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Proximus Sa — Belgacom — Q2 2012 Earnings Presentation

61 slides from Proximus Sa's earnings presentation, September 2012

1. Slide 1: Belgacom Presentation Q2 2012 results Roadshow September 2012

   Belgacom Presentation Q2 2012 results Roadshow September 2012 Group Highlights Q2 2012 Results per segment Other topics Q2 2012 Revenue – slide 2 Consumer – slide 19 P&L – slide 37 Cost of Sales – slide 4 Balance Sheet – slide 38 Enterprise – slide 26 Non-HR expenses - slide 5 Shareholder return – s

2. Slide 2: Group revenue Q2 growing on comparable basis by +0.8% YoY

   Group revenue Q2 growing on comparable basis by +0.8% YoY Quarterly Group Revenue ( € million) -0.1% Reported Q2’12 revenue nearly stable YoY 1,6 80  including € -12m one-off accounting 1,6 30 1,640 1,658 impact (new Telecom Law) 1,612 1,596 1,616 1,5 80 1,5 30 1,583 1,588 1,611 Like-for-like, reve

3. Slide 3: Group revenue trend improved vs 2011

   Group revenue trend improved vs 2011 Group revenue evolution Revenue as reported Like-for-Like Underlying Group revenue showing improved trend 1.8% 1.0% 0.8% 0.3% Underlying revenue up 1.8%, i.e. excluding impact Q2'11 Q3'11 Q4'11 Q1'120.1% Q2'12 -0.1% -0.9% -1.0% from M&A, accounting adjustment and

4. Slide 4: Cost of Sales 3.9% higher, excluding one-off

   Cost of Sales 3.9% higher, excluding one-off Quarterly Cost of Sales ( € million) +7.4% +3.9% Q2’12 Cost of Sales includes one-off 68 0 accounting adjustment for € 22m on 667 63 0 651 655 655 mobile sales commissions. This 633 645 621 614 58 0 609 excluded, CoS at € 645m, + 3.9% YoY, 53 0 driven by

5. Slide 5: Non-HR expenses up 3.8% on comparable basis

   Non-HR expenses up 3.8% on comparable basis Quarterly Non-HR expenses ( € million) +14.4% +3.8% 25 0 24 0 Q2 2011 included a positive one-off following the 23 0 22 0 230 232 reduction of litigation provisions for about EUR 20 226 224 218 220 216 21 0 20 0 213 million. Excluding this, the non-HR cost

6. Slide 6: HR expenses impacted by wage inflation & M&A

   HR expenses impacted by wage inflation & M&A Quarterly Group HR-expenses (€ million) +1.1%  Positive effect of headcount restructuring 29 0 program ‘Tutorship’ offset by: 281 282 283 282 285 27 0 278 274 278  25 0 Inflation-based salary indexations (in June 2011 23 0 and March 2012) 21 0  19 0 M&

7. Slide 7: Q2'12 like-for-like Group EBITDA 4.7% lower YoY

   Q2’12 like-for-like Group EBITDA 4.7% lower YoY Opposite one-off effects on reported Q2 EBITDA:  Q2’12: € -34m accounting adjustment (new Telecom Law)  Q2’11: € +20 million reversal of litigation provisions EBITDA -4.7% like-for-like  € -7m regulation impact Underlying EBITDA -3.2% YoY; underlyin

8. Slide 8: Continued investments in high-quality Fixed and Mobile networks

   Continued investments in high-quality Fixed and Mobile networks 700 600 11.2% 15, 0% 14, 0% 13, 0% 10.5% 12, 0% 11, 0% 500 10, 0% FY’12 Capex 400 360 9,0% in upper- 334 end “10%- 8,0% 7,0% 300 6,0% 12%” of 5,0% revenue Belgacom invested € 174m in Q2 2012, 200 4,0% 3,0% € 360m YTD June 2012 or 11.2%

