Eutelsat Communications

Hello and welcome to the UtilCell Group second quarter and first half 2024-25 results. My name is Caroline and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. For today's event, we have Eva Bernicke, the CEO, and Christophe Caudrillier, the CFO. I will now hand over the call to your host, Eva Bernicke, the CEO, to begin today's conference. Thank you.

Good morning. Welcome and thank you for joining us today for UtilSAT's second quarter and first half 25 results presentation. I'm Eva Bernicke. the CEO, and I'm joined by Christophe, our CFO. Today's agenda, as usual, we'll run through a few of the key events of the first half, as well as our operational and financial performance, and we'll take a few next steps for the remainder of our financial year, which ends this summer, and then wrap up around the financial outlook. Start out with the key events of the first half. Key event was of course the signature of the agreement that will set the SpaceRise consortium designing, building and operating the IRIS2 multi-orbit constellation. This will present a big step in UTILSAT's LEO build-out strategy. The signature was on December 16th in Brussels. Following this confirmation of the IRIS2 contract, UTILSAT procured the first batch of 100 LEO satellites that required to ensure continuity enhancement of services, and new technology compatible with the R-squared future assets. In December, we also exercised the put option of the sales and leaseback of passive ground infrastructure, where proceeds are still expected due in first half calendar 26. In terms of financial results, we reported a first half with operating vertical revenues of $600 million, up just shy of 4% at 3.9%, and an adjusted EBITDA margin of 55.2, which is stable year-on-year. This performance enabled us to confirm our full-year revenue and EBITDA margin objectives, albeit with less headroom than in the beginning of the year. Elsewhere, our gross capex is now expected to be lower than initially guided, expected to be between 500 and 600 million euros, thanks to the timing of LEO investments, and reinforced vigilance on GEO expenditures. Finally, on a less positive note, we took a goodwill impairment of $535 million on various GEO assets reflecting a lower expected future cash flows from these assets. I'll come back to this. Quick look at the key numbers. Total revenues at $606. up by almost 6% at 5.9% on a reported basis and a 4.4% on a like-for-like. As you remember, we only integrated one web at the end of Q1 last year. When we look at our operating verticals, revenues for our four operating verticals stood at 600, up by 3.9% or almost 4% on a like-for-like basis. Reported adjusted EBITDA stood at 334.9 at the end of the year 24 compared to 365.6 a year earlier. On a like-for-like basis, adjusted EBITDA was up 4.9%. The adjusted EBITDA margin stood at 55.1% and constant currency versus 63.8 reported and 54.8 on a like-for-like basis. The net debt-to-adjusted EBITDA ratio stood at 3.92 compared to 3.79 at the end of June 24 and 3.79 at December 23. I'll hand over to Christophe to look at a bit more details on the operational and financial performance before I come back to some of the strategic outlook for the year.

