Proximus Sa · EURONEXT:PROX
Proximus Sa — Q2 2018 Earnings Presentation
55 slides from Proximus Sa's earnings presentation, September 2018
Slide 1: Proximus Group Results presentation Q2 2018
Proximus Group Results presentation Q2 2018 September 2018
Slide 2: Reporting remarks
Reporting remarks GROUP 2 • All financials in the presentation are provided under IAS 18 • 2018 figures under IFRS 15 are available as from Q1 2018 in the published quarterly reports and excel factbook • The provided 2018 guidance is under the IAS 18 standard • Exception has been made for the househ
Slide 3: Key achievements Q2
Key achievements Q2 GROUP 3 Solid EBITDA growth and increasing customer base in highly competitive market +45,000 +35,000 € 66.2 +0.8% YoY ARPH Domestic Mobile postpaid Tuttimus & Bizz +0.8% YoY revenue cards all-in +6.2% YoY +5.5% YoY € 159m ICT revenue Domestic DM + 18.5% YoY FCF YTD’18 (€180m exc
Slide 4: Supporting upselling strategy
Supporting upselling strategy GROUP 4 Average revenue per household increasing, in spite of regulatory and competitive headwinds. Strong uptake of all-in offers, Solid increase in number of Average revenue per Household increasing 4-Play HH/SO HH/SO taking 4 Plays (in 000’s) (incl. small offices) Tu
Slide 5: Growing Internet/TV customer base
GROUP Growing Internet/TV customer base 5 Adding customers in competitive market, supported by dual brand strategy Broadband 1,996 2,002 1,944 1,959 1,965 1,983 1,906 1,920 in ‘000 +44K lines YoY 24 net adds Park 14 15 15 7 17 14 6 +2.2% Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 TV 1,575 1,584
Slide 6: Mobile postpaid customer gain
Mobile postpaid customer gain GROUP 6 +45,000 Postpaid cards in highly competitive mobile market, supported by World Cup campaign Park (K) (excl. M2M) Mobile Cards Postpaid # Mobile cards: Smartphone 4,838K end-June’18 penetration +112K YoY 4,915 4,918 4,897 4,900 75% 4,825 4,838 4,831 4,838 i.e. +2
Slide 7: Maintaining solid market position
Maintaining solid market position GROUP 7 Market shares for Data, TV and Mobile (Proximus + Scarlet) Internet Mobile Total 46.6% 46.5% 46.6% 46.6% 46.4% 39.2% 38.9% 38.9% 39.1% 39.5% Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 TV Mobile Postpaid 43.4% 43.1% 42.8% 42.7% 42.7% 36.6% 36
Slide 8: Mobile Data traffic
Mobile Data traffic GROUP 8 Steep increase of usage for National Data and roaming National d ata usage Data/user Total Traffic (Gb/user/month) X 1.6 X 1.6 Total National Traffic Total National Data 1.9 Traffic X 1.6 YoY 1.6 1.3 1.4 1.2 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Roam
Slide 9: Group Revenue +2.6%
Group Revenue +2.6% GROUP 9 Higher Q2 revenue for both Domestic operations and BICS Group revenue by segment (M€) 28 1,454 Group revenue by quarter (M€ & YoY %) 1,417 -1 8 2 0.7% 2.6% -1.4% -0.8% -0.9% -0.2% -2.9% -3.2% +1.2% +8.9% 1,487 1,490 1,477 Domestic: +0.8% 1,443 1,417 1,441 1,441 1,454 382
Slide 10: Domestic revenue by product
Domestic revenue by product GROUP 10 Customer growth driving Internet, TV and Postpaid revenue. Solid ICT growth. Q2 Domestic Revenue Variation (Q2'18 vs Q2'17, M€) (M€) ICT 8 • Higher Fixed Data and TV revenue, compensating Fixed Data / Internet 8 for the steadily erosion in Fixed Voice. Mobile Pos
Slide 11: Group direct margin +3.5%
