Contemplated Capital Increase of € 1.35 Billion, to Secure the Execution of Eutelsat Long-Term Strategic Vision, Anchored by the French State and Other Reference Shareholders

Eutelsat plans to raise €1.35 billion through a capital increase, anchored by key shareholders including the French State, Bharti Space, CMA CGM, and FSP, to fund its LEO (Low Earth Orbit) strategy and deleverage its balance sheet. The move aims to capitalize on the rapidly growing LEO-enabled B2B connectivity market, projected to expand at a 28% CAGR through 2029, and support Eutelsat's role in European strategic autonomy through programs like IRIS² and partnerships with the French Ministry of Armed Forces. Following the capital increase, the French State would hold a 29.99% stake, while Bharti Space, CMA CGM, and FSP would hold 18.70%, 7.81%, and 5.22% respectively.

Analysis

Eutelsat is undertaking a significant strategic financial maneuver with a contemplated €1.35 billion capital increase, aimed at bolstering its Low Earth Orbit (LEO) ambitions and accelerating deleveraging. This capital injection, strongly supported by key shareholders including the French State (via APE, targeting a 29.99% stake), Bharti Space, CMA CGM, and FSP, underscores confidence in Eutelsat's unique positioning as the sole GEO-LEO operator and the only European entity with a fully operational LEO network focused exclusively on B2B and B2G markets. The LEO B2B connectivity market is projected for robust expansion, with an estimated 28% CAGR from 2025 (valued at over $2.1 billion) through 2029. Eutelsat aims to capture this growth, evidenced by a €3.7 billion revenue backlog predominantly from Connectivity and projected 50% year-on-year LEO revenue growth in FY'2025-26. The capital raise, comprising a €716 million reserved increase at a +32% premium to the 30-day VWAP and a €634 million rights issue, will fund LEO capabilities, including the order of 100 additional satellites and procurement of 340 more for the current constellation, support the future IRIS² constellation (a €2 billion capex envelope from 2027-28), and reduce net debt/EBITDA to approximately 2.5x by FY'2025-26. Financially, Eutelsat targets revenues of €1.5-€1.7 billion and an EBITDA margin of at least 60% by FY'2028-29, despite anticipating FY'2025-26 revenues in line with FY'2024-25 and a slightly lower adjusted EBITDA margin due to impacts from Russian sanctions on its Video business. Gross capital expenditures are set to rise to €1.0-€1.1 billion in FY'2025-26, reflecting accelerated LEO deployment. The company's strategic alignment with European Union and NATO objectives, highlighted by a 10-year, €1 billion framework agreement with France’s Ministry of the Armed Forces, further solidifies its role in critical government connectivity.

Key Decisions for Investors

• Investors should evaluate the long-term growth potential stemming from Eutelsat's strategic pivot to the LEO market, particularly its B2B/B2G focus and unique GEO-LEO offering, against the immediate dilutive impact of the €1.35 billion capital increase.
• Monitor carefully the execution of the LEO deployment, achievement of the targeted 50% LEO revenue growth in FY'2025-26, and progress towards the FY'2028-29 goals of €1.5-€1.7 billion in revenue and over 60% EBITDA margin.
• Consider the positive impact of accelerated deleveraging to c. 2.5x Net Debt/EBITDA by FY'2025-26, which enhances financial flexibility for future strategic investments like IRIS² and potentially improves creditworthiness.
• Assess the strategic value and de-risking factor of increased French State ownership and significant government contracts, such as the Nexus program, which could provide stable, long-term revenue streams in the B2G segment.