Good afternoon, ladies and gentlemen, and welcome to the Proximus conference call on the Q2 2022 results. For your information, this conference is being recorded. At this time, I would like to turn the call over to Nancy Goossens, Director, Investor Relations. Please go ahead.
Thank you. Welcome everyone to this results presentation. Let me just quickly introduce you to participants on our side. We start with the CEO, Guillaume Boutin. He will open the session with an introduction. After that, we turn to your questions. For the Q&A, we are also joined by the CFO, Mark Reid. Jim Casteele, the residential segment lead. Anne-Sophie Lotgering, the business segment lead. The CTO, Geert Standaert. Our corporate affairs lead, Dirk Lybaert, and Matteo Gatta, the CEO of BICS. They will be taking your questions in a moment, but first, Guillaume will take us through the highlights of today. Guillaume, please go ahead.
Thank you, Nancy, and also welcome from my side to this conference call covering the Proximus second quarter results. Next slide. In the next 10-15 minutes, I will take you through some of our key achievements, the progress made with respect to our Inspire 2022 strategy, and of course, a quick overview of the second quarter performance. Starting with some of the key achievements over the past month. Overall, to say I'm proud of our trajectory so far. With first, and again, some meaningful steps taken in our strategy, and we'll walk through some of them later. Two key steps for sure have been the strong position we have obtained in the spectrum auction, and also our announced ambition to further broaden our fiber rollout.
Secondly, even though the quarter was commercially less active, we continued to see a strong commercial momentum for Proximus. The last point, we achieved over the past quarter a strong set of financial results, with group revenue up by 4.9% and direct margin up by 4.7%. The annual growth levels we have not seen for a long, long time. As we are closing a strong first half of the year, we feel comfortable in raising revenue and EBITDA metrics on our guidance. This slide sums it from a financial perspective. With the revenue growth translated into higher direct margin for both our domestic segment as well as for BICS and Telesign. The group EBITDA was up by 0.9%, with especially BICS closing a strong second quarter.
As already mentioned, we have made significant progress in our strategy, and this has also supported Proximus in becoming much more resilient in a changing market. I think we are very well positioned to continue winning the domestic market. We further strengthen our mobile network, which is already today recognized as the first in terms of quality. We are turning our fixed copper network into a fiber network, known to be the best technology available. We'll have undisputed product superiority on fixed, mobile, and conversions for our customers. You all know how important it is to have product superiority in that industry. We have a residential customer base that is highly convergent and is addressing customer needs through different brands. This includes fully-fledged premium offers, but also low-cost offers for price seekers.
Last, our business segment is supported by a very strong telco customer base, with strong upsell potential to IT services. Our NPS results progressed further in the second quarter, leading to first half NPS ever shown on the graph at the bottom left, with a nice improvement across our three brands. The increased level of customer satisfaction also supported the price changes we have put through the year. Overall, this has landed well, with no material increase in churn levels. Turning a moment now to the outcome of the spectrum auction. Overall, we are very pleased with the amount of spectrum obtained. Out of the spectrum in which we could make a difference in the auction, we obtained half of what was available.
With this, we have secured over the next 20 years a crucial asset to make a considerable difference in network quality, and hence, offering the best mobile experience to our customers. Another big step in our gigabit network strategy was taken with the announcement of our ambition to broaden our fiber coverage. We agreed an MoU with a consortium of Belgian financial partners to bring high-speed connectivity to the country's low-populated areas. This envisions a balance sheet structure as an ambition to reach 95% of the population with fiber. This by 2032. It will reinforce our position as leading fiber operator in Belgium, and it will generate financial benefit from a broader fiber scale, including also cost benefits from copper decommissioning. We aim to reach a final agreement by the end of the year.
Today, we are already rolling out fiber in 62 cities and municipalities, and we are well on track to reach our target of 22% coverage by the end of the year. In June, we crossed the 1 million mark of homes and businesses passed with fiber, highlighting the fast expansion of our fiber network. Customer demand for fiber is increasingly higher, with also the fiber price increase having landed very well. I think we all agree digital technology has become essential, and this is certainly also true for our B2B customers, for which we continue to develop innovative offers. This through the new partnerships or through the co-creation of new solutions on 5G, with on the right of the slide, some recent examples. In a context where cybersecurity becomes increasingly relevant, we are proud to announce our partnership with Microsoft for the development of a sovereign cloud solution.
