Good afternoon, ladies and gentlemen, and welcome to the Proximus 2018 Q3 result conference call. For your information, this conference is being recorded. I now hand over to Mrs. Nancy Goossens, Director of Group Investor Relations. Madam, please go ahead.
Thank you. Good afternoon, ladies and gentlemen, and thank you for calling in. As usual, all documents on the results went out this morning and have been published on the website. I hope that you have all well received these and that you have been able to go through our communications. This call is mainly intended to answer your questions. We will get to that in a minute. I have here with me the CEO, Dominique Leroy, and CFO, Sandrine Dufour, as well as the other members of the executive committee. They will take your questions in a moment. Before we get to that part, we will start with an introduction by Dominique. Please go ahead.
Thank you, Nancy, and good afternoon or good morning for U.S. friends, and welcome to the third quarter conference call. I am pleased we could announce this morning yet again a sound set of results, both on commercial drivers and on financials. While we operate in a highly competitive residential market, we have achieved to further attract customers on our TV platforms. We have grown our internet base, and we further increased our mobile postpaid subscribers. This sustained growth in our customer base proves that our segmentation approach is paying off. Our all-in offers, Tuttimus and Bizz All-in, continued to do well in the higher end of the market, with especially a sustained traction by families. Our different approach for millennials with our new mobile offer called Epic is also starting to pay off.
We are seeing a good uptake. The full digital experience we offer to this specific customer segment is very well perceived. At the same time, we continue to position our Scarlet brand towards the low end of the market, addressing especially customers that look for the lowest price and where Scarlet's no-frills offers fulfills their requirements. On the enterprise side, competition is also very present. Nonetheless, we realized a sound quarter with a firm mobile customer growth and with higher revenue from ICT. For ICT, we clearly benefit from our conversion strategy, bringing our customers offers that go well beyond pure connectivity services. In this view, we have announced over the past year several small acquisitions in the ICT domain. These highly specialized companies provide the necessary expertise to offer meaningful solutions for the digital transformation of our enterprise customers.
With the good commercial drivers in both the consumer and enterprise segments, we realized 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, benefiting from the Telesign contribution. All in all, this leads to an underlying group EBITDA increase by 1.4% for the third quarter 2018. Based on the good results we have achieved so far, we have raised our expectation for the underlying group EBITDA and expect to end the year 2018 with a growth of 2%-3% compared to 2017. For the domestic revenue, we reiterate our expectation to end 2018 nearly stable to the prior year. Our CapEx outlook for the year remains unchanged as well, we expect to end 2018 with CapEx of around EUR 1 billion.
As you know, we are spending an increasing part of our CapEx envelope for the rollout of fiber in Belgium, which brings a super-fast future-proof network to our customers. With the build-out gradually ramping up, I'm pleased to see that the first indications are positive in terms of take-up rates and customer satisfaction. As a last point, we also reiterate the intention to return over the year 2018 a dividend of EUR 1.5 per share, and I'm pleased to announce that the interim dividend of EUR 0.50 will be paid on the 7th of December. With this, I have covered my introduction and propose we now start with your questions. Thank you.
Ladies and gentlemen, we will now begin our Q&A session. If you wish to ask a question, you may press 01 on your telephone keypad. We kindly ask you not to use your microphones and headset while asking your question. We have one question from Mr. David Vagman from ING. Sir, please go ahead.
Yes, good afternoon, everyone. David Vagman, ING. Thanks for taking my question. First, a question on the wholesale roaming rates. Could you explain us the mechanism and the commercial logic of the wholesale roaming rates contract negotiation? All these contracts are linked domestically and internationally. Then I've got a second question on ICT revenues. Could you give us an indication of the underlying trends of these ICT revenues if we exclude M&A? Also explain us or clarify the strategy in term of geographies, because I see you've basically acquired a couple of Dutch ICT services companies. Thank you.
I'm sorry. I could not understand your first question. This is Sandrine speaking. On the wholesale roaming rates. Could you please repeat it? Thanks.
Yes. On the wholesale roaming rates that you've negotiated. Is there a link between the rates that you negotiate abroad and the domestic rates that basically that you have? Because I understand that you've negotiated these rates down in the interest of the group. This impacted wholesale revenues, but helped the consumer and the enterprise division.
