Earnings Transcript for ETL.PA - Q2 Fiscal Year 2018

Executives: Rodolphe Belmer – Chief Executive Officer Michel Azibert – Deputy CEO and Chief Commercial Officer Sandrine Teran – Chief Financial Officer

Analysts: Aleksander Peterc – Societe Generale. Paul Sidney – Credit Suisse Michael Bishop – Goldman Sachs Giles Thorne – Jefferies Wilton Fry – Royal Bank of Canada Nick Dempsey – Barclays David Cerdan – Kepler Patrick Wellington – Morgan Stanley Vincent Maulay – ODDO Laurie Davison – Deutsche Bank Sami Kassab – Exane

Operator: Good day, and welcome to the Eutelsat Communications 2017-2018 results conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Rodolphe Belmer, Chief Executive Officer. Please go ahead.

Rodolphe Belmer: Thank you. Welcome, and thank you for joining us today for half year 2017-2018 results presentation. I’m Rodolphe Belmer, CEO, and I’m joined today by Michel Azibert, Deputy CEO and Chief Commercial Officer; and Sandrine Teran, our CFO. Let’s start by taking a quick look at the highlights for the first half. First, Page 3, key data in relation to our stated financial objectives. First half revenues stood at €697 million, down 5.7% on a like-for-like basis. I will return to this. The EBITDA margin rose 0.5 points at constant currency to 78.4%, very comfortable. This is our objective for this year of above 76%. Discretionary free cash flow posted an increase at constant currency of 8% to €379 million. I’ll remind you, we have an objective of mid-single-digit CAGR over 3 years. The net-debt-to-EBITDA ratio improved to 3.3x versus 3.4x in December 2016, even after the acquisition of Noorsat and the dividend payments, on our way to deleveraging below 3x. Returning briefly to the top line. Revenues, €679 million, were down 7.7% reported, but by 5.7% at constant perimeter and currency, i.e., in the basis for our financial objectives. There was a negative currency effect of 1.7 points or €13 million and a negative perimeter effect of minus 4.3 points or €3 million, the net effect between the disposal of Wins/DHI and DSAT Cinema last year and the integration of Noorsat this year. In H1 last year, we had a very exceptional level of other revenues, €41 million compared to €12 million only this year. They included in H1 last year the termination fees related to the rationalization at HOTBIRD, fees in respect of unusually large engineering contract and revenues related to the agreement with SES at 28.5º East. If we exclude those items, the underlying revenues performance from our 5-year – from our 5 verticals was minus 1.8%, i.e., in the range of our objective for the year as a whole. Let’s now take a look at the operating highlights for the first half. We executed the smooth entry into service of EUTELSAT 172 B with contracted incremental capacity, which will contribute over full 6 months in the second half. We delivered a solid commercial performance, which will also support revenues in the second half. A few weeks ago, we signed MoU to collaborate with China Unicom in the context of the One Belt, One Road project. The integration of Noorsat, acquired to optimize video distribution in MENA, is progressing smoothly. And on the financial front, we have been highly efficient in containing our CapEx. While we are not at this stage altering our 3-year objectives, we expect the outturn for the current year to be below the average of €420 million per annum. And we are ahead of plan on the LEAP cost-savings program. A quick look at the commercial performance now. In video, at the HOTBIRD position, a major renewal with Polsat was secured, with a favorable outcome in terms of revenues, and we have recently signed a contract with Mediaset for HD. Elsewhere, a contract was recently signed with Altice-SFR in France at the 5° West orbital position, in particular demonstrating the pertinence of satellite as a complement to growing infrastructure to telcos looking to maximize the reach of their content offering. And we continued to make progress in the emerging DTH markets, with incremental capacity for Fiji on EUTELSAT 172B, and for the Caribbean region, on 117 West B. In other verticals, as we reported at Q1, the DoD renewal campaign was positive at 95% in value terms. Recently, we signed multi-transponder contracts in Government Services at the new 174° East position, covering Asia-Pacific as well as a multi-transponder agreement with the Colombian Ministry of Defense for capacity on EUTELSAT 115 West B. Finally, incremental capacity for in-flight mobility has been contracted at 172° East position in addition to the capacity presold to Panasonic on the HTS payload. A word on China Unicom. China Unicom is the world’s fourth-largest mobile service provider by subscribers, with around 75 million fixed-line broadband and over 250 million mobile subscribers. Eutelsat’s relationship with China Unicom dates back to 2008 when Eutelsat provided satellite transmission services to China Unicom during the Beijing Olympics games. The new MoU signed at the beginning of January aims at addressing the satellite communications market in the framework of the Belt and Road initiative by leveraging resources and the newly operational EUTELSAT 172B for in-flight connectivity services. In this context, it has contracted the totality of the remaining HTS capacity on EUTELSAT 172B from 2019, from the beginning of 2019. As a reminder, 60% of this capacity is already sold to Panasonic. And we hope this reinforced partnership will lead to broader opportunities in the future, with both companies leveraging on their respective strength to address the broader connectivity markets. Now over to Michel Azibert for a look at the operating performance of the group.

