EUTELSAT COMMUNICATIONS Investor Presentation March 2018
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot H1 2017-18 performance 4 Outlook 5 Appendix 2
The satellite value chain Satellite manufacturers Satellite launchers Satellite operators TV broadcasters, Telecoms, Governments Consumers and businesses 3
Business characteristics 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 Profitable business model Significant backlog with long term contracts Economies of scale High operating margins Predictable operating cash flow 4
Trends in our core businesses VIDEO: MODEST DEMAND GROWTH FIXED DATA: STRUCTURALLY CHALLENGED GOVERNMENT SERVICES: POCKETS OF OPPORTUNITY Sustained growth in emerging markets Robust channel growth Increasing HD penetration MENA and SSA leading growth Prices well-oriented Broad stability in Europe Broadly stable channel count HD and UHD ramp-up Improving encoding and compression Low growth Global demand driven by increasing connectivity needs Large HTS systems adding to existing overcapacity Ongoing severe pricing pressure More stickiness in certain segments In decline US DoD demand stabilizing, albeit at lower prices Slower migration to HTS than Data Services Opportunities in Europe, Asia and MENA and in non-military Broad stability 5
Longer-term potential in Video and Connectivity VIDEO FIXED AND MOBILE CONNECTIVITY Satellite and IPTV set to dominate global video distribution in the longer term Opportunity to enhance satellite value proposition by offering IP-like viewer experience Outsourcing of services by broadcasters will create additional sources of demand Nascent markets with huge potential Massive growth in bandwidth usage per consumer Medium-term potential in Aero Long-term potential in land Mobility VHTS and VVHTS satellites are pre-requisites in terms of volume and pricing for mass-market adoption 6
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: +1.5% ~24,000 ETL footprint 19% 43% ~20,500 Russia and Central Asia SSA 11% 19% 4% 36% 2026 2016 MENA 16% 38% LATAM 24% 50% Central Europe 19% 50% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Western Europe North America 29% 38% 74% 81% Predominantly driven by emerging Video markets Everywhere, including mature Video markets Source: Euroconsult 2017 7
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 Format Modulation MPEG-2 MPEG-4 HEVC 15 000 10 000 SD DVB-S ~12 - - DVB-S2 - ~26-5 000 HD DVB-S - - - DVB-S2 - ~9 ~15 0 2016 2018 2020 2022 2024 2026 UHD DVB-S2 - - ~3 Standard Definition High Definition Ultra High Definition and 3D Source: Euroconsult 2017, EMEA and LATAM 8
Video: Satellite s competitive advantage over OTT / IP COST-EFFICIENCY UNIVERSAL REACH SERVICE QUALITY BROADBAND COVERAGE BANDWIDTH REQUIREMENT (Mbps) Cost OTT 1 UHD channel in HEVC 20 Satellite 72% 64% 75% 1 HD channel in MPEG 4 7 19% 17% 24% 1 SD channel in MPEG 2 3 # viewers Italy Poland EU Average Satellite a fraction of TV platforms operating costs CDN costs rise in line with audience growth For a large Pay-TV platform, OTT distribution would be much more expensive than satellite Satellite more cost efficient >50k viewers in Western Europe > 30 Mbps of which FTTP High cost of fibre roll-out Terrestrial networks cannot reach entire population Lower image quality Or even no service Satellite provides full coverage of a market Higher quality of image leading to increased bandwidth usage Congestion of terrestrial networks Video will represent >80% of IP traffic in 2021 Satellite and hybrid solutions give unimpaired viewing experience Source: Eutelsat analysis, European Commission - Broadband Coverage in Europe 2016, CISCO VNI 2017 9
