Eutelsat Communications SA

PAR:ETL

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and welcome to the Eutelsat Communications' First Quarter 2021 Revenues Presentation. Today's conference is being recorded. And at this time, I would like to turn the conference over to Michel Azibert, CEO. Please go ahead.

[Sandrine Téran, Chief Financial Officer]

Yes. Hello, Sandrine speaking, actually. So good evening to everyone, and thank you for joining us on this call where we will present our first quarter 2021 revenues. I am Sandrine Téran, CFO, and I am joined by Michel Azibert, Deputy CEO. Our revenues highlights the general resilience of our activity in the COVID context, with operating vertical revenues down 1.9% year-on-year and total revenues down 0.7%. Broadcast remained resilient with the Sky Italia renewal securing broadly stable revenues over the medium-term and the extension of contract durations with Tricolor TV in Russia and Azam TV in Sub-Saharan Africa. We have taken significant steps in our Fixed Broadband strategy with the acquisition of Europe's leading satellite broadband distributor, BigBlu Broadband Europe, coming just ahead of the entry into service of EutelSat KONNECT and complementing the wholesale agreement with Orange for the entire French capacity on the satellite. Finally, all financial objectives for current and next fiscal year are confirmed. Total revenues for the first quarter stood at EUR 315 million, down 0.7% on a reported basis. This included a negative currency effect of EUR 4 million related to devaluation of the euro-dollar rate, offset by a hedging impact included in other revenues, which, therefore, saw a positive swing of EUR 8 million. Revenues of the 5 operating verticals were down by 1.9% on a like-for-like basis. A few comments on renewal with Sky Italia, which was signed in September. Sky Italia is our largest customer, accounting for 6% of group revenues, 10% of Broadcast revenues and 30% of Western Europe Broadcast revenues. This multiyear agreement represents a secured backlog of around EUR 450 million, with future extension opportunities coming on top of this firm commitment. It secures broadly stable revenues with Sky Italia over the medium term, comforting our financial objectives. As a reminder, the HOTBIRD replacement satellites will be launched next calendar year with an enhanced service level at substantial CapEx savings relative to the existing constellation. These contracts highlight the unmatched reach of HOTBIRD for broadcast across Europe, the long-term effectiveness of satellite for linear distribution in Western Europe and the general resilience of our Broadcast revenues. Turning to other commercial activity. In Broadcast, we extended the duration of contracts with Tricolor TV in Russia, one of our largest customer, and with Azam, one of the leading pay TV operators in Sub-Sahara Africa. And we secured new business for the launch of new DTH platforms, BluTV in Brazil on EUTELSAT 65 West A and Switzerland's Kabelio at HOTBIRD. These contracts nevertheless come in the context of a general slowdown in the pace of new business against the current operating backdrop. Among the other applications, in government services, the outcome of the full 2020 renewal campaign resulted in an estimated renewal rate of circa 80%. In Fixed Broadband, we signed a multiyear distribution agreement with Paratus for network connectivity in South Africa, and we concluded a long-term agreement with Ovzon for the provision of satellite control services for its 3 satellite to be launched in the fourth quarter of 2021. This will be recognized on the other revenues. Recent quarters have seen several major steps to prepare the return to growth in Fixed Broadband, most recently, the acquisition of the European activities of Bigblu Broadband, adding a retail pillar to our distribution strategy in Europe. This transaction was closed on September 30, and integration is progressing well. It comes just ahead of the imminent entry into service of EUTELSAT KONNECT within the next couple of weeks. This complements the major wholesale agreement secured with Orange for the entire French capacity of the satellite. Discussions with other major European telcos are moving forward. As a reminder, we also have a MoU with Schoolap to provide high-speed connectivity to almost 4,000 schools in the Democratic Republic of Congo, and are exploring similar opportunities with government-backed digital inclusion programs, which will be a key component of our African Broadband business. Now let's take a look at the Q1 performance by application. As a reminder, all commentary and figures relates to a like-for-like basis, i.e., at constant currency and perimeter. Turning to the revenues of each of the 5 verticals this quarter. Broadcast, 62% of total group revenues, recorded revenues of EUR 191 million, down 1.5% versus last year; Data and Professional Video, 13% of group total, saw revenues of EUR 40 million, down 6.2%; Government Services, 12% of group total, saw revenues of EUR 38 million, up 0.7%; Fixed Broadband, 7% of revenues, stood at EUR 21 million, a progression of 3.8% year-on-year; and Mobility, 