Good morning, ladies and gentlemen. Welcome to the conference call to report the Second Quarter 2023 Financial Results for Telesat. Our speakers today will be Dan Goldberg, President and Chief Executive Officer of Telesat; and Andrew Browne, Chief Financial Officer of Telesat. I would now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management. Please go ahead, Mr. Bolitho.

Thank you, and good morning. This morning, we filed our quarterly report on Form 6-K with the SEC and on SEDAR. Our remarks today may contain forward-looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward-looking statements as a result of known and unknown risks and uncertainties. For a discussion of known risks, see Telesat's annual and quarterly reports filed with the SEC and SEDAR. Telesat assumes no responsibility to update or revise these forward-looking statements. I will now turn the call over to Dan Goldberg, Telesat's President and Chief Executive Officer.

Okay. Thanks, Michael. This morning, I'll share some thoughts on our financial results and give an update on the business. I'll then hand over to Andrew, who will speak to the numbers in detail, and then we'll open the call up for questions. As we noted in our earnings release, we've had a busy first half of the year. We're tracking our guidance, received FCC validation on C-band clearing which allowed us to recognize approximately $260 million in the quarter and completed some meaningful additional debt repurchases that we think strengthen our balance sheet and create value for shareholders. But certainly, the big news was our announcement this morning that we've selected MDA as a prime contractor for the Telesat Lightspeed satellites; and that, by leveraging the advanced technology they've been investing in, we're able to reduce our CapEx on the project by roughly $2 billion, while fully maintaining the revolutionary capabilities of the network that we think are going to make it so disruptive and successful in the market. Lightspeed is now fully funded global service delivery given the company's own equity contribution, certain vendor financing and aggregate funding commitments from our Canadian federal and provincial government partners. The government financing commitments are subject to a number of conditions, including completion of confirmatory due diligence and the conclusion of definitive agreements, which we're aiming to get done by the end of the year, recognizing it could take a little bit longer. I want to thank our government partners for their strong and consistent support of Lightspeed and their recognition of the manifold public interest benefits that flow from the project. I want to say a few words about why this approach with MDA is so much more capital efficient and why we ultimately pivoted and made the move to…

Thank you, Dan, and good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. However, as Dan has said, it's been a long road and obviously, with our announcement on Lightspeed, we are so excited to be in a position to move forward with our program. Now focusing on our financial performance in the second quarter of 2023, Telesat reported revenues of $180 million, adjusted EBITDA of $139 million. And for the six months ended June 30, 2023, we generated cash from operations of $102 million, and we have $1.5 billion of cash on the balance sheet. In the second quarter of 2023, when compared to the same period in 2022, revenues decreased by $7 million to $180 million. Operating expenses decreased by $7 million to $52 million, and adjusted EBITDA decreased by $8 million to $139 million. The adjusted EBITDA margin was 77.1% compared to 78.4% in 2022. Between 2022 and 2023, changes in the U.S. dollar exchange rate had a positive impact of $5 million in revenues, a negative impact of $1 million in operating expenses and a positive impact of $4 million on adjusted EBITDA. When adjusted for changes in foreign exchange rates, revenues decreased by $12 million, operating expenses decreased by $8 million and adjusted EBITDA decreased by $12 million. The revenue decrease was mainly due to a termination in service by a South American customer combined with a reduction in revenues from one of our North American DTH customers. This was partially offset by increased revenue from the work we are performing from NASA related to satellite-to-satellite communications and lower overhead. The decrease in operating expenses is primarily due to lower noncash share-based compensation partially offset by higher costs associated with the procurement of third-party satellite capacity…

Thank you. We will now take questions from the telephone lines. [Operator Instructions] The first question is from Mike Pace from JP Morgan. Please go ahead.

HI, good morning. Thanks for taking the questions. Dan, I appreciate all the color and commentary earlier on the NDA contract and what you're getting out of that different than before. But I guess, just to be really clear here for some of us that aren't so smart on satellite technology. You will have the same or roughly the same amount of capacity in this network than the prior network. I just want to confirm that. And then what are you not getting, if anything, for spending $2 billion less? And then I have a few other follow-ups.

