Ladies and gentlemen, thank you for standing by. Welcome to Gilat's Third Quarter 2020 Results Conference Call. All participants are at present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded November 10, 2020.
If you have not received it, please contact Gilat's Investor Relations team at GK Investor and Public Relations at 1-six forty six 688-3559 or view it in the News section of the company's website, www.gilat.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin, please?
Yes. Good morning and good afternoon everyone. Thank you for joining us today for Gilat's Q3 2020 conference call and webcast. A recording of this call will be available beginning at approximately noon Eastern Time today, November 10th, and will be available for a telephone replay until November 13th at noon. The webcast will be archived on Gilat's website for a period of 30 days.
Also, please note that investors are urged to read the forward looking statements in Gilat's earnings release with a reminder that the statements made on this earnings call are not historical facts and may deemed forward looking statements within meaning of the Private Securities Litigation Reform Act of 1995. All such forward looking statements, including statements regarding future financial operating results, involve risks, uncertainties and contingencies, many of which are beyond the control of Gilat, which may cause actual results to differ materially from anticipated results. Gilat is under no obligation to update or alter these forward looking statements, whether as a result of new information, future events or otherwise, on the company's explicit disclaimers any obligation to do More detailed information about the risk factors can be found in the last reported filed with the Securities and Exchange Commission. With that, let me turn to introductions. On the call today are Mr.
Adi Fadia, Gilat's Interim CEO and Mrs. Gossmaz Halpern, Gilat's Interim CFO. I would now like to turn over the call to Adith Fadia, for where to begin.
Thank you, Ehud, and good day everyone. I would like to thank you for joining us today as we resume our quarterly updates, which we were not able to hold over the past year to the pending acquisition agreement with Comtech. Last month, on October 5, we reported that the merger agreement with Comtech signed on January 29, 2020 was terminated and a settlement was reached on all pending litigation for a payment of $70,000,000 to Gilat by Compex. We recently announced our plan to share a $55,000,000 dividend with our shareholders derived mainly from the determination fee. A cash dividend of $20,000,000 was declared and will be paid on December 2, 2020 and an additional $35,000,000 will be declared subject to court approval.
Moving ahead, we are continuing its full force to implement our strategy, which we believe will generate long term value to our shareholders. I would like to briefly summarize that strategy for those of you who are new to our story and to remind those of you that have not met us for a while. Gilat is a leading global provider of satellite based broadband communications. We have over 30 years of experience designing and manufacturing cutting edge ground segment equipment and provide comprehensive solutions and end to end services powered by our innovative technology. Our main growth engines are cellular backhaul over satellite, in flight connectivity or IFC and the ground segment for non gestationary orbit satellites or NGSO and very high throughput satellite or VHTS for short.
Cellular backhaul is part of our fixed network segment. Our customers include Tier 1 Mobile Network Operators or MNOs usually requiring satellite backhauling to extend their networks to rural areas and other remote locations such as islands, highways and parks where terrestrial coverage is prohibitively expensive to lay out. In addition, we are increasingly seeing the need for cellular backhaul over satellite for emergency response and as a backup to terrestrial lines. This quarter we won several important and strategic managed service deals in cellular backhaul, which we believe will continue to be a strong profitable growth engine for the foreseeable future. In addition, our network segment fixed network segment includes our broadband solutions for enterprise and consumer, including our services in Peru.
Now turning to IFC, which is part of our Mobility Solutions segment. Our largest customer in this segment are Gogo, one of the largest IFC service provider in the world and Honeywell, one of the largest global system integrators. Though COVID-nineteen has a devastating impact on travel and aviation in general, IFC is expected to grow in importance as the industry recovers and passengers require high speed Internet connections. The Mobility Solutions segment includes also our on the move products and solutions for defense, maritime and trains. In addition, the Mobility Solutions segment includes our U.
S. Subsidiary WaveStream, which design and manufactures high speed power, high power solid state power amplifiers for ground, sea and airborne satellite communication systems. WaveStream focuses on providing solutions for IFC, defense applications and NGSO gateways. Another important focus is the NGSO and the VHTS solutions. Our major win last year to provide the ground segment for the SCS O3B EMPIRE satellite constellation has put us at the forefront of the basement providers for NGSO.
