Eutelsat Communications

Good day and welcome today. You just heard group half year 2023-24 results conference call. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you will 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 0 and you'll be connected to an operator. At this time, I would like to turn the conference over to Eva Bernicke, Chief Executive Officer, and Christophe Cordelia, Chief Financial Officer. Please go ahead. Thank you.

Good morning. Welcome and thank you for joining us for today's first half of UTILSAT 24 presentation. I'm Eva Bernicke, Chief Executive Officer, and I'm joined by Christophe, our CFO. So what are we going to do this morning? For today's agenda, we have four points. We have a bit the highlights of this past quarter and the sixth month. We go through our operational performance, then our financial performance, and then we'll come to the outlook and financial objectives. Let's start with the highlights of the past six months. First half operating verticals revenue stood at 571 million euros, confirming the return to top-line growth. This was underpinned by Utilsat's legacy business, thanks notably to the Utilsat 10B and Connect VSTS that gave us incremental capacity, as well as the inclusion of one-web businesses since the second quarter. Second quarter operating verticals continues this trend, revenues up by 3.9% on a like-for-like basis and by 5.4% on a quarter-on-quarter. We delivered successful operational execution, notably with the entry into service of ConnectVHTS in September and UTILSAT-10B also in September, as well as the completion of the space segment of the one-way constellation. The UTILSAT and OneWeb combination is effective since very late September and the integration is progressing well and synergies are well confirmed. We're seeing commercial traction for OneWeb with further growth in the secured backlog as well as the activation of numerous key customer partnerships. And this despite the delay in the rollout of the ground segment that we flagged at the end of January. So we are progressing really well on design on the next gen OneWeb constellation, which focus on securing continuity of the current client service, as well as a stepwise capacity and functionality improvement. This will lead to a reduction in expected capex for the period 25 to 30. Let's go down a few of the key elements. Let me start by confirming that the GEO business is doing well. Looking at the GEO business, we're delivering absolutely in line with our expectations and we confirm the return to top line growth. This is thanks to incremental connectivity capacity that came into service with the UTELSAT-10B. It's located at 10 east and offering a visibility spanning Americas to Asia. It has two multi-beam HTS KU band payloads that are able to process more than 50 gigahertz of bandwidth, offering a throughput of around 35 gigabits. We have multi-year capacity commitments, both on maritime and in-flight connectivity with Panasonic, Intelsat, and also recently a deal with Marlink. The other one is a big connect VHTS, which is a KA band capacity of 500 gigabits. embarking in the most powerful onboard digital processor ever put in orbit. It allows capacity, allocation, flexibility, and optimal spectrum use. It does support the development of European fixed broadband and in-flight connectivity. Commitments on this satellite alone totals 450, with key customers that includes Thales, Orange, with its subsidiary Nordnet, and TIM. Elsewhere in the geo business, the second half is also in the video business, where the top line trend is expected to return to market average. But the big event, and I think I am telling nobody news here, is of course the combination with Utilsat OneWeb. Just stepping back and just reminding of the whole rationale behind the deal is very clear. Combining a legacy cash generative geo business with a high growth activity in low orbit that generates strong revenue growth. We're accessing a massive and still growing satellite connectivity market where the majority of growth is going to come out of the non-geo part of the segments. OneWeb is a truly unique asset. It is still one of only two LEO constellations, with the other one being Starlink, that has proven commercial and operational efficiency. Together, combining LEO and GEO assets makes us a really unique player that can actually provide the best of both worlds with the low latency of our LEO offering and the high capacity and flexible capacity of the GEO side. And finally, now three months into it, our integration is progressing well, and we validated the value creation and especially the synergies in this deal. So we're live. A major milestone was achieved when it was approved the 29th of September that we could combine UTILSAT and OneWeb. Since then, we've been focused on integrating the two companies as well as driving operational and commercial momentum. The space segment, that's the 650 approximately satellites, is fully up and running and delivering proven and expected performance. OneWeb's order backlog continues to grow. It now stands at €700 million. That is a conversion into Europe, as well as excluding the UTELSAT part of the backlog, but it continues to grow. And we continue to see commercial traction with deals activated with quite a few customers. Progress on the ground rollout is following some delay, but we track for a 90% coverage by mid-24. And of course, that excludes China and Russia, as has been previously confirmed. As well as confirming the synergies, what we're seeing in terms of revenues, distribution partners are actually starting to provide multi-orbit services with a combination of GEO and