April
26 What time we come to Mom’s birthday?
nice restaurant romantc evening family meal movies
ANNUAL REPORT 2011
5
numbers of packs (in thousands)
1,089
870
more than
560
50%
302 2008 2009
2010
2011
of customers
5,478,000
have positively changed their opinion about
mobile customers
Belgacom
(Proximus & Tango)
+150% 226,000 1,590,000 internet customers internet on residential & business
1,211,000
smartphone a unique network complementarity
DSL
Belgacom TV customers
mobile internet on laptop and tablet
3G
FON
91%
Belgacom TV
coverage
mobile data card customers
Highlights 2011
Our company concludes an important partnership with Fon, the largest Wi-Fi community in the world, with more than 500,000 Wi-Fi hotspots accessible in Belgium.
Over 81% of the Belgian population can now enjoy High Definition television and fast download speeds thanks to the Broadway project.
We focus on putting more SME customers on packs by including mobile in the mix, a truly all-in-one business solution, which also promotes convergence.
Packs for ouSMEs Vous êtes indépendant dirigez une PME ? Optez pour un pack professionnel
avec forfait mobile gratuit
HD
With Happy Time XL, our customers can now call all fixed-line and mobile numbers for free in Belgium with their fixed line after 5 p.m. and during the weekend! New offer
Offre destinée aux clients professionnels, valable du 01/02/2012 au 31/03/2012 inclus pour toute nouvelle souscription d’un contrat de minimum 12 mois à ce Pack d’une valeur de € 72/mois. Celui-ci comprend une ligne téléphonique Classic, un abonnement Belgacom National No Limit Anytime, un forfait mobile Belgacom Bizz Mobile 20 et un abonnement Belgacom Bizz Internet Favorite. Grâce à ce Pack, vous bénéficiez d’une réduction de € 20/mois (équivalente au forfait Bizz Mobile 20). Offre non cumulable avec d’autres promotions sur les différents services du Pack. Prix HTVA. Prix et conditions applicables en Belgique pour un usage national.
Content Thanks to an exclusive agreement with Deezer, Belgacom has become the first operator in Belgium to offer online music with unlimited access to more than 13 million music tracks.
Telindus International Customer orientation Belgacom improves its service everyday to make life easier for its customers, and promotes its SERVICING on radio and TV.
Web Experts As part of its initiatives to reduce the digital devide, Belgacom launches «Web Experts», an educational project encouraging youngsters to share their Internet knowledge with the elderly. www.webexperts.be
Telindus International continues its solid growth path Telindus France acquires storage specialist Eudasys. Telindus UK takes over management of the Virgin Media network in a major outsourcing deal.
Our Group has launched a new application, “TV Everywhere”, which allows customers to watch TV anywhere and on different devices. Customers can watch video on demand, TV channels and football matches sponsored by Belgacom on their PC, TV or tablet, at home or on the move.
Innovation
The new Microsoft Office 365 and Mozy PC Backup: both cloud solutions took off like a rocket in less than 3 months.
Cloud
Belgacom acquires Wireless Technologies, which owns the retail outlets of The Phone House chain in Belgium.This acquisition enables us to get even closer to our customers and respond even better to the expectations of a constantly changing telecom market.
Acquisition
The Huawei swap, the fastest upgrade performed in Europe, was finished ahead of schedule. Almost 4000 antenna sites were upgraded in 14 months.
BICS
Mobile data To support its mobile data offensive, the Enterprise Business Unit launched the CRM Mobile application, answering the needs of professionals that are interested in an end-to-end solution
Scarlet Belgacom has concluded a DEAL with Samsung to give everybody the possibility to get online everywhere: Belgacom offers access to the Internet at home and on the move, together with a Samsung Galaxy tablet.
Scarlet adds data to its mobile offers. Scarlet also launches “Me & Surf” with mobile internet, offering 1GB to surf on the Proximus 3G network for EUR 15 per month.
BICS has transported up to 100 million SMSs per month: from Europe over Africa and the Middle East, to such exotic destinations as Fiji and Papua New Guinea.
Content with 02Interview Theo Dilissen
Ready to take advantage of future opportunities
with 04Interview Didier Bellens
Tuning Belgacom’s fixed and mobile network into an unrivaled customer experience
06Our profile 08Operating context 18Our strenghts
he Belgacom 62 Tshare 68Corporate governance 84Management report 106Glossary
FLAP
30Our customers 46Our people esponsible 52 Rbusiness - CSR
Key financials
INTERVIEW
/// page 2
Ready to take advantage of future opportunities After a tough economic year, Belgacom is in good shape and fit for the future. We have the strengths we need to get through a new year. Interview with
Theo Dilissen Chairman of the Board of Directors
How did Belgacom come out of a tough economic year? In a year dominated by the economic crisis, Belgacom had a quite satisfactory 2011. As ever, our principal focus was on our customers. We have taken further strides in making things simple and accessible for our customers, and the stronger retail presence from our acquisition reinforces our in-market consolidation: maximising our leading position, and making it easier for everyone - customers and potential customers – to obtain precisely what they need. Of course, we need to go further in being close to our customers, also at the most basic level such as reducing response times in call centres. Even minor innovations – like giving a check call just before a technician arrives for a home appointment – are of interest to the customer. One of the highlights was that we came even closer to them through our successful bid to acquire the Phone House chain of retail outlets in Belgium. This move was yet another demonstration of how we
are putting into effect our strategy of customer focus that we introduced two years ago. We have invested in techniques that sensitively measure our progress towards the targets we have set, and at board level we ensure that progress is maintained. We face erosion of our traditional market in the order of 2-3% every year, and our response takes the form of ever more effective use of resources, and ever more attractive innovations in our expanding offer of services and products. We closely followed up our cost base and maintained social peace. We invest in a good working relation with our unions. We also respect and appreciate the responsible social role they have been playing.
Are you still confident that our strategy is the right one? I am. We took some daring decisions that have proved right.
annual report | belgacom | interview | FR | NL | UK |
For example, we engaged in a fruitful partnership with Samsung and we chose to create a real return for shareholders. As the year has demonstrated, the partnership with Samsung has delivered spectacular results for Belgacom. The same conviction underlies our approach to pricing: despite exceptional offers from competitors, our average price levels are in line with other market offers, and our packs and bundles and high-quality services retain customer loyalty while ensuring financial equilibrium for the group. Similarly, despite the tough times, we courageously kept up our investments to the tune of EUR 777 million. Our consistent investment in fibre and the latest transmission technology has allowed us to launch innovations like IPtv, and to materialise convergence. We are right on track and right on time, bringing fibre closer to the home. Yet again, we have been ranked among the world’s leading fiber optic. We are committed to keep delivering investment at the necessary level to keep up our momentum, as we know that taking shortcuts in investment would imperil our ability to take advantage of future opportunities – as some of our competitors have been discovering for themselves.
Do customers really care about the networks? The quality of our networks may not be a concern in itself to our customers, but they certainly see the results of it in the quality and reliability of the products and services it delivers to them – whether they are part of the 1.2 million Belgacom TV subscribers, or the customers switching seamlessly from Wi-Fi to 3G on their mobile devices, while continuing to upload their files from Internet. Our reputation among business partners and investors is continually boosted by the cachet of respectability and credibility conferred by our world ranking.
How were you affected by the changing regulatory context? We continued to face regulatory pressure, which absorbs a significant portion of our profit and cash flow year after year. The abolition of the asymmetry of mobile termination rates (see p. 14) was a positive development that we had been arguing for years, yet
3
We have chosen a policy of judicious investment and smart cost-control, linked with selective partnerships. the level playing field that we seek with cable operators is still a long way off. Regulatory authorities are still not completely synchronised with the market realities. We will go on insisting that the same conditions be applied to all players.
What about the broader competitive context? Although we naturally focus on the market in Belgium, where most of our business is, we remain alert to opportunities or challenges abroad. With BICS, we have an international perspective, and much of our Telindus business comes from beyond Belgium. There is little evidence at present of the long predicted move towards international consolidation among operators, and indeed some of the most renowned predators are experiencing limits to their scope for action. We, by contrast, have chosen a policy of judicious investment and smart cost-control, linked with selective partnerships. We are aware, of course, of the big moves being made by some players, particularly in Asia, and these we closely watch. So, for instance, we are monitoring the intentions of a Chinese operator which has now acquired a 4G licence for Belgium.
As Chairman, are you satisfied with the year? Our performance on the BEL-20 proves we are doing things properly. In a year when the market index fell by 20%, Belgacom’s shares closed the year with just a minor slippage of 3% and we were able to produce a stable dividend of EUR 2.18. Last year also saw the introduction of a number of new legal requirements on corporate governance – enhancing the rights of shareholders, bringing additional independence to remuneration mechanisms, promoting greater gender balance on boards, and greater transparency in company management and supervision. Our adherence to such requirements adds to our credibility in the outside world, and allows us to improve our performance internally.
Highlight 2011 The buy-out of The Phone House chain will enable us to get closer to our customers but also to strengthen our presence on the retail market.
INTERVIEW
/// page 4
Interview with
Didier Bellens, President & Chief Executive Officer
The trend to one supplier for all services is reinforced. Fixed broadband increasingly becomes a standard in most homes. Strategic partnerships are broadening Belgacom’s performance. Didier Bellens has every reason to take an ambitious view on the future.
Tuning Belgacom’s fixed and mobile network
into an unrivaled customer experience What was the dominant theme of 2011?
Number of Belgacom TV clients from launch (in 000) 1,211 975 752 506 305 140 0
33
05 05 06 07 08 09 10 11 june
Last year was a difficult year, yet Belgacom performed relatively well. Our number of customers, in both the residential and corporate market, rose considerably. It means we anticipated their expectations correctly and timely. The driver of this development has been the ever increasing data traffic, the success of digital TV and of packs. Here lies the exact strength of Belgacom: as a single provider we used our world-leading fixed and mobile network to create a customer experience that enables the integrated use of platforms, content and devices. It is what we call our strategy of convergence. From the point of view of the customer, this strategy means he can enjoy our services anytime, anywhere, on any device he finds appropriate in order to access his content and his applications.
Just how does Belgacom make this integration of services happen? As fixed broadband becomes increasingly a standard in most homes, along with the related services, multiple screens, etc, the trend to one supplier for all services is reinforced. The digital home is becoming a reality. We are therefore offering new possibilities that are reinforced by strategic partnerships. Residential customers outside their homes can benefit from mobile internet through 3G, and from a wider Wi-Fi coverage, thanks to our collaboration with Fon, the world’s first global, crowd sourced Wi-Fi network. Our partnership with Samsung helped to achieve excellent sales. In 2011 Samsung tablets sales have been exceptional in Belgium, largely thanks to the successful pack offers
annual report | belgacom | interview | FR | NL | UK |
which make this partnership an exemplary win win. There is Deezer offering a huge base of music our customers can pick from the cloud. Not any storage capacity is needed, the choice of music can be personalised and the music is accessible any which time one wants. We are on track with the Y-generation trend that cherishes the ability to share emotions at their convenience. Those emotions can take the form of music, the proximity of friends, the exchange of experiences, feeling, ideas, hopes, Movie Me grants access to a catalogue of around 500 feature films. You can watch them anytime, anywhere, on any screen you wish. The same goes for TV-programmes on TV Everywhere.
our community investment initiatives, we stimulate social links between people and communities for more social cohesion.
The next step in digital connectivity - to alarms, energy meters, domotics, the digital home, etc. -, which takes convergence several steps further, is now on the brink of readiness.
In 2011 we had to make some strategic choices, for which we maintained our discipline and opted not to take the easy road but to hold on to our end goal, value creation. As such we were vigilant not to overpay for Belgian football broadcasting rights. This now proves to have been the right choice since football-related churn is back to previous levels, when we had all the rights.
Is it mainly a question of new offers to customers? It is not. All through our strategy, our focus is on the customer. So for instance, we have radically improved our customer service establishing longer opening hours, shorter response times, simpler and more customer-friendly communication. All this resulted in a noticeably greater customer satisfaction. We also look at benefits in terms of customer experience. To Belgacom, it is all about functionality, easy use and how it makes people’s lives more creative, enriching, invigorating, inspiring, in how our convergent offers answers their aspirations. Better products, great connectivity and more ubiquitous service are tools to achieve this more meta goal. Our regular investment of about 12 % of revenues has enabled us to concretize the ambition of a full service ‘anywhere, anytime, any device’.
What about Belgacom’s responsibilities to the world it operates in? We aim to grow our business in a responsible and sustainable way, as we believe it has to benefit both the society and our long-term development. It goes beyond managing our own social impact and environmental footprint. We focus on enabling a more inclusive, safer and greener (e)- society. We have successfully embedded green and people-oriented policies into our business, from reducing our own CO2 emissions by 62 % since 2007, to initiatives helping more people get online and enjoy the benefits of the digital society, or enabling our employees to train children on a safe use of the Internet and mobile devices. Through
Our efforts to become a more responsible company were recognized and Belgacom’s social responsibility rating improved in 2011 as we were selected in the Ethibel Sustainability Index Europe. We will pursue our efforts in 2012, in line with our ambition to become a leading responsible business. And by ‘we’, I mean: the company and our staff, taking into account the expectations of our stakeholders.
5
20%
of our residential customers buying a pack in 2011, included mobile in it
How is Belgacom coping with the crisis?
Yes, we look also to areas where we can also further increase our efficiency by improving our way of working and our speed of implementation. We even have the possibility of emerging stronger from the turmoil, and it is important that our own staff, customers and shareholders are aware of this. Our TV offer continues its strong growth, we further progress in mobile data and there has been a very successful take up of our packs. We invested in a higher speed and reach of VDSL and mobile networks. By the end of 2011 we reached over 81% Fiber-to-The-Curb (VDSL) service coverage and 97% 3G population coverage. This is clearly a leading world-wide position.
How do you see the future? Given our continued investments and convergence strategy we are well prepared. Our customers can expect to see Belgacom moving further ahead and developing new businesses. The way ahead will remain, as always, a blend of vision and pragmatism - all the more important in a year that will be unpredictable. We are not planning to throw vast sums into promotion and marketing, but will assess the competitive situation as it evolves, and react accordingly. We will maintain capital expenditure, but we will adjust it in light of the behaviour of major customers, who are also under the pressure to make savings. We prefer tie-ups with partners in sourcing and adjacent new service offerings which support our strategy.
How Belgacom gives back to society • 15,788 employees and 6,000 suppliers (17,000 people) working for us • 900 people hired • more than EUR 900 million in the form of dividends, taxes, social security etc. • EUR 3 million social donations to support the communities in which we operate
OUR PROFILE
/// page 6
The Belgacom Group in a snapshot
strategy Belgacom wishes to offer
business
The Belgacom Group is
Belgium’s main single provider of integrated telecom services Belgacom offers quadruple-play services combining fixed-line and mobile, internet and television.
the best of telecom, media and IT convergence through an unrivalled customer experience
mission Belgacom wants to be the
preferred provider Belgacom ICT-services also offer a comprehensive portfolio of solutions around networks, data centers, security aspects, unified communications services, telephony mobile applications.
of intuitive end-to-end solutions combining fixed and mobile telecom, IT and media, enabling its customers to master and enrich their professional and private lives in a sustainable way.
annual report | belgacom | our profile | FR | NL | UK |
identity
Innovative
Belgacom maintains a consistent identity every day, in everything it does.
Belgacom strengthens its leadership in innovation, so that it can capture growth from new fields, bringing additional value to our customers.
Responsible Belgacom wants to grow sustainably and focus on enabling a more inclusive, safer and greener digital society.
Customer centric
In every act and every decision, Belgacom puts customers’ interests first and offers them simple, efficient and accessible solutions.
organization
Our organization reflects the company’s focus on our customers and our convergence strategy. Consumer Business Unit
• Fixed Voice • Fixed Data • Mobile Voice • Mobile Data • Digital TV • Entertainment
Enterprise Business Unit
• Fixed Voice • Fixed Data • Mobile Voice • Mobile Data • I CT product/ services
Service Delivery Engine & Wholesale • N etwork & IT services • N ational wholesale
Staff & Support • Finance •S ervices to business • Human resources • S trategy
Belgacom Group
BICS • J oint venture between Belgacom, Swisscom Fixnet, & MTN • I nternational carrier activities
7
OPERATING CONTEXT
/// page 8
8:45 a.m., OOSTENDE
Leo and Lenart
My son Lenart spends most weekends with me at the Belgian coast. I have an apartment in Ostend. Lenart has no friends here so far, so I bought him a smart phone. He is maybe a little young for that device, I know, but under the circumstances I think it’s okay. At least he is connected with his friends all the time. Lenart is now what people call a digital native. He conjures with all them apps, helps me out when I get stuck, it’s amazing. Luckily he still fancies a brisk walk in the dunes…
annual report | belgacom | operating context | FR | NL | UK |
Are you having fun, boys? ;o)
9
OPERATING CONTEXT
/// page 10
A permanent revolution
in an increasingly connected world
Tablets penetration
Smartphones penetration
About 10 billion mobile phones -
4% in residential market 15% in professional market
20% in residential market 34% in professional market
or the equivalent of the world’s population – will have access to the Internet by 2016.
Source: Belgacom research
Source: Belgacom research
Source: Cisco study
annual report | belgacom | operating context | FR | NL | UK |
11
Belgacom is operating in a fast-changing and complex environment: we are driven forward continually by shifts in consumer behavior, the evolution of technology, and our competitors. But we are constantly reinventing ourselves to stay ahead of changes. We possess all the assets to give us confidence in facing every challenge.
Demanding and “always-on” consumers
A direct impact on the telecommunications sector
Consumers are increasingly demanding. As they search out the best price/quality ratio and the best answer to their specific needs, they expect more transparency and are prepared to make comparisons. They are ready to pay – but only for what they really choose and use. Beyond price and quality, a growing proportion of customers take account of environmental impact and social responsibility when they select their supplier. In the “always on” world that technology now allows, consumers want to be able to stay in touch with their friends and family. They also want to access their entertainment, their content or their valued applications in real time, anywhere, any time and on any device they choose. Frontiers between private and professional life are blurring and employees expect to access their work environment remotely and seamlessly.
Matching technologies and services
Because everything is accelerating around them, consumers can feel under pressure in their daily lives. They long for more free time and less complexity. They expect their suppliers to make their lives easier with simple products and services, tailored advice and recommendations.
New growth areas
The ‘always-on’ world applies to the work environment too. The same needs, the same services, and the same pressures, are changing professional life. Consequently, Belgacom is responding with offers in the professional market that provide greater mobility, easy switching between devices and platforms, and packaged solutions that give customers the benefits without any of the worries about configuration and computability.
Today we see ever faster penetration of tablets, smartphones, and laptops that can be used on different types of network. These devices allow access and sharing for all types of multimedia content and applications that become more widely available at any time and on any network. Convergence is materializing, driven by smart devices and content. The wrap-around range of networks (fixed, mobile 3G or soon 4G, wi-fi) make these seamless links possible on channels that were previously separate. Additionally, devices originally designed for private use become powerful enough to run business software. More and more employees want their hardware to function in both their professional and private usage leading to a blurring frontier between those two worlds.
While the revenues from traditional telecom business - such as voice traffic - are decreasing, there is growth in the increasing use of entertainment and professional tools via the Internet, and in the accelerating availability of smartphones and tablets at affordable prices. To match the new opportunities, content is undergoing a change too. There is a move away from purchasing and installing content locally (film on DVD, music on a dedicated player, and downloaded applications). There is a corresponding move towards a concept of rental and on-line use (film or video-on-demand, streaming music, applications in the cloud). We are experiencing a boom in cloud computing and cloud entertainment. These intuitive and friendly-to-use services are accompanied by easy access on a pay-for-what-you-use basis, while the underlying technology is managed by the partner. Boost-
OPERATING CONTEXT
/// page 12
ing these growth areas demands education for clients, a clear perception of the advantages, and a new degree of trust in technology.
Multi-play environment Customers are moving away from individual suppliers for individual services (phone, internet, television), and are tending instead to choose a single provider for all telecom, TV and ICT. This is not only for reasons of administrative convenience; it is also because the multiscreen availability of the same content requires a strong complementarity in the devices and networks that provide connectivity. Guaranteeing a continuous stream of information and communications will be more important. Investments in the networks are key for that, since broadband and digital TV will soon penetrate almost every home. Our competitive position (market share) Internet 8% Other
45% Belgacom
47% Cable
Digital TV 5% Other
32% Belgacom
Mobile
32% Mobistar
To be relevant to their customers, suppliers need to segment and personalise their offer more than ever. The “average consumer” no longer exists, and individuals in the same family require individualized treatment. Personalization and recommendation become then very important. Content and applications are consequently driven to expand from the mainstream to embrace niche content & apps as well as mainstream. Tools to support households and individuals in taking advantage of these opportunities therefore acquire new importance, such as the smart recommendation engine for selecting movies.
The competitive environment1
63% Cable
28% Base
New customer-approach
40% Belgacom
The competitive landscape in which Belgacom operates is characterised by the presence of strong regional cable operators, mainly focussed on offering TV and fixed line products. Belgium counts about 11 million inhabitants, and about 4.7 million households. The Belgian business market exists of over 900,000 companies, including independents, small -and medium enterprises up to large multi-nationals. The professional market evolves quickly and competition is very diversified and fragmented. Belgacom faces not only competition from local Fixed and Mobile players, but also from system integrators, IT providers and international telecom operators. Three nation-wide mobile network players are active on the Belgian market, with the Belgacom mobile brand Proximus competing with BASE and Mobistar, subsidiaries from respectively KPN and France Telecom. In addition, many virtual mobile operators compete on the 1. Source of markets shares and penetration rates: ISPA, BIPT, ECTA, competitor press releases and internal data or estimates
mobile market. Belgacom, as the sole nation-wide Fixed -and Mobile network player, deployed a convergence strategy early on and offered multi-play packs since 2007, a strategy we saw followed recently by our competitors.
On fixed voice and internet market Belgium saw the volume market penetration of Fixed, Mobile and TV services at least stable or increasing versus the prior year. Fixed Voice market penetration remained stable at 73% for the Consumer market, with Mobile-only’s at 27%. Like other European incumbents, we saw our market share in Fixed Voice further declining in 2011 to the benefit of cable, a trend we aim to slow through the revival of our Fixed Voice connection via attractive offerings. The Fixed Internet penetration rate increased to 68% of Belgian consumers, while for the Enterprise market this is 86%. In this increasingly competitive market, Belgacom’s total market share by end 2011 was 44.6% or 1.6pp lower than one year ago.
On mobile market Under our mobile brands e.g. Proximus, Scarlet and Mobisud we also operated in a highly penetrated mobile market. By end 2011, our total Mobile market share ended just above 40%, 0.9pp down to last year, though declining at lower pace versus 2010. This while we kept a strong position in the overall Postpaid market, in spite of a market-move to contract customers and subsidised offers by the cable competitor. Especially in the Business segment, we remain the preferred supplier for Mobile services.
On the digital TV market The move from analogue to digital continued, with end 2011 69% of Belgian TV viewers being digital. Belgacom is a challenger on the TV market, and has acquired a strong position since its Belgacom TV launch in 2005, this in spite of strong competition. In 2011 too, we continued to take share from our cable competitors, ending 2011 with an overall TV market share of 22%, and 32% of the digital TV market.
On mobile data market Mobile data is another area in which we performed very well, as customers enjoy with Proximus the best 3Gnetwork in Belgium, in combination with Belgacom’s high-quality WiFi network. End 2011 226,000 mobile cards were connected via laptop of tablet, leaving our competitors behind.
annual report | belgacom | operating context | FR | NL | UK |
New competitors In competition with rivals from beyond - the “Over-TheTop� competitors, largely international players that use our networks to provide a service to our customers - we have resisted the threat on voice and SMS by pro-active offers (such as for unlimited SMS or calls); OTT players pose a serious challenge, especially for entertainment services. At the same time, entering their playground is an opportunity for us to reach new customers.
50%
of the Belgian households have a telecom pack (fixed products only or with mobile included)
15%
of tablet owners use their tablet on the move via the 3G network) Source: Belgacom research
A 4th player acquired the 4G license and might arrive in the mobile market soon. Its intentions are still unknown, but we remain alert to this.
The regulatory factors Efficient and balanced regulation in the telecom sector is in the long term interest of Belgian consumers and companies. As the leading telecommunications operator in Belgium, Belgacom continues to experience intense regulation, but 2011 confirms the move initiated last year towards a level playing field. This context and its evolution is fully explained in detail on next pages.
The rights assets to anticipate market expectations In this context, we are confident that we will be able to face the upcoming challenges.We have the right strategy, and we have the right assets to carry it out. We know the marketplace is full of challenges, but we also know it is full of opportunities. We will not only meet the expectations of the market; we will anticipate them.
52%
of youth aged 18 to 25 years have a laptop Source: Belgacom research
13
OPERATING CONTEXT
/// page 14
Regulation A fair regulation between the different actors in the telecom sector is essential to maintain, in the long term, a sound competition to the benefit of Belgian consumers and industry. To evolve towards a level playing field, Belgacom has concentrated its efforts in three key domains: (i) equal regulation of Belgacom and the cable operators (ii) the abolition of asymmetrical mobile termination rates (MTR) and (iii) a more balanced regulation concerning universal service. Open networks
Mobile termination rates (MTR)
So far, only the Belgacom network has been regulated, whereas cable operators have been exempt from any obligation to share their network with other actors. On 1 July 2011, the Belgian media regulators (BIPT, CSA, Medienrat and VRM) decided to regulate the dominant cable operators in their respective coverage areas and to require them to resell analogue TV, to open up their digital TV platform, and to resell broadband. Belgacom can only obtain access to analog TV. The wholesale prices of the cable operators will have to be approved by the regulators and the effective implementation of the obligations should occur in the second half of 2012.
The mobile termination rates (MTR) are the fees that fixed and mobile operators must pay to other mobile operators to terminate a call on their network. Belgium was suffering since many years from an asymmetrical regulatory regime and Belgacom had to pay, to Mobistar and Base, much higher termination rates than what it received itself. But on 29 June 2010, the BIPT finally decided to reduce gradually the tariff asymmetry and to abolish it completely by 1 January 2013.
Belgacom considers this a step forward towards a level playing field with cable but there is still an important imbalance in the proposed regulatory controls. Symmetric regulation of all infrastructures is the best approach for Belgian consumers and businesses and will ensure fair competition between all operators.
