SES S.A. (SGBAF)

SES is a satellite operator. It launches and operates satellites in orbit around the Earth and rents capacity on those satellites to customers who need to send television signals, internet data, or voice communications across regions where building ground infrastructure is difficult or uneconomic. The company is based in Luxembourg and operates a fleet of satellites in geostationary orbit — high above the equator, always hovering over the same spot on Earth — and has begun moving into medium-earth orbit, a lower altitude where signals move faster but satellites move faster too. For decades, this was a simple and profitable business: broadcasters needed satellites to distribute television, and SES was one of the few companies with the capital and expertise to own and operate them at scale. That business is now shifting rapidly. Terrestrial networks are better and cheaper for most uses, and new low-orbit satellite companies are arriving with capital and ambition. SES is caught between a legacy business that is slowly shrinking and a new business it is building but cannot yet dominate.

What a satellite operator actually does

When you watch a television broadcast that originates on a different continent, or when an oil rig in the middle of the ocean needs to transmit data, or when a bank needs a backup communication link that does not rely on undersea cables, that transmission often travels through a satellite. A satellite operator owns or operates the satellite, maintains it, ensures it stays in the right orbit, and sells capacity on it to customers. The customer pays for the bandwidth they use, either as a monthly fee or as a per-gigabyte charge. It is a straightforward rental business, similar to renting space in a data center or a warehouse — except the warehouse is in space.

SES built this business starting in 1985, when the company launched its first satellite and began selling capacity to broadcasters. At the time, this was the only way to distribute a television signal across a continent or an ocean. Cables existed, but they were expensive, slow to build, and required permission from governments that a signal had to cross. A satellite could reach dozens of countries instantly. European broadcasters depended on SES satellites, as did broadcasters across Africa, Latin America, and Asia. The business was profitable and required high capital upfront (launch costs, satellite manufacturing) but generated recurring revenue for years.

The geostationary advantage and its limits

SES’s core fleet is in geostationary orbit — about 36,000 kilometers up, where a satellite orbits at the same speed the Earth rotates, so it stays above the same spot forever. That is useful for broadcasting because an antenna can point at a fixed spot in the sky and receive the same satellite all the time. No moving parts needed on the ground. SES built dozens of these satellites over decades, creating a global constellation that covers nearly the entire Earth.

Geostationary satellites have limits. They are very far from Earth, so radio signals take a noticeable time to travel up and down — not a problem for broadcasting, but problematic for any two-way conversation or for applications that need low latency. They are also visible from only a portion of the Earth — a satellite over the Atlantic cannot reach the Pacific. And they take up a fixed slot of spectrum, which is regulated and scarce. There are only so many geostationary positions available, and governments carefully control which companies can use them.

Those constraints created a moat for decades. If you needed satellite capacity for broadcasting, SES and a handful of competitors like Intelsat were your only options. The company built a strong business, generated steady cash flow, and became almost invisible to the public while being essential to media distribution.

The shifting competitive landscape

Two things are breaking that moat. The first is terrestrial: fiber optic cables, mobile networks, and internet infrastructure have become ubiquitous. Video can now be streamed over ground-based networks almost everywhere, eliminating the need for satellite distribution. A broadcaster that once relied on SES to reach rural areas can now use a mobile network or a terrestrial broadcast tower. The second is space-based: new low-earth-orbit satellite constellations like Starlink, Amazon’s Kuiper, and others are launching thousands of small satellites in much lower orbits, creating global internet coverage that is faster and cheaper than SES’s high-orbit approach.

These competitive threats are real and immediate. SES’s geostationary business is in slow decline. Broadcasters need less satellite capacity every year as internet video streaming replaces satellite television distribution. The company’s revenue has been under pressure for years. That is not about mismanagement; it is about structural change in how the world communicates.

The company has responded by investing in low-earth orbit (LEO) satellites — launching its own constellation called SES-12 and others to compete with the new entrants. This makes some strategic sense: a satellite operator that abandons space-based communications entirely will become irrelevant. But SES cannot easily compete with Starlink or Amazon because those companies have far more capital, are willing to operate at losses to gain market share, and are building constellations of thousands of satellites where SES has dozens.

The business model and why it is being pressured

SES generates revenue in three main ways: broadcasting (selling capacity to broadcasters and television distributors), enterprise (selling connectivity to oil companies, shipping firms, financial institutions, and other customers who need reliable backup or primary communication), and government (contracts with defense ministries, intelligence agencies, and government communication bureaus). Broadcasting used to be more than half the revenue; now it is shrinking as a share because it is being cannibalized by terrestrial and LEO alternatives.

Enterprise and government are higher-margin and more resilient because they have different requirements: a mining company or a military needs robust, reliable connectivity in remote locations, and satellite communication is often the only practical option. But even those segments are facing pressure. Better terrestrial networks are reaching more remote areas every year. LEO satellites offer lower latency, which is valuable for real-time applications. And the new space companies are aggressive on pricing.

The margins on traditional geostationary satellite services are compressing as the company moves capacity to lower-cost offerings and tries to defend market share. That puts pressure on profitability — the company is generating less revenue per satellite while carrying the same depreciation and operating costs.

The change underway: from owner to operator

SES is in the middle of a transition that will define its future. The old story — own satellites, rent capacity, generate cash flow — has limited growth. The new story SES is trying to build is more ambitious: operate a globally distributed satellite network that competes with terrestrial networks and other satellite companies on coverage, speed, and reliability. That requires more satellites, more launches, more operational complexity, and more capital.

The company is pursuing this transformation while managing the decline of its legacy business. That is difficult. It requires the discipline to harvest cash from the geostationary satellite business while reinvesting aggressively in new technology. It requires competing with far larger companies and accepting years of negative free cash flow. And it requires customers to believe that SES can execute a transformation — which they may not, which is why the company has lost market share and is trying to recover through partnerships and differentiated offerings.

SES is also exploring whether to be a pure operator (owning satellites) or a managed-services provider (building networks for others and managing them). That shift would change the capital intensity and risk profile of the business, but it has not yet been resolved.

What to watch

Anyone researching SES should start with the 10-K filing (SEC CIK 0001347408), which breaks revenue by segment and discusses the competitive environment. Watch the trend in broadcasting revenue and the health of enterprise and government segments. Earnings calls will reveal management’s confidence in the LEO transition and any major changes in contract wins or losses to competitors.

The clearer signal is whether the company is improving its cash flow or deteriorating. A satellite operator that is burning cash to fund the transition and not yet seeing returns is in a vulnerable position. If SES can stabilize cash flow while growing the new business, it has a future. If the transition keeps deepening the cash burn while losing market share, the company will eventually have to restructure or exit certain businesses.