Proximus Sa · EURONEXT:PROX
Proximus Sa — Q2 2016 Earnings Presentation
61 slides from Proximus Sa's earnings presentation, 2016
Slide 1: Results Presentation
2ZOV OZ Results Presentation prossimus
Slide 2: Agenda
Q2’16 Group highlights 3 Financial position 16 Key Group achievements Q2’16 4 FY 2016 Outlook 17 Group underlying revenue per segment 5 Voluntary Early leave plan 18 Group underlying revenue by product group 6 Consumer segment results 19 Fixed Internet and TV 7 Enterprise segment results 36 Mobile s
Slide 3: Underlying Group EBITDA up 1.7%, driven by Domestic growth
Underlying Group EBITDA progressed by 1.7%, driven by a solid 4.1% Domestic EBITDA growth. Commercial Revenue* EBITDA* Capex FCF drivers €1,460m €463m €215m €122m Continued growth of customer base, in a -3.0% YoY +1.7% YoY more competitive market + 21,000 Underlying Domestic Domestic EBITDA of € Tot
Slide 4: Key Group Achievements Q2 2016
Key Group Achievements Q2 2016 4
Slide 5: Group underlying revenue per segment
Domestic revenue +0.7% YoY, Fixed revenue offsetting lower revenue from roaming and device sales. BICS revenue decreased YoY due to lower voice volumes, in declining market and context of a voice to data shift. Group underlying revenue (M€) & YoY variance 19 -4 1 -52 -1.2% 2.2% 5.5% 1.5% 2.5% -0.3%
Slide 6: Group underlying revenue by product group
Q2 • Solid revenue growth from Fixed driven by Internet, TV and ICT. 27 -4 -8 -4 • Mobile services revenue impacted by 1,505 -1 -3 -52 roaming regulation and unfavorable travel 1,460 destination mix. Domestic +0.7% • Less revenue from low-margin Mobile Group -3.0% devices. • Lower BICS revenue due t
Slide 7: Fixed Internet, TV and Fixed Voice customer evolution
Fixed internet TV Fixed Voice Broadband customer evolution Fixed Voice customer evolution net adds total 1,879 1,892 TV evolution net adds total unique net adds total 1,828 1,856 1,813 1,759 1,795 1,816 1,788 1,692 1,716 2,850 2,831 2,836 2,822 2,800 2,781 1,740 1,657 2,751 2,723 1,718 1,558 1,593 1
Slide 8: Mobile services revenue
Mobile services revenue : -1.1% YoY, on lowered roaming Growing base mobile cards rates since end-April ‘16 and changed travel destination mix Mobile excluding M2M and Internet Everywhere cards (in 000’s) 4,902 4,929 4,922 4,919 4,924 4,939 4,911 4,907 YoY: 2.7% • +138,000 Mobile Postpaid 2.1% 1.7%
Slide 9: Convergence strategy progress
• 45 % of the Households/Small offices are 3-or 4-play, • Revenue from X-play HH/SO +3.1% YoY; 4-Play revenue and count for 65% of total HH/SO revenue +8.2% • Continued improvement of mix following growth for • ARPH up by 2.5% YoY to EUR 65.7, 4-Play ARPH at € 114.9 3-Play and 4-Play CBU Households
Slide 10: Group underlying direct margin
Group underlying direct margin(M€) & YoY variance 5 -2 -1.2% 2.2% 5.5% 1.5% 2.5% 1.9% 1.4% -0.5% -1 -8 3 891 879 890 915 917 896 902 911 915 64 62 65 75 73 65 67 67 Domestic +0.5% 911 827 817 825 840 844 831 835 844 Group -0.5% Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Domestic BICS DM Underly
Slide 11: Underlying cost evolution
Group underlying Underlying Other Opex by nature expenses (€m)(M€) & YoY & var. YoY 3.4% 0.4% 1.2% 0.4% -3.9% -2.6% 30 25 32 32 26 57 29 32 29 62 69 62 57 53 73 59 Domestic 164 162 146 144 140 144 161 139 227 246 226 230 230 247 219 221 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Marketing Sales
Slide 12: Group underlying EBITDA
Group underlying EBITDA (M€) & YoY variance 2.2% 5.5% 1.5% 2.5% 9.5% 2.5% 1.7% 6 463 -1.2% 433 455 453 418 418 463 6 382 408 455 -4 39 47 41 34 35 38 32 39 394 350 369 408 412 384 383 425 Group +1.7% Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Domestic BICS Underlying EBITDA Direct Margin Worfor
Slide 13: Net income (Group share)
• YTD June’16 net income (Group share) totaled € 239m, including € 126m for the second quarter. The decrease versus the same period of 2015 is for a large part explained by a negative impact from incidentals, and higher depreciation & amortization. This was partly offset by a lower tax expense. Ytd
