Proximus Sa · EURONEXT:PROX
Proximus Sa — Investor Day (February 2016)
80 slides from Proximus Sa's investor day presentation, Feb 26, 2016
Slide 1: Group Highlights, Network & IT, Consumer, Enterprise, BICS, Financials
Group Network Consumer Enterprise BICS Financials Highlights & IT 26 February 2016
Slide 2: Group Highlights – Dominique Leroy, CEO
Group Highlights Dominique Leroy – CEO
Slide 3: Solid commercial drivers in Q4
Solid commercial drivers in Q4 Customer base grew in Q4 by Q4 Financials** + 44,000 + 0.5% TV subscriptions Core revenue + 28,000 -0.3% Fixed Internet Lines Group revenue + 50,000 +1.9 % Mobile Postpaid cards* Group Direct Margin + 20,000 + 8.4% 3 & 4-Play Households/ Small Group EBITDA offices *exc
Slide 4: Guidance metrics achieved for 2015
• Solid growth for Guidance metrics Revised Outlook 2015 2015 (Oct 2015) ACHIEVED Consumer and Enterprise, partly offset Core underlying revenue Around 2% growth + 2.1% by Wholesale decline BICS underlying revenue Slightly positive + 2.5% • BICS closed a very Group underlying EBITDA 4% - 5% growth +
Slide 5: We connect people to the world
Improved customer Simplified offers Customer centric “Wepeople experience & leaner organization constantly keep connected to the world so Improved content they can live better Network quality Moving customers Omni-channel and innovative and work smarter. ” to the best fit approach & Service solution
Slide 6: Improved market positions and strong customer loyalty
Improved market Convergent offerings, Value based Reinforced cost positions & strong enhancing value & management to grow control & customer loyalty revenue and direct simplification acquisition margin 6
Slide 7: National market shares
National market shares Fixed Internet market share DTV market share Mobile postpaid market share +1.9 p.p +1.3 p.p. +3.3 p.p vs. 2013 vs. 2013 vs. 2013 44.2 44.5 46.1 35.1 45.8 46.9 47.1 31.8 32.9 % % % % % % % % % 2013 2014 2015 2013 2014 2015 2013 2014 2015 +115.000 Fixed internet in FY15; +167.00
Slide 8: Consumer 3-4 Play and Enterprise connectivity and ICT
Consumer – increasingly selling 3-4 Play Enterprise– Bridging connectivity and ICT % of total HH/SO having 3 or 4 plays • Solutions in both Telco & IT 2014 2015 • Going beyond mere connectivity 2014 Total HH/SO 2,804 K 2,783 K • Leverage our IT capabilities 2015 • Deliver end–to-end solutions includ
Slide 9: Value based revenue growth in key services
2013 2014 2015 ‘14 vs ’13 ‘15 vs ‘14 Total Core Underlying 4,294 4,287 4,379 -0.2% +2.1% Revenue Of which 1,343 1,307 1,334 -2.7% +2.1% Value based Revenue Of which 763 768 808 +0.6% +5.2% growth in key services Of which 261 286 328 +9.7% +14.5% converted into growing Direct Of which ICT 454 474 484
Slide 10: Workforce expenses
Core Workforce Group Workforce Expenses in M€ reduced by 4.4% Expenses in M€ reduced by 3.6% in 2 in 2 years years Proximus reducing internal and external 1,199 workforce expenses. 1,159 1,244 1,205 1,146 1,199 2013 2014 2015 2013 2014 2015 Ratio reduced by 2 p.p. in 2 years Ratio reduced by 1 p.p.
