Proximus Sa · EURONEXT:PROX

Proximus Sa — Q4 2014 Earnings Presentation

60 slides from Proximus Sa's earnings presentation, February 2015

  1. Slide 1: 2014 Q4 Company presentation

    2014 Q4 Company presentation

  2. Slide 2: Content

    Content Key achievements 2014 & Outlook Strategy: “Fit-for-Growth” 19 Improved underlying core revenue trend 4 Network Core revenue performance drivers 5 Mobile 24 Core business benefitting from Mobile recovery 6 Fixed 25 Fit-for-Growth supporting cost structure 7 Spectrum 26 Group underlying EBITDA

  3. Slide 3: Key Achievements Q4 / FY 2014 & Outlook 2015

    Key Achievements Q4 / FY 2014 & Outlook 2015 Slide 3

  4. Slide 4: Improved Underlying Core revenue trend

    Improved Underlying Core revenue trend • • Consumer: Mobile revenue: Q4 +2.2% underlying • Strong increase Mobile terminals revenue on YE promo • Mobile Service revenue further improving • Fixed revenue: Good growth TV and Internet • Revenue 3-Play and 4-Play up 4.1% and 16.9% • Enterprise: • Except

  5. Slide 5: Core revenue performance driven by solid Q4 operationals in Consumer and Enterprise

    Core revenue performance driven by solid Q4 operationals in Consumer and Enterprise Business Units Gaining • Good increase in Mobile customer base More Next Slide +0.2pp Market 40,6% 40,8% • Mobile Service revenue trend stabilising Share in End'13 End'14 • Success YE campaign and tactical joint-offe

  6. Slide 6: Core business benefitting from Mobile recovery

    Core business benefitting from Mobile recovery  Solid growth in Group mobile customer base  Proximus Smartphone penetration* increasing, supported by Joint-Offers 5,484k +193k 5,677k 39% 50% 2013 2014 Dec'13 Dec'14  Mobile market share evolving positively  Average Mobile data consumption increas

  7. Slide 7: 'Fit-for-Growth' strategic measures supportive for cost structure

    ‘Fit-for-Growth’ strategic measures supportive for cost structure -1.2% Q4 FY Underlying Cost of Sales (€m) -3.9% -11.0% -9.2% -13.1% -10.4% -0.1% -1.4% 6.1% Q4’14 CoS up 6.1% driven by 700 Millions 650 year-end promo’s and Joint- FY’14, CoS -1.4%, resulting from 600 627 590 594 589 591 593 581 550

  8. Slide 8: Group underlying EBITDA -2.5% for FY

    Group underlying* EBITDA -2.5% for FY ; Q4 impacted by higher non-HR exp. - Gross margin nearly stable Q4 0 -4.7% underlying 5 • Group’s Gross Margin -0.4% YoY , including strong year-end promotions on devices. -21 • Operating expenses +3.1%, or € 15 m higher, incl provisioned Walloon Region 1 pylon

  9. Slide 9: Investing in excelling customer experience

    Investing in excelling customer experience (amounts in € million) 2013 2014 972 994 16 120 +126m YoY 426 978 852 371 120 16 Spectrum 306 H1’13 H1’14 355 Without Spectrum Q2’13 Q4'13 FY'13 Q2’14 Q4'14 FY'14 • €371m capex, incl. €16m for additional spectrum in 900Mhz/1800Mhz band. • Remaining € 355m c

  10. Slide 10: FY'14 FCF of €711m

    FY’14 FCF of € 711 m including higher sale of consolidated companies and buildings Belgacom generated € 711 m of FCF in FY’14, or FY’14 (in million €) € +206m YoY. Main drivers: 77 -99 109 -24 • higher cash received from the sale of consolidated 141 companies and buildings • lower income tax payment

  11. Slide 11: We keep a sound financial position

    We keep a sound financial position • Net financial debt at € 1,800m, € 15m lower versus end 2013 • The outstanding long term financial gross debt amounted to € 2.5Bio • Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook -1,815 -1,800 711 -718 -33 54 2 Net Debt FCF Dividends Non co

  12. Slide 12: Attractive shareholder remuneration

    Attractive shareholder remuneration On 26 February 2015, Belgacom’s Board of Directors approved to propose to the Annual Shareholder meeting to return a total gross dividend of € 1.50 per share over the result of 2014, of which €0.50 was paid in December 2014. For the normal dividend of €1,00/share:

  13. Slide 13: Outlook for 2015

    Outlook for 2015  We made good progress in 2014 on our ‘Fit-for-Growth’ strategy  Underlying trends are on track to deliver our underlying revenue and EBITDA growth objective in 2016. Under current market conditions, we expect the year 2015 to be the tipping point within our track to growth. i.e.:

  14. Slide 14: Group Mobile/Fixed & Convergence

    Group Mobile/Fixed & Convergence Slide 14

  15. Slide 15: Strong mobile customer growth leading to improved market share

    Strong mobile customer growth leading to improved market share Mobile market shares (based on company research  Belgian Mobile market growing by 2% YoY to 12.5 million mobile cards  Mobile penetration at 112%  Belgacom market share at 40.8% slightly up mainly thanks to higher postpaid market shar

  16. Slide 16: Good Q4 performance for all Fixed products

    Good Q4 performance for all Fixed products Broadband customer evolution net adds total 1,740 1,705 1,718 1,677 1,694  Belgian Fixed internet market still growing, but at slower pace 22  Internet penetration @ 80% 17 16 12 13  Belgacom market showing positive evolution Q4'13 Q1'14 Q2'14 Q3'14 Q4'1

  17. Slide 17: Good progress in convergence strategy

    Good progress in convergence strategy - Operational drivers x-play Household reporting CBU Households per x-play Q4'13: CBU Households per x-play Q4'14: Total of 2,359,000 Households Total of 2,309,000 Households Annualized full churn rate (HH) 4-Play: 4-Play: 343 392 # Plays Q4'14 14% 1-Play: 17% 1

  18. Slide 18: CBU revenue from households slightly up YoY

    CBU revenue from households slightly up YoY - higher ARPH & RGUs CBU Revenues per x-play Q4'13: CBU Revenues per x-play Q4'14: • € 386m came from X-play Total x-play Revenues of € 369mio Total x-play Revenues of € 386 mio households; +1.6% YoY 1-Play: 1-Play: 4-Play: 104 100 60% 4-Play: 97 • 75% fro

  19. Slide 19: Fit-for-Growth strategy progressing

    Fit-for-Growth strategy progressing 19

  20. Slide 20: Invest & Innovate

    Invest & Innovate In what Status To build the foundation of our next wave of growth:  Outdoor coverage 4G of 85%, mainly on 1800 Mhz • Mobile leadership and further deploy 4G  Avg mobile data speed 45% faster vs competition for 4G device  3-yr vectoring roll out started and on track, already conn

  21. Slide 21: Transform & Develop

    Transform & Develop What Some of our achievements +9 p.p. • Product usage experience (TV Everywhere, FON, …)  . # calls answers within 2.5 min • Touchpoints experience (call centers, technicians, …) Develop superior • End-to-end process (first time right) Jan-14 Dec-14  Increased customer satisfac

  22. Slide 22: Grow

    Grow How Some of our achievements • Best Mobile customer experience across technologies. High Mobile Broadband Digital TV LTE coverage, best average speed. Attractive mobile pricing market share market share market share and value creative Joint-Offers Regain +0.3pp +0.2pp +0.9pp • Improved broadban

  23. Slide 23: Investing in a best-in-class customer experience

    Investing in a best-in-class customer experience Slide 23

  24. Slide 24: Mobile Network

    Mobile Network - Best true customer experience as top priority Best Customer …when & where it …across devices & Experience… matters… networks Best experience to call, surf & Best experience to live better and Best experience cross devices via watch videos work smarter seamless switch mobile & WiFi A

  25. Slide 25: Fixed Network

    Fixed Network - Deliver a fixed network fit for the right customer purposes Vectoring technology on VDSL • 3-year roll-out program on track since start in 2014 Vectoring technology enables • All VDSL street cabinets will be up-to-70 Mbps speeds on covered copper FTTB in Industrial Zonings • 800 Busi

  26. Slide 26: Spectrum: ownership & usage

    Spectrum: ownership & usage 800 MHz 900 MHz & 1800 MHz 2100 MHz 2600 MHz • Used for 2G, 3G and 4G • Used for 3G • Will be used for 4G • Used for 4G • Licenses granted in ‘95 • UMTS licenses granted in • Licenses granted in July ‘12 • Licenses granted in • 1st tacit extension (‘10-’15): 2001 • 15 yea