Video: Satellite resilience in Western Europe MILLION TV HOMES BY DISTRIBUTION MODE IN WESTERN EUROPE IP GAINING SHARE VS. TERRESTRIAL, NOT SATELLITE 172 173 175 49 49 48 28 31 36 44 43 43 51 50 47 2016 2017 2022 Slight increase in total number of TV homes 175 million Satellite reception broadly stable just below 50 million homes Satellite market share of 28% IP gaining share against terrestrial, not satellite Terrestrial Cable IP Satellite Source: Digital TV Research, 2017 10
Video: Satellite gaining market share worldwide MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL Total number of TV homes to increase by 95 million to 1.7 bn by 2022 Satellite reception to grow by 50 million homes to 475 million by 2022 1604 1624 1720 475 411 426 171 195 247 566 555 560 Satellite market share to rise from 26% to 28% 456 448 439 2016 2017 2022 Terrestrial Cable IP Satellite Source: Digital TV Research, 2017 11
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot H1 2017-18 performance 4 Outlook 5 Appendix 12
Eutelsat in a snapshot KEY DATA REVENUE BREAKDOWN BY APPLICATION By geography Revenues of 1.48bn Fleet of 38 satellites; global coverage Operating >1,400 transponders 7% 11% 10% 5% 5% Western Europe Central Europe 31% MENA RCA SSA Americas 8% APAC 23% Unallocated and others Broadcasting >6,800 channels Backlog of 4.7bn, representing 3.2 years of revenues By application 7% 5% Video 12% 12% 64% Fixed Data Government Services Fixed Broadband Mobile Connectivity Data as of 31 Dec. 2017 except for revenues which are at 30 June 2017. 13
Breakdown of revenues by Application CORE BUSINESSES Video 66% Fixed Data 11% Government Services 12% Direct-to-Home (DTH) Cable headends Professional Video Mobile backhaul Corporate networks Military Security CONNECTIVITY Fixed Broadband 6% Mobile Connectivity 5% Internet access for households and corporates In-flight Connectivity Maritime Connectivity As of 31 December 2017. % of revenues excluding Other revenues 14
Eutelsat s global network March 2018 15
Financial structure NET DEBT / EBITDA RATIO 1 Net Debt/EBITDA ratio reduced to 3.3x versus 3.4x at 31 Dec. 2016 3.4x 3.3x Average cost of debt after hedging reduced to 2.9% versus 3.1% in H1 2016-17 31 Dec. 2016 31 Dec. 2017 1 Based on net debt at the end of the period and last twelve months EBTIDA 16
Bond and Bank Debt maturity schedule ONGOING DEBT OPTIMISATION BOND AND BANK DEBT MATURITY SCHEDULE One year extension of 600m term loan and 200m revolving credit facility Refinancing of 450m revolving facility Pre-hedge: 800m at c. 1.45% ex. spread 800m Pre-hedge: 500m at c. 1.12% ex. spread 930m 200m 2019 and 2020 bonds mid-swaps pre-hedged 5.0 % 2.625% 500m 300m 450m 1 Average debt maturity of 2.5 years 1.125% 600m 3.125% 2019 2020 2021 2022 Undrawn lines of credit (Eutelsat S.A) Outstanding Bonds Term loan / undrawn line of credits of Eutelsat Communications Note: Maturities are provided on a calendar year 1 With 2 possible extension facility of one year subject to lenders agreement 17
Shareholder structure EUTELSAT SHAREHOLDING STRUCTURE AS OF 30 JUNE 2017 Bpifrance 26.4% Free float and others 59.4% CIC 1 6.7% FSP 2 7.5% 1 China Investment Corporation 2 Fonds Stratégique de Participations 18
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot H1 2017-18 performance 4 Outlook 5 Appendix 19
Key data REVENUES Financial outlook First Half 2017-18 Underlying performance Revenues -2 to -1% (at constant currency and perimeter) 697m -5.7% 1 (vs. H1 16-17) EBITDA margin Above 76% (at constant currency) 78.4% 2 +0.5 pts2 (vs. H1 16-17) Discretionary Free Cash-flow Mid-single digit 3-year CAGR 3 (at constant currency) 339m +8% 2 (vs. H1 16-17) Net Debt / EBITDA Below 3.0x 3.3x -0.1x (vs. Dec. 16) 1 At constant currency and perimeter. Revenues down 7.7% on a reported basis. 2 At constant currency. EBITDA margin up 0.3 pts on a reported basis. Discretionary Free cash-flow up 4% on a reported basis. 3 3-Year CAGR between FY 16 and FY 19. Discretionary Free Cash-flow defined as Net cash-flow from operating activities less Cash Capex less Interest and Other fees paid net of interest received. 20
