Proximus Sa · EURONEXT:PROX
Proximus Sa — Belgacom — H1 2007 Earnings Presentation
43 slides from Proximus Sa's earnings presentation, Aug 24, 2007
Slide 1: 24 August 2007
24 August 2007 slide 1
Slide 2: Highlights on results
Highlights on results Very strong H1 2007 financial performance… Fixed revenue grew 0.5% yoy. Growth of Internet, TV and ICT services compensates for declining traditional voice Outstanding result of Mobile, limiting total revenue decline to 3.1% Excluding impact MTR-cuts, revenue increased slightly
Slide 3: Year-to-date performance versus guidance
Year-to-date performance versus guidance FY guidance as given in Feb 2007 Q1 2007 Q2 2007 H1 2007 FLS • Total revenue: -1% to -2% +0.8% +0.2% +0.5% (Fixed) • Fairly stable EBITDA Margin 31.0% 32.0% 31.5% • Add Belgacom TV customers at hi +9,826 +41,857 +51,683 pace of 2006 • Belgacom TV ARPU of €15
Slide 4: Belgacom new 2007 guidance
Belgacom new 2007 guidance Updated full year guidance FLS Total revenue decline of around -1% Fairly stable EBITDA Margin compared to 2006 Add Belgacom TV customers at higher pace than 2006 Belgacom TV ARPU of €15 MCS Total revenue decline to around -4% +1% Business performance -4% MTR impact (€ -83
Slide 5: Fixed Line Services
Fixed Line Services belgacom
Slide 6: Traditional Voice Services
Traditional Voice Services Trend continues but revenue decrease limited in H1 2007 H1 2007 Voice Access line Loss impacted by Launch VoIP offer for residential customers Launch of ‘ADSL without Voice’: migrations and lower net adds ARPU Voice Access ARPU increases 1.8% thanks to price indexation on
Slide 7: Voice ARPU, line loss and traffic
Voice ARPU €/Month Voice 27.3 13.0 26.6 12.0 Traffic 27.5 13.2 27.1 12.6 14.3 14.6 Access 14.3 14.5 Q206 Q207 H106 H107 Voice Access Traffic Volume Line loss (000) (mio min) -59 -58 -85 -100 4,697 4,544 2,286 2,201 Q206 Q207 H106 H107 Q206 Q207 H106 H107 24 August 2007 slide 7
Slide 8: Broadband
Broadband Battle for the Broadband customer continues Volumes • Belgacom Broadband growth affected by tough competitive environment where alternative operators offer ‘internet with voice’-bundles and cheap internet access • Belgacom added 48,436 new Broadband customers in H1 2007, leading to a total
Slide 9: Broadband Growth
Broadband Growth (‘000) 80 Broadband 32 12 48 Q206 Q207 H106 H107 Residential ADSL** Broadband lines EOP ARPU/month (EUR) (‘000) + 2.1% +120 31.4 32.1 34 Q3 ‘05 25 1,056 1,176 H106 H107 H106 H107 Average ADSL ARPU ADSL Light ARPU * : PSTN, ISDN, ADSL, VDSL (incl. BiLAN) **: incl small business ADSL
Slide 10: ICT
ICT* Important part of Belgacom revenue and growing ICT revenue (‘000) +7.2% Product group contains all ICT-related +16.0% products and services offered by the 391 364 Belgacom Group. 201 174 Q206 Q207 H106 H107 Revenue evolution • H1’07 revenues increased 7.2% compared to same period last year Laun
Slide 11: Belgacom TV
Belgacom TV Accelerated growth in Q2 2007 TV growth TV total EOP Strong pick-up of net adds in Q2’07 (‘000) (‘000) Boost of ARPU in TV Q2’07 to EUR EOP customers 15.7 191 Thanks to end Try&Buy promotion and new launches: Comfort view 74 31 42 Belgacom TV over ADSL Time Additional channels Packs incl
Slide 12: FLS revenue
FLS revenue Decrease traditional voice compensated by growth of Internet, ICT and Belgacom TV +0.5% 1,823 2000 1,814 1500 +0.2% 6 16 905 907 364 391 1000 221 247 4 9 TV 174 201 ICT 500 113 125 712 678 Internet 353 331 Voice 0 Q206 Q207 H106 H107 24 August 2007 slide 12
Slide 13: FLS costs
FLS costs Slightly increased costs as positive effect MTR cuts was offset by higher personnel expenses Total Cost (EUR mio) Positive evolution of Materials and +0.3% charges to revenue ( -3.7% compared to H106) mainly driven by reduced MTR 1400 1,245 1,249 charges. 1200 +0.6% 262 264 1000 Positive e
Slide 14: FLS EBITDA
FLS EBITDA Favourable EBITDA evolution: +0.9% EBITDA (EUR mio) The slight yoy revenue increase of the first half of 2007 together with fairly flat costs, led to an overall EBITDA increase of 0.9% compared to H1 +0.9% 2006. 550 -0.6% 574 569 350 292 290 150 -50 Q206 Q207 H106 H107 Total EBITDA 24 Aug
Slide 15: FLS EBITDA margin