9. Slide 9: FCF H1 2012 impacted by lower EBITDA, M&A, higher Capex and working capital

   FCF H1 2012 impacted by lower EBITDA, M&A, higher Capex and working capital FCF end June 2012 at €289m; €97m lower YoY: H1 2 0 11 H1 2 0 12 variance  Lower EBITDA (adjusted for non-cash one-off impacts) CF from operating activities 719 670 -49  Acquisition of The Phone House Belgium stores for € 2

10. Slide 10: Sound financial position

    Sound financial position  Net financial debt at EUR 1,716 m (after dividend paid in April’12)  The outstanding long term financial gross debt amounted to €1.9Bio  Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook ( 1 ,479) 28 9 ( 538) 1 ( 1 ,716) 13 Net debt FCF Dividends Net

11. Slide 11: FY 2012 guidance reiterated

    FY 2012 guidance reiterated Metrics Outlook FY’12 Q1 2012 Q2 2012 H1 2012 on comparable on comparable basis basis Group revenue About -1% +0.3% +0.7% +0.5% Group EBITDA Between -3.1% -8.6% -5.9% “-5% to -6% “ Capex/Revenue Upper end of 11.7% 10.7% 11.2% “10% to 12%” Based on its performance over the

12. Slide 12: Growing Mobile customer base, Fixed Voice erosion stabilized

    Growing Mobile customer base, Fixed Voice erosion stabilized Mobile customer evolution 2 Mobile data card evolution 3 1 292 Mobile market share net adds total 75 net adds total 3 00 5.458 5.498 5.543 100 5.413 5.600 226 232 2% 5.338 5.400 216 250 198 60 80 5.200 50 200 26% 60 75 5.000 40% 64 4.800 1

13. Slide 13: Growing Internet and TV customer base

    Growing Internet and TV customer base Broadband customer evolution Fixed Internet market share net adds total  Belgian Fixed internet market still 1.650 28 1.606 1.615 1.591 Other 10% 23 1.573 1.572 1.600 growing, but at slower pace 18 1.550  Consumer Internet penetration @ 74% 18 45% 13 15 1.500

14. Slide 14: Packs acquisition reflects convergence & value approach

    Packs acquisition reflects convergence & value approach, take up of mobile in pack Packs evolution net adds total  Total Packs increased by ~20% YoY to 1,177,000 1.400.000 1.177.000 1.089.000 1.143.000 1.200.000 1.024.000 977.000  Of Packs sold in Q2’12, 20% include mobile component 80 1.000.000 6

15. Slide 15: Belgacom taking convergence a step further

    Belgacom taking convergence a step further and strengthening it’s position in the Belgian market “TV Everywhere” “WiFi everywhere via FONspots” “Internet Everywhere”  TV Everywhere  > 300.000 downloads €24.95/month €34.05/month €44.94/month  > 30 channels 50Gb 150Gb unlimited  Wifi Everywhere -

16. Slide 16: SMS revenue and usage showing continued growth

    SMS revenue and usage showing continued growth SMS (Group)  No visible substitution of SMS by Mobile data applications Revenue in € million and YoY variance such as WhatsApp or iMessage 8% 9% 11% 9% 11% 10%  Smartphone penetration Belgium growing but still 6% 4% 3% lower than some other EU countri

17. Slide 17: Advanced Mobile Data growing, driven by smartphone & tablet penetration

    Advanced Mobile Data growing, driven by smartphone & tablet penetration Advanced Data (Group) Revenue in € million and YoY variance  Revenue from Advanced Mobile data (non-SMS) 30% 34% growing YoY 19% 17% 14% 14% 15%  Customers using Advanced data nearly doubling YoY, 1% 4% 46 44 46 thanks to devi

18. Slide 18: Q2 2012 results per business unit

    Belgacom Company presentation Investor Relations Q2 2012 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) 18 18 Slide

19. Slide 19: Consumer - P&L

    Consumer - P&L Underlying revenue continues to grow in Q2; pressure on EBITDA from lower Direct Margin 61 0 CBU revenue (EUR mio)  Revenue Mobile Data, Tango & TV, more than offsetting Fixed & -0.7% Mobile Voice revenue erosion, ex-regulation. 600 59 0 57 0 585 579 572 577 575  Reported revenue in