LEO, both in mobility, enterprise, and government. Cost synergies are fully on track, and we think we have scope even to exceed our original plans. As a reminder, the annual expected run rate was around 80 million euros pre-tax synergies from the merger. And then finally, CapEx synergies are also confirmed with the design of the next generation OneWeb constellation based on a stepwise capacity and functionality improvement that will lead to significant reduction in our original CapEx estimates. Starting with some of the commercial momentum we're seeing, several important contracts are live with key customers across main Leo applications. If we start with fixed data, you might have seen our announcement together with Telstra on Leo backhaul services in some of the remote areas of Australia. Paratus is a satellite connectivity service that combines you and Leo to address enterprises in remote part of South Africa. Autonomous is delivering Leo connectivity to applications in Saudi Arabia and across 15 countries in the Middle East and Africa. And then finally that one is enterprise and maritime LiU connectivity services across Australia. So very strong traction seen there. But when we move to the government segment, I think there's also some very interesting new developments. Changhua in Taiwan is serving the government with both fixed and mobility services. Airbus will be delivering fixed and mobility solutions across both government and commercial grade applications. And finally, Hughes, one of our longstanding partners also on the geo side, is also one of our major partners in government and mobility in the LEO services. And finally, coming to mobility, Speedcast, we see connectivity in both passenger and cruise markets, and IP access with a large fleet of LEO mobility solutions in the U.S., So across all three of our connectivity segments, we see very strong commercial traction on LEO, but also on combination of LEO and GU. We'll come back to the growth of these new segments in a minute. We see progress on the network coverage, and we are progressing on the rollout of especially the ground network. So this refers to the ground networks in terms of space and satellite coverage. The whole globe is covered, so there are no holes in the coverage. But in terms of the network ground coverage, we have now 30 gateways built, and we've secured coverage of the entire American continent, both north and south, as well as the southern hemisphere, most importantly, Australia and South Africa. By mid-24, that's calendar 24, coverage will be extended to cover gaps in the Middle East and Asia, as well as the North Atlantic, on track to meet our target of coverage of around 90%, including coverage of all the main markets. This is, of course, key to customers in those markets, and especially in mobility customers that are in the backlog, where near-global coverage is a prerequisite for activating mobility services. Meanwhile, the space segment is operational and delivering a high level of technical performance. Testing has validated robustness of the network with an HDS technology delivering up to 7 gigabits per satellite and a robust 4G core network developed with telecom industry leaders. We have a satellite failure rate below 1%, which is one of the best in the industries. We have better look angles leading to lower blockages, which you sometimes can experience when you have the low look angles. Finally, when you turn actually to what does the user experience, we see some very positive elements with global latencies of around 70 milliseconds. We see download speeds of up to 195 megabits and upload speed around 32 megabits. So we are supporting customers with fully managed service, both by our own teams, but mainly through distribution partners. We now have around 11 user terminals that are available to customers in the specific segments and that are fitting their specific requirements. And we are well advanced in also the LIU and GU combined user terminals, which we expect to start operating mid-24 with potential new use cases. Coming back to how this evolved in the future, we are progressing also well in how we look at the next generation OneWeb constellation, with potential solutions focused on especially customer service continuity and a stepwise improvement and enhancement of OneWeb services. This focus is informed by both operational and commercial dialogues in market, as well as the experience now that the constellation is fully in service. The next-gen will progressively embark both additional capacity and enhance functionality performances compared to the first-gen, with a scope to upgrade the constellation services and performances progressively. The cost of this approach is however lower than our previous estimates for the build-out in the one-web next-gen, so we are adjusting our mid-term CAPEX estimates. Our cash capex for 24 remains as expected in the range of 600 to 650 million euros. However, for the period 25 to 30, we expect cash capex after synergies in the range of 600 to 700 million euros on average per year. Previously, this was set slightly higher between 725 and 875 per year. I'll come back to some of these points, but first I just want to let Christophe give you a perspective on the operational and more importantly also the financial performance of this first half year. Just reminding everybody, it's a special year. It's six months where we have around three months of UTILSAT historic standalone and three months in the combined. So there's a lot of numbers floating around, and it can be a little bit hard to follow the numbers, but I'll let Christoph explain all of this to you. Over to you, Christoph.

