Reference Document 2017 -18 CREATING SPACE FOR YOUR COMMUNICATIONS Every day, Eutelsat demonstrates its expertise as a satellite company which contributes essential resources supporting the growth of digital communications. As a player at the heart of the video and broadband markets, the greatest advances are yet to come. Ongoing progress brings with it the prospect of an increased role for satellites in order to optimise the use of spectrum, 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. >30 years €1,408 m of Eutelsat revenues Communications for 2017-18 ~1,000 38 274 m employees satellites television operated(1) households(2) (1) At 30 June 2018. (2) Direct and indirect audience. CONTENTS LETTER FROM RODOLPHE BELMER, REGULATION 107 CHIEF EXECUTIVE OFFICER 02 05 5.1 Regulations governing frequency LETTER FROM DOMINIQUE D'HINNIN, assignments and international CHAIRMAN OF THE BOARD OF DIRECTORS 03 coordination 108 5.2 Regulations governing the operation of earth stations, the deployment of networks, the operation of electronic communications networks and the provision of electronic communications services 112 PRESENTATION OF EUTELSAT 01 COMMUNICATIONS 05 5.3 Regulations governing content 114 5.4 Regulations governing space 1.1 Highlights of the financial year, operations 116 outlook and key figures 06 5.5 U.S. export control requirements 1.2 Group activities, main markets (regulations governing the activities and competition 09 of the Group’s suppliers) 117 1.3 In-orbit operations 18 5.6 Other provisions applicable 1.4 Management 24 to the Group 117 1.5 Social and societal responsibility 24 06 FINANCIAL INFORMATION 121 CORPORATE GOVERNANCE 25 02 6.1 Review of Eutelsat Communications’ 2.1 Composition of the Board of Directors 26 financial position 122 2.2 Key management personnel 35 6.2 Consolidated financial statements 2.3 Information on compensation paid as of 30 June 2018 133 to Company Directors and Corporate 6.3 Annual financial statements Officers 37 as of 30 June 2018 172 2.4 Information concerning the elements of remuneration owed or attributed to Corporate Officers 41 07 OTHER INFORMATION 187 2.5 Attendance fees paid to the Board 7.1 Legal information regarding the Group 188 Members 55 7.2 Other operational information 195 2.6 Shareholding in the Company capital 7.3 Principal shareholders 198 by administrative and management 7.4 Organisational chart 200 members 57 7.5 Legal and arbitration proceedings 202 2.7 Corporate governance 58 7.6 Group property and equipment 203 7.7 Research and development, patents SUSTAINABLE DEVELOPMENT 65 and licenses 203 03 7.8 Important contracts 203 3.1 Business model, risks, CSR policy 66 7.9 Related party transactions 204 3.2 Societal information 67 7.10 Significant changes in financial 3.3 Environmental information 72 and commercial position 204 3.4 Social information 77 7.11 Relations and conflicts of interest 3.5 Measures taken to prevent all forms within the administrative and of corruption 81 management bodies 205 3.6 Other measures taken in favour 7.12 Statutory Auditors 205 of human rights 82 7.13 Documents available to the public 206 3.7 Indicators 83 7.14 Responsible person 206 3.8 Methodology and scope 86 04 RISK FACTORS 87 4.1 Operational risks 88 4.2 Risks relating to changes in the satellite telecommunications market 90 APPENDICES 209 4.3 Liquidity risks 94 4.4 Regulatory risks 98 CROSS-REFERENCE TABLES 222 4.5 Market risks 100 GLOSSARY 226 4.6 Internal control procedures and risk management policy 102 LETTER FROM CHIEF EXECUTIVE OFFICER Letter FROM RODOLPHE BELMER, Chief Executive Officer Fully delivering on all our financial objectives for the second year in a row, with progressive improvement in our core operating verticals STRONG FREE CASH FLOW GENERATION, PERMITTING A FURTHER INCREASE IN DIVIDEND The year 2017-18 has been an important one in an agreement was secured with Taqnia for in the Arabic world and increase its direct access cementing the foundations for the Group’s return incremental capacity on the EUTELSAT 3B and to end-customers, facilitating stimulation of to growth. First and foremost, I am pleased EUTELSAT 70B satellites. These agreements, High Definition TV take-up and the upselling of to report that we fully delivered on all of our together with the double-digit revenue growth of incremental video services. financial objectives for the second year in a row. this vertical, confirm the buoyancy of the Mobile One of the major events of the past year was In particular, I would highlight the progressive Connectivity market. the procurement of the KONNECT VHTS satellite improvement in revenue trends throughout the The performance of our Fixed Broadband vertical, from Thales Alenia Space to shape our future year for the five operating verticals. Our LEAP declining for the first time, reflected lower Connectivity strategy. Expected to be