Ladies and gentlemen, good afternoon, and welcome to the Proximus Q1 2021 Conference Call. For your information, this conference is being recorded. At this time, I would like to turn the call over to Nancy Gosen, Director of Group Investor Relations. Please go ahead.
So welcome everybody. As usual, we will start by an introduction by the CEO, Guillaume Butin. And after this introduction, we will go to your questions. The participants on our side for the Q and A are Kathleen Van Weijer, the CFO, Hi, Jim Castile, the Chief of the Consumer Segment Ann Sophie Lotkering, the Chief of the Enterprise Segment The CTO, Gerd Stannard the CEO of BiCS, Matteo Gata. And so they will all be very happy no doubt to take your In a moment, but first we will turn the word to Guillaume for his introduction.
Please go ahead.
Thank you, Nancy. Good afternoon To you all, and good morning to those joining from the U. S, welcome to our webcast on the Q1 results. Let me go through some of the key achievements over the Q1 of 2021. During the Q1, Belgium set up its COVID-nineteen vaccination campaign.
And I'm very proud that Proximus is playing a crucial role in this By equipping the various vaccination centers in the country with telecom and IT infrastructure as well as advanced IoT solutions to monitor the temperature of the vaccines. Commercially, we are keeping a strong momentum proving that our continued efforts especially around our brands are paying off. Specifically, the Consumer segment is showing solid continued growth with especially high traction for higher value offers. On the Enterprise segment, we are carefully managing the transformation, moderating the financial impact of legacy services decline and gaining in more strategic areas, but I will come back to this in a moment. In parallel, we continue the execution of our Inspire 2020 strategy aiming at structurally transforming Proximus towards sustainable growth.
We are well underway with regards to our ambition to build the best gigabit network for Beijing doubling our fiber rollout speed in the Q1. We have launched our 5 gs innovation platform to allow our B2B customers to explore the full potential of this technology. As for our Cocytoph strategy, We already made significant progress. We launched our partnership with Signpost to enter the EdTech sector. We launched ads and data, an ecosystem aiming at creating scale for the advertising at local level.
Or lastly, we soft launched Beats, Our telco in banking offer sold in selected Belfius channels. From a financial perspective, The COVID-nineteen crisis clearly still impacted our results negatively. Yet, we do see that the effect on the year on year variance is starting to moderate, A trend we expect to further improve over the next quarter. Overall, our Q1 results are on track with our expectations And hence, we can reiterate the guidance we set for 2021. But let's take a closer look at some of these realizations.
Let's start with our operational trends. As you can see on the graphs, the start of the year was in line with previous quarters Showing continued operational success. Our growing customer base remains a key revenue driver, especially as we are focusing our efforts call on high value customers. Besides growing our mobile and internet basis, we see continued growth of our TV base, Adding 17,000 TV subscriptions over the 1st 3 months of the year. Our high value customer growth is of course relying on a proven convergence track record.
Specifically, our convergence Customer base increased by 21,000 over the 1st 3 months of the year, meaning that we managed to grow the segment of customers characterized by higher than average RPC, low churn and a very promising NPS. As a result, our convergence revenue grew by 2.7% and resulted in an overall growing ARPC. This growth in conversions was again well supported by our Flex range. Over the Q1, we no less than 160 key customers to one of the Flex offers and this was a mix of new customers and migration of existing customers from legacy offers. Fax is really answering changing customer needs and that is what is making its continued success.
There is less and less appetite for fixed voice line, which is reflected in the fixed line erosion that you can see on the graph. But there is a growing appetite for multi mobile and other value added services. Lastly, You know that we pursue a strong gigabit connectivity strategy with fiber and 5 gs because it allows us to provide the best connectivity in Beijing. We already see very encouraging results of this strategy with growing appetite for our fiber offers. At the end of the Q1, we had A total of 77,000 fiber customers within our consumer segment.
We see that in the zones where we deploy fiber, The commercial drivers like churn rate reduction and ARPC uplift are well on track with the ambitions we have. We expect of course the trend to accelerate rapidly as we progress on the coverage in the coming months years. As I said before, we have been making good progress on our ambition to rapidly expand the reach of our fiber offer. Our weekly rollout increased to an average of 6,100 home passed, which is more than doubling the pace of deployment since Q1 last year. We have been bringing fiber to an additional 73 ks homes and businesses over the Q1 of this year.
In March, we passed 533,000 homes and businesses with fiber, meaning we are close to a coverage of 9% of all premises of the country. And this is just a start. As we have announced, we will further increase our roll out speeds in the coming quarters. Following announcement to partner with Equity, a new company was created called Fibrecla. Fibrecla Plans to get started this year in about 10 Flemish cities and municipalities and has the ambition to pass at least 1,500,000 homes in centers by 20 call.
