Proximus Sa · EURONEXT:PROX
Proximus Sa — Investor Day (February 2014)
56 slides from Proximus Sa's investor day presentation, Feb 28, 2014
Slide 1: Investor & Analyst Meeting
Investor & Analyst Meeting Friday 28 February 2014 Slide 1
Slide 2: Agenda
Agenda Introduction Dominique Leroy - CEO 2013 Group financials Consumer Business BICS Ray Stewart Dominique Leroy Jan Manssens Daniel Kurgan strategic focus for 2014 and beyond Transform & Invest to return to Growth Dominique Leroy & Geert Standaert Outlook 2014 & Shareholder return Ray Stewart Sli
Slide 3: Group Financials
Group Financials Ray Stewart CFO Ray Stewart Slide 3
Slide 4: Group revenue impacted by regulation and mobile pressure
Group revenue impacted by regulation, pressure on mobile in segments ; and in Q4 by lower BICS revenue -3.8% reported +20 1,644 -15 -19 -14 +3 -2 1,582 -29 Q4 -5.0% Like-for-Like 2013 (in mio €) Q4 2012 Net Impact Regulatory Underlying Underlying Underlying BICS Intra-group Q4 2013 One-offs impact C
Slide 5: Good cost management
Good cost management Operating expenses (total of HR & non-HR) slightly down vs. 2012 Quarterly Non-HR expenses (€ million) Quarterly HR expenses (€ million) 270 -5.0% 310 +1.7% 290 25 0 256 290 290 288 270 230 244 250 278 281 278 283 282 226 224 225 210 230 19 0 217 218 216 210 190 170 170 150 150
Slide 6: Group EBITDA impacted by regulation and mobile margin pressure
Group Ebitda impacted by regulation and mobile margin pressure. Q4 2013 showing slight improvement from previous quarters +16 -3.7% reported -5 +4 429 -17 Q4 +8 -1 413 2013 -8.3% -17 -4 (in mio €) Like for Like Q4 2012 One-offs One-offs Regulatory Underlying Underlying Underlying Underlying BICS Q4
Slide 7: EUR 852 million invested, 13.5% of Group revenue
EUR 852 million invested, or 13.5% of Group revenue, spectrum license excluded Increased network investments vs. 2012: to maintain network superiority on mobile speed and coverage, substantially increased bandwidth on fixed network via dlm and vectoring technology making operations leaner thro
Slide 8: FY 2013 performance versus guidance
FY 2013 performance versus guidance Belgacom met its FY guidance for EBITDA and Capex, while the revenue guidance was just missed as BICS revenue declined in Q4’13. FY 2013 FY 2013 Metrics outlook reported Group revenue Decline between -2.2% -1% and -2% Group EBITDA* Decline between -4.9% -4% and -6
Slide 9: FY'13 Free Cash Flow of €505 million
FY’13 Free Cash Flow of € 505 million Q4 Free Cash Flow (in mio € ) Belgacom generated € 95m of FCF in Q4’13, or € -59m YoY. Main drivers for the FCF decline are : 154 - lower EBITDA, 95 - higher cash paid for Capex - Higher cash paid for income tax - partly offset by a favorable evolution in workin
Slide 10: Sound financial position
Sound financial position • Net financial debt at € 1,815m, € 214m 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 ( 7 01) 50 5 ( 1 ,601) 25 ( 1 ,815) ( 38) ( 6) Net debt FCF Dividends
Slide 11: Consumer Business Unit
Consumer Business Consumer Business Unit Unit Dominique Leroy CEO Dominique Leroy Slide 11
Slide 12: Consumer Business Highlights
Consumer Business Highlights Our convergence strategy remains successful and is materialised through more value for the customer and new solutions. Despite a rough 2013 on the mobile market, we returned to customer growth for postpaid thanks to strong acquisition campaigns and a persistent churn man
Slide 13: CBU revenues under pressure by mobile disruption
CBU revenues under pressure by mobile disruption, partly compensated by solid fixed revenue and contribution of Scarlet and Tango 581 7 4 -6 3 -5 556 -24 -4 -4.2% Q4 Reported* 2013 (in mio €) Q4 2012 Regulatory Fixed Voice Fixed Data TV Mobile Service Subsidiaries Terminals & Q4 2013 impact Revenue
Slide 14: CBU Mobile Service Revenue
CBU Mobile Service Revenue Mobile Service revenue showing first signs of recovery in Q4’13, some mobile disruption effects started to annualise Mobile service revenue showing Evolution re-priced postpaid first signs of recovery in Q4’13 customers 0% CBU Mobile Service Revenue -2% Q1'12 Q2'12 Q3'12 Q
Slide 15: Mobile Postpaid
Mobile Postpaid We increased our Postpaid subscriber base by >200K in 2013. Mobile disruption had significant ARPU impact, though somewhat stabilising. postpaid churn back to solid Postpaid net adds acceptable levels Blended postpaid ARPU showing ‘out of bundle’ revenue dropped with ~50% some stabil
Slide 16: Mobile Prepaid
Mobile Prepaid In a shrinking prepaid market the customer loss is slowing down. Prepaid ARPU is less impacted. Prepaid loss continued, though is Prepaid churn remains high with new slowing since its peak in Q1’13 telco law removing postpaid barriers Prepaid ARPU impact less significant Slide 16
Slide 17: Launch of 4G for all in January
Launch of 4G for all in January Combined with a differentiated and high-end abundant offer is showing promising results High-end abundant 4G access for all 4G in Brussels offer SMART 50 x 2.5 active 4G users >50 € 26-50€ 4G 0-25 € traffic increase + 68% Approx. 25% of data traffic is situated in the
