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

Good day, and welcome to the Eutelsat First half 2021-'22 Results Conference Call and Webcast. Today's conference is being recorded. And at this time, I would like to turn the conference over to Eva Berneke, CEO. Madam, please go ahead.

Thank you, and welcome to all of you. Thank you for joining us today for our half year '21/'22 results presentation. I'm Eva Berneke, CEO, and I'm joined on today's call by Michel Azibert, Deputy CEO; and Sandrine Téran, CFO. As this is my first earnings call and first time speaking with many of you, let me start with a few words of introduction about myself. Prior to joining Eutelsat, I was the CEO of KMD, Denmark's leading IT and software company. I oversaw the transformation on KMD from a declining business into a growth company through development of new businesses while managing the slowdown of legacy business. Prior to that, I held several senior positions at CDC, including Head of Strategy and head of the company's largest business division. I also have experienced having served on several boards of successful international groups such as LEGO, Vestas and Schibsted. I decided started to join Eutelsat at this compelling phase of development and I know I can count on the experienced management team at Eutelsat, including Michel and Sandrine here with me today to fully support me in this new role. Let's now turn to the results with a quick overview of the highlights of first half. In terms of numbers, first half operating vertical revenues were broadly in line with expectations and within our forecasted range of objectives for the full year, albeit in the lower half. Despite this revenue decline, we reported further industry-leading profitability with an EBITDA margin above 76%. Adjusted discretionary free cash flow was robust, exceeding EUR 200 million and well on track to reach our full year objectives. Among the other highlights in December, we received $125 million proceeds related to Phase 1 of the C-Band transition and we continued to work on securing Phase 2 proceeds as soon as possible. On the operational side, we made further progress to our Fixed Broadband rollout as highlighted by the massive acceleration of revenues, which are up 37% year-on-year. More on this later. First half also saw the entry into service of EUTELSAT QUANTUM, which is enjoying a strong commercial momentum will have in the satellite at a very advanced stage of commercialization. And finally, our strategic investment in OneWeb was closed, making us the second largest shareholder in what remains today one of the very limited number of global EU constellations. Looking at the financial performance. Total first half revenue stood at EUR 572 million, down 4.7% on a like-for-like basis. Revenues of our 4-- 5 operating verticals stood at EUR 569 million, down 4.2%. EBITDA margin was 76.4% at constant currency, down 0.6 points versus last year. Cash CapEx stood at EUR 98 million in the first half, slightly lower than last year. As usual, phasing issues mean that first half is not reflective of full year. Discretionary free cash flow stood at EUR 195 million on a reported basis and EUR 203 million on an adjusted basis. That is as defined in our financial objectives. This is down EUR 62 million compared to the record high level of H1 2021. And finally, net debt-to-EBITDA ratio stood at 3.53 at the end of December which is 0.44 higher than a year earlier, reflecting notably our investment in OneWeb. As mentioned, we made a really strong progress in the rollout of our Fixed Broadband activity, both in Europe and Africa, which is one of the key drivers of our connectivity pivot. In Europe, our recent contracts with Hispasat in Spain and Deutsche Telekom in Germany mean 4 out of the 5 most populous markets are now covered by wholesale or distribution deals with major operators that includes, for France, Orange and TIM for Italy. In Africa, we are making good progress with multiple distribution channels with telecom operators and that includes agreements with Globacom in Nigeria and Vodacom in Tanzania. With Internet service providers, such as Intersat for the capacity cover in Gambia and Guinea Bissau or even community WiFi with more than 250 express WiFi in DRC now activated. And finally, but not least, business to government where we are making good progress in discussions with quite a few major international institutions. EUTELSAT QUANTUM began operational service mid-November. As you might remember, EUTELSAT QUANTUM is the very first software-defined satellite bringing unprecedented features to customers giving a truly real-time adaptability to their evolving business needs. These include full in orbit-reconfiguration in terms of footprint, spectrum, power and capacity; remote control of beam customization; and even enhanced security features and interference mitigation capabilities. After the first few months of operations and the attendant testing of the satellite by prospects, the commercialization of 4 beams out of the 8 are real advanced. First contracts are secured for 2 beams, one with the customer in the Middle East for maritime mobility and one for a service provider operating for the U.S. administration. We're also in well advanced discussions for commercialization of additional 2 beams. And of course, we continue to see a promising pipeline to the business that address USG and non-USG customers. Now turn to the investments in OneWeb. We closed our investment, making us #2 shareholder in OneWeb. We're now at 23% stake and strong governance rights. The operation relates to a $580 million cash-out while the remaining $135 million will be caused in the coming quarters. First generation of the constellation is now fully and even slightly overfunded with no requirements of additional funding until a decision is taken on Generation 2 of the constellation. 13 OneWeb launches have been successfully completed, the last one just a few days ago, which means that 2/3 of the fleet is now in orbit. As a result, partial coverage is now available in the Northern Hemisphere and first distribution partners have been onboarded. On the commercial front, numerous distribution partnerships have been signed to address multiple verticals, including BT, AT&T, Airbus and Hughes. The first substantial precommitment was secured with NEOM in the Middle East and discussions for commercial cooperation between ourselves and OneWeb are opening very promising prospects. Now I'll hand over to Michel for a deeper dive into our operating verticals.

