Good morning, ladies and gentlemen. Welcome to the conference call to report the second quarter 2022 financial results for Telesat. Our speakers today will be Dan Goldberg, President and Chief Executive Officer of Telesat, and Andrew Browne, Chief Financial Officer of Telesat. I would now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management. Please go ahead, Mr. Bolitho.
Thank you and good morning. This morning, we filed our quarterly report on Form 6-K with the SEC and on SEDAR. Our remarks today may contain forward-looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward-looking statements as a result of known and unknown risks and uncertainties. For a discussion of known risks, see Telesat's annual and quarterly reports filed with the SEC and SEDAR. Telesat assumes no responsibility to update or revise these forward-looking statements. I will now turn the call over to Dan Goldberg, Telesat's President and Chief Executive Officer.
Okay, thanks, Michael. This morning I'll share some thoughts on our results and give an update on the business. I'll then hand over to Andrew, who will speak to the numbers in detail, and then we'll open the call up to questions. As noted in the earnings release, we're off to a good start for the year, and as a result, we're able to raise our full year guidance for both revenue and Adjusted EBITDA. Our confidence around this comes from securing the partial DISH renewal, reselling the portion of capacity that DISH didn't renew, the rebound we've seen in traffic for mobility services over the course of the year, and a number of other contributors on both the revenue and expense side of the business. Pricing environment remains largely stable and we continue to maintain relatively high utilization across the fleet.
On our last earnings call, we noted that we purchased in the open market Telesat unsecured notes with an aggregate face value of $60 million, and that our board had authorized us to purchase up to an incremental $100 million of face value of Telesat debt, which we did in Q2 last quarter. At our board meeting yesterday, we received authority to purchase up to an additional $100 million face value in Telesat debt. Suffice to say, we think our debt's trading below fair value and that this is an accretive way for us to use our cash. I want to flag this morning an issue with our Anik F2 satellite that we called out in the 6-K we filed.
In previous filings, we've noted that Anik F2 suffered anomalies on two of its thrusters, and that as a result, we had to implement a workaround mode to maintain its orbital position and provide service to customers. We expected this approach would allow us to provide station-kept service until 2025, but it now appears that we can only maintain station-kept service until the end of this year, at which point the satellite will be put in inclined orbit. When that happens, services currently supported on the satellite will be adversely impacted, some as early as next February, while other services will degrade over time, depending on the size of the antennas receiving signals from the satellite. As a result, beginning next year, we expect Anik F2 revenues will decline if we can't find alternative ways to support those services.
In an effort to provide continuity of service and preserve revenue, we're developing a range of potential mitigation strategies for Anik F2, including adding tracking antennas at certain of our sites, which would extend the service life for many of our customers, and exploring repointing customer antennas to alternate Telesat satellites or to third-party capacity. We're working closely with our Anik F2 customers and with government officials here in Canada on this effort, as most of the services on the satellite are provided in Canada. To give you a sense of the potential financial impact, Anik F2 and related ground services represent around 8% of our revenue, so a little bit more than CAD 50 million. We don't anticipate any adverse revenue impact for this year, 2022.
For next year, and assuming a given service ends when it can no longer be supported on the satellite, we estimate we'd lose around a third, 1/3 of Anik F2's revenue next year in 2023, which likely would be somewhat offset by resale of the freed up capacity for mobility services, which Anik F2 can support when it's in inclined operations. To be clear, we'll be seeking to use our own and third party capacity to find solutions for our Anik F2 customers in order to provide continuity of service and preserve the revenue on Anik F2 to the maximum extent possible. We will, however, incur incremental expense for any third-party capacity or other investments we make to extend the impacted service. Turning to Telesat Lightspeed, we received a few weeks ago a final proposal from Thales, which we shared with the ECA lenders earlier this week.
It took us longer than anticipated to get the Thales proposal. On our last earnings call, I indicated we hope to have a good sense of where we stood with the ECAs by the end of June, but given the delay in getting Thales' final proposal, that's now slipped out a few months. We also believe that we're going to need to secure some additional financing above and beyond the ECA borrowings as inflation and the delay in the schedule for Telesat Lightspeed has led to an increase in the cost of the program. To that end, we're in discussions with potential financing sources at this time. The contemplated financing, this incremental financing, would be at the Lightspeed unrestricted subsidiary level and would be subordinate to the ECA lenders and the Government of Canada and Government of Quebec investments.