Thank you, Eva. Good morning, everybody. So just as a reminder, as Eva said, all commentary is on a like-for-like basis, i.e. at constant currency and parameter. Reported indicators include one web since October 1st, 2023, and are compared to UTELSAT's H1-2223 performance on a standalone basis. Total revenues for the first half of fiscal year 23-24 stood at 572.6 million euros, down by 1.9% on a reported basis and up by 1% like for like. Revenues of the four operating verticals, that is to say excluding other revenues, stood at 571.1 million euros. They were up 1.2% on a like-for-like basis, excluding a negative currency impact of 18 million euros. Second quarter revenues stood at 298.7 million euros, up 3.7% like-for-like. Revenues of the four operating verticals stood at €298.6 million, up 3.9% year-on-year on a like-for-like basis, and up 5.4% quarter-on-quarter. Let's look at revenues in more detail. Video revenues represented 58% of revenues, stood at €331 million in the first half, down 8%. The other three verticals include a contribution from OneWeb, consolidated since 1st of October. Government services, 13% of revenues stood at €74.2 million, up 10.5%. Mobile connectivity, 12% of revenues, stood at 71.2 million euros, up 35.6%. And fixed connectivity, now 17% of revenues, stood at 94.6 million euros, up 9.2%. Other revenues amounted to 1.6 million euros versus minus 8.1 million euros a year earlier. This improvement reflected a negative impact from hedging operations of €2 million compared with €12 million a year earlier. Turning to video, first half revenues were down by 8% to €331.1 million, reflecting, first, the impact of the early non-renewal of the capacity contract with DigiTurk from mid-November 2022. Second, Low revenues in Europe related to volume reductions with certain resellers. And third, the effect of sanctions against Russia and Iran channel. Second quarter revenues stood at 167.6 million euros, down by 6.4% year on year, and up 1.9% on a sequential basis. This increase was partly due to a one-off contract of around 3 million euros in Latin America. Professional video revenues, which account for less than 10% of the video vertical, also decreased, reflecting ongoing structural headwinds. Looking ahead, the second half basis of comparison will no longer reflect the impact of sanctions against Russian and Iranian channels, nor digital non-renewal. Revenues are therefore expected broadly in line with the wider market trend of a mid-single-digit decline. Going to government services, revenues stood at 74.2 million euros, up by 10.5% year-on-year, reflecting the slightly better renewal rate of the fall U.S. Department of Defense campaign, above 80%. as well as the contribution of the EGNOS-G04 contract on hard birth 13G. Second quarter revenues stood at €40.7 million, up by 17.4% year-on-year and by 4.2% quarter-on-quarter. The second half would benefit from the full period contribution from OneWeb's LIO-enabled connectivity solutions, as well as the contribution from the above-mentioned EGNOS G04 contract and Hartberg 13G. As a reminder, this contract is set to generate €100 million in revenues over 15 years. First half mobile connectivity revenues stood at 71.2 million euros, up 35.6% year-on-year, underpinned by the entry into service of the high-throughput satellite Eutelsat 10B with significant pre-commitments, and the commercialization of the final beam on Eutelsat Quantum for a maritime mobility client. Second quarter revenues stood at €36 million, up 28.2% year-on-year and up by 0.2% quarter-on-quarter, reflecting the tougher basis of comparison due to the above-mentioned entry into service of incremental capacity during the first quarter. Over the full year, mobile connectivity is expected to see double-digit growth, driven by strong demand for both GEO and LEO-based connectivity solutions. First half fixed connectivity revenues stood at 94.6 million euros, up 9.2% year-on-year, mainly reflecting the entry into service of CONNECT VHTS, as well as a contribution from LEO connectivity. Second quarter revenues stood at €54.3 million, up 17.6% year-on-year, and by 23.7% on a sequential basis, mainly reflecting contracts that started from mid-October following the entry into service of Connect VHTS. This positive dynamic is expected to translate into double-digit growth for the full year on the back of Connect VHTS as well as the contribution from the LEO connectivity offer. Moving to backlog, it stood at 3.9 billion euros on 31st December 2023. compared to €3.7 billion a year earlier and €3.4 billion in June 2023, representing 3.5 years of revenues. The contribution of OneWeb's growing backlog is amounting to €700 million at the end of December 2023. Natural erosion of the geo-backlog, especially on the video segment, in the absence of major renewal. Video is accounting now for 46% versus 59% a year ago. This trend clearly illustrates the impact of successful telecom pivot strategy. Let's turn now to the financial performance, starting with profitability. Adjusted EBITDA stood at €365.6 million at the end of December 2023, compared with €419 million a year earlier, down by 12.7%. Operating costs were €52.2 million higher than last fiscal year, reflecting the impact of the consolidation of OneWeb. This was partially offset by a positive perimeter effect from the disposal of the big blue retail broadband operations, as well as lower bad debt, especially in video business. The adjusted EBITDA margin stood at 64.1% at constant currency, 63.8% reported, versus 73% a year earlier. This is reflective of the progressive rebalancing of our business towards connectivity applications. Turning to the P&L, group share of net income stood at minus 191.3 million euros versus plus 51.9 million euros a year earlier. This reflected Other operating expenses negative of €183.9 million compared to a positive €34 million last year, mainly due to fair value adjustment of shares owned by Eutelsat before the combination with OneWeb. Higher depreciation of minus €316.1 million versus minus €233.8 million a year earlier, reflecting the perimeter effect from OneWeb, as well as higher in-orbit and on-ground depreciation. We have fourth as a light, Hotbird 13, Hotbird 13G, UTSA 20, and Connect VHTS that entered into service between April and September 2023. And net financial results, negative 60.7 million euros versus negative 56 million euros a year earlier, reflecting the higher interest rates, partly offset by favorable evolution of foreign exchange gains and losses. Corporate income tax is a gain of 28.5 million euros versus a tax cost of 0.8 million euros last year, reflecting the recognition of positive deferred tax on the C-band payment as well as a reduction of the French corporate tax rates. Higher income from associates, negative 23 million euros, reflecting the contribution of the stake in OneWeb for the first quarter, which last year was from July 2022 onwards. Cash CapEx reaches 224 million euros versus 194 million euros last year. It is reflecting the perimeter effect from the consolidation of OneWeb. It's also not representative of the decrease in CAPEX, reflecting phasing of satellite programs delivery last year for both UTELSAT and OneWeb. At the end of December 2023, net debt stood at €2,619 million, down €146 million versus end of June 2023. It reflected the receipt of phase 2 of CBAN proceeds, net of tax for €330 million, a negative impact from our financing activities, mostly related to structured debt combined with a decrease in cash flow from operating activities due to the consolidation with OneWeb. As a result, the net debt to adjusted EBITDA ratio stood at 4.13 times compared to 3.55 times at the end of December 2022 and 3.35 times at the end of June 2023. The average cost of debt after hedging stood at 3.16%, 2.7% in H1 2022-2023. the weighted average maturity of the group's debt stood at 3.0 years, compared to 4.1 years at the end of December 23. Earned round credit lines and cash stood at around 1.8 billion euros. Now, back to Eva for a comment on the outlook.

