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

Good day, and welcome to Eutelsat First Half 2022 and 2023 Results Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Eva Berneke, CEO. Madam, please go ahead.

Good morning, everyone, at least those of you on kind of European time zone, and welcome and thank you for joining us today for Eutelsat's half year '22-'23 results presentation. I'm happy to be joined here today by Christophe, who is our new Chief Financial Officer. Christophe brings a wealth of experience as CFO from more than 30 years in global industries, with operational excellence and long-term investments as key elements. I'm sure he will contribute positively to the transformation of Eutelsat and you'll hear more from him in just a second. But let's now turn to the results. First a quick overview of the highlights of first half. In terms of numbers, first half Operating Verticals revenues were within our forecast range of objectives for the full year. Despite this, which is a revenue decline, we reported further industry-leading profitability, with an EBITDA margin at 73%, a level that also reflects the progressive rebalancing of our business towards connectivity. On the operational side, we successfully launched 4 satellites this half year, ensuring a seamless service for existing customers and also paving the way for return to growth. First half also saw the rapid ramp up of EUTELSAT QUANTUM, with now 7 out of 8 beams commercialized in the first year of service. We've also made further progress on our Telecom Pivot. The successful reorganization of the company along with 2 business units, one for video and one for connectivity to reinforce customer centricity and better address the different market opportunities as well as ramp up of new Eutelsat Advance services. With all of this, we confirm the standalone full-year '22-'23 as well as the longer-term financial objectives. And finally, I'll make an update on OneWeb commercialization, which is progressing according to plan and closing is still expected in Q2 or Q3 of this calendar year. Looking at Eutelsat's first half financial performance. Total first half revenue stood at EUR 574 million, down by 6.1% on a like-for-like basis. Revenues of the 5 operating verticals stood at EUR 582 million, down 4.1%. The EBITDA margin was just under 73%, at 72.9% at constant currency, down 3.2 points versus last year. Cash CapEx was EUR 194 million in the first half, which is higher than last year. It reflects the phasing of the satellite programs with 4 launches this half year, delivery and launch, and is not representative of the full year. In the second half, we don't expect to launch any satellites from Eutelsat. Discretionary free cash flow stood at EUR 82 million on a reported basis and EUR 121 million on an adjusted basis. It's down EUR 111 million compared to H1 '22. Likewise, this is not representative of the expected full year figure, because of the phasing of the satellite launches into this first semester. And net debt to EBITDA stood at 3.55 at the end December, broadly stable against last year. As mentioned, this past semester has seen considerably operational success with a record number of 4 satellite launches. These launches illustrate operational excellence and our capacity to select the best industrial partners, in a context where demand for satellite and launches is just booming. First, start September, we launched KONNECT VHTS, which was built by Thales Alenia Space and launched by Arianespace in Kourou in early September. KONNECT VHTS brings connectivity across Europe and Africa with more than 500 gigabits covering the European and African geographies. The 2 next ones is the HOTBIRD 13F and 13G, that both were built by Airbus Defence and Space and launched by SpaceX in October and December, respectively. These 2 serve our video market on our key 13 degrees position across Europe. And then finally, but not least, EUTELSAT 10B, which was also built by TAS was launched by SpaceX in late November. E10B is also providing additional capacity for the mobility market in Europe. Throughout the development of these programs, we managed to keep their cost within our cash CapEx annual envelope of EUR 400 million. These launches will pave the way for return to connectivity growth, while ensuring seamless service for existing customers. The KONNECT VHTS with 500 gigabits of capacity is dedicated to fixed broadband and mobile connectivity, with more than EUR 450 million secured incremental backlog from operators like Orange, Telecom Italia and TAS. EUTELSAT 10B will give incremental 35 gigabits in the Ku-band, addressing mainly mobile connectivity, but also with a strong list of pre-commitments signed with Panasonic. But we are also embarking a widebeam C and Ku-band payloads to ensure continuity for customers that are already on the existing satellite on Eutelsat 10A. And then finally, 13F and 13G, the 2 HOTBIRDs will ensure broadcasting service continuity at our flagship 13 East position. That broadcast over 3,800 TV channels just by the acquisition. And additionally, on the one of the HOTBIRDs, the 13G, is also hosting the EGNOS GEO-4 payload, which gives European space additional capacity. One word on EUTELSAT QUANTUM, which just celebrated its 1 year anniversary in operational service. It came into operational service in November '21. This software defined satellite first of its kind has given customers a real time adaptability to evolving business needs. It gives full in-orbit reconfiguration in terms of footprint, spectrum, power and capacity. It gives customers remote control of beam customization and it gives enhanced security features and interference mitigation capabilities. After just 1 year, 7 out of 8 beams have been commercialized. 