Michel Azibert: Thank you, Rodolphe. Let’s take a look at revenues by application. Among the core businesses, Video was down 1.2% like-for-like at €449 million. Fixed Data was down by 10.6% to €73 million, and Government Services was stable at €81 million. Among the 2 connectivity verticals, Fixed Broadband was down 8% to €44 million, while Mobile Connectivity was up by 21% to €37 million. Let’s turn to each application individually, starting with Video. Revenues in the first half were down 1.2% like-for-like to €449 million. Broadcast revenues were up 0.3%, excluding the carryforward impact of the termination of the TV d’Orange contract last year. Growth came predominantly from Middle East and Africa. Professional Video revenues continued to experience a mid-single-digit decline. Second quarter Video revenues stood at €226 million, flat on a quarter-on-quarter basis and down 1.6% year-on-year. At the end of December 2017, the total number of channels broadcast by Eutelsat satellites stood at 6,810, up 7% year-on-year. HD penetration continued to increase, standing at 1,275 channels versus 997 a year earlier, i.e., plus 28%, implying a penetration rate of 18.7% compared to 15.7% a year earlier. Let’s take a closer look at trends on HOTBIRD. Channel count was resilient. Year-on-year, it declined by just 1% or 10 channels. The number of HD channels was up by 23% to 304 channels, a growth rate which remains much stronger than the ramp-up of MPEG-4 channels of only 9% to 548 channels and continues to confirm the inflection identified during the course of the past year. Moreover, MPEG-4 is still considerably more advanced than HD at 55% penetration versus 30%, implying that this trend is set to continue. Turning now to Fixed Data. In the first half, Fixed Data revenues stood at €73 million, down 10.6% like-for-like, reflecting ongoing pricing pressures in all geographies. Second quarter revenues stood at €36 million, down 9.4% on a year-on-year basis and by 2.9% quarter-on-quarter. Government Services revenues stood at €81 million, stable like-for-like, reflecting solid levels of renewals with the U.S. Department of Defense in the last 12 months. Second quarter revenues stood at €40 million, down 1.2% on a year-on-year basis and by 0.4% quarter-on-quarter. Following the entry into service of EUTELSAT 172B, EUTELSAT 172A was relocated to the 174° East position, covering Asia-Pacific, enabling it to secure incremental business in Government Services. These contracts cover several transponders, and other opportunities exist. Elsewhere, Eutelsat signed a multitransponder agreement with the Colombian Ministry of Defense for capacity on EUTELSAT 115 West B satellite. Looking ahead, we continue to have an extremely positive response to our Quantum marketing initiatives to the point where I’m pleased to report that a significant portion of the capacity on this satellite has now been reserved by Paraton, a major DoD service provider. Fixed Broadband revenues stood at €44 million, down 8.1% like-for-like, partly reflecting the absence of a positive one-off booked in the first quarter last year and an underlying decline in European broadband. Excluding the one-off, the decline would have been 5%. Second quarter revenues stood at €22 million, down 6.5% year-on-year and down by 1.7% quarter-on-quarter. The revenue trend is expected to improve in the second half of the year with the retail JV up and running. The JV has started to roll out its consumer broadband retail distribution business across Europe. In particular, pricing products and the marketing strategy have been defined. Offers were launched in Norway and Poland in December, and in Sweden and Finland in January. Other markets will follow. Elsewhere, we are refreshing initiatives in wholesale, with specific plans to address low-fill beams and ongoing yield management in high-fill zones. Finally, Mobile Connectivity revenues stood at €37 million up 20.6% like-for-like, reflecting the Taqnia contract signed last year and further growth on wide-beam capacity, notably over at the Americas and at the 172° East position. Second quarter revenues stood at €19 million, up 10.1% on a year-on-year basis and by 0.8% quarter-on-quarter. EUTELSAT 172B started to operate at the end of November, with the HTS payload now fully contracted to Panasonic and China Unicom as well as incremental wide-beam capacity for in-flight mobility. Let’s turn to the backlog and fill rates. The backlog stood at €4.7 billion at the end of December 2017, versus €5.2 billion at the end of June. The evolution reflects mainly the impact of the integration of Noorsat, i.e., minus €400 million of backlog. The backlog was equivalent to 3.2x 2016-2017 revenues. Video Applications represented 85% of this backlog. The number of operational transponders at December 31, 2017, rose by 90 year-on-year to 1,416 transponders, mainly reflecting the entry into service of EUTELSAT 117 West B and EUTELSAT 172B. The fill rates stood at 67% compared to 70.9% a year earlier, reflecting mainly the impact of this new capacity. An incremental 18 transponders have been sold since end June 2017, reflecting notably new business at 174° East and in Mobile Connectivity. Now over to Sandrine for the financial performance.

Sandrine Teran: Thank you, Michel. I will start with profitability. EBITDA amounted to €545 million at 31 December, 2017, compared with €588 million a year earlier, down 7.4%. The EBITDA margin stood at 78.2% and 78.4% at constant currency, up from 77.9% last year, thanks notably to the LEAP cost-savings plan and despite the much lower level of other revenues with no associated costs. As usual, the H1 margin is not representative of the full year due to favorable phasing of certain operating costs. Nevertheless, the LEAP program is running ahead of plan, and therefore, we can confirm that the improvement is not purely due to phasing. Going back to the P&L. Depreciation and amortization was down €20 million year-on-year, principally due to lower depreciation of satellites ending their operational life in the past 18 months are already fully depreciated. In the second half, G&A will reflect the entry into service of EUTELSAT 172B at end November. Other operating income stood at minus €10 million, reflecting mainly a negative one-off accounting impact related to the acquisition of Noorsat. It compared with plus €23 million a year ago, which includes the capital gain of Wins/DHI. The net financial result was minus €56 million versus minus €60 million a year earlier, reflecting lower cost of debt, thanks mainly to the reimbursement of the €850 million bond in March 2017 and the evolution of other financial income reflecting, predominantly, the negative valuation in foreign exchange gains and losses. The tax rate was 27% versus 28.2% last year, which included the positive non-cash one-off in respect of default tax liabilities in recognition of the future reduction in the French corporate tax rate as well as the impact of the refund relating to the 3% dividend tax for previous years. As a reminder, last year’s tax rate also reflected the partial tax exemption of the capital gain in respect of the disposal of Wins/DHI. Group share of net income stood at €157 million versus €192 million a year earlier, a 18.6% decrease and representing a margin of 22.5%. Net cash flow from operating activities amounted to €412 million versus €482 million in H1 2016-2017. This reflected mainly the lower EBITDA, a slightly less favorable impact from the working capital requirement and higher tax paid, reflecting the timing of tax payments. Cash CapEx amounted to €53 million, down from €130 million a year earlier, reflecting the phasing of various satellite programs. This amount is not representative of the anticipated full year LEAP. However, as Rodolphe said earlier, we do expect CapEx for the current year to be below the target three-year average of €420 million per annum. Interest and other fees paid net of interests received amounted to €21 million compared to €27 million last year, reflecting lower interest related to financial leases. As a result, discretionary free cash flow amounted to €339 million, up 4.3% on a reported basis and by 8.1% at constant currency. At 31 December, 2017, net debt was broadly unchanged at €3,650,000,000 versus €3,641,000,000 at 30 June, 2017. Discretionary free cash flow largely covered the dividend payment of €295 million, including dividends paid to minorities. Equity investments, acquisition of Noorsat and of minority interest in broadband for Africa generated cash outflow of €89 million. The €32 million decrease of the foreign exchange portion of the cross-currency swap, which is included in net debt as well as other items mainly related to repayment of export credit financing and financial leases, contributed to the net debt reduction to the tune of €24 million. As a result, net debt to EBITDA ratio stood at 3.3 times, a slight improvement on end December 2016, which was at 3.4 times. The weighted average maturity of the group’s debt stood at 2.5 years compared to 2.9 years at end December 2016. The average cost of debt after hedging was 2.9% versus 3.1% in H1 2016-2017. Liquidity remains strong with undrawn credit lines for €650 million and cash of €360 million. Now back to Rodolphe to speak on the outlook.

