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Proximus Sa — Belgacom — Q2 2013 Earnings Presentation

57 slides from Proximus Sa's earnings presentation, September 2013

  1. Slide 1: Belgacom Presentation Q2 2013 results

    Belgacom Presentation Q2 2013 results Roadshow September 2013 Financial highlights Operational highlights Detailed segment results Executive summary – slide 3 Executive summary – slide 15 Consumer – slide 27 Enterprise – slide 34 Revenue – slide 5 Mobile – slide 16 SDE&W/S&S slide 40-41 Direct margi

  2. 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-

  3. Slide 3: Executive summary - financials Q2 2013

    Executive summary- financials Q2 2013 Financial results - Group revenue: € 1,583m; -1.7%* YoY Q2 on track to meet FY - Group ebitda: € 430m, -1.9%* YoY guidance - Group capex: € 177m, +2.1% YoY Well positioned to face - Pressure on Mobile revenue fairly stable to Q1 challenging - Successful mobile r

  4. Slide 4: FY 2013 guidance reiterated

    FY 2013 guidance reiterated FY 2013 H1 2013 Metrics outlook reported Group revenue Decline between -0.9% -1% and -2% Group EBITDA* Decline between -4.1% -4% and -6% Capex/Revenue Between 11.7% 13% and 14% * Compared to the restated 2012 EBITDA of € 1,801 m, following the retrospective application of

  5. Slide 5: Q2 and H1 2013 Group revenue

    Q2 2013 Group revenue (mio €) H1 2013 Group revenue (mio €) Slide 5

  6. Slide 6: Q2 and H1 2013 Group direct margin

    Q2 2013 Group direct margin (mio €) H1 2013 Group direct margin (mio €) Slide 6

  7. Slide 7: Non-HR expenses

    Non-HR expenses Cost management limiting impact of commercial push Quarterly Non-HR expenses ( € million) - Q2’13 non-HR expenses of € 225m +0.7% - Company-wide cost containment 25 0 24 0 256 nearly offset the impact from the 23 0 232 226 22 0 224 218 225 217 21 0 increased commercial activity in th

  8. Slide 8: HR expenses

    HR expenses Salary indexation partly offset by one-off provision reversal and lower headcount Quarterly HR-expenses (€ million) +0.6% 29 0 Mach 2012 & 27 0 283 281 290 290 283 278 278 278 Jan 2013: 25 0 2% inflation 23 0 21 0 based salary 19 0 indexation 17 0 15 0 Q311 Q411 Q112 Q212 Q312 Q412 Q113

  9. Slide 9: Q2 and H1 2013 Group EBITDA

    Q2 2013 Group Ebitda (mio €) H1 2013 Group Ebitda (mio €) Slide 9

  10. Slide 10: Invest in high-quality fixed & mobile network to maintain leadership in convergence

    Invest in high-quality fixed & mobile network to maintain leadership in convergence Accelerated network investments Group Capex in € millio n / % of revenue 13%-14% - maintain network superiority on 12 .1% 900 11.1% 11.7% 800 mobile speed and coverage, 700-substantially increase the 600 bandwidth on

  11. Slide 11: Q2'13 Free Cash Flow

    Q2’13 Free Cash Flow of € 47 million, impacted by income tax payments and lower ebitda Q2 H1 2 0 12 2 0 12 IAS 2 0 13 IAS 2 0 13 Re s t a t e d Re s t a t e d (in mio € ) var. var. Operating CF before working capital changes 379 366 -13 771 730 -41 CF for Working capital -95 -142 -47 -101 -235 -134

  12. Slide 12: Sound financial position

    Sound financial position - Net financial debt at € 2,027m, € 426m higher versus end 2012 - The outstanding long term financial gross debt amounted to € 2.1Bio - Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook 136 (538) (1,601) (38) 14 (1) (2,027) Net debt FCF Dividends Non cont

  13. Slide 13: Belgacom consolidated balance sheet

    Belgacom consolidated balance sheet 31-Dec 30-Jun (EUR million) 2012 2013 TOTAL ASSETS 8,243 8,196 Non-recurrent assets 6,192 6,116 Goodwill 2,339 2,339 Intangible assets with finite useful life 1,097 1,067 Property, plant and equipment 2,467 2,475 Investments in associates 1 1 Other participating i