Those tariff reductions have allowed to bring Belgium back in line with the European Commission recommendation and the European practices in other Member States. On 14 July 2010, Mobistar and KPN Group Belgium each filed an appeal before the Brussels Appeal Court against the BIPT decision of 29 June 2010, both asking the Court to suspend and annul the decision (especially regarding their own MTR tariffs). On 15 February 2011, the Court took its decision in
MTR-Glidepath (EUR ct) 12
Base Mobistar Proximus
10 8 6 4 2 0 before*
01-08-10*
01-01-11*
01-01-12*
01-01-13
* Rates with inflation
the suspension procedure, rejecting all the claims of Mobistar and KPN Group. The annulment procedure is still ongoing. The decrease in MTR is totally reflected by Belgacom in its fixed-to-mobile retail tariffs. Accordingly, Belgacom lowered its fixed-to-mobile tariffs on 1 August 2010, 1 January 2011 and 1 January 2012.
annual report | belgacom | operating context | FR | NL | UK |
15
Final decision on MTR
eurocents Proximus Mobistar Base % change Proximus Mobistar Base Asymmetry Mobistar-Prox Base-Prox
Before*
01-Aug-10*
01-Jan-11*
01-Jan-12*
01-Jan-13
7.20 9.02 11.43
4.62 5.05 5.81
3.94 4.29 4.90
2.62 2.79 3.11
1.08 1.08 1.08
-36% -44% -49%
-15% -15% -16%
-34% -35% -36%
-55% -58% -62%
9% 26%
9% 24%
7% 19%
0% 0%
25% 59%
EUR ct
35/min
for outgoing voice roaming since July ‘11
* Rates with inflation
Lower Roaming rates The EU authorities introduced caps on voice roaming prices in 2007. In July 2009, they adopted revised rules (Roaming II Regulation) that cut roaming charges further so that by July 2011 the maximum roaming charge would be 35 eurocents per minute for outgoing calls and 11 eurocents for incoming calls. A retail cap of 11 eurocents (excl. VAT) combined with a wholesale cap of 4 eurocents has also been imposed for SMS roaming as from 1 July 2009 for outgoing SMS. Data roaming services are regulated at wholesale level based on a price cap, calculated on a kilobyte basis. On 1 July 2011, the data roaming prices went down from 80 eurocents to 50 eurocents per Mb.
selection for roaming services) from July 2014 and to propose wholesale roaming access from July 2012. The Roaming III would also extend the current retail and wholesale price cap regime with downward glide paths for a transitory period to give the new structural changes to the roaming market time to be developed and implemented. The extended price cap regime would also include new price caps on retail charges for data roaming. The Regulation would cover a tenyear period from 1 July 2012 to 30 June 2022.
Wholesale services
In addition, measures aimed at preventing “bill shocks” for Mobile data roaming were also implemented. As of 1 July 2010, all customers are by default on a maximum financial limit of EUR 49.85 (excl. VAT) per month for Data roaming, unless they opted-out.
In 2010, the BIPT defined a cost-oriented monthly rental fee of EUR 7.78 for a full unbundled copper line. On 18 November 2011 the BIPT published a repair decision setting the monthly rental price at EUR 8.03 with retroactive effect on 15 August 2010 based on a ruling of the Brussels Appeal Court. Since the BRUO tariffs are a building block for the BROBA tariffs, these tariffs were adapted accordingly. Belgian fixed access prices are currently at lower end of EU benchmark.
The Roaming II regulation expires on 30 June 2012 and in July 2011, the European Commission whose ultimate objective is that the difference between roaming and national tariffs should approach zero by 2015 has proposed “structural solutions” to make the roaming market more competitive. European mobile operators would be required to unbundle the sale of roaming services from domestic mobile services (carrier pre-
The market analysis decision of BIPT on wholesale broadband of 1 July 2011 obliges Belgacom to provide a “multicast” functionality in the bitstream offer (to be used for broadcast). On 19 September, Belgacom submitted to the BIPT an alternative multicast solution based on shared channels (wholesale customers can use the multicast channels that are already on the Belgacom network if they acquire the corresponding
Voice Roaming (EUR ct per minute) 100
Retail outgoing Wholesale outgoing Retail incoming
80 60 40 20 0
before end regulation Aug’07
end Aug’08
July’09
July’10
July’11
SMS Roaming (EUR ct per sms) 40
Retail wholesale
30 20 10 0 before regulation
1 July’09
Data Roaming (EUR ct per Mb) 100 Wholesale
80 60 40
1 July’09
1 July’10
1 July’11
OPERATING CONTEXT
/// page 16
content rights). On 4 January 2012, the BIPT has approved this solution and Belgacom has to submit a detailed reference offer. The same market analysis imposes also an obligation of “Operational Excellence� to Belgacom and announces that BIPT will assess the status of wholesale operations at the end of 2012.
Financial collecting model for Premium Rate Services Since 1 April 2010, Belgacom adopted, where appropriate, a financial collecting model for part of its Premium Rate Services in which Belgacom collects from customers on behalf of a third-party content provider. This is a consequence of the circulars issued end 2009 by the Ministry of Finance concerning the application of VAT on Premium Rate Services and Tax on Chance Games. As a result, these revenues can no longer be considered as Belgacom revenues. This affects the reported revenues but not EBITDA.
Mobile licenses 2G licence On 18 August 2010, Belgacom filed an annulment procedure before the Constitutional Court against the Law of 25 March 2010 requiring the mobile operators to pay for the tacit extension of their 2G licenses. This law aimed to counter the ruling of the Appeal Court of 20 July 2009 that considered that the license was extended automatically until 2015 for free. The Constitutional Court, in an intermediary judgment, decided on 16 June 2011 to introduce 4 prejudicial questions to the European Court of Justice in order to ascertain whether the Belgian law complies with the interpretation of the Authorization and Framework directives. Beside this annulment procedure, Belgacom initiated on 7 October 2010 an action against the Belgian State and the BIPT before the Civil Court to ensure the possibility to recover the undue license fees. In the meantime, Belgacom will comply with the payment obligations with all due reserves. The amount of EUR 74 million for Belgacom for the first period of extension of its license (until 2015) corresponds to the original 2G license fees proportionate to the spectrum quantity and duration. Belgacom has opted for annual payments. The first one, for the amount of about EUR 12 million, was made in April 2010, the second one of
about EUR 16.7million was made in December 2010 for the year 2011 and the third one of about EUR 16.3 million was made in December 2011 for the year 2012. An additional payment for further extension for the second period (20152021) will also be due except if the Constitutional Court decides otherwise.
3G licence On 2 August 2011, the BIPT awarded the fourth 3G (2.1 GHz) license to Tecteo Telenet Bidco (TTB) for a total amount of 71.5 million EUR and for the same quantity of spectrum as the existing operators (2x15 MHz). The license will expire at the same date for all operators (existing and new operators) i.e. on 15 March 2021. TTB will be allowed to exercise a call option for 2G spectrum in both the 900MHz (2x4.8Mhz) and 1800MHz (2x10Mhz) bands, with frequencies expected to become available on 27 November 2015. In this case, they will have to pay an additional license fee of EUR 31.5 million. A reshuffling of this spectrum is foreseen and existing operators will have to surrender a part of their spectrum with a guarantee to keep 2x10 MHz in the 900 MHz band and 2x20 MHz in the 1800 MHz band. The 900 MHz and 1800 MHz licenses have been extended until 15 March 2021 in order to be aligned with the 2.1 GHz end date.
LTE licence On 16 November 2011, the BIPT adopted two decisions. The first one allows the four mobile operators to deploy UMTS/ LTE in the 900 MHz, 1800 MHz and 2.1 GHz bands. The second one reviews the current allocation of the 1800 MHz spectrum so as to allow Belgacom and Mobistar to have a continuous block of 2x20 MHz (now 2x15 MHz) as from 1 July 2012 at the latest. This will allow us to optimize the use of the LTE technology in this band. The 2.6 GHz spectrum auction held on 28 November 2011 by the BIPT was concluded after 4 rounds with total bids reaching EUR 77.79 mio. Belgacom acquired 2x20 MHz contiguous in the lowest part of the 2.6 GHz frequencies for an amount of EUR 20.22 million. The other licensees are Mobistar (2x20 MHz for EUR 20.02 million), KPN Belgium (2x15 MHz for EUR 15.04 million), BUCD bvba (45 MHz for EUR 22.51 million). Belgacom, Mobistar and KPN Group Belgium opted for the FDD technology and BUCD for the TDD technology. One block of 2x15 MHz remained unsold. The licenses are valid for 15 years, effective as of 1 July 2012. Payment will also
annual report | belgacom | operating context | FR | NL | UK |
Since 1998, Belgacom has been subject to a broad universal service obligation (USO) which is the most extensive regime in Europe.
occur in July 2012. Belgacom has decided to pay the fee in one-shot. No coverage obligations are imposed but there is an obligation to inform the customers on the effective coverage. This band is technology neutral and tradable.
Consumer protection The draft law transposing the revised EU telecom framework strengthens the current consumer protection rules and introduces new measures related to contract regulation imposing (i) contract duration of 24 months maximum for consumers and obligation to propose a 12 month contract to all customers, (ii) possibility of early termination of fixed term contracts after 6 months (without any penalty except potential reimbursement of residual value of a free device) for consumers and small enterprises and (iii) specific conditions applicable to the replacement of an existing contract by a new fixed term contract (in particular after distant selling). The final adoption of the law is expected in the course of 2012.
Universal Service Since 1998, Belgacom has been subject to a broad universal service obligation (USO) which is the most extensive regime in Europe. Belgacom has never been compensated for providing these services. On 6 October 2010, the EU Court of Justice considered that the way the Belgian Law appreciates the unfair burden of the universal service is not in full accordance with the European law. Based on this, the Belgian Constitutional Court annulled the articles in the Belgian law regarding the funding of the social tariffs on 27 January 2011. The current system will be reviewed at the light of these decisions in the context of the new telecom law that will transpose the revised EU directives in the course of 2012.
The draft law foresees that Belgacom designation as “default� provider will end 13 months after publication of the law. The new regime will also move from a priori designation of a provider to a designation if needed after a monitoring of the market for payphones, directory enquiry services and paper directories. The scope of universal service will also be extended to broadband internet.
Regulation impacting financial results of Belgacom The regulated price cuts in Mobile Termination Rates, Roaming Rates, LLU and Bitstream prices, and the move to a Financial collecting model for Premium Rate Services, had a direct impact on the revenue and EBITDA of Belgacom Group. Over the year 2011 these regulatory measures reduced the Belgacom Group revenue by EUR 112 million, while the EBITDA was reduced by EUR 29 million. This compares to a revenue impact of EUR 121 million and an EBITDA decrease of EUR 26 million in 2010.
17
OUR STRENGTHS
/// page 18
annual report | belgacom | our strengths | FR | NL | UK |
Anne
Julie
Wow nice !
I like · Share · 2 minutes ago
5:25 p.m., CHAUDFONTAINE
JULIE
Home alone. A moment of reflection. It’s so cozy snuggling up with my big cat Jules. I went to business school and work as a manager. But the one thing I am really passionate about is interior decoration. I finally enrolled in a course, combining it with my full-time job. It was tough, but I did it. I have my own company website now. And it’s going well. I love to work at home. I sometimes invite people to evening sales events, and on my website I keep track of the orders I receive. I have travelled to Paris and Milan to find out about new trends. And of course, one day, I want to complement my webshop with a real decoration shop…
19
OUR STRENGTHS
/// page 20
Developing a strategy of convergence anywhere, anytime, on any device
219,000 new Packs sold in 2011
A rich portfolio of contents, applications, partners & devices for innovative and differentiating offers
Movie Me First move to win audiences from unmanaged networks
Improved brand preference and customer loyalty
annual report | belgacom | our strengths | FR | NL | UK |
21
Belgacom goes on investing in its world-leading fixed and mobile networks. To that, it adds valuable partnerships, such as those with Samsung, Fon and Deezer. Our customers now also use our networks – Fiber, copper, Wi-Fi, 3G – for internet browsing and for digital television. This is how Belgacom creates an unrivalled, rich customer experience that enables the integrated use of platforms, high quality contents, applications and devices. It is what we call our strategy of convergence.
From the point of view of the customer, our strategy of convergence means he can enjoy our services anytime, anywhere, on any device he finds appropriate in order to access his contents and applications. Furthermore, we strategically use value management to maximize customer profitability, we reduce the ‘time to market’, and improve our customer friendliness. Belgacom continuously reinvents itself and changes its way of working, in order to match its services with the evolving aspirations of the market.
Convergence: it’s all about the customer experience The boundaries are blurring between telecom and IT, fixed and mobile, communications and entertainment, households and individual customers, bilateral links and online community links, and to some extent, business and leisure. People increasingly use the same devices across applications and contents, for work and at home. What used to be merely connectivity is now connectivity and content. What used to be proprietary telecom services are now applications. Alongside this evolution, customer aspirations are a continuous source of inspiration for Belgacom. Customers expect maximum mobility, and their private and professional lives are merging into a single stream of interactions which they wish to experience in an increasingly personalized way. There is no more one-size-fitsall, and there is no average customer. Belgacom finds distinct ways of evolving for distinct customers, even within the same household. Combining individual and household needs into a single experience to enable an integrated business experience is another facet of fixed-mobile convergence. Belgacom’s strategy is not about technology as such, nor is it about devices or
Reaction “For customers, true convergence is materialized through the access to their preferred contents and applications on multiple screens, wherever they are.” Bruno Chauvat – Executive Vice President Strategy & Content
OUR STRENGTHS
We have something no one else has Revolution in smart devices requires integrated networks like Belgacom’s. By combining the best Mobile, Wi-Fi, and Fixed networks together, we offer every member of the household or enterprise unique benefits and experiences: we bring access anywhere and anytime for all communications needs, at predictable and controllable pricing.
/// page 22
mere connectivity; it is about anticipating, inspiring and facilitating ways of experiencing and enriching life in an increasingly complex world. Belgian households and enterprises choose more and more one single provider for their telecom, entertainment and/or IT services needs. It is easier not only from an administrative point of view, but also because of the convergence of platforms and contents. New crossscreen services are possible. Belgacom makes this seamless, tailor-made experience a reality for customers wherever they are and whenever they want, whether they are conducting business or communicating with their friends, easily switching from one screen to another, one network to another. Due to the ease of this integration, the digital divide is quickly disappearing. By combining the full mobility of 3G mobile Internet with the ease of nomadic Fon, the world’s first global crowd-sourced
annual report | belgacom | our strengths | FR | NL | UK |
23
Overview of our strategy
boosting convergence
• seamless fixed/ mobile/IT convergence enriched by contents and applications
Wi-Fi network, Belgacom customers get a concrete/ tangible experience of what “everywhere” really means. After the “commercial” convergence (packs), Belgacom now offers a suite of services fully linked across platforms, contents and apps. It’s a new experience. And Belgacom is the best placed to offer it. It has a world-leading fixed and mobile network and new valuable partnerships, such as those with Samsung, Fon and Deezer, which enhance the Belgacom experience. Belgacom therefore has every reason to be ambitious. In the residential market, it aims to expand its market share of digital homes (i.e. households connected with digital TV and/or Internet) while in the professional market, Belgacom aims to maintain a leading position by expanding its portfolio of end-to-end solutions.
Value management Some customers want an enriched experience and premium services, and are prepared to pay for it. Others want less because they know exactly which cherry to pick. Belgacom offers both customers exactly what they want through differentiated marketing propositions. To do so, Belgacom needs to maximize the profitability of all actions (perfect equation between revenues and costs). Belgacom also makes sure it extracts value out of its investments and management decisions and resisted subsidizing smartphones, since it considered the financial commitment disproportionate. Overall, Belgacom avoided subsidizing handsets, which has proved to be quite expensive for operators, and consistently built up a rich, high-quality entertainment offer. The spending on football coverage has been reduced because the renewal of the exclusivity contract, which served its purpose well
creating value
• focus on value management • maximizing customer profitability
reinventing ourselves
• solution-centricity • enhancing customer experience • entertainment and applications offering • new business models • reduced time-tomarket • improved way of working.
by increasing the impact of the Belgacom TV launch, would not have brought adequate returns. Belgacom is now focusing on the best combination of international, national and local football coverage.
Reinventing ourselves Belgacom does face threats, however. Its customers use its managed networks –fixed lines for telephony or TV, and Wi-Fi and 3G networks for internet browsing. Yet, on the web, customers encounter many other communication experiences that are not dependent on Belgacom’s managed networks or its traditional business models. Belgacom’s first move in the so-called Over-the-Top approach was the launch of Movie Me, providing customers and non-customers with access to part of the Belgacom TV catalogue through the first Belgacom TV application on Samsung Connected TVs. Non Belgacom customers can then have a first taste of the Belgacom TV experience on the competition’s internet network. Furthermore, the aforementioned deal with Fon brought Belgacom into the world of Internet communities, offering wide Wi-Fi access to customers on a reciprocal basis and, at the same time, giving new value to the fixed infrastructure. Belgacom has also shifted its approach to win audiences from unmanaged networks, turning threats into opportunities, and changing its way of working. Belgacom did this with Fon, but also with programs such as Simple and Friendly, resulting in improved brand preference and customer loyalty, and a shift in the mindset of its employees and their treatment of customers. Furthermore, Belgacom is reinventing itself through a solutioncentric approach for the enterprise market and by enriching its offer of contents and applications on all screens.
Movie Me The customer is looking for personalized experiences through interactive applications. Belgacom aims to offer him access to a wide choice of entertainment options - games, music, films, or classic television.
Our contents offering is in full deployment. In the following pages, we mention some beautiful launches with sport, music, cinema and professional offers.
OUR STRENGTHS
/// page 24
More entertainment and applications to become the preferred telecom operator Here is an overview of the offers launched by Belgacom in 2011 in entertainment and business solutions. These offerings are innovative thanks to their availability on multiple screens and networks but also because they combine universal content for households and enterprises with highly specific content for niche needs and tastes: a customizable offer which, when expanded, will make it possible to integrate all contents and applications, for both private and professional use, on the same screen.
Sport
A stunning match performance! Belgacom claimed a new victory with its football coverage in 2011, fielding a completely new offer. And just like in any successful match, the key was teamwork: Belgacom selected complementary types of contents – international football and national, local matches. Belgacom offered the Primeira Liga (Portuguese league), the 5 Jupiler Pro League Saturday night matches, and the Belgian Division 2 with the home matches of four clubs (Antwerp, Waasland-Beveren, Charleroi and Eupen). Belgacom also broadcast the quarter-finals and semi-finals of the Copa del Rey, including the double “Clasico” between Real Madrid and FC Barcelona. More to come! The best of Belgian basketball has been made available exclusively on Belgacom TV. And from August, the Spanish league, one the best in Europe, will be broadcasted for three consecutive seasons. Watch it anywhere! This sport offer is available on TV and all other screens (mobile, tablet, laptop or smartphone) via the Belgacom’s TV Everywhere application.
Music everywhere! Thanks to Belgacom’s exclusive partnership with the Deezer music service, Belgacom customers have unlimited access to a music catalog of more than 13 million tracks, which they can listen to wherever they are, on a PC/Mac, smartphone or tablet. Music you choose! The Deezer music service allows customers to search by track, album and artist. Via editorial recommendations and radio stations, they discover new national and international artists. Customers can make their own playlists and select their favorite albums. They can also share music with friends via social media such as Facebook. Moreover, customers can access Belgacom’s exclusive music content (music videos, concert broadcasts, contests to win tickets to music events, etc.).
annual report | belgacom | our strengths | FR | NL | UK |
Movie
25
Your personalized movie guide! With Movie Me, customers can create their own movie profile and receive personal recommendations of movies from Belgacom TV catalog. Movie Me also offers a very intuitive experience with its image-based navigation and its search tool to browse the catalog. From their PC/Mac, customers can select the films they like and find them easily on their TV (in a new category called “my favorites”) thanks to the converged bookmark functionality. Movie Me is available on PC/Mac (via www.movieme.be) and on smartphone (by downloading the application from Android Market or App Store). Wider availability! A daring new venture was launched in October with “Movie Me for Smart TV”, the first TV application of Belgacom which provides an immediate access to a part of the Belgacom TV catalog to all users of a Samsung Connected TV, whether they are Belgacom customers or not. Users can also create an account on the Movie Me website and benefit from all its recommendations and other features, at home or on the go.
Floating in the Cloud!
Tools for professionals
For companies, Belgacom offered a complete suite of professional software applications hosted in the cloud (i.e. on remote servers), which the user can access wherever he is located and on whatever device he is using. The success of the offers Belgacom launched in 2011 confirmed that there is massive potential in this new growth area, and convinced major business customers that Belgacom was no longer just a tele com supplier but also a key partner of fully integrated IT solutions: CRM Mobile gave companies the chance to mobilize their sales teams and increase their efficiency on the go; Microsoft Office 365 gave end users access from the cloud to key business applications anytime, anywhere and on any device; and Mozy PC Backup guaranteed automatic backups of critical files in Belgacom’s secure data centers. Belgacom also introduced a series of applications for specific activity sectors. Publinergie helped local authorities optimize their energy use, and Corilus made the daily work of health professionals easier.
Music
2011 was only the beginning of a new content and applications era. In 2012, we will continue with new contents and applications that fit in with our strategy. We will then improve our TV offer with more diverse and exclusive contents, while enriching the customer experience on all screens through innovative functionalities.
OUR STRENGTHS
/// page 26
Stable and intelligent networks for voice and data
97% 3G coverage
Top Ten in the world for our optical fiber network
-50%
More than 91%
network outages in 2011
TV coverage
annual report | belgacom | our strengths | FR | NL | UK |
27
Belgacom has made significant investments in its network over the past years. Our networks are therefore ready to absorb the increasing bandwidth demand for Internet and TV services. Our fixed copper access network offers a promising outlook in terms of throughput and speed. Our optical fiber network (fiber to the curb FTTC) is ranked in the top ten in the world and our high-performance mobile network provides the best 3G coverage in Belgium (97% of the country).
Thanks to our converged networks, we are able to offer services, content and applications on computers and TV sets as well as mobile devices such as smart phones and tablets – a first in Belgium. In 2011, we launched a number of new services such as TV Everywhere and Deezer. In 2011, we achieved a 50% decrease in network outages as a result of our three-year investment in fiber, copper, servers, software, hardware and manpower.
Fixed network achievements In 2011, Belgacom continued to invest heavily in its fixed network in order to improve VDSL2 coverage. By further deploying fiber to the street cabinet and installing remote optical platforms for VDSL2, the Broadway project enabled over 81% of the Belgian population to benefit from Internet bandwidths of up to 30 Mbps at end 2011. In the meantime, video compression was further enhanced, allowing VDSL2 customers to receive up to four simultaneous TV streams. In the framework of the Broadway project, over 17,000 km of fiber have been deployed, which positions Belgacom as the most advanced operator in Belgium in terms of its optical fiber network, and puts us in the top ten worldwide. Belgacom is also looking at additional tools to further improve the performance of its fixed
network. In October 2011, an ambitious jointdevelopment program agreed with AlcatelLucent was announced at the Broadband World Forum in Paris. This program enables Belgacom, thanks to vectoring technology, to boost the performance of its national tripleplay network and provide guaranteed speeds of 50 Mbps and beyond, setting a new quality standard for Belgian citizens as of 2014.
Mobile network achievements Last year, we began to replace the radio technology of Nokia-Siemens Network (NSN) with Huawei technology. We completed this migration in October 2011. We broke all European migration records by upgrading 3,835 antennas in 14 months. Thanks to this migration, we can offer better voice quality, a shorter call setup time, improved transmission speeds for mobile data, flexibility and adaptability to new technologies, improved operational costs, and lower energy consumption. In addition, we won a 4G license (LTE) in a competitive bid against four competitors. This new technology will give online customers vastly improved speeds and a better experience for mobile data services. As a further demonstration of Belgacom’s mobile network leadership, LTE was technically launched in June 2011 and a limited group of Belgacom business customers now benefit from the service.
Reaction “Intelligent networks are also networks that work without any incidents: it may be like working in shadows, but it is vitally important.” Geert Standaert – Executive Vice President Service Delivery Engine & Wholesale
Fiber investments (in EUR million) 91
47.6
44 32
2008
2009
2010
2011
OUR STRENGTHS
/// page 28
• The customer interaction model will shift towards customer self-management, giving the customer more control during interactions such as sales, installations and repairs. We will invest in product simplification and intuitive e-tools. In 2011, we continued the roll out of our new sales support tool and enhanced our monitoring and diagnostic services, including modem and set-top box problems. Other achievements in 2011 were the completion of a full Ethernet backbone and the development of tools and equipment to prepare the migration towards a full IP network. We started the first switching outphasing and have already migrated more than 2,000 lines. This will allow us to empty the first building by end 2012. So far, EUR 154.2 million have been invested in the MaIP project, of which EUR 55 million were invested in 2011.
Thanks to the Broadway project over 81% of the belgian population can now enjoy High Definition Television and high download speeds.
Customer satisfaction and simplification In our network and technical support department, we focused on improving customer satisfaction. In 2011, we continued actions to make the customer’s life easier.
Move to all IP investments (in EUR million) 50
55
40
11
2008
In 2012, Belgacom will continue to counter the indoor coverage impact due to the law in the Brussels-Capital Region that limits the power emission of GSM antennas to 3 volts per meter. Compliance with this norm is a gradual process that must be completed by 2014.
Move to all IP program 2009
2010
2011
Our long-term business transformation project “Move to all IP” has three main objectives: • A network transformation in which end-of-life legacy technologies will be gradually replaced by IPbased alternatives. • An IT transformation that will increase efficiency through further automation and the reduction of manual handling time.
We became more accessible, by extending the opening hours of our technical call centers. We now offer technical support from 7 a.m. to 10 p.m. on weekdays to residential customers, as well as during the weekend, and our professional customers can reach us 24/7. We simplified the home voice menu (maximum 3 options before speaking to an operator) and introduced a single phone number for all the services. Our technical call centers made strenuous efforts to answer every call within two minutes and to offer the possibility of a call-back. Customers who chose to install their modem themselves were offered personalized technical support by phone. For on-site interventions, we extended our field support services until 8 p.m. and on Saturdays. And to make life easier for our customers, we implemented a simpler and more user-friendly Belgacom TV menu and a single login for the Belgacom and Proximus e-Services.
annual report | belgacom | our strengths | FR | NL | UK |
29
Over 17,000 km of fiber have been deployed, which positions Belgacom as the most advanced operator in Belgium in terms of its optical fiber network, and puts us in the top ten worldwide.
All our employees were mobilized to bring the customer satisfaction program to life, with technical teams working together with Marketing and Sales to reach common objectives from a customer-centric perspective. An internal charter was developed to engage all our employees, backed up by powerful internal campaigns such as road shows with our external installers, golden rules and coaching, and training programs for all front-line technicians.
20%
energy savings thanks to the upgrade of our mobile network equipment
Wholesale activities Belgacom’s Service Delivery Engine & Wholesale department provides regulated and commercial telecommunications services to other operators and service providers on the Belgian market. The products and solutions offered to our wholesale customers have evolved in line with the latest technologies on the market. In the regulated environment, delivery times of our wholesale solutions, as well as our customer support, exceeded all formal obligations. We also made significant improvements in the commercial environment. We expanded our solution portfolio for carriers active in the professional market and increased VDSL2 speed and coverage for all active operators. Along with this infrastructure upgrade, we launched different services to support existing and upcoming ICT standards on our Explore solutions: improved Quality of Services for VoIP and critical business applications, reporting tools, and an enhanced Service Level Agreement. These solutions will allow our wholesale customers to provide their B2B customers with the solutions they require. To give carriers more autonomy and a quicker service, we also further developed the e-tools at their disposal. During operational working groups with the BIPT (the institute that regulates Belgian telecommunication services) and Other Licensed Operators, we demonstrated our capacity for professional collaboration and an open and constructive dialog. All our efforts, combined with the close relationship model we have developed over the years, were clearly appreciated by our wholesale customers, resulting in a 85% customer satisfaction score.