6% of revenues, saw revenues of EUR 18 million, down by 7.2%. Finally, other revenues stood at EUR 9 million. That included a positive EUR 2 million impact from hedging operations compared to a negative impact of minus EUR 2 million last fiscal year. Overall, there were EUR 8 million higher than last year. Let's look at each one in more detail. First quarter Broadcast revenues amounted to EUR 191 million, down 1.5% year-on-year. This reflected predominantly the impact from July 1 of the renegotiation of contract terms with Greece's Forthnet which represented a minus EUR 2.5 million headwind for the quarter. They also included a positive one-off of almost EUR 2 million in the MENA region. As mentioned above, we renewed our Sky Italia contract, extended contract links with Tricolor and Azam and signed a new business with Kabelio and BluTV. This activity, nevertheless, comes in the context of a general slowdown in the normal rate of new business, resulting from the general operating environment brought about by the COVID crisis. Turning to channel count, which was down 4% year-on-year at circa 6,700 units, reflecting the lower lineup at 5 degrees West, following the end-of-life in stable orbit of EUTELSAT 5 West A and the technical issue on EUTELSAT 5 West B, which led to a reduction in certain services. The anticipated decrease in the Sky Italia lineup in the context of the renewal with higher prices offsetting lower volumes and technical factors, mainly the end of temporary dual illumination in Professional Video. On the other hand, the number of HD channels continue to progress, reaching a penetration rate of 26%, 3 points higher than a year ago. All major orbital positions contributed to this progression. At the same time, the number of MPEG-4 channels was broadly stable and remains at 71% penetration, much more advanced than HD. The combination of these various factors resulted in stable megabit usage year-on-year. Finally, let's take closer look at core Broadcast, accounting for more than 60% of revenues. As the graph on the left shows, if we exclude the revenues of the FRANSAT DTT platform, core Broadcast has been broadly stable at constant perimeter over the last 13 quarters. This is unique in the industry and reflects the following factors: our geographic exposure with emerging markets accounting for over 50% of revenues and our absence from the mature North American market and the fact that our business model is predominantly DTH, the most resilient subvertical, compared, for example, with cable headends CD. Over the same 3-year period, our main channel KPIs have been well-oriented, leading to a slight progression in megabit consumption. Channel count was up 2%, with growth mostly in emerging markets. HD penetration continued to progress from 17% to 26%. This represents almost 60% growth in HD channels compared with a rise of 16% in MPEG-4 channels over the same period. First quarter Data and Professional Video revenues stood at EUR 40 million, down by 6.2% year-on-year. Fixed data continued to reflect the ongoing pricing pressure and highly competitive environment, notably in Latin America, but benefited from improved volume trends with, in particular, the carryforward effect of new business secured in MENA last fiscal year. Professional video was once again in decline on a year-on-year basis, but occasional use, which was strongly affected by the COVID-related lockdown in the fourth quarter of last year, showed signs of recovery in September with the reinstatement of live sports events. First quarter Government Services revenues stood at EUR 38 million, up 0.7% year-on-year. They reflected, on one hand, the contribution of the EGNOS payload on EUTELSAT 5 West B, which entered into service in February, and on the other, the negative carryforward effect of U.S. government renewals last year. On a quarter-on-quarter basis, revenues were down by 5.8% since the fourth quarter of last fiscal year, included a one-off revenue related to the temporary relocation of EUTELSAT 7A at 59 degrees East. The renewal company with the U.S. government for 2020 resulted in an estimated renewal rate of circa 80%. First quarter Fixed Broadband revenues stood at EUR 21 million, up 3.8% year-on-year in a context where demand for high-quality, ubiquitous and reliable Internet connectivity is higher than ever. This reflected growth in Europe and across the Mediterranean Basin, with positive net additions for the second quarter in a row and higher terminal sales during the summer period. In Africa, while the contribution to revenues remain modest, we progress on our go-to-market capabilities with notably a multiyear distribution agreement with Paratus to bring network connectivity to South Africa. With the imminent entry into service of EUTELSAT KONNECT, this year will mark a turning point for fixed broadband, building on the recent wholesale agreement with Orange for the French capacity of the satellite and the integration of the European distribution operations of Bigblu broadband, which is progressing well. First quarter revenues stood at EUR 18 million in mobile connectivity, down 7.2% year-on-year. This reflected the impact of