  14. Slide 14: Group - quarterly P&L

    Group – quarterly P&L * The 2012 financial figures have been restated after the adoption of the IAS 19R revision VAR in mio € Q112 Q212 Q312 Q412 FY 2012 Q113 Q213 Q2/Q2 Restated Revenues (1) 1,5 8 8 1,6 11 1,6 20 1,6 44 6 ,46 2 1,5 8 6 1,5 8 3 -1.7% Total OPEX -1,118 -1,172 -1,156 -1,215 -4,661 -1,

  15. Slide 15: Executive summary - operationals Q2 2013

    Executive summary- operationals Q2 2013 - Total Group mobile customer base of 5,410,000 + 46,000 - Strong Mobile Postpaid net adds, growing Belgacom’s Mobile cards postpaid customer base to 3,570,000. - Prepaid customer base lower, in shrinking prepaid market, +128,000 -82,000 reaching 1,837,000 pre

  16. Slide 16: Retention actions stabilised mobile churn

    Retention actions stabilised mobile churn, positive trend seen in Q1 continued Consumer Mobile Churn postpaid prepaid Clear effect New telecom law Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Focus on mobile in H1 through positioning of Proximus network quality, proactive Enterprise Mobile Churn retention an

  17. Slide 17: Q2'13 Focus on Mobile acquisition

    Q2’13 Focus on Mobile acquisition - Belgacom Group added 46,000 mobile customers in Q2’13, with Postpaid growing by 128,000 Supported by tactical Mobile customer evolution 2 Split Postpaid - Prepaid net adds total joint offers Net adds Postpaid Net adds Prepaid & MVNO & strong 5,543 5,504 1 00 5,416

  18. Slide 18: Mobile offers became more abundant and have been simplified

    Mobile offers became more abundant and have been simplified Evolution of comparable offers Positioning Scarlet as no frills brand, with very attractive pricing for ‘price seekers’ Feb-13 June-13 Aug-13 Launch Launch Launch prepaid postpaid 3-play offer offer offer Slide 18

  19. Slide 19: Clear Postpaid ARPU impact, while Prepaid ARPU remains stable

    Clear Postpaid ARPU impact, while Prepaid ARPU remains fairly stable Consumer blended ARPU: Split Prepaid - Postpaid Since the Telco law came into force, the Consumer 28.9 € 27.3 € 26.6 € Postpaid ARPU decline clearly accelerated. Blended .0270 € 24.1 € 24.4 €  Initial loss high-value postpaid cust

  20. Slide 20: Solid performance of fixed products

    Solid performance of fixed products Broadband customer evolution net adds total 28 1,637 1,647 1,652 1,700 1,615 1,626 Other 7% 23 1,600  Belgian Fixed internet market Belgacom 18 1,500 44% still growing, but at slower pace 13 12  Internet penetration @ 78% 11 1,400 8 9 10 1,300 Cable 49%  Belgac

  21. Slide 21: Convergence strategy - key advantage in challenging market

    Convergence strategy - key advantage in challenging market Packs evolution net adds total 1,214,000 1,237,000 1,259,000 1,278,000 1,300,000  Continued uptake of multi-play packs 1,177,000  End June 2013; 21% of PACKS included 80 1,200,000 60 1,100,000 mobile (from 13% previous year) 1,000,000 40 3

  22. Slide 22: Belgacom brings connectivity anywhere, anytime and on any device

    Belgacom brings connectivity anywhere, anytime and on any device Fixed Network Mobile Network2 Wi-fi Hot Spots @   99.85% DSL @ > 99% (among world leaders) 3G & 2G @ 700,000 FON HD spots in Belgium @   > 86% VDSL (2nd in Europe) @ ~ 36% 4G  ~ 93% TV coverage coverage All download 55.9 Mbps spe

  23. Slide 23: Fixed network

    Fixed network Speed evolution in Mbps 2013 to >2018 Launch of Dynamic Line Management Preparation for Vectoring roll-out Launched Planned Q1 2013 Q1 2014 DLM monitors line stability and dynamically applies max Vectoring cancels crosstalk in the copper cables resulting possible speed when a line is s