Slide 14: Capex and network
4G outdoor 4G indoor Average speed 4G(+) device1 (Mbps) coverage 1 coverage 1 Mobile Network 4G+ 35% Capex (M€) population coverage2 98,8 99,7 93,4 97,6 41 33 % % % % 15 75 Download Download Upload End 2015 Q2’16 End 2015 Q2’16 national largest cities national 424 452 High streaming quality: YTD’15
Slide 15: Free cash flow
YoY FCF (in M€) 67 -11 -46 Transversal cash management 12 255 18 initiative launched mid-2015 215 contributed to a strong YTD ’16 Free Cash Flow of € 255m. FCF YT D JUN 15 Higher underlying Lower income tax Business working Lower disposals Other FCF YT D JUN 16 EBITDA payment s capital From EBITDA t
Slide 16: Financial position
Jun-16 Net Debt DEC Dividends to non-controlling Net sale of Net Debt JUN Net debt/EBITDA ratio @ 1.2 2015 FCF Dividends interests treasury shares Other 2016 In M€ • Net financial debt at € 2,005M • Credit ratings: Standard & Poor’s A, 255 -323 Moody’s A1 , both stable outlook. -26 13 -4 -1,919 -2,0
Slide 17: 2016 Outlook
Q2’16 YTD June’16 2016 Outlook Outlook 2016 Actuals Actuals Domestic* underlying revenue +0.7% +0.2% Slight growth Group underlying EBITDA +1.7% +2.1% Slight growth Around Capex (excl. Spectrum) €215m €452m €950m With Group EBITDA growing by 2.1% over H1’16, and taking into account the benefits from
Slide 18: Voluntary early leave plan
Description: Financial implications: • Employees as from 60 years can stop their active career • Last 2 yrs of active career, the work time is reduced to 80% • Cumulated over the period 2016-2019, Proximus will report • Replacement income paid by Proximus until earliest retirement € 255M in non-recu
Slide 19: Consumer results Q2 2016
Consumer results Q2 2016
Slide 20: Consumer revenue, COGS and direct margin
Q2’16 Consumer revenue -1.2% YoY Consumer underlying revenue (M€ ) & YoY • Revenue from Fixed data +10.0% and TV +7.6% 5. 3 % 3 . 9% 2 . 0% 1. 1% -0. 3% -1. 2% • Pressure on Mobile Services revenue, -1.6%, due to lowered roaming rates in line with EU regulation and change in travel behavior. • Decli
Slide 21: Product view
Product view
Slide 22: Consumer revenue decrease by product
Q2’16 -1.2% YoY revenue decrease 5 -9 • Revenue growth for Fixed Data and TV offset by lower 6 revenue in Terminals, the Fixed Voice erosion and the -1 -17 14 impact of EU roaming regulation on Mobile services 727 -6 Mobile service revenue. revenue €-4M 718 -1.2 % Underlying Fixed Voice Fixed Data T
Slide 23: Fixed data revenue and customer base growth
Growing internet customer base and ARPU leading to +10.0% revenue increase Solid revenue growth, up 10.0% for Q2’16 Fixed data revenue (M€) & YoY • Driven by the growing customer base, up by 80,000 or 5. 9% 5. 8% 9. 1% 8 . 5% 9. 0% 10.0% +4.8% in one year. • Q2’16 ARPU up by 4.5% YoY. 130 132 135 13
Slide 24: TV revenue and subscriber growth
Continued subscriber growth for Proximus and Scarlet brands, +21,000 in Q2’16 Q2’16 revenue from TV totaled € 88m, +7.6% YoY TV revenue (M€) & YoY variance • Continued subscriber growth, with both the Proximus and 15. 0% 17. 9% 13 . 9% 11. 6% 10. 5% 7. 6% Scarlet brand increasing their customer base
Slide 25: Fixed voice revenue and ARPU
Stable ARPU decline YoY due to pack migration Q2’16 revenue from Fixed Voice totaled € 131m, Fixed voice revenue (M€) & YoY variance -4.5% YoY -3 . 6% -4. 1% -2 . 5% -4. 0% -3 . 5% -4. 5% • Eroding Fixed Voice customer base • Lower ARPU, including Pack discount 142 143 139 137 138 137 134 131 Q3'14
Slide 26: Mobile service revenue and customer base
Roaming regulation reduced Mobile service revenue by -1.6%. Postpaid service revenue +2.3%. Q2’16 revenue from Mobile services down 1.6% YoY, Mobile service revenue (M€) & YoY variance • Postpaid revenue +2.3% following greater customer base, more than offsetting roaming regulation impact. 2 . 0% 0.