Group direct margin +3.5% GROUP 11 Both Domestic and BICS posting direct margin growth for Q2 Q2 • Domestic direct margin growth (M€) 12 932 driven by Consumer segment, 15 0 0 5 posting a 2.7% direct margin 901 growth. P Domestic: +2.3% +18.5% • BICS direct margin up 18.5% including TeleSign contrib
Slide 12: Group expenses
Group expenses GROUP 12 Q2 increase mainly attributable to BICS’ acquisition of TeleSign. Domestic underlying expenses -1.2% YoY. Q2 (M€) 8 440 Q2’18 operating expenses +0.7% YoY 436 -5 • Domestic expenses -1.2% YoY or € -5m. • incl. higher expenses fueling ICT growth • aacquired ICT subsidiaries +
Slide 13: Domestic EBITDA
Domestic EBITDA GROUP 13 +5.5% YoY for Q2 driven by higher direct margin and lower expenses Q2 YTD (M€) 7 -2 454 19 +3.2% 430 846 873 Underlying Direct Margin Worforce cost Non Workforce Underlying YTD'17 YTD'18 EBITDA Q2'17 cost EBITDA Q2'18 Q’s 8.8% 5.5% 5.3% 5.5% 1.1% 0.8% 0.8% (M€) -1.9% 435 416
Slide 14: Group EBITDA
Group EBITDA GROUP 14 +6.1% YoY , with both Domestic operations and BICS showing good YoY progress Q2 4 493 YTD 24 (M€) (M€) 464 +3.6% +5.5% +12.7% 914 947 +6.1% Underlying Domestic BICS Underlying YTD'17 YTD'18 EBITDA Q2'17 EBITDA Q2'18 Q’s 4.7% 5.5% 7.5% 1.0% 1.1% 6.1% 0.4% -2.2% (M€) 474 464 464
Slide 15: Net income (Group share)
Net income (Group share) GROUP 15 € 129m Net Income in Q2 leading to a total of € 253m for H1’18 YTD (M€) 33 -4 -33 245 16 -1 253 H1’18 Net Income € +8m YoY -2 + Higher EBITDA + ETR 26.7% vs 30.5% in H1’17 - Increasing asset base driving higher D&A Net income Underlying EBITDA Incidentals D&A Net Fi
Slide 16: €459M capex over H1'18
€ 459M capex over H1’18 GROUP 16 Continued investments to improve the overall customer experience Capex (M€) 2017 Incl. Jupiler League football broadcasting rights On track for FY2018 385 502 estimate of around € 1bn 314 459 281 238 183 221 205 221 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 YTD
Slide 17: FCF
FCF GROUP 17 €159M for H1’18, or € 180M excl. acquired ICT subsidiaries YTD (M€) 33 7 -2 -17 212 -6 -65 • H1’18 FCF of € 159 m , or € 180 m excl. cash-out for acquired ICT -6 2 159 subsidiaries • Remaining FCF YoY decrease mainly driven by higher cash paid for Capex (including remaining carry-over e
Slide 18: Sound financial position
Sound financial position GROUP 18 April dividend payment temporarily increasing net debt Net Debt (YTD, M€) Net Debt DEC Dividends to non- controlling Net Debt JUN 2017 FCF Dividends interests Other 2018 6.1 Yrs Average debt duration 159 -323 -28 5 Debt maturity schedule (M€) -2,088 -2,276 1.78% 600
Slide 19: Outlook
Outlook GROUP 19 Full-year 2018 outlook reiterated • H1’18 EBITDA slightly ahead of company expectations, including some one-off tailwinds benefitting the Consumer direct margin. • For H2’18, Proximus expects to benefit from the annualizing RLAH price FY2 017 FY2018 2 018 YTD regulations, though wil
Slide 20: Consumer results
20 Consumer results
Slide 21: Consumer
Consumer CONSUMER 21 Value accretive customer mix, nearly stable revenue in spite of RLAH impact, direct margin up 2.7% +0.7% Fairly stable revenue 1 .9% 1 .3% 1 .9% 1 .7% -0 .1% -0 .5% 1 .5% -0 .2% • Fixed services up 1.3% Revenue (M€) & YoY 73 0 73 7 72 0 72 7 72 9 73 4 73 1 72 5 1,446 1,456 • Mob
Slide 22: Consumer revenue
