SES S.A. (SESGL) Earnings Call Transcript & Summary

Hello, and welcome to the SES Q1 2022 Results Call. My name is Jazz, and I'll be your coordinator for today's event. [Operator Instructions] I will now hand over to your host, Richard Whiteing, Head of Investor Relations, to begin today's call. Thank you.

Good morning, everyone. Thanks for joining this analyst and investor call for our Q1 results. This morning's presentation was uploaded along with the press release to the Investors section at ses.com, if you don't already have it. And as always, please note the disclaimer at the back of the document. In a moment, Steve Collar, our CEO, will present the main business highlights, followed by Sandeep Jalan, CFO, to gather the financials in a little bit more detail. After some closing remarks from Steve, we'll be happy to take your questions. With that, let me hand over to Steve.

Very good. Thank you, Richard, and good morning, everyone. Thanks for joining us this morning. I'm going to start on Page 3 with the main highlights and a solid Q1 and a strong start to 2022. In the first quarter, we generated revenues of almost EUR 450 million and EBITDA of EUR 274 million, both are fully in line with our expectations and consistent with the delivery of our full year outlook. Our continued focus on OpEx and cost control contributed to a 17% improvement in net profit, while in April, we returned EUR 220 million of cash to shareholders in the form of a 25% increase in our dividend. 2022 is a big year of delivery and execution across a number of long-term value drivers for SES, and we've achieved a number of important milestones already in the quarter. SES-17, the largest and most capable geostationary satellite that we've ever launched is now on stage and above the Americas. The mission to-date has been flawless with all deployments successfully completed, and now we're undergoing final orbit testing before starting service in mid-June, a little earlier than previously communicated. Good progress also with O3b mPOWER, our transformational medium at orbit constellation. The satellites are progressing well through the factory, and we've increased our launch cadence in the second half of the year within our existing CapEx envelope to accommodate slightly later deliveries of the satellites themselves. Commercial momentum continues to build for both of these assets with a combined gross backlog up 20% year-on-year, an increasing roster of major global telcos, cruise lines, service partners and companies signing and more broadly, we've seen good deal flow and momentum in our networks business in the first few months of the year. We're extremely pleased with the acquisition of DRS Global Enterprise Solutions that we announced in March. Combining DRS GES with our existing SES GS business will double our government business and enable us to serve U.S. government customers with an expanded set of connectivity solutions, leveraging our unique multi-orbit fleet at the time where we'll be bringing the extraordinary and powerful capability in the form of O3b mPOWER to market. And lastly, with respect to U.S. C-band, things are going extremely well in the second phase clearing. Our first C-band satellite is now on the way to the launch base with a confirmed launch date at the very end of this quarter and others following shortly behind. We're well on track to achieve our second phase clearing milestone by the end of 2023 and earn the remaining accelerated relocation payment of $3 billion, while we've created substantial additional value for SES through the clearing agreement with Verizon in a deal worth up to USD 170 million that we expect to earn over the course of 2022. So with that, I'll move fairly rapidly through the remaining slides. And on Page 4, a closer look at our Video business. The most significant news in our Video business is undoubtedly the important renewal and extension of business with Sky U.K. in a deal valued at EUR 85 million on the back of a EUR 90 million deal that we announced last year. We serve 365 million households through our Video platforms and in these neighborhoods built over decades that deliver our customers the most valuable content in the most reliable and cost-effective way. This deal extends our business with Sky towards the end of the decade with backlog in Video standing at a healthy EUR 3 billion. The trajectory of our Video business continues to improve with revenue down 2.6% year-on-year, including a termination payment from Nordic