Proximus Sa · EURONEXT:PROX
Proximus Sa — Belgacom — Q3 2008 Earnings Presentation
50 slides from Proximus Sa's earnings presentation, Nov 7, 2008
Slide 1: Q3 results 2008
Q3 results 2008 7 November 2008 Slide 1
Slide 2: Content
Content • Group Highlights & Summary Results slide 3-7 • Consumer Business Unit CBU highlights & summary slide 9-11 Operationals slide 12-16 Financials slide 17-19 • Enterprise Business Unit EBU highlights & summary slide 21-23 Operationals slide 24-27 Financials slide 28-30 • Service Delivery Engin
Slide 3: Highlights Q3 2008
Highlights Q3 2008 belgacom
Slide 4: Group financial highlights
Group financial highlights YTD YTD • Group revenue of EUR 4,435m, a YoY decrease Sept 07 Sept 08 var. of 116m or 2.6%; including total regulation impact Key group financials of €118m in € million Revenue 4,551 4,435 -2.6% Group operating expenses evolved positively by of which non-recurring revenues
Slide 5: Group operational highlights
Group operational highlights YTD YTD var. var. vs Sept 07 Dec 07 YTD YoY Dec 07 Key group operationals in '000 Voice Access Lines* 3,956 3,906 3,755 -200 -151 Mobile Active customers 4,494 4,620 4,821 327 201 Broadband lines 1,202 1,237 1,315 113 78 TV subscribers 249 305 443 194 138 Packs 120 153 2
Slide 6: Overview tariff changes due to regulation
Overview tariff changes due to regulation MTR rates excl VAT and inflation as set by the BIPT on 29 April 2008 €ct 1 Nov '06 1 May '07 1 Feb '08 1 May '08 1 Jul '08 Proximus 10.13 8.09 8.02 7.48 6.56 EC insists on need to reach Mobistar 12.75 10.16 8.84 9.38 8.21 symmetry. Base 15.81 12.76 10.36 11.
Slide 7: Group 2008 full-year guidance
Group 2008 full-year guidance Regarding the 2008 full-year Group revenue, Belgacom estimates the decline to be around 2%, while it expects to stay within the EBITDA margin range of 33%-34%. The Belgacom Group capex in percentage of revenue, is still expected to be about 11%, excluding the renewal of
Slide 8: Consumer Business Unit
Consumer Business Unit (CBU) Q3 2008 Results / CBU / CBU highlights / CBU voice / CBU Data / CBU TV / CBU Financials
Slide 9: CBU - Highlights
CBU - Highlights Although operating in a highly competitive market, CBU remained the number 1 national player for most product lines. CBU 3rd quarter operationals show an improvement compared to the 2nd quarter : CBU added 33k mobile customers in Q3’08, all via its own brand ‘Proximus’ Q3’08 counted
Slide 10: CBU - Tango
CBU - Tango In the framework of its cross-border strategy, Belgacom announced on 26 June 2008 the acquisition of Tele 2 Luxembourg, the second mobile operator in Luxembourg, operating under the brand name “Tango”. This acquisition allows Belgacom to extend its footprint to a neighboring country. Key
Slide 11: CBU - Summary operational & financial result
CBU - Summary operational & financial result Operational result* YTD 07 YTD 08 Var. Net adds (´000) 137 194 57 Fixed Voice Access lines -128 -127 -1 Mobile active customers 102 123 21 Broadband Lines 53 60 7 TV Subscribers 110 138 28 ARPU (EUR/month) Fixed Voice 22.0 21.4 -2.8% Blended net ARPU - Mo
Slide 12: CBU - Voice - Fixed
CBU - Voice - Fixed CBU Voice CBU Voice lines* EOP (000) The increase in VoIP lines net line loss* (000) (+13k) in Q3’08 limited the -169k 1 -39 2 2,370 net line loss to -39k. -47 2,201 2 YTD September 2008, the -42 35 -45 total net line loss stabilized -46 at -127k. -36 2,368 2,167 Q1 Q2 -128 -127
Slide 13: CBU - Voice – Mobile
CBU - Voice – Mobile YoY, CBU acquired 215.524 new customers of which the CBU mobile customer CBU mobile customers larger part (144.381 customers) Growth (000) EOP (000) via its own brand Proximus. +216k +123 +102 YoY retail* churn increased 33 from 17.5% to 19.8% mainly 49 24 3,489 3,705 driven by