Slide 11: Total expenses kept under control
Total expenses kept under control, in spite of: • additional pylon tax provisions in 2014- 2015 1,900 1,880 1,884 • more spectrum fees • higher ICT & innovation investments Some benefits of Simplification showing, 2013 2014 2015 larger part back-end loaded. 11
Slide 12: Capex investment
• Fixed and Mobile networks were further upgraded • Progress in simplification projects and IT-transformation • Investment in content enrichment Excl. Spectrum 852 Spectrum 978 926 120 75 16 2013 2014 2015 12
Slide 13: Network & IT – Geert Standaert, CTO
Network & IT Geert Standaert - CTO
Slide 14: Build, Simplify, Enable investment priorities
“Proximus brings you instantly close to what matters”: 3 investment priorities Build Simplify Enable best-in-class to a lean and a more agile IT network capabilities efficient company environment Support business and residential Transform towards all-IP and fiber- Evolve architecture and needs for t
Slide 15: Build
prosgimus
Slide 16: Proximus is addressing real customer needs
TODAY Proximus is addressing the real customer needs Successful Vectoring roll-out Strong average speed evolution High quality of streaming Rapid expansion of Vectoring technology, Average VDSL speed of 52 Mbps while one Best video quality in Belgium for Netflix one of the first to reach such scale
Slide 17: Residential – the right digital experience
SHORT-TERM Residential – The right digital experience for our customers Customers on latest technology Enable a Full Digital experience Boost the Cloud experience Migrate to best available technology for a Sufficient downstream for a full digital Further optimize upstream performance best indoor exp
Slide 18: Residential – bringing fiber closer to the customer
MID-TERM Residential – Prepare for future by bringing fiber closer to the customer Densify our FTTC network Enhance VDSL performance Use alternatives for distant areas Further extend our existing FTTC network Enhance performance with new Make use of alternative networks for by gradually shortening l
Slide 19: Accelerate Fiber-To-The-Enterprise deployment
SHORT-TERM Enterprise – Accelerate the deployment of Fiber-To-The-Enterprise Enterprise fiber roll-out architecture Prepare for the future • Increasing need of Businesses for higher downstream capacity, • Maximally reuse existing FTTC assets to scale fast & efficient more symmetrical bandwidth and l
Slide 20: Reuse existing assets to deploy Enterprise Fiber
SHORT-TERM Enterprise – Maximally reuse existing assets to deploy Enterprise Fiber Proximus already has important fiber assets Maximum reuse of existing fiber assets One of the most dense FTTC networks in Europe, consisting of Existing FTTC assets (91% coverage), i.e. empty fiber ducts; will be 21.0
Slide 21: Proximus is a world-pioneer in network innovation
Proximus is a recognized world-pioneer in network innovation World-recognized DSL pioneer R&D and trials in pipeline Strong strategic partnerships Long history in network innovation, driven New innovations incubating to maximally Partnerships with academia & vendors for by competitive Belgian market
Slide 22: Best overall mobile experience
TODAY Proximus bringing best overall mobile experience Coverage as key driver for experience Voice & Data Experience • Ubiquitous 4G outdoor coverage and rapidly increasing 4G • Best voice experience with dropped calls below 0.5% indoor coverage (+35% in one year) • Best data experience with fastest
Slide 23: Further maximizing mobile experience
SHORT-TERM Further maximizing experience by thinking customer Experience availability Experience tuning Experience enrichment Completion of nationwide ubiquitous 4G Further enhance experience through Further enrich existing calling and mobile indoor coverage similar to 2G network tuning from custome
Slide 24: Strong mobile data evolution by 4G take-up