Slide 27: Mobile data usage and blended ARPU
Average Mobile data usage up by 55% YoY to 790Mb. Blended Mobile ARPU decreasing -0.6% YoY to € 22.6 Blended net mobile ARPU (EUR ) & YoY • EU roaming regulation, travel destination mix and to a lesser 1.3 % 3 .1% 1. 6% 2 .1% 1.3 % degree the revamped mobile pricing mid-August 2015 offering 0. 2 % -
Slide 28: Tango revenue and customers
Tango revenue (M€) & YoY variance Tango Q2’16 revenue of € 30m, -3.7% YoY 9. 5% 11. 0% 9.9% 13 .8% 0. 1% -3 . 7% • Change in growth trend of prior quarters due to roaming regulation. 30 31 31 31 33 35 31 30 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Tango mobiles customers & EOP (000) 286 287 2
Slide 29: X-Play view
X-Play view
Slide 30: 3 & 4-Play revenue growth offset by devices and prepaid
Solid growth of 3 & 4-Play revenue offset by low margin device sales and prepaid decline 727 718 8 38 34 -2 -3 15 -9 31 30 -12 47 34 727 38 -1 47 718 HH/SO +3.1% +3.1% -3 Total Consumer -1.2% 582 565 Underlying 4-Play 3-Play 2-Play 1-Play Prepaid Terminal Tango Other Underlying Q2'15 sales Q2'16 Q2'
Slide 31: 4-Play and 3-Play main revenue growth drivers
4-Play revenue (M€) & YoY variance 3-Play revenue (M€) & YoY variance 10. 1% 8. 2% 6. 6% 4. 5% 172 179 184 186 190 193 171 175 179 179 182 183 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 2-Play revenue (M€) & YoY variance 1-Play revenue (M€) & YoY variance -3 . 0% -2 . 9%
Slide 32: Households/Small offices by X-Play
End-Q2’16, Proximus serviced 2,950,000 HH/SO in total, with improving customer mix 4-Play growth & EOP (000) 3-Play growth & EOP (000) 510 52 1 53 1 547 555 564 744 755 768 771 72 2 73 8 22 11 16 9 10 8 27 16 10 13 7 4 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 2-Play gr
Slide 33: ARPU by X-Play
4-Play ARPU (EUR ) & YoY variance 3-Play ARPU (EUR ) & YoY variance -0.1% -0.4% -0.8% -1.3% 115.0 115.4 116.6 115.1 114.9 114.9 80.6 79.9 80.7 79.6 79.6 79.3 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 2-Play ARPU (EUR ) & YoY variance 1-Play ARPU (EUR ) & YoY variance 1.