Entertainment that keeps us whole from a revenue perspective in the Nordic region in 2022. The end of our wholesale agreement with DISH U.S. on [indiscernible] last year, transitioning to a significant renewal directly with DISH Mexico is the other key driver in year-on-year comparisons. And when excluding both the impacts of U.S. wholesale and NENT -- the one-off termination payment from NENT, our underlying video business is down 4% year-on-year. We carry an industry-leading number of HD TV channels with QVC being the latest example of a long-term customer, leveraging our broad neighborhood reach and upgrading their services to high definition. Pricing remains robust in all of our core markets, reflecting the significant value that we create for our customers through our reach and our market penetration. Finally, in Germany, our HD+ consumer platform continues its good momentum from last year and is now truly multi-platform following the launch of HD+IP and HD+2Go. So now to networks on Page 5, and we saw a good rebound in mobility from this time last year, up close to 10% year-on-year with our cruise business growing nicely and aviation also showing a positive track. Government year-on-year was dragged down by the rapid withdrawal of forces from Afghanistan, but excluding this, our network revenue is actually ahead by low single-digit percentage year-on-year, sustaining the positive performance that we saw in the second half of last year. The quarter was characterized by sustained and positive deal flow across all network segments that were not necessarily showing up in the numbers yet support our growth outlook for the year for networks. In our Government business, our support for a number of defense forces in Ukraine and surrounds will provide momentum in the second half while in the U.S., we've won an important recompete that will anchor U.S. government revenues for the year. The recent announced award from NASA is an exciting opportunity for us to develop and showcase the unique capabilities of O3b mPOWER as a critical communications relay, a new use case and one that leverages our unique position as the only operator in medium earth orbit. Equally, in our fixed data business, we continue to build our commercial appeal with telcos and mobile network operators, notably across Asia and the Americas and extending their reach with terrestrial quality solutions. In fixed data, we've signed deals with COMNET and SSi, both on SES-17, ComClark for educational services in the Philippines and expanded our plant capabilities by becoming a FastNet Connect partner with direct access to Oracle client. Our partnership with Microsoft is a key enabler of O3b mPOWER, is growing with a number of agreements supporting Grand Station as a service. While the landmark partnership with Reliance Jio announced last quarter across our Jio and MEO assets has now been memorialized in the signing of the joint venture. And so then finally, on Page 6 and our key strategic value creation drivers. We've made really good progress with more green ticks being added to the chart as we promised you last time. Getting SES-17 on orbit and entering into service a little ahead of schedule is significant, and we've secured an important time-to-market advantage versus other high-throughput satellites to be launched into the Americas over the next few years. From O3b mPOWER, we've been able to accommodate an increased launch cadence, with no impact on our overall CapEx envelope. In moving to 3 launches instead of 2 for the first 6 satellites, we've optimized our time to orbit and we've been able to accommodate a slightly later delivery of the satellite to the launch base. Importantly, we still expect to be in service in generating revenue on O3b mPOWER from the beginning of 2023. Two important additions to the chart in the quarter with the acquisition of DRS GES, which we expect to complete during the second half of the year, and the important additional C-band clearing that we'll conduct with Verizon or for Verizon in a deal that's worth up to $170 million for SES, most of which we expect to receive during the course of 2022. We continue to execute really well with the second phase of C-band clearing. Our first new C-band satellite will be in orbit by the time -- next time we speak, and we're well on track to achieve full clearing before the end of 2023, triggering the remaining accelerated relocation payment of USD 3 billion. And with that, I'll hand over to Sandeep for the financial highlights.