Okay. Well, maybe let me explain this. There are a couple of elements here. The first one is the situation of Belgium and Proximus has changed in terms of our net sender. There was net receiver position before. Over the summer, with the growth of roaming out, sorry. With the growth of the volumes of roaming out, which have exceeded the growth of volumes of roaming in, we have become structurally a net sender of traffic, which means that there were more consumption of data done by Belgian people on holidays than consumption of data done by foreigners in Belgium. With these structural changes, it was in our interest to negotiate different tariffs with our partners and to decrease our prices so that the total cost of traffic being done internationally gets lower than the revenue of the traffic being done domestically.
That's what we mean, and that's why you see that our roaming-in revenue, which is largely in the wholesale segment, is decreasing. The decrease of the roaming-in revenue is lower than the decrease of the total cost for the business segments, CBU and EBU. Net for the domestic perimeter, it's a positive contribution in terms of tariff margin for the quarter.
For your second question, this is Bart speaking. Your question on the underlying trend excluding M&A, it is true that in this quarter, we have a growth in ICT of almost 7%. This growth is mainly driven by the acquisitions for this quarter, especially because we compare to a third quarter of last year where we had high product revenues, which is, as you know, seasonal. Also, I want to highlight that if you take years to date, we're still growing substantially in ICT, of which part is also organic growth. It's not only the M&A, but this quarter, indeed. To answer your second question on the geographical coverage, it is so that we really focus on Benelux. The acquisitions, by the way, that we do, we also leverage them as much as possible on a Benelux level. Our focus is Benelux.
Next to that, it's more an opportunistic base that we look in other countries, but the focus is really Benelux.
Maybe a very quick follow-up. Can you tell us whether basically the competition for these digital M&A, digital companies has increased in terms and the multiples that you pay for this acquisition has increased?
Competition is very broad in this case, it's not like in the telco where you have a couple of competitors in this area. You have competitors by specification. If you take Davinsi Labs, who is very specialized in security vulnerability management, security analytics, it's completely different competition than Codit, who is active in application integration and move to Azure cloud and so further.
Okay, thank you.
Thank you, sir. We have another question from Mr. Xavi Emmanuel from Kepler Cheuvreux. Sir, please go ahead.
Yes. Hi, good afternoon. Xavi, Kepler Cheuvreux. Three questions. First of all, are you using the threat of a potential fourth mobile entrant to accelerate your cost savings program? If so, what could add that in terms of additional savings compared to the current guidance? Secondly, on 2019 EBITDA, consensus is only expecting half a % growth. Could you help us in explaining the most important drivers into next year's EBITDA? I'm thinking about FTR, international voice regulation, some posted one, I think, Q2, so maybe there are some other elements that will play a role. Lastly, on cable wholesale regulation. Orange Belgium stated that they expect a five-year reduction on broadband and TV and a 10-year reduction on broadband standalone. I would like to hear what you expect on that topic and on what basis. Thank you.
Okay, Dominique speaking, I think on the threat of a fourth entrant, I think as you read in most of the analysts, I think the most estimation is that there is a 50/50% chance or risk that a fourth entrant would come. As a company, of course, we are preparing ourselves for the eventuality that a fourth entrant would come. We are currently reviewing a bit our strategy for the three years to come with a view on how can we even differentiate more on the market, how can we accelerate our transformation, and of course, also, how are we able to further decrease costs. I think it's too early to give any indication on that for the time being. I think we have a guidance still end 2019 with the EUR 150 million net savings that we announced by the end of 2015.
This is still what we expect to achieve in 2016, 2019. We will come with further savings plan, I think, ahead of that. That's too early to say. What type of magnitude is also way too early to give any indication on that.
Perhaps as I have the mic, I will also try to answer your third questions on the cable regulation. I think it's very difficult to see what type of price the regulator will come up to in the course of next year for cable. I know that Orange is pretty positive in terms from their point of view in very low cable price. I'm a bit more cautious on that because I think the regulator has also a very clear view that what they will bring for cable will also impact fiber. As, of course, it's important that we continue to invest in fiber. I think, I would be a bit more cautious in terms of expectation on wholesale price regulation for cable. I don't think that the reduction will be as big as what Orange is stating currently.
I will leave the floor to Sandrine for your questions on EBITDA guidance 2019, although I think it's quite early to say anything on that one.
Well, on this one, I think Dominique has just answered. That typically we give the guidance in February after the full year results. I won't be much more precise. What I can say though is that indeed, we'll have the adverse impact of fixed termination rate decrease. By the way, we learned that this decision was going to be potentially enacted in December, which means that we would have 11 months of adverse impact next year. To your point as well, we will have the negative impact of the international call new legislations, which we picked, I think, in May. That's also a negative impact. I think it's too early to give a global color on commenting on the consequences. We will come back on this at the end of February.