  27. Slide 27: Consumer results Q4 2014

    Consumer results Q4 2014 Slide 27

  28. Slide 28: Consumer - Underlying quarterly P&L

    Consumer - Underlying* quarterly P&L *Adjusted for incidentals Q4’14 underlying revenue +4.8% YoY +4.8%  Solid revenue from Internet, TV and especially Mobile Devices  Further recovery of Mobile service revenue on customer growth and favorable ARPU trends  Regulatory measures impacted Q4 revenue

  29. Slide 29: Consumer underlying revenue variance

    Consumer underlying* revenue variance (in EUR million) 22 -4 8 -2 Q4’14 577 -2 3 +4.8% underlying 550 Underlying Fixed Voice Fixed Internet TV Mobile Subsidiaries Terminals & Underlying Q4'13 Service Others Q4'14 Revenue 25 -37 39 -16 9 FY’14 2,216 2,204 +0.5% -8 underlying Underlying Fixed Voice Fi

  30. Slide 30: Consumer - Fixed voice

    Consumer - Fixed voice Limited Fixed Voice revenue erosion: significantly reduced Fixed Lines loss and slightly higher ARPU Fixed Fixed voice voice (EUR revenue revenue mio) & YoYmio) (EUR Variance  Limited Fixed Voice revenue erosion; further improving from the previous -1.5% -2.4% -1 , 8 % quarte

  31. Slide 31: Consumer - Fixed Internet

    Consumer - Fixed Internet Fixed Internet revenue up 3.7%; Proximus and Scarlet adding +20,000 customers in Q4, best quarterly customer gain in years Fixed Internet F ixed Internet revenue revenue (EUR mio) &(EUR Y oYmio) Variance  Q4’14 Fixed Internet revenue of € 93m, i.e. +3.7% YoY, driven by the

  32. Slide 32: Proximus TV

    Proximus TV Double digit revenue growth for Proximus TV through larger customer base and uptake of TV options TV revenue TV revenue & YoY (EUR mio)(EUR Variance mio)  Q4’14 TV revenue grew by 11.6% to €77m with a continued subscriber growth and TV-options such as football subscriptions & TV-replay.

  33. Slide 33: Consumer – Mobile Service

    Consumer – Mobile Service Revenue trend showing further improvement; strong growth in Postpaid customer base MobileMobile Service Service revenue revenue (EUR mio) & YoYmio) (EUR Variance Q4’14 revenue from Mobile services at € 186m, - 1.9% YoY; Recovery continued : -2.9% -1. 9% -7.0% -7.0%  Solid

  34. Slide 34: Tango Luxembourg

    Tango Luxembourg Impacted by regulated MTR reduction Tango revenue TV revenue (EUR mio) & YoY (EUR mio) Variance 60 15.2% 14.2%  Tango Q4’14 revenue of € 31m, i.e. -6.4% YoY; mainly caused by the 9 .9% 8.4% regulated MTR decrease 2 0 .0% 55 50 1 0 .0% - 3.5% 45 40 - 12.6% - 7.4% -6 ,4% 0 .0 %  The

  35. Slide 35: Enterprise results Q4 2014

    Enterprise results Q4 2014 Slide 35

  36. Slide 36: Enterprise – Underlying quarterly P&L

    Enterprise – Underlying* quarterly P&L *Adjusted for incidentals, mainly effect from Telindus France and Telindus UK divestures, hence we have adapted underlying figures of previous quarters accordingly. EBU underlying revenue (EUR mio) & YoY Variance Underlying revenue continued to grow in Q4’14 (+

  37. Slide 37: Enterprise underlying revenue

    Enterprise underlying* revenue (in EUR million) 1 2 18 493 Q4’14 -3 -1 476 +3.6% underlying Underlying Fixed Voice Fixed Data ICT Mobile Terminals & Underlying Q4'13 Service Others Q4'14 Revenue 0 -1 -14 25 FY’14 1,894 -6 1,898 +0.2% underlying Underlying Fixed Voice Fixed Data ICT Mobile Terminals

  38. Slide 38: Enterprise - Fixed Voice

    Enterprise - Fixed Voice* Continued stable Fixed Voice revenue decline Fixed voice revenue (EUR mio) & YoY Variance Q4’14 EBU Fixed Voice revenue of € 110m,  Slightly Improving decline of -2.9% YoY 180 -4.9% -2.9% -3.3% -4.5% -3.1% -3.3% -3.2% -2 . 9% 0 .0 %  Key driver of the revenue decline is c