Thank you, Eva. Total revenues for the first half stood at EUR 572 million, down 9% on a reported basis. This included a negative perimeter effect of EUR 20 million from the disposal of Euro broadband infrastructure, partially offset by the consolidation of Bigblu Broadband. Other revenues, as a reminder, revenues other than those generated from the commercialization of satellite capacity and volatile by nature, were down EUR 12 million with 2/3 of this impact resulting from the variation in hedging revenues. As a result, and in the absence of any material currency effect, revenues of the 5 operating verticals were down by 4.2% on a like-for-like basis. Let's look at them in more detail. As a reminder, all comments are based on like-for-like change, i.e., at constant currency and perimeter. Broadcast, 62% of group total, recorded revenues of EUR 351 million, down 7.5% versus last year. Data & Professional Video, 14% of group total, saw revenues of EUR 78 million, down 4.1%. Government Services, 13% of group total, saw revenues of EUR 74 million, down 3.8%. Fixed Broadband, 5% of revenues, stood at EUR 30 million, an organic progression of 37%. And Mobility, 6% of revenues, saw revenues of EUR 37 million, up by 9.8%. Other revenues stood at EUR 4 million, which included a negative EUR 2 million effect from hedging compared to a positive EUR 6 million last year. Turning first to Broadcast. First half revenues were down 7.5% to EUR 351 million. This reflected, first, lower revenues in Europe due to the carryforward effect of the COVID-related slowdown in new business last year, accounting for around half the decrease. Second, a temporary headwind related to the partial renewal in October of capacity with Nilesat at 7/8° West, representing a 1.5 point impact; and third, a negative impact of circa 1 point, reflecting the combination of the positive one-off in Q1 fiscal year '21 and lower revenues from FRANSAT. Second quarter revenues were down by 8.6% year-on-year and 3.1% quarter-on-quarter. Looking ahead, this trend is expected to progressively improve as the comparison basis eases from the second half onwards and the available capacity at 7/8 West is gradually resolved. Data & Professional Video revenues stood at EUR 78 million, down by 4.1% year-on-year. Fixed Data, 2/3 of this vertical, benefited from higher volumes, notably in Latin America, which offset most of the negative impact of price pressure. Professional Video recorded a high single-digit decline on the back of ongoing structural headwinds related to competition of terrestrial infrastructure and the unfavorable phasing of a specific contract. For the full year, we expect the decline to remain broadly consistent with the trend of the first half. Government Services revenues stood at EUR 74 million, down 3.8% year-on-year. They reflected the negative carryforward effect of the full 2021 U.S. government's renewal campaign with a 75% renewal rate on the back of the geopolitical context in the Middle East. This was partially offset by new business. Second quarter revenues were down by 5.9% year-on-year and by 2% quarter-on-quarter. The second half will reflect the full effect of the above-mentioned headwinds, the full effect of fall 2021 renewals; and the geopolitical context in the Middle East, which is also likely to impact the spring 2022 campaign. First half, Fixed Broadband revenues stood at EUR 30 million, up 37% year-on-year on a like-for-like basis, i.e., excluding perimeter effects. This reflected the contribution from the wholesale agreements with Orange, TIM and from November 2021 Hispasat as well as, to a lesser extent, the continued growth of our African operations. As flagged by Eva, we have secured a number of agreements in Europe and in Africa, which will continue to feed growth in the coming quarters. Elsewhere, several spot beams on the EUTELSAT 65 West A HTS payload were selected to provide Internet access for rural schools in Mexico under a government-backed program highlighting the relevance of satellite to address rural connectivity projects. These tailwinds will benefit the second half, which will see a continuation of robust double-digit growth. First half Mobility connectivity revenues stood at EUR 37 million, up 9.8% year-on-year. This reflected the contribution of the contract with Anuvu, formerly Global Eagle, and more generally, a sound performance of maritime mobility, driven by the ramp-up of contracts with service providers and the agreement with a customer in the Middle East for one beam on EUTELSAT QUANTUM. Second quarter revenues were up 20% year-on-year and by 11% quarter-on-quarter. Commercial momentum remained favorable with the extension of our global partnership with Marlink in addition to the previously mentioned deal on QUANTUM. This positive dynamic is expected to translate into double-digit growth for the full year. Turning finally to backlog and fill rate. The backlog stood at EUR 4.2 billion at 31st December 2021 versus EUR 4.4 billion at end June 2021 with natural erosion in H1 more than offsetting the impact of the partial renewal with Nilesat and the Hispasat contract. The number of operational transponders stood at 1,380 broadly stable year-on-year and compared to end June 2021 in the absence of entry into service of new regular capacity or end of stable orbit life of any satellite in the past 12 months. The number of utilized transponders stood at 974, up by 7 units year-on-year and down by 7 units compared to end June, the latter reflecting the return of capacity by Nilesat. As a result, the fill rate stood at 70.6% compared to 70.1% a year earlier and 71.2% at the end of June. Now over to Sandrine for the financial performance.

