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

Hello, welcome to the Eutelsat Full Year 2023/2024 Results. My name is Caroline, and I will be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions] I will now hand over the call to your host, Eva Berneke, the CEO, to begin today's conference. Thank you.

Good morning, everybody. Welcome and thank you for joining us to Eutelsat full year results. My name is Eva Berneke. I'm the CEO of Eutelsat. I'm joined by Christophe Caudrelier, our CFO. And on bonus, you get our IR team, Lugo and Joanna also in the room. We are today announcing our results, and I will run through the key events of the past year, both our operational and financial performance. Christophe will help me with some of the details there. And then we'll come back to the outlook and objectives for '24/'25. Turning first to the highlights of the past year. Our financial year, as you know, ends on end of June. So we our financial year '23, '24 were in line or even a bit better than objectives in terms of revenue and profitability. The key event that was, of course, the closing of the Eutelsat OneWeb combination at the end of September, creating the first 2 GEO-LEO integrated player. Our connectivity pivot is now well and truly established with the growth boosted by the LEO ramp-up as well as additional incremental GEO capacity. Robust commercial traction, notably with major multi-application contracts in the OneWeb constellation. I can mention Intelsat as an example, but multiple others as well. Some of the operational success, which includes entry into service of both E10B and Connect VHTS as well as the launch of EUTELSAT 36C complete the space segment of the OneWeb constellation at the midyear. And elsewhere, also for our balance sheet, we achieved a successful refinancing of the November '25 bond early on that was already completed at the end of March this year. A quick look at some of the key numbers, which might be of interest to some of you. Our total revenues stood at EUR 1.213 billion, up by 7.2% on a reported basis and on a 5.6% on a like-for-like basis. As you know, we guide on our 4 operating verticals and revenues of the 4 operating verticals stood at EUR 1.209 billion, up by 5.9% on a like-for-like basis. Revenues compared to our financial objectives, so pro forma and including OneWeb for 12 months rather than 9 months and a constant exchange rate were at EUR 1.268 billion. So well within our objective range, which was EUR 1.250 billion to EUR 1.300 billion. Adjusted EBITDA ended up at EUR 719 million, down 12.9%. As our financial objectives, it stood at EUR 698 million, so nicely above our objectives of EUR 650 million to EUR 680 million. Cash CapEx ended up at SEK 463 million, so below the expected range of $60 million to $65 million. The net debt adjusted to EBITDA stood at 379x compared to 335x at the end of June 23 and for '16 at the half year, December '23. Turning to a bit of the commercial momentum that we've seen. We continue to see a really strong commercial traction in especially our connectivity business. This has been a year with very few renewals in the video. So a lot of the commercial traction has been driven by LEO services but also some strong wins in our GEO connectivity capacity, in particular on our connect capacity over Africa. Two of the main contracts I'd like to highlight are, of course, the large Intelsat 7-year deal that provides Intelsat with new services across some of their key verticals signed in March this year, but also ViaSat for maritime broadband services and Yahsat with a multiyear -- multi-gigabit contract for high-speed Internet connectivity across African and Middle Eastern nations, essentially on our Connect satellites, which is now going to be turned to be used extensively over Africa and the Middle East. CBN Warner Brothers in Poland, renewing and expanding capacity on HOTBIRD. That's a broadcasting contract in this otherwise slightly smaller renewal year. And NEC with a multimillion-dollar deal for connectivity capacity, especially on low earth orbit over Africa. But also some of our distributors have signed contracts with -- especially targeting connecting the unconnected with liquid for communities and businesses in Africa. Time has come for connectivity to the public safety sector across the U.S., Q-KON, also services, especially for South Africa and of course, a strong partnership with Hanwa, distributing LEO services to South Korea to connect the unconnected. As a result of a lot of the strong commercial momentum, our backlog is now just short of EUR 4 billion at EUR 3.9 billion at June 24, coming up 15% over the EUR 3.4 billion a year earlier. It reflected the contribution, of course, of OneWeb, which more than offset the natural erosion of the broadcasting video segment where we saw an absence of major renewals this year. The backlog is about 3.5x of '22/'23 revenues, and connectivity is now more than half of our backlog at 56% of the total, up at 40% year-over-year. So we really show the momentum and the commercial momentum behind our connectivity pivot. A quick view on our coverage as today and what we expect to see at the end of the summer. We are on track. We're now 37 gateways open, coming up another 3 against 34% in March. And coverage is further extended, especially in the Middle East and some of East Asia as well as Africa and most of India. Now I'll hand it over to Christophe for a look at some of the operational and financial performance of the year, and I'll be back with the outlook to wrap it up.