Could you guide us what kind of impact you expect from international voice regulation?
Yeah, I think we said earlier that it would be slightly less than 1% of the EBITDA cost.
Is that on a full year basis, or is that if it starts in May?
Just for next year. It will continue the year after. Just for 2019.
Okay. Is there any other important element that could have a positive or negative impact into next year's EBITDA?
We'll come back on this in February.
Okay. Thank you.
I think I've mentioned the biggest element that are known today in terms of regulatory environment, which are the one that you had mentioned. Okay?
Thank you.
Thank you, sir. We have another question from Mr. Nicolas Cote-Colisson from HSBC. Sir, please go ahead.
Thank you. Hello. First question is on the CBU. If I look at the fixed business, I understand that 2018 did benefit from price increases. I was wondering how comfortable you are in taking prices up next year to fuel growth in the context of stronger competition. I was just wondering if a more formal strategy could work in the Belgian market. I've got a second question still on CBU on the direct margin this time. If I look at Q2 and Q3, I can see a strong improvement year-on-year in the margin, despite actually this quarter from the impact from the collection process. I was wondering, what are the drivers there to take quarter after quarter the margin up strongly, and do you see room for further improvement in Q4 next year? Thank you.
Guillaume speaking. On your first question, Nicolas. In Belgium, every beginning of the year, there is a lot of indexations in a lot of sectors and industries, there is no reason why, as we speak today, that we would not do something as well. On the second question, direct margin improvement, I would say that the same driver that we have seen for the first two quarters of the year. It means that despite the fact that the market is very competitive, that we are doing some progress commercially, as you have seen the customer numbers. We managed to have a sound and healthy direct margin improvement quarter after quarter. If you exclude the fact that, of course, there is a change in the reminders fee, as you mentioned.
It means that if we continue on the same kind of customer development, successful conversion strategy, still developing our segmented approach. We have Scarlet, we have an offer for millennials, and we are still pushing very strongly our conversion offers. There's no reason why we should not continue in the fourth quarter as well.
Okay, thanks. That's very helpful. If I may, just taking profit of me being online. Any things you can say on Telesign, because there's a few mention of it in the press release, but it's been now a year that you've been with this business. Are you positively surprised by what you bought, does it open new area for M&A in the future?
This is Daniel. We were not positively or negatively surprised. We are happy with the company performance to date. We've been, I think, good at realizing the synergies, using the big networks on the back end to deliver
The two-factor authentication, voice and messages, that is delivered. There are still a wide range of opportunities in this space, this communication platform as a service, mobile identity. We have a whole roadmap leveraging on the power of the combination. No more comments on the M&A, I would think.
Sure. Okay. Thank you very much.
Thank you, sir. We have a question from Sir Ulrich Rathe from Jefferies. Sir, please go ahead.
Yeah, thank you. I have several. The first one is, you still have probably mentioned what you see as the market handicapping of the new entrant likelihood. Just wondering whether you would share your view on how likely it is based on all the conversations you're having. That would be my first one. The second one is the fixed line loss in CBU remains relatively high, I suppose. Would you see the balance between raising price and accepting the volume loss, the right one at these levels? Or do you think there's room to maybe cut the volume loss a bit, possibly at the expense of not raising prices? I'm just wondering how you think about that volume loss or the rate of the volume loss. The third one is on Roam Like at Home, actually sort of two sub-questions there.
The first one is, why is the retail effect of the annualization of Roam Like at Home so small in CBU and EBU? Also I was wondering, you explained hopefully in the renegotiation of the rate that is the net benefit. Would you be able to quantify what the net benefit is on the direct margin? My last question is a very simple one. On the device sales, which are coming down a lot, mobile device sales coming down a lot at the moment. I understand you're cutting back on some low-margin third-party sales. Is there any trend in the device sales into your own retail customers that is noteworthy outside of this external business you're running? If so, could you discuss what the implications are? Thank you.
Yes, Dominique, I will answer your first question on the new entrant. I think how likely, to be honest today, there is still quite a lot of discussions between the federal government and the regions, before the current auction regulation can be published. I think, we are in a scenario where we will know probably a bit later than anticipated when, and if, a new entrant would come into Belgium, because the royal decree with the new auctions has not yet been published, and there is still some discussions between regions and federal before the whole thing can be published. In that sense, we think that where we expect still the auctions to take place in Q4 next year, it could be that we don't know if there will be a new entrant even for the summer next year.
