Satellite service provider SES reported 1H 2016 results for its Video business of €665.7 million, an increase of 0.8% versus 1H 2015, and an increase of 4.1% when compared to the second half of 2015. On a constant currency basis the Video business grew 0.3% on a year-over-year basis.
For the first half of 2016, the Video division contributed 70% of SES’s total revenue, an increase compared to the 66% contribution in 1H 2015, and the 67% contribution for the full year 2015.
SES’s acquisition of RR Media was not completed until July 6, 2016. As such, no revenues from RR Media were included in SES Video’s first half results. RR Media generated €63.2 million of revenue during the first half of 2016.
SES merged the former RR Media business with its SES Platform Services subsidiary. The new subsidiary was rebranded MX1.
Update on MX1 Subsidiary
During SES’s investor day, Management disclosed the combined MX1 business is a €240 million annual revenue business with a backlog of €500 million (or two years of annual revenue). The regional revenue breakdown is 70% Europe and 30% outside of Europe. Half of MX1’s revenue is generated by the resell of satellite capacity – with SES acting as the satellite service provider for 50% of this capacity.
For the full year 2016 the acquisition of the former RR Media business is expected to contribute €70 million of revenue to SES’s Video business (before eliminating intercompany revenue).
On the Company’s earnings call with analysts, SES’s CEO Karim Michael Sabbagh offered an anecdote on the SES’s initial synergies with RR Media by relaying a recent briefing by Avi Cohen, CEO of MX1 (and former CEO of RR Media) to the board of SES. “…he [Avi] mentioned three key multimedia clients with whom they have served. And he said had it not been for SES, we would not have signed them… this speaks for itself when you have the kind of capabilities that they have, that we have and the kind of market access that we have through our almost three decade long experience with these clients” said Mr. Sabbagh.
Update on Satellite Channel Developments
In its earnings presentation, SES reviewed data points on the channel growth over its satellite network during first half of 2016.
Total channels for SES’s Video business was 7,463 at the end of 1H 2016, representing an increase of 4.2% on a year-over-year basis, and sequential growth of 2.7% since the end of 2015.
HDTV channels distributed by SES grew 9.5% to 2,442 (32.7% of total channels). 60% of all channels are now broadcast in the MPEG-4 compression standard. This compares to 54% in first half of 2015 and 60% at the end of 2015.
The channel count for Ultra HD (UHD) is now 16, versus eight at the end of 2015 and zero a year earlier. Management highlighted the May 2016 announcement with Viasat to launch an Ultra HD sports channel. The new channel will launch in Scandinavia in August 2016.
International markets outside of Europe and North America, including the faster growing markets of Latin America, Asia-Pacific, the Middle East and Africa, made up 38% of TV channels over SES satellites. The channel count in this region grew by 1.7% during the first half of the year to a total of 2,850 channels.
The below slide from SES’s investor presentation illustrates channel and geographic growth of the Video business.
Press Release: SES first half of 2016 Results
Presentation: SES first half of 2016 Results
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