Eutelsat Communications

Hello and welcome to the UtahSAT full year 2023-2024 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 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. I will now hand over the call to your host Eva Bernike, the CEO, to begin today's conference. Thank you.

Good morning everybody and welcome and thank you for joining us to UtahSAT's full year results. My name is Eva Bernike. I'm the CEO of UtahSAT. I'm joined by Christophe Coudrelie, our CFO, and on bonus you get our IR team with Hugo and Joanna also in the room. We are today announcing our results and I will run through the key events of the past year, both our operational and financial performance. Christophe will help me with some of the details there and then we'll come back to the outlook and objectives for 2024-25. Turning first to the highlights of the past year, our financial year as you know ends on end of June. Our financial year 2023-24 were in line or even a bit better than objectives in terms of revenue and profitability. The key event that was of course the closing of the UtahSAT one web combination at the end of September, creating the first true Geo-Leo integrated player. Our connectivity pivot is now well and truly established with a growth boosted by the Leo ramp up as well as additional incremental geo capacity. Robust commercial traction notably with major multi-application contracts in the one web constellation. I can mention IntelSAT as an example but multiple others as well. Some of the operational success which include entry into service of both E10B and Connect VHTS as well as the launch of UtahSAT 36D completes the space segment of the one web constellation at the mid-year. And elsewhere also for our balance sheet we achieved a successful refinancing of the November 25 bond early on that was already completed at the end of March this year. A quick look at some of the key numbers which might be of interest to some of you. Our total revenues stood at 1 billion 213 million up by 7.2 percent on a reported basis and on a 5.6 percent on a like for like basis. As you know we guide on our four operating verticals and revenues of the four operating verticals stood at 1 billion 209 million up by 5.9 percent on a like for like basis. Revenues compared to our financial objectives so performer and including one web for 12 months rather than nine months and a constant exchange rate were at 1 billion 268. So well within our objective range which was 1 billion 250 to 1 billion 300. Adjusted EBITDA ended up at 719 million down 12.9 percent. As our financial objectives it stood at 698 million so nicely above our objectives of 650 to 680. Cash capex ended up at 463 million so below the expected range of 6 to 650. The net debt adjusted to EBITDA stood at 379 times compared to 335 times at the end of June 23 and 416 at the half year December 23. Turning to a bit of the commercial momentum that we've seen we continue to see a really strong commercial traction in especially our connectivity business. This has been a year with very few renewals in the video so a lot of the commercial traction has been driven by leo services but also some strong wins in our geo connectivity capacity in particular on our connect capacity over Africa. So the main contracts I would like to highlight are of course the large intel sat seven-year deal that provides intel sat with leo services across some of their key verticals signed in March this year but also via sat for maritime broadband services and ya sat with a multi gigabit contract for high speed internet connectivity across African and Middle Eastern nations essentially on our connect satellites which is now going to be turned to be used extensively over Africa and the Middle East. CBN Warner Brothers in Poland renewing and expanding capacity on hotbird that's a broadcasting contract in this otherwise slightly smaller renewal year and NEC with a multi million dollar deal for connectivity capacity especially on low earth orbit over Africa but also some of our distributors have signed contracts with especially targeting connecting the unconnected with liquid for communities and businesses in Africa. Kinectcom for connectivity to the public safety sector across the US. Qcon also services especially for South Africa and of course a strong partnership with Hanwha distributing leo services to South Korea to connect the unconnected. As a result of a lot of this strong commercial momentum our backlog is now just short of 4 billion at 3.9 billion at June 24 coming up 15 percent over the 3.4 billion a year earlier. It reflected the contribution of broadcasting video segment where we saw an absence of major renewals this year. The backlog is about 3.5 times of 22-23 revenues and connectivity is now more than half of our backlog at 56 percent of the total up at 40 percent year over year. So we really show the momentum and the commercial momentum behind our connectivity pivot. A quick view on our coverage as per day and what we expect to see at the end of the summer. We're on track with now 37 gateways open coming up another three against 34 in March and coverage is further extended especially in the Middle East and some of East Asia as well as Africa and most of India. Now I'll hand it over to Christophe for a look at some of the operational and financial performance of the year and I'll be back with the outlook to wrap it up.

