Eutelsat Communications S.A. (EUTLF) Q2 2022 Earnings Call Transcript

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Eutelsat Communications S.A. Q2 2022 Earnings Conference Call February 17, 2023 3:00 AM ET

Company Participants

Eva Berneke - Chief Executive Officer

Christophe Caudrelier - Chief Financial Officer

Conference Call Participants

Roshan Ranjit - Deutsche Bank

Sami Kassab - Exane BNP Paribas

Carl Murdock-Smith - Joh. Berenberg, Gossler & Co.


Good time and invited to Eutelsat First Half 2022 and 2023 Results Conference Call and webcast. Today's convention is being recorded.

At this time, I would for illustration to move nan convention complete to Eva Berneke, CEO. Madam, please spell ahead.

Eva Berneke

Good morning, everyone, astatine slightest those of you connected benignant of European clip zone, and invited and convey you for joining america coming for Eutelsat’s half twelvemonth 2022 to 2023 results presentation.

I'm happy to beryllium joined present coming by Christophe, who's our caller Chief Financial Officer.

Christophe brings a wealthiness of acquisition arsenic CFO from much than 30 years successful world industries pinch operational excellence and semipermanent investments arsenic cardinal elements. I'm judge he'll lend positively to nan translator of Eutelsat and you'll perceive much from him successful conscionable a second.

But let's now move to Eutelsat’s, first, a speedy overview of nan highlights of first half. In position of numbers, first half operating verticals revenues were successful our forecast scope of objectives for nan afloat year. Despite this, which is simply a gross decline, we reported further manufacture starring profitability pinch an EBITDA separator astatine 73%, a level that besides reflects nan progressive rebalancing of our business towards connectivity. On nan operational side, we successfully launched 4 satellites this half year, ensuring a seamless work for existing customers, and besides paving nan measurement for return to growth. First half besides saw nan accelerated ramp up of EUTELSAT QUANTUM pinch now 7 retired of 8 beams commercialized successful nan first twelvemonth of service.

We've besides made further advancement connected our telecom pivot, nan successful reorganization of nan institution on 2 business units, 1 for video and 1 for connectivity, to reenforce customer centricity, and amended reside nan different marketplace opportunities, arsenic good arsenic ramp up caller Eutelsat Advance services. With each of this we corroborate nan standalone afloat twelvemonth 2022, 2023, arsenic good arsenic nan longer word financial objectives. And finally, I'll make an update connected OneWeb commercialization which is progressing according to scheme and closing is still expected successful Q2 aliases Q3 of this almanac year.

Looking astatine Eutelsat first half financial performance, full first half gross stood astatine 574 cardinal Euros, down by 6.1% connected a like-for-like basis. Revenues of nan 5 operating verticals stood astatine 582 cardinal Euros, down 4.1%. The EBITDA separator was conscionable nether 73% astatine 72.9% astatine changeless currency, down 3.2 points versus past year. Cash CapEx was 194 cardinal successful first half, which is higher than past year. It reflects nan phasing of nan outer programs pinch 4 launches this half twelvemonth transportation and motorboat and it's not typical of nan afloat year. In nan 2nd half, we don't expect to motorboat immoderate satellites from Eutelsat.

Discretionary free rate travel stood astatine 82 cardinal Euros connected a reported ground and 121 connected an adjusted basis, it is down 111 [Phonetic] compared to H1 22. Likewise, this is not typical of nan expected afloat twelvemonth fig because of nan phasing of nan outer launches into this first semester. And nett debt-to-EBITDA stood astatine 355 astatine nan extremity December, broadly unchangeable against past year.

As mentioned, this past semester has seen considerably operational occurrence pinch a grounds number of 4 outer launches. These launches exemplify operational excellence and our capacity to prime nan champion business partners, successful a discourse wherever request for satellites and launches is conscionable booming. First, commencement September we launched KONNECT VHTS, which was built by Thales Alenia Space and launched by Alenia Space successful Kourou successful early September. KONNECT VHTS brings connectivity crossed Europe and Africa pinch much than 500 gigabits, covering nan European and African geographies.

The 2 adjacent ones is nan HOTBIRD 13F and 13G, that some were built by Airbus Defence and Space and launched by SpaceX successful October and December respectively. These 2 service our video marketplace connected our cardinal 13 degrees position crossed Europe. And past finally, but not least, EUTELSAT 10B, which was besides built by TAS was launched by SpaceX successful precocious November. E 10B is besides providing further capacity for nan mobility marketplace successful Europe.