An additional business for Gilat is providing terrestrial telecommunication infrastructure projects in Peru for Pronatel, a government owned company as well as operating parts of the network and selling additional services in support of the Peruvian population. The construction phase of these networks is reported under our terrestrial infrastructure project segment, while the operational phase and the additional services provided on top of the networks are reported under our Fixed Networks segment. Our target in Peru is to reach a run rate of $60,000,000 in iron recurring revenues, which we believe can be reached by the end of 2022. As of today, we have in our backlog a run rate of yearly service revenues in Peru of more than $30,000,000 There is no question that the COVID-nineteen pandemic has and continues to affect our 2020 results. This is primarily in the mobility segment, which is dominated by the IFC market.
Having said that, during the Q3, we began to see recovery in most of our other business areas. This is demonstrated by a solid increase in our backlog. Thanks to our cost cutting initiatives, we were able to show a slight improvement in our adjusted EBITDA. In the current quarter, adjusted EBITDA stood at about 600,000 compared with the previous quarter's adjusted EBITDA of about $100,000 In the Q4, I expect that we will show an improvement both in the revenue level and profitability compared with this quarter. Summarizing our financial performance in the 3rd quarter, revenue totaled $37,300,000 GAAP operating loss totaled $10,900,000 and adjusted EBITDA was about $600,000 Boss Matt will elaborate on our financial performance in a few minutes.
I will now move on to review our Q3 business achievements. I will start with the Mobility segment and our IFC business. Even though the COVID-nineteen pandemic has impacted the global aviation market, Gilat has not changed its overall mobility strategy. We expect that upon industry recovery, IFC will be even more important as passengers who throughout the pandemic came to rely heavily on always connected experience will continue to demand reliable high speed Internet connections. In addition, we believe that the introduction of widespread free Wi Fi will significantly increase take up rates and will provide a strong tailwind to the industry and to Gilat.
We are working closely with our customers and partners to enable them to meet the expected increase in bandwidth requirements and passengers' connectivity demands. In China, we announced this summer an important milestone as a driver of opening up the Chinese Ka band for in flight entertainment and connectivity market for a multimillion dollar market opportunity. The announcement was made with our partners, China Satcom and FTS, a leading Chinese system integrator who received the STC certification for in flight entertainment and connectivity earlier this year. Gilat has already received initial orders out of the multimillion dollar potential for its flagship aero modem. The non geostationary orbit satellite constellation and the very high throughput satellite continue to be a major strategic focus area for Gilat.
We are on track with the platform development for the Empire MEO constellation. We are working closely with SCS on additional program needs. Recently, we expanded the OCB Empire partnership with SCS under a multimillion dollar follow on order for high speed modems. The modems will deliver multi gigabit throughput targeting high end services over the constellation. Furthermore, we believe that we are well positioned to win additional NGSO business as the opportunities mature.
Gilat's only owned U. S. Subsidiary, WaveStream, is a trusted supplier to the U. S. Department of Defense, providing high quality military communication products.
In the Q3, WaveStream received further multimillion dollar orders from the U. S. Department of Defense, demonstrating their continued faith in WaveStream ability to execute at the high level and support their needs for years to come. In cellular backhaul, one of our strategic growth engines, we are continuing to excel and have maintained our global market leadership. According to a 2020 report by market analyst NSR, Gilat leads with 44% market share in modern shipments.
This superiority is furthered with impressive 5 gs technical achievements. As a matter of fact, this quarter we successfully demonstrated 5 gs traffic carrying with outstanding performance of the Tycon GEOS HTS satellite. Superior user experience was recorded using Gilat Capricorn Plus VSAT. With this successful test, we have declared Gilat's cellular backhaul solution operational and ready for implementation in the 5 gs architecture. Gilat's strategy of providing the cellular backhaul over satellite solution as a managed service has proven successful and is beneficial for both the MNOs and Gilat.
