Good afternoon, ladies and gentlemen, and welcome to Proximus Q1 twenty twenty Results Conference Call. For your information, this conference is being recorded. At this time, I would like to turn the call over to Ms. Nancy Gosens, Director, Group Investor Relations. Madam, please go ahead.
Thank you. Good afternoon, ladies and gentlemen, and thank you for calling in. I trust that everyone has seen the Q1 results and the presentation that we published this morning. We will not go through the results in detail, but we will keep the usual format. So most of the available time will be spent on your questions.
So let me just quickly introduce the from our side. We have here the CEO, Guillaume Routin on the call and we have some members of the Executive Committee. I regret to say that for two of them, this is the very last proxy results call for the CFO, Sandrine Dufour and Bastien Hirsch, the Chief of the Enterprise segment. And this after, yes, many quarterly iterations, would say, between 21 for Sandrine, 37 for Vast, if I'm not mistaken. So yes, furthermore, we have on the call Jim Castire, the Chief of the Consumer segment here, Stamard, the CTO and Dirk Liebard, the Chief Corporate Affairs and Daniel Gron, the CEO of Bix.
They will all be very happy to take your questions in the moment. But before we get to that part,
I hope that everyone is getting through the pandemic in good health and in good spirits. The virus crisis is no doubt impacting us all personally and professionally. For the telecom sector, these are crucial times to prove huge value to society and to take up our responsibility to support our stakeholders in this difficult period. At Proctimus, we have taken up that role to the best of our abilities, and I'm truly proud on how well our networks have been able to sustain the boost in traffic since the confinement. Today, we benefit from the significant investments done over the past years to keep high quality networks, and we continue to invest.
As we announced at our Capital Markets Day March, the first pillar of our Inspire 2022 strategy is to build the Belgium gigabit network of tomorrow, deploying both fiber and five and to be the undisputed Belgium leader in terms of networks. The recent events have even reinforced our belief that investing in the networks of the future is essential for the connected society of tomorrow. At the same time, we have closely followed up on the needs of our customers and launched mid March several proactive commercial measures to support our customers through this time of lockdown. This view, we have also very recently increased the Internet upload speed for the vast majority of our residential customers and professional customers. The protection of our employees is obviously the top priority as well.
Therefore, we decided even before any government obligation to close all of our shops and to limit our customer installations and repairs. Especially the limitation in customer installations is reflected in a lower net customer growth for TV and Internet in the first quarter. Including nearly 7,000 Internet customers that could not be connected in March, but that will be connected in April, our net Internet customer growth would have been around 8,000 for the 2020, so very much in line with first quarter of last year. Overall, Proximus is showing a good level of resilience in this very exceptional circumstances. And from a financial point of view, the effects of the COVID-nineteen sanitary crisis were very limited so far with only two weeks of impact in the first quarter.
We closed the 2020 for domestic operations with minus 1% in revenues and achieved a stable underlying EBITDA, including a strong reduction in costs compared to the same period of 2019. The mix of customer segments benefited once more from our conversion and segmentation strategy, further growing our conversions customer base. This was supported by the mobile data boost, which we have given for prepaid mobile services, while Epic Combo continued to address successfully the Millions segment. I'm also pleased by the results of our revamped mobile portfolio, leading to a steady decrease in mobile postpaid churn and a good customer growth in the first quarter. Our Enterprise segment posted a solid increase too for its mobile customer base in spite of its already strong margin.
At the same time, the further erosion in legacy services notably affected our B2B margin, underlying the necessity of the major transformation that we have set up for the segment in the coming years, transformation that we announced with our Inspire twenty twenty two plan. While the limited COVID-nineteen effects so far are reassuring, it's clear we are not fully immune to the crisis. We expect the impact to become more visible over the next quarter. The economic recovery for Belgium remains uncertain, and especially roaming and ICT projects are exposed to further negative effects. It is very difficult to have a clear view on what the overall impact will be.
So far, there are no signs the financial impact will be worse than what we have anticipated, and we expect that the EBITDA impact will be largely offset by lower CapEx. We therefore reiterate our twenty twenty full year guidance of group EBITDA minus CapEx, landing between $780,000,000 and €800,000,000 So before opening the line for questions, I would like also to thank thank you for opportunity to thank strongly and Bart as opposing today their last quarterly results for Proximus. So thank you, Bart, and thank you,
We have one first question from Mr. Nicolas Scott Collison from HSBC. Sir, please go ahead.