Thank you, Eva. Good morning, everyone. As mentioned above, total revenues for the first half, 24-25, stood at €606 million, up by 5.2% on a reported basis and by 4.4% like for like. It reflected a parameter effect of €8 million due to the acquisition of OneWeb, a €2 million negative currency effect, and a €5 million positive swing in other revenues, mainly from hedging. Excluding other revenues, revenues of the four operating verticals were up 3.9% on a like-for-like basis. Let's have a look at the segmental reporting. Video, representing 51% of revenues, stood at €309 million, a decline of 6.4%. Fixed connectivity revenues, representing 20% of the group total, rose 22% to 119 million euros. Government services, 16% of revenues stood at 96 million euros, a rise of 22%. And finally, mobile connectivity revenues, representing 13% of the group total, stood at 75 million euros, a rise of 7%. Let's go into more detail, starting with video. First half revenues were down by 6.4% to €309.2 million, in line with the broader secular market decline. Second quarter revenues stood at €157.4 million, down by 5.6% year-on-year, and up 3.8% on a sequential basis, reflecting the linearization of revenue recognition on certain contracts. This trend does not alter the underlying cadence in video of a mid-single-digit decline, and the second half is expected in line with the trend of the first half. Moving to fixed connectivity. First half revenues stood at 118.9 million euros, up 22% year-on-year, mainly reflecting the continued growth of LEO-enabled connectivity solutions as well as a one-off impact from catch-up revenues from ADO customers. Second quarter revenues stood at 62.2 million euros, up 16% year-on-year, and by 9.9% on a sequential basis, mainly reflecting the above-mentioned one-off impacts. Key contracts signed during the past quarter include a new multi-year agreement with QCOM, to expand LEO satellite services across sub-Saharan Africa, as well as a multi-year, multi-million dollar partnership with NishkomSat to deliver LEO satellite services in Nigeria. Second half revenues will reflect more challenging conditions for geo-enabled consumer broadband in Europe. And notably, by this temporary stop of revenue recognition, from a specific customer on a Connect VHTS satellite. Against this backdrop, Eutelsat is repurposing capacity on Connect VHTS to address a broader range of applications, notably mobile connectivity. First half government services revenues stood at 96.4 million euros, up by 21.9% year on year, reflecting the contribution from LEO services. Second quarter revenues stood at 50 million euros, up by 23.3% year-on-year and by 8% quarter-on-quarter. This vertical is benefiting from improved U.S. DOD renewals in the latest campaigns, as well as increased demand from non-U.S. governments. And finally, mobile connectivity revenues stood at 75.3 million euros for the first half. up 7% year-on-year, mainly reflecting demand for LEO-based solutions, notably for maritime applications. Second quarter revenues stood at 33.3 million euros, down 4.5% year-on-year, and by 20.4% quarter-on-quarter. This decrease reflected lower geo revenues, as well as a one-off contract in Q1 of around 3 million euros, not repeated in Q2 and higher equipment sales in Q1. As a result, the backlog stood at 3.7 billion euros at the end of December 24 versus 3.9 billion a year earlier. This decrease reflects the natural erosion of the backlog, especially in the video segment, partly offset by the growing LEO backlog. Backlog was equivalent to 3.1 times of 2023-2024 revenues, with connectivity representing 56% of the total, and LEO now accounting for 48% of this segment. Let's turn now to the financial performance. Reported adjusted EBITDA stood at €335 million at the end of December 2024, compared with €365.6 million a year earlier, down by 8.4%. On a like-for-like basis, adjusted EBITDA was up 4.9%. The adjusted EBITDA margin stood at 55.1% at constant currency versus 63.8% reported and 54.8% on a like-for-like basis. Rating cost. were 64.3 million higher than last fiscal year, reflecting the impact of the consolidation of OneWeb for six months of the current fiscal year, compared with only three months for fiscal year 23-24. On a pro forma basis, costs were up 3.7%, reflecting on one hand the embarkation of OneWeb at full operational run rate, and on the other, cost control measures implemented since the merger. Group share of net income was a loss of 873.2 million euros versus a loss of 191.3 million euros a year earlier. This reflected higher other operating expenses of 690.8 million euros compared to 183.9 million euros last year. They included a goodwill impairment of 535 million euros in respect of GEO assets, based on the test performed at the end of December 2024. It reflects the cash flow forecast adopted by the group in its latest five-year plan, embarking the lower future cash flows the group expects to be able to generate from its existing GEO assets. Please take account of increased competition in the connectivity market and a greater than expected decline in demand for video services. This is consistent with the impact already experienced by the group in lower video customer renewal rates, and more recently, the transfer of demand from GEO to LEO connectivity services. Then, higher depreciation of 433.7 million euros versus 316.1 million euros a year earlier, reflecting the perimeter effect from OneWeb, as well as higher in-orbit and on-ground depreciation. UTELSAT-3060 satellites and 20 Leo spares entered service during the first half. Net financial results of €99.1 million versus €-60.7 million a year earlier, reflecting higher interest costs partly offset by favorable evolution of foreign exchange gains on losses. Corporate tax expense of 7.6 million euros versus a tax gain of 28.5 million euros a year earlier, implying an effective tax rate of minus 0.9%. It reflects the non-recognition of different tax assets related to losses in France and in the U.K., the net impact of the exemption mechanism for profits allocated to satellites operated outside France, the effect of the tax rates of foreign subsidiaries, and the impact of impairments on the group satellites, particularly those in the SatMex arc. Losses from associates of minus 1 million euros versus minus 23 million euros reflecting the contribution of the state in one way or in the first quarter of fiscal year 2023-2024, now fully consolidated. Moving to CAPEX. Gross CAPEX amounted to 174.8 million euros versus 313.7 million euros last year. This decrease reflects the geo-satellite program delivery on launch last year, as well as lower LEO on ground CAPEX versus last year. First half CAPEX is not representative of expected 2425 outturn, which will embark the 100 LEO satellite patch order. Nevertheless, CAPEX for the full year is now expected in the 500 to 600 million range, lower than previous range of 7 to 800 million euros, reflecting the timing of LEO investments as well as increased vigilance on GEO CAPEX. At the end of December 2024, net debt stood at 2,695.8 million euros, up 151.6 million euros versus end of June 2024. It was mainly due to capex-related movements and higher financial costs, partially offset by net cash flow generated by activities. The result? The net debt to adjusted EBITDA ratio stood at 3.92 times compared to 4.13 times at the end of December 24 and 3.79 times at the end of June 2024. The average cost of debt after hedging stood at 4.84%, with 3.16% in H-1-23-24. The weighted average maturity of the group debt stood at three years, compared to three years at the end of December 23. And drawn credit lines on cash stood at around 1.24 billion euros. Now, back to Eva to comment the outlook and next steps.