Thank you, Michel, and good morning, everyone. Starting with EBITDA, which stood at EUR 436 million at 31 December 2021 compared with EUR 484 million a year earlier, down by 10%. EBITDA margin stood at 76.4% at constant currency, 76.1% on a reported basis versus 77% a year earlier, reflecting the decline in revenues. OpEx were EUR 8 million lower than last year, reflecting the favorable effect of changes in perimeter, a reduction in bad debt and continued strict cost discipline in the legacy businesses. On the latter, EUR 24 million of savings have been fully secured in the context of the LEAP 2 cost-saving program in the high end of the EUR 20 million to EUR 25 million target. Turning to the P&L. Group share of net income stood at EUR 166 million versus EUR 137 million a year earlier, up by 21% and representing a margin of 29%. This reflected, on the positive side, lower depreciation and amortization, EUR 243 million at 31 December '21 versus EUR 260 million a year earlier, reflecting the disposal of the KA-SAT satellite and the end of the amortization period of certain in-orbit assets; other operating income of plus EUR 84 million compared to expenses of EUR 8 million last year, including the USD 125 million payment related Phase 1 of C-Band proceeds, partly offset by some asset impairments. The net financial result of minus EUR 35 million versus minus EUR 47 million a year earlier, reflecting a favorable evolution of foreign exchange gains and losses. On the negative side, the tax rate of 24% versus 15% last year, reflecting the 30% tax rate applied to the C-Band proceeds. And a negative income from associates of minus EUR 13 million, reflecting the contribution of the stake in OneWeb since September. Net cash flow from operations amounted to EUR 363 million, down by EUR 72 million. This reflected mostly the decrease in EBITDA, and to a lesser extent, an outflow related to working capital compared to the compelling base of last year, which included a COVID-related catch up. Cash CapEx amounted to EUR 98 million, EUR 99 million lower than last year. It reflected the phasing of satellite program milestones and is not representative of the expected full year outturn. Interest and other fees paid amounted to EUR 70 million versus EUR 61 million last year. The slight increase largely reflecting the fact that all the coupon payments related to our bond issuances now fall in the first half. As a result, discretionary free cash flow amounted to EUR 195 million on a reported basis, down EUR 62 million year-on-year. Adjusted discretionary free cash flow as per our financial objectives, i.e., excluding ForEx, hedging and one-offs, stood at EUR 203 million, also down EUR 62 million year-on-year. At 31 December 2021, net debt stood at EUR 3.081 billion, up EUR 426 million versus end June. It's mainly reflected, on one hand, EUR 195 million in discretionary free cash flow generated in the first half and C-Band proceed of USD 125 million or EUR 109 million, and on the other, the dividend payment of EUR 222 million and the outflow in respect of inorganic investments of EUR 495 million, mostly OneWeb. As a result, the net debt-to-EBITDA ratio stood at 3.53x compared to 3.09x at end December 2020 and 2.88x at end June 21. As a reminder, December represents a peak in the annual leverage profile due to the timing of the dividend payment. The picture is amplified this year by the timing of the OneWeb payment, whereas only 1/4 of the C-Band proceeds have been received at this stage. The average cost of debt after hedging stood at 2.5% versus 2.3% in H1 '21. The weighted average debt maturity stood at 4.5 years compared to 4.3 years at end December 2020. And last but not least, liquidity remained very strong with undrawn credit lines and cash of around EUR 1.5 billion. Now back to Eva to speak on the outlook.