Thank you. I'll start with the mobile market. Two things please. First, you had a good run-in Q1 in terms of postpaid net adds, but ARPU has dropped massively despite only two weeks of COVID. So could you explain a bit more what is happening there beyond the e press effect?
Secondly, still on the mobile market, Orange Belgium has launched the offers that are quite attractively priced. I can see some promotions on your website matching Orange Belgium pricing. So I wonder what is the engine there? How can you differentiate on other criteria than prices in a context of network sharing eventually? And if I may, just before saying goodbye and all the best to Sullivan and Bart, was wondering if you could share the process for the succession plans.
Thank you.
Good afternoon. This is Giancarstela speaking. So on the first question linked to the good results on postpaid ADAS, but the impact on ARPU with only two weeks of COVID. So indeed, mobile ARPU is impacted by three big elements. The first one is international regulation that continues to put pressure on our mobile ARPU year over year.
The second one is linked to the good performance that we had commercially with the data boost that we did on January 1, which has an impact, of course, on our out of bundle revenues. And as we all know that it takes some time before customers adapt to new volume limits. And so we expect to ease out this effect in the coming quarters. And on top of that, but indeed only for two weeks, we gave an additional 10 gigabytes of data to our customers during the COVID-nineteen confinement period. And then the third element that impacts the mobile ARPU or the internal accounting allocations that are linked to three big elements.
First of all, the ePrep but secondly, also the continued push to convergence and also the impact that joint offers had on mobile ARPU. So I think these three elements together explain why mobile ARPU continues to be under pressure.
And then this is Mark for Enterprise. The good news is that we have been able to grow our park again. So we added 8,000 mobile cards. So the increasing on market share, that was already very strong. The other good news is that we're able to keep our churn pretty stable.
But indeed, there is pressure on ARPU actually for three reasons. The first reason is competitive pressure. I mean, it's not a secret. The result is that Orange is trying to take the stake in the enterprise mobile market, so that puts pressure on prices. But next to that, it's also that customers are moving more and more to bundles, including more and more data allowance at the competitive prices.
And so traditional out of bundle revenues are decreasing and have an excellent effect on ARPU. And then at least indeed, there is much lower roaming revenues due to COVID-nineteen. So those are the elements.
So on the second question, so this is Jim speaking again. So on the Orange offer and how do we see ourselves differentiating going forward. So for the moment, we don't really see a big impact of Orange Go on our commercials. As you know, our strategy our commercial strategy is to boost convergence where we bundle different products into one and the same offer towards the consumer. And so that gives you additional opportunities to differentiate when you bring a proposition to the customer.
And even if you are doing network sharing with Orange, even then we still have capabilities to differentiate our mobile experience towards the customers. So I think these elements for us allow us to continue to differentiate in the market even if we are sharing the network with Orange.
We get the the the succession plan. You're switching. So the process is ongoing since for for for a few weeks now. So we are actively in the market, and I hope I will be able to give
you more news on that front to deliver the next
one of those
positions. Next
question is from Mr. David Wagram from
Yes. Good afternoon, everyone. Can you hear me, Jean Pauline? Yes. So yes, so I've got two questions on my side.
The first on the wholesale cable regulation, so what is your view and how do you think this will impact the commercial dynamics in Belgium? And secondly, what would be your wholesale commercial strategy for fiber? So I think Orange Belgium has been quite vocal about their desire to have a passive access. What is your view on this? And maybe a last question on broadband.
Could you come back on the performance, which was a bit weaker than consensus was expected?
Was The last
on broadband net adds. If you could just explain us a bit what was explaining so yes, sorry, the weaker performance in net adds in Q1?
So on the cable wholesale pricing, so the formal new notification shows that the PIPT indeed has taken good note of all the focus comments that we did at Fortumis, but also that other deals, the depreciated asset valuation, the link with fiber, as we can see, ignore in that reflection of the wholesale cable pricing and also the importance of gearing. So just for you to know that the timing is Q1 was for the new credit conditions to react. So we should have revenues by the end of Q2. So what is the takeaway for us? I think rather good news and those pricing are in the right direction.
