Proximus Group financial results – FY 2020

Proximus closes 2020 delivering financial results within guidance, supported by strong commercial performances

  • 2020 guidance achieved, EUR 836 million Group EBITDA-CAPEX incl. higher customer driven capex than anticipated
  • Strong full-year customer growth, with +174,000 Mobile Postpaid customers, +48,000 Internet customers and +36,000 TV customers in 2020
  • Proximus continued to attract high-value customers in the Consumer segment, with Flex rising to 317,000 packs and the Fiber customer base increasing to 65,000 by the end of December. This benefited the overall ARPC, up by 1.5% compared to the year before.
  • Fiber roll-out acceleration, reaching 460,000 homes and businesses passed by end-2020
  • Full-year underlying Domestic revenue of EUR 4,285 million, 2.3% below 2019
  • Proximus’ Domestic operations posted a full-year underlying EBITDA of EUR 1,705 million, -0.7% compared to 2019
  • Underlying Group EBITDA totaled EUR 1,836 million in 2020, a decrease of 1.8% compared to the year before, including a Covid-19 impact estimated at about EUR -49 million
  • Full-year normalized Free Cash Flow of EUR 354 million, incl. EUR 154 million cash-out related to workforce transformation plans
  • Thanks to relentless efforts to reduce its environmental impact, Proximus reached its 2025 carbon footprint goals already in 2020
  • Gross dividend of EUR 1.20 per share, of which EUR 0.70 to be paid in April 2021

I'm proud of what we achieved, not only in terms of our financial results and commercial performances in unprecedentedly challenging times, but also of our relentless efforts to reduce our environmental impact. This has enabled us to reach our 2025 carbon footprint goals already in 2020.

The pandemic has unveiled more than ever the important societal role we play. We have kept people and businesses connected every day. The initiatives to support our customers and the specific actions we took for the most affected industries like education, hospitality, culture and healthcare, are still ongoing. At the same time, the sanitary crisis has boosted digital adoption, across all domains and age groups, opening up new opportunities for e-commerce, e-education, and many others.

Looking ahead, with the vaccine roll-out gradually picking up pace, we can shift our focus and start preparing for a new normal. We are confident that despite some Covid-19 impact still ahead, we will achieve our objective for the years to come: find a path towards sustainable and inclusive growth in Belgium.

Specifically, I'm convinced that Proximus has an important role to play in reconciling the digitalization of our economy with the environmental challenges we're facing. We are proud to have reduced our emissions by 105 kton in 2020. As a result, we have already reached our carbon footprint objectives for 2025. While the conditions were truly exceptional, this acceleration proves that change is within reach. Our ambition goes beyond our own emissions by supporting our customers and suppliers in embracing more sustainable habits. At the Enterprise side, thanks to our converged solutions, we helped our customers to reduce their footprint by 465 kton in 2020 or 69% of our footprint. Thanks to our “Don't miss the call campaign”, we collected 65,000 old mobile phones, and we also reached the milestone of 2 million refurbished modems and decoders. We aim to continue the good trend and stay on track towards making a net positive contribution to a net zero planet and true circularity by 2030.

At the same time, we cannot build a green and digital Belgium without, at its heart, a future-proof connectivity for everyone. Proximus is building the best Gigabit network for Belgium, for both fixed and mobile, with the aim of covering every household and business. We have strengthened our mobile leadership in 5G, both with the only Belgian public 5G network and with the activation of the 3.6-3.8 GHz band in selected areas to allow businesses across different industries to unlock their full potential. On the fixed side, our ambition is to cover at least 70% of Belgium with Fiber by 2028. To that end, the rollout of our Fiber network is accelerating, with 460,000 homes and businesses passed by end-2020. With our deployment speed doubling in 2021 compared to 2020, and with the operationalization of our network JVs, we are on track to deliver our ambitious Fiber plan. On top of that, in order to accelerate specifically the digital inclusion of youngsters, we have also committed to connect almost all secondary schools in Belgium to fiber by the end of 2023.

Our investments in our networks will be key as they will make our commercial offers more competitive and allow us to return to profitable growth. Over the past year, we have kept a strong commercial momentum in a competitive setting, growing in our core customer bases with a specific focus on high-value customers. Our new convergent Proximus Flex offer sees strong customer traction, reaching a total of 317,000 packs by end-2020. In addition, Fiber offers are increasingly popular, with 65,000 consumers already enjoying a Fiber connection end-2020. All in all, this led to a 60% convergence rate and an increase in Average Revenue per Customer, in spite of the Covid-19 roaming headwinds. We also announced the acquisition of Mobile Vikings, which will complement our multi-brand strategy once we will have obtained the clearance from the competition authorities. Next to our traditional telco offers, we've also made leaps forward in our diversification strategy, with for instance our Digital Classroom as a service offer developed with Signpost or the development of a neobank with Belfius that will be launched in 2021.