Thank you, Sandrine. As a reminder, our strategic road map is based on 2 main pillars: one, to maximize the cash generation of our heritage business in order to fund our transition towards high-growth verticals whilst continuing to deliver high level of shareholder returns. Second pillar is to deliver growth in the connectivity verticals, in the medium term through GEO enabled growth, notably in Fixed Broadband via KONNECT and KONNECT VHTS, and in other applications via selected geostationary investments such as QUANTUM and EUTELSAT 10B. In the longer term, also LEO-enabled via our strategic investments in OneWeb. At the same time, we'll work to generate synergies between our GEO and LEO assets. Let's look at progress on the key priorities we set ourselves for 2022. On cash generation, as Sandrine mentioned, we've delivered on the LEAP 2 plan with the high end of our savings target already secured. We had the first tranche of the C-Band proceeds in December, and we maintained all cash flow levers on the intention to generate robust free cash flow in the first half. On the connectivity pillar, we are well advanced for the commercialization of 4 out of the 8 beams on the EUTELSAT QUANTUM satellite. In Fixed Broadband, we made strong progress in Europe and in Africa as presented earlier. We continued to see very good traction in maritime notably with the launch of Eutelsat ADVANCE and the extended partnership with Marlink. And on the LEO front, we completed both tranches of our strategic investment in OneWeb, and we're making good progress in developing commercial cooperations. Converse, we've suffered a setback with the availability of KONNECT VHTS that has been delayed from first half to second half of calendar year '23. Entry into service of EUTELSAT 10B satellite has also been delayed versus our previous expectations although it's still expected to be within the first half of '23 window. This will have a mechanical impact on revenues, which I'll come back to. First half revenues were broadly in line with our expectations, albeit in the bottom half of our guidance range for the full year. Relative to our initial expectations, we've seen 2 main headwinds. First, the resale of capacity on 7/8 West is taking slightly longer than expected to materialize. However, we are seeing strong commercial interest in the available resources and we remain confident in our ability to gradually resell the capacity. Second, the geopolitical situation in the Middle East has led to a headwind in Government Services, which already partly materialized in the U.S. Department of Defense fall renewal campaign and is also expected to impact the spring renewal campaign. As a result, we expect our operating verticals to land in the lower half of our guidance range between EUR 1,110 million to EUR 1,150 million. So we are adjusting the top end of the range to EUR 1,130 million. Outer year will be mechanically affected by the delayed availability of KONNECT VHTS and EUTELSAT 10B due to delays from our suppliers. As a result, return to top line growth in financial year '23 is no longer achievable, although the trend will materially improve relative to financial year '21/'22. And we remain confident that financial year '24 revenues will grow on the back of the availability of the incremental resources. As a reminder, the coming years will benefit from entry into service of substantial incremental capacity, several of these already with firm commitments. EUTELSAT KONNECT is already significantly derisked with wholesale commitments from Orange, TIM and Hispasat covering around 40% of the capacity. EUTELSAT QUANTUM with already firm commitments for 2 beams and probably 2 additional beams to come very soon. HOTBIRD 13G will carry an incremental EGNOS payload bringing some EUR 7 million in revenues per annum over 15 years from early '23. And EUTELSAT 10B will bring 35 gigabits of incremental HTS capacity for mobile connectivity over EMEA, partially precommitted by Gogo and Panasonic and also have firm precommitment from overrun for regular capacity. KONNECT VHTS with firm pre-commitments from Orange, Thales and TIM potentially completed in the future by commitments by Hispasat and Deutsche Telekom. And finally, Eutelsat 36D predominantly a replacement satellite for broadcast, but also carries an incremental UHF payload operated by Airbus. Firm precommitment for incremental capacity all represent a backlog of almost EUR 800 million with an average contracting of around 10 years. As previously mentioned, we expect to generate operating vertical revenue between EUR 1,110 million and EUR 1,130 million for current fiscal year based on a euro-dollar rate of 1.20. At midpoint, this is broadly in line with market expectations. Taking into account perimeter and currency effects, the midpoint of this range equates to a minus 4% in organic decline. As highlighted, financial year '23 revenue trend is now expected to materially improve relative to this variation. Revenues are expected to return to growth from financial year '24 on the back of the incremental capacity in space. Also confirm all our discretionary cash -- free cash flow objectives for the next 3 fiscal years with financial year '22 expected between EUR 400 million and EUR 430 million and growth in the 2 following years. The revenue headwind will be offset by additional effort on other levers of cash generation, particularly cash CapEx, which will not exceed EUR 400 million per year for each of the next 3 fiscal years. Finally, we confirm our leverage targets and dividend policy. So a few words to conclude. We continue to generate a very robust level of cash flow, and we are on target to meet our full year expectations. Top line trend is set to improve significantly from financial year '23, but less than expected due to incremental capacity availability delay. We expect to grow from financial year '24 underpinned by substantial firm commitments. All our free cash flow objectives are confirmed as well as our dividend policy. We remain focused on continued execution of our two-pronged strategy. Eutelsat is a unique combination of highly cash-generative legacy business and a strong asset to address massive connectivity opportunity as well as additional opportunities provided by our investment in OneWeb. So I thank you for your attention and to Michel and Sandrine, and I'm now ready to take any questions. Thank you.