Thank you Eva. Good morning everyone. Before we start a quick reminder on how the numbers are presented. Reported figures include OneWeb 6 October 1st 2023 and are compared to UTELSAT's reported fiscal year 22-23 performance on a standalone basis. All commentary regarding revenues is on a like for like basis that is to say at constant currency and perimeter. As mentioned above total revenues for fiscal year 23-24 stood at 1213 million euros up by 7.2 percent on a reported basis and by 5.6 percent like for like. Revenues of our four operating verticals that is to say excluding other revenues stood at 1209 million euros. They were up by 5.9 percent on a like for like basis excluding a negative currency impact of 20 million euros. Operating verticals revenues as per financial objectives i.e. pro forma including 12 months and at a euro dollar rate of one stood at 1268 million euros. Let's now have a look at the segmental reporting. Video representing 54 percent of revenues stood at 651 million euros a decline of 6.8 percent. Fixed connectivity revenues representing 19 percent of the group total rose 29 percent to 234 million euros. Permanent services 14 percent of revenues stood at 165 million euros a rise of 5 percent. And mobile connectivity revenues representing 13 percent of the group total stood at 159 million euros a rise of almost 50 percent. Other revenues amounted to 4 million euros versus minus 5 million euros a year earlier. They included a reduced 3 million euros negative impact on hedging operations compared with 15 million euros last year. Moving to the operating verticals. This carrier 2324 video revenues were down by 6.8 percent to 651 million euros reflecting a secular market decline in this application. In the first half this trend was accentuated by the effects of sanctions against Russian and Iranian channels as well as the early non-renewal of a capacity contract with DGTurk from mid-November 2022. Both these effects washed out in the second half. On the commercial front recent highlights include the renewal and extension of capacity by Poland's TVN Warner Bros. Discovery at Utah's Hot Bird neighborhood as well as the consolidation by United Media Group of its entire DTH broadcasting activity at Utah's 13 degree east and 16 degree east hotspots. Professional video revenues which account for less than 10 percent of the video vertical decreased reflecting structural headwind as well as the seasonality of some events. They will be mildly boosted by the Olympic Games in Q1 fiscal year 25. Fourth quarter revenues stood at 159 million euros down by 6.2 percent year on year and broadly stable quarter on quarter. As mentioned above fixed connectivity revenues were underpinned by the entry into service of in October 2023 and the progressive transfer of UTELSAT Connect capacity to the foreign African market. Capacity on UTELSAT Connect is being contracted by YASAT YACLIC to drive growth across its satellite broadband footprint in Africa. Elsewhere KU band capacity on UTELSAT 70B was selected by InterSAT to extend its pan-African satellite services to enterprise and retail customers complementing existing KU band agreement on the UTELSAT Connect satellite. Revenues were also boosted by a significant uplift in OneWeb Leo with the activation on progressive ramp up of commercial agreements in line with the progressive availability of the ground network. The OneWeb contribution was especially visible in the fourth quarter where revenue stood at 82 million euros up by 73.5 percent year on year and by 42.6 percent quarter on quarter. Moving to government services revenues stood at 165 million euros up 5 percent year on year. They reflected the contribution of the EGNOS-GO4 contract on Hotbird 13G from June 2023, the contribution from OneWeb's Leo connectivity solutions and the more favorable outcomes of the past two USDOD renewal campaigns. This rise was partly offset by a tougher basis of with last year due to the one-off contract of 14 million euros with German space agency DLR in the fourth quarter where UTELSAT Hotbird 13F provided a service from April 2023 at the 0.5 degree east orbital position prior to its commissioning at 13 degree east. Fourth quarter revenues stood at 47 million euros down by 14.5 percent year on year reflecting the above mentioned contract. Excluding this impact fourth quarter revenues would have risen by 15.6 percent year on year. For mobile connectivity fiscal year 23-24 revenues stood at 159 million euros up 49.3 percent year on year reflecting the entry into service of the high throughput satellite UTELSAT-10B and the contribution from OneWeb. Fourth quarter revenues stood at 49 million euros up 80.4 percent year on year on by 25.6 percent quarter on quarter mainly driven by DO performances. Let's now turn to the financial performance. Adjusted EBITDA stood at 718.9 million euros at the end of June 2024 compared with 825.5 million euros a year earlier down by 12.9 percent. It reflected higher operating costs due to the impact of the consolidation of OneWeb. The rising cost was nevertheless contained at plus 8.9 percent reflecting cost control measures. Adjusted EBITDA as per financial objective i.e. pro forma including OneWeb for 12 months and at a euro dollar rate of one stood at 697.5 million euros above our objective of a range between 650 and 680 million euros. On a pro forma basis the adjusted EBITDA margin stood at 54.8 percent and at 59.3 percent on a reported basis versus 73 percent a year earlier. Moving to net income. Group share of net income stood at a negative 310 million euros compared to a positive 315 million euros a year earlier. This reflected first other operating costs of 208 million euros compared to income of 204 million euros last year mainly due to last year's 352 million euros proceeds related to the phase two of the USC band sale as well as the fair value adjustment of shares owned by UTELSAT before the combination. Second depreciation of 702 million euros versus 456 million euros a year earlier reflecting the perimeter effect from OneWeb as well as in orbit on on-ground depreciation. UTELSAT 10b and connect VHCS entered into service between July 2023 and June 2024. Third a net financial result of minus 124 million euros versus minus 91 million euros a year earlier reflecting higher interest costs partly offset by the favorable evolution of foreign exchange gains on losses. Fourth a corporate income tax gain of 28 million euros versus a charge of 67 million euros a year earlier mainly driven by the non-recognition of the deferred tax assets on OneWeb losses partly offset by the specific French tax regime relative to satellite operators. In fiscal year 2022-23 the tax charge reflected the 30 percent tax rate applied to the C-band proceeds. And finally losses from associate of 23 million euros versus 87 million euros last year reflecting the contribution of the minority stake in OneWeb in the first quarter versus a full 12 months in fiscal year 2022-23. Let's move to cash now. Cash capex amounted to 463.2 million euros versus 270.5 million last year reflecting the consolidation of OneWeb. It is below our previous estimates reflecting Leo constellation phasing on other capex delays notably the Flexat America satellite which is to calendar due to manufacturer timing issues. This career -23-24 growth capex that is to say excluding the financing of all or part of certain satellite programs under export credit agreements or through other bank facilities stood at 517.1 million euros. From fiscal year 24-25 onwards growth capex will be adopted as our core indicator by excluding financing related flows the group seeks to provide a clearer and more accurate representation of its direct capital expenditures. Moving to debt. At the end of June 2024 net debt stood at 2544.4 million euros down by 221.3 million versus end of June 2023. It notably reflected proceeds from asset disposal namely the net debt proceeds from the second branch of the C-Ban sale and the disposal of the shares in the Airbus OneWeb satellite joint venture owned by OneWeb. It was partially offset by capex related movements as well as OneWeb entry into perimeter. As a result the net debt to adjusted bid-da ratio stood at 3.79 times compared to 3.35 times at the end of June 2023 and 4.7 16 times at the end of December 2023. The average cost of debt after hedging stood at 4.87 percent 2.96 percent in fiscal year 22-23. The increase reflected notably the impact of issuance of the 20-29 high yield bond. The weighted average maturity of the group's debt amounted to 3.5 years compared to 3.6 years at the end of June 2023. Equity remains strong with undrawn credit lines and cash around 1.39 billion euros. With that I hand it back to Eva to comment the next slide.