As for the fiber partnership in Wallonia with Eurofiber, we expect the clearance before the summer. Between our own rollout, fiber cloud and the JV yet to be launched in Wallonia, we are fully on track to realize our ambition to pass 4,200,000 homes As for Enterprise segment, we announced last year a multiyear transformation. Our aim is to become the preferred partner for the digital transformation for enterprises, allowing us to return back to profitable growth for our B2B segment as of 2023. Last year, we elaborated on our plan to that end And the execution is well on track showing initial results. First, we want to transition towards telco ICT convergent solutions with a specific focus on higher profitability customer segments.
We also want to accelerate the growth on the profitable services that we currently sell on the back of our telco acid products. 2nd, we'll take advantage and monetize our superior gigabit connectivity. We just talked about fiber of course, but also 5 gs. For example, we have recently launched a dedicated 5 gs co creation platform to support professional customers in exploring the full potential of this technology through specific use cases. And our customers are already showing massive interest resulting in a strong commercial pipeline and a lot of co creation with our clients and partners.
Thirdly, we have a lot of progress ahead to create the best user centric digital experiences combining second interfaces, Redesigned G and A's, automation and personalization. The first results are really encouraging as we have already seen the last In the last month, an increasing adoption of our self-service tools and utilization of customer interactions. Let's take a look at the results of the Q1 more call specifically now. From the Q1 results, it's clear that the Enterprise segment is holding up quite well With the revenue decline mitigated to minus 1.2 percent despite the challenging operating environment. We actually grew our core telecom customer basis for fixed and mobile.
By balancing volume and pricing, we have mitigated the structural headwinds from our legacy services. When we look at ICT, the story is a bit different. Over the past quarters, we faced some headwinds from COVID on our ICT business with some delayed or canceled ICT projects and constraints on delivery. But we see that COVID is also bringing such opportunities in domains like virtual call centers, fixed to mobile traffic, cloud computing, security cooperation and collaboration software. As a result, we expect the restoring and positive trends will come with companies That will increase the IT spend to support an accelerated digital transformation.
And this will create opportunities for consultative and managed services on top of the traditional telco and ICT products. Of course, the big question is timing. Some uncertainties remain like impact bankruptcies of company risk adverse behavior in coming months. But as we explained, we are investing the right convergent telco ICT products and services And we saw this quarter with a growing share of higher value ICT. So we are confident that we will provide the right solutions to capture the benefits of a restored growth when it materializes.
Moving now to the total domestic revenue for the Q1, which was down by 1.7% with a comparable basis still tough for this quarter. As you see on the chart, the first three buckets represent our core service revenue that we invoice to customers both for our consumer and business segments. This includes mobile revenue which was significantly impacted by lower roaming out traffic as a result of the COVID-nineteen related travel decrease. If we take out the roaming out revenue, our telco and ICT service revenue would have been up by 0.3% conference call. Another important driver of the domestic revenue decline was interconnect revenue at low margin.
This decline at low margin, sorry. This decline represents rapid change of behaviors in the way people and businesses are communicating since COVID times. And finally, we had negative roaming in impact for obvious reasons. This was for domestic revenue. If we now take a look At TeleSign on the next slide.
As we announced, we are now managing TeleSign and BiGG separately given that the two assets require different growth strategies. TeleSign sustained its very strong growing performance with both programmable communication and digital identity services on the rise. With steady signed revenue in U. S. Dollars, There are some ForEx effects that impacted the year on year variance.
When we eliminate these effects by applying a constant currency, TeleSign's revenue grew by 43% by almost 44% in the Q1. Of course, It is essential to fuel this growth with the necessary investments. In line with our previous announcements, the company has been investing in attracting the right skills strengthen among others the
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market and the R and D domains, which will in turn generate even more growth in a booming sector. For the big segment, so now excluding TeleSign, the sanitary crisis was still playing a significant role in this quarter, Especially as we are comparing to a quarter which was virtually still unaffected by COVID. On top of that, the ongoing insourcing of services by MTN Still had some additional negative impact although the effect is gradually moderating. These two elements Which are of temporary nature overshadowed the otherwise quite resilient business trends of BiCS. Especially in the core and growth domains, BIGs visited in the competitive market.
The revenue from growth services, which includes Cloud Communication and IoT was up by almost 13% year over year. And this core services representing revenue from messaging, mobility and infrastructure was up by 7.2% year over year. Our group EBITDA for the Q1 was €446,000,000 A 3.9% decline from the year before. This largely reflects 3 main elements. First of all, There is still a remaining impact of COVID-nineteen on our results.
