Proximus Group financial results – FY 2017
Proximus Group financial results – FY 2017
Proximus closing 2017 with Domestic revenue and Group EBITDA growth, for the third year in a row, while continuing its strategic transformation
- In spite of a more competitive Belgian landscape and significant regulatory headwinds, full-year 2017 underlying Domestic revenue up by 1.1%, fuelled by Proximus’ convergent customer growth and Scarlet.
- Underlying Group EBITDA 1.5% higher versus previous year, driven by a Domestic EBITDA growth of 2% thanks to strong focus on reducing costs.
- CAPEX investment of EUR 1,092 million, including renewal of 3-year contracts for football broadcasting rights and increased network investments driven by the start of Proximus’ Fiber for Belgium project in 7 big cities.
- Stable total dividend distribution of EUR 1.50 per share over the result of 2017.
With sound financials for the fourth quarter, our Fit for Growth strategy resulted in a full-year Domestic revenue growth of 1.1% and a 1.5% growth in Group EBITDA, increasing for the third year in a row.
In an increasingly competitive market we further grew our customer base. Proximus won market share for both Internet and TV, demonstrating solid customer gains and improved Fixed churn levels. We also realized growth in our Mobile postpaid customer base, in spite of the many competitor promotions. These customer gains were supported by our convergent all-in offers, with Tuttimus/Bizz All-in having attracted in total 360,000 subscribers by end-2017, and 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 progress in ICT, and ongoing growth in Mobility and convergent services, offsetting the pressure on legacy products.
With the significant cost reductions achieved in the first nine months of the year, our company-wide transformation program supported the growth in our underlying Domestic EBITDA, up by 2.0% for 2017. This was realized in spite of the Roam-like-at-Home regulation, causing a EUR -41 million net loss in roaming margin. This aside, the Domestic EBITDA for the year 2017 would have grown by 4.5%.
BICS, facing the ongoing transition from Voice to Data usage, closed 2017 with lower EBITDA. TeleSign, consolidated since November 2017, will accelerate BICS’ strategic ambitions in the growing Application to Person market.
Delivering upon our plans, we invested extensively in enhancing our networks and improving the overall customer experience. The renewal of the Jupiler Pro League and the UEFA Champions League aside, the 2017 capex was fully in line with the company guidance of around EUR 1 billion and included investments driven by Proximus’ Fiber for Belgium project, now initiated in several cities.
In 2018, we will continue our transformation journey to turn Proximus into a customer-focused and fitter organization, continuing our efficiency and simplification efforts to further structurally reduce our costs and transition to a digital company. This will support our growth trajectory on EBITDA-level, with the 2018 Group EBITDA expected to be slightly growing from the prior year. This includes some further regulatory headwinds. These will also impact the 2018 Domestic revenue, which we expect to remain nearly stable to 2017. Potential spectrum auctions aside, we expect the 2018 capex to be around EUR 1 billion, including a further progress on our Fiber project. We reconfirm our intention to return to our shareholders a stable dividend of EUR 1.50 per share over 2018 and 2019.
Proximus continues to grow its customer base in 2017, driven by strong growth of convergent all-in offers and succesful dual brand strategy
After a highly promotional 4th quarter, Proximus closed 2017 with a solid customer base uptake for its main products TV, Internet and Mobile Postpaid. Supported by its year-end campaign, Proximus attracted many customers to its all-in offers Tuttimus/Bizz All-in, reaching 360,000 subscriptions end-December 2017. Moreover, Scarlet confirmed its solid position in the lower end of the market and reached a 5.8% broadband share in the consumer market by end-2017, proving Proximus’ dual brand strategy success in the current competitive landscape.
The larger customer base resulted in market share growth for Fixed Internet with 0.3 p.p., reaching 46.6%, as well as for Digital TV with 0.9 p.p., reaching 36.8%, and a +0.3% p.p. growth for total Mobile to a market share of 39.9%.
In the Consumer segment, Proximus’ convergence strategy resulted in customer gain, with a firm growth in the number of 4-Play households. The Enterprise segment continued its strong mobile customer growth and benefited from a solid 7.2% increase in ICT revenues in 2017.
- Unique TV customers totaled 1,560,000, with +71,000 new subscriptions over the full year 2017 (+4.8 % year-on-year).
- The total Fixed Internet customer base grew to 1,983,000 end-2017, with +62,000 Fixed Internet lines added over 2017 (+3.3% year-on-year).
- Fixed Voice totaled 2,624,000 lines at the end of 2017, a decrease of 64,000 lines in 2017 (-2.4% year-on-year).
- The total Mobile customer base stands at 6,050,000 (-0.6% year-on-year) over 2017, with +145,000 Mobile Postpaid Voice, -225,000 Mobile Prepaid, and +41,000 M2M (machine-to-machine cards).
- 3- & 4-Play households and small offices totaled 1,431,000 at end-2017, representing 48.7% of the total customer base, with +68,000 customers over the full-year 2017 (+5.0% year-on-year).
- 56.8% Convergent households and small offices, increasing 1.9 p.p. year-on-year.
Solid Domestic financial performance, with increased underlying revenue and EBITDA
For the full-year 2017, Proximus achieved a 1.1% underlying revenue increase for its Domestic operations to EUR 4,458 million, in spite of a more competitive Belgian landscape and significant regulatory headwinds. The revenue growth was primarily driven by the ongoing expansion of Proximus’ TV, Internet and Mobile Postpaid customer base and a solid revenue increase from ICT (+7.2%) as well as a good traction in Advanced Business Services, with strong growth for BeMobile. Proximus Wholesale segment also closed a favorable year, benefiting from the higher roaming-in traffic and the reversal of Fixed Termination Rates. This more than offset the pressure on the Domestic Fixed Voice revenue and the steep decline in Prepaid, triggered by the prepaid identification legislation.