Lightspeed represents a compelling investment opportunity, but there's no assurance that these discussions will come to a successful conclusion. Although we've been disappointed with the supply chain challenges and inflationary pressures that we've encountered, we remain extremely bullish about the opportunity Telesat Lightspeed gives us to grow our business. We have a highly disruptive and robust constellation design, over CAD 750 million in contractual backlog and over CAD 4 billion in financing arrangements, and the strong support of government partners at the federal and provincial levels here in Canada. Our overwhelming focus is on completing the financing and commencing the full-scale construction of the program. With that, I'll hand over to Andrew, and then look forward to addressing any questions.
Thank you, Dan, and good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. In the second quarter of 2022, Telesat reported revenues of CAD 187 million, Adjusted EBITDA of CAD 146 million, and generated cash from operations of CAD 26 million, with CAD 1.5 billion of cash on the balance sheet at quarter end. For the second quarter of 2022 when compared to the same period of 2021, revenues decreased by CAD 1 million to CAD 187 million. Operating expenses decreased by CAD 6 million to CAD 59 million, and Adjusted EBITDA decreased by CAD 2 million to CAD 146 million. The Adjusted EBITDA margin was 78.4% compared to 78.7% in 2021.
Between 2021 and 2022, changes in the U.S. dollar exchange rate had a negative impact of CAD 4 million on revenues, a minimal impact on operating expenses, and a negative impact of CAD 4 million on Adjusted EBITDA. When adjusted for the changes in foreign exchange rates, revenues decreased by CAD 6 million for 2022 compared to 2021. Operating expenses decreased by CAD 7 million and Adjusted EBITDA decreased by CAD 5 million. The revenue decrease was primarily due to reduction on renewal of a long-term agreement with a North American direct-to-home customer, partially offset by an increase in services provided to customers in the mobility market as it continues to recover from the impacts of COVID-19. The decrease in operating expenses was primarily due to lower non-cash share-based compensation and lower professional fees.
Interest expense increased by CAD 3 million in the second quarter when compared to the same period in 2021. The increase in interest expense was primarily due to interest on the 2026 Senior Secured Notes, which were issued in April 2021, combined with higher interest on a U.S. Term Loan B facility. This was partially offset by the impact of the repurchase of our senior unsecured notes, combined with the impact of the maturity of one of our interest rate swaps in September 2021. During the six months ended June 30th, 2022, we repurchased senior unsecured notes with a principal amount of CAD 202.1 million by way of open market purchases in exchange for CAD 97.2 million.
These repurchases resulted in a gain in the second quarter of CAD 86 million, and for the six-month period, a total gain of CAD 107 million. These notes have been retired. Also to point out, we represent an annual interest savings of approximately CAD 10.4 million per year. As Dan has mentioned, we have also authorization to purchase up to a further $100 million U.S. face value of debt. In 2022, we recorded a loss in foreign exchange of CAD 99 million during the second quarter compared to a gain of CAD 41 million in the second quarter of 2021. The loss for the three months ended June 30th was mainly the result of a stronger U.S. dollar to Canadian dollar, with a resulting unfavorable impact from the translation of our U.S. denominated debt.
Our net loss for the second quarter of 2022 was CAD 4.4 million, compared to net income of CAD 53 million in the prior year. The variation of CAD 67.4 million was principally due to non-cash foreign exchange losses for the three months ended June 30th, 2022, compared to the same period in the prior year. This loss was partially offset by the gain on extinguishment of our debt. For the first half of 2022, the cash inflows from operating activities were CAD 69 million, and the cash flows generated from investing activities were CAD 31 million. Included was CAD 65 million by way of receipt of the remaining phase one U.S. C-band clearing process, and virtually all of the capital expenditures related to a lower orbit constellation, Telesat Lightspeed.
Looking to guidance, as you would have noted in our earnings release this morning, and as Dan has elaborated in his remarks, we are updating our previously stated 2022 guidance. For 2022, Telesat now expects its full year revenues to be between CAD 740 million-CAD 750 million, and an increase from CAD 720 million to CAD 740 million. Also, as stated when we provided the preliminary 2022 guidance on March 18th, included in our revenue expectations is the recognition of a significant hardware sale with the provision of related services to DARPA later this year as part of a CAD 18.3 million contract. In terms of Adjusted EBITDA, Telesat now expects it to be between CAD 545 million-CAD 560 million and an increase from CAD 525 million to CAD 545 million.