the COVID-19 crisis in aero mobility, weighing on airtime-related revenues on KA-SAT and reducing revenues from certain service providers. Conversely, Maritime revenues grew further on the back of the ramp-up of contracts, with distributors secured in the last couple of years. As a reminder, the first quarter of last year included a negative one-off of circa EUR 1 million related to the timing of revenue recognition. The backlog stood at EUR 4.4 billion at September 30, 2020, versus EUR 4.2 billion at end September 2019, and EUR 4.1 million at end June 2020. The 3% year-on-year growth reflects the inclusion of the Sky Italia contract, partly offset by natural backlog consumption. The backlog was equivalent to 3.4x '19/'20 revenues, with Broadcast representing 70%. The number of operational transponders at September 30, 2020, stood at 1,382, down by 5 units year-on-year. That's reflected, on one hand, lower operational capacity at 5 degrees West, following the transfer of services from EUTELSAT 5 West A to EUTELSAT 5 West B in January 2020, and on the other, incremental capacity brought by EUTELSAT 7C in January 2020. The number of utilized transponders stood at 966, unchanged on a year-on-year basis and up by 6 units quarter-on-quarter. As a result, the fill rate stood at 69.9% compared with 69.7% both a year ago and at the end of June 2020. Let's turn now to the outlook. We are only a couple of weeks ahead of the entry into service of the KONNECT satellite, which will start operations in early November. As a reminder, the entry into service will be gradual with 80% of the capacity in service by year-end and 100% by early March 2021. The coverage of the satellite will be split between Europe, with circa 55% of the capacity initially and a focus on high demand areas where the KA-SAT is congested namely France, Italy, Germany, Spain and the U.K., and Africa, where it will gradually replace the capacity we purchased to Yahsat and allow an acceleration of our operations. KONNECT comes with a superior economic performance compared to existing assets. It comes with an unprecedented flexibility, allowing to reallocate 20% to 25% of capacity between beam hence, facilitating improved fill rates. The cost per sellable gigabit is almost 3x lower than for the KA-SAT. As a result, we will be able to deliver more compelling offers for end users on sound economic terms with enhanced speed. With the first quarter in line with our expectations, we confirm our fiscal year 2021 objective of revenues of the 5 operating verticals of between EUR 1.180 billion and EUR 1.220 billion. This is based on a euro-dollar rate of 1.14 and is before the impact of the acquisition of BBB from October 1. This includes the front-end loading of revenues, in particular, in Government and Broadcast where the second half is expected to be slightly lower than the first. Cash CapEx will remain at an average not exceeding EUR 400 million per annum for the period July '20 to June '22. Although as recent years show, we are able to limit this and where necessary. We will continue to leverage all measures to maximize cash generation, notably the execution of the LEAP 2 plan aimed at generating EUR 20 million to EUR 25 million in annual savings by fiscal year '22 and improving working capital requirement trend. We also confirm our discretionary free cash flow target of between EUR 420 million and EUR 450 million in fiscal year '21/'22. We remain committed to a sound financial structure to support our investment-grade credit ratings and continue to target a medium-term net debt-to-EBITDA ratio of around 3x. And of course, we confirm our policy of the stable to progressive dividend based on the dividend of EUR 0.89 recommended at the upcoming Annual General Meeting, reiterating our commitment to a high level of shareholder return. Looking ahead, the next 3 years should mark the end of the negative top line trend with the ramp-up and arrival of targeted incremental capacity predominantly in connectivity. As a reminder, EUTELSAT 7C entered into service in January this year with 19 incremental transponders addressing Sub-Sahara in Africa, one of the remaining pockets of growth in broadcast. The deal with Canal+ and the recently added smaller DTH platforms will gradually fill this capacity. KONNECT, as already mentioned, EUTELSAT QUANTUM, which has been delayed due to a later-than-expected availability of its copassenger, is due to enter service at the end of Q2 '21. Positioned at 48 degrees East and with its unrivaled flexibility and joint commercialization agreement with Intelsat, it will represent a compelling offer for government customers. KONNECT VHTS will start operation towards the end of 2022, with 500 gigabits of VHTS capacity and firm precommitment from Orange and Palace, which will represent a major milestone of our connectivity strategy in Europe. And finally, EUTELSAT 10B, due to start operation in H1 '23 when the aero market should have somewhat recovered, will bring 35 gigabit of incremental HTS capacity for mobility over the EMEA, of which 1/3 already firmly precommitted. Thank you for your attention, and Michel and I are ready for your questions.

