Eutelsat Communications

Hello and welcome to the UTOSAT full year 2023-2024 results. My name is Caroline and I will be your coordinator for today's event. Please note this call is being recorded 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 will be connected to an operator. I will now hand over the call to your host, Eva Bernicke, the CEO, to begin today's conference. Thank you.

Good morning, everybody. Welcome and thank you for joining us to UTILSAT's full year results. My name is Eva Bernicke. I'm the CEO of UTILSAT. I'm joined by Christophe Couturier, 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. so our financial year 23-24 were in line, or even a bit better, than objectives in terms of revenue and profitability. The key event that was, of course, the closing of the UTILSAT OneWeb 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 OneWeb 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 ConnectVHTS, as well as the launch of UTILSAT-3060, completes the space segment of the OneWeb 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 1,213,000,000, up by 7.2% on a reported basis. and on a 5.6% on a like-for-like basis. As you know, we guide on our four operating verticals, and revenues of the four operating verticals stood at $1,209,000,000, up by 5.9% 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 $1,268,000, so well within our objective range, which was $1,250,000 to $1,300,000. Adjusted EBITDA ended up at $719 million, down 12.9%. 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 3.79 times compared to 3.35 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. Some of the main contracts I'd like to highlight. are, of course, the large Intelsat seven-year deal that provides Intelsat with LEO services across some of their key verticals signed in March this year, but also Viasat for maritime broadband services and JASAT 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. CVN 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 connected the unconnected with liquid for communities and businesses in Africa. Can it come for connectivity to the public safety sector across the U.S.? 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% over the $3.4 billion a year earlier. It reflected the contribution, of course, of OneWeb, which more than offset the natural erosion of the broadcasting video segment where we saw an absence of major renewals this year. The backlog is about 3.5 times of 2022-2023 revenues, And connectivity is now more than half of our backlog at 56% of the total, up at 40% year over year. So we really show the momentum and the commercial momentum behind our connectivity pivot. A quick view on our coverage as per day and what we expect to see at the end of the summer. We're on track. We're now 37 gateways open, coming up another three against the 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 one web, 6 October 1, 2023, and are compared to UTELSAT's reported fiscal year 2022-2023 performance on a standalone basis. All commentary regarding revenues is on a like-for-like basis, that is to say at constant currency and parameter. As mentioned above, Total revenues for fiscal year 23-24 stood at 1,213 million euros, up by 7.2% on a reported basis and by 5.6% like for like. Revenues of our four operating verticals, that is to say excluding other revenues, stood at 1,209 million euros. They were up by 5.9% 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 one web for 12 months and at a euro-dollar rate of 1, stood at 1,268 million euros. Let's now have a look at the segmental reporting. Video, representing 54% of revenues, stood at 651 million euros, a decline of 6.8%. Fixed connectivity revenues, representing 19% of the group total, rose 29% to 234 million euros. Government services, 14% of revenues, stood at 165 million euros, a rise of 5%. And mobile connectivity revenues, representing 13% of the group total, stood at 159 million euros, a rise of almost 50%. Other revenues amounted to 4 million euros versus minus 5 million euros a year earlier. They included a reduced 3 million euros negative impact from hedging operations compared with 15 million euros last year. Moving to the operating verticals, fiscal year 23-24 video revenues were down by 6.8% to 651 million euros, reflecting a secular market decline in this application. In the first half, this trend was accentuated by the effect of sanctions against Russian and Iranian channels, as well as the early non-renewal of a capacity contract with DigiTurk from mid-November 2022. Both these effects washed out in the second half. On the commercial front, recent highlights include the renewal and extension of capacity by Poland's TVN Warner Bros. Discovery at UtahSat's Hot Bird neighborhood, as well as the consolidation by United Media