[Operator Instructions] We will now take our first question from Aleksander Peterc from Societe Generale.

A warm welcome to Eva. Now can I just ask a few. First, given that you have some headwinds in terms of revenue due to launch delays, will that be offset at the cash flow level also by any pushouts of CapEx cash-outs so that would ease a little bit the impact for you guys? And specifically in Fixed Broadband, do you see further extensive deals with European telcos or have you now pretty much covered all of the key markets? Where do we stand there? And then just in terms of housekeeping, could you help us understand what we should model for associate losses for the year as this is now more material post the OneWeb acquisition.

Thank you, Aleksander, for these questions. Let me maybe start out with the 2 first ones and then come back to the third one on associated losses. Yes, we are -- the headwind we are seeing is related to the late arrivals of our 2 additional assets. And we -- in order to keep our cash flow objectives, we will be looking at all cash levers because, of course, the revenue decline will impact the EBITDA. We do think that the taxes paid will be lower than last fiscal year, and we're also working with both working capital as well as cash CapEx commitments. So that's how we expect to offset this headwind linked to delayed availability of the 2 satellites. Turning to your question on Fixed Broadband. Yes, as I told, we now have 4 out of the 5 big European countries covered with Orange, TIM, Hispasat and Deutsche Telekom. So we think we are making very good progress in terms of coverage. And that actually has allowed us this very significant growth in Fixed Broadband of 37%. Of course, when the KONNECT VHTS becomes available, we hope to further strengthen these partnerships. When I come to associate revenues. I guess it's the negative -- minus EUR 13 million of OneWeb. And Sandrine, maybe you can answer that. It's been included since September where we started our investments. But please highlight?

Yes. Thank you, Eva. Yes. So Aleksander, so just to confirm what Eva just said. So the EUR 13 million corresponds to our share in the contribution of OneWeb from September 1 until December. We will not guide specifically on this line, Aleksander, but we can say that for the full year '22, it should be more or less aligned to this figure for the first -- for the last 4 months of the calendar year '21.

We will now take our next question from Nicola Gifford from Goldman Sachs.

[Audio Gap] That resale of capacity. Last quarter, management had said impact should be in the magnitude of about EUR 5 million on a quarterly basis from 2Q, given you're seeing delays and this is one of the reasons you're lowering top line guidance. What sort of magnitude should we expect or be thinking about for the rest of the year?

Michel?

I think the figure, which was in the range of EUR 5 million, the -- I mean, the quarterly impact of the partial renewal of the loss of capacity will now turn into a EUR 7 million impact on a quarterly basis. And then, of course, progressively after that, we will resell the capacity. But for this year, this is...

Did you have any other questions?

Great.

We will now take our next question from Terence Tsui from Morgan Stanley.

Eva, congratulations on your appointment. As an ongoing telecoms analyst, I do remember speaking with you whilst at TDC. So all the best for your new role. I've got a couple of questions, please. Firstly, just more broadly around the midterm guidance. You talk about it being a mechanical delay. Can you just give us some confidence that you're still seeing demand in the end markets for these new satellite launches and that you think pricing will continue to hold up with all the upcoming satellite launches by the competition? And then secondly, can you talk specifically about your launch delays? Just elaborate on some of the manufacturing delays and the pairing difficulties and share with us some of the experiences that you're seeing on the ground? And then lastly, just a specific question around Nilesat. Are you still expecting to sell the excess capacity that has been freed up? I think back in October, you mentioned maybe even selling at a pricing premium. Is that still the case, please?

