Ladies and gentlemen, welcome to the Orange Financial Results 2022. For the first part of this call, let me remind you that all participants will be on listen only mode, and afterwards, there'll be a question and answer session. I would now like to hand over to Koen Van Mol, Head of Investors Relations. Sir, please go ahead.
Thank you, operator. Good afternoon, everyone. My name is Koen Van Mol. I'm Director of Corporate Strategy and Investor Relations at Orange Belgium. I would like to welcome you to the presentation of the results of the second half and the full year of 2022. Here with me are Xavier Pichon, our CEO, and Antoine Chouc, our CFO. As usual, you should have received our financial communication this morning. In any case, you can also find all the relevant information on our corporate website. A Q&A session will follow right after Xavier's and Antoine's introductory statement. I will now leave the floor to Xavier.
Thanks, Koen. Thank you very much. Hello, everyone. Hope you're well. Such a pleasure to have you on board. We are honored to present you our results for 2022. On page three of our deck. You can see that we've had very good results and we are very satisfied with our performance, both commercially and financially. I would say despite a slowdown of the growth of the market, our customer base continues to grow, especially when it comes to fixed and convergence. Our positioning has been strengthened by launching new innovative products, thus confirming our new market positioning. We also have been active from a societal perspective with the Orange Digital Center, as well with the Orange Belgium Fund. We have been able to provide concrete, real assistance to partners active in digital inclusion.
2022 has also been a pivotal year for some strategic steps that have been passed. The recent agreements we have signed with Telenet, the upcoming closing of the VOO transaction, and the investment we are making in state-of-the-art technology on our mobile network are the key enablers to execute our convergent nationwide multi-gigabit strategy. Let's go into the highlights of the last semester. Page five, slide five. End of June, sorry. We have signed with Telenet II commercial fixed wholesale agreements. From the moment the closing of the VOO transaction has been complete, we will give access to each other's fixed network for a 15-year period. The agreements cover both current Hybrid Fiber Coaxial and fiber, and future Fiber to the Home technologies in both network areas.
With these agreements, we take care access to Telenet's Hybrid Fiber Coaxial network and to its future Fiber to the Home network. It is a key enabler to strengthen, as we said, our convergent nationwide multi-gigabit strategy. We will provide Telenet access to VOO and Brutélé's Hybrid Fiber Coaxial network and to our future Fiber to the Home network in the regions of the South Wallonia. It will secure Telenet as a wholesaler customer, increasing network penetration and return on network investment. These agreements will foster competition and network investment nationwide. Slide number six. We announced the signing of an agreement with Nethys for the acquisition of 75 minus one share of VOO at the end of 2021. The acquisition of VOO, the key, is key for our convergent multi-gigabit strategy.
One of the major closing conditions is the clearance of the European Commission, which we expect to happen this quarter. The closing is expected to happen in the second quarter of this year after the integration of Brutélé into VOO. Slide number seven. During the last semester, we have taken several initiatives in relation to 5G. Thanks to a plateau effect, we've started to raise the bar on the consolidation of 5G of the consolidation and 5G rollout, which will lead to have 5G coverage of 40% of the population in 2023 and 90%, 90, in 2025. We are deploying a 5G Standalone core network on a cloud-native architecture together with our partners, allowing virtualized end-to-end networks and combining the best of technical IT and data management solutions. Together, we show the full potential of 5G while investing in next generation services.
Another initiative is that together with KPN, we investigate how 5G technology can accelerate the further digitalization of one of Europe's most important waterways, the Western Scheldt. The study by Orange Belgium and KPN aims to define a low-altitude cross-border digital corridor for mobility application that will make ports and inland waterways more efficient, secure, and sustainable. The high speed and low latency of the 5G networks will secure and highly reliable connectivity. In addition, after the opening of the first Orange 5G Lab in Antwerp, we have partnered up with the iconic campus of Liège to showcase our 5G technology. The Orange 5G Lab will be used to develop and test innovative and concrete new 5G applications in collaboration with customers, prospects, and partners. Slide number eight. Quite of fresh news on the regulatory topics.