Group of its entire DTH broadcasting activities at Eutelsat 13°E and 16°E hotspots. Professional video revenues, which account for less than 10% of the video vertical, decreased, reflecting structural headwinds as well as the seasonality of some events. They will be mildly boosted by the Olympic Games in Q1 Fiscal Year 25. Fourth quarter revenues stood at €159 million, down by 6.2% year-on-year, and broadly stable quarter-on-quarter. As mentioned above, fixed connectivity revenues were undumped by the entry into service of Connect VHTS in October 2023, and the progressive transfer of UTELSAT Connect capacity to the buoyant African markets. Capacity on UTSAT-Connect is being contracted by YASAT's YACLIC to drive growth across its satellite broadband footprint in Africa. Elsewhere, KU-band capacity on UTSAT-70B was selected by Intersat to extend its Pan-African satellite services to enterprise and retail customers, complementing existing KA-band agreement on the UTSAT-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 revenues stood at 82 million euros, up by 73.5% year-on-year and by 42.6% quarter-on-quarter. Moving to government services, revenues stood at €165 million, up 5% year-on-year. They reflected the contribution of the EGNOS G04 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 comparison with last year due to the one-off contract of 14 million euros with German Space Agency, DLR, in the fourth quarter where Eutelsat Hotbird 13.5 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% year-on-year, reflecting the above-mentioned contract. Excluding this impact, fourth quarter revenues would have risen by 15.6% year-on-year. For mobile connectivity, fiscal year 2023-2024 revenues stood at 159 million euros, up 49.3% 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% year on year, and by 25.6% quarter on quarter, mainly driven by geo-performances. Let's now turn to the financial performance. Adjusted EBITDA stood at 718.9 million euros at the end of June 2024, compared with 825.5 million euros a year earlier, down by 12.9%. It reflected higher operating costs due to the impact of the consolidation of OneWeb. The rising cost was nevertheless contained at plus 8.9%, reflecting cost control measures. Adjusted EBITDA as per financial objective, i.e. pro forma, including one web for 12 months and at a euro-dollar rate of 1, 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%, and at 59.3% on a reported basis versus 73% a year earlier. Moving to net income, group share of net income stood at a negative 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 II of the U.S. C-band sale, as well as the fair value adjustment of shares owned by UTestat 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 and on-ground depreciation. Eutelsat 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 WAMWES losses, partly offset by the specific French tax regime relative to satellite operator. In Fiscal Year 2022-2023, the tax charge reflected the 30% tax rate applied to the CBAN proceeds. And finally, losses from associates of €23 million versus €87 million last year, reflecting the contribution of the minority stake in OneWeb in the first quarter versus a full 12 months in fiscal year 2022-2023. 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 delayed to calendar 2028 due to manufacturer timing issues. Fiscal Year 23-24 gross capex, that is to say excluding the financing of all or part of certain satellite programs under export credit agreements or through other bank facilities, stood at 517.1 million euros. From Fiscal Year 24-25 onwards, gross capex will be adopted as our core indicator. By excluding financing-related flows, the Group seeks to provide a clearer and more accurate representation of its direct capital expenditures. Moving to debts. At the end of June 2024, net debt stood at 2,544.4 million euros, down by 221.3 million versus end of June 2023. It notably reflected proceeds from asset disposal, namely the net proceeds from the second tranche of the C-band sale and the disposal of the shares in the Airbus OneWeb Satellites joint venture owned by OneWeb. It was partially offset by CAPEX-related movements as well as OneWeb entry into parameters. As a result, the net debt to adjusted EBITDA ratio stood at 3.79 times compared to 3.35 times at the end of June 2023 and 4.16 times at the end of December 2023. The average cost of debt after hedging stood at 4.87%, 2.96% in fiscal year 2022-2023. The increase reflected notably the impact of issuance of the 2029 high yield bond. The weighted average maturity of the group's debt amounted to 3.5 years compared to 3.6 years at the end of June 2023. Equity remained strong with undrawn credit lines and cash around 1.39 billion euros. With that, I hand it back to Eva to comment the outlook.

