Space for a digital world REFERENCE DOCUMENT 2012 – 2013 EUTELSAT COMMUNICATIONS: CREATING SPACE FOR YOUR COMMUNICATIONS Every day, Eutelsat demonstrates its expertise as a satellite company that contributes essential resources supporting the growth of digital communications. As a player at the heart of video and broadband markets, the greatest advances are yet to come. Ongoing progress brings with it the perspective of an increased role for satellites in order to optimise the use of spectrum that is a valuable and finite resource, and to transform the digital society into an environment of economic and social benefit for all. With these goals in mind, our Group is pursuing a development strategy based on investment and innovation, operational excellence and the creation of lasting value. CONTENTS MESSAGE FROM THE CHAIRMAN FINANCIAL AND CHIEF EXECUTIVE OFFICER ������������������������������ 2 INFORMATION...........................................................94 6 Review of Eutelsat Communications’ financial position 94 PRESENTATION Consolidated financial statements as of 30 June 2013 106 OF EUTELSAT COMMUNICATIONS ����������������������������� 4 Annual financial statements as of 30 June 2013 145 1Significant facts of the financial year and key figures 4 Main markets and competition 6 OTHER Group activities 10 INFORMATION.........................................................160 In-orbit operations 16 7Legal information regarding the Group 160 Management 22 Other operational information 169 Social and societal responsibility 23 Principal shareholders 171 Organisational chart 174 CORPORATE GOVERNANCE.......................................25 Legal and arbitration proceedings 177 Composition of the Board of Directors 25 Group property and equipment 177 2 Key management personnel 33 Research and development, patents and licenses 177 Compensation and benefits 34 Important contracts 178 Report of the Chairman of the Board of Directors Related party transactions 179 of Eutelsat Communications in application Significant changes in financial and commercial position 179 of Article L. 225-37 of the French Code de commerce 42 Relations and conflicts of interest within the administrative and management bodies 181 SUSTAINABLE DEVELOPMENT..................................50 Statutory Auditors 181 Social information 50 Documents available to the public 182 3Environmental information 57 Person responsible 182 Information relative to societal commitments in favour of sustainable development 61 Person responsible for information 182 Methodology and scope 64 Provisional timetable for financial reporting 182 RISK PERSON RESPONSIBLE FOR INFORMATION................ 182 FACTORS...................................................................65 PROVISIONAL TIMETABLE 4 Operational risks 65 FOR FINANCIAL REPORTING................................................... 182 Risks regarding changes LIST OF APPENDICES.................................................................... 183 in the satellite telecommunications market 71 Liquidity risk 75 GLOSSARY............................................................................................. 194 Regulatory risks 78 Market risk 80 REGULATION.............................................................83 Regulations governing frequency assignments 5and international coordination 83 Regulations governing the operation of earth stations, the deployment of networks, the operation of electronic communications networks and the provision of electronic communications services 86 Regulations governing content 88 Regulations governing space operations 90 U.S. export control requirements (regulations governing the activities of the Group’s suppliers) 91 Other provisions applicable to the Group 91 Société anonyme (limited company) with a share capital of 220,113,982 euros Registered office: 70, rue Balard, F – 75015 Paris 481 043 040 R.C.S. Paris Eutelsat Communications • 2012-2013 Reference Document • 1 MESSAGE FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER In 2012-2013, our Group once again recorded growth, against an unexpectedly contrasting global backdrop for the fixed satellite service sector. Our revenues have increased by 5.1% to 1,284 million euros, EBITDA rose by 4.0% to 995 million euros, and our net income by 8.8% to 355 million euros. This last figure enabled us to offer our shareholders a higher dividend amount of 1.08 euro per share (+8%). Our main business, Video Applications, remains well positioned on the market. Revenues from this segment have increased by 4.0% with the introduction of 400 new television channels and the growing success of High Definition television in all regions “OVER THREE DECADES, covered by our fleet. Our Data and Value-Added Services have generated