20. Slide 20: Consumer - Fixed voice

    Consumer - Fixed voice Fixed Voice line erosion stable; revenue decline continued to persist Fixed Voice line erosion stable, ARPU decline contained 14 0 Fixed voice revenue (EUR mio)  Fixed Voice revenue -8.3% YoY -8.3% 13 0 12 0  Fixed Line erosion offsetting positive impact of price 124 124 ind

21. Slide 21: Consumer – Mobile Voice

    Consumer – Mobile Voice Revenue still under pressure; +50k postpaid net adds driven by Internet Everywhere 17 0 Mobile voice revenue (EUR mio)  Q2 includes € -10.1m one-off accounting adjustment C&Ds 16 0 15 0 162 -16.1%  One-off excluded, revenue -9.2% YoY 156 14 0 13 0 140 147 143  Further impa

22. Slide 22: Consumer - Fixed Data

    Consumer - Fixed Data Solid Fixed Internet net adds in seasonally low quarter, revenue slightly up Fixed data revenue (EUR mio) 0.9%  Q2’12 revenue up 0.9% YoY 86 84  Positively impacted by price indexation Jan’12 85 85 84 84  82 83 83 YoY customer growth 82 82 80 78 76 74 72 Q310 Q410 Q111 Q211

23. Slide 23: Consumer - Mobile Data

    Consumer - Mobile Data Double-digit revenue growth and increasing SMSage Mobile data revenue (EUR mio) +11.6%  Mobile Data rev up by 11.6% YoY 12 0 SMS Adv Data 102  SMS rev +8.7% to € 87m 97 82 88 87 92 93 97 13 12 15  Advanced Mobile Data rev +32.2% to € 15m: increasing 11 14 90 10 10 10 popula

24. Slide 24: Belgacom TV

    Belgacom TV Revenue up 8.3%; customer base further expanding with 48k TV revenue (EUR mio)  TV revenue +8.3% YoY +8.3%  Driven by sound subscriber growth 49 51 53 51 53 55 57  Still tempered by free football offer 46 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 TV growth & EOP (000) 1,254 1,301  Stro

25. Slide 25: Tango – Mobile activities in Luxembourg

    Tango – Mobile activities in Luxembourg Tango revenue (EUR mio)  +4.4% 28 Q2 revenue +4.4% to € 28m 28 28 27 28 26 25 25 25  Growth drivers: Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212  Success of mobile subscriptions for iPhone  In addition, the still ongoing conversion from Tango mobile customers

26. Slide 26: Enterprise - P&L

    Enterprise - P&L 64 0 EBU revenue (EUR mio)  Business performance improved in Q2 vs. Q1 62 0 -2.9%  Var. impacted by one-off, divesture, customer segmentation  60 0 606 606 Like-for-like* revenue decline limited to -0.3% 593 593 58 0 591 579 572 576  56 0 54 0 Regulation impact of €6m (-1.1%) 52

27. Slide 27: Enterprise - Fixed Voice

    Enterprise - Fixed Voice Fixed Voice price indexation giving some support, though offset by continued line erosion Fixed voice revenue (EUR mio) -4.0%  Fixed Voice revenue -4% YoY  14 0 13 0 Trend improvement to prior year (-7.8% YoY) 132 132 12 0 11 0 128 125 121 122 124 120  Price indexation 1

28. Slide 28: Enterprise - Mobile Voice

    Enterprise -- Mobile Enterprise Mobile Voice Voice Significant Solid increase customer growth,inrevenue Mobileunder cards;pressure revenue under due pressure to pricing due to and regulation pricing & regulation Mobile voice revenue (EUR mio)  Q2’12 includes € 2.1m one-off acc adjustment C&Ds -11.9

29. Slide 29: Enterprise - Fixed Data

    Enterprise Enterprise -- Fixed Fixed Data Data Slightly positive revenue Data connectivity trend slightly continued; up; Internet Internet customer customer base fairly base remains stable fairly stable 10 2 Fixed data revenue (EUR mio)  Q2’12 revenue from Fixed Data up 1.4%  +1.4% 10 0 Includes F

