SES S.A.: A High-Conviction Buy After the Intelsat Acquisition and Strong H1 2025 Performance

In the rapidly consolidating satellite communications sector, SES S.A. (EPA:SCT) has emerged as a standout strategic winner. The company's $2.6 billion (€2.2 billion) acquisition of Intelsat, completed on 17 July 2025, has transformed it into a true multi-orbit connectivity leader, positioning the firm to capitalize on the surging demand for secure, high-performance satellite-based solutions. With a post-merger pro forma revenue of €3.7 billion and Adjusted EBITDA of €1.8 billion, SES is not only scaling its operations but also unlocking a robust pipeline of synergies and free cash flow generation. For investors seeking exposure to a consolidating industry with durable cash flow potential, SES presents a compelling case.

Strategic Value Creation: A Multi-Orbit Powerhouse

The Intelsat acquisition was not merely a transaction—it was a strategic repositioning. By combining Intelsat's 90+ geostationary (GEO) satellites with SES's O3b mPOWER medium Earth orbit (MEO) constellation and strategic access to low Earth orbit (LEO) assets, the company has created a diversified satellite infrastructure capable of delivering end-to-end solutions. This multi-orbit, multi-band (C-, Ku-, Ka-, Military Ka-, X-band, UHF) approach allows SES to serve high-growth verticals such as government, aviation, maritime, and media with unmatched resilience and flexibility.

The acquisition's strategic rationale is underscored by a €2.4 billion net present value (NPV) of synergies, with 70% expected to materialize within three years. These synergies stem from streamlined operations, procurement efficiencies, and optimized capacity costs. For example, the integration of Intelsat's ground infrastructure with SES's existing network has already begun yielding Day 1 savings, while the combined fleet's scale reduces per-unit costs for satellite operations. This operational leverage, coupled with the expanded commercial footprint, positions SES to outperform peers in both cost discipline and customer retention.

A Tailwind in a Consolidating Sector

The satellite communications sector is undergoing a wave of consolidation, driven by the need for scale to fund capital-intensive projects and compete with LEO-first players like SpaceX's Starlink and Amazon's Kuiper. SES's acquisition of Intelsat aligns perfectly with this trend, creating a stronger entity capable of matching the technical and financial heft of industry giants.

According to MarketsandMarkets, the satcom market is projected to grow at a 14.5% CAGR through 2029, fueled by demand for IoT connectivity, 5G backhaul, and rural broadband. SES's focus on government and mobility—segments growing at double-digit rates—positions it to capture a disproportionate share of this expansion. The company's recent H1 2025 results reinforce this momentum: revenue hit €978 million, Adjusted EBITDA reached €521 million, and Adjusted Free Cash Flow (FCF) surged 32% year-over-year to €193 million.

Free Cash Flow Potential: A Foundation for Shareholder Value

The Intelsat acquisition's financial rationale is equally compelling. The combined entity is expected to generate over €1 billion in Adjusted FCF by 2027–2028 (pre-IRIS2), supported by a €4.2 billion gross contract backlog. SES's disciplined capital allocation strategy further amplifies this potential: annual CAPEX is projected to average €600–€650 million from 2025–2028, excluding the IRIS2 satellite program. This balance between reinvestment and financial flexibility ensures the company can fund growth while maintaining a net leverage ratio below 3 times by mid-2026.

Notably, SES is prioritizing shareholder returns once the leverage target is met. The company plans to raise its base dividend and allocate a majority of exceptional cash flows to dividends or buybacks. This approach mirrors the capital-efficient practices of high-performing industrials, where free cash flow is reinvested in growth or returned to shareholders.

Risks and Mitigants

While SES's strategic moves are robust, risks remain. Competition from LEO players like Starlink could pressure pricing in consumer broadband markets. However, SES's focus on enterprise and government clients—segments where security, reliability, and customized solutions are paramount—mitigates this risk. Additionally, the company's partnership with Impulse Space to accelerate satellite deployment via the Helios launcher extends asset lifespans and reduces time-to-market, further enhancing margins.

Investment Thesis: A High-Conviction Buy

SES S.A. offers a rare combination of strategic momentum, operational discipline, and free cash flow potential in a sector poised for long-term growth. The Intelsat acquisition has not only expanded its satellite fleet but also created a platform for cross-selling and innovation in critical markets. With a pro forma Adjusted EBITDA margin of ~48% and a path to €1+ billion in FCF by 2027, the company is well-positioned to deliver both revenue growth and shareholder value.

For investors, the current valuation—trading at a forward EBITDA multiple of ~8x—appears undemanding given SES's growth trajectory and sector tailwinds. The stock's recent outperformance against the S&P Global Aerospace & Defense Index (see visual) suggests market recognition of these fundamentals.

In conclusion, SES S.A. is a high-conviction buy for investors seeking exposure to a consolidating satellite communications sector. The company's strategic integration of Intelsat, disciplined capital structure, and focus on high-growth verticals make it a compelling long-term holding. As the demand for global connectivity accelerates, SES's multi-orbit leadership and cash flow resilience will serve as strong catalysts for outperformance.