TODAY Strong mobile data evolution by solid 4G take-up Proximus mobile data growth nearly doubled 4G users &usage drive strong mobile data growth • Higher customer appetite for smartphones (+8pp) resulting • More than 1,200,000 active 4G mobile data users end of 2015 in strong 4G mobile data growth
Slide 25: Exponential capacity growth and path to 5G
MID-TERM Support exponential capacity growth while paving the way to 5G Technology and … Spectrum and … Densification Fit more bandwidth and devices within the Refarm existing spectrum to more recent Gradually densify the network by bringing available existing spectrum technologies and add new spect
Slide 26: Simplify
#Network & | Simplify prosgimus
Slide 27: Efforts to reduce operating costs
TODAY Important efforts past years to reduce operating costs Outphasing of legacy Telephone-switching Transformation of our internal IT systems • 54% of PSTN equivalent lines migrated • Ongoing transformation of Selling & Ordering tools to • 8 buildings outphased and 500 ton copper removed & sold ra
Slide 28: Transformation towards all-IP to reduce costs
SHORT-TERM Active transformation of Proximus towards all-IP to reduce costs Outphase legacy telephony Transform to one unified backbone Rationalize IT platforms Complete consolidation of legacy Voice by Evolve to a high-capacity architecture with Rationalize IT landscape to enable higher EO 2017 and
Slide 29: Extensive simplification towards a lean network
MID-TERM Extensive simplification towards a lean network Network Simplification+ Expected benefits (> 2018) 1. Further consolidation of legacy copper From ADSL To Copper network: improved operational efficiency, Fiber VDSL Coax less maintenance costs,… FTTH FTTH Central Technical 2. Towards outphasi
Slide 30: Enable
= #Network & | prosgimus
Slide 31: IT as enabler for experience differentiation
SHORT-TERM IT as enabler for long term experience differentiation • From a silo to a more horizontal and loosely coupled architecture • Bi-modal architecture with flexible front-ends and robust back-ends • Enable one coherent digital experience in all channels 31
Slide 32: Evolve delivery capabilities for new business models
SHORT & MID-TERM Evolve delivery capabilities to enable new business models & experience for faster time-to-market and higher scalability Cloudification Softwarization Openness Delocalization of functionalities from the Abstraction & virtualization of Open platforms for 3rd parties and integrate end
Slide 33: Consumer – Dominique Leroy, CEO
Consumer Dominique Leroy - CEO
Slide 34: Consumer achievements in 2015
• positioned our Scarlet and Proximus brands Best to cover the entire spectrum of consumers Mobile Quality • commercialized new convergent solutions on the market OneDrive for Bizz Switch Mobile Coverage Business Extender • made Proximus TV experience intuitive and modern, and enriched our content (
Slide 35: Fixed: solid revenue growth for Broadband and TV
FIXED Solid revenue growth for Broadband and TV Very good customer Improved market Sound ARPU Revenue Growth growth* (in K) share, also in Flanders trends (in €) (in M€) Flanders Region** -0.7% +0.6% +7.3% +7.5% +1.2p.p. +4.2% +0 p.p. +2.8% 1,718 34.4 27.9 27.7 27.9 558 33.2 33.2 1,533 1,598 % 520 %
Slide 36: Strong market position in Mobile
MOBILE Strong market position in Mobile Strong growth in Postpaid Prepaid erosion Mobile service revenue Strong net adds in Back to growing ARPU Reducing Prepaid Mobile service revenue Mobile Postpaid* (in K) -4.3% 1.1% loss (in K) improving (in M€) 30.4 150 124 29.1 29.4 +1.0% -3.3% 2014 2015 2013
Slide 37: Strong uptake of 3 and 4 Play services
CONVERGENT A strong uptake of 3 & 4 Play services We developed Proximus Selling all our products to our Households/Small Offices Achieving higher retention customers, increasing their ARPU towards convergence Convergence evolution RGU / HH and ARPH evolution Full churn per play FY’15 +6.2% Household
Slide 38: Growth in Consumer revenue and Direct Margin
Growth in total Consumer Revenue & Direct Margin Value-driven revenue growth in Fixed and Mobile services leading to sound growth in Direct Margin CBU Revenue (underlying) +0.4% +3.0% 2015 Direct Margin €2,196m 2,889 2,793 2,803 +3.1% YoY 2013 2014 2015 38