Thank you, Christophe. Just a few words to sum up. The integration between UTILSAT and OneWeb is making really good progress. From a technical point of view, the LEO constellation is operational and delivering proven and robust performance. Acceleration in the ground network rollout is coming live following the recent delays. Multiple user terminals are now available addressing various customer segments. and the LiU-GU terminal is expected by mid-24 for mobility and opening additional use cases. On the commercial front, we see a very resilient GU activity continuing to deliver as expected. We see a growing one-way backlog, which is up 23% during the past quarter. Strong commercial momentum in multiple service deals activated with major customers in recent months. And finally, importantly, all synergies are confirmed. The integration between utilSAT and OneWeb is progressing smoothly from an organizational point of views. All synergies are confirmed, most notably cost synergies, where we believe we have additional source of savings that we could tap into. And finally, design of OneWeb NextGen based on a more stepwise design, assuring continuity of customer service, leading to significant CapEx savings. Turning to the outlook, the geo business is on track and confirms its return to top line growth for 23-24 financial year. As we closed a couple of weeks ago, the results of Leo activities are running behind schedule relative to the original roadmap. We see delays in the availability of the ground network that impacts revenue ramp up, especially in mobility and in certain geographies where market access is also still outstanding. While the revenue mix is more oriented than expected towards sale of user terminals, it's also impacting margins. The deployment of the ground network is progressing well, and we're seeing strong momentum in take-up of pre-signed commitments from major customers. Nevertheless, this dynamic is not going to suffice to close the gap relative to our near-term expectations. So we have adjusted our financial objectives for 2023-2024 as follows. This is the same as you saw a few weeks back. Revenues are expected in the revenues of 1.25 to 1.3 billion versus previously 1.32 to 1.42. Adjusted EBITDA is expected in the range of 650 to 680 million euros, previously 725 to 825. Cash capex for 24 remains expected in the range of 6 to 650 after synergies for the period of 25 to 30. The integration of this revised capex expectation for one-web next-gen means that capex is now expected to be between the 6 to 700 and average per year. This is down from 725 to 875. And we continue to target a leverage of around three times in the medium term. To allow for more accurate assessment of the prospects in this context of rapid development of the one-web business, our financial objectives for 2425 will be viewed and, of course, shared with you as a result in early August. We remain super confident in the prospects of OneWeb and the potential of combining GU and LIU. The constellation achieves full global operational coverage, and we anticipate revenues that continue to target double-digit CAGR in revenues and adjusted EBITDA in 2024 to 2028. Thank you for your attention, and Christophe and I are ready to take your questions.

