CORPORATESSECTOR IN-DEPTH 26 January 2016TABLE OF CONTENTS Summary 1Larger European satellite services operators' organic revenue growth is likely to rebound in 2016 2Larger players operating margins should remain broadly stable in 2016 while Avanti's margins are likely to continue improving 6Capital spending is likely to moderate in 2016 toward its long term average 7 A higher-than-usual number of satellite launch delays in 2015 weighed on most European operators' earnings and revenues in 2015 8 The US dollars appreciation was slightly positive for the larger European satellite operators in 2015 but those effects are likely to fade in 2016 11Most operators' key credit metrics expected to remain broadly stable in 2016 12Appendix 18Moody's Related Research 19ContactsMichael Mulvaney 44-20-7772-1385 MD-Corporate Finance michael.mulvaney@moodys.comAlejandro Nunez 44-20-7772-1389 VP-Senior Analyst alejandro.nunez@moodys.comMikel Zabala 44-20-7772-5620Associate Analyst mikel.zabala@moodys.comMichelle H Cheng 44-20-7772-1038 Associate Analyst michelle.cheng@moodys.comSatellite Services - EuropeA Rebound in Revenue Growth, Stable Margins and Plateauing Capex to Support Credit Quality in 2016 Summary¯ Larger European satellite services operators' organic revenue growth is likely to rebound in 2016 after stagnating in 2015. We foresee aggregate organic revenue growth of 3% (at constant currencies) for Eutelsat S.A. (Baa3 positive), Inmarsat plc (Ba1 stable) and SES S.A. (Baa2 stable) and a higher growth rate for Avanti Communications Group plc (Avanti, Caa1 stable), a niche emerging markets operator. Over the nearto medium term, operators exposed to fixed and mobile data services, particularly enterprise networks and consumer broadband, and to emerging markets are likely to exhibit stronger growth.¯ Larger satellite companies' operating margins should stay broadly stable in 2016 while Avanti's margins are likely to continue improving. We expect SESs and Eutelsats EBITDA margins to remain in the range of 74%-77% and Inmarsats to stay between 52% and 55%. Avantis EBITDA margin is likely to trend above 20% in the near term reflecting its earlier stage of development.¯ Capital spending is likely to moderate in 2016 toward its long term average. Although we expect the sectors capital expenditure (capex) as a percentage of revenues (excluding Avanti) to average 33% in 2015-2016, we project this capex-to-revenues level will decline in 2017 to under 30% and below its long term average of 34%.¯ A higher-than-usual number of satellite launch delays in 2015 weighed on most European operators' earnings and revenues. In 2015, SES and Inmarsat were the most adversely affected by the SpaceX and Proton rocket launch delays and failures and we believe they are the most exposed to further potential launch delays or failures in 2016 and 2017.¯ The US dollars appreciation had a slightly positive effect in 2015 on the reported results of some ope...