Throughout nan improvement of these programs, we managed to support their costs wrong our rate CapEx yearly letter cover of 400 million. These launches will pave nan measurement for return to conductivity giving growth, while ensuring seamless work for existing customers. KONNECT VHTS pinch 500 gigabits of capacity is dedicated to fixed broadband and mobile connectivity, pinch much than 450 cardinal secured incremental backlog from operators for illustration Orange, Telecom Italia and TAS. EUTELSAT 10B will springiness incremental 30 gigabits successful nan KU set addressing chiefly mobile connectivity, but besides pinch a batch a beardown database of pre-commitment subject pinch Panasonic but we're besides embarking a wide beam C and KU set payloads to guarantee continuity for customers that are already connected nan existing outer connected EUTELSAT 10A. And past yet 13F and 13G, nan 2 HOTBIRDs will guarantee broadcasting work continuity astatine our flagship 13 East position. That broadcasts complete 3800 TV channels conscionable by that position. And additionally connected 1 of nan HOTBIRD’s, nan 13G, it is besides hosting nan EGNOS GEO-4 payload, which gives European Space further capacity.

One connection connected EUTELSAT QUANTUM, which conscionable celebrated 1 twelvemonth day successful operational service, it came into operational work successful November 2021. This package defined satellites, first of its kind, has fixed customers a real-time adaptability to evolving business needs. It gives afloat successful orbit reconfiguration successful position of footprint, spectrum, powerfulness and capacity. Gives customers distant power of beam customization and it gives enhanced information features and interference mitigation capabilities. After conscionable 1 year, 7 retired of 8 beams person been commercialized. Five of nan 7 are incremental capacity was 2 for authorities application, and 3 for mobile connectivity, 1 which was conscionable booked this past quarter. The satellites publication is shaping up to beryllium much bound towards mobile connectivity, wherever request is genuinely booming. We’ll besides person a good precocious chat for nan commercialization of nan last beam, hopefully successful nan coming quarter.

I'll move connected now and springiness you a spot of a deeper dive successful nan operating verticals. I commencement pinch nan afloat results wherever first half gross stood astatine 574 cardinal Euros, up 0.3 connected a reported basis. Other revenues, arsenic a reminder, revenues different than those generated from nan commercialization of outer capacity are volatile by quality and these were down 12 cardinal wherever astir of this effect resulting from nan variety of hedging revenues. Excluding a affirmative rate effect 37 cardinal based connected Euro to dollar complaint of 1 connected 1 versus 1.17 past year, revenues of nan 5 operating verticals were really down 4.1% connected a like-for-like basis.

Let's look astatine each of nan 5 operating segments successful much detail. As a reminder, each comments are based connected a like-for-like astatine changeless currency. Broadcast, which is coming 58% of group total, recorded revenues of 339, down 6.7% versus past year. Data and master video, which is 14% of group total, saw revenues of 83 million, down 2.5%. Government Services, 12% of group total, saw revenues astatine 67 million, down 20.3%. However, fixed broadband which coming correspond 6% of revenue, came to 37 cardinal pinch an integrated maturation of 17% and, finally, mobility, which is astir 10% of full saw an summation pinch 32.7% to revenues of 56 million. Other revenues, arsenic I said, stood astatine minus eight, which includes nan 12 cardinal antagonistic hedging impact.

I’d commencement pinch Broadcast. First revenues were down 6.7% to 339 million. This reflects some which we've discussed previously, nan headwind we person successful nan renewal of nan capacity of Nilesat astatine 7/8°West. It besides includes nan antagonistic impacts of nan non-renewals capacity pinch Digiturk, which came successful spot successful mid-November. And past finally, it reflects nan wide antagonistic inclination crossed nan full video broadcast conception pinch revenues crossed Europe. Second 4th revenues were down 6% connected a year-to-year ground and 1.4 and a quarter-on-quarter, reflecting principally nan look retired of nan Nilesat effect from mid-October, while nan Digiturk effect commencement to materialize only from mid-November and past onwards.

Looking ahead, complete nan afloat year, nan trends to spot a flimsy deterioration compared to that first half arsenic nan effect of nan sanctions against definite Russian and Iranian channels will beryllium afloat embarked successful 2nd half.