H1 revenues analysis H1 Y-O-Y REVENUE BRIDGE ( M) H1 revenues of 697m -1.8% -7.7% reported -5.7% at constant perimeter and currency Underlying businesses down 1.8% excluding Other revenues 755 (13) (3) (29) (13) 697 Reported H1 2016-17 Currency 1 Perimeter Change in Other Revenues Operational trend Reported H1 2017-18 1 Net of Hedging revenues 21
H1 operating Highlights Entry into service and ramp-up of EUTELSAT 172B with incremental capacity contracted Solid commercial performance to support revenues in the second half MoU with China Unicom to address satellite communications market in the framework of the Belt and Road initiative Acquisition and smooth integration of Noorsat to optimise Video distribution in the MENA region Efficient capex containment underpinning 8% 1 rise in DFCF LEAP cost-savings program ahead of plan 1 At constant currency. 22
Solid commercial performance IN VIDEO IN OTHER VERTICALS HOTBIRD Positive outcome of contract renewal with Cyfrowy Polsat New contract with Mediaset for HD channels Contract at 5 West with Altice-SFR Multi-year agreements for new DTH platforms in emerging broadcast markets Fiji on ETL 172B Caribbean region on ETL 117 WB Favourable outcome of US Government Autumn renewals Incremental business in Government Services at 174 East Multi-transponder agreement with Colombian Ministry of Defence for capacity on ETL 115WB Incremental capacity for in-flight Mobility at 172 East 23
H1 2017-18 Revenues by application REVENUE REVENUES 2 CONTRIBUTION 1 ( m) LIKE-FOR-LIKE 3 CHANGE CORE BUSINESSES Video 66% 449-1.2% Fixed Data 11% 73-10.6% Government Services 12% 81-0.1% CONNECTIVITY Fixed Broadband Mobile Connectivity 6% 44-8.1% 5% 37 +20.6% 1 The share of each application as a percentage of total revenues is calculated excluding Other revenues. 2 Total revenues of 697m also include Other revenues of 12m. 3 At constant currency and perimeter. 24
Video 66% REPORTED REVENUES 1 ( M) H1 revenues of 449m, down 1.2% like-for-like Broadcast revenues up 0.3% excluding end of TV d Orange at HOTBIRD at end-dec 2016 Mid-single digit decline in Professional Video 6,810 channels at end-dec 2017 +7.4% y-o-y HD channels up 28% 18.7% HD penetration (vs 15.7% a year earlier) Q2 Q1 455 452 449 229 Q4 224 Q2 226 227 228 223 Q3 Q1 H1 2016-17 H2 2016-17 H1 2017-18 1 1 Including the contribution of Noorsat 1. 25
Fixed Data 11% REPORTED REVENUES ( M) H1 revenues of 73m, down 10.6% like-for-like 85 83 73 Ongoing pricing pressure in all geographies Q2 41 Q4 41 Q2 36 Not offset by additional volumes Q1 43 Q3 42 Q1 37 H1 2016-17 H2 2016-17 H1 2017-18 26
Government Services 12% REPORTED REVENUES ( M) H1 17 revenues of 81 million, stable like-for-like Solid levels of renewals with the US DoD in the last 12 months Incremental business secured at 174 E covering APAC Multi-transponder contracts Multi-transponder agreement with Colombian Ministry of Defence Q2 Q1 86 90 81 44 Q4 45 Q2 40 42 Q3 45 Q1 41 H1 2016-17 H2 2016-17 H1 2017-18 27
Fixed Broadband 6% H1 revenues of 44m, down 8.1% likefor-like REPORTED REVENUES ( M) Down 5% excluding positive one-off in Q1 last year Underlying decline in Europe 49 47 44 Revenue trend set to improve in H2 with Retail JV up and running Pricing, products and marketing strategy defined Offers launched in Norway, Poland (Dec.), Sweden and Finland (Jan.); other markets to follow Q2 Q1 24 Q4 23 Q2 22 25 Q3 24 Q1 22 Initiatives in wholesale Plan to address low-fill beams Ongoing yield management in high-fill areas H1 2016-17 H2 2016-17 H1 2017-18 28
Mobile Connectivity 5% REVENUES 1 ( M) H1 revenues of 37m, up 20.6% like-for-like Agreement with Taqnia on the HTS payload of EUTELSAT 3B Growing wide-beam capacity sales at several orbital positions: 172 East 115 West Q2 33 18 Q4 36 19 Q2 37 19 117 West EUTELSAT 172B bringing additional dedicated capacity in FY 2017-18 HTS Payload fully contracted Incremental wide-beam capacity contracted for in-flight Mobility. 2 15 Q3 17 Q1 19 Q1 H1 2016-17 H2 2016-17 H1 2017-18 1 Proforma revenues reflecting new applications as well as the disposal of Wins for H1 2016-17 29
