Eutelsat's €1.35B Capital Increase: A Strategic Pivot to LEO and European Sovereignty

Eutelsat's announcement of a €1.35 billion capital increase marks a pivotal moment for the European satellite operator, positioning it at the forefront of a transformative shift in global connectivity. By securing significant backing from strategic investors—including the French State, Bharti Space, and the Fonds Stratégique de Participations—Eutelsat aims to leverage its unique strengths in Low Earth Orbit (LEO) technology and sovereign infrastructure to dominate B2B and government markets. This move is not merely financial engineering but a bold strategic realignment to capitalize on a multi-decade trend toward space-based connectivity and European tech autonomy.

The capital raise, which includes a €716 million reserved increase and a €634 million rights issue priced at a +32% premium to Eutelsat's recent trading price, reflects investor confidence in the company's vision. The French State's 29.99% stake and Bharti's 18.7% holding underscore the blend of geopolitical ambition and commercial pragmatism driving this deal. The funds will primarily fuel Eutelsat's push into LEO, where it aims to become the leading European player in a sector dominated by U.S. firms like SpaceX's Starlink.

LEO as the New Frontier for B2B Connectivity
Eutelsat's LEO ambitions are central to its growth narrative. The company plans to deploy 340 additional LEO satellites and advance its Gen-1 follow-on program, targeting a 50% year-on-year revenue jump in fiscal 2025-26 and €1.5–1.7 billion in LEO revenue by 2028-29. This focus aligns with the growing demand for reliable, high-speed connectivity in sectors such as maritime, aviation, and government services.

The IRIS² program, a cornerstone of European strategic autonomy, will absorb an estimated €2 billion from 2027 onward. Designed to ensure secure, sovereign-controlled communications for defense and critical infrastructure, IRIS² positions Eutelsat as a critical partner to governments seeking to reduce reliance on non-European providers. A landmark 10-year deal with France's Ministry of the Armed Forces—valued up to €1 billion—highlights the commercial and geopolitical value of this initiative.

This comparison would reveal whether investors have already priced in Eutelsat's LEO ambitions or if the stock remains undervalued relative to its strategic pivot.

Financial Engineering and Risks
The capital increase aims to reduce leverage to 2.5x by 2025-26, a critical step toward sustainable growth. However, near-term financial metrics are tempered by the lingering impact of Russian sanctions on its video business, which will keep FY2025-26 revenue flat and EBITDA margins slightly below 2024-25 levels.

Investors must weigh these short-term headwinds against the long-term prize: a 60%+ EBITDA margin by 2028-29, driven by LEO's scalability and operational leverage. The premium paid for shares in this capital raise—€4 per share, 32% above recent trading levels—also demands scrutiny. While the price reflects strategic investor support, it could compress returns for new entrants unless LEO revenues materialize as projected.

This data would illustrate the company's path to financial stability and the critical role of LEO in driving margin expansion.

Investment Considerations
For investors, Eutelsat's capital increase is a vote of confidence in its ability to navigate the satellite industry's transition from traditional geostationary orbits to LEO's dynamic future. Key positives include:
1. Strategic Backing: European governments and tech titans like Bharti see Eutelsat as a linchpin for sovereign connectivity.
2. Scalable Model: LEO's potential for high-margin B2B/government services contrasts with commoditized video markets.
3. IRIS² Leadership: The program's alignment with EU defense and infrastructure priorities creates a moat against global competitors.

Risks remain, however: delays in satellite deployment, regulatory hurdles for IRIS², or overvaluation of LEO's addressable market could disrupt the narrative. Additionally, the stock's post-announcement performance will hinge on near-term execution, including shareholder approval and regulatory sign-off by year-end.

Conclusion: A Long-Term Play with Sovereign Tailwinds
Eutelsat's capital increase is more than a financing event—it's a strategic manifesto. By marrying European geopolitical imperatives with cutting-edge LEO technology, the company is staking its future on a sector with secular growth and defensible margins. While short-term earnings will face headwinds, the long-term opportunity for Eutelsat to become the continent's go-to provider of sovereign connectivity is compelling.

Investors with a multi-year horizon and tolerance for execution risk should consider Eutelsat as a core holding in portfolios emphasizing European tech sovereignty and space innovation. For the risk-averse, wait until the capital increase is finalized and initial LEO revenue milestones are met. Either way, this deal signals a new era for Eutelsat—and a critical step forward for Europe's ambitions in the final frontier.