Good day and welcome to the Eutelsat Group half year 2023-2024 results conference call. Please note, this call is being recorded and for the duration of the call, your lines will be on listen-only mode. However, you will have an opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. At this time, I would like to turn the conference over to Eva Berneke, Chief Executive Officer, and Christophe Caudrelier, Chief Financial Officer. Please go ahead. Thank you.
Good morning. Welcome, and thank you for joining us for today, first half of Eutelsat 2024 presentation. I'm Eva Berneke, Chief Executive Officer, and I'm joined by Christophe, our CFO. So what are we gonna do, this morning? For today's agenda, we have four points. We have a bit the highlights of this past quarter and the sixth month. We go through our operational performance, then our financial performance, and then we'll come to the outlook and financial objectives. Let's start with the highlights of the past six months. First half, operating verticals revenue stood at EUR 571 million, confirming the return to top-line growth. This was underpinned by Eutelsat's legacy business, thanks notably to the Eutelsat 10B and KONNECT VHTS, that gave us incremental capacity, as well as the inclusion of OneWeb businesses since the second quarter.
Second quarter operating verticals continues this trend, revenues up by 3.9% on a like-for-like basis and by 5.4% quarter-on-quarter. We delivered successful operational execution, notably with the entry into service of KONNECT VHTS in September and Eutelsat 10B, also in September, as well as the completion of the space segment of the OneWeb constellation. The Eutelsat and OneWeb combination is effective since very late September, and the integration is progressing well and synergies are well confirmed. We're seeing commercial traction for OneWeb with further growth in secured backlog, as well as the activation of numerous key customer partnerships, and this despite the delay in the rollout of the ground segment that we flagged at the end of January.
So we're progressing really well on design on the next gen OneWeb constellation, which focus on securing continuity of the current client service, as well as a stepwise capacity and functionality improvement. This will lead to a reduction in expected CapEx for the period 2025-2030. Let's go down a few of the key elements. Let me start by confirming that the GEO business is doing well. Looking at the GEO business, we're delivering absolutely in line with our expectations, and we confirm the return to top-line growth. This is thanks to incremental connectivity capacity that came into service with the Eutelsat 10B. It's located at 10° East and offering a visibility spanning Americas to Asia. It has two multi-beam HTS Ku-band payloads that are able to process more than 50 GHz of bandwidth, offering a throughput of around 35 gigabits.
We have multi-year capacity commitments, both on maritime and in-flight connectivity with Panasonic, Intelsat and also recently a deal with Marlink. The other one is the big KONNECT VHTS, which is a Ka-band capacity of 500 gigabits, embarking the most powerful onboard digital processor ever put in orbit. It allows capacity, allocation, flexibility and optimal spectrum use. It does support the development of European fixed broadband and in-flight connectivity. Commitments on this satellite alone totals EUR 450 million with key customers. That includes Thales, Orange, with its subsidiary, Nordnet and TIM. Elsewhere in the GEO business, the second half is also set to benefit from a more favorable comparison in the video business, where the top-line trend is expected to return to market average. But the big event, and I think I am telling nobody, news here is, of course, the combination with Eutelsat OneWeb.
Just stepping back and just reminding of the whole rationale behind the deal is very clear. Combining a legacy cash generative GEO business with a high growth activity in low orbit that generates strong revenue growth. We're accessing a massive and still growing satellite connectivity market, where the majority of growth is gonna come out of the non-GEO part of the segments. OneWeb is a truly unique asset. It is still one of only two LEO constellations, with the other one being Starlink, that has proven commercial and operational efficiency. Together, combining LEO and GEO assets makes us a really unique player that can actually provide the best of both worlds, with a low latency of our LEO offering and the high capacity and flexible capacity of the GEO side.
Finally, now, three months into it, our integration is progressing well, and we validated the value creation and especially the synergies in this deal. So we're live? A major milestone was achieved when it was approved, the twenty-ninth of September, that we could combine Eutelsat and OneWeb. Since then, we've been focused on integrating the two companies, as well as driving operational and commercial momentum. The space segment, that's approximately 650 satellites, is fully up and running and delivering proven and expected performance. OneWeb's order backlog continues to grow. It now stands at EUR 700 million. That is a conversion into euros, as well as excluding the Eutelsat part of the backlog, but it continues to grow. And we continue to see commercial traction with deals activated with quite a few customers.
Progress on the ground rollout is following some delay, but we track for 90% coverage by mid-2024. And of course, that excludes China, Russia, as has been previously confirmed. As well as confirming the synergies, what we're seeing in terms of revenues, distribution partners are actually starting to provide multi-orbit services with a combination of GEO and LEO, both in mobility, enterprise and government. Cost synergies are fully on track, and we think we have scope even to exceed our original plans. As a reminder, the annual expected run rate was around 80%—80, 80 million euros pre-tax synergies from the merger. And then finally, CapEx synergies are also confirmed with the design of the next generation OneWeb constellation, based on a stepwise capacity and functionality improvement that will lead to significant reduction in our original CapEx estimates.