Thank you, Christoph. 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 one web 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 LIU technology represents a significant opportunity, both in terms of commercial and government markets, but also challenges inform a powerful entrance in the space. In this context and as communicating during our trading update in January, we're adopting a progressive approach to the procurement of the next generation of OneWeb. Future investments will ensure continuity of our business with our customers and 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 covenants of the UTILSAT group. In 2025, which will be a year of transition, we'll complete the integration of UTILSAT and OneWeb. We'll complete the OneWeb ground infrastructure and prepare the future shape of the next-gen constellation. In this context, we expect a combined FY25 revenue of the four operating verticals to be around the same level as in 24 at the constant currency and parameter. The adjusted EBITDA is expected slightly below the level of FY24, reflecting the embarkation on one web 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 2024-2025 is expected to be between 7 and 800 million euros. Capital expenditure for the following year will depend on the outcome and the options under consideration and partnerships for the next generation of the LEO constellation. In all events, our priority will be to remain within the guidelines to ensure that remain comfortable within leverage range compatible with debt covenants. 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 our new offering, but also underpinning a backlog that stands now almost at 4 billion, with a 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 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 forecasts as well as the experience coming from the massive appetite for this type of multi-orbit capacity. With that, thank you for your attention and Christophe and I are open to take your questions. I think you need to hit the pound test to ask questions.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from line Ankur 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. 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. One web will be completed during the spring of 25 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 ConnectBHTS and an E10B during the next year. There's still some growth in the geomarketing connectivity market, but it's clear that next year it's especially the slightly or the slower rollout of the ground infrastructure and market access which is a lot of regulatory country-by-country openings, which is giving a slower ramp-up of the LEO revenues. So it would be a pivotal year next year, because it's going to be a full year where we will complete the global coverage from a LEO perspective, with the LEO ground fully rolled out, but also progressing on bringing both LEO and GU 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 going to be within the envelope of 7 to 800, which is in line with our also previous guidances on CAPEX, where we'll start embarking on the continuity and what I call the first step in our next gen. That first step will, of course, foremost ensure compatibility for our customers and continuation of services. But it's also going to start embarking some new elements of the technology that's fully mature and the journey also towards completing one or several partnerships in the market. Irish Square could be one, but there are also other dialogues around partnerships in the market. And as you see, more and more of our customers, just like with Intelsat, also ask us to be part of the roadmap going forward because they see our Leo connectivity capacity to be integrated in their offering. So some of those partnerships we're exploring quite extensively, and we see ourselves as a very good platform for those kind of partnerships, be it Iris Squared or alternatives where we actually – built a joint technology roadmap for bringing mature technologies or more mature technologies to the market once they get there. So that's what we're exploring. As you know, we've had the RFP out for about a year now and have had a couple of teams working in a co-engineering approach to exactly draft what is the relevant 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? And in terms of how we got this, of course, we still have our return on capital criteria, which we've always had in UTILSAT group on showing a strong return on capital to our shareholders. And we remain within the same guidance that we've had historically for our geo fleet, putting some of the same return on capital criteria also for the investments into the new constellations. So we remain confident that we'll find the right way forward. And we also are a strong platform for partnerships. especially for our new connectivity and constellation, 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 part of our strategy going forward. Should we take the next question?