Thank you, Christophe. The past three months have been an alignment of several strategic elements paving our way for our LEO build-out strategy. First, we exercise the put option with the EQT infrastructure fund regarding the sale of a majority stake in our passive ground infrastructure, leading to the signing of a binding share purchase agreement. As a reminder, the transaction consists of the carve-out of Utilsat's passive ground infrastructure assets. To form a standalone company in which EQT will acquire 80%, while Utilsat will remain committed as a long-term shareholder, anchor tenant, and partner of the new company with a 20% holding. The transaction value is in the new entity at an enterprise value of $790 million with the closing of the deal expected in the first half of calendar year 26. This will deliver net proceeds of around $500 million after tax to UTILSAT at the sale of 80% and will strengthen our financial resources and contribute to the LEO Constellation extension. The second very important element is the SpaceRise Consortium and the signature of IRO Squared, SpaceRise Consortium, where we are a leading member, received the go-ahead from the European Union to design, build, and operate the Iris Squared Constellation, due to enter service in 2030 with an initial 12-year concession contract. As a reminder, the project is valued at 10.6 billion euros, with the public funding representing around 60% of the total project cost, supplemented by private financing from the three consortium members. UTILSAT will invest in the region of 2 billion back-end loaded to the later stages of the project, and it will allow UTILSAT to have access to the additional sellable LEO capacity of around 1.5 terabits out of a total of 2 terabits of LEO capacity, access to the KMIL capacity, which is not consumed by sovereign needs of EU, scale advantages and its shared fixed infrastructure and R&D investments in new technology funded by EU and ESA. Commitments from EU and other member states for Irish Guard capacity worth several hundred millions of euros in take-up pays. And a clearly capped financial commitment with strict milestones providing for exit and compensation in the event of missed targets that will compromise returns to UTILSAT. So UTILSAT expected to generate around 6.5 billion of revenues over the 12-year concession period. And finally, given that IRIS2 is now confirmed and moving forward, this also allows the confirmation of our involvement and represents a key step in our strategy of how to develop and expand our LEO constellation. Specifically, it gives a clear roadmap for the extension of the existing LEO constellation in terms of technology roadmap, which is compatible with the future IRIS2 assets. Following confirmation of the IRISCRED contract, UTILSAT therefore procured the first batch of 100 LEO satellites to be delivered by the end of calendar 26 that will ensure continuity and enhancement of services. We estimate the extension of LEO constellation up to the availability of IRISCRED will require further 340 satellites on top of these initial 100. And this equates the total of the extension program in the order of 2 to 2.2 billion euros between this financial year 24-25 and 28-29. As mentioned, our contribution to R-squared will be back-end loaded during the period ahead of the availability of the Constellation. The availability of the Constellation is expected end 30 and thereby our back-end loaded contribution will be beginning in 28-29. We're actively working on a financing plan in line with our strategic roadmap and also in line with our longer-term leverage targets. So with all of that we confirm our first half performance was in line with our expectations enabling us to confirm the financial year 24-25 revenue and profitability objectives. As a reminder the 25 financial year revenues of our four operating verticals around the same level as financial year 24 and an adjusted EBITDA margin slightly below the level of 24. Nevertheless, these objectives will be more challenging in light of geoconsumer broadband headwinds identified above and in Christoph's notes. Our gross capital expenditure for this year, initially expected in the range of 7 to 800 million euros, is now expected around 200 million lower in the range of 5 to 600 million euros. That also means we continue to target leverage of three times in the medium terms. So if you... A few words to sum up before we go to Q&A. H1 revenues and EBITDA margin in line with the expectation and our objectives for financial year confirmed. Our capex is now expected 200 million lower at 5 to 600 million range. The put option for the sale and leaseback of our passive infrastructure and ground stations is expected to generate the 500 million H1 calendar 2016. and the go-ahead of iris-squared constellation representing a key milestone in our multi-orbit strategy, also allow us to define the roadmap for interim LEO extension. With that, I wrap up here and Christophe and I are ready to take your questions. Thank you for listening.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from line Roshan Ranjit from Deutsche Bank. The line is open now. Please go ahead.