We would like to highlight, as said earlier, that we expect the clearance of the European Commission for the VOO transaction in the first quarter of this year, and we foresee a closing before the end of the first semester. The Belgian Competition Authority decided to dismiss Telenet's complaint against Proximus and Orange Belgium regarding the roaming sharing. Slide number nine. We have successfully implemented our segmented value and marketing policy. For our residential customer, on the one hand, we have our Orange premium brand. We provide innovative products that provide the ultimate customer experience. For example, the guarantee a seamless indoor connectivity and with respect to the new, to new construction standards, we provide the Mesh Wi-Fi aimed at reinforcing the connectivity at home for our customers. We have also launched the new gaming pack.
Ultra Gaming allows gamers to enjoy Microsoft's Xbox All Access offer, which is an Xbox Series S console with 24 months of unlimited access to hundreds of games. Under the Orange brand, we also offer a complete offer smart device which wholly controlled by our mobile application. For our residential customer, we have our hey! brand, which provide the best digital offers on the market, addressing our digital-savvy customers. We have included specific promotions and encouraging loyalty by increasing the data bundles over time. For our business customers, we provide relevant services such as cloud telephony, security, 5G Standalone for industrial application, and ICT services. Slide 10. In the light of our segmented strategy, we have substantially upgraded all our mobile data volumes, and we remain ultra-competitive with hey!. We are the only Belgium operator following a more for more logic.
To absorb the impact of rapidly increasing costs linked to the economic context and continue our network investment, we have also adapted several prices. Slide number 11. We go to the key achievement of 2022. Our positioning contributed to a good commercial result. We have increased our mobile customer base by 2.5%, reaching about 2.8 million customers. During the year 2022, we added 49K new cable customers, reaching 443K customers, an increase of 12.4%. These results contributed to an increase by 2% in total revenues, which reached EUR 1.391 billion, whereby the retail service revenue grew by 6.8%.
Because of the increase in retail, in retail services revenue and management of our cost, we were able to increase our EBITDA above by roughly 6%, reaching EUR 374 million. Slide number 12. Our revenues grew by 2% over the year in line with our guidance and our flow single-digit growth versus 2021. EBITDA has exceeded slightly our guidance with a result of EUR 374 million, while we guided between EUR 350 million and EUR 370 million. Our eCapEx of EUR 220 million is perfectly within the range of our guidance for 2022. That being said, I will now pass the floor to Antoine, who will give you more detail on the commercial and financial results.
Thank you, Xavier. Thank you everyone for being on the call today. I'm delighted to share with you our commercial and financial results. Let's start on slide 14 with our cable customer base evolution. We keep on growing, and we gain more and more market share in convergence, thanks to our cable. The last six months of 2022, we acquired 26K new cable customers. With 443K customers, we have more than 12% increase compared with year-on-year. Slide 15 shows the steady growth of the mobile postpaid customer base. Despite the fierce competition, we consolidate our market share with 36 net adds over the last half year. The main component being the net adds coming from convergent customers. Slide 16 indicates an increase in our convergent ARPU and an increase in mobile ARPU.
Our convergent ARPU increased thanks to our segmented and value approach. The mobile-only postpaid ARPU also increased by 4.4% to EUR 21, also thanks to this marketing approach and increased roaming usage. On slide 17, you can see that our revenue have increased by 0.9% for the semester, mainly following the growth in retail service revenues, where we have an increase by 7.2%. Wholesale revenues decreased due to the loss of Mobile Vikings revenues, as well as a decrease in incoming traffic. If we go to slide 21, you'll see the waterfall of the revenues for 2022. In our retail service revenues, we see an increase of EUR 64 million in comparison to last year, mainly thanks to the increase of our convergent customer base.
The growth of our fixed customer base has contributed to the increase of our fixed and IT service revenues. We also had an increase in our mobile-only service revenues, explained by the growth of the mobile-only ARPU in combination with the higher customer base. Our wholesale revenues contracted by EUR 32 million, and in the equipment revenue, revenues, we had a decrease of EUR 5 million. In slide 23, you have the waterfall for our EBITDA for the full year 2022. The strong performance of our EBITDA was driven by an increase in revenues, and we have used the retail price increase to offset higher costs due to inflation and higher energy costs. We also continue to manage our costs and therefore profitability has improved. EBITDA grew by almost 6% year-on-year. Slide 24.