Slide 34: Annualized churn by X-Play
Quarterly improvement for all X-Plays. Average churn X-Play at 12.0%, 1.4pp lower QoQ, stable YoY 4-Play Annualized full churn rate 3-Play Annualized full churn rate 2 . 9% 3 . 0% 2 .9% 2 . 8% 10. 6% 9. 6% 11. 8% 11. 2% 10.4% 9. 6% 2 . 5% 2 . 7% Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q1'15 Q2'15 Q3'15
Slide 35: Prepaid revenue, ARPU and churn
Prepaid revenue (M€) & YoY variance Prepaid ARPU (EUR ) & YoY variance -8.6% -9.6% -17.8% -19. 0% 46 47 10.7 11.2 10.4 10.0 9.8 10.1 42 40 38 38 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Prepaid loss & EOP (000) Prepaid churn rate 1,402 1,3 76 1,3 41 1,3 07 1,2 68 0 1,2
Slide 36: Enterprise results Q2 2016
Enterprise results Q2 2016
Slide 37: Enterprise underlying revenue, cost of sales and direct margin
Q2’16 underlying revenue +5.8 YoY Enterprise underlying revenue (M€) & YoY • Largely driven by a 14,2% growth in ICT 2 . 1% -0. 1% 4. 8 % 1. 4% 0. 1% 5. 8% • Benefitting from the revenue increase from the Smart Mobility company created mid-March ‘16, combining the activities of Be- Mobile and Flow w
Slide 38: Enterprise revenue by product
Q2’16 in M€ Q2’16 revenue of Enterprise up 5.8% YoY • Strong ICT revenue, up by 14.2%. 5 345 • Fixed data revenue up by 1.1%, on continued growth 15 0 from data connectivity services. • Stable Mobile services revenue, up 0.3%, growth 326 -2 1 tempered by roaming regulation, changed travel +5.8% dest
Slide 39: Enterprise Fixed Voice revenue
Fixed Voice revenue decline due to Fixed Voice customer base erosion Q2’16 revenue from Fixed Voice totaled € 60m, - 2.8% YoY Fixed voice revenue (M€) & YoY variance • Continued Fixed Voice line erosion. -4.2% -5.7% -3.3% -3.8% -4.4% -2.8% • Technology migration to VoIP. • Competitive pressure. 0 Mi
Slide 40: Enterprise Fixed data revenue
Q2’16 revenue up 1.1% YoY, driven by continued growth from data connectivity services Q2’16 Fixed data revenue of € 63m, +1.1 % YoY Fixed data revenue (M€) & YoY variance • Favorable revenue trend from Data Connectivity services -2.0% 0.7% 2.6% 2.0% 1.1% 1.1% • roll-out of large customer projects on
Slide 41: Enterprise ICT revenue
Enterprise generated in Q2’16 € 123m revenue from ICT, up Underlying ICT revenue (M€) & YoY 14.2% YoY 2.2% -1.2% 9.1% -0.3% 1.1% 14.2% • ICT benefited from large product deals and an increase in ICT services 0 Millions 0 104 127 107 107 113 127 108 123 • In spite of lower-margin product deals, the f
Slide 42: Enterprise Mobile service revenue
Service revenue +0.3% in spite of Roaming regulation, unfavorable travel destination mix and competitive pressure on pricing Q2’16 revenue from Mobile services totaled € 80m, stable YoY Mobile service revenue (M€) & YoY variance • In spite of lowered EU roaming rates since 30 April ‘16 and 3 . 4% 1.
Slide 43: M2M growth and data usage
Continued strong M2M growth. Average monthly data users of 4G-users reaching 1,045Mb Q2’16 M2M growth M2M *growth & EOP (000) • M2M park growth of 117,000 in Q2’16, driven by the Road User 98 8 Charging project. 4 53 576 1,105 2 67 2 98 3 11 321 412 0 • Park end June 2016: 1,105,000 cards. Thousand
Slide 44: Wholesale revenue and direct margin
Wholesale underlying revenue (M€) & YoY Wholesale underlying direct margin (M€) &YoY -14.1% -5. 5% -8.2% -12 .2% -4. 9% -7. 3% -15.3% -6. 1% -7. 8% -12 .0% -1. 7% -5. 4% 55 54 51 53 51 48 48 49 47 47 43 46 44 41 43 43 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'1
Slide 45: BICS revenue and direct margin
BICS Q2’16 results facing a high comparable base with record margins achieved in 2015 Q2’16 revenue totaled € 359m, -12.7% YoY BICS underlying revenue (M€) & YoY variance • BICS operating in a declining voice market, with a shift from voice to data: voice revenue -17.0% YoY. 11.9% -1.3% -0. 8% 2.5%
Slide 46: BICS underlying segment result and volumes
Underlying segment result -19.3% YoY on high comparable base Q2’16 segment result of €38m, down 19.3% YoY • Segment result growing sequentially. BICS underlying segment result (M€) & YoY variance • High comparable base in 2015, where BICS benefited from 32.4% 34.9% temporary high-margin voice traffi