  24. Slide 24: Mobile network

    Mobile network Steep Mobile data evolution increase in mobile data +60% in 6 — Mobile data usage still in early stages with usage months 250 smartphone penetration just above 30%. 200 — However, quickly emerging market need for 4G with much higher mobile data usage each quarter Strong 150 increase i

  25. Slide 25: Network simplification

    Network simplification Leaner operations through a simplified all-IP-network SIMPLIFICATION SITUATION TODAY • Out phase 30 buildings • High network complexity, high • Out phase ATM network number of technologies • Out phase legacy telephony • High maintenance cost • High connectivity cost PSTN & ISD

  26. Slide 26: Q2 2013 results per business unit

    Belgacom Company presentation Investor Relations Q2 2013 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) 26 26 Slide

  27. Slide 27: Consumer - P&L

    Consumer - P&L Pressure on Direct Margin partially offset by cost containment CBU revenue (EUR mio)  Q2’13 Revenue -1.5% lower 61 0 -1.5% 59 0 – Excl Q2’12 €-10.1m accounting adjustment rev -3.1% 57 0 577 575 587 581 – Regulation impact Q2 ’13 of €-8m (-1.4%) 571 572 567 55 0 53 0 553 – Pressure on

  28. Slide 28: Consumer - Fixed voice

    Consumer - Fixed voice Fixed Voice Fixed Voice line price adjustments erosion stable;resulted revenueindecline growing ARPU andtocontained continued persist revenue decline Fixed voice revenue (EUR mio) 14 0  Fixed Voice revenue erosion limited to -1.9% YoY -1.9% 13 0 12 0 – Price changes brought r

  29. Slide 29: Consumer - Mobile Voice

    Consumer – Mobile Voice Mobile customer base back to growth; Mobile Voice revenue remains under pressure Mobile voice revenue (EUR mio) 16 0  Q2’13 Mobile Voice revenue -19.8% like-for-like 14 0 -13.2% – Driven by regulatory impacts & 143 136 133 – 12 0 130 123 especially by lower Prepaid customer

  30. Slide 30: Consumer - Fixed Data

    Consumer - Fixed Data Fixed Internet revenue grew 5.4%, driven by price indexation and larger customer base Fixed data revenue (EUR mio) +5.4%  Q2’13 revenue up 5.4% YoY – 90 88 Positively impacted by price indexation Feb’13 89 86 84 82 85 84 85 85 87 – Continued YoY customer growth 82 82 80 78 76

  31. Slide 31: Consumer - Mobile Data

    Consumer - Mobile Data Mobile data revenue declined, impacted by regulation, more abundant offers and the mobile customer evolution age Mobile data revenue (EUR mio) -4.3%  Q2’13 Mobile Data rev -4.3% YoY 12 0 SMS Adv Data 97 102 98 100 97 98 – Revenue impacted by regulation, lower mobile customer

  32. Slide 32: Belgacom TV

    Belgacom TV Double-digit TV revenue growth through larger TV customer base and higher ARPU TV revenue (EUR mio) +15.3%  TV revenue +15.3% YoY driven by 64 66 – Continued growth of subscribers 61 62 55 57 – Price increase of rented settop box 51 53 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 TV growth &

  33. Slide 33: Tango Luxembourg

    Tango Luxembourg Tango revenue (EUR mio) 28  +16.8% 32 Q2 2013, Tango’s revenue +16.8% YoY to € 32m. 30 29 28 28 27 28 28 – supported by the growing mobile subscriptions – success of the offers for Smartphones Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 – increased terminals sales  H1’13 revenue of €

  34. Slide 34: Enterprise - quarterly P&L

    Enterprise – quarterly P&L 64 0 EBU revenue (EUR mio)  Q2 YoY decline of 3.8%; -4.2% like-for-like* -3.8% 62 0 60 0 – Q2’12 included €-2.1m one-off acc adjustment 58 0 591 – Regulation impact of € -20m (-3.5%) in Q2’13 579 576 579 572 – increased pressure on mobile only partly offset by higher ICT