For smaller businesses customers, we announced our partnership with Odoo, providing our customers access to Odoo's full suite of business applications. Now turning to our international business, and let me start with Telesign. Clearly, we regret that the broader economic context and impact on financial markets hampered the envisioned public listing. Telesign is, however, continuing its strong commercial performance, and we remain fully supportive of its growth trajectory. We are considering our options, and we'll get back to you on this once this crystallizes. For BICS, there was good news on the closing of a multi-year commercial agreement signed with international communications company, Ooredoo Group, for which BICS is now becoming the trusted partner for communication services. A great proof of the quality provided by BICS and by its team.
As a last point of the strategic part, a few realizations in the ESG domain. What I would like to highlight here is our announced ambition to provide at least 15,000 charging points for electrical vehicles by 2028, which we see as a very nice and relevant side opportunity of our fiber rollout plan. Turning to our second quarter's results now, and starting with the domestic segment. Overall, the past quarter was not the most intense from a commercial perspective, as I said, but did not have the big promotion as we had last year in view of the European Football Championship. In this context, we are able to take a big portion of the market growth, which again confirms we have been doing the right things. One of these things is a focus on convergent offers, with Flex continuing to do a great job in attracting multi-mobile customers.
An additional 84,000 customers opted for one of our Flex offers in the second quarter, and as such, we have now crossed the 1 million mark. The traction of multi-play offers remains an important revenue driver for our residential unit, which closed a very good second quarter, with its total revenue growing by 4.3% from the year before. This was supported by the inflation-driven price indexations, the remaining two months of inorganic contribution of Mobile Vikings, and higher revenue from mobile handsets. Zooming in on the services part of the residential unit, we have posted in total a 3.3% growth, sequentially improving from prior quarters, driven by better ARPC trends. As shown on the slide, if we put aside the impact of Mobile Vikings, the ARPC was up by 3.7% on an organic basis.
Turning to our business unit, which closed the second quarter with a 0.6% revenue growth, mainly resulting from a firm revenue increase from internet services and also higher IT hardware revenue, partially a one-off, but we also see some of the previously delayed product contracts catching up. Taking a closer look at the business services revenue. All services combined, we post a slight decline of 0.4%, so roughly the same trend as from the previous quarter. Revenues from fixed data, mobile, and IT services were up year-on-year, though was offset by the fixed voice revenue erosion, which is losing the support of the temporary vaccination center-related traffic linked to COVID-19, COVID crisis.
Finally, our wholesale unit, for which the revenue from fixed and mobile wholesale services was up by 20.1%. This was offset by the headwinds on the interconnect revenue, which, however, no meaningful margin impact, as you know. This brings me to the total domestic revenue, for which we achieved 1.9% growth for the second quarter. As for the domestic operating expenses, we faced a significant impact from increased inflation, especially on the wages, which have now increased 4x since October last year. As illustrated on the chart, we have been able to offset most of the inflationary effects by our cost efficiency program. The remainder of the cost increase mainly reflects customer-related OPEX and costs related to the ongoing company transform ation.
Moving to the results of our international segments, and starting with the strong achievements of BICS. BICS closed the second quarter with its EBITDA up from last year by 25.5%, driven by strong margin growth in its core services, more precisely messaging and mobility services, and another excellent performance in cloud communication services. Our second international business, Telesign, continued its strong commercial trajectory of the last quarters, resulting in strong revenue and direct margin growth for the second quarter. Commercial indicators such as the net revenue retention rate remained solid at 125%, and the momentum was also supported by further geographical expansion as well as the launch of new services within the digital identity suite. Overall, these results reflect the success of the strategic course the company has taken to reinforce its position in the digital identity and communication markets.
This brings me to the group view. As illustrated on the slide, we are closing a good first half of the year, with all three segments growing revenue, overall leading to a 0.7% growth in group EBITDA. Our CapEx remains fully in line with our projections, with an increase on last year largely resulting from the accelerated fiber investments. This brings me to the free cash flow over the first half of 2022. As shown on the graph, the two main driver of the low free cash flow so far are, one, the higher cash out from, for CapEx, and two, an unfavorable year-on-year evolution of business working capital needs. Our financial position remains very sound, and we remain on track to maintain our full year net debt, net debt level around 1.6 x.
Longer term, we have secured our debt, and we have hedged our exposure to rising interest rates through 2025. In conclusion, I'm overall very pleased with our achievements over the first half of the year. Our domestic business is delivering better than expected ARPC and churn, which is very supportive for the offsetting of inflationary effects we are facing. In addition, also our international businesses are performing better than anticipated. Hence, we're in a good position to raise our outlook for the year. We now expect to close the year 2022 with a growth of 1%-2% for our domestic revenue, excluding terminals. For the domestic EBITDA, we expect to land at the upper range of the guidance. For the group EBITDA is expected to grow up to 1% compared to the year before.