I've got three, please. Eva, you mentioned and highlighted in the release the increased vigilance on GEO, and Christoph mentioned the headwinds. Is this driven by kind of cannibalization of the GEO business from LEO? And when, I guess, if we think about the Leo business, that ramp up, is that enough to kind of offset the new kind of geo decline that you are highlighting today? Secondly, and tied to that, around the normalized geo capex, you've provided the envelope for the Leo extension, 2.2 billion over four years, so roughly just over 500 billion a year. How much geo CapEx? Should we layer on top of that? Are we still thinking over the mid-term of 700, kind of 800 million annual CapEx prior to Iris Squared started or Iris Squared CapEx started? And lastly, just a quick question. We've seen a lot of noise around the C-band development, potential new auction. How much C-band do you guys actually have that you could monetize? Thank you.

Thank you for your questions. Those are important. The vigilance in geo is, of course, a key element in terms of the headwinds, I think, especially in what we would call B2C connectivity. It is clear that that is where especially Starlink is picking up a lot and, by the way, also driving a bigger market. So we see in our market estimates actually market estimates or addressable market for B2C connectivity from space actually being increased continually. And in that segment for B2C, it's very clear that we see headwinds. And as you know, we do have ConnectBHTS satellite, which was specifically targeted for B2C connectivity over Europe and Africa. And that's where we have seen those headwinds specifically there. And I'd also say we are looking at alternative solutions, especially within the mobility segment. for the Connect VHTS satellite. So we hopefully will be able to, or we will be able to use it also for other things than pure B2C connectivity. So yes, we do see, especially in the B2C segment, a move towards LEO on the connectivity. Now you'll say B2C is not our key focus, and that is absolutely right. We are a B2B player. But we do also see Starlink starting to come into some of the B2B segments as expected. We'd expected that Starlink would also start addressing the large B2B market. So that's seen in mobility, especially in maritime mobility. And you've also seen some of the announcements on Arrow, where we also have a very strong backlog on Arrow, and Starlink is starting to come in there as well. So it is clear that we do see some of that also being a switch between GU and LU in the connectivity market. We still expect to see the connectivity market being a very strong growth market in total. The LEO extension and the GEO CAPEX is, of course, and just given your first question, you'll be happy to hear that, of course, we're being very vigilant on our GEO CAPEX going forward, because if it's a switch we're seeing and we're seeing the market trend slightly slightly more negative on GEO compared to LEO. That is a key one. So that is something we're looking at over the next five-year period. And we have also in our outlooks there pinpointed a few places where we'll be very vigilant on the GEO CAPEX in terms of how we renew it. That goes, of course, for video, which has been a trend for a while amid single-digit declines. So, of course, there, everything we could do in terms of being smart about how we renew long-term strategic assets, and that will go also for geoconnectivity. On the C-band, we do note the recent comments by the FCC. We don't know exactly when or if at all it will be repurposed. We do have the capacity on three satellites, 172, 115, 170, and the later two are over the cones that is relevant. So we will have a little bit less than we had previously because we no longer have the 113, which counted in the previous C-band brown, but we will have our If it moves forward, we will, of course, have our relatively small part of the C-band. The majority, as you know, is with the CS and Intel set should this move forward. But right now, we simply don't know whether this has been just a discussion. By the way, you know the discussion has been going up for at least a couple of years now, so still no confirmed timeline on it. Did we take the next question? Thank you.

Thank you. We will take the next question from line . The line is open now. Please go ahead.

Hi, guys. Just a few points here. So on the ground terminal proceeds, can you just clarify what the lease cost will be going forward on a cash basis? And also of the $500 million cash proceeds that you mentioned, what the intended use might be there? Second one is just on the bond side, on the refinancing and capital allocation. How are you thinking about the 27 wall? It's fairly sizable out to 29, so keen to understand how you think about the interest cost side of the business, if I could.

Okay. So let me maybe start with the second one and come back. I'm not quite sure I got your first question, but the second question is, of course, we have a 27 refinancing, and as we put out, we are looking at various financing options. Now we have both. the IRA squared capex and also our rich capex clear. It is looking at the various financing options is one of them that can go through partnerships. Of course, we're exploring quite a lot of export finance as well. And also how we time the, especially the IRA squared capex will be towards the end of the period. So with that, we are looking at various financing options actively in this moment. Christophe, do you want to take the one that I didn't get? Maybe you got it.

Yeah. Maybe before answering precisely on the question, we also have to take into consideration that the impact of the operation will be a decrease also of the capex. And this is very important to notice. We estimate the annual cost around 70 to 80 million, most of which actually should not be lease costs. They should be OPEX. Just a small part of the cost would be treated or should be treated as leases.

So the total is, of course, that we will have these additional annual cost, a mix of OPEX and CAPEX, and overall lower CAPEX envelope because we no longer have to invest in our ground infrastructure that will be picked up by the company, and then around $500 million cash in. So those are kind of the key elements.