I talked about this before and you see this especially reflected in the domestic and Bixby direct margins. Secondly, domestic expenses were higher, including some higher costs related to customer interactions calls And cost also linked to the good commercial momentum and fiber migrations. And thirdly, as we announced in framework of our guidance for this year, We have some higher costs related to our ongoing transformation plans for both our domestic operations and also as I just explained to boost the growth of TeleSign. Over the 1st 3 months of this year, We invested a total of €225,000,000 with the timing of content contract renewals explaining why we were slightly below last year. In line with our expectations and our rollout, the level of fiber investment increased And it is now representing 28% of our total CapEx envelope.
Also in line with our strategy, We stepped up investments in the area of digitalization and IT transformation. At the same time, we are rationalizing on CapEx for less strategic areas to maintain the overall envelope and prioritize strategic investments. This brings me to the free cash flow for the Q1 of this year with a total of €143,000,000 on normalized basis. The chart shows You have the different moving parts. I'd like to highlight that this includes the quit injections of in the company FibroClar for €30,000,000 So in conclusion, we are on track With the execution of our strategy and our results so far are fully in line with our expectations.
So we therefore reiterate our guidance for the year. With this, I've come to the end of my introduction and you can now go to your questions.
Thank The first question comes from Nicolas Colisson from HSBC. Please go ahead, sir.
Hello, everyone. Two questions, please. First is on CBU. Your convergent ARPU Q is down, I would say, sharply year on year. Is it just a function of bundle mix from 4P to 3P?
Because if you could help us on getting the trends for the rest of the year, this would be very helpful given the price increasesroaming Change in the mix, not very clear where we should land eventually. And my second question is about Having maybe a bit more indications on labor costs evolution into the coming quarters because as you said, there will be a mix of salary rises and workforce attrition. Question. So if you can update us on the phasing between the rest of 2021 2022 to get to the group targets eventually. Thank you.
Good afternoon. This is Jim Castile for Consumer. So on the first question On the convergence RPC, so I think what is important first to note of course is that our overall RPC continues to increase Year over year by 0.4%. So we continue to see a very nice growth of the convergent customer base, Which is generating higher average RPC of €94 And this higher value mix Within our customer base is driving the overall growth of RPC. Now on the specific drop of the trip on the convergent RPC, It's actually within the mix that we see that our convergent RPC It's evolving.
We typically see that and it's linked to the fixed voice erosion The bundles of Internet, fixed voice and mobile are declining and these are typically A bit of a higher IRPC than the average convergent IRPC. But when you look at every Specific IRPC within those different mixes, each of them is growing. So it's really the mix That is impacting and that mix is linked to the fixed voice erosion that we see in the market. So I think what is important on our side is that we continue To look at the overall RPC, we see a nice growth again this year versus Q1 last And maybe just to conclude, if you compare the growth in Q1 2020 with Q1 2021, The delta you see in that growth is completely linked to the ePres impact that is now fully embedded, of course, in the Q1 results cost of consumers.
Good afternoon, Nicolas. So as to your question on the evolution of the labor cost, Last year on the 1st March, our FFP program, so fit for purpose program started off and so we had a very important Reduction in headcount. And so of course, this quarter, we are still benefiting from 2 months of savings related So this FFP has come to a reduction. And going forward, this disadvantage will disappear. And as to the indexation, the last indexation of our labor cost was last year in April 2020.
And for this year, according to the latest provisions. We're not foreseeing any further indexation according to the latest Provisions of next indexation is at the moment foreseen as of the 1st June 2022.
So does it mean that in absolute numbers, The labor cost should be similar in the coming next quarters to the one we have in Q1?
Indeed.
Okay. Thank you.
Thank you. Next question from Christian Radej from Deutsche Bank. Please go ahead.
Great afternoon. Thank you for the questions. Three very quick ones from me actually. On the B2B transformation. Is it possible to just get a sense how far through I guess I do appreciate it's early in that stage, but how far through you are in the renegotiation and the reprice question of the contracts and maybe migration of the contracts for your customers.
Secondly, sticking with B2B, I think you mentioned upfront there was some contribution in ICT for some of the COVID centers and providing data services for the immunization process. It's possible to again quantify that How much that was this quarter? And lastly, on the consumer side, just to confirm the 73,000 fiber connections. That's all done via Proximus. I think you said that the approval process for FibroClar has been achieved.
Should we can we anticipate any contribution from the JV impacting the Q2 numbers? Or would that come in the second half of the year? Thank you.