5 of the 7 are incremental capacity with 2 for government applications and 3 for mobile connectivity, one of which was just booked this last quarter. The satellite's contribution is shaping up to be more balanced towards mobile connectivity, where demand is truly booming. We also have a well advanced discussion for the commoditization of the final beam hopefully in the coming quarter. I'll move on now and give you a bit of a deeper dive in the Operating Verticals. I'll start with the full results where first half revenues stood at EUR 574 million, up 0.3% on a reported basis. Other revenues as a reminder, revenues other than those generated from the commercialization of satellite capacity are volatile by nature and these were down EUR 12 million, with most of this impact resulting from the variation of hedging revenues. Excluding a positive currency effect EUR 37 million based on euro to dollar rate of 1.01 versus 1.17 last year, revenues of the 5 operating verticals were actually down 4.1% on a like-for-like basis. Let's look at each of the 5 operating segments in more detail. As a reminder, all comments are based on a like-for-like at constant currency. Broadcast, which is today 58% of group total, recorded revenues of EUR 339 million, down 6.7% versus last year. Data and Professional Video, which is 14% of group total, saw revenues of EUR 83 million, down 2.5%. Government Services 12% of group total saw revenues at EUR 67 million, down 20.3%. However, Fixed Broadband, which today represent 6% of revenue came to EUR 37 million, with an organic growth of 17%. And finally, Mobility, which is about 10% of total, saw an increase with 32.7% to revenues of EUR 56 million. Other revenues, as I said, stood at minus EUR 8 million, which includes the EUR 12 million negative hedging impact. I will start with Broadcast. First, revenues were down 6.7% to EUR 339 million. This reflects both which we've discussed previously, the headwind we have in the renewal of the capacity of Nilesat at 7/8 West. It also includes the negative impact of the non-renewals capacity with Digiturk, which came in place mid-November. And then finally, it reflects the general negative trend across the entire Video Broadcasting segment with revenues across Europe. Second quarter revenues were down 6% on a year-to-year basis and 1.4% on a quarter-on-quarter, reflecting principally the phase-out of the Nilesat impact from mid-October, while the Digiturk impact started to materialize only from mid-November and then onwards. Looking ahead, over the full year, the trend should see a slight deterioration compared to that of first half as the impact of the sanctions against certain Russian and Iranian channels will be fully embarked in second half. Data and Professional Video, Data and Professional Video revenues stood at EUR 83 million, down 2.5% year-on-year. In fixed data, which is 2/3 of the revenues, the improved volume trends are now offsetting most of the negative impact of competitive pricing pressure. Professional Video, which is the 1/3 of the video in the segment recorded a mid-single-digit decline, namely on the back of lower occasional use in Q1, especially in the Americas as well as the structural headwinds. Top line for the year as a whole is expected to decrease in the mid-single-digit range due to the seasonality of some contracts, notably in Professional Video. Government Services stood at EUR 67 million, down 20.3% year-on-year. They reflect a negative carry forward effect of prior U.S. Department of Defense renewals, in particular with a 65% renewal rate in the Fall '22 campaign, following the 75% renewal rate in the Spring '22, and that's due to the specific U.S. geopolitical context and our capacity mapped against that. The second half will reflect the full effect of the above mentioned headwinds. Fixed Broadband first half revenues stood at EUR 37 million, up 17% year-on-year on a like-for-like basis. This reflected the contribution from 4 European wholesale agreements with Orange, TIM and more recently is Hispasat and Swisscom as well as to a lesser extent, the growth of the African operations. Over the full year, Fixed Broadband should be broadly stable as the comparison basis now better reflects the above mentioned contracts in Europe and Africa. Growth in this segment is of course expected to reaccelerate in next financial year on the back of the entry into service of the KONNECT VHTS, which will provide much more capacity than on the current KONNECT satellite. And finally, on Mobile Connectivity, first half revenues stood at EUR 56 million, up 32.7% year-on-year, reflecting in particular the commercial success of EUTELSAT QUANTUM for which 2 additional beams were commercialized for incremental capacity in maritime mobility during the first half, bringing the total number of beams commercialized for mobile connectivity to 3. Second quarter revenues stood at EUR 30 million, up 33.8% year-on-year and by 13.3% quarter-on-quarter, reflecting the timing of the commercialization of the third beam of EUTELSAT QUANTUM for maritime mobility. This very positive dynamic is expected to translate into double-digit growth for the full year, albeit at a somewhat slower pace compared to the first half as the comparison basis will gradually reflect some of the above mentioned as well as other incremental contracts. So after the 5 segments, we will turn to the backlog and fill rate. The backlog stood at EUR 3.7 billion in December '22 versus EUR 4.2 billion a year earlier and EUR 4.0 billion in end June 2022. The natural erosion of the backlog in the first half more than offset the contribution of the wholesale contract with Swisscom on EUTELSAT KONNECT as well as the new beams commercialized on EUTELSAT QUANTUM. The backlog is equivalent to 3.2x '21-'22 revenues and Broadcast represent 59% of the total versus 64% a year ago. The backlog profile is progressively reflecting the rebalancing our operations towards connectivity with a less longer-term contracts. Please also note that the backlog does not include managed services yet, but we are looking into a methodology that will better reflect these services also in the backlog. The number of operational transponders by the end of December '22 stood at 1,359, broadly stable year-on-year and compared to end June '22 with no entry into service of any regular capacity or end of stable orbit life of any satellite over the last 12 months. The number of utilized transponders stood at 955, down 19 units year-on-year and down by 21 units compared to end June. The latter reflecting notably the return of capacity by Digiturk starting mid-November. As a result, the fill rate stood at 70.2% compared to 70.6% a year later and 73.2% at end June. Now I'll hand over to Christophe for a bit more on the financial performance.