Starting with some of the commercial momentum we're seeing, several important contracts are live with key customers across main LEO applications. If we start with fixed data, you might have seen our announcement together with Telstra on LEO backhaul services in some of the remote areas of Australia. Paratus is a satellite connectivity service that combines GEO and LEO to address enterprises in remote parts of South Africa. Tonomus is delivering LEO connectivity to applications in Saudi Arabia and across 15 countries in the Middle East and Africa. And then finally, Sat One is enterprise and maritime LEO connectivity services across Australia. So very strong traction seen there. But when we move to the government segment, I think there's also some very interesting new developments. Chunghwa in Taiwan is serving the government with both fixed and mobility services.
Airbus will be delivering fixed and mobility solutions across both government and commercial-grade applications. And finally, Hughes, one of our long-standing partner, also on the GEO side, is also one of our major partners in government and mobility in the LEO services. And finally, coming to mobility. Speedcast, we see, connectivity in both passenger and cruise markets, and IP Access with a large fleet of LEO mobility solutions in the U.S. So across all three of our connectivity segments, we see very strong commercial traction on LEO, but also on combination of LEO and GEO. We'll come back to the growth of each of the segments in a minute. We see progress on the network coverage, and we are progressing on the rollout of especially the ground network. So this refers to the ground networks in terms of space and satellite coverage.
The whole globe is covered, so there, there are no holes in the coverage. But in terms of the network ground coverage, we have now 30 gateways built, and we've secured coverage of the entire American continent, both north and south, as well as the Southern Hemisphere, most importantly, Australia and South Africa. By mid-2024, that's calendar 2024, coverage will be extended to cover gaps in the Middle East and Asia, as well as the North Atlantic. On track to meet our target of coverage of around 90%, including coverage of all the main markets. This is, of course, key to customers in those markets, and especially in mobility customers that are in the backlog, where near global coverage is a prerequisite for activating mobility services. Meanwhile, the space segment is operational and delivering a high level of technical performance.
Testing has validated robustness of the network with an HTS technology delivering up to seven Gbps per satellite and a robust 4G core network developed with telecom industry leaders. We have a satellite failure rate below 1%, which is one of the best in the industries. We have better look angles leading to lower blockages, which you sometimes can experience when you have the low look angles. Finally, when you turn actually to what does the user experience, we see some very positive elements with the global latencies of around 70 milliseconds. We see download speeds of up to 195 Mbps and upload speed around 32 Mbps. So we are supporting customers with fully managed service, both by our own teams, but mainly through distribution partners.
We now have around 11 user terminals that are available to customers in the specific segments, and that are fitting their specific requirements. And we are well advanced in also the LEO and GEO combined user terminals, which we expect to start operating mid-2024 with potential new use cases. Coming back to how this evolve in the future, we are progressing also well in how we look at the next generation OneWeb constellation, with potential solutions focused on especially customer service continuity and a stepwise improvement and enhancement of OneWeb services. This focus is informed by both operational and commercial dialogues in market, as well as the experience now that the constellation is fully in service. The next gen will progressively embark both additional capacity and enhanced functionality performances compared to the first gen, with a scope to upgrade the constellation service and performances progressively.
The cost of this approach is however lower than our previous estimates for the build-out in the OneWeb next gen. So we are adjusting our mid-term CapEx estimates. Our cash CapEx for 2024 remains exactly as expected in the range of EUR 600 million-EUR 650 million. However, for the period 2025-2030, we expect cash CapEx after synergies in the range of EUR 600 million-EUR 700 million on average per year. Previously, this was set slightly higher, between EUR 725 million and EUR 875 million per year. I'll come back to some of these points, but first, I just want to let Christophe give you a perspective on the operational and, more importantly, also the financial performance of this first half year. Just reminding everybody, it's a special year.
It's six months where we have around three months of Eutelsat historic standalone, and three months in the combined. So, there's a lot of numbers floating around, and it can be a little bit hard to follow the numbers, but I'll let Christophe explain all of this to you. Over to you, Christophe.
Thank you, Eva. Good morning, everybody. So just as a reminder, as Eva said, all commentary is on a like, on a like-for-like basis, i.e., at constant currency and perimeter. Reported indicators include OneWeb since October first, 2023, and are compared to Eutelsat's H1 2022-2023 performance on a standalone basis. Total revenues for the first half of fiscal year 2023-2024 stood at EUR 572.6 million, down by 1.9% on a reported basis and up by 1% like-for-like. Revenues of the four operating verticals, that is to say, excluding other revenues, stood at EUR 571.1 million. They were up 1.2% on a like-for-like basis, excluding a negative currency impact of EUR 18 million.
Second quarter revenues stood at EUR 298.7 million, up 3.7% like-for-like. Revenues of the four operating verticals stood at EUR 298.6 million, up 3.9% year-on-year on a like-for-like basis and up 5.4% quarter-on-quarter. Let's look at revenues in more detail. Video revenues, representing 58% of revenues, stood at EUR 331 million in the first half, down 8%. The other three verticals include a contribution from OneWeb, consolidated since first of October. Government services, 13% of revenues, stood at EUR 74.2 million, up 10.5%. Mobile connectivity, 12% of revenues, stood at EUR 71.2 million, up through 35.6%.