So I'll take 2 and 3, your number 2 and number 3 question. And Sophie, I will let you answer the first question. So On your question around the contribution in terms of revenue for the implementation of the COVID vaccination centers, Honestly, this is not something that we want to disclose, but the good thing is around the perception of the brand and we are it's very good For perception to help also bezier in that difficult times, but we are not doing that for generation of revenues and this is more helping the country fighting against the pandemic than any other things. But we believe this is quite important in those times. On number 3, really rapidly, It's only the Proximus standalone fiber rollout that we see in that quarter and it can you be the same for the next quarter?
This ramp up is really fully fueled by the own Proximus standalone fiber rollout. And Sophie, if you can answer the first question.
Yes, of course. Thank you, Guillaume. So to your first question, I think it was related to where we were in terms of our transformation and how far we were in terms of the repricing and renegotiations of contracts. As you said yourself, 2021 is the execution year of our transformation. And as you can imagine, it's very important that we strike the right balance, managing on the one hand our customers moving towards next generation technologies such as SD WAN or others, Whilst still ensuring we're managing the value of our existing business as much as possible.
And as you could see in the numbers, all technology such as fixed Voice is actually ramping up. And I think that the Q1 numbers testify to the risk shareholder management. Now to give you an illustrative example as to how we're managing this transformation is we've identified and segmented our customers and cohorts To accelerate selectively the migration to new technologies, proactively accelerating this migration of the early adopters 1st, whilst making sure we also keep an eye on the future technologies of the market and ramp up as and when needed. I think you also heard from Guillaume in his introduction that our transformation is about ensuring the convergence of traditional telco with ICTs with IT solutions And customer value propositions that are answering our customers' requirements, such as, for example, secure connectivity to the cloud, As you know, those contracts have different year terms and therefore, it's very difficult to be able to talk generically About contract 2 could be of a different year term and therefore would be renewed in different times. So I can't really answer That question in detail, but hopefully, I've given you the gist as to how we're managing our transformation today and moving forward.
And just also to add to what Anzopi is saying, so far we still feel confident that The 2023 horizon to profitable growth for our B2B segment is still reachable.
Yes, absolutely. We're committing to ensuring the commitment that we took at the Capital Markets Day to be back to growth in 2023. Indeed, Guillaume, I should have
Okay. That's great. Thank you. Thank you for that.
Thank Q and next question now from Naya Palmishet from Citi. Please go ahead.
Hi, thanks for taking my question. I have two questions, please. What is your view on fiber returns on fiber, especially in flanders where you have a lower market share? Returns are based on utilization and hence depending on wholesale as well. And in this respect, Telenet doesn't seem keen to take wholesale from Proximus and also a fair focus Orange Belgium with wholesale partner, do you see this as a risk and affecting returns?
And the second question is, you're building 2,200,000 homes with own build out of which 600,000 with Brussels. That leaves you with 1,600,000 homes to be built in the dense areas of Bologna and Flanders. Would you be open to using net network and wholesale basis in flounders and the dense areas and focus building more on in Bologna where network competition may arise if wool is acquired and restructured, which is
On the first question on the returns Our 5 investment in Flanders, as we said several times, the return on investment is depending on a lot of different factors. And as you know, the Proximus standard rollout will focus on the city centers and the dense areas Where we see a lot of opportunities to bring a fiber superiority compared to coax And that the speed with which we are holding out fiber is also shown in the numbers that we just shared for Q1, but it's going to be on accelerated trends for the coming quarters. There is a product superiority and fiber will demonstrate that In Belgium, it has demonstrated that product superiority in other geographies. And you can see that in customer traction, customer churn, NPS for existing customers on the fiber network of Proximus. So we are very confident that we will attract more customers and we will also increase the stickiness of the customer base And at the same time increase the value of every customer connection.
That's for the City centers, dense areas. And for the moment, we are really on track with that ambition. So that's one. 2nd, indeed we are rolling out an open network. It means that we are welcoming, which is new for us.
We are welcoming any operators that would be willing To get access to fiber connectivity going forward. And that's a new thing because we can do that with using fans In dense areas, we can also use in fact using the P2P architecture that we're going to be rolling out in the less dense areas with our JV partners. And again, that will create some additional revenue opportunity to increase the return of the fiber investment of Proximus. And also very one thing which is really important to keep in mind, we are not Protecting any wholesale fixed revenue on our copper network because our competition today is on coax. So it means that compared to also Other incumbent operators, we are in a much better shape to really get a strong return of the fiber investment on the long run because we have No protection of any existing fixed Internet wholesale revenue for the moment.
That's second and as a combination of those two elements, I'm sure that if we maintain the speed to roll out the network that first mover advantage On the long term will be a key success factor for us. And of course, we could have OBL as a wholesale partner. We Also our friends from the cable at some point from some regions also welcome on our network. We will see. It's too soon today to commit on that, but there is a rationality to find A structure where we avoid to destroy value on the Beja market and that's really what we are aiming at.