MNOs are free to focus on their core competencies, while leaving of the satellite communication to the satellite expert. Gilat on the other hand provides an end to end service enjoying a larger contract with recurring revenue. I am pleased to report that this quarter Gilat won several multimillion dollar managed service deals, which included new MNOs as well as substantial contract renewal extensions and extensions. In North America, we had 2 major achievements this quarter. Gilat was awarded $20,000,000 for a 3 years managed service contract renewal and expansion from Tier 1 MNOs in the United States.
With this, Gilat becomes the MNO's sole vendor to provide end to end services for LTE backhauling and disaster recovery while replacing existing satellite technologies. This contract is a testament to the MNO's appreciation of Gilat's proven service and technological capabilities. In addition, we were awarded a 3 years managed service contract by Southern Link for coverage to remote areas as well as emergency response. On top of securing a new MNO in the United States, This achievement further validates Gilat Provent Technology superiority and testify to our industry leadership in cellular background. I would like to share that we extended another cellular backhaul managed service contract with a leading MNO in Mexico and have a healthy pipeline of additional such deals worldwide and I hope to announce additional success in the near future.
We also closed several important cellular backhaul equipment deals among others one with AMN, Africa Mobile Networks, which extended Gilat's contract for Africa's largest cellular backhaul network over satellite and another contract with Kcell, Kazakhstan's largest mobile network operator. In the area of broadband connectivity, we continue this quarter to strengthen our presence in Latin America with important wins in Peru and Argentina. In Argentina, we were selected by Telefonica International All Cell Services, a subsidiary of Telefonica Group to deliver broadband services to rural areas. In Peru, we were awarded a 3 year service deal for a nationwide enterprise. Both of these projects were particularly challenging due to the pandemic and Gilat's local team and partner excelled in timely deployment in difficult rural terrain.
As we have reported in the past, our business in Peru in the first three regions awarded in early 2015 move into operational phase and are now delivering services to 500,000 people. Also we are in an acceptance process regarding the 4th region that was awarded in late 2015. We expect to finish the acceptance no later than the end of Q1 2021 which will allow us to enter the operational phase and enable us to start recognizing the related recurring service revenue. We are progressing with the additional 2 regions, which were awarded in 2018 slightly slower than expected due to the pandemic restriction in Peru. This quarter Gilat was awarded a substantial 5 years expansion contract by IPT, a consortium consisting of Telefonica and Facebook among others.
In a festive signing event, Mrs. Nakadawa, Vice Minister of Communications said, and I quote, the expansion of these services will benefit around 500,000 people. Gilat accepted the challenge to work on a regional project in an extremely difficult area and we should praise its impeccable work. This milestone proves that the investment in private entities generating the expected value for the citizens, especially during the current worldwide pandemic where we need internet access to stay connected. We believe that further to this expansion, which includes hundreds of additional sites, there is still significant potential to increase and expand to additional regions as well as to extend the deal over time.
This deal demonstrates our ability to execute our vision of profitable recurring revenues in Peru. In closing, I'm pleased to share with you that even though the industry continues to deal with the COVID-nineteen pandemic, we had some very significant achievement this quarter, which will support our long term growth. As we move into Q4, we are beginning to see the light at the end of the tunnel and are cautiously optimistic. However, we are watching the pandemic closely as the second wave hits many parts of the world. We like others have learned to conduct business with the pandemic and I'm pleased with our accomplishment and with a healthy pipeline of significant and large opportunities.
On a personal note, I'm optimistic about the great future for Gilat. I'm fully committed, supported by my dedicated management team and talented employees to bring Gilat back to growth and profitability and to surpass our success from before the pandemic. Bossaat, we are ready for your report. Please go ahead.
Thank you, Jardine, and good morning and good afternoon to everyone. I would like to remind everyone that our financial results are presented both on a GAAP and non GAAP basis. We regularly use supplemental non GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions. We believe these non GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating performance. Non GAAP financial measures mainly exclude the effect of stock based compensation, amortization of purchased intangibles, amortization of lease incentive, litigation expenses or income related to Trade Secrets claims, reorganization costs, merger, acquisition and related litigation expenses and initial recognition of deferred tax assets with respect to carry forward losses.