Good morning, everyone. Before we start, a quick reminder on how the numbers are presented. Reported figures include OneWeb since October 1, 2023, and are compared to Eutelsat's reported fiscal year 2023 performance on a stand-alone basis. All commentary regarding revenues is on a like-for-like basis that is to say at constant currency and perimeter. As mentioned above, total revenues for fiscal year '23 '24 stood at EUR 1.213 million, up by 7.2% on a reported basis and by 5.6% like-for-like. Revenues of our 4 operating verticals that is to say excluding other revenues stood at EUR 1.209 million. They were up by 5.9% on a like-for-like basis, excluding a negative currency impact of EUR 20 million. Operating verticals revenues as per financial objectives, i.e., pro forma, including OneWeb for 12 months and at a Euro-Dollar rate of 1 stood at EUR 1.268 million. Let's now have a look at the segmental reporting. Video representing 54% of revenues, stood at EUR 651 million, a decline of 6.8%. The fixed connectivity revenues representing 19% of the group total rose 29% to EUR 234 million. Vermont services, 14% of revenues stood at EUR 165 million, a rise of 5%. And mobile connectivity revenues, representing 13% of the group total stood at EUR 159 million, a rise of almost 50%. Other revenues amounted to EUR 4 million versus minus EUR 5 million a year earlier; they included a reduced EUR 3 million negative impact from hedging operations compared with EUR 15 million last year. Moving to the operating verticals fiscal year, '23 '24 Video revenues were down by 6.8% to EUR 651 million, reflecting a secular market decline in this application. In the first half, this trend was accentuated by the effect of sanctions against Russian and Iranian channel as well as the early nonrenewal of a capacity contract with Digiturk from mid-November 2022. Both these effects washed out in the second half. On the commercial front, recent highlights include the renewal and extension of capacity by Poland's TVN Warner Bros discovery at Eutelsat HOTBIRD neighborhood as well as the consolidation by United Media Group of its entire DTH broadcasting activities at Eutelsat 13-degree East and 16 degrees East hotspots. Professional revenue video revenues, which account for less than 10% of the video vertical, decreased, reflecting structural headwinds as well as the seasonality of some events. They will be mildly boosted by the Olympic Games in Q1 fiscal year '25. Fourth quarter revenues stood at EUR 159 million, down by 6.2% year-on-year and broadly stable quarter-on-quarter. As mentioned above, fixed connectivity revenues were underpinned by the entry into service of KONNECT VHTS in October 2023 and the progressive transfer of Eutelsat connect capacity to the buoyant African market. Capacity on EUTELSAT KONNECT is being contracted by Yahsat, Yakik to drive growth across its satellite broadband footprint in Africa. Elsewhere, Ku-band capacity on EUTELSAT 70B was selected by Intelsat to extend its Pan-African satellite services to enterprise and retail customers, complementing existing Ka-band agreement on the EUTELSAT KONNECT satellite. Revenues were also boosted by a significant uplift in OneWeb LEO with the activation and progressive ramp-up of commercial agreements in line with the progressive availability of the ground network. The OneWeb contribution was especially visible in the fourth quarter, where revenues stood at EUR 82 million, up by 73.5% year-on-year and by 42.6% quarter-on-quarter. Moving to Government Services. Revenues stood at EUR 165 million, up 5% year-on-year. They reflected the contribution of the EGNOS GOE-4 contract on HOTBIRD 13G from June 2023. The contribution from OneWeb's LEO connectivity solutions and the more favorable outcomes of the past to U.S. DoD renewal campaigns. This rise was partly offset by a tougher basis of comparison with last year due to the one-off contract of EUR 14 million with German-based agency DLR in the fourth quarter where EUTELSAT HOTBIRD 13F provided a service from April 2023 at the 0.5 degree East orbital position prior to its commissioning at 13 degrees East. Fourth quarter revenues stood at EUR 47 million, down by 14.5% year-on-year, reflecting the above-mentioned contract. Excluding this impact, fourth quarter revenues would have risen by 