Rodolphe Belmer: Thank you, Sandrine. A quick reminder of the revenue path in the 2017-2018, which, as we highlighted in July and again in October, is set to improve in the second half. First, the comparison base will become gradually easier due to lower other revenues, which I explained earlier, the termination of TV d’Orange contract on the 31st of December, 2016, worth €5 million per semester and easing comparables in Fixed Data. Second, revenues will benefit from entry into service of EUTELSAT 172B, with the HTS payload partly presold to Panasonic, as well as incremental wide-beam capacity and which will have a full quarter impact from Q3 onwards. An incremental business, notably at 174° East in Government Services. So in sum, the first half revenues performance should not be extrapolated over the year as a whole. In consequence, we reiterate our revenue outlook at constant currency and perimeter for fiscal year 2017-2018 of between minus 1% and minus 2%. From fiscal year 2018-2019 onwards, we expect a return to slight revenue growth. The EBITDA margin at constant currency remains expected above 76% for fiscal year 2017-2018, rising above 77% from 2018-2019 onwards. Discretionary free cash flow is expected at mid-single digit CAGR between July 2017 and June 2020. Our CapEx plans and our commitments to our investment grade and deleveraging objectives are reiterated also, as is our undertaking to serve a stable-to-progressive dividend. Nevertheless, for the current year, we expect to have a below-average CapEx spend. So thank you very much for your attention, and we are now ready to take your questions.

Operator: Thank you. [Operator Instructions] We will take our first question from Aleksander Peterc from Societe Generale. Go ahead.

Aleksander Peterc: Fine, good morning. And thank you for all taking my question. You already highlighted all of the puts and takes that we see going into the second half of this year. So given the absence of the d’Orange drag and then you have the additional capacity with both SND and HD and the incremental capacity in Video, in wide-beam on 172B. Can we assume that these positives will outweigh the negative of the potential services drag? So will we, therefore, see growth like-for-like in H2 at some point? And then just on the matter of special services, should we assume that this is a long-term decline in business along the lines of Fixed Data? Or is this temporary? And if so, when will it stop and why? Thanks.

Rodolphe Belmer: Well, thank you for your questions which concerns the evolution of the Video Application going forward. As we said in the past already, we expect return to slight growth in the Video segment going forward. This evolution, this slight turnaround should occur during this semester, the semester we have just started. And we expect, actually, a very slight growth in revenues in the Video segment. This slight growth will be a combination of two effects

Sandrine Teran: Aleks, can you just repeat your second question.

Aleksander Peterc: Yes, I was just wondering on the matter of professional services, is this like the Fixed Data business, so long-term declining? Or are there any mechanisms here at play? And should we assume that this is a long-term decline in business ? Or will this drag from professional services stop at some point? Thanks.

Rodolphe Belmer: Wel,, when it comes to Professional Video, a small part of our business – well, small part of video segment, very small part of our business in total, we expect a sort of sustained decline, a bit like in the Fixed Data segment, even though we believe that this – well, the sort of secular declining trend in this segment will be softer than in the Fixed Data segment because of the resilience brought by the preinstalled equipment that are used by channels or – and video producers to transmit this service. But in essence, the price pressure which is at stake in the Fixed Data segment plays also in this segment, even though to a lesser extent.

Aleksander Peterc: That’s very clear. Thank you very much.

Operator: Our next question comes from Paul Sidney from Credit Suisse.

Paul Sidney: Yes, good morning. I just have three questions, please. Firstly, at the HOTBIRD position, given the Polsat’s and the Mediaset’s recent announcements, I was just wondering, could you just remind me of how much capacity you took back from the distributors in H1 2016. And how much of that has been recontracted to date, please? And then secondly, just following up on the first Video question. Pretty positive you’re confident on a return to Video growth in H2, but beyond that, are you also confident that we can enter a period of slight growth in Video for then many years? And post that, do we finally sort of reach that inflection point? And then just thirdly, I was just wondering if you could give us an update on Al Yah 3 and when you would expect to launch Konnect Africa services. Thank you.

Rodolphe Belmer: Well, question on HOTBIRD first, what’s happening at HOTBIRD? We have posted – well, we have communicated that we have signed very important contracts with blue chip companies like Polsat and with Mediaset. And we’ve said that those contracts should, which are the renewable ones, were signed in what we think are good conditions, favorable conditions to us. What we expect is that HOTBIRD, after the period of what we called rationalization of purge that we had last year, will return to slight growth going forward. And the main drivers for that is stability in terms of number of channels, a quite sustainable or solid growth in HD development, plus around 23% year-on-year, which does compensate for the adoption of MPEG-4. When you look at the consumption in volume on HOTBIRD, when you look at the consumption in megabit, we are stable. And pricing-wise, we have also been able for the last renewals to have favorable pricing, meaning that net, the pricing on HOTBIRD is broadly stable. All in all, these projects, these into – trajectory for HOTBIRD that should be stable to slightly growing going forward. What are the drivers in that context of the return to growth in the retail segment? Well, slight growth, as I said, in the Video segment is mostly the emerging markets. We continue to enjoy growth in the emerging markets, driven by the emergence of new television platforms, pay-TV platforms, and driven also by the creation of quite a number of new channels. As you’ve seen, the number of channels we distribute on our fleet is experiencing a quite solid and sustainable growth. And we have added this year, again, 7% more channels year-on-year after 5% last time we have communicated, and so forth and so on. Meaning that, well, emerging markets are growing because number of channels are growing, numbers of pay-TV platforms are growing. And even though this growth comes with lower price per transponder because we are not able to charge the same price for capacity in the emerging markets, that’s the main driver of the growth of the Video segment, which compensates for the, what, less solid growth in Western Europe. Al Yah 3, we don’t have much news to communicate at this point in time beyond what has been already communicated by themselves. Meaning that they expect a slight impact on the entry into service of the satellite due to the launch incident. But we – but the satellite is in good hands and is expected to be a nominal in service in the next few months.

Paul Sidney: That’s right. Thank you very much.

Operator: Our next question comes from Michael Bishop from Goldman Sachs.