Slide 14: CBU - Data - Fixed
CBU - Data - Fixed CBU managed to improve considerably broadband net adds compared to Q2’08: In Q3’08 CBU added 17k new broadband customers. At the end of September 2008, the total customer base counted 876,113 customers, or a YoY increase of 84,017. Product enhancements and successful “back to scho
Slide 15: CBU - Data - Mobile
CBU - Data - Mobile Total number of SMS/month/user increased by almost 30% from 80 SMS to 104 SMS, driven by increased usage of free CBU Normalized SMS* units/month SMS included in the pricing offers towards the customer. Excluding free usage, SMS traffic is still growing by 8.3%. +8.3% Data includi
Slide 16: CBU - Belgacom TV
CBU - Belgacom TV Another strong quarter: +51 679 new TV users YoY net adds increased by 193.705 TV users leading to a total customer base of 443,139 at the end of September 2008, including 53,651 second stream users: The further roll out of VDSL2 increased the capacity and visibly increased the tak
Slide 17: CBU - revenue
CBU - revenue Total revenue decline of 1% driven by regulation impacts. Excluding regulation, CBU revenue increased 1.6% YoY due to the contribution of Tango and growing TV & Data revenues Revenue from fixed remained flat compared to 2007 Voice revenues evolution linked to line losses and impact fro
Slide 18: CBU - costs
CBU - costs Costs of materials & charges to CBU Total Costs (EUR mio) revenue show a decline of 2.4% as a results of lower roaming charges -0.4% 829 826 192 196 Headcount reduction offset by annual wage increase, indexation and Tango 238 240 cost contribution, YoY Personnel expenses increased 2.4% 3
Slide 19: CBU - EBITDA & Contribution margin
CBU - EBITDA & Contribution margin Slight positive cost contribution not sufficient to offset revenue pressure CBU EBITDA declined by 1.6% driven by the revenue pressure due to regulation Contribution margin remained fairly flat at 50.3% Ebit da Ebit da mar gin CBU EBITDA (EUR mio) CBU Contribution
Slide 20: Enterprise Business Unit
Enterprise Business Unit (EBU) Q3 2008 Results / EBU / EBU highlights / EBU voice / EBU Data / EBU Financials
Slide 21: EBU - Highlights
EBU - Highlights Operational performance for EBU: Voice access line loss stabilized compared to previous quarters with -8k lines in Q3’08 Continued Broadband growth for first 9 months ‘08 (+18k) but limited to 3k in Q3 ’08 Continued Mobile customer growth in 2008 (+78k) of which 23k in Q3’08 YoY, to
Slide 22: EBU - Summary operational & financial result
EBU - Summary operational & financial result Operational result YTD 07 YTD 08 Var. Net adds (´000) 75 72 -3 Fixed Voice Access lines -27 -24 3 Mobile active customers 81 78 -3 Broadband Lines 21 18 -3 ARPU (EUR/month) Fixed Voice 33.8 31.8 -5.9% Mobile net ARPU 69.9 61.4 -12.1% ARPU broadband - Fixe
Slide 23: EBU - Summary operational & financial result
EBU - Summary operational & financial result The ICT domain has shown not to be immune to the economic slowdown with sales projects being reduced and decision processes taking longer. In order to grow a profitable business, Belgacom EBU will focus on its core countries. YTD September 2008, ICT reven
Slide 24: EBU - Voice - Fixed
EBU - Voice - Fixed EBU Voice EBU Voice lines* For the first nine months of net line loss* (000) EOP (000) 2008, EBU net line loss -32k stabilized at -24k. VoIP lines 1,585 1,554 -9 -8 1 2 4 amounted to 4k at the end of -7 -12 Q3’08. -9 -6 1,585 1,550 -24 Fixed Voice Traffic impacted -27 Q1 Q2 VOIP
Slide 25: EBU - Voice - Mobile
EBU - Voice - Mobile YoY EBU acquired 111,283 new mobile customers EBU mobile customer EBU mobile customers Growth (000) EOP (000) resulting in a total customer Q3 +111 base of 1,115,877 at the end of Q2 Q1 September 2008. +81 +78 During Q3, EBU added 23k new customers 1,005 1,116 29 23 25 28 Net Vo