Reducing our energy consumption Reducing our CO2 emissions is also one of our network management priorities. In this context, we managed to increase the energy efficiency of our data centers by 10% compared with 2007, and we will build a green data center next year. In 2011, we finalized the replacement of our mobile network equipment with state-ofthe-art technology delivering up to 20% energy savings. The combination of our numerous energy improvement actions have resulted in EUR 8.3 million savings (cumulative since 2009). Our long-term objective is to improve the energy efficiency of our entire network infrastructure and data centers by 25% before 2020.
An increasingly digital world
News We optimized our install and repair field support, by extending our services slots until 20h and on Saturday.
With the proliferation of smartphones, tablets, connected TVs, and new content and applications, we are facing growing demands for bandwidth. Traffic and speeds on Internet networks continue to increase with the growth of customized online services and content. In the alwayson and increasingly mobile world that digital technology allows, Belgacom aims to become the exclusive supplier of telecom products, TV and multi-play services, not just for each household or business but also for each individual within that household or business. To achieve this, our key advantage over our competitors is that we have as well a fixed as a mobile network (broadband, 3G, Wi-Fi). Also, we have convergent customer databases (fixed and mobile customers) which will allow us to offer entertainment or useful services tailored to the individual preferences of customers. We will therefore continue to invest heavily in our networks, and to maintain them in order to offer a top-quality service to our customers. We want them to become the smartest networks for sharing information and emotions everywhere.
OUR CUSTOMERS
/// page 30
1:30 p.m., BRUSSELS
Tania
I work in a bank. I find it a quite challenging job. Of course, the image of banks and bankers has been damaged. Although I can understand why, it is not entirely justified, and when I discuss my job with my friends, I spend a lot of energy trying to modify the image they have of what I do. My boyfriend finally understands me. I can occasionally have lunch with him in the center of Brussels. But it’s actually my chat sessions with him on my way back home on the train to Namur that finally convinced him.
annual report | belgacom | our customers | FR | NL | UK |
Lunch at Foodmaker’s ?
Generation XL SMS et appels illimités
35
€ par mois
www.generationxl.be SMS illimités 24/24, vers tous les réseaux. Appels illimités pendant la semaine de 19 à 7 heures et le week-end, vers tous les réseaux. Les SMS et appels illimités sont uniquement valables en Belgique, vers tous les réseaux, à l’exception des numéros spéciaux pour un usage personnel conformément aux conditions générales.
31
OUR CUSTOMERS
/// page 32
Belgacom offered even more to its customers in 2011, and we are empowering our residential customers so as to enrich their lives, giving them access to their communications, entertainment and applications anytime, anywhere and on any device.
Empowering our customers to enrich their lives
30%
less complaints versus 2010 for fix network customers
1,200,000
More than customers watch Belgacom TV
The largest wi-fi network in Belgium with
500,000 hotspots
Belgacom TV
now also available on tablets, laptops and smartphones
annual report | belgacom | our customers | FR | NL | UK |
33
Building on new flexible links across our fixed and mobile networks, and on new products and partnerships, Belgacom launched successful, innovative offers throughout the year.
The innovations that keep us ahead of our competitors and drive our strong performance in the marketplace
device – PC, tablet or smartphone. No other operator on the Belgian market today is offering music streaming services bundled with telecom products.
TV Everywhere
The Samsung Tablet combined with fixed and mobile Internet
Fon
As a perfect example of our successful tie-up with Samsung, this offer allows our customers to have a tablet + fixed Internet + mobile Internet, all for a single monthly fee. Launched in June 2011, the offer was an immediate success. This combination revealed the advantage of being a fully converged player, since our competitors found it difficult to copy our offer. Furthermore, we accompany the pack with a program of support so that the customer benefits from an offer that is simple and easy to use (see “Simplification and Customer Satisfaction”).
Belgacom Fon free Wi-Fi access to more than 500,000 hotspots www.belgacom.be/fon
Free Wi-Fi In partnership with Fon, the largest Internet community in the world (with four million users), the community-based Wi-Fi network of Belgacom’s customers offers free Internet outside the home. This is the perfect match between fixed and mobile Internet through the wireless network. In less than four months since its launch in November 2011, over 500,000 Belgacom wifi-hotspots were activated. With this number rising, Belgacom currently offers the largest wireless Internet coverage in Belgium in collaboration with Fon.
Music content (Deezer) With Deezer, Belgacom offers a unique and unlimited musical experience to its Internet and mobile customers, with access to more than 13 million music titles, available anywhere, anytime, and on any
Reaction “The Samsung tablet combined with Internet was so successful that, at the end of 2011, we became the largest seller of Samsung tablets in Europe.” Scott Alcott – Executive Vice President Consumer Business Unit
Thanks to this application, TV follows you everywhere: Belgacom customers can watch almost 20 of the most popular TV channels, live football, and films on demand – even without a TV: it works on a PC, tablet or smartphone, wherever and whenever they want, on the fixed network and the mobile 3G network. At the end of 2011, nearly 20% of our Belgacom TV customers had downloaded the TV Everywhere application. This offer combining Wi-Fi and 3G is exclusive on the Belgian market, with similar offers being limited to Wi-Fi usage only.
Free calls to mobile networks With Happy Time XL, our customers can call more for free. They could already call for free from their fixed line to other fixed lines in Belgium. In 2011, we extended free phone calls to mobile numbers, on weekdays from 5 p.m. till 8 a.m. and around the clock on weekends and public holidays. Hundreds of thousands customers had activated this option within three months of its commercial launch. This offer positively impacted customer satisfaction and the attractiveness of the fixed line, resulting in an improved churn. A good move, as confirmed by our competitor launching a similar offer in reaction to ours.
A useful application for mobile phones “Hello” allows customers to check their mobile, SMS and Internet usage, providing them with a userfriendly and transparent way to control their costs.
OUR CUSTOMERS
/// page 34
We enhanced the appeal of our combined Tablet + Internet offer through imaginative customer care: demonstrating and configuring the tablet in our shops, installing the Wi-Fi settings at the customer’s home, and proactively contacting our customers to make sure that everything was alright and that they received a first-class service. This won us new loyalty: more than 80% of our customers would recommend this product to their family and friends.
Foot
About 9 games per weekend to watch live and exclusive. www.belgacom.be
Deezer
13 million songs to listen to at home and elsewhere. www.belgacom.be
Hello!
In 2011, we implemented actions to simplify the lives of our customers and launched easy-to-choose products through clear promotions and transparent communication. We reduced the number of call-center number options in our automatic home phone menu, did our utmost to answer within 2 min. and introduced the “call back” option at an appointed time. We simplified our website navigation and login, and developed intuitive applications and services allowing customers to personalize and manage their services and usage. Belgacom TV was given a simpler menu, faster navigation, and a decoder reboot time of just three minutes.
We became a more accessible company by extending our toll-free technical support to every day, from Our new application to control your mobile 7 a.m. till 10 p.m., and we provided our install and repair field services until 8 p.m. on weekdays, with repairs on consumption. Saturdays as well.
Simplification and customer satisfaction In an increasingly complex telecom world and an ever more demanding market, we want to do more than deliver innovative products and services. To this end, we launched the “Simple and Friendly” project, designed to provide our customers with products and services that are not just excellent, but also intuitive, transparent and user-friendly. We want to make sure our customers have proactive, accessible and personalized support to get the best out of their choice of Belgacom as a supplier.
We also rewarded the loyalty of our customers through a range of attractive advantages and programs, and we continued to roll out the Premium Club loyalty program launched at the end of 2010. Premium Club is a points and advantages program for Belgacom and Proximus customers. Points can be exchanged for a selection of rewards, free calling minutes, mobile devices, vouchers and other items. We also organized a range of events in which customers could enjoy a day out with their family or friends at an attraction park (Pairi Daiza and Bobbejaanland in 2011) or at the movies, for a reasonable price. We saw customer satisfaction scores rise, with a clear improvement in loyalty and brand image and 30% fewer complaints from our fix network customers.
annual report | belgacom | our customers | FR | NL | UK |
35
We want to make sure our customers have proactive, accessible and personalized support to get the best out of their choice of Belgacom as a supplier.
A personalized customer approach The better we know our customers, the more efficient we can be in supplying what they want, and the better return we can make on our investment. We have therefore developed tools for identifying targets and gaps with a new level of precision, based on socio-demographic criteria, brand preference, product penetration, market share, intent to switch, etc. We are proud of the progress made in 2011: • we increased our digital TV market share among seniors by 50% in one year, thanks to the launch of a Pack including a fixed telephone line and TV at an attractive price; • we had great success in the youth market (12-24 years), thanks to the revamp of our Generation rate plans with unlimited calls and SMS offers, increasing our market share in that segment.
Reducing the digital divide Offering simple and accessible products is important, but we also want to make sure that customers have the skills they need to embark on the digital journey. In 2011, we launched “Webexperts”, an initiative stimulating youngsters to share their Internet knowledge with the elderly. Schools or individuals can submit projects using the tutorials on www.webexperts.be, and we reward the best projects each month. After three months, more than 50 projects had already been submitted, with a majority coming from schools. Thanks to those projects, 700 seniors received training and have discovered the world of the Internet and its potential.
Strengthening our sales channels Belgacom has four sales channels: controlled distribution shops (Belgacom Centers and Generation Stores), contact centers, E-channel and uncontrolled shops.
In 2011, we focused on the reinforcement of all our channels thanks to numerous traffic activations, and on optimizing our customer relationships through a targeted tactical approach. In the channels traditionally dedicated to fixed products, we acquired new business in mobile products, and vice-versa, too: our Belgacom Centers increased their share of the mobile postpaid channel from 31% in 2009 to 51% in 2011. We also improved customer experience. In our Belgacom Centers we provided on-the-spot configuration of tablets and smartphones, and launched a new tool for fixing a shop appointment online. In our contact centers, we extended opening hours and drastically cut waiting times. We also strengthened the collaboration between our sales channels, thereby improving the efficiency of sales transactions. We continued our efforts to facilitate information finding, support, self-service and sales on our websites. In 2011, Online Sales increased by more than 20%.
Confident for the future A richer multimedia experience The arrival of more and newer devices – such as TVs connected to the Internet – will strengthen the trend towards access across network platforms, everywhere and at any time. Following on from what we started in 2011, we will pursue our bid, together with privileged partnerships, to boost access to multimedia content and applications across networks, and to develop and enrich new entertainment platforms.
A commercial approach Increased market share in Internet and TV is a top priority. And since multi-play customers are the most valuable and loyal, we want to go a step further by integrating mobile products and developing a new range of Packs.
A customer approach In 2011, we surprised our customers with unexpected “Simple and Friendly” value proposals and by occupy-
The Tablet ready to use, combined with the fixed and mobile Internet of Belgacom: the perfect example of a privileged partnership with Samsung, but also of a successful convergence through our complementary networks. www.belgacom.be
OUR CUSTOMERS
/// page 36
ing a service territory that our competitors had ignored. In 2012, we will intensify our efforts by raising some of the indicators that are still not at the level they should be, and by deploying specific servicing approaches for high-value customers. At the same time, we will pursue initiatives aimed at our key customer segments, and add the new criteria for obtaining value in terms of revenues, margins, and costs, while we increase efficiency and profitability.
Our sales channels On 15 April 2011, Belgacom announced the acquisition of Wireless Technology, which owns the chain of The Phone House stores in Belgium. The Phone House stores complement our current distribution network and will allow us to serve new customer segments that Belgacom did not reach before. We will also capitalize on each other’s sales channels. In particular, we intend to promote the web as a channel for simple transactions, such as topping up a prepaid card, adding subscriptions and options, or ordering a move.
Social media Given that our customers increasingly use social media to express themselves, being present in this sector is vital for a company like Belgacom. Since 2010, Eva, our virtual operator, has been listening to and helping customers on Twitter, Facebook, the Belgacom Community site, and other important forums.
EVA
In 2011, Eva posted 6,920 messages and answered 95% of support requests made via social media. In 2012, we will continue to listen to, help and engage with our customers, allowing them to become more involved in the development of our products and solutions.
Tango
Our virtual operator listens to, helps and engages with our customers on social media
With its Tango operation, Belgacom has a leading position in mobile prepaid in Luxemburg, and is the energetic challenger for mobile telephony, fixed telephony and Internet (3G, ADSL, VDSL and Fiber) in the residential and professional market. In 2011, we broke new ground: • in the post-paid market, we offered bundles of voice, messaging and data and a strong portfolio with roam-
ing. Combined with the new iPhone 4S, this allowed Tango to turn in a positive performance; • i n the triple-play market (fixed + mobile telephony + Internet), we launched Tango Blue, a completely new range of ultra high-speed broadband offers on optical fiber, increasing customer access to new entertainment services, such as football from the Portuguese Primeira Liga. Our 3-play customers can now enjoy one of the best European football championships on their smart phone, tablet or PC, everywhere in Luxembourg. •F ollowing the growing usage of mobile internet and the powerful uptake of Smart phones, we launched our mobile App allowing customers to keeps informed of our latest offers as well as managing their subscription. This Apps is well appreciated by our customers, which is proved by the over 40.000 downloads made in 3 months. •T o capture further market share within the International community residing in Luxembourg, Tango has successfully promoted a set of mobile international calls services that allow the consumer to seamlessly call to Luxembourg or Europe. This opt-in packages delivers up to 5 hours on International calls to Europe at competitive prices. In line with our group strategy, the objective for 2012 is to develop fixed and broadband offerings as a springboard for value-added entertainment services.
Scarlet Scarlet offers simple, functional products at the best price: Internet, fixed and mobile telephony, Belgacom TV and prepaid Mobile to Africa via its Mobisud affiliate. Scarlet’s positioning is not geared to convergence products; instead, it develops innovative offers which, as they mature, can be introduced at Belgacom. In this way, Scarlet acts as a kind of incubator for Belgacom. The addition of Belgacom TV in 2009, together with Scarlet’s focus on having multiple play customers has consolidated Scarlet’s customer loyalty. In 2012, the focus will be on improving the mobile portfolio, reinforcing Scarlet’s presence in distribution channels, capitalizing on the e-channel and the web for customer contact and servicing, and improving installation times.
annual report | belgacom | our customers | FR | NL | UK |
37
In 2012, we will intensify our efforts by raising some of the indicators that are still not at the level they should be, and by deploying specific servicing approaches for high-value customers.
Scarlet Mobile Me & Surf idéal pour : Scarlet Pocket Wifi, iPads, Netbooks, uSb dongles/uSb mobile broadband sticks.
Belgacom Happy Time XL Chez Belgacom, vous appelez désormais gratuitement de votre ligne fixe vers les numéros de GSM après 17 h et le week-end
HappyTime XL
Kids pass
Tango
• Un réseau qui garantit une disponibilité de l’accès • 1 GB de data pour 15 ¤ par mois • Envoyer des sms à un prix fixe et avantageux, à tout moment, vers tous les réseaux • Surfez à un tarif ne dépassant pas 0,15 ¤ seulement par MB après épuisement du forfait • Tarifs attractifs pour votre roaming data • Carte MicroSim livrée gratuitement
Me & Surf
1 Gb de data Pour 15 ¤ Par MoiS
Free calls to fixed lines and GSM after 17h and on weekends. www.belgacom.be
Appels gratuits de 17 à 8 h en semaine et 24h/24 les week-ends et jours fériés vers les lignes fixes en Belgique et les numéros mobiles nationaux. En semaine, de 8 à 17 h, vous payez € 0,35/appel vers les lignes fixes en Belgique et € 0,50/ appel vers les numéros mobiles nationaux. Option uniquement valable pour le téléphone fixe sur la ligne Classic. Maximum 1 option par client et utilisation uniquement à des fins privées et conformément aux conditions générales de Belgacom. Non cumulable avec d’autres options octroyant des remises sur les appels nationaux. Non valable pour des appels vers des numéros spéciaux (07x, 09xx, sauf appels de et vers le service PhoneMail).
Series and favorite movies of your children www.belgacom.be
Tango included VDSL/ Me & Surf, launched in 2011 Fibber connectivity www.scarlet.be by Scarlet offers 1 GB to surf in its 3-play product on smartphone or tablet for “Tango Complet”. 15 € / month
OUR CUSTOMERS
/// page 38
On the professional market, 2011 was a strong year for Belgacom. Excluding the impact of regulations, and allowing for divestitures (Telindus Spain) and investments (Eudasys in France), we showed growth, ensuring our leadership on this market. Nevertheless, despite our good operational performance, we need to meet the challenges of a rapid transformation, as technologies merge and new business models arise.
Helping our professional customers do better business 4.6%
+21.7%
growth revenue in ICT in 2011
growth revenue in mobile data
+105,000 mobile customers
20,000 mobile payments transactions per day
annual report | belgacom | our customers | FR | NL | UK |
New boosts to our traditional business We have a strong basis in fixed and mobile networks that complement each other and provide unsurpassed coverage and performance. This allowed us to develop package deals that kept us way out in front in the traditional telecoms market and delivered solid operating results in 2011.
On the small and medium enterprises market • Our Packs for small and medium enterprises were very successful: they brought in additional revenue, reinforced customer loyalty, and confirmed Belgacom’s position as a single provider for all communications needs. • In 2011, we launched a comprehensive offer including a Samsung tablet, a complete Internet solution for a flat monthly fee, unlimited calls, and the service guarantees foreseen for our professional customers.
On the large enterprises market
Reaction “Cloud becomes the backbone of our industry. Belgacom is uniquely positioned with its complementary networks and its Belgian-based state-of-the-art data centers.” Bart Van Den Meersche – Executive Vice President Enterprise Business Unit
• We launched a new version of PubliLink, a connectivity solution designed to meet the needs of public authorities. This update offers permanent availability thanks to a mobile backup and service quality guarantees defined by contract. It also makes PubliLink a gateway to new content and applications. PubliLink is now used in every province in Belgium, as well as by almost all the municipalities and social service bodies and about half of the police force. • Another highlight of 2011 were the contracts we won with major enterprises and public institutions, such as the Belgian Federal Government with the extension of the mobile voice deal, the VDAB (fixed WAN connectivity), Corelio (mobile data for tablets) and De Lijn (fixed and mobile data and voice, amongst others).
Transforming ourselves
• By the end of 2011, the total number of Forum 500 telephone exchanges installed at our customers reached 40,000; this product, launched nearly 10 years ago, was the first to use both traditional and IP (Internet Protocol) telephony. • We also wanted to strengthen our local presence and provide our SME customers the best IT and telecom advice. To this end, we took significant steps to advance our multi-channel approach for ICT: after cooperating with four partners to launch Bridging ICT in 2010, we formed an additional partnership in 2011 with eight “IT Experts”. By combining our assets with those of our partners, who are strongly embedded in the local SME market, we strengthened our position in integrated telecom and IT solutions. The “IT Expert” contributes his strong relationship with the customer as an IT advisor, and Belgacom contributes its unique, convergent telecom offerings. In this way, our SME customers can take full advantage of the integration of our fixed, mobile and cloud solutions.
39
Bizz Fusion Team Bizz Fusion Team allows to share a package of minutes and SMS.
Our operational performance helped us to maintain our lead in traditional markets. But we are seeing revenues slip, particularly for fixed and mobile voice traffic, as a result of strong regulatory and competitive pressure (see page 14). At the same time, the increasingly connected world offers a wealth of new opportunities. So while traditional telecom declines, we see new business models emerging, particularly in cloud computing and mobile data. We have already started to transform our company in order to reverse the decline and return to growth. Our transformation is occurring at multiple levels: by enhancing our market share of SME customers, taking the lead in the three principal areas of growth – cloud computing, mobile data and unified communications – and adopting an approach centered on providing end-to-end integrated solutions. Examples of concrete actions taken in these growth areas are the strategic investments and commercial partnerships with two Belgian cloud startups (Dacentec & Awingu). Thanks to our complementary fixed and mobile networks and our data centers, we are ideally placed to seize these new market opportunities. The transformation has
OUR CUSTOMERS
/// page 40
For a fixed monthly fee, the professional Pack combines all the tools necessary to call and stay connected at any time in the office and on the road: unlimited nationwide calling, fixed and mobile Internet with guaranteed service level and a Samsung Galaxy tablet. Tablette incluse
begun, and the positive results already achieved confirm that we have chosen the right path.
Increasing our market share among SMEs The small enterprises sector has strong growth potential. Our current aim is to develop a complete connected office for the coming years. We have already redefined our broadband Internet offer, adding guaranteed services – such as repairs within eight hours – and new facilities for mobility through the Fon, Wi-Fi and 3G Proximus networks. We also plan to include a back-up solution available in the cloud. With such creative initiatives, we are strengthening our ability to meet the specific needs of SME customers and increase our market share.
Becoming a leader in three growth areas Cloud computing Cloud computing is expanding rapidly and represents a new, alternative IT sourcing model for businesses. Through this model, all data and applications are hosted in Belgacom’s secure, green data centers (or those of our suppliers) and connected to the customer’s PCs or smartphones via the public Internet or a secure private connection. Currently, 80% of new business software is available through a cloud model, so the user no longer needs IT knowledge for the software installation and maintenance, and his IT budget is based only on usage. In 2011, we launched several new cloud offerings that were an immediate success: • In June, Microsoft launched Office 365, which offers the familiar office support tools in cloud version and makes it easy for multiple users to work on the same document, wherever they are, via e-mail, web conferencing, and calendars. In September, Belgacom became the first Microsoft syndication partner in the Belgium mar-
ket, allowing us to offer customers a better service, and the success of this offer is growing. • PC Mozy enables the automatic backup of user files (customer data, accounting, e-mails, etc.) in our secure data centers. Customers can view the restored data on any mobile device, smartphone or tablet. Since its launch, several key customers have entrusted the security of their critical data to us. The benefits of this service allow us to play a major role in the market for securing online data. vContainer was launched during the summer. It meets the needs of customers who, for security reasons or to manage specific applications, want their own virtual environment. vContainer is highly flexible, and makes it possible to organize a virtual data center with minimal investment and maximum protection. Several ICT partners, public institutions and large enterprises have already opted for this service. Mobile data and machine-to-machine Other growth areas we are developing are mobile data, with the launch of a wide range of applications to support the activities of a company and its mobile employees, and machine-to-machine, allowing permanent contact with a fleet of machines (dispensers, payment terminals, vehicles, etc.). • The Field Force Automation solution hosted by Belgacom, in partnership with Praxedo, enables customers with field staff (technicians, delivery drivers, convenience stores, etc.) to organize the planning, distribution of work orders and data collection for billing, in a simple and intuitive way. This solution was launched in a test phase at the end of 2011. The mobilised Microsoft Dynamics CRM application enables sales staff to complete transactions and conduct other related business while they are visiting a customer, whatever the time
annual report | belgacom | our customers | FR | NL | UK |
and location. It also provides them and their management with a detailed overview of their activities. • I n 2011, Belgacom’s mobile payment system for parking places, pioneered in Antwerp in 2006, was extended to more than 20 other Belgian locations. De Panne, Genk, Anderlecht, Verviers, Liège, Sint-Truiden and Heusden-Zolder were among the authorities to adopt this innovative solution, which allows customers to pay for a parking place by simply sending an SMS message to a four-digit number. Android users can download an application to make the procedure even easier. This innovation is clearly popular, judging by the more than 3.3 million SMS parking payments made in 2011. Today, Belgacom manages more than 20,000 mobile payment transactions per day, mainly for parking, De Lijn transport tickets and proximity payments based on NFC (Near Field Communication) technology. We are committed to expanding our mobile payment offers with, over the longer term, the dematerialization of physical wallets and purses, and the simple payment of daily expenses with a mobile phone. Unified communications The Fixed Mobile Unification solution offered by Belgacom integrates fixed and mobile voice communications, fax, SMS, e-mail, social messaging and video conferencing into a common platform hosted in our data centers. Through just one number and one voicemail, the mobile user has access to all the company’s communication functions, such as identifying a calling number even when the call is forwarded, and the possibility for colleagues to see whether the mobile user is free or busy.
Developing a customer approach based on solutions rather than just products In the past, our approach was largely product driven. Today, our starting point is no longer the product, but the customer. We are focusing on the customer’s concerns in managing everyday communications, and on what he needs to improve business efficiency. By working with selected external partners, we are now able to offer a combination of services and products in a single end-to-end solution – along with a service guar-
Safety
Access
Bizz Online Back-up An outsourced backup solution for critical data and business documents.
Bizz Online Collaboration Via their Internet connection, our customers access anywhere to their mails and documents.
41
OUR CUSTOMERS
/// page 42
Other solutions described above, such as SMS parking and mobile CRM, are in essence horizontal, but can be integrated into sets of vertical solutions. Vertical solutions At the end of 2011, we proposed a platform to the holding company SEDIFIN, which makes it possible to detect anomalies in the consumption of gas and electricity within 27 public bodies in Wallonia. This service, called Publinergie, identifies any billing errors, notes differences in consumption from one year to another, and highlights possible malfunctioning of meters or energy wastage. Developed in partnership with Dapesco, a consulting firm specialized in energy optimization, this service opens up the possibilities for improved management of energy resources.
In 2011, we gave our account managers training on green IT and sustainability to help them better integrate this in their customer inter actions. To engage in a discussion on this topic with our customers, we published a white paper on “Smart and Green IT” and organized customer events on this theme. h ttp://ict.belgacom. be/greenict
antee. We are evolving from being merely a “provider” into a partner and business problem solver. To ensure the integration of new innovative solutions into a solution-oriented approach, we have adapted our own working methods. We have created a business development department and competence center and are developing a pool of talent skilled in thinking in terms of solutions through training and recruitment. We are also strengthening our relationships with external partners, ranging from major groups such as Samsung to local businesses that are flexible, innovative, and able to rapidly develop solutions that meet the specific needs of the Belgian market. Some solutions can be deployed across business sectors, and are called “horizontal” solutions. Others are designed for specific sectors, and are called “vertical” solutions. But all of them respond to our customers’ problems. In 2011, we started to deploy a number of “vertical” and “horizontal” solutions. Horizontal solutions Belgacom’s Videoconferencing In The Cloud solutions allow people to interact in a natural, human way without being physically in the same location. The service is based on a pay-as-you-use model and avoids the costs and inconvenience of installing and updating infrastructure on site.
For the medical world, we launched a working platform that makes it easier for doctors to treat their patients and handle the related administration. This service is the result of a partnership between Belgacom and Corilus, which is specialized in complete IT solutions for the medical and paramedical sector. On behalf of the Brussels Region tourist office, we launched VisitBrussels, in partnership with K-Company. This application is available on the App Store and gives tourists a complete overview of all there is to see and do in Belgium’s capital.
The promise of better service In 2011, we made every effort to improve the everyday quality of our services and promised to make life easier for our business customers. To achieve this, we focused on three areas: • Improving the efficiency of our entire internal processing, from product and solution development over the sales cycle to supply, installation, and accurate billing. • Making our end-to-end process more responsive to demand, so as to shorten the time for activation, installation and repair. • In this perspective, further building end-to-end service level agreements. The results were very positive. For example, in our Explore network, which ensures a secure connection between a company’s sites and its employees, we were
annual report | belgacom | our customers | FR | NL | UK |
43
An active partnering and a sector-specific approach are needed to create market traction, build full end-to-end solutions for a specific business need, and drive innovation.