So And last point, we are not going to compete on price. We are not competing on price. We will compete on product superiority Because we want to behave rationally as an incumbent operator. So I think the combination of this approach, the speed, The first module advantage and the openness of the network will ensure that we cannot drive very nice return on our fiber investments. As far as your question around Wallonia, I think this is the same story.
I think we first Roll out the network in dense areas because this is where we do think this is easy for us to First to reach as many customers as possible and with a very nice return as well. So we will focus the standalone Proximus rollout in Brussels and city centers of Wallonia and Flanders. And then for the less dense areas, we will rely On the joint rollout with our partners, equating the North and Eurofiber on time in the South.
Great. Thank you.
Thank you. Next question from David Bachman from ING. Please go ahead.
Yes. Good afternoon, everyone. Thanks for taking my question. First on fiber and the activation rate of fiber clients in Q1, what is your view? And basically, how do you think you could accelerate in the coming quarters or in the coming years?
Is there are there any change needed or you and then Steve as a quick follow-up on this one, Are you getting any closer to signing both in the client? Then second question, on Mobile Viking, Could you explain us what are the regulatory order you face with this acquisition? And explain us Basically, why you think you have a very strong case with the antitrust authorities to get the deal approved? I have, of course, in mind the sale of Mobile Viking by Tevinet as a remedy to have its acquisition of base approved. Thank you.
Good afternoon, David. Jim Castelli. So on your first question, first of all, I think from a consumer So we are very happy with the acceleration of the network team in the deployment of fiber. Of course, as you know, there's a timing difference Between the moment that we pass homes with fiber and then the moment that those areas are ready for commercial activity, But when I look at both the fiber deployments we have done in 2018, 2019, 2020 And the way we have been activating those areas also in Q1, we are on track with the plans that we have presented to you In January. So we're really comfortable and really satisfied with the commercial performance that we have in line with the deployment rate that we are doing.
That means targeting the 50%, 60% take up rate?
You have to disconnect the calculation of active customers divided by homes passed because there's a timing Delay between both and of course also in our commercial plans, we are not going to activate everybody in the 1st 3 months Over deployment, because we also from an operational perspective, we manage that part. So as said, When I look at the plans that we have and that are in the case for fiber, we're really happy with the performance that we see. And it's aligned with the message that we gave in January, where we see in fiber areas double as much gross gains As we see on copper, we also continue to see the better churn in those fiber footprints also in Q1 This year versus what we announced in January. And also on the ARPU uplift, we continue to see that 10% ARPU uplift Also in Q1, like we announced also in January. So from you, we're really with the numbers that you see here, I understand That is it can be a strange calculation to do.
But when you take into account the timing delay between Activating customers on a fiber network and the deployment of the fiber network, we're really on track on that.
Okay. David, this is Geert speaking. With respect to your second question on wholesale, we definitely see very positive traction in the past days, we've signed the 31st wholesale agreement for Fibers. And then as Guillaume explained, This is a fully open asset, and we also are looking forward to further extend that also with different sized of partners as well. So overall, very positive traction.
So and then with respect to the speed, so first of all, the standalone, but also with fiber class In quarter 4, we will start you will see us starting deploying as well there through the fiber cloud
CV. Thanks, Bruce.
And on the Mobile Vikings acquisition, I will not comment Because this is ongoing discussion with the competition authority, but we are quite confident there is no Reason why we would change an opinion on the good change we have to get clearance and we should have
Thank you. Next question from Emmanuel Carlier from Kempen. Please go ahead.
Yes. Hi, good afternoon all. Two questions from my side. The first one is on the drop we have seen in customer relationships on the consumer side. I think you lost something like 25 or 27 ks customers, I think, which is the highest number in many quarters.
So could you explain us a little bit more why that is and how you expect to reverse that trend? That's question 1. And the second one is with respect to the recent launch of 1 by Telenet. So I would love to hear your thoughts on this product and how you believe it will impact the market and Proximus particularly. Thank you.
Good afternoon, Emmanuel. So on the first question On the drop in customer relationships, so this is inherently linked with the acceleration we have seen in Q1 On the convergent households, where we see really consolidation of mobiles within the family. And as you know, in the past, FABroximos has a history of 2 companies coming together. So we still had customers that had a postpaid account on a separate customer account that is now as part of the Flex conversions being brought together into The same customer account. So I think you see an acceleration of that trend due to the success of Flex where we see more and more Mobile within a family consolidating under 1 and the same household account.
On the yes, go ahead. Okay. Sorry. And then on the question of Tilenat, so I would say that if you look at our pricing strategy, we have quite a balanced strategy already today in the market. We have On the one hand, Flex that is really oriented towards families, where we offer customers the possibility to really tailor There are family needs with a flex offer and we know from market service that customers are really looking for that.