Yes. No, thanks, Mike. No, I mean, it's as we said, this constellation by leveraging this more advanced digital beamformer, it's got the same effect of capacity. We were not going to settle on that. We've got a really good understanding, at least we think we do, of what the market needs, what our customers are looking for. They need to concentrate capacity dynamically around the Europe. And so we didn't trade off any of that, which is the beauty of this. So we still have four ISOs, which we've always said is important in terms of our ability to dynamically route traffic around the world and have greater resiliency throughout the network and gives us a lot more scope in terms of rolling out landing stations. And so I didn't even talk about it in my remarks, schedule, having compromised schedule at all. The good thing about working with MDA as the prime satellite contractors that we've always been working with MDA on this program. I mean they already had a big part of the program with the antenna that they were going to build. So yes, no, I mean, look, what can I tell you? I mean we've been beavering away in the background. I mean we've been doing all sorts of things to close the business case and some of that we talked about really explicitly like engaging with investors on incremental equity contributions and the like. We also said maybe a little more elliptically that we were looking at other ways to optimize the constellation, the network. And ultimately, we really hit [indiscernible] there. So anyway yes, no, we're -- it's equally capable. And as I said in my remarks, with the digital beamformer and our CTO, Dave Wendling is sitting with me here, too, and Dave can talk more about it. The link is better between the spacecraft and the user terminal when it's transmitted with this digital beamformer. And that kind of above my pay grade in terms of how all that works. But anyway, the analog antenna has to kind of squint at the user terminal at lower elevations and the digital one doesn't. And it just improves the link.

But just starting in a month, just to be super clear here, is there anything that you're not getting? And the answer in simple no works as well, too. But just didn't...

It's a simple no from a capability perspective, from a flexibility perspective. I mean, yes and if anything, I think we're gaining stuff, I mean with 3 times the beans on each satellite, we've just got so much more scope to route traffic around. And look, we looked at this technology years ago. But we -- I mean you know Telesat. We're not the most risk embracing organization on the face of the earth. I think we're forward leaning, but we don't get overly aggressive. So we took a pass on it. The thermals were too high. I mean there's all kinds of stuff. But in any event, I mean MDA kept investing, and they're leveraging some of the work that they did on the analog beamformer, which is another reason why we're not taking any schedule hit. So yes, no, it's just a home run.

Got it. And then I don't know who wants to take this one, but I'm hoping some folks can maybe just bridge some funding gaps for me here. So $3.5 billion total, $1.6 billion Telesat equity. We often do math on how much money has moved over there to date. But I'm wondering, can you give us that number rough rounded and couraged. I'm assuming C-band proceeds will help fund that and then additional money moving over. I'm just wondering if you can fill that in a little bit.

Let me try to fill it in. And if there are still gaps, which is often the case after I respond to questions then the finance folks are going to -- but a couple of things, and we tried to be clear about this in the release. We're fully funded for right now, 156 satellites. So the deal that we've announced with MDA is for 198 satellites. The $3.5 billion is for the 198 satellites. But right now, with the cash that we have, including the cash that we've already invested in this project. Oh, and I should note the C-band proceeds that we're expecting to get real soon here. With the cash that we have in the C-band proceeds that are coming with the money that we've lined up with our Canadian federal and provincial partners. We've mentioned that we've got some vendor financing, which is not as significant as our own equity contribution or the government contributions. So with all of that money, we've got enough money. We're fully funded for 156 satellites, plus we built a nontrivial amount of contingency in there because that's kind of how we roll. So that gives us enough money for the 156 satellites, which gives us full global coverage in a really good, high-performing constellation. But we've committed to MDA for another 42 satellites that we'll fund the current plan is using the existing cash flows of Lightspeed once Lightspeed gets up and running in a few years' time. So that's the plan. And so then the math should work. So the CapEx, just to be real clear here, the CapEx for the 156 satellite constellation is about $2.7 billion. The total program cost is about $3.5 billion for the 156 satellites. So that's CapEx plus everything else is about $3.5 billion, plus some contingency that I mentioned. And then when you look at the funding, there's about $1.6 billion equity contribution from Telesat. And just to be clear, that's cash that we've already put into the project. Cash that is already available outside of the restricted group for LEO, the C-band proceeds that are coming in, that covers all that $1.6 billion. And then the government contributions are about $2 billion. And then as I mentioned, there's some vendor financing as well. So that's what gets us there.