Backlog and Fill Rate BACKLOG ( BN) OPERATIONAL AND LEASED TRANSPONDERS 1,326 1,372 1,416 5.3 5.2 0.8 0.8 Noorsat (0.4) 4.7 0.7 940 931 949 4.0 4.5 4.3 31 Dec. 2016 30 June 2017 31 Dec. 2017 Video Others Fill rate 31 Dec. 16 30 Jun. 2017 31 Dec. 17 70.9% 67.9% 67.0% Operational transponders Backlog evolution reflecting mainly the impact of the integration of Noorsat 3.2 years of revenues Video accounting for 85% OSD of ETL117 WB in Jan 17 and ETL 172B end-nov 17 18 incremental TPE leased since June 17 Based on 36 MHz-equivalent transponders (TPE), excluding HTS capacity 30
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot H1 2017-18 performance 4 Outlook 4 5 Appendix 31
Reminder: Our strategic roadmap STEP 1 STEP 2 GROW CASH-FLOW 2016-2019 GROW TOPLINE 2019-2025+ 2017-19 Maximise Free Cash-Flow generation Build on our core video business to accelerate growth Capture longer term potential in Connectivity 32
Maximize free cash-flow: Financial measures CAPEX REDUCTION LEAP COST-SAVINGS PLAN Implement design to cost approach Ground capex under strict control Average annual cash Capex reduced by > 80m 1 Launch of «LEAP», a wide-ranging cost-savings plan with a focus on external costs Annualised savings of 30m by FY 2019 of which 15m in FY 2018 1 OPTIMIZATION OF COST OF DEBT OTHER MEASURES 500m bond issue at 1.125% coupon Refinancing of 850m Mar. 2017 Bond (4.125% coupon) Swap-lock ahead of 2019 800m bond Locked at c. 145 bps, (-90 bps) Swap-lock ahead of 2020 930m bond 500m locked at c. 112 bps Annual savings of c. 30m from 2017 onwards, c. 50m from 2019 1 Streamlining the asset portfolio: agreement reached with Abertis for Hispasat stake ( 302m) Improving working capital through DSO optimization 1 Savings vs. FY 2015-16 basis 33
Build on our core Video business to accelerate growth; capture longer term potential in Connectivity MEDIUM TERM (FROM FY 2019) LONG TERM (FROM FY 2021) VIDEO Build on our core business to accelerate growth FIXED BROADBAND Prepare for scalability MOBILE CONNECTIVITY From niche to mass market Growth potential of Video Opportunity for further value creation Harnessing technology Optimize existing assets within a limited current addressable market Progress on prerequisites for scalability Decide on scale and location of investments Use existing assets to anchor foothold in the market Selectively invest in capacity to improve coverage Pave the way for Mass market 34
Video: Build on our core business to accelerate growth GROWTH POTENTIAL OF VIDEO OPPORTUNITY FOR FURTHER VALUE CREATION HARNESSING EXISTING TECHNOLOGY Video via satellite will continue to grow Distribution will be split between satellite and IPTV longer term Outsourcing of services by broadcasters will create additional sources of demand Greater integration within the IP ecosystem Enhance viewer experience Add new services for broadcasters, advertisers and consumers Develop connected terminals Improve efficiency Compression Encription Security Increase revenue Metadata management Targeted advertising Payment Enhance loyalty Multiscreen Smart EPG TV everywhere Enhance end-viewer experience to reinforce customer loyalty and generate additional revenue opportunities 35
Connectivity: Agreement with ViaSat CLOSING OF JV AGREEMENT WHAT S NEW? Combining Eutelsat s European broadband business with ViaSat s expertise Two entities: Infrastructure (51% Eutelsat) Retail (51% ViaSat) ViaSat paid 132.5m for 49% of European Broadband business Initial JV perimeter extended to include both Fixed Broadband AND in-flight Mobility Initial technical assessment of Viasat 3 VHTS technology successfully completed ViaSat-3 EMEA satellite expected to be added to the joint venture Platform to drive growth acceleration in Connectivity vertical from early 2020s 36