Our full year outlook for CapEx and for the net debt ratio remain unchanged. With this, I have covered my introduction, so we can now turn to your questions.
Ladies and gentlemen, thank you for joining this Proximus Q&A session. If you wish to ask a question, please press the code zero and one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. We kindly ask you not to use microphones or headsets when asking your question. If your question has been answered, you can remove yourself from the queue by dialing zero two. Once again, please press the code zero one on your telephone keypad. We have our first question from David Vagman from ING. Please go ahead.
Yes. Good afternoon, everyone, and thanks for taking my question. I've got two. One on fiber and one on BICS. First on the fiber networks, what is your reaction to the recently announced communication from Telenet, by Telenet and Fluvius on their NetCo plans, and especially on their economics. It seems on paper at least that the NetCo has more favorable rollout costs compared to Fiberklaar or Proximus. Making it potentially, I think, more attractive commercially to access seekers. Is it a view that you would share or rather why not? How would you hope to make a difference to attract access seekers to Proximus standard network or to Fiberklaar? That's on fiber. Second on BICS.
Could we zoom indeed on BICS and strong performance to better understand the sales and margin dynamic at play in this Q2, but also going forward, in coming quarters and in the years ahead, when thinking about the different trajectory of legacy, core and growth sales. What is structural, what is not, et cetera. Thank you.
Well, I start with the first one. You know, it was expected that Telenet and Fluvius would come to an agreement. I would obviously not comment on the agreement of Telenet and Fluvius on the economics. What I know is that there is no magic in rolling out fiber. You need to trench, you need to go on façade, you need to deliver the network to the end customers. That is costly. I don't see why they would not bear the same kind of cost that we are bearing for rolling out the network.
We have good experience now because we started five years ago. You know, we know what it costs to roll out the network in Belgium. There is no, especially in this context, it's a new context we have since a few quarters. You know, there is gonna be no magic, no surprise, and they're gonna have the same kind of cost that we do have to roll the network. I have to say that, you know, for the moment, we are really delivering the acceleration plan of fiber according to our plan. We are making a lot of rapid progress.
Now we have a run rate of 10% of additional new Belgium homes per year, because we are starting the summer with that kind of run rate. That is going to be like that for the next eight years. I think that's always the same, you know, strategy that we want to deliver. We'll be the first to plant our fiber flag in every cities and municipalities of Belgium with a view to cover 100% of the country. That's the plan we have, and then we're gonna benefit from a copper-free company because we want to get rid of copper by 2035.
That will create a lot of opportunities for us to further reduce the cost to operate and to bring, more importantly, better services to our customers, being B2B customers or B2C customers. We are delivering on our own strategy. I think we are, you know, we have the time advantage. Still a lot of paperwork to be done for Telenet and Fluvius to come to a live state. Regulatory approval, talks with the commune. It will take some time. During that time, we are accelerating and delivering more and more plugs to Belgian homes. That's for me a key advantage that we have.
Just one last comment on this. As I always say it, we will also be pragmatic and rational in the approach. I think this is also the message that they convey. We're gonna have a pragmatic approach in that initiative. With a view at the end of the day, to own a network, to deliver a fiber solution to 100% of the Belgian citizen.
Maybe a very quick follow-up on this one, on the, let's say, being pragmatic. Do you view any regulatory headwinds, or have you been discussing with the regulator on, let's say, the less dense areas to see what is possible in terms of cooperation with other players?
I think for the moment, this is really a statement that we all make, that we have to have a rational approach in less dense areas because there is not a lot of sense or economical sense to roll out two networks. At the same time, there is no regulatory framework to organize this kind of discussion. We want to, of course, be pragmatic, but we have also to comply to the competition framework of the country and also the regulatory framework. That pragmatism is going to be executed in that context. That's the only thing I can say.
You already negotiating or discussing with the regulator? I mean, to get such a framework, a new framework, you mean?
I think we will come back to you when we can, you know, share more on this one.
Sure. Thanks.
I'll take the BICS question. David, thanks for the BICS question. I think it's great to recognize BICS. I think we you know we've come off of five straight quarters of growth now, top line and EBITDA, and Q2 was the strongest EBITDA quarter of those five. As you can tell, we're super pleased with the performance. In terms of the constituent parts, the core part of the business, the mobility services, signaling, messaging enjoyed you know continued growth, sequential growth. There's a part of that supported by the return to travel that we're seeing pretty strongly over Q2. That's certainly progressing into Q3 as we go into the main holiday period.