Slide 39: Reconfirming our winning strategy
… we reconfirm our winning strategy Grow our profitable market leadership through mobile led convergence, superior customer experience and brand preference Mobile led Superior Brand convergence customer preference experience 39
Slide 40: Reinforce mobile quality leadership and user experience
We will reinforce our mobile quality leadership and deliver top of class user experience anywhere and on any screen, with professional specificities for SE Mobile solutions Enhanced TV experience Professional market New opportunities Further develop professional Further explore new Improve coverage
Slide 41: Optimize channels and customer experience
We will further optimize our channels, bring the customer experience to the next level Optimize distribution channels to enhance experience and efficiency • One coherent Proximus experience across different channels (web, app, stores,…) and cross all products (Fixed, Mobile, TV, Cloud,…), • Exploit
Slide 42: Think digital first and improve efficiency
Think digital first and further improve efficiency Think digital first Customers using MyProximus (in K) Residential customers using E-Billing • In communication, in sales and servicing (eg. support portals) 46% 531 640 38% • Revamp of Proximus.be and the 430 24% MyProximus app with more valuable in
Slide 43: Best multi-screen experience for each member
We will provide the best multi-screen experience to each member of the family/the company, indoor and outdoor Keep feeding our brands and apply differentiated communication approach by region Proximity of the Proximus brand through quality and service Position Scarlet as the smartest alternative Val
Slide 44: We will continue to GROW
Reinforce our value • By continuing our winning strategy, and position • bringing our operational costs down, thanks to Simplification and Cost efficiency programs, we will continue to GROW. Excel in the execution 44
Slide 45: Enterprise – Bart Van Den Meersche
Enterprise Bart Van Den Meersche - Chief Enterprise Market Officer
Slide 46: #NewPerspective
• Realised growth thanks to: #NewPerspective • new contracts with both Corporate customers (Belfius, ING, Worldline, …) and medium enterprises (Lukoil, Wibra, VWR, Clearchannel, …) • successes in the Telco and ICT business (Swift, Astrid, Euroclear, Delhaize, …) • new fiber projects (ING, Volvo, Car
Slide 47: Our customer-centric mission
Since 2014 we stick to our customer-centric mission Our mission Be the nearby, reliable ICT partner that brings solutions to live better and work smarter, and that is easy to do business with! 26 February 2016 47
Slide 48: Proximity
Best in market Customer-centric Convergence SLA’s Proximity Bestmake We customer our offer coverage as • Customer centric close as possible to the (omni-channel) Customer organization Experience Increased Proximus 96% achievement customer’s business • improved CustomerYoY with workplace seats up to
Slide 49: Progressing underlying revenue, +2.1% for 2015
Progressing underlying 2015 revenue up mainly on growing revenue revenue, +2.1% for 2015 from Mobile services and ICT 9 1,338 17 +2.1% +0.4% 1,305 1,311 1,338 1,311 -11 10 2 2013 2014 2015 Underlying Underlying 2014 Fixed voice Fixed data ICT Mobile services Terminals & other Underlying 2015 Revenue
Slide 50: Mobile ARPU turnaround and market position
Mobile ARPU Back to Mobile Service Leading market position in Mobile (in K) turnaround (in €) revenue Growth (in M€) Net adds in VOICE and Mobile VOICE and DATA* cards +3.6% +5.6% DATA* customer base +6.0% -7.5% base +0.5% -0.6% 894 49 863 31 814 324 32.0 29.5 29.7 309 307 2014 2015 2013 2014 2015 2
Slide 51: ICT revenue growth
ICT revenue growth • IT solutions enriching Telco solutions +2.3% • Hybrid solutions combining platform-based solutions +4.6% and integration business • Ensuring best-in-class 455 business continuity 444 • Double digit growth in 425 security domain 2013 2014 2015 50’