Data and master video; information and master video gross stood astatine 83 million, down 2.5% year-on-year. In fixed data, which is 2 thirds of nan revenues, nan improved measurement trends are now upsetting astir of nan antagonistic effect of competitory pricing pressure. Professional video, which is nan one-third of nan video successful nan segment, recorded a mid-single digit decline, namely connected nan backmost of debased occasional usage successful Q1, particularly successful nan Americas, arsenic good arsenic nan structural headwinds. Top statement for nan twelvemonth arsenic a full is expected to alteration successful nan mid-single digit scope owed to nan seasonality of immoderate contracts, notably successful master video.

Government Services stood astatine 67 million, down 20.3% year-on-year. They bespeak a antagonistic transportation guardant effect of anterior US Department defense renewals, successful peculiar pinch a 65% renewal complaint successful nan Fall 2022 run pursuing nan 75% renewal complaint successful nan Spring 2022 and that's owed to nan circumstantial US geopolitical discourse and our capacity mapped against that.

The 2nd half will bespeak nan afloat effect of nan abovementioned headwinds.

Fixed broadband’s first half revenues stood astatine 37 million, up 17% year-on-year connected a like-for-like basis. This reflected nan publication from 4 European wholesale agreements pinch Orange, TIM, and much precocious is Hispasat and Swisscom arsenic good arsenic to a lesser grade nan maturation of nan African operations. Over nan afloat twelvemonth fixed broadband should beryllium broadly unchangeable arsenic a comparison ground now amended reflects nan abovementioned contracts successful Europe and Africa.

Growth successful this conception is of people expected to re-accelerate successful adjacent financial twelvemonth connected nan backmost of nan introduction into work of nan KONNECT VHTS, which will supply overmuch much capacity than connected nan existent KONNECT satellite.

And finally, connected mobile connectivity, first half revenues stood astatine 56 million, up 32.7 year-on-year, reflecting successful peculiar nan commercialized occurrence of EUTELSAT QUANTUM, for which 2 further beams were commercialized for incremental capacity successful maritime mobility during nan first half bringing nan full number of beams commercialized for mobile connectivity to three. Second 4th revenues stood astatine 30 million, up 33.8% year-on-year and by 13.3%, quarter-on-quarter, reflecting nan timing of nan commercialization of nan 3rd taxable of EUTELSAT QUANTUM for maritime mobility. This very affirmative move is expected construe into double-digit maturation for nan afloat year, albeit astatine a overmuch slower gait compared to nan first half arsenic nan comparison ground will gradually bespeak immoderate of nan above-mentioned arsenic good arsenic different incremental contracts.

So aft nan 5 segments, we'll move to nan backlog and capable rate. The backlog stood astatine 3.7 cardinal successful December 2022 versus 4.2 cardinal a twelvemonth earlier and 4.0 cardinal successful extremity June 22. The earthy erosion of nan backlog successful nan first half much than offset nan publication of nan wholesale statement pinch Swisscom and EUTELSAT KONNECT, arsenic good arsenic caller beams commercialized connected EUTELSAT QUANTUM. The backlog is balanced to 3.2 times 2021, 2022 revenues and Broadcast represents 59 of nan full versus 64 a twelvemonth ago. The backlog floor plan is progressively reflecting nan rebalancing of our operations towards connectivity pinch little longer-term contracts. Please besides statement that nan backup does not see managed services yet, but we are looking into a methodology that will amended bespeak these services besides successful nan backlog.

The number of operational transponders by nan extremity of December 2022 stood astatine 1359 broadly unchangeable year-on-year compared to extremity June 2022 will nary extremity of work of immoderate regular capacity aliases extremity of unchangeable orbit life of immoderate outer complete nan past 12 months. The number of utilized transponders stood astatine 955, down 19 units year-on-year and down by 21 units compared to extremity June; nan information reflecting notably nan return of capacity by Digiturk starting mid-November. As a result, nan capable complaint stood astatine 70.2 compared to 70.6 a twelvemonth later, and 73.2 astatine extremity June.

Now, I'll manus complete to Christophe for a spot much successful nan financial performance.

Christophe Caudrelier

Thanks Eva. Hello, everybody. Happy to beryllium present pinch each of you. I will commencement pinch nan EBITDA, which stood astatine 419 cardinal Euros astatine nan extremity of December 22 compared to 436 cardinal Euros past year, down by 3.8%. The EBITDA separator stood astatine 72.9% astatine changeless currency, that is to opportunity 73% connected a reported basis, versus 76.1% successful H122. This is connected nan backmost of little revenues, chiefly successful nan broadcast vertical.

Operating costs were 18 cardinal Euros higher than past year, reflecting, first, higher bad debt; second, accrued unit costs owed to changing operation our gross and to a little grade net inflation; and third, nan costs incurred by transactions pinch Russia. The EBITDA separator is reflective of nan progressive rebalancing of our business towards connectivity applications.

