Hi, good afternoon. Welcome to our Third Quarter 2023 Results Conference Call. So as usual, José Pedro Pereira da Costa, our CFO, will go through the highlights of the results. And then we have the full executive committee with us to take your questions after the brief presentation.
Okay. Thank you, Maria, and good morning, everyone. Starting with the highlights in the quarter, we'd like to highlight that we continue to sustain very positive commercial momentum across our telco business, and also we have cinema unit hitting a new quarterly ever record. We have very healthy operational growth with RGU net adds exceeding again 100,000 number, as in the last two quarters. With conversion offers remaining the main driver of growth, with 12,000 net adds and now representing almost 70% of the fixed customer base. Also, we have core value postpaid mobile subs continuing to grow very nicely with around 70,000 net adds. Also, our best-in-class 5G network continues to be deployed at a fast pace ahead of our main competitors. It now covers around 91% of the Portuguese population.
Finally, as already referred, we have our best performing quarter ever in the cinema business in terms of attendance, gross box office revenues, and EBITDA, exceeding the numbers of the third quarter of 2019, which was our record quarter up to now. This robust operating performance drove very strong financial results with double-digit growth in EBITDA, generating also very positive free cash flow levels. In terms of financial highlights, we would like to highlight that consolidated revenue reached around 70% growth year-on-year, driven by the very positive momentum in the telco business and also by these record numbers in terms of cinema and audiovisuals. The telco unit grew again very strongly in the quarter, almost 5%.
Consolidated EBITDA grew double digits, around 13% year-on-year in the quarter, and consolidated EBITDA after leases also grew 12.3%, showing operational leverage and continued cost control. Total CapEx in the quarter came in line with the last couple of quarters, around EUR 98 million, confirming the strong acceleration in deployment of 5G and FTTH. And finally, and also in line with last quarter, we continued to post significant free cash flow generation of EUR 29 million or EUR 40 million, if adjusted for the non-recurrent cash tax payment related with the tower sale of last year. Now starting giving a bit more color in terms of operational review, we have posted around 105,000 RGU net adds in the last quarter, again, growing well in all services.
Year-on-year growth in terms of total RGUs was 3%. Core services grew very positively in the quarter. Postpaid mobile numbers grew close to 70,000 in the quarter, mostly driven by the take-up of conversion packages, with prepaid back to positive numbers. On fixed, we have posted solid fixed pay TV and fixed broadband net adds of 8,000 and 12,000, respectively, benefiting mainly from FTTH uptake. We have added this quarter 12,000 conversion customers, ending with 1,126,000 conversion customers, representing now close to 70% of the fixed base. This represents around 5.9 total conversion RGUs, with net adds in the quarter of around 80,000. In terms of our cinema units, as already mentioned, we had our best ever quarter so far, beating the record holder.
That was the third quarter of 2019 in both attendance, revenues, and EBITDA. Versus this third quarter of 2019, attendance was up by 2%. Revenues grew in excess of 13%, with movies like Barbie and Oppenheimer impacting very positively July and August numbers. A number of smaller titles also working very positively for the September numbers. Now moving to a quick strategic update. One of our main strategic pillars has been leading in 5G, and for that matter, NOS mobile network continues to be recognized as the best network in Portugal, with the highest coverage, 91% of the Portuguese population. Once again, we were distinguished in this case, DECO Proteste award, published last July, for the best mobile internet service for the fourth consecutive time.
And also, we got the Opensignal Award for the best mobile network in Portugal, where we ranked first in 13 out of the 14 categories that are more relevant in terms of mobile customer experience, namely download and upload speeds, and coverage. On the FTTH network rollout front, our FTTH deployment continues at a strong pace, reaching a total of 3.8 million homes passed. That is over 70% of total coverage, around 70,000 FTTH homes passed added in the quarter, of which most of them were what we call brownfield homes passed. In terms of ESG progress, we continue to execute our strategy.