Slide 52: Shape, Anticipate, Innovate, Excite
“Get into SHAPE to ANTICIPATE expected challenges, to INNOVATE and to EXCITE our customers” Shape Anticipate Innovate Excite challenges • Customer centric • Pre-empt mobile • Internet of • Business organization & challenges Things transformation solution portfolio • Accelerate Fiber • Data Analytics
Slide 53: Customer centric and cost control
Shape our portfolio to become more customer-centric and get fit for the future Customer Cost centric: control: • Co creation & friendly • Digitalization: user testing online self-service • 5 value propositions • Efficient sourcing • Vertical approach • Process improvements • Portfolio lifecycle mana
Slide 54: Anticipate upcoming challenges
Anticipate upcoming challenges initiated by competitors, regulation and changing customer behavior New communication Fixed: Mobile: and collaboration tools • Accelerate Fiber roll-out • Network superiority • New C&C solutions better serve customer • Further differentiate by replacing legacy servic
Slide 55: Double digit revenue growth from innovation
Increase business value for our customers through innovating activities and specific focus on transformational deals Internet-of-Things Data analytics Security Cooperate with strong solution Translate captured data in new Aiming to be n 1 ICT security providers, insights to make smarter business pro
Slide 56: Improve end-to-end customer experience and reduce costs
Excite our customers by providing an excellent customer experience in every touch-point of their journey Business transformation E2E services ICT industrialisation Redesign internal processes, Customer centric after-sales • IT & Telco solutions in a redesign portfolio and IT services, converged over
Slide 57: Sustaining our solid market position
By • Shaping our portfolio to become even more customer-centric • Anticipating upcoming challenges initiated by competitors, regulation and changes in customer behavior • Increasing business value for customers through innovating activities • Exciting our customers by providing an excellent customer
Slide 58: BICS – Daniel Kurgan, CEO
Proximus Capital Markets Day 9 iN & “fp e © BICS Daniel Kurgan - CEO A” pros<imus
Slide 59: BICS mission and service portfolio
Sending Telecom Service Receiving End user Local Partner End user providers Local Partner • Fixed Operators • Fixed Operators • Mobile Operators • Mobile Operators • MVNOs • xSP’s • OTTs • xSP’s Wholesale only, International only MISSION: Deliver converging international wholesale solutions to exist
Slide 60: Move up the value chain
Value Added Services Business Fraud detection Roaming Intelligence (big data) and remediation Value added services Move up the value chain Transport services Voice Messaging Signalling Data Infrastructure services Terrestrial cables Submarine cables Satellite 59
Slide 61: Products and regions
Products Regions Infrastr. Voice Mobile data EMEA Americas Asia #4 Top-3 #1 Top-3 #2 Own footprint #3 Own footprint Level 3 KPN iBasis SAP Comfone SAP PCCW-G Other PCCW-G IDT Comfone KPN iBasis KPN iBasis SAP 60
Slide 62: Customer portfolio and neutrality
Customer portfolio • >1000 customers, including >400 Mobile operators • Connecting OTTs (business growth with OTTs >30% in 2015) and MVNOs Neutrality • Neutral hub independent from major mobile groups Integrated delivery model • “One stop shopping” solutions delivered over the same network, with 1 s
Slide 63: Revenue, Direct Margin, OPEX and CAPEX
Revenue Revenue and Direct Margin (M€) • Destination mix (Voice) 350 1,645 1,666 1,577 1,616 2,000 • Non voice business growth 300 1,562 250 1,500 • Forex (very positive in 2015) 133 DM Voice 200 120 130 141 118 1,000 Direct Margin 150 DM Non Voice 100 Voice: 500 130 145 50 104 115 113 Revenue • Ove
Slide 64: Low EBITDA margin but high cash conversion
EBITDA and Operating Cash Flow* (M€) Low EBITDA margin (voice dilutive effect) but high Cash conversion 2015 record year for BICS In 2016, accelerated investment ** in resources to tap new growth opportunities and continue to transform BICS. * Defined as EBITDA – CAPEX ** Excluding sale of Homesend