Thanks, Steve. Good morning, everybody. Turning to the financial highlights on Page 8. We are very pleased with the solid start to the year, with strong financial performance in quarter 1 of this year. Group revenue of EUR 448 million was 2.6% higher year-on-year on a reported basis, mainly thanks to the positive effect of the stronger U.S. dollars and also a bigger revenue. Adjusted EBITDA of EUR 274 million was also higher by 2.4% year-on-year on a reported basis and represented a robust margin of 61.3%. Adjusted net profit improved by 17% year-on-year to EUR 88 million, thanks to improvement in both EBITDA as well as below EBITDA items. And at the end of quarter 1, our leverage stood at 3.1x, the slight increase from the end of 2021 mainly reflects the timing of cash flows related to the C-band clearing and of reimbursement from the clearing house, which we expect to begin starting in the coming months. Finally, we are on track to deliver our full year outlook of group revenue between EUR 1.75 billion and EUR 1.81 billion, and adjusted EBITDA range of EUR 1.03 billion to EUR 1.07 billion. Looking at the Page 9 at net profit bridge in more details. As you can see, the improvement in EBITDA performance was driven by 3 main components: The stronger U.S. dollar versus euro, which contributed EUR 10 million; the contribution of periodic revenue, termination fees, from Nordic Entertainment, which contributed EUR 10 million; and continued strong cost management, whereby recurring OpEx reduced by EUR 3 million or 1.9% year-over-year. As Steve has already explained, Video was 6% lower on an underlying basis and 4% lower, excluding the U.S. wholesale, while the impact of Afghanistan led to flat revenues in network, although we expect this to improve over the course of the year. The second important element was interest cost, which further reduced by EUR 8 billion or about 24% to EUR 27 million in quarter 1 of this year. We recognized the forex gain of EUR 11 million in this period, which compares with EUR 9 million in the quarter 1 of previous years. Recent U.S. dollar strengthening is overall positive for SES' financial performance as we have much more USD revenues than USD cost. I would like to remind once again our earlier guidance that each set of USD strengthening versus euro leads to about EUR 8 million higher revenue, about EUR 4 million to EUR 5 million higher EBITDA and on most neutral cash impact due to dollar CapEx spend. On top, for C-band second tranche, EUR 3 billion incentives, each cent of USD strengthening versus euro would lead to about EUR 20 million more net cash inflow for us. The effective tax rate of 10% for quarter 1 is consistent with our expectation of 10% to 15% for the full year. And as a result, the adjusted net profit stood at EUR 88 million or about 20% up compared to quarter 1 of last year. Reported net income was EUR 82 million, and it included on top of adjusted net income 2 exceptional items: number one, the net C-band expenses for the period stood at EUR 7 million; and second, other significant special items amounted total to EUR 1 million and price cost related to restructuring as well as acquisition of DRS GES. Lastly, on Page 10, about the CapEx outlook. This is unchanged. And as a reminder, it excludes C-band-related and which is proceeding very well. In quarter 1, we expect in total CapEx, EUR 160 million, excluding the C-band and with the balance to come during the remainder of the year. As you can see, CapEx starting 2023 comes down meaningfully, and this complemented with growth in revenue and EBITDA from our unique investments will drive significant cash flow generation. With that, I will hand back to Steve to conclude.

