Proximus Group
I
Integrated annual report 2021
I
327
However, it remains challenging to achieve the monetization
results in the next few years.
At first, there is an operational risk related to a smooth
migration of Proximus and OLO’s customers to Fiber, while
ensuring best-in-class customer experience to avoid migration
churn. In that matter, during the COVID-19 lock-down
period of
spring 2020, the application of strength social constraints
has
largely complexified and delayed customer activations (e.g.:
difficulty in accessing buildings for the installation of vertical
cablings; no entry to customers’ premises). At the same time,
these heavy restrictions have also impacted Fiber sales
channels by closing Proximus shops and by stopping
local
marketing activities. There is a risk that a potential intensification
of COVID-19 contamination in the future may lead to the
same
“idle period”.
Secondly, we have observed
that the Belgian telecom sector
regularly announces consolidations (e.g. acquisition Base
by
Telenet; the recent acquisition of VOO by Orange
Belgium) and
partnerships (e.g. ongoing discussion for a Netco
Fluvius/Telenet), and even the possibility to welcome a 4th
operator after 5G spectrum auction in 2022. A potential
new
entrant in the low-cost segment may put pressure on
market
pricing, leading the Operators to trade-off between market-
share retention and pricing preservation. In this context,
a
monetization through price tiering would be more difficult
and
would require for a larger differentiation in the offers
(e.g. by
including multi Gigabit services).
A third monetization risk may be driven by the multiplication
of
FTTH roll-out initiatives. Today, Proximus is the only player
rolling out FTTH at large scale in Belgium. Plans by competition
and utility companies (e.g. Fluvius) to roll-out a competing
FTTH network could reduce the profitability of Proximus
investments, reduce wholesale prices in the market and impact
prices that CBU and EBU can charge for their Fiber products.
In dense city areas, it is possible to overbuild and have
2 fiber
networks. But when leaving the city centers, the
construction
costs will rapidly increase making two Fiber networks
economically not profitable. Therefore, Proximus has joined
forces with two experienced industrial and financial
Partners
(EQT Infrastructure and Eurofiber) to accelerate and
expand
the Fiber rollout in less dense areas and as such ensuring
the
first mover advantage. Meaning to be the quickest
to deploy
where the density remains sufficient high (and consequently
benefit from lower unit costs) and being the first to
provide
Fiber technology on the market with the aim to
win as much
market-share as possible. Let’s also re-iterate that Proximus
fiber network will be fully open and non-discriminatory
with the
ability to co-use fiber assets with competition and maximize
the
network utilization.
Business model and servicing evolution
Proximus operates in a fast-changing industry.
In order to be
future-proof Proximus needs to constantly adapt to
new
technologies, deploy improved servicing approach and launch
new products. We are confident that our strategy
is focusing on
the right answers to handle these evolutions. However,
it
cannot be excluded that some of our initiatives do
not achieve
the expected outcome in terms of revenues or profitability.
This
could have a negative impact on our overall financial
performance.
Proximus’ business model has been and continues to
be
impacted by (disruptive) technologies, such as SD-WAN,
5G and
over-the-top (OTT) services. Our response as a group
to these
new technologies and market developments and its ability
to
introduce new competitive products or services, which are
meaningful to its customers, will be essential to our
performance and profitability in the long run.
Proximus, and the industry as a whole, is evolving towards
a
more individualized approach to servicing its customers. For
example, for ultra-broadband, fiber-based connectivity
Proximus adopts a local marketing approach, in which
the sales
forces, technical staff and local partners join forces
for its fiber
deployment project. Proximus also continues to develop
the
capacity to support business customers in their digital
transformation with its industry-tailored support and
convergent products combining connectivity, hybrid
cloud and
managed security solutions. For example, we embarked
on a
massive proactive migration of our enterprise customers
to
next-gen connectivity solutions.
On the residential front, we also increase our relevance
by
developing and expanding new local ecosystems, such
as our
partnerships with press conglomerates to develop our
ePress
offering, or our partnership with Belfius leading to development
of Banx and Beats offering. These collaborations allow
us to
develop relevant local solutions for and together with
our
customers, in order to provide competitive products and
services to the Belgian market.
Even if Proximus is successful in launching these new
technologies and mitigating initiatives are effective, the
risk
remains significant, as those new technologies could generate
lower revenues and/or lower profitability than existing
/ past
products and services, and consequentially negatively
impact
Proximus’ top and bottom line. The risk can therefore
not be
fully mitigated.