30. Slide 30: Enterprise - Mobile Data

    Enterprise Enterprise-–Mobile MobileData Data Continued Revenue revenue growthSMS up 9%; strong : Advanced growthData up ~12%, SMS up ~14% continued Mobile data revenue (EUR mio)  Mobile Data rev up by 9% YoY  80 SMS ADV Data +9.0% 70 SMS continued its double digit revenue growth (+10.1%) 60 47 47

31. Slide 31: Enterprise - ICT

    Enterprise Enterprise –- ICT ICT ICT revenue up by 6.1% on like-for-like basis 6.1% growth on a like-for-like base  Q2’12 revenue up by 6.1% on like-for-like basis ICT revenue (EUR mio)  2.8% down year-on-year on a reported basis. 22 0 21 0 -2.8%  20 0 showing improvement from the seasonally lowe

32. Slide 32: Service Delivery & Wholesale – P&L

    livery & Wholesale - P&L Service Delivery & Wholesale – P&L SDE&W revenue (EUR mio) -4.9%  Q2 revenue -4.9%  98 93 88 Regulation impact reducing revenue by 1.1% in Q2  83 78 83 81 Lower leased line volumes 73 79 80 77 80 78 76 68 63 58  Volume increase of Roaming volumes partially offsetting 53

33. Slide 33: Staff & Support – P&L

    Staff & support - P&L Staff & Support – P&L S&S Revenue(EUR mio) 30 • Q2 revenue 4.7% up +4.7% 25 20 25* 15 10 5 10 7 8 7 8 9 7 0 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 * Internal invoice; neutral on group level S&S Personnel costs (EUR mio) • Q2’12 HR-expenses 2.0% down  48 46 44 -2.0% Lower head

34. Slide 34: International Carrier Services – P&L

    International Carrier Services International P&L Carrier Services – P&L BICS Revenue (EUR mio) • Q2 revenue increase of 5.5% YoY +5.5%  42 0 41 0 415 Voice revenue +4.3%, Non-Voice +16.9% 409 40 0 39 0 402 401 401  Positive currency effect 388 38 0 37 0 36 0 372 382  Favorable destination mix 35

35. Slide 35: International Carrier Services

    International Carrier Services Bics delivering best in class global solutions BICS ownership • Active in the international carrier market since 1997 • January ‘05: spin off of Belgacom ICS as an independent affiliate of 20% Belgacom 22.4% 57.6% • Since Dec ‘09 JV held by Belgacom, Swisscom & MTN • I

36. Slide 36: Other topics

    Belgacom Company presentation Investor Relations Ytd September Other topics 2010 results in detail • Consumer Business Unit (CBU) • Customer Centricity – slide 42 • P&L – slide 37 • Network & Spectrum – slide 43 • Enterprise Business Unit (EBU) • Balance sheet – slide 38 • Pricing – slide 49 • •Shar

37. Slide 37: Group – P&L

    Group – P&L On reported basis, incl. one-off items VAR VAR in mio € Q111 Q211 YTD 2011 Q112 Q212 YTD 2012 Q2/Q2 YTD Revenues (1) 1,5 8 3 1,6 12 3,19 5 1,5 8 8 1,6 11 3,19 8 -0.1% 0.1% Total OPEX -1,103 -1,09 9 -2,202 -1,122 -1,176 -2,29 9 7.0% 4.4% Cost of goods sold -609 -621 -1,230 -614 -667 -1,28

38. Slide 38: Belgacom consolidated balance sheet

    Belgacom consolidated balance sheet 31-Dec 30-Jun (EUR million) 2011 2012 TOTAL ASSETS 8,312 8,304 Non-recurrent assets 6,217 6,192 Goodwill 2,323 2,338 • Goodwill of €2,338m , up as a result of the Intangible assets with finite useful life 1,155 1,145 Property, plant and equipment 2,401 2,405 acqui