So far we thought that we would know about it before the summer. Late in discussion we have had with the regulator could even be that the new entrant will only be known at the end of the summer. The time is also opening up, perhaps, more potentiality for a new entrant. For me, it's extremely difficult to say, will there be a new entrant, yes or no? As I said earlier, I think today we try to prepare ourselves for the worst, and I think that's what we need to do as management. We will know perhaps a bit better, at least when the royal decree with the full details of the conditions will be published, and when the regulator will then be able to publish also the execution modalities, and knowing when then a new entrant would need to signify itself.
For the time being, as I said, I think it's a 50/50 risk that a new entrant will come, but we are indeed taking that seriously and looking from all sides how we can best prepare. As something you've probably seen, we are continuously as well increasing the awareness of Scarlet that is currently 80% awareness in the country, which means that contrary perhaps to other countries that launch a second brand when a new entrant came into the market. We have a strong brand, which is sitting there with 80% awareness and that we can of course leverage to counter a new entrant. That's all measures we take in preparation. The same is true, as I said, we are reviewing our structure, our strategy, but that's all quite early to give indication on that. It's for sure that we take the risk seriously.
On the question of fixed lines, Guillaume speaking first. What we try to do every quarter is to migrate those fixed line only customers to more convergent products. This is one element of the strategy we have. Also on the price indexation, I think should we do more indexation in the future, what we do is that we carefully monitor the return on the investments on those actions. If you want to act on that front, we for sure, it's always a trade-off between the risk of churn versus the revenue increase, but I'm not going to disclose what we have in mind for next year. Third, on device revenues at CBU, the most of the decline comes from the role of distributor we do for others. It's not revenue declines in the volumes of devices we sell in our shops.
It's more the impact of devices that we sell as a distributor for others.
This is Bart speaking on your question for Roam Like at Home and why the retailer sector annualization smaller than what you would have expected in EBU. That's how I understood your question. It's because there is the annualization, but at the same time, there is a continuous decrease of roaming options that still plays a role. Next to that, we have a shift to bundles so that we have less out-of-bundle revenues. In total, still, I think it's important that we still grow in mobile services. To answer your question on to quantify the benefits of the effect of the benefit, I don't think we disclose any information on that one.
That's very helpful. Thank you so much.
Thank you, sir. We have one question from Mr. Paul Sidney from Credit Suisse. Sir, please go ahead.
Yes, thank you. Good afternoon. Just a couple of questions, please. Firstly, on consumer mobile, Orange Belgium seems to have some fairly good traction on the marketing of its unlimited data tariff that it launched, I think, in April of this year and has introduced some unlimited voice tariffs as well. Again, it seems to have some good traction on that. My question is, do you think you need to introduce your own unlimited mobile data offers or increase the size of your existing data bundles to defend against those offers? Just secondly, on the fiber build, I think you gave some comments that there was some good early take-up and it seems to be progressing well.
I was just wondering, is there any way you can give us some more specific data points on how that build is going in terms of take-up percentages, whether it's on track in terms of the coverage targets? Just really give us a bit more detail around that. Thank you.
Guillaume, on your first question on the unlimited. Just for information, we reacted with the Scarlet brand, offering unlimited voice on the hot package as soon as end of August, with a good success on this offer on the market since we launched it, so end of August, after the summer. We also launched some kind of unlimited tariff plans for including data for millennials because we included all the most used applications in our Epic offers and portfolio end of June. We think that it's for sure the peace of mind in using data is very important, especially for this segment of the population. As Dominique said, we had very nice results and traction on this offer since we launched it.
Last but not least, we already have a lot of packages when you are in a convergent offer, when you double your data, and we already are offering for those customers in Tuttimus package more than 20 GB of data, which is not unlimited but give you a lot of security not to be constrained in your data consumption. This is what we do.
Okay, thank you. Just to summarize, you're pretty happy with the way your mobile products are currently.
We are making improvements every quarter, so I don't think that we are not going to change anything next quarter, but it means that we are already tackling this subject and we are happy with the results of this strategy so far.
Okay, on your question on fiber, Paul. As you know, it's very small numbers. Now we're now deploying fiber in eight cities. In terms of coverage, it's a good sample, but it's a small sample. Since we are seeing good traction, we are seeing good traction on the uptake of the pace of putting customers on the fiber footprint is moving nicely month after month. The weight of win-back versus migration is turning out to be better than our expectation. The ARPU uplift on the migration is also slightly better than our anticipation. Again, small sample, too early to give numbers, but the first indications are positive.