  35. Slide 35: Enterprise - Fixed Voice

    Enterprise - Fixed Voice Fixed Voice revenue showing some relief from price changes, ARPU up 1.3% while line erosion continued Fixed voice revenue (EUR mio)  Fixed Voice revenue Q2’13 -2.8% YoY -2.8% – 14 0 13 0 lowered Fixed-to-Mobile rates on 1 January 2013 following the 12 0 regulated cut in Mob

  36. Slide 36: Enterprise - Mobile Voice

    Enterprise - Mobile Voice Enterprise - Voice Pressure on Mobile Mobile Voice ARPU stable versus previous quarter; customer Solid basecustomer growinggrowth, revenue with 33,000 undercards mobile pressure due to pricing and regulation Mobile voice revenue (EUR mio) 13 0  Q2’13 Mobile voice revenue -

  37. Slide 37: Enterprise - Fixed Data

    Enterprise - Fixed Data Enterprise - impacted Fixed Data revenue Fixed byData migrations to Explore platform and Slightly uptakepositive revenue Packs of converged trend continued; Internet customer base fairly stable with internet 10 2 Fixed data revenue (EUR mio)  Q2’13 Fixed Data revenue €96 m,

  38. Slide 38: Enterprise - Mobile Data

    Enterprise – Mobile Data Regulated price caps pressuring both SMS and advanced Mobile data revenue Mobile data revenue (EUR mio)  Q2’13 Mobile Data revenue -7.3% YoY 80 70 SMS ADV Data -7.3% – Q2’13 non-SMS Data revenue € 29m, -7.4% YoY fully 57 56 58 due to negative regulated price effect. 56 55 5

  39. Slide 39: Enterprise - ICT

    Enterprise Enterprise –- ICT ICT ICT revenue Solid up by 6.1% ICT revenue, on like-for-like showing 2% growthbasisin challenging economic context  Q2’13 ICT revenue +2% YoY to € 175m 22 0 ICT revenue (EUR mio) – 21 0 Growth somewhat contained due to customers 20 0 19 0 +2.0% delaying IT projects or

  40. Slide 40: Service Delivery Engine & Wholesale - P&L

    Service livery & Delivery Wholesale& Wholesale - P&L – P&L SDE&W revenue (EUR mio) 98 -3.4%  Q2’13 revenue -3.4% YoY driven by slowing wholesale 93 88 revenue 83 78 80 – Regulatory measures reduced the Q2 revenue by 1.7%. 78 73 77 76 75 76 75 74 – 68 63 58 lower traffic and broadband volumes 53 Q31

  41. Slide 41: Staff & Support - P&L

    Staff & support - P&L Staff & Support – P&L S&S Revenue(EUR mio) • Q2’13 revenue of € 7m 30 -5.2% 25 20 25 • H1’13 revenue of € 25m, including a capital gain of € 11m 15 18 realised by Belgacom resulting from the sale of a technical 10 5 8 9 7 7 11 7 building as part of Belgacom’s ongoing network 0

  42. Slide 42: International Carrier Services - P&L

    International Carrier Services International Carrier Services – P&L P&L 44 0 BICS Revenue (EUR mio) +0.9 • Revenue Q2’13 up 0.9% from strong comparable base 42 0 430 – Reduced EU MTRs and slight negative dollar effect impacted 40 0 424 417 409 413 Voice revenue 38 0 401 401 36 0 382 34 0 – More than

  43. Slide 43: Other topics

    Belgacom Company presentation Investor Relations Work In Progress Ytd September Other Other topics topics 2010 results in detail • Consumer Business Unit (CBU) • •Shareholder Enterprise Business structure – slide 44Unit (EBU) • Pricing – slide 47 • •Shareholder Serviceremuneration Delivery Engine -

  44. Slide 44: Shareholder structure

    Shareholder structure* Belgian state owns ~ 53.5% 338,025,135 shares, of which 318,838,944 Outstanding • Limited liability company under public law - Belgian state main shareholder: 53.5% - Legal obliged threshold: 50%+1 share Own Shares; • Free float 40.8% 5.7% • Treasury shares 5.7% Free Float; Be