growth of 7.6%. This market is driven by the sharp OUR COMPANY HAS increase in Value-Added Services, up 30.7%, which enjoy dynamic IP service sales on our KA-SAT satellite while the Data DEMONSTRATED ITS Services market has been affected by lower sales volumes than expected in Africa, due to temporary excess capacity in ABILITY TO RECORD the region. Lastly, the Multi-Usages segment, which covers our services provided to administrations and governments, GROWTH WHERE remains stable following the integration of the EUTELSAT 172A satellite (previously named GE-23), offsetting the direct effects POSSIBLE…” of U.S. federal budget cuts on contract renewals. While growth in global demand for satellite capacity is currently less robust than in the last decade, our Group is benefitting from investments made in recent years to increase its exposure on the most vibrant markets. Our order backlog is up at nearly 5.4 billion euros. This represents 4.2 years of revenues and provides our Group with long-term visibility on its revenues, in particular those generated by the video segment which accounts for over 90% of total revenues. A driving force behind our organic growth, major satellite resources will enter into service by early 2016, increasing our in-orbit capacity and extending our fleet’s coverage. Three of the satellites under procurement – EUTELSAT 9B, EUTELSAT 8 West B and EUTELSAT 36C – will consolidate our flagship broadcasting positions in Europe, the Middle East and Africa in 2015. The Video Applications segment will also be boosted by the signature of an agreement with Russian operator RSCC in July 2012. This partnership has provided our 2 • Eutelsat Communications • 2012-2013 Reference Document Group with broadcasting resources on two new orbital positions covering Eastern Russia and Siberia. This strategic agreement in Russia, in addition to the successful integration of the GE-23 satellite (renamed EUTELSAT 172A) covering the Asia-Pacific, highlights Eutelsat’s ability to both strengthen its business on its traditional core markets and develop targeted profitable growth in other regions of the world. I would like to above all present our progress in Latin America, as we are stepping up a gear in this region. In terms of volume, this market is already as important as Western Europe. It is also the market that is set to generate the most robust growth indicated that he would not request the renewal of his term for Fixed Satellite Services, ahead of the Russia/Central Asia of office, which is to expire at the next General Shareholders’ and African markets on which our Group continues to enjoy a Meeting, in order to comply with the provisions of the AFEP- firm foothold. MEDEF governance code relating to multiple directorships. The Board unanimously decided to merge the duties of Chairman Eutelsat is using two levers to become a major player in Latin and of Chief Executive Officer, and to appoint me as Chairman America. We announced our order for the EUTELSAT 65 West A and CEO. I wish to offer my warmest thanks to Jean-Martin satellite when we published our annual results. This satellite Folz for his valuable contribution to our Board during his two will be located at the 65° West orbital position above Brazil, years as Chairman. one of our key markets. It will operate a portfolio of orbital 1 rights acquired last year. The second driver of our strategy in Our Group is underpinned by solid fundamentals and is fully the region is the acquisition, announced on 31 July, of 100% committed to successfully completing each expansion beyond of the Mexican operator Satmex. Satmex owns 11% of the our traditional borders. As a result, we face the year 2013-2014 Latin American market with three satellites in operation. This with confidence and energy. Eutelsat celebrated its thirtieth position will be further consolidated in 2015 by two satellites anniversary in 2013. Over three decades, our Company has demonstrated its ability to record growth where possible, currently under procurement. Subject to government and by leading complex and often highly innovative industrial regulatory approvals, this operation is set to be completed by programmes serving the booming digital economy. Our the end of 2013. ambition is to continue in this direction, by ensuring a balanced Continuing to carefully exercise its role in the Company’s development of our businesses, targeted geographic expansion governance, the Board of Directors evolved during the financial and a stringent control of our balance sheet required to keep year 2012-2013 and more recently. It now has 10 Directors, profitability at a high. To reach this target, I am proud to be including six independent directors and three women. The able to rely on an international team of highly