The favorable evolution in our core customer bases and our strong focus on costs has allowed us to deliver upon our full-year 2020 guidance, including Covid-19 headwinds. We ended the year with EUR 836 million Group EBITDA-CAPEX, in spite of somewhat higher than anticipated customer-driven capex end-2020.

The year, 2021, will be a transition year for Proximus, in which we will further execute upon our #inspire2022 strategy. We expect the 2021 underlying Domestic revenue to remain rather close to the 2020 level. The expected growth in Consumer internet, TV and Mobile postpaid bases, fueled by our attractive offers and accelerated Fiber migrations, will compensate for the careful transition of our Enterprise segment. We anticipate returning to profitable growth on domestic level as from 2022, with accelerating trends as from 2023, once our B2B transformation will have been completed.

On the cost side, we are anticipating higher expenditures for the Group in 2021. For our Domestic operations this is related to Fiber migrations and IT transformation. Moreover, Cloudification and the roll-out of the shared mobile network by Mwingz will have the effect of increasing OPEX, while reducing capex. In total, these effects are estimated around EUR -50 million of additional expenses. The underlying Group EBITDA for 2021 is expected to range between EUR 1,750 million and EUR 1,775 million. In line with our communication during the Fiber Update of mid-January, the Group Capex is projected to end close to EUR 1.2 billion for 2021. Proximus anticipates its net debt/EBITDA ratio to remain below 1.6X, including Fiber equity injections, the acquisition of the minority stakes in BICS and the acquisition of Mobile Vikings, pending the approval of the competition authorities.

In view of keeping a tight cost control going forward, we are shaping up a new company-wide cost program, ambitioning a total gross cost saving of about EUR 400 million by 2025. Roughly half of this is reflected in our 2020-2022 cost objective to reduce the OPEX between -1% to -2% CAGR .

Besides our domestic focus, we will engage in a value creation development plan for BICS and TeleSign, having regained full strategic agility by purchasing stakes of minority shareholders. With an ambition to make them leaders in their domains: the #1 platform in the world for Voice, Communication & Mobility services, IOT and cloud numbering with BICS; the Worldwide leader in Digital Identity platforms with TeleSign.

Strong commercial performance throughout 2020, boosted through convergent Flex offer and succesful end-of year campaign

In 2020, Proximus Group strongly accelerated the growth pace for its core customer bases compared to 2019. For Internet, +48,000 subscriptions were added, an improvement versus +31,000 in the previous year. For TV Proximus grew its customer base by +36,000, up from +21,000 in 2019, and for Mobile postpaid +174,000 mobile cards were added whereas this was +92,000 the year before.

In the Consumer market there was a strong traction for high-value Flex offers, totalling 317,000 packs end-2020, and the Fiber uptake growing to a total of 65,000. Moreover Scarlet continues to thrive in the no-frills segment, continuing its customer attraction in this part of the market. At the end of December 2020, Proximus counted 1,124,000 convergent customers, increasing its convergence rate to 60.0% of the customers having at least a Fixed and a Mobile component. This represents an increase of 2.5 p.p. year-on-year.

The Enterprise segment showed good resistance in a challenging environment, further growing its mobile base by +33,000 in 2020, +566,000 M2M cards and keeping its internet base roughly stable to 133,000 by end-2020. Both the ongoing transition to convergence and price competition put pressure on ARPU'. Moreover, Mobile ARPU remained impacted by Covid-19 effects on roaming. The erosion in legacy Fixed Voice continued, although the sustained rise in traffic volumes brought some relief. The ICT revenue of Proximus grew slightly in 2020, in spite of an unfavorable operating environment, with the pandemic causing some ICT projects to be delayed or cancelled. Revenue from Advanced Business Services showed a limited decrease compared to the previous year, with some Covid-19 exposure on Be-Mobile's parking activities.

  • The number of Fixed Internet customers totaled 2,137,000, with 48,000 lines added over the entire year (+2.3% year-on-year).
  • TV customer base grew by 36,000 in 2020, reaching 1,677,000 end December (+2.2% year-on-year).
  • Mobile Postpaid customer base grew by 174,000 cards in 2020 (+4.2% year-on-year), to a total of 4,277,000. The number of Prepaid cards totaled 624,000 end December (-12.9% year-on-year), while a net amount of 566,000 M2M cards were added in 2020 to reach 2,354,000 cards (+31.7% year-on-year).
  • By the end of December 2020, the total amount of Fixed Voice lines was 2,213,000 (-7.8% year-on-year).
  • Proximus ended the year with a market share of 45.3% for Fixed Internet, 38.7% for total Mobile (excl. M2M) and 37.8% for Digital TV.

