Eutelsat Communications S.A. (ETL) Earnings Call Transcript & Summary

Good day, and welcome to the Eutelsat Full Year 2019-2020 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Rodolphe Belmer, CEO. Please go ahead, sir.

Welcome, and thank you for joining us today for our full year results. I am Rodolphe Belmer, CEO. And I'm joined on today's call by Michel Azibert, Deputy CEO; Yohann Leroy, Deputy CEO and Chief Technical Officer; and Sandrine Téran, CFO. Let's start taking a look at the highlights of the year. First of all, we delivered resilient results in spite of the COVID-19 crisis with a top line outturn above our revised expectations. We were also able to generate a record level of free cash flow with a cash conversion ratio of 37%. As a result, we are proposing a dividend of EUR 0.89 per share, which is 2.3x covered by discretionary free cash flow. At the operational level, our core Broadcast vertical remains robust with a continuation of the underlying top line stability over the past 3 years. On the commercial front, contract wins in many of our applications will underpin our future performance. Finally, we made significant headway in our Fixed Broadband growth strategy with the arrival of EUTELSAT KONNECT marking a turning point. A quick look at each of these points, starting with key data for full year 2019-2020. Revenues for the 5 operating verticals stood at EUR 1,276 million on a reported basis and EUR 1.261 billion at 1.14 euro-dollar rate, exceeding our COVID revised objective of circa EUR 1.250 billion. This represented a 3.9% decline on a like-for-like basis. In spite of this decline, we continued to deliver an industry-leading level of profitability with 76.8% EBITDA margin, down only 1.3 points versus last fiscal year. This reflects our continued strong cost discipline. Cash CapEx amounted to EUR 222 million. This level is not reflective of our medium-term trajectory since it is net of EUTELSAT 5 West B insurance proceeds. Discretionary free cash flow reached a record high of EUR 474 million on a reported basis and EUR 483 million as defined in our financial objectives, representing a further 6% organic increase. The net debt-to-EBITDA ratio was contained at 3.05x, almost unchanged versus last year and reflecting our strong financial discipline. Finally, the proposed dividend per share of EUR 0.89 is covered 2.3x by the discretionary free cash flow. Let's have a quick look at our track record of cash conversion. Since 2016, the ratio of cash flow to revenues has more than doubled, from 16% to 37%, in fiscal year '20. This is despite the very challenging conditions in our industry, which have put pressure on the top line. It has been achieved, thanks to our systematic and vigorous action to optimize all the levers below the top line, including OpEx, CapEx, cash interest and cash tax. Let's take now a closer look at core Broadcast, accounting for more than 60% of revenues. As the graph on the left shows, if we exclude the revenues of our FRANSAT DTT platform, which has been volatile over the past 3 years, our core Broadcast has been essentially stable at constant perimeter over the past 12 quarters. This is absolutely unique in the industry and reflects 2 factors: our geographic exposure, with emerging markets accounting for over 50% of revenues; and our absence from the mature North American market, and the fact that our business model is predominantly DTH, the most resilient subvertical compared, for example, with cable head-end feeding. Over the same 3-year period, our main channel KPIs have been well oriented, leading to a progression in megabit consumption. Channel count was up 4% with growth mostly in emerging markets. HD penetration continued to progress from 17% to 25%. This represents a 50% growth in [ HGT ] channels compared with a rise of 16% in MPEG-4 channels over the same period of time. Moreover, in recent years, Satellite has continued to gain market share in our Broadcast footprint. The number of satellite households has grown at a compound rate of 1.7% to almost 170 million homes. Satellite represents 36% of TV households in our footprint compared with 35% in 2015, meaning that it's growing and remains the main mode of TV reception. And all regions in our footprint are showing progress in terms of satellite penetration, except Western Europe, where the decline is nevertheless limited, as you can see on the slide. Now a quick look at the main commercial achievements of the last 12 months. First, in Broadcast. We have signed an on core deal with Canal+ in Ethiopia, on the recently added incremental capacity on EUTELSAT 7C. This long-term, multi-transponder contract reflect the quality of our portfolio of innovate assets covering SSA as well as the dynamism of this market. More generally, commercial activity remained extremely positive in this region with the addition of several new platforms in the last 12 months, highlighting the dynamism of the African DTH market. And has platform, Ghana RCS, AfricaXP and Strong Roots. Among the other applications, the last 12 months, notably, saw a significant multi-transponder deal in Fixed Data with the telecom operator in the MENA region, marking a significant improvement in volume trends; 2 deals in Fixed Broadband, 2 important deals, 1 in Africa with Schoolap and 1 with Orange in France, I will revert to that later; and in Mobility, a multiyear contract with Telenor, maintaining momentum in Maritime, where we continue to gain market share. Finally, the past year has seen several essential steps in both Europe and Africa to prepare the return to growth in Fixed Broadband. The successful launch of KONNECT in January, which will bring long-awaited incremental capacity in Europe and a change in scale in Africa. It will gradually enter service in the fall and operate at full capacity from early 2021. Second, the signature of MoU to provide high-speed connectivity to schools in the Democratic Republic of Congo, highlighting the opportunity of government-backed digital inclusion programs in the continent. Third, a major wholesale agreement secured with Orange for the entire French capacity on the KONNECT satellite. And finally, the acquisition of the European activities of Bigblu Broadband, adding a retail pillar to our distribution strategy in Europe. I will revert to this later because it's a very important announcement that we are making today. At the same time, we also progressed on different work streams, including testing distribution models in Africa, the implementation of the Preferred Partner Programme in Europe, the optimization of CPE costs and more broadly, the preparation of the arrival of KONNECT. Now over to Michel Azibert for a look at the operational performance.