Internationally
able to provide consistent service throughout the year thanks to better end-to-end organization and more efficient planning of resources during holiday periods.
In our international approach to the market, we deploy our extensive range of products and services through Telindus International and its four affiliates, Telindus France, Telindus Luxembourg, Telindus United Kingdom and Telindus Netherlands.
We also improved our time-to-market on other products and services, such as telephone exchanges, connections, and broadband ICT solutions, including domain names and shared hosting.
Telindus International contributes to the development of the Belgacom Group on the corporate customer market, both in Belgium and abroad.
For SMEs, we launched an information campaign on our improved quality of service: a single phone number for SMEs, 24h/24 telephone support for any questions or technical repairs, and a guaranteed repair time (within eight hours) in case of an Internet connection fault. Thanks to the improvements we made to the quality of our services, the results show that we surpassed our main competitors in terms of “business continuity” and “easy to do business with” and complaints decreased by 10% in the professional market.
The Belgacom Group’s solution-oriented approach is co-delivered by Telindus International through a closelylinked management system. Cloud computing is a key area in ICT development worldwide. Cloud solutions are by definition borderless. Telindus International centers its growth strategy on cloud building, developing associated security services and focusing on unified communication.
Our priorities for 2012 On the SME market, our aim is to become the preferred end-to-end business partner, with a relaunch of our broadband portfolio and the integration of mobility. We will continue to improve our quality of service with guarantees and business continuity in case of outage. We also want to offer our customers the benefits of cloud solutions such as Office 365, CRM Mobile, Mozy PC Back-up, etc. On the large enterprises market, we want to strengthen our leadership in converged telecom and ICT solutions and to position ourselves as the leader in cloud-based services. New innovative cloud solutions will contribute further to our revenue growth and will broaden the range of services we offer in the cloud to meet the requirements of SMEs as well as large enterprise customers. We will achieve a European first by deploying Smart Networking on our Explore service platform. Thanks to this solution, our customers will be able to give priority to critical applications over other data on their network, and thereby improve the efficiency of their operations. We will also develop more solutions and vertical applications, such as the “Emergency package” – a set of fully integrated solutions to support public authorities in case of a major crisis (natural disaster, etc.) or unexpected events during mass gatherings (at festivals, amusement parks, etc.).
The Telindus affiliates enhanced their product and service portfolios by developing new strategic capabilities and by acquiring major customers. • Telindus France provided a new voice and data infrastructure to one of main French trade unions. It also completed the integration of Eudasys, a specialist in the storage and data-center market.
Services Bizz Internet, guarantees business continuity... even if case of failure.
• Telindus Luxembourg expanded its portfolio to include cloud and telecom services based on its own infrastructure, and successfully launched the brand “Telindus Telecom”. It won the “Best Cloud Computing Company of the Year” award, granted by a panel of 50 CIOs from all sectors of the Luxembourg market.
Business Magazine for top ICT Professionals Q4 / October 2011 • www.onemagazine.be
Dossier
Smarter, greener and cheaper
• Telindus Netherlands is transforming its organization, moving towards data-center services, virtualization and advanced managed services. It has acquired major reference customers in the public sector.
Nicolas Troch, Sales Manager at Guy Troch Import
The cloud has made us a greener company The device of the moment
How important is security at NATO? The director’s view.
Round table: Can ICT save the planet?
From consumer to company: a new device is gaining ground
The tablet is the future The rising popularity of tablets appears unstoppable – and logically so: a tablet is more than a mere replacement for the traditional laptop or smartphone. The device supports a new way of working and living.
Mag Digital version One Magazine > www.onemagazine.be/
• Telindus United Kingdom continued to form service provider partnerships, which, complemented by direct sales engagement, allowed it to penetrate the public and private sector markets. It launched a Microsoft Lync offer, enriching its unified communications service and giving customers a wider choice of integrated Unified Communications solutions.
OUR CUSTOMERS
/// page 44
BICS is one of the world leaders in providing the vital links between telecom operators in different countries. An international call, message or data transfer reaches its destination only after transiting through the networks of one or more intermediaries. These companies trade across frontiers in voice minutes, messaging, roaming, connectivity, and mobile financial transfer services around the world.
Providing vital links to telecom operators
27 billion minutes traded in 2011 (+8.5%)
1 billion SMS
messages transfered
120
new mobile data contracts
annual report | belgacom | our customers | FR | NL | UK |
45
BICS keeps building success and leadership in the international wholesale market, which is changing very fast and not without threats, but also with plenty of opportunities.
BICS currently serves operators for voice, messaging, GPRS roaming, and signaling (the service that exchanges information between operators in establishing a telephone call). BICS is a joint venture between Belgacom, Swisscom and the multinational MTN, the mobile telecommunications leader in Africa and active in 21 countries.
nologically. It is tapping into new segments, including OTT providers, broadband providers and Mobile Virtual Network Operators. These so-called MVNOs have little or no infrastructure or frequency, they buy minutes of telephony from traditional mobile operators and resell them to their own customers. In 2011, BICS developed a new services portfolio providing MVNOs as of day one with the same international coverage and services as any established mobile operator. And the success of this formula has been demonstrated by the contracts it has won, such as the contract with Virgin Mobile France.
A strong BICS position in 2011 BICS traded 27 billion voice minutes in 2011, up 8,5% on 2010, confirming its position as the fourth largest international voice carrier in the world. It also consolidated its position as number one in the Middle East and Africa market, and kept a strong position among the top three in Europe and the Asia Pacific region. In mobile data, BICS retained its worldwide leading position, with performances that outstripped expectations.
The market is evolving Voice traffic continues to grow in volume, but stiff competition and tight regulatory pressure on roaming rates are pulling down revenues on this important traditional market. New players, such as Skype, Google, Viber and Rebtel, are intensifying the competition with services that are not dependent on managed networks – the so-called Over The Top providers (OTT). Technology drives new business models. In 2011, 25% of BICS voice traffic was carried through IP technology (VoIP).
New growth opportunities To counter the erosion of voice revenues, BICS is exploring new territories, geographically and tech-
At the same time, BICS is developing value added services for voice just like it has done for mobile data. The 2011 launch of its new VAS for roaming already resulted in 27 new contracts won.
BICS priorities Reaction “ Mobile data remains our growth engine. In 2011 we signed again 120 new contracts and made a breakthrough on the MVNO market. ” Daniel Kurgan – CEO of BICS
25%
of BICS voice traffic was carried through IP technology (VoIP).
The main challenge will be to maintain the growth trend for BICS despite the voice market decline, by driving ever growing volumes at a marginal cost increase. We are confident that this can be achieved thanks to BICS’s global portfolio for both voice and data, combined with its wide customer base, which is particularly attractive for a hub. Besides that, our other key strength is our focused wholesale company, with a successful M&A track record, which is always alert to opportunities arising from market consolidation. In 2012, BICS’s main objectives will be to further rationalize its voice business, capitalize on its market leadership in mobile data and develop adjacent value added products and services.
OUR PEOPLE
/// page 46
Hi grandma, we’ve arrived. Mum is going to make pancakes !!!
How much flour again for 15 pancakes?
annual report | belgacom | our people | FR | NL | UK |
2:08 p.m., Wimereux
France, Annette and Eléonore Whenever we can, we escape to Wimereux: life is so pleasant there, we are close to the sea, our cottage is our home, and we are more of a family there than anywhere else. Here, you can see us when we arrived, having fun in our small garden. My husband sent this first snapshot immediately to my mom who, for the time being, can’t travel so far because of my dad’s illness. This way, they can share special moments with us, and that means a lot to my dad right now. So we keep them updated!
47
OUR PEOPLE
/// page 48
As part of Belgacom’s convergence strategy, we already brought all our employees from the different entities together in 2010, creating a single workforce geared to delivering real results right across our entire range of operations. We also worked hard to harmonize different remuneration systems and job family descriptions. In 2011, we were able to fully focus on further developing human potential and drawing up strategic plans to meet the company’s future competence needs.
Developping
our human potential 1,200 employees
have changed jobs internally 900 vacancies have been filled externally
18 learning projects to help our staff develop the necessary “simple and friendly” aptitudes
800 employees
participated in the “Live my Life!” exchange program
24 hours of training followed by each Belgacom employee (average per year)
annual report | belgacom | our people | FR | NL | UK |
49
To improve customer satisfaction and engage our employees, we developed staff training, provided new tools and introduced new working time arrangements.
Building the workforce for the future Building the skills for the future is an important challenge for Belgacom and for its employees. It is crucial that our company identifies where there will be gaps or overlaps among functions in the future, and that it organizes its Human Capital Strategy and people development plans accordingly. In 2010, we launched a Strategic Workforce Plan to build the right skills for the future. In 2011, we mapped out our precise needs and started planning so as to ensure that the Group will have the human skills and resources to meet those needs. This planning will be finalized and implemented in 2012 and beyond.
A common system for performance management Until 2011 the former entities of the Belgacom Group had different systems for measuring their employees’ performance. This complicated an important process, and presented particular difficulties for managers of “mixed teams”. Now we have a single tool for the entire Group. This covers not just personal objectives, but also those of the Group, so everyone can see how they contribute to the achievement of the Group goals. Rapid feedback from colleagues can be recorded in this tool, stimulating a culture of continuous feedback.
Particular attention to career management Career management within Belgacom is just as important for the individual employee as for the company. The employee is responsible for
his or her own career, but the manager helps in the reflection process. In 2011, we accelerated and innovated our career management approach, with extra support and tools for employees and managers:
•A career center accessible online, with tools and information to assist in assessment and reflection.
•A talent profile tool, allowing employees to enter their profile, CV, experience, projects and aspirations.
•D edicated career consultants specialized in counseling, to provide guidance in discussing career options, identify preferences and review career objectives.
CSR In 2011, we reimbursed 1.1 million kms for business ride by bicycle and 13,500 employees now receive their payslip in electronic form.
•N ew leadership development programs that focus on developing or improving the coaching skills of our team leaders. The new career concept was promoted with the creative internal campaign “I love me”. This campaign gave new impetus to developing a more active Group culture in which employees take their career into their own hands.
Customer satisfaction To improve customer satisfaction and engage our employees in this program, we developed staff training, provided new tools and introduced new working time arrangements.
• In all customer-facing departments where employees are in direct contact with the customer, we further implemented no fewer than 18 learning projects to help our staff develop the necessary aptitudes: being friendly, accessible, proactive and able to explain things in a simple way.
Reaction “ Our employees need to grow professionally and develop themselves on the job. Career management is about matching individual aspirations with company needs and tthat’s why we will continue to stimulate internal mobility towards jobs of the future. ” Michel Georgis – Executive Vice President Human Resources
OUR PEOPLE
/// page 50
Developing the right skills, competences and knowledge, now and for the future, is an essential part of our Human Capital strategy.
•M ore than 800 employees participated in the “Live my Life!” exchange program. For one day, they shadowed a customer-facing colleague, such as a contact center operator, sales team member in a Belgacom Center, or a technician on the road. Live my Life! provided a rich experience that offered a behindthe-scenes look at customer contacts and showed participants how all the processes are linked together. This understanding will lead to better processes across the business units, resulting in better customer service.
•E xternally, we reinforced our customer satisfaction focus, highlighting our Simple & Friendly attitude in the sourcing process, with attention to a customer friendly attitude that is innate rather than acquired. The annual employee survey revealed that our people highly appreciate the efforts to improve customer satisfaction.
Elix Every year, we conduct a wide-ranging employee survey known as Elix, which not only measures our employees’ satisfaction but also their involvement in their job and with the organization. The results and feedback from Elix are used as a basis to take action. The results in 2011 confirmed that we are moving in the right direction. This positive trend is largely the result of our efforts on career and performance management. Our focus on customer centricity - with the customer satisfaction program - increasingly inspires our staff to do their best for the customer (+9% vs 2010).
Engagement At Belgacom, employee engagement is high on the strategic agenda. Whether it concerns
the alignment of employees with a project or involving the whole workforce in the company’s objectives, we believe that employee engagement is crucial for our current and future success. We define employee engagement as “people going the extra mile to meet company objectives and increase performance”. While individual employees have a role to play, we see it as the role of management to provide the tools, technology, information, support, and other resources and to create a culture that fuels engagement. Since the end of 2010, a dedicated team within HR has focused on coordinating and stimulating engagement efforts throughout the company. In 2011, we paid particular attention to career development, the role of our team leaders, and the creation of a coaching culture. The employee engagement survey is an important instrument for measuring commitment and defining actions to increase engagement. By addressing our employees’ concerns, we show that we listen to their needs and act accordingly.
Training In a sector undergoing constant change and where intellectual capital is a prime source of innovation and growth, developing the right skills, competences and knowledge, now and for the future, is an essential part of our Human Capital strategy. Each Belgacom employee follows on average 24 hours of training per year. Belgacom has also created Training Academies in the most important customer contact fields, and in marketing and product management. This allows us to identify and measure the most important skills for each job, and to create adapted training paths for each employee. Developing leadership skills
is also essential for Belgacom because of the important role leaders play in the engagement and coaching of their team members. Several tracks have been created to ensure that the leadership style of our management corresponds with the new business reality.
Diversity We strongly believe that diversity in the workplace leads to creativity and thus innovation, to better knowledge and understanding of our customers, and in the end to better business results. We are therefore also firmly committed to treating everybody equally and with respect, irrespective of their gender, race, background, education, etc. In 2011, we decided to give extra attention to gender and ”mature workforce” management.
Gender Women occupy about 30% of the functions at Belgacom and 21% of the senior management group’s posts. Although we are among the best performing companies in this area, we want to achieve more gender balance in our company and thus also at the top level. In 2011, we signed the European Code of Best Practices for women in the ICT sector, confirming our ambition to promote increased participation of women in this sector. We also increased awareness of the opportunities for women in our management and leadership functions, with particular attention to top management. Beyond this quantitative male/female balance, we want all our leaders to develop a more balanced leadership style, applying masculine as well as feminine qualities and competencies in the workplace. Our leadership development program takes this into account.
annual report | belgacom | our people | FR | NL | UK |
Technogirls
Belgacom encourages women to choose a career in ICT. It sponsors initiatives such as “She goes ICT” (Datanews), and promote technological studies among girls by collaborating with Agoria Technogirls.
Focus
Elix results of 2011 vs. 2010 10,583 employees completed the survey Employee satisfaction: 90% (+2%) Commitment to Belgacom: +1% Job engagement: status quo Level of participation: 63% (+1%)
In 2011, Belgacom was again awarded the “Quality for Equality and Diversity” label granted by the federal government. This distinction is an official recognition of the efforts made in the field of diversity.
Our priorities for 2012 “Mature workforce” management Our long-term goal is to encourage our staff to stay vital, active and motivated longer, by developing an age-conscious HR management. In the short term, we focus on employees above the age of 50 who are assigned heavy tasks or work in sales. In 2011, we created an action plan with 42 best practices and 9 main themes, including ergonomics, health programs, career planning, and working time organization.
Top Employer in Belgium In 2011, Belgacom again received the Top Employers Belgium award, which is based on independent research and demonstrates the quality of our HR policies and plans, particularly with respect to: •P rimary (salary) and secondary (fringe benefits) work conditions •T raining and development •O pportunities for mobility
•C orporate culture
In 2012 and beyond, we will ensure that we develop the right skills for the future, thanks to our strategic work plan and will give continued support to our employees in managing their careers (with a special focus on age-conscious career planning and stimulating women to apply for management positions). We will also reinforce connections between our staff and our company strategy, strengthen our performance, and promote a culture of recognition in order to increase employee engagement.
51
CSR
/// page 52
6:55 p.m., Antwerp
Michel and Arthur My grandson Arthur is fascinated by music. He plays the piano. A buffet piano. We don’t have the space for a flugel, unfortunately. He’s the second-best in his class. I am so proud of him. Hearing and seeing him play is very emotional for me. I made a video clip of him playing a Chopin waltz. I am not much of a musician, but I can do some filming and editing. And you know what? He put it on his Facebook page. That shows how much he appreciates my work…
annual report| belgacom | CSR | FR | NL | UK |
Do you come for lunch on sunday ?
53
CSR
/// page 54
Responsible business About our CSR report This is Belgacom’s sixth Corporate Social Responsibility (CSR) report. It aims to provide a balanced account of our performance on the socioeconomic, ethical and environmental issues which are the most relevant to Belgacom Group and its stakeholders.
+
More information on
+
www.belgacom.com/ responsibility (CSR reports) • Key Figures (KPI) table • Details on scope and definitions of our KPI’s • GRI reference table • Ernst & Young assurance statement
W e welcome your feedback on our CSR strategy and report
csr@belgacom.be
Because CSR is increasingly embedded in our dayto-day activities, we no longer publish a separate CSR report and included several case studies throughout our activity report. More information is available on our website. Unless otherwise stated, all data and activities are for the year 2011 and refer to the Belgacom Group as a whole.
G3.1 principles, we self-declare compliance with level B requirements. Ernst & Young gave a limited assurance on the qualitative information and on a selection of key indicators for 2011 (covering all our CSR commitments), identified by a √ in our Key Figures table available online.
We use the GRI G3.1 principles as a basis for determining relevant content and metrics. Against the GRI
Our CSR Strategy “We aim to grow our business in a responsible and sustainable way, as we believe it has to benefit both the society and our long-term development.“ Didier Bellens - CEO See message on p. 5.
At Belgacom, we recognize the need for a responsible and transparent way of managing our business vis-à-vis our stakeholders. We believe our future business success will depend on the positive impact we, through our activities, have on economic, technological and social progress, and on winning the trust of our interest groups. Corporate Social Responsibility (CSR) is therefore considered a strategic management tool and a key component of our corporate mission and strategy. Our CSR strategy enables a more inclusive, safer and greener (e)-society, while ensuring that we do business in an ethical and responsible way.
commitments strategy challenges
Our CSR strategy
online safety
digital divide
climate change
ageing population
Enable a more inclusive, safer and greener (e)-society 1 Enhancing access to communications
2 Encouraging a responsible product use
3 Enabling a low-carbon society
4 Ethical and responsible operations (employees, suppliers, communities)
By doing this, we aim to increase our business growth and protect our reputation, while contributing to the broader economy and society as a whole. Our significant investment in Belgium’s digital infrastructure will improve access to technology at the same time as our initiatives are helping more people get online and enjoy the benefits of the digital society. Our green IT solutions help customers reduce costs and their environmental impact. Our new Belgacom Foundation stimulates social links between people and communities for more social cohesion. We also contribute to Belgian society as one of its biggest employers and by paying over EUR 900 million in taxes, social security, and dividends. Belgacom’s social responsibility rating improved in 2011: we were selected for inclusion in the Ethibel Sustainability Index Europe and enhanced our score within the Carbon Disclosure Project. We believe we are on the right track to achieve our ambition of being recognized as a leading socially responsible company in Belgium, and will pursue our efforts in the coming years in order to create value both for our business and for society at large.
annual report| belgacom | CSR | FR | NL | UK |
55
Managing CSR Our governance model firmly embeds CSR in our group activities, and ensures that the world beyond Belgacom has a legitimate opportunity to influence our choices and priorities.
We regularly challenge our CSR strategy to ensure we address the CSR issues that are the most relevant for our stakeholders and our business. This year, in internal workshops, we cross-checked our current CSR priorities against the new ISO26000 guidelines for social responsibility. We identified our most critical issues, based on the financial and reputational risks and opportunities for Belgacom on the one hand, and on our potential influence on these sustainability issues on the other. This exercise confirmed that we were addressing the right issues with our current CSR strategy. But we will ask external stakeholders to validate this in 2012. Our CSR report focuses on the most material CSR stakes for our stakeholders and for our business, identified in the top-right corner of our materiality matrix.
Embed CSR throughout the organization Our mission, our corporate values (Respect, Can Do, Passion), our Corporate Governance Charter, our Code of Conduct and our compliance office and poli-
Our approach to CSR
Stakeholder engagement
CSR
Transparent reporting on progress
Materiality assessment
CSR programs and targets per business unit
+
More information on
www.belgacom.com/ responsibility • CSR management • Stakeholder dialogue • Ethics & compliance
Materiality matrix
High
Focus on relevant topics
Our internal governance and reporting structure is centered around three entities: the Group CSR department, the CSR Steering Committee and representatives in each business unit implementing the action plans. The Vice-President in charge of CSR and the Steering Committee report directly to the CEO and the Belgacom Management Committee. Our key CSR priorities are managed as a ‘corporate strategic program’, with monthly progress reports to our Belgacom Management Committee. To stress the importance of our non-financial performance, employee satisfaction and customer centricity results directly influence the variable remuneration of our top management. Our CSR governance structure was not impacted by the organizational changes we experienced in 2011 and our CSR priorities remained unchanged.
Green customer solutions
Importance for stakeholders Medium
We engage with a wide range of stakeholders in order to understand their expectations, challenge our approach, improve our performance and build trust-based relationships. This is done in various ways, such as face-to-face meetings, satisfaction surveys from our employees and customers, and the Belgian public, and interactions with financial analysts. We also exchange best practices with peers through various CSR networks and partnerships.
cies, underpin our approach to responsible business and to corporate social responsibility.
Employment issues
Customer satisfaction Electromagnetic fields & health
Corporate Governance and Compliance Ensure ICT education E-waste and handset recycling
Community investment Responsible purchasing Responsible network deployment
Biodiversity
Low
Understand our stakeholders’ expectations
Low
Water
Fair competition Responsible marketing
Digital inclusion & accessibility Privacy & safe use of products Energy & CO2 efficiency
Employee volunteering
Waste management
Medium Current or potential impact for Belgacom
High
CSR
/// page 56
Performance overview Our objectives
Target date
Status
Our performance in 2011
Key Figures
CSR strategy and governance Continue to share best practices with our international subsidiaries
Yearly
Best Practices workshops on energy/CO2 and human resources management.
Organize a multi-stakeholder panel on our CSR strategy
Dec-11
Performed an internal assessment of our material issues based on ISO26000 guidelines. Validation by external stakeholders postponed to 2012.
Ensure that we remain included in Ethibel Investment register
Yearly
Included in the Ethibel Sustainability Index Europe
ENHANCING ACCESS TO COMMUNICATIONS Improve our customer satisfaction, via improved service and simplicity
Yearly
Customer satisfaction scores rised, with a clear improvement in loyalty and brand image.
Develop responsible marketing and communication guidelines
Dec-11
Responsible guidelines included in our marketing and communication approval processes.
Launch at least two new initiatives to bridge the digital divide
Dec-11
Launched 'Webexperts' and a new large-button mobile phone.
Improve the accessibility of our web sites for people with disabilities
Dec-11
Started to improve the accessibility of our corporate website and will pursue efforts in 2012.
Provide at least 170,000 hours of ICT training per year.
Yearly
Provided 191,474 hours of ICT training, enhancing the digital skills of 9,699 persons.
Take new initiatives to bridge the digital divide
Yearly
Launch the EMF e-learning tool and take at least another initiative to inform customers Retrofit of our mobile network in the Brussels and Flemish regions as legally required
hours of ICT training
new
ENCOURAGING A RESPONSIBLE PRODUCT USE (child online safety and electromagnetic fields) Take at least 2 new initiatives to encourage a responsible use of our products
191,474
Employees trained 3,600 kids on ‘safe Internet and mobile phone use’ in schools. Informed 50,000 parents on how to choose the 1st mobile phone of their child in a responsible way. Launched an e-learning on electromagnetic fields. Provided tips to reduce exposure to electromagnetic fields via our bill inserts.
Dec-11
Dec-11
Launched the retrofit of our mobile network to comply with strict new exposure norms.
Dec-15
Train at least 13,000 children on a safe use of Internet and mobile devices
Dec-12
new
Continue to inform our stakeholders on electromagnetic fields and health
Yearly
new
3,600
kids trained on safe Internet and mobile phone use
annual report| belgacom | CSR | FR | NL | UK |
• Inclusion in Ethibel Sustainability Index Europe • New initiatives to get more people online, such as Webexperts • 3,600 kids trained on safe Internet and mobile phone use by Belgacom employees • -62% of our CO2 emissions in Belgium since 2007 • EUR 2.98 million invested to support our communities • +2% employee satisfaction ENABLING A LOW-CARBON SOCIETY Lower our CO2 emissions by 70% and improve the energy efficiency of our networks and datacenters by 25% over the period 2007-2020 Launch at least 2 new initiatives to help our customers become more energyefficient Increase collection and recycling of old mobile devices
Lowered our CO2 emissions in Belgium by 62% vs 2007 (14% vs 2010). Energy efficiency targets for networks and datacenters are on track. SME account managers received training on green IT and sustainability. We published a white paper on ‘smart and green IT’.
Dec-20 Yearly
5% increase in phones collected for reuse/recycling vs 2010.
Yearly
SUPPORTING OUR COMMUNITIES Launch the new Belgacom Foundation
Dec-11
The new Belgacom Foundation supported 36 innovative projects stimulating intergenerational dialogue.
Support at least 100 social projects
Dec-11
118 social projects supported.
Offer access to sport or cultural events to disadvantaged youngsters in collaboration with our sponsoring department
Yearly
We included paralympic athletes in the Belgacom Memorial Van Damme competition and offered free entrances to disdvantaged children.
Contribute to more social integration via our projects and partnerships
Yearly
+
A detailed overview of our key performance indicators is available on
www.belgacom.com/ responsibility
-62% 75% 40,328 CO2 vs 2007
of waste recycled
mobile phones collected
EUR
2,98 mio to support our communities
new
PROMOTING A POSITIVE WORKING CULTURE Ensure each business unit has its own skills plan
Dec-12
We mapped out our precise needs for the workforce of the future. All business units will have their skills plan by 2012.
Stimulate career management also for mid and late career employees
Dec-14
New career management approach and tools have been launched.
Improve employee satisfaction each year and by 5 percent in 2015 vs. 2010
Dec-15
Employee satisfaction increased by 2% vs. previous year
DEVELOPING A RESPONSIBLE SUPPLY CHAIN Extend CSR risk assessment for all suppliers with a spend above EUR 125,000 Evaluate the CSR performance of detected medium and high-risk suppliers and follow up with 10 more high-risk suppliers Continue to elaborate CSR topics in strategic review meetings with key suppliers Integrate additional sustainability criteria in the sourcing plans and in our request for proposals for at least 5 categories
57
Dec-11
We assessed the CSR risk of 397 suppliers, representing 31% of our total spend.
Dec-11
Pre-evaluation of 9 high risk suppliers identified in 2011. Follow up of 11 high risk suppliers identified in 2010 will be finalised in Q1 2012.
Dec-11
CSR included in scorecards presented to suppliers during Vendor Performance Meetings.
Dec-11
Sustainability criteria integrated in RFP and sourcing plans for 5 categories
Perform on-site audits in collaboration with other telecom operators
Yearly
new
Include sustainable criteria in relevant request for proposals
Yearly
new
29%
women in total workforce
90%
employee satisfaction (+2%)
397
suppliers assessed on CSR risk
Delayed Completed On track new New
CSR
/// page 58
Enhancing access to communications We want to enable as many people as possible to enjoy the benefits of a digital society, by improving our customer service and facilitating access to our technologies (particularly for people with special needs), while enhancing the digital skills of citizens. By developing our ICT infrastructure and the use of ICT, we increase our business growth and contribute to the broader economy and to society as a whole.