The reconciliation table in our press release highlights this data and our non GAAP information presented excludes these items. I will now move to our financial highlights for the Q3 of 2020. Revenues for the Q3 of 2020 were $37,300,000 compared to $63,400,000 in the Q3 of 2019. This mainly reflects the impact of COVID-nineteen on revenue from our IFC in our Mobility Solutions segment. However, compared to previous quarter of 2020, revenues were similar at $38,300,000 declining by only around $1,000,000 Fixed Network segment's revenues were $22,800,000 compared to $27,300,000 in the same quarter last year.
The decrease is mainly due to lower revenue from our EMEA region. We saw a slight improvement compared with the prior quarter where fixed networks revenues were $21,800,000 Mobility Solutions segment revenues were $9,200,000 compared to $27,100,000 in the same quarter last year and $14,000,000 in the previous quarter. The decrease reflects the effect of COVID-nineteen on the IFC market. Terrestrial Infrastructure Projects segment revenues, which include the construction revenues for our projects for Pronacel in Peru, were $5,300,000 compared to $9,000,000 in the same quarter last year and $2,500,000 in the previous quarter. As we have discussed previously, during the construction phase, revenues from Fronatelli will vary quarter to quarter depending on the percentage of the project's completion.
Our progress in the last two quarters has been slightly slower than expected due to the pandemic restrictions in Peru. Our GAAP gross margin in the Q3 of 2020 was 25% of revenues compared to 37% in the same quarter last year. The decrease in our gross margin is mainly attributable to a less favorable revenue mix as well as the lower revenue level. Our gross margin in the previous quarter was 25%. Total operating expenses on a GAAP basis for the Q3 were $20,300,000 compared to $16,300,000 in the same quarter of last year and $13,000,000 in the previous quarter.
In the current quarter, we had expenses related to the Comtech merger and litigation amounting to $8,200,000 GAAP operating loss was $10,900,000 compared to operating profit of $7,000,000 in the same quarter last year and operating loss of $3,500,000 in the previous quarter. Excluding expenses related to the Comtech litigation, GAAP operating loss in the quarter was $2,700,000 GAAP net loss in the 3rd quarter was $11,600,000 or $0.21 per share compared with net income of $6,300,000 or $0.11 per diluted share in the same quarter last year. Net loss for the previous quarter was $4,200,000 or $0.08 per share. Now looking at our results on a non GAAP basis. Operating loss was $1,900,000 compared with an operating income in the same quarter last year of $7,500,000 We saw an improvement compared with the previous quarter's operating loss of $2,600,000 I would like to note that we have put significant effort in matching our ongoing operating expenses with a reduced revenue and our operating expenses were $11,400,000 reduced from $15,800,000 in the Q3 of last year and $12,200,000 in the previous quarter.
Net loss in the 3rd quarter was $2,600,000 or $0.05 per share. In the same quarter last year, we reported net income of $6,800,000 or $0.16 per diluted share. We improved versus the previous quarter in which we reported a net loss of $3,300,000 or $0.06 per share. Adjusted EBITDA for the Q3 of 2020 was $600,000,000 compared with $10,100,000 in the Q3 of last year. We saw an improvement compared with the previous quarter in which adjusted EBITDA was $100,000 As of September 30, 2020, our total cash and cash equivalents, including restricted cash, were $77,200,000 a decrease of $8,100,000 from the previous quarter.
I note that we received an additional $70,000,000 in cash, a termination fee for the Comtech merger cancellation during October 2020. We recently announced our plans to distribute dividends to our shareholders in a total amount of $55,000,000 out of which $20,000,000 was declared and will be paid on December 2, 2020, and additional $35,000,000 is expected to be declared subject to court approval at the beginning of 2021. DSOs, which include our Fixed Networks and Mobility Solutions segments and exclude receivables and revenues of Our shareholders' equity at the end of the quarter totaled $225,300,000 compared with $236,900,000 at the end of the previous quarter. That concludes our review. Thank you for your attention.
I would like now to open the call for questions. Operator, please?
Thank you. The first question is from Gunther Karger from Discovery Group. Please go ahead.