Thank you Christophe. A few words on our expectations for the coming year. We expect to continue to make progress on the Leo ramp up with a full deployment on the ground network expected by Q2 2025. We also expect to see continued connectivity growth mainly driven by the ramp up of OneWeb Leo service revenues. BDO revenues are expected down by single digits in line with the broader market and in terms of profitability adjusted EBITDA in financial year 24-25 which will embark the OneWeb cost base at a full operational run rate will be partially offset by further cost savings measures. Our industry is in the middle of a profound transformation. The rapid adoption of Leo technology represents a significant opportunity both in terms of commercial and government markets but also challenges in form of powerful entrance in the space. In this contact and as communicating during our trading update in January we're adopting a progressive approach to the procurement of the next generation of OneWeb. Through the new technology we're going to be able to make future investments will ensure continuity of our business with our customers and will adapt the ramp up of Leo capacity to the opportunities of partnerships as well as technology maturity both with the potential of partnering with institutional and commercial players and taking into account financing available. Our priority will be to ensure that we remain comfortable within the leverage range that are compatible with our debt of the UTELSAT group. In 2025 which will be a year transition will complete the integration of UTELSAT and OneWeb. We'll complete the OneWeb ground infrastructure and prepare the future shape of the next-gen constellation. In this contact we expect a combined financial year 25 revenue of the four operating verticals to be around the same levels in 24 at the constant currency parameter. The adjusted EBITDA is expected slightly below the level of financial year 24 reflecting the embarkation on OneWeb cost at a full operational run rate and on the other hand full year cost saving implemented since the merger and the growing proportion of service revenues from the Leo contribution. Gross capex for 24-25 is expected to be between 7 and 800 million euros. Capital expenditure for the following year will depend on the outcome, on the options, on the consideration and partnerships for the next generation of the Leo constellation. In all events our priority will be to remain within the guidelines to ensure that we remain comfortable within leverage range compatible with debt commonance. We continue to target leverage of three times in the medium term. Before opening the floor to questions I just want to sum up this short presentation of our 23-24 results. We've delivered our 23-24 results fully in line with objectives. Financing has been secured with successful bond insurance going on to 29. We're seeing a very strong commercial traction in connectivity driven by the Leo offering but also underpinning a backlog that stands now almost at 4 billion with the majority coming from connectivity. Financial year 24-25 will be a year transition as we complete the merger integration and with a fully prepared Geo Leo integrated offer as well as moving forward with our new next generation of Leo constellations. Finally we remain very confident in our ability to grow connectivity revenues while maintaining our market share in Geo based on both independent market forecast as the experience coming from the massive appetite for this type of multi-orbit capacity. With that thank you for your attention and Christophe and I are open to take your questions. I think you need to hit the pound task to ask questions.

