Satellite Solutions Worldwide Group Plc (LON:SAT) saw its shares take off today on news it has landed a new commercial deal with a Europe-focused broadband operation.
The sales and marketing agreement, with a joint venture between Viasat Inc and Eutelsat Communications, is described as a ‘first step toward building a retail consumer broadband business across Europe’.
READ: Satellite Solutions Worldwide makes three earnings-enhancing acquisitions for a total of £1.8mln
Separately, the company also told investors that it has hit a key business target – 100,000 customers by year end – a month early and said that following a year of strong growth the company is "comfortable" that results for the financial year will be in line with market expectations.
In a note to clients, analysts at Numis Securities said: “Strategically significant, the agreement is expected to accelerate the pace of customer acquisition in European countries where the company has limited market share.”
They noted that the required investment is expected to be partially offset by new customers in 2018, to be break-even within 18 months, and accretive to earnings thereafter.
To reflect this impact, the analysts have lowered their 2018 EBITDA estimate for Satellite Solutions to £6.4mln, from £6.8mln, and raised their 2019 estimate to £9.3mln, from £8.8mln.
Numis reiterated a ‘buy’ rating and 12p target price on Satellite Solutions shares, which were 1.7%, or 0.12p higher at 7.38p in late morning trading today.
Retail services and subscriber management
SSW is to help the venture with localised retail services and subscriber management. It will specifically provide in-language/in-market sales, installation, billing, customer care and logistics services for the new broadband operation.
Initially, the roll-out will begin in Poland and Norway followed shortly thereafter in Sweden and Finland – it is expected that the service will be the fastest available satellite broadband for residential customers in those territories.
“We are delighted to be working closely with the joint venture company established by Viasat and Eutelsat,” said Andrew Walwyn, SSW chief executive.
“Viasat's extensive marketing experience in consumer satellite broadband in North America and Eutelsat's established European broadband business, together with SSW's deployment capability, will bring the deep expertise needed to respond to consumer expectations for a high-quality online experience."
High-quality broadband where wires won't reach
Evan Dixon, chief marketing officer for the Viasat/Eutelsat joint venture said: “Our goal is to bring high-quality broadband to areas where traditional wired broadband providers cannot.
“To support our mission, SSW is a natural partner as they have a proven operation that will enable us to quickly and effectively bring better broadband options to consumers in select European countries."
SSW expects to see a material increase in customer numbers and revenue across the territories, where it presently has only a small market share of satellite broadband customers.
Additional investment will be required from SSW, it estimates up to £1mln in the first year, which will be partially offset by income from new customers. The company expects the new operation to breakeven on the investment within 18 months.
-- Adds analyst comment, share price --