Thanks, Eva. Hello, everybody. Happy to be here with all of you. Let me start with the EBITDA, which stood at EUR 419 million at the end of December '22 compared to EUR 436 million last year, down by 3.8%. The EBITDA margin stood at 72.9% at constant currency. That is to say, 73% on a reported basis versus 76.1% in H1 '22. This is on the back of lower revenues mainly in the broadcast vertical. Operating costs were EUR 18 million higher than last year, reflecting: first, higher bad debt; second, increased staff costs due to a changing mix of revenue and to a lower extent salary inflation; and third, the cost incurred by transactions with Russia. The EBITDA margin is reflective of the progressive rebalancing of our business towards connectivity applications. Turning to the P&L, Group share of net income stood at EUR 52 million versus EUR 163 million a year earlier, down by 68.2% and representing a margin of 9%. This reflected on the positive side, lower depreciation of EUR 234 million versus EUR 243 million in H1 '22, which was due to lower in-orbit as well as on-ground depreciation. And on the negative side was reflected other operating expenses of minus EUR 34 million compared to an income of EUR 84 million last year, which mainly included the EUR 125 million payment of the Phase I of C-band proceeds. The negative financial results of EUR 56 million versus EUR 35 million last year, reflecting an unfavorable evolution of foreign exchange gains and losses. And lastly, negative net income from associates of EUR 39 million related the full semester contribution of the stake in OneWeb, which last year was only from September '21 onwards. The effective tax rate was 1% versus 24% last year. The decrease was mainly due to a lower French tax rate as well as a more favorable impact of the specific French satellite tax regime. Last year's tax rate was also inflated by the 30% taxation of the EUR 125 million payment related to the Phase I of C-band proceeds. Moving now to cash. Net cash flow from operation amounted to EUR 353 million, down by EUR 10 million, reflecting the lower EBITDA partially compensated by lower working capital requirements needs, thanks to strong cash collection this semester. Cash CapEx amounted to EUR 194 million, EUR 96 million higher than last year. It reflected the phasing of satellite program delivery and launch with 4 satellites launched this semester and this is not representative of the expected full year figure. Interest and other fees paid amounted to EUR 77 million versus EUR 70 million last year. The slight increase mostly reflects capitalized interest from the credit facility drawn down for the financing of satellite programs. As a result, discretionary free cash flow amounted to EUR 82 million on a reported basis, down EUR 113 million compared to last year. Adjusted discretionary free cash flow as per our financial objective, that is excluding forex hedging and one-offs stood at EUR 121 million, also down EUR 111 million year-on-year. Turning to the next slide, at the end of December '22, net debt ended at EUR 2,996 million, up EUR 182 million versus end of June. It reflected the lower discretionary free cash flow of EUR 82 million generated in the first half; the lower dividend payment of EUR 81 million following the payment of part of the dividend in shares under the scrip option; the outflow regarding inorganic investment of EUR 34 million for OneWeb and other items, which contributed to the increase in net debt for a net impact of EUR 149 million. This reflects mostly the use of a debt-related finance lease for the financing of satellites programs, which amounted to EUR 200 million. As a result, and as you can see on Slide 22, the net debt to EBITDA ratio ended at 3.55x compared to 3.53x at the end of December '21 and 3.27x at the end of June '22. As a reminder, December represents a peak in the annual leverage profile, reflecting the timing of the dividend payments. It was also impacted in H1 fiscal year '23 by the phasing of investments. The average cost of debt, after hedging, stood at 2.67% versus 2.5% in H1 '22. The weighted average debt maturity stood at 4.1 years compared to 4.5 years at the end of December '21. And last but not least, liquidity remains strong with undrawn credit lines and cash around EUR 1.3 billion. And with that, I will now hand it over to Eva to present the outlook.