paving the way for the longer-term opportunity Significant longterm potential Core market for Fixed Broadband via satellite estimated at c.5m households in Europe in 2030 1 Global revenues for in-flight Connectivity capacity expected to exceed 1bn in 2025 VHTS gamechanging technology Provision of fibre-like service Production costs enabling transition from niche to mass market Springboard for growth rebound from 2020 Managed within current capex and profitability framework Early mover advantage Strong technology partner Combining ViaSat s distribution know how and Eutelsat s established positions and go-to-market experience Shared Investment with ViaSat KA-SAT funds earmarked for VHTS investment Eutelsat retains an infrastructure business model with no impact on margins 1 Households with Fixed Broadband connection below 10 Mbps and no indoor LTE coverage 37
Y-o-Y revenue trend to improve in the Second Half 2017-18 revenue path back-end loaded HALF-YEAR PROFORMA REVENUES IN FY 2016-17 AT H1 2017-18 EUR/USD RATE (1.17) Comparison base to ease in H2 Lower Other revenues End of TV d Orange on 31 Dec. Easier comps for Fixed Data 734 41 699 13 H2 benefiting from: Entry into service of ETL 172B New business secured at the end of calendar year 2017 693 686 H1 H2 Other revenues Revenues excluding Wins/DHI and DSAT Cinéma at 1.17 EUR/USD rate 38
Financial outlook REVENUES (At constant currency, and perimeter) -1% to -2% in FY 2017-18 1 Return to slight growth from FY 2018-19 EBITDA MARGIN (At constant currency) Above 76% in FY 2017-18 Above 77% from FY 2018-19 CAPEX DISCRETIONARY FREE CASH FLOW 3 (At constant currency) LEVERAGE FY 2017-18 to FY 2019-20: average of 420m 2 per year FY 2017-18 expected below 420m average FY 2016-17 to FY 2019-20: mid-single digit CAGR Investment grade rating Net debt / EBITDA below 3.0x DISTRIBUTION Stable to progressing dividend 1 Based on Proforma revenues of 1472m for FY 2016-17 excluding the contributions of Wins/DHI and DSAT; 2 Inc. cash outflows related to ECA loan repayments and capital lease payments; 3 Net cash-flow from operating activities less Cash Capex less Interest and Other fees paid net of interest received. Three year CAGR calculated on the period FY 2016-17 to FY 2019-20. 39
Future launches Name EUTELSAT 7C EUTELSAT 5 WEST B AFRICAN BROADBAND SATELLITE Orbital Position 7 East 5 West TBD TBD Launch date 1 H2 2018 H2 2018 2019 2019 Manufacturer Launcher Coverage MENA SSA Europe North Africa Flexible SSA Applications Video Video Government Services Broadband Total Capacity (TPE/Spotbeams) 49 Ku 35 Ku N/A 65 Ka / 75 Gbps o/w Expansion Capacity 2 19 Ku - N/A 65 Ka / 75 Gbps Electrical propulsion HTS Payload 1 Calendar year 2 Excludes unannounced redeployments 40
Agenda 1 FSS Industry 2 3 Eutelsat in a snapshot Q1 2017-18 performance 4 Outlook 5 Appendix 41
Appendix 5.1 H1 2017-18 financials 5 5.2 Miscellaneous 42
Profitability EBITDA ( M) Rise in EBITDA margin to 78.4% at constant currency despite lower Other revenues Favourable phasing of certain operating costs Positive impact of LEAP cost saving plan Ahead of plan at the Half Year Margin at constant currency (%) 588 545 77.9 78.4 1 77.4 77.4 77.5 H1 2016-17 H1 2017-18 1 Reported EBITDA marging stood at 78.2% 43
Net income Extracts from the consolidated income statement in m 1 H1 2016-17 H1 2017-18 Change Revenues 755 697-7.7% EBITDA 2 Operating income Financial result Income tax 588 545-7.4% 337 280-16.9% (60) (56) -6.4% (78) (61) -22.5% Lower D&A reflecting end of life / full depreciation of several satellites Capital gain on Wins/DHI last year ; negative accounting one-off this year related to Noorsat acquisition Lower cost of debt following reimbursement of Mar 17 bond Negative variation in Forex gains and losses Non-cash positive one-off related to future reduction in French tax rate Group share of net income 192 157-18.6% Net margin of 22.5% 1 Rounded to closest million 2 EBITDA defined as operating income before depreciation, amortisation, impairments and other operating income/(expenses) 44