39. Slide 39: Belgacom committed to attractive shareholder return

    Belgacom committed to attractive shareholder return Shareholder remuneration policy: - Belgacom commits to an attractive shareholder remuneration policy by returning, in principle, most of its annual free cash flow, to its shareholders. - The return of free cash flow, either through dividends or sha

40. Slide 40: Shareholder structure

    Shareholder structure Belgian state owns ~ 53.5% 338,025,135 shares, of which 318,099,343 Outstanding • Limited liability company under public law - Belgian state main shareholder: 53.5% - Legal obliged threshold: 50%+1 share - 14 Board members, 50% state-appointed • Free float 40.6% • Treasury shar

41. Slide 41: Improving our Way of Working

    Improving our Way of Working • Results of the International Telecommunications Benchmarking have indicated improvement opportunities for Belgacom. • Belgacom needs to improve its time-to-market as well as its operational and financial performance to fuel growth. • To achieve these objectives, Belgac

42. Slide 42: Customer centricity

    Customer centricity Main H1 2012 achievements We became an accessible company, even during weekend without additional fee  We became a field servicing company operating 6/7 6/7 days i  We communicate in a more simple & friendly way e.g. new Facebook page, -50% footnotes, fees simplification, bills

43. Slide 43: An all-integrated-network thanks to early and continuing investments

    An all-integrated-network thanks to early and continuing investments Current fixed network Current mobile network • Belgacom among world leaders • Leader in coverage 2G & 3G > 83% Technical for fiber coverage 79.2% VDSL (> 97%) launch LTE • End June 2012 VDSL2 coverage of • Leader in speed 99.85% >

44. Slide 44: Recap of our fixed network strategy

    Recap of our fixed network strategy Statement EC on wholesale regulation positive to monetize investments Local Street cabinet & Homes / businesses Non-shared bandwidth in Mbps exchange/ Remote optical 4) Phantom Mode Central Office platform 1)1 VBB ≥ 100 ≥ 50 2 DSM VBB 2) 30 ROP 3) 3 Pair bonding 3

45. Slide 45: Strength of the Belgacom fiber network is in pushing fiber speeds over copper

    Strength of the Belgacom fiber network is in pushing fiber speeds over copper Belgacom is a pioneer in bringing Fiber Speeds over copper to its customers. It is the sole operator in Belgium having fiber that close to the customer. Some network facts • 17.000 km of Fiber • > 4 million homes passed •

46. Slide 46: Position of the Belgacom network vs cable

    Position of the Belgacom network vs cable For good product positioning it is important to offer sustainable bandwidth matching customer needs and expectations Important future customer needs Cable characteristics • Business & consumer needs for Upstream Upstream spectrum is upstream are diverging se

47. Slide 47: Recap of our mobile network strategy

    Recap of our mobile network strategy Head start in mobile data thanks to continued improvements in our mobile network 4G Spectrum efficiency 50-100Mbps HSPA+ A few 10Mbps HSDPA A few Mbps UMTS EDGE Evolution 128 to 384 kbps 10-14 Mbps GPRS 30 to 50 kbps EDGE : Voice/Circuit 150 à 200 kb/s 1995 2005

48. Slide 48: Spectrum

    Spectrum Belgian situation 2G spectrum 3G spectrum 4G spectrum Digital dividend 900 MHz & 1800 MHz 2100 MHz 2600 MHz 790 MHz – 862 MHz • Belgian operators allowed • Proximus, Mobistar & Base • Out of 5 candidates, 4 have • Spectrum that is freed up to deploy UMTS in 900 obtained spectrum in 2.6 GHz

49. Slide 49: Pricing – Fixed products

    Pricing – Fixed products Classic Happy Time XL No Limit National Anytime Happy time international 19.65€ / month 19.65€ / month 29.33€ / month 20.65€ / month Note: Free FIX to FIX Anytime Free to most European Free FIX to FIX & MOB Lower tariffs during peak countries during OffPeak & Weekend compare