15.6% year-on-year. For mobile connectivity, fiscal year '23 , '24 revenues stood at EUR 159 million, up 49.3% year-on-year, reflecting the entry into service of the eye throughput satellite EUTELSAT 10B and the contribution from OneWeb. Fourth quarter revenues stood at EUR 49 million, up 80.4% year-on-year and by 25.6% quarter-on-quarter, mainly driven by GEO performances. Let's now turn to the financial performance. Adjusted EBITDA stood at EUR 718.9 million at the end of June 2024 compared with EUR 825.5 million a year earlier, down by 12.9%. It reflected higher operating costs due to the impact of the consolidation of OneWeb. The rising cost was nevertheless contained at plus 8.9%, reflecting cost control measures. Adjusted EBITDA as per financial objective, i.e., pro forma, including OneWeb for 12 months and at a Euro-Dollar rate of 1, stood at EUR 697.5 million, above our objective of a range between EUR 650 million and EUR 680 million. On a pro forma basis, the adjusted EBITDA margin stood at 54.8% and at 59.3% on a reported basis versus 73% a year earlier. Moving to net income. Group share of net income stood at a negative EUR 310 million compared to a positive EUR 315 million a year earlier. This reflected, first, other operating cost of EUR 208 million compared to income of EUR 204 million last year, mainly due to last year's EUR 352 million proceeds related to the Phase 2 of the U.S. C-band sale as well as the fair value adjustment of shares owned by Eutelsat before the combination. Second, depreciation of EUR 702 million versus EUR 456 million a year earlier, reflecting the perimeter effect from OneWeb as well as in orbit an on-ground depreciation. EUTELSAT 10B and KONNECT VHTS entered into service between July 2023 and June 2024. Third, a net financial result of minus EUR 124 million versus minus EUR 91 million a year earlier, reflecting higher interest costs, partly offset by the favorable evolution of foreign exchange gains and losses. Fourth, corporate income tax gain of EUR 28 million versus a charge of EUR 67 million a year earlier, mainly driven by the non-recognition of the deferred tax assets on OneWeb losses, partly offset by the specific French tax regime relative to satellite operator. In fiscal year '22, '23, the tax charge reflected the 30% tax rate applied to the C-band proceeds. And finally, losses from associates of EUR 23 million versus EUR 87 million last year, reflecting the contribution of the minority stake in OneWeb in the first quarter versus a full 12 months in fiscal year '22, '23. Let's move to cash now. Cash CapEx amounted to EUR 463.2 million versus EUR 270.5 million last year, reflecting the consolidation of OneWeb. It is below our previous estimates, reflecting LEO constellation phasing and other CapEx delays, notably the FlexSat America satellite, which is delayed to calendar 2028 due to manufacturer timing issues. Fiscal year '23 ,'24 gross CapEx, that is to say excluding the financing of all or part of certain satellite programs under export credit agreements or through other bank facilities stood at EUR 517.1 million. From fiscal year '24, '25 onwards, gross CapEx will be adopted as our core indicator. By excluding financing-related flows, the group seeks to provide a clear and more accurate representation of its direct capital expenditures. Moving to debt. At the end of June 2024, net debt stood at EUR 2,544.4 million, down by EUR 221.3 million versus end of June 2023. It notably a reflected proceeds from asset disposal, namely the net proceeds from the second tranche of the C-band sale and the disposal of the shares in the Airbus OneWeb satellite joint venture owned by OneWeb. It was partially offset by CapEx-related movements as well as OneWeb entry into perimeter. As a result, the net debt to adjusted EBITDA ratio stood at 3.79x compared to 3.35x at the end of June 2023 and 4.16x at the end of December 2023. The average cost of debt after hedging stood at 4.87%, 2.96% in fiscal year '22, '23. The increase reflected notably the impact of issuance of the 2029 high-yield bond. The weighted average maturity of the group's debt amounted to 3.5 years compared to 3.6 years at the end of June 2023. Liquidity remains strong with undrawn credit lines and cash around EUR 1.39 billion. With that, I hand it back to Eva to comment the outlook.

