Proximus Group financial results – Third quarter 2017
Proximus Group financial results – Third quarter 2017
Proximus continues to grow its customer base despite intensifying competition and posts financial results in line with its expectations
- Solid uptake of all-in offers Tuttimus and Bizz All-In, 306,000 subscribers end-Q3’17
- Stable 1.7% Postpaid Mobile services revenue growth, in spite of significant “Roam like at home” impact.
- Third-quarter underlying Domestic1 revenue stable
- Underlying Group EBITDA of EUR 464 million in the third quarter, -2.2% on a high comparable base
- Year-to-date Domestic revenue growing 1.1% and underlying Group EBITDA growing 1.7%
- Proximus reiterates its full-year 2017 outlook
- Interim dividend of EUR 0.50 per share to be paid on 8 December 2017
With third quarter financials in line with our expectations, we are confident to end the year with a slight growth in Group EBITDA.
The summer holiday season was marked by a high exposure to the impact from ‘Roam-like-at-home’ with traveling Proximus customers taking great benefit from this new advantage. Data roaming volumes were boosted, increasing by 6 times compared to last years’ third quarter. As a positive, visitor roaming volumes also increased considerably, partly compensating for the higher roaming-out costs.
Mobile data usage was also encouraged by our increased data bundles for all of our Mobilus subscriptions. Effective 1 August, our all-in offers Tuttimus/Bizz All-in became even more attractive by doubling the data, which continued to fuel the traction for our convergent portfolio, reaching 306,000 end-September.
The third quarter noticed a step up in competitor promotions, especially in the Consumer market. Nonetheless, thanks to our convergence and dual brand strategy, we managed to mitigate the impact on churn and further grew our customer base. This was supported by Scarlet, occupying a competitive position on the low-end of the market. Our Enterprise segment sustained its solid position, firmly growing its mobile customer base and benefitting from a solid ICT quarter and ongoing growth in Mobility and convergent services, offsetting the ongoing pressure on legacy products.
Our cost efficiency program continued to deliver well, decreasing our expenses further from an already reduced base in 2016. As we anticipated, the third quarter Domestic EBITDA variance turned negative, declining by 1.9% versus last year’s high comparable base and coping with high-roaming exposure. Excluding the net roaming impact, the Domestic EBITDA would have grown by 2.3%. Including BICS, the Group EBITDA was down by 2.2% in the third quarter.
We have invested in the further deployment of simplification and transformation projects and further enhancements of our mobile network, including the commercial roll-out of 4.5G. As for the fixed network we have completed our VDSL2 upgrade with vectoring technology, reaching now 83% of the population, the largest vectoring coverage worldwide. This technology raised broadband speeds considerably, and allowed for a whole range of enhanced digital services.
Our Fiber for Belgium project is also moving ahead and getting up to speed, with the roll-out started in 5 large cities.
With the year-to-date financial results being in line with our expectations, we reaffirm our full-year guidance of slight growth in Group EBITDA, and a nearly stable Domestic revenue. We also confirm our 2017 Capex outlook of EUR 1 billion.
Concerning the ongoing market analysis, Proximus provided its comments to the BIPT. We strongly advocate for a regulatory context that favors investments and for a non-regulated, open fiber network, based on flexible bitstream access, enabling a competitive gigabit market in Belgium. We recently closed a commercial wholesale fiber agreement with Edpnet, reflecting our active engagement with our wholesale customers to meet their evolving needs. Proximus guarantees fiber access for Belgian households in the quickest and most cost-effective way, taking into account the specific Belgian context. We are also open to co-investments in fiber infrastructure, under acceptable technical and financial conditions.
As a final point, I’m very pleased to announce that Proximus acquired the nation-wide exclusive broadcasting rights for Studio 100 TV. With their successful family and kids entertainment productions, this channel is an important addition to our content offering.
Proximus continued to grow its customer base, be it seasonally muted, and facing a step up in competitor promotions and somewhat higher churn
Many customers continued to be attracted by Proximus’ all-in offers Tuttimus/Bizz All-In, reaching 306,000 end-September 2017. Proximus’ low-cost brand Scarlet confirmed its competitive position in the lower end of the market.
Proximus’ Enterprise segment sustained its solid position, firmly growing its mobile customer base and benefitted from a 5.3% growth in ICT revenues, and from the continued progress it made in the field of Smart Mobility and convergent business solutions.
- Unique TV customers totaled 1,543,000, with +9,000 new subscriptions in the third quarter of 2017 (+ 4.8% year-on-year)
- The total Fixed Internet customer base grew to 1,965,000 end-September, with +7,000 Fixed Internet lines added over the third quarter (+3.1% year-on-year).
- Fixed Voice totaled 2,645,000 lines, a decrease of 26,000 lines in the third quarter of 2017 (-1.9% year-on-year).
- The total Mobile2 customer base stands at 6,025,000 (-0.8% year-on-year), with +20,000 Mobile Postpaid (total 3,860,000) and -95,000 Mobile Prepaid (total 954,000) and +9,000 M2M cards in the third quarter.