[Operator]

[Operator Instructions] We'll take our first question from Paul Sidney from Crédit Suisse. .

[Paul Sidney, Research Analyst]

Just 3 questions for me, please. Just a bit on clarification on Slide 21. Should we interpret that as you're targeting top line growth in full year '23? Sorry, just to make sure I get that right. And then just a couple of quick questions on Fixed Broadband. Can you remind us of the addressable market you see in Europe Fixed Broadband? I think maybe you mentioned a figure of 4 million homes in the past. Just a bit of an update there. And could you...

[Sandrine Téran, Chief Financial Officer]

Sorry, Paul. I apologize. Sorry, Paul. Could you please speak a bit loudly because we have hard time to hear you well. Thank you. Can you repeat the question again?

[Paul Sidney, Research Analyst]

Sure. Is that better?

[Sandrine Téran, Chief Financial Officer]

Maybe a bit better.

[Paul Sidney, Research Analyst]

Okay. My first question was just to interpret the return to top line growth on Slide 21. I just wondered if it's right to think about your targeting top line growth in June '23 from that slide. Just to make sure I got that right. And then just a couple of questions on Fixed Broadband. Could you just remind us the addressable market you see for Fixed Broadband in Europe? And also could you actually just give us the number of physical customers and connections you have currently, including the 50,000 from Bigblu?

[Sandrine Téran, Chief Financial Officer]

Thank you, Paul. I will take the first one, and Michel will answer on the Fixed Broadband. So yes, your understanding is correct on the Slide 21. The objective of the slide is to show what is the path that we have with incremental capacity to return to growth in fiscal year '23.

[Michel Azibert, Deputy Chief Executive Officer]

With regards to the Broadband. So if we take a term horizon, fiscal year '30, to, of course, account for the progress of fiber and 4G and 5G, we believe that the addressable market in Europe, I mean, of course, including Western and Eastern and Central Europe, is in the range of 3 million to 4 million households or premises because sometimes we have country houses. So -- and it's mostly, of course, B2C, but there is a fraction of our business, which will be B2B in the range of maybe 15% to 20%. And the -- we do not communicate on the number of subs that we currently have. But you know that Bigblu was our #1 distributor for Europe. So obviously, we have much more than the 50,000 from Bigblu. And what is good news is in a sequence of 2 quarters in a row. We've been growing this number of subs, which is partly related to COVID and partly related to the development of the PPP program outside Western Europe, which is now congested on [ KA-SAT ].

[Paul Sidney, Research Analyst]

And maybe just a very quick follow-up. How many customers could you serve on both KONNECT and KONNECT VHTS? I'm sure you've given these figures before, but just to remind me.

[Michel Azibert, Deputy Chief Executive Officer]

I would say several hundred thousand on both. Approximately, probably between 2 and 3x more on KONNECT VHTS than on KONNECT, given that probably the provisioning per premise that we would have in Europe would be higher than the one we have in Africa. Of course, I'm talking about KONNECT. We deployed completely on Africa. When I mentioned these figures, of course, if we talk about KONNECT as a transition and a springboard for Europe, basically, it's definitely much less because we would be only using, as mentioned by Sandrine, 55% of the capacity of KONNECT for Europe. But if you would take KONNECT VHTS, let's say, several hundred thousand is a good number.

[Operator]

Moving on to our next question comes from Sami Kassab from Exane.