Thank you, Rodolphe. So full year revenues amounted to EUR 1.278 billion versus EUR 1.321 billion last year. They reflected a positive currency effect of EUR 17 million; a negative perimeter effect of EUR 2 million related to the carryforward impact of the disposal of EUTELSAT 25B in August 2018; a change in other revenues of minus EUR 6 million, which reflected a positive EUR 9 million related to currency hedging and the absence of a significant one-off booked last year. Excluding the other revenues, the revenues of the 5 operating verticals were down by 3.9%. Turning to the revenues of each of the 5 verticals. Broadcast, 61% of group total, recorded revenues of EUR 785 million, down 1.2% versus last year; Data and Professional Video, 14% of group total, saw revenues of EUR 175 million, down 14.1%; Government Services, 13% of group total, saw revenues of EUR 161 million, down 3.3%; Fixed Broadband, 6% of revenues, stood at EUR 77 million, a decline of 5.6% year-on-year; and Mobility, 6% of revenues, saw revenues of EUR 79 million, down by 5% -- by 5.1%. Finally, other revenues stood at EUR 2 million, which included minus EUR 1 million of negative hedging revenues. They were EUR 6 million lower than last year, which included a significant one-off engineering contract. Let's look at each one in more detail, starting with Broadcast. Revenues were down 1.2% to EUR 785 million. They reflected, notably, lower revenues at 36 degrees East with the return of a couple of transponders in Russia, and the termination of a contract in Sub-Saharan Africa at 7 degrees East. Q4 revenues were down by 1.5% year-on-year and by 1.4% quarter-on-quarter, with net one-off items accounting for most of the sequential decline. At the end of June 2020, the number of channels -- the total number of channels broadcast by Eutelsat satellites stood at 6,788, down 4% year-on-year, reflecting, in particular, the termination of the contract in Sub-Saharan Africa, already mentioned, in previous quarters; a negative one-off effects related to contribution services and the end of certain services at 5 degrees West as a consequence of the loss of power of EUTELSAT 5 West B. HD penetration continued to increase, standing at 1,679 channels versus 1,551 a year earlier, implying 8% year-on-year growth and a penetration rate of 24.7% compared to 21.9% a year earlier. On the commercial front, the past year saw dynamic commercial activity in Sub-Saharan Africa with the addition of new platforms, such as Ghana RCS and Strong Roots, and the anchor deal with CANAL+ in Ethiopia at 7 degrees East, preparing the ground for future growth across this region. On the other hand, the contract with the Greek operator Forthnet was renegotiated at lower terms, following its acquisition by United Group, one of our main customers in the Balkans. The agreement resolves an overdue issue and secures business on a long-term basis. Data and Professional Video revenues stood at EUR 175 million, down by 14.1% year-on-year. They continue to reflect the ongoing pricing pressure and highly competitive environment, notably, in Latin America. Nevertheless, volume trends improved throughout the year in Fixed Data, notably, thanks to new business in MENA in the second half. On the other hand, in the last 4 months of the year, Professional Video was strongly affected by the suspension of live sport events resulting from the lockdown. This was strongly reflected in fourth quarter revenues, which stood at EUR 43 million, down 13.6% year-on-year and by 5.2% quarter-on-quarter. Government Services revenues stood at EUR 161 million, down 3.3% on a like-for-like basis. They're reflected on one hand, the negative carryforward effect of renewals with the U.S. government during the last 18 months. And on the other hand, the contribution of the EGNOS payload on EUTELSAT 5 West B since mid-February, and incremental revenues generated at the temporarily relocated EUTELSAT 7A satellite. Fourth quarter revenue stood at EUR 43 million, up 5.1% year-on-year and up 6.1% quarter-on-quarter. The coming year stands to benefit from the entry into service of EUTELSAT QUANTUM in calendar 2021, bringing flexible and innovative capacity. The multiyear agreement has been reached with Intelsat for this satellite, giving access to the 48 degrees East orbital position, thereby opening up extended access, notably, to the MENA region and maximizing the commercial potential of this satellite. Fixed Broadband revenues stood at EUR 77 million, down 5.6% like-for-like. The decline reflected yet again the scarcity of capacity and a lower contribution from traditional distributors in Europe, which is yet not offset by the ramp-up of the Preferred Partnership Programme. Nevertheless, net additions returned to positive territory in the fourth quarter of this year. In Africa, revenues remain modest, pending the arrival of new capacity. Fourth quarter revenues were down 10.6% on a year-on-year basis, but stable quarter-on-quarter. In the post-COVID context, the demand for high quality, ubiquitous and reliable Internet connectivity is higher than ever, and fiscal year '21 should mark a turning point for Fixed Broadband with the entry into service of KONNECT, bringing long-awaited incremental capacity to Europe and a change of -- and a change in scale in Africa; the significant headway made in our European broadband strategy on which more later; and the ramp-up of the Schoolap contract in Africa. Mobile Connectivity revenues stood at EUR 79 million, down 5.1% like-for-like. Revenues were stable over the first 9 months, but affected by the COVID-19 crisis in the fourth quarter, which led to an absence of airtime-related revenues on KA-SAT and lower revenues from certain service providers. As a result, fourth quarter revenues were down 20.7% on a year-on-year basis and by 20.5% quarter-on-quarter. On a positive note, the year saw the extension of our maritime mobility activity, where we have been constantly gaining market share. We, notably, signed recently a new multiyear contract with Telenor. So a quick look at the backlog and fill rate. The order backlog stood at EUR 4.1 billion at the end of June 2020 versus EUR 4.4 billion at the end of June 2019, reflecting natural backlog consumption in the absence of material Broadcast renewals. It was equivalent to 3.2x 2019 revenues, with Broadcast representing 68%. The number of operational transponders at the end of June 2020 stood at 1,376, down by 11 units year-on-year. This reflected, on one hand, lower operational capacity at 5 West following the transfer of services from EUTELSAT 5 West A to EUTELSAT 5 West B in January 2020. And on the other hand, incremental capacity brought by EUTELSAT 7C in January 2020. Despite the decrease in operational transponders, the number of utilized transponders stood at 960, unchanged year-on-year and reflecting, notably, the ramp-up of Maritime contracts. As a result, the fill rate rose slightly to 69.7% compared to 69.2% a year ago. Now over to Sandrine to run through the financials.