Yes, thank you. First, thank you for an outstanding report given the pandemic circumstances. Secondly, a question. With regard to Gogo and its ongoing sale of its commercial division to Intelsat, that's where they're selling the KAKU equipment to. What is the impact, if any, on Gilat for that?
For an example, with the sale to Intelsat, I could expect there may be some expansion of service. So I would welcome any comment on that.
Yes. Indeed we are seeing several consolidations in the market and Gogo acquisition Gogo CA acquisition by Intelsat is one of them. We are working closely with Gogo and closely with Intelsat and we think that the combination of the 2 carries significant potential for Gilat. First of all, we consider both of them as partners and we believe that there is room for extending the cooperation of Gilat with those two companies. I guess that one of the reasons Intelsat acquired Gogo is that Gogo will use their Ku capacity and that means more deployments for Gilat hubs and later on modems.
So in general, we see it as a positive development for Reliance.
Thank you. A follow-up question if I may. On the military side, defense, you just recently appointed ahead of the rejuvenated department at Gilat to deal with that sort of business. Could you offer any comment as to what areas or what effort is ongoing at this time with that area of business?
That's a good question. As you know in the past few years the defense business was relatively small business for Gilat, mainly tactical equipment, UAVs, antennas and the amplifier that we develop and manufacture in wave stream. What we see today is that we see increase in the opportunities in the market and we thought it's the time is right to strengthen our team and we hired a new Head of Defense Business to make sure that we can capture those opportunities. So it's too early to say because it's just starting the work as we speak, but we believe that with him we will be able to capture much more opportunities that we used to capture in the past.
Thank you very much and good luck.
Thank you, Gunther.
The next question is from Yuval Shein of Hebrew University. Please go ahead.
Hello. With growing competition, can you say something about what is your competitive advantage and what is your goal towards the Chinese market and the old Eastern market and whether you need a substantial amount of cash for our future growth?
So in one question you capture 30 minutes answer, but I'll try to be short. First of all, our competitive advantage is we believe that our technology and our presence worldwide, we have presence in a lot of countries worldwide, we invest heavily in R and D and our ability to provide not only equipment, but also services including managed service position us very well in the growth areas that we invest in. As for the cash that we need for future expansion, we have I think after we include $70,000,000 payments from Comtech and $55,000,000 dividend. I think we have about $85,000,000 to $90,000,000 in cash and equivalents. So it's sufficient money to support our future growth, may it be organic or inorganic growth.
Can you repeat the 3rd question that you had?
The Chinese market, I asked it for the competition aspect of the Chinese market and the growing companies that deal with these kinds of technologies?
So the Chinese market is not a simple market. We are working several years in China. We delivered a base bed for China, such 16 and we recently announced our achievement with ChinaSat and FTS of deploying our aero modem and I think it's the 1st commercial modem that fly in China using ChinaSat 16 ks band. It helps that we are an Israeli company in China, not that the Chinese are not doing business with the U. S, but sometimes it helps to be a non U.
S. Company. There are several large opportunities in the coming future. ChinaSat is going to launch several new satellites and we think that we are well positioned to win them and we are expecting the RFP to be issued probably at the second half of twenty 21. I think today the most important activity that we are doing is mainly concentrate on the in flight entertainment and connectivity opportunities in China.
Thank you very much.
The next question is from Asaf Baral of Oppenheimer. Please go ahead.
Hey, guys. First of all, welcome back. Good to hear from you again on the conference call. If we could start off, I'll ask a few questions on each of the operating segments just to kind of keep it clean. So for Fixed Networks, we're seeing that revenues are stabilizing and even recovering from 2Q 'twenty levels, which is pretty encouraging.
To what extent is that stabilization or maybe initial signs of recovery attributable just attribute this give or take. Yes, I don't actually need a dollar sign back to everything. But number 1, traditional satellite equipment that you guys sell. Number 2, the satellite backhaul business. And then number 3, the Fattell services revenues, because when we do the comps on a year over year basis, we should see even an incremental gain from Fitel.
So kind of break it down for us where the positive trajectory is coming from since 2Q and then some of the other moving parts?