Yes. And good to have you back here in -- now in space. So thank you for your congratulations. Let me start out with your question around the midterm guidance because, yes, that's definitely been an area we've been diving in for the last couple of weeks to fully understand. It's -- let me start with KONNECT VHTS. Let me start out by saying that, yes, we definitely see the market demand for these assets, for sure. And we'll be spending these days on also talking to the customers who are eagerly awaiting us to put this capacity into the market. So it is really a double whammy in terms of not coming out with this capacity as fast as we'd hoped for because we do have customers waiting to actually provide a fixed broadband to the ones who don't have it today. So on that, we are quite confident also given that on the KONNECT we already have a lot of these wholesale agreements in place, which will then switch to KONNECT VHTS once we get it up there flying. So some of the delays and just diving into what are the reasons. It's a mix of a delay out of the various tests. We just have them out of what's called TVAC. I'm learning a lot of new vocabulary in this industry, and that gives us about half the delay. And the other half is linked to what you could call access to space, which is a combination of available launches as well as co-passengers. As you know, we launched these with a co-passenger, 2 satellites launched at the same time. So both of them need actually to be ready to be launched in order for us to go. So it's a combination of these 3 factors, and it's clear there's some COVID in there in terms of our suppliers. We've gotten a lot of notice on that. And as you know, lots of supply chain constraints all over the world. We're not the only industry impacted by that. So the combination of all of that give us about a 6-month delay on the KONNECT VHTS. On the E10B, it's a bit of the same thing. It's a slightly shorter delay, it's only a 3-month delay, but it's also a combination of late availability of a rather complex satellite. These 2 things are pretty complex animals to build. So that has given our suppliers a bit of a headache. But also there, we've been working on trying to optimize the launch pattern and access to space in order to get it up there. On the Nilesat, I think, Michel, you will correct me, but we actually still do expect to sell the available capacity. It's just taking us slightly longer than what we'd hoped for, essentially, given that we're going to have to sell through a lot of smaller deals rather than a few very large deals that we'd hoped for when we talked to you after the end of last quarter. Terence, did that kind of cover what you asked for?

Yes. That's very useful.

QUANTUM pricing, I think, Michel, do you want to give a word on that?

Yes. Based on the -- let's say, on the 2 deals which have been signed, one on Mobility, one on Government with U.S. administration; and the 2 which are in the pipeline, also another one for Mobility, another one for Government. We can say that the pricing is coherent with our anticipations and what we are sort of forecasting as a run rate for the revenue of the satellite going forward. We indicated something in the range of EUR 35 million for the satellite in a couple of years when it's full. So first, let's say, the pipeline is quite healthy and the pricing is good meaning that it is a premium to the price of the capacity -- price per megahertz of the capacity that we sell to, for instance, to the U.S. government for regular capacity. So everything seems to be well in line.

We will now take our next question from Sami Kassab from BNP Paribas.

Welcome to the forum, Eva. I would like to ask you 3 questions, please. The first one, can you discuss the impact you expect from the newly announced European broadband satellite system that the EU Commission published yesterday. Is that an opportunity to sell additional capacity? Or is it more of a risk of a competing system with VHTS? Secondly, can you discuss your midterm CapEx outlook in the context of OneWeb Generation 2 and perhaps additional investment requirements to participate in the EU program? Do you think you can maintain the EUR 400 million envelope beyond fiscal '24? And lastly, please, can you share your midterm outlook for the Government division? Do you still expect this business line to remain flat? Or do you see some midterm revenue pressure in Government?