On the other hand, we have our epic offer That is tailored to the needs of digital natives. And then with Scarlett, we can target the price seekers. So when you look at Telenet's offer, the Telenet 1 is actually doing the same between the same And it's not disrupting the pricing strategies that we have already today within our current portfolio when we address those 3 segments.
Thank you. And don't you fear that more customers than before will move towards Telenet because they offer higher speeds. Of course, you're also working on that with the fiber rollout, but that will take quite some years.
I think speed is one of the elements that comes into play. Now as you know with Flex, We already have a very successful offer in the market already over the last year. I think as you look at the evolution of the proximate net adds on Internet over the last quarters, we have been really performing very well. Also on our copper footprint where we have offers at 100 megabits, so we really play on the different elements That drives the choice of a customer when he has to choose a package which is no longer a telecom package, but which is really Package that is relevant in the daily digital life is about entertainment, it's about digital press. So we have a lot of other assets That we bundle in our Flex offer.
And of course, the good news is that on top of that in fiber, we can add additionally Also the speed element and this is what we then see in fiber where we have an even better performance on acquisition than we have in copper. So I don't really see this today impacting the market because also that additional speed It's only available on the high end of their prices. So for me, I see this really as a value move From Telenet, not one to be aggressive in the market.
Yes. Sorry,
Close to the mic. Yes, I fully agree with Jim's comment. If I can add one element, I think this is good for the market that the tiering based on Technology is what we push forward both Tenet and Proximus. And then this is really where I think the competition should focus. And this is, I think, for me a good sign that the market is really driving for good competition around the product, which is, I think, quite Good to have.
It's much better to have a competition on pricing, on the product quality and capabilities. But again, I think this is not only around speed. You have to also consider that fiber is bringing much more than speed. Low latency, as you know, for gamer is quite important. For those We know what is the difference in between coax and the fiber network.
They will know about the low latency capabilities of the fiber network. So That will drive the word-of-mouth positively around the fiber rollout, this is And you know that there is 1 gamer in every 2 home. So that's really something important, so one. And second, the stability of the network, Which is good and better way better on copper and fiber compared to coax. And the 3rd element and it's really important in COVID times, Upload capabilities and you know that when you have to spend 10 hours on Teams on Zoom and do video conferencing, The upload element is also quite important.
So this is going to be a technology marketing And perception battle, but I'm convinced we have the better product. So at the end of the day, it will make the difference.
Thank you.
Thank you. Next question from Ulrich Rathe from Jefferies. Please go ahead.
Thanks very much. I have 2. First one is on the Flex proactive migration. I think you mentioned this also in the context of the of some RPC Dilution. I was wondering what exactly does proactive migration mean?
Do you Send people offers and they take them up? Or do you say, well, your contract on this tariff doesn't exist anymore, now you're on this tariff. If you don't like it, you can quit? Or how exactly does this work? And the second question is on TeleSign.
In your call on your call from February, you sort of talked about Synch and Twilio as comparable companies. And you sort of guided us to look at the valuations of Cinci and Twilio. Could you maybe comment a bit, because you haven't in the past really highlighted TeleSign and its business profile very much in detail. Could you comment a little bit what the differences of TeleSign versus the Incentuous Twilio might be? What might be unique about TeleSign
Hi, Ulrich, Jim speaking. So on the first question with respect to Flex migrations, I would say that it's a bit the same approach like Anne Sophie explained on the enterprise segment. So we do value based migrations Where we look, of course, for opportunities within our current customer base to see where we can create additional value For the company, we focus also a lot on mobile consolidation within our households. And I would say that When we look at other types of migrations, the legacy migrations of the real Older packs is also something that we continuously look at because we know that it drives the simplification. And thanks to that simplification, we can also have a positive impact on costs.
So those migrations are really a mix of commercial value based migrations on the one hand and then From a legacy portfolio management perspective to drive costs down from a simplification perspective.
Then to your question around Telethign, I would like to make a few comments. So Telethigns, They do operate in the digital identity market. That market is a $35,000,000,000 market. And in that market, we want to become a worldwide leader in connecting and protecting digital interactions between consumers and companies. But it's important that we I explained a little bit more.
I think preventing fraud And securing digital interactions is not new. That's for sure and was of critical importance long before 2020. But what we believe is that the digital transformation also linked to the pandemic, with individuals turning to to facilitate everyday tasks that they might have doing before in person Mean that the role of TeleSign is going extremely central and more and more important. Just one Striking example, cybercrime every year costs over $6,000,000,000,000 globally And digital identity theft alone cost over $56,000,000,000 So as more and more transactions happen online, I think the incentive from further cyber criminals is only getting bigger and bigger Every day. So without solutions like TeleSign, those kind of losses could continue for The need to reduce the fraud losses while continuing to deliver a great customer experience.