Got you. And then, sorry, can I just clarify that at the end of year, there was obviously some headlines around kind of some outages system outages. Do you mind just clarifying what the issue was?

Yes, we had a software glitch with a supplier which meant that the ground infrastructure became out of sync with the satellite. Ground infrastructure was operating perfectly. And satellite infrastructure was operating perfectly, but the match between the two were off in a date. This was simply a software supplier who had forgotten we had a leap year last year. Not a very brilliant thing to do, but we did experience an outage around at least 24 hours while we got that reset and got the two dates back in sync. We estimate penalties and costs being around $1 million of this. And of course, we have a bit of a heated discussion with our software supplier on this point. It doesn't seem to be rocket science to know that last year was a leap year, but it seems to be that way.

Thank you.

We will take the next question from line Ben Rickett from New Street Research. The line is open now. Please go ahead.

Hi. Thanks for the questions. Firstly, just a follow-up question. You mentioned you were hoping to use ECA financing. Could you talk a bit about how much of the 2 to 2.2 billion of Gen 1 continuity CapEx you would hope to finance with ECA? I think this time last year you were talking about two-thirds to four-fifths. So is that still the right sort of range?

I think pretty much, yes.

OK. That's helpful. second another sort of hopefully quick capex question um on slide 24 you're showing the iris squared capex and from the diagram it almost looks like it's it's out beyond 2030 I've just wondered you could clarify the sort of exact phasing of when you're expecting to pay the iris squared capex

I think we expect the IRA squared capex, which is the order of magnitude of $2 billion, starting a bit in 28. 29 will have a chunk, but then 31 and 32 will also have it. So it's one of the key advantages of IRA squared for us is that we'll be able to push the capex much closer towards the go-live date. So we have a little bit cut in 28, and then 29 will start stepping it up. 29 and 30 are the two bigger years.

That's great. If I could have one final question. It was just on the OneWeb trajectory. So it looks like you did OneWeb revenue of about 40 million in H1. You're saying the OneWeb backlog is still at around 1 billion. I'm just wondering, what gives you confidence that you will see OneWeb revenue ramping up towards the The sort of 6.5 billion euros that you mentioned.

Oh, the 6.5 is hour squared. I think you're talking about the hour squared billion, right? The 6.5 revenues is over the concession period out of the 1.5 terabits of capacity that's an hour squared billion. As you know, that will be a sub-part of our LEO constellation. That will be additional capacity to UTILSAT. So that's where the 6.5 comes in. LEO revenues are ramping up well. We don't split our connectivity revenues in LEO and GEO, but I don't really fully recognize your numbers where the LEO revenue are ramping up nicely. That is part of how we can also confirm our full-year guidance.

Okay, thank you.

Thank you. We will take the next question from line from Saria. The line is open now. Please go ahead.

Yes, hello. Thank you very much. I just have a few questions that are probably revealing that I'm a relative beginner on satellites. But could you remind me again what led to the relatively sudden drops at the moment in CapEx in the last quarter. And where your current rollout is of that Gen 1 Leo generation seems to be delayed. Where are you there in resolving that delay? Have you resolved it? Or is perhaps the drop due to ongoing delays? I'm not entirely sure there. Please correct me if anything I'm saying is wrong. And another question would then be one where revenue, is that all equipment still or is it already capacity? And then my last question is, would be obviously that one web constellation as you're outlining it with that second generation or additional satellites of, I think, Gen 1 that you're looking at here, 340 additional Gen 1 satellites. That is still going to be a lot smaller than, say, your big competition out of the US. How are you intending to compete there? Can you remind us of your strategy there? How that's going to work? Thank you.