We increased our CapEx by 7.8% to EUR 220 million for the year, mainly following the implementation of the RAN sharing agreement with Proximus. Our net debt amounted to EUR 190 million, an increase following partly payment of the spectrum fees. Gearing remains low, with net debt to EBITDA at only 0.5. Slide 26. Looking forward to 2023. In terms of guidance, we expect a low single-digit revenue growth in 2022, in 2023, sorry, taking into account further uptake on our postpaid and convergent customer base. We target an EBITDA between EUR 360 million and EUR 375 million. In addition, total CapEx is expected to be between EUR 210 million and EUR 230 million.
For the outlook, we did not include the acquisition and integration of VOO, although we consider that the current market condition do not change drastically. On the dividend, the board of directors will not propose a dividend for the financial year 2022 to preserve cash for future capital requirements, such as the full payment of the spectrum fees and the VOO acquisition, of course. With this, I conclude the presentation, we are open to answer your questions.
Ladies and gentlemen, we're now ready to take your questions.
You have the opportunity to ask questions regarding the results. Operator, may I ask you to open the floor for questions?
Yes. We are ready to take your questions. You have the option to either use webinar or your telephone. If you wish to ask a question via your telephone, please press star one on your keypad to be placed in the queue. If you wish to withdraw your question, it's star two. Note that you will hear a prompt on your line indicating it's your turn to ask your question. Please say your name and company name before asking. Thank you. We have the first question. Paula, please go ahead.
Yes, hello. Good afternoon. Can you hear me?
Yeah.
Yes. Hello. Thanks for taking my question. David Vagman from ING. First question is on the deal with Telenet. Could you give us a rough idea of the type of savings that you could generate in the north of the country, so in Flanders versus wholesale cable, right? Let's say that's in the north. In the south, would you rather expect Telenet to be more successful commercially? The ambitions to, you know, to capture over time a 10% market share. Do you see them rather being successful on the VOO footprint? Is that a threat in the view rather on the Proximus footprint? That's my first question. A second one on CapEx. Can you come back on the capitalized expense for this year? The EUR 263 million reported in the cash flow statement. I guess a good deal of that is the spectrum payment, but what is the rest? Thank you.
Okay. Thanks, David. Maybe on your first point. Unfortunately... Sorry. On the first question, so sorry about that, but of course, yeah, we can't provide any, I would say, detail out of those that have been announced through the press release. We can't answer directly your question on the potential saving on the wholesale tariff. Sorry for that. For your question on the retail, I would say, goal and ambition, I invite you to, I would say, ask your question directly to the Telenet management. Of course, we can't comment what has been said by Telenet on that side as well.
On the CapEx side. As you said, the EUR 250 million of the CapEx that are for the fees, the spectrum fees that are capitalized for 2022. It's, we've already paid around half of the total amount due following the auction. The second part will be paid over the course of the first semester 2023, meaning that the rest of the auction payment will be capitalized in 2023. I don't know if it answers your questions.
Is there a mismatch, let's say, between the... I think I understand that you paid really there was a cash out for the spectrum payment of EUR 1.78 billion this year, I mean, 2022? Is that correct? Or is it really that you paid out already EUR 253?
No, in fact, there are two different, there are two different things there. There is the one-shot payment that is, that is being made. The one that we committed to buy, to pay during the auction. You know that there is also, as part of the auction rules, I would say, of the spectrum allocation rules. There are some annual fees that have to be paid. That we also capitalize the net present value of this annual spectrum fees that are on top of what we are, the, let's say, the one-off amounts that we are, that we paid following the auctions.
That you have around EUR 200 million, EUR 180 million to be specific, that are linked to the one-off that is one-off payments that have been made. The rest of it being paid will be paid in 2023. You have around EUR 60 million of net present value of the annual fees that will be paid and cashed out over the course of the license over 20 years.
Okay. This implies a change in term of accounting. They used to be expensed.
They used to be expensed, you may know that there is a different billing model with the licenses acquired in 2022. It has changed from a variable model for the previous licenses to a fixed model. Meaning that we can now capitalize them, the annual spectrum fees.