Thanks, Sandeep. And concluding with the familiar chart on Page 12. We've made a solid start to 2022 with strong execution in the core of the business, supporting our full year outlook and good progress in the delivery of the all-important growth driving segments. The coming months will see us achieve further significant milestones as we put in place the key elements that will drive revenue growth, EBITDA growth and expanding cash flows in our business for the years to come. And on that note, we're happy to take questions.

[Operator Instructions] The first question comes from the line of Sami Kassab from BNP Paribas.

Three questions to start with, please. The first one, what revenue impact have you seen or would you expect from the war in Ukraine? Did the demand for quantum in East Europe increase? Can you please elaborate on that, Steve? Secondly, I understand that the mPOWER entry into service date is confirmed, but still, it is the third consecutive quarter where the launch of BATCH 1 is slipping, so not have confidence too much. So can you comment on the reference to a delayed delivery of the asset? When will Boeing deliver the satellites? Have they been delivered to you? Any visibility and any risk that we may have in mind as to the delivery of the assets? And lastly, can you update us on the status of ongoing discussions with the EU Commission on the European Constellation project?

Thanks, Sami. So yes, look, Ukraine, again, I'd sort of be remiss not to emphasize the fact that this is, first and foremost, for us about our people and making sure that our people in -- we've been serving the market in Ukraine for the last 20 years, and making sure that we're looking after our customers and our people in Ukraine is the most important thing for us. And the good news there is that continues to be the case. On sort of revenue and what we expect, as I mentioned, we have seen a sort of an uptick in demand, as you would imagine, for defense services. In particular, we have the GovSat asset, which is well positioned to support the defense of Ukraine. You've seen a number of, in particular, European MODs taking up additional capacity and services on GovSat. So we do expect some positive momentum in the second half of the year coming that, which should help us offset this -- the impact of the withdrawal of forces from Afghanistan late last year. So yes, we do expect to see that impacting revenues positively. It's not life-changing in terms of quantum, but I think important and certainly something that we will expect to see coming through our government revenues in the second half. Look, as far as mPOWER is concerned, this is obviously a very large significant investment that we've made, and it's a complex system that we're making sure is 100% right before it goes -- before we ship and then launch it. As you would expect, this is a very important, very significant long-term investment by SES. And I think we're managing the program very well. The fact that we've managed to accommodate slightly later deliveries of the satellites while optimizing our launches. Effectively by going to 3 launches, it cuts our time to orbit by about 2 months. And so net-net, we're pretty much where we were, and we're pretty happy about that. So yes, I wouldn't -- I don't think anybody needs to get too excited about a month or 2 in a satellite project that has taken, I don't know, 4 years, something like that to get to this point and ultimately it's going to sustain revenue growth for the company for the next 10 years. And then on the European Commission Constellation, look, what I'd say is we continue to believe that this is a significant strategic and long-term plan on behalf of the European Commission to develop a sovereign space architecture. And I think we feel that we're well placed to help the European Commission in that ambition, significant engagement continues. I think we expect to see the formalization of a program happen over the next few months, and we continue sort of our engagement with the commission. So nothing too much to say in terms of concrete milestones, but I think we continue to see that program moving forward, and we continue to expect to be a part of that project as it progresses.

Next question comes from the line of Nick Dempsey from Barclays.

Can you hear me?

Yes, Nick. Loud and clear.

Just first up on the EUR 10 million of periodic revenue in Video that I think you guys flagged as a termination fee for the NENT deal. So is that a final revenue that you'll receive from NENT deal? And when you're looking at organic revenue growth for 2023 versus 2022 when you're expecting to see positive growth, will you exclude that EUR 10 million from the base when you're making that organic calculation? Second question, for the renewal of the tranche of transponder with Sky U.K., can you give us any indications on whether you've held price, maintained volume for that tranche for that -- the previous deal for the same tranche? And the third question, just any sense of when you expect naturally telco expansion and cloud deals to start to offset those lower Pacific revenue issues in your big state line?

Very good. Very clear. Yes, look, on the reason that we've kind of presented all of the information is just so that you can understand how this sort of the termination fee impacts our overall Video numbers. I mean the good thing I would highlight is essentially what this termination fee does is it keeps us whole for the year with respect to NENT to the first approximation. So if you included in the numbers, we're only 2.6 down year-on-year at this point. Obviously, that will kind of unwind, if you like, through the year. And -- but as an overall, it keeps us whole for the Nordic region for 2022. In terms of will we show that versus sort of growth in following years, I think that's why we've broken this out as recurring and nonrecurring just so that is clear. And we generally use the recurring numbers as the comparison. So I would imagine that, that's what we'll do when we do year-on-year for next year. Obviously, in the scheme of our overall revenue, it's not super meaningful, but that's probably what we will do. As far as Sky is concerned, I mean, again, super, super happy with the deal. And I think the fact that we've done 2 EUR 80 million, EUR 90 million deals with Sky over the last couple of years, really sort of reinforces the relationship and the value that we deliver to Sky in the U.K. Not going to talk about obviously price and volume with respect to any individual deals. But I will tell you that overall, in Video, we see price really slide, really robust, reflecting the value that we do create. And we've actually signed a couple of deals, where we've seen pricing moving up, which is very positive. In terms of volumes, volumes with the Sky deal were very, very strong. I mean essentially, we renewed. As I think we've talked about before, with a number of our broadcast customers, some of them have kind of big one-off renewals and others renew business over time and with Sky, we generally renewing handful of transponders at a time. And the fact that we had 2 such significant deals over the last couple of years is very positive. And on fixed data, yes, look, I think we -- I'd point you back to the deals that I talked about as we were reviewing the network performance. And the quarter really was characterized by a good number of smallish deals that we think will contribute nicely over the course of 2022 and then into 2023 as we get kind of full year of SES-17. So yes, I think we've said in the past that we expect growth in all 3 of our network segments, and I don't think anything that we've seen suggests that, that will be different. So I think we do expect fixed data to grow. And so that will, if you like, offset, as we say, the declines that we've seen in the Pacific with growth -- new growth, in particular, I would say, on SES-17 but also in our MEO portfolio and obviously ahead of the delivery of mPOWER.