Proximus shows resilience to Covid-19 with good customer traction for its core products and strong cost control, resulting in a slight Domestic EBITDA decline over the entire year

For its Domestic operations, Proximus posted underlying revenue of EUR 4,285 million for the entire year 2020, which is 2.3% below the result of 2019. The revenue was mainly impacted by Covid-19 related headwinds on roaming and the erosion of low to no-margin SMS inbound revenue within the Wholesale segment.

For the full year 2020, Proximus posted an underlying direct margin of EUR 3,273 million for its Domestic operations, 2.2% or EUR 75 million below that of 2019. The year-on-year variance was primarily impacted by Covid-19 effects for an estimated amount of EUR 51 million and by lowered international calling and texting rates as of May 2019. Moreover, the direct margin variance was impacted by other negative effects of a temporary nature. These headwinds were partially offset by the positive effect of Proximus' ongoing customer growth and increase in ARPC. This especially resulted from a successful convergence strategy in the Consumer segment, further supported by e-Press and the January 2020 price indexation.

Proximus reduced its Domestic expenses for 2020 to EUR 1,567 million, a 3.9% decrease mainly resulting from structural efforts to improve the cost base by means of efficiency and digitalization. Moreover, the cost base of the company benefited from some pandemic-related effects, driven a.o. by widespread homeworking and prevailing travel restrictions. The sanitary crisis accelerated Proximus' digitalization trajectory, generating cost benefits sooner than expected. Proximus' Domestic indirect expenses were reduced by 4.4% over the entire year.

In spite of Covid-19 headwinds for about EUR -34 million, Proximus was able to limit the underlying EBITDA decline for its Domestic operations to -0.7% or EUR -12 million, bringing its full-year 2020 EBITDA to EUR 1,705 million.

While BICS results remain impacted by travel restrictions and MTN insourcing, TeleSign continues to grow strongly in authentication and mobile identity services

The direct margin of BICS for 2020 decreased by 6.7% year-on-year to EUR 303 million, including an impact from the pandemic related travel restrictions for a total estimated amount of about EUR -18 million, in addition to a progressive impact from MTN's insourcing of services. This was somewhat compensated for by a continued strong performance of TeleSign, whose direct margin grew by 20.7% to EUR 78 million.

BICS' full-year 2020 EBITDA totaled EUR 131 million, a decrease of 14.5% or EUR -22 million compared to 2019, with the Covid-19 impact estimated at about EUR -16 million. BICS' operating expenses were stable compared to 2019, including higher workforce costs following hirings at TeleSign to fuel its growth. This was offset due to lower non-workforce expenses, helped by Covid-19 related cost savings.

Impact of Covid-19 on Group financials partly offset by strong cost control

Overall, the Proximus Group ended the year 2020 with an underlying revenue of EUR 5,479 million, a decrease of 3.6% compared to the year before.

The full-year 2020 underlying direct margin of the Proximus Group totaled EUR 3,576 million, a 2.6% decrease compared to the year before.

The Proximus Group reduced its underlying operating expenses for the entire year 2020 by 3.5%, to reach a total of EUR 1,740 million. This was fully driven by lower Domestic expenses, while BICS' expenses remained stable year-on-year.

The underlying EBITDA of the Proximus Group for 2020 totaled EUR 1,836 million, 1.8% below the result of 2019. The impact from Covid-19 on the full-year Group EBITDA is estimated at about EUR -49 million.

Proximus posted an adjusted Free Cash Flow of EUR 354 million for the entire year 2020, including EUR 154 million cash-out related to workforce transformation plans, mainly in the framework of the 2020 Fit for Purpose plan.

Total investment reaches EUR 1 billion in 2020, supporting a.o. the further ramp-up of the Fiber roll-out to reach 460,000 homes and businesses passed

Excluding spectrum and football broadcasting rights, Proximus invested EUR 1,000 million in 2020. This was a touch above own expectations following higher customer capex over the past three months, a.o. driven by the success of Flex, the uptake of Fiber and ICT-projects. In line with its strategy, Proximus stepped up its investments in Digitalization, IT transformation and especially in Fiber, while reducing non-strategic investments. Over the last 3 months of 2020, Proximus further ramped-up its fiber roll-out, increasing its weekly roll-out speed to an average of 5,000 homes and businesses passed. As such, Proximus deployed Fiber for an additional 69,000 homes and businesses passed in the last quarter of 2020, bringing its Fiber footprint to 460,000 homes and businesses passed by end-December 2020.