Those are pretty big questions. But let me start out with the drop-in capex. The drop-in capex is as much in this financial year, which, as you know, ends by the end of June. So there's some of that that, of course, flows into next year. So there's an element of it, which is the exact payment schedules. of the orders of the next satellites which influences this. So I think that is a good chunk of the job in CAPEX. There's also some CAPEX linked to the finalization of the LEO rollout. As you know, we've been talking into gateways. We still have around five gateways to go in some of the complicated places like Tanzania and Senegal and Martinique. And those are flowing into second half of the year, which also means that that impacts some of our coverage that is driven by that. That's linked to delays in the partners that are helping us building those five hard gateways we have. 39 now passing commercial traffic, so that has started to go live, but the last five are still dragging their feet a little bit into second half of the year. So that is the same story on the delay in rollout, but that also moves CapEx into a slightly later period. In terms of OneWeb revenues, no, it is certainly mostly capacity. Service revenues is what we call it. There is a bit of UGs in there, but it's a smaller part of the OneWeb revenues. The major part is certainly service revenues in the OneWeb revenue numbers. And then finally, in terms of the additional satellites, as you know, we fly higher. than Starlink and Amazon, so they're around 400 to 500 kilometers, which means that just to cover the Earth, they need many more satellites, just the physics, if you want to point to any point on Earth. So we only need around 400, 450 to 500 satellites to actually cover and have global coverage. And that also means that we don't need the thousands of satellites simply to have global coverage. We have a B2B-focused strategy as well, whereas Starlink has started out with a very standardized B2C product, so attacking consumer broadband, driving volume in terminals, whereas we have opted for a B2B strategy where we work with distributors in the market. So those are two very different approaches. Now, Starlink is also starting to address the B2B market just as we do address B2C market in a much smaller scale. So we are currently the only alternative to Starlink as Kuiper and Lightspeed is not expected before 28, earliest. And I think we see most customers not necessarily want to be in a monopoly situation. Lots of customers are putting a lot of importance also to have non-US, non-Chinese alternatives. So this is not a question only of resilience. A lot of customers want multiple networks for resilient purposes, and some customers simply want to have alternatives. One example is our large contracts recently signed with the Taiwanese government for coverage on Taiwan. They wanted to have an alternative to the Starlings, and we see that in quite a lot of places. And, of course, we also see, especially the European and other MODs, being very interested in having all the alternatives available, not only for kind of geopolitical reasons, but, of course, also for resilience. So I think the main point is you want to have access to multiple networks for resilience purposes.

Thank you. Thanks very much. I just have two tiny follow-up questions there. How high do your satellites fly and how many do you need to guarantee service levels?

Okay, so that's simple. It's around 1,200 kilometers. And I think I said that, but we need around the 400 mark. to have full global service and a bit extra. So that will give a good global service everywhere, poles, equator, everything else. Now we have around 600 flying right now, which enables you to have slightly better elevation angles. The big question is what kind of elevation angle, or you need a decent number of satellites if you want to have flat panels. Parabolic antennas are a little bit easier to operate with fewer satellites. So that's one of the key questions when we have, but with 400, we have good elevation angles on flat panels, which is what customers want today.

Thank you.

We will take the next question from line Samika from BNP Paribas. The line is open now. Please go ahead.

Thank you. Good morning, Eva. Good morning, Christophe. I have a few questions. The first one, you talked about the several hundred millions of take-or-pay commitments from the EU and Iris Square. Is that on the UTELSAT part or on the whole program? And can you be more specific on the compensation mechanisms that should ensure minimum returns on the project and possibly share what the minimum guaranteed rate of return is on your $2 billion investment? Secondly, you have suggested that geo-connectivity trends are perhaps a bit weaker than expected. Yet, in the preface, you suggest that the cessation of revenue recognition on Connect VHS is said to be temporary. When will you resume recognizing revenues and why is it temporary? Thank you.

So let me start with the commitments of Irish Grid. There are some take-up-pace plans for especially hard-gov and soft-gov capacity for EU. That is not yet distributed, partly because we're talking about capacity that's going to be needed beyond, let's say, from 31 and on. So it's a bit early, and it will be a mix of kind of commercial and, of course, the KMIL, HARTGOV competence. So that's a total for the entire consortium. And, of course, it can be – if it's MEO, it's more likely it will – that's where SES has its main interest. If it's LEO, it's where we have the main interest. But it is not finalized yet. That is part of the discussion. The way the – I think the other one was how the compensation was going to run, or how the protection was going to be for the internal rate of return. And I think you know the mechanism of this first rendezvous point, which is in about a year's time, which is a key element of having a confirmation of both timeline, cost, and quality. And we have an extra option if we don't at that time see a supply chain that can meet those obligations. The same thing, by the way, of IRA Squared. So right now we're in the process of confirming the supplier setup, which is probably what you'll hear from a lot of the Airbuses, the OHBs, and others, that they're in competition to enable us to ensure that we can build this constellation on time and within the 10.6 billion mark. So on the Connect VHTS, we had initiated a discussion with TIMSS, Tim is one of our customers on Utilsat Connect and Utilsat Connect VHTS and Tim has not started migrating customers from Connect to Connect VHTS as was the original agreement and is debating whether they have an interest in that. And that's why we have stopped recognizing revenue with Tim. We have a multi-year take-a-pay with him. So we are right now in discussions with him on how to bring that into the future. And an IRA is a minimum IRR that you can share on your investment? Yes, it's in line with our typical IRRs of 10% to 12%.

And that's the minimum that's in line with 10% or that's the expected one?

No, that's the minimum one. That's the one we expect to at least have, yeah.