+
More information on
www.belgacom.com/ responsibility www.webexperts.be
9,699
disadvantaged people followed our ICT trainings
563
computers donated to schools and charities
Our progress in 2011 Improving our customer satisfaction through better service and simplicity We have seen customer satisfaction scores rising, with a clear improvement in loyalty and brand image. Complaints for our fixed-line business were down by 30%, and we did our utmost to answer calls to our contact centers within two minutes. More information on p. 34. Our new guidelines for “responsible marketing and communication” are included in the approval processes prior to the launch of new products and advertisements. This checklist reminds employees of the importance of aspects such as the accessibility, environmental impact and transparency of our products and communications.
Facilitating access to technologies for all
Tom and Johan, teachers... ... of a school class that trained 18 elderly people using the Webexperts program “It was very stimulating to see our pupils in action. They were patient when explaining to the adults in detail how to use the Internet. We saw a lot of radiant faces, both among the children and the adults they assisted. In general, everyone was very enthusiastic.”
The share of the Belgian population that has never used the Internet decreased to 14% in 2011 (26.5% in 2008), well ahead of the European target (15% by 2015). And 60% of disadvantaged people use the Internet at least once a week, which is better than the European average (48%) – source: EC Digital Agenda Scorecard 2011. These are positive results, but we aim to continue our efforts to bridge the digital divide in Belgium.
We further facilitated access to our technologies by expanding our network coverage (99.85% for 1Mbps broadband and the best 3G coverage in Belgium), by launching attractive offers for the elderly (with free installation and training), and by offering free wireless Internet via 500,000 Wi-Fi hotspots in Belgium. We promoted large-button phones for people with special needs. Over 350,000 customers benefit from our “social tariff”, a discounted offer for disadvantaged people, and 563 refurbished computers were donated to specialized schools and non-profit associations. We also started to enhance the accessibility of our corporate and commercial websites and will pursue these efforts in 2012.
Enhancing digital skills
It is important to offer simple and accessible products, but we also want to make sure that customers have the skills they need to embark on the digital journey. We continued to provide free Internet training and to support various ICT training centers, enabling 9,699 disadvantaged people to enhance their digital skills 191,474 hours).
In order to help elderly people get acquainted with our digital technologies, we launched “Webexperts”, an initiative stimulating youngsters to share their Internet knowledge with the elderly. Schools or individuals can submit projects using the tutorials on www.webexperts.be, and each month we reward the best projects. After three months, more than 50 projects had already been submitted, with a majority coming from schools. Thanks to those projects, 700 seniors received training and have discovered the world of the Internet and its potential!
annual report| belgacom | CSR | FR | NL | UK |
+
59
More information on
www.belgacom.com/ responsibility • Review of scientific research on electromagnetic fields • E-learning on EMF
Encouraging a responsible product use We encourage a responsible use of our products, and focus in particular on providing transparent information on electromagnetic fields and health and on protecting children online. This helps us to mitigate potential financial and reputational risks, and to build trust with our stakeholders.
3,600
Our progress in 2011 Child online safety
Electromagnetic fields and health
In addition to the security mechanisms we provide on our products (parental control, anti-spam, anti-virus) and our information security management system (ISO 27001-certified), we support awareness raising and we fight online child abuse through our partnership with Child Focus, the Belgian Safe Internet Center. Belgacom employees teach online safety in schools, and we promote the use of hotlines to report offensive or harmful online content. Furthermore, we adhere to the Belgian e-safety charter and the code of conduct for safer mobile use by young teenagers and children.
Some anxieties remain about the potential effect on health of electromagnetic fields (EMF). We have taken on board these concerns by closely following scientific research in this domain, applying a responsible network deployment, and informing our stakeholders in a transparent way.
Our employees gave training to 3,600 children on the safe use of the Internet and mobile phones in 64 schools across Belgium, in collaboration with Child Focus (the Belgian Safe Internet Center) and Microsoft. Given the very positive feedback of our employees, the children, and the schools, this initiative will be extended in 2012.
We provide tips to reduce exposure to electromagnetic fields via our websites and bill inserts. We also indicate the exposure level to electromagnetic fields in all our wireless devices, and provide an earpiece by default with our mobile phones. We provide transparent information to our stakeholders. For this purpose, we established a new e-learning on electromagnetic fields. Also, we organize information sessions for municipalities and our employees. Last year, we launched the retrofit of the mobile network in the Brussels and Flemish regions as required by the environmental legal framework. The new norm in Brussels is the strictest one in Europe.
kids trained on “safe Internet use” by Belgacom employees
100%
of our wireless products with a label indicating exposure to EM waves (in at least one communication channel)
Wouter, a Belgacom employee... ... who trained kids on safe Internet use “I found this to be a very rewarding thing to do. I was impressed by the kids, about their internet savvy as well as their eloquence. Got great interaction and feedback afterwards. I will be more than happy to repeat this. Great initiative !”
CSR
/// page 60
Enabling a low carbon society Climate change represents potential risks for our operations and at the same time enables new business opportunities. We are committed to playing an important role in preserving the environment and moving towards a low-carbon society. Our aim is to reduce our CO2 emissions by 70% by 2020 (2007 baseline), to help our customers lower their costs and environmental impact, and to involve our stakeholders.
More information on
www.belgacom.com/ responsibility
Our green solutions and white paper on
http://ict.belgacom.be/ greenict
-62%
CO2-emissions vs 2007
75%
of waste recycled
40,328 mobile phones collected
Gauthier Andries, CTO Stepstone “Belgacom can help us increase our efficiency further and support our objectives to become even more sustainable. The main green initiative taken by Stepstone was to migrate all the applications and servers to the Belgacom data center in Machelen. As a result, our servers lose less heat and show a better energy efficiency. Secondly, we virtualized all our applications in the Belgacom data center”.
Our progress in 2011 Reduce our CO2 emissions in Belgium by 70% (2007-2020) Energy efficiency is a key component of our environmental management system and environmental policies. This year, we achieved an extra electricity saving of EUR 1.9 million in total, partly thanks to the further virtualization of our server park, the continued rollout of free air cooling, the dismantling of old network cards, etc. The major project to replace our mobile network infrastructure was completed by the end of 2011, and will result in an annual electricity saving of about 17 GWh. Thanks to our efforts related to efficient energy management in buildings, a greener vehicle fleet (e.g. the average emission of new ordered company cars dropped to 115g CO2/km), and the continued promotion of public transport, our CO2 emissions in Belgium decreased by 14% compared to 2010 (-15 % for our global operations), and by 62 % compared to 2007. The Environmental Investment Organization (EIO) ranked Belgacom first among European telcos in its
carbon ranking, on the basis of our scope and CO2 reduction in relation to turnover. In 2011, we produced 4 % less waste than the previous year, and 75 % of our waste was recycled or reused.
Help our customers lower their environmental impact In 2011, we developed a “green ICT” training course for our SME sales managers to enable them to give our customers better information on how our products can help to increase their efficiency in terms of costs and energy. A Belgacom white paper on “green ICT” was also drawn up, with a focus on ‘a smaller ecological footprint and reduced costs, thanks to smart ICT solutions’.
Involve and raise awareness of stakeholders on climate change In 2011, we became founding partner of GoodPlanet. be, a new organization which aims to raise environmental awareness in schools with material from French photographer and filmmaker Yann Arthus-Bertrand. We worked with several suppliers to drastically reduce the ecological impact of their products.
CO2-emissions in Belgium decreased with 62% vs. 2007
200
I nternational operations Electricity - Belgium Heating - Belgium Transport*- Belgium
150 kTon CO2
+ +
100 50 0
2007
2008
2009
2010
2011
2020 target
* Transport includes the CO2 of our fleet vehicles and in Belgium also business travel, employee commuting and outsourced transport for our network
annual report| belgacom | CSR | FR | NL | UK |
+
61
More information on
www.belgacom.com • Corporate Governance and compliance www.belgacom.com/ responsibility www.belgacom.com/ foundation
Ethical and responsible operations We aim to conduct our business in a responsible and ethical way vis-à-vis our employees, our suppliers and the communities in which we operate. This helps us to build trust with our stakeholders, protect our reputation, enhance employee engagement, contribute to social integration, and forge stronger links with our suppliers and communities.
EUR 2.98 million community investment
90%
employee satisfaction (+ 2%)
397
suppliers assessed on CSR risk
Anne-Sophie Parent, Secretary General AGE Platform “As President of the Jury of the Belgacom Foundation in 2011, I was very enthusiastic to participate in the selection of 36 valuable initiatives stimulating intergenerational dialogue in Belgium, which fit in perfectly with the 2012 European Year for Active Aging and Intergenerational Solidarity.”
Our progress in 2011 Our Corporate Governance Charter, our Code of Conduct and our compliance office and policies underpin our approach to responsible business. See p. 83, 98-99.
Positive working culture
This year, we further increased employee satisfaction by 2%, launched a new career management program, initiated a plan for the future skills needed to cope with our business transformation, and started tackling our ageing workforce issue, in close collaboration with our unions. See p. 48-51. Caring for the health and safety of our employees and suppliers is also a priority. Our policy covers all aspects related to stress, moral and sexual harassment and violence. These internal proceduresare published on our intranet with advice and contact persons, along with our whistle-blowing procedure. Our proactive campaigns aimed at preventing accidents helped us maintain a rather low occupational accident index (9.2).
Responsible supply chain
We have labor, ethical, safety and environmental standards for suppliers (based also on our Code of Ethical Procurement), and we monitor compliance through questionnaires and discussions with suppliers (during Vendor Account Meetings). Out of the
11 strategic suppliers identified at risk in 2010, 10 proved to have a lower risk rank as originally defined after an in-depth analysis. An improvement plan has been defined with the remaining supplier at risk. In 2011, we assessed the CSR-related risks of 397 suppliers with spending above EUR 125,000, and identified 9 suppliers with potential risks, which we will follow-up in 2012. An additional 100 suppliers with spend above EUR 125,000 will be assessed in 2012 with our new tool, along with our strategic suppliers. CSR is now included in our vendor performance scorecards.
Supporting our communities
We invested EUR 2.98 million this year to support our communities, through financial donations, in-kind support, and volunteering of our employees. We launched the Belgacom Foundation, whose mission is to create, restore or strengthen social links between people and communities. In our first external project call, we supported 36 innovative projects aimed at stimulating intergenerational dialogue. 563 refurbished computers were donated to schools and social projects. Finally, we supported 49 social projects in which our employees are active as volunteers.
THE BELGACOM SHARE
/// page 62
4:55 p.m., Liège Guillemins
Fred
I am a newspaper journalist. I love to travel by train. For one thing, because in most cases, I don’t lose any precious time stuck in traffic. And I like to have people around me. Even when I am not working, I take great pleasure in observing other people, overhearing their conversations, inventing stories about their lives, starting a novel starring the woman sitting in front of me. Sometimes I take photos with my cell phone so that later on I can recall what inspired me. I have a whole gallery of them by now: people, moods, stories. Life is fascinating when you look at it that way.
annual report| belgacom | Belgacom share | FR | NL | UK |
Rosario @pingpong
Just watched ‘your’ JT. Poor weather in Brussels
10 min
63
THE BELGACOM SHARE
/// page 64
The Belgacom share
Share listing Stock market
First Market of Euronext Brussels
Ticker
BELG
ISIN: BE0003810273 National 3810.27 SVM code Bloomberg BELG BB code Thomson code:
BELG-BT
Reuters code:
BCOM
Since March 2004, Belgacom’s shares have been listed on Euronext Brussels under the ticker symbol BELG. The Belgacom share is included in the following leading indices: BEL20, EURO STOXX Telecommunications Index, STOXX Europe 600 Telecommunications index, FTSE Eurofirst 300 Telecom index and MSCI Euro. Belgacom share performance in 2011 The Belgacom share stands for stability and reliability in insecure and volatile markets. The financial and sovereign crisis in 2011 left many companies and industries facing considerable volatility. Benefitting from its strong financial position and its attractive shareholder return policy, the Belgacom share enjoyed a defensive status and continued to be viewed as a safe haven. In comparison to other Belgian companies in the BEL20 and its peers in the Telecom Sector, the Belgacom share performed well over 2011.
Over the year 2011, the Belgacom share lost 3.5%, with the closing price of 30 December 2011 at EUR 24.24, while the average daily volume in 2011 rose by 8.6%. The share reached its year-high closing price of EUR 27.64 on 8 April 2011 and its lowest level on 1 November 2011 with a closing price of EUR 21.40 as nervousness about the Greek sovereign crisis peaked and was reflected on the European financial markets. The BEL20 closed the year 2011 19.2% lower versus end 2010, with Belgacom performing fifth best. The Dow Jones STOXX Europe Telecommunications Index ended 6.2% lower versus one year ago
annual report| belgacom | Belgacom share | FR | NL | UK |
After a positive start in 2011, the markets went down in March, driven by the uncertainty following the earthquake in Japan and the political instability in Libya. The Belgacom share went ex-dividend on 26 April 2011, and after a short recovery dropped by 5.12% on 6 May as a reaction to Belgacom’s profit warning announced with the first quarter 2011 results. Unfavourable macro news flows and general market concern on the Telecom sector put the Belgacom share on a further negative trend in the second quarter. During the third quarter, the financial markets
were on a roller coaster of fear and short-term relief driven by the European debt crises and the stalling US recovery. The announced Greek euro referendum provoked a serious drop in the beginning of November followed by S&P downgrading Belgium near the end of November. However, Belgacom’s reassuring third quarter results combined with the appreciated label of safer haven, and a new Belgian government caused the Belgacom share price to perform well in December.
Share performance
Share information Share price high Share price low Share price at 31 December Annual trading volume (number of shares) Average trading volume per day (number of shares) Number of outstanding shares Weighted average number of outstanding shares Key data per share as reported EBITDA1 Net Income (Group Share)1 Ordinary dividend (gross) Interim-dividend (gross) Gross dividend yield2 Price/earnings at 31 December2 Key data per share before non-recurring EBITDA1 Net Income (Group Share)1 Price/earnings at 31 December2 Market capitalization at 31 December (billion EUR)3
2007
2008
2009
2010
2011
35.82 27.82 33.74 291,898,716
33.31 24.58 27.33 281,419,643
28.65 21.67 25.32 181,364,309
29.11 24.31 25.13 138,569,376
27.64 21.40 24.24 148,786,324
1,144,701
1,099,295
708,454
532,959
578,935
332,071,776 334,017,553
320,334,261 326,179,820
320,614,683 320,475,553
321,482,641 321,138,048
317,648,821 319,963,423
6.08 2.87 1.68 0.50 6.5% 11.76
5.84 2.45 1.68 0.50 8.0% 11.15
6.14 2.82 1.68 0.40 8.2% 8.98
7.56 3.94 1.68 0.50 8.7% 6.37
5.93 2.36 1.68 0.50 9.0% 10.26
6.22 2.96 11.40 11.20
6.10 2.71 10.09 8.75
6.10 2.79 9.09 8.12
6.18 2.57 9.79 8.08
5.97 2.41 10.06 7.70
Belgacom share performance over 2011 as compared to BEL20 and STOXX Europe 600 (source: Thomson One)
Belgacom share performance over 2011 as compared to some of its peers (source: Thomson One)
30
30
25
25
20
20
15
BELG-BT Close BEL 20 restated SXKP restated 01.01 01.02 01.03 01.04 01.05 01.06 01.07 01.08 01.09 01.10 01.11 01.12
15
BELG-BT Close MOBB-BT restated TNET-BT restated KPN-BT restated SCMN-BT restated
01.01 01.02 01.03 01.04 01.05 01.06 01.07 01.08 01.09 01.10 01.11 01.12
65
Reaction “In 2011, the Belgacom share proved once more to stand for stability and reliability. It was a tough year for financial markets, yet the Belgacom share performed fairly well compared to most of the BEL20 companies and its main peers in the Telecom sector thanks to Belgacom’s solid operational result, strong financial position and attractive shareholder return.” Ray Stewart– Executive Vice President Finance & CFO
1. Based on weighted average number of outstanding shares 2. Based on share price 31 December 2011 3. Calculation based on number of outstanding shares & share price 31 December 2011
THE BELGACOM SHARE
Share ownership 53.5% Belgian State
/// page 66
Ownership on 31 December 2011 40.5% Free-Float
Belgacom ownership Belgian State Belgacom own shares Free-Float TOTAL
Shares
% Total shares
% Voting rights
% Dividend rights
180,887,569 20,376,314 136,761,252 338,025,135
53.5% 6.0% 40.5% 100.0%
57.0% 0.0% 43.1% 100.0%
56.1% 1.5% 42.4% 100.0%
Treasury shares evolution 6.0% Belgacom own shares
Status 31 December 2010 Options exercised during 2011 Discount Purchase Plan employees Acquisition of treasury shares Cancellation Status 31 December 2011
Our shareholders The Belgian government remains the main shareholder, owning 53.5% of the Belgacom shares. The free-float represents 40.5%, with the main institutional shareholders located in the United States, the United Kingdom, Benelux, France and Germany. End 2011, Belgacom held 20,376,314 treasury shares, representing 6.0% of the total number of shares. In the course of 2011, 277,474 treasury shares were used in a Discount Share Purchase Plan for Belgacom management and 189,681 options were exercised. In February 2011, the Belgacom Board of Directors approved a share buyback program for a maximum amount of EUR 200 million to be carried out over the period 2011-2012. In this context, Belgacom acquired in the second and third quarter of 2011 a total of 4,300,975 treasury shares at an average price of EUR 23.25 via two tranches of each EUR 50 million. The voting rights of the treasury shares are suspended by law. The dividend rights of the treasury shares acquired in 2004 are also suspended, whereas the dividend rights for shares acquired as from 2005 are cancelled. However, in order to cover the outstanding stock options granted in 2010 and 2011, the Board of Directors approved the conversion of 2,025,774 treasury shares without dividend rights into treasury shares entitled to dividend rights, on 27 October 2011.
16,542,494 -189,681 -277,474 4,300,975 0 20,376,314
Under Belgian law, companies are prohibited from owning more than 20% of their outstanding share capital.
Transparency declarations According to Belgacom’s bylaws, the thresholds as from which a shareholding needs to be disclosed, have been set at 3% and 7.5%, in addition to the legal thresholds of 5% and each multiple of 5%. On 20 June 2011, Belgacom SA notified that its ownership of own shares crossed the threshold of 5% of outstanding shares on 17 June 2011. As of that day, Belgacom held in the aggregate 16,901,625 shares, representing 5% of the total number of outstanding shares. On 16 September 2011, Capital Research and Management Company notified that its shareholding in Belgacom SA went below the 3% threshold on 12 September 2011 (previous notification of 3.27% shareholding on 1 April 2010). To Belgacom’s knowledge, no other shareholder owned 3% or more of Belgacom’s outstanding shares at 31 December 2011. Notifications of important shareholdings to be made according to the Law of 2 May 2007 or Belgacom’s bylaws should be sent to FSMA (former CBFA) on trp.fin@fsma.be and to Belgacom on investor.relations@belgacom.be.
annual report| belgacom | Belgacom share | FR | NL | UK |
Investor Relations Belgacom Investor Relations (IR) aims at providing the Belgian and international investment world with an open communication on a regular basis. Through a transparent and consistent dialog with investors and financial analysts, the Group strives for a fair share value based on high-quality financial information. In this context, Belgacom is proud to have received the overall Award for Best Financial Information in October 2011 from the Belgian Financial Analysts’ Association. To keep Belgacom’s current and potential shareholders informed, Belgacom’s management speaks to the financial community on a regular basis. Each quarterly results announcement is followed by a conference call during which maximum time is reserved for a “questions & answers” session. Twice a year, following the full-year and half-year results, Belgacom organizes a roadshow with top management covering the most important money centers of Europe and the United States. Furthermore, Belgacom participated in several major international investment conferences. In between these events, meetings and conference calls with senior management are organized. In all these activities, management is supported by the Investor Relations team (IR). Furthermore, on 29 June 2011, Belgacom organized an Investor & Analyst day in Brussels, during which the focus was on market shares and the involvement of all business units therein. The Belgacom IR team offers daily support to the retail and institutional shareholders as well as to the analysts. A strict quiet period is observed four weeks before the issuing of a quarterly report and six weeks before the communication of the annual results.
Shareholder remuneration
growth, organically or via selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. The shareholder remuneration policy is based on a number of assumptions regarding future business and market evolutions, and may be subject to change in case of unforeseen risks or events outside the company’s control.
Shareholder return from the result of 2011 Following the above-mentioned commitment, the Board of Directors approved in October 2011 the payment of an interim dividend of EUR 0.50 gross per share (net amount of EUR 0.375 per share), corresponding to a total amount of EUR 161 million. The dividend was paid on 9 December 2011. On 1 March 2012, the Board of Directors decided to propose an ordinary dividend of EUR 1.68 per share to the Annual Shareholder Meeting of 18 April 2012. After approval, the normal dividend will be paid on 27 April 2012, with record date on 26 April 2012 and ex-dividend date on 24 April 2012. This brings the 2011 total dividend to EUR 692 million, including the interim dividend.
The return of free cash flow either through dividends or share buybacks will be reviewed on an annual basis in order to keep strategic financial flexibility for future
Financial calendar 18 April 2012 Annual General Shareholder Meeting 24 April 2012 Ex-dividend listing of shares 27 April 2012 Payment of ordinary dividend 04 May 2012 Announcement of first-quarter results 2012 27 July 2012 Announcement of half-year results 2012 26 October 2012 Announcement of third-quarter results 2012 Note that these dates may be subject to change.
In addition to the approved share buyback (February 2011) for a maximum amount of EUR 200 million, Belgacom acquired in the second and third quarter of 2011, 4,300,975 treasury shares for an amount of EUR 100 million.
Dividend per share (in EUR) 1.93
1.89
1.38
1.60
Shareholder return policy Belgacom commits to an attractive shareholder remuneration policy by returning, in principle, most of its annual free cash flow1 to its shareholders.
67
1.52 1.52
0.55
2.18 1.68
2.18 1.68
0.50
0.50
2007
2008
0.29 2004
2005
Interim dividend
2006
Extra-ordinary dividend
2.08 1.68
0.40 2009
2.18 1.68
2.18 1.68
0.50
0.50
2010
2011
Normal dividend
1. Belgacom defines free cash flow as cash flow generated by operating activities, minus capital expenditures and including other investing activities such as acquisitions or divestments.
EUR 2.18 gross dividend 2011
CORPORATE GOVERNANCE
/// page 68
8 a.m., Zwevezele
Juliana
My son Julian, while recovering from a severe flue that kept him at home for nearly a week, told me he wanted to become a doctor, like his mum. I said: why? He said: people like doctors because they cure them. I said: but a doctor can’t always cure people. He said: but you always cure people, don’t you? Then he gave me a hug. And I thought: I am a doctor and probably a good mom. There’s a lot a doctor can do at home without losing touch. I wouldn’t mind Julian becoming a doctor one day.
annual report | belgacom | corporate governance | FR | NL | UK |
Monday 4 June 2012 8.30 Meet with Susan 9.30 1h Breakfast 10.00 Contact Bob 12.30 Lunch with M. Davids 13.45 Conference 18.00 Pick up Esther for piano
Mum, do not forget my swimming suit? :•)
69
CORPORATE GOVERNANCE
/// page 70
Corporate governance
statement
Corporate governance aims to define a set of rules and behaviours according to which companies are properly managed and controlled, with the objective of increasing transparency. It is a system of checks and balances between the shareholders, the Board of Directors and management. Belgacom is committed to comply with the legal, regulatory, and best practices.
Belgacom governance model At Belgacom, the Articles of Association are strongly influenced by the specific legal status of the company. As a limited liability company under public law, Belgacom is in the first instance governed by the Law of 21 March 1991 on autonomous public sector enterprises (“the 1991 Law”). For matters not explicitly regulated otherwise by the 1991 Law, Belgacom is governed by Belgian corporate law. The key features of Belgacom’s governance model are: • A Board of Directors, which defines Belgacom’s general policy and strategy and supervises operational management;
•T he creation by the Board of Directors within its structure of an Audit and Compliance Committee, a Nomination and Remuneration Committee and a Strategic and Business Development Committee; •A President & Chief Executive Officer, who takes primary responsibility and ownership for operational management (including, but not limited to, day-to-day management); •A Management Committee, which assists the President & Chief Executive Officer in the exercise of his duties.
Designation applicable Code on Corporate Governance Belgacom designates the 2009 Belgian Code on Corporate Governance as the applicable Code.
Board of Directors
Members of the Board of Directors appointed by the Belgian State
Name Theo Dilissen Didier Bellens Martine Durez Mimi Lamote Michèle Sioen Michel Moll Paul Van de Perre
Age
Position
Term
58 56 61 47 46 64 59
Chairman President & CEO Director Director Director Director Director
2004 - 2015 (*) 2003 - 2015 1994 - 2012 2006 - 2012 2006 - 2012 1994 - 2012 1994 - 2012
* As Chairman until 2012
Members of the Board of Directors appointed by the General Shareholders’ meeting
Name Jozef Cornu Guido J.M. Demuynck Pierre Demuelenaere Pierre-Alain Desmedt Carine Doutrelepont Oren G. Shaffer Lutgart Van den Berghe
Age
Position
Term
67 61 53 68 51 69 59
Independent Director Independent Director Independent Director Independent Director Independent Director Independent Director Independent Director
2009 - 2015 2007 - 2013 2011 - 2017 2004 - 2016 2004 - 2013 2004 - 2013 2004 - 2016
As provided for in the 1991 Law, the Board of Directors is composed of: • Directors appointed by the Belgian State in proportion to its shareholding • Directors appointed by a separate vote among the other shareholders, for the remaining seats. At least 3 of these Directors must be independent according to the criteria of article 526ter of the Belgian Code of Companies and the criteria of the Belgian Corporate Governance Code. The Board of Directors is composed of maximum 16 members, including the person appointed as President & Chief Executive Officer. Today the Board is composed of 14 members.
Functioning of the Board of Directors The Board of Directors meets whenever the interests of the company so require or at the request of at least two Directors. In principle, the Board of Directors meets every year in five regularly scheduled meetings. The Board of
annual report| belgacom | corporate governance | FR | NL | UK |
Directors must also evaluate the strategic long-term plan in an extra meeting each year. In general, the Board’s decisions are made by simple majority of the Directors present or represented, although for certain issues a qualified majority is required. The Board of Directors has adopted a Charter which, together with the charters of the Board Committees, reflects the principles by which the Board of Directors and its Committees operate. The Board Charter provides, among other things, that important decisions should have broad support, understood as a qualitative concept indicating effective decision-making within the Board of Directors following a constructive dialogue between Directors. They should be prepared by standing or ad hoc Board Committees with significant representation of non-executive, independent Directors within the meaning of Article 526ter of the Belgian Company Code. All charters were updated on 24 February 2011.
Committees of the Board of Directors In accordance with the bylaws, Belgacom has an Audit and Compliance Committee, a Nomination and Remuneration Committee and a Strategic and Business Development Committee.