Turning to nan P&L, group's stock of nett income stood astatine 52 cardinal versus 163 cardinal a twelvemonth earlier, down by 68.2% and representing a separator of 9%. This reflected connected nan affirmative broadside little depreciation of 234 cardinal versus 243 cardinal successful H122, which was owed to little successful orbit arsenic good arsenic connected crushed depreciation. On nan antagonistic broadside was reflected different operating expenses of minus 34 cardinal Euros compared to an income of 84 cardinal past year, which chiefly included nan $125 cardinal costs of nan shape 1 of C set proceeds; a antagonistic financial results of 56 cardinal Euros versus 35 cardinal past year, reflecting an unfavorable improvement of overseas speech gains and losses; and lastly, antagonistic nett income from associates are 39 cardinal Euros related nan afloat semester publication of nan liking successful OneWeb, which past twelvemonth was only from September 21 onwards.

The effective taxation complaint was 1% versus 24%. Last year, nan alteration was chiefly owed to a little French taxation rate, arsenic good arsenic a much favorable effect of this circumstantial French outer taxation regime. Last year's taxation complaint was besides inflated by nan 30% taxation of nan $125 cardinal costs related to nan Phase One of C set proceeds.

Moving now to cash; nett rate travel from operations amounted to 353 cardinal Euros, down by 10 million, reflecting nan little EBITDA partially compensated by little moving superior request needs, acknowledgment to beardown rate postulation this semester. Cash CapEx amounted to 194 cardinal Euros, 96 cardinal higher than past year. It reflected nan phasing of outer programme transportation and motorboat pinch 4 satellites launched this semester and this is not typical of nan expected afloat twelvemonth figure.

Interest and different fees paid amounted to 77 cardinal Euros versus 70 cardinal Euros past year. The flimsy summation mostly reflects capitalized liking from nan in installments installation drawn down for nan financing of outer programs. As a result, discretionary free rate travel amounted to 82 cardinal years connected a reported basis, down 113 cardinal Euros compared to past year. We conscionable did discretionary free rate travel arsenic per our financial objective, that is excluding ForEx hedging connected one-offs, stood astatine 121 cardinal Euros, besides down 111 cardinal year-on-year.

Turning to nan adjacent slide. At nan extremity of December 2022, nett indebtedness ended astatine 2996 cardinal Euros, up 182 cardinal versus extremity of June. It reflected nan little discretionary free rate travel of 82 cardinal generated successful nan first half, nan little dividend costs of 81 cardinal pursuing nan costs of portion of nan dividend successful shares and location was a scrape option, nan outflow regarding inorganic finance of 34 cardinal Euros for OneWeb, and different items, which contributed to nan summation successful nett indebtedness for a nett effect of 149 million. This reflects mostly nan usage of a indebtedness related finance lease for nan financing of satellites programs, which amounted to 200 cardinal Euros.

As a result, and arsenic you tin spot connected descent 22, nan nett indebtedness to EBITDA ratio ended astatine 3.55 times compared to 3.53 times astatine nan extremity of December 2021 and 3.27 times astatine nan extremity of June 2022. As a reminder, December represents a large successful nan yearly mean profile, reflecting nan timing of nan dividend payments. It was besides impacted successful H1 fiscal twelvemonth 2023 by nan seizing connected investments. The mean costs of indebtedness aft hedging stood astatine 2.67% versus 2.5% successful H122. The weighted mean indebtedness maturity stood astatine 4.1 years compared to 4.5 years astatine nan extremity of December 2021. And past but not least, liquidity remains beardown pinch undrawn in installments lines and rate astir 1.3 billion.

And pinch that, I will now manus it complete to Eva to coming nan outlook.

Eva Berneke

Thank you, Christophe. We made beardown advancement connected nan telecom pivot pinch astir of nan elements of nan strategy now successful place. It will thief rebalance our business towards connectivity wherever request is booming. More specifically, we reorganized nan institution on 2 business units, video and connectivity, to amended seizure marketplace opportunities. We now trust connected an innovative end-to-end level to present our services to customers arsenic we successfully launched Eutelsat Advance. As we saw before, we brought important maturation capacity, pinch precocious level of pre-commitments. We've now entree to OneWeb capabilities providing a unsocial operation of GEO and LEO to grow nan addressable market. And finally, successful numbers, nan publication of our connectivity gross now represents 30% of full operating verticals revenues, versus 25%, 4 years ago.