That's great. Thank you very much.
We have another question from Mr. Michael Bishop from Goldman Sachs. Sir, please go ahead.
Yes. Hi, everyone. Good afternoon. Just a quick follow-up actually on the fiber to the home. I was just wondering if you could give us roughly what the ARPU uplift is, maybe just from a retail perspective, i.e., what are you offering customers who are actually taking it? Secondly, if I look in the U.K. at BT, they've seen a considerably lower cost for their initial fiber to the home build versus a couple of years ago, and some of that is effectively driven by improvements in the technology and standardization of the boxes and the kit, meaning that a lot of it's plug and play, and you don't need to splice and get lots of engineers out into the field for a long time. I was just wondering whether you're seeing any potential deviation away from your EUR 1,000 per home cost. That'd be great. Thanks.
On the ARPU uplift, it's too early to give numbers. Again, as I said, it's a small sample, I prefer to have more hindsight and come to the market with very solid and based on a larger footprint. Be patient. We'll come back to you with the progress when we have larger footprint.
This is Geert speaking for your question on the cost side. Of course, we started our deployment since two years, and continuously we are improving on different levels, as you stated, improvements on the technology side itself, but also on the way we approach this, process-wise. With this, we are confident that we can aim for that EUR 1,000 unit cost that we have brought in the past towards you.
Thanks. If I could just follow up, are you seeing any savings on the civil side, or is that probably not likely to happen in Belgium? Because as I remember, you were deploying a lot more overgrounds. You're effectively not reusing a huge amount of your existing infrastructure, or are you finding some incremental synergies on the civil side?
On the civil side, and that is typically for Belgium, so Belgium is not a ducted country, but what we do is that we work a lot on façade, and that is the way that we overcome, in fact, the trenching costs. The balance we have between underground and façade is a crucial parameter in those civil works.
Okay. Are you finding extra efficiencies, do you think, or is it very much in line with expectations?
We are constantly looking towards extra efficiencies, of course. As I said, the EUR 1,000 indication that we gave, that is our first target. Of course, we will never stop if we see additional synergies to capture these. First target is to get there.
Yeah. That's great. It's really helpful. Thanks.
Thank you, sir. We have another question from Mr. Alexandre Butcher from Exane. Sir, please go ahead.
Coming back on your guidance upgrade of 2% to 3% growth. Obviously, there's been a couple of acquisition in B2B and ICT. Wondering if you could give us maybe a little bit of color and remind us of what is the inorganic contribution of those assets for the guidance. Secondly, focusing on Wallonia, I'm wondering what impact you're seeing from the increased promotional activity on mobile data from VOO that's been fairly recent and also fairly recent, but still at VOO, the newly offered broadband speed of 400 megabytes. Maybe it's a bit early, but are you seeing any change of trends here or even regarding possibilities? Thanks.
On your question on the guidance. It's true that, since last quarter, we've integrated the newly acquired company, Codit, in ICT domain, but contribution as a whole is very limited. It's not what's behind the increase of the guidance from 2% to 3%. It has more to do with the removal of uncertainty around the roaming, specifically on the volume growth, and from other elements. The ICT integration is minimal.
Regarding VOO and new offers, it's obviously too soon to see any kind of impact. What we saw recently, it's more an impact of a good traction of Orange's offers, as you saw in the numbers as well, but nothing else apart from that on the market. Not really a specific impact to describe for VOO at the moment.
All right. Thank you. Maybe just one follow-up on that, VOO, if I may. In your introductory remarks, you did mention that fiber was actually adding good traction. I think in previous call you mentioned that you were not willing to accelerate fiber deployment without any concrete business case. With that broadband speed upgrade at VOO in the south, are you feeling a little bit more pressured, or are you seeing maybe incremental benefits of rolling out fiber faster? Thanks.
Again, we are very cautious, but we are not seeing any kind of additional competitive pressure coming from VOO. Neither on the offer nor on the broadband technological aspect.
For sure, fiber is going to help us be more relevant on the market, but it's going to be in Flanders mainly and then in the Walloon region. We are betting on fiber to be more successful in the future. So far, we are not planning a plan because of a small exchange in the VOO portfolio or offers.
That's very clear. Thank you.
Thank you. We have one question from Mr. Ruben Devos from KBC. Sir, please go ahead.