[Sami Kassab, Media Research Director, Co]

Yes. So 2 or 3 questions. The first one, can you -- you did flag the rate of new business in Video Broadcast being slower than usual. Does that mean that we should expect the rate of decline in Video to worsen through the remaining quarter of the year? Secondly, when should we expect mobility to return to growth? Do you think it will be ahead of Q4 this year? And lastly, can you please provide details on the commercial offering for KONNECT over Europe? What's the monthly retail price you are targeting? And what will be the terminal cost -- the cost to buy the terminal, please?

[Sandrine Téran, Chief Financial Officer]

Sami, I will take the first 2 questions, and I will ask Michel to answer the third one. So yes, what I have explained in the presentation, and I can give more color now is that what we can observe is a slowdown in the pace of new business in the COVID context. So it's true for almost all applications, but it is also true for Broadcast. And I would even say more specifically for Europe, so which means that our expectations today for the Broadcast segment and what are the perspective for the next coming quarter is that we expect to decline slightly beyond the Greece Forthnet impact because first of a limited contribution of the new business in the energy market in the context of the slowdown I mentioned and also some delays of new DTH project. And also for Europe, because the natural erosion of the business that we always have in Europe is not sufficiently compensated by the new business as we can see today. So yes, we expect the trend in Broadcast to worsen in the next quarters of this fiscal year. On the mobility, when do we expect the mobility to return to growth? Frankly, it is very much dependent of the COVID situation. You know that the visibility in the aero mobility market is very low. We have good news in the Maritime segment, as you know, because we have some revenue ramp-up to come during the year, but very difficult to answer your question in a precise manner for the old segment.

[Michel Azibert, Deputy Chief Executive Officer]

With regard to the -- yes?

[Sami Kassab, Media Research Director, Co]

So Michel, Sandrine, you suggested that the rate of decline in Video would somewhat accelerate. From what base do I have to take the minus 1.5% you reported today? Or is it more 2.5%, if you exclude it from [ your ] one-off, therefore, you should look at the...

[Sandrine Téran, Chief Financial Officer]

Yes. In the 1.5% that you see today, it's mostly explained by the Forthnet impact. So we expect the decline to be slightly more than the minus 1.5%. But I will not give more precise figures. It's a slight decline. I mean we are not talking about something drastic.

[Michel Azibert, Deputy Chief Executive Officer]

Okay. On the broadband retail offer for KONNECT, which is covering 10 countries of Western Europe, so in the developed markets, the retail price is in the range of EUR 30 to EUR 70, VAT included, and including the rental of the kit because we will not sell the kit, modem and dish, but rent it in our retail offers. So of course, these offers vary according to the performance delivered, the speed, in particular, between 30 and 100 gigabit per second and also the monthly allowance, although all the offers will include some kind of unlimited version, because obviously, the satellite is completely empty at the beginning. So this is -- and of course, it might vary from country-to-country to be perfectly adapted to the local market, which competitive environment might be different from one to the other.

[Sandrine Téran, Chief Financial Officer]

And maybe, Sami, one complement. It's obvious in my mind, but just to be fully clear on this, of course, what we said on the trend for Broadcast and, of course, full year accounted for in our guidance. So it's something which is fully factored in the guidance that we have reconfirmed.

[Operator]

We'll now take our next question from Michael Bishop from Goldman Sachs. .

[Michael Bishop, Equity Analyst]

As you mind a bit of a follow-up on the prior question. Given you reported the minus 2% in the first quarter, that would imply your tracking towards the top end of the guidance range on an organic basis. And away from the previous answer, so what you've explained in Broadcast, it felt like going through the slide, you're also talking a bit about some phasing in Government. Could you just clarify that? And also just talk us through the Government renewals, because it sounds like you've done 80% renewal rate, but then you've added the 4 transponders in total. So I'm just trying to work out how that shakes out for Government. And then also, just as the third, sort of follow-up of that question, how does the very slight delay on QUANTUM also impact that vertical as well this year?