Fixed connectivity, now 17% of revenues, stood at EUR 94.6 million, up 9.2%. Other revenues amounted to EUR 1.6 million versus -EUR 8.1 million a year earlier. This improvement reflected a negative impact from hedging operations of EUR 2 million, compared with EUR 12 million a year earlier. Turning to video, first half revenues were down by 8% to EUR 331.1 million, reflecting first, the impact of the early non-renewal of a capacity contract with Digiturk from mid-November 2022. Second, lower revenues in Europe related to volume reductions with certain resellers. And third, the effect of sanctions against Russia and Iran channel.
Second-quarter revenues stood at EUR 167.6 million, down by 6.4% year-on-year and up 1.9% on a sequential basis. This increase was partly due to a one-off contract of around EUR 3 million in Latin America. Professional video revenues, which account for less than 10% of the video vertical, also decreased, reflecting ongoing structural headwinds. Looking ahead, the second half basis of comparison will no longer reflect the impact of sanctions against Russian and Iranian channels, nor Digiturk non-renewal. Revenues are therefore expected broadly in line with the wider market trend of a mid-single-digit decline. Going to government services.
Revenues stood at EUR 74.2 million, up by 10.5% year-on-year, reflecting the slightly better renewal rate of the full U.S. Department of Defense campaign, above 80%, as well as the contribution of the EGNOS GE0-4 contract on Hotbird 13G. Second quarter revenues stood at EUR 40.7 million, up by 17.4% year-on-year and by 4.2% quarter-on-quarter. The second half will benefit from the full period contribution from OneWeb's LEO-enabled connectivity solutions, as well as the contribution from the above-mentioned EGNOS GE0-4 contract on Hotbird 13G. As a reminder, this contract is set to generate EUR 100 million in revenues over 15 years. First half mobile connectivity revenues-...
stood at EUR 71.2 million, up 35.6% year-on-year, underpinned by the entry into service of the high-throughput satellite, Eutelsat 10B, with significant pre-commitments, and the commercialization of the final beam on Eutelsat Quantum for a maritime mobility client. Second quarter revenues stood at EUR 36 million, up 28.2% year-on-year and up by 0.2% quarter-on-quarter, reflecting the tougher basis of comparison due to the above-mentioned entry into service of incremental capacity during the first quarter. Over the full year, mobile connectivity is expected to see double-digit growth, driven by strong demand for both GEO and LEO-based connectivity solutions. First half fixed connectivity revenues stood at EUR 94.6 million, up 9.2% year-on-year, mainly reflecting the entry into service of KONNECT VHTS, as well as a contribution from LEO connectivity.
Second quarter revenues stood at EUR 54.3 million, up 17.6% year-on-year, and by 23.7% on a sequential basis, mainly reflecting contracts that started from mid-October following the entry into service of KONNECT VHTS. This positive dynamic is expected to translate into double-digit growth for the full year on the back of KONNECT VHTS, as well as the contribution from the Leo connectivity offer. Moving to backlog. It stood at EUR 3.9 billion on 31 December 2023, compared to EUR 3.7 billion a year earlier and EUR 3.4 billion in June 2023, representing 3.5 years of revenues. The contribution of OneWeb's growing backlog is amounting to EUR 700 million at the end of December 2023.
Natural erosion of the geo backlog, especially on the video segment, in the absence of major renewal. Video is accounting now for 46% versus 59% a year ago. This trend clearly illustrates the impact of successful telecom pivot strategy. Let's turn now to the financial performance, starting with profitability. Adjusted EBITDA stood at EUR 365.6 million at the end of December 2023, compared with EUR 419 million a year earlier, down by 12.7%. Operating costs were EUR 52.2 million higher than last fiscal year, reflecting the impact of the consolidation of OneWeb. This was partially offset by a positive perimeter effect from the disposal of the Bigblu Retail broadband operations, as well as lower bad debt, especially in video business.
The adjusted EBITDA margin stood at 64.1% at constant currency, 63.8% reported, versus 73% a year earlier. This is reflective of the progressive rebalancing of our business towards connectivity applications. Turning to the P&L. Group share of net income stood at minus EUR 191.3 million versus plus EUR 51.9 million a year earlier. This reflected other operating expenses, negative of EUR 183.9 million, compared to a positive EUR 34 million last year, mainly due to fair value adjustment of shares owned by Eutelsat before the combination with OneWeb.
Higher depreciation of EUR -316.1 million versus EUR -233.8 million a year earlier, reflecting the perimeter effect from OneWeb, as well as in-orbit higher in-orbit ongoing depreciation. We have four satellites, Hotbird 13F, Hotbird 13G, Eutelsat 10B, and KONNECT VHTS, that entered into service between April and September 2023. The net financial results, EUR -60.7 million versus EUR -56 million a year earlier, reflecting the higher interest rates, partly offset by favorable evolution of foreign exchange gains and losses.