Yes. Good afternoon. Thanks for taking my questions. I got three small ones. The first one is basically on Scarlet. I guess there has been a bit less talk on Scarlet this year than last year, I feel. Just wondering, on the hybrid brand strategy, how we should view the balance of both brands driving net adds in the last few quarters, and how that has compared in the first nine months of 2018 compared to last year? The second question. I understood your comments on the renegotiation of wholesale rates, but could you maybe give some additional color on the scope of that renegotiation? And whether we should bear in mind a further step down, possibly beyond 2019. Lastly, just on the decline in other revenues in consumer, regarding the renewed collection process.
Is it right that there was a change in pricing for these so-called reminder fees, and that you therefore earn less incoming fees going forward? Or are there other elements we should take into consideration regarding the renewed collection process? Thank you.
Guillaume again. Regarding Scarlet and the dual brand strategy. We are not disclosing the share of Scarlet versus Proximus growth gains. What we can say is that despite the fact that the development of the no-frills segment is a reality on the Belgium market, and we are very happy with it because we are the leader in that segment. We still manage to have a value accretive customer mix because as you saw in our publication, the average revenue per home is still increasing. This is what we want to achieve, to take benefit of the development of this no-frills market, but still have a value approach, and to try to continue to grow our revenue per homes.
Okay. On the renegotiation of wholesale. It's a yearly discussion to try and rearrange our wholesale agreements with all potential partners worldwide. The biggest discussions are taking place as we speak, and that are going to set the color for next year. It's a bit early to tell you what's the outcome. Of course, the mandate is to see if we are able to get better terms, and that would certainly help the businesses, knowing that now we are more structurally in a net sender position. The time when we were in a net receiver is behind us, considering the fact that the roaming out growth is higher than the roaming in growth. Definitely are interested to see how we can further decrease this rate, but I cannot give more color as to whether that will help next year. On the new collection process.
Well, there's actually two elements. One has to do with, we change our own internal process, and that is decreasing the volumes of the reminder fees that we're sending. It helps customer experience. It decreases the volumes, and we are charging less reminder fees. Another aspect has to do more with the regulatory environment, where we typically send the first reminder for free to our customer. The second one used to be charged EUR 15, and by regulation, since the beginning of July, it's now priced at EUR 10. This is the pricing impact, which is the second impact. This element will continue over the next quarters.
All right. Thank you very much.
Thank you, sir. We have our next question from Mr. Alexandre de Leeuw from Oddo. Sir, please go ahead.
Hi, thank you for taking my question. Two, if I may. First, I would like to have maybe a little bit more color on the 5G spectrum and maybe first 5G CapEx that we could expect. There is a lot of spectrum that is going to come next year. A lot of renewal, 900, 1800, 2.1, and some new one. I suppose it all depends if there is a fourth player or not, maybe can you give us some guidance of what you expect in terms of prices or competition there? Also if you expect first 5G CapEx to when do you expect them? The second would be on the guidance and the comments you made last conference call, Q2. If we look at your current guidance, and if I understand well, 2% would represent flat or even slightly negative EBITDA in Q4.
You were saying that you had some negative basis effect in H2 that would make the H2 a little bit more difficult than the Q2 that was excellent. Is this possible that this basis effect make Q4 being a negative in terms of EBITDA? Is it Q3. Could be a good assumption of what's going to be the Q4.
Yeah. This is Geert speaking. With respect to the spectrum, yeah, the only thing we can say is like you yourself stated, is that, of course, this spectrum auction will be very different depending on the situation we'll be in with the fourth entrant or not. More information than that, we cannot give on that. On 5G, at the other hand, what we can say is that on 5G, this will be more an evolutionary take-up, not a revolutionary one. The first case that we will embed in our network will be linked in fact with capacity growth and where it becomes more efficient to use 5G to deal with that capacity growth than with other technologies. Of course, this goes hand in hand with the device penetration.
We'll see some of 5G effect in our three-year plan, but this is not to be considered as a very disruptive impact there. It's a gradual impact in our total mobile investment scheme.
For the guidance, indeed we gave this yearly guidance from 2% to 3%. I think now for Q4, the uncertainty over roaming volumes is behind us because it's largely impacted Q3. As you know, Q4 is quite an intense quarter in terms of promotion with the year-end Christmas season. We prefer to have the leeway in terms of commercial intensity, and that's why we give this type of band and Q4 not being more narrowly defined. I think it's important you keep this in mind.
