EU space star takes one small step towards success

Eutelsat Communications SA

25/11/2025 12:08

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, Nov 25 (Reuters Breakingviews) - Europe's answer to Starlink is still in the game. Paris-headquartered Eutelsat ETL.PA operates one of two major low-earth orbit (LEO) satellite networks in existence globally, the other being the space-internet service offered by Elon Musk's SpaceX. On Tuesday, the French group launched the final stage of its 1.5-billion-euro ($1.7 billion) capital hike, which puts recent balance-sheet problems in the past. Yet the move doesn't resolve longer-term questions about Eutelsat's competitiveness.

Like many of its sector peers, 1.5-billion-euro Eutelsat once specialised in beaming TV channels down from space via relatively high-orbiting satellites. That business is now in decline, but still accounted for nearly half of revenue in the first quarter of the French company's current financial year. The primary growth focus now is using LEO constellations to offer broadband internet services instead – a market that's already served by Musk's Starlink, and which targets areas with poor fibre coverage. Eutelsat first invested in OneWeb, a UK LEO company once primarily backed by SoftBank Group 9984.T, in 2021 to offset the impact of its shrinking video business. The two subsequently merged in 2023.

The combined group has grappled with a heavy debt burden, at a time when its traditional income streams have seemed stagnant at best. Meanwhile, policymakers in Brussels have grown uneasy about Europe’s reliance on satellite services provided by an increasingly erratic U.S., especially given Musk's political entanglements. In June, France committed to a substantial capital increase to shore up Eutelsat. Other shareholders including the UK government, Sunil Mittal's Bharti Space and shipping group CMA CGM participated in the funding efforts, which reached their final stage on Tuesday with the launch of a 670-million-euro rights issue.

Eutelsat is hoping that by next summer, its net debt will be down to 2.5 times EBITDA, compared with 3.9 times in June 2025. That trajectory helps to explain why bond markets are less worried about the company: yields on a 2029 bond have shrunk to about 7% from 16% in February. The fundraising will also allow CEO Jean-François Fallacher to replace ageing OneWeb satellites. By the start of the 2030s, the constellation will be integrated into a European satellite project known as IRIS², which will provide secure connectivity for European Union governments. Around one quarter of the project’s broadband capacity could be reserved for these users, implying that the majority is earmarked for commercial customers.

Unlike Starlink and Amazon.com’s AMZN.O forthcoming LEO constellation, Eutelsat does not plan to offer satellite broadband to individual consumers. That means the European player may miss out on some economies of scale, at least relative to American giants. Indeed, Eutelsat's 650-strong OneWeb constellation is an order of magnitude smaller than Musk’s Starlink.

Fallacher now has the balance sheet to start trying to close the gap, but the long-term return on that investment rests on signing up business customers. Analysts' forecasts gathered by Visible Alpha currently imply that Eutelsat will not consistently generate meaningful free cash flow, after deducting interest payments, until the 2030s. Amazon’s constellation will be fully operational by then, and Starlink has already made major inroads with airlines and shipping customers. Keeping pace with deep-pocketed rivals looks like a tall order.

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CONTEXT NEWS

Paris-based satellite operator Eutelsat launched a 670-million-euro rights issue on November 25, which is part of a 1.5-billion-euro plan to reduce debt and fund future capital expenditures. It follows a separate 828-million-euro equity raise completed last week, with participation from the governments of France and the United Kingdom.

Eutelsat's funding costs have stabilised after an early-2025 crisis https://www.reuters.com/graphics/BRV-BRV/dwvkqenwkvm/chart.png

(Editing by Liam Proud; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))