Thank you, Michel. Starting with EBITDA, which stood at EUR 982 million versus EUR 1.032 billion at 30 June 2019, down 4.9%. The EBITDA margin stood at 76.9% at constant currency, 1.2 points below the record levels achieved last year. The slight decrease comes after 3 consecutive years of improvement, starting from 76.2% in fiscal year '16 to 78.1% in fiscal year '19. It reflected the decline in revenues, higher costs associated with the Broadband activity in preparation of the arrival of the KONNECT satellite and a higher level of bad debt reflecting more challenging cash collection conditions in the COVID-19 context. These headwinds were partly offset by ongoing rigorous cost control. The LEAP 2 program, which is set to generate EUR 20 million to EUR 25 million of savings in fiscal year '22, has also started. As anticipated, its impact on fiscal year '20 EBITDA remains modest. Moving to the P&L. Group share of net income stood at EUR 298 million versus EUR 340 million in fiscal year '19, down by 13%. The net margin stood at 23% versus 26% last year. This reflected on the negative side, the lower EBITDA, slightly higher depreciation and amortization costs of EUR 531 million compared with EUR 519 million last year, due, notably, to a negative currency impact and to the entry into service of EUTELSAT 5 West B and EUTELSAT 7C. The tax rate of 23% versus 18% last year. The increase, reflecting principally the noncash variation of Satmex's deferred tax assets and liabilities as a result of currency and inflation variations. On the positive side, other operating income of plus EUR 36 million versus plus EUR 13 million last year, reflecting principally insurance of EUR 92 million related to the partial loss of EUTELSAT 5 West B, partly offset by the impairment of assets for EUR 42 million and other one-off items, including costs incurred for the transfer of customers from EUTELSAT 5 West A as well as LEAP 2 and the headquarter move. The net financial result of minus EUR 81 million versus minus EUR 92 million a year earlier, mainly reflecting the positive impact of the refinancing of the bonds redeemed in January and October 2019. Net cash flow from operating activities amounted to EUR 779 million, EUR 69 million lower than last year. This reflected principally the decrease in EBITDA, the deterioration in the working capital requirement, reflecting a more challenged cash collection environment in the COVID-19 context, which should be partially reversed next year. Partly offset by a lower level of tax paid, reflecting the full effect of the change in tax territoriality treatment last year. Cash CapEx amounted to EUR 222 million, EUR 102 million lower than last year. The level is not representative of normalized CapEx since it reflects milestone delays due to COVID-19 and is net of the insurance proceeds in respect of EUTELSAT 5 West B for EUR 86 million. Interest and other fees paid net of interest received amounted to EUR 83 million versus EUR 117 million last year, a EUR 34 million improvement, reflecting the refinancing of the 2 bonds in 2019. As a result, discretionary free cash flow amounted to EUR 474 million on a reported basis. At constant currency and excluding the impact of hedging, one-off costs related to the LEAP 2 plan and the headquarter move, it stood at EUR 483 million, up 6% or EUR 26 million. This further increase comes after 3 consecutive years of double-digit organic growth. At 30 June 2020, net debt stood just under EUR 3 billion and -- sorry, and records a further EUR 73 million decrease versus end June 2019. Discretionary free cash flow of EUR 474 million more than covered the dividend payment of EUR 316 million, including dividends to minority interest. Other changes included a EUR 39 million one-off cash-out related to the settlement of an interest rate pre-hedge instruments; a net cash-in of EUR 20 million for equity investment and divestments, including half of the proceeds from the EUTELSAT 25B disposal on one hand and the acquisition of minority interest in the Russian operations on the other; share buybacks of EUR 20 million; and other item for a net amount of EUR 46 million. The net debt-to-EBITDA ratio stood at 3.05x, which is almost unchanged compared to the level of 2.98x reached last year. The average cost of debt after hedging was further reduced to 2.4% compared to 2.6% in fiscal year '19 and 2.9% in fiscal year '18. The average weighted maturity of debt stood at 3.4 years compared with 3.6 years on 30 June 2019 and 2.2 years on 30 June 2018. The liquidity remains strong, with cash and undrawn credit lines totaling over EUR 1.2 billion. And our investment-grade ratings have been confirmed by both S&P and Fitch post-COVID-19 crisis. Now back to Rodolphe to speak on the outlook.