launched cost-saving program was well ahead of track, revenues from European Broadband in a context in 2021, it will bring 500 Gbps of Ka-Band helping us deliver an EBITDA margin of 76.9% at of scarcity of available capacity in Western Europe capacity over Europe to support the development constant currency, well above our 76% target. We as well as slower than hoped-for progress by the of European Fixed Broadband and in-flight strongly improved our financial position, with Net European retail joint-venture with Viasat. However, Connectivity businesses. Significant multi-year Debt/EBITDA ending the year close to our 3.0x the launch of the commercial service in Africa and distribution commitments have been signed with target level, helped by the disposal of our stake in actions in Europe including yield management, Orange to address the Fixed Broadband market Hispasat for circa 300 million euros. Discretionary differentiated offers and a strengthened focus in European countries where the Group has a free cash flow rose by 12% at constant currency on under-penetrated verticals should lead to a retail presence and Thales to serve notably the despite a tough comparison basis of +65% in FY return to growth in this vertical in FY 2018-19. government market. 2016-17, covering 1.4 times our recommended Finally, as expected, Fixed Data revenues, which At the same time as attending to our commercial, dividend of 1.27 euros per share, an increase of now represent just 10% of the Group total, saw a strategic and financial priorities, we have 5%. further decline in the past financial year, reflecting continued to invest in reinforcing the cohesion and This year delivered a robust commercial ongoing pricing pressure in all geographies and motivation of our teams, notably with the roll-out performance: Video saw a well-oriented channel the absence of significant incremental volumes. of ‘One Eutelsat’ programme bringing together count, up 4.5% with HD penetration of 21%, up Our cautious view on this vertical is unchanged, 200 employees across all subsidiaries, including 3.8 points. The outcome of several important and we will continue to divert our resources into the Executive Committee, to define Eutelsat’s contract renewals, notably Cyfrowy Polsat and the other, more promising verticals. core values, with an emphasis on team work TVN at the HOTBIRD position, was positive, while We continued to outperform our targets in terms and emotional intelligence, and to strengthen new business was generated in Europe with of reducing capital expenditure, with a level of their management skills. Elsewhere, the second SFR-Altice at 5°West, Mediaset at HOTBIRD and 358 million euros in 2017-18, well below the edition of the “Rising Star” programme, aimed XtraTV at the 9°East orbital position as well as in 420 million euros average objective. Looking ahead at identifying high-potential future executives, several emerging broadcast markets, including Fiji the successful application of our design-to-cost was launched in partnership with HEC Executive on EUTELSAT 172B and the Caribbean region on policy will enable us once again to reduce our Education, under the supervision of internal EUTELSAT 117 West B. In Government Services, Capex envelope in the coming years. Indeed the mentors. we achieved favorable outcomes in both the recent Memorandum of Agreement (MoA) with Our priorities for the current year are clear: we Fall 2017 and Spring 2018 renewal campaigns Airbus Defence and Space for the procurement will pursue our financial discipline aimed at with the U.S. Department of Defense, as well of two larger new satellites to replace the three maximising free cash flow generation, ensuring we as winning significant incremental business existing satellites at our HOTBIRD flagship deliver the full benefits of LEAP with our 30 million at the newly opened 174°East orbital position. neighbourhood is a perfect illustration of this. euros target, securing further interest cost savings Also in Government Services, much of capacity These two new satellites are set to be launched with the refinancing of the January 2019 Bond on EUTELSAT QUANTUM, due to be launched in in 2021. and continuing to strive for Capex efficiencies via the second half of calendar 2019, has now been Elsewhere in 2017-18, we absorbed Noorsat, one our design-to-cost policy. In operational terms, reserved. In Mobile Connectivity, we signed a of our distributors, in the MENA region, to optimise we will further focus on extracting maximum landmark Memorandum of Understanding with Video distribution. This operation fits with our value from our core Video vertical with ongoing the Chinese telecom operator, China Unicom, broader strategy of streamlining distribution within efforts to stimulate the transition to HD/UHD, rapidly followed up by the commercialization selected core video neighborhoods.