Eutelsat Communications SA is buying Satmex as part of its strategy to expand its footprint in Latin America. Regional satellite use is expanding at a frenetic pace because of increased commercial use, rise in defense and security telecommunications and growth of entertainment industries and social media, analysts said.
Eutelsat will be using a bridge loan for the acquisition, the company announced from its Paris headquarters. Earning forecasts suggest Eutelsat will finance repayment of the loan from higher profits in the coming period.
Demand for satellite services in Latin America is growing annually at more than 7 percent, Eutelsat said citing statistics since 2011 and its own projections right up to 2016. Market monitors suggest Eutelsat's earnings predictions may be somewhat overoptimistic even as analysts don't dispute Latin American growth potential in the sector.
Eutelsat expects a sales growth of more than 2.5 percent this year and in 2014, doubling in the period up to 2016, but skeptics see risks in those forecasts. Satmex observers say the company has tidied up its books in recent years and is on track to boost profits. Satmex has also won backers on the strength of praise directed at its recent performance.
Satmex Chief Executive Officer Patricio Northland said the deal, which includes Eutelsat taking over the Mexican company's debts, was "a very positive outcome for the shareholders and other stakeholders of Satmex."
Joining the Eutelsat Group is seen as a mutually beneficial undertaking.
"Our fleet will provide Eutelsat with a unique strategic opportunity to enter the fast-growing Latin American market and obtain premier orbital locations across the continent.
"Our clients will benefit from the integration of our network into Eutelsat's world-class satellite fleet and operations. This transaction would not have been possible without the dedication and leadership of Satmex's management team, as well as its first-rate employees," Northland said.
Eutelsat Chief Executive Officer Michel de Rosen said its acquisition of Satmex will make Eutelsat a key operator in vibrant digital markets across Latin America.
"With Satmex's strategic orbital slots, state of the art fleet and upcoming satellites, Eutelsat is gaining a robust platform from which to access the significant opportunities in this region. Via this acquisition, we are significantly upscaling our presence in Latin America to complement our footprint in fast-growing markets, and securing future sources of growth and value creation."
The transaction is expected to be completed by the end of 2013.
Satmex's three satellites in "highly attractive, contiguous orbital slots" cover more than 90 percent of Latin American population. Eutelsat already has 31 satellites that reach out to homes in Europe, the Middle East, Africa, Asia, parts of the Americas and the Asia Pacific region.