Michael Bishop: Yes, good morning. Just two questions for me, please. Firstly, just picking up on your guidance for free cash flow. I think at the beginning of the year, it’s fair to say you were fairly cautious, given the good performance last year, about taking the mid-single-digit growth guidance for this year. And then just as part of that free cash flow question, it seems like you’ve beaten on the margins, but again, you were quite cautious in terms of the Noorsat dilution coming in, in the second half. So I was just wondering, if we put all that together and the lower CapEx guidance for this year, are you essentially saying you’re happy with the mid-single digits or the top end of that free cash flow guidance for FY 2018? And then secondly, could you just give us a bit more insight on the Altice-SFR contract? And so just the rationale behind the strategy of using satellites and then maybe some insights on pricing and the overall scope of the contract. Thanks very much.

Rodolphe Belmer: Well, the first question on cash flow generation, you know that’s the main focus of our short-term strategy, to grow the cash flow of this company, to make sure that we have significant headroom to finance solid dividends, together with deleveraging the company and financing for the – for our organic growth. We are delivering on that. We said in our guidance last year that we will deliver mid-single-digit CAGR growth in our cash flow. But we specified at the time that this growth would – will be – we said precisely that it would be back-end loaded in the outer two years. And it was implicitly implying that this year, we wouldn’t deliver that. And as you’re now realizing, we now expect we will deliver that kind of growth of cash flow this year already, and it’s on the back on an improvement on our CapEx spendings and also on the efforts that we are doing through our cost-saving plan that we call LEAP. On the contract with Altice-SFR, well, we inked the contract with them with – objective is to distribute a certain number of channels by satellite to people living outside of the natural footprint of Altice-SFR, terrestrial footprint in France. More specifically, we’ll be introducing 20 channels, which are HD channels on our five West B satellites, and it will enable SFR to propose a pay-TV offering of those 20 – made of those 20 channels that they own to subscribers beyond their fiber and cable footprint. For us, it’s a quite meaningful contract even though it’s – in value, it’s not a very significant contract because it’s only 20 channels, but it’s a significant contract because it shows that satellite distributions make sense even in a world where telecom companies are developing themselves into the video distribution segment because they need satellite distribution to complement the distribution they are proposing through the wire networks. We have said that for quite a while, and now we are seeing some hard evidence of that, and notably through this contract that we have just signed with SFR-Altice.

Michael Bishop: Thank you.

Operator: Our next question comes from Giles Thorne from Jefferies.

Giles Thorne: Thank you, good morning. I had three questions, a couple on video and then one on Fixed Broadband. Firstly, on Video. The Sky Q dishes product launch burst back into our lives recently and much of the response seems to forget or overlook the fact that there’s actually been exactly this type of dishless product from Sky in Italy for about three years now. It’s been a commercial flop in that market for [indiscernible] and Sky. But nonetheless, it’d be interesting to know whether the dishless option has ever been used as a negotiating card by Sky in your commercial conversations. Secondly, still on Video, Rodolphe, in a recent interview, you spoke of your conviction around how Video has slight – stable to slight growth over the medium term and how this has actually been informed by in-depth surveys you’ve done with Broadcast customers. Would you ever consider publishing those surveys? And then lastly on Fixed Broadband and its fee funding of the RetailCo, satellite solutions worldwide in its commercial agreement with RetailCo has signaled that subscriber acquisition costs will be funded by the RetailCo. Now assuming the fact it will all be ViaSat modems and antennas, it feels like ViaSat will fund RetailCo with assets while Eutelsat will have to contribute cash. So my question is, how big will your cash injection to RetailCo be? And has that happened yet? Thank you.

Rodolphe Belmer: Well, on the – well, first question on Sky Q, which is a story which is coming back again and again. Well, first, maybe I would like to say that, well, Sky Q is no news. It has – well, it was launched three years ago. And it’s not unique to Sky because CANAL and some other companies, they’ve done exactly the same. What are they doing? They are developing pure OTT boxes to address high-density areas, people living in big buildings where satellite distribution cannot really go because satellite distribution is designed mostly for people living in individual houses. And – well, and what we want to say, also, is that in the statements made by Sky themselves, it’s absolutely clear and evident that the purpose of Sky Q is not to substitute the distribution, it comes as an addition to target markets where satellite cannot go very easily. They said that very clearly, explicitly, without any doubt. And that’s exactly what we are seeing in every market where we operate. Satellite distribution has a very solid and sustainable and long-term competitive advantage to address the vast majority of population living in houses, in the individual houses, and the cost of distribution is absolutely – well, and the simple reality in the cost of distribution is absolutely unchallenged. We provide price per user which is very, very significantly below what OTT is capable to deliver. It’s a factor of in between a 5 or 10, depending on the different markets because OTT price varies a lot according to the different market, but still it’s a very significant factor. Plus you have the legacy of all the satellite dishes which are installed, meaning that we see absolutely in no country any negative impact of the launch three years ago already of full OTT boxes in Western Europe. And when you look at the development of the satellites' penetration in the world, satellite penetration is growing year-on-year, it’s growing. We are adding percentage points of penetration everywhere in the world. Not in the U.S., but we are not in the U.S., as you know very well. Now are they trying to – well, our clients, be they Sky and others, are they trying to negotiate down the price? Yes. Are they trying to use arguments? Yes. Are they trying to use bad faced arguments? Sometimes they do. But well, are we able to resist and to maintain price? As you’ve seen and as we have communicated for the last round of renewals we’ve had with blue chip customers, we were able to obtain favorable out start. Now on the growth of Video and the work we are doing with our clients, well, we are not able to communicate analysis on surveys we have done with them. Still, what we can say, when you look, again, at what Sky said recently at the occasion – on the occasion of their annual results, they say that satellite distribution was there to stay for them. And they were very clear on that, that they would continue to rely massively on satellite distribution. I don’t remember the words with precision, but the quote of their managers are very eloquent. On our joint venture with ViaSat in Europe, and I will remind that we have actually two joint ventures with them, an infrastructure joint venture that is owning actually the KA-SAT satellite, and it’s a – it’s the joint venture that we control at 61% that we’d consolidate fully. And there is a retail joint venture, another one, which is operating the commercial distribution of the service to end users in Europe. And this part, we own only 49%, it’s – and it’s owned by – at 51% by ViaSat themselves and consolidated by them. How do we finance for this RetailCo? Well, actually most of the investments that have to be considered in this RetailCo are actually subscriber acquisition costs, as you have mentioned very well. This will be financed by RetailCo, and we will inject cash to finance for this development. But I’ll like to underline, and I cannot give precise figures by definition, but there is a cap to the investments we will – we have to concede in this RetailCo. Meaning that from the beginning, we have agreed on the cap. And above that cap, we can decide to follow or not follow the investment in RetailCo.