Sure, thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We'll pause just for a moment for everyone to have an opportunity to signal for questions. Thank you. We will take the first question from Alexander Patek from Associate General. The line is open now. Please go ahead.

Alexander Patek Yes, good morning and thank you for taking my question. I have three to start with. So the first one would be on the re-phasing of spending for Gen 2? If you could define the stepwise enhancement a little bit better, does it imply anything in terms of the availability of next-gen features and capacity? Does it have any impact at all on your view of how the revenue will develop on Gen 2? Then the second question would be specifically on the backlog growth, which was quite strong at 25% quarter-on-quarter. Can we extrapolate this kind of growth into the near term, and what are the trends of this quarter? And I'll have a quick follow-up after that. Thank you.

Did you have two or three? I noted down two questions.

Yeah, there's two, and then I have a third one. I'll save it for later.

Okay. Let me start, I think, in terms of refacing of the Gen 2. I think our priority has been, now that we are operational and we have significant customer commitments that reach into the multi-year, is of course ensuring that we can continue to give them the service and increased capacity over time. And that's why we've taken this stepwise approach. and we'll embark technologies on the new satellites as they become mature, both in order to ensure that we don't get any delays related to immature technology, but also allow us to increase capacity more stepwise over time as customer orders come in and continue to increase. In terms of the backlog, the 23% increase, I'm not sure I want to give you any kind of idea on how we will evolve our backlog over time. It comes, as you might imagine, a little bit in bumps. But we continue to have quite a lot of customer dialogues on what we call the take our pace or confirmed backlog. So we do expect to see it increase, whether it can continue to increase 25% every single quarter. I'm not going to promise you that.

Okay, excellent. And then maybe a question for Christoph. If you could tell me a little bit about the structured debt increase, what exactly – was going on there, what's behind that. And also, if I look at your duration of debt at about three years weighted average, that means refinancing quite soon. Do you have any plans in that respect? Thank you.

Okay. Thank you. First, Alexander, on the structured debt, this is really related to the CapEx line. We've got a specific CapEx line that, as you probably know, to finance the investment on the geo side. And we had three trenches of this CAPEX line, and we have withdrawn the last trench of this facility. So that's the explanation for the increase in the structure depth. And the second question related to the financing and the terms of the three-year terms for our debts, the next, I would say, deadline is the 800 million euros bond that is going to mature at the end of October 2025, so it's a bit more than a year from now. We obviously have the plan to refinance this bond ahead So we have different actions ongoing at the moment. First is to address this refinancing and the situation has obviously changed for UTELSAT because we are moving from an advancement grade environment to high yield environment. So we have the plan to refinance this 800 million euro bond ahead of time. So it's going to be very soon now. We obviously have to address and we are addressing with our banks the subject of the liquidity because we currently have a level of €850 million of RCF lines, undrawn RCF lines with our banks, which are maturing also at the same time as the €800 million bond. So this is the second step that we are addressing. And obviously, we also have opportunities if I look at the needs for the second gen of the next gen of the Constellation. Our financing plan is based upon two things. First of all, obviously, the cash generated by the resilient geo business. But we also assume in our financing plan a significant part of ECA financing in order to cope with this liquidity level.

Excellent. Thank you very much.

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

Hi there, guys. just to confirm they're on the refinancing plan. You're saying that you aim to do it, is that before the October 24 deadline, before they come current? And would that be in conjunction with addressing your term loans?

I think it's October, it's late 25, the deadline is there.

Okay.

Yeah, I guess just... For the refinancing. So I think what we do in refinancing is that we have the maturity is in, I think, actually November 25. It's October 25. October 25. So we have around 18 months ahead, and we start just to prepare and be ready for potential financing, refinancing of that.

Okay. But the idea would be to do the refinancing of the bonds in conjunction with your ICF fund drawings.

Yes, and again, the objective is to do that well ahead of the October 25 due date, obviously.

Sure. And the expectation on the refinancing would still be an unsecured bond, or how do you – is that the kind of – Yeah, it's – yes, Mark, it's the way we are working, and we've been addressing this –

This question with the market, and yes, we are going to – we're likely to go for a bond issuance on the high-yield market, but I need to precise we are probably going to do that at the UTELSAT SA level.

Okay. Right. So the OPCO level. Understood. Can I confirm a few other points here? So on C-band proceeds coming in, does that end this year? No more proceeds expected for next year?

Yes. Yes.

Okay, great. And I guess the other thing is just your medium leverage term target of three turns. So can you just specify? I mean, you guys are over four, got a fairly large CapEx guide for the next two to three years. One, what exactly is medium term? But two, how do you aim to get there in the next, I guess, two to three years ahead of what will be another sort of chunk of debt refinancing to do?

Yeah, yeah. Let me try to answer your question, Mark. Well, first of all, what we plan is, according to the needs and CapEx needs, we plan to have a in net debt, which would be rather flat. So the big part of the majority of the part of the improvement of the ratio of the leverage ratio will come from the improvement of the EBITDA and the improvement of the growth of the EBITDA will come obviously with the ramp up of the OneWeb activity. It's really, it's not, I would say, related to the decrease in the net debt. which again is planned to be rather flat over the period, but it's coming from the significant improvement of the EBITDA. And the improvement of the EBITDA will be possible thanks to the implementation of the synergies on one side, and on the second side, obviously, the top-line growth for the LEO activity leading to significant improvement of EBITDA level.

And sorry if I could just squeeze in one more.

It's just to ask in terms of the... Can you move a bit closer to your mic just so we can hear you?