FLS EBITDA margin Slight increase compared to first six months 2006 EBITDA Margin (%) - 0.2ppt +0.1ppt 30% 20% 32.2% 32.0% 31.4% 31.5% 10% 0% Q206 Q207 H106 H107 24 August 2007 slide 15
Slide 16: Capital expenditures
Capital expenditures CAPEX (EUR mio) - % of revenue FLS investments increased yoy 3.9% to EUR 198 million, including: 10.5% 10.9% Further roll-out of Broadway 250 +3.9% project EUR 53 million 12.9% 11.9% Belgacom TV capex for EUR 200 45 million 150 -7.8% 100 191 198 50 117 108 0 Q206 Q207 H106 H107
Slide 17: Broadway investment
Broadway investment Continued step-by-step fibre roll-out Future proof roll-out of FTTSC (fibre to the street cabinet) ongoing Status end June 2007: National population coverage: 52% Remote Optical Platforms (ROP) installed: 11,487 Km of fibre: 9,351 Broadway invested capex in million € including Fi
Slide 18: Updated Outlook 2007
Updated Outlook 2007 Based upon the results of the first half of 2007, and taking into account the expected impact of decreased Fixed-to- Mobile tariffs, FLS estimates that: The revenue decline of 2007 compared to 2006 will be around -1% The EBITDA margin over 2007 will be fairly flat compared to 20
Slide 19: Mobile Communications Services
Mobile Communications Services
Slide 20: Active penetration reached 93.2% in Belgium
Active penetration reached 93.2%(*) in Belgium In 6 months, active penetration increased 3.5pp Total active customers in Belgian market: 9,888,810 93.2% +3.5ppt 89.7% +4.0ppt +1.6ppt +1.3ppt84.1% 85.7% +1.3ppt 82.8% 81.5% EOY'04 H1'05 EOY'05 H1'06 EOY'06 H1'07 (*) BMB estimates 24 August 2007 slide
Slide 21: Continued outstanding churn rate
Continued outstanding churn rate • Despite fierce competition, churn kept low at 15.3% • Proximus maintained high brand loyalty index of 77.5 Customer churn % 15.1% 15.4% 15.3% 14.8% Q206 Q207 H106 H107 * Annualized blended churn rate of registered SIM cards 24 August 2007 slide 21
Slide 22: Proximus' strategy results in solid customer gain
Proximus’ strategy results in solid customer gain Yoy Proximus added 163,000 customers, leading to a total of 4,415,824 active customers. 69,564 new active customers in Q2’07compared to a loss of 7,000 a year ago. Quarterly customer Total customers EOP growth (‘000) (‘000) +163K 4,253 4,416 70 -7 Q2
Slide 23: Proximus' Market Share at 44.7%
Proximus’ Market Share at 44.7%(*) Effective customer-oriented approach slows down the market share loss 315,000 Postpaid customers added yoy, improving further quality of customer portfolio with 49% of the customers being Postpaid Customer Base and Market Share* (%) 47.3% 45.5% 45.0% 44.7% 43% 46%
Slide 24: Blended net ARPU
Blended net ARPU H1’07 Net ARPU went down by 5.5%. Excluding the impact of MTR cut in November 2006 and May 2007, the net ARPU decrease would be limited to 1.8%; driven by the success of new bundled tariff plans. Blended ARPU1 (EUR/month) (Excl MTR: -2%) (Excl MTR: -1.8%) 38.2 35.7 37.7 35.6 1.7 1.4
Slide 25: Total revenue decrease driven by MTR cut
Total revenue decrease driven by MTR cut Total revenues decline of -3.1% is primarily driven by the decrease in MTR. Excluding the MTR impact, total revenue increased by 0.2%, primarily driven by an increased and improved customer base. Total revenue (EUR Mio) -3.4% 1,069 -3.1% 1,035 9 11 542 524 45
Slide 26: Net Service Revenues evolution
Net Service Revenues evolution • NSR decreased 2.9%. Excluding the MTR-cut impact, the revenue grew 0.6%. • Gross Data revenues increased 24%, partly compensating the decline in gross voice revenue. • The success of new pricing offers like “Freetime” and “bonus for life” campaigns had a significant
Slide 27: Costs increase primarily linked to customer acquisition
Costs increase primarily linked to customer acquisition • The increase of ‘Material and charges to revenues’ is mainly driven by higher cost in commissions, Leased Lines and content fees, partly compensated by the lower handset, termination and roaming costs • Other expenses mainly increased for ren
Slide 28: EBITDA overview
EBITDA overview • The acquisition strategy and to a lesser extent the MTR cuts, are the main drivers of the EBITDA decline EBITDA (EUR Mio) & EBITDA Margin 49.5% 49.1% 46.5% 46.0% 530 482 266 241 Q206 Q207 H106 H107 24 August 2007 slide 28