  45. Slide 45: Belgacom intends to ensure its shareholders an attractive return

    Belgacom intends to ensure its shareholders an attractive return Shareholder remuneration Dividend per share & dividend yield 11.2% SBB Dividends % of FCF Interim dividend Extra dividend Normal dividend 9.0% 8.2% 8.7% Mio € Seri… Dividend Yield* 8.0% 1,000 150% 6.1% 6.5% 900 5.5% 5.7% 2.49 800 120%

  46. Slide 46: Spectrum: Belgian situation

    Spectrum: Spectrum -The Belgian Belgian situation situation 900MHz • 900 MHz & 1800 & 1800 MHzMHz 2100 MHz 2600 MHz 800 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 Conditions

  47. Slide 47: Pricing - Fixed products

    Pricing – Fixed products Classic Happy Time XL No Limit National Anytime Happy time international € 19.99 / month € 19.99 / month € 29.67 / month € 20.99 / month Note: Free to FIX & to MOB Free to FIX ,to MOB & to Lower tariffs during peak during OffPeak & Weekend Free to FIX Anytime most European c

  48. Slide 48: 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 € 40 /month PACK 20 min + 150 min + Smartphone unlimited SMS unlimited SMS 240 min unlimited SMS Unlimited min unlimited SMS users € 0.

  49. Slide 49: 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

  50. Slide 50: Pricing - Mobile Data

    Pricing – Mobile Data Standard 4G Option Pay & Surf € 10 / month € 0.5 / MB (prepaid ) € 4.99  50 MB Or 1 GB incl. € 9.99  500 MB € 0.85 / MB (postpaid) €0.1/ MB General Post-paid Only Prepaid Only GSM Only Laptop & Tablet Only iPad Only Laptop Only Prepaid Only Prepaid Only Pay & Surf Daily Comfo

  51. Slide 51: Pricing converged PACKS

    Pricing converged PACKS - examples of possible combinations As from 1 Jul’13, TV + Fix the rates of Packs including internet went up: + € 2 for Start TV + Internet + € 3 for Comfort € 35.75 / month + € 1 for Maxi TV € 53.95 / month Fix+ Internet In exchange, customers + get more volume, Classic (or

  52. Slide 52: Regulation - Overview financial impact

    Regulation – 1 Overview financial impact Estimated Impact Actuals Regulation impacts FY 2013 Q1 2013 Q2 2013 (Decrease in EUR million) MTR & Revenue ~ €45m €10m €10m flow-through Fix-to-Mob EBITDA ~ €5m €1m €1m Roaming Revenue ~ €48m €15m €19m (i.e. Voice, SMS and Data) EBITDA ~ €48m €15m €19m Reven

  53. Slide 53: Regulation - Mobile Termination Rates

    Regulation – 2 Mobile Termination Rates (MTR) – Glidepath in place since August 2010. Full symmetry effective MTR-Glidepath in €ct since 1 January 2013 11.43 – MTR decreases reflected in F2M tariffs of BGC 9.02 – Mobistar & Base filed separate appeal against decision: 7.2 • Suspension procedure: On

  54. Slide 54: Regulation - Roaming

    Regulation – 3 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 roaming

  55. Slide 55: Regulation - Opening up the Belgian Cable Network

    Regulation – 4 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 obli

  56. Slide 56: Macro economic environment

    Macro economic environment Belgium & Euro area - prospects GDP growth forecast (%) 1 Belgium Euro area Unemployment rate forecast (%) 2 Belgium Euro area 12.2% 1.9% 11.4% 10.2% 1.4% -0.3% 0.0% -0.6% -0.4% 8.3% 7.2% 7.6% 2011 2012 2013 2011 2012 2013 Inflation forecast (%)3 Belgium Euro area Belgium:

  57. Slide 57: For further information: Belgacom Investor Relations

    For further information: Belgacom Investor Relations e-mail: investor.relations@belgacom.be Tel: +32 2 202 82 41 http://www.belgacom.com Slide 57

Belgacom — Q2 2013 Earnings Presentation on 6ix