Can you break up the government financing and the vendor or give us one of those pieces? Is the government of Canada -- is that the same from last time is what I'm asking? Has anything changed?

Well, I mean, if you do the math, so we've said that it's approximately $2 billion, which at current exchange rates is about CAD2.7 billion. Previously, what we said is that the government of Canada had committed to about CAD1.44 billion contribution, Quebec, CAD400 million of Canadian contribution. So there's an incremental $900 million there that we've been in advanced discussions with our government partners about. So that's kind of the government piece. And we're not free right now to break down exactly how much is coming from the different sources, but we'll be able to talk more about that in the future. And then the vendor financing, we're subject to confidentiality obligations with our suppliers. It's some hundreds of millions of dollars, but we can't be more specific than that at this time. I will say it's not MDA. MDA is holding their call I think, shortly after ours, and I'm sure they'll get asked. So we chose MDA because they got this great technology, and they're leaning in hard in building -- in wanting to be a LEO prime, but we didn't select them because of vendor financing commitments.

And just quick into clarity, I think I know the answer, this is still going to be funded, built in unrestricted subsidiaries. And then in the future, you might consider bringing everything back together. Is that still the thought?

Yes, nothing has changed there in terms of how and where we're funding this. We've -- yes, I mean, what happens in the future in terms of restricted group versus unrestricted group? We're not saying anything about that. They're -- at some point in the future, it could all come back together or we could continue to finance those activities separately. But there's nothing about today's announcement that changes any of that.

Thank you.

Okay. Thanks, Mike.

Thank you. The next question is from Walter Piecyk from LightShed. Please go ahead.

Thanks. Dan, just to confirm that incremental government piece of the puzzle is not the revenue commitments that exist, right? This is...

No, no, no and I mean, no, we've got a capacity commitment from the federal government of Canada. It's CAD600 million over a 10-year term. We've got a separate commitment from the government of Ontario, that's CAD109 million over a five year term. And again, we've talked about this before, the way those things are structured, we think that the amounts are essentially going to get doubled when we take that pool of capacity that's subject to those funding arrangements and enter into agreements here in Canada with ISPs and the like. But no, those amounts are separate.

So this CAD900 million then, I understand I respect that you can't really disclose it, but cost-wise, obviously, is it going to look as attractive as what we saw from the government of Canada?

So that's a great question. So this approximately $2 billion of government funding, we said it's subject to the completion of confirmatory due diligence and getting definitive agreements in place. We're going to need to work with the government to agree fresh terms for all of that. I believe it's going to continue to be attractive financing, but we'll update everyone on that. So yes.

Fine. And then just the overall numbers. It was definitely helpful to recognize that your CapEx is even lower for the initial launch and the revenue pump going. But the overall number then in terms of what you've outlined sources relative to the uses, it seems like you don't even need the operating cash flow to get to the full 198 constellation?

Listen, we don't need the operating cash flow, Walter, to get to fund the $3.5 billion plus contingency for the 156, but we're going to need roughly another $800 million to fully fund the incremental 42 satellites plus the launch vehicles.

But why is that you said $2.7 billion for the 156, right? So if I just take $1.6 billion plus $2 billion...

No, no, no. Hold on. Wait. $2.7 billion for the CapEx, about $3.5 billion for the total program cost.

As contingencies, this is all, yes.

It's a little confusing because the total program cost for the 156 is roughly equivalent to the CapEx for the 198.

The numbers are the same.

Okay. I'm going to ask the first -- the JPMorgan dude's question in a different way. You had these presentations that were very helpful in terms of sizing the market, $365 billion TAM, and you kind of broke it down and talked about your percentages. Has anything changed in terms of how you look at that TAM relative to this new constellation, does it increased to TAM? Does it decrease the TAM? I assume we're growing the size of that TAM as we hit a commercial date that might be a little bit later than what I first kind of was forecasting back in 2021? Just thoughts on that.