Slide 29: Capital expenditures
Capital expenditures • Capex 18% below investments in H1 2006, mainly driven by phasing of projects and network deployment. • UMTS Coverage at the end of June is already far above legal obligations. CAPEX – CAPEX as % of total revenue 8.7% 7.4% 8.6% 8.6% 93 76 47 45 Q206 Q207 H106 H107 24 August 200
Slide 30: Update on Roaming and impact on Proximus financials
Update on Roaming and impact on Proximus financials Regulatory requirements Maximum voice charges in EU Retail outgoing Retail incoming Wholesale end Aug/end Sep 2007 49 cents 24 cents 30 cents end Aug 2008 46 cents 22 cents 28 cents end Aug 2009 43 cents 19 cents 26 cents Estimated impact on Proxim
Slide 31: Update on MTR and impact on FY guidance
Update on MTR and impact on FY guidance Regulatory requirements (excl. VAT and inflation), subject to approval by European Commission. €ct 1 Nov’06 1 May ‘07 1 Jan ’08 1 July ‘08 1 Jan ‘09 1 July ’09 Proximus 10.13 8.09 8.03 7.96 7.85 7.73 Mobistar 12.75 10.16 9.06 7.96 7.85 7.73 Base 15.81 12.76 10
Slide 32: Updated Outlook 2007
Updated Outlook 2007 Thanks to the success of its commercial strategy, Proximus estimates its overall business revenue to increase around +1% However, regulation of MTR and Roaming will impact 2007 results negatively: MTR • EUR -83 million on revenue (-4%) • EUR -33 million on EBITDA Roaming (Wholes
Slide 33: International Carrier Services
International Carrier Services 24 August 2007 slide 33
Slide 34: Operational Overview
Operational Overview • Consolidation & outsourcing to strengthen leadership • Post Merger Integration Swisscom & Belgacom carrier operations successfully completed – full network integration through deployment of Next Generation transmission network & switching platform • Outsourcing project with MT
Slide 35: Revenue & Direct Margin overview
Revenue & Direct Margin overview • Revenue and direct margin increase thanks to more Mobile terminated minutes & Middle East and Africa business • Shift from Standard Quality to Premium Quality products (higher price & margin) • Growth in mobile data products (Signalling & SMS transit) Revenue (EUR
Slide 36: Cost overview
Cost overview • Overall OPEX reduction reflecting synergies of Swisscom integration Cost structure (EUR Mio) 31 28 -9.1% 7 7 13 12 12 10 H106 H107 HR related expenses Network expenses IT & General Admin. 24 August 2007 slide 36
Slide 37: Group Financials
Group Financials 24 August 2007 slide 37
Slide 38: Consolidated income statement
Consolidated income statement ( million Euro) H1 2006 H1 2007 Variance . Total Revenues 3,032 3,039 0.2% Cost of goods sold -975 -991 1.7% HR expenses -547 -572 4.5% Other operating expenses -400 -397 -0.7% Total Operating Expenses -1,922 -1,960 2.0% EBITDA 1,110 1,079 % -2.8% Depreciations -399 -38
Slide 39: Segment result
Segment result Revenues (EUR Mio) EBITDA (EUR Mio) 3,039* 1,110 0.2% -2.8% 3,032* 1,079 350 361 12 23 1,069 1,035 530 482 1,814 1,823 569 574 H106 H107 H106 H107 Fixed Line Mobile International Carrier Non recurring item * Total revenues as reported post inter-segment eliminations 24 August 2007 sli
Slide 40: Capex
Capex (EUR Mio) 286 279 2 5 93 76 191 198 H106 H107 Fixed Line Mobile International Carrier 24 August 2007 slide 40
Slide 41: Free cash flow
Free cash flow influenced by financial assets transactions Free cash flow (EUR Mio) • Earlier than last year payment of income taxes related to the past. 607 • Transactions on financial assets • 2006 : acquisition of Telindus (-584 mio) • 2007 : disposal of M* & Eutelsat -50 (+245 mio) • acquisition
Slide 42: Net financial position
Net financial position (EUR Mio) 1,636 1,541 532 607 20 Net Debt Dec 2006 FCF Dividends Other Net Debt Jun 2007 24 August 2007 slide 42
Slide 43: Balance Sheet
Balance Sheet EUR Mio YTD Dec 2006 YTD June 2007 TOTAL ASSETS 7,300 7,058 Non-Current Assets 5,504 5,134 Goodwill 1,760 1,780 Intangible Fixed Assets 590 527 Property, Plant and Equipment 2,527 2,480 Associates and Other Participating Interests 234 1 Deferred Income Tax Assets 351 319 Pension and Ot