This quarter, we would like to highlight our improvement in the Corporate Sustainability Assessment by S&P, where we improved our score by 7 percentage points, ranking higher in the environmental area, but also with a very strong progress in the social and governance areas. Now, moving to the financial review. We have, as we said, a very strong set of financial results this quarter. In terms of top line, we delivered strong group revenue growth of close to 7%, benefiting from 4.7% growth in the telco unit, also from the record numbers in terms of cinema and audiovisuals.
Giving you a bit more granularity in the telco revenues, the consumer segment posted a very positive 5.6% year-on-year growth on the back of RGU and ARPU growth, + 4.7%, almost same level versus last quarter and continuing to show a very positive trend. The B2B segment also increased revenues very nicely by 6.3% in the quarter. As we said, in the last quarter, performance in SMEs was again very positive, with double-digit growth, with the performance in large corporates, again, being positively impacted by both core revenue growth and also some slight recovery in low-margin resale revenues. In terms of profitability, consolidated EBITDA grew an impressive 12.7%, driven by strong telco EBITDA growth of 10.6%, in line with last quarter growth.
Also benefiting, again, by operating leverage and also helped by cost control efforts and efficiency gains that we are implementing and which are compensating well the overall inflationary pressures that we are seeing in some areas. Cinema and audiovisuals increased 46% this quarter, achieving also a record quarter in terms of EBITDA in this unit. Just a quick note in terms of energy. It continued to represent tailwind to telco EBITDA evolution. It represented around 1.7% of positive contribution to EBITDA growth this quarter, which is slightly below the tailwind in the first and the second quarters.
In terms of EBITDA after leases, consolidated numbers, it grew also an impressive 12.3% on the back of strong telco EBITDA after leases growth of 10%, despite the increase in leasing costs as a result of the additional tower sales executed last year and to the inflationary environment at leasing costs. Cinema and audiovisuals EBITDA after leases increased by 53%. In terms of net income, we have reached a net income level of EUR 46 million in this quarter, in line with last quarter. Against a very positive performance at the EBITDA level, net income adjusted for the tower sale increased only slightly as a result of a number of impacts. Firstly, we had a relevant financial expenses increase, given the interest rate context.
This quarter, particularly relevant since it was the first full quarter after the May refinancing of the EUR 300 million DCM bond. This last quarter represents now a good base to project interest costs in the coming quarters, of course, subject to base interest rate evolution. Also, the share of JV results also decreased in a less relevant way. The strong devaluation of ZAP local currency, which took place in the second quarter, affected negatively the operating performance of the ZAP business. As expected, total group CapEx in the quarter, ex-leasings, came in line with last couple of quarters, around EUR 98 million. A strong year-on-year decrease, as expected, reflecting, on one hand, a strong deceleration in technical telco CapEx to around EUR 59 million, reflecting, again, particular deceleration in 5G deployment. We continue to lead versus peers in terms of 5G rollout.
Also, some decrease in terms of, customer-related CapEx to close to EUR 34 million, more or less same level of last quarter, and reflecting continuing low levels of churn. This quarter, fixed TV churn stood at 7.3%, one of the lowest levels ever, and also efficiency gains that we have been achieving, which are helping to mitigate, some inflation in terms of equipment, unit costs, and indirect salaries at this level. Following the strong EBITDA increase, and also strong CapEx reduction, operational cash flow, grew very nicely. EBITDA - CapEx exceeded EUR 100 million, a record numbers also in the last few years. Operational cash flow after leases reached also a very solid EUR 70 million. Free cash flow after interest and taxes, reached EUR 29 million.
This quarter, we paid out a significantly higher level of taxes, which is mostly related to the tower sale that was executed last year. Therefore, if we take this out, the recurrent level of free cash flow in the quarter was around EUR 40 million, which is pretty much in line with the last couple of quarters. And finally, on the capital structure, strong free cash flow generated in the quarter has allowed us to decrease net financial debt to around EUR 130 million, representing now around 1.9 x the EBITDA after leases number.