Discretionary free cash flow up 8% At constant currency In m +8% at constant currency (53) (21) (13) Currency impact 412 1 (1) 339 Net cash Flow from operations Cash Capex (1) Interest and Other fees paid net of interests received Discretionary Free Cash-flow Change -70 +77 +6 +14 H1 2016-17 482 (130) (27) 325 (1) Cash Capex includes capital expenditure and payments under existing export credit facilities and long-term lease agreements on third party capacity. 45
Net debt stable after dividend payment and Noorsat acquisition In m - 10m 89 (32) (24) (339) 295 3,641 3,630 Net Debt at end- June 17 Discretionary Free Cash Flow Dividends paid Equity investments FX portion of CC Swap Change in fin. leases / ECA and Others Net Debt at end-dec. 17 46
Appendix 5.1 H1 2017-18 financials 5 5.2 Miscellaneous 47
HOTBIRD: HD ramp-up continues to outpace MPEG 4 transition rate Resilient channel count 1,012-43 -1% 1,002 Dec. 16 Dec. 17 247 +23% 304 Acceleration in HD ramp-up Dec. 16 Dec. 17 MPEG-4 still rising but at a lesser pace than HD +9% 502 548 Dec. 16 Dec. 17 Figures at end Dec. 16 exclude Orange TV 48
Evolution of used capacity at HOTBIRD KEY TRENDS BY FY 2021 EVOLUTION OF CAPACITY USED Positives HD penetration to reach 50% (vs. c. 25% today) >20 UHD channels (vs. <5) Negatives Reduction in simulcast (from 10% to 5% of total channels) Efficiency gains (coding, modulation, compression) +37 (20) 100 (17) 109 FY 17 In Mbps (base 100 in FY 2017) SD channel reduction Efficiency gains HD channel increase +9 Sensitivity: a variation of 10 channels would have a 1 point impact on capacity used UHD channel increase FY 21 New pricing model based on Mbps Increase in Mbps used => revenues at least stable 49
Acquisition of Noorsat: Streamlining Video distribution INCREASE DIRECT CUSTOMER ACCESS BY INTEGRATING DISTRIBUTION Increase our control over the commercial development of MENA Hotspots Increase our direct access to the end clients: Boost HD adoption Upsell incremental Video Services Leverage on salesforces for crossselling Internalize the distribution margin Noorsat in a snapshot One of the largest distributors of video in MENA c. 300 channels Blue chip customers Financial impacts Acquisition price of c. 75 M$ > $15m on revenues 1 Slightly dilutive margin impact absorbed within objectives - 0.4bn on backlog 1 annualized basis net of capacity purchased by Noorsat from Eutelsat 50
Video Case study: Development of hybrid offer in South Korea VIDEO KT MEDIA SUBSCRIBERS (M) South Korea is one of the countries with the highest fiber penetration KT Telecom hybrid offer launched in August 2009 combining IPTV with DTH Part of a triple play offer including broadband and Voice over IP 9.71 5.35 Differentiated services offering Wide range of linear channels including HD channels (from satellite TV) Olleh TV (IPTV) 1.55 4.55 Significant VOD contents (from IP offer) After adopting the hybrid platform KT was perceived to be superior to cable TV or competitor IPTV Olleh TV Skylife (hybrid) Skylife TV (satellite) 0.84 2.15 1.94 2.43 Satellite Became a leading IPTV player 2011 2017 Satellite prospering in the land of fiber Source: Eutelsat analysis, company reports 51
Video via satellite: Italian market focus SKY ITALIA SATELLITE SUBSCRIBER DEVELOPMENT Eutelsat s number one Video market Sky Italia retail customers, in 000 subs Unrivalled distribution cost Eg: Sky It is paying c. 90m /year to distribute 260 channels to 4.8 M households 4,833 4,760 4,734 4,700 4,809 4,768 This represents c.7 cents per channel per household per year Low terrestrial infrastructure penetration Sky Italia available via Telecom Italia terrestrial since 2015 Sky Satellite subscribers have risen since then Dec12 Dec13 Dec14 Dec15 Dec 16 Dec 17 Launch of OTT Source: OECD, Sky reports 52