Over the full-year 2017 period, Proximus posted a direct margin of EUR 3,332 million for its Domestic operations, or -0.7% from the prior year. This included a EUR -41 million net loss of roaming margin, with the roaming-out price regulation impact of EUR -61 million being partly offset by a positive volume impact for visitor roaming.
Proximus kept a strong focus on structurally improving its cost base, leading to a decrease in Domestic expenses by EUR 55 million, or -3.2% in 2017.
For its Domestic operations, Proximus increased its EBITDA by 2.0% to EUR 1,680 million, in spite of the EUR –41 million net loss of roaming margin.
BICS posts a strong fourth quarter and closed the acquisition of TeleSign, accelerating its transformation into an international digital enabler
In the light of the ongoing shift in usage from Voice to Data within the International Carrier market, BICS accelerated its transformation from a global wholesale carrier business to an international digital enabler with the close of the strategic acquisition of TeleSign in November ‘17.
The integration of TeleSign’s data-driven cloud communications platform into BICS created the world’s first end-to-end Communication Platform as a Service provider, facilitating real-time and secure digital communications through the integration of voice, messaging and identity solutions into any web or mobile application. This strategic acquisition will allow BICS to significantly extend its strategic footprint in the Americas and expand its customer reach to global over-the-top brands.
BICS’ direct margin ended 1.9% above that of the prior year, mainly due to a strong fourth quarter (+15.5%). BICS closed the year 2017 with a EUR 143 million EBITDA, -4.2% from the prior year.
The Proximus Group posts solid financial results, delivering an underlying EBITDA growth for the third consecutive year
The Proximus Group generated an underlying revenue of EUR 5,778 million in 2017, 1.6% lower compared to 2016. The Domestic revenue grew by 1.1% in 2017, while revenue from BICS ended 9.6% below that of 2016.
In 2017, the Proximus Group posted a direct margin of EUR 3,612 million, slightly down by -0.5% in comparison to 2016, driven by its Domestic operations.
Over the full-year 2017, the total Proximus Group expenses were reduced by EUR 44 million or 2.4%, totaling EUR 1,789 million. With the strong Domestic cost reduction, totaling EUR 55 million or -3.2% in 2017, from an already lowered 2016 cost base, Proximus remained well on track to reach its ambition of EUR 150 million net cost savings in the four-year period 2016-2019. The full-year 2017 expenses of BICS were up by EUR 12 million, including TeleSign and an unfavorable currency impact.
Proximus’ 2017 underlying Group EBITDA totaled EUR 1,823 million, a 1.5% increase compared to the previous year.
Proximus’ Free Cash Flow totaled EUR 292 million in 2017, including EUR 219 million cash-out related to the acquisition of TeleSign. On a like-for-like basis, the 2017 FCF totaled EUR 511 million. The decrease compared to the EUR 559 million of 2016 was mainly the consequence of higher income tax payments. In addition, cash paid for Capex was higher following the increased investments, and working capital needs increased somewhat as well. This was partially offset by a growth in underlying EBITDA and lower interest payments on long-term debt.
Continued investments to enhance networks and improve overall customer experience
The Proximus Group invested EUR 1,092 million in 2017 including the renewal of 3-year contracts for football broadcasting rights.
The 2017 capex included increased network investments driven by the start of Proximus’ Fiber for Belgium project. The deployment of this future proof network was kicked-off in several main cities. Proximus customers already enjoy a very wide coverage of Fiber-to-the-Curb, reaching 94% end-December. Moreover, Proximus also finalized the Vectoring upgrade of its Fixed network. With coverage reaching 83%, the largest worldwide, Proximus customers benefit from a significantly better broadband customer experience: broadband connection speeds raise to 72 Mbps on average, and over half of the population have access to 100 Mbps.
Proximus also continues to invest in its mobile network. Proximus mobile customers enjoy a high-quality mobile service, with a completed 4G roll-out providing an outdoor coverage of 99.8% and an indoor coverage of 98.1%. Investments in mobile capacity to ensure high quality standards are also maintained while national data traffic volumes are boosted by nearly 70% over the past year. Customers’ monthly national data usage went up to almost 1.4 GB on average and 1.6 GB for 4G users. Smartphone penetration on Proximus’ network increased further to 73%, with a 4G smartphone penetration of 63% at end-December 2017, or +13pp in one year.
On top of this, Proximus continued to invest in more extensive TV content. In the course of 2017, Proximus renewed the Belgian professional football broadcasting rights on a non-exclusive basis and announced the extension of its exclusive coverage of the UEFA Champions League to the next three seasons. As of 1 January 2018, the family content offer greatly benefits from the strategic partnership with Studio 100.
Other investments covered IT systems and further simplification and transformation which contributed to the decreasing cost base.
2018 and comparable base of 2017 both under IAS18
|FY 2017 Actuals||FY 2018 Outlook|
|Domestic underlying revenue||€ 4,458 million||Nearly stable|
|Group underlying EBITDA||€ 1,823 million||Slight growth|
|Capex||€ 1,092 million*||Around €1Bn**|
* Incl. renewal of 3-year football broadcasting licences (Jupiler Pro League, UEFA Champions League)
** Excl. potential Spectrum capex
In line with the announced three-year commitment on 16 December 2016, Proximus expects to return over the result of 2018 and 2019 a stable gross dividend per share of €1.50.
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