Giles Thorne: Thank you.

Operator: Our next question comes from Wilton Fry from Royal Bank of Canada.

Wilton Fry:

.: The second question, you have a significant proportion of your annual bonuses and LTIPs are based on free cash flow. How much of the CapEx phasing is due to management discretion on CapEx? Thanks.

Rodolphe Belmer: Well, on backlog, our backlog, I would say, apparently or the way we reported is in decline, actually. But if you exclude two elements, which is the effect of the devaluation in the currency and also the acquisition of Noorsat, which had a negative sort of artificial impact on our reported backlog, our backlog is stable. It’s true though that it’s lower than it used to be in the past. But I would like to say that we don’t really concentrate on that KPI. And we don’t give that KPI as a part of our guidance. Why? Because we believe that it’s not a driver of the value creation of that company and that we should focus on cash flow generation. When we look at the average duration of contracts, it varies a lot across our different applications. In the Video segments, they tend to be longer. But even though in the mobility segment, which is growing very fast, the duration, well, finance of contract, contract length are also very significant. But going back to the Video segment, they used to be around 10 years in the past, now the contracts tend to be shorters – shorter, sorry. Again, it varies a lot according to type of customer. With blue chip customers, we tend to have longer contracts. And with new customers, we tend to have shorter contracts. But again, as you know, our strategy is to be able to maximize cash flow by cost control, by CapEx control, but also by the optimization of our pricing. We wanted to be able to take our fair share of the productivity gains brought by the new compression and the new modulation standards. And if you want to be able to take a fair share of these productivity gains and if you want to reflect that into our pricing, we want to add contracts which are not sticking ourselves to fixed prices for 10 years. Otherwise, it’s very difficult to evolve price positively. And that’s a reason why we think that sometimes backlogs comes at the expense of cash flow and of revenues. In terms of the compensation of the management team, we have different factors. Actually, we are compensated against four main KPIs, which are the revenues evolution, the EBITDA evolution, the cash flow evolution and the relative TSR of the company, meaning that cash flow is part of it. It’s true that’s the new element that we’ve put in our performance criteria. It’s true that part of the cash flow growth is triggered by CapEx. And it’s true that CapEx, as you said, sort of implicitly, we cannot sort of control in the phasing of the CapEx. But what we can say is that we are – what we are doing in CapEx, which is controlling the CapEx, we have been able to reduce the CapEx line by from the historical level of €500 million per year to €420 million. We said it would be the three years, the three-year average just, well, to avoid these phasing elements and this ability that we could add to artificially phase some CapEx spendings to us and boost the cash flow of one year. And again on cash flow, we are also giving three years guidance, and that’s also the way we are compensated. We are compensated against our performance on a three-year window on cash flow, which would be in line or above the objectives we gave to the federal community. And this should give you some reassurance that we are concentrated on delivering on what we say. And also, we don’t have the ability, even though we want – it’s sort of bad face, we don’t really have the ability to play with phasing because that’s not the way we are compensated.

Wilton Fry: Could I just clarify one of the earlier questions – answers? You said some of the contracts were shortened because that would allow you to, as I understood it, raise prices at the break points. Is that correct? And have you seen any price rises?

Rodolphe Belmer: Well, I don’t see that we have shortened contract orders positively. The fact is that sometimes, well, now the norm that we see in our renegotiation with blue chip contracts is contracts which are around seven years, seven, eight years with blue chip clients. What we said is that, we don’t push for longer-term contracts. Why? Because we find it very difficult to integrate automatic price rise in our contracts with our clients. They want fixed prices when they concede a long-term contract. And what we say that we don’t really fight for a very, very long-term contracts because we think that it doesn’t really create value for us. And it prevents us from adopting us our price and exercising our legitimate pricing power in our relationship with our big customers.

Wilton Fry: Understood, thank you.

Rodolphe Belmer: But well, the last renewals we’ve had with our blue chip clients, and we mentioned some of them, just to make sure that they already realize what price was increased. We have recently – recent contract with Arqiva, with Globecast, with Polsat, with Digiturk, and those contracts, they – we are able to sign them with favorable terms. Meaning that for all of them, we have not to concede rebates or to deteriorate price.

Operator: Our next question comes from Nick Dempsey from Barclays.

Nick Dempsey: Yes, good morning guys. I’ve got three left. First of all, in Fixed Broadband, you’re pointing to some help in the second half from the retail JV with ViaSat. Can you give us an indication about how the second half for you started, therefore, in Fixed Broadband? I mean, have you seen a step-change improvement in organic growth in the six weeks or so for this calendar year? Second question. Where you have Broadcast revenues around the world that aren’t your biggest hotspots? Have you seen pricing declines in the last year, that’s something that NSR has been pointing to as a big difference between hotspots and non-hotspots in terms of pricing? Third question, you talked about Quantum, a significant portion of that reserved. Can you give us any indications of how we should be thinking about modeling that? Any kind of range of what it might contributing in its first year or second year or whatever makes sense?