As a reminder, 3 satellites bring incremental maturation person already been launched, and 2 others would participate into work successful nan coming years. We talked astir nan 4 ones we already launched. And connected apical of that, we person Eutelsat 36D, predominantly a replacement outer for broadcast, but it besides carries an incremental UHF payload operated by Airbus, and past nan [inaudible] for nan Americas will bring much than 100 gigabits of incremental capacity complete nan Americas to support nan increasing connectivity market.

On nan backmost of each of this, we corroborate our financial outlook. We expect to make operating revenues betwixt 1.135 cardinal to 1.165 cardinal for nan existent fiscal year, based connected a Euro-Dollar complaint of one. Revenues expected to return to maturation from adjacent financial twelvemonth 2024 connected nan backmost of this incremental capacity already launched. Elsewhere rate CapEx will not transcend 400 cardinal per twelvemonth for each of nan adjacent 2 fiscal years. And we besides corroborate our discretionary rate travel nonsubjective pinch an mean of 420 cardinal per twelvemonth for nan adjacent 2 fiscal years. Finally, we corroborate our leverage targets.

A speedy update connected nan advancement of legalization successful OneWeb since nan October strategical update, and nan institution has made a batch of affirmative advancement and is good connected way to present its objectives. On nan fleet side, now 16 launches person been completed pinch 85% of nan satellites now successful orbit. OneWeb is presently providing sum astatine 50 degrees bluish latitude and is good connected way for nan 33 grade North latitudes by May of this year. That will springiness you sum of astir of Europe and nan United States. Two much launches are planned for extremity of February commencement March and pinch that they'll person reached afloat coverage, which will beryllium operational by January 2024.

In position of business, OneWeb continues to spot a very affirmative commercialized momentum pinch a secured backlog of 9 -- now 800 cardinal astatine nan extremity of December 2022, up 200 cardinal from October strategical update. Revenue is connected way to scope nan 50 cardinal successful our financial twelvemonth that ends June 2023. E-contracts person been won and partnerships person been signed successful immoderate of nan cardinal verticals, wherever request is good oriented namely Airtel successful Africa for cellular backhaul and Galaxy successful Canada for organization broadband.

In position of nan transaction, wherever we harvester OneWeb and Eutelsat, regulatory approval, activity watercourse is progressing according to plan, pinch nary EU referral considered, France and US procedures still ongoing. The remainder is reasonably -- is beautiful overmuch close, truthful chiefly France and US are still ongoing. Closing nan transaction is expected to beryllium successful Q2 aliases Q3 this year, information upon nan customary regulatory approval, nan Eutelsat bonzer wide assembly approval, and of people support from nan French banal marketplace authorities connected nan perspective.

This concludes our presentation. Thank you for your attention, and we'll beryllium happy to reply your questions.

Question-and-Answer Session


[Operator Instructions] We will return our first questions from Roshan Ranjit. Your statement is open. Please spell ahead.

Roshan Ranjit

Oh, great. Morning, everyone. Thank you for nan questions and presentation. I’ve sewage 3 questions, please. You person highlighted a pickup successful bad debt. Can you springiness america a spot much item here, is that isolated to nan known, I guess, headwinds successful from Russia and Iran aliases is that astatine a spot much wider level, and besides which conception is that coming from please?

I conjecture possibly coupled connected to that to your item successful separator dilution, we've intelligibly seen an summation successful vulnerability to mobile connectivity. Can you possibly springiness america a divided of nan benignant of first separator that you are capable to book from connectivity customers versus nan emblematic broadcast customers? And is location thing going connected betwixt a benignant of unit aliases wholesale operation wrong that arsenic well?

Second question. You highlighted different beam could beryllium sold successful nan coming quarters, again, is that wrong mobility? Are you seen immoderate liking from immoderate different extremity segments? And finally, conscionable connected OneWeb, tin we get a consciousness of nan type of discussions that were going connected astatine nan regulatory level you? You said that there's nary EU referral. What benignant of made them happy? Any feedback you've sewage connected nan French and US broadside and conscionable thoughts into immoderate update connected procreation 2 connected OneWeb please? Thank you very much.

Eva Berneke

Sorry, if I will -- sorry 4 questions. Let's Christophe reply nan mobility connected bad indebtedness and past I'll return -- I'll astir apt return nan different 3 ones, because I deliberation they're awesome questions. So let's commencement pinch your first mobility connected bad debt.

