Proximus Group financial results – Second quarter 2022

• Read the full Q2 Financial Report here

Highlights Q2 2022

• Proximus Group closed the second quarter of 2022 with strong growth for its Mobile customer base, adding +52,000 Mobile Postpaid cards. In a quarter where we saw lower commercial activity than last year, Proximus added +8,000 Internet subscriptions while slower TV customer gain led to a net -1,000 TV subscriptions in the quarter, in spite of good churn rates. The traction for Residential convergent offers continued, growing by +11,000 customers to a total of 1,022,000, +5.5% compared to 12 months ago. On an enlarging footprint, Fiber offers gained further traction, adding +23,000 active Residential and Business lines, bringing the total to 194,000 lines. With an additional +84,000 Residential and Business customers opting for a Flex offer in the second quarter, Proximus crossed the 1 million-mark, with a total of 1,006,000 Flex subscriptions end-June. Reflecting changing customer needs, the Fixed Voice line base further eroded by -46,000 lines over the past three months.
• Proximus’ Domestic underlying revenue was up by +1.9% to EUR 1,101 million. Excluding low-margin Terminals revenue, the Domestic revenue grew by +1.8% (excluding Mobile Vikings, +1.1%). The Residential unit posted a +4.3% revenue increase, largely driven by a strong +7.2% progress in Convergent revenue and a +10.8% increase in Mobile-only revenue, including the inorganic contribution of Mobile Vikings, which annualized 1 June 2022. The Business unit revenue was up by +0.6%, with the revenue increase from Fixed Data, Mobile and IT services and a strong quarter for IT products revenue, offsetting the ongoing Fixed Voice erosion. Proximus’ Wholesale unit posted overall a -2.3% revenue decrease, with the decline in low-margin interconnect revenue more than offsetting a +20.1% growth in Fixed and Mobile wholesale services revenue.
• The second-quarter 2022 Domestic EBITDA totaled EUR 431 million, a +0.3% increase compared to the same period in 2021. The support from higher Direct Margin, up by +2.6%, was offset by higher operating expenses (+5.1%), with inflationary cost effects, customer and transformation costs partly mitigated by ongoing cost efficiencies.
• Telesign closed the quarter with a strong revenue and direct margin, with solid growth for both its Digital Identity and Communication segment. For the second quarter of 2022, Telesign’s revenue was up by +39.5% (+24.0% on a constant currency basis), reaching a total of EUR 107 million and its direct margin was up by +51.2% reaching EUR 27 million (+18.5% on a constant currency basis). With investments in Telesign’s growth ambitions further increasing its operational costs, the second quarter 2022 EBITDA stood at EUR 0 million.
• For the second quarter of 2022, BICS grew its revenues by +11.2% to EUR 270 million. BICS’ Core services revenue was up +6.8% due to an increase in Mobility and Messaging, Growth services revenue more than doubled on strong traction for Cloud services, and Legacy services revenue increased by +8.1%. The Direct margin was up by +21.9%, and drove a +25.5% EBITDA increase, reaching a total of EUR 33 million for the second quarter of 2022.
• In aggregate, the Proximus Group underlying revenue totaled EUR 1,437 million for the second quarter of 2022, a +4.9% growth compared to the same period in 2021. The underlying Group EBITDA totaled EUR 463 million, up by +0.9%.
• Excluding spectrum and football broadcasting rights, the Proximus Group CAPEX over the first six months was EUR 557 million, with the year-on-year increase largely driven by Proximus’ investments in Fiber, which counted for 37% of the total Capex. In the second quarter of 2022, Proximus passed an additional +122,000 homes and businesses with Fiber, bringing the total to 1,031,000 by end-June 2022, which represents a Fiber population coverage of over 17%.
• Over the first half of 2022, Proximus Group posted a Free Cash Flow of EUR-15 million, or EUR -3 million when adjusted for M&A-related transaction costs. The year-on-year decrease on a comparable basis mainly resulted from higher cash-out for Capex investments and an unfavorable year-on-year impact of business working capital needs, in part offset by less cash out for ongoing transformation plans and income tax payments.

Guillaume BoutinCEO Proximus Group

"Proximus continued to deliver growth in Q2 with Revenue and EBITDA up year-on-year, both domestically and internationally. With strong first half results, we raise our full-year guidance.

Looking back over the past three months, I am very pleased by Proximus’ robustness, achieving good progress despite the more difficult economical context we are operating in. I am especially satisfied with the continued NPS improvements, across our three brands. Thanks to our customer satisfaction efforts over the past years, the inflation-driven price indexations landed well, with no material increase in churn.

With our recent launches, we are further addressing the needs of each customer segment: Flex XS for our Proximus brand and a fixed internet option – including Fiber – for Mobile Vikings in the digital savvy segment. Moreover, our newly launched internet box will significantly boost the in-home experience of our customers thanks to Wi-Fi 6, which enables both a faster and more stable wireless connection.

Digital technology has become essential, and it is important that our customers - both citizens and companies - can count on trustworthy digital partners who understand their concerns. For the B2B domain, Proximus and Microsoft are joining forces to meet the privacy and sovereignty challenges of companies in public and regulated sectors by developing a ‘sovereign cloud’ solution, combining Microsoft’s Azure hyperscale capabilities and Proximus’s hybrid capabilities. This solution will enable customers to use the most powerful public cloud capabilities while benefiting from the ultimate sovereign and privacy controls. For smaller businesses, we will be partnering with Odoo, providing access to its full suite of digital solutions, whether for managing their customer relations, sales, e-commerce, accounting or human resources.