Compared to 2019, the accrued capex decreased by EUR 27 million, following a careful management of its capex envelope, including the slow-down in Mobile investments in 2020, awaiting Proximus' new Radio Access Network. The announced renewal with Nokia, Proximus' selected vendor for the RAN, will start in 2021. Moreover, a number of investment projects are past their capex peak, or have been fully completed, such as Fiber to the Business in large industrial zonings.

Guidance 2021

The year 2021 will be a transformational year for Proximus, in which it will further execute upon its #Inspire2022 strategy as was set out at the Capital Markets Day of March 2020.

The level and duration of Covid-19 related impacts remain highly uncertain for the year to come. Proximus anticipates a gradual recovery of roaming volumes in the second part of 2021. This included, the 2021 underlying Domestic revenue is expected to remain rather close to the 2020 level, supported by a further customer growth in its Consumer Internet, TV and Mobile Postpaid base, and by a carefully managed transition within the Enterprise segment. The Wholesale segment is expected to carry a continued impact from eroding SMS inbound traffic, though with a neutral margin effect on Domestic level.

To build the foundations for its growth trajectory, Proximus Group anticipates some additional expenditures in 2021. For its Domestic operations this is related to Fiber migrations and its IT transformation. Moreover, Cloudification and the roll-out of the shared mobile network by Mwingz will have the effect of incurring OPEX, while reducing capex. At the same time, Proximus anticipates less cost benefits from Covid-19-related measures in comparison to 2020. In aggregate, all these elements count for Proximus' Domestic operations a total of around EUR 50 million of operational expenses. Proximus will continue its tight cost control and structurally reduce its cost base through further digitalization, automation and simplification of its operations. Overall, the underlying Group EBITDA for 2021 is expected to range between EUR 1,750 million and EUR 1,775 million.

The Group Capex is projected to end close to EUR 1.2 billion for 2021, with the year-on-year increase driven by Proximus' announced accelerated Fiber roll-out, aiming to double its roll-out speed compared to 2020, and by investments in its Mobile Network as well as its IT transformation. For 2021, Proximus anticipates its net debt/EBITDA ratio to remain below 1.6X, including Fiber equity injections, the acquisition of the minority stakes in BICS and the acquisition of Mobile Vikings, pending the approval of the competition authorities.

Guidance metrics
Guidance metric FY20
Actuals
FY21
Guidance
Underlying Domestic revenue € 4,285M Close to the 2020 level
Underlying Group EBITDA € 1,836M € 1,750-1,775M
Capex (excluding Spectrum & football rights) € 1Bn Close to € 1.2Bn
Net debt / EBITDA 1.28X < 1.6X

With regard to its environmental efforts to be a truly circular company, Proximus foresees to collect 150,000 phones, refurbish 500,000 modems and decoders and recycle 900 tons of copper in 2021.

Shareholder return

Proximus reiterates its intention to return over the result of 2021 and 2022 an annual gross dividend of EUR 1.20 per share, to be considered as a floor.

On 25 February 2021 the Proximus Board of Directors approved to propose to the AGM of 21 April 2021 to return to the Proximus shareholders a gross normal dividend of EUR 0.70 per share. With the interim dividend returned in December 2020 included, this brings the total dividend over the result of 2020 to EUR 1.20 per share.

Coupon 32:
Gross normal dividend: EUR 0.70/share
Net dividend (30% withholding tax assumed): EUR 0.49/share

  • Ex-coupon date: 28 April 2021
  • Record date: 29 April 2021
  • Payment date: 30 April 2021

#inspire2022

Proximus confirms its ambitions from its #inspire2022 strategy, bringing its Domestic operations back to topline and EBITDA growth as of 2022. Proximus also confirms its indirect OPEX ambition for 2022, i.e. a net indirect OPEX reduction of between -1% to -2% CAGR over the 3-year period 2020- 2022. With digitalization benefits coming in sooner than expected, this cost objective was already largely reached in 2020. In view of obtaining structural cost efficiencies, Proximus is shaping up a new company-wide cost program in which its ambitioning a total of gross cost savings for about EUR 400 million, of which roughly half is reflected within its 2020-2022 cost objective. The remaining cost decrease envisioned through this program is to come through in the 2023-2025 period.

Outlook
Outlook
Underlying Domestic revenue excl. terminals Grow as of 2022
Domestic Indirect OPEX Reduce by -1% to -2% CAGR over the 3-year period 2020-2022
Gross cost savings About € 400M over 2020-2025 of which about roughly half over 2020-2022
Underlying Domestic EBITDA Grow as of 2022

Q4 financial results

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