We expect to reduce leverage even further at year-end, to same level of year-end last year, around 1.8 x EBITDA after leases, which is, of course, quite positive evolution, considering we have paid this year a significant ordinary and extraordinary dividend, and we didn't have any non-recurrent asset sale. Average cost of debt increased to 3.9% as expected, following the already referred repayment in May of the DCM bond. Again, this level should be seen as a new normal in the current interest rate context, and this is well accommodated within our low leverage and strong operational capital phase that we are going through. Cash and unused credit lines reached around EUR 280 million at the end of the quarter, showing also a robust liquidity level.
At this point, we conclude the presentation, and we invite you to start the Q&A session.
Thank you. If you would like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. And to withdraw your question, please press star one and one again. Once again, that's star one and one, if you would like to ask a question. Thank you. We'll now take our first question. This is from the line of Roshan Ranjit from Deutsche Bank. Please go ahead.
Hello, afternoon, everyone. Thanks for the questions. Got three, please. You mentioned the strong performance in the B2B business, particularly in SME. Now, I think this is the second quarter where we've had good trends. Could you remind us what your market share is in this segment? You did mention some of it was low margin sales, but are you seeing a good recurring business stream coming through, and no kind of weakness based on any of the macro conditions? Second question, please. On EBITDA growth. Now, I think you're well on track for double-digit growth this year. If I look through to 2024, if I look at current consensus, it's around 2%-3%. So you got strong tailwinds from the PPA.
Is there anything in the contract which could see a step up in energy costs for whatever reason in 2024? Anything you could detail there, please? And finally, just on Digi, have you had any discussions around wholesale agreements? Thank you.
Okay, thank you very much. Addressing your first question on B2B market shares, there are no accurate numbers around B2B market shares as we have in residential market shares, but nevertheless, we have our numbers. And what I can tell you is that our market share on B2B is lower than our overall market share, and that's our B2C market share, which means that the potential for growth and market share gains is even higher than on B2C.
Okay, thank you, Roshan. I'll take the second part of the question. Regarding what you mentioned in terms of double-digit growth for full- year 2023 EBITDA numbers, it's pretty much in line with what we just said in the last call, so we were expecting more or less second- half performance to be relatively similar to the first half. We still don't know why the consensus doesn't reflect that very specific guidance that was given in the last call, but today, there is a significant discrepancy between the consensus numbers and where we expect to land in terms of full-year 2023 EBITDA numbers.
In terms of 2024 and specifically around energy, the PPA price contracted is 100% fixed, but there's an element of the energy bill that is not included in the PPA, which is what we call the access tariffs. It has already been published by the energy regulator, a significant increase in the access tariffs for next year, so we shouldn't expect energy to be, again, next year, a tailwind in terms of EBITDA evolution in principle. This is not yet the final decision by the regulator, it's yet to be published.
But if it's going to be confirmed, we should have some increase in terms of energy costs relating to next year, which still shouldn't put in terms of EBITDA evolution for next year as with a very significant impact. But still, it's not going to work as a tailwind as it worked this year.
As for your third question about wholesale requests from potential new entrants, I can tell you that we have none whatsoever.
That's great. It's very clear. Thank you. If I just go back to the first question on B2B, is it fair to assume that the SME trend is then recurring, and we should think of a similar trend through in 2024?
Well, we had some ups and downs in B2B, but that's exclusively on the high-end B2B.
So when we're talking about SMEs, this is recurrent revenues. There's no up and downs, there's no big projects, there's no projects whatsoever in terms of that could impact revenues. So what we see on SMEs revenues is the recurring revenues that one might expect, for the foreseeable future.
Great, thank you.
Thank you. We'll now take our next question. This is from the line of Nuno Vaz from Société Générale. Please go ahead.
Hi, good afternoon. Thank you for the opportunity to ask questions. I have two from my side. One is on the net adds momentum, because we saw an improvement quarter-on-quarter. So I was just wondering what's driving this, if that's just seasonality, if there's something in the market that's a little bit more positive. Fixed is very much in line with what was the peak last year, but mobile is still a little bit below last year levels in terms of net adds mobile postpaid in specific. So I was wondering if that's to do with the overall market or is potentially maybe one of your competitors being a bit more protective of their market share? Because you're investing a lot, quite a lot on mobile, so is there opportunity to grow this a little bit more?