Christophe Caudrelier

So related to nan hiccups connected nan bad debts, it's, arsenic you said, it's mostly related to -- not to nan Russian customer, actually, but it is related to nan sanctions pinch Iran, for which we had to book depreciation. We besides had a flimsy hiccup successful pinch Middle East customers and this is nan main reasons. But coming backmost to your point, I would say, it's mostly focused connected nan effect of nan sanctions.

Eva Berneke

So, astir of nan bad debts from nan Iranians, who will now adjacent down entirely. Coming backmost to your mobility connected nan effect connected nan margins of conductivity, it's clear that correct now we person 2 effects successful our conductivity business, some nan accelerated built of a work business successful pinch Eutelsat Advance, which is yet not mature, truthful not astatine what you telephone maturity margins. And you astir apt you will besides person successful here, nan reselling of OneWeb, which is besides has immoderate effect connected margins, fixed that coming it is simply a resale agreement, of course, not astatine nan aforesaid margins of this. So, we do spot immoderate separator dilution from nan connectivity but chiefly related to nan accelerated maturation successful nan marketplace and nan built up of a work offering successful that market.

On nan QUANTUM beam, I'd opportunity nan 2 segments that are -- that nan QUANTUM outer is targeted astir is authorities and mobility. And I deliberation nan past beam is besides expected, alternatively shortly, actually, apt successful nan authorities segment. But successful immoderate case, we person a beardown request for nan satellite, which you've seen, pinch really further request coming retired of nan mobility segment, which could beryllium a bully backup, but we are reasonably assured that we person nan past beam successful trial correct now pinch nan customer.

On nan OneWeb, connected nan regulatory approval, nan 2 outstanding 1 is simply because of nan clip span and nan number of mobility rounds that are reasonably typical, truthful it's thing retired of nan ordinary, either pinch nan French authorities nor pinch nan US FCC Team Telecom. We've seen a referral to Team Telecom, which I deliberation we announced backmost successful Q4, which is wholly normal process successful nan FCC successful position of approval, and that conscionable typically takes up to half a year. So we are successful nan information 2 questions backmost and forth, which we dream coming towards an end, which is why we estimate that we'll beryllium capable to person closure successful this successful Q2 aliases Q3. I deliberation we haven't had immoderate questions connected a regulatory level that we're not perfectly normal. We don't person a batch of overlap betwixt nan OneWeb’s marketplace coming and Eutelsat. We're successful different orbits and we don't person competing capacities but of people location is simply a request to afloat understand nan outer marketplace fixed that particularly nan constellation marketplace is reasonably caller to regulators.

Could we return nan adjacent question? Hey, there's nary much --


We will return nan adjacent questions from Sami Kassab. Your statement is open. Please spell ahead.

Sami Kassab

Thank you and bully morning, Eva, and [Foreign Language] Christophe. I person my accustomed 3 questions arsenic well, please. The first 1 fixed broadband is up 17% successful H1, but it's guided to beryllium broadly unchangeable for nan afloat year. Does that propose that H2 will spot diminution successful revenues and, if so, tin you punctual maine what's driving nan diminution successful H2?

Secondly, tin you please remark connected nan latest improvement pinch regards to nan US outer communications project? What do you spot arsenic nan cardinal milestones up for this task to spell ahead? And lastly, QUANTUM was -- if my representation serves maine right, QUANTUM was initially presented arsenic a outer for nan authorities work marketplace wherever prices usually are higher than successful nan mobility assemblage but you look to person repositioned nan commercialized attack towards mobility. May I inquire why that aliases whitethorn I opportunity whether you still expect QUANTUM to make astir 35 cardinal euro of yearly gross astatine capacity? Thank you, Eva.

Eva Berneke

Yep. I think, connected your -- fto maine conscionable commencement pinch nan past 1 connected nan QUANTUM here. Yes, you're correct that successful nan beginning, we benignant of targeted because of nan precocious level of security, and besides elasticity connected nan QUANTUM outer successful position of operating nan beams for nan authorities marketplace and we besides had seen immoderate beams sold to nan authorities marketplace here. But what we've seen is it's been a very absorbing conception successful nan maritime mobility, which really wanted to salary nan aforesaid benignant of prices, truthful we don't spot needfully a value diminution successful that outer pinch nan existent commercialization. But it does divided otherwise into 2 segments, truthful we person 3 of nan beams successful nan mobility conception wherever we astir apt expected astir of it to beryllium successful nan authorities segment, truthful you're correct connected that one. But it's not that we spot a deterioration of nan pricing image connected QUANTUM correct now, it is rather unsocial capacity successful nan marketplace arsenic we presently stand.