And honestly, we are also confronting to that that Proximus could be sometimes impossible problem to solve. Adding more security checks, balances And that may reduce fraud losses, but some same security measures can also be annoying customers. So the role of TeleSign is to help end that trade off in between protection fraud protection and seamless use of services. That's why I'm really, really convinced that the value we bring to customer, Even if it's somehow different from the people you mentioned, but there is no reason why we should see that the value That we bring to customers would not be at par with the companies that you mentioned. As we are right at that intersection in between communication and CPaaS and digital identity.
So that's really what is Telesign about and what is our secret sauce? What is the difference of Telesign? And I think we are really unique because we have insights of billions of phone numbers worldwide And associated communications metadata, that's the difference of TeleSign. This data combines with our own expertise In terms of data science, creating of this AI based machine learning based scoring platform, That's what is the secret sauce of TeleSign and create that compelling solution that is Growing at booming trends as you can see in the result of last year and result of Q1. That's really What Telesanne is about, that's why I'm so convinced that we can really further accelerate and create a lot of value your company.
That's very helpful. Thank you very much. Thank you.
Thank you. Next question from Ben Lyons from Credit Suisse. Please go ahead.
Thank you for taking my questions.
I have a few. The first is if you
could just comment on the competitive environment at the moment in Belgium and what your 5 gs pricing strategy will be now that we're seeing the Steve, Tearing on the mobile side. Just a follow-up on the TeleSign question as well. If you could give us any FX sensitivity, so the growth rate This is impacted by currency, so that would be quite helpful. And lastly, on the working capital benefit, do you expect that to unwind over the rest of the year? Thank you.
Hi, Ben. So Jim speaking. So on the question linked to Pete Tiering, today, and I think like Guillaume says, it's good to see that other operators in Belgium are going to follow the same path. If you look today on the consumer side, the way we are monetizing 5 gs, 5 gs is only available on our high end mobile plans. And By doing so, we have today an implicit tiering on speed as the 5 gs speeds are only available on The 2 most expensive mobile plans for the consumer and all the other ones are on 4 So I would say that it's good to see that competition is also going to drive the market In the same direction, so we can indeed continue to build on 5 gs capabilities to create value through speed tiering.
On the TeleSign growth rate, I think we have been very clear in the slides in the intro, on constant currency, the growth year over year is 45%. That the revenue growth of TeleSign, extremely impact of the currency Effecting between dollars and euros. And on the working cap, I will let
So the working capital effect of Q1 is indeed pure timing difference. And so for the rest of the year, we do expect that this benefit will unwind.
Great. Thank you.
Thank you. We have one new question from Nicolas Cote Colisson from HSBC. Please go ahead.
Yes, thank you. Two small ones. The first one is maybe a smaller issue, but I was wondering why such a fall in the Advanced Business Services, Because if anything, this should be a buoyant segment, so I'm a bit surprised. And sorry, another follow-up on Telefine, because in the press release, you talked about a significant customer pricing effect, but still you're growing the business double digit. So can you help reconcile this?
What's the balance between price and volumes to get to that 44% growth? Thank you.
First question, I think this is for Anne Sophie.
Yes. It's for me, indeed. So I think your question, Nicolas, was related to the Advanced Business Services and why That was well, as you know, this part of the business is actually very much impacted by COVID. And this is why you see the decline in terms of revenue. And more specifically, on certain elements That I will outline to you in a minute.
The elements that are impacted by Covina are pretty much Sorry, I'm just trying to find.
I can take the TeleSign question meanwhile, Nicolas, so that you can restart your computer. Yes. On the growth of TeleSign, it's really volume driven for the moment. But at the same time, what we are trying to do is more and more doing POX, so proof of concept on a lot Of the digital identity use cases at customers. That's why we also have a small dilution of the direct margin because those folks yet did not yet deliver the value that they will deliver going forward.
So that's why really You see that evolution in between revenue and direct margin, so really driven by volume, but we are really now Accelerating the ramp up of the pure digital identity use cases that will be really the fuel Of the growth for the coming quarters, it's going to be really seen as of next quarter and the quota that are going to be following this year, but also for the years to come.
Yes. Thank you, Huweme. And apologies about this. Computer is still not rebooting, but I will set my brain to find the answer. So as you know, the Advanced Business Services is really the smart Mobility revenue is impacted with more specifically on the automotive and the parking revenues Because of course they're highly exposed to COVID-nineteen.
So the decline that you see is linked to that, the exposure for COVID-nineteen on the automotive and parking revenues.