And then second question was, you mentioned inflation pressure. I was wondering specifically, if you could talk about some of the items where you're feeling inflation pressure, and how they might be impacted, especially on the coming, the next year. There's a lot of, typically a lot of, indexation done at the start of the year. So I was wondering about that. And was wondering as well, what would be the least inflation level or the growth in the least sort of organic, excluding these impacts from Cellnex, if there's a level we should think about, and how that might change coming into the next year, if there's some renegotiations at the start of the year? Thank you.
Well, in terms of net adds, or specifically mobile net adds, I don't think you can read too much from a single quarter or comparing a quarter with last year's same quarter last year. What is relevant in our view is that the dynamic is very positive. The growth is very significant. The market share gains in terms of mobile are also clear to see, and we don't expect that strong dynamics to decelerate in the near future. So the numbers in our view, mainly postpaid, mobile postpaid numbers, are quite strong. And our expectation is continue to grow market share and continue to grow the customer base, mobile customer base, on top of many of the investments and our strategy, and that you're aware of.
So we are very happy with the numbers from the quarter. Again, namely, in what concerns postpaid, and we expect this very strong momentum in mobile postpaid to continue going forward. Okay, regarding inflation, so it's obvious that it had some impact in some of the cost lines. But part of this impact has been mitigated by our efforts in terms of efficiency improvements. Well, the lines which were more affected in terms of inflationary pressures are all the lines that relate to labor costs. Internally, it doesn't represent a significant cost item, but of course, we have to adjust salaries 5%-6%, so it impacted our overall wages and salaries. And then we have a significant component of indirect salaries that we contract through service providers.
And for that matter, the increase in terms of minimum wage is something also that impacts us in areas like sales, technical installations, call centers, et cetera. And also finally, in terms of equipment unit costs, both for set-top boxes, routers, we have seen also some increase in terms of unit costs. So as I said, this has been mitigated by a lot of the efficiency improvements we have been able to implement. A lot have to do with what we call transformation program and the move to digital. So we have had, for instance, a significant higher percentage of interactions with customers through digital, which have resulted in fewer call center calls, more efficient, like, handling of these calls, first time resolution, reduction of follow-up calls, et cetera.
Just to give you one example in one area, that is vastly impacted by these inflationary pressures, but where we have been able to compensate part of this inflation and actually control pretty much the overall cost item.
Thank you. Thank you.
Thank you. We'll now take our next question. This is from the line of Fernando Cordero from Banco Santander. Please go ahead.
Hello, good afternoon. Thanks for taking my three questions. The first question is some kind of follow-up on the net adds drivers. In that sense, I would like to understand how your commercial activity is performing, sorry, in the greenfield areas, particularly in those areas where you are within the market for the first time, how is the market share or the penetration curve performing? The second question is regarding the outlook on top line for next year, and particularly on price increases or price updates. Do you have any kind of, let's say, initial thoughts on how your pricing policy could evolve next year? And third point is regarding the pricing policy, sorry, but the impact in 2023.
In that sense, and you are growing by 4.7% in the third quarter, that is around three percentage points below the price increases that you announced at the beginning of the year. In that sense, they are willing to understand what the results are behind this, price spread, although recognizing that you are efficiently translating the price increases. But, willing to know if the percentage of premium subscriptions in your customer base is decreasing in pay TV, premium subscriptions is decreasing, how the client mix is evolving, how competition is impacting in your ARPU. Just to understand a little bit, the spread between ARPU and price increases implemented at the beginning of the year. Many thanks.