Latest improvement connected IRIS2 is you astir apt saw nan news past week connected nan support of nan IRIS2 EU abstraction project. And thing successful general, we are ace supportive of EU really getting progressive successful nan space. Everything is an area of European serenity, which is wherever it is simply a very invited improvement that EU wants to go a subordinate successful it and we’re, of course, pursuing very intimately nan developments astir nan tender. Right now we expect to spot nan invitation to tender nan ITC mid-March, aft nan support conscionable past week, truthful a reasonably accelerated and eager timeline. So mid March, we will cognize precisely what nan EU is thinking, what are nan criteria linked to some eligibility to tender, but besides of people what's really nan contented of nan RFP.

In nan meanwhile, we're moving connected respective fronts, we're moving connected what's nan correct consortium, what's nan correct partnerships we request to. I uncertainty anybody would want to bid this arsenic a azygous standalone company. It's very apt that we'll beryllium successful a partnership, successful a consortium pinch different players, and it is correct combination. Those are a batch of nan discussions going connected left, correct and halfway successful nan European abstraction industry. And of course, we’re besides preparing eventual eligibility criteria, particularly aft nan operation pinch OneWeb. We conscionable want to make judge that Eutelsat continues to beryllium eligible and a highly applicable partner for nan IRIS2 project.

And for your diminution versus a 17% increase, yes, we do really expect to spot a diminution successful 2nd half, chiefly linked to immoderate of nan timing and phasing of KONNECT successful that marketplace earlier we spot nan introduction into work successful September of nan KONNECT VHTS, immoderate of nan contracts has been system that measurement that we do commencement to spot a mini diminution successful nan adjacent half year, coming successful past pinch a beardown maturation erstwhile we commencement commercializing KONNECT VHTS adjacent year. I dream that covers your 3 questions. Thanks for nan questions. Yeah, spell ahead.

Sami Kassab

Can I speedy travel up -- nan statement collapsed down partially erstwhile you answered nan QUANTUM question. Did you reiterate nan 35-ish cardinal Euro of yearly revenues? Implicitly, I would imagine, you person that prices are nan aforesaid but I did not understand aliases did not perceive nan reply to that portion of nan question, please.

Eva Berneke

Yeah, no, I don't deliberation we person immoderate important value erosion compared to what we expected connected this one, truthful yes.

Sami Kassab

Thank you. And connected nan IRIS2, is simply a measurement whereby nan European Union decides to reinvent nan instrumentality and to support nan launching and manufacturing manufacture alternatively than nan outer operators aliases is that retired of nan array and you deliberation nan astir apt script is for outer operators to beryllium involved?

Eva Berneke

I deliberation outer operators are each very willing to beryllium involved, for judge and we surely dream to beryllium portion of consortiums wherever you besides spot outer operators. But I deliberation your conjecture is arsenic bully arsenic excavation successful position of what nan Europe will beryllium coming retired pinch adjacent week. We're each looking very interested. There's tons of rumors flying astir but I surely dream that they'll deliberation astir involving besides European operators. Both Spain, Italy, Luxembourg and France person beardown operators and we surely dream to beryllium a portion of this ace absorbing task arsenic well.

Sami Kassab

Fantastic. Many acknowledgment for your answers. Thank you very much, Eva.


We will return our adjacent questions from Carl Murdock-Smith. Your statement is open, please spell ahead.

Carl Murdock-Smith

Good morning. Thanks very much. Two questions from me. The first 1 I'm really stealing from Roshan because I don't deliberation you really commented connected it. And conscionable an update connected your thoughts astir OneWeb Gen 2 astir benignant of backing and timing of that. So immoderate commentary connected that would beryllium very interesting.

And past secondly, conscionable connected authorities services, again, today's numbers person missed statement and nan diminution location is still rather aggressive. Just wondering, successful position of your position of benignant of erstwhile will we scope bottommost connected authorities services revenues successful position of nan benignant of USDA aliases governmental context? And really overmuch much is location still to benignant of travel retired location and what are your early expectations arsenic we spell into nan outpouring renewal period? Thank you.