Yes. So our thoughts about the addressable market, the size of the market, the amount of share we can take in that market are unchanged. Again, I mean, we deliberately have designed a constellation that allows us to do everything that we have been planning to do under the prior plan, if you dissect what we've said about the adjustable market in the past, order of magnitude, it's about $400 billion, we think, out in the -- I think we said 2025 time frame. Roughly, we've said about half of that $400 billion is kind of direct-to-consumer, which is not the market that we're focused on. We've always been real clear, we're focused on the enterprise and the government services market. So that's roughly the other half of that TAM. We've said if we get 2% of that which we don't think is the most ambitious kind of perspective that will be hitting our business plan. And so our thinking around that...

I have that. I'm glad to see the $430 billion is reaffirmed as is a time line on that. But I think maybe what's the follow-on that is like you've had a delay, you have a new vendor there's been a lot more conversation about, I guess, what people are calling direct-to-device markets and more of the consumer thing. There's -- I mean, Ergon on his sat-Dish call was talking about S-band, although they're not financed. I think you've got the Ligado spectrum. I don't know what's going on at Viasat. Is there an opportunity perhaps to partner with one of these other players get access to some additional spectrum and modify this constellation to the extent that you can address that broader $430 billion market you identified for 2025?

So here's what I'd say about that. First off, the $430 billion doesn't include the direct-to-handset market, which is some of what I know DISH is focused on. But these satellites right now have really been optimized. Frankly, just like our prior satellite design, they're optimized to do high throughput broadband connectivity for the enterprise market. And we have squeezed out every watt of power and directed it to that market, and we've sized the satellites, we've optimized them for that mission. In order to change the mission, it just wouldn't make any sense. Now having said that, if we had access to S-band spectrum or L-band spectrum, could we leverage the bus, the process or potentially the antennas, although the antennas might look different, yes, we could potentially do something like that. But right now, we just got to stay laser-focused on this huge market that's in front of us that we know well that we've been serving for years that we've been out there engaging with customers about Lightspeed for quite some time. So Walter, that's our focus. Now could the TAM be a little bit...

And is there a drop dead date when you'd have to work something out with an S-band or an L-band owner...

We're off to the races. We're already moving forward with MDA on this. We're not -- look, if there's some great opportunity here with some third-party bringing that spectrum and some capital, then it would just be almost kind of like an adjacent network that might leverage Lightspeed in terms of routing traffic around and whatnot. But, yes. You just think about...

We've talked about this before in terms of the rev commitments that when we were waiting for TELUS to get and the ECA and that stuff that it impacted your ability to get signature. So I assume that this is going to kind of open up that spigot. Are you -- how do you envision disclosure in terms of as you get incremental revenue commitments for the new constellation, individual press releases, updating on a quarterly basis, how do we get to...

Yes. All of that will be transparent about the deals that we're signing so that folks will have visibility. We understand how important that is.

Awesome. Thank you.

Okay. Thanks.

Thank you. The next question is from Arun Seshadri from BNP Paribas. Please go ahead.

Hello, gentlemen. Thanks for taking my question and first of all, congrats on getting a Lightspeed program reconstituted and funded, a lots of skeptics, so definitely hats off. Just wanted to nail down a couple of details on the funding, the equity side. So just to make sure I got my math right, the existing cash balance that you have right now is probably somewhere in the range of about $1.1 billion. You're getting another $260 million from the C-band proceeds that gets you close to $1.4 billion, so is it fair to say that you have another $200 million or so of additional equity that you need to contribute either from the operating cash flows in order to get to your $1.6 billion of equity funding?

This is Andrew. I'll take that. I think as Dan laid out very clearly that we are totally funded, the $1.6 billion is already there today. And that is comprised of, as you say, the cash we have currently we've got our C-band proceeds coming in CAD345 million. But also during the course of the program, we have been investing in the development over time. So that number includes that funding. And also, yes, so I think altogether, I think we're in good shape. I think the key point, we don't need any more cash to come in today for us to say we're fully funded. Any cash that comes in today is something for the future. But for today, we're fully funded.