Our guidance still reflects a Canadian dollar to US dollar exchange rate of 1.3. With respect to expected capital expenditures, we still expect our 2022 cash flows used in investing activities to be in the range of CAD 100 million-CAD 120 million, including capital expenditures to further advance our Lightspeed program. Once we have greater visibility around the construction and financing of our Telesat Lightspeed program, we'll provide a further update on our anticipated capital expenditures for the year, which could increase substantially. To meet our expected cash requirements for the next twelve months, including interest payments and capital expenditures, we have approximately CAD 1.5 billion of cash and short-term investments at the end of June, as well as approximately $200 million of borrowings available under our revolving credit facility.
Approximately CAD 1 billion in cash was held in our unrestricted subsidiaries. In addition, we continued to generate a significant amount of cash from our ongoing operating activity. At the end of the second quarter, leverage, as calculated on the terms of the amended senior secured credit facilities, was 5.56x. Telesat has complied with all the covenants in our credit agreement and indentures. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. Our 6-K provides the unaudited interim condensed financial information in the MD&A. The non-guarantor subsidiaries shown are essentially the unrestricted subsidiaries of minor significance. That concludes our prepared remarks for this call, and now we'll be happy to answer any questions you may have. With that, we turn back to the operator.
Thank you. We'll now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. First question is from Walt Piecyk from LightShed. Please go ahead.
Nice. Dan, can you give us a little bit more specific timeline on when you expect to finalize things with the ECA? I know that you just, as you stated in your prepared remarks, finished up with Thales very recently, contacted ECAs. When's that gonna be finalized? And then what is the approximate amount of the incremental financing that you think that you're gonna need to secure?
Thanks, Walt. Let's see. As far as timing and when things will be finalized, you know, what we said before, as I mentioned this morning about, you know, the ECA timeline is, yeah, we had expected sort of, you know, by now to have a good sense of where we stood with the ECAs. In the process with the ECAs is, you know, you engage with them, you sign a term sheet, and then it takes some months to, you know, kind of close your financing and sign definitive documents. I understand from our advisors that once you have a term sheet, you've got a pretty high degree of certainty around your financing.
You know, if I sort of do apples- to- apples, you know, with what I thought we would know by now, I now think we'll know in a couple of months. You know, call it sometime in Q4, and by that, you know, have a good sense for where we are with the ECAs. Is this thing coming together or not? That's our sense around timing with the ECAs, and then, you know, to follow on what I said.
That event, though, that you're saying is in Q4 is the term sheet or that's the finalization of the term sheet that was previously signed?
Yeah, it's gonna—I mean, by, you know, the end of Q4, I think, yeah, we've got a good sense of where we are, and maybe the full term sheet is signed by that point, too, though harder for me to say because.
It would take another. Basically into Q1 to finalize a term sheet that would hopefully be signed by the-
No, I think. No, I mean, look, you know, I've never done one of these ECA things, and they've got all sorts of procedures, you know, above and beyond what you know, commercial lenders have. It would be our expectation that, yeah, we'd have a good sense of where we stood with them in the next few months. The term sheet will, I don't know, you know, take a little bit longer thereafter, but I don't think it's unreasonable to believe that by the end of this year, that term sheet should be in place. From our perspective, you know, based on all the advice that we've gotten, once we have that term sheet in hand, we're gonna feel comfortable about making meaningful expenditures and moving forward with the program.
The launch of the program doesn't have to await having, you know, going through the entire definitive document process based on the advice that we've been getting. Maybe I'll pause there. Did you have any other questions about that? I'll talk about the-
No, no. Just the incremental. Yeah, thank you.
On the incremental financing, a couple of things as we said, you know, because of this inflationary environment that we're in, because the schedule got elongated, which we've talked about before, you know, the program costs have gone up. You know, we've talked about Lightspeed as like a CAD 5 billion CapEx kind of project. When we kind of look at the current costs and the inflationary pressures and whatnot, it's up, you know, probably the CapEx sub 10%, but it's up. It's up some, you know, hundreds of millions of Canadian dollars. The biggest unknown for us right now, I think we've now got a good sense for where the capital costs are coming.
I mentioned took us longer than we would have liked, but we now have a final proposal from Thales. You know, but another unknown is with the ECA lenders. They, for those of you who know, they often require contingent capital to deal with different cost contingencies that can arise over the course of a multiyear program. You know, that's stuff like schedule delays, cost overruns, you know, all that sort of stuff. We, you know, we don't know at this point in time the magnitude of, you know, what's referred to as contingent equity, this contingent capital.