Slide 18: Mobile pressure partly offset by Fixed Internet
Mobile pressure partly offset by solid performance of Fixed Internet… Fixed internet customer evolution Fixed internet ARPU evolution net adds total 1,235 1,210 1,219 28 1,193 1,203 1,169 1,181 23 1,159 26.9 € 26.9 € +3.6% 26.4 € 26.5 € 26.1 € 26.3 € 26.7 € 26.4 € 18 13 17 15 13 12 8 10 10 9 7 3 -2
Slide 19: …and Belgacom TV
…and Belgacom TV Belgacom TV customer evolution Belgacom TV arpu evolution net adds total 1,479 1,600 1,412 1,428 1,447 1,340 1,386 60 1,301 1,400 1,254 +6.7% 18.6 € 18.7 € 19.0 € 1,200 48 40 43 46 18.1 € 18.2 € 18.3 € 39 1,000 17.6 € 17.6 € 31 800 20 26 19 16 600 0 400 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Slide 20: Our convergence strategy remains Belgacom's main force
Our convergence strategy remains Belgacom’s main force…. CBU pack evolution % Packs with mobile voice component CBU Pack Net adds CBU Packs 1,150 1,023 1,040 70 1,050 993 1,008 918 950 970 60 950 884 50 850 40 750 650 30 550 20 450 10 43 34 32 20 22 16 15 17 350 0 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13
Slide 21: Diverse and locally anchored distribution channel
…as well as our diverse and locally anchored distribution channel Human interaction Belgacom Centers Partners Contact Centers 50% Consumer electronics & ‘convergent’ 133 telco specialists agents shops Website Device Digital interaction 10% of Sales ~870K via down- website loads in 2013 Slide 21
Slide 22: Enterprise Business Unit
Consumer Enterprise Business Unit Business Unit Jan Manssens VP Enterprise Business Planning Dominique Leroy Slide 22
Slide 23: Enterprise Business Highlights
Enterprise Business Highlights EBU stood its ground in 2013, which was a very challenging year, marked by a difficult economic & competitive environment. EBU continued mobile customer growth through network differentiation and competitive pricing. We see first signs of recovery on mobile service rev
Slide 24: EBU revenues pressured by mobile disruption and roaming regulation
EBU revenues pressured by mobile disruption and roaming regulation 579 -8 -4 -1 557 -7 -3 -3.8% Q4 Reported* 2013 (in mio €) Q4 2012 Regulatory Fixed Voice Fixed Data ICT Mobile Service Terminals & Q4 2013 impact Revenue Others *like-for -like idem, no one-off effects in Q4 -4.2% reported 2,294 2 FY
Slide 25: EBU mobile differentiation strategy successful
EBU mobile differentiation strategy successful mobile churn under control & subscriber base increased with >140k cards % EBU Packs with mobile voice component Continued customer growth 26% in a highly competitive, saturated market 8% Mobile Acquisition EBU (K cards) Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'
Slide 26: EBU mobile revenue under pressure
EBU mobile revenue under pressure further erosion to be controlled mobile service revenue showing first adv. data revenue showing upward trend signs of recovery in Q4’13 with regulation impact lessening EBU advanced data YoY % growth EBU Mobile Service Revenue -5% Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13
Slide 27: IT of strategic importance for EBU
IT of strategic importance for EBU clear benefits on Telco convergence EBU’ IT: total revenues (mio €) and Telindus France (potential disposal in 2014) Benefits IT – Telco convergence are materialising • IT = 32% of EBU total 2013 revenues 1 new EBU growth • pure cloud + 12% full year 2013 • securit
Slide 28: EBU's strategy is Telco/IT convergence
EBU’s strategy is Telco/IT convergence making it concrete with an example: New Way of Working New Way Of Working Organize business around people by creating flexible workplaces (NWOW) = facilitating collaboration between all stakeholders. Convergence Servicing As-a-service fix + mobile voice / dat
Slide 29: BICS
Consumer BICS Business Unit Daniel Kurgan CEO Dominique Leroy Slide 29
Slide 30: 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 31: Global Presence Network
Global Presence Network • 100+ Points of Presence (PoPs) • Ownership in 40 submarine cables • Satellite connectivity to “hard to reach” countries Slide 31
Slide 32: Market Segments
Market Segments Voice Mobile Data Capacity • Market size • 2012 revenue 24 B€ 2 B€ 3 B€ • CAGR bottom 1% 9% n.a. line (mid-term) • Profitability 3-5% 30-40% >20% (EBITDA margin) • CAPEX intensity Low Low High • Labour intensity Low Low Low • BICS Position Leader - #2 Leader - #2 “Niche” Slide 32
Slide 33: Voice
VOICE commodity in declining trend, managed to protect margins • Part of business is volatile: 2014 revenue to decline YoY due to end of commercial agreement of limited duration -• Growth of Peer to Peer VoIP (Skype) impedes market volume growth • Termination rate downward trend pressures revenue an
Slide 34: Mobile Data
Mobile Data volume growth but price pressure • Increasing competition in attractive segment. Price pressure on the core services - • Messaging and Roaming transactions still growing steadily • Opportunities provided by new segments (OTT, MVNO), new applications (Machine + to Machine, Application to