  39. Slide 39: Enterprise - Fixed Data

    Enterprise - Fixed Data Fixed Data revenue impacted by migrations to Explore platform, Fixed Internet revenue fairly stable Fixed Data revenue (EUR mio) & YoY Variance Q4’14 revenue was -0.9% YoY to € 94m  Fixed Data, revenue consists of Fixed Internet and data connectivity 180 1 0 .0%  continued

  40. Slide 40: Enterprise – underlying ICT

    Enterprise – underlying ICT* Underlying ICT revenue growth of 15% EBU posted € 134 m underlying ICT revenue, in Q4’14, +15% underlying ICT revenue (EUR mio) & YoY Variance YoY:  a solid revenue from the Telindus activities, benefitting from a 15.0% 5.5% 3.4% number of large product deals and some b

  41. Slide 41: Enterprise - Mobile Service

    Enterprise - Mobile Service Year-on-year growth on larger mobile customer base and better price-tiering Mobile Service revenue (EUR mio) & YoY Variance Mobile service revenue showed growth for the second consecutive quarter:  continuously growing mobile customer base, 4.1% 1.5%  improved customer

  42. Slide 42: Service Delivery & Wholesale – P&L

    Service Delivery & Wholesale – P&L SDE&W revenue (EUR mio)  Q4’14 revenue decline to € 58m, -10.3% YoY -5.4% -9.9% -9.6% -9.6% -10.3%  Eroding Carrier Wholesale Services revenue due to continued decline in 9 3 .00 8 3 .00 wholesale broadband lines, leased lines and traffic volumes. 7 3 .00 6 3 .00

  43. Slide 43: Staff & Support – P&L

    Staff & Support – P&L S&S underlying Revenue(EUR mio)  For Q4’14, Staff and Support recorded revenue of € 8m. +70.1%  FY’14 revenue of € 30 million, on an underlying basis 9 8 (i.e. excluding proceeds from building sales) 8 7 7 7 7 8 7 6 5 7 4 3 2 5 1 0 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 S&S

  44. Slide 44: BICS – Underlying quarterly P&L

    -1.3% BICS – Underlying quarterly P&L BICS underlying Revenue (EUR mio) BICS Q4’14 revenue totaled € 395m, -1.3% or € 5m YoY -14.3% 0.5% -6.1% -1.3%  lower Voice revenue, down 3.1 % on lower Voice traffic, -1.3% 500 450  not fully offset by continued growth in non-voice revenue, up by 10.3% in Q4’

  45. Slide 45: Other Information

    belgacom Other Information

  46. Slide 46: Group – quarterly P&L – as reported

    Group – quarterly P&L – as reported VAR in mio € Q113 Q213 Q313 Q413 Year Q114 Q214 Q314 Q414 Year Q4/Q4 VAR FY Total Revenues 1,586 1,583 1,568 1,582 6,318 1,480 1,631 1,486 1,515 6,112 -4.2% -3.3% Total OPEX -1,144 -1,153 -1,139 -1,184 -4,619 -1,069 -1,074 -1,053 -1,161 -4,358 -1.9% -5.7% Costs of

  47. Slide 47: From reported to underlying – incidentals

    From reported to underlying – incidentals GROUP - Revenue incidentals GROUP - EBITDA incidentals (EUR million) Q413 Q414 FY'13 FY'14 (EUR million) Q413 Q414 FY'13 FY'14 Reported 1,582 1,515 6,318 6,112 Reported 398 354 1,699 1,755 Underlying 1,474 1,506 5,960 5,864 Underlying 398 380 1,695 1,653 Inc

  48. Slide 48: Belgacom consolidated balance sheet

    Belgacom consolidated balance sheet As of 31 December As of 31 December (EUR million) 2013 2014 ASSETS NON-CURRENT ASSETS 6.254 6.339 Goodwill 2.320 2.272 Intangible assets with finite useful life (*) 1.185 1.180 Property, plant and equipment 2.558 2.680 All balance sheet captions impacted Investmen

  49. Slide 49: Divestures and natural attrition reducing headcount

    Divestures and natural attrition reducing headcount Estimated cash-out for termination benefits related to Telindus PTS -6,300 FTE past headcount reduction +2,600 FTE programs: BeST -4,160 FTE € million 2006-2012 2014 49 Tutorship & FMS -3,900 FTE 2015 22 14,187 2016 6 • 14,187 FTEs in Belgacom Grou