- 3- & 4-Play households and small offices3 totaled 1,418,000 at the end of the third quarter, representing 48.2% of the total customer base, with +8,000 new customers in the third quarter (+5.2% year-on-year).
- 56.4% Convergent households and small offices, an increase of 2.3 p.p. year-on-year.
Domestic financial performance in the third quarter marked by stable revenue, supported by a growing Fixed and TV customer base as well as strong ICT performance, whilst further reducing costs
Proximus posted for the third quarter of 2017 Domestic underlying revenue of EUR 1,105 million, stable compared to previous year. This was driven by an enlarging customer base for Fixed Data and TV, and by revenue growth posted for Proximus’ ICT operations. Revenue from Mobile Postpaid services was up too, achieving a sequentially stable growth in spite of a higher roaming exposure. This compensated for the ongoing revenue erosion in Fixed Voice and the revenue loss in Mobile Prepaid, triggered by the identification legislation.
For the third quarter 2017, Proximus posted a Domestic direct margin of EUR 831 million, 1.7% lower than the prior year. The direct margin is impacted by an unfavorable revenue mix effect, with revenue from Fixed voice decreasing. In addition, mobile services margin was significantly impacted by volume-driven roaming wholesale costs. This was however partly offset by a favorable evolution in visitor roaming, resulting in a margin increase for Proximus’ Wholesale segment.
Proximus keeps high focus on structurally improving its cost base, further lowering its underlying Domestic expenses by 1.4% in the third quarter 2017, from a low comparable cost base.
Including regulatory roaming impacts, Proximus’ third quarter Domestic operations posted a 1.9% decline in underlying EBITDA, totaling EUR 426 million. Excluding the net roaming impact, the Domestic EBITDA would have grown by 2.3%. The ongoing reduction of operating expenses compensated partly for the lower direct margin.
BICS containing direct margin impact, while continuing its transformation into a global digital enabler
BICS contained the impact on its direct margin from its revenue pressure, with for the third quarter a direct margin decline of 4.3%, on a high comparable base. BICS posted third-quarter EBITDA of EUR 38 million, a year-on-year decrease by 5%, driven by lower direct margin, somewhat compensated for by lower expenses.
BICS expects to close the acquisition of TeleSign shortly, thereby creating the world’s first end-to-end Communication Platform as a Service (CPaaS) provider.
Group underlying EBITDA progressing over first 9 months, despite roaming impact
The Proximus Group generated an underlying revenue of EUR 1,441 million in the third quarter, 3.2% lower compared to the same period in 2016, explained by stable Consumer and Enterprise revenues, growing Wholesale revenue while BICS’ revenue ended 12.1% below the comparable period in 2016.
In the third quarter, the Proximus Group posted an underlying direct margin of EUR 901 million, down by 1.9% versus prior year, including a significant direct margin loss following roaming regulation.
Proximus keeps high focus in the third quarter on structurally improving its cost base, with Proximus Group underlying operating expenses ending 1.5% below the previous year, driven both by lower expenses in Domestic and at BICS. With this, Proximus is well on track to realize its cost reduction ambition of EUR 150 net cost savings in the 4-year period 2016-2019.
Proximus Group’s third-quarter underlying EBITDA totaled EUR 464 million, i.e. -2.2% from the prior year’s high comparable base. Over the first nine months, the underlying Group EBITDA increased with 1.7% compared to the previous year.
Proximus’ Free Cash Flow over the first nine months of 2017 totaled EUR 480 million, including significant higher tax payments following the raised legal prepayment percentage, partially offset by underlying EBITDA growth.
Further investments in the overall customer experience
Over the first nine months of 2017, Proximus invested EUR 707 million. The EUR 72 million increase on the same period of 2016 is largely explained by the capex related to the Jupiler League football broadcasting rights acquired in May 2017. This aside, invested amounts mainly supported the further improvement in Proximus’ Mobile and Fixed networks, including Fiber for Belgium which now started roll-outs in five cities, after the announcements in the first quarter of 2017, and next to the completion of its nationwide VDSL2 upgrade with vectoring technology. Investments also relate to a comprehensive entertainment offer and the deployment of simplification and transformation projects that contribute to a decreasing cost base and better customer experience.
2017 outlook confirmed
With financials over the first nine months of 2017 in line with estimations, Proximus is confident to close the year with nearly stable Domestic revenue and slightly growing Group EBITDA, supported by its cost reduction plan.
Proximus’ Group Capex for the year 2017 is expected to be around EUR 1 billion, excluding the capitalization of football broadcasting rights.
1 Domestic is defined as Proximus Group excluding BICS. Domestic also includes subsidiaries in Luxembourg and the Netherlands.
2 Households/Small Offices, with Small Offices being all customers of Consumer-SE. These are small enterprises with up to 10 employees.
3 Group (Consumer, Enterprise, Tango) figure.
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