That makes sense. Thank you so much.
Yes. Sorry about that.
Thank you. We have 2 other questions, one from Michael Bishop from Goldman Sachs. Please go ahead.
Yes, thanks very much. I just wanted to follow-up on this interesting TeleSign discussion. I think You've been in the local press, obviously, suggesting that the value of TeleSign could be sort of unicorn type valuation. But at the same time, if you sort of read the press release and also your comments, you've talked about the need to scale up. And Therefore, I just really wanted to ask sort of 2 things.
Firstly, what do you think the sort of the reinvestment Organically required is to really sort of scale up and in particular go outside of the U. S? And then secondly, if you look at a business like Cinch, For the last sort of 5, 10 years, they've done a huge amount of bolt on M and A in this space to basically build more global scale. And I appreciate You are slightly operating across different verticals, but did you think you'll have to do quite a bit of bolt on M and A at TeleSign To sort of drive similar scale given this tends to be a global business with your high volume, low cost of execution wins out. And then just secondly, following the previous question, So are you suggesting that growth can accelerate from here or whether there was some sort of one time Benefits to growth in the last couple of quarters from an increase in volumes?
Thanks very much.
So a lot of questions. But yes, indeed, I think the focus that we have today with Gilbert and the new management that we put in place, It's really to execute on the organic growth because now we really want to take that unique positioning in So that's the first focus of the moment, really to make sure that we can deliver that promise On fraud management, fraud prevention and on the digital entity space and that We require some strong execution focus and some investments In the product. That's why we say that if we manage to execute We should quite weigh on those product investments that are not massive product investments, so do not be scared. But we are in a very nice situation because TeleSign despite the fact growth is EBITDA positive. They are They are generating EBITDA, which is quite unique for a company that is growing that fast.
So we can use part of that to Invest in the product and also in the go to market. In the software industry, when you have a good product, you need good sales guys To deliver the promise to the customers. So we need also to scale up the go to market. And If you manage to do that, indeed, there is an opportunity to further accelerate the growth of the digital identity part, Because today the mix there is a mix of messaging and digital identity revenues within TeleSign. We want really to scale up the digital identity part So that we also can improve significantly as a margin of the the direct margin of the company.
That's really the focus. If we can do that, everything would be then possible.
Thanks. And then sorry, the second question was just, I guess, on The growth profile if we think about the next year, could it accelerate because versus the sort of 45% that you've Slacked on an organic basis or has it benefited from the sort of higher volumes more recently that creates a tougher comp?
As I said, you're going to see an acceleration of the revenue trends On the digital identity segment, so you have revenue growth, but with a better mix. That's really what is going to happen in the coming years because the contribution of the digital identity part is going to be Higher and higher going forward. That's really what would drive the value of the company.
Great. Thanks for all the color. Appreciate it.
Thank you. Last question for the moment registered is from Simon Cowles from Barclays. Please go ahead.
Thank you. Thanks for taking the questions. It's just on the fiber injection. So obviously, you had a start up on for the Flanders JV This quarter and it's presumably there should be another one for the Wallonia JV at some point this year. I'm just wondering is that enough to cover the JVs for say the next 1 or 2 years, because I remember you saying before that the fiber the equity injections for the fiber JVs were back end loaded?
Or should we consider sort of you need the smaller ones for the next couple of years and then the bigger ones come in as the fiber rollout really ramp up? Thank you.
So Simon, So right now, we have done equity injections in fiber, Klas, in Q1. And so going forward, as soon as The JV with Uruguay will be approved. We will, of course, as well have to make equity injections. But given the fact that The coverage of this JV will be smaller than 1 of fiberglass, the size of the JV tickets and this JV will be proportionally smaller. And then of course, like we said, the JVs, they will fund as well with debt.
70% of the cash needs of those JVs will be funded with debt and the rest will be funded with EBITA. And of course, the need for depth of those TVs, that will be depending on the further rollout of those TVs.
Okay. But if we took, say, the €30,000,000 and gross that For what EQT would put in and the debt that you'll generate, that would suggest that you could probably cover sort of a couple of 100,000 households. So You're good in, say, the Solander's JV for the next couple of years. And then in 2023 or 2024, that's when the big injections start happening the bigger injection for Henri.
So there will be debt in first instance and debt at the level of those That will be at their balance sheet and so that will not be consolidated in our debt. And so indeed, the next Equity injection that will need to be done, will be done once that new cohorts will be completely hold out by those JVs.
Thank you. We don't have any more questions. We just have a moment. Looks like we don't have any more questions. Back to you for the conclusion.
Thank you all for your participation. I wish you a lovely weekend. And for any your follow ups, you can contact the Investor Relations team.
Thank you. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for attending. You may now