So while Woosmat is gathering the information you asked, I'll give a high level brief. What we saw in the market this quarter is a very decent recovery in the fixed networks, especially in terms of booking. And there is a timing issue between booking and revenue. Usually it's between 3 to 6 months. Sometimes we deliver the day after, but in most of the cases if you buy hubs and other equipment it takes time to manufacture, ship and install and get the acceptance.
So I believe that the achievement we have made and announced this quarter especially in cellular backhaul which was close to 40% or 50% of our booking this quarter. We will see in the coming few quarters especially since it's a managed service and you will see it over a 3 years period. In Peru, we are progressing as planned with services for Pronatell. And in addition, as I said in my script, we were awarded extension significant extension or expansion of the IPT agreement, which is a contract of tens of 1,000,000 of dollars for a period of 5 years, providing the connectivity for IPT which will use it for 4 gs backhauling. And this is just the beginning of those service because right now we can serve them only in 3 regions.
Soon we'll be able to provide this also in Cusco, the 4th region. We expect to move to operational phase early next year. And in ICA and Amazonas, the 5th and the 6th region that we were awarded in 2018, probably only in 2022. So the potential over there is very high and the additional cost from those revenues are relatively low because we are selling the existing capacity of the network. In addition, there are several other large opportunities in Peru that we hope to capture in 2021.
One of them is get the award from Ponatello of services of the second half of the network that right now we are not obliged to maintain.
If you look at the fixed segment, in general, and this changes quarter over quarter in Gilat, it's important to know that quarter over quarter, the revenue mix changes a lot due to different large deals. But in general, the cellular backhaul is around 30% of the revenues there. The Peru services revenue right now are around 20% to 25%, and we expect them to rise as we enter into the operational phase of the different regions. And the broadband, which is the rest is around 45% of those revenue.
Okay. That's actually extremely helpful. The Peru revenues actually sound even when I'm doing the math in my head here, even a little bit better than what we had modeled pre COVID, right? You weren't expecting to get maybe 25% of the fixed networks revenues, right? Is this going better than you had expected in terms of services coming online?
You're talking about the Terrestrial?
No, I think it's as expected, except I think that the IPT deal is very, very a good beneficial deal that is maybe higher than expected. But except for that, when looking at the Peru Regional projects, it's not better than expected. I think it's more or less in line or even maybe a bit slower because of the COVID-nineteen.
I will remind you that in Peru, the restrictions are still valid for almost 7 or 8 months. Peru is significantly affected by the COVID and there is still some areas that are completely closed and it's we as a telecom company has the ability to move from region to region and install and provide service, but it's not as easy as it should be.
Yes. What I was referring to is just not on the construction business, right? I'm just talking about the services. Yes. That's 1.5% of what services revenues, right?
Just to be clear.
Yes, out of the fixed, right.
Yes, yes, yes, of course. Okay. Okay, cool. So that color is very helpful. Many of the satellite players legacy satellite players have come under financial pressure.
This has been a long term trend, long term negative trend. So COVID-nineteen really worsened the situation for the more leveraged companies. We've had one major company actually declare bankruptcy. What kind of impact are you guys seeing? Are you seeing a shrink in CapEx?
How should we expect this to play out moving forward? Are there even maybe potentially opportunities here? Any color.
So indeed, the service providers, especially the big ones and the satellite operators are highly leveraged companies. We saw at the beginning of the year Chapter 11 trend when Speedcast and Global Eagle and the Intercept and others went into the Chapter 11. Most of them are on their way out. I know that the Speedcast received or going to receive equity injection from their creditors and Global Eagle moved to beyond by the 1st lien creditors. Intelsat received court approval to invest $400,000,000 from the creditors in order to acquire Gogo CA.
So I think all of them will move out. I think that no doubt there was effect, especially with Speedcast where we are doing a lot of business with them in Australia. But right now, NBN acquired Speedcast Australia and we are going to do the business directly with them. So we believe that there is no business that was lost, some delayed and we'll see the orders are coming probably if not this quarter than early 2021.
So I guess kind of on the same question, because it's also going to apply to the NGSO business and moving forward. You guys compete to a certain extent with the traditional satellite players on equipment, right? So are you seeing maybe any less competition? Any kind of impact of you maybe being last man standing in certain products?