50. Slide 50: Pricing – Mobile Voice

    Pricing – Mobile Voice Generation MTV 15 + Generation MTV 10 Generation MTV 15 Generation MTV 25 Generation XL 35 Generation XL 55 50MB 10€ / month 15€ / month 19.99€ / month 25€ / month 35€ / month 55€ / month 15 min ATAN + 60 min ATAN + 60 min ATAN + 120 min ATAN + 60 min ATAN 180 min ATAN Unlimit

51. Slide 51: Pricing – Mobile Data

    Pricing – Mobile Data Internet on GSM Internet on GSM Blackberry service Standard Internet on GSM Start Pay & Surf Comfort Favourite 0,42€ / 5 min 4,99€ / month 9,99€ / month 19,99€ / month 9,99€ / month 3€  25 MB Or 50 MB incl. 250 MB incl. 1 GB incl. 200 MB incl. 10€  200 MB 0.5€ / 100 kb €0.1 /

52. Slide 52: Pricing converged PACKS

    Pricing converged PACKS TV + Fix TV + Internet 34,75€ / month 50.95€ / month TV Fix+ Internet + TV Classic (or Happy 50.95€ / month + Time XL) TV + Fix + Internet Internet Comfort +Unlimited volume Classic (or Happy +Unlimited hotspot Time XL) 59.95€ / month access + Internet Comfort TV + Mobile + I

53. Slide 53: New Telecom Law

    New Telecom Law The new Belgian Telecom Law entered into force on 4 August 2012. A transitional period until 1 October is however foreseen for the measure related to contract termination. Since this measure applies retroactively to existing contracts, Belgacom accounted for the accounting impact of

54. Slide 54: Regulation – 1

    Regulation – 1 Overview financial impact Estimated Impact Actuals Regulation impacts FY 2012 Q1 2012 Q2 2012 YTD 2012 (Decrease in EUR million) MTR & Revenue ~ €45m €10m €12m €22m flow-through Fix-to-Mob EBITDA ~ €10m €2m €3m €5m * Revenue ~ €26m €2m €3m €5m Roaming * EBITDA ~ €26m €2m €3m €5m Reven

55. Slide 55: Regulation – 2

    Regulation – 2 Mobile Termination Rates (MTR) – Glidepath in place since August 2010 leading to full MTR-Glidepath in €ct symmetry by 1 January 2013 11.43 Big drop in – Any MTR decrease reflected in F2M tariffs of BGC asymmetry as 9.02 from August – Mobistar & Base filed separate appeal against 7.2

56. Slide 56: Regulation – 3

    Regulation – 3 Mobile voice and data-roaming: EU Roaming III Regulation regulation Roaming regulation impact Q2 2012 – Carry-over impact from lower rates on 1 July 2011 – Voice and data roaming rates further decreased on 1 July 2012 – In addition, measures taken to prevent bill shocks with financial

57. Slide 57: Regulation – 4

    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’ in its area a is submitted to the following obligation

58. Slide 58: Legal – Damage claim Base/Mobistar

    Legal – Damage claim Base/Mobistar Update on status On-net case: damage claim Base/Mobistar – Damage claim filed in 2003 by KPN Group Belgium (Base) & later also by Mobistar, claiming that BGC: − applied termination charges that were not cost-oriented − abused its dominant position by applying too l

59. Slide 59: Macro economic environment

    Macro economic environment Belgium & Euro area - prospects GDP growth (%)1 Belgium Euro area Unemployment rate (%)2 Belgium Euro area 2.3% 1.9% 10.9% 11.2% 1.9% 0.5% 10.1% 10.1% 1.5% 9.5% -0.4% -0.1% 7.5% -0.4% 8.3% -2.8% 7.9% 7.0% 7.2% 7.3% 7.2% Belgium in line with -4.1% EU average 2008 2009 2010

60. Slide 60: Cautionary statement regarding forward-looking statements

    Cautionary statement regarding forward-looking statements “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 a

61. Slide 61: 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 61

Belgacom — Q2 2012 Earnings Presentation on 6ix