From a technology point of view, Fiber is providing a future-proof, secure and reliable customer experience. We are proud to have reached two major milestones. First, in June, we crossed the 1 million mark of homes and business passed with Fiber, highlighting the fast expansion of our Fiber network. Over the second quarter we passed an additional 122,000 premises with Fiber, bringing us to a nation-wide coverage level of 17% end-June. Second, we announced our plan to broaden our Fiber coverage by agreeing an MoU with a consortium of Belgian financial partners aligned with our vision to bring high-speed connectivity to the country’s low populated areas. Through this off-balance sheet structure, we aim to extend our Fiber coverage, with the goal of ultimately reaching 95% coverage by 2032. This partnership will have several benefits: it strengthens Proximus as the leading Fiber operator in Belgium, thereby generating financial benefits from a broader Fiber scale and copper decommissioning. It also supports our societal ambition with a major step towards covering 100% of the country with a gigabit network, leveraging fixed wireless access technology for the remaining 5%. We aim to reach a final agreement by year-end.

Aligned with our mobile strategy and cementing our position as the best mobile network in Belgium, we managed to secure a wide range of spectrum for the next 20 years, 285 Mhz in total, a crucial asset that will make a considerable difference in network quality and hence offering the best mobile experience to our customers. The newly acquired spectrum in the 700Mhz and 3600 MHz band will finally make it possible to bring the benefits of 5G to the entire Belgian population.

Turning to our two international software platforms, for both BICS and Telesign we delivered another sequential quarter of strong growth. For BICS, the second quarter showed, once again, a double-digit EBITDA growth, up by 25.5%, driven by margin growth in its Core services, messaging and mobility services, and once again an excellent performance in Cloud services. Notably, the good results in Voice services underline BICS’ continued relevance and ability to optimize value in this field. This was confirmed by the multi-year commercial agreement BICS has recently signed with international communications company Ooredoo Group, in which BICS is becoming the trusted communications partner. This innovative partnership underlines both Ooredoo’s and BICS’ commitment to fuel market-leading growth in this evolving telecommunications landscape. As the Voice market is consolidating, it is increasingly crucial to offer future-proof quality, stability and protection to both operator networks and subscribers.

Our second international business, Telesign, continued its strong commercial trajectory seen over the last quarters, posting revenue growth of 39.5%, thereby emphasizing the success of the strategic approach it has taken to reinforce its position in the Digital Identity and Communication market.

Given the wider economic context and impact this has had on financial markets, we did not reach the conditions that were necessary for Proximus to conclude the envisioned public listing of Telesign, despite such a strong commercial performance. We remain nonetheless as confident as ever with regard to Telesign’s future growth, sound strategy and strong value propositions. We are fully satisfied with Telesign’s track record so far and reiterate our commitment to further supporting its growth trajectory. We are considering our options and will inform the market once this crystalizes.

Reflecting on what has been a continuation of the strong commercial performance in the first half of 2022 and our outlook for the rest of the year we raise our guidance for the year 2022, with Domestic Revenue expected to grow by 1% to 2% year-on-year and Domestic EBITDA at the upper range of our previous guidance of ‘growing up to +1%. Including our strongly performing international businesses BICS and Telesign, we expect our Group EBITDA to grow up to +1% from the year before. Our Capex and Net Debt ratio expectations remain unchanged."

Key Figures

Operationals, in thousands

Revised full-year 2022 guidance

Based on the strong results of the first half of 2022 and the best estimate for the remainder of the year, Proximus expects for year-end 2022:

• Underlying Domestic revenue excluding Terminals to grow by 1 %-2 % from the preceding year, an improvement from the previous outlook of ‘growing up to 1 % year-on-year’.
• The domestic revenue growth is expected to run ahead of EBITDA due to some inflationary cost increases, including automatic wage indexation effects. The full-year 2022 Domestic EBITDA is expected to land at the upper range of the set guidance (grow up to 1 % year-on-year).
• In terms of the Proximus Group EBITDA, it’s expected to end the year 2022 positively, with Group EBITDA growing up to 1 % compared to the year before, improving from the previous outlook of ‘Around -1 % year-on-year’. Besides slightly better projections on Domestic EBITDA, this includes also the very strong first-half 2022 EBITDA achieved by BICS, driven by strong travel uptake supporting BICS’ messaging, roaming and legacy Voice products, reinforced by a favorable destination mix over the first six months. Also, global Cloud communication services are achieving a sustained strong performance, supported by increasing Enterprise demand.
• Telesign also closed a better than expected first-half of 2022 and anticipates posting for 2022 a more moderate year-on-year EBITDA decline versus its announced projections in the December 2021 investor presentation. (www.Telesign.com/investors).
• With Proximus’ Fiber deployment program well on track, the 2022 Group CAPEX expectations remain unchanged, i.e. to go up to close to EUR 1.3 billion (excl. spectrum and football rights).
• The expected net debt ratio for 2022 remains unchanged at around 1.6x underlying EBITDA.