We have another question from Mr. David Wright from Bank of America. Sir, go ahead.
Yes, two questions. One that's actually just following on from a recent comment. The spectrum auction, I think you mentioned you could expect in Q4, next year. I guess whether there is so much competitive tension or not, we could expect a price for the spectrum. It's clearly not going to be free. The reason I ask is that consensus net debt really doesn't move 2018/2019, which given your payout policy, suggests that consensus has practically no 5G spectrum CapEx in next year. Is that because the spectrum payment could be more stepped? Is there anything we don't understand here or is consensus just maybe thinking it's more like a 2020 event? I'm not so sure. Either way, it looks a little light.
My second question, I guess is a question we're just starting to ask a little wider across the industry and I hear exactly what you've just said about 5G CapEx, just conceptually, why is the industry so frightened of 5G? Why is it trying to defend 5G and saying, "Oh, don't worry, it's evolutionary. Don't worry about the CapEx." Why are the ambitions not bigger? Every other industry seems to be asking and talking about 5G. Why is the provider of this, the telecoms industry, so afraid of talking up this opportunity? Why not commit more CapEx? I guess it's why is the ambition seem to be so stilted? Thank you.
Okay. On your first question, one element, the auction will be next year, the license of the new spectrum kicks in 2020, and the renewal of the existing spectrum is 2021. Cash out is not before 2020, 2021. Most importantly, the payment of the spectrum is spread over 20 years. I would say the yearly impact is not as high and would not be felt in the net debt next year.
Yeah, this is Geert speaking again. On 5G. In fact, if we look at the different use cases that are out there, and if I refer first to an IoT use cases, a lot can be done today still with 4G. Plus, in addition, there is still some standardization work that is ongoing. The first real use case that we see coming is the one that is linked with capacity growth and dealing with capacity, and where at a certain moment in time you reach a certain threshold on your 4G, and you need more performant technology. That is the use case that is now embedded into our plan, and which leads to a more step-by-step investment in towards this new technology.
Okay. Any comments, Dominique, on the ambition for 5G, the bigger picture for Proximus?
Well, I think Geert said it. I think 5G is first for us, a capacity enhancing. Of course, if you deploy 5G, you need more spectrum. The first prerequisite for 5G is of course to have the spectrum in the high band and the very low band. There is no way we can deploy 5G before 2020, 2021. Secondly, there is indeed the standardization and the fact that you need devices.
To really be able to lift up 5G. I think the first use case we see will most probably be in the enterprise market, where slicing is certainly a potential, but it will also take some time. I think there are, of course, opportunity for 5G. We will do 5G. I never said that we will not do 5G. I don't think there is any urgency to go to 5G. When I discuss with people from the automobile industry, things like that, they all are asking for 5G, but when I say, "Are you ready to pay for it?" Of course, they look at me with a question mark.
I think we will also need to make sure that before we go into a lot of new type of use case, that we also align with those type of industry on how we can monetize it. I think that's still a bit unclear today. It's unclear on the spectrum price, it's unclear on the standardization. It's still unclear on the monetization of the specific use case you can see, and it will also be linked to standards in term of slicings and agreement with other industry. We will go there, but I don't think there is any urgency to go there, and that's probably what you hear from most of the telco.
It would seem so. Thank you very much.
Thank you, sir. We have another question from Stefaan Genoe from Degroof Petercam.
Yes. Thank you. Stefaan Genoe, Degroof Petercam. Two questions on the personnel expense evolution in the quarter. Could you indicate that the constant consolidation scope, what has been the evolution, and how should we see this in the coming quarters? Is there any kind of indexation that might be coming up in the coming quarters? A second question on the trend in the customer loss to Orange convergence offer. Have you seen a change or a significant change in the third quarter versus the first of the previous quarters? Thank you.
On your first question, Stefaan, the workforce expenses would have decreased at constant perimeter. In Q4, there is an impact of indexation that's starting in October. That was not the case in Q3.
On Orange, what is very important to see in our numbers is that despite the fact they launched their unlimited offers on mobile, we improved the trends year-over-year in terms of mobile postpaid subscriptions. This is one. Second, on convergent offers, there we do not see any change in the market dynamics. We are still developing very nicely our convergent offers, and not that much being hurt by the offers of Orange. We can say that we have been very resilient despite this aggressive move from Orange.
Okay. Thank you.
Thank you, sir. We have another question from Mr. Guy Peddy from Macquarie. Sir, go ahead.