Yeah, sure. So I guess I just wanted to follow up on the actual constellation itself just so I understand. So with, I guess you're 90% of satellites installed, but do you actually receive the revenues for those currently? Like how is the OneWeb revenue...

are you actually getting that even though some of that ground network hasn't been connected could you just walk us through that because that's not clear to me yes i can so there are several things of of getting getting to revenue because i think that's that's probably what you're looking for the first thing is that the satellites are all in place so we now have the 650 satellites circling where they need to be. So in terms of the space coverage, we're there. And where we are operational, we see that at a 99.5% network efficiency. So that is good. Space is there. Now, the way it works is that, you know, once you touch the satellite, it gets back underground to a gateway or an SNP. We need around 43 to cover the entire globe of those, and we have around 30 of them done now. A few are missing, South India, Saudi Arabia. So a few are missing. And before we had these ground stations there, uh the signal i mean it could get to the satellite but it can't get back down so then the operational network is not operational it's solved for all of north america and south america so there's a lots of areas that was the the map with the orange blotched on and that means that you have the ground network working so you can actually use the full signal So, the only thing that might block in those areas is then country landing rights. So, there are a few countries where you also need specific market access licenses, which either we have ourselves or our distributors need to take. So, a few countries have taken a bit of time to approving that, because they needed to understand what Li was all about. So, ground network and market access are the two additional hoops you need to jump through once you have the satellites in place. And as you can see, a combination of that gives the rollout in the orange spots you saw on one of the pages over the next month. We expect to be at that 90 percent ground coverage in three to six months' time, so over the mid-year, where we'll have all of those countries. And there will still be a few countries that have specific license and landing rights requirements. You see that also with Starlink. Some countries are only opening for Starlink, now are not even open for Starlink. That's a country-by-country approach. But we actually have quite a few countries where we see solid progress. In India and Saudi, it's done already. So I think those are the two additional hoops to do that. And then revenues start coming in. It's only when we have the landing rights and licenses in place we can actually start billing a customer. So that's how we can see the ramp up. And that's why you see a backlog that continues to grow with a lot of customers wanting to buy, but either because... Either we don't have the gateway in their region in, let's say, South India or the place, or Angola is another place where we need to have a gateway there before we can actually start serving, or because the country has not yet approved landing rights, which is a few countries there, before we can actually start building. And a lot of our backlog is actually in mobility, and it's clear that the mobility, of course, they want to be able to sail across the ocean, with whatever that requires of both gateways and landing rights. So the revenues will start ticking in there. We now have a quite close connection between when is the country going to open, what are the take-up pays or the backlog we have on that country, so when do we turn it on, especially, of course, important for Saudi Arabia, where we have a large take-up pay with autonomous. But we now do this on a country-by-country, and I'm sitting here with kind of all the countries that I expected to go live in March, all the countries that I expected to go live in April. So we know when we can actually start expecting that. But that's how it works. Did I talk too much? Did that actually answer your questions, get more clear?

Yeah, I mean, great summary. I just wanted to know, like, how much of the revenue are you actually making from those 650-odd satellites?

that are installed i realize you've still got some like land land i mean we i mean all the satellites are functioning so we can make all the revenues the problem is when you when the signal gets either where the terminal needs to be there you need to be allowed to use those landing rights that's a country thing loads of countries are open i think we have 50 uh more than 54 countries open with everything in green, so you can just go and plug in your terminal if you take it under your arm. Then we have some where we have the network and ground network is fine, but landing rights are still pending. So that can be some of the African countries who need to get there, where we still have that pending. And then we have a few countries where they're still missing a gateway, Sometimes the landing rights are there, so they're just waiting for the gateway. Saudi is one example. The landing rights are fine, but they're needing one more gateway to open up fully. And then, of course, we have very few countries where both things are the issues. But those are going to get there as well. Tanzania is one where we have both things that needs to get fixed over the next three months. But many other countries will get – it has only one pending thing, and we'll get it fixed over the next couple of months. Thanks a lot.

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

Yes, good morning. Thank you for taking my question. Really just thinking about, you know, funding the CapEx, I mean, obviously when you announced the OneWeb acquisition, you were an IG company in a very different rates environment. And, you know, today you're a high-yield company in a very different rates environment. Has that really changed the way you think about structuring the financing for this CAPEX, and have you looked at, say, secured debt solutions, or is it possible to raise debt specifically at the one web entity? Any thoughts on that would be much appreciated. Thank you.

