Proximus Sa · EURONEXT:PROX
Proximus Sa — Belgacom — Q1 2014 Earnings Presentation
64 slides from Proximus Sa's earnings presentation, 2014
Slide 1: Belgacom Presentation Q1 2014 results
Belgacom Presentation Q1 2014 results Group financials Q1‘14 Group operationals Q1’14 Network & Simplification – slide 27 Executive summary – slide 4 Mobile – slide 18 Detailed segment results Outlook – slide 5 Fixed – slide 19 Consumer – slide 34 Group Revenue – slide 6 Household reporting – slide
Slide 2: 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-
Slide 3: Group Financials
Group Financials Executive summary – slide 4 Outlook – slide 5 Group Revenue – slide 6 Mobile Service Revenue slide 7 CBU Revenue – slide 8 EBU Revenue – slide 9 Operating expenses - slide 10 EBITDA – slide 11 Capex – slide 12 FCF/FIN POS – slide 13-14 Ray Stewart P&L – slide 15 Balance sheet – slid
Slide 4: Financial performance Q1 2014 in line with company expectations
Financial performance Q1 2014 in line with company expectations - Group revenue: -6.6% YoY; with BICS revenue down by 14%, € 1,480m driven by lower Voice volumes REVENUE - Excluding BICS and capital gain impact, revenue -3% YoY € 412 m - Group EBITDA: -6.6% YoY or -5.0% like-for-like EBITDA - Capex
Slide 5: 2014 Outlook reiterated
2014 Outlook reiterated Reported FY ‘13 Guidance FY ‘14 Q1 ‘14 reported Group revenue 6,318 Core business (excl. 4,410 Decline between -1% and -2% -3.9% BICS & Telindus FR) Telindus France 242 BICS 1,666 Decline between -10% and -15% -14.3% Group EBITDA 1,713 Group EBITDA excl. 1,702 Decline between
Slide 6: Group revenue significantly impacted by lower BICS revenue
Group revenue significantly impacted by lower BICS revenue, CBU and EBU improving from previous quarters Q1’14 Group revenue € 105m lower than Q1 2013 € -60m related to Bics due to drop in Voice volumes € -11m due to building sales in Q1 2013 € -8m regulation impact € -26m from CBU/EBU/Wholesale 1,5
Slide 7: CBU and EBU revenue trend improving on Mobile recovery
CBU and EBU revenue trend improving on Mobile recovery G roup Mobile Service Revenue Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 -3% Reported -5% -6% -7% On comparable basis -12% -13% -13% -14% Trend improvement seen in Q4’13 continued on fading impact from Q4’12 mobile re-pricing Slide 7
Slide 8: CBU revenues
CBU revenues • Revenue from Fixed Internet & TV growing YoY; • but not enough to compensate for the loss in Mobile • Mobile service revenue trend showing improvement versus previous Q’s: - Impact of lower mobile prices on YoY variance starting to fade - Good mobile customer growth -3.0% YoY 553 +5 +
Slide 9: EBU revenues
EBU revenues • Revenue pressure on Fixed and Mobile in unfavorable economy • Total ICT revenue slightly down YoY, in spite of growth for Belux ICT • Mobile service revenue trend showing improvement versus previous Q’s, mainly on good customer growth -2.6% YoY 554 -4 -4 -2 539 -2 -2 -1 Q1 2013 Regula
Slide 10: Favorable cost evolution
Favorable cost evolution Quarterly Cost of Sales (€ million) 75 0 -9.8% Lower costs for BICS and for CBU due 65 0 667 649 680 to lower interconnection costs, focus on 55 0 637 645 636 643 45 0 35 0 575 cost efficiency, and lowered MTRs in 25 0 Luxembourg. 15 0 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114
Slide 11: Group Ebitda