Thank you, Christophe. A few words on our expectations for the coming year. We expect to continue to make progress on the LEO ramp-up with a full deployment on the ground network expected by Q2 '25. We also expect to see continued connectivity growth, mainly driven by the ramp-up of OneWeb LEO service revenues. BDO revenues are expected down by mid-single digits, in line with the broader market. And in terms of profitability, adjusted EBITDA in financial year '24, '25, which will embark the one webcast base at the full operational run rate will be partially offset by further cost savings measures. Our industry is in the middle of a profound transformation. The rapid adoption of LEO technology represents a significant opportunity, both in terms of commercial and government markets, but also challenges in form a powerful entrants in the space. In this context and is communicating during our trading update in January, we are adopting a progressive approach to the procurement of the next generation of OneWeb. Future investments will ensure continuity of our business with our customers and we'll adapt the ramp-up of LEO capacity to the opportunity of partnerships as well as technology maturity, both with the potential of partnering with institutional and commercial players and taking into account financing available. Our priority will be to ensure that we remain comfortable within the leverage range that are compatible with our debt covenants of the Eutelsat Group. In '25, which will be a year transition will complete the integration of Eutelsat and OneWeb. We'll complete the OneWeb ground infrastructure and prepare the future shape of the next-gen constellation. In this context, we expect the combined financial year '25 revenue of the 4 operating verticals to be around the same level as in '24 at the constant currency and perimeter. The adjusted EBITDA is expected slightly below the level of financial year '24, reflecting the embarkation in one webcast at a full operational run rate. And then the other hand, full year cost savings implemented since the merger and the growing proportion of service revenues from the LEO contribution. Gross CapEx for '24, '25 is expected to be between EUR 700 million and EUR 800 million. Capital expenditure for the following year will depend on the outcome and the options under consideration and partnerships for the next generation of the LEO constellation. In all events, our priority will be to remain within the guidelines to ensure that we remain comfortable within leverage range compatible with debt covenants. We continue to target leverage of 3x in the medium term. Before opening the floor to questions, I just want to sum up this short presentation of our '23, '24 results. We delivered our 224 results fully in line with objectives. Financing has been secured with a successful bond insurance going on to '29. We're seeing a very strong commercial traction in connectivity, driven by our view offering, but also underpinning a backlog that stands now almost at EUR 4 billion with the majority coming from connectivity. Financial year '24, '25 will be a year of transition as we complete the merger integration and with a fully prepared GEO-LEO integrated offer as well as moving forward with our new next generation of LEO constellations. Finally, we remain very confident in our ability to grow connectivity revenues while maintaining our market share in GEO based on both independent market forecast as well as the experience coming from the massive appetite for this type of multi-orbit capacity. With that, thank you for your attention, and Christophe and I are open to take your questions.