Corporate income tax is a gain of EUR 28.5 million versus a tax cost of EUR 0.8 million last year, reflecting the recognition of positive deferred tax on the C-band payment, as well as a reduction of the French corporate tax rates. Higher income from associates, negative EUR 23 million, reflecting the contribution of the stake in OneWeb for the first quarter, which last year was from July 2022 onwards. Cash CapEx reaches EUR 224 million versus EUR 194 million last year. It is reflecting the perimeter effect from the consolidation of OneWeb.
It's also not representative of the decrease in CapEx, reflecting phasing of satellite programs delivery last year for both Eutelsat and OneWeb. At the end of December 2023, net debt stood at EUR 2,619 million, down EUR 146 million versus end of June 2023. It reflected the receipt of phase two of C-band proceeds, net of tax for EUR 330 million. A negative impact from our financing activities, mostly related to structured debt, combined with a decrease in cash flow from operating activities due to the consolidation with OneWeb. As a result, the net debt to adjusted EBITDA ratio stood at 4.13 times, compared to 3.55 times at the end of December 2022 and 3.35 times at the end of June 2023.
The average cost of debt after hedging stood at 3.16%, 2.7% in H1 2022-2023. The weighted average maturity of the group's debt stood at 3.0 years, compared to 4.1 years at the end of December 2023. Undrawn credit lines and cash stood at around EUR 1.8 billion. Now back to Eva for a comment on the outlook.
Thank you, Christophe. Just a few words to sum up. The integration between Eutelsat and OneWeb is making really good progress. From a technical point of view, the LEO constellation is operational and delivering proven and robust performance. Acceleration in the ground network rollout is coming live following the recent delays. Multiple user terminals are now available, addressing various customer segments, and the LEO GEO terminal is expected by mid-2024 for mobility and opening additional use cases. On the commercial front, we see a very resilient GEO activity continuing delivering as expected. We see a growing OneWeb backlog, which is up 23% during the past quarter. Strong commercial momentum in multiple service deals activated with major customers in recent months. And finally, importantly, all synergies are confirmed. The integration between Eutelsat and OneWeb is progressing smoothly from an organizational point of view.
All synergies are confirmed, most notably cost synergies, where we believe we have additional source of savings that we could tap into. Finally, the design of OneWeb Next Gen, based on a more stepwise design, assuring continuity of customer service, leading to significant CapEx savings. Turning to the outlook, the GEO business is on track and confirms its return to up, to top line growth for 2023-2024 financial year. As we closed a couple of weeks ago, the results of LEO activities are running behind schedule relative to the original roadmap. We see delays in the availability of the ground network that impacts revenue ramp-up, especially in mobility and in certain geographies where market access is also still outstanding. While our revenue mix is more oriented than expected towards sale of user terminals, it's also impacting margins.
The deployment of the ground network is progressing well, and we are seeing strong momentum in take-up of pre-signed commitments from major customers. Nevertheless, this dynamic is not going to suffice to close the gap relative to our near-term expectations. So we have adjusted our financial objectives for 2023, 2024 as follows. This is the same as you saw a few weeks back. Revenues are expected in the revenues of EUR 1.25 billion-EUR 1.3 billion, versus previously EUR 1.32 billion-EUR 1.42 billion. Adjusted EBITDA is expected in the range of EUR 650 million-EUR 680 million, previously EUR 725 million-EUR 825 million. Cash CapEx for 2024 remains expected in the range of EUR 600 million-EUR 650 million after synergies for the period of 2025-2030.
The integration of this revised CapEx expectation for OneWeb Next Gen means that CapEx is now expected to be between the 600-700 on average per year. This is down from 725-875, and we continue to target a leverage of around 3x in the medium term. To allow for more accurate assessment of the prospects in this context of rapid development of the OneWeb business, our financial objectives for 2024, 2025 will be reviewed and of course, shared with you as a result in August, early August. We remain super confident in the prospects of OneWeb and the potential of combining GEO and LEO. The constellation achieves full global operational coverage, and we anticipate revenues that continue to target double-digit CAGR in revenues and adjusted EBITDA in 2024-2028.
Thank you for your attention, and Christophe and I are ready to take your questions.
Sure. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We'll pause just for a moment for everyone to have an opportunity to signal for questions. Thank you. We will take the first question from Alexander Patak from SocGen. The line is open now. Please go ahead.
Yes, good morning, and thank you for taking my question. I'd have three to start with. So the first one would be on the rephasing of spending for Gen 2. If you could define the stepwise enhancement a little bit better, does it imply anything in terms of the availability of next-gen features and capacity? Does it have any impact at all on your view of how the revenue will develop on Gen2? Then the second question would be specifically on the backlog growth, which was quite strong, at 25% quarter-on-quarter. Can we extrapolate this kind of growth into the near term, and what are the trends so far this quarter? And I'll have a quick follow-up after. Thank you.
Did you have two or three? I noted down two questions.
Yeah. Yeah, just two, and then I have a third one. I save it for later.
Okay. Let me start. I think in terms of rephasing of the Gen2, I think our priority has been, now that we are operational and we have significant customer commitments that reach into the multi-year, is of course ensuring that we can continue to give them the service and increase capacity over time. And that's why we've taken this stepwise approach, and we'll embark technologies on the new satellites as they become mature, both in order to ensure that we don't get any delays related to immature technology, but also allow us to increase capacity more stepwise over time as customer orders come in and continue to increase.