Okay. Thank you very much, Xavier.
Thanks.
Thank you. We have no further questions coming from the phone lines. As a reminder, if you'd like to ask a question, star one on your keypad. Next question. Caller, please go ahead.
Hi. Nicolas Cote-Colisson from HSBC. I've got a question, as usual, on the fiber strategy, because I just wonder what you are expecting from the regulator. It looks like there is a market analysis or at least a consultation that should be presented before the end of 2023. I suspect it will take time before it concludes. How do you see Orange Belgium building a network strategy with VOO when the regulation is pending? I'm just curious to see how you plan to deal with the upgrade that VOO's network and decide whether you go for upgrading cable or fiber. If you can give us a bit of clarity on that would be great. Thank you.
Yeah. Hello, Nicolas. I would say yes, you're right to say so. Maybe it will take time, nevertheless, and even if we are working, you know, for now, a lot of time, huh? For years, I guess to build the more efficient and appropriate thick network strategy in every region. Okay. We actually, we need maybe to, of course, to do it accordingly to the future potential regulation that could be stated and elaborated by the BIPT. We invite, I would say, the BIPT to pursue its willingness to get some view on that.
Of course to make sure that in the upcoming potential strategy we might have in all the regions, okay, it will be reliable and accurate. This is it. In the meantime, of course, we need to make some decision. We did it with the VOO signing, of course. To make sure that every I would say strategy will be well-designed, we definitely need to get the BIPT view. We'll see how much time it will take. At the moment, of course, I guess maybe this is exactly what has been said by Proximus a couple of weeks ago during then their capital market day.
This is the work that BIPT gets on its plate. We are, I would say, eager to see what will happen outside.
You mentioned Proximus, okay, but at least on their side, they invest on fiber. It looks like there's a lot of delay between Proximus and yourself and also Telenet, and it looks like this delay will remain for some time. You're not too worried about this asymmetry of technology that will be perpetrated in the next couple of years maybe?
Yes and no. Depends on what we will be authorized to deal and with whom and where. That's why we are eager to see what could be the BIPT view on that side. Nevertheless, as soon as we can, I would say, have direct and deep access to the VOO data on that side, we'll see what could be the best option for the years to come in the South and of course, in Brussels. This is it. Our strategy is to deliver this multi-gigabit network capabilities everywhere. We'll design and disclose what could be the best options for the South and Brussels, South, as soon as we're able to do. We'll see.
Thanks. If you allow me just a very quick follow-up. You mentioned we should refer to Telenet when it comes to their 10% market share. You may be able to answer the question of the kind of market share you intend to capture in Flanders then.
The one we are intending to catch in Flanders, you mean?
Yeah, yeah, obviously your strategy. Because obviously they come to you, and you are already... you don't give the split between the...
Okay.
You are achieving in Flanders and in Wallonia. I'm just wondering if you have the same type of market share targets on the other side?
You mean Orange in Flanders or our view of Telenet in the south?
No, no, no. Of you in Flanders. More easy for you to answer, I suspect.
Orange in Flanders? I said one day that we aim to reach 20% nationwide, so it could be interesting to see the maths with the South, potential future South market share in the South and then in Brussels as well. Of course, we are signing, and we've signed our commercial agreement in the North and in the South to make sure that we will able to provide this key enabler that is the multi-gigabit network for the next year. Of course our ambition, either on network but also on the retail market share is, I would say, to get, yeah, a larger pace, piece of the market.
I don't want to provide any figure and precise figure, but Flanders is of course one of the key growth territory for Orange in the future. This is it. Our ambition is to grow everywhere. I don't want to provide any specific. Okay, maybe one day we'll do the maths between our market share and the fact that this deal will be closed in the south. Honestly, we are a nationwide provider. We are a nationwide MNO. I think our products on the Orange and hey! brand are B2C and B2B well fitted for every region, including a good performance we're now having in the north. This is it.
We do have a great ambition in north as well, not only the south of course.
Okay. Thank you.
Next, question. Caller, please go ahead.