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 result of the slower rollout of ground networks and slow regulatory agreements across countries? various geographies. And even if that's the case, I would have expected that you have incrementally a lot more capacity to sell on OneWeb in more geographies in 25 versus 24. So I'd just like to understand, is the legacy UtahSat in a tailspin, and that's maybe in step with the rest of the geomarket? Or is OneWeb's growth simply not delivering? And it's a really material question for shareholders because they suffer the 50% dilution with the transaction of Stakeover OneWeb. So I'd just like you to put a little flash on the phone here. And also, would you at some point be able to give us a more longer-than-forecast when you expect to actually reach that double-digit growth that you were initially modeling? And at what point do you expect free cash flow to break even? That will be the first question. The second one is we saw SES moving its orbital slots from indefinite life to definite life because of the structural decline in geomarkets. 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?

And then finally... Alex, sorry, your line's not very clear. Can you just repeat the question on SES? Yes.

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 geomarkets. 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? and what would that mean for your numbers. Then I have a quick follow-up. Thank you.

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

Yes, thanks, Alexandra. 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 having a strong coverage, but still with some holes, and 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 sold, but we are still waiting for some of those market approvals. Some markets, we see the exact same picture with Starlink. The market simply only open up when the local regulator opens up for it. Thailand is a market where it's still in discussion. as well where the regulator 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 10 test terminals and make sure that they know how to install them, how to bring them out. Sometimes we even need just to get the import papers for this kind of technology out in the market and then rolling up from there to actually start seeing revenue ramp. And I think it's that last market access terminals out in the market, import papers, 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 E10B 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 system. And then, as you can see also here, a very big demand for the Connect satellite over Africa. As soon as we liberated the capacity over Europe, we managed to 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 FlexSat 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, we'll be more dependent on the ramp-up on the LEO services for the connectivity And then finally, you shouldn't forget that we see the video, which is still more than half of our revenues, that 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 video that's simply mechanical. 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? Yeah, just 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 interest in Alton lead 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 Rights Consortium, which officially communicates and aligns communication with the European Commission. But one of the key things is that UTILSAT Group is still part of the Space Rights Consortium, which I think is an update in and by itself. As you've seen over the summer, Airbus and TAS has informed that they do not wish to be part of the core consortium of SpaceRise, which means that today the SpaceRise consortium consists of SES, ISPA-SAT, and UTIL-SAT group. We're still very much convinced about the strategic importance behind the IRE 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 space sector, not only TAS and Airbus, but of course also a lot of the other sectors. suppliers, small and medium companies also across the European space sector to deliver this to the European Commission. Right now we're working towards what's called an optimized buffer with the changes of the consortium, which has a deadline in early September, and hopefully taking that into a further dialogue with the European Commission afterwards. But I think what's the space for kind of September? announcement, that's where we try to see how we make sure that Europe still has sovereign capacity 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 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 totally forgot your second question. Can you 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 line 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, Eva, and 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 22, 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 OneWeb delays, are there any kind of revenue synergies, should we expect any 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 OneWeb 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 kind of slightly down? And 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 kind of building your backlog? Are there discussions around pricing? Have they become a bit more detailed? Are you seeing any pricing pressure there? And lastly, just to follow up on the ground infrastructure, you said it's still a discussion, it's still a thought process, but are you seeing kind of interest, incoming interest? We saw one of your peers yesterday highlight the scope for divestments So is there a 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, 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 OPEC synergies, I think we probably always over-delivered on OPEC 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 technologies. which might have happened anyway because 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 go-to-market approach. 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, so it's not the main ramp-up on terminals. The larger part of the ramp-up for NextGen OneWeb is 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 the 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, 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 geoworld. 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 with ITU is that you send an application about what are you planning to build, and then you get in line, and as long as you deliver on your milestones, you keep your priority. Right now, OneWeb has delivered on their milestones historically, so that means that our constellation, our Leo constellation, has the first priority in the KU band, even ahead of Starlink, 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 for the KA band. The KA band, there are no constellations live yet. The ones that we're expecting to see is, of course, Kuiper from 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 get there if you have deep enough pockets. You could overcome a lower priority in the spectrum band. Because what needs to happen is that you need to launch more satellites to compensate for having to coordinate with the other players in the same spectrum band. So that's why we're saying the combination of having some of the spots of the top priorities already filled, and maybe not that many people who will be massively overpaying an already relatively expensive Leo constellation, we give maybe four or five a real chance 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 fact that the Chinese see this as a very 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 solution proposal to the American and potentially Chinese constellations. So I think that's a key selling point. It's a lot of discussions we have with not just in the governmental segments, but also in a lot of the private sector of having alternatives and delivering on different constellations. And then finally, don't underestimate, especially in the governmental sector, people want resilience. customers are buying resilience, especially for critical services, which means that you typically tap into different type of networks. That can mean both multi-orbit between GU and DU, 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. We've seen a lot of the inbound interest from especially infrastructure funds, which is also why it's still something we are contemplating.

That's super helpful. Thank you.

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

Yes, good morning, everyone. Thank you. I 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-like 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 take-or-pay, like India, perhaps Thailand. How should we think about the delays in the lending rights authorisation? Shall we think of those as purely 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.

Thank you. Good question. Good question. So let me start with the last one here. This is essentially administrative delays we're seeing. This is a new type of capacity that a lot of markets have or a lot of administrators in markets or regulatory authorities have wanted to get a better understanding of. Whereas we've previously seen when you launch a new geosatellite, it's a well-known type of capacity, and it's something that the administrative procedures are well known, whereas bringing in a LEO capacity, and typically we've seen that maybe Starlink has been either at the same time or just ahead of us and then they want to try to figure out how to do something, a regulatory approval of both at the same time to have competition in the market, which is what we see with India. In other terms, it's because it's a combination of both a gateway approval Import approval and 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 party telecom in order to explain and to authorities a lot of the questions on the new technology, and as well as in Thailand, where, as you know, we work closely with TICOM as well, given our partnership in the geospace. So a lot of times that's actually a good collaboration. Sometimes it's also combined with those local operators bringing on live capacity for themselves. We've seen that in multiple cases that they're interested in complementing their geocapacities with some geocapacities, so sometimes it also becomes a commercial discussion with them. So I'd say it's lengthy, 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 action. 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 it was north of India where we've seen big floods taking out some of our equipment. So it's simply us. Some of these gateways are getting to the tougher areas. But we're 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 really get the ground network completed. On Iris Squared, yes, it's clear that I can't explain a lot of the actual architecture, but there's been speculation about whether a kind of hosted payload could be an alternative. Right now we're still working on the original tender offering and structure with the Commission, but of course there are lots of alternatives. And I think what's important is that we get to a point where we have really European sovereign capacity. To me, that's the most important objective of the Irish Squared discussions.

Thank you, Eva.

Maybe we have time for one more question. We have one or two minutes left. Is there one or two more questions left or nobody in the line?

Thank you. There's no further question in the line. I'll hand it back over to you for closing remarks. Thank you.

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

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