Thank you, Sandrine. As a reminder, we have a strategic road map with 2 pillars. First, maximizing cash generation, leveraging all components of free cash flow. And second, return our company to growth by extracting additional value from the core Video business and capturing the Connectivity opportunity. Our operational priorities for fiscal year '21 are driven by this 2-pronged strategy. On cash flow generation, we will continue maintaining all components and attention, in particular, ensuring we execute on our LEAP 2 cost-saving plan and improve our working capital trends. We must also ensure we deliver on the clearing of the C-Band on time with first deadline in December 2021. With regard to the Video vertical, we will continue to maximize the yield in major markets, notably, by securing renewals on the best possible terms and optimizing pricing at key hotspots. At the same time, we will seek to tap growth pockets, notably, leveraging the incremental capacity on EUTELSAT 7C and stimulating HD and UHD ramp-up. The coming year should mark a turning point for our Connectivity activities and especially Fixed Broadband, and our focus will be on the ramp of KONNECT both in Europe and in Africa, the business to government opportunities in Africa, the further development of wholesale partnerships, the expansion of our maritime mobility footprint, and preparing for the arrival of EUTELSAT QUANTUM and in the longer-term KONNECT VHTS and EUTELSAT 10B. Turning to the structuring of our European broadband strategy. The availability of EUTELSAT KONNECT will bring long-awaited capacity in high demand areas and with it, and improved end-user experience based on superior economics and flexibility compared to existing assets. Moreover, we have secured a major agreement with Orange for the entire French capacity on KONNECT, effectively bringing forward the contract on KONNECT VHTS. Discussions are underway with other European players, where the features of KONNECT and KONNECT VHTS can help them meet their coverage obligations under the European drive to reduce the digital divide. This wholesale pillar of our distribution strategy is complemented by the acquisition of the European activities of Bigblu Broadband, giving immediate access to a scalable direct distribution channel with a proven track record across Europe. Adding a retail pillar means we can efficiently reach customers in all areas, thanks to a range of tools tailored to satellite broadband. This is a critical enabler to accelerate the ramp-up of future capacity as well as a means to maximize the value of customers over time through the direct control of commercial operations, distribution networks and customer base. Let's have a closer look at Bigblu Broadband. Our indirect model has shown its limitations with a fragmented distributor base, many lacking the critical size to fund subscriber acquisition cost. This has led to a progressive erosion in both subscriber base and revenues. The PPP program has been the first response to this with promising early results. But the imminent availability of EUTELSAT KONNECT means the time is right to more deeply integrate distribution in order to benefit from enhanced end-user access with the ability to pilot retention and upsell initiatives, benefit also from a direct control of product definition and price, allowing a faster alignment with market trends, and also control over distribution levers, in particular, sales force incentives, communication and promotion. As our #1 distributor on KA-SAT with an impressive track record and an existing base of around 50,000 subscribers, Bigblu Broadband represents an ideal target, bringing a true pan-European reach with operations in 10 countries, a scalable platform for direct sales, which we can combine with our own tools and experienced and highly capable management team and a unique pan-European network of installs and resells. The unencumbered acquisition price of around GBP 38 million implies an EBITDA multiple of around 10x. The acquired activities generated around GBP 35 million of revenues in 2019, with a low double-digit EBITDA margin. Given the level of intra-group eliminations, the net contribution to group revenues will not be material, but this acquisition will object the necessity to invest in the development of our own retail channel in Europe. The transaction is expected to be completed by end of October, subject to the usual shareholder and regulatory approval. Turning to our assumptions for each operating vertical for fiscal year '21. Broadcast will be affected by the specific effect of the renegotiation with Forthnet in Greece, which