Yes. Hi. It's David Vagman again from ING. So, coming back on the, let's say, fiber and the rollout of the coming [infrastructure]. What is your view on Proximus's I4B initiative? You know, they take about 25% of coverage of the footprint. I would say, yeah, maybe again, by region. So would you look at it in Flanders given that you're actually in disagreement with Telenet [at previous], but in the south [with inflation] obviously at the same time?
Thanks, David. Actually, this initiative is, I would say, part of course of our whole thinking about that, particularly in the south. It's an interesting, I would say, initiative that will be put in the landscape. Actually this is also something that could connect the dots with what I said on the market study done or that will be done by the BIPT. You know, it of course includes every, I would say, part of the territory, including these less dense and rural areas that are maybe linked to this project.
We will look, I would say, and have a look on every single initiative, and we will make the right choice either for the investors and the clients of Orange, depending on the landscape and the region. This one, of course, will be part of our study.
That's very clear for the south. For the north?
Is there any initiative?
Okay. Okay. The same. Okay. Thank you.
For the north, I think for first, the I4B initiative. I think it's still relatively unclear when it comes to the economics. Even the coverage areas. For the moment we have an agreement with Telenet that will cover 100% of the territory. We'll have, thanks to this agreement, solution to have access to the whole territory with at least a gigabit option.
It will take a very, very long time I guess, before we'll be able to have the I4B initiative will be able to compete in these remote areas with cable. I think we still have sometimes to assess the different options. My, I would say, question would be, maybe correct me if I'm wrong, I haven't seen any I4B initiative in the north. Is it?
Yeah. To me, it's across the country in general, the 25% footprint.
What do you mean?
Is it nationwide? To me, I4B is nationwide.
Sorry, my bad. I thought that it was much more focused, they were much more focused on the south. Okay. My bad.
Okay, anyway, depending on the potential footprint that could be covered by somebodies, of course we'll have a look on every single project. Of course.
Mm-hmm. No, that's clear. Thanks. Thank you very much.
We have no further questions coming from audio lines. Yes, we have one question coming. Sorry. Next question. Caller, please go ahead.
Hi, Nicolas again. Just a short one on the wings and the network adventure. What are the concrete impact on the PNL for 2023?
We cannot hear you, Nicolas. Maybe...
Oh, is it, is it better now?
Yeah, now it's good.
Can you hear me?
Now it's okay.
Oh, okay. Sorry about that. My question is on your network sharing with Proximus. I was wondering if you could share any concrete impact on the PNL and cash flow statement for 2023.
No, we won't disclose the detailed impact of the RAN sharing deal on our PNL. What we can say that we consolidated around a bit more than one-third of the total number of sites. meaning that on this footprint we share with Proximus, the energy costs, all the rent, all the costs related to the sites. What we can say that we are well in line with our expectations when our initial expectations when it comes to OpEx and CapEx sharing.
Yes, of course, RAN sharing, as we previously stated, but this deal is absolutely key for us to deliver and execute our cost saving program.
Okay. Makes sense. Another short one on the wholesale revenue. Obviously, I understand with Mobile Vikings, Viking, but the EUR 15 million on the wholesale side of things, the other wholesale, you mentioned it was incoming traffic, and I can see it's like a 100% margin. What should we assume for 2020 for you on that side?
More or less the same, when it comes to revenue, more or less the same, the same trend. Of course not concerning Mobile Vikings. For the rest of the wholesale revenue, it should be more or less the same trend than in 2022.
Okay. Very clear. Thank you.
Next question. Caller, please go ahead.
Thank you for taking my questions. It's Martin here from Citi. I have two please, and apologies if they have already been answered. The first one is on, after the price increase you implemented in January, have you seen sort of an increase in churn over the last month, or has it sort of been rather stable? The second one would be on the new entrant. Just can you tell us maybe anecdotally what sort of you see on the ground coming from DIGI? Thank you.
Thanks a lot. First question, I think Honestly, we have no sign either coming from the call centers or direct connection with the customer touch point or churn that this, I would say, price increase have had a negative impact on the flow. So far so good. I think, as we said, we are moving forward to a more for more marketing segmented approach, which has been, I would say, well received either by the Association Consommateur, but also, of course, by the client. No sign either, I would say, as I said, on the field or on the churn side that could be marked or posted. On the fourth entrant, I would say no sign either or neither.
