Proximus Group financial results – FY 2018

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Proximus Group posts solid commercial performances in a highly competitive market, showing results in line with the guidance

  • Proximus Group achieved continuous customer growth for Internet, TV and Mobile Postpaid in 2018, while Fixed Voice and Mobile Prepaid continued to decline
  • In the Consumer segment, strong performance of the segmented offers with continued commercial success of Tuttimus, Bizz All-in and Scarlet
  • In the Enterprise segment, further growth of ICT business, boosted by recent acquisitions
  • Strong year for BICS supported by the successful integration of TeleSign
  • Full-year 2018 financial results within guidance: stable full-year Domestic revenue and +2.4% Group EBITDA
  • Total investment of EUR 1,019 million, including growing Capex for Fiber for Belgium
  • Stable gross dividend of EUR 1.50 per share over the year 2018

I’m pleased to announce sound commercial and financial results in a competitive market. We therefore raise our full-year expectations for the Group underlying EBITDA to a growth of 2% to 3%.

Our segmentation approach for the residential market is delivering results. The Proximus brand is growing a more valuable customer base with the ongoing traction of Tuttimus and Bizz All-in offers, for which we reached 477,000 subscribers by end September. The Epic mobile offers launched end-June are also proving successful, bringing a full digital experience to millennials. In the price seekers segment, our Scarlet brand continues to grow, benefitting from its no-frills offers.

Our Mobile business remained strong for both the Consumer and Enterprise segment, with our total Postpaid customer base growing by 32,000. The Proximus Enterprise segment also benefited from its convergence strategy in ICT, differentiating on high service levels and expanding its portfolio beyond pure connectivity services. To this end, we have acquired some small but highly-specialized companies, providing expertise in offering meaningful solutions for the digital transformation of our Enterprise customers. For instance, Codit, consolidated in July, offers skills and services in the application integration area.

We maintain a strong position on the Belgian IoT market, providing Smart IoT solutions such as Smart Metering (connecting digital meters for gas and electricity), and Smart Building solutions in partnership with BESIX Group, a global construction player.

We also continuously look for ways to help Small Enterprises with their move to digital. Recently we launched the ‘Bizz Online’ offer. With this service we create, manage and reference our customer’s Bizz Online website and help them boost their online presence.

In view of bringing an overall improved digital experience for our customers, we have given our TV app a new look and feel, have revamped the MyProximus App with enhanced features such as real-time usage monitoring, as well as the consultation and payment of invoices.

With high-quality networks being the foundation of a great customer experience, we continue to invest heavily in our networks. The Fiber roll-out plan is progressing well, delivering promising indications in terms of take-up rate and customer satisfaction.

The good commercial drivers resulted in a sound direct margin, which in turn drove a 1.1% increase in underlying Domestic EBITDA. The BICS segment posted a solid 4.8% increase in EBITDA, benefitting from the TeleSign contribution. In aggregate our underlying Group EBITDA was up by 1.4% for the third quarter 2018, leading to a year-to-date growth of 2.9%. Taking into account our best estimate for the last quarter of 2018, we feel comfortable in raising our full-year underlying Group EBITDA outlook from “slight growth” to a growth of 2% to 3%. The guidance on Domestic revenue and Capex remains unchanged. We also reconfirm our intention to return over the year 2018 a total dividend of EUR 1.50 per share.

Proximus continues to attract customers for Internet, TV and Mobile Postpaid in a competitive setting

Proximus continued to enlarge its customer base in the third quarter of 2018, supported by its Back-to-School campaign, the ongoing traction of Tuttimus/Bizz All-in offers and Proximus’ no frills brand Scarlet. Proximus achieved solid growth in its Mobile Postpaid base, in spite of the competitive intensity on the market.

The Enterprise segment benefitted from its recently acquired ICT companies, Advanced Business Services, along with strong mobile customer growth, which largely compensated the pressure on the more traditional telecom services.

Proximus maintains upward trend in customer base throughout the entire year 2018, with growth for Internet, TV and Mobile Postpaid in every quarter

In a highly competitive setting, Proximus continued to enlarge its customer base in the fourth quarter of 2018, supported by a catching year-end campaign, driving further traction for its Tuttimus/Bizz All-in offers. Proximus achieved good growth in its Mobile Postpaid base as well, supported by its renewed mobile offer and the year-end promotions. Moreover, Scarlet confirmed its strong position as leader in the no-frills segment.

The larger customer base resulted in a fairly stable market share for Fixed Internet of 46.4%, a further increase for Digital TV with +0.5 p.p., reaching 37.3%, and a +0.4 p.p. growth for total Mobile to a market share of 39.3%.

The Enterprise segment finished 2018 with a 4.1% year-on-year increase of its mobile customer base and with a 4.5% ICT revenue growth, benefitting from acquired companies strengthening the Proximus ICT portfolio.

Proximus closed 2018 with stable Domestic revenue, achieving a 1.9% Domestic underlying EBITDA increase driven by higher direct margin

In 2018, Proximus posted a stable EUR 4,458 million Domestic underlying revenue. The revenue was primarily supported by the ongoing expansion of the TV, Internet and Mobile Postpaid customer base, despite a highly competitive landscape. The Group ICT revenue showed good progress (+4.4%), driven by a strengthened portfolio, including the acquisition of several small, specialized ICT companies. Furthermore, Proximus benefitted from a continued positive revenue evolution in Advanced Business Services (+6.2%) and a revenue increase for Tango (+3.9%). These favorable evolutions offset the continued revenue erosion from Fixed Voice and Mobile Prepaid, and the lower Wholesale revenue.