Thank you, Christophe. We made strong progress on the telecom pivot. With most of the elements of the strategy now in place, it will help rebalance our business towards connectivity where demand is booming. More specifically, we've reorganized the company along 2 business units, video and connectivity to better capture market opportunities. We now rely on an innovative end to end platform to deliver our services to customers as we have successfully launched Eutelsat Advance. As we saw before, we brought substantial growth capacity with high level of pre-commitments. We've now access to OneWeb capabilities providing a unique combination of GEO and LEO to expand the addressable market. And finally, in numbers, the contribution of our connectivity revenue now represents 30% of total operating verticals revenues versus 25% 4 years ago. As a reminder, 3 satellites bring incremental growth, have already been launched and 2 others will enter into service in the coming years. We talked about the 4 ones we already launched and on top of that we have EUTELSAT 36D, predominantly a replacement satellite for broadcast, but it also carries an incremental UHF payload operated by Airbus. And then the FLEXSAT for the Americas will bring more than 100 gigabits of incremental capacity over the Americas to support the growing connectivity market. On the back of all of this, we confirm our financial outlook. We expect to generate operating revenues between EUR 1.135 billion to EUR 1.165 billion for the current fiscal year, based on a euro-dollar rate of 1. Revenues are expected to return to growth from next financial year '24 on the back of this incremental capacity already launched. Elsewhere, cash CapEx will not exceed EUR 400 million per year for each of the next 2 fiscal years and we also confirm our discretionary free cash flow objective with an average of EUR 420 million per year for the next 2 fiscal years. Finally, we confirm our leverage targets. A quick update on the progress of our participation in OneWeb since the October Strategic Update. And the company has made a lot of positive progress and is well on track to deliver its objectives. On the fleet side, now 16 launches have been completed with 85% of the satellites now in orbit. OneWeb is currently providing coverage at 50 degrees northern latitude and is well on track for the 33 degree north latitude by May this year. That will give you coverage of most of Europe and the United States. 2 more launches are planned for end of February, start March. And with that, they will have reached full coverage, which will be operational by January '24. In terms of business, OneWeb continues to see a very positive commercial momentum with a secured backlog of now EUR 800 million at the end of December '22, up EUR 200 million from October strategic update. Revenues are on track to reach the EUR 50 million in our financial year that ends June '23. Key contracts have been won and partnerships have been signed in some of the key verticals where demand is well-oriented, namely Airtel in Africa for cellular backhaul and Galaxy in Canada for community broadband. In terms of the transaction where we combine OneWeb and Eutelsat, regulatory approval work stream is progressing according to plan, with no EU referral considered, France and U.S. procedures still ongoing. The remainder is fairly -- is pretty much closed, so mainly France and U.S. are still ongoing. Closing the transaction is expected to be in Q2 or Q3 this year, conditioned upon the customary regulatory approvals Eutelsat Extraordinary General Assembly approval and of course approval from the French Stock Market Authorities on the prospectus. This concludes our presentation. Thank you for your attention and we'll be happy to answer your questions.

