service Total throughput of 90 Gbps Network of ten ground stations 45
Joint-Venture with ViaSat BROADBAND Partnership to jointly develop Broadband in Europe Combining Eutelsat s existing European broadband activity around Ka-Sat with ViaSat s satellite broadband technology and retail expertise Two entities Infrastructure (51% Eutelsat): owning and operating satellite, gateways and terrestrial network, responsible for indirect sales of capacity to distributors Retail (51% ViaSat): development of direct-to-consumer ISP business in Europe ViaSat to pay 132.5m for 49% of Eutelsat s existing European broadband business Earmarked for future Broadband projects Plans for additional capacity over Europe, featuring improvements in bandwidth and cost per bit under joint-consideration Closing expected during Q2 2016 46
to give new impetus to European Broadband BROADBAND + Mixed model combining direct and indirect distribution Faster ramp-up JV to jointly develop European broadband business History of co-operation Unique European broadband activity with 185 k customers Access to state-of-the-art technology ViaSat s experience in direct distribution Improved retention Cost-sharing Mutualizing existing and new capacity 47
African Broadband Initiative BROADBAND AMOS-6 FOLLOW-ON SATELLITE Multi-year lease of Amos-6 HTS Ka-band payload 18 HTS Ka-band spot beams ~18 Gbps o/w c. 50% for Eutelsat Facebook secured as an anchor partner Service expected to start end- 2016 Timely investment opportunity Procurement of a new-generation HTS satellite from TAS All-electric satellite New Spacebus Neo platform Unprecedented flexibility Baseline mission: 65 spotbeams, ~75 Gbps with option to double capacity Quasi-complete coverage of SSA Launch expected in 2019 48
Appendix 5.1 Video 5.2 Broadband 5 5.3 Miscellaneous / Industry information 5.4 H1 2015-16 financials 49
Eutelsat s expansion capacity by geography EXPANSION OF REGULAR CAPACITY (36 MHZ- EQUIVALENT TRANSPONDERS) BY GEOGRAPHY 1 EXPANSION OF HTS (GBPS) CAPACITY BY GEOGRAPHY 7% 7% 75 3 10% 10% 51% 12 38 18 2 2 9% 6% EUTELSAT 36C EUTELSAT 65WA AMOS-6 PAYLOAD EUTELSAT 172B AFRICAN BROADBAND SATELLITE Latin America Asia-Pacific Sub-Saharan Africa Europe Russia and Central Asia North-America MENA Launch Date Q4 2015 Q1 2016 H1 2016 H1 2017 2019 1 Between end-june 2015 and end-dec.2017 based on nominal deployment plan 2 Total leased capacity on AMOS-6, of which c.50% operated by Eutelsat 3 Total capacity for the baseline mission. Option to double the capacity 50
Satellite programme capex profile BREAKDOWN OF CAPEX TYPICAL TIMING OF CAPEX PAYMENTS 30% 30% 40% YEAR 1 YEAR 2 YEAR 3 Others Insurance Launcher Satellite Capex generally split equally over three years prior to launch Insurance paid in year three 51
Satellite economic model 1 : Regular capacity 1 For a greenfield satellite, using chemical propulsion 52
Typical ramp-up profile for a regular capacity satellite Pure replacement Pure expansion Mix of expansion and replacement 90% 90% 90% 60% 60% 60% 30% 30% 30% 0% Y1 Y2 Y3 Y4 Y5 0% Y1 Y2 Y3 Y4 Y5 0% Y1 Y2 Y3 Y4 Y5 Assumption: 50% pure replacement, 50% pure expansion Ramp-up dependent on: mix of replacement vs. expansion region and application Pre-sales not the norm, but occur in fast-growing markets, more common in Video 53
Case study: Ramp-up of 7/8 West orbital position, creating leading Video hotspot in MENA 54
Industry average revenue per transponder 2012-2014 AVERAGE REVENUE PER TRANSPONDER (m$) 3.0 3.1 3.2 2.8 2.7 2.4 2012 2013 2014 1.9 1.8 1.7 1.5 1.5 1.5 1.4 1.3 1.3 1.5 1.5 1.5 1.2 1.3 1.3 1.5 1.5 1.5 1.2 1.1 1.2 1.1 1.1 1.1 1.3 1.4 1.4 1.2 1.2 1.3 North America Latin America Western Europe Central Europe CIS & Central Asia Middle East Sub Saharan & North Africa Africa Southern Asia North East Asia China area South-East Asia Oceania Source: Euroconsult 2015 - Average Revenue per Transponder for regular capacity only 55
Eutelsat Quantum: Cutting-edge technology Software-defined class of satellites First satellite to be launched in 2019 Manufactured by Airbus Defence and Space Incomparable flexibility in terms of: Coverage Bandwidth Power and frequency configurability Premium capacity through footprint shaping and steering, power and frequency band pairing that customers will be able to actively define Targeting for users operating in Government, Mobility and Data markets Example of a coverage hopping between 2 markets Most of the capacity is devoted to Cairo, during day-time in Africa Most of the capacity is devoted to NYC, during day-time in Americas 56
Eutelsat Quantum: Wide-ranging benefits BENEFITING EUTELSAT ITS CUSTOMERS AND THE INDUSTRY AS A WHOLE Better synergy within the fleet Optimized usage of spectral and power resources Future-proof design to cope with market uncertainties First-mover advantage Adaptability to demand in terms of coverage, power and frequency allocation Ideal match for Government, Mobility and surge requirements for Data Applications Independent building blocks from applications and ITU regions From on-demand manufacturing to preproduction of hardware Lower production cost Shorter production cycle A win-win-win innovation 57