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 first question from Lion Ankhil Dattani from JP Morgan. The line is open now please go ahead.

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

Okay very relevant question so thank you for that. Let me try to give you some guidance here. We are still of course fully in the integration phase of our merger so just simply also getting embarking a full year of OneWeb into our next year is a key part of it. The other one is of course that we expect the ground infrastructure. So we're now in the ground infrastructure of OneWeb will be completed during the spring of 2025 with the last five eight gateways which are some of the tougher ones and some of the quite tough geographies and also of course market access in order to during the spring next year have the full global coverage. So that operational ramp up is on track but it is certain that that delay which we already announced back in January is still the main delay for the full operational growth coming out of the Leo services. So within the different verticals we do see connectivity boosted by the Leo growth mainly next year whereas you see less new capacity coming online from a connect BHGS and E10B during the next year. There's still some growth in the geo market and connectivity market but it's clear that next year it's especially the slightly or the slower rollout of the ground infrastructure and market access which is a lot of regulatory country by country openings which is giving a slower ramp up of the Leo revenue. So it would be a pivotal year next year because it's going to be a full year where we will complete the global coverage from a Leo perspective with a with a Leo ground role fully fully rolled out but also progressing on bringing both Leo and Geo offering out in the market. And then turning to your next question it's also going to be a year where we figure out what is the right way of moving forward with the CAPEX. Next year CAPEX is guided to be within the envelope of seven to eight hundred which is in line with our also previous guidances on CAPEX where we'll start embarking on the continuity and the what I call the first step in our next in our next gen. That first step will of course for and foremost ensure compatibility with our for our customers and continuation of services. But it's also going to start embarking some new elements of technology that's fully mature and a journey also towards completing one or several partnerships in the market. IrishGrad could be one but there are also other dialogues around partnerships in the market. And as you see more and more of our customers just like with IntelSAT also ask us to be part of the roadmap going forward because they see our Leo connectivity capacity to be integrated in their So some of those partnerships we're exploring quite extensively and we see ourselves as a very good platform for those kind of partnerships be it IrishGrad or alternatives where we actually build a joint technology roadmap for bringing a mature technologies or more mature technologies to the market once they get there. So that's what we're exploring. As you know we've had the RFP for about a year now and have had a couple of teams working in a co-engineering approach to exactly draft what is the relevant timeline for bringing on board new technologies and how do we ensure the continuity of services and compatibility of services from our current constellation in a stepwise approach to the next. In terms of how we got this of course we still have our return on capital criteria which we've always had in the IntelSAT group showing a strong return on capital to our shareholders and we remain within the same guidance as we've had historically for our geo fleet putting some of the same return on capital criteria also for the investment into the new constellation. So we remain confident that we'll find the right way forward and we also are a strong platform for partnerships especially for our geo connectivity and constellations but you see also increasing in the geo world and opening for partnerships as we showed with the partnership with TICOM for geo capacity over Asia so that's the part of our strategy going forward.