I think also putting more in balance in the South in the north of the country. So I think that's pretty much what I can say at that time. We have to have the confirmation and we see how it goes, but it's rather good news for us. In terms of commission strategy for fiber, and we announced that during the Capital Markets Day of March, we want to build a fiber network, which is an open network, open to wholesale activities, to wholesale partners. And I'm confirming that we want to pursue in that direction, that we want to be a network that will be open to commercial partners, but also partners to co invest with that network.
There are discussions that could happen and that will happen definitely with Orange on both sides of the equation. So when we can have more advanced discussions with Orange, we'll get back to you.
Thank you.
Yes. Go ahead. We have the new questions. So on
the maybe first on the third question on the broadband net adds. So indeed, as we mentioned, the lockdown has impacted our operational results. The closing of the shops has impacted the sales. But more importantly, the onboarding of new customers, Internet and TV, were impacted by our strict application of limiting the few technician activities to urgent interventions, which have significantly reduced the installation capacity. As you know, to protect our employees, we have applied the guidance of government very strictly, more strictly on the GSA.
We closed our shops sooner than competition. At the same time, we have also limited over the period broadband installations to urgent installations only. And of course, we continue to do full repair service to our customers. We expect indeed that these customers will be installed in the next quarter. But keep into account, of course, as we try to project this to the next quarter, that in April, we were still in a strong consignment period as well.
And on top of that, we, of course, have limitations on our production capacity. But I would say that the customers that we didn't install over the last weeks, they will be installed like Jung said or being installed already today as we speak.
Okay. Thanks very much. And a quick follow-up on the wholesale cable sorry, and on the co investments. Do you see rising appetite from, let's say, local players in Sanderson and Wahrenier to co invest together with you in fiber? Can you already tell us a bit more on that, on potential partners for the fiber rollout?
I will not comment on the evolution of all the discussions we do have as we speak with different types of partners.
It's So too soon
to comment on that question, but I hope
that we'll able to
comment later this year on that front.
Thank you.
Next question is from Madam Maya Ranjit from Citi. Madam, go ahead.
Hi. Thank you so much for taking my question. First one, can you quantify some of the COVID impact seen so far, in particular impacting churn and savings and also on Slack? And or has this been impacting marketing costs? Then my second question is on football subs that have been paused, and Cox is trying to get a rebate on this.
Can you help us quantify how much would be the revenue impact and also how much do you expect to recover in cost? And thirdly, do you have an update on the spectrum auction, if any? The BIPT has granted Proxima and four of the companies a temporary five gs licenses today. Do you still foresee this as a risk of a new entrant?
So I'm not sure I understood all your questions. I understand that you wanted some quantification of the COVID impact, but I cannot get all the details of the question. But I must say that in Q1, there is a limited financial impact of COVID. We have said that it mainly has an impact in the measures that we have taken and also sort of the benefit that we give to our customers, granting some more data and fixed voice. So that has had an impact on out of bundle.
It also had an impact on our roaming revenue where we saw the decrease in traffic. So this has had an impact. There have been a couple of savings as well, of course. This is true for Proximus, this is true for BICS as well. And this has helped a bit, but net net, it's limited to a couple of millions for the first fifteen days for the last fifteen days of March.
State of
which is currently foreseen or published by the regulators, will be respected. That is to say that the statutory the
licenses would become available as of July 1 and operators have to activate the license then between July 1 and the end of the year. On the real auction, there we have to wait for government in full power. And for the moment, we don't have a government in full power. We have to wait for a government in full power. And so we don't expect this auction anymore in 2020.
It will be for next year somewhere.
So on the churn impact related to COVID, so indeed we have seen as all the other operators reduced commercial activity in the last two weeks of March. So this has positively impacted the churn on the fixed part. On the mobile part, we have very good churn results in the first quarter. But these are driven more thanks to the commercial changes we did on the portfolio on January 1, where we boosted the data for our customers, which has really given a very good impact on churn. And this is more important on mobile churn impact than the COVID of the last two weeks.