Thank you very much.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the next question from line Alexander Pitek from Bernstein. The line is open now. Please go ahead.

Yes, hi. I just have a little follow-up on CapEx first. So, the 200 million shift of CapEx out of this year, is that going into later years or did you just reduce the entire approach and reduce the amounts to spend here? And then when you talk about increased vigilance on geo CapEx, is this a warning that you may have to drastically reduce geo spending going forward given the disruption in the market from Leo? Is that what's going on? I'm going to have a follow up. Thank you.

I think on the CapEx, we see a lower CapEx this year. We don't necessarily guide multi-year CapEx on it. I think there is some switch, which is simply the payment schedules and some of the ground infrastructure rollout that we will have in the second half of the year as well. But there is also a real reduction in it. And I think on GeoCAPEX, what you'll see is that we will be looking at many types of partnerships. You saw the partnership we have with TICOM as an example, right, and a way of launching connectivity capacity in partnership, in this case, with TICOM. where we share a satellite rather than launch one each. And I think those are the type of partnerships which both enable us to lower our own geocaps or simply share the risk with other players. So those could be types of way of being vigilant on future geocap expense.

Thank you. And then the follow-up will be on your comments regarding the B2C disruption of Starlink And you seem to be implying that prospects for Connect VHGS on the B2C side are materially weaker now. Does that mean that at least part of the capacity there is going to be a write-off or very little occupies? No. What exactly is going on there?

No, so ConnectVHTS was originally meant for connectivity over Europe, and we actually are providing a lot of connectivity. We are ConnectVHTS both on Spain, Switzerland, and on France, and a lot of the capacity that you, as an example, see Orange has been doing a very strong job on migrating their satellite customers to ConnectVHTS and allowing them much higher bandwidth with actually quite some solid success because it's a very strong value proposition for the consumer segment. So it's only Tim that's opted not to do an active migration into the Connect VHTS. However, we will probably not sell all of the capacity. It's a 500 gigabit satellite Connect VHTS. So what we're doing right now, we're developing terminals for also mobility use, As you know, we've seen quite a lot of attraction in the mobility market, and it's a market that's actually very hungry for capacity, whether it's for land mobility, whether it's for maritime or for aero. That is the segment that is really increasing capacity requirements because it's a segment that simply gets other options. So for the mobility segment, we need slightly different terminals than the B2C terminals that we had for ConnectBSGS. And adapting that satellite to be able to serve the mobility market is happening as we speak. So we're in the first test of that. So we will be able to leverage that capacity into the mobility market, which is actually not bad news in terms of pricing because it's typically a market where prices have been better. However, we do need to get the capacity out there as it's a segment that is asking for it.

Thank you. And then my last question would be on the opportunity for Leo connectivity in mobility aero markets and IFCs. I've seen Starlink taking sizable deals there, not least Air France KLM, Qatar, and United. So my question is, do you have a roadmap for OneWeb serving these markets? Do you have any wins in this area? What's the timeline for developing this vertical? Thank you.

Yeah, thank you for the question because we actually do. It's been one of our core segments for a long time. We have a backlog of around 1,000 aircrafts that are scheduled for installation. You've probably seen, I think we put that out on LinkedIn, some of the very positive early installations with Air Canada, but we also have American Airlines, Alaska, and Japan. It is not us direct. We, as you know, are working with distributors. We have a B2B approach, so you'll see that through Intelsat, Panasonic, even Viasat are using our Leo capacity for their aero services. So we're working with all of them, and we've now go-go business jets for smaller jets. It's also one of them who has started to fly with our capacity. So we have a very strong backlog, actually, in aero for our LiU services. And then for Europe, we'll be able to put some Connect VHTS on top of that, and that will be even stronger. So aviation has been a very strong backlog element for us. Why it's taking a bit longer for it to start actually generate revenue has to do with the different approval of the FFA for terminals and, of course, the test flights, and then, of course, just installation on the fleet. But as I say, we have more than 1,000 aircraft in the backlog, and Starlink is more recent into the market. Again, not a surprise that Starlink will start being interested in the B2C market, which has typically been three quarters of the satellite market. And also on Aero, and you saw especially the United deal where they, I think, are also going to install themselves. And then with Air France, which I believe is more that they're bringing Starlink into the mix, but not for replacement. But I would expect to see many aircraft carriers and distributors who would want to take in the different types of capacity. Just like we're seeing in the maritime market that a lot of our distributors have both OneWeb and Starlink capacity and mixing the two.

Okay, so just to understand, so the strong backlog you have in mobility, in LEO, is that going to transpire in your revenue trajectory? What time frame? Is it next year's event or longer? How long does it take?