In terms of the cloud communication, the growth part of the business, again, we've seen double-digit growth on that business with particularly strong demand for cloud comms from our enterprise customers. You can see that in the earnings presentation in terms of our exposure to enterprise customers versus telcos is significantly ramping. Then legacy, a business that, you know, has been declining. We had growth in the quarter, again, destination mix of where the legacy voice is being delivered and the travel return to travel is helping there. You know, and I'm sure we're gonna get guidance questions on that, but I think, you know, the business is performing really well.
You know, as you know, there is some volatility in some of that traffic mix. You know, we're cautiously optimistic for the rest of the year. That was one of the parts of where we got to in terms of upgrading the group guidance. Matteo, I don't know if there's anything else you'd add to that.
No, not really much to add. Just to say that if we compare to prior to the COVID, basically, BICS performance has reached the same level as 2019, but the mix is very positive because it's more structured, more recurring business compared to the past. So growth has replaced basically part of the legacy voice. That is the underlying message.
On the margin mix, could you make just a comment on the difference between growth, legacy and core?
David, we haven't gone to that level of disclosure, so we won't. It's positive, you know, in terms of, as you said, the overall business is outperforming our expectations. You know, as Matteo says, the recurring nature of that business, specifically on the growth side, we're particularly pleased with, so.
Okay, thank you. Thank you, guys.
We have another question from Nicolas Cote-Colisson from HSBC. Please go ahead.
Hi, everyone. My question is on Telesign. Obviously, the IPO didn't happen, and the funds were to support the expansion. Should we assume lower growth and maybe less ambitious growth margin or EBITDA margin forecast now that the process is aborted? I also wondered if you were to face any legal fees or legal costs, I mean, or fees after the cancellation of the IPO. I've got another question, but I may let you answer this one first.
Okay. Yeah, thank you, Nicolas. Yeah, clear. I think, as you saw in Q2, Telesign continued to perform right in line with what we told the investment market back in November, while we were going through the preparation for the IPO. You know, we've seen again, internationally, we're super pleased with the way the businesses are progressing. Telesign has you know really matured from a management perspective, from a strategic and execution perspective. You can see that coming through the numbers. The company was you know ready for IPO. The market you know just wasn't there, and that's clear. In terms of you know do we see any slowdown in that? The business is executing exactly as we expect it to.
You'll see some of the EBITDA primarily better in the first half, primarily because the ramp-up OpEx is more phased to the second half of the year. But again, you know, we don't see any material issue in terms of the performance or execution of the growth plan with or without the public listing at this point. In terms of fees, there's nothing material. Everything was success-based. Yeah, there's no material element of kind of post the closure of the process with NAAC.
Thanks for the precision. If I remember on the slides, the IPO slides, the 2026 revenue of EUR 1.1 billion was quite aggressive. Obviously it's a long time from now. Should we keep in mind the same kind of growth profile, not just for H2 or 2023, but beyond?
Yeah. I think the objective to get to a EUR 1 billion company stays. That's really the commitment of the management team and that also our, you know, our views. We want to get there and to grow that business towards that EUR 1 billion threshold, you know, by 2026. That commitment is still valid.
Okay, thanks. That's very clear. Maybe just a quick follow-up on the market. Obviously it's been a supportive market in Q2, but still I noticed a spike in churn in your four-play stats. I was just wondering if it was just a one-off, or if it was saying something about affordability and people trying to cut the cord a bit among their products.
Nicolas, on the four-play, three-play, and the related churns, this is the continued pressure that we see on fixed voice, which quarter-over-quarter continues to impact the movement from four-play to three-play. We indeed see structurally a better market traction on our Flex triple-play offer rather than the Flex four-play offer. That part is gonna continue to go into the numbers going forward.
Okay. That's very clear. Thank you.
We have another question from Ulrich Rathe from Jefferies. Please go ahead.
Thank you. Maybe one follow-up on the fiber question. In the big picture, is this now essentially a rat race where you roll out and Fluvius roll out and then sort of see what happens? Because it's a bit difficult from the outside to see how two networks can be rolled out to at least 80% of Flanders and both of them making proper returns. I suppose the question, you know, in simple terms is it Kenyan visitor situation where there would be two networks covering 80% both making returns or is it more a question of who wins in the way to get there now?