Got it. Thank you, Andrew. And then in terms of the -- I noticed that you haven't laid out any future debt buyback authorizations. Is it fair to say that given you're fully funded, is it fair to say that future operating cash flow you're generating is still sort of likely to be used for debt buybacks?

So what would I say, look, we've been doing a fair amount of debt repurchases, and we highlighted that in the earnings release. And we think that it's been a really smart thing to do with the cash that we have that we don't have -- we haven't had a higher value use for at the time. And rather than it just build up in the restricted entity, it just made a ton of sense to us to be repurchasing that debt back as we thought it's trading at attractive values, and it was a good way to strengthen our balance sheet and create equity value for to shareholders. And all I would say is going forward, we're just going to be pragmatic about it as we go forward. If we -- if that continues to be the highest value opportunity for that cash, then we would consider more debt repurchases depending on where the debt is trading and the like. If we had other attractive uses for that cash building geo satellite or some other use, then we would consider that. But it's a long answer, but suffice to say, we feel good about the debt repurchases that we've done in the past. And going forward, we'll just be -- I don't know, just kind of pragmatic about it. Andrew?

Yes. No, just to confirm what Dan has said, that's absolutely correct. And today's value repurchased $456 million back, as we mentioned, and that gives the gain of $222 million. But we're very focused on overall debt. That's why I threw in that since going back to the end of 2020, we've reduced our overall debt by 24%. So in addition to all of the activities on Lightspeed getting going, the future of the company. We're very, very focused on responsible about the debt we have today.

Got it. Thank you. And then last question for me. In terms of -- so obviously, you have a lot of work to do to finalize the agreements, et cetera. So two other topics. One is the structure of the remaining $900 million in financing, do you anticipate that to be at the Lightspeed subsidiary? And then secondly, do you -- I guess, beyond all of this, what are the other, I guess, risks or dependencies remaining beyond getting all the agreements sorted out, what keeps you up at night at this point?

So we expect that all of the government funding will be, yes, over on the unrestricted side, LEO, that was always the plan, and it continues to be the plan. As far as what else keeps us up at night, look, we've got to close the funding with our government partners. I'm highly confident that we'll achieve that, but it's got to get done and it's got to get timely done. And then we've got a ton of work to do. We're going to be hiring a whole bunch of people and ramping up our staff moving out with MDA in a big way. We're going to be ramping up our sales and marketing team as we do more heavy engagement with the customers. I mean it's all that and we've got our day-to-day business that we're running to and never take our eye off the ball on that. So anyway, I mean, we're just so excited to be finally on our way, and we can stop talking about when are we going to be fully funded? When can we get going? I mean it's just so liberating after all this time to have the funding lined up to have a great plan with MDA and the rest of our partners. So from this point forward, it's just all about really focused execution.

Congrats and all the best.

Okay. Thank you.

Thank you. The next question is from Raghav Garg from DoubleLine. Please go ahead.

Yes. Thank you for taking the question. Can you talk about the life of these satellites given they're slightly smaller? Does that impact your sort of duration of the consideration?

It's a good question. No, same capability from a lifetime perspective, which is to say, we've expected that the satellites meet their performance specifications for effectively 11 years. Do we expect them to maybe go longer, yes. That's been our experience in the past, and I think the experience of others in the past. But from a spec perspective, our contract with MDA, it's absolutely comparable to the prior plan, it's 11 years.

Got it. Thank you. And any color on -- you've given an IRR estimate, you've given the CapEx. So can you just talk about on my math, presuming some duration, can you throw out an EBITDA number because you've sort of given the input to, I get to $2 billion to $3 billion, is that unreasonable?

It's not unreasonable. We've tried to provide some kind of high-level building blocks. But we're going to quickly move past that. So we mentioned that we'll scheduled an Investor Day before the end of the year. We definitely plan to be presenting at more conferences where we can meet with investors one-on-one and share a whole lot more information about what the business case looks like.

Okay. Thank you.

The next question is from Mr. [Rattenburg] (ph) from Credit Suisse.