Group Ebitda • Group EBITDA: -6.6% YoY or -5.0% like-for-like – improving from previous quarter (Q4 was -8.3% YoY like-for-like) – Pressure on Mobile margins softens, solid Fixed business and lower costs – Regulatory measures reduced the Group EBITDA by €7m (-1.5%) 441 -6.6% +4 reported -11 -7 +1 +3
Slide 12: EUR 179 million invested in Q1 '14
EUR 179 million invested in Q1 ’14 YoY decline driven by timing of TV-content renewal Q1’14 investments € 13m lower YoY : 19 3 179 Due to timing of capex needs in CBU for TV-content renewal Amount invested in SDE accelerated in line with announced Network and Simplifiaction strategy Q1'13 Q1'14
Slide 13: Q1 '14 Free Cash Flow of € 119 million
Q1 ’14 Free Cash Flow of € 119 million Belgacom generated € 119m of FCF in Q1’14, or € +30m YoY. Main drivers for the FCF increase are : - lower income tax payments, - less cash paid for capital expenditure and - lower needs in terms of core working capital, - partially offset by a lower EBITDA. 119
Slide 14: Sound financial position
Sound financial position • Net financial debt at € 1,723m, € 92m lower versus end 2013 • The outstanding long term financial gross debt amounted to € 1.9Bio • Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook 119 ( 3) ( 33) ( 1 ,815) 8 (1) ( 1 ,723) Net debt FCF Dividends Non con
Slide 15: Group – quarterly P&L
Group – quarterly P&L VAR in mio € Q113 Q213 Q313 Q413 FY13 Q114 Q1/Q1 Revenues (1) 1,5 8 6 1,5 8 3 1,5 6 8 1,5 8 2 6 ,318 1,48 0 -6 .6 % Total OPEX (1) -1,144 -1,153 -1,140 -1,168 -4,605 -1,06 8 -6 .7% Costs of materials and charges to revenues -637 -645 -636 -643 -2,561 -575 -9.8% Personnel expens
Slide 16: Belgacom consolidated balance sheet
Belgacom consolidated balance sheet As of 31 December As of 31 March (EUR million) 2013 2014 ASSETS NON-CURRENT ASSETS 6,254 6,187 Goodwill 2,320 2,292 Intangible assets with finite useful life 1,185 1,144 Property, plant and equipment 2,558 2,567 Investments in associates 6 6 Other participating in
Slide 17: Consumer Group Operationals
Consumer Group Business Operationals Q1’14 Unit Dominique Leroy Mobile – slide 18 Fixed – slide 19 Operational Household reporting – slide 20 Financial Household reporting – slide 21 Slide 17
Slide 18: Good commercial performance for mobile
Good commercial performance for mobile… 22 0 6 -10 Continued mobile customer growth 0 0 -73 59 -21 33 25 Postpaid Paying cards 18 0 24 33 33 +Tango net adds total 0 20 21 Postpaid Free 0 Data Cards -58 -48 -71 -67 5,484 5,539 0 -98 Prepaid 100 5,366 5,422 5,445 5,600 0 0 80 5,400 0 60 5,200 Q1'13 Q2
Slide 19: …and for Fixed Internet & TV
…and for Fixed Internet & TV Broadband customer evolution net adds total 1,677 1,694 1,647 1,652 1,660 28 1,637 1,700 Other 6% 23 1,615 1,626 Belgian Fixed internet market 1,600 Belgacom 18 1,500 44% still growing, but at slower pace 13 17 16 Internet penetration @ 79% 12 Cable Belgacom market
Slide 20: Operational drivers x-play Household reporting
Operational drivers x-play Household reporting CBU Households per x-play (in '000) Annualized full churn rate of a x-play Household 2,409 2,403 2400.. 2,378 2,359 2,352 307 323 333 2200.. 343 356 4-Play 26.0% 2000.. 522 519 1800.. 516 515 515 1-Play 3-Play 16.4% 19.9% 20.3% 20.4% 1600.. 19.4% 13.5%
Slide 21: Financial drivers x-play Household reporting