The second question is, you are talking much about the staff costs in the context of inflation much more than in energy costs. On slide 39, it's sort of showing that the energy cost inflation is very minor. Could you talk a little bit about the outlook into 2023 for that? If I may squeeze in a third one. When you mitigate the wage cost, I suppose the one lever is to get the headcount down. Are you increasing early retirement offers at the moment? Is the cost of those offers going up or are these things essentially in place and you're counting on the sort of gradual take-up as it has happened in the past? Thank you.
On the fiber, the fact that Telenet and Fluvius did announce a partnership last week, it was not a new news or a surprise to us. In our ambition to deliver 95% of coverage of the country, we of course took into account the probability that to see some overbuild coming from other players. Does that mean that you're gonna see overbuild in all parts of the country? Probably not, because this is not something that is rational. I don't think that overbuild is going to be fully there, especially on the less dense areas. That's why I think the speed to roll out in those also in those geographies is important.
Are you gonna see some overbuild in the more dense areas? Probably yes, because this is something that is happening in every market. Again, we are at full speed. We are rolling out, you know, 550,000 plugs this year. It's going to be even more next year. We are delivering 10% of Belgian homes every year with good partners, with a fully funded plan and with the ability for us to become a copper-free company, and which is super important for us in order to also transform the OpEx of the group.
You know, with those kind of ambition, we are super enthusiastic about the prospect of putting on the ground the fiber network as a key element for future growth for the group.
Ulr, let me take your energy costs. In terms of as you know, 2022, we're pretty much fully hedged. We have no material impact there. In terms of 2023, I think last time we spoke, we were around 50% hedged. We're now up to 75% hedged for 2023. We're monitoring it every day in terms of kind of opportunities to buy. In terms of the overall e xposure, it's probably a kind of low double-digit impact for 2023. As I said before, we continue to kind of look at various ways from our efficiency program to mitigate those things.
In terms of the overall workforce, you're right, we continue to be very focused on you know the overall number of indirect workforce in terms of you know we still consider you know customer supporting and directly billable FTE very carefully. The overall number is going down. In terms of any program, we don't have any program to accelerate you know pensions or any additional costs associated with that in the plan. That's where we are right now. Clearly, we also have a, you know, a significant external workforce, which we're also very carefully managing, to mitigate overall costs.
Thank you very much.
We have another question from Roshan Ranjit from Deutsche Bank. Please go ahead.
A great afternoon, everyone. Thanks for the questions. Got three, please. Every are very quick. You've seen the pricing support come through, which is driving your top line guidance increase. That's clearly indexation-led. Is there a consideration to maybe put the underlying price of the fiber product up, given that you've seen good take-up in the areas and as you're rolling out, you are seeing a higher kind of penetration in certain areas. Is there a case of, I guess, increasing that fiber premium? Second question, on the enterprise or the business unit side is we've seen a number of peers this week cite a weakness in enterprise. I mean, that's clearly different from what you guys are seeing.
Is that a case of maybe the corporates in Belgium or your end kind of customer, or are you guys further through the mix of that legacy versus new products? Which I think a couple of years ago you were embarking on that big shift within the enterprise segment. Thirdly, just touch on some of the previous questions. On fiber, you announced these two further JVs, and that extends the fiber coverage. Was there a consideration to maybe accelerate the coverage? So you still got this 70% target by 2028. Was there a consideration to say, I don't know, 70% by 2026? Did that ever come up in discussions or not? Thank you.
We will let Jim answer the last part of the first question, but the good top line on consumer is of course the result of the pricing indexation, but it's way more than that. It's just like, it's not like you decide to do price increase and everything is suddenly happening as a miracle and landing on the revenue of the residential segment. This is way more difficult than that. I have to remember that there is no contract in Belgium, so there is no commitment. You can, you know, leave Proximus tomorrow if you want to.
It's way more than just that. It's a product superiority on which we are putting a lot of effort and investments on fiber and mobile. This is the improvement of the NPS. You see the trends on NPS that are favorable and that are continuing to bring better customer satisfaction despite the fact that we value-managed during the quarter. We also have some good volumes in a market that was quite not that active in Q2. You know, if you look at the performance of Proximus, we are clearly winning the vast majority of the customers on mobile and half of those in internet.
Just to put a little bit of context, it's way more than just, you know, deciding to increase prices. This is way more than that that is driving the good performance of the residential segment. I will really let Jim answer that question. Also, the strength of our brand. If you look at the Proximus brand over the last three years, we improved a lot the perception of the brand and that will continue to pay off in the coming quarters, that's for sure.