Eva Berneke

Yep. Good question. Thank you for keeping maine honorable connected getting to reply each your questions. So I will commencement pinch a Gen 2, which I did forget. So connected Gen 2, it is, arsenic you know, arsenic we are already shareholders successful OneWeb, we do really travel nan reflection connected Gen 2 rather closely, arsenic shareholders, and it is moving guardant nicely. We will apt request a Gen 2 successful 2027, 2028 erstwhile nan existent gen 1 will commencement needing renewal connected nan orbital positions. We do person a replacement for nan first mates of orbital plans of Gen 1 successful bid to bring nan lifespan to 2027, 2028. And you tin opportunity oh, that's a agelong clip but it's really not that agelong clip out, truthful it does mean we'll person to astir apt put retired an RFP, Q2 is astir apt this year, and hopefully get manufacture responses backmost successful Q3, Q4, this year, successful bid to person a bully afloat picture.

As you know, we've been guiding a Gen 2 astir nan 4 cardinal people and we're still reasonably convinced that that's going to beryllium feasible fixed nan synergist that is pinch a batch of nan infrastructure already successful spot for Gen 1, but also, of course, nan measurement we are conceiving nan Gen 2, truthful we're still reasonably comfortable pinch that envelope.

Timing connected erstwhile that spending will start, I deliberation adjacent fiscal year, we'll commencement seeing a small bit, but that's benignant of early creation elements and we will of people spot successful our adjacent fiscal year, astir apt besides nan prime of nan suppliers successful nan Gen 2. But I deliberation nan large spendings will beryllium successful nan years aft and of people astir nan launches, which will happen, you know, 2025, 2026, successful those years that will beryllium benignant of much important amounts of nan Gen 2 spending that will beryllium needed successful those years. Of course, we can't precisely opportunity erstwhile nan different things will autumn earlier we really person nan responses coming backmost and nan nonstop timeline. And arsenic you know, it's besides an manufacture wherever we often person a usage of vendor financing that tin smoothen retired a small spot immoderate of nan CapEx spent. So each of that I deliberation will beryllium astir apt overmuch much clear into nan commencement of our adjacent financial year.

On nan authorities services, you're right. It's been 2 consecutive, rather mediocre renewal campaigns. We do deliberation we commencement being retired of nan benignant of ramped down connected a capacities from Afghanistan and immoderate of those areas, and we surely do spot we'll spot immoderate much stableness and not nan aforesaid magnitude of antagonistic improvement complete nan adjacent mates of mates of renewal campaigns. Of course, immoderate of our expectations antecedently had been related to that we expected QUANTUM to autumn wholly wrong nan authorities conception arsenic immoderate of nan erstwhile questions besides pointed to and fixed that they now count successful nan mobility conception alternatively than nan authorities segment, that besides accentuates a small spot nan diminution compared to our expectations.

Carl Murdock-Smith

That’s great. Thanks very much.

Eva Berneke


Christophe Caudrelier

We person a written mobility from Tom Singlehurst from Citi. Can you springiness a spot much colour connected nan value versus measurement trends wrong Broadcast and really this will germinate going into 2024? Should we beryllium assuming mid-to-single digit declines into nan outer years?

Eva Berneke

Good question. Tom. Thanks for that. I do deliberation we spot -- what we spot correct now, what hurting america astir is nan 2 benignant of what are called measurement declines from respectively nan non-renewal of an extracurricular capacity and past nan Digiturk, which are intelligibly measurement related. Prices are holding up reasonably well. So, it's much nan benignant of measurement alteration wherever definite customers trim nan magnitude of measurement they request alternatively than a value pressure. And arsenic you mightiness imagine, we besides moving connected a batch of elements that will protect your pricing successful position of a amended value of work and truthful forth. So it's much measurement crippled correct now. And yeah, I deliberation mid to azygous -- mid-single digit diminution is astir apt nan apt outlook besides successful nan outer years successful this video broadcast market. It is an underlying structural inclination successful that bid of magnitude.

Could we return nan adjacent either written aliases nonstop question? Are we retired of person questions aliases immoderate anybody is sitting pinch a mobility they are burning to put guardant aliases should we possibly wrap this up for now. I conscionable springiness you benignant of 5, 10 seconds to outcry loudly aliases punch 1 aliases immoderate you request to do. It doesn't sound that way. In that case, I conscionable want to convey you each for getting up this greeting and listening to us. I deliberation if location are immoderate different questions, our IR Thomas is location opinionated by, truthful if you travel up pinch a mobility during nan greeting aft your java that you are burning to put forward, conscionable get backmost to america and different than that, person a marvelous Friday and a awesome play erstwhile you get astir to it. Thank you for listening.


This concludes today's call. Thank you for your participation. You whitethorn now disconnect.

Editor: Naga

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