[Operator Instructions] we will take the first question from Akhil Dattani from JPMorgan.

I've got 2, please, if I can. Firstly, could you help us understand a little bit better the way we should think about the building blocks for your revenue target for this year? I guess if we go back, the expectation had been with OneWeb that we're ramping towards a double-digit growth in for this year. So clearly, the revenue target here is quite a lot lower than people would have thought, right, your wrongly Bloomberg consent just had double-digit growth in for this year. So it's clearly quite a long way below that. So maybe you can help us understand what the moving parts are and specifically why you're not expecting growth this year? And then the second question is a bigger picture one. And I appreciate it's difficult given you're no longer guiding to the previous target you had for OneWeb. But how should we try and think about the economics and growth path from your combination with OneWeb? I guess the challenge for us on the outside world is that we now don't have complete visibility on how you're thinking around the CapEx envelope, how aggressively you're going to invest in OneWeb. So obviously, it makes like very difficult in terms of trying to model and understand how we should think about this. So maybe you could help us understand your perspective in terms of what are your thoughts aspirations? Is it about return on capital? Is it about something else? And how do we try and size the opportunity as you see it today in the context of what you're seeing around a bit more competition and maybe a little bit harder to really size quite what you're looking to do?.

Okay. Very relevant questions. So thank you for that. Let me try to give you some guidance here. We are still, of course, fully in the integration phase of our merger. So you're simply also getting embarking a full year of OneWeb into our next year is a key part of it. The other one is, of course, that we expect the ground infrastructure. So we are now in the ground infrastructure, OneWeb will be completed during the spring of '25 with the last 5, 8 gateways, which are some of the tougher ones and some of the quite tough geographies and also, of course, market access in order to -- during the spring next year, have the full global coverage. So that operational ramp-up is on track, but it is certain that, that delay, which we already announced back in January is still the main delay for the full operational growth coming out of the LEO services. So within different verticals, we do see connectivity boosted by the LEO growth mainly next year, whereas you see less new capacity coming online from a KONNECT VHTS and E10B during the next year. There's still some growth in the GEO market and connectivity market, but it's clear that next year, it's especially the slightly or the slower rollout of the ground infrastructure and market access, which is a lot of regulatory country-by-country openings, which is giving a slower ramp-up of the LEO revenues. So it would be a pivotal year next year because it's going to be a full year where we will complete the global coverage from a LEO perspective with the LEO ground rule fully rolled out, but also progressing on bringing both LEO and GEO offering out in the market. And then turning to your next question. It's also going to be a year where we figure out what is the right way of moving forward with the CapEx. Next year, CapEx is guided to be within the envelope of EUR 700 million to EUR 800 million, which is in line with our also previous guidances on CapEx, where we'll start embarking on the continuity and what I call the first step in our next gen. That first step will, of course, and foremost ensure compatibility for our customers and continuation of services. But it's also going to start embarking some new elements with technology that's fully mature and the journey also towards completing one or several partnerships in the market. Irish Square could be one, but there are also other dialogues around partnerships in the market. And as you see more and more of our customers, just like with Intelsat also ask us to be part of the road map going forward because they see our LEO connectivity capacity to be integrated in their offering. So some of those partnerships we're exploring quite extensively, and we see ourselves as a very good platform for those kind of partnership, be it Irish Square or alternatives where we actually built a joint technology road map for bringing a mature technologies or more mature technologies to the market once they get there. So that's what we're exploring. As you know, we've had the RFP out for about a year now and have had a couple of teams working in a co-engineering approach to exactly draft what is the relevant time line for bringing on board new technologies and how do we ensure the continuity of services and compatibility of services from our [indiscernible] constellation in a stepwise approach to the next. And in terms of how we guide is, of course, we still have our return on capital criteria, which we've always had in Eutelsat Group on showing a strong return on capital to our shareholders, and we remain within the same guidance that we've had historically for our GEO fleet, putting some of the same return on capital criteria also for the investments into the new constellations. So we remain confident that we'll find the right way forward. And we also are a strong platform for partnerships, especially for our dual connectivity and constellation, but you see also increasing the GEO world and opening for partnerships as we showed with the partnership with Ticom for GEO capacity over Asia. So that's part of our strategy going forward.

We will take the next question from the line Aleksander Peterc from Bernstein.

I'd just like you to come back a little bit on flat revenue in fiscal '25. Is this really just the result of the slower rollout of ground networks and flow slow regulatory agreements across various geographies? And even if that's the case, I would have expected that you have incrementally a lot more capacity to sell on OneWeb in more geographies in '25 versus '24. So I'd just like to understand, is the legacy Eutelsat in a sales spin and that's maybe in step with the rest of the GEO market? Or is one we got simply not delivering? And it's a really material question for shareholders because this offered a 50% dilution with the transaction of takeover of OneWeb. So I'd just like you to do flash on the bottom here. And also, would you, at some point, be able to give us a longer term forecast of when you expect to actually reach that double-digit growth that you're initially modeling? And at what point do you expect free cash flow to break even? That will be the first question. The second one is, we saw SCS moving its orbital slots from indefiniteness because of the structural decline in GEO markets. Would you be taking a similar approach? I don't know how you classify these assets now? And what kind of impact would that have on your accounts?

Alex Sorry, your line is not very clear. Can you just repeat the question on SCS?

Yes. Sure, yes. So SCS in the second quarter report changed the accounting treatment of its orbital slots and move them from indefinite life to definite life. And they said that this is the result of the structural decline GEO markets for the longer-term basically single value in GEO orbital slots that we pose taking. Do you have your orbital slots as indefinite lives or definite? And what would that mean for your numbers? And then I have a quirk follow-up.

Yes. Thanks, Aleksander. Well, first of all for the GEO satellites, we don't have valued orbital slots in our balance sheet. So we already are on a definite life, I would say, option when we test our satellite, our GEO satellites. We only have indefinite life for the LEO constellation. As you know, it's a permanent renewal of the assets. And this is being treated also in the purchase accounting and the purchase price allocation. So we have indefinite life again, when we test our LEO constellation, but nothing as indefinite life for GEO satellites.