Roshan Ranjit, maybe adding on that on the fiber part. Fiber indeed is bringing a better experience, of course, to customers than on copper technologies. That's already reflected in, I would say, the base pricing of our fiber Flex versus the Flex that we are delivering on copper technology. Next to that, also, thanks to fiber, we can introduce a new kind of tiering that we didn't have on our copper technologies, which is a tiering based on upstream and downstream speeds. We already have today next to our standard offer, a 1 Gb solution in the market, which is tiered at a higher price. It's EUR 12 more than on the copper.
Next to that, as you know, by the end of the year, we're also gonna launch the 10 Gb solution on fiber, which is again gonna be a way to increase the value that we're getting out of fiber customers. We're really also there already today, indeed leveraging the quality of fiber to get as much value as possible for our customers. This is reflected in the pricing, of course, as well.
Maybe I should take the enterprise question. This is Anne-Sophie Lotgering. I'm responsible for the enterprise business. Thank you very much for your question, Roshan. I think there's a couple of highlights I could provide you. As you know, we're in the midst of our transformation and our strategy to become an ICT convergent player. Really benefiting from our telco DNA, but with our IT expertise. We're offering our solutions to our customers in an end-to-end way, i.e., completely correlated with the network or in an over-the-top play, which is completely independent of whatever infrastructure our customers have. To do that, we also have a very segmented approach, which of course goes more and more into package industrialized offer the lower down you go into the market towards the SMEs.
Now, I think it's by focusing on our convergent solutions that we're able to mitigate the telco decline. If you look at our results, we continue to keep our good momentum in fixed data, thanks to both Park and RPU growth within internet, but also within data connectivity. Within data connectivity, we have a good balance between, on the one hand, our growing fiber park, and on the other hand, our legacy outphasing and migration towards SD-WAN offers with an attractive customer connectivity pricing. Overall, I think we see here the results of this ICT convergent strategy really paying off so far. Thank you.
On fiber, the new agreement we have with our partners to get to 95%, as we said in the announcement, is going to be in parallel. It will go in parallel compared to what we have previously announced with an acceleration, of course, in the later years. It might be indeed that but we want to first finalize the discussion. It might be indeed that 70% is going to be more than 70%, as a mechanical effect of rolling out more products with new partners during that the time frame between 2023 and 2028.
We will come back to you once the agreement is finalized with more clarity on the ramp up of that additional fiber initiative.
Great. Thank you. If I may just follow up there. While we wait for the details on the additional point, was there a discussion to bring forward, I guess, the original plan, which if I remember correctly, you gave back in 2020? You know, i.e., you know, the 70% being brought forward earlier. Could that be a case?
No, no. We will stick on the original plan as far as the Unifiber, Fiberklaar and Proximus own development are concerned. On top of that, we can have the new agreement in between Proximus and its new partner for the less dense areas that would come on top. The initial plan is not going to be affected by the new agreement.
Okay. Understood. Thank you very much.
We have another question from Polo Tang from UBS. Please go ahead.
Yeah. Thanks for taking the questions. I have two. The first one is really just about the spectrum auction now that it's over, what are your latest thoughts in terms of the impact of a new entrant and the range of outcomes? Do you think that Belgium could become the new Italy, for example? Second question, is really, can you talk through the phasing of your domestic EBITDA growth through the rest of this year? For example, should we expect it to accelerate as you benefit from price rises, have easier comparables, and realize synergies from the Mobile Vikings acquisition? Alternatively, are there offsets and headwinds to consider? Thanks.
On the new entrant, I think what we can say that we're gonna be fully prepared for that new entrant when he will enter the market. The rest you should ask to Digi because we don't have the plan of Digi, so it would be a little bit depending on the way they want to position themselves. What I can say, because I've been there before, we're gonna be ready for it, both on the enterprise segment, but also on the customer segment.
By the way on the phasing of the EBITDA, clearly the guidance we've just given shows a, you know, implied acceleration of the EBITDA in the second half. I think the key components you hit, right, the price rise, you know, we're pleased with how that's landed. The churn's been positive. We continue to see commercial momentum so that we expect to continue. Mobile Vikings synergies will, you know, fully annualize in the forthcoming quarters. We've got effectively the inflation, you know, offsetting by the efficiencies that we're putting through from a management perspective. Then we are gonna face some easier comps in Q4 on an OpEx perspective.
I think, you know, I think that's the way you should think about it, in terms of the phasing for the rest of the year.
Thanks.
We have another question from Ben Lyon from Credit Suisse. Please go ahead.