So I would say on fixed, the churn reduction is thanks to this. Due to, I would more say, COVID on mobile is mainly the changes on the commercial portfolio that has driven churn and also impacted by COVID reducing churn as well.
You. Thank you, madam. Next question is from Mr. Emmanuel Carlier from Kempen. Sir, go ahead.
Yes. Hi. Good afternoon. Three questions from my side. The first one is coming back on the fixed subscriber additions.
I think it's since a couple of quarters that they are quite weak. You mentioned the COVID-nineteen impact, but given that that only started to take place, by mid March, It cannot just be the the only reason, I think. So I I would love to hear a little bit more explanation on what is, resulting in these weak, fixed subscriber additions and how you intend to turn that around? Secondly, on cost savings. So I've seen quite solid cost savings.
Is that base sustainable? And is that mainly driven by the recently announced layoffs? And then how should that evolve in the coming quarters? And then lastly on the fourth entrant, do you believe that politicians have generally less appetite for fourth entrant because of the importance of good networks in a COVID-nineteen environment? Thank you.
So I'm going to start on the fixed part. So I understand your question and the hesitation that two weeks of COVID can have such an impact on the net adds. But as you know, the broadband market is a very saturated market where we do quite some acquisitions to compensate quite some churn at the same time. So if you calculate the churn rates on the installed base and you look on the volumes that it drives over a quarter, you will quickly realize that indeed in two weeks' time, if your production machine is nearly stopped, that it can have quite an impact on the net adds of the quarter.
Then on your question on cost savings, so it's true that we had indeed a very good year over year cost reduction in Q1 and that was mainly the result of the lower headcount. Of course, we continue to take actions everywhere in the company to focus on our costs. But Q1 decrease should not be taken as a run rate for the rest of the year. We certainly expect further savings by end of year, but not at the same rate. And I can give maybe a bit more color on that.
First, we had for this Q1 last year, it's a higher comparable basis in 2019. If you look at the Q2, Q3, they are about €20,000,000 lower this Q1. So we've worked on the costs at the next quarter in 2019. So that's one element. There are also some tightening effects, so in the commercial means where some media campaigns have been postponed.
And remember, as of April 1, we had wage indexation in Belgium. So the year over year for the next quarters will be impacted by this element. And as part of our FFP plan, we had many FFP, which departed March 1. And we've always said that there were some specific skills that we needed to rehire. And this has not really had an impact in month of March yet, but this is ahead of us.
So I think that's a series of explanations to guide you not to multiply by four the performance of Q1 in cost decrease.
On the fourth interest question, this is for sure there will be a word post COVID that will be fully different from the word before COVID. This is one element because we proved the importance of network, as you mentioned, as being crucial for the economy. That's the first element. Second element, you know that we've announced a massive investment plan to upgrade the network provision and to roll out fiber, which you know will be instrumental to make sure that the recovery of the economy will be accelerated without good connectivity, without the fiber network, the five gs network. There will be no speed, a faster recovery of the economy.
So we're going view a central element also with our investments to create good momentum for the economy of Belgium. This is the second element. And third element, the more you wait, the less attractive is the better market for insurance. So all those three elements together, I think that probably lowers the risk of adding a fourth entrant into the market. That said, we never know.
But for sure, I think I might say that the risk is a little bit lower compared to the risk we had a few quarters ago.
Does that mean that the government kind of gave their words that they appreciate that if you do private new home investments that, yeah, that makes it quite tough if there would be a fourth entrance, or is that a step too far?
Not not for the moment. Okay.
Thank you.
Thank you, sir. Next question is from Mr. Ruben Devos from KBC Securities. Sir, go ahead.
Yes. Good afternoon. Thank you. Two questions just. The first one on potential additional lockdowns.
I can imagine you don't take it into account in your current outlook. But of course, I'm curious whether you could expand a bit on a scenario where there would be additional lockdowns, how much of a strain that could be for your business, you think? Some businesses say such scenario may be very disruptive. But I was curious for telco, would it be much different from what we've already seen in your view? Secondly, just on five gs and sort of the press reports or the concerns by citizens around health and environmental issues?