When we think about what that incremental financing, I should also say, you know, what we've said in the past is the ECA financing should cover, you know, most of the remaining financing that we needed. But it was never, you know, all of it. We always knew that we were gonna need to raise a little bit of extra money. When we think about this incremental financing, I'd say it's gonna be, you know, at least kind of 10% of our overall capital costs. It could be more depending on, you know, where we end up with the ECA lenders on this contingent capital. That-
Any of this, Dan, commentary from the ECAs in terms of them saying, "Look, we need you to do this incremental CAD 500 million to CAD 1 billion in order for us to get to our term sheet." Do they require that to specifically be equity, or is it something that could be layered on as subordinate debt?
That's a good question. I mean, what they're most focused on, obviously, is that it's subordinate to them and that it's kind of non-recourse. Yeah, but beyond that, I think I'm looking at our general counsel who's closer to this stuff than I am. Yeah, I think that's what, you know, would satisfy them. For sure, I mean, we've been engaging with these ECA lenders for some amount of time, so we've got, you know, kind of a decent sense for the. We're not done yet, as I mentioned, but we got a sense already for what the overall kind of, you know, financing package that we're gonna need to have lined up is going to be. As I mentioned, now that we've got a better sense for...
Now that we've got this final Thales proposal, a better sense for what the total CapEx is. Yeah, it's apparent to us. We always knew we needed to raise some incremental financing. Now we know that it's gonna need to be a little bit bigger because of the cost increases and the sense that we're getting around the contingent capital. Yeah, we've been out engaging looking to secure this financing. Yeah, just wanted to set that up.
Is it, Again, is it tied to the ECA, meaning that are you gonna have to do this before they reach their finalized term sheet in the fourth quarter?
I don't think so. I don't think so. You know, they're gonna need to have visibility that. We're gonna have, you know, all of our, you know, again, all of our financing in place so that, you know, they can go forward.
I mean, given the Thales, it seems like you're kind of locked in on one at this point, and prices go up. That doesn't seem like a favorable situation. What's their appetite for coughing up some vendor financing, given that they're partly responsible for not managing their own supply chain better?
Well, look, first off, you know, we think that Thales is a top vendor for advanced satellite constellations, you know, number one. Look, the reality is we are operating in an inflationary environment. We are operating in an environment where supply chains are stretched, and I mean, just look across the industry, kind of everybody's getting delayed in their program right now. We're not locked into Thales. I mean, I think, you know, they're a good prime contractor. I think they've got a great track record. We're not locked into Thales.
It just sounds like the time keeps pushing out a bit, and then now the price creeps up. It's centralized on Thales. I mean, at some point.
No, I mean, it-
Like, they can go fly a kite.
I'm sorry, Walt, one more time.
Should they be sent a message at some point that maybe they need to share in some of this pain?
Look, suffice to say, you know, they've been sent a message. I'm comfortable where we are now. Our huge focus right now is getting this thing financed right now, where our objective is to get that done and to get going on the construction of the program by the end of the year. That's what we're trying to execute on right now. Has it been frustrating that we've encountered these delays and whatnot? Yeah. It's, you know, hasn't been what we wanted, but things are teed up right now. They're gonna be teed up with the ECAs and whatnot, and we're gonna know a whole lot more, you know, in a few months' time. That's my expectation.
Okay. I'm sorry for the other-
Hey, Walt, I gotta say I love talking to you, but you can't filibuster on the call here, so maybe one more from you.
No, I'm on a little register. Okay, one more then. Just on the equity versus debt, meaning that you said you've already been having key conversations. Can you give us a sense on where that is in the cap structure on the initial conversation you've had? One final question.
That's a great question. I'm glad we let you ask one more. Look, you know, just like we think our debt's been trading below fair value, we don't think our current share price is a fair representation of the value of Telesat and the value of our future prospects with Lightspeed and whatnot. That's how management feels. Our board strongly feels that way. Our two largest shareholders feel that way. Suffice to say, when we think about raising this incremental financing, we're all really focused on raising it in a way that's not dilutive to the equity at a minimum, but rather that's accretive to the equity. That's what our focus is, has been.
Thank you very much.
Thank you.
Thank you. Next question is from Mike Pace from JP Morgan. Please go ahead.