So coming back to your first question, which also was a bit reflected on the first one. I think we saw it's clear that the ground infrastructure rollout, let me just maybe walk you through, we've had now for some time, actually full satellite coverage, the global coverage. So the satellites are where they should be and actually covering the entire world in order to actually start serving customers that are then a couple of steps. There is a step of actually having ground infrastructure, so gateways or sometimes we call them but S&Ps but gateways where you actually bring the traffic back down and into the Internet. And that's a set of around 45% to cover the full global coverage. We are now at 37%, so very close to having a strong coverage, but still with some holding, as I showed on the map in it for a few of the difficult ones. There's some of the Pacific area, there some of the Indian Ocean that is only coming online during the next 6 to 9 months. So that's to achieve coverage. But then actually, to move into a country, you also need to have what we call landing rights and right to operate in a country, which is a country-by-country approach. We are going very well with that, but there are still a few countries recently, Japan is coming through. India has been bubbling back and forth, but also in a good route to open. And some of those markets are also in the markets where we have what we call take-or-pay so as soon as the market actually open up, we have the capacity sold, but we are still waiting for some of those market approvals. Some markets, we see the exact same picture with Sterling. The market simply only open up when the local regulator opens up for it. Thailand is a market where it's still in discussion as well where the regulator still needing to set the final signatures. Then the next step, of course, is having distributors in the market or working with customers in the market and get them into actually trial capacity. Typically, they start with 5 to 10 test terminals and make sure that they know how to install them, how to bring them out. Sometimes we even need just to get the import papers for this kind of technology out in the market and then rolling up from there to actually start seeing revenue ramp. And I think it's that last market access terminals out in the market, import papers, the distributors actually ramping, starting to ramp-up significantly, even though they've acquired the capacity. I think that's the slowness we've seen. And therefore, we expect to see the LEO service revenue only ramping up over this year to reflect the full global coverage from a ground infrastructure towards the spring next year. In addition, we have less additional new capacity in the GEO connectivity this year. We still have capacity left on 10B and KONNECT VHTS but it was not as steep a ramp-up as we saw this year, where we had a very strong backlog already on KONNECT VHTS with customers like Tim and Orange starting very early on to migrate capacity onto these additional satellites. And then as you can see also here, a very big demand for the Connect satellite over Africa as soon as we liberated the capacity over Europe. We managed to resell that relatively fast into Africa and Middle East. But there's less additional capacity there over the next year. So that's how you'd be thinking about it. The GEO fleet is healthy just to answer that part of your question. But we don't have additional GEO connectivity satellites coming up this year. The FlexSat that we have in the books is a bit delayed due to some manufacturing issues. So that's only towards the end of '26, '27, that we'll see more connectivity capacity coming up in that region. And meanwhile, we'll be more dependent on the ramp-up on the LEO services for the connectivity. And then finally, you shouldn't forget that we see the Video, which is still more than half of our revenues that have a mid-single-digit decline also expected next year. And simply just to compensate for that, we already need the connectivity to grow at a higher pace. So the connectivity needs to grow at a high-end single-digit number just to compensate for that video that's simply mechanical. So that's what we expect to see next year.

Very clear. Can I just have 2 very short follow-ups. One is on IRIS square, what's your view just on IRIS. What's your view on what's going on? There's a big rethink apparently around this project and some disagreements among the protagonists? And the second one, any progress on your thoughts regarding the [indiscernible] and leaseback?

Let me start with IRIS because it's a big question. As you know, we can't necessarily we're part of the SpaceRISE consortium, which officially communicates and align communication with the European Commission. But one of the key things is that Eutelsat Group is still part of the space right consortium, which I think is an update in and by itself. As you've seen over the summer, Airbus and TAS has informed that they do not wish to be part of the core consortium of space right, which means that today, the SpaceRISE consortium consists of SES, Hispasat and Eutelsat Group. We're still very much convinced about the strategic importance behind the IRIS in terms of having European sovereign capacity and having a strong European sector for it, and we still hope to be able to collaborate with the entire sector space sector, not only TAS and Airbus, but of course, also a lot of the other suppliers, small and medium companies also across the European space sector to deliver this to the European Commission. Right now, we're working towards what's called an optimized buffer with the changes of the consortium, which has a deadline in early September and hopefully, taking that into a further dialogue with the European Commission afterwards. But I think what's the space for kind of September announcement. That's where we try to see how we make sure that Europe still has sovereign capacity in close collaboration with the commission. It's one of the most important potential partnerships that we're also seeing for finding synergies with our next-generation development or LEO constellation. Synergies are something that has been a key element of our strategy around the next steps in the constellation. So that's also one of the timing or one of the time lines that we try to align with our deployment of the gradual approach to our next-gen constellation. And now I just totally forgot your second question. Can you just quickly repeat it?

Sure, yes. Thank you. It's just on the ground infra, there was some talk of potentially selling it and then leasing it back. Do you have any progress on that front?

It's still an area we look attentively at just as we've said previously.

We will take the next question from Roshan Ranjit from Deutsche Bank.

I've got 2, please. First one, just a few points around the guidance, please, even you've already given us quite a bit of detail. Can I just check on the previously given synergy targets? I think going back in '22. And clearly, we've had a few moving parts since then. But I think you, at the time, guided to EUR 80 million of CapEx synergies in the first year. How are we tracking to that number? And I guess, given the OneWeb delays, are there any kind of revenue synergies should we expect to revenue synergies in the FY '25 guidance? And just coupled with that, you highlighted at the EBITDA level scope efficiencies. I guess most of the OneWeb revenue contribution in '25 would still be terminals. Is that fair to say? So what level of efficiencies can we expect to keep the margin kind of slightly down? Second question is, at the time of the announcement deal, you've always highlighted that you expect 3 to 4 global LEO networks. And yesterday, we saw the launch of the first set of LEO satellites from China. Are you seeing any pressure in terms of kind of building your backlog? Are there discussions around pricing? Have they become a bit more detailed have seen any pricing pressure there? And lastly, just to follow up on the ground infrastructure. You said still a discussion. There's still a thought process. But are you seeing kind of interest income and interest. We saw one of your peers yesterday highlight the scope for investments. So is there a strong appetite for satellite infrastructure?