Okay. Thanks. Just to answer quickly to the first point, I didn't change anything. It has not changed in terms of plants. Obviously, the environment is totally different, but this was foreseen at the beginning and since the beginning when we decided to do this strategic move. So it was included in our plans. including moving to a different type of debt environment, so coming from IG to a high-yield environment. In terms of cost of financing, this had also been factored out. Obviously, the race environment has changed since, and this we have updated, and we have included this increasing environment into our models. So that's the first point. Second point is we still believe that our financing is going to be based upon, I would say, three major legs. The first one is obviously the strong generation of cash from the UtilSat legacy activities. UTSA has generated for many years a significant amount of cash, and this is also supported by the decision to stop distributing dividends and to use this cash generation in order to fund the needs in CAPEX. So that's the first leg. The second leg is is obviously the refinancing of the current debt at UTELSAT level, and this is what we are dealing with, and with the refinancing of the bond that I've mentioned just before. And we still think And we have approached the market accordingly. We still think that the unsecured type is the right solution for us, obviously. And that's why I mentioned that our plan is to do that. at the level of Eutelsat SA, that is generating the cash. Obviously, we need to negotiate and to define the circulation of the cash within the group, but this is also something we have addressed and we are really confident that we can do. And the third leg, I would say, is, again, the ECA financing. Most of the financing of the CAPEX needs for the constellation, for the new constellation, will come from ECA financing. And by the way, I would add one point I forgot to mention when I answered to Mark. One of the reasons why the structured debt has increased is because we have included at the level of OneWeb already an ECA financing from India related to the last launch for the constellation, the first generation of constellation. So coming back to the ECA financing as it was an example, we strongly believe that we are just in the heart of the strategy, I would say, of ECA financing. And this is why we, in our models, we consider that we will finance more or less, I would say, around a bit more than two-thirds, four-fifths of the needs of the CAPEX requirements for the next generation through ECA financing.

Okay, great. And just remind me, that's unsecured lending typically, is that correct?

Yes, definitely. Yes. It's a back, I mean, it's a kind of financing which is backed by, I would say, government agencies. We are mostly dealing with, so we are started with India. but we are also talking to UKEF and BPI in France. So, yes, I would say it's a debt supplied, I would say, by the banks, but backed up by government agencies.

Great. Thanks very much. Appreciate that. Thank you.

Thank you. We will take the next question from line Tom, Single House from Citi. The line is open now. Please go ahead.

Good morning, Tom here from Citi. I had a couple of questions, maybe three actually, if it's okay. The first one on the sort of change in the way that you're planning on investing in CapEx for Gen 2. I'm just interested in whether that is a decision that's been taken with a sort of financial sort of leverage hat on or one that's been taken with a sort of operational hat on? I mean, are you choosing that new mode because it's the best thing for the constellation and for the users and then customers, or is it because it just eases the burden in terms of capex spend? That's the first question. The second question, on 2025, financial year guidance, which you've obviously withdrawn. I know it's slightly academic, but I'm interested in whether you've just withdrawn that because you don't know when one web will sort of light up and you'll start really seeing the revenues, or is it because you've got a sort of more cautious view on the run rate? an opportunity from OneWeb. If you can clarify that, that would be great. And then finally, any update on Iris Squared would be very much appreciated. Thank you very much.

Thank you, Tom. You just take all the light questions, right? So, let me dive into them. Starting out with the change in approach on investment, this is clearly an operational choice we've taken. Given that we start having customers who come in with multi-year, five-year commitments, of course, they're going to be very interested in having continuity of service compatibility of service in the way the capacity is used. They don't want to pull their airplanes or ships back in harbor to either change terminals or do anything. So the continuity of services is clearly important. Also, in terms of integrating new technologies, dialogues with vendors – and you follow this industry, so you also know that there's sometimes a solid degree of optimism in how fast you can mature technologies and how fast you can get them there, which has led to multiple delays in the past – So we're taking a somewhat more conservative approach on when do we embark new technologies, when are they mature enough, because we will need to get continuity of service up there. So we're taking that a more stepwise approach and finding a way where we can over time bring more new technology, new functionality to the constellation without having a big cut. And that maybe also on Iowa Squared will also allow for some of the innovations that will come with Iowa Squared to be embarked where we see Iris Squared as a way of maturing a lot of technology development in the European constellation context, which also will allow us to profit from some of the potential synergies there. Just maybe finishing on that, Iris Squared is, we're in the process of, in the consortium, where we're in a consortium with Airbus, Thales, East Passat, and SES, finalizing the BAFO that needs to go into the Commission these days. So that is in good progress. It's something we've spent quite a lot of time on, and we continue to very strongly believe that this is a very important investment and area of interest for the European Commission. And that's also what we see in the dialogue with the Commission. They've shown themselves to be super collaborative with the SpaceRise consortium. Then coming back to 25, guidance. I mean, we've never guided on multiple years, so I think it would actually be more odd to continue to do that, and especially in an environment where we are seeing much more growth and much more future growth coming in. It's very hard to guess 18 months out, especially with the uncertainties we see right now and precisely when will some of these very big take-up pays actually start to kick into revenues again. So we will do the guidance as we normally do with our full year results for the coming year, rather than try to guess what happens over the next couple of years.

That's very clear. Thank you.

Thank you. We will take the next question from Lion Roshan Ranjit from Deutsche Bank. The line is open now. Please go ahead.