Slide 26: EBU - Data - Fixed
EBU - Data - Fixed Continued growth in broadband (+29k new lines YoY) but limited to 3k in Q3’08: Tough competition in the business segment & progressive saturation of low-end fixed internet market, somehow tempers the growth. End of September ’08, EBU Broadband customers amount to 439k Broadband AR
Slide 27: EBU - Data - Mobile
EBU - Data - Mobile Growing number of SMS (+14.4%) driven by: trend to include mobile subscription in remuneration of EBU SMS (units) employees “SMS-generation” entering the free profession market +14.4% “Advanced” data revenue grows by 31.7% compared to YTD Sep’08 and represents 64% of total mobile
Slide 28: EBU revenue
EBU revenue EBU revenue decline of 2.7% mainly due to mobile regulation. Excluding regulation, revenue increased 0.3% YoY. • Revenue from fixed: EUR -46m or -3.2% YoY, excluding regulation decrease limited to -2.1% Decline in Data Revenue (EUR -13m) results from the disposal of satellites activities
Slide 29: EBU costs
EBU costs The decrease in EBU cost of materials & charges to revenue of EUR -45m or 6.6% is mainly explained by the favorable impact of the regulation on EBU Total Costs (EUR mio) roaming & termination costs -2.6% the disposal of satellite activities 1,092 1,063 111 128 Personnel expenses and pensio
Slide 30: EBU EBITDA & Contribution margin
EBU EBITDA & Contribution margin YoY EBU EBITDA decreased -2.8% to EUR 953m as the positive evolution of operating expenses did not fully compensate the revenue decline The Contribution margin remains stable at 47.3% compared to the same period of last year EBU EBITDA Ebit da (EUR mio) EBU Contribut
Slide 31: Service Delivery Engine
Service Delivery Engine (SDE) Q3 2008 Results / SDE / SDE highlights / SDE Financials / SDE Networks
Slide 32: SDE – Summary financial result – revenue
SDE – Summary financial result – revenue Summary financial result in million € YTD 07 YTD 08 Var. Total Revenue 393 315 -19.9% Costs of materials/charges to revenue -115 -74 -36.0% Personnel expenses and pensions -165 -159 -3.7% Other operating expenses -125 -131 5.4% Total OPEX -405 -364 -10.0% Tot
Slide 33: SDE costs & EBITDA
SDE costs & EBITDA SDE Total Costs (EUR mio) The lower costs of materials/charges to revenue result from the decline in Proximus 405 -10.0% Transit Traffic (mainly eliminated at Group level) 364 and the lower interconnect volumes. 125 131 Despite the annual wage increases and indexation 165 (obligat
Slide 34: SDE – Mobile & Fixed Networks
SDE – Mobile & Fixed Networks Back in 2004, Belgacom launched its Broadway project, bringing fibre to the street cabinet and rolling out VDSL technology. Since its launch in 2004: -12,780 km of fibre rolled out to the street cabinet -15,500 remote platforms connected - Active population coverage of
Slide 35: Staff & Support
Staff & Support (S&S) Q3 2008 Results / S&S / S&S highlights & Financials
Slide 36: S&S - Highlights and summary financials
S&S - Highlights and summary financials Q3 2008 highlights • The S&S revenue decrease (EUR 14m YTD Sept’08) is mainly due to one-time gains realized in 2007 • The increase in Other Operating Expenses results from the provision that has been set-up for rental costs of the Proximus building which is g
Slide 37: International Carrier Services (ICS)
International Carrier Services (ICS) Q3 2008 Results / ICS / ICS Highlights / ICS Operationals / ICS Financials
Slide 38: ICS – Highlights Q3 2008
ICS – Highlights Q3 2008 Voice volumes of Q3’08 show a strong increase of 14.3%. However positive effect on voice revenue for great part offset by decrease in mobile termination rates & weak dollar Compared to last year, ICS revenue of Q3’08 grew 3.4%. YTD September 2008, revenue grew 3.7% to EUR 58