Audit and Compliance Committee The Audit and Compliance Committee (ACC) consists of five non-executive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director. The Audit and Compliance Committee’s role is to assist and advise the Board of Directors in its oversight of: • The financial reporting process; • Efficiency of the systems for internal control and risk management of the company;
71
• The Company’s internal audit function and its efficiency; • The quality, integrity and legal control of the statutory and the consolidated annual accounts and the financial statements of the Company, including the follow-up of questions and recommendations made by the auditors; • The relationship with the Company’s auditors and the assessment and monitoring of the independence of the auditors; • The Company’s compliance with legal and regulatory requirements; • Compliance within the Company with the Company’s Code of Conduct and the Dealing Code.
Executive Officer and members of the Management Committee; • The review on an annual basis of the remuneration philosophy and strategy for all personnel, and specifically the compensation packages of top senior management; • The oversight of the decisions of the President & Chief Executive Officer with respect to the appointment, the dismissal and the compensation of management; • The preparation of the remuneration report and the presentation of that report at the Annual General Shareholders meeting; • Corporate governance issues.
The Audit and Compliance Committee meets at least once every quarter. Messrs. PierreAlain De Smedt (Chairman), Guido J.M. Demuynck, Michel Moll, Oren G. Shaffer and Paul Van de Perre are the members of the Audit and Compliance Committee.
The first meeting each year reviews the performance, budgets for payout of bonuses and merits, and long-term and short-term incentive plans. At that meeting an annual review of the philosophy and strategy of the remuneration is also discussed. At the second meeting the Nomination and Remuneration Committee fixes the performance measurement targets of the President & Chief Executive Officer and the members of the Management Committee through Key Performance Indicators. In addition to these meetings, the Committee organises a meeting on Human Resources and a meeting on Corporate Governance.
Nomination and Remuneration Committee The Nomination and Remuneration Committee (NRC) consists of five Directors, the majority of whom must be independent. In line with its charter, this committee is chaired by the Chairman of the Board of Directors, who is an exofficio member. The Nomination and Remuneration Committee’s role is to assist and advise the Board of Directors regarding: • The nomination of candidates for appointment to the Board of Directors and the Board Committees; • The appointment of the President & Chief Executive Officer and of the members of the Management Committee on proposal of the President & CEO; • The appointment of the Secretary General; The remuneration of the members of the • Board of Directors and the Board Committees; • The remuneration of the President & Chief
The Nomination and Remuneration Committee meets at least four times a year.
In 2011, Mr. Theo Dilissen (Chairman), Mr. Jozef Cornu, Ms. Martine Durez, Mr. Pierre-Alain De Smedt and Ms. Lutgart Van den Berghe were the members of the Nomination and Remuneration Committee.
Strategic and Business Development Committee The Strategic and Business Development Committee (SBDC) consists of six Directors. In line with its charter, the President & Chief Executive Officer and the Chairman of the Board of Directors are ex-officio members, and the Committee is chaired by the Chairman of the Board of Directors. One additional mem-
CORPORATE GOVERNANCE
/// page 72
Members of the Board of Directors Didier Bellens President & Chief Executive Officer and Director of Belgacom since March 2003. ore info see p. 77 m Members of the Management Committee.
Theo Dilissen
Paul Van de Perre Mr. Van de Perre is the co-founder of GIMV (Venture Capital Firm) and was formerly a director of Sidmar (Arcelor). He is currently director of Grontmij NV, Greenbridge Incubator (University of Ghent) and member of the Investment Commitee of PMV. Mr. Van de Perre is CEO of Five Financial Solutions (corporate finance) and CEO of Caesar Real Estate Fund (real estate finance). Mr. Van de Perre holds an MBA in Economics and is a certified accountant (IAB).
Chairman of the Board of Directors of Belgacom since October 2004. Mr. Dilissen is since June 2010 CEO of Arcadis Belgium. Previously Mr. Dilissen was CEO, Managing Director and Vice-Chairman of Real Software and from 1989 to 2000 he was COO and member of the Board of ISS (a Danish publicly listed company). From September 2005 until the end of March 2009 he was CEO and afterwards Chairman of Aviapartner. Since January 2011 Mr. Dilissen is also member of the Board of Directors of Eurostar. He studied Sociology and holds a Master in Business Administration.
Ms. Michele Sioen is CEO of the Sioen Industries group since 2005. She held various positions in the group from 1990 until 2005. Sioen Industries produces and processes technical textiles, is stock quoted and world market leader. Michele Sioen was president of Fedustria until 2010. She is vice president of the VBO and is a member of the board of directors of several companies: amongst others ING Belgium and D’Ieteren. She is also member of the Corporate Governance Commission. Michele Sioen holds a degree in Economics and several postgraduate degrees.
Michèle Sioen
Ms. Durez was the Chief Financial and Accounting Officer at bpost until January 2006, when she became Chairman of the Board of bpost. Ms. Durez was also Professor of Financial Management and Analysis at the University of Mons-Hainaut until 2000. She has also served as a member of the High Council of Corporate Auditors and the Committee of Accounting Standards and as a special emissary at the Cabinet for Communication and State Companies. She served as a regent of the National Bank of Belgium. Ms. Durez graduated as a Commercial Engineer and holds a PhD in Applied Economics from the University of Brussels (ULB).
Martine Durez
Mr. Moll serves as a non executive director in industrial and financial companies such as Sonaca (Société Nationale de Construction Aérospatiale) and SBI (Belgian Corporation for International Investment). He is also a Censor of the National Bank of Belgium. Until April 2007 he was President & CEO of the limited company BATS (Belgian Advanced Technology Systems), specialized in Security Electronics, in Liège. Until December 2005, Mr. Moll was President of the venture company BRUFICOM and before that he was manager and director of the National Investment Corporation (SNI) in Brussels. Mr Moll graduated as Engineer in applied economics from the business school of the University of Louvain (UCL).
Michel Moll
Oren G. Shaffer Formerly, Mr. Shaffer was Vice Chairman and Chief Financial Officer of Qwest Communications from 2002 to 2007 and President and Chief Operating Officer of Sorrento Networks. He was a member of the Board of Directors at Belgacom from 1996 to 2000. He currently holds directorships on various boards . He received a Bachelor of Science in business administration from The University of California at Berkeley and a Master of Science in management from The Massachusetts Institute of Technology.
Mr. De Smedt is since March 2011 the Chairman of the Fédération des Entreprises de Belgique (FEB/ VBO). Before and since June 2006, he was the Chairman of Febiac (Fédération belge de l’Automobile et du Cycle). From 1999 till end of 2004 he was Executive Vice President of Renault. He was chairman of Autolatina, VAG and Ford’s joint venture subsidiary in Latin America. He served as Chairman of Volkswagen Brazil and Argentina before being appointed as Chairman of Seat. Mr. De Smedt is the Chairman of the Board of Deceuninck Plastics Group and a member of the Board of Alcopa (Group Moorkens). He is a graduate in engineering and economics of the University of Brussels (ULB).
Pierre-Alain De Smedt
annual report| belgacom | corporate governance | FR | NL | UK |
Lutgart Van den Berghe Ms. Lutgart Van den Berghe is doctor in Business Economics of the University of Ghent (B). She is Executive Director of GUBERNA (Belgian Governance Institute) and Extra-Ordinary Professor at the University of Ghent (B). She is a Partner of the Vlerick Leuven Gent Management School where she served for many years as Chairman of the Competence Center “Entrepreneurship, Governance and Strategy”. She is a Member of the Belgian Commission for Corporate Governance and Non-Executive Director in several international companies, such as SHV (NL) and ELECTRABEL (B). At EcoDA (European Confederation of Directors’ Association), she is a Member of the Board and chairwoman of its policy committee.
Ms. Lamote is Vice President at Grand Vision B.V. (former Pearle Europe), Amsterdam. She started her career in retail in 1988: she held different positions in C&A Europe. From 2001 until 2005 Ms. Mimi Lamote was General Manager of C&A Belgium-Luxembourg. From 2001 until 2004 she was member of the Board of Directors of the Federation of Enterprises in Belgium (FEB). In the same period, Mrs. Lamote was also member of the Board of Directors of Fedis (Federation of Distribution). From 2005 until 2006 she was CEO of SCF (Belgium-Lithuania), listed on the Belgian stock market. From 2007 until October 2009, Ms. Lamote worked as COO in ZNA (hospital network Antwerp). She holds a master degree in Applied Economic Sciences of the University of Antwerp, a master in Retail Management of the Tias University of Tilburg and several other postgraduate degrees.
Mimi Lamote
Pierre Demuelenaere Mr. Pierre Demuelenaere is the co-founder, President & CEO of I.R.I.S. (Image Recognition Integrated Systems), a company created in 1987 to commercialize the results of his PhD. Mr. Demuelenaere has more than 30 years of experience in Imaging and Artificial Intelligence. He has accumulated a solid experience in technology company management, R&D management and setting up of international partnerships with US and Asian companies (HP, Kodak, Adobe, Fujitsu, Samsung, Canon…). He remains very involved in defining the R&D vision of I.R.I.S and has contributed to the development of new technologies, new products and the filing of a number of patents. Pierre Demuelenaere received the “2001 Manager of the Year” award and I.R.I.S. received the «2002 Company of the year» award. He is also member of the board of directors of Pairi Daiza, BSB and Guberna. Mr. Demuelenaere is a civil engineer in Microelectronics from the Université Catholique de Louvain (UCL) and received his PhD in applied sciences in 1987.
Ms. Doutrelepont is a lawyer at the Brussels’ Bar and member of the Bar of Paris. She is the founding partner of the Belgian law firm Doutrelepont & Partners, which specialises in Information and Communication Technologies, Intellectual property, Media law, Competition matters and European law. She holds a PhD in law from the University of Brussels (ULB). She is a Professor of Media Law, Intellectual Property Law, and European Law at the ULB Faculty of law, at the Institute for European Studies, as well as in universities in other countries. She is also President of the Information and Communication Law Centre of the ULB. For years, she worked as an Expert for the European Commission (General Directorate Internal Market), at the Belgian Senate and at the Belgian Competition Council. Since 2008, she is a Member of the Royal Academy of Belgium (Technology and Society Section). She is the author of several books and publications.
Carine Doutrelepont
Jozef Cornu Mr. Jozef Cornu embarked on his career at the Brown Boveri Research center (now ABB) in Switzerland in 1970. From 1973 until 1982 he held various positions in Bell Telephone Mfg Co, the Belgian subsidiary of the ITT Group. From 1982 to 1984 he was CEO of Mietec, a start-up semiconductor company. From 1984 to 1987 he was General Manager of Bell Telephone Mfg Co. From 1988 to 1995 he was a member of the Management Board of Alcatel NV, before assuming the post of General Manager of Alcatel Telecom from 1995 to 1999. From 2000 to 2008 he was a member of the board of Alcatel (and later Alcatel-Lucent) and advisor to the chairman until 2004. From 2006 to 2007 he was chairman of ISTAG (Information Society Technologies Advisory Group) of the European Union. From 2007 to 2008 he was chairman of Medea+, the European Eureka programme for research in Microelectronics. Mr. Cornu was CEO of Agfa-Gevaert from December 2007 till end of April 2010 and remains a member of its board of directors. He is also a non-executive director at KBC. Mr. Cornu holds a degree of civil engineer in electrical and mechanical engineering from the Catholic University of Leuven, as well as a Ph.D. in electronics from Carleton University in Ottawa, Canada.
Until December 2010, Mr. Demuynck was CEO of Liquavista. Before that he held various positions within Royal Philips Electronics NV from 1976 till 2002. Amongst others, he was Vice President Marketing Audio in the USA, CEO of Philips in South Korea, General Manager Line of Business Portable Audio in Hong Kong, CEO Group Audio in Hong Kong. In 2000, he became CEO Product Division Consumer Electronics in Amsterdam and member of the Group Management Committee of Philips. In 2003, Mr. Demuynck joined Royal KPN where he became member of the Board of Management and CEO of the Mobile Division (KPN Mobiel Netherlands; Base Belgium, E-Plus Germany). Until July 2008, he was the CEO of Kroymans Corporation BV in the Netherlands. Mr. Demuynck is also member of the Supervisory Board of Tom Tom since June 2005. As from January 2011 he joined the Supervisory Board of Apollo Vredestein BV and the Supervisory Board of Xsens BV. As from January 2012 he is also Board member of Divitel BV and Aito BV. He holds a degree in applied economics from the university of Antwerp (UFSIA) and a degree in marketing from the University of Ghent (R.U.G).
Guido J.M. Demuynck
73
CORPORATE GOVERNANCE
ber is chosen among the Directors appointed by the Belgian State. Three members must be appointed among the Directors appointed by the General Shareholders meeting. The Strategic and Business Development Committee’s role is to review envisaged acquisitions, mergers and divestments over EUR 100 million and to review large corporate restructuring programmes. If appropriate, the Board of Directors can decide on establishing a special ad hoc Committee, dealing with a specific subject, and composed of members with the appropriate experience. In 2011, Messrs. Theo Dilissen (Chairman), Didier Bellens, Jozef Cornu, Guido J.M. Demuynck, Michel Moll and Mrs. Carine Doutrelepont were the members of the Strategic and Business Development Committee.
Changes in the composition of the Board of Directors At the General Shareholders Meeting of 2011. Mr. Georges Jacobs resigned as member of the Board for having reached the age limit of 70 years and was replaced by Mr. Pierre Demuelenaere.
Departure from the 2009 Belgian Corporate Governance Code Belgacom complies with the principles and provisions of the 2009 Belgian Corporate Governance Code, except provisions 4.6 and 4.7. Although provision 4.6 stipulates that mandates of Directors should not exceed four years, the mandates of Belgacom Directors are for six years as prescribed by article 18 of the 1991 Law. Where provision 4.7 states that the Board appoints its Chairman, article 18 § 5 of the 1991 Law foresees that the Chairman is appointed by the King.
/// page 74
Transactions between the company and its Board Members and executive managers A general policy on conflicts of interest applies within the company. It prohibits the possession of financial interests that may affect personal judgment or professional tasks to the detriment of the Belgacom Group. In accordance with article 523 of the Belgian Companies Code, the President & CEO, Mr. Didier Bellens, declared to have a conflict of interest in connection with the Employee Incentive Plans of the agenda of the Board of Directors’ meeting of 24 February 2011. He is in fact a beneficiary of the Senior Management Short- & Long-term Incentive Plan 2009. He informed Belgacom’s auditor of this conflict of interest and decided not to participate in the deliberation or voting on this item. On 24 February 2011, the Board adopted a “related party transactions policy” which governs all transactions or other contractual relationships between the company and its board members.
Application of the measures taken by the company in order to comply with legislation on insider trading and market manipulation (market abuse) In order to comply with legislation on insider dealing and market manipulation, Belgacom adopted a dealing code prior to the Initial Public Offering. This code aims to create awareness about possible improper conduct by employees, officers and Directors and the possible sanctions. This dealing code has been widely communicated and is available to all employees. A list of key persons is kept, and all Directors and key employees were requested to sign an affidavit that they had read, understood and agreed to comply with the dealing code. Closed periods (including prohibited periods) are defined, and any deal must be communicated to and cleared by the Head of Compliance Services before transaction (see “Compliance” section on p. 83).
Belgacom has contractual relationships and is also a vendor for telephony, Internet and/ or ICT services for many of the companies in which Board members have an executive or non executive mandate. These transactions take place in the ordinary course of business and at arms length. Belgacom is also a Partner of Guberna, the Belgian Institute for Directors (affiliated with Mrs Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of EUR 30,250 in 2011.
Evaluation of the Board
Activities Report of the Board and Committee meetings
The President & Chief Executive Officer is appointed by the Belgian State by Royal Decree deliberated in the Council.
In 2011, 7 meetings took place for the Board of Directors, 7 meetings for the Audit and Compliance Committee, 6 for the Nomination and Remuneration Committee and 2 for the Strategic and Business Development Committee. A list with the attendance of the members is included in the Remuneration Report.
Given the fact that the Board of Directors performed an evaluation in 2010, no evaluation has been done in 2011. The action plan, as described in the Annual Report 2010, was further implemented in 2011.
Management President & Chief Executive Officer
Appointments are for a renewable six-year term, and can be terminated only by Royal Decree deliberated after discussion in the Council of Ministers. In line with the 1991 Law and the Company’s Articles of Association, the President & Chief Executive Officer is a mem-
annual report| belgacom | corporate governance | FR | NL | UK |
ber of the Board of Directors. The President & Chief Executive Officer and the Chairman of the Board of Directors must come from different language groups. The President & Chief Executive Officer is entrusted with day-to- day management, and reports to the Board of Directors. In addition, in line with the 1991 Law and the company’s Articles of Association, the Board of Directors may, deciding by a majority of two thirds of its members present or represented, delegate all or part of its powers to the President & Chief Executive Officer, with the exception of: • The approval of the Management Contract with the Belgian State and changes to it; • The establishment of the business plan and general policy of the company; • The supervision of the President & Chief Executive Officer; • And other powers explicitly reserved by law to the Board of Directors which include, for example, the establishment of the annual accounts for submission to the General Shareholders Meeting and the preparation of merger proposals. The Board of Directors has delegated broad powers to the President & Chief Executive Officer.
The current President & Chief Executive Officer is Mr. Didier Bellens. Mr. Bellens’ sixyear fixed-term contract started on 1 March 2003 and was renewed in December 2008 for a new six-year term that will end on 28 February 2015.
Management Committee The members of the Management Committee are appointed and dismissed by the Board of Directors on proposal of the President & Chief Executive Officer, after consultation of the Nomination and Remuneration Committee. The powers of the Management Committee are determined by the President & Chief Executive Officer. The Management Committee’s role is to assist the President & Chief Executive Officer in the exercise of his duties.
75
Mr. Grégoire Dallemagne left the company on 6 April 2011. Ms. Astrid De Lathauwer left the company on 15 September 2011.
Changes in the composition of the Management Committee since 2012 Since 1 January 2012, Mr. Michel Georgis is the Executive Vice President Human Resources and Mr. Scott Alcott is the Executive Vice President of the Consumer Business Unit of Belgacom. On 1 March 2012, Mr. Geert Standaert was appointed as Executive Vice President Service Delivery Engine.
The Management Committee aims to decide by consensus, but in the event of disagreement, the view of the President & Chief Executive Officer will prevail. The Management Committee generally meets on a weekly basis. In 2011, the Belgacom Management Committee, in addition to the President & Chief Executive Officer, was composed of the following members (see table below):
Members of the Management Committee
Name
Age
Position
Scott Alcott Bart Van Den Meersche
46 54
Michel Georgis Ray Stewart Bruno Chauvat
59 63 49
Executive Vice President Service Delivery Engine Executive Vice President Enterprise Business Unit & Chief Executive Officer of Telindus Group N.V. Executive Vice President Consumer Business Unit Executive Vice President Finance Executive Vice President Strategy & Content
CORPORATE GOVERNANCE
/// page 76
Members of the Belgacom Management Committee
Didier Bellens
Ray Stewart
Michel Georgis
Scott Alcott
Bart Van Den Meersche
Bruno Chauvat
annual report| belgacom | corporate governance | FR | NL | UK |
Didier Bellens Mr. Bellens started his career at Deloitte Haskin & Sells. He held the post of financial Director of the Brussels Lambert Group until 1985, before taking on the position of Deputy Manager of the Pargesa Holding, where he was responsible for the management of holdings, mergers and acquisitions. Between 1992 and 2000 he was back at the Brussels Lambert Group, as Managing Director, taking charge of the group’s strategic participations in companies such as Royale Belge, the BBL and the CLT. He played an instrumental role in the merger between AXA and Royale Belge, the change in ownership of the BBL, and the merger between the CLT and the UFA. Between 2000 and 2003, he served as CEO of the RTL Group, where he focused on the group’s international expansion. He concluded the merger with Pearson Television and launched the RTL Group on the stock market. Mr. Bellens was appointed Belgacom’s President and Chief Executive Officer for the first time in March 2003. His mandate was then renewed in March 2009 for a six-year term. Mr. Bellens is a member of the Board of Directors of BICS, Scarlet and Tango. He is also a member of the Board of Directors of AXA Belgium, VOKA (the Flemish Chamber of Commerce and Industry) and is on the steering committee of the FEB (Federation of Enterprises in Belgium). In addition, Mr. Bellens serves as independent Chairman of the Nomination and Remuneration Committee, and as independent Director of the Board of Directors of the Compagnie Immobilière de Belgique. He is also advisor to CV Capital Partners and member of the International Advisory Council of the New York Stock Exchange. He is also a member of the Board of Directors of the Erasmus Foundation, of Business & Society and of the ULB Foundation, and serves as Vice Chairman of the Solvay Business School’s Consultative Council. Mr. Bellens holds a degree in management engineering from the Solvay Business School (ULB).
Scott Alcott Scott Alcott was in 2011 the Executive Vice President of Belgacom’s Service Delivery Engine division. In that capacity, he oversaw all technical infrastructure and operations for the group as well as wholesale activities. Previously Mr. Alcott has served as Belgacom’s Chief Operating Officer Fixed Line Services, Chief Strategy Officer, Chief Information and Technology Officer,
General Manager of Marketing and Product Management, EVP (a.i.) Enterprise Business Unit and CEO (a.i.) of the Telindus Group. Prior to Belgacom, Mr. Alcott held various positions in marketing, product management and new business development for AT&T, AT&T Wireless, Ameritech and SBC. Mr. Alcott is a member of the Board of Directors of BICS, Scarlet, Calient Networks, AmCham Belgium, and the International School of Brussels. Mr. Alcott holds a B.S. in Economics from the Wharton School at the University of Pennsylvania. Since 1 January 2012 Mr. Alcott is the Executive Vice President of the Consumer Business Unit of Belgacom.
Michel Georgis From June 2007 until December 2011, Michel Georgis was the Executive Vice President of the Consumer Business Unit Belgacom. Since 1 January 2012 he is the Executive Vice President Human Resources. He is also the Chairman of the Skynet and Tango Luxembourg Boards and member of the Committee for Development of Belgian Sports (Belgian Olympic Committee). As of May 2005 and until the integration in January 2010, Michel Georgis was the CEO of Proximus (Belgacom Mobile). Prior to this position he was as of January 2004 the Chief Operations Officer at Proximus. He joined Proximus in January 2000 as Executive Vice President Sales, Marketing & Customer Operations. Michel Georgis started his career in 1977 at Coca-Cola Belgium. In 1991 he joined Interbrew, where he filled different positions before becoming Sales & Marketing Director Central & Eastern Europe. Michel Georgis holds a Master’s degree in Applied Economics from the University of Leuven.
Ray Stewart Ray Stewart is Executive Vice President Finance & CFO. Prior to Belgacom, from 1994 until 1997 he was the Chief Financial Officer for Matav, the incumbent Telephone Company in Hungary. From 1991 to 1994 he was the Chief Financial Officer for Ameritech International which was the International Business Development unit for Ameritech headquartered in Chicago. He has a Business Undergraduate degree in Accounting and a Masters of Business Administration in Finance. He is also a Certified Public Accountant. Ray Stewart is also a member of the Board of Directors of Nyrstar since September 2007.
77
Bart Van Den Meersche Bart Van Den Meersche is the Executive Vice President of Belgacom’s Enterprise Business Unit. Mr. Van Den Meersche recently joined Belgacom, after 28 years of experience in the ICT Sector through a professional career with IBM, of which 16 years in different Management positions, including 8 years as Country General Manager of IBM Belgium/Luxembourg. In his last year at IBM, he was Vice President Industries & Business Development IBM South-West Europe and a member of the IBM South-West Europe Executive Management Team. Bart Van Den Meersche holds a degree in Mathematics from the University of Leuven. Mr. Van Den Meersche was during 6 years President of Agoria ICT and also a member of the Board of Agoria, VOKA and VBO/FEB.
Bruno Chauvat Bruno Chauvat joined the Belgacom Management Committee as Executive Vice President Strategy & Content in September 2011. Mr. Chauvat started his career in 1983 as Media Financial Analyst. Over the years he held executive positions in media & telecom industries, from small entrepreneur-driven ventures to large international listed companies : Co-head of European media research at UBS, CEO of Audiofina (subsidiary of Groupe Bruxelles Lambert), Managing Director & Chief Strategy Officer of RTL Group, Consultant/Advisor to the CEO leading Belgacom TV Project (Belgacom Group), Founder and CEO of MusicMakesFriends.com/ Playtime Luxembourg. As CEO of Broadcasting Communication & Media Consulting, he has also enabled Belgacom to settle in the past 2 years several innovating strategic partnerships (OnLive, Jinni, Softkinetic, Blinkx, Mubi, …). He is also a Board Member of Tango and Telindus Luxembourg. Mr. Chauvat holds a Master’s degree in management engineering and a Financial Analyst professional certificate.
CORPORATE GOVERNANCE
Remuneration report Belgacom considers transparency about executive remuneration very important. Therefore, the company provides the following information towards its shareholders, and all other stakeholders, in conformity with the corporate governance law of April 6, 2010 and Principle 7 of the Corporate Governance Code 2009. This implies the description of the Director’s remuneration and a high level explanation of the Group remuneration policy. Furthermore, it comprehends an analysis of our executive remuneration and provides an overview of the main provisions of the contractual relationships.
Director’s Remuneration
/// page 78
All members of the Board of Directors, with the exception of the President & CEO, have the right to an attendance fee of EUR 5,000 per attended meeting of the Board of Directors. Attendance fees of EUR 2,500 are foreseen for each member of an advisory committee of the Board of Directors, with the exception of the President & CEO. For the Chairman of the respective advisory committee these attendance fees are doubled. The members also receive EUR 2,000 per year for communication costs. For the Chairman of the Board of Directors the communication costs are also doubled.
Policy of Director’s Remuneration
The Directors do not receive performance-
The remuneration and compensation of the Directors was decided by the General Shareholders Meeting of 2004. The principles of this compensation did not change in 2011: it foresees an annual fixed compensation of EUR 50,000 for the Chairman of the Board of Directors and of EUR 25,000 for the other members of the Board of Directors, with the exception of the President & CEO.
based remuneration such as bonuses or longterm share-related incentive programs, nor do they receive benefits linked to pension plans.
Overview of Director’s Remuneration The individual Director remuneration for the fiscal year 2011, based on their activities and attendance at Board and Committee meetings
Remuneration Policy Belgacom has an advanced and innovative remuneration policy which is regularly assessed and updated through close cooperation with external Human Resources fora and universities. The remuneration policies of Belgacom employees are determined in a process of full dialogue with the Board of Directors and the social partners. The Belgacom remuneration policy aims at offering fair remuneration both to civil servants and to the group’s contractual employees, taking into account the performance of the employee and of the company. The evolution of total remuneration is linked to the results of the company. Because of Belgacom’s history as a publicservice company, there are some differences in its dynamics and structure, compared to the private sector. This has a major influence on how its remuneration policy has evolved. Belgacom Human Resources developed creative and adaptable programs to deal with its obligations related to the statutory employ-
is presented in the table below.