Hi. Thank you. Good morning. Just to follow up on the incremental financing. I guess, does that, let's call it the 10% of the budget or so, does that include or contemplate any more money coming from the restricted group? I believe there's still maybe CAD 200 million of basket availability or is that excluding any additional money?
Andrew, do you wanna take that?
Yeah. No, it does not. What Dan is talking about is indeed like looking at other sources of financing, and that is not part of what we're speaking about, Mike.
Okay. To follow up to that, I guess, you've been buying back a lot of debt in the open market, I guess. How do you think about balancing bond buybacks with the potential need for GEO to help continue to support LEO in the context of the GEO free cash flow?
I mean, Andrew, can I take the first crack at this?
Yeah. Go for it.
Look, we're totally committed to our GEO business and are totally prepared to make incremental investments in GEO so long as we've got a good business case. You know, I think that what we've been doing with some of our cash to repurchase this debt has been the smart thing for us to do. You know, we shared this morning that the board just authorized us to buy up to an incremental $100 million of debt. Like we said before, you know, we're not committing to do that. We don't have to do that. Yeah, you know, our business is generating a lot of cash.
A lot of that cash gets built up in the restricted group, and we're focused on putting it to use in good ways to support the overall business where our debt's trading where it is. I don't know. I mean, it just strikes us that, you know, we can spend the money that we've been spending to be accretive to the overall business, but still leave us with sufficient cash to make the investments that we need to make to continue to support the GEO business. I don't know, it sounds like a long answer, but that's exactly how we think about it when we look at new GEO programs on a regular basis. I'm looking around the room because, you know, there are some things that we're thinking about now.
Long as there's a good business case, you know, for us to put money to work to invest in the GEO business, and there might be some opportunities out there, we're gonna do that.
Yeah. That's fantastic. I don't know, Dan or Andrew, I don't know who wants to take this one, but I guess with the guidance raise, you know, is that a function of Q2 outperforming for you guys? Maybe that, I guess, termination fee from a LATAM customer, and if you can quantify that latter point, that would be really helpful. If it wasn't a Q2 beat, you know, what changed in the second half of the year for you guys to get to, you know, CAD +15 million or so midpoint to midpoint?
I'll start. I mean, I think it's all the things that I hit in our script. If you remember when we originally gave guidance, we were clear that the big uncertainty for the year was where we were going to land with DISH on the renewal. When we gave guidance at the outset of the year, we were real clear that the guidance embraced kind of, you know, all possible outcomes. We get no renewal, you know, we get a partial renewal. Obviously, you know, we got the partial renewal, and I think we already said on our last call, that gave us the confidence to start making noises that we're gonna be, you know, kind of, you know, higher up in the guidance range.
Beyond that, the environment's just been pretty good. You know, we've been signing a good amount of business on the mobility side. You see the utilization of the fleet, you know, growing, on the expense side. Frankly, with some of the delays in LEO, we put off some of the OpEx that, you know, we had thought that we might incur earlier in the year. I don't know, it's kind of been all of those things that led us to do it. No, it really wasn't that termination charge really at all. So everyone knows, I mean, try to be transparent about this stuff, which is why we called it out in the release. That was order of magnitude about CAD 5 million.
It really, on the year, really didn't have any impact on the year. It probably put more revenue in Q2 than it otherwise would have. That's revenue that we would have captured over the course of the year anyway. In terms of how we had thought about our guidance at the outset of the year, it's not. That wouldn't have been impactful.
I just add on the operating side of the house, we're pretty laser-focused on controlling our expenses, so we're all over that. That's contributed as well.
I'm sorry, Mike, just while we're on the topic of guidance and whatnot. You know, we've shared with everyone that we got this, I think, very positive contract with DARPA to build two satellites in LEO that they'll be using to demonstrate. It's mostly about demonstrating intersatellite optical links. We said there's really not a whole lot of margin for us in that opportunity, and that. I think we gave the dollar value contribution. Andrew, what did we say?
Yeah. In fact, as part of the opening remarks, we actually said that. In fact, we called it out and said that, I'll just read. Also, as stated and provided in preliminary 2022 guidance on March 18, included in our revenue expectations, the recognition of a significant hardware sale with the provision of related services to DARPA later this year, and that was part of an $18.3 million.
Yeah. For us, you know, we're assuming that we recognize that revenue this year. There's a chance that it gets pushed to next year. If it does, that'll be revenue impacting, but because as we said, there's really not a lot of margin there, it won't be Adjusted EBITDA impacting, we think so. Anyway, just to call that out again for everyone.