Hello. Thank you for taking my questions. I have two. The first one is on the rural fiber JV. It seems like the economics are a little bit more difficult given the rollout cost. Could you give us an idea of whether you are having to offer, you know, higher wholesale rates, or if you're expecting others to join you in that in order to attract a third party? My next question would just be on the fiber adds. Could you give us an idea of how many of these are win-backs versus migrating the current customer base? Thank you.
I think on the rollout costs, again, I'm gonna repeat what I said. There is no magic. If you want to roll out fiber network, you're gonna bear the same kind of cost that we are having today. So there will be no difference, except from the fact that we have started before, that we have long-term commitments with construction partners. That includes also the effect of inflation. You know, launching this kind of initiative today in high inflationary environment is probably more difficult compared to the situation we experienced four years ago when we started to accelerate massively the rollout of the technology, of this new technology.
Maybe as an addition to that, in fact, we have been tuning our topology to the specifics of the area where we roll out. In high density, we're rolling out in point-to-multipoint, which makes that there's due to the fact that we can optimize better for less trenching, more on façade. In fact, that topology should bring higher efficiencies than doing it in P2P. We have as well a combination of trenching, façade, but now as well pylons. We make the combination of those three to get tuned per geographical area, really the best costs and the highest efficiencies.
On the fiber net add. As you know, we are indeed doing better in terms of acquisition in fiber zones. At the same time, we also know that we have a lower churn in fiber, and then we also migrate our existing customers. This is indeed bringing the net adds. We're not disclosing, of course, the details of how much acquisition we're getting in that fiber net add, but you can assume that we are able to migrate about 65% of our customers in the first year after we deploy fiber in a certain area.
Thank you. That's really helpful. If I could just have a follow-up on the fiber JVs. I mean, if I just look at the sort of EUR 4 billion committed, that kind of implies a more than EUR 2,000 a home cost. I mean, just in terms of that, I mean, would you have to charge the same kind of wholesale rates that you're charging on the other builds, which are much closer to EUR 1,000 a home? Or is that the wrong way to think about it? Thank you.
I think that at the end of the day, the market is not going to be regional. You're gonna have one price for fiber in every part of the country. You're gonna have to do some price creation at some point. That's why we also believe that having an active access to the network is also a good way to get access to this fiber products that we're gonna have rolled out. That's another story. Indeed, at some point, we're gonna have to manage globally, nationally, the effect of having different costs to build the network. It's super cheap in Brussels. It's less cheap in the less dense part of the country. They're gonna be only one price for accessing at the retail side the fiber technology.
That's not unusual to deal with that different cost of building a network in different geographies. This is, you know, the story of the telecom industry, and we're gonna manage that in the same way we have managed mobile costs and copper costs.
That's really helpful. Thank you.
We have another question from Joshua Mills from BNP Paribas Exane.
Hi, guys. Thanks for the question, hope you can hear me. I just want to ask a bit more about the working capital. Obviously we saw another a big negative outflow this quarter. I think on the Q1 call, you talked about the fact that working capital outflows were partly to do with phasing. Now you're talking about unfavorable year-on-year impact on business working capital. My question is, could you give us a kind of soft steer on where you expect working capital to end at the end of the year? I think consensus are expecting it to be a positive contributor to your free cash flow in 2022. It'd be great to know if you think that's sort of case.
Somewhat related to that, Mark, I think on the last call you made the point that whilst you don't give a clear guide on free cash flow, an explicit guide, you are comfortable with the EUR 200 million or so that consensus is at currently. Would just like to understand, you know, how that may or may not have changed given the higher EBITDA guidance on the one hand, but potentially some of these working capital headwinds, if they don't unwind in the second half. Great to hear your thoughts there. Thanks.
Sure, Josh. Thank you for the question. Yeah. Look, I think again, continuing, you know, there are timing differences, continues into half one, right? I think if you looked at our 2021 working capital, you know, it was specifically positive related to timing of some expenditures in 2020 and 2021. I think we're still cycling against some comps from a working capital perspective that made H1 from a working capital perspective look more difficult. I think what I said on the first call was that overall working capital and tax payments would be net positive for the year. Still kind of in that place. We're just gonna see the benefit of that come out in the second half of the year.
I think the way you should think about it, though, is, you know, we're also, you know, thinking through the overall supply chain constraints that we're seeing. We continue to see some of that. Therefore, there will be some inventory build up as we kinda make sure that we've got the right equipment for customers in the second half of the year and into 2023. I think that's possibly, you know, a little bit of something we're continuing to consider and may weigh, you know, marginally on consensus. As you know, we don't give overall free cash flow guidance. That should possibly help you get to what we're thinking of.