Activities report and attendance at Board and Committee meetings
Name Theo DILISSEN Didier BELLENS Jozef CORNU3 Pierre DEMUELENAERE1 Guido J.M. DEMUYNCK3 Pierre-Alain DE SMEDT3 Carine DOUTRELEPONT3 Martine DUREZ Georges JACOBS2 Mimi LAMOTE Michel MOLL3 Oren G. SHAFFER Michèle SIOEN Lutgart VAN den BERGHE Paul VAN de PERRE
Board (total 7) 7/7 7/7 7/7 4/6 7/7 7/7 6/7 7/7 1/1 7/7 7/7 7/7 6/7 7/7 7/7
ACC (total 7)
NRC (total 6)
SBDC (total 2)
Total Remuneration
6/6
2/2 2/2 2/2
EUR 164,000 EUR 0 EUR 79,500 EUR 39,708 EUR 79,500 EUR 104,500 EUR 62,000 EUR 77,000 EUR 16,792 EUR 62,000 EUR 84,500 EUR 82,000 EUR 57,000 EUR 77,000 EUR 79,500
5/5 5/6 6/7
2/2 5/5 2/2 6/6 1/1
7/7 7/7
2/2
6/6 7/7
1. Appointed on 13 April 2011 2.End of mandate on 13 April 2011 3.Appointed as member of the ACC or NRC or SBDC on 1 March 2011 (see section on Committees of the Board of Directors).
Total Remuneration: telecom advantage included
annual report| belgacom | corporate governance | FR | NL | UK |
ment status of some of its workforce, and introduced new elements that harmonised policies between civil servants and contractual employees. • Some powerful private sector instruments were introduced, such as performance differentiation, job classification, employee engagement and variable pay. These were superimposed on the traditional payment rules linked to statutory employment. • Belgacom also maintains -and modernisespowerful public sector instruments, such as work-life benefits and social assistance. It is the responsibility of the Belgacom worklife department to combine the needs and responsibilities of employees and their families with those of the company and society as a whole. Over the years Belgacom has won several awards for the continuous efforts of the company to create a balanced working environment for its staff. The publicsector component is also an important tool for employer branding. The objective of Belgacom is to treat all employees equally and to create a working environment in which any differences are acceptable to employees.
Executive Remuneration Policy of Executive Remuneration Belgacom has a balanced executive remuneration policy which rewards executives competitively and at rates which are attractive in the market, aligning the interests of management and shareholders. The company wants to attract and retain high performing top executives for its Management Committee and for its senior management. It wants to reward clear role models, who have a commitment to high performance and the company values. The top executives are covered by dedicated reward programmes which focus on the principles of Belgacom’s strategy to consistently reward high performance by individuals and by the company. To distinguish itself from other employers, Belgacom seeks to excel in the total package it offers, by providing not only cash but also numerous other benefits. A fundamental principle of its remuneration policy is a degree of freedom for executives in choosing how they are to be rewarded.
The company wants to position top executive pay towards the median in the market for base salaries, and towards the upper quartile for total remuneration when there has been sustained excellent performance. The policy aims to ensure that top performers can benefit from the growth of the company through long-term incentive plans. The Nomination & Remuneration Committee sets the remuneration policy for top executives and decides the individual packages for the President & CEO and the members of the Management Committee. These are regularly verified by benchmarking executive pay against both the BEL 20 companies and a set of peer companies in the ICT sector, both in Belgium and in Europe. The current remuneration policy does not provide for a specific contractual claw back stipulation in favour of the company for the variable remuneration of executive managers accorded on the basis of incorrect financial information, this without deterioration of the various legal provisions applicable between the concerned individuals and the company (e.g. Acts of July 7, 1978, April 12 1965 and February 10, 2003 concerning the claw back possibilities from employees in case of fraud, serious fault and usual minor fault, civil liability, etc.). No fundamental changes to the policy are foreseen for the next two years. The relationship between the distinct remuneration components of the Belgacom Management Committee members and the President & CEO is illustrated in the figures alongside (figure 1).
Overview of executive remuneration The executive Remuneration Policy is build upon fixed components, being the basic remuneration, the retirement and post employment benefits and other benefits, and variable performance based components, being the short term variable remuneration and the long term share-based variable remuneration. In the frame of the application of the new corporate governance law the Board of Directors has approved to rebalance the short term variable remuneration and the Long Term sharebased variable remuneration in order to obtain
Figure 1: Relative importance of the various components of remuneration (KPI’s 100% at target) President and CEO 5%
0%
25% 45% 25% Basic remuneration Short term variable remuneration Long term share-based variable remuneration Group insurance premiums Other benefits
Belgacom Management Committee 8%
3%
22% 45% 22% Basic remuneration Short term variable remuneration Long term share-based variable remuneration Group insurance premiums Other benefits
79
CORPORATE GOVERNANCE
Figure 2: Information about the “Care and Ease indicator”
Care
Web
Distribu- Install & tion Repair
Usage
Customer Service
Ease
Web
Distribu- Install & tion Repair
Usage
Customer Service
Basic remuneration (in kEUR) 2,608.9
2,597.6
938.6
914.7
2010 CEO
2011
Management committee
Figure 3: The Belgacom Management Committee policy takes into account Group, Business Unit and Individual performance
Group 30%
Result Business Unit 30%
Individual 40%
Short term variable remuneration (in kEUR) 2,226.4 1,653.1
736.0
712.1
2010 CEO
Management committee
2011
/// page 80
an equal weight between payment after 1 year and deferred payment, as from performance year 2011. Annual variable pay is calculated in relation to performance against Key Performance Indicators set by the Board of Directors upon advice of the Nomination & Remuneration Committee. For 2011, these performance indicators included financial indicators as well as nonfinancial indicators, at both Group and Business Unit level. The achievement of these KPI’s are followed-up and communicated regularly. The results are based on audited financial figures and non-financial indicators measured by internal and external agencies specialised in market and customer intelligence, of which the processes are audited on a regular basis. • The most important key financial indicator used is the operational cash flow. • Important non-financial indicators included are the “care and ease” indicator and the “employee loyalty index”. The “care and ease” indicator (see figure 2) supports the ambition of Belgacom to offer superior service to each customer (care) and to re-introduce a culture of superior process quality (ease). The “care indicator” measures the end-to-end satisfaction of our customers. The “ease indicator” measures operational excellence in our customer interactions. Satisfaction and operational excellence of our interactions and channels are measured on a regular basis. Another operational indicator is the “employee loyalty index”, which each year measures employees’ organisational commitment and job engagement through a survey. This is used as a starting point for further actions.
Basic remuneration The basic remuneration of the Management Committee is annually reviewed by the Nomination & Remuneration Committee, based on an extensive review of performance and assessment of potential provided by the President & CEO, as well as on external benchmarking data. The basic remuneration comprises the base salary earned in the position of the President & CEO and the members of the Management Committee for the reported year. The President & CEO, Didier Bellens, is also a non-remuner-
ated member of the Board of Directors. During 2011, neither the President & CEO nor the other members of the Management Committee received a merit increase. Changes in the figures are the result of legal indexation in June 2011 and changes within the Management Committee composition (see basic remuneration chart).
Short term variable remuneration The Belgacom Group variable pay system reflects the group values, emphasizes the strengths of the Business Units, and creates incentives for individual performance (see figure 3). The short term variable remuneration includes the actual bonus paid in the reported year 2011, for performance year 2010, through one of the options of the “Short Term Incentive Plan”. The CEO and the members of the Management Committee can choose to receive the bonus in cash, or under the “Share Purchase Plan” or complementary pension plan. The Discounted Share Purchase Plan provides the right to buy allocated shares at a 16.67% discount. The shares are treasury shares and are blocked for a period of two years. The employee himself finances 83.33% of the full share purchase price. The discount is financed by the employer. The President & CEO chose to receive his bonus through a “Share Purchase Plan”. The other members of the Management Committee have chosen different options. The Short term variable remuneration of the President & CEO and the members of the Management Committee decreased in comparison with last year, as a result of lower KPI results of the performance year 2010 and changes in the composition of the management team (see short term variable remuneration chart).
Long term Share-based variable remuneration On an annual basis the members of the Management Committee may also receive a stockoption grant. The options issued under this plan are subscription rights, each giving the right (for a limited period) to acquire Belgacom shares at a price equal to the value of the share at the time of grant of the options.
annual report| belgacom | corporate governance | FR | NL | UK |
81
Overview of stock option plan: President & CEO and other members of the Management Committee
on January 1st, 2011, Stock options remaining from previous years: Stock options Number granted during Exercise price reported year (in EUR) Stock options Number exercised during Year of grant of reported year options exercised Stock options Number lapsed during Year of grant of reported year options lapsed TOTAL
Didier BELLENS 425,266
Scott ALCOTT 146,001
111,319 25.015
39,897 25.015
-
-
15,000 2005
536,585
170,898
To comply with the new law on corporate governance the Long Term Incentive plan has been changed as from the stock options, granted in 2011: • The vesting schedule has been updated to a vesting of 50% after at least 2 years and 50% after at least 3 years following the grant. • An explicit vesting condition has been installed: the closing price of the share must be higher than the exercise price minus the total amount of gross dividends attached to the shares which can be acquired through the exercising of the options. • A 3 year cliff exercising period has been installed. • In case of termination of the employment contract the stock options continue to vest in accordance with this vesting condition. Stock options which are vested must, under penalty of forfeiture, be exercised with respect for the 3 year cliff exercising period and prior to the earlier of the expiration of 5 years following the termination of the employment contract or the expiration of the exercise period. On an individual basis, the Management Committee received the options mentioned in the table “Overview of stock option plan”. The variation in the figures of long term sharebased variable remuneration is due to changes within the composition of the Management Committee (see long term share-based variable remuneration chart).
Bruno Grégoire CHAUVAT DALLEMAGNE 111,623
Astrid DE LATHAUWER 139,405
Michel GEORGIS 136,321
0 25.015
42,244 25.015
56,325 25.015
77,447 25.015
55,000 25.015
-
9,625 2009
23,316 2006
-
26,787 2005
-
-
101,998
158,333
192,646
293,112
55,000
Retirement and post employment benefits The President & CEO participates in a complementary pension scheme which foresees an annual indexed contribution of EUR 77.970,53. The current members of the Management Committee have a “Defined Benefit Plan”.
Ray Bart VAN DEN STEWART MEERSCHE 242,452 -
Long term share-based variable remuneration (in kEUR) 1,154.4
1,116.0
465.0
474.3
Other benefits Belgacom Group wants to stimulate its executives by offering a portfolio of benefits and advantages that are competitive in the market place. The President & CEO and the other members of the Management Committee receive benefits on top of their remuneration, including medical insurance, car and other benefits in kind.
Overview The table on the next page reflects the remuneration and other benefits granted directly or indirectly to the members of the Belgacom Management Committee in 2011 by Belgacom or any other undertaking belonging to the Belgacom Group (benefit based on gross or net remuneration, depending on the type of benefit). The year-on-year evolution of the figures is the consequence of mainly: • The reduced performances against the Key Performance Indicators driving variable remuneration related to the performance year 2010 paid in 2011, compared to the amount of 2009 paid in 2010.
2010 CEO
Management committee
2011
CORPORATE GOVERNANCE
/// page 82
Overview basic and variable remuneration CEO and other members of the Management Committee
President & CEO Remuneration Basic remuneration Short term variable remuneration Long term Share-based variable remuneration Retirement and post-employment benefits Other benefits TOTAL (excl. employer’s social contribution) TOTAL (incl. employer’s social contribution)
• the changes in the composition of the management team • the legal indexation of salaries
Main provisions of the contractual relationships Contractual arrangement of President & CEO In March 2009 Didier Bellens started the first year of his new six-year mandate as President & CEO. He has a contract as a self-employed executive. Nevertheless he is subject to employee social security charges, in line with Article 11 § 1 of the Royal Decree of November 28, 1969. This article states that “the application of the law on the social security system for employees is expanded/extended to those institutions of public utility and autonomous public enterprises as well as such individuals who, in their capacity of agent and against remuneration, devote their principal activity to the day-to-day management or direction of these institutions and enterprises, to the extent no statutory pension regime is applicable to these individuals”. Clauses The President & CEO is bound by a non-competition clause, prohibiting him for 12 months after leaving the group from working for a competitor of Belgacom Group in Belgium and in those countries where Belgacom Group generates at least 5% of its consolidated rev-
2010
2011
914,708 736,046 465,006 108,301 9,732 2,233,793 2,561,455
938,591 712,056 474,330 109,440 9,663 2,244,080 2,580,147
enues. He will receive an amount equal to one year’s salary as compensation. The members of the Management Committee, who are bound by a non-competition clause prohibiting them for 12 months after leaving the group from working for any other mobile or fixed licensed operator active on the Belgian market, will receive an amount equal to six months’ salary as compensation. Didier Bellens and Ray Stewart have a contractual termination clause with an indemnity of one year’s remuneration. Scott Alcott and Michel Georgis have a contractual termination clause with an indemnity of one year’s remuneration plus one month pay per year of seniority acquired, with a maximum of two years’ remuneration after 12 years of service. Bart Van Den Meersche and Bruno Chauvat have a contractual termination clause with an indemnity of one year’s remuneration, compliant with the new corporate governance law. Grégoire Dallemagne, who left the company in April 2011 and Astrid De Lathauwer, who left the company in September 2011, are granted an indemnity in line with their contractual termination clause. For Grégoire Dallemagne, the contractual termination clause contained one year’s remuneration plus one month pay per year of seniority
Other members of the Management Committee 2010 2,608,943 2,226,448 1,116,018 510,295 185,555 6,647,259 7,718,257
2011 2,597,582 1,653,134 1,154,360 514,310 203,409 6,122,795 7,438,289
acquired, with a maximum of two years’ remuneration after 12 years of service. The contractual termination clause of Astrid De Lathauwer contained one year’s remuneration plus one month pay per year of seniority acquired.
Board of Auditors The Board of Auditors of the company is composed as follows: • Deloitte Auditors SC sfd SCRL, represented by Mr. Geert VERSTRAETEN also Chairman of the Board of Auditors • Romain LESAGE, Member of the Court of Auditors; • Pierre RION, Member of the Court of Auditors; • Luc Callaert SC sfd SPRLU, represented by Luc CALLAERT Deloitte Auditors SC sfd SCRL, represented by Mr. G. Verstraeten and Mr. L. Van Coppenolle, are responsible for the audit of the consolidated financial statements of Belgacom and its subsidiaries. The other members of the Board of Auditors are, together with Deloitte, entrusted with the audit of the non-consolidated financial statements of the parent company. Mr. Lesage’s mandate will expire on 30 June 2014, the mandates of Mr. Rion, Deloitte and Callaert will expire at the annual General Shareholders Meeting in 2016.
annual report| belgacom | corporate governance | FR | NL | UK |
Additional fees paid to the auditors In accordance with the provisions of Article 134 § 2 of the Belgian Companies Code, Belgacom declares the supplementary fees that it granted during the 2011 financial year to two auditors, members of the Joint Auditors: Deloitte Auditors SC sfd SCRL and Luc Callaert SC sfd SPRLU. The Group spent during the year 2011 an amount of 350,863.76 EUR for non-mandate fees for Deloitte Auditors SC sfd SCRL, the Group’s auditors. This amount is detailed as follows:
in EUR Other mandatory audit missions Tax advice Other missions Total
Auditor
Network of auditor
15,330.00
10,100
0.00 28,794.00 44,124.00
0.00 296,639.76 306,739.76
The Group also spent during the year 2011 an amount of EUR 1,500 for non-mandate fees paid to Luc Callaert SC sfd SPRLU. This amount is detailed as follows:
in EUR Other mandatory audit missions Tax advice Other missions Total
Auditor 1,500 0 0 1,500
Government Commissioner The State has appointed Mr. Paul Vanwambeke as Government Commissioner in order to supervise, in conformity with the 1991 Law, the management of Belgacom from an administrative point of view.
Compliance Role of Compliance at Belgacom In an increasingly complex legal and regulatory context and a changing business environ-
ment as well as a difficult economic situation, compliance plays an important role in the business world. The Belgacom Group Compliance Office is responsible for coordinating compliance activities within the Belgacom Group, explaining the applicable rules, providing with the required tools to encourage compliance, and ensuring a consistent approach to compliance within the Group. Our compliance program is a key building block for our Corporate Social Responsibility strategy (more infos available in the CSR section). All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles using the company values (Respect, Can do and Passion) as guiding principle. The Code “ The way we do responsible business” sets out the above-mentioned principles, and aims to inspire each employee in his daily behavior and attitude. The ethical behavior is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive. The principles and the rules in the Code are more developed in the different internal policies and procedures. The Code is available on www.belgacom.com.
Organisation of compliance activities The Compliance Office is managed by the Vice President Group Legal, who reports directly to the Chairman of the Audit and Compliance Committee (ACC). The ACC Charter determines the ACC’s responsibility in helping and advising the Board of Directors with respect to monitoring Belgacom’s compliance with the legal and regulatory requirements, as well as internal compliance with the Code’ “The way we do responsible business”and the various policies.
The Compliance Programme Ethical behavior and respect for the values are part of the compliance approach within the Belgacom Group. The revision of the compli-
83
ance programme launched in 2009 was continued in 2011. A very particular effort was made on the visibility of the policies, as well as of the Code of conduct. A new intranet site, entitled “Ethics in practice”, mentioning all the policies classified per theme, has been launched. The Belgacom corporate site (www. belgacom.com) now contains a page fully dedicated to compliance, that provides visitors with all explanations regarding our compliance program. The compliance domains which were the prioritary focus areas for 2011 were : • The Dealing Code • Regulatory compliance • Competition law • Chinese walls • Environment • Privacy • Accounting practices • Business expenses
Report on internal control and risk-management systems Belgacom defines risk as any uncertainties impacting the achievement of its performance objectives. Taking risk is inherent in doing business and an effective internal control & risk management of those risks delivers values to the Belgacom various stakeholders. The identification and the assessment of the particular risks and uncertainties which could affect Belgacom business are updated, reviewed and reported each year through an extensive Enterprise Risk Management framework exercise. The detailed report on the assessment of the effectiveness of the internal control and risk management systems can be found on pages 98 to 103.
MANAGEMENT REPORT
/// page 84
8:35 p.m., NEW YORK
PIERRE
It’s part of my job: I spend a lot of time travelling from A to B. I am currently in New York. Busy, busy, busy, all day long. No time to be in touch with the home front. But between midnight and 1:00 a.m., nothing comes between me and my family. It’s my quality time. And they know it. They are there for me. I always watch the Belgian news (RTBF) on my notebook and I try to catch that comedy program my eldest son is so crazy about. Somehow it brings us closer, being able to talk about the same things. And, okay, it does brighten up my sometimes lonely evenings abroad.
annual report| belgacom | management report | FR | NL | UK |
Rendez-vous Ă Soho Ă 13h30?
Pierre @miam
10 min
Discover the new place to be in New York
85
MANAGEMENT REPORT
/// page 86
Management report1 Belgacom Group • Group revenue2 of EUR 6,406 million, 3% lower than previous year; -1.3% excl. regulation impact • Group EBITDA of EUR 1,912 million, i.e. 3.7% less than for 2010; -2.2% excl. regulation impact • Full-year EBITDA margin of 29.8% • B elgacom ended the year 2011 with EUR 788 million of Free Cash Flow
Revenues
Share in 2011 Group revenue per BU
The Belgacom Group ended the year 2011 with a total revenue before non-recurring items of EUR 6,406 million, which is 3% or EUR 197 million less than the previous year. This is partly caused by regulatory3 measures which reduced the 2011 Group revenue by EUR 112 million, or -1.7%. In addition, the European-wide reduction of Mobile Termination Rates also impacted the revenue from BICS. Furthermore BICS revenue was negatively influenced by fluctuations in the dollar exchange rate. For both the Consumer and the Professional segment the pressure on revenue mainly came from the traditional Fixed and Mobile Voice business. Revenue (in EUR million) before non-recurring items 5,990
2009
6,603
2010
6,406
2011
5% SDE&W
1% S&S
24% BICS
36% EBU 35% CBU
Operating expenses The Belgacom Group’s total operating expenses for 2011 amounted to EUR 4,494 million before non-recurring items, which is a 2.7% improvement over 2010 driven by lower Cost of Sales. The Belgacom Group ended the year 2011 with a Cost of Sales of EUR 2,517 million, i.e. 4.7% lower than the previous year. An important part of the decline is due to the favorable effect of certain regulatory measures4. The remaining year-over-year decline is largely because of lower Cost of Sales from International Carrier Services (BICS), because of the lower BICS revenue. In the course of 2011, the Belgacom Group saw its headcount further reduced, including the employees leaving under the ongoing “Tutorship” restructuring program. In addition,
1. Detailed financial results as from page 94. 2. Revenue excluding non-recurring items, and is defined as the sum of net revenue and other operating income 3. Lower Mobile Termination Rates, lower Roaming rates, and the implementation of a collecting model for Premium Rate Services 4. Less costs following the lower Mobile Termination Rates and the implementation of a collecting model for Premium Rate Services 5. HR expenses: i.e. personnel expenses and pensions 6. Other operating expenses
the total headcount was lower as a result of some divestments. By end-2011, the Belgacom Group counted 15,788 full-time equivalents, or 520 fewer FTEs than one year ago. The 2011 HR-expenses5 of EUR 1,117 million were 0.9% higher versus 2010, including a negative effect of inflation-driven wage indexations, offsetting the benefit from the lower headcount. The 2011 non-HR expenses6 for the Belgacom Group decreased by 1.1% to a total of EUR 860 million, including the positive effect from one-off provision reversals. Total expenses (in EUR million) before non-recurring items 4,619
4,494
870
860
1,107
1,117
Cost of Sales 2,087
2,642
2,517
2009
2010
2011
4,035
Non-HR costs
840
HR costs 1,108
Headcount evolution (in FTE) 16,804
16,308
15,788
2009
2010
2011
annual report| belgacom | management report | FR | NL | UK |
EBITDA
CAPEX
For 2011, Belgacom reported a Group EBITDA, before non-recurring items, of EUR 1,912 million, i.e. 3.7% less than for 2010. Regulatory measures had a negative impact for a total amount of EUR 29 million, or -1.5%. Excluding the regulation impact, the full-year EBITDA was 2.2% lower than the previous year. This led to a full-year EBITDA margin of 29.8%.
The Belgacom Group invested a total of EUR 777 million in 2011, or 12.1% of its Group revenue. The investments are mainly related to increasing Belgacom’s coverage and speed for both its fixed and its mobile network, fully supporting the Group’s convergence strategy. In this regard, the Broadway project - bringing fiber-to-the-curb and installing VDSL2 - continued. Belgacom spent EUR 48 million on this project in 2011, increasing the service coverage to over 81% by year-end. Furthermore, Belgacom upgraded its Mobile Radio Access network and Mobile Backhaul. End November 2011, Belgacom acquired 20 MHz of LTEspectrum in the 2.6 GHz frequency band for an amount of EUR 20.22 million.
EBITDA (in EUR million) & margin before non-recurring items 32.6%
30.0%
29.8%
1,984
1,955
1,912
2009
2010
2011
2011 EBITDA contribution per BU (in EUR million) -92 SDE&W
-328 S&S
Free Cash Flow (in EUR million)
C apex (in EUR million) & C apex as % of revenue 10.0%
12.1%
11.1%
777
734
122 bics
597
2009
980 797
788
2009
2010
2011
* Cash Flow before financing activities
Net financial position Belgacom’s net financial position remained very sound, with its financial debt end of 2011 at EUR 1,479 million. This corresponds to 0.8 times EBITDA (before non-recurring items), remaining one of the lowest net debt positions in the European telecom sector. The Net Debt increased by EUR 28 million as the cash returned to shareholders in the form of dividends and share buybacks slightly exceeded the 2011 Free Cash Flow. The outstanding gross financial debt amounted to EUR 1,972 million (re-measured at fair value), none of it maturing before December 2013.
1,025 CBU 1,185 EBU
87
2010
2011
Net financial position (in EUR million)
2011 Capex per BU (in EUR million) 51 S&S
Tax Expense The 2011 full-year tax expense amounts to EUR 262 million, whereas this was EUR 233 million in 2010. The effective tax rate resulting from the application of the general principles of Belgian tax law for 2011 was 25.3%. This compares to 21.6% for 2010, which benefitted from the anticipated use of tax losses carried forward and other one-off items. Effective tax rate* 25.3% 21.0%
21.6%
2009
2010
2011
* Normalized effective tax rate, excluding the non-recurring nontaxable gain of EUR 436 million.
22 BICS
134 CBU 18 EBU
552 SDE&W
Free Cash Flow* Belgacom ended the year 2011 with EUR 788 million of Free Cash Flow, i.e. EUR 193 million lower than for 2010, which included a EUR 51 million one-off cash increase resulting from the full consolidation of BICS and lower income tax payments following the legal entity merger and positive one-offs. Furthermore, the 2011 Free Cash Flow was pressured by the lower operating result and the higher cash paid for Capex investments.
(1,451)
788
Net debt December 2010
FCF
(701)
(24)
(86)
Dividends Dividends Net to non acquisition controlling of treasury shares interests
(5) Other
(1,479) Net debt December 2011
MANAGEMENT REPORT
/// page 88
Consumer Business Unit - CBU • • • •
011 revenues of EUR 2,288 million, including EUR 54 million negative regulation impact 2 Growth in Mobile Data and TV did not fully offset Fixed and Mobile voice decline Growing customer base: Belgacom TV +236,000; Mobile +36,000; Internet +32,0008 Full-year segment result of EUR 1,025 million, i.e. a 4.4% decline from 2010
CBU revenues
CBU 2011 revenue split
For the full-year 2011, CBU reported revenues of EUR 2,288 million or a decrease of 3.3% compared to 2010. The year-over-year decline in revenue is for a large part driven by the impact of regulatory measures, reducing the 2011 revenue by EUR 54 million (-2.2%). This resulted from the carry-over effect from the implemented financial collecting model for Premium Rate Services, the further decline of the roaming tariffs, the double cut in Mobile Termination Rates and consequently the decline in fixed-to-mobile tariffs. These regulatory measures impacted fixed voice, mobile voice and mobile data revenues. When excluding these regulatory impacts, the underlying revenue from the consumer business unit was down 1.1% compared to the previous year as the growth from Mobile Data and TV did not fully offset the decline in traditional telecom products such as Fixed and Mobile voice. Revenue (in EUR million) 2,414
2009
2,368
2010
Fixed line & mobile customers (in ‘000) 4% Terminals 8% Scarlet & Tango
4% Other
31% Data (fixed & mobile)
Fixed & mobile voice revenue (in EUR million)
704
641
565
561
506
454
2009
2010
2011
2,288
2011
3,805 2,028 1,933
Fixed
Belgacom’s more traditional product lines such as Fixed voice and Mobile voice continued to be under pressure, largely due to regulation. The share of revenue from Voice in the total consumer revenue further decreased to 45% in 2011, whereas this was 49% in 2010.
Fixed
3,769
9% TV
45% Voice (fixed & mobile)
Mobile
3,824
Mobile
The consumer segment generated EUR 454 million in revenue from Fixed voice, which is 10.2% lower compared to the previous year. The Fixed voice revenue was pressured by the ongoing erosion of voice access lines. However, as a result of targeted actions to revive the fixed voice line, the line erosion over 2011 improved to a loss of 115,000 lines versus 129,000 in 2010. End 2011, CBU counted a total Fixed Voice customer base of 1,818,0009. Furthermore, the revenue from the Fixed line was pressured by the recurring discounts on multi-play Packs and some regulatory measures10 but received some support of the price indexations of 1 August 2010 and 1 January 2011.