Great morning, everyone. Thank you for the questions. I've got three, please. And just going back to your points on the previous question around CapEx and the operational change that drove that decision, I guess, is there a risk that you kind of lose the first mover advantage if you're waiting for the evolution of the technology and you're waiting for your customers to come on board rather than building it out and trying to attract them onto the Gen2 network. And I guess coupled with that, you used the word like stepwise. So whilst we've seen this reduction in the kind of annual capex guidance, what should we be thinking about the overall envelope? Is there scope to still build out that network over time? So we're still looking at the kind of, I think you previously said, a €4 billion capex spend on Gen 2. So anything you can say there will be super helpful, please. Secondly, circling back to IRIS2, I think when we caught up at the end of last year, you emphasised that Gen 2 certainly won't be delayed as a result of IRIS2, but you are also keen to incorporate some of the parameters that the EC wants in IRIS2 within Gen 2. So are those timeframes running in parallel? And also, how should we think about the 40% subsidy and how that could fit in with the build-out of Gen 2? And finally, for your quick one, on the 90% of ground stations to be built by Q2, does that then suggest that global operations of Gen 1 should be done by the summer? So we should expect kind of global courage by the summer there. And what is the CAPEX component for the remaining around 13 ground stations to be built? Thank you.

Thank you. Let me start with the last one, because I think we have exactly 43 ground stations we need. We are now at 30, so 3-0. And we expect to be at that 90%, so probably missing... a bit less than a handful by the summer. So that will give us that 90% coverage. There's still a few, some for the Indian Ocean and some out in the Atlantic, which will take longer. The CAPEX is in our plans for that. It is not massive, but it is in our plan already. This is mainly kind of civil works on putting in pads for antennas. So it's not like the same order of magnitude as you see for launching satellites. So that's the expectations on the remainder of the ground network. Then coming back to your bigger questions on going out in the future for the space, I think we expect kind of overall a kind of around 30% reduction in that overall envelope we have seen previously, kind of in order of magnitude. And it's very much driven by this, by actually making sure we maintain our first or you might call it second mover advantage, because over the next, and we believe at least until 27, 28 years, It is really only going to be us and Starlink that are in this market. Starlink will be there, but we think that both the Telesat project and the Amazon project will be there 27, 28 earliest. So we really need to make sure that we have that continuity service and that we can keep our customers in those long-term contracts that they've signed with us already. So having any kind of gap there would not be good in terms of at that time potentially seeing some of those new competitors coming live. And that's why we do this stepwise where we can also embark. I think a little bit also your question with the IRS, if there are public sector subsidies to developing some of these new technologies in terms of financing what we in the industry call the non-recurring costs, so the actual development costs. it would just make sense for us to say, let's align with that development, make sure that we are several payers for maturing these technologies, and then embark them on the constellation in the timing that works well for not having to do all the spending on the non-recurring costs. So that's what's driving that stepwise approach. But it's also really to make sure that the timeline works. I think it's very important for us that we keep the continuity of service with our customers in these multi-year contracts and step them up over time, and then bring the new functionality when it's ready and when it's potentially, as you said, financed or subsidized partly by other developments as well.

That's really helpful. Thank you. If I may just quick follow up on the time frame. So, I mean, again, I guess you're not going to be pushed on this, but the global, it seems to be that the global operations probably towards the end of the year then, if by the summer you'll still have. a few filings still to be signed. Is that right, towards the end of the year for global operations?

In terms of ground coverage, I think we expect to be at that 90% kind of over the summer. However, what I will say is that I don't have full control over all the landing rights and licensing, because that is a country-by-country, almost door-to-door opening. But in terms of network coverage, at least that should be available kind of over the summer. And then there will be a few pending holds, mainly in some of the oceans, where we have a few a bit difficult areas for some of these ground gateways to cover. So those will be the – there's going to be a lot of ocean pending.

And these ocean rights are also needed for global coverage, service coverage?

Some of them are, but not truly. I mean, this is the south part of the Pacific. It would be nice to have for some crews, but I'd say a lot of the mobility, what they're looking for is, let's say, at least get the Mediterranean covered well or the Caribbean covered well. But it needs to be some of those. The Indian Ocean needs to be covered well. But it needs not just to be one country. They do need multiple countries where they come in.

Understood. Thank you so much.

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

Okay. Well, thank you for all the questions, and thank you for showing up here on a Friday morning, which at least for Francis is on the way to the winter vacation, so maybe some are going. We're super happy that we were able to explain a little bit to you where we are in this very interesting first half year of the combined entity, which actually only has three months of combination and three months of util-set historic business. So we're looking forward to taking it on into the next half year. And are there any questions? We have Hugo and Joanna who can probably help you navigate if I said something totally bonkers or if there's something you just need a little bit of help to understand. So feel free. And other than that, just have a great Friday.

Thank you for joining today's call.