Giuliano Berretta: we are looking for external
growth opportunities, and have financing in place for
Satellite operator Eutelsat is developing a solution for
telecoms operators that want to deliver ADSL-standard broadband
services to remote places. A new high-powered satellite is due
for launch in 2010 - but before then the Paris-based company is
running a trial system with Swisscom.
If you have a terminal - $450 now, $270 soon - "you can have
your connection to the high-speed internet on top of the
Matterhorn" with your laptop, says Eutelsat's CEO Giuliano
Maximum bandwidth is two megabits now but 10 megabits when the
new satellite is launched and a new generation of user terminal
is on the market.
And Eutelsat's US partner in the project, ViaSat, is planning
its own version of the same satellite, to cover North America,
Eutelsat will not be selling broadband services direct to the
consumer. It will follow its traditional role, as a wholesale
supplier to telecoms operators, which will package Eutelsat's
bandwidth into services for customers.
Swisscom became the first operator to sign up to deliver the
service - called Tooway - in January 2008.
"Swisscom won the Swiss government tender for universal high
speed internet service in Switzerland," says Berretta. "They
tested our system and selected it as the best one available on
the market for this service. Swisscom estimates their initial
needs to up to 10,000 terminals."
Eutelsat is also talking to Swisscom's Italian broadband
subsidiary, Fastweb, about extending the service south of the
Alps, he says. And in June 2008 the company announced a Tooway
partnership with a German company, TelDaFax.
But that's for the pilot, borrowing capacity on an existing
satellite. The real explosion in capacity will come after 2010,
with the launch of the new KA-SAT satellite, now in development
by EADS Astrium in Toulouse.
"The KA-SAT satellite was ordered in December 2007 and it will
be delivered at the end of 2010," says Berretta. "It takes
longer than other satellites to build because it is very
It will have a total capacity of over 70 gigabits a second, he
adds, "which is almost twice that of the total fleet of
Eutelsat today". He puts the cost per bit at one eighth the
current price, so it will allow Eutelsat's retail partners "to
offer services at consumer appealing prices", he says.
Users will need to have a dish pointing at the satellite - 67
centimetres in diameter, similar to those used for digital TV
today - and a terminal, about the size of a book, to connect
into their computer. To keep costs down, and to avoid the need
to develop new technology, Eutelsat and ViaSat have chosen to
use the existing DOCSIS standard used by cable operators to
deliver high-speed internet.
"We can talk about different types of speeds, but technically
the new terminal will be capable of supporting up to 90
megabits a second for downloads and up to 10 megabits a second
for uploads," says Berretta.
"The standard service for internet access will be offered at
speeds of 8-10 megabits for consumer applications." The price
and speed with be "comparable to ADSL2", he emphasises.
Middle East service
The satellite will have so much capacity because its
antennas, 36,000 kilometres up in space, will be beamed in 80
different spots across Europe. Spots will be about 250
kilometres in diameter, and they will overlap, so the satellite
will be able to cover not just most of Europe - areas in the
far north get tricky, as satellites are too low on the horizon
- but also North Africa as far west as Morocco and the Middle
Where will the main market be? Hard to say at this stage, but
it's likely that much of the enthusiasm will come from those
countries where there's good quality broadband in urban
If town-dwellers get several megs all the time, it will be
easier to market to their friends and family who are stuck with
dial-up because they live at the end of a 20 kilometre track.
But that will be a task for the telecoms operators that take
the service from Eutelsat and develop it into retail
The system will be controlled from eight base stations on the
ground, spread out across Europe to enable re-use of
frequencies, with two back-ups, linked by what Berretta calls
"a motorway in fibre" which will be supplied by wholesale
The name, by the way, simply borrows from satellite engineers'
name for the 20 gigahertz band it will operate on: the Ka band,
above the Ku band that digital TV satellites use today.
Eutelsat plans to put KA-SAT alongside its existing Hotbird
range of TV satellites, so that end users will need just one
dish - with some clever electronics - to feed video channels to
their TV set and broadband to their PC.