Hi. Thank for taking my question and congratulations on the announcement with MDA. Some of my questions have already been asked here, but I did have a couple more. I was hoping to loop in here. On the math part, I mean, some of the information you gave has definitely been very helpful. One remaining question I do have, just trying to close the gap a little bit between I guess, uses of proceeds. So I mean, the MDA announced it seems like it's CAD2.1 billion contract and just trying to reconcile that with the numbers that you specified for at least the initial 156 satellites. I mean, it seems like there's a pretty big delta there. I mean probably over and above just what a contingency would be? I mean, so is there another significant vendor in the mix? Is there another kind of part of the puzzle, I guess, I'm trying to...

Yes, yes. No. I mean all -- it's -- there aren't too many moving parts. It's the satellites. It's the launch vehicles. It's the global ground infrastructure it some upgrades that we need to make at our facilities here in order to operate this global constellation. There's some IT systems that need to get put in place. We've got some money for further user terminal development, that's kind of it. And when you add it all up, and we've been rigorous in terms of building up the business case, that's kind of what it comes into. And then, yes, as we mentioned, we do have some nontrivial contingency in the plan because that just seems to be the prudent thing to do. We hope we don't spend it. I mean, that would be really nice, but we budgeted for it and our funding covers it.

We think we've been very prudent in the build-out in terms of contingencies and looking at all of the elements that I just outlined that we've got proper funding and not just at the NDA contract itself.

Got it. And then as far as the, I guess, revised structure of terms with the Government of Canada and Quebec, I understand there's probably some moving parts there. But are you able to clarify just, I guess, the status of that relationship? I mean, I think previously, you've had term sheet and an MOA in place, respectively, with the two that had some contingencies related to the ECA financing. So I guess with the ECA financing gone, I guess I'm just wondering, I mean, will there be some forthcoming disclosures of those documents or key structures?

Yes. No, absolutely. I mean, we will provide lots of -- all the material information relating to the structure of that funding when it's available. I mean that's -- we've got commitments from these government partners, who I got to say, have always been strongly supportive of Lightspeed. But as we mentioned, now they've got to finish their confirmatory due diligence because they've already spent quite some time understanding the project that they've got to do some confirmatory diligence around the MDA path. And then we've got to get definitive agreements in place and the like. And so we're all very focused to getting that done in short order. And I guess the other thing I'd say is the government has -- and when I say the government, our government partners, federal and provincial have always been really supportive of our program. And I got to think that certainly now that MDA, which is also a Canadian company with a big footprint here in Canada now that MDA is taking on a much greater role in the project. And it's roughly 2.5 times a bigger contract for MDA, which means building out more facilities at their facility in Quebec, hiring a whole lot more people, a whole lot more IP development here in Canada. We're now like the anchor for MDA's new digital satellite platform, which they hope to export around the world, so driving more exports. Just all of that I guess the point is if our government partners, our Canadian government partners like them were strongly supportive of the old path, we got to think that with this new path, there'll be even more supportive still. And I do want to emphasize, we didn't pick MDA because they're Canadian. We picked MDA because they're a genuinely world-class prime for high-volume LEO satellite constellations. That's why they won the Apple contract, Apple Globalstar contract, but it doesn't hurt either that they're Canadian. So anyway, so that's how we think about it. But we'll provide lots of clarity on that government funding once it's in place.

Appreciate that. And the last final question, I mean you probably anticipated with the time line of an operational LEO project in 2027 relative to your debt maturities back in 2026. Just curious if you've given any thought to potential structural changes that you might put in place prior to that to kind of capitalize on growing backlog on the LEO side as far as refinancing?

I mean, I guess I'd say that the schedule that we announced today, it's fully consistent with the schedule that we had under the prior plan. So there's nothing new about the timing of our plans with MDA that really alter any of that. We're fully cognizant of kind of the maturities. It's still some years out there, obviously, in terms of when these maturities are coming up and think we've been making it easier still with all these debt repurchases that we've been doing. So anyway, I mean, our expectation is we've got some time, our Lightspeed business certainly is going to develop. Our GEO business will continue to evolve as well. The whole landscape is continuing to evolve. So in any event, I mean we'll speak more about that going forward. But there's certainly nothing that we announced today that alters in any way or thinking about it. And certainly, I think we already had a really strong business case with Lightspeed. This -- the updated business case that's so much more capital efficient. It's only got a strength in the overall company. And that just, I think, puts us in a better place going forward no matter how you're -- what lens you're thinking about the business.