Slide 65: Opportunities
OPPORTUNITIES FOR Cloud communication Internet of things Big data and Fraud and Security and traditional players monetization disintermediation of user information Enable cross-border Leverage information Address new Secure international mobility of people available in the network customer segments
Slide 66: Become global, transform the company
Optimize Core and Go beyond Boundaries Products FIT THE CONSOLIDATE FACTORY FOR Value Added LEADERSHIP GROWTH Services Transport BECOME GLOBAL Develop new Address new Expand in EMEA Operators Products Customers Complementary and features segments Geographies Asia & OTT & Americas Cloud TRANSFORM THE
Slide 67: Financials – Sandrine Dufour, CFO
Financials Sandrine Dufour - CFO
Slide 68: Q4'15 and FY'15 revenue
Fixed and Mobile growth mitigated by lower mobile devices and flat ICT both on high comparable base Q4’15 Q4 Core revenue up +0.5% in M€ +0.5% -0.3% Consumer: + 1.1% YoY Enterprise: + 1.4% YoY FY’15 TEC: - 11% YoY in M€ +2.1% +2.2% - 2.7% YoY 67
Slide 69: Q4'15 and FY'15 EBITDA
Q4’15 Q4’15 in M€ Core EBITDA further improved from prior quarters driven by: +8.7% +8.4% • solid Direct Margin growth • lower HR and non-HR costs, o/w timing impact 2014 Regional Pylon tax accrual. BICS EBITDA up by 5.8% YoY FY’15 in M€ Initial impact from cost +3.6% +4.9% initiatives resulted in €
Slide 70: Gross opex savings ambition by 2018
Ambition to realize ~260M gross Initiatives for Gross Opex Partly offset by… savings by 2018 savings Supported by early leave plan Agile organization • Increasing customer installed base Company-wide detailed cost • Optimize Sales channels • Capacity driven maintenance costs programs to accelerate O
Slide 71: Rebalancing Capex to Fixed
• Investing in capacity and speed, both in Fixed and Mobile • Enriching content • Rebalancing Capex portfolio • Special focus on Fiber-to-the-Enterprise in 2016 (M€) 16 75 Rebalancing Capex to Fixed 978* 926 950 investments 2014 2015 2016E 2014 2015 2016E Mobile Fixed Capex excl. spectrum Spectrum *
Slide 72: EBITDA to FCF
FY’15 EBITDA to FCF 2015 FCF initiatives offset by in M€ • €120M settlement agreement on mobile tariff related litigation, • higher cash paid for Capex • less cash received from the sale of consolidated companies and Income CAPEX Working Acquisitions/ Settlement Other FCF Underlying EBITDA FIN resul
Slide 73: Transversal cash management initiative
Transversal Cash Management initiative As from 2016, • Launched mid- 2015 Operating FCF, including Working • Focus on all actionable working capital operating decisions Capital, is part of • Active management to normalize FCF from high level at 2014-closing management’s short- • Optimize a long-term
Slide 74: Net debt, ratings and debt maturity
YTD Net debt/EBITDA ratio @ 1.1 DEC’15 in M€ • Net financial debt at € 1,919M • Credit ratings: Standard & Poor’s A, Moody’s A1 , both stable outlook. Average debt maturity DEBT extended MATURITY SCHEDULE • € 500M Senior Unsecured Notes in M€ issued (due Oct 2025) • Cash tender on two outstanding 20
Slide 75: 2016 Outlook
2016 Outlook We expect to end 2016 with slightly growing Core revenue and Group EBITDA, in spite of the high comparable basis for BICS and the additional challenges that 2016 is expected to bring: Core underlying revenue Slight growth • Proximus will operate in a new competitive landscape in Belgium
Slide 76: Dividend of 1.50 per share
1.50/share 0.50 0.50 0.50 1.00 1.00 1.00 2014 2015* 2016E Normal Interim 2015 2016 normal dividend*: Intention to pay out a stable dividend of EUR 1.50 per share - Payment 29 April 2016 - Ex-dividend 27 April 2016 * Subject to approval AGM 20 April 2016 75
Slide 77: Proximus Capital Markets Day
Proximus Capital Markets OSA Day
Slide 78: Thank you
hank you
Slide 79: 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 80: 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