Berretta believes that some of Eutelsat's existing customers -
the satellite TV broadcasters - will be interested in
delivering pay-per-view IPTV over the broadband service. "Maybe
pay TV companies will be interested," he says. "We are
discussing with the major players. And we are discussing with
the telcos about IPTV service and high-speed internet in areas
where they cannot reach."
IPTV over ADSL does not always work well in areas remote from
the telco's exchange, where bandwidth drops to below a usable
level, he points out. "So they need an alternative system. We
think that we are in front of a revolution."
ViaSat already has experience of satellite broadband in the US,
where it provides the decoder technology for WildBlue
Communications, a company - part-owned by Eutelsat's rival,
Washington-based Intelsat - which specialises in delivering
internet services in remote regions.
Berretta makes much of the importance of ViaSat in this
project. "We are working together and will be the only ones
using their technology in Europe, but the cooperation could go
further," he says. "We are more than customers. Our
collaboration with ViaSat is a win-win situation."
ViaSat's own satellite, ViaSat 1, is due for launch in 2011, he
adds. It is "very much on the same concept as ours. Their
satellite will cover North America - the same model of
satellite." Eutelsat wants to give ViaSat "more support in
becoming a satellite operator in their chosen market in North
America", he adds.
The relationship is particularly intriguing because it hints
at ambitions beyond Europe for Eutelsat - in a world where
satellite operators are consolidating faster than incumbent
telcos. Eutelsat's great European rival, Luxembourg-based SES,
or Société Européenne des Satellites, has
hoovered up AsiaSat, Americom and New Skies to become a global
Eutelsat is still essentially European, and Berretta is
particularly sensitive about this as, he says, he stopped the
company from being sold to one of its rivals several years ago:
he didn't say to which.
Berretta is the man who in a decade has taken Eutelsat from
being an international treaty organisation to a private company
- a process that Intelsat and London-based Inmarsat went
through at a similar time.
"I was director general of Eutelsat as an international
organisation from the beginning of 1999. It took two years and
a half to privatize with a lot of challenges to address to
transform the international organisation into a private
company," he says.
"It was also important for it to be an efficient private
company - because we were already considering the next logical
step which was to quote the company. So the first thing to do
was to get into a satisfactory financial situation."
As an international organisation it was doing very well, but it
was under-capitalised at that time, he recalls. "The states
were behind guaranteeing the debt, but the signatories were not
putting money into the organisation. Just to give an extreme
example, in 1993 we had a debt-equity ratio of sixteen to one,
which is extremely leveraged even by the standards of leveraged
But nations do not guarantee European Investment Bank loans to
private companies, so he had "to bring the debt-equity ratio to
a level one to one at the moment of privatisation".
He achieved it just too late: in the aftermath of 9/11, the
financial markets were no longer interested. Other satellite
operators, and other telcos, had similar challenges. The
company dropped its plans for a stock exchange listing.
"It was also a moment when the company risked disappearing
in the hands of a competitor," he says. "Shareholders asked me
to sell the company, although this was not how I saw the future
of Eutelsat, particularly considering our character as a
European company with a strong track record of developing
technology and services."
So, in parallel with many other satellite operators, private
equity was the answer. After a bit of shuffling of
shareholders, Eutelsat became owned by five private equity
shareholders: Eurazeo, Cinven, Goldman Sachs, TPG - Texas
Pacific Group - and Spectrum from Boston.
Almost three years ago the company was able to revive its plans
for listing: 42% was floated on the Paris exchange in December
2005. "We came out of the first day at €11.80 - and
despite all the difficulties in the market at the moment we are
still about €18," says Berretta. "We have outperformed the
CAC 40 and the general industry, even in front of our main
Since 2006 the rest has been owned by Abertis, a Spanish
infrastructure group which bought a 31.5% stake from four of
the previous shareholders, and French financial group La Caisse
des Dépôts, which bought Eurazeo's stake. "We went
from private equity to a new era of stability and continued
effort into developing the company," he says.