represents an impact of around EUR 10 million. Conversely, Africa should start to benefit from recently signed contracts, and overall, Broadcast revenues are expected to slightly decline. Data and Professional Video will continue to decline, reflecting ongoing price pressure, albeit at the slowest pace than in recent years, thanks to improved volume trends and a gradual recovery of occasional use. Government Services will reflect, on one hand, the full year effect of the EGNOS payload and the initial contribution of EUTELSAT QUANTUM Satellite. And on the other hand, the negative carryforward of last year's renewals and the wash-through of revenues generated by the temporary relocation of EUTELSAT 7A. This year should mark a turning point for Fixed Broadband with the entry into service of KONNECT, the wholesale agreement with Orange in France, the addition of a retail pillar in Europe with Bigblu Broadband, and the ramp-up of Schoolap contract in Africa. Mobile Connectivity will remain affected by the impact of the COVID-19 crisis on the air mobility market, where the timing of recovery remains uncertain, but we will benefit from the ramp-up of recently signed maritime business, maritime contracts. As a result, in fiscal year '21, we expect to generate revenues from the 5 operating verticals of between EUR 1.180 billion and EUR 1.220 billion based on current perimeter and at 1.14 euro to dollar rate. This is consensus -- this is consistent, sorry, with consensus expectations. Cash CapEx will remain at an average, not exceeding EUR 400 million per annum for the period July '20 to June '22, although as recent years show, we are able to limit this spend where necessary. We will continue to leverage all measures to maximize cash generation, notably, the execution of the LEAP 2 plan aimed at generating EUR 20 million to EUR 25 million in annual savings by fiscal year '22, and improving working capital requirement trends. In this context, we are reinstating our discretionary free cash flow target suspended on April 9, amid the COVID-19 crisis, which we now expect to stand between EUR 420 million and EUR 450 million in fiscal year '22. We remain committed to a sound financial structure to support our investment-grade credit rating and continue to target a medium-term net debt-to-EBITDA ratio of around 3x. Finally, our policy of a stable-to-progressive dividend interrupted in fiscal year '20 is reinstated based on the dividend of EUR 0.89 recommended at the upcoming Annual General Meeting, confirming our commitment of a high level of shareholder returns. Looking ahead, the next 3 years should mark the end of the negative top line trend with the ramp-up and arrival of incremental capacity predominantly in Connectivity. We have EUTELSAT 7C with 19 incremental transponders addressing Sub-Saharan Africa, one of the remaining pockets of growth in Broadcast, the deal with CANAL+, and the recently added smaller DTH platforms will gradually fill this capacity. KONNECT is due to start operations from fall 2020, and to operate at full capacity in early 2021, with pre-commitments from Orange for the entire French capacity, representing 10% to 15% of the satellite capacity. EUTELSAT QUANTUM delayed by COVID-19 is due to enter service at the end of Q1 '21, positioned at 48 degrees East. And with its unrivaled flexibility and with the joint commercialization agreements with Intelsat, it will represent a compelling offer for government customers. KONNECT VHTS will start operation towards the end of 2022, with 500 gigabits of VHTS capacity and firm pre-commitments from Orange and Thales, it will represent a major milestone of our Connectivity strategy in Europe. And finally, EUTELSAT 10B due to start operations in H1 '23, when the overall market should have recovered, will bring 35 gigabits of incremental HTS capacity for Mobility over the EMEA region, which -- of which 1/3 already firmly pre-committed. So a few words to conclude. Even in the face of the COVID crisis, we have shown our ability to generate a high level of free cash flow. We continue to serve a high level of dividend, which is covered more than 2x by free cash flow. Our core Broadcast remain resilient, with, in particular, the good dynamics in SSA. The coming year will represent a turning point in our Fixed Broadband strategy, with the arrival of long-awaited incremental assets and the conditions in place to maximize their ramp-up. And finally, we have capacity coming online in the next 3 years, which is set to reverse the declining top line trend since 2016. Thank you for your attention, and we are now ready to take your questions.