Okay, just to be clear, your view is still that this could be a tailwind, depending on what you do with managing supply chains, that may not be the case now. Maybe you could just give us a practical example? I think, as I understand, you're doing things like paying bills early to try to avoid price rise in the future, maybe buying some handsets. Is there anything else going on here that you could draw our attention to and explain why managing that working capital in this way could be a positive?
Yeah, I mean, I think, you know, I mean, interest rates are changing, so the way that we think through, you know, the cash management is clearly something that we're considering and, you know, this time versus this time last year is we're in a bit of a different environment. I think in terms of the inventory, you know, handsets is one way of thinking, but also, you know, customer equipment for our consumer business and also our enterprise business is another thing that we're, you know, making sure that we have adequate supply so that we don't have any disruptions on the commercial side.
You know, we feel very positive being able to do that, but we're being thoughtful about how we do that in the second half of the year. That you know, has the possibility of having some, you know, as I said, small to medium effect on working capital.
Got it. Just one final one. If I just to size it maybe, I mean, obviously you're upgrading EBITDA guidance, which would imply a tailwind to the free cash flow this year as maybe EUR 18 million-EUR 30 million, EUR 20 million-EUR 30 million. Is that the kind of delta we should expect maybe of additional working capital investment? Or is it, are we talking about even bigger amount which might be coming in the second half?
As you say, we don't guide, but the EBITDA guidance the group will not be additive to the free cash flow consensus. I think that's the way you should think about it. As I said, I think you know, we've still got to make the full decisions on any inventory. You know, we'll see that as we go into the second half of the year.
Great. Very clear. Thank you.
We have another question from Yemi Falana from Goldman Sachs. Please go ahead. Mr. Yemi Falana from Goldman Sachs, your line is open. You can ask your question. We are going to the other question from Martin Hammerschmidt from Citi. Please go ahead.
Yeah, thanks for taking my question. Apologies, some of them I will repeat as my line dropped at the beginning. The first question is on Telesign. In your presentation, you basically stated that Telesign is ready to be publicly listed when the time is right. Would you also consider just having an outside investor and keeping it within sort of the Proximus perimeter? I mean, you would have done that within, you know, SPAC, but do you need to take it public or are you looking sort of at other alternatives as well? The second question is on the dividend. I mean, you're running against the end of a three-year cycle, and your dividend is yielding somewhere like 9%.
Can you show us how you think about the dividend? I know that it might be a thing for the CMD at the end of the year. Do you feel comfortable sort of not fully covered for a couple of years knowing your CapEx will come down soon and your leverage is rather low compared to some of your peers? Just your latest thinking here would be quite appreciated. Thank you.
Martin, let me thank you for the question. Let me take on the Telesign one first. I think, look, I think, you know, the ambition to, you know, create a currency for Telesign for, you know, the various reasons for whether M&A or for, you know, internal staff talent traction, you know, all the benefits of being public, you know, still are very attractive to us. I think that's, you know, the. I think, you know, 12 months on, the company is ready, the strategy is being executed, you know, the company's performing.
In terms of the various routes that we can look at, you know, I think we've got, as you know, the earlier question, we're free of any obligations from the SPAC process. We have various options that we can explore down there. As you'd imagine, we are, you know, looking at what the best option those. There can be a combination of options over time on. I think that's the way that we're thinking about the overall Telesign asset. I think, you know, net-net, we're just really super pleased with the change we've enacted and the management enacted in that business over 12 months. That's really where we are on the future. We've got optionality, you know, but the IPO was, you know, there was a reason for why we were thinking about that.
In terms of dividend, I think, you know, you answered your own question. I think, look, you know, we've always had this view of being, you know, comfortable where we impact the dividend coverage over the medium term. We're super pleased with the progress of the business as we kinda exit half one, and that's why we've taken, you know, the guidance up.
Look, we're currently in the middle of our kind of next three to five-year planning cycle, and that question you're asking is one that we'll, you know, give, you know, due consideration of, given the strategy that we're putting together. I think, you know, that's where we are. You will absolutely get an update in the Capital Markets Day in December and, you know, look forward to talking to you about that at that point.
Thank you very much.
There are no more questions in the queue. We will therefore hand over the call to Nancy Goossens, Director of Group Investor Relations, for closing comments.
Just a big thank you to all of you for your questions and joining us. As always, should you have any follow-up questions, you can send those to Elaine or myself. Thank you very much. Bye.
Ladies and gentlemen, this concludes today's conference call. Thank you all for attending. You may now disconnect.