Slide 39: ICS - Summary operational & financial result
ICS - Summary operational & financial result YTD 07 YTD 08 Var. Voice volumes (billion of minutes) 10.28 11.70 13.8% Total to fixed destinations 4.77 5.06 6.0% Total to mobile destinations 5.51 6.64 20.6% Total Revenue 561 582 3.7% Costs of materials/charges to revenue -480 -491 2.2% Personnel expen
Slide 40: Operational Overview
Operational Overview Consolidation and outsourcing to increase leadership in carrier market Outsourcing projects with MTN Group and Omantel are successful and generate more volumes than expected Investment through Omantel in the deployment of the Europe India Gateway: the first direct, high bandwidt
Slide 41: Revenue & Direct Margin overview
Revenue & Direct Margin overview Voice revenue* growing slightly by 1.5% due to more Mobile terminated minutes & Middle East and Africa business, offset price declines in Europe (termination rate decreases) Shift from Standard Quality to Premium Quality voice products (higher price) Drop in unit mar
Slide 42: Cost overview
Cost* overview • HR related expenses show an increase reflecting the headcount increase (from 220 FTE to 233 FTE YoY) required to sustain the mobile data growth • Network expenses slightly higher due to shift from European to more costly African & Asian voice business Cost structure (EUR Mio) 5.5% 4
Slide 43: Group Financials
Group Financials belgacom
Slide 44: Consolidated income statement
Consolidated income statement (EUR million) YTD Sept YTD Sept % Change 2007 2008 Total Revenue 4,551 4,435 -2.6% of which non-recurring revenues 0 8 Costs of materials and charges to revenue -1,497 -1,435 -4.1% Personnel expenses and pensions -848 -843 -0.6% Other operating expenses -599 -630 5.2% T
Slide 45: Segment result
Segment result Revenues* (EUR Mio) EBITDA* (EUR Mio) -5.0% -2.6% 4,551 4,435 1,607 1,527 5 ,0 0 0 2 ,0 00 0 0 8 8 38 46 4 ,5 0 0 561 582 38 4 ,0 0 0 393 24 315 1 ,5 00 3 ,5 0 0 980 953 3 ,0 0 0 2,072 2,016 1 ,0 00 2 ,5 0 0 2 ,0 0 0 1 ,5 0 0 5 00 849 835 1 ,0 0 0 1,677 1,660 5 00 0 -11 -49 -249 -266
Slide 46: FTE evolution per business unit
FTE evolution per business unit Ytd September 2008, personnel expenses were slightly lower than previous year (-0.6%) as the headcount decrease offset the pressure on wages by indexation and salary increases. YoY a total of 449 FTE’s left the company, including a natural attrition of 301 FTE’s Wages
Slide 47: Investments per Business Unit
Investments per Business Unit Lower Capital Expenditures for SDE due to 3G investments which have 11.4% been delayed to Q4’08 506 600 9.0% Over the first nine months of 2008, 408 SDE spent: 500 6 27 EUR 70m on Broadway bringing the total population coverage to 64% 400 7 26 EUR 55m on TV platform & s
Slide 48: Free cash flow (in million €)
Free cash flow (in million €) Decrease in FCF is mainly due to: acquisition of Tango in Q3’08 for an amount of EUR 207m net of cash increase in capital expenditures following the renewal of the football broadcasting rights. favorable impact in Q1’07 of the disposal of the remaining interests in Mobi
Slide 49: Net financial position (EUR million)
Net financial position (EUR million) Belgacom continues to have a sound financial position with a net debt of EUR 1.5bn, corresponding to 0.8 times EBITDA. 457 ( 1,16 7 ) (569) ( 1,5 2 2 ) ( 2 4 1) (2) N e t de bt E O P 2 0 0 7 FCF D iv ide nds N e t a c quis it io n o f O t he r N e t de bt Y T D 2
Slide 50: Balance Sheet
Balance Sheet YTD Dec YTDSept (EUR million) 2007 2008 TOTAL ASSETS 7,325 7,294 The acquisition of Tango Non-recurrent assets 5,072 5,223 Goodwill 1,777 1,948 generated a goodwill of Intangible assets with finite useful life 482 537 Property, plant and equipment 2,470 2,409 EUR 168m Other participati