I'm not sure I understand your question. Can you just maybe reformulate?

Yeah, just to reformulate then. So looking at mobility, it fell well short of expectations in the reported quarter. And so my question is, at what point will your strong backlog in LEO connectivity for IARO starts to transpire in the mobility top line.

Okay. So Aero will probably start, we'll start seeing some of it in next financial year, start to ramp up in next financial year, some from the summer. I mean, it's going to be very small over the summer and then it's going to start ramping up with the installation on the fleet over the next financial year.

Excellent. Thank you very much.

We will take the next question from Line Staff and Bayazin from Odoo. The line is open now. Please go ahead.

Thank you very much for taking the questions. I've got two, if that's possible. The first one is related to CapEx. Would you be able to give us an idea of how big is going to be your GEO fleet, let's say, I don't know, but let's say at the end of this decade versus today? I'm just trying to understand to what extent you are redimensioning the GEO fleet. And my second question is regarding IRIS II again, and just a follow-up. Could you give us more color on how the revenue calculations have been made? I guess what I'm trying to understand is how much extra EU state spending you're expecting versus what the states are actually spending today. Thank you very much.

Ooh, those are big questions. What I can tell you, by the end, by 2030, we're probably still going to have around 35 satellites flying, because we're talking much longer investments. I think your question, and I'll pass on the actual capex to Christophe, is that what we're, and that's just the rhythm of geosatellites, is that Within the next year, we're going to have to start thinking about the satellites that will go into service by 2030, 2031. So that's just the rhythm of how long it takes to develop, launch, bring into orbit, test into orbit, and then actually start migrating customers on it. So we're on some very long things. But of course, and I think that's what we're looking at closely with the stuff on, is that let's not spend on something that's going to go into service in early as 29, but more likely 30 and 31, let's make sure that we don't overspend because they are going to be in service for 15 to 20 years after that. So, Siddharth, do you want to put a word or two on geocapex and how we think about it?

Yeah, what we are looking at is obviously we have orbital positions that we need to keep and use, exploit. So in terms of we are also thinking of different ways of different types of either satellites, either smaller satellites or partnerships. Particularly if your question is related to how much capex we would spend in the coming years to replace the current fleet, it would be obviously much lower than in the past for the reasons that we have just mentioned. And just to give an idea of the range, it would be below 200 million.

Okay. Thank you.

Thank you. We will take a follow-up question from Lansamika from BNP Paribas. The line is open now. Please go ahead.

Yes, thank you. I have a question on India. Given that one of your largest shareholders is a large Indian telco, given that India is a large, perhaps attractive market, can you please elaborate and tell us where you stand with market access rights into India and and perhaps the business plan for India and how much revenues might India contribute to by the end of this decade. Thank you.

I don't know where India is going to be by the end of this decade, but it is clearly one of our core markets. We right now have some testing ongoing for specific use cases, and they've opened up for actually allowing for kind of governmental and remote connectivity use cases in India. So we're the only one testing there. As you know, neither Starlink nor us have actually full market access rights in India yet. That's part of a geopolitical trend we see in quite a lot of places where people Governments are spending a lot of time studying what LEO connectivity will and which conditions they want to give market access. And so India, we expect to open up, especially for remote and government uses. And we are already testing. We've had a couple of quite successful tests with the Indian military. And, of course, we are helped by one of our large shareholders in collaboration with Airtel on this. So Barsi Telecom and Airtel are close collaboration with them. And we have actually a significant take or pay on India already, which will kick in at the time where we actually gain market access to India. So we have a backlog already. sitting in India which is ready to go live as soon as we get market access. We have the gateways in India up and running, so it's simply a question of regulatory approval of that market. So we'll likely get it at the same time as Darling is my best guess, but it's been quite a long administrative process with the Indian regulator.

And I imagine you would not disclose the size of the take-off pay contract in the backlog, would you?

No, but it's quite significant because India is a big market with quite a lot of interest as well.

Fantastic. Thank you very much, Eva.

Thank you. It appears no further question at this time. I'll hand it back over to your host for closing remarks.

Well, thank you. Thank you for showing up this morning, numerous and with some great questions, some very strategic and some more operational questions. just want to take the opportunity to sum up the year uh... strong revenue and a bit of margin in line with expectations and objectives confirmed capex lower uh... with about two hundred million less than previously guided uh... and uh... three very strategic steps forward. First of all, Iris Squared, of course, which allow us to pave the way of continuity and increased functionality on our Leo constellation towards an Iris Squared, and the signature of the put option with Stargate, which is also on track for 26. So all in all, a year that was busy both on the operational but also on the strategic front. With that I just want to thank you for showing up this morning and have a wonderful Friday. Take care.

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