Got it. That was actually my next question. If you don't mind, just, you know, how much DARPA money was in the second quarter, if anything? Just, can you just give us a rough kind of cadence of how that might flow through the rest of the year and maybe leak into early next?
I don't think. I'm looking around the table. There really wasn't anything material in the first half of this year, really. The big swinger is kind of probably Q4 of this year, I think is what we're expecting.
It'll be Q4 when we're expecting the DARPA sort of monies to come in. As we said, as Dan had said, that's the equation for the revenues. On the just the EBITDA side, we're pretty good, so we don't see any changes to that because, as we outlined when we talked about the DARPA contract, it's very important here for our business with the U.S. government, so therefore there's very little margin coming from it because it's about future growth and development. Hence it won't impact our adjusted EBITDA.
Great. Thanks, guys.
Thank you.
Thank you. The next question is from Arun Seshadri from Credit Suisse. Please go ahead.
Yes. Hi, guys. Thanks for taking my questions. First for me is just, you know, if you could provide, you know, Dan, is it a more realistic view, I guess, on Lightspeed in the context of, you know, a smaller constellation, you know, Amazon's Kuiper timing, I guess, coinciding with the new launch dates, you know, possibly in that 2025, 2026 timeline, and then obviously Eutelsat OneWeb. You know, are you in your revised or if you've revised your plans on Lightspeed, any context you can give in terms of, I guess, for investors seeking a little bit more of a cadence of what those kinda year one - five look like, you know, under the new kinda Lightspeed configuration?
Thanks for the question. Apologies, I'm not sure I totally followed it. I mean, here's how we think about the timing. One thing I wanna note is, you know, when we get our financing committed, and we start the program, we're gonna update everyone on what our schedule expectations are and whatnot. Just to note that. You know, look, we're out in the market every day talking to customers. Everyone would like Lightspeed to be coming sooner than later. There's no doubt about that. It's been frustrating for them and frustrating for us that, you know, schedule has moved to the right.
We continue to have just total conviction that what we're gonna be bringing to the market, and you're right, we're starting with 188 satellites and 10 spares. That will be a very capable, very disruptive constellation. It's probably also gonna be the case. You know, I expect that we're gonna be very successful with it. I expect we're gonna grow it over time, just like, you know, I think other LEO folks think about their constellations. Look, it's focused on the enterprise segment including government. It has features, kind of enterprise-grade features that we don't believe some of these other constellations are going to have.
We think it's going to really resonate in the market, whether it's aero connectivity, maritime connectivity, providing enterprise-grade services for corporates, telcos, ISPs. Those are the folks that we're engaged with in the market now. Those are the folks that are excited about, Lightspeed coming. You know, we've mentioned we've already got, you know, CAD 750 million of backlog right now. You know, as you know, we haven't even finished securing our backlog. My expectation is, you know, we get this thing financed and going. Our focus is on late this year, and then once, you know, that's done, and we're rolling, and the customers see that, you know, Telesat and Thales is building and can see hardware, and we're doing more in-orbit demonstrations that we'll be signing up more customers and creating more backlog, which we'll be reporting on every quarter.
That's our expectation. That's what we think. You know, I don't think we're gonna own this market. It's a huge market. You know, we've estimated the TAM at, I think, CAD 420 billion-ish, and looking around the room in the, like, 2030 kinda timeframe or something like that.
You know, we envision getting a very small percentage of that. No doubt, Amazon will, you know, take a share of that market. So will SpaceX, so will OneWeb. So will Viasat, Inmarsat, SES, all of them. It's a big market. Now, we strongly believe you need to bring the right value proposition to that market to be successful. We think that Telesat Lightspeed is that. You know, it's gonna be a great value proposition. But that's how we think about it, and that's reinforced by all the conversations we're having with the customer community. I hope that's responsive.
No, it's helpful from a high-level context, so I appreciate that. Just wanted to understand the mechanics around the ECA discussion. Our prior sort of expectation was that the inflation in the overall program was effectively you know addressed by shrinking the satellite constellation you know by shrinking the constellation you know by the significant number of satellites, roughly a third. Are we talking about inflation being an additional sort of 10% on top of that, sort of the you know that shrinkage accounting for the inflation? I guess that's question one. Question two is, in terms of are we talking structurally with additional funding being required junior to the ECA?