[Operator Instructions] We will now take our first question from Nick Dempsey from Barclays.

I've got three questions. First of all, just regarding your deal with Orange in France. Is it possible you could sign something similar to that in other countries where there's a government focus on improving broadband coverage across the whole country? Or is the situation in France somewhat special for you? Second question, just maybe if you could comment on the Sky Italia renewal process. I mean you've mentioned in previous results calls, you haven't touched on it today, I know that's probably some of kicking off around now. Any update on that would be helpful. And lastly, in terms of the 48 degrees East deal with Intelsat, can you give us a bit more detail on how that's going to work? Do you have to give up some of the revenue generation potential of QUANTUM to secure the contract with them and a better ramp? And perhaps you could say roughly whether you expect QUANTUM to contribute much in FY '21?

Well, thank you, Nick. For the distribution -- wholesale distribution strategy of our KONNECT and KONNECT VHTS satellite in Europe, we have started to -- our wholesale strategy with our partnership with Orange and which lead the signature of the contract for the distribution of the capacity of KONNECT for France. Of course, France is not special. And we think that while this contract with Orange will serve as a reference, as a business case to help us penetrate other the large telcos in Europe, what I can say at the time is that we have engaged in similar discussions with other large size operators in Europe. Well, nothing to announce today, but we are of course following exactly the same strategy, same path elsewhere in Europe. And of course, the contract with Orange and -- the distribution strategy with Orange that help a lot with -- in the other negotiations that we are having. Sky Italia, well, I cannot comment a lot at this stage, as you can guess. What I can say is that while the negotiations for the renewal of that contract have started, what I can -- well, I cannot really comment a lot on the terms of that negotiation. What I can tell -- to give you some color on how it's going, I would qualify those negotiations as going well. And we are expecting the results of this discussion shortly. In -- what -- for deals with Intelsat on QUANTUM, it's a distribution deal. We are working, as you know, for our Government Service capacity a lot with third-parties distributors, including already with Intelsat General, of course. And the deal we have signed of 48 degrees East has to be considered in that kind of context. Does it mean that we are going to reduce the revenue expectation that we have on QUANTUM? The result is no. We have exactly the same expectation that we are not going to give up some revenues at that position. The positive for us is that we have embarked a very powerful distributor in that region, which will help us accelerate the ramp of this satellite at 48 degrees.