[Operator Instructions] We will take our first questions from Roshan Ranjit.

I've got 3 questions, please. You have highlighted a pickup in bad debt. Can you give us a bit more detail here? Is that isolated to the known I guess headwinds from Russia and Iran, or is that a bit more wider level and also which segment is that come in from, please? I guess, maybe coupled on to that, you are highlighting margin dilution. We've clearly seen an increase in exposure to mobile connectivity. Can you maybe give us a split of the kind of initial margin that you are able to book from connectivity customers versus the typical broadcast customers? And is there anything going on between a kind of retail, wholesale mix within that as well? Second question, you highlighted another beam could be sold in the coming quarters. Again is that within mobility? Are you seeing any interest from any other end segments? And finally just on OneWeb. Could we get a sense of the type of discussions that were going on out there at the regulatory level? You said that there's no EU referral. What kind of made them happy? Any feedback you've got on the French and U.S. side? And just tied into that, any update on generation 2 on OneWeb, please?

Sorry, 4 questions. I'll let Christophe answer the question on bad debt and then I'll take -- I'll probably take the other 3 ones, because I think they're great questions. So let's start with your first question on bad debt.

Okay. So related to the hiccup on the bad debt, as you said, it's mostly related to -- not to the Russian customer actually. That's related to the sanctions with Iran, for which we had to book a depreciation. We also had a slight hiccup in -- with Middle East customers and this is the main reasons. But coming back to your point, I would say, it's mostly focused on the impact of the sanctions.

So most of the bad debts from the Iranian, who will now close down entirely. Coming back to your question on the impact on the margins of connectivity, it's clear that right now we have 2 effects in our connectivity business, both the rapid build of a service business in -- with Eutelsat Advance, which is yet not mature. So not at what you'd call maturity margins. And you probably -- you will also have in here the reselling of OneWeb, which also has some effect on margins, given that today it is a resale agreement. Of course, not at the same margins of this. So we do see some margin dilution from the connectivity, but mainly related to the rapid growth in the market and the buildup of a service offering in that market. On the QUANTUM beam, I'd say, the 2 segments that the QUANTUM satellite is targeted on is government and mobility. And I think the last beam is also expected rather shortly actually likely in the government segment. But in any case, we have a strong demand for the satellite, which you've seen with actually additional demand coming out of the mobility segment, which could be a good backup. But we are fairly confident that we have the last beam in test right now with the customer. On the OneWeb, on the regulatory approval, the 2 outstanding ones is simply because of the time span and the number of question rounds that are fairly typical. So it's nothing out of the ordinary, either with the French authorities nor with the US FCC Team Telecom. We've seen a referral to Team Telecom, which I think we announced back in Q4, which is totally normal procedure in the FCC in terms of approval. And that just typically takes up to half a year. So we are in the rounds of questions back and forth, which we hope coming towards an end, which is why we estimate that we'll be able to have closure on this in Q2 or Q3. I think we haven't had any questions on a regulatory level that were not perfectly normal. We don't have a lot of overlap between OneWeb's market today and Eutelsat. We're in different orbits and we don't have competing capacities. But of course there is a need to fully understand the satellite market, given that especially the constellation market is fairly new to regulators. Could we take the next question? Maybe there is no more questions.