In terms of the backlog, the 23% increase, I'm not sure I wanna give you any kind of idea on how we, how we will evolve our backlog over time. It comes as, as you might imagine, a bit, little bit in, in, in bumps. But we continue to have quite a lot of customer dialogues on what we call the take-or-pay or confirmed backlog. So we do expect to see it increase. Whether it can increase, continue to increase 25% every single quarter, I'm not gonna promise you that.
Okay, excellent. And then, maybe a question for Christophe. If you could tell me a little bit about the structured debt increase, what exactly was going on there? What's behind that? And also, if I look at your duration of debt at about three years, weighted average, that means refinancing quite soon. Do you have any plans in that respect? Thank you.
Okay, thank you. Yeah, first, Alexander, on the structured debt, this is really mainly related to the CapEx line. We've got a specific CapEx line that, as you probably know, to finance the investment on the GEO side. And we had the three tranches of this CapEx line, and we have withdrawn the last tranche of this facility. So that's the explanation for the increase in the structured debt. On the second question related to the financing and the terms of the three-year terms for our debt.
The next deadline is the bond, the EUR 800 million euros bond that is going to mature at the end of October 2025. So it's a bit more than a year from now. We obviously have the plan to refinance this bond ahead. So we have different actions ongoing at the moment. First is to address this refinancing, and the situation has obviously changed for Eutelsat because we are moving from an investment-grade environment to high-yield environment. So we have the plan to refinance this EUR 800 million euro bond ahead of time. So it's going to be very soon now.
We obviously have to address, and we are addressing with our banks, the subject of the liquidity, because we currently have a level of EUR 850 million of RCF lines, undrawn RCF lines with our banks, which are maturing also at the same time as the EUR 800 million euro bond. So this is the second step that we are addressing. And obviously, we also have opportunities, if I look at the needs for the second gen of the next gen of the constellation. Our financing plan is based upon two things.
First of all, obviously, the cash generated by the resilient GEO business, but we also assume in our financing plan a significant part of ECA financing in order to cope with this liquidity level.
Excellent. Thank you very much.
Thank you. We will take the next question from the line, Mark Watts from Citi. The line is open now. Please go ahead.
Hi there, guys. So just to confirm there on the refinancing plan, you're saying that you aim to do it, is that before the October 2024 deadline, before they come current? And would that be in conjunction with addressing your term loans? I think it's October. It's late 2025, the deadline is there.
Okay. Yeah, I guess just-
For the refinancing. So I think what we do in refinancing is that we have the maturity is in, I think, actually November 2025?
It's October 25.
October 25. So we have around 18 months ahead, and we start just to prepare and be ready for potential financing, refinancing of that.
... Okay, but the idea would be to do the refinancing of the bonds in conjunction with your RCF undrawn facility?
Yes. Yeah.
Okay.
Again, the objective is to do that well ahead of the October 25 due date, obviously.
Sure. And the expectation on the refinancing would still be an unsecured bond, or how do you? Is that the kind of the expectation?
Yes, Mark, it's the way we are working, and it's, we've been addressing this question to with the market. And yes, we are going to, we are likely to go for a bond issuance on the high yield market. But I need to precise, we are probably going to do that at the Eutelsat SA level.
Okay. Right. So the opco level. Understood. Can I confirm a few other points here? So on C-band, proceeds coming in, does that end this year? No, no more proceeds expected for next year, for 2025?
Yes. Yes.
Okay, great. I guess the other thing is just your medium-term leverage target of 3 turns. So can you just specify, I mean, you guys are over 4, got a fairly large CapEx guide for the next 2-3 years.
Yeah.
One, what exactly is medium term? But two, how do you aim to get there in the next, I guess, 2-3 years ahead of what will be another sort of chunk of debt refinancing to do?
Yeah. Yeah. Let me try to answer your question, Mark. Well, first of all, what we plan is according to the needs and CapEx needs, we plan to have a net debt, which would be rather flat. So the big part of the, or let's say, the majority of the part of the improvement of the ratio, of the leverage ratio, will come from the improvement of the EBITDA. And the improvement of the growth of the EBITDA will come obviously with the ramp-up of the OneWeb activity.
It's really not, I would say, related to the decrease in the net debt, which again is planned to be rather flat over the period, but it's coming from the significant improvement of the EBITDA. The improvement of the EBITDA will be possible thanks to the implementation of the synergies on one side, and on the second side, obviously, the top-line growth for the LEO activity, leading to significant improvement of EBITDA level.
Sorry, if I could just squeeze in one more. It's just to ask in terms of the-
Can you move a bit closer to your mic, just so we can hear you?
Yeah, sure. So I guess I just wanted to follow up on the actual constellation itself, just so I understand. So with, I guess, your 90% of satellites installed, but do you actually receive the revenues for those currently? Like, how is the OneWeb revenue, how are you actually getting that, even though some of that ground network hasn't been connected? Could you just walk me through that? Because that's not clear to me.