Financial drivers x-play Household reporting Average Revenue Generating Unit per x-play Household Revenues per x-play (in € million) 4.52 4.55 4.57 4.60 4.61 400000. . 366 374 375 369 367 Total 350000. . 91 98 102 104 300000. . 107 4-Play 1-Play 3.12 3.13 3.14 3.15 3.15 250000. . 2-Play 108 109 110
Slide 22: Strategic priorities
Strategic priorities ‘Fit for Growth’ overview – slide 23 Invest – slide 24 Transform – slide 25 Growth – slide 26 Ray Stewart Slide 22
Slide 23: Strategic Priorities: 'Fit for Growth'
Strategic Priorities : ‘Fit for Growth’ Grow Back to sustainable growth Customer Efficient Experience Organisation Good to Transform Gold culture Brand Simplification differentiation Leader in convergent services Invest Seamless network and IT Slide 23
Slide 24: Invest
Invest To build the foundation of our next wave of growth Access • Maintain mobile leadership and further deploy 4G networks • Push legacy copper network to max capabilities (vectoring, DLM) • Gradually introduce FTTH • Push digital (e-sales, e-services) IT and • Renew selling and ordering systems •
Slide 25: Transform
Transform • Product usage experience (TV Everywhere, FON, …) Develop superior • Touchpoints experience (call centers, technicians, …) customer experience • End-to-end process (first time right) • 360°customer communication quality • Products and services portfolio Simplify to structurally • Network
Slide 26: Grow
Grow • Exploit mobile leadership • Improved broadband experience Regain • Roll-out fiber in greenfield and gradually in brownfield to offer the market shares ultimate broadband experience • Superior customer experience (web, shops of the future, …) • Deliver solution-centricity to unlock value in EB
Slide 27: Network and Simplification
Network and Simplification Overview – slide 28 Invest in Mobile – slide 29 Spectrum – slide 30 Invest in Fixed – slide 31 - 32 Ray Stewart Slide 27
Slide 28: Network & simplification strategy
Network & simplification strategy Invest and transform to return to growth Strategic focus is to invest in our Access Networks, in Simplicity and in better Customer Service Invest in Mobile Invest in Fixed Transform to reduce cost Accelerate simplification of Maintain our mobile network Push our leg
Slide 29: Invest in Mobile
Invest in Mobile: Offering the best overall mobile customer experience Maintaining mobile leadership combining optimal coverage with speed Mobile Network Status1 Speed tiering with 4G for everyone > 99% • Becoming technology agnostic while offering 2 different experience levels 3G & 2G coverage • TI
Slide 30: Spectrum: The Belgian situation
Spectrum: The Belgian situation 900 MHz & 1800 MHz 2100 MHz 2600 MHz 800 MHz • 900 MHz & 1800 MHz • Used for 2G, 3G and 4G • Used for 3G • Will be used for 4G • Will be used for 4G • Belgian operators allowed • Proximus, Mobistar & Base • Out of 5 candidates, 4 • Belgacom acquired 2x10 to deploy UMT
Slide 31: Invest in Fixed
Invest in Fixed Dynamic investment track ahead of us Push our legacy copper network to maximum capabilities while gradually preparing for the introduction of Fiber-To-The-Home (FTTH) in Brownfield areas in function of copper network renewal Speed evolution in Mbps 2014 to >2018 FTTH in Brownfields a
Slide 32: Invest in Fixed
Invest in Fixed Going further with FTTH in new zonings & in Brownfields Belgacom will deploy Fiber-To-The-Home (FTTH) deployment in new Fixed Network Status residential zonings and will gradually and selectively introduce FTTH in function of the step-by-step renewal of our copper network 99.85% DSL