We will now take our next question from Aleksander Peterc from Societe Generale.

So just first of all, could you clarify on the guidance? You said that that's in line with expectations. But if I look at your old numbers, it looks like you're guiding slightly below, about EUR 20 million below consensus, so maybe there's an FX that you could clarify for us. Secondly, how should we model any impact on the EBITDA margins from the Bigblu Broadband acquisition? Is there a dilution for EBITDA margins that we should model going forward? And from which period exactly? And lastly, on Forthnet, Greece, should we model the impact starting in the current quarter or at a later period?

Well, thank you for your questions. I will start -- I will give a first-line answer, and then I will turn to Sandrine, which will probably can give much more precision than I do. Our revenue expectation at constant currency is exactly in line with the consensus. We have fixed guided bracket of in between EUR 1,180 million and EUR 1,220 million. It's given at 1.19 euro-dollar exchange rate -- 1.14, sorry, euro-dollar exchange rate. And when we take the consensus at this same rate, it's almost just in the middle of this bracket. EBITDA margin, BBB acquisition, well, we are acquiring the European activities of BBB to be very specific and precise. And there is no dilution expected to our EBITDA margin. And finally, Forthnet, Greece, the contract will take place -- will materialize as of July 1, meaning that the effects can be seen as of the first quarter of our fiscal year. But maybe I can turn to Sandrine to answer better your questions.

Yes. Aleksander, the precise maths on the consensus are the following: so the consensus for fiscal year '21 for the operating verticals only is at EUR 1.221 billion. The implied ForEx behind this figure is EUR 1 for USD 1.11. When you translate this at the rate of our guidance, which is 1.14, as you know, we end up with a consensus is expressed under our guidance of EUR 1.208 billion. So I confirm what Rodolphe just explained in terms of our guidance for next year.

We will take our next question from Sami Kassab from Exane.

I have three questions as well, please. In Fixed Broadband, you now own a retail distribution arm. 3 years from now, how much of your revenues or subscriber count do you expect that the retail assets will deliver? Can you discuss wholesale versus retail distribution as you see developing, say, 3 years from now and the impact it may have on good margins, please, Rodolphe? Then secondly, can you comment on how you see capacity pricing trends in the current environment? Are we dealing with the same type of price deflation than a year ago? Or has it worsened? Or perhaps improved? And lastly, you have given a mixed outlook for Government, some positive, some negative. Do you expect Government revenues to grow or decline in fiscal '21?

Well, in Fixed Broadband, what would be the distribution mix that we'll be adding in the future? Of course, there are some -- still some uncertainty in that respect because, of course, we are trying hard, as I said, to develop as much as we can the wholesale part of our distribution strategy. And also, what I must say that the mix will probably differ continent by continent. When you take Europe, most probably, it will be more or less a 50-50 split between retail and wholesale. In Africa, most probably, the situation will be slightly different since we are adding a B2G components to our distribution strategy in Africa. B2G meaning, the digital including program that we have with the government in the region and where we have been able to mark our first success with this Schoolap deal. And probably in Africa, the bias would be more pronounced towards wholesale and B2G. On your second question regarding capacity pricing. I don't know which application you are sort of focusing on. Overall, what we can say is that in the Broadcast segment, pricing at our video hotspots are remaining very, very stable -- remarkably stable. In the Data and Professional Video segment, price continue to erode and to decrease at the same kind of pace as before, the double-digit decline. And for the rest, in Broadband and Mobile Connectivity, no change in price evolution. Our revenue in the Government vertical in fiscal year '21. What -- we think that, well, it will be -- I -- well, I don't know what I'm supposed to say there. What I will say it will be more or less stable, this application. With -- for nobody, we don't give guidance, as you know, on an application-by-application basis. But let's say that it will be broadly stable with 2 factors compensating, one -- well, compensating each other. First factor is the sort of natural erosion embarked by the renewal of the contract with the U.S. DoD. Even though the outcome of the latest renewal campaigns were good, there was still only at 85%, which means the natural erosion compensated by 2 positive elements. The first positive element being, of course, the entry into service of the QUANTUM satellite launched in the fiscal year. And second, the full year effect of the EGNOS positioning payload.

Thank you, Rodolphe. And in terms of pricing, when you commented on Mobile Connectivity, did you say that prices remained stable versus last year? Or did you say that the rate of decline remained stable versus what we had seen historically?