And now? Berretta has his eye on a role in the consolidation of
the satellite business.
"Of course, we are looking for external growth opportunities,
and have financing in place for acquisitions," he says.
"So far our main focus has been on organic growth, building
strong video neighbourhoods by positioning multiple satellites
at a single position, and opening orbital positions to address
new markets and expand our geographic reach beyond our core
markets of Europe, North Africa and the Middle East."
The company is spending a lot on new satellites: "We now
have seven satellites in construction and due for launch by end
2010," he says. "This is one of the largest investment
programmes by a satellite operator and will enable us to renew
and expand capacity as well as increase in-orbit
But, he adds, "we could increase our debt because we have the
possibility to draw finance under very good conditions". Debt
is currently €2.4 billion and the debt to EBITDA ratio is
3.48, "within what we currently consider to be the right range
for our company", he adds. "When we went to the stock exchange
our debt was much higher. We were leveraged by over 5.5 times
EBITDA, and by quoting the company we could reduce it."
One of the attractive features about satellite operators - Matt
Desch, CEO of Iridium, make a similar remark to GTB in his
interview in the May-June 2008 issue - is that they are cash
generators. "Our net cash flow from operating activities for
the last financial year is up by 7.4% to €566.6 million,
representing more than 64.5% of revenues," says Berretta.
So is he looking around? Berretta is too careful to say, but
one long-term possibility could be Intelsat itself, which in
2006 bought US rival PanAmSat for $3.2 billion.
Intelsat is also private-equity owned - after similar
challenges to Eutelsat's earlier in the decade - but in 2007 a
London-based private equity firm, BC Partners, bought a 76%
stake from a consortium including Apax Partners and Apollo
Management for around $5 billion. The consortium held onto the
"Buying Intelsat was typically the type of transaction that
private equity companies might consider," says Berretta.
"Considering the high debt raised and high leverage of the
company, the latest results show that BC Partners and the
management are doing well." He's clearly watching
KA-SAT is not the only high-tech project that Eutelsat is
involved in. The company has set up a joint venture, called
Solaris, with rival company SES to deliver TV to mobile
This will use a set of frequencies close to those used by 3G
networks, hopefully to minimise the cost of adding satellite
reception to the handsets. The satellite is another of those in
production - this one due for launch in 2009.
SES and Eutelsat has appointed Steve Maine to run Solaris, with
a headquarters in Dublin. Maine is one of the true pioneers of
satellite TV: over two decades ago, as a senior executive at
what was then British Telecom International, he was one of a
group of visionaries who spotted the opportunity for using
medium-power satellites to deliver a wide range of channels
directly to viewers' homes.
Within a couple of years Rupert Murdoch had developed a small
investment in an experimental service into Sky Television, and
investors started SES to launch a pan-European satellite which
broadcast a remarkable payload for the time of 16 TV
Today, says Maine, "we are standing on the verge of a whole new
market for mobile satellite services".
For Eutelsat, which still earns 75% of its revenue from TV
distribution - to cable operators and direct to viewers - it is
a natural extension of its business. "The company is a 50-50
joint venture," says Berretta.
"Television is still an extremely important driver for
satellites, and for us in particular. Over the last financial
year our revenues from video applications increased by 10% and
our channel count went up by almost 20% to 3,123 channels, of
which almost 50 channels are already HDTV channels."
Satellite, he says, "is the most economic way to transmit
television". Once they're launched the satellites, after all,
are powered purely from solar energy in space.
"In Italy there are over seven million satellite dishes,"
reaching one third of households. "In Poland there are over
four million dishes and in the UK there are even more. The
transmission cost per channel, per user, is a few cents a year,
making satellite TV the most cost-efficient broadcasting
Next year, he'll be hoping that sceptics about mobile TV will
be proved wrong. GTB