Consumer revenue CONSUMER 22 Q2 3 -7 (M€) 4 727 -7 8 0 0 -3 725 + YoY growing Internet, TV and Mobile Postpaid customer -0.2% base Q2'17 Fixed Fixed Data TV Mobile Mobile ICT Tango Terminals Q2'18 + Upselling Voice Postpaid Prepaid & others + Price changes Mid’17 & Jan’18 YTD 8 5 -13 3 3 1,456 1,446
Slide 23: Fixed data revenue +5.0%
Fixed data revenue +5.0% CONSUMER 23 Customer base up +7,000 in Q2’18; +47,000 YoY – ARPU up 2.2% +5.2% +5.0% revenue from Internet 5. 5% 4. 9% 4. 0% 2 . 0% 3 . 7% 4. 1% 5. 4% 5. 0% subscriptions YoY, driven by Fixed data revenue (M€) & YoY 150 151 153 154 156 157 161 162 307 323 • higher base Q3'16
Slide 24: TV revenue +4.0%
TV revenue + 4.0% CONSUMER 24 TV customer base grew by 9,000 households in Q2’18; +51,000 YoY +4.3% 10. 8% 11. 2% 9. 2 % 8. 8% 6. 1% 4. 6% 4. 5% 4. 0% 0 • TV revenues up by 4.0% YoY Millions Millions TV revenue (M€) & to a total of €99m in Q2’18 94 95 96 97 98 99 99 190 198 YoY variance 91 0 0 Q3'16
Slide 25: Fixed voice
Fixed voice CONSUMER 25 Revenue decline YoY driven by line erosion and lower traffic -5 .1% -6.3% -3.1% -3.3% -5 .5% -4.6% -4.8% -5 .4% -5.1% Fixed voice revenue (M€) & YoY variance 13 1 12 8 13 0 12 6 12 4 12 2 12 4 119 256 243 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 YTD'17 YTD'18 Total Fix
Slide 26: Mobile service revenue
Mobile service revenue CONSUMER 26 Mobile Postpaid revenue up +1.4% YoY. Continued Prepaid erosion. Mobile service revenue (M€) & YoY variance Blended net mobile ARPU (€) & YoY variance Blended ARPU up on better customer mix -1. 2% -1. 4% -1. 6% -1. 6% -2 . 6% -1. 6% -1. 3% -1. 7% -0. 4% -0. 1% -0.
Slide 27: Postpaid and prepaid
Postpaid and prepaid CONSUMER 27 +1. 2% 2 . 1% 2 . 5% 2 . 3% 3 . 0% 2 . 6% 2 . 4% 1. 0% 1. 4% 434 439 Fading RLAH YoY Revenue (M€) & YoY 218 215 215 219 223 221 217 222 impact YTD'17 YTD'18 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 +2.4% YoY customer -2 . 5% -2 . 2% -2 . 9% -2 . 8% -3 . 1% -2
Slide 28: Tango Luxembourg
Tango Luxembourg CONSUMER 28 Consumer revenue +1.1% YoY Tango revenue (M€) & YoY variance Improved consumer revenue driven by : • Steady growth in 8.3% mobile base 7 .7% 5 .6% -0 .1% -1 .2% -1 .1% 1 .1% -4.8% • Successfull convergence strategy +4.6% execution, with FttH driving increase in 28 29 27
Slide 29: X-Play view
X-Play view (under IFRS 15) 29
Slide 30: 4-Play revenue up 7.2%
CONSUMER 4-Play revenue up 7.2% 30 Revenue from HH/SO stable YoY (under IFRS 15), declining Mobile Prepaid and less Terminal sales in Q2’18 Incl. upselling to 4P Q2 16 -6 -4 (M€) -7 734 -7 -4 • Under IFRS15, € 724 m, 0 1 724 -1.4% YoY HH/SO -0.1% • Stable X-Play revenue Total Consumer -1.4% -2,088 •
Slide 31: Stable X-play revenue
Stable X-play revenue CONSUMER 31 4-Play revenue up 7.2%, representing 33% of Total Consumer revenue 0. 8% -0. 1% Ongoing expansion of 4-Play base, up 52,000 YoY, including 13,000 in Q2’18 X-Play revenue (M€) & YoY variance Growing 4-Play revenue, offset by lower 1- 2- and 583 589 586 585 588 589 3-
Slide 32: HH/SO base up 2K to 2,979K
HH/SO base up 2 K to 2,979 K CONSUMER 32 Improving Customer Mix, continued 4-Play growth Q2’18 24% 4P 4.85 (+2 pp) RGU 38% 1P 429 421 41 5 41 1 40 2 397 658 670 683 697 711 2-Play 4-Play growth & EOP growth & EOP (0 00) (000) -6 -6 -10 -8 -4 -9 22 11 14 14 13 25% 3P Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q1'
Slide 33: Overall ARPH up 0.8% YoY