Thank you, Sami, for these very, very relevant questions. Let me start with the EU constellation, which is an area we've been very closely involved in. And you probably also -- you might know that we've been part of one of the consortiums together with Airbus, looking at the models for the EU constellation. And there are several elements -- or there are several steps before we get to a level where we have a full EU constellation launched. And we see it much more as an opportunity where Eutelsat and potentially also some of our partners will be able to provide capacity into this EU constellation. There's still -- it will be a multi-orbit approach where you'll see both GEO, MEO and LEO orbits in the constellation. So I definitely think we see this as an opportunity. Of course, we have many players in the market who are interested in that, and there's also a political process that needs to happen before any financing is secured. So it's not going to be something that impacts neither this year or next year's figures, but we definitely see it as an opportunity. In terms of the midterm CapEx outlook, our guidance is to remain under the EUR 400 million in cash CapEx. However, you know we don't consolidate in OneWeb and the investment into Generation 2 of OneWeb has not yet been decided for OneWeb. Right now, OneWeb is funded for their Generation 1 and it's well funded, as we pointed out. However, the Generation 2 is really only -- not only -- it's not even on the drawing board, but it's getting to the drawing board. So before we know that, we simply don't know what kind of CapEx OneWeb will have to fund for the second generation. And of course, there can be both some EU constellation, both in our GEO CapEx investments where we have capacity up there and we'll get capacity with especially KONNECT VHTS in the short term, whereas CapEx for Generation 2 will only get more LEO capacity from OneWeb up there in probably 5-plus years. As you know, it takes quite a long time to launch a constellation if you don't have it started already. So if you don't already have capacity up there as OneWeb and we have, it will be a long journey to get additional capacity and potentially also complicated in terms of filings, and I think that's one of the key questions in the EU constellation. The final one on the outlook on Government Services is that we continue to see a decline for the full year financial year this year. So it's a continued decline and deterioration that will have both the impact of the fall campaign as well as lower-than-expected or historical averages on the spring campaign also. But we do expect to see in the kind of looking beyond this financial year that the QUANTUM ramp-up would give us a good positive momentum as well and then actually also we'll continue to see the opportunities to sell the capacity that the U.S. government has returned. And then finally, there's a couple of upcoming payloads with the EGNOS and the UHF payload, which are coming in on the E10B, which will also give us positive, but that will only hit the year after this financial year. So continued headwind in the rest of this year and then some positive developments on that coming in next year.

[Operator Instructions] We will now take our next question from Ben Lyons, Credit Suisse.

Welcome, Eva. Just a few quick ones. So the first one was on the C-Band. Are you still expecting that in H2 the remaining payments? My next question would be just a quick follow-up on the European broadband network. There were some comments last year made from Thierry Breton, I believe, who said that the investment in OneWeb may have an impact, and you talked [ about the ability ] to take part. I mean have you seen any impact from way you sort of engaged so far? And lastly, I'm not sure if I misheard, but I think you mentioned the EUR 800 million figure on the backlog. Was that related just to the connectivity assets? And if so, how much of that is incremental?

Okay. Ben, you had a bit of a difficult line, but let me try to just make sure that your first part was on the C-Band proceeds. And the second one was on the European constellation broadband network?

Yes, I think the first one was, Ben, yes, it was about the C-Band and Phase 2. I think the second one was about European broadband and specifically last year's remarks by Thierry Breton and what impact, if any, you thought that would have on our chances of being part of the constellation. I think the first one was about the precommitment-s on the upcoming capacity. And he wanted to know how much of that was incremental and how much of it was not incremental. Is that right?

That's perfect. Apologies for the line.

That's fine, Ben. I hope you can hear us better than we can hear you. So -- but let me dive into the -- into your questions. The C-Band proceeds, yes, we are in good progress on Phase 2 as well. Our current hypothesis is that it will be during the spring/summer of this year that we get the Phase 2 because we've done pretty much all the work. As you know, we were the first player to actually touch the Phase 1. So we hope also to be the first one to touch Phase 2 and finalize this work. Our colleagues in the market have chosen slightly more complicated ways of going through this. So we do expect to be among the first ones to touch also the second phase of the C-Band proceeds this spring or likely more during the summer. On our -- on the EU constellation and some of the -- especially comments from Mr. Breton is very much linked to the discussion about European serenity. And I think that's -- it's clearly a topic that we are aware of. And I think it's also a big question on how we address European serenity. I think actually Eutelsat being a shareholder of OneWeb gives a great opportunity for potentially solving that serenity issue. And for Eutelsat, it's clear that we see ourselves as very key to ensuring European serenity on the EU constellation. Now how OneWeb can be part of that will need to be figured out, so we can ensure that serenity. We see more the comment of Monsieur Breton as a willingness to ensure that both government and kind of secure server and services can function on this network. In the last -- your last question in terms of the precommitments, as I think I walked through, we actually have quite a lot of additional capacity coming in and almost EUR 800 million in insured additional pipeline in the coming years. So in terms of additional capacity, we have both the KONNECT and QUANTUM that are already in play. We'll have the EUTELSAT 10B that actually has an extra payload with 33 gigabytes of extra capacity. And then, of course, we have the KONNECT VHTS that even though it's 6 months late, it will all be additional broadband capacity. And then finally, 36C, which also has an additional payload. So that is actually with firm precommitments of over EUR 800 million and contracts for 10 years. So we are very comfortable that we have a quite solid precommitment on this capacity once we get it up in space. And all of that will be incremental -- just to make sure, all of that will be incremental. I think we had it on Page 20-something in the presentation, so you can dive back in it there.