Okay. Let me start the guidance on the synergies. I think we are seeing and of course, once you're actually fully integrated, it's a bit like re-separating the warm and the cold water. But we do actually track our synergies and both on CapEx and on OpEx as well as on revenues, and I said revenues is probably the hardest one to really track because you are up against some guesswork of what would have happened if we had not merged on revenues. But on all 3 targets, we actually see the revenues or the synergies coming in strongly. On OpEx synergies, I think we're probably always over delivered on OpEx synergies taking in very rapidly integrating the 2 organizations within the targeted scope and on CapEx synergies as well. Now part of this is, of course, also to change the approach towards this more gradual stepwise approach to bringing on new technology, which might have happened anyway because it has much to do with technology maturity and negotiations and how to get into the right technology road map with it. On revenue synergies, I think it's very clearly that this combination has seen the revenue synergies of a joint sales force and go-to-market approach. So there, we are quite comfortable within the deal rationale around synergies. The EBITDA levels in terms of ramp-up, actually, most of the ramp-up is expected to be service revenues, much lower target on terminals. And so it's not the main ramp-up on terminals is the larger part of the ramp-up for next Gen 1, where he's going to be service revenues, which is also what gives us comfort in that it's going to be a slight decrease on our EBITDA margin, but not necessarily something which is hugely impacted by a huge chunk of terminals as we look at it now. On a 3 to 4 global LEO constellations, it's very clear that, that's the perspective that has both a financial as well as a spectrum technology argument behind it. The reason we say we don't expect to see more than a handful of LEO networks globally. Of course, there is an overall ticket of getting started in this space, which is well north of the EUR 6 billion to EUR 8 billion to get anywhere towards having a global LEO network with an kind of capacity. And that necessitates a certain amount of deep pockets, which, of course, certain states can choose to have, but it's not every single nation who do that. The second one, which is as much a technology explanation is has to do with the way spectrum works. Spectrum in a consolidation work in the LEO constellation is very different from what you see in the GEO world. In the GEO world, you have a position on the arc, right? So you have 36 degrees or 114 West 7, 8. You have a position on the arc, and that's your spectrum position. That's how it works in the GEO world, and it stays there. In the LEO world, it's on a priority basis. And the way it works with you is that you send an application about what are you planning to build and then you get in line. And as long as you deliver on your milestones, you keep your priority. Right now, OneWeb has delivered on their milestones historically. So that means that our constellation, our LEO constellation has the first priority in the Ku-band, even ahead of Starlink in the Ku-band, which means that for constellations that come later, they will have to coordinate not only with us but also with Starlink because Starlink is now into the second priority in the Ku-band. The same goes to the Ka-band. The Ka-band, there are no constellations live yet. The ones that we're expecting to see is, of course, Kuiper from Anoto and the other one could potentially be Telesat. And then we have the Chinese who, in spite of having a lower priority, a lower priority, you can compensate by launching more satellites. It just gets more expensive. So you can't get there if you have deep enough pockets, you could overcome a lower priority in the spectrum band. Because what needs to happen is that you need to launch more satellites to compensate for having to coordinate with the other players in the same spectrum band. So that's why we think the combination of having some of the spots on the top priorities already filled and maybe not that many people who will be massively overpaying an already relatively expensive LEO constellation. We give maybe 4, 5 a real chance for having a business case in there. However, we do think that the Chinese see this as a very important sovereign almost infrastructure in the same way as Belt & Road is a physical infrastructure. This could be a digital infrastructure in the same way. And we will see some countries who will be well aligned to go with the Chinese capacity or support in that areas. We certainly see a lot of other countries who want alternatives. And I think that's one of the key elements of our value proposition is that we provide a different sovereign proposal to the American and potentially Chinese constellations. So I think that's a key selling point. It's a lot of discussions we have with not just in the governmental segments but also in a lot of the private sector of having alternatives and delivering on different constellations. And then finally, don't underestimate, especially in the governmental sector, people want resilience. Customers are buying resilience, especially for critical services, which means that you typically tap into different type of networks. That can mean both multi-orbit between GEO and LEO that gives you an element of resilience, but can they also simply to be customers at multiple constellations. So that's especially true for it. And on the ground infrastructure, it's the same thing. We've seen a lot of the inbound interest from especially infrastructure funds, which is also why it's still something we are contemplating.