Hi, team. Two quick questions. One, a bit more of a clarity. I think Geert mentioned that he was looking to get or target the 1,000 EUR per home passed on fiber. Is that because you can't actually deliver that number yet and that that is still a target, or are you already delivering at that level and therefore it's a reiteration? That's the first point. On the second point, also on your same CapEx slide, you talk interestingly about renewed and simplified IT systems. Can you just explain what you mean by a new mass market IT chain, please? Thank you.
This is Geert speaking. With respect to your first question, indeed, so we are not there yet at this moment, but we have all the actions in place, and we're confident that we will reach that level of the 1,000 EUR per fiber. You well understood this one. On the new market IT chain, it's in fact a new digital chain that we did put in production, where we are now putting the last hand on it. We have been migrating already more than 2 million customers towards this new mass market chain, we will be completing this next year. Next year, in fact, all mass market CBU customers will be moved on this new mass market IT chain.
Thank you.
Thank you, sir. We have another question from Mr. Didier Nicolas from Berenberg. Please go ahead.
Yes. Okay. Yeah. Two quick questions for me. The first is get a bit of clarification on the CapEx guidance, you mentioned around EUR 1 billion, which is, in terms of communication, a bit vague. Because if I look at where the consensus is spot on EUR 1 billion, but around EUR 1 billion to me, it's from EUR 951 to EUR 1,049. So maybe the way to ask the question is, the consensus is expecting something around EUR 300 million. Are you okay with that number? Considering that last year when you said around EUR 1 billion, excluding football cost, we could not check actually if you were around EUR 1 billion. That's the first question on CapEx.
The second is to come back on your comments on the fiber and the impact of cable pricing on fiber rollouts. If I wanted to look the glass as empty, I don't get it.
If there is more competition on convergence, would the impact be positive in terms of pushing you to roll out faster fiber rather than to slow you down? Thank you.
Okay. On your first question, I think the consensus of CapEx is that around, do you have closer numbers? One billion? The consensus is one billion. We're very close to that. I hope it helps narrow the bracket.
Yes.
Dominique speaking. On your second question, I think what we see, of course, the risk if cable is open and the price of cable is low, you can attract more wholesale competition, and you can have a price decrease of the internet offer and also the convergent offer. Of course, if you have price decreases, you have less leeway to have profits and investment. That's what I was saying, that there is a relationship between cable prices and fiber price, because those price will make sure that we'll open up the network for wholesale offers. That creates a dynamic in the market, which is indeed a competitive dynamic that could be damageable if prices are getting too low.
Of course, there is two markets according to the regulator, but we all know that wholesale players are looking for their internet at all the available technology on the market, being copper, being fiber, being coax, and they will take their decision based on technology and pricing.
Thank you.
Thank you, sir. We have another question from Mr. Matthijs van Meijeren. Sir, please go on.
Yeah. Actually, my question has been answered. It was related to the last question, but just pro forma. If I look at the balance sheet, you have EBITDA class leverage at, I think, a 1.1. Can you remind me your strategic priorities? Apparently, the chance of increased CapEx or increased fiber rollout is somewhat limited due to cable wholesale. Could it be the case that you might increase your dividend or do a share buyback or so?
First, on the element you said on fiber, I think what we've always been saying, and quite explicitly, is that we have a portion of our current EUR 1 billion CapEx, which is on fiber and increasing over the years, but that currently there are still three unknown on the fiber, which is the take-up rate of fiber. There we see first traction are positive, but it's a small sample, so we need to have more comfort on the take-up and customer satisfaction. The second one is indeed the cost of deployment, where we are still in early phase, and as Geert said, we are looking towards the EUR 1,000, but we are not there yet. The third one is about the regulatory price of coax and fiber that we will know around next year.
Depending on those three elements, we have always said that we could, if those are positives, accelerate our fiber rollouts, and to do that we would use our balance sheet to do that if there is a strong business case. That's certainly one of the possibility to use our balance sheet is to accelerate the fiber rollout. A second one is about M&A. We have always said that on M&A, we would use the balance sheet to finance M&A. We have done some M&A last year. We can still see if there are some opportunities within the market to further do M&A, and that would be our first usage of our current debt level and not so much dividend or share buyback.
That's very helpful. Thanks a lot.
Thank you. We have no further question. I now return the floor to Mrs. Goossens. Madame?
Thank you. Thank you all for calling in, and thank you for your questions. Should you have any follow-up questions, you can contact the investor relations team. Thank you.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.