Slide 33: Q1 2014 results per business unit
Belgacom Company presentation Investor Relations Q1 2014 results per business unit Consumer Business Unit (CBU) Enterprise Business Unit (EBU) Service Delivery Engine &Wholesale (SDE&W) Staff and Support (S&S) Belgacom International Carries Services (BICS) 33 33 Slide
Slide 34: Consumer - P&L
Consumer - P&L CBU revenue (EUR mio) 61 0 Q1’14 Revenue -3% lower, reg. impact €-4m (-0.7%) -3.0% 59 0 – Revenue decline showing quarterly improvement supported by 57 0 587 581 convergence strategy 575 55 0 567 – Further recovery of mobile service revenue trend 553 556 549 536 – 53 0 51 0 Continue
Slide 35: Consumer - Fixed voice
Consumer - Fixed voice Fixed Voice price increases results in higher ARPU, line erosion and mobile traffic substitution explaining revenue decline Fixed voice Fixed revenue voice revenue & YoY (EUR mio)(EUR Variance mio) Fixed Voice benefitted from price changes, bringing relief to the declining V
Slide 36: Consumer – Mobile Service
Consumer – Mobile Service Significant improvement of Mobile service revenue trend; Postpaid customer base further growing Mobile Service Mobile Service revenuerevenue & YoY (EUR mio)(EUR Variance mio) Q1’14 revenue from Mobile Services down 7% YoY; -2.5% -3.4% significantly improving from previous
Slide 37: Consumer - Fixed Data
Consumer - Fixed Data Continued Fixed Internet revenue growth, strong addition of 15,000 customers Fixed Internet Fixed Internet revenue revenue & YoY (EUR mio)(EUR Variance mio) Revenue growth driven by growing customer base and price changes. 3.8% 3.7% 2.2% 5.4% 5.6% 4.9% 2.7% 0.9% 10 .0% 12 5 5
Slide 38: Belgacom TV
Belgacom TV TV revenue growth through larger TV customer base and higher ARPU TV revenue TV revenue & YoY (EUR mio)(EUR Variance mio) TV revenue +8% YoY driven by continued growth of subscribers and higher ARPU 18.9% 18.1% 16.9% 25 .0% 15.3% 13 5 10.2% 11.3% 8.0% 20 .0% 11 5 8.3% 15 .0% 95 10 .0%
Slide 39: Tango Luxembourg
Tango Luxembourg Impacted by MTR reduction Tango revenue TV revenue (EUR mio) (EUR& YoY mio) Variance Q1 ‘14 revenue -3.5% YoY, generating € 28m. 16.8% 60 25 .0% 55 12.9% 20 .0% Revenue impacted by the regulated MTR decrease in 50 8.8% 7.1% 8.2% 15 .0% 45 4.4% 2.7% 10 .0% Luxembourg (from 8.2cts
Slide 40: Enterprise – quarterly P&L
Enterprise – quarterly P&L EBU revenue (EUR mio) Q1’14 revenue -2.6% YoY, improving from previous quarters 62 0 -2.6% – better Mobile service revenue trends 57 0 – impact from regulatory measures limited to the lowered roaming 576 579 52 0 560 554 554 557 tariffs ; € -4m (-0.8%). 533 539 47 0 42 0
Slide 41: Enterprise - Fixed Voice
Enterprise - Fixed Voice* Stable Fixed line erosion, while Fixed Voice ARPU is slightly up Fixed voice revenue (EUR mio) & YoY Variance Q1’14 revenue in Fixed Voice -3.1% YoY, as a result of continued line erosion, partly compensated for by price -2.4% -4.0% -2.8% -3.4% -3.7% -3.1% -5.2% -4.9% ind
Slide 42: Enterprise - Mobile Service
Enterprise - Mobile Service Mobile Service revenue trend significantly improved through continuously growing customer base Mobile Service revenue (EUR mio) & YoY Variance Q1’14 Mobile services revenue -4.7% YoY, significant improvement from prior quarter 25 0 -4.1% -7.3% -8.9% -8.7% -4.7% 0.0 % -5