[Operator Instructions] We will take the next question from [ Lisa ] from BNP Paribas.

I have 2 remaining questions. The first one, now that manufacturers are out of space rise, shall we think that IRIS could turn out to be more of a hosted payloads type of system make somewhat CapEx-light systems that leads to capacity procurement on existing infrastructure rather than reinventing perhaps the wheel and investing into new infrastructure? And secondly, part of the '25 revenue outlook is driven by the lack of progress on lending rights in some important markets where you probably have take-or-pay like India, perhaps Thailand. How should we think about the delays in the lending rights authorization? Shall we think of those as purely an administrative issue? Or shall we think of the delays are reflective of the competitive landscape of India and talent having their own space industries that they are trying to protect by preventing others to access their markets?

Good questions. So let me start with the last one here. This is essentially a sensitive delays we're seeing. This is a new type of capacity that a lot of markets have wanted or a lot of administrators in markets or regulatory authorities have wanted to get a better understanding of. Whereas we've previously seen it, when you launch a new GEO satellite it's a well-known type of capacity. And it's something that the administrative procedures are well known, whereas bringing in LEO capacity. And typically, we've seen that maybe Starlink has been either at the same time or just ahead of us, and then they want to try to figure out how to do something, a regulatory approval of both at the same time to have competition in the market. Which is what we see with India. In other terms, it's because it's a combination of both a gateway approval, import approval and serving the market approval as in Thailand because in Thailand, we also have a gateway. So we need both a gateway approval. We need an import for terminal approval and, of course, serving the market approval. So that combines in Thailand. We actually work with a lot of the local distributors, both in India, we have very good help from our also large investor from Bharti Telecom in order to explain to authorities, a lot of the questions on the new technology and as well as in Thailand, where, as you know, we work closely with Ticom as well, given our partnership in the GEO space. So a lot of times, that's actually a good collaboration. Sometimes it's also combined with those local operators bringing online capacity for themselves. We've seen that in multiple cases that they're interested in complementing their GEO capacities with some GEO capacity. So sometimes it also becomes a commercial discussion with them. So I'd say it's lengthy with the same thing we've seen in Japan. It's taking probably 3 to 4 months longer simply to make sure that all, in this case, with telecom operators who are comfortable with it. But it's not only market access. It is also that we're getting down to some of the very hard gateways, the last 5 gateways are on some rather exotic places, both from a weather perspective right now, it's 50 degrees plus in Saudi Arabia, where we're building one. We've seen floods in North of India, I think it was north of India, where we've seen big floods taking out some of our equipment. So it's simply as some of these gateways are getting to the tougher areas. But we're also succeeding within Kazakhstan is now live. We have an Africa and some of the Pacific Islands that need fiber. So there's a few islands that just need to have the fiber connection out there for us to get there. So the last 5 is the one that's taking the next 6 to 9 months to really get the ground network completed. On IRIS, yes, it's clear that I can't explain a lot of the actual architecture, but there's been speculation about whether a kind of hosted payload could be an alternative. Right now, we are still working on the original tender offering and structure with the commission. But of course, there are lots of alternatives. And I think what's important is that we get to a point where we have really European sovereign capacity. To me, that's the most important objective of the IRIS discussions.

There's no further questions on the line. I'll hand it back over to you for closing remarks.

Thank you. Well, thank you, everybody, for joining us this morning. I think we spent a good amount of time on what we expect for the future. But just summing up, I think we have actually delivered a financial year solidly and even slightly above our EBITDA in line with our objectives and also make sure that we have a strong financing outlook with the bond reinsurance. For the next year, we expect to see the connectivity growth outpacing the broadcasting decline. And a lot of that is going to be driven by our LEO services. So we look forward to a very interesting '24, '25, where we fully complete the merger and continue our connectivity pivot with the continuation of the strong growth we've seen in the past. So looking forward to this next year, it will be an interesting year. We lost some partnerships and lots of new customers coming into our LEO capacity as well as continued work with our strong customer segments in both broadcasting and GEO connectivity. I hope you'll have a wonderful rest of the day and enjoy the end of the Olympics. We're doing that here from Paris. So with that, have a great Friday. Thank you for joining.

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