The next question comes from the line of Carl Murdock-Smith from Berenberg.

Just 2 for me. I mean just on the -- increasing the cadence of the mPOWER launch is moving from effectively 2 to 3 launches obviously, you've not moved your CapEx guidance at all. So can you just talk about how you've kind of included that within the pre-existing CapEx envelope? And then secondly, just more broadly across the business, can you talk about a bit about the impact from higher inflation with regards to costs, both OpEx and CapEx, but also to what extent you have any inflation indexation within your revenue?

Thanks, Carl. Just on the 2 to 3, look, 1 of those 2 was an extendable. So we were having -- the second launch was going to be a higher power launch. So in moving to 3 standard launches, we've actually kind of optimized things from our standpoint and optimized things a little bit, I think, from SpaceX's standpoint, I think it was a good deal for both of us, and we've managed to sort of achieve that overall deal within the CapEx analog that we previously had. I hand over to Sandeep for any additional comments on that and for the second question.

Yes. So regarding CapEx, indeed, we don't have any changes in our overall CapEx guidance. You have to keep in mind that for this year and next, we are spending cumulatively about EUR 1.5 billion of CapEx. So this launch cadence, it doesn't affect in totality. We have lots of optimization possibilities within that and that we are doing very well there. So regarding your second question on the inflation. So yes, inflation is happening around us. But on a net basis, we don't see any impact for us in a short term. And I'll give you some of the elements thereof. So yes, starting with the very first one, energy is a very, very small component of our cost. And on the staff cost, we are starting to see some impact, but nothing in the short term. I think in the short term, our guidance very well factors added into account. And a very important component is that there is about 20% of our contracts, which have an indexation clause, so there, the impact, whatever we might have from the cost front, it would be largely offset by the indexation and the revenue. So overall, in short term, we don't see any impact of this inflation hitting our EBITDA of cash generation or our guidance for 2022. Of course, we have to continue to monitor developments for the next years, how long it takes, what are the impacts. But again, we will try and offset as much as we can on the price front. And just as a reminder, I mean, our cost base is less than 40% of our total revenue. So the upside on the revenue should be there to offset any impact that we would see.

Your next question comes from the line of Roshan Ranjit from Deutsche Bank.

I've got 3, please. Firstly, on the Video side, I think last year, you kind of alluded to maybe a slight pause in some of the HD migration, which you've seen from some of your customers. You obviously announced the QVC contract, I guess, extension may be slight incremental given the HD capacity. Do you see more of that picking up this year, so maybe a catch-up from slower run rate last year? Secondly, on the mobility side, I think it was a stronger performance this quarter than I certainly had anticipated. Are we now quarter-on-quarter seeing this good momentum building up on the cruising side? And I think you had previously alluded to an announcement with another cruise company. I guess I haven't seen that in yet. Is that still in the works? And lastly, on the C-band payments now, Sandeep, you alluded to the slightly higher tick up in leverage this quarter, and that was time in around in the C-band reimbursements. I think at the end of 2021, you had just over EUR 700 million of reimbursements. Could we get a sense of how that unwinds through the year? I know you said that it is expected to come through the year, but any phasing around that? And just on the phasing point, you highlighted EUR 160 million of CapEx being paid this quarter. Is it possible to get a sense of the phase-in for the remainder of just over EUR 700 million for the rest of the year?