Yes, I can. So there are several things of getting to revenue, because I think that's probably what you're looking for. The first thing is that the satellites are all in place. So we now have the 650 satellites circling, they're where they need to be. So in terms of the space coverage, we're there. And where we are operational, we see that at a 99.5% network efficiency. So that is good. Space is there. Now, the way it works is that, you know, once it, you touch a satellite, it gets bounced back down to ground to a gateway or an SNP. We need around 43 to cover the entire globe of those, and we have around 30 of them done now.
A few are missing South India, South, Saudi Arabia. So a few are missing, and before we had these ground stations there, the signal, I mean, it could get to the satellite, but it can't get back down. So then the operational network is not operational. It's solved for all of North America and South America, so there's lots of areas that was the map with the orange splotched on, that means that you have the ground network working, so you can actually use the full signal. So the only thing that might block in those areas is then country landing rights. So there are a few countries where you also need specific market access licenses, which either we have ourselves or our distributors need to take.
So a few countries have taken a bit of time to approving that because they needed to understand what LEO was all about. So ground network and market access are the two additional hoops you need to jump through, when once you have the satellites in place. And as you can see, a combination of that gives the rollout, in the orange splotch you saw on one of the pages, over the next month. We expect to be at that 90% ground coverage, in 3-6 months time, so over the mid-year, where we'll have all of those countries. Then there will still be a few countries that have specific license and landing rights requirements. You see that also with Starlink.
Some countries are only opening for Starlink now, or not even open for Starlink. That's a country-by-country approach, but we actually have quite a few countries where we see solid progress. In India and Saudi, it's done already. So I think those are the two additional hoops to do that. And then revenues start coming in. It's only when we have the landing rights and licenses in place, we can actually start billing a customer. So that's how we can see the ramp-up, and that's why you see a backlog that continues to grow with a lot of customers wanting to buy. But either we don't have the gateway in their region, let's say, South India or other place. Or Angola is another place where we need to have a gateway there before we can actually start serving.
or because the country has not yet approved landing rights, which is a few countries there, before we can actually start building. And a lot of our backlog is actually in mobility, and it's clear that the mobility, of course, they want, you know, they want to be able to sail across the ocean, with whatever that requires of both gateways and landing rights. So the revenues will start ticking in there. We now have a quite close connection between when is the country gonna open? What are the take-up pays or the backlog we have in that country, so when do we turn it on? Especially, of course, important for Saudi Arabia, where we have a large take-up pay with the, with the Tonomus.
But we now do this on a country-by-country, and I'm sitting here with a kind of all the countries that are expected to go live in March, all the countries that are expected to go live in April. So we know when we can actually start expecting that. But that's how it work. Did I talk too much? Did I actually answer your questions? Did it get more clear?
Yeah, yeah. I mean, great, great summary. I just wanted to know, like, how much of the revenue are you actually making from those 650-odd satellites that are installed? I realize you've still got some, like, LAN network.
No, I mean, we—I mean, all the satellites are functioning, so we can make all the revenues. The problem is when you, when the signal gets, either where the terminal needs to be, there you need to be allowed to use those landing rights. That's a country-by-country thing. Loads of countries are open. I think we have 50, more than 54 countries opened, with everything in green, so you can just go and plug in your terminal, if you take it under your arm. Then we have some where we have the network and ground network is fine, but landing rights are still pending. So that can be some of the African countries who need to get there, where we still have that pending.
Then we have a few countries where they're still missing a gateway. Sometimes the landing rights are there, so they're just waiting for the gateway. Saudi is one example. The landing rights are fine, but they're needing one more gateway to open up fully. And then, of course, we have very few countries where both things are the issues. But those are gonna get there as well. Tanzania is one where we have both things that needs to get fixed over the next three months. But many other countries will get... It has only one pending thing, and we'll get it fixed over the next couple of months.
Thanks a lot.
Thank you. We will take the next question from line. Brian Egarin from UBS. The line is open now. Please go ahead.
Yes, good morning. Thank you for taking my question. Really just thinking about, you know, funding the CapEx. I mean, obviously, when you announced the OneWeb acquisition, you were an IG company in a very different rates environment, and, you know, today you're a high-yield company in a very different rates environment. Has that really changed the way you think about structuring the financing for this CapEx? And have you looked at, say, secured debt solutions or, or is it possible to raise debt specifically at the OneWeb entity? Any thoughts on that would be much appreciated. Thank you.
Okay, well, thanks. Just to answer quickly to the first point, I didn't change anything. It has not changed in terms of plan. Obviously, the environment is totally different, but this was foreseen at the beginning and since the beginning when we decided to do this strategic move. So it was included in our plans, including moving to a different type of debt environment, so coming from IG to a high-yield environment. In terms of cost of financing, this had also been factored out. Obviously, the rates environment has changed since, and this we have updated, and we have included this increasing environment into our models. So that's the first point.