Rodolphe Belmer: Well, on the first question, which is – which concerns our European broadband to consumer business, our forecast for the semester is that it would better than the first semester. The first semester had been in slight decline because, in fact, we have been affected by the sort of defocusing of our organization while we were merging with ViaSat and we were making some management changes, as you’ve probably noticed, which we changed a little bit, the CEO of this business. But what all that is behind us. And we have been able now with ViaSat and through the JV to launch new commercial plans in new geographies, notably in Scandinavia and also in eastern part of Europe. And what we can see now we have only one month of experience, but what we can see that the results are encouraging, and it should sort of be the underpinning factor of a better performance for this subsidiary, for this business in the – during the rest of the year. While the year. While we are not expecting a very significant growth in that activity in the next 6 months, but still it would be better than the first part of the year, which was negative. On the pricing in the Video segments, it’s true that there are significant – well, there are differences across geographies and also across orbital positions. And also depending on the type of clients. The difference that we see – it’s true that what – the difference that we see is more around the different geographies, meaning that we are able to sell at a higher price in Europe than in the emerging markets even – well, independently of the sort of hotspot status of our orbital position. For instance, in Africa, we have very solid positions, notably at 16º East, which is a very strong position for the English-speaking part of Africa. And even though it’s a very strong orbital position, we have to adjust pricing to the economic power of the region, meaning that the price for transponder is significantly lower in Africa than it is in Europe. And it’s also the same situation in Russia, when we control the biggest hotspots for the Russian-speaking world. But still, given the market context, price we are able to apply in Russia its all over than in Western Europe. Now there is also a significant difference that we can explain is the difference between existing clients and new clients. When we contract a new contract with a newcomer, a newcoming pay-TV platform, for instance, to help them build up their business, started their business in the first years, we can see lower prices. And it’s a way for us to stimulate the emergence of newcomers in the different geographies we cover. And the way we look at our pricing is pricing for orbital position. Are we able to grow prices orbital position by orbital position, and pricing at renewal and pricing for newcomers. When it comes to Quantum, well, we are now have been able to reserve the vast majority of the capacity of Quantum. Lastly, with the renovation we have just been able to sign with [indiscernible] meaning that while most of the capacity is now reserved, how could you, well, construe that in our – in your models? Well, it’s true that’s not transponder, that’s setting 8 big beams to those consumer. What I can say that the nominal revenues that we anticipate for Quantum at run rate at the high rent of the revenue, which we typically extract from the traditional spacecraft. And you divide that by 8, to just have a sense of what’s the revenue we are generating per bit.

Nick Dempsey: Okay. Can I just follow up on the Broadcast revenues question? I guess I understand there’s variations in pricing across the globe. I was more interested, I suppose, in are there other places where you’re seeing pricings declines when you do – when you’re – when those are outside your big hotspots?

Rodolphe Belmer: Oh, well, the answer is clearly, no, when we look orbital position by orbital position. And if you take the renewal of our clients, the renewal price, orbital position by orbital position, is not in decline.

Nick Dempsey: Thanks.

Operator: Our next question comes from David Cerdan from Kepler.

David Cerdan: This is David Cerdan from Kepler Cheuvreux. I have a question regarding Express-AT. Have you received the proceed at this stage? And if not, when do you expect to have it? Second question is, I would like to – you have discussed about Sky. But can you give us your view on the decision of telephonic chat to start the satellite in the near future? Can we have an update on this? And third question is regarding the next refinancing. Can we have an update on the potential of financial charges savings?

Rodolphe Belmer: I will answer to the 2 first question, and I will hand over to Sandrine for the last one. Hispasat, we have exercised – we exercised our approach to exit Hispasat, now it’s almost 18 months ago. And we have found an agreement with Abertis to sell our stake to them according to our books, to the terms of our books for a consideration of €302 million. This agreement is signed. It’s filing. And now we are waiting for the authorization of the Spanish government, which has a sort of forma rights to give their authorization for a change in the shareholding of Hispasat. The fact is that our exit has been sort of disturbed by what’s happening with Abertis. And we, at worst, we expect to get to proceeds of – well, of this €302 million consideration whenever this situation is solved out. Could – it could go faster than that. Well, it seems like the situation is big around Abertis and around this and its getting clearer. And we expect to – we expect to have a favorable outcome during the course of this fiscal year. But again, that will completely depend on us, that’s a political consideration in Spain. And when politicians are involved, sometimes it’s out of our control. Telefonica in Spain, well, they said that they would stop resorting to satellite distribution to distribute their detailed content. But while it doesn’t affect us at all because we don’t have business in Spain, it does concern some competitors of ours. The situation in Spain is very different from the situation in other European countries. In Spain, well, there were very limited number of households. Actually, you’re receiving television by satellite, meaning that Telefonica didn’t truly take advantage to continue to have this kind of distribution. But also, what I can say is that we see exactly the opposite trends in other geographies, and I have quoted the example that I find quite compelling to the contract we have been able to sign with SFR-Altice in France, where we are seeing telcos that are striving to expand their natural footprint by adding satellite distribution to their traditional fiber or GSL distribution. And while – in our discussions around the globe, we see more and more interest from telcos on this ID.

David Cerdan: And have you any numbers on the number of subscribers in Europe receiving TV-pay satellite in 2000? What was the trend for European subscribers? Do you have any numbers that could support this positive trend?

Rodolphe Belmer: Well, there are 50 million homes in Western Europe receiving television by satellite. Does it answer your question?

David Cerdan: Yes. So 50 million – 50 million in Western Europe?

Sandrine Teran: 5-0, 50.

David Cerdan: 50. What was the number, maybe , 5 years ago?

Rodolphe Belmer: It was down. I don’t know it, by 1/3, but it was down. Satellite penetration has been growing in the world, but substantially around 2 percentage points year-on-year. It has been more flat, flatter in western Europe, obviously. But there was no decline to report. And I would say that – well, it’s – well, I do not – maybe we could call out by a separate phone call later on to give you the precise figures, but I would say that the figure was lower 5 years ago than it is now.

David Cerdan: Okay.

Operator: Our next question comes from Vincent Maulay from ODDO.

Sandrine Teran : Sorry, I think there was a question on financial expenses first that I should answer to David. So you asked a question about the reduction in the financial expenses. So we will have a first step as soon as this current fiscal year, so fiscal year 2018, when we will save, so we are saving €50 million on a full year basis, 3-0. This is deriving from the refinancing of the bond in March 2017. So this is the first step. And there will be a second step as from fiscal year 2020. We will add an additional €20 million financial expenses saving when we will refinance the following bond for which we have already prehedged the interest rate. So €50 million this year, €50 million total starting fiscal year 2020.

Rodolphe Belmer: I looked at the figures while you were speaking with Sandrine. And actually, Western Europe is flat over the past 5 years and total Europe is growing.

Operator: Our next question comes from Patrick Wellington from Morgan Stanley.

Patrick Wellington: Three questions, actually. Just focusing on Broadcast, the TV d’Orange effect falls away in Q3, that’s about €5 million. That’s about 200 basis points onto your Broadcast growth in Q3. So we should see a healthy level of Broadcast growth. Do you want to comment on that? Secondly, on my traditional question on the signing of the deal on ViaSat-3, I think the original deal was signed on papyrus with hieroglyphics, it was a long time ago. Do we have any update on the ViaSat-3 deal? And then thirdly, just on African broadband, I think the original intention was that it would produce about €50 million of revenues in its first full year. Obviously, it has been delayed. What is your feeling now for the likely first year revenues when African broadband does get underway?