Except of course what has been said, probably by the company, on the press, but we have no clue, I would say, and no obvious sign that has been detected on the field as well. We continue of course to prepare ourselves, and you can see on our commercial, fresh innovative product and fresh segmented approach.
Using Orange, the premium brand, and also using hey!, that we are, of course, preparing actively what could be maybe the landscape, and a much more intense competition coming up in the Belgian market in the next years.
Great. Thanks very much.
Next question. Caller, please go ahead. Caller, please go ahead.
Yes, hello. Sorry. Good afternoon, again. David. Very last question from my side, and sorry I was on mute. On the EBITDA guidance for 2023, could you break down some building blocks to go from 2022 to 2023? Maybe wage inflation, energy cost, gross cost savings from the Orange Ahead transformation plan or price increase. Thank you.
Well, I won't give too much details, but just a few highlights on the impact of inflation. Of course, we have this 11% of indexation on our labor cost leading to a very significant impact on our cost base, between EUR 10 million and EUR 15 million. We'll have also a year-over-year significant impact on when it comes to energy prices, to rent indexation, to outsource contracts that are also indexed, maybe not at 11%.
11%. All our labor-intensive partners, whether it's in call centers for the field intervention, also, et cetera, et cetera, asked for an increase in their prices. All in all, our inflation-related cost increase between 2023 and 2022 with around, let's say, between EUR 30 million and EUR 35 million. That's what I can tell you.
Thanks. That's labor related?
Labor. All the inflation, indirect, the whole impact of the inflation on our indirect cost base, including labor costs.
Excluding the energy, let's say.
No, no, it includes energy.
It includes energy. Okay. Okay, perfect. Thanks for that.
We have no further question coming from audio lines. I'll hand over to you hosts.
Received another question from Roshan from Deutsche Bank. The first question is regarding to the wholesale rate for cable. The question is the delta between the north and the south, as it is regulated for, by the BIPT. The second question is, the ARPU growth is greater for mobile versus convergence. Is this due to the dilution of the duo product? The third question is regarding the RAN CapEx. Do you see any acceleration in 2023 as you highlighted in 2022?
Regarding the question on the ARPU growth between the convergence and mobile-only products, as you say, Roshan, it's mostly a mixed effect, meaning that we have a higher proportion in our cable customer base of duo customers, meaning without the TV option. That leads to a pressure on the ARPU. But as you may know, we are the same profitability rate for duo customers and for trio customers, meaning that the impact on our profitability is not that significant.
There is also an impact of, let's say some promotion when it comes to installation costs that we used to bill to our clients. We are in 2022, it was often offered for free. With also a slight impact on our ARPU year-over-year. That's the two main explanation. The first one being obviously the most important one. The third question for CapEx. We plan to be more or less stable at a high, relatively high level compared with our, what would be our baseline without RAN sharing.
In this mix we expect to have higher RAN sharing CapEx in 2023 than in 2022. The overall envelope will remain globally the same. That's what I can tell you. For the first question regarding the wholesale rate for the coming years between the north and the south, I'm not exactly sure to understand the question. To be, maybe, Roshan, I don't know if you're on the call, if you can specify a bit your question. There is, as you know, a difference between the wholesale rate in the north and the south in the current regulatory framework.
There could be, sorry, there should be a new regulation starting as from 2023. It's quite difficult for me to tell you what will be this new regulatory framework and what would be the impact on the wholesale rates. What I can tell you is that there is, I would say, a structural difference in the cost base between the north and the south. It's obviously more costly to build and maintain a cable network in Wallonia, where with a relatively low density compared with Flanders. That's the explanation. It's a quite obvious explanation for this difference.
I guess it will remain over the coming years. That's it.
Okay. If there are no further questions, can we conclude this earnings call. Would you have any further question, do not hesitate to contact the IR team. We are available for any additional questions that you may have later on. Thank you for your participation, and have a nice day.
Thank you.
Bye-bye.
This concludes today's conference call. You may now disconnect your lines. Thank you.