[Sandrine Téran, Chief Financial Officer]

Thank you, Michael. So on the H2 perspective and the outlook for the whole year, so there are several elements on top of the one I described for Broadcast. But it's right that there are also some for Government Services, for which the comparison basis will be much -- will be tougher in H2 than you've seen in H1, first, because we booked a one-off in Q4 of previous year for EUR 2 million, if you may remember for the relocation of the satellite. And second, because the EGNOS revenues will be fully in the comparison basis for H2, which means that the year-on-year change for government will be unfavorable in H2 as compared to H1. We also have the carryforward effect of the previous renewal campaign with the U.S. DoD, which was at 85% for the last one and 90% for the full '19 one. So this will weigh on the government segment in H2. We also have, of course, the continued uncertainty on aero mobility, as I mentioned before, and the delay of QUANTUM that you have referred to. So QUANTUM will be now operational at the end of fourth quarter of the fiscal year, so it will have a very limited contribution to the Government segment. It's something that we can absorb in our guidance because it's a couple of months delay as compared to the previous situation, but it will also weigh on the profile of the Government Service in H2. 80% renewal for the very latest campaign with the U.S. DoD. It's a bit lower than the previous ones. It's partially compensated with the new business. Of course, the EGNOS new business that we have mentioned before and also some new business with some of the U.S. DoD but also with non-U.S. DoD customers that will only partially offset the 80% renewal rate in value terms that we have -- that we have recorded over the last weeks.

[Michael Bishop, Equity Analyst]

So if we just take the group guidance then at the beginning of the year, I think you were talking about quite a lot of prudence into the Sky Italia renewal, which felt like it was better than expectations. So is the message that maybe Government's a little bit worse than expectations now, and therefore, that's why you're still happy with this fairly wide range and then obviously declines?

[Sandrine Téran, Chief Financial Officer]

No, no, no. We always embark some caution on the -- on the government segment, as you know, because we always have this potential loss of a few -- of some business at each renewal campaign. And we know also that we have this potential opportunistic growth, but no, we have -- when we mentioned -- when we defined our guidance, we already had a relatively good idea about the outcome of the Sky renegotiation, and we have embarked overall caution to face the COVID situation.

[Operator]

We'll now take our next question from [ Atul Durano ] from Barclays.

[Unknown Analyst]

I just have one. I was wondering whether if you think you've seen, as a result of COVID-19, any changes to the launch schedule which may have you concerned about delays for your launch plans for calendar 2021?

[Sandrine Téran, Chief Financial Officer]

Sorry, Mathieu, because the line is -- you are asking about the COVID-19 impact on the launch schedule, right?

[Unknown Analyst]

Yes, for calendar 2021.

[Sandrine Téran, Chief Financial Officer]

Calendar 2021, we have the impact of QUANTUM that I mentioned before that will be launched in Q1 calendar 2021 So it's not so much related to a COVID situation on our side, but it's related to the situation of the co-passenger. So I cannot comment much more about this. And that's it for the calendar year 2021, and the rest are coming significantly later.

[Operator]

Moving on to our next question, we'll take from Giles Thorne from Jefferies.

[Giles Thorne]

First question was on HOTBIRD. And following the Sky Italia renewal, which is obviously going to be a very significant lead indicator for future renewals on HOTBIRD and combining that renewal outcome with what you know about your replacement costs for HOTBIRD. It would be useful to get some comments and some color on how HOTBIRD IRR has changed, if at all.

[Sandrine Téran, Chief Financial Officer]

Sorry. Can you talk a little louder?

[Giles Thorne]

I think we're all having a problem tonight. Okay. I'm practically kissing the phone now. So the question on HOTBIRD IRR. You've just done a major renewal that will be a lead indicator for future to [indiscernible] you're replacing the satellite. So it would be useful to get an update on how IRRs have changed, if at all, on HOTBIRD. Hopefully, you got that. Second question. Second question was back on Fixed Broadband. [ Some ] acquisition was to address any type of [ multiples ] that exist at the retailer level around customer acquisition costs and subsidies. You can be much more in control now. In that context, are you planning to do a big, aggressive subsidy round for customer acquisition for KONNECT? Is that part of the picture, that part of the story for the short term?

[Sandrine Téran, Chief Financial Officer]

Okay. On the HOTBIRD IRR. Giles, so you know that the IRR and the DoD position is even improving in the future, thanks to the CapEx efficiency that we can develop with the replacement of the new constellation. Remember that we are replacing 3 satellites with 2, and that we are significantly reducing the CapEx of the HOTBIRD constellation. So by nature, the IRR of HOTBIRD for the same level of revenues is improving and will improve when we have the new constellation in operation. And of course, the renewal of the Sky contract is only good news that can strengthen the fact that the IRR of the next HOTBIRD constellation will be very high.