Rodolphe Belmer: Well, first question on Broadcast. The contract with Orange for the TV d’Orange represented €5 million by semester, not by quarter. I think that it gives you a partial answer, meaning that we expect to have growth which is above this €2.5 million by quarter coming from the rest of our Broadcast business. But I think it’s more – seems more achievable when you think of much more figures. The ViaSat-3 deal, the negotiations are underway. They are going well. You know we have been telling that quite a few times already that it’s a complicated technique – discussion and negotiation with them, which encompasses commercial, technical elements which are complicated. But still it’s very positive. Due diligence is ongoing, almost done and the negotiation teams are in place and they do negotiate with lots of intensity. And I think that both of us, ViaSat and ourself, we have reiterated our intention to find a positive outcome in this negotiation in the meaningful time. African broadband. Well, we had to delay the launch of that initiative because of the launch delay of Al Yah 3, and it was the main reason why we had to adjust our guidance at the first quarter because we were counting on the launch of Al Yah 3 to bring some growth in our – coming from Africa already this year. Now we expect the launch of our operations in Africa at the beginning of the next fiscal year on the back of the entry into service of Al Yah 3 satellite. We don’t know exactly the dates of entry into service of this satellite yet, but we expect that it will be consistent with our objective to start our commercial operations in Africa as of the beginning of next fiscal year, which starts in July for us, as you know. We said in the past that we were expecting in the first year of operation in Africa around €50 million. And we are – we have the similar set of objectives in the future.

Patrick Wellington: That’s great. And can I just ask one more. I believe, I mean, we’ve talked a lot about video contracts. I believe that the Sky Italia contract comes up for renewal at some point over the next couple of years, I may be wrong. Would you expect to be able to have the same robust terms with Sky Italia as you’ve had with those other customers you talked about today?

Rodolphe Belmer: Well, actually, the renewal with Sky in Italy, while there are different blocks in our contracts with them, but the 2 bigger blocks are coming, one in 2019, one in 2020. While it’s very difficult to say in advance what would be the outcome of a negotiation, but we see no real reason why the outcome should be different from the kind of result we’ve had with our clients in other geographies, all the more that we know that satellite distribution is absolutely crucial in Italy, where this country is one of the most important country in Europe for satellite, for photo reception by satellite. And also it’s a country where fiber development is the less developed, and it’s true for now and it’s probably true going forward. Meaning that we think that we have good plans, we have a good partnership, and we’re providing to them a very differentiated service. And it’s reasonable to expect that we get reasonably remunerated for that.

Patrick Wellington: Excellent, thank you very much.

Operator: We will now take our question from Vincent Maulay from ODDO.

Vincent Maulay: Yes. Good morning. Two questions. The first one, could you detail where the ‘18 incremental lease transponder comes from? It’s 2 quarters in a row, I suppose, and mainly related to EUTELSAT 172B but not only. And the second question is a follow-up on talks you have with the telco and OTT players regarding video. Altice-SFR has quite a specific setup as a telco in term of content to broadcast and board coverage. So it comes at the opposite of Orange move typically. So is it fair to say that you have very limited talks with other telco for similar deals? Or could we be positively surprised? And by the way, regarding the OTT on video and namely Netflix at least you talked with, could you give us some color on what are the project of Netflix on the satellite industry? Is there other queue of Eutelsat? Or is there other board member of Netflix?

Rodolphe Belmer: Well, on the source of growth in the number of transponders we have been able to sell, well, maybe I will turn to Michel – Michel Azibert, and I will come back on your couple of other questions.

Michel Azibert: So we, of course, as we mentioned during the call, we sold capacity already at 174º, the new position in the Pacific. We also sold additional capacity at 7/8º West in the Ku and C-band. We sold capacity at 10 degrees East. And we sold capacity on the EAS fleet, especially, for instance, for Alaska or for new video business, we mentioned one in the Caribbean. So what is probably interesting to note is it’s very widespread. So it’s coming from different directions, maybe with a push in the Asia-Pacific region.

Rodolphe Belmer: On the discussions we have with telco, we see more and more telcos which adopt a triple-play strategy, especially for this sort of premium position telcos. And we are having discussions to convince them, like SFR-Altice, to extend their natural footprint by satellite. There is nothing we can report now. The only thing I can say is that we have discussions with the telcos which are adopting a triple-play strategy. And there are quite a few – well, quite a number of them, as you know, all across the world. And it’s also true with Orange, even though they have sort of slowed down in their investment in content distribution. They’ve maintained their television distribution and OCS as their flagship channel as you know very well. Obviously, I am not going to comment anyhow as a member of the board of Netflix. It’s not in my limits to comment on their behalf, I’m not an executive in that company. But well, on this and what concerns us today, which is Eutelsat and the satellite industry, do we believe that going forward, OTT players, whatever they are or where they are, could have to also partner with satellite companies to go beyond the footprint of terrestrial networks to fuel their growth once they have reached their maturity on fiber networks? I think, well, in my view it’s very evident. Okay, question is more when than how.

Vincent Maulay: Okay. Thanks

Operator: Our next question comes from Laurie Davison from Deutsche Bank.

Laurie Davison: Thanks. It’s two questions. Most of them have been answered. But just two outstanding. Firstly, can you just say whether Video has returned to growth? You said that you expected it in the second half. Can you just confirm over the first few months of second half whether that has actually – whether you’ve actually seen that in the numbers so far? Second question, abrupt change in management from the SES board. I was wondering why you thought the SES board saw it necessary to make such a dramatic change in management as a close peer of yours? Thanks

Rodolphe Belmer: Well, the second question is, well, I don’t know how to answer it. Absolutely, no idea. I can’t express in public on that question. On what’s happening in the Video segment, what we have only – we have gone through only one month into second semester now because, well, we are in the middle of February and I don’t have yet the commercial results for the month of February. And for the moment, well, we are in line with our projection in the Video segment. I don’t know if it answers your question.

Laurie Davison: I thought I’ll have a try. All right. Thank you very much.

Rodolphe Belmer: Thank you.

Operator: Our next question comes from Sami Kassab from Exane.