Was that just purely a function of the additional inflation, or are we talking about a portion of the original funding now required? You know, the ECA saying, "Listen, it's a smaller constellation, therefore here's what we're gonna give you on an ECA level, and the rest has to be raised in a junior fashion." Or is it more in terms of structure change, I guess? Those are the two questions.
Yeah. Okay. No, those are good questions. So on the increase in the cost of the capital program, yeah, I tried to hit it in my script. It's two things. It is inflation. You know, Thales went back out and before making their final proposal and rounded up again with their suppliers. So part of it's Thales, and, you know, we've got other suppliers, too. So part of it is inflation, and part of it is, as we said before, our schedule's longer, and with a longer schedule, it just means you gotta carry everything longer. Those were the two main contributing factors. That's number one. Then your second question was about, you know, what kind of drove this incremental debt and whatnot. Well, it's two things, I would say.
I tried to hit this a little bit, but one, the cost of the program went up, so we need to raise more money, number one. Number two, we had always said we need to raise some incremental financing. You know, at one point, we thought, you know, some of that might make sense to do through equity. With our shares trading where they are and our, you know, strong belief that you know that again doesn't represent fair value. Less interested in raising that incremental financing, you know, by issuing equity. What I said about just this unknown right now about the magnitude of the contingent capital requirements that the ECAs are going to require.
We've always known, I mean, they require that, I think, for, you know, almost every program they lend under. We knew, having engaged with them for a while, that, you know, they were gonna be looking for that, you know, from us as well. I don't think there's anything about us going from 298 - 188 with the ECAs that really changes that so much, but it's really those other things that I mentioned. It's the inflation, it's the impact of just having a longer schedule. It's the fact that we always needed to raise some incremental financing, and, you know, at this point in time, you know, issuing equity is just a whole lot less attractive to us than it might have been with the shares trading at a much higher level.
Being prepared for, at the end of the day, where we land with the lenders on the magnitude of the contingent capital.
Has there been any change to the French ECA's posture on participating post OneWeb Eutelsat?
No, not that we can see, and certainly not, you know, anything that we've heard from Thales. You know, but in truth, you know, Bpifrance, which is the export credit agency in France that we've been engaged with, Bpifrance has always been a large, if not the largest, Eutelsat shareholder. For us, kind of nothing's really changed, if you know what I mean. They're a big Eutelsat shareholder now. They have been for, I'm sure, as long as we've been engaged with them on this project. You know, assuming that the OneWeb transaction goes through, it looks like they'll continue to be a big Eutelsat shareholder. I don't think it's really changed the complexion.
Okay. The only reason I ask the question is this whole context of creating a LEO, sort of European LEO champion, and if the Eutelsat LEO kind of Eutelsat OneWeb combination kind of de facto becomes that, and does that change the dynamic was the sort of thought. But it sounds like it's not really impacting you.
Well, I mean, I think that I'm no savant on Bpifrance's mandate, but I believe fundamentally these export credit agencies are there to support their domestic exporters to, you know, help create jobs and develop technologies and whatnot. Thales obviously, you know, will be a big beneficiary of the Lightspeed contract and intends to hire a lot of people, and we'll be developing, you know, state-of-the-art technologies. I think, you know, that fits quite nicely within Bpifrance's mandate
Got it. One last thing, if I could sneak in. On 2023, you've mentioned the Anik F2 issue and sort of quantified that. Thank you for that. Can you give us some sense of how DISH looks in 2023 at a high level? Directionally, ex-DISH and ex the Anik F2 impact, how do you see the, you know, at a high level, how do you see the backlog, et cetera? And how do you see the trend line for 2023 versus 2022 on the restricted group side? Thanks.
On DISH, you know, we said we got a two-year renewal from DISH that came, you know, I think, kind of at the end of April, of this year. We had said that DISH has an additional option year to extend for another year beyond those, the two-year renewal. DISH should be, our expectation, should be stable throughout 2023, 2024. Yeah, it comes up. No impact there. As far as what 2023 looks like, it's too early. You know, we'll give guidance when we give guidance for 2023.
Anyway, we wanted to, you know, let everyone know about this anomaly on F2 and to be as clear as we could be about how we're seeing it, what F2 contributes today, what the potential financial impact for 2023 could be. We'll update on that because, as we said, there are a lot of things that we can do, that we think we can do to mitigate the impact of that F2 anomaly. We're working on that now with our customers and whatnot. I think we'll be able to say more about that later.
We will update as you go along, for sure.
