French Government Intervention Alters Eutelsat’s Financial Trajectory

Eutelsat FR0010221234

A major transaction intended to bolster the balance sheet of European satellite operator Eutelsat has been blocked by French authorities. The government's move to prevent the sale of critical ground infrastructure leaves the company without an expected €550 million in proceeds, forcing an immediate revision of its debt reduction targets.

The French Ministry of Finance, led by Minister Roland Lescure, intervened to stop the sale of ground stations to Swedish investment firm EQT. Officials classified the infrastructure as vital for national sovereignty, describing it as "strategic assets." Consequently, EQT Infrastructure VI was unable to meet the necessary suspensive conditions, terminating the deal permanently.

While Eutelsat retains full ownership and control of its passive ground segment, the company must now operate without this significant, planned liquidity injection. The €550 million was earmarked specifically for deleveraging.

Revised Financial Metrics for 2025/26

In response to the collapsed deal, Eutelsat has updated its key financial objectives for the 2025/26 fiscal year. The changes reflect the direct impact of the lost proceeds.

• Leverage Ratio: The net debt-to-EBITDA target has been adjusted upward from 2.5x to 2.7x.
• Long-Term Margin Outlook: For the 2028/29 period, the EBITDA margin forecast has been raised to approximately 65%, up from a previous target of around 60%. This improvement is attributed to the avoided costs of leasing external infrastructure, now that the assets will remain in-house.

Company management has emphasized that core strategic projects, most notably the expansion of its OneWeb low-Earth-orbit (LEO) constellation, remain fully funded and on track.

Expansion Continues Amidst Financial Reshuffle

Despite the higher debt outlook, Eutelsat is pushing forward with significant operational investments. In a key January move, the group awarded a major contract to Airbus Defence and Space for the construction of 340 additional satellites for the OneWeb fleet. This expansion is considered critical for the company to effectively compete with rivals like SpaceX's Starlink in the burgeoning LEO satellite internet market.

Simultaneously, Eutelsat is deepening its engagement with the U.S. defense sector. Its American subsidiary, Eutelsat Network Solutions, recently appointed retired U.S. Air Force General Jim Slife to its board. This strategic hire signals a focused push to grow the company's security and government-related business in a key market.

Investor Implications and Forward Look

The loss of €550 million in anticipated cash necessitates a fresh assessment of balance sheet risk. In the near term, the elevated leverage guidance is likely to weigh on investor sentiment. However, retaining control of strategic ground infrastructure could yield long-term operational benefits and cost efficiencies.

The central question for shareholders is whether the growth trajectory of the OneWeb division will be robust enough to offset the company's increased debt burden. Forthcoming quarterly results will provide the first concrete evidence of whether this revised financial strategy is sustainable.

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