I mean much has been written on the topic, refuting the arguments that the rollout of five gs would be harmful. But still, how do you think the development could hinder the rollout of five g technology, the granting of mobile permits? So, you know, I'll I'll have discussions being with policymakers really and communities in general on this topic. Thank you.
Okay. So on your first question of the potential lockdown and the impact on the business, we are of course as all companies working on various scenarios of how this will evolve, what is going to be the length, what is going to be the depth of the impact over our business and how should we best prepare to make sure that we can minimize the impact. And of course, beyond what we've seen so far, we can expect to be impacted in the business, most exposed to the crisis. And so on the B2B front, we are closely monitoring the evolution that can have from the various customer base. But also in the IC, certainly expect that some decisions will be postponed and that there will be an impact on the traction on the type and our ability to execute some of our potential projects there.
Travel certainly will not be the same. So for sure, our roaming business part is going to be impacted for a certain period of time as well. So that's certainly part of the scenario. And so at the same time, what we're doing is that we're very closely looking at how we can best absorb this and see how we can manage and better manage our costs to make sure that we can minimize the impact on our EBITDA and our global cash expectation. So that's the type of very close monitoring that the company is putting place on a very regular basis and also, of course, on the cash aspect.
Okay. Let's start with your second question. This is Pierre speaking. First of all, when we launched five gs, I'm still very good press coverage. Of course, afterwards, we got many negative reactions followed on social media and mostly driven by fake news.
The overall observation of this, this is a growth trend, of course, in Belgium. That is one. But the second observation, very big difference with respect to the reaction between the north of the country and the south of the country. With respect to our reaction, we have chosen to decide, in fact, to softly react. We'll bring more information.
And we are now preparing because clearly, South has been a request for more information. So we're now preparing that with all the different stakeholders. The next steps that are scheduled is we continue with five gs. So the first rollouts that we will now do will be in the North. So that is one step.
The other step is that we will do the two with the stakeholders in Wahgnion to bring the necessary information so there we can bring comfort with respect to five gs and further rollout as we go on.
We have a next question from Mr. Stephane Gilloux from Degroof Petercam. Sir, go ahead.
Thank you. Stephane Gilloux, Degroof Petercam. Two questions. Overall, you've seen a limited COVID impact on the results in the first quarter. But could you give a bit more color what you've seen on the different cost levels of the company and the cost layers of the company in terms of impact?
And could you draw, I would say, lessons from this going forward that could benefit you in terms of saving going forward? And then second question, has there been a sell up from clients having lower broadband connection, lower capacity broadband connections such as the Scarlet customers that have requested for higher bandwidth offers in view of the homeworking that we've seen in the country? Thank you.
So well, on the cost side, there are the obvious ones because everyone working from home. You can expect to see that anything which is linked to supporting the business, the travel, the fuel, the events, all this has stopped. And so that's immediate impact in some of our part of the company. As we said, we stopped as well some installation and the provisioning. So these are elements which have had an impact as well on our OpEx and part of our CapEx as well, where we stopped deploying.
And of course, when you see that there is a less traffic going on from time delivery, COGS associated to this. And now what does that mean for the future? Of course, the question is how digital will continue to grow. There will be a portion of this which might be leveraged, but we'll go back at some point to physical interaction and team meetings and connecting with customers. So I think it's certainly lessons to be taken.
It will be early to say, but we look at this and see how we can leverage the experience and maybe it has been an accelerated journey to digitalize the way we work. And we'll certainly learn from this for the future, but hopefully not to the magnitude of what we've been living over the past weeks.
So then on the second question linked to up tiering on broadband. So we haven't seen a lot of short term impacts on the broadband tiering due to the COVID crisis. Of course, I think we all agree that this crisis has shown the importance of good performing connectivity for both consumers and businesses. What we do have seen, however, on the consumer side is, I would say, an increase in the TV options. So the Netflix, BTV or family, bouquets and VOD consumption, there we have seen some traction over the last weeks.
And in enterprise, we have indeed had several customers who asked us to increase their bandwidth because of the employees working from home, which we have been able to accommodate all of them.
Thank you.
Sir, we have no other questions.
Thank you. Then I think we can leave it at this. Should there be any follow-up questions, we can obviously address these to the Investor Relations team. Thank you very much and have a nice day.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.