LEO constellations Geostationary Orbit (GEO) 36 000 Km LEO offers lower latency than GEO orbit OneWeb Medium Earth Orbit (MEO) ~8 000 Km Low Earth Orbit (LEO) ~ 1000 Km Stratosphere ~ 20 Km In LEO, satellites are moving with respect to earth surface LEO constellations face feasibility and cost challenges: Complexity and cost of ground antennae on the end-users side Cost of the ground segment Efficiency Go-to market approach, particularly in emerging markets Regulatory uncertainty regarding spectrum and country licencing 58
Appendix 5.1 Video 5.2 Broadband 5 5.3 Miscellaneous / Industry information 5.4 H1 2015-16 financials 59
Net income of 188m, net margin of 24% Extracts from the consolidated income statement in m 1 H1 2014-15 H1 2015-16 Var. Revenues EBITDA 2 723 774 + 7.1% 560 600 + 7.3% Positive currency impact of 5.6 points Stable margin Phasing of opex marginally favourable to H1 Operating income Financial charge Income tax 325 361 +11.0% (56) (63) +12.8% (108) (112) +3.3% Increase in D&A following OSD of EUTELSAT 8 West B and EUTELSAT 115 WEST B Positive impact of term loan refinancing Higher capitalized interests Variation in Forex impact Tax rate of 37.7% Income from associates Group share of net income 8 10 +30.2% 161 188 +17.0% Higher contribution of Hispasat Net margin of 24% 1 Rounded to closest million 2 EBITDA defined as operating income before depreciation, amortization, impairments and other operating income/(expenses) 60
Strong cash flow generation In m 217 171 504 1 447 287 276 H1 2014-15 H1 2015-16 % of revenues 70% 30% 40% 58% 22% 36% Free Cash-flow Cash Capex Net cash Flow from operations Free Cash flow: Net Cash Flow from operations Cash Capex Cash Capex includes capital expenditures and payments under existing export credit facilities and under long-term lease agreements on third party capacity 61
Slight decrease in net debt In m 447 Net operating Cash Flow 171 Cash Capex 20 109 Interest paid, net Dividend Payment 19 10 Change in currency component of crosscurrency Others 3,841 swap 3,723 Net Debt at June 30, 2015 Net Debt at Dec 31, 2015 62
Debt maturity schedule 200m 850m 800m 930m 450m 200m 1 800m 4.125% 5.0% 2.625% 600m 1 300m 178m 36m 3.125% 3.125% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Bank debt Undrawn lines of credit Bonds Others Former debt renegotiated in early 2015 Note: Maturities are provided on a calendar year basis figures based on accounts as of 31 December 2015 1 With two possible extension facilities of one year each subject to lenders agreement 63
Disclaimer This presentation does not constitute or form part of and should not be construed as any offer for sale of or solicitation of any offer to buy any securities of Eutelsat Communications, nor should it, or any part of it, form the basis of or be relied on in connection with any contract or commitment whatsoever concerning Eutelsat Communications assets, activities or shares. This presentation includes only summary information related to the activities for the third quarter and the first half of 2015-16 and its strategy, and does not purport to be comprehensive or complete. All statements other than historical facts included in this presentation, including without limitations, those regarding Eutelsat Communications position, business strategy, plans and objectives are forward-looking statements. The forward-looking statements included herein are for illustrative purposes only and are based on management s current views and assumptions. Such forward-looking statements involve known and unknown risks. For illustrative purposes only, such risks include but are not limited to: postponement of any ground or in-orbit investments and launches including but not limited to delays of future launches of satellites; impact of financial crisis on customers and suppliers; trends in Fixed Satellite Services markets; development of Digital Terrestrial Television and High Definition television; development of satellite broadband services; Eutelsat Communications ability to develop and market value-added services and meet market demand; the effects of competing technologies developed and expected intense competition generally in its main markets; profitability of its expansion strategy; partial or total loss of a satellite at launch or in-orbit; supply conditions of satellites and launch systems; satellite or third-party launch failures affecting launch schedules of future satellites; litigation; ability to establish and maintain strategic relationships in its major businesses; and the effect of future acquisitions and investments. Eutelsat Communications expressly disclaims any obligation or undertaking to update or revise any projections, forecasts or estimates contained in this presentation to reflect any change in events, conditions, assumptions or circumstances on which any such statements are based, unless so required by applicable law. These materials are supplied to you solely for your information and may not be copied or distributed to any other person (whether in or outside your organization) or published, in whole or in part, for any purpose. 64