I'm not sure I fully understand your question. In some cases, with satellite operator, we compete on equipment. The only satellite operators own their own equipment. It's only Viasat who usually doesn't sell their equipment as standalone. So it's not really a competition.
It's mainly competition for our customers. And the Hughes Network and with them we do compete here and there. And nothing beside that. We do compete with some of our customers on services, but our services today is strictly to MNOs and we try to limit the managed service that we are providing to MNOs and when needed we buy the capacity from the satellite operator. So we have a customer vendor relationship.
So I think that we are managing the relationship well.
Okay, great. Yes. How is the financial situation in Peru? We can see on the balance sheet the way receivables look in terms of the GAAP accounting, but do you guys feel comfortable with the situation in Peru with the government? I mean, we haven't taken a close look at the fiscal situation, but any color there would be helpful.
The relationship of Gilat and the government are very good. We are doing projects with the government in the last 20 years. I think we had more than 15 projects already. They are paying on time and in dollars. So we don't have the exchange rate risk.
In most of the cases, they are paying in advance. Today in some of the regions we are in a situation that we are in order to achieve milestones we are more progress than we should based on the contract. And in those kind of cases sometimes we need to finance it on our own. We expect a very large payment from the government once they accept Cusco. It's close to $20,000,000 in 2 payments depend on what type of the network they accept.
There are delays in accepting the networks mainly because of the COVID. They can send people to test and accept relevant sites. Today we are in progress with them and we believe that by the end of Q1 we'll be able to get the 2 acceptance both for the transport and for the access network. So we are aiming to get payment if not by the end of this quarter Q4 then by Q1 2021.
Okay, great. That's very helpful. Okay, I think that's enough on fixed networks. On the mobility business, I know that visibility is still low here. But number 1, obviously, the revenues came down from $14,000,000 to $9,000,000 this quarter.
To what extent is that the bottom? So that's number 1. And then number 2, you had mentioned that you expect obviously the business to return to a certain level. We were talking about maybe 2,000 airplanes being fitted, whether it be retrofitted or fresh new airplanes being equipped with in flight connectivity. How quickly do you think we come back here even if the airlines do go back to normal business, maybe late 2021, who knows when?
How what's kind of the turnaround time between when business starts to normalize in terms of air traffic and then when we start to see a pickup in demand for modems?
That's a good question. We are not going to give guidance for Q4 revenues. I think it's the revenue in Q3 was lower mainly because at the beginning of the year we delivered orders that we had in the backlog. Right now most of the service providers and the integrators are not buying equipment until they will see that aviation markets return. The question when it will return, I don't think anyone knows the answer.
I think everyone thinks that the earliest will be probably mid next year. Some think that maybe 2022 or even later, it depends what is the aspiration of each one that you talk to. We think that once the aviation will return, we believe that in the same quarter or the quarter after all the service providers will return to buy equipment and install and increase their network deployment. We believe that the adoption of the wide adoption of free Wi Fi will is a significant opportunity for Gilat and the market. There is a lot of potential over there.
And from my discussions with analysts and CEOs of those service providers, they say that they can't predict when everything will return to normal, but they believe that within 3 to 5 years' time they will manage 5 to 10 times the capacity they used to manage before the pandemic. This alone is enormous opportunity for Gilat in equipment and services.
Okay. I guess last question, if I could. We had spoken in the past, if you could just remind me, because I missed the press release or whatever, on the situation of the antennas. We had spoken about you guys signing a business aviation deal. Obviously, we can put that on ice or I don't know where they know where that stands, but in general, kind of the future of commercial antenna?
Yes. So we have the antenna for Business Aviation, but the project was canceled I think a year ago when we announced it. We announced several development with our ESA antenna in the past few months. We are progressing, but I must be honest very slowly because the fact that service providers and airlines are unwilling to invest right now, that means that the opportunity will take significantly more time than originally expected. So it will take time.
It's not something for tomorrow morning. And even once they will decide to invest, it's a cycle of several years until you fit the antenna to their needs, get all the certifications. So it's not an opportunity for the near future.