[Michel Azibert, Deputy Chief Executive Officer]

And on the Broadband, yes, you're right. I think for Europe, in connection with the Bigblu acquisition, so we're going to go full speed on retail. It does not prevent us in certain cases, by the way, to go also wholesale like we did in France with Orange. But as opposed maybe to Africa, where I think in the mix, we would have maybe more B2B and B2 -- Government and maybe a little bit less business-to-consumer in Europe. The market is there in remote areas. And so we would definitely leverage on the scale and the strength of Bigblu to complement what we have already. And that will give us the retail offer. It will give us, obviously, a better access to the end user, strengthen ability probably to pilot retention and to upsell. And of course, a total control of the product and service definition and the price. Maybe that was one part of your question, price and [ SACs ] and price and, let's say, management of [ SACs ] in a reasonable way. I mean, we don't want to do things which are not reasonable, but which would, of course, allow us to capture these difficult customers, which are in remote areas, so we need to have a sort of fully dedicated and adjusted sales force to do that with a network of resellers and installers. And Bigblu is bringing that. They're really bringing the control of the distribution levels and the way to incentivize and communicate and bring more awareness to our products. So we'll definitely be more aggressive with KONNECT than we have been, obviously, in the last years of the KA-SAT.

[Giles Thorne]

And just on the HOTBIRD point, perhaps this is the wrong way to look at it. But if you look at cash flow generation from Sky Italia, over's the course of this renewal, and you allocate a portion of the CapEx to that particular contract, and maybe that's just not possible. But if it is possible, is your cash generated from the lifetime of the contracts gone up or down or flat?

[Sandrine Téran, Chief Financial Officer]

Sorry, Giles, can you repeat the point or the question? If we look at the profile of...

[Giles Thorne]

Sorry, Sandrine to talk over you. Let me -- I'll go back into the queue, and I'll let the next person ask the question and I'll try again.

[Joanna Darlington, Head of Investor Relations]

Giles, we can get back to you afterwards if you prefer.

[Giles Thorne]

Okay.

[Operator]

We'll now take our next question from Aleksander Peterc from Societe Generale.

[Aleksander Peterc, Equity Analyst]

First of all, could you briefly comment on mobile connectivity? Sequentially, you had the 12% growth quarter-on-quarter. And I'd just like to know what's happening. Is it mobility that was not as bad as in the previous quarter? Or is there strong traction in Maritime? I mean, what exactly is going on here? That will be the first one. And then secondly, just on Government. I'd like to understand, given the weak overall renewals that we saw in DoD in recent campaigns, should we model revenue now drifting lower quarter-on-quarter for this year because you won't have much new capacity coming through? QUANTUM is delayed, and it wasn't going to contribute much in the year. So just how we should think about modeling government from here on?

[Sandrine Téran, Chief Financial Officer]

So on the mobile connectivity, you are right that we have an increase, which is more than 11% quarter-on-quarter. This is explained by, I would say, a negative one-off that we had in Q4 of the previous fiscal year. In the -- I would say, in the context of the COVID crisis, we have had several discussions with significant client. And a number of them belong to the mobility vertical. And in Q4 of last year, we had to -- we recorded the impact of negotiation that we have had with a specific customer in the mobility segment. And the impact of this concession was visible in Q4 last year. And the impact in the Q1 of FY '21 is lower. So this is why you have the sequential change with a positive variance on a sequential basis. So of course, we take all the cases one by one. When we agree to renegotiate a contract or to do a concession, it's, of course, based on the strategic long-term relationship that we have with those customers. And I would say, fundamentally, we don't have to agree on concession without compensation. I would say, you know that the capacity is something which is quite strategic for our customers. But for one specific client, we recorded this one-off in Q4 for an amount, which is above the impact that we have in Q1 for fiscal year '21. So that's the explanation for this valuation. On the Government, it's true that we don't have much help in the next quarter because of the delay of QUANTUM. So it would be reasonable to assess that the revenue for the next quarter would be lower than the one of the first quarter, except if we have new business, more coming in the rest of the year, but it would be reasonable to forecast this way.