Appreciate that. Thanks again.

Okay. Thanks.

Thank you. The next question is from Marcello Chermisqui from Ares. Please go ahead.

Hi, guys. Congrats on the fully funded now. I had a question, Dan, maybe just to parse, some of the language you gave on debt buybacks from a prior caller. You said that if it continues to be the highest value opportunity for cash, but there may be other attractive uses of that cash that you would consider. So what other alternative uses of the cash flow do you consider at GEO business?

No, I mean it's just to say that, look, I mean, it's all about strengthening the business, like how we always think about the use of cash. It's all about strengthening the business, creating value for shareholders and providing great service to our customers. So we're always looking for ways to grow our business in a way that is, I hope, smart and prudent. It turns out to be the case that we haven't ordered a GEO satellite in quite some time. I think we've always been very disciplined in terms of how we think about CapEx and the use of cash and how we run our business with our high operating margins and whatnot. But we don't foreclose the opportunity that in the future, there could be a good opportunity to make some investments on the -- in the restricted group. That could be a new GEO satellite. I don't know it could be something else that would strengthen the business and meet all those objectives that I just talked about. To date, nothing has come across our plate which is why we've used the cash to repurchase debt. We just want to be clear that, that's something we can do, but we don't want to mislead folks that, that's all we're going to do with the cash. We're going to be open-minded and opportunistic and that's all we were trying to say.

That makes sense. And with respect to the 42 satellites that are not part of the 156 million, you said that comes out of operating cash. So at what point will you have the operating cash to finance those? Is that in five years when you were fully run rated or is it...

Andrew, do you want to talk about the timing of our assumptions there?

Yes, indeed. You answered the question yourself, actually. That indeed, when we're fully global coverage, where actually Lightspeed is off with customers, we will be generating cash flows, and that's on our models show that being pretty conservative that we will be able to fund that from our cash coming from Lightspeed itself. That's why we don't feel we need any external financing whatsoever right now.

Understood. And then the 100 option, I guess what is the timing around that? And what would you look for before exercising that option?

Yes. Well, there -- listen, I mean, we've built in a lot of capabilities to scale up our network over time it will be totally demand-driven. And so we think it's a really smart thing to have the rights there in the MDA contract to order additional satellites if we've got the business case to do it, we don't have to. We've also built into our regulatory rights, the ability to scale up our constellation. And so this is all about future optionality to continue to grow the constellation, but that will purely be a function of what the demand environment looks like at the time with 156 satellites and then 198 satellites, we have a massively capable network that can deliver multiple terabits of capacity to users. Our focus right now is getting that taken up, and then we'll think about ordering incremental satellites and expanding.

And lastly, I know you're still negotiating the I guess, the financing with the government. But in terms of the split between I guess, debt and preferred, is that still similar? And do you think that there might be more warrants that they might take in the rest of the business?

It's something that we really need to work through with our government partners. We think everyone here is around the table. We're all constructive. We know each other well. They've been strong supporters of the project. We, I think, always tried to be good custodians of the capital that's entrusted with us. So we've got to work through all those details with the government, and then we'll share all that with the market.

Thank you so much for taking the questions.

Thank you. I think we've got time for maybe one more question.

Perfect. Thank you. The next question is from [Bill Wise] (ph) Invesco. Please go ahead.

Thanks very much and congratulations on the announcement today. Just -- most of my questions have been answered, but is there any update on or any more thoughts you have on the impact of the DISH-EchoStar merger on Telesat's business and DISH renewals going forward? Thank you.

I think it has no impact on the work that we do with DISH and with EchoStar. We've obviously followed that situation closely. I think we have a really good relationship with DISH with EchoStar. But no, we don't think that, that combination changes in any way the work that we do with them.

That’s it. Thank you.

Okay. Well, thank you. And listen, thank you all for your time today. We look forward to speaking with you again when we issue our Q3 numbers, and we really appreciate everyone's time and all the good wishes. So thank you very much.

Thank you very much.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.