We will take the next questions Sami Kassab.

I have my usual 3 questions as well, please. The first one Fixed Broadband is up 17% in H1, but is guided to be broadly stable for the full year. So that suggests that H2 will see decline in revenues. And if so, can you remind me what's driving the decline in H2? Secondly, can you please comment on the latest development with regards to the EU satellite communications project? What do you see as the key milestones ahead for this project to go ahead? And lastly, QUANTUM was -- if my memory serves me right, QUANTUM was initially presented as a satellite for the government service market where prices usually are higher than in the mobility sector, but you seem to have repositioned the commercial approach towards mobility. May I ask why that or may I ask whether you still expect QUANTUM to generate around EUR 35 million of annual revenues at capacity?

Yes. I think on your -- let me just start with the last one on the QUANTUM here. Yes, you're right that, in the beginning, we kind of targeted because of the high level security and also flexibility on the QUANTUM satellite in terms of operating the beams for the government market and we also had seen some beams sold to the government market here. But what we're seeing is, there has been a very interesting segment in the maritime mobility, which is actually wanted to pay the same kind of prices. So we don't see necessarily a price decline in that satellite with the current commercialization. But it does split differently in the 2 segments. So we have 3 of beams in the mobility segment where we probably expected most of it to be in the government segment. So you are right on that one. But it's not that we see a deterioration on the pricing picture on QUANTUM right now. It is quite unique capacity in the market as we currently stand. Latest development on IRIS Squared is, you probably saw the news last week on the approval of the IRIS Squared EU space project. And I think in general we are super supportive of EU actually getting involved in the space area. We think it's an area of European serenity which is -- where it is a very welcome development that EU wants to become a player in it and we're of course following very closely the developments around the tender. Right now, we expect to see the invitation to tender, the ITT, mid-March, after the approval just last week. So a fairly rapid and ambitious timeline. So mid-March, we will know exactly what the EU is thinking, what are the criterias linked to both eligibility to tender, but also of course what's actually the content of the RFP. In the meanwhile, we are working on several fronts. We are working on what's the right consortium, what's the right partnerships we need to. I doubt anybody would want to bid this as a single standalone company. It's very likely that will be in a partnership in a consortium with other players with the right combination. Those are -- a lot of the discussions going on left, right and center in the European space industry. And of course, we are also preparing eventual eligibility criteria, especially after the combination with OneWeb, we just want to make sure that Eutelsat continues to be eligible and highly relevant partners for the IRIS Squared project. And for your decline versus 17% increase, yes, we do actually expect to see a decline in second half, mainly linked to some of the timing and phasing of KONNECT in that market before we see the entry into service in September of the KONNECT VHTS. Some of the contracts has been structured that way that we do expect to see a small decline in the next half year coming in then with a strong growth once we start commercializing KONNECT VHTS next year. Hope I covered your 3 questions?

Can I have 2 quick follow-ups, the line broke down partly when you answered the QUANTUM question. Did you reiterate the EUR 35-ish million of annual revenues implicitly I would imagine you have given that prices are the same, but I did not understand or did not hear the answer to that part of the question, please?

Yes. No, I don't think we have any significant price erosion compared to what we expected on this one. So yes.

And on the IRIS Squared, is there a way whereby the European Union decides to reinvent the wheel and to support the launching and manufacturing industry rather than the satellite operators or is that out of the table and you think the most likely scenario is for the satellite operators to be involved?

I think satellite operators are all very interested to be involved, for sure. And we certainly hope to be part of consortiums where you also see satellite operators. But I think your guess is as good as mine in terms of what Europe will be coming out with next week. We are all looking very interested. There is lots of rumors flying around, but I certainly hope that they will think about involving also European operators. Both Spain, Italy, Luxembourg, and France have strong operators and we certainly hope to be part of this super interesting venture as well.

We will take our next questions from Carl Murdock-Smith.