Overall ARPH up 0.8% YoY CONSUMER 33 Progress to € 66.2, in spite of RLAH impact on Mobile and Fixed Voice traffic erosion • Overall ARPH continued to 1 .3% 0 .8% X-Play grow, on an improved ARPH (€) & customer mix YoY Variance 65.6 65.3 65.4 65.9 66.2 • More and more 4-Play HH/SO with an ARPH of €
Slide 34: Annualized full churn rates
Annualized full churn rates CONSUMER 34 Sequential improvement for Q2 vs prior quarters • The overall annualized full churn rate up 0.4% YoY to 11.9%. X-Play Annualized full churn 13.6 % 11.5% 13.4% 13.1% 14.5% 11.9 % • Mainly driven by single-play Mobile and rate Fixed Voice, and by Fixed-only 2-Pl
Slide 35: Enterprise results
35 Enterprise results
Slide 36: Enterprise
Enterprise ENTERPRISE 36 Growth in ICT, Mobile Services & Advanced Business Services offsetting pressure on legacy Telco services. Stable direct margin. 0. 7% 0. 9% 4. 8% -1. 7% 0. 5% 3 . 3% 0. 8% 2 . 4% +1. 6% • ICT +6.5%, benefitting from a 720 710 strengthened ICT portfolio and Revenue (M€) & YoY
Slide 37: Q2'18 revenue up by 2.4%
Q2’18 revenue up by 2.4% ENTERPRISE 37 Supported by ICT, Mobile devices, Mobile services and Advanced Business Services Q2 0 3 351 8 1 343 -4 M€ 0 1 Operating in a competitive environment, Proximus’ Enterprise +2.4% segment achieved a 2.4% YoY revenue growth Q2'17 Fixed Voice Fixed Data Mobile ICT A
Slide 38: Fixed Voice
Fixed Voice ENTERPRISE 38 Lower revenue on line erosion and lower usage -4. 9% -5. 5% -5. 6% -7. 7% -8 . 7% -9. 7% -7. 1% -7. 3% 0 • Ongoing rationalization by -7.2% 0 customers on Fixed line Millions Fixed voice revenue (M€) 0 connections, lower usage, & YoY variance 58 58 57 55 53 52 53 51 113 105
Slide 39: Fixed Data
Fixed Data ENTERPRISE 39 Ongoing migration of legacy data products to new solutions at more attractive pricing. Fairly stable Internet customer base of 133,000 lines. 1. 0% -1. 0% -1. 6% -0. 9% -2 . 7% -1. 0% -0. 8% -0. 4 % -0.6% 0 0 Fixed data revenue (M€) • Nearly stable revenue for Fixed Millions
Slide 40: Advanced Business Services ICT
EC NOTE NRSP URMIE SRE Advanced 40 Business Services ICT Solid revenue from Smart Mobility and Successful strategy of expanding portfolio convergent business solutions well beyond pure connectivity services Advanced Business Services (M€) ICT revenue (M€) & YoY 1. 1% 2 . 1% 16. 1% -1. 3% 5. 3 % 9. 5
Slide 41: Mobile
Mobile ENTERPRISE 41 Continued solid customer growth drives +0.9% in Mobiles Service revenue Mobile service revenue (M€) & YoY variance Postpaid excl. M2M growth & EOP (000) • Mobile Voice park of 1,010,000 -0.9% 1,010 -2 . 7% -3 . 5% -4. 9% -1. 6% -0. 8% -0. 4% -2 . 6% 0. 9% 92 6 93 9 952 965 975 9
Slide 42: Wholesale
Wholesale WHOLESALE 42 4% revenue increase related to higher visitor roaming traffic slightly offset by decline in traditional Wholesale services. Stable direct margin. Revenue (M€) & YoY 1.1% -3.3% 8.0% -1.6% 9.5% 10.3% 4.0% -8.7% -2 . 6% 100 97 51 46 52 48 56 51 48 50 YTD'17 YTD'18 Q3'16 Q4'16 Q1'
Slide 43: BICS results
BICS BICSresults results
Slide 44: BICS segment result up by 12.7%
BICS segment result up by 12.7% 44 Solid Direct Margin uplift. TeleSign accelerating BICS’ A2P growth strategy and realized cost synergies. +2.3% 8.9% -9.1% -5.6% -6.6% -12.9% -12.1% -6.6% -3.9% YoY uplift mainly driven by the Revenue (M€) & YoY additional business from TeleSign, variance 645 659 38