Slide 47: Other topics
Other topics
Slide 48: Pricing: Packs and internet offers
Scarlet Proximus Proximus Proximus Scarlet Proximus Proximus Proximus Trio Pack Start Pack Comfort Pack Maxi Trio Pack Start Pack Comfort Pack Maxi Internet Internet Start Internet Comfort Internet Maxi Internet Internet Start Internet Comfort Internet Maxi 50 Mbps/4 Mbps 60 Mbps/4 Mbps 100 Mbps/6 M
Slide 49: 4-Play pricing
3-Play + 13 40 Mobile subscription @ Smart+ 15 Smart+ 45 Comfort Pack + Smart 15 discount 20 55 4-Play at € 76.95/month Smart+ 25 Smart+ 65 49
Slide 50: Smart+ mobile subscriptions
Prices are incl. VAT 40 55 13 20 Smart+ 15 Smart+ 25 Smart+ 45 Smart+ 65 Unltd min Unltd min 120 min 300 min Unltd sms Unltd sms BE + Unltd sms Unltd sms Unltd sms in EU 1 GB 2 GB 4GB 10GB Speed Tiering Roaming 240 min in EU 240 MB in EU included 240 min to EU International calling VERY FAST SUPER F
Slide 51: Bizz Smart mobile offers
Prices are excl. VAT Bizz Smart XL 8 15 35 50 70 €10 €20 €40 €60 €80 Unlt min 2 Fix + CUG 100’ 250’ Unl min Unl min Unl min 250sms Unl sms Unl sms Unl sms EU Unl sms EU 500MB 2 GB 5 GB 10GB 10GB PCAC QoS + Conf call + PCAC 600’ in EU 1000’ in EU 600 MB EU 2 GB EU Speed Tiering 600‘ to EU 1000‘ to EU
Slide 52: Prepaid and Smart Full Control offers
Smart Full Control Reload P&G + 15 25 45 10 15 25 120 min 300 min Unltd min 10 min 20 min 50 min Unltd sms Unltd sms Unltd sms 500 sms Unltd sms Unltd sms 1 GB 2 GB 4 GB 100MB 250MB 500 MB Double data Automatic reload each month bundle of minutes/SMS/data Reload P&G + Credit reload needed for
Slide 53: Higher speed and value when in Pack
Higher speed when included in Pack Value increases when included in Pack 53
Slide 54: TV access via Proximus TV decoder
Easy access to via the Proximus TV decoder + TV Replay free in packs Attractive sports offering with national and foreign football competitions and international sports. Agreement with ELEVEN SPORTS NETWORK, adding 2 new sports channels Eleven and Eleven Sports including 54
Slide 55: TV content: Wanagogo and SwipeBox
TV — provide customers easy access to a wide range of content Wanagogo is a digital platform with all your kids’ favorite heroes. They can play with Bumba, Maya UAbeille, Vic le Viking, Heidi, Fred & Samson, le Lutin Plop, Pat le Pirate, Mega Mindy, and all their friends! Wanagogp, parents are fans!
Slide 56: Positioning Scarlet as no frills brand
Positioning Scarlet as no frills brand, with very attractive pricing for ‘price seekers’ Postpaid Prepaid Red Hot Chili Reload 8 Reload 15 €8 € 18 € 28 €8 € 15 150 min 500 min 1000 min Bonus : Bonus : 1000 SMS 2000 SMS 5000 SMS 100 min to Unlimited to Scarlet 50 MB 1 GB 2 GB Scarlet mobile Mobile 10
Slide 57: Regulation: roaming and fixed termination rates
2016 : Transitory period towards Roam-like-at Home - From 30 April 2016 until Roaming 14 June 2017. • Operators are able to apply surcharge up to the current regulated wholesale Estimated negative impact on YoY variance rates. (not yet including positive elasticity effect on usage) • As of 30 April
Slide 58: Spectrum ownership and usage
800 MHz 900MHz & 1800 MHz 2100 MHz 2600 MHz • Used for 2G, 3G and 4G • Used for 3G • Licenses granted in ‘95 • Used for 4G • UMTS licenses granted in 2001 • 1st tacit extension (‘10-’15): Proximus paid • Licenses granted in November ‘13 • 20 year-licenses valid until €74m (annual payments). • 20 yea
Slide 59: Shareholder structure and remuneration
Dividend of 1.50/share General Shareholder return policy: We offer an attractive shareholder remuneration policy by returning, in principle, most of our annual free cash flow. 2014 2015 2016E status on This return of free cash flow is 30/09/2015 reviewed on an annual basis in order to keep strategic
Slide 60: For further information
For further information Investor relations Nancy Goossens Sarah Franklin +32 2 202 82 41 +32 2 202 77 11 Director Investor Relations Investor Relations Manager E-mail: investor.relations@proximus.com Proximus investor relations website: www.proximus.com/en/investors
Slide 61: 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