Got it. Thank you.
Thank you. The next question is from Jason Kim from Goldman Sachs. Please go ahead.
Thank you, and thanks for all the details so far. I'm going to ask the Lightspeed key cadence question in a different way. You're obviously focused on finalizing the financing for the project, but given the delays, your expected revenue ramp will also going to happen later than you probably initially planned for. At this point, in the context of your debt coming due in 2026, how do you envision the refinancing to take place for your existing debt? Are you assuming that there will be enough of a revenue backlog and visibility into the LEO business such that you can refinance the capital structure before the debt becomes [current or ballooning]?
Yeah. I'll take a crack at this. Yeah, look, by the time we get out to when our debt, you know, is in the main kind of, you know, maturing, everyone's gonna know a whole lot about, you know, Telesat Lightspeed and the traction that we're getting in the market. We'll have been reporting our backlog all along the way. I think the market will have massive visibility into how we're doing, how our competitors are doing, what portion of this, you know, TAM are we getting, where exactly we are in terms of, you know, cadence of, I mean, just everything.
I think the market will have great visibility, and will able to, asses Telesat's future prospects based on where Lightspeed is at that time. I mean, anyway, Jason, that's how we think about it. We're gonna be very transparent with everyone around, you know, how we're doing on Lightspeed. Of course-
Thank you for the color.
Yeah. Thank you.
Have your launch schedules been pushed out as well?
The last update we gave on schedule, we said we'd be launching in 2025. When we finalize our financing and get the program going, we'll update, you know, all the schedule, you know, when launches occur, when the polar constellation's in service, when global coverage. We'll provide an update then.
Thank you. I'll end with a big picture question for Dan, and that is, for years we've been talking about M&A in this space, but not much has happened. You know, just over the past year, we have seen two deals announced, one with Viasat and Inmarsat, and then another one obviously with, you know, between Eutelsat and OneWeb, and then we saw some press reports involving a few of your other satellite peers, just in the past week. How are you thinking about all of these M&A activities and what they mean for Telesat?
Yeah. No, we've definitely all been talking about the potential for industry consolidation for quite some time. You know, I think I'm on the record saying we expect it to happen. We expect that, I don't know, given technology changes, given new entrants, given the, you know, synergies that can be achieved when you bring these companies together, the things that we're seeing in the market and the things that we're hearing in the market, I'd say are, yeah, fully consistent with our expectations. The two deals that you referenced, in many ways, you know, they're two different deals, two different types of things. You know, there's Inmarsat, Viasat, and then there's Eutelsat, OneWeb. For me, they say, I don't know, a couple of things. The market's changing.
We're, you know, seeing in some ways a transition in our industry where, you know, where probably the biggest, most promising growth opportunities in the future. It's all around broadband connectivity. You know, high throughput, low cost, highly reliable, secure, global broadband connectivity. I think that's, you know, a big driver of the combination between Inmarsat and Viasat. What you're seeing with Eutelsat, I actually think, you know, it's the same thing. How does an existing satellite operator best position themselves to capture what all of us believe is gonna be a huge market and explosive demand? I don't know, I wasn't surprised at all with what Eutelsat announced, what was it, a couple of weeks ago.
I mean, the reality is, and you've seen how we're orienting our business. We think LEO's the right answer. We think LEO's the future. We think it's the best architecture to bring the best value proposition to that global broadband connectivity market, particularly for enterprise applications. I don't know, Jason. What we're seeing today, I don't know, kind of fully reinforces our own thesis and whatnot about where the market's going, what the best technology is to capture this demand. I gotta say, I think it's a good thing for the industry. I think, you know, for years, we had too many operators launching too much duplicative capacity in some ways. Seeing some of this consolidation will invariably result in some rationalization of the supply side of the industry, which I think will be good for the sector.
I think, you know, with Eutelsat making this OneWeb move and with what we're doing with Lightspeed, these are the technologies that need to get developed if satellite is going to be relevant in a world where the users, the enterprise users are demanding high throughput, low -latency, affordable broadband connectivity. So anyway, long-winded answer, but that's how we think about it. That's why we're excited about the path that we're on.
Thank you, Dan.
Okay. We are out of time for questions. Dan?
Yeah. Okay. Michael, thank you. Thank you everyone for participating. Thank you, operator, and we look forward to chatting with everyone when we issue our Q3 results. Thank you very much.
Yeah. Thank you.[ Cheerio].
Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.