Slide 35: Going Forward
Going Forward create more value Extend the product portfolio with a set of value added Leverage on the footprint and Improve the mix with lower services : the customer base (400+ GSM revenue but high margin business intelligence, fraud operators) products protection and remediation, advanced roaming
Slide 36: Strategic priorities
Strategic priorities Dominique Leroy CEO Ray Stewart Slide 36
Slide 37: 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 37
Slide 38: 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 39: 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 40: 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 41: Network and Simplification
Network and Simplification Geert Standaert EVP Service Delivery Engine & Wholesale Ray Stewart Slide 41
Slide 42: 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 43: Invest in Mobile: maintain mobile network leadership
1 Invest in Mobile Maintain mobile network leadership Belgacom is determined to maintain its mobile leadership through continued investment Best mobile 3G network Best mobile 4G network • Significantly better 3G indoor coverage in comparison with • First to reach 50% outdoor population coverage and
Slide 44: Invest in Mobile: importance of Brussels
1 Invest in Mobile Zoom-in: importance of Brussels in Mobile business High business importance of large urban area of Brussels with nearly a quarter of all data traffic of Belgacom driven by this area. Therefore, important to be a first mover in 4G seen high market potential Best mobile 3G network i
Slide 45: Invest in Mobile: best mobile experience
1 Invest in Mobile Best mobile experience for our customers Belgacom to bring the best mobile experience possible to its customers in a technology agnostic way through implementation of 4G speed tiering and through introduction of seamless convergence of network connectivity Speed tiering with 4G fo
Slide 46: Invest in Fixed: dynamic investment track
2 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 6 FTTH in Brownfiel
Slide 47: Invest in Fixed: Dynamic Line Management & Vectoring
2 Invest in Fixed Step 1 Dynamic Line Management & Step 2 Vectoring After 2.5 years of intensive engineering efforts in close collaboration with Alcatel-Lucent the Vectoring technology has been proven to work on our network. Mass roll-out started at beginning of 2014 Fast track Dynamic Line Manageme
Slide 48: Invest in Fixed: Vectoring working live
2 Invest in Fixed Zoom-in: Vectoring working live in our network today Belgacom is First in the World with nationwide activation of the Vectoring technology on an existing VDSL2 network for a significantly better broadband experience Powerful vectoring technology Results from the technical field tri
Slide 49: Vectoring optimization & DLM on top
2 Invest in Fixed Step 3 Vectoring optimization & Step 4 DLM on top To further increase bandwidth the Vectoring technology will be further optimized to support higher ranges while Dynamic Line Management (DLM) will be employed on top of Vectoring to reach up-to-100 Mbps speeds Further optimization o
Slide 50: FTTH in new zonings & brownfields
2 Invest in Fixed Step 5 FTTH in new zonings & Step 6 FTTH in Brownfields Belgacom will deploy Fiber-To-The-Home (FTTH) deployment in new residential zonings and will gradually and selectively introduce FTTH in function of the step-by-step renewal of our copper network FTTH in new zonings FTTH in br
Slide 51: Transform to reduce cost: network simplification
3 Transform to reduce cost Network simplification on track with 650.000 lines migrated Network Simplification aims at simplifying our network & decreasing operational costs and generates savings as of year one growing to 35M€ recurrent savings as from 2018 Fixed Voice consolidation Fixed Data consol
Slide 52: Transform to reduce cost: IT enablers
3 Transform to reduce cost IT enablers for higher efficiency & simplicity Employ new IT enablers to simplify products & processes for better customer service & higher efficiency IT to enable a converged customer experience IT to enable higher efficiency & simplicity Full convergence of IT architectu
Slide 53: Conclusion
Conclusion Ray Stewart CFO Ray Stewart Slide 53
Slide 54: 2014 Outlook
2014 Outlook Revenue: Group EBITDA: Group Capex: • Core business (excl. BICS): 1% to • Decline by • About 2% revenue decline, assuming 3%-4% €900 m continued stability in the Belgian Mobile market. • BICS: 2014 revenue could be 10% to 15% lower versus 2013, though should only have a minor impact on
Slide 55: Shareholder return
Shareholder return On 27 February 2014, Belgacom’s Board of Directors approved: For the year 2013: To propose to the Annual Shareholder Meeting of 16 April 2014 to return to the shareholders a total dividend of EUR 2.18 gross per share, of which EUR 0.50 per share was paid in December 2013 and EUR 1
Slide 56: Q&A Investor & analyst meeting
Q&A Investor & analyst meeting Friday 28 February 2014 Slide 56