The Domestic underlying direct margin was up by 1.0%, reaching EUR 3,366 million end-December, including a net loss in roaming margin of EUR 30 million, with the roaming out price regulation especially impacting the first half of the year. The Domestic direct margin benefitted from the growing customer base, focus on value management and acquired ICT companies, partly offset by lower wholesale direct margin.

Proximus’ Domestic expenses totaled EUR 1,653 million for 2018, fairly stable in relation to the prior year (+0.1%). Company-wide efforts to achieve structural cost efficiencies compensated for the increased workforce expenses related to inflation-based wage increases and acquisitions in the ICT domain.

The Domestic underlying EBITDA grew by 1.9% to a total of EUR 1,713 million. This was driven by direct margin generated by Proximus’ growing customer base, more than offsetting the EUR -30 million net decline in roaming margin.

BICS realizes double-digit direct margin growth as well as strong EBITDA increase in 2018, with TeleSign largely contributing to the uplift

In 2018, BICS’ direct margin progressed to EUR 317 million, a year-on-year increase of 13.5% thanks to the successful integration of TeleSign. The ongoing decline of Voice services was more than offset by a strong increase in Application-to-Person messaging volumes and by the realization of direct cost synergies between BICS and TeleSign.

This led to a strong EBITDA for 2018, totalling EUR 154 million, 7.7% above that of 2017.

Proximus achieves fourth consecutive year of Group underlying EBITDA growth, closing 2018 with a 2.4% increase

Over the year 2018, the underlying revenue of the Proximus Group totaled EUR 5,804 million, a 0.5% improvement compared to the prior year. This includes a stable revenue from Proximus’ Domestic operations, and a 2.0% increase for BICS.

The 2018 Group underlying direct margin improved by 2.0% to total EUR 3,683 million for the entire year.

The Proximus Group operating expenses totaled EUR 1,816 million in 2018, a 1.6% increase compared to 2017. The efforts to keep a strong focus on structurally improving the cost base were offset by the operational costs from acquired companies, with TeleSign elevating costs in BICS, and ICT companies in the Enterprise segment. The additional expenses from TeleSign and acquired ICT companies aside, Proximus posted a slightly declining cost base.

With the higher direct margin offsetting the increased expenses, Proximus posted an underlying EBITDA of EUR 1,866 million at Group level for 2018, an increase of 2.4% compared to 2017.

Proximus’ 2018 FCF totaled EUR 451 million, or EUR 501 million when excluding the cash-out related to the acquisition of subsidiaries in the ICT domain.

Proximus maintains high investment pace, focusing on digitalization, networks and overall customer experience

Proximus invests extensively in enhancing its networks and improving the overall customer experience. In 2018, Proximus invested EUR 1,019 million. The deployment of its future-proof network in the context of the Fiber for Belgium project kicked off early 2017, with the roll-out ongoing in 9 cities in 2018. Proximus also invested extensively in its IT systems and digital platforms and in further enhancing its mobile network. In addition, it ensured attractive content for its TV customers.

Mobile data usage shows a continued strong uptake, with for the fourth quarter the average monthly usage going up to 2.2 GB per user, and the annual total traffic increasing by nearly 60%. Proximus therefore continues to invest in its mobile network to guarantee the best mobile experience for its customers. In 2018, Proximus focused on further improving the coverage experience of its customers, especially in indoor. In the fourth quarter 2018, Proximus covered 99.5% of the population (indoors), and has been confirmed by BIPT as best Belgian operator for both indoor and outdoor coverage. The continuous network optimizations and the introduction of VoLTE (Voice over LTE/4G) in 2018 allow Proximus to be the best-in-class Belgium operator in terms of voice quality as well as for the fastest call set-up.

With regard to mobile data, OpenSignal presented the Mobile Video Experience Award to Proximus on 24 October 2018 for delivering the best Overall Video Experience in Belgium.

2019 outlook

2019 and comparable base of 2018 are both under IFRS15. The underlying numbers exclude the incidental impacts and include lease depreciation and interest as from 2019, neutralizing the IFRS16 impact.
Acquisitions of Rights of Use in application of IFRS 16 will not be part of Capex.

Guidance metrics FY 2018 Actuals FY 2019 Outlook
Domestic underlying revenue € 4,460 million Nearly stable
Group underlying EBITDA € 1,865 million Stable
Capex € 1,019 million Stable

In line with the announced 3-year commitment in 2016, Proximus expects to return over the result of 2019 a gross dividend per share of EUR 1.50.

Proximus anticipates its 2019 underlying Domestic revenue to remain nearly stable compared to the prior year. The 2019 underlying Group EBITDA is expected to remain stable relative to 2018. Within the mix, Proximus expects a slight EBITDA growth of its Domestic operations to be offset by an unfavorable EBITDA effect on BICS following a renewed agreement (Subject to MTN Board ratification) with MTN. This includes a progressive insourcing by MTN of the transport and management of its traffic within the Middle East and African regions, while BICS will remain MTN’s preferred provider for International Voice and Messaging services to and from the rest of the world.

The Group Capex for 2019 is expected to be stable compared to the level of 2018.

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