Slide 45: Non-Voice Voice
Non-Voice Voice 45 Firm growth on SMS A2P volumes, DM supported by more favorable market conditions on benefitting from BICS –TeleSign combination core Voice, and by TeleSign authentication services BICS - Voice Revenue (M€) -0,5% BICS - Non Voice Revenue (M€) 40.8% 32.0% -8,4% -8,4% 25.3% -12,6% -1
Slide 46: Appendix
APPENDIX Appendix 46 Pricing 47 Spectrum 50 Headcount 53 Shareholder 54 st structure
Slide 47: Pricing strategy
APPENDIX Pricing strategy 47 Increasing value for converged customers. Move from packs discounts to enhanced product features for convergent packs. (incl. 04/09/2018 price change) Mobile only Our mobile offer addresses the steep increase in mobile data consumption. Mobilus S Mobilus M Mobilus L • 12
Slide 48: New mobile offer for millennials
APPENDIX New mobile offer for millennials 48 Epic: worry-free connection anytime, anywhere Launched 25 June 2018
Slide 49: Positioning Scarlet as no frills brand
APPENDIX 49 Positioning Scarlet as no frills brand, with very attractive pricing for ‘price seekers’ Postpaid (incl. 04/09 price change) Fixed Red Hot Chili HiFive € 23 / month Internet: 50 GB Extra € 3 per block of 50 GB €8 € 18 € 28 € 15 Down 30 Mbps Up 2 Mbps 150 min Unlt min Unlt min 0 min Unlt
Slide 50: Spectrum: current ownership and new spectrum
APPENDIX Spectrum 50 Current ownership and new spectrum Expiry dates Proximus OBEL Telenet 29/11/33 800 MHz 2 x 10 2 x 10 2 x 10 Proximus OBEL Telenet 15/03/21 900 MHz 2 x 12.4 2 x 11.6 2 x 10.2 Renewal Proximus OBEL Telenet 15/03/21 1800 MHz 2 x 24.8 2 x 24.8 2 x 24.8 Proximus OBEL Telenet Unalloca
Slide 51: Spectrum auction: reserved spectrum
APPENDIX Spectrum auction 51 Reserved spectrum Frequency band Total capacity Spectrum cap Spectrum reserved For each existing For a new entrant operator 700 MHz 30 MHz duplex 10 MHz duplex - 5 MHz duplex Details of reserved spectrum as 900 MHz 35 MHz duplex 15 MHz duplex 5 MHz duplex 5 MHz duplex pu
Slide 52: Spectrum auction: coverage obligations
APPENDIX Spectrum auction 52 Coverage obligations Frequency band Obligations for existing operators Obligation for new entrant - 70% population after 1 year - 30% population after 3 years - 99.5% population after 2 years - 70% population after 6 years 700 MHz - 99.8% population after 6 years - 99.8%
Slide 53: Headcount
APPENDIX Headcount 53 Domestic workforce cost benefitting from reduced headcount Early Leave Plan & natural retirements leading to ~2,750 FTEs to leave End H1’18, Proximus over civil servants @ 2016-2020 27% of Domestic headcount (gross outflow - not including hiring to cover business needs) Positiv
Slide 54: Shareholder structure
APPENDIX Shareholder structure 54 Total number of shares Free-float Belgian government Number of % shares % Voting % Dividend Number of Number of ~€ 6.8 Bn shares rights rights shares with shares with voting rights dividend rights Market Capitalisation* Belgian state 180,887,569 53.51% 56.05% 55.90%
Slide 55: Cautionary Statement
Cautionary Statement “This communication might include some forward-looking statements, without limitation, regarding Proximus’ financial or operational results, certain strategic plans or objectives, macro-economic trends, regulation, future market conditions and other risk factors. These forward-l