Thanks, Roshan. Yes, look, Video, I would say, with customers sort of migrating, upgrading to high definition, QVC was a really nice year. And I think it came on the back of similar deals with CTV and 1 or 2 others in the second half of last year. And yes, I think we do see this trend. I think as a general comment, our video customers, broadcast customers have fed fairly well through the COVID environment. I think that with more people at home, watching and consuming more linear TV, in particular, whether that be news or obviously the case with QVC shopping has done relatively well through this period as far as sort of online shopping and so on so. So yes, I think we can expect to see more of our customers having the confidence to move from standard definition to high definition. And generally, that means more value for us. That means that volumes move up. And with pricing staying robust, I think we can expect to see some growth coming from the migration from standard definition to high definition. And certainly, QVC is an important customer for us across a number of our platforms. In this case, it was in the U.K. but QVC, obviously, an important customer for us across a number of our locations. On mobility, yes, no, we were pleased with the pickup. I would think it reflects the fact that in our segment, in particular in cruise were emerging from this COVID period, I'm really confident we've had pretty much all of our cruise customers signed for O3b mPOWER. And so our Cruise business will continue to grow as we look ahead to migrating customers and upgrading them and serving more ships on mPOWER as soon as we have the system up and operational. And I think, yes, through 2022, it's reasonable to expect that we'll see continued sort of development positive momentum in the mobility side of our business. And on C-band, Sandeep, maybe you take that question.

Yes. So on the C-band, the whole process is now in motion. The whole process envisage is that first of all, we have to make the payments and then claim the reimbursements. So there are a few months lag effect. So during first quarter, we have made lots of payments concerning the C-band. We basically consumed the proceeds that we received from the relocation incentives. And by now, we have a spent close to over $1 billion of the C-band reimbursable expense. And good thing is that we have submitted most of the invoices and these invoices are in process of clearing at the clearing house. And then during coming months, we would expect the reimbursement of these amounts as is foreseen in the process. So all that process is fully in place, and it's going well.

Great. And just to follow up on the -- just to get a sense of the CapEx phasing for the remainder of the year, please?

Yes. So our CapEx guidance for the year is EUR 950 million. By now in quarter 1, we have spent EUR 160 million. So that means the remaining during the year would be about EUR 790 million, and we are very much in line with our CapEx guidance. And this CapEx again, it doesn't include the C-band-related spend that I was mentioning. This is not what we report as CapEx because these are basically reimbursable expenses that we are incurring and expecting reimbursement within a few months.

Next question comes from the line of Aleksander Peterc from Societe Generale.

Could you perhaps clarify a little bit further the Nordic Entertainment impact? I understand you have the EUR 10 million settlement. So that comes in as a periodic revenue. Do you still have any recurring revenue coming from Nordic Entertainment this year? So what is the impact of that rolling off on a full year basis that we should expect in 2023? And then a second question, just in terms of M&A, would you now rather prioritize smaller targets with a good operational fit such as DRS? Or are you still also contemplating larger M&A opportunities?

Thanks, Aleksander. Yes, look, on that, I would say that the one-off largely keeps us whole for 2022. So if you compare sort of '21 revenue from the Nordic region and '22 revenue, that largely approximate -- there was some incremental, but it's not meaningful. It's EUR 1 million, EUR 2 million, I think. So overall, kind of EUR 12 million in total, EUR 10 million of which was the termination fee, which keeps us approximately from '21 to 2022. And as we go forward, we don't expect any more revenue from net debt. They relocated. We're in the process of finalizing the relocation of [indiscernible]. And so we don't expect any revenues in 2023 from NENT. On M&A, look, we're really, really happy with DRG GES. It was a business that we had our eye on for some time. We kind of felt that it would be a very, very good fit for us and a very, very good fit in particular, given the investments that we've made in SES-17, but particularly O3b mPOWER, government business fits incredibly well with the kind of capabilities that we have on O3b mPOWER balance. So we feel really good about that. And I would say, everything that we've seen subsequent to the announcement in terms of sort of initial engagement and so on gives us very good confidence that indeed, this was a good thing for us to do with the business. And in terms of sort of other M&A, I would say, we continue to feel ourselves in a very good position with respect to the consolidation -- any potential consolidation of the industry. We've got a very strong balance sheet, a new fleet, a lot of investments that we've made, a growing business, obviously, the successful execution in C-band. And so I think we feel ourselves to be in a good position. I think the overall feeling continues to be that consolidation would be good for the industry, particularly, I would say, horizontal rather than vertical. This was a case of vertical with DRS GES. But we're going to make sure that we're always doing things in a financially disciplined way and looking out for the best interest of SES shareholders. So it's certainly not consolidation for consolidation sake. We're going to make sure that anything that we do, do makes absolute sense from a value-creation standpoint, and we feel very strongly that the DRS GES is a great example of that.