Okay. Thank you, Fernando. I'll take the first and the third question. Well, in terms of traction in greenfield areas, the take up in of our product is increasing quarter after quarter. We typically hit numbers that exceed the 10%, but that is typically after a reasonable number of quarters, so it takes time to get there. But we are seeing, well, good take up of our services, namely around fixed broadband and fixed TV in these greenfield areas. In terms of ARPU evolution, a lot of the ARPU increase that we now see, as you mentioned, we are growing 4.7% year-on-year in terms of fixed ARPU to now in excess of 50 EUR.
It is, of course, driven a lot by what we call a base ARPU, which includes basically the monthly subscription, that our customers pay, which was, of course, adjusted at the beginning of this year, by the price, price adjustment that we did. It is also affected by the upsell in terms of other services that we sell, on top of this, and basically, around conversions, adding up mobile on top of fixed, also helps in terms of, of ARPU increase. And finally, here and there, we see other elements with also, positive trajectory. For instance, we've seen some recovery in terms of roaming out, revenues, which is a little bit more discretionary, but where we have been seeing some good progress, in the last few quarters.
Well, in terms of the question around price increases, it's, there's a simple answer. Obviously, we have been internally discussing the possibility, but, even if we had a final decision, we couldn't share with you for, for competition reasons, compliance reasons, that is something that we cannot announce in advance. So there's nothing more that I can tell you at this stage.
Okay, fair enough. Many thanks.
Thank you. We'll now take our next question. This is from the line of Molly Freeman from Citi. Please go ahead. Molly Freeman from Citi, your line is open. Please ask your question.
Yes. Okay. Thank you. Thank you for taking my questions. I have two, please. One around, you said obviously you're not had any wholesale requests from Digi, but are you still seeing building activity? Have they started to hire? I'm just wondering if you're seeing any other signs that they are looking to launch in H1 of next year. And secondly, your dividend policy or lack thereof, I was just wondering , since CapEx is coming down, cash is looking good, whether you'd be looking to revisit that in the new year. Thank you.
Okay, thank you very much. Well, we don't have a lot of, to say the least, we don't have a lot of visibility on, what Digi is doing or not doing. And as such, there's nothing very new or intelligent we can add around the launch time. What we know is basically what we see, in the news, what is public information. We don't have, significant additional information that allow us to, have a more educated guess than the one that you offered. So we don't know.
Well, regarding shareholder remuneration, there, also there's not much we can talk at this stage. As you know, we don't have a formal dividend policy. Typically, dividends have been proposed by the board to the AGM every year on the basis of free cash flow generation. We are quite comfortable with the level of recurrent free cash flow that we are generating today to basically fully cover what has been the ordinary dividend up to now, the EUR 0.278 that we paid in the last four years now. So there's not much more that we can comment at this stage. It will be a board decision, of, beginning of next year. A board proposal to the AGM decision to be more, rigorous.
Okay, thank you very much.
Thank you. We'll now take our next question. This is from the line of Antonio Seladas from AS Independent Research. Please go ahead.
Hi, good afternoon. Most of the questions were already answered. Nevertheless, I don't know if you can talk a little bit about the competitive environment. I have noticed that some of your competitors are maybe advertising more and even yourself. So I don't know if you can speak a little bit about how is the environment in terms of competition. Thank you very much.
Well, I would say that there is a seasonal effect on the level of investment in advertising or marketing as a whole. To be honest, our reading is that in terms of competitive environment, it hasn't changed a lot, or it hasn't changed significantly, to be more clear. So it's a tough environment, a very mainly two very strong competitors, very aggressive. But that has been the case for quite some time now. We don't see there is seasonal investment on back to school, and there is seasonal investment mainly around this time for the Black Friday. And of course, we will have Christmas, and so typically this is a season where investment goes up.
But, I wouldn't read too much from that level of investment. As I said, in terms of competitive dynamics, it's hard, but it is as hard as it was 3, 6, 9 months ago.
Okay. Thank you.
Thank you. There are no further questions at this time, so I will hand the conference back to the speakers. Thank you.
Okay, well, thank you once again for listening in. As usual, we're available for follow-up questions and look forward to speaking with you soon. Bye.