We will now take our next question from Carl Murdock-Smith from Berenberg.

And Eva, I'd like to extend my welcome and congratulations as well. Two questions for me. The first one is a very broad question. In your introduction, you talked about that Eutelsat [indiscernible]

Carl, can you maybe repeat that because we have a bit of a bad line.

I was wondering if you could expand on your first impressions of the satellite industry...

First impression is, yes, I can definitely -- I think that was the only thing I captured, Carl. So are there any -- you said you had 3 questions. So my first impressions and the 2 other ones?

Your first in questions of the satellite industry overall. And then the second question was just a clarification on the C-Band payments for Phase 2 being in the summer. Q1, you talked about getting the Phase 2 payment before the end of June. So I was just wondering if you were now walking away from that. And indeed, you won't get the Phase 2 payment by the end of this financial year?

Okay. So let me start with that very concrete question. I think we are still targeting and doing everything we can to try to get the proceeds before the end of June. However, we do know that there is a 90 to potential 120 days delay after we file and we have yet to receive the exact format of what we need to file. I'm actually talking to FCC later today to ask about when we can expect this to come because we are ready to go. So we just need to know that we are filing the right stuff and then the ticker on the 90 days until we get the money will start to run. But it's also clear that if we don't get at least the list of all the stuff we need to file, then we just might not make it. But it's not in spite of being ready, and we are doing everything we can to push because we are the first ones ready so we are the ones to be pushing, which I think is part of being a first mover in this area. But we're doing everything we can to stick to that commitment. But there is a chance that it won't happen mainly given -- due to the fact that we have not yet filed the things because we simply don't know exactly what we need to file. So that's on the C-Band proceeds. Going back to some of my first impressions on the satellite industry. That's a pretty wide question, Carl, but let me give you a few things, both on the satellite industry but also on Eutelsat. The satellite industry is in an extremely interesting period of its life. It's been around for at least half a decade. But right now, there's a lot of change going on, both in terms of new technologies coming into play with the investments into the constellations as one big move, which is also giving a lot of new investments in both the new constellation, but also in general in what you would call new space. That, of course, provides both a lot of opportunities, but also some challenging times for the more historic players in the field, and you've seen moves from several of us with both the ViaSat acquisition, our acquisition into OneWeb, Intelsat's acquisition of Gogo. So it is definitely interesting times to be in the space business. And a lot of the technology you see from other sectors, and as you know, I come from telecom and I've been in the digital, IT space, also has a lot of impact on how we operate in the space industry. Our telecom or connectivity pivot borrows a lot of the same trends that I've seen in telecom before. So some of those gut reactions you carry with you from telecom will also be relevant in the space industry. And of course, some of the digitization trends are also impacting our industry. So that's, in general, on the space industry. Specifically, on Eutelsat, it's a company with a very, very strong technology heritage and with a lot of competence that goes really deep in the space and satellite industry, which is a true pleasure to join. It's also a company that has an amazing commercial reach. As opposed to telco, the satellite industry is, by definition, a global or at least very international business from the day you send up a satellite. So that's slightly different. And the commercial reach we have is very impressive. And we have a culture of really good engineering and commercial work, which I'm really looking forward to exploring much more in the year to come in this telecom pivot, where you can -- where we need to change the company from both maintaining a very strong historic business on our legacy business, but also excelling in the broadband and connectivity area. So I'm looking a lot forward to that over the next couple of years.

[Operator Instructions] We currently have no questions in the queue at this time. I will turn the call back to your host.

Well, thank you, everybody, for listening in this morning. This is my first time with you. I'm looking forward to many more together with you. The next time will definitely be this summer with our full year results. So until then, I wish you all a great day, and thank you for your attention. Take care.

Ladies and gentlemen, that will conclude today's conference. You may now all disconnect.