Slide 43: Enterprise - Fixed Data
Enterprise - Fixed Data Fairly stable Fixed Data revenue in spite of migrations to Explore platform and uptake of converged Packs with Internet Fixed Internet revenue (EUR mio) & YoY Variance Fixed Data, consisting of Fixed Internet and data connectivity revenue, -1.7% YoY 18 0 1.4% 10 .0% – due t
Slide 44: Enterprise – ICT
Enterprise – ICT* ICT revenue slightly down In the context of an unfavorable economy, ICT revenue (EUR mio) & YoY Variance EBU reported € 185 m ICT revenue in a Telindus France seasonally slow first quarter. -2.8% 2.4% 2.0% 3.6% 1.9% -0.7% -0.2% -1.0% 10 .0% – Belux ICT revenue showed YoY growth,
Slide 45: Service Delivery Engine & Wholesale – P&L
Service livery & Delivery Wholesale& Wholesale - P&L – P&L SDE&W revenue (EUR mio) * -5.2% Slowing wholesale revenue – lower connectivity ARPU’s 93 83 73 63 76 75 76 – declining traffic volumes and 53 67 66 66 65 64 – lower wholesale broadband lines. 43 33 – impact from roaming price regulation al
Slide 46: Staff & Support – P&L
Staff & Support – P&L S&S Revenue(EUR mio) Q1’14 revenue of € 7m, compares to Q1’13 which included a 30 -59.9% 25 capital gain of € 11m realized by Belgacom through the 25 sale of a technical building as part of Belgacom’s ongoing 20 18 15 10 11 10 network simplification plan. 5 7 7 7 7 0 Q212 Q31
Slide 47: International Carrier Services – P&L
International Carrier Services – P&L 50 0 BICS Revenue (EUR mio) -14,3% Q1 BICS’ revenue -14.3% YoY on lower voice traffic 45 0 40 0 – expected lower traffic to the Asian region which was temporary 409 424 430 417 413 437 – loss of material volumes from a few key customers, already partly 35 0 401
Slide 48: BICS Products and Services
BICS Products and Services Sending Receiving End user Service End user Local partner Providers • Fixed Operators • Fixed Operators • Mobile Operators • Mobile Operators • MVNOs • OTTs Wholesale only, • xSPs • xSPs International only • Voice Collecting & terminating international voice traffic all ov
Slide 49: Other topics
Consumer Business Other topics Unit Dominique Leroy FTE Evolution – slide 50 Shareholder remuneration & structure – slide 51 Pricing – slide 52 Regulation & legal – slide 59 Belgian economy – slide 63 Slide 49
Slide 50: FTE evolution
FTE evolution Belgacom headcount in FTE 25000 Estimated cash-out for Telindus termination benefits PTS -6,300 FTE +2,600 FTE 20000 € million 2014 51 2015 21 BeST -4,160 FTE 2016 7 15000 2006-2012 15,568 2017 6 Tutorship & FMS -3,900 2018-2033 21* FTE (* Cumulative for full period) 10000 15,568 FTE
Slide 51: Shareholder remuneration & structure
Shareholder remuneration & structure For 2013: a total dividend of € 2.18 gross per share, of which € 0.50 per share was paid in December 2013 and € 1.68 per share in April 2014 For the 3 years to come: Board of Directors intends to pay out a stable yearly dividend of € 1.50 per share (interim divid
Slide 52: 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
Slide 53: Pricing – Mobile Voice (Postpaid)
Pricing – Mobile Voice (Postpaid) Easy+ 10 Easy+ 15 Easy+ 25 Easy+ 45 € 10 / month € 15 / month € 25 / month € 45 / month For non- € 10 /month PACK € 20 /month PACK € 35 /month PACK 20 min + 150 min + Smartphone unlimited SMS unlimited SMS 240 min unlimited SMS Unlimited min unlimited SMS users € 0.