Second point is we still believe that, our financing is going to be based upon, I would say, three major legs. The first one is obviously the strong generation of cash from the Eutelsat legacy activities. Eutelsat has generated for many years a significant amount of cash, and this is also supported by the decision to stop distributing dividends and to use this cash generation in order to fund the needs in CapEx. So that's the first leg. The second leg is obviously the refinancing of the current debt at Eutelsat level, and this is what we are dealing with and with the refinancing of the bond that I've mentioned just before. And we still think and we have approached the market accordingly.
We still think that the unsecured type is the right solution for us. Obviously, and that's why I mentioned that. Our plan is to do that at the level of Eutelsat SA, that is generating the cash. Obviously, we need to negotiate and to define the circulation of the cash within the group, but this is also something we have addressed, and we are really confident that we can do. And the third leg, I would say, is again, the ECA financing. Most of the financing of the CapEx needs for the constellation, for the new constellation, will come from ECA financing. And then by the way, I would add one point I forgot to mention when I answered to Mark.
One of the reasons why the structured debt has increased is because we have included at the level of OneWeb already an ECA financing from India related to the last launch for the constellation, the first generation of constellation. So coming back to the ECA financing, as it was an example, we strongly believe that we are just in the heart of the strategy, I would say, of ECA financing, and this is why we, in our models, we consider that we will finance more or less, I would say, around two-thirds, three-quarters, four-fifths of the CapEx requirements for the next generation through ECA financing.
Okay, great. And just remind me, that's unsecured lending, typically. Is that correct?
Yes, definitely. Yes. It's, I mean, it's a kind of financing, which is backed by, I would say, government agencies. We are mostly dealing with... So we started with India, but we are also talking to UKEF and BPI in France. So yes, they are, I would say, it's a debt supplied, I would say, by the banks, but backed up by government agencies.
Great. Thanks very much. Appreciate that. Thank you.
Thank you. We will take the next question from line. Tom Singlehurst from Citi. The line is open now. Please go ahead.
Yeah. Good morning, Tom here from Citi. Sort of in echoing Mark, but I had a couple of questions, maybe three, actually, if it's okay. The first one on the sort of change in the sort of the way that you're planning on investing in CapEx for Gen2 . I'm just interested in whether that is a decision that's been taken, you know, with a sort of financial, sort of leverage hat on, or one that's been taken, you know, with a sort of operational hat on. I mean, are you choosing that new mode because it's the best thing for the constellation and for the users, and then customers, or is it because it just eases the burden in terms of CapEx spend? That's the first question.
The second question, on 2025 financial year guidance, which you've obviously withdrawn. I'm just... I know it's slightly academic, but I'm interested in whether you've just withdrawn that because you don't know when OneWeb will sort of light up and you'll start really seeing the revenues, or is it because you've got a sort of more cautious view on the, you know, the run rate and opportunity from OneWeb? If you can clarify that, that would be great. And then finally, any update on IRIS² would be very much appreciated. Thank you very much.
Thank you, Tom. You just take all the light questions, right? So, let me dive into them. Starting out with the change in approach on investment, this is clearly an operational choice we've taken. Given that we start having customers who come in with multi-year five-year commitments, of course, they're gonna be very interested in having continuity of service, compatibility of service in the way the capacity is used. They don't want to pull their airplanes or ships back in harbor to either change terminals or do anything. So the continuity of services is clearly important.
Also, in terms of integrating new technologies, dialogues with vendors, and you follow this industry, so you also know that there's sometimes a solid degree of optimism in how fast you can mature technologies and how fast you can get them there, which has led to multiple delays in the past. So we're taking a much more or somewhat more conservative approach on when do we embark new technologies? When are they mature enough? Because we will need to get continuity of service up there. So we're taking that a more stepwise approach and finding a way where we can, over time, bring more, bring more new technology, new functionality to the, to the constellation without having a big cut.
That maybe also on IRIS² will also allow for some of the innovations that will come with IRIS² to be embarked where we see IRIS² as a way of maturing a lot of technology development in the European constellation context, which also will allow us to profit from some of the potential synergies there. Just maybe finishing on that, IRIS², we're in the process of, in the consortium, where we're in a consortium with Airbus, Thales, Hispasat, and SES, finalizing the BAFO that needs to go into the commission these days. That is in good progress.
It's something we've spent quite a lot of time on, and we continue to very strongly believe that this is a very important investment and area of interest for the European Commission, and that's also what we see in the dialogue with the commission. They've shown themselves to be super collaborative with the SpaceRISE consortium. Then coming back to 25 guidance. I mean, we've never guided on multiple years, so I think it would actually be more odd to continue to do that, and especially in an environment where we're seeing much more growth and much more future growth coming in.
It's very hard to guess 18 months out, especially with the uncertainties we see right now and precisely when will some of these very big take-up pace actually starting to kick into revenues. So we will do the guidance as we normally do, with our full year results for the coming year, rather than try to guess what happens over the next couple of years.
Thank you. Thank you.
Thank you. We will take the next question from line, Roshan Ranjit from Deutsche Bank. The line is open now. Please go ahead.