Fixed Broadband: Preparing for mass market adoption BRIDGE DIGITAL DIVIDE IN-MARKET PROPOSITION INDUSTRIAL TRANSLATION TIMING Deliver fiber-like capacity (30 Mbps) Reach fiber-like pricing ( 40 / month) Lower barrers to adoption Assess adressable market Develop appropriate distribution VHTS satellites 1m / Gbps Terminals < $200 Refine assessment of fiber deployment Test and validate business models 2020-21 C.2019 2018 onwards 2016-18 Use the time to VHTS to prepare for mass market: optimize existing or committed assets (KA-SAT, Russian and African Broaband) and validate go-to-market models 53
Mobile Connectivity: Market foothold with existing assets BRING FIBER-LIKE CONNECTIVITY IN MOBILITY IN-MARKET PROPOSITION INDUSTRIAL TRANSLATION TIMING Deliver streaming-like experience for IFEC 1 Mbps / passenger for 50% of passengers VHTS satellites 1 Terabyte satellite 2020-21 Deliver on-the-move fiber-like Connectivity for ground transportation VVHTS Flat terminals 2025-2035+ Pave the way by leveraging our existing assets in Aero (172 East, 10 East, 117 East, KA-SAT), selectively invest to improve coverage, and seek partnership deals with stakeholders for each vertical 54
Strong pipeline for in-flight Connectivity KA-SAT EUTELSAT 172B OTHER RESOURCES Several contracts signed using capacity on KA-SAT over Europe Finnair SAS El Al Icelandair Eutelsat provides satellite capacity, ViaSat is the prime contractor Customised HTS payload to support IFEC growth over APAC Fully sold to 2 major customers Panasonic China Unicom Panasonic to use also widebeam capacity to deliver live TV to aircrafts Contract with Taqnia for four HTS Ka-band spotbeams on ETL 3B Capacity to be used for 100 medium / long-haul aircraft of Saudi Arabian Airlines Several contracts for the use of widebeam capacity by major service providers 55
Stepping up cooperation with China Unicom Historic and strong partner in the region New MoU addressing satellite communications market in the framework of the Belt and Road initiative Remaining HTS capacity on ETL 172B contracted for in-flight Connectivity Considering further jointdevelopment of satellite communication services 56
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 and Mobility 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 57
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 58
Design-to-cost: EUTELSAT 5 West B case study DESIGN-TO-COST Improved match of coverage with customer requirements Lower cost of payload Smaller platform LAUNCH Shared launch in a stacked configuration on a Proton rocket Lower launch cost Lower insurance cost >30% 1 in capex savings Improved IRR Enhanced performance (1) relative to the theoretical cost of replicating EUTELSAT 5 West A s Ku band mission 59
Satellite economic model 1 : Regular capacity 1 For a greenfield satellite, using chemical propulsion 60
LEAP Programme: 30m cost-savings by 2019 LAUNCH OF LEAP WITH IDENTIFIEDSAVINGS TIMING AND IMPACT OF LEAP EBITDA margin above 75% Scope for improvement relative to best-in class c. 140m of adressable costs identifed Out of total opex base of c. 340m Target of >20% reduction Based on granular internal analysis and benchmarking FY 2016-17 FY 2017-18 FY 2018-19 Launch and quick wins 15m savings 30m savings EBITDA margin 1 target raised* Cost savings target attributed to each manager with attendant incentivisation >76% >76% >77% *from >75% previously for the three years 1 At constant currency 61
IR Contacts Joanna DARLINGTON T: +33 1 53 98 31 07 E: jdarlington@eutelsat.com Cédric PUGNI T: +33 1 53 98 31 54 E: cpugni@eutelsat.com 62