Well, what we have in Mobility, typically, is that we have -- what -- in the long-term contracts that we ink in the Mobility segment, typically, the structure of the contract is that we progressively decrease the price per megabit, while we increase the consumption of megabit. That's the way it's structured.

[Operator Instructions] We will now take our next question from Patrick Wellington from Morgan Stanley.

Yes. I've got three questions. Sandrine, you mentioned debt collections on a couple of occasions. I think at the half year, the receivables over 90 days went up from EUR 40 million to EUR 218 million. I haven't had a chance to check that number for the full year. But could you talk around what is happening with that long-dated debt? What the trends are? I think you said you thought you'd get a bit of an improvement as we run through this year. So can you talk around the dynamics of that? Secondly, on QUANTUM. I think in the past, you've said that this is around a EUR 35 million revenue opportunity. Does the delay that we've seen in the launch impact that at all? And then thirdly, you talk about a stable and progressive dividend, and you have done for some time. But of course, you've cut the dividend from EUR 1.27 to EUR 0.89. And you're now saying that the stable and progressive nature of the dividend is from a base of EUR 0.89. So it's not really a stable and progressive dividend. You've also suspended the buyback. So can you talk a bit about the decision-making there? Are we likely to see the buyback restored at some stage?

Maybe we'll start with your first two questions. Sandrine, if you like to take this one.

Patrick, so on the debt collection, as I mentioned, of course, we have suffered some delay in the cash collection due to the COVID-19 crisis. When you look at our balance sheet, at June 30, the total receivable on the balance sheet has increased by EUR 50 million, 5-0, and it's mostly driven by the COVID-19 crisis. We expect to catch up on part of it in fiscal year '21, and this is also taken into account in our forecast in fiscal year '21. When you look at the total receivables above 3 months, because you mentioned also the long-dated receivables, they are also increasing by approximately EUR 70 million, 7-0, which is also strongly driven by the COVID-19. And as we mentioned during our presentation, we have sold one significant contributor to this kind of receivables, which is Forthnet. So this is one improvement on this side, too. I would also highlight that we have, of course, a significant amount of provision at the balance sheet to cover the risk on that receivables and that the net amount of receivable after taking into account this provision is EUR 130 million. This is maybe what I can tell you for our position at the end of June on this side.

On your second question regarding QUANTUM. Do we revise our expectations of revenue from this satellite? The answer is no. Do we expect the same kind of order of magnitude of revenues as we said some months ago at around EUR 35 million? The answer is no. We stay exactly on that objective, and we are even a bit more optimistic on the ramp of this satellite given the commercialization deal we have been able to sign recently with a very capable, as I mentioned, distributor for this kind of a service, which are dedicated mostly, as you have understood, to government-related telecommunications services. On your question regarding the dividend and the reinstatement of our return to progressive dividend, we have been very explicit in saying that -- which will be based on the rebased dividend. We are starting from this point, of course, at EUR 0.89, which is -- which we think is clear and it's well understood by the financial markets when we take the consensus of dividend. It's exactly in line with what we say now. Concerning the remuneration strategy of the group, well, our remuneration is clearly oriented towards the return to our shareholders. We delivered a very strong yield, even with our rebased dividend, the yield, which is at around 10%, it's very well covered by our free cash flow. And I think we are bringing strong elements to sustain that our free cash flow will remain extremely robust in the next 2 years. And you can imagine that it will be likewise in the year -- in the outer years, after the guidance proving that we have a very robust cash flow, very solid, a very strong ability to deliver our cash flow target. And that's really the bedrock of our remuneration strategy. Could we do more in the future? More, probably. The reason why we don't do more those days is, first, because we are quite focused also on elements like the net debt to EBITDA. We want to remain solidly in the investment-grade zone. We think it's important in current uncertain times to stay very -- well, clearly, investment-grade rated. That's the first element. And second, we have to take into consideration also -- even though we are extremely solid with a lot of visibility in our business model, given the outside uncertainty, we have to remain prudent. And that's the reason why we are not going above the level of today, which is, in absolute terms, very, very good in current days.

Can I just follow-up quickly on Nick's question on Sky Italia. I think when you've talked about that contract in the past, you've talked about it being in multiple portions, if you like. So the negotiation in...

Sorry, sorry, sorry. I didn't understand the word that you used.