[Aleksander Peterc, Equity Analyst]

And can I just have a quick follow-up just on the margin mix? It looks like if your revenue overall doesn't move much in terms of guidance, I understand that, but Broadcast looks a little bit weaker. And it seems to me that you may have more costs in Fixed Broadband as well if you try to attract new customers. So should we think a bit more conservatively on EBITDA margins for the year, just in broad lines in terms of trend?

[Sandrine Téran, Chief Financial Officer]

Yes. So you know, Aleksander, that we don't guide anymore on EBITDA margin, but it's true that with the ramp-up of the broadband activity, we will have some dilution on the EBITDA margin. And we are talking about a few points, but this is something that we could have in fiscal year '21, but it's something which is fully monitored in our forecast. And it will have an impact in the next coming years, I would say, marginal on the EBITDA margin, because it's not something that will be very significant at the level of EBITDA margin that we have. But yes, Broadband will weigh on the EBITDA margin for a few points, especially in the ramp-up period of the Broadband activity.

[Operator]

I will take your last question that comes from Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Great. Two questions for me, please, very quick. Just on the Fixed Broadband side. Is it possible to detail or just provide an overview if you are in kind of discussions with any other telcos to size the whole sales agreement as you did with Orange? Number of the telcos are talking about the ways of which they can, I think, more strategically, given the current COVID integration, regarding remote working and ways to kind of bridge the terrestrial network for secular homes, et cetera. That will be good. And secondly, something you mentioned at the end of last year regarding kind of payment and working capital. And again, I appreciate it is certainly a fluid situation. But is there anything which you could say this quarter regarding payments from your customers? If any customers have actually been able to make good on some of the previous delayed payments? Anything you could say there would be helpful.

[Michel Azibert, Deputy Chief Executive Officer]

First of all -- yes, we do. We are in discussions, sometimes in preliminary discussions or sometimes a little bit more advanced with telcos both in Europe and in Africa for KONNECT and KONNECT VHTS. I mean trying, of course, to follow the example of the discussion with Orange. I would say it's promising, but we are at an early stage. So we will let you know on that. And I think the interest of the telco, as you say, is related to the difficulty they have to KONNECT in a reasonable time frame, the 2% or 3% or 4% of the population, which they cannot reach easily with fiber and 4G. So it comes at the right time in the COVID maybe on these discussions.

[Sandrine Téran, Chief Financial Officer]

On the cash collection and the working capital, so yes, you're right. We mentioned in July that we are seeing some slowdown in the cash collection at the end of fiscal year 2020, sorry. The impact was significant. It was a substantial amount, I would say, of receivable that was delayed in terms of cash collection. So it's definitely a focus of this year. Part of the deficit in the cash collection at the end of '20 is being recovered, part of it, but there are still work to do to recover everything. We expect globally a better trend, an improved trend in the working capital in fiscal year '21 as compared to fiscal year '20. And we are, of course, focusing a lot to recover the cash not collected previous year as well as the one of the revenues of this year. But overall, the working capital should be better this year than it was in 2020.

[Roshan Vijay Ranjit, Research Analyst]

Okay. That's helpful. And if I could just follow-up on the first question, to push it a bit more. In terms of the discussions, are they kind of to the same magnitude as the Orange one because that was quite material, right, covering the French territories. So are we talking about the same scale or -- if you could just try to provide a bit color whether it's Europe or Africa type regions that would be helpful.

[Michel Azibert, Deputy Chief Executive Officer]

I think if we speak about Africa, to start, I would say, we're targeting something a little bit more modest than Orange. If we talk about Europe, of course, it depends which country, in which country we end up being successful. So we cannot promise on the magnitude.

[Operator]

And at this time, there are no further questions. I would like to turn the conference back to you for any additional or closing remarks.

[Sandrine Téran, Chief Financial Officer]

Thank you very much. So we thank you, everyone, for your attendance, and we wish you a very good evening. Talk to you very soon. Bye-bye.

[Michel Azibert, Deputy Chief Executive Officer]

Bye-bye.

[Operator]

And that concludes today's call. Thank you for your participation. You may now disconnect.