Oh, great, morning, everyone. Thank you for the questions. I've got three, please. And even just going back to your point on previous question around CapEx and the operational change that drove that decision. I guess, is there a risk that you kind of lose the first-mover advantage if you're awaiting for the evolution of the technology, and you're waiting for, you know, your customers to come on board rather than building a tower and trying to attract them onto the Gen2 network? And I guess coupled with that, you used the word, like, stepwise. So whilst, you know, we've seen this reduction in the kind of annual CapEx guidance, what should we be thinking about the overall envelope? You know, is there scope to still build out that network over time?
So we're still looking at the kind of, I think you previously said a EUR 4 billion CapEx spend on, on Gen2. So anything you can say there will be super helpful, please. Secondly, circling back to IRIS², I think when we caught up at the end of last year, you know, you, you emphasized that Gen2 certainly won't be delayed as a result of IRIS². But you are also keen to incorporate some of the parameters that the EC wants in IRIS² within Gen2. So now are, are those time frames running in, in, in parallel? And also, how should we think about the, I think, 40% subsidy, and how that could fit in with, the kind of build-out of, of Gen2? And finally, hopefully a quick one.
On the 90% of ground stations to be built, I think you said by Q2, does that then suggest that global operations of Gen1 should be done by the, by the summer? So we should expect kind of, you know, global coverage by, by the summer there. And what is the CapEx component for the remaining around 13 ground stations to be built? Thank you.
Thank you. Let me really start with the last one, because I think we have around, forty... We have exactly 43 ground station we need. We are now at 30, so 30. And, we expect to be at that 90%, so probably missing a bit less than a handful, by the summer. So we-- that will give us that 90%, 90% coverage. There's still a, a few, some for the Indian Ocean and some out in the Atlantic, which, will take longer. The CapEx is in our plans for that. It is not, it is not massive, but it is in, in our plan already. This is mainly kind of civil works on putting in pads for antennas.
So it's not like the same order of magnitude as you see for launching satellites. So that is the, that's the expectations on the remainder of the ground network. Then coming back to your bigger questions on going out in the future for the space. I think we expect kind of overall a kind of around 30% reduction in that overall envelope we have seen previously, kind of in order of magnitude. And it's very much driven by this, by actually making sure we maintain our first, or you might call it, second mover advantage, because over the next, and we believe at least until 2027, 2028, it is really only gonna be us and Starlink that are in this market.
Starlink will be there, but we think that both, the Telesat project and the Amazon project will be there 2027-2028 earliest. So we really need to make sure that we have that continuity service and that we can keep our customers in those long-term contracts that they've signed with us already. So having some, any kind of gap there would not be good, in terms of at that time, potentially see some of those new competitors coming live. And that's why we do this stepwise, where we can also embark, and that was, I think, a little bit also your question, with the IRIS.
If there are public sector subsidies to developing some of these new technologies, in terms of financing what we in the industry call the non-recurring costs, so the actual development cost, it would just make sense for us to say, let's align with that development, make sure that we are civil payers for maturing these technologies and then embark them on the constellation in the timing that works well for not having to do all the spending on the non-recurring costs. So that's what's driving that stepwise approach. But it's also really to make sure that the timeline works.
I think it's very important for us that we keep the continuity of service with our customers in these multi-year contracts and step them up over time, and then bring the new functionality, when it's ready and when it's potentially, as you said, financed or subsidized, partly by other developments as well.
That's really helpful. Thank you. If I may just, quick follow-up on the timeframe. So, I mean, again, I'm guessing you're not gonna be pushed on this, but, the global-- it seems to be that the global operations probably towards the end of the year then, if, you know, by the summer, you'll still have, you know, a few filings still to be, signed. Is that right? Towards the end of the year for global operations?
No, I think in terms of ground coverage, I think we expect to be at that 90% kind of over the summer. However-
Right.
What I will say is that, I don't have full control over all the landing rights and licensing, because that is a country-by-country, almost door-to-door, opening. But in terms of network coverage, at least that should be available kind of over the summer. And then there will be a few pending holes, mainly in some of the oceans, where we have a few, a bit difficult areas, for some of these ground gateways to cover. So those will be the-
Understood.
There's gonna be a lot of ocean pending.
These ocean rights are also needed for, you know, global coverage, service coverage?
Some of them are, but not, not, not truly. I mean, this is the south part of the Pacific. It'd be nice to have for some cruise, but I'd say a lot of the mobility, what they're looking for is, let's say, at least get the Mediterranean covered well, or the Caribbean covered well. So they... But it needs to be some of those, the Indian Ocean needs to be covered well. So it... But it needs not just to be one country, right? They do need multiple countries, where they come in.
Understood. Thank you so much.
Yep. It appears no further question at this time. I'll hand it back over to your host for closing remarks.
Okay. Well, thank you for all the questions, and thank you for showing up here on a Friday morning, which at least for France, is on the way to the winter vacation, so maybe some are going. We're super happy that we were able to explain a little bit to you where we are in this very interesting first half year of the combined entity. Which actually only has three months of combination and three months of Eutelsat historic business. So we're looking forward to taking it on into the next half year. And are there any questions?
We have Hugo and Joanna, who can probably help you navigate if I said something totally bonkers, or if there's something you just need a little bit of help to understand. So feel free, and other than that, just have a great Friday.
Thank you for joining today's call.