Two questions from me. The first one, I'm actually stealing from Roshan, because I don't think you actually commented on it. Just an update on your thoughts around OneWeb Gen 2 around kind of funding and timing of that. So any commentary on that would be very interesting. And then secondly, just on Government Services, again today's numbers have missed consensus and the decline there is still quite aggressive. Just wondering in terms of your view of kind of when will we reach bottom on Government Services revenues in terms of the kind of U.S. geopolitical context and how much more is there still to kind of come out of that and what are your early expectations as we go into the spring renewal period?

Yes. Good questions. Thank you for keeping me honest, I'm getting to answer all your questions. So I will start with the Gen 2, which I did forget. So on Gen 2, it is -- as you know, as we are already shareholders in OneWeb, we do actually follow the reflection on Gen 2 quite closely as shareholders and it is moving forward nicely. We will likely need Gen 2 in '27, '28 when the current Gen 1 will start needing renewals on the orbital positions. We do have a replacement for the first couple of overall plans of Gen 1 in order to bring the lifespan to '27, '28. And you can say, oh, that's a long time, but it's actually not that long time out. So it does mean we will have to probably put out an RFP. Q2 is most likely this year and hopefully get industry responses back in Q3, Q4 this year in order to have a good full picture. As you know, we've been guiding Gen 2 around the EUR 4 billion mark and we are still fairly convinced that that's going to be feasible given the synergies that is with a lot of the infrastructure already in place for Gen 1, but also, of course, the way we are consuming the Gen 2. So we are still fairly comfortable with that envelope. Timing on when that spending will start, I think next fiscal year, we'll start seeing a little bit, but that's kind of early design elements and we will, of course, see in our next fiscal year probably also the choice of the suppliers in the Gen 2, but I think the big spendings will be in the years after. And of course, around the launches, which will happen '25, '26 in those years. That would be kind of more significant amounts of the Gen 2 spending that will be needed in those years. Of course, we can't exactly say when the different things will fall before we actually have the responses coming back and the exact timeline. And as you know, it's also an industry where we often have use of vendor financing that can smoothen out a little bit some of the CapEx spend. So all of that I think will be probably much more clear into the start of our next financial year. On the Government Services, you're right, there's been 2 consecutive quite poor renewal campaigns. We do think we start being out of the kind of ramp down on capacities from Afghanistan and some of those areas. And we certainly do see -- we'll see some more stability and not the same amount of negative development over the next couple of renewal campaigns. Of course, some of our expectations previously had been related to that we expected QUANTUM to fall entirely within the government segment as some of the previous questions also appointed to. And given that they now account in the Mobility segment rather than the government segment that also accentuates a little bit the declines compared to our expectations.

We have a written question from Tom Singlehurst from Citi. Can you give a bit more color on the price versus volume trends within broadcast and how this will evolve going into 2024? Should we be assuming mid to single-digit declines into the outer years?

Good question, Tom. I do think we see -- what we see right now, what is hurting us most is the 2 kind of what are called volume declines from respectively the non-renewal of Nilesat capacity and then the Digiturk, which are clearly volume-related. Prices are holding up fairly well. So it's more the kind of volume decrease where certain customers reduce the amount of volume they need rather than a price pressure. And as you might imagine, we're also working on a lot of elements that will protect your pricing in terms of better quality of service and so forth. So it's more volume game right now. And yes, I think, mid-single-digit decline is probably the likely outlook also in the outer years in this video broadcast market. It is an underlying structural trend in that order of magnitude. Could we take the next either written or direct question? Are we out of questions or anybody is sitting with a question they are burning to put forward or should we maybe wrap this up for now? I'll just give you kind of 5, 10 seconds to shout loudly or punch 1 or whatever you need to do. Doesn't sound that way. In that case, I just want to thank you all for getting up this morning and listening to us. I think if there are any other questions, our IR Thomas is there standing by. So if you come up with a question during the morning after your coffee that you are burning to put forward, just get back to us. And other than that, have a marvelous Friday and a great weekend when you get around to it. Thank you for listening.

This concludes today's call. Thank you for your participation. You may now disconnect.