Okay. So with that, first of all, thank you very much for the very clear, broad kind of clear answers. Best of luck. I look forward to talking to you guys tomorrow.
Thank you very much.
The next question is from Yarev Steiner. Please go ahead.
Hi, Adi. I wanted to ask you regarding your cash balance. So you have a lot of cash on hand and your stock price is very undervalued. So are you thinking of making a buyback plan?
1 by 1, I would say. We just announced that we want to share $55,000,000 dividend, dollars 20,000,000 was declared and going to be paid in 3 weeks' time, another $35,000,000 will be declared once we get approval from court to capital reduction because we don't have significant distributable profits because the termination fee profit will be recorded in Q4 and we wanted to share the dividend as soon as possible and not wait to after we report our yearly results towards the end of Q1. So $55,000,000 is already there. We remain with 85,000,000 dollars And in the future, if we think it's appropriate, we will discuss it in the Board. And if we decide that we will go with it, we will announce.
Right now it's not on the table.
Okay. And when should we expect return to profitability? Is it next year? Like can you give some timelines about it?
So it's a bit too early to give guidance for 2021. Although I can say that we are definitely going to see growth on top line and on bottom line. We show minimal adjusted EBITDA this quarter. We will show quarter over quarter progress in Q4 and later on in Q1. 2021 will be profitable.
Again, we are cautiously optimistic because we see that the world is starting to digest the situation and do business although there is COVID and although we can't travel and meet face to face with customers, we can't do installation on our own and we're doing it remotely in most of the cases. So we feel that acceptance is there to do business. Profitability, significant profitability, we will see once we will see the top line return to the level we used to see before the pandemic and the IFC will return. I think that 2021 will be a significantly better year than 2020 and will show a decent double digit EBITDA, but it's too early to say more than that.
Okay. Thank you and good luck.
Thank you very much.
The next question is a follow-up question from Gunther Karger of Discovery Group. Please go ahead.
Yes. Thank you for taking the additional question. With the MNOs gravitating rapidly toward their 5 gs network systems, the emerging IoT, Internet of Things is coming into play as well. So my question is, as the IoT accelerates and starts generating bandwidth demand in addition to the standard network operators, will this have any positive influence on Gilat's business?
So, I'll start with the 5 gs. No doubt 5 gs will be a significant growth engine in the future. But I need to be honest, 5 gs material revenues, I will say it will take 2 to 3 years to see it in the P and L. From the simple fact that you first start with the cities where you have a terrestrial connection and later on you deploy in rural areas. What we will see in the interim period is that 5 gs will drag a lot of 4 gs deployments because a lot of MNOs who is going to deploy 5 gs will be required in several cases by their license to deploy 4 gs in the rural areas.
And the fastest way and the easiest and the cheapest way to do it is with Gilat equipment. And as I said, based on the analyst report NSR, we have about 44% market share in the cellular backhaul. But if you look at the details and just look at the 4 gs, I think we have more than 80% of the market share. So I think we are well positioned to capture a lot of the 4 gs business in the coming few years, up until 5 gs will be ready for satellite cellular backhaul. We recently announced our achievement with the Tycom, which we demonstrate together with them.
As for IoT, IoT most of the applications for IoT is narrowband and not broadband. And we are looking at this area also. I can't say that today we are investing a lot in IoT. We do have some business in IoT, especially in aggregation places like backhauling for IoT devices and we will see more of this in the coming future.
Thank you, Adi.
Thank you, Gunther.
There are no further questions at this time. Before I ask Bosmat Halpern to go ahead with her concluding statement, I would like to remind participants that a replay of this call is scheduled to begin 2 hours after the conference. In the U. S, please call 1-eight eighty eight-three 269310. In Israel, please call 3,9,250,904.
Internationally, please call 9,723-9255,904. Post Smart, would you like to make your concluding statement?
I want to thank you all for joining us on this call and for your time and attention. We hope to see you soon or speak to you in our next call. Anyone who would like to speak to us is invited to contact our Investor Relations team. Thank you very much, and have a great day.
Thank you. This concludes Gilat's Q3 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.