Sami Kassab: Good morning, everyone. I have three questions, please. The first one, you have kept the CapEx guidance for this year, but you have not communicated any new satellite project nor have you lowered the free cash flow growth guidance for year 3 on the accrual of your plan. So is the reduction in CapEx just a function of savings? Or does it also reflect structural long-term CapEx efficiency gains, which are sustained going forward? That’s the one. Secondly, can you update me on the Russia Broadband initiative, perhaps number of subscribers you now have in Russia? Now you’ve seen it’s developing. And lastly, can you be more specific on the delay in the entry into service of Al Yah 3? Are we talking about just a few weeks? Or are we talking about a few months? And if we are talking about a few months, is there enough propellent on board the aircraft to reach the final orbit? Thank you.

Rodolphe Belmer: Well, on Al Yah 3, I cannot communicate on their behalf officially. What I can say is exactly what they said in their public communication that satellite is controlled. It’s working nominally, and they expected it to enter service on short horizon of time. What I can tell you that Eutelsat Communications this time is that we expect to be able to enter service for our African Broadband initiative at the beginning of next fiscal year, in line with our projections and in line with what we said to the financial community before. And you should conclude by yourself what kind of delay we are expecting from Al Yah 3. Now on the lifetime of the satellite, well, we – even though we are partners with them, and we like our partners very much, we have just to say that we leave the capacity on Al Yah 3 for short period of time, meaning that we are not really concerned by how affected will be the lifetime of this satellite going forward. It doesn’t mean that I have any clue, it doesn’t mean that I have any indication to tell you today on what will be in reality. How effective will be the lifetime of the satellite by this launch incident, I don’t know, well, and I cannot tell anyway. But it doesn’t concerns us. It’s not a subject which matters ourselves that could affect us. On the Russian Broadband initiative, we have made some organizational change in Russia. We had a difficult start. It seems like we are back on track, notably with our main customer, Tricolor, the incumbent pay-TV operator in Russia, which is very satisfied by the initial steps of the service. And that’s all what I can say for the moment. And for the CapEx and cash flow guidance, well, we said that this year, we would be below our nominal envelope of €420 million. It doesn’t mean that we are pushing forward some CapEx. The answer is no. We are just trying to do better than – and that’s what we try to do in all the KPIs of our guidance, which are under our control, CapEx, OpEx and cash flow. We try to do better than our guidance. It doesn’t mean that we are going to be able to overdeliver every year CapEx-wise, but we are not pushing forward CapEx.

Sami Kassab: So it’s not phasing, it’s the structure. Okay. Thank you.

Rodolphe Belmer: No, no, no, it’s not phasing, it’s not phasing.

Operator: We will now take a follow-up from Paul Sidney from Credit Suisse.

Paul Sidney: Yes. Thank you. Just a really quick follow-up. I mean, we’ve had a very interesting discussion on the outlook for Video revenues and you’ve given a lot of detail and comments on pricing, channel growth and the traffic from over the top. I was just wondering just simply, are you more confident on the outlook for Video revenue growth now than you were 12 months ago?

Rodolphe Belmer: No, no. What we said 12 months ago, I think we are sort of confirming it today, meaning that we think that Video is a very resilient segment. We think that this segment will be slightly growing going forward because the underpinning drivers are very solid and very predictable. We said and we reiterated that the growth would be very, very low, it’s a low one single digit. But it is very solid, very predictable because the underpinning factors, which is the growth in number of channels, the growth in consumption of megabit per channel, which is sort of flat rather than a growth, and the price. We think that those factors, they are under control. And even though there is no significant driver for growth, the fact that we are able to confirm that this business is very resilient, with a very high focus committee. I don’t know if it’s English or what. And also that we can generate more cash out of this business tomorrow than we are doing today because we have undertaken a very determined strategy to contain or to reduce our CapEx for the Video segment through our design to cost initiative. It should bring very strong confidence in our business going forward. Revenues that are under control, resilient, and CapEx that can be reduced, thanks to the design to cost initiative, meaning that cash flow should be – and our very solid arguments today to prove that cash flow should be growing. And since it’s a bigger part of our business, it’s a good signal for the entire broad cash flow.

Paul Sidney: Thanks, again.

Operator: We will now take a follow-up from Giles Thorne from Jefferies.

Giles Thorne: Thank you very much. I wasn’t expecting to get this one in. You’re a USC Band stakeholder. Do you intend to join the Intelsat and SES consortium?

Rodolphe Belmer: Well, C-band, the answer to your question is yes. But I want to give more details and maybe more explanation. Well, there has been a spontaneous and sort of unilateral step made by one of our competitors in the U.S., which aims at sharing in essence the C-band spectrum that we own in North America with mobile operators and to monetize this sharing through what they called a market-based approach. Well, do we like to participate to that initiative and do we like to be part of the consortium? The answer is yes. The fact is that we should be prudent by in all saying that it’s a very complicated process. It’s a process which is going to take quite a long time. And we are only at the very beginning of it, meaning that even though it looks exciting, you should wait to be excited. And second element, we control only a small portion of the C-band in North America. We have around 5% of the C-band, meaning that we are a minor player. It doesn’t mean that we don’t want to be a player, we will be a player, we will be part of it because we want to understand, to have visibility and to have our words to say on how the C-band spectrum is going to evolve in North America. But complicated situation, not for now, and we represent only a minority or a very, very, very minor portion of this platform.

Giles Thorne: And just as a very quick follow-up, and I appreciate we’re eating up the time now. Are you comfortable with suggesting that the 600 megahertz for the AWS-3 spectrum auctions are a good benchmark for prices? Or I’m assuming you don’t want to give anything there?

Rodolphe Belmer: Well, as long as we are not very clear on how it’s going to be structured in market-based approach, and as long as we’re not going to be clear on – and how the mobile telecom operators having to respond to that approach is very, very unclear at that moment, very vague at that moment. And as long as not – we’re not going to be clear on what’s going to be the SEC response on that actual data. As long as not one – to be clear on what are the regulation and legislation modification to be undertaken in the U.S. just to give us a framework to that market-based approach. I cannot give an answer, and that’s why it’s very complicated because there are lots of elements that needs to be undertaken and which are at stake, which gives very, very little clarity to that subject at the moment, and what could be the real value of that spectrum at that moment. It depends a lot on how we can sell it, to whom and what’s the framework to give the level to us in the negotiation and not to different stakeholders.

Giles Thorne: Thank you very much. And thanks for follow-up.

Operator: As there are no further questions at this time, so I’d like to turn the conference back to our host for any additional or closing remarks.

Rodolphe Belmer: Well, no additional closing remarks. Thank you for this call today, and see you in three months for our quarterly results.

Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.