Your next question comes from the line of Ben Lyons from Credit Suisse.

Most of them have been answered, but maybe just a follow up on the consolidation point. I mean we're just seeing operators move to a more end-to-end product offering. Are you expecting to see more horizontal consolidation or might be in multi-step deal or more vertical type deals like the GES deal that you completed or in process of completing? And maybe if I could just ask on Starlink moving into IFC, signed a couple of deals. How are you thinking about that? And how you thinking about competition going forward in aviation?

Yes. Thanks, Ben. Look I don't have too much more to say on consolidation. I don't know kind of what we should expect from others. I kind of how we think about things. And as I said, what -- DRS GES for us is important because they operate networks for customers. They really are the sort of the network operator. And at a time where we expect growth in government business, and we expect a particular interest in the sort of capabilities that we can bring with O3b mPOWER, we see them as an incredibly good fit and very complementary to our existing SES GS business. So it doesn't -- I don't think that this reflects sort of a general move on behalf of SES towards verticalization. It sort of reflects a very, I think, well thought through strategy around how do we grow and develop our government business in a way that's sustainable and sort of adds very significant capability to what we have already a sort of strong platform in government. I think, again, on horizontal versus vertical, consolidation, in general, will benefit. I've talked before about the investment that we've seen in CapEx on behalf of a number of different sort of businesses. And I think the more that we can sort of align our CapEx investment, whether that be through consolidation or through strategic partnership, I think those things are beneficial to the industry. And your second question was on Starlink. Yes. Look, I think it's no surprise. I mean we've -- in previous calls, we've talked about where our real strength is, which is in the sort of high throughput, high flexibility services. And we've got a real heartland there, again kind of reflecting back on why government is an important segment for us. This is where most of the government requirements fall, this is where cruise falls, aviation in a kind of straddles I would say, low throughput, high throughput with extreme flexibility. And it's that flexibility that I think will sort of introduce some challenges that for LEO to address. So I think LEO will start to address requirements that are quite domestic. And so I think the examples that you talked about are sort of U.S. domestic networks. And I think that's probably consistent with where they will target the market early on. I think these first announcements are relatively I would say, experimentally in nature. I think there's a lot of work to be done in terms of getting hardware onboard planes and actually operating the network. So I suspect we'll see that happening over a period of years rather than months. But yes, not at all unexpected. Don't expect it to have a meaningful impact, I would say, on our Aviation business. I think we expect that trend to sort of continue and that they will be a competitor in sort of regional aviation and potentially sort of the commercial aviation business but probably focus more around domestic markets rather than we do a lot of international, particularly transatlantic, transoceanic, and I think that stuff will be tough for LEO. The concentration that you tend to get around airports is also something that's difficult to address when you've kind of got fixed supply, and I think that will lead to some challenges. So I think they will be a player. They will add to the market. I don't think that it will sort of significantly impact our business in the short, medium term and frankly, as we look out into the long term as well.

We have no further questions. So I will now hand back to SES for closing.

Very good. Thanks very much, as always, for joining us. Much appreciated and look forward to talking to you with our first half results. Thanks all.

Thanks. Bye-bye.

Thank you for joining today's call. You may now disconnect your lines.