PROXIMUS : In the first quarter of 2016, Proximus continues to deliver strong commercial results and enhances its profitability

In the first quarter of 2016, Proximus continues to deliver strong commercial results and enhances its profitability

04/05/2016

• In the first quarter of 2016, Proximus continues to win customers in a more competitive market, driving a solid revenue growth in Fixed and Mobile services, whilst BICS revenue was lower and low-margin mobile device sales decreased.
• The solid Group EBITDA progress sustains in Q1 2016. Proximus reports good growth in the Underlying Group EBITDA (+2.5% year-on-year) and 3.8% growth in Domestic EBITDA, supported by a strong direct margin as well as cost efficiencies.
• Strong free cash flow of EUR 133 million in the first quarter.
• Proximus reiterates its 2016 full-year guidance and, as part of its Fit for Growth strategy, continues its efforts to reduce costs, including the execution of the early leave plan prior to retirement that was recently approved by the social partners.

Another quarter of growing customer base, driven by a strengthened portfolio in the Consumer segment and new large contracts in the Enterprise business

Proximus continued to grow its customer base in the first quarter 2016 for Fixed Internet, TV and Mobile Postpaid, thereby further increasing market shares, for both the Proximus and the Scarlet brand. The Consumer business strengthened its portfolio further, shifting towards high value and low-churn triple and quadruple-play households and small offices. The Enterprise business added new large contracts, supporting the revenue growth in Data connectivity and ICT.

• TV subscriptions totaled 1,795,000, with +35,000 new subscriptions in Q1 (+8.3% YoY).
• The total Fixed Internet customer base end-Q1 grew to 1,879,000, with + 23,000 Fixed Internet lines added in Q1 (+5.1% YoY).
• Fixed Voice totaled 2,751,000 lines at the end of the quarter, a decrease of 30,000 lines.
• Mobile cards total base at 6,397,000, an increase of + 388,000 Mobile cards this quarter (+17,000 Mobile Postpaid Voice, -45,000 Mobile Prepaid, + 416,000 M2M (machine to machine) & Internet Everywhere cards) (+11.9% YoY).
• 3- & 4-Play households and small offices totaled 1,323,000 at the end of Q1, representing 45% of the total customer base, through winning 21,000 new customers this quarter (+1.6% YoY).
• 53.2% Convergent households and small offices, an increase by 1.5 p.p. year-on-year.

Solid financial performance in the first quarter of 2016 with continued revenue growth from Fixed and Mobile Services combined with strong Domestic EBITDA improvement

In the first quarter of 2016, the Proximus Group generated underlying revenue of EUR 1,433 million, -3.1% compared to the same period of 2015, mainly driven by lower revenue from BICS (-10.9%). The underlying Domestic revenue of EUR 1,077 million remained nearly stable in relation to the prior year (-0.3%), with continued higher revenue from Fixed (+2.2%) and Mobile Services (+1.7%) nearly offsetting decreasing low-margin sales of mobile devices.

Proximus' value-based approach resulted in a continued growth in underlying Group direct margin, increasing by 1.4% to a total of EUR 902 million for the first quarter 2016. The Domestic direct margin was up by 1.2% and BICS posted a 3.5% increase from the prior year.

In line with Proximus' ambition to lower its cost base, the Domestic operating expenses for the first quarter 2016 were reduced by 0.9%, benefitting from efficiency gains. This was offset by an increase in expenses for BICS which invested in new geographies and growth initiatives. This led to a 0.4% increase in operating expenses for the Proximus Group.

Proximus' first-quarter 2016 underlying Group EBITDA totaled EUR 418 million, a 2.5% improvement compared to the same period of 2015. Domestic posted a 3.8% EBITDA improvement on a higher Domestic direct margin, and on lower expenses. Proximus improved its Domestic EBITDA margin to 35.5%, +1.4 p.p. from the prior year.

In line with the Fit for Growth strategy, Proximus continued to invest in improving its customer experience. For the first quarter 2016, the capex totaled EUR 237 million, EUR 10 million above that of the comparable period in 2015. Investments led to increasing Fixed and Mobile speeds and improved coverages: Vectoring at 49%, 4G outdoor coverage of 99.6% and indoor coverage of 96.9%. Proximus also continued to roll-out 4G+, with population coverage increasing to 33%.

In the first quarter 2016, Proximus posted a strong free cash flow of EUR 133 million. The improvement versus EUR 8 million the year before was largely due to structural actions to lower cash needs for working capital, higher underlying EBITDA and lower cash paid for capex.

We continued to deliver strong customer acquisition results while enhancing profitability.
For the first quarter 2016, we managed to sustain solid EBITDA growth, up by 3.8% for Domestic, and growing by 2.5% for the Group. This was driven by a continued growth in Fixed and Mobile Services, delivering a stronger direct margin. The sustained progress in our EBITDA comes from consistently executing on our Fit for Growth strategy, enhancing our customer experience and focusing on value-accretive customer growth. Operating in a changing competitive market, we continued to grow our customer base as customers remain attracted by our differentiating mobile network quality, converged offers, high-quality content and innovative end-to-end solutions for our business customers. We reconfirm our full-year guidance, with 2016 underlying Domestic revenue and Group EBITDA expected to grow slightly. Our EBITDA objective will be supported by the progress on our efforts to reduce cost. In this context, I am pleased to inform you that the social partners approved our proposal for a voluntary early leave plan prior to retirement, which comes into force on 1 July 2016.

1. Domestic is defined as Proximus Group excluding BICS.
2. Total number of set-top boxes.
3. Including Voice and Data Mobile cards sold through Consumer, and M2M cards in Enterprise, Mobile cards from the Tango, MVNO and Wholesale segment are included as well. Mobile base end 2015 adjusted for cleaning of inactive cards. 17,000 have been removed from the base for Consumer.
4. Households/Small Offices, with Small Offices being all customers of Consumer-SE. These are small enterprises with 10 employees or less.