  50. Slide 50: Pricing converged Proximus PACKS

    Pricing converged Proximus PACKS - successful combinations 3-Play 4-Play TV & Fix + Internet € 62.95 / month TV & Mobile & Internet TV & Fix & TV Mobile & TV Everywhere € 66.95 / month Internet + TV Fixed Voice (incl. TV Everywhere € 75.95 / month TV Happy Time XL and + TV Everywhere Happy Time Mobi

  51. Slide 51: Pricing – TV options

    Pricing – TV options TV Everywhere Note: € 4.95 / month TV Everywhere Thanks to TV Everywhere, your smartphone, tablet or is for free laptop becomes an additional TV screen! You won’t miss for customers having any of your favorite programs anymore since your TV a comfort or can now follow you anywhe

  52. Slide 52: Consumer Mobile Postpaid subscriptions

    Consumer Mobile Postpaid subscriptions Easy+ 10 Easy+ 15 Easy+ 25 Easy+ 45 € 10 € 15 € 25 € 45 € 13 in PACK € 20 in PACK € 35 in PACK voice & sms only 20 min 150 min Unlt min 240 min (non-Smartphone Unlt SMS Unlt SMS Unlt SMS Unlt SMS users) € 0.25 / min € 0.25 / min € 0.25 / min € 0.25 / MMS € 0.25

  53. Slide 53: Pricing – Mobile Voice (Prepaid)

    Pricing – Mobile Voice (Prepaid) Reload bonus For each reload, with Pay&Go Easy you get : Focus on Pay & Go Easy • Bonus 1 (towards fix and Mobile): € 10 reload= 30min, € 15 reload= 60min, € 25 € 0.27/ min calls € 0.12 / SMS reload= 90min, € 50 reload= 200 min € 0.25 / MMS OR Bonus 2 (towards fix):

  54. Slide 54: Pricing – Mobile Data

    Pricing – Mobile Data Standard Pay & Surf € 0.5 / MB (prepaid ) Or € 4.99  50 MB included € 0.85 / MB € 9.99  500 MB (postpaid) General Prepaid Only GSM Only Laptop & Tablet Only iPad Only Prepaid Only Prepaid Only Pay & Surf Daily Comfort Favorite Favorite for iPad Pay & Surf for iPad € 4.99 / mo

  55. Slide 55: Positioning Scarlet as no frills brand

    Positioning Scarlet as no frills brand, with very attractive pricing for ‘price seekers’ TV + Fix + Internet € 39 / month TV: ~30 channels + Fixed Voice line: Free calls to fix Off Peak + Internet: Unlimited volume Down 30 Mbps Up 4 Mbps 55

  56. Slide 56: Pricing – Fixed products

    Pricing – Fixed products Classic Happy Time XL No Limit National Anytime Happy time international € 20.99 / month € 20.99 / month € 30.67 / month € 21.99 / month Note: Free to FIX & to MOB during Free to FIX ,to MOB & to Lower tariffs during peak OffPeak & Weekend Free to FIX Anytime most European c

  57. Slide 57: Regulation- 1

    Regulation- 1 Estimated negative financial impact from regulatory price decreases Estimated impact Regulation impacts FY 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 FY 2015 (Decrease in EUR million) Revenue ~ € 38m € 3m € 4m € 4m € 4m € 15m € 1m MTR EBITDA ~ € 2m € 1m € 2m € 2m € 2m € 8m € 1m Roami

  58. Slide 58: Regulation- 2

    Regulation- 2 Mobile voice and data-roaming: EU Roaming III Regulation regulation • Roaming III Regulation entered into force on 1 July 2012. • It imposed a further lowering of the existing regulated price caps, and extended the roaming regulation to retail data as from July 2012. It also imposed tr

  59. Slide 59: Macro economic environment

    Macro economic environment GDP Growth actuals and forecast Inflation rate actuals and forecast 2.5% forecast forecast 7.0 2.0% 6.0 5.0 1.5% 4.0 1.0% 3.0 2.0 0.5% 1.0 0.0% 0.0 -1.0 • Belgium decreases to -0,4, Europe to -0,2. -0.5% • After the temporary decline in 3Q14 linked to the drop in the build

  60. Slide 60: Cautionary Statement

    Cautionary Statement “This communication might include some forward-looking statements, without limitation, regarding Belgacom’s financial or operational results, certain strategic plans or objectives, macro- economic trends, regulation, future market conditions and other risk factors. These forward

Proximus — Q4 2014 Earnings Presentation on 6ix