Thank you. We will take the next question from Alexander Patrick from Bernstein. The line is open now please go ahead.

Good morning and thank you for taking the question. I'd just like you to come back a little bit on flat revenue in fiscal 25. Is this really just the results of the slower rollout of networks and slow regular agreements across various geographies and even if that's the case I would have expected that you have incrementally a lot more capacity to sell on one web in more geographies in 25 versus 24. So I'd just like to understand is the legacy you've got in a tailspin and that's maybe in step with the rest of the geo market or is one web's growth simply not delivering and it's a really material question for shareholders because they suffer the 50% dilution with the transaction of takeover of one web so I'd just like you to put a flesh on the bone here and also would you at some point be able to give us a more long-term forecast when you expect to actually reach that double digit growth that you initially modeling and at what point you expect free cash flow to break even. That will be the first question. The second one is we saw SCS moving its orbital slots from indefinite life to definite life because of the structural decline in geo markets. Would you be taking a similar approach? I don't know how you classify these assets now and what kind of impact would that have on your accounts? Can you tell me the SCS? Alex,

sorry your line's not very clear. Can you just repeat the question on SCS?

Sure, yeah. So SCS in the second quarter report changed the accounting treatment of its orbital slots and moved them from indefinite life to definite life and they said that this is the result of the structural decline in geo markets so they longer term basically see no value in geo orbital slots. That's the approach they're taking. Do you have your orbital slots as indefinite lives or definite? What would that mean for your numbers? Then I have a quick follow-up. Thank you.

Should we just start with the first one because I think that can be a bit faster maybe?

Yeah thanks, Alexander. First of all, for the geo satellites we don't have valued orbital slots in our balance sheet so we already are on a definite life, I would say option, when we test our satellites, our geo satellites. We only have indefinite life for the Leo constellation. As you know, it's a permanent renewal of the assets and this has been treated also in the purchase accounting and the purchase price allocation so we have indefinite life again when we test our Leo constellation but nothing as indefinite life for geo satellites. That's great. Thank you very much.

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

It is very clear. Can I just have two very short follow-ups? The one is on Iris Squared. What's your view on what's going on? There's a big rethink apparently around this project and there's some disagreements among the protagonists. And the second one, any progress on your thoughts regarding the ground infrastructure in Alton Leeds back? Thank you.

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

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

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

Thank you very much.

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 two please. First one just a few points around the guidance please Evan. You've already given us quite a bit of detail. Can I just check on the previously given synergy targets? I think this was given back in 2022 and clearly we've had a few moving parts since then but I think you at the time guided to 80 million of CAPEX synergies in the first year. Are we still how are we tracking to that number and I guess given the one where delays are there any kind of revenue synergies should be expected revenue synergies in the FY25 guidance and just coupled with that you highlighted at the EBITDA level scope for efficiencies. I guess most of the one web revenue contribution in 25 will still be terminals. Is that fair to say? So what level of efficiencies can we expect to keep the margin slightly down? Second question is at the time of the announcement deal you've always highlighted that you expect three to four global Leo networks and yesterday we saw the launch of the first set of Leo satellites from China. Are you seeing any pressure in terms of building your backlog? Are there discussions around pricing? Have they become a bit more detailed? I've seen any pricing pressure there and obviously just to follow up on the ground infrastructure you said it's still a discussion there's still a thought process but are you seeing kind of interest income and interest? We saw one of your peers yesterday highlight scope for divestments so is there strong appetite for satellite infrastructure? Thank you.

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

that's super helpful thank you

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yes good morning everyone thank you we have two remaining questions the first one now that manufacturers are out of space rise shall we think that Iris Square could turn out to be more of a hosted payload type of system a somewhat capex light system that leads to capacity procurement on existing infrastructure rather than reinventing perhaps the wheel and investing into new infrastructure and secondly part of the 25 revenue outlook is driven by the lack of progress on lending rights in some important markets where you probably have -or-pay like India perhaps Thailand how should we think about the delays in the year landing rights authorization shall we think of those as truly an administrative issue or shall we think of the delays as reflective of the competitive landscape of India and Thailand having their own space industries that they are trying to protect by preventing others to access their markets

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

thank you Eva

maybe we have time for one more question we have one or two minutes left this is one one or two more questions left or nobody in the line

thank you there's no further question in the line I'll send it back over to you for closing remarks

thank

you well thank

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

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