Slide 54: Mobile Postpaid pricing: Belgium vs. neighboring countries
Mobile Postpaid pricing: Belgium vs. neighboring countries BIPT study August 2013 (pricing changed in meantime) Lowest to highest price offer (BE, NL, FR, UK) for the indicated usage profile Belgian mobile providers (Mobistar, BASE or Telenet) B Belgacom pricing – mobile standalone. Pricing in Pack=
Slide 55: Pricing – Mobile Voice (Prepaid)
Pricing – Mobile Voice (Prepaid) Reload bonus For each reload within 31 days, with Pay&Go Easy you get : For non- Pay & Go Easy • Bonus 1 (towards fix and Mobile): € 10 reload= 30min, € 15 reload= 60min, € 25 € 0.27/ min Smartphone € 0.12 / SMS reload= 90min, € 50 reload= 200 min € 0.25 / MMS OR Bon
Slide 56: Pricing – Mobile Data
Pricing – Mobile Data Standard Pay & Surf € 0.5 / MB (prepaid ) Or € 4.99 50 MB € 0.85 / MB € 9.99 500 MB (postpaid) General Prepaid Only GSM Only Laptop & Tablet Only iPad Only Laptop Only Prepaid Only Prepaid Only Pay & Surf Daily Comfort Favorite Favorite for iPad Pay & Surf for iPad € 4.99 /
Slide 57: Pricing converged PACKS
Pricing converged PACKS - examples of possible combinations TV + Fix TV + Internet € 35.75 / month € 53.95 / month Fix+ Internet TV + TV € 53.95 / month TV + Fix + Internet Classic (incl. Happy TV Everywhere Time XL) + Classic (incl. Happy € 62.95 / month Internet Comfort Time XL and Happy +Unlimite
Slide 58: Scarlet pricing
Scarlet pricing Positioning Scarlet as no frills brand, with very attractive pricing for ‘price seekers’ €8 € 18 € 28 125 min + 500 min + 1000min + 250 SMS 500 SMS 1000 SMS +50 MB incl +250 MB incl +500 MB incl € 0.16 / min € 0.16 / min € 0.16 / min € 0.09 / SMS € 0.09 / SMS € 0.09 / SMS € 0.20 / MM
Slide 59: Regulation Overview financial impact
Regulation Overview financial impact Outlook Estimated impact Regulation impacts FY 2014 Q1 2014 (Decrease in EUR million) Revenue ~ € 10m € 3m MTR EBITDA ~ € 5m € 1m Roaming Revenue ~ € 25m € 5m (i.e. Voice, SMS and Data) EBITDA ~ € 25m € 5m Revenue ~ € 35m € 8m Total EBITDA ~ € 30m € 7m • Over the
Slide 60: Regulation – MTR
Regulation – MTR • Luxembourg - Regulator implements symmetrical MTR at 0.98 €cts, down from 8.2 €cts – On 16 January 2014, the Luxembourg regulator, ILR, published its final decision concerning its review of the MTR market analysis. The three mobile operators (EPT, Tango and Orange) are submitted a
Slide 61: Regulation – Roaming
Regulation – Roaming Mobile voice and data-roaming: EU Roaming III Regulation regulation • Roaming III Regulation entered into force on 1 July 2012. • This regulation covers a ten-year period until 30 June 2022. • It imposed a further lowering of the existing regulated price caps, and extended the r
Slide 62: Regulation – Cable
Regulation – Cable Decision to open-up the Belgian Cable Network On 18 July 2011, the Belgian regulators published their final decision on broadband & broadcast regulation: – On the broadcast Market Each cable operator has ‘Significant Market Power’ (SMP) in its area a is submitted to the following
Slide 63: Macro economic environment
Macro economic environment Belgium & Euro area - prospects GDP Growth actuals and forecast Unemployment rate 2.5% 14% 2.0% 12% 1.5% 10% 1.0% 8% 0.5% 6% 0.0% 4% -0.5% 2% -1.0% 0% JUL JUL JUL JUL JUL JUL JUL JUL JUL JAN JAN JAN JAN JAN JAN JAN JAN JAN APR APR APR APR APR APR APR APR APR OCT OCT OCT OC
Slide 64: For further information: Belgacom Investor Relations
For further information: Belgacom Investor Relations e-mail: investor.relations@belgacom.be Tel: +32 2 202 82 41