1,818 2009
2010
2011
The EUR 565 million of revenue from Mobile Voice11, was 11.9% lower than for 2010, including a significant impact from regulatory measures12. Over 2011, the mobile customer base grew soundly by 36,000 new customers to a total of 3,805,000, compared to a decline of 54,000 customers in 2010. CBU did especially well in postpaid, growing its customer base solidly by 85,000, partly driven by the growing success of Packs including mobile. This led to a further improvement in its postpaid ratio from 42.6% end of 2010 to 44.4% end of 2011. The prepaid customer base, including MVNO counted 49,000 fewer customers. The revenue growth from Mobile data further accelerated in 2011, more than offsetting the revenue pressure on Fixed Internet, and driving the share of Data in the total CBU revenue to 31% versus 28% in 2010. Fixed & mobile data revenue (in EUR million) 303
334
369
Mobile 323
337
332
2009
2010
2011
Fixed
8. Excluding 11,000 Internet customers (‘Internet for Employees’) that were resegmented from EBU to CBU 9. Including Scarlet VoIP customers 10. Implementation of a financial collecting model and lower fixed-to-mobile tariffs following the cut in mobile termination rates 11. As of 2011 the allocation of Mobile Access revenue to Voice and Data was adjusted to better reflect the price plans. The 2010 revenue from Mobile Voice and Data was restated accordingly. 12. Lower roaming tariffs, a double cut in mobile termination rates and the implementation of a collecting model for Premium Rate Services
annual report| belgacom | management report | FR | NL | UK |
Full-year Mobile data13 revenues of EUR 369 million were 10.4% higher than for the prior year. Mobile data includes revenue from both SMS and non-SMS data, i.e. “ Advanced Data ”. Revenue from SMS continued its growth trend in 2011, increasing by 8.1% compared to the previous year. This trend is driven by the continued success of pricing plans including free SMS, boosting the total SMS volume by 13% to an average of 250 text messages/user/ month. Advanced Data revenue growth accelerated over 2011, up 28.5% year-over-year, driven by the strong growth in Mobile Internet and Mobile Data roaming. The revenue from Fixed Internet saw a slight decrease of 1.4% from last year. While CBU continued to grow its Fixed Internet customer base in 2011, the revenue was impacted by the success of multi-play Packs at attractive discounts for the customer. This led to a 5% lower Broadband ARPU of EUR 26.8 for 2011. The Packs, however, provided good support to grow CBU’s Internet customer base to a total of 1,156,00014, this in spite of tough competition. Fixed Internet customers (in ‘000) 1,075
1,113
1,156
CBU segment result and contribution margin
TV revenue (in EUR million) 208
182 134
2009
2010
The CBU full-year segment result amounted to EUR 1,025 million which is a 4.4% decline from 2010. This includes a negative regulation impact of EUR 17 million (-1.6%). The 2011 full-year contribution margin16 decreased to 44.8% from 45.3% for 2010.
2011
Segment result (in EUR million) & margin
TV customers (in ‘000) 1,211
Multiple Stream
752 100
975 135
2010
2011
Over 2011, Belgacom TV proved once more to be very successful, its customer base growing by 236,000 customers to a total of 1,211,000, including 190,000 multi-set-top box users. This results from a very sound gross customer gain, more than offsetting the temporary higher churn due to the loss of exclusivity on Belgian soccer broadcasting rights. The TV customer gain was mainly supported by Belgacom’s attractive and well-targeted Packs including TV. As a result, Belgacom TV revenue grew to a total of EUR 208 million, up 14.3% compared to one year ago. In 2011, TV revenues represented 9% of total CBU revenues.
43.4%
190
45.3%
44.8%
1,048
1,073
1,025
2009
2010
2011
1,021
839
652
Household 2009
2010
2011
CBU operating expenses CBU’s total expenses were 2.4% down from last year. This is the result of lower Cost of Sales, which decreased year-over-year by 8% to EUR 624 million. Most of this decline was driven by a positive effect from regulatory measures15 and initiatives to improve product profitability. Inflation-based wage indexations of October 2010 and June 2011 drove the 4.5% yearover-year increase in HR costs to EUR 340 million.
2009
89
Non-HR costs for 2011 totalled EUR 299 million or 2.7% higher compared to 2010, including more outsourcing in the framework of the customer centricity project.
Tango For the full-year 2011, Tango reported revenues of EUR 107 million or an increase of 8.4% compared to 2010. This growth is driven by strong sales in Luxembourg of smartphones and the iPhone, recently reinforced by the launch of the iPhone 4S. Along with the ongoing migration of prepaid towards postpaid offers and increased revenues from bundles, this resulted in a continued revenue increase. Furthermore, over the year 2011, Tango added 4,000 customers. Revenue (in EUR million) 107 99 93
Total expenses (in EUR million) Non-HR costs HR costs
1,365 297 345 723
1,295 291
1,263
325
340
678
624
Cost of Sales 2009
2010
299
2009
2010
2011
Tango Mobile customers (in ‘000) 259
260
264
2011
2009
13. As of 2011 the allocation of Mobile Access revenue to Voice and Data was adjusted to better reflect the price plans. The 2010 revenue from Mobile Voice and Data was restated accordingly. 14. Including 11,000 Internet customers (‘Internet for Employees’) that were resegmented from EBU to CBU 15. Implementation of a collecting model and the cut in mobile termination rates 16. Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W
2010
2011
MANAGEMENT REPORT
/// page 90
Enterprise Business Unit - EBU • Total underlying revenue remained nearly flat to 2010 • Organically, the revenue from ICT was up by 4.6% over the previous year • Non-SMS mobile data revenue grew by 21.7% to EUR 118 million • 2011 segment result totals EUR 1,185 million, which is 2.2% less than the previous year
EBU revenues
EBU 2011 revenue split
Over the year 2011 Belgacom’s professional customer segment generated EUR 2,349 million in revenue, i.e. 3.0% lower than for 2010. This decline is partly explained by the divestment of Telindus Spain, partially compensated by the acquisition of Eudasys by Telindus France. Organically, i.e. excluding the M&A impact, the revenue erosion was limited to -2.0% and was mainly caused by regulatory measures, lowering EBU’s 2011 revenue by EUR 45 million or -1.9%. Leaving aside the M&A and regulation impact, the underlying revenue from EBU remained nearly flat to 2010. The underlying revenue showed an improving trend over the quarters as the growth in Mobile Data and ICT increasingly offsets the pressure on Fixed and Mobile Voice.
2,421
4% Terminals
30% ICT
40% Voice
26% Data
The traditional voice products, both Fixed and Mobile, continued to feel pressure from regulatory measures, i.e. from the lowered Mobile Termination Rates, the resulting lower Fixedto-Mobile rates and the cut in Roaming rates. In 2011, Fixed and Mobile Voice represented 40% of the total EBU revenue, whereas this was 43% for the previous year. Fixed & mobile voice revenue (in EUR million)
Revenue (in EUR million) 2,501
1% Other
560 2,349
Mobile 574
500
539
448
496
In 2011 EBU’s Fixed Voice line base eroded by 55,000 lines to a total of 1,385,000. The price indexations of 1 August 2010 and 1 January 2011 gave some support. Nevertheless, the 2011 Fixed Voice ARPU17 fell by 4.2% to EUR 28.7. Revenue from Mobile Voice for the year 2011 amounted to EUR 448 million, 10.4% lower compared to 2010. Regulatory price decreases in Mobile Termination and Roaming rates further impacted the Mobile Voice revenue, along with continued price erosion as a result of the successful uptake of Mobile pricing plans including free Voice minutes and the fierce competition in the Corporate Mobile Market. The price pressure was however partly compensated by a solid customer growth of 105,000 active Mobile customers18, ending 2011 with a total of 1,408,000 Mobile customers. Usage per customer was 0.9% lower from the previous year with an average usage of 319 minutes per month. Fixed line & mobile customers (in ‘000)
Fixed
1,235
Mobile 2009
2010
2011
2009
2010
1,303
2011
1,408 1,491
In 2011, EBU generated EUR 496 million in revenue from Fixed Voice, which is 7.9% lower than for 2010. This is in part due to the lowered Fixed-to-Mobile rates, and in part due to the continued erosion of Fixed Voice lines.
17. Average revenue per user on a monthly basis 18. Including Mobile Voice, Mobile Data and M2M cards
Fixed
1,441 1,385 2009
2010
2011
annual report| belgacom | management report | FR | NL | UK |
In 2011 EBU reported EUR 697 million revenue from ICT, compared to EUR 692 million in 2010. The variance was however impacted by the divestiture of Telindus Spain and the acquisition of Eudasys by Telindus France. Organically, the revenue from ICT was up by 4.6% over the previous year, which is an improvement to the 3.3% growth seen in 2010, in spite of the unfavorable economic and financial climate of 2011.
eroding revenue from Fixed Internet. In a highly competitive and saturated professional Internet market, EBU kept its Fixed Internet customer base fairly flat, ending the year 2011 with 434,00019 Internet customers with an ARPU of EUR 39.2.
692
Fixed & mobile data revenue (in EUR million) 184
216
187
Mobile 401
697
For 2011, EBU reported a total non-HR expense of EUR 144 million, i.e. 3.4% less than the previous year. The non-HR costs include some fluctuations in foreign currency effects. Total expenses (in EUR million)
ICT revenue (in EUR million) 670
392
389
Fixed
Non-HR costs
1,269 142
HR costs
379
Cost of Sales
748
2009 2009
2010
2010
2011
Mobile Data revenue continued its growth trend in 2011, up by 15.4% to EUR 216 milion. The revenue from Mobile Data includes both revenue from SMS and revenue from non-SMS Data (Advanced Mobile Data). Revenue from SMS grew by 8.7% year-overyear to EUR 98 million for 2011. The usage per customer increased by 14% to a total of 89 text messages per user per month. Non-SMS Mobile Data revenue grew by 21.7% to EUR 118 million. The growth in Advanced Mobile Data revenue results from a strongly increasing customer base for Mobile Internet and a solid growth in Mobile Data Roaming. For 2011, EBU reported Fixed data revenue of EUR 389 million, which is slighly down compared to last year. Revenue from Data connectivity did not fully offset the slightly
1,210 149
1,164
375
381
685
639
2010
2011
144
2011
EBU segment result and contribution margin
Fixed internet customers (in ‘000) 2009
91
446
445
434
2009
2010
2011
EBU operating expenses
The EBU segment result for full-year 2011 totals EUR 1,185 million, which is 2.2% or EUR 27 million less than the previous year. This includes a EUR 7 million negative impact from Regulation, and a net negative impact from the divestment and acquisition within the ICT domain. The contribution margin21 increased slightly to 50.4% in 2011. Segment result (in EUR million) & margin
EBU ended the year 2011 with EUR 639 million Cost of Sales, i.e. 6.7% less than for 2010. The lowered Mobile Termination rates for all Belgian Mobile operators positively impacted EBU’s costs for terminating mobile calls on alternative mobile networks. In addition, EBU had less Cost of Sales due to the divestment of Telindus Spain. Compared to 2010, EBU’s HR-expenses went up 1.6% to EUR 381 million, with salaries impacted by inflation-based wage indexations20.
19. Including impact from resegmentation of 11,000 Broadband customers (Internet for Employees) to CBU 20. Salaries were indexed by 2% on 1 October 2010 and 1 June 2011 for Belgacom SA employees, and on 1 January 2011 for all other employees 21. Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W
49.2%
50.0%
50.4%
1,231
1,212
1,185
2009
2010
2011
MANAGEMENT REPORT
/// page 92
Service Delivery Engine & Wholesale – SDE&W SDE&W revenues
SDE&W operating expenses
Revenue within the SDE&W segment relates mainly to wholesale activities from Belgacom. Over the full-year 2011 the SDE&W revenues amounted to EUR 318 million, or 6.9% below those of 2010. This includes the negative effect from some regulatory22 measures, lowering the SDE&W revenue by EUR 13 million in 2011. The remaining decline is due to a lower volume of leased lines and decreases in Roaming prices.
Total operating expenses for 2011 of EUR 410 million, were 9% lower versus 2010. Over 2011 the SDE&W cost of sales strongly declined by 21% to EUR 36 million, mainly as a result of the positive effect of some regulatory measures.
Revenue (in EUR million) 386
2009
342
2010
318
The positive effect from lower headcount on HR expenses fully offset the inflation-based salary indexations, leading to a 1.8% lower HR-expense for 2011.
Total expenses (in EUR million) Cost of Sales
72
HR costs
193
Non-HR costs
185 2009
46 203
202
2010
36 199
175 2011
The non-HR expenses of EUR 175 million for the full year 2011 were significantly lower compared to the previous year as 2010 included costs linked to the swap of the Mobile Radio Access network, whereas the 2011 expense benefitted from positive one-offs resulting from provision reversals due to litigation settlements.
2011
Staff & Support – S&S S&S revenues
S&S operating expenses
Staff and Support reported EUR 47 million of revenues for the year 2011. The increase over last year, however, is the result of the accounting of internal revenue, which was neutralized on a Group level.
Total operating expenses were up by 5% to EUR 374 million, driven by non-HR expenses that included some internal costs, neutralized on a Group level, and one-offs. HR expenses were 3% down as the lower headcount offset the impact of wage indexations.
Revenue (in EUR million)
Total expenses (in EUR million) 47
33
35
HR
370
358
374
166
165
160
204
192
2009
2010
215
Non-HR 2009
2010
2011
2011
22. First quarter variance was still impacted by the introduction of a financial collecting model for Premium Rate Services as of April 2010; other regulatory impacts come from Mobile Termination Rates and lowered Local Loop Unbundling and Bitstream prices
annual report| belgacom | management report | FR | NL | UK |
93
International Carrier Services - BICS • Solid volume growth: > 27 billion Voice minutes traded, non-Voice volume up 34% • Volume-driven revenue growth only partly offset the negative MTR and currency effect • 2011 gross margin slightly down from 2010 ICS revenues ICS operated in an increasingly competitive market while its revenue was pressured by the European-wide decrease of Mobile Termination Rates and by a negative currency effect as the average dollar rate weakened yearover-year. Volumes, however, continued to grow solidly, with Voice volumes up 8.5% to more than 27 billion minutes traded, while nonVoice volume growth accelerated to 34%. The volume-driven revenue growth, however, only partly offset the negative MTR and currency effect. Over full-year 2011, ICS generated revenue of EUR 1,562 million, i.e. 3% below 2010. Revenue (in EUR million) Before non-recurring items 1,610
`
ICS Volumes
Gross margin (in EUR million)
1,562
226
224
143
Volumes (in million) 1,074 800 2009
2010
2011
ICS EBITDA and margin The reported EBITDA of ICS for 2011 of EUR 122 million was 6.1% down compared to last year due to the pressure on gross margins and higher non-HR costs, partly offset by lower HR-expenses. The 2011 EBITDA margin of 7.8% remained nearly flat to last year as a result of the solid performance of the non-voice business.
892
EBITDA (in EUR million) & margin 2009
2010
2011
ICS gross margin ICS reported for full-year 2011 a gross margin of EUR 244 million. The growing nonVoice gross margin offset for a large part the decrease in Voice gross margin, resulting in an overall limited decline of ICS’s gross margin by 1.1%. Voice unit margins were pressured by the intense competition in the International Carrier market, as well as by the high fluctuations in the EUR/USD exchange rate. Nonvoice margins, however, grew 10% year-overyear as a result of the increasing leadership of ICS in mobile data.
Volumes continued to grow in 2011 with voice volumes up 8.5%, while non-voice volumes grew almost 34% year-over-year.
8.7%
8.0%
7.8%
129
122
2010
2011
78
2009
Non-Voice Voice
549
19,316
25,290
27,442
2009
2010
2011
MANAGEMENT REPORT
/// page 94
Quarterly results as reported Group - Financials
(EUR million) Revenues 1 Consumer Business Unit Enterprise business unit Service Delivery Engine & Wholesale Staff&Support International Carrier Services Intersegment eliminations Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses EBITDA before non-recurring items Segment EBITDA margin 1 Non recurring items Ebitda
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
1,641 590 615 94 10 378 -47 -662 -274 -210 495 30.2% 436 931
1,664 592 610 85 7 414 -45 -674 -275 -212 503 30.2% 1 504
1,640 585 590 79 10 415 -40 -651 -281 -218 490 29.9% 0 490
1,658 600 606 83 7 402 -39 -655 -278 -230 495 29.9% 8 503
6,603 2,368 2,421 342 35 1,610 -172 -2,642 -1,107 -870 1,984 30.0% 444 2,428
1,583 565 593 81 8 372 -36 -609 -274 -220 480 30.3% 0 480
1,612 579 593 80 7 388 -36 -621 -282 -196 512 31.8% -18 494
1,596 571 572 77 25 401 -51 -633 -278 -213 472 29.6% 0 472
1,616 572 591 80 8 401 -36 -655 -283 -232 446 27.6% 4 450
6,406 2,288 2,349 318 47 1,562 -159 -2,517 -1,117 -860 1,912 29.8% -15 1,897
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
154 49 2 96 5 2
222 19 3 180 13 8
139 11 7 96 19 6
219 54 7 121 26 11
734 132 20 492 62 27
173 44 4 115 7 3
161 27 4 119 9 2
163 24 3 125 9 3
279 40 8 193 26 14
777 134 18 552 51 22
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
590 291 133 85 44 8 21 279 158 83 15 24 21 -180 -81 -65 264 44.7%
592 280 125 85 43 7 20 288 165 82 16 25 24 -171 -81 -73 267 45.1%
585 281 124 84 46 8 19 285 162 82 17 25 19 -158 -82 -70 276 47.1%
600 288 124 83 49 7 23 290 156 88 21 25 23 -169 -82 -83 266 44.3%
2,368 1,139 506 337 182 31 84 1,142 641 334 68 99 87 -678 -325 -291 1,073 45.3%
565 281 118 85 51 7 21 265 139 87 14 25 19 -149 -83 -70 264 46.7%
579 278 115 83 53 6 21 279 147 92 14 26 23 -149 -85 -74 271 46.8%
571 271 111 82 51 7 20 279 143 93 16 28 21 -158 -86 -71 257 45.0%
572 269 110 82 53 7 18 280 136 97 19 28 23 -168 -87 -84 233 40.8%
2,288 1,099 454 332 208 26 79 1,104 565 369 63 107 86 -624 -340 -299 1,025 44.8%
1. Before non-recurring items
Group - Capex
(EUR million) Group Capex Consumer Business Unit Enterprise Business Unit Service Delivery Engine & Wholesale Staff & Support International Carrier Services CBU - Financials
(EUR million) Revenues From Fixed Voice Data TV Terminals (excl, TV) Scarlet From Mobile Voice Data Terminals (excl, TV) Tango Other Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result Segment Contribution margin
annual report| belgacom | management report | FR | NL | UK |
95
CBU Operationals
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
3,120 1,904 32 93 1,091 1,178 976 104 98 814 713 100
3,098 1,877 31 92 1,099 1,052 857 103 91 868 753 115
3,076 1,850 30 90 1,107 1,004 824 94 86 920 795 125
3,046 1,817 28 88 1,113 1,140 942 102 96 975 839 135
3,046 1,817 28 88 1,113 4,374 3,599 404 371 975 839 135
3,028 1,781 27 88 1,131 1,061 875 95 91 1,029 879 149
3,006 1,756 26 88 1,136 977 795 96 87 1,087 925 162
2,977 1,728 25 86 1,138 936 765 89 82 1,139 963 176
2,974 1,712 24 83 1,156 1,036 821 123 92 1,211 1,021 190
2,974 1,712 24 83 1,156 4,011 3,256 402 352 1,211 1,021 190
21.2 28.7 20.7
20.3 28.5 19.1
20.3 28.1 19.3
20.9 27.6 19.7
20.7 28.2 19.7
20.2 27.6 19.4
20.0 27.0 19.2
19.7 26.7 17.8
19.8 26.1 17.5
19.9 26.8 18.4
3,739 2,201 1,538 20.9%
3,745 2,188 1,557 20.1%
3,773 2,199 1,573 21.8%
3,769 2,165 1,604 22.8%
3,769 2,165 1,604 21.4%
3,723 2,117 1,606 21.3%
3,726 2,096 1,630 20.4%
3,774 2,111 1,663 20.4%
3,805 2,116 1,690 25.2%
3,805 2,116 1,690 21.8%
14.3 32.5 21.5 14.2 7.3 318.0 104.4 215.2
15.0 32.9 22.3 15.0 7.3 335.1 110.5 226.5
14.7 32.1 21.8 14.6 7.2 307.1 105.9 203.5
15.3 31.4 22.0 14.2 7.8 345.3 107.5 240.5
14.8 32.2 21.9 14.5 7.4 326.5 107.0 221.6
14.1 29.2 20.5 12.7 7.8 338.0 102.2 238.7
15.3 30.0 21.6 13.4 8.2 357.5 106.6 254.1
14.4 30.0 21.1 12.9 8.2 335.4 103.6 235.1
14.9 28.6 20.7 12.2 8.5 373.3 103.8 273.0
14.7 29.5 21.0 12.8 8.2 351.6 104.3 250.5
from fixed
Number of access channels (thousands) PSTN ISDN IP ADSL, VDSL Traffic (millions of minutes) National Fixed to Mobile International TV (thousands) TV - households of which multiple settop boxes ARPU (EUR) ARPU Voice ARPU broadband ARPU Belgacom TV from MOBILE
Number of active customers (thousands) Prepaid 1 Postpaid Annualized churn rate (blended - variance in p.p.) 2 Net ARPU (EUR) 3 Prepaid Postpaid Blended Blended voice Blended data UoU (units) MoU (min) 4 SMS (units)
1. Prepaid includes Mobisud customers that were previously reported as MVNO customers 2. Q4 2011 impacted by clean-up of inactive prepaid cards. This clean-up has no impact on the number of active customers & prepaid net adds. 3. Mobile ARPU’s 2010 have been adapted to reflect the change in mobile access revenue allocation 4. MoU reflect the duration of all calls from or to Proximus/voice customer/per month. In 2011 the definition of voice customers has been fine-tuned to exclude all data cards. 2010 MoU have been adapted accordingly.
MANAGEMENT REPORT
/// page 96
EBU - Financials
(EUR million) Revenues From fixed Voice Data Terminals ICT From Mobile Voice Data Terminals Other Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result Segment Contribution margin
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
615 432 141 99 18 174 177 129 45 3 6 -183 -91 -36 306 49.7%
610 425 136 98 18 172 180 130 48 3 5 -175 -93 -35 308 50.4%
590 413 130 98 19 166 174 123 47 3 3 -163 -96 -39 292 49.5%
606 427 132 98 18 179 170 119 47 5 8 -164 -95 -40 306 50.6%
2,421 1,697 539 392 74 692 702 500 187 15 23 -685 -375 -149 1,212 50.0%
593 420 128 98 18 175 169 115 50 4 4 -162 -94 -37 300 50.6%
593 417 125 97 18 177 171 115 53 3 5 -160 -98 -37 298 50.3%
572 398 121 96 18 163 169 110 56 3 5 -154 -93 -34 291 50.9%
591 420 122 97 18 182 168 108 57 3 4 -164 -96 -36 296 50.0%
2,349 1,655 496 389 72 697 677 448 216 13 17 -639 -381 -144 1,185 50.4%
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
1,922 647 818 11 445 848 579 173 96
1,912 644 810 12 446 790 529 168 93
1,901 641 801 12 446 727 487 153 86
1,886 636 791 13 445 781 529 165 87
1,886 636 791 13 445 3,145 2,123 660 362
1,861 631 781 13 436 782 526 165 90
1,849 627 771 14 436 732 485 160 86
1,834 622 763 15 434 672 445 147 80
1,820 618 752 15 434 716 476 160 80
1,820 618 752 15 434 2,901 1,932 633 336
30.9 39.4
30.2 39.1
29.0 39.0
29.7 38.7
30.0 39.1
29.1 39.6
28.9 39.3
28.1 39.1
28.6 38.9
28.7 39.2
1,252 1,252 10.6%
1,271 1,271 10.9%
1,286 1,286 10.0%
1,303 1,303 10.8%
1,303 1,303 10.6%
1,327 1,327 11.1%
1,357 1,357 10.8%
1,380 1,380 9.4%
1,408 1,408 10.2%
1,408 1,408 10.3%
46.9 34.7 12.2 360.7 322.0 74.6
47.0 34.4 12.6 363.6 324.3 77.0
44.7 32.3 12.5 345.3 308.3 74.7
42.8 30.8 12.1 372.8 330.5 85.5
45.3 33.0 12.3 361.3 321.8 78.1
41.8 29.2 12.6 356.5 317.1 83.7
41.9 28.7 13.2 369.6 328.3 90.1
40.6 26.9 13.8 343.3 305.0 87.3
39.5 25.9 13.7 363.4 322.8 95.6
41.0 27.6 13.3 358.8 318.9 89.4
EBU - Operationals
from fixed
Number of access channels (thousands) PSTN ISDN IP ADSL, VDSL Traffic (millions of minutes) National Fixed to Mobile International ARPU (EUR) ARPU Voice ARPU Broadband from MOBILE
Number of active customers (thousands) Postpaid Annualized churn rate (blended - variance in p.p.) Net ARPU (EUR) 1 Postpaid Postpaid voice Postpaid data UoU (units) MoU (min) 2 SMS (units)
1. Mobile ARPU’s 2010 have been adapted to reflect the change in mobile access revenue allocation. 2. MoU reflect the duration of all calls from or to Proximus/voice customer/per month. In 2011 the definition of voice customers has been fine-tuned to exclude all data cards. 2010 MoU have been adapted accordingly.
annual report| belgacom | management report | FR | NL | UK |
97
SDE&W - Financials
(EUR million)
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
94 -15 -51 -50 -23
85 -10 -48 -50 -23
79 -10 -53 -52 -36
83 -10 -50 -50 -27
342 -46 -203 -202 -109
81 -9 -49 -52 -29
80 -9 -50 -33 -12
77 -9 -50 -48 -30
80 -9 -50 -42 -21
318 -36 -199 -175 -92
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
10 1 -41 -50 -80
7 0 -43 -45 -80
10 0 -41 -45 -75
7 0 -40 -52 -85
35 1 -165 -192 -320
8 0 -39 -47 -79
7 0 -40 -41 -74
25 0 -40 -66 -81
8 -1 -40 -61 -95
47 -1 -160 -215 -328
(EUR million)
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result Segment EBITDA margin
378 -325 -10 -15 28 7.4%
414 -359 -9 -15 32 7.7%
415 -356 -9 -16 34 8.1%
402 -344 -10 -12 36 8.9%
1,610 -1,383 -39 -58 129 8.0%
372 -320 -10 -18 24 6.5%
388 -333 -9 -17 29 7.5%
401 -342 -9 -15 35 8.7%
401 -342 -9 -16 33 8.3%
1,562 -1,338 -37 -65 122 7.8%
Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result S&S - Financials
(EUR million) Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result ICS - Financials
ICS - Operationals
Volumes (in million) Voice Non-Voice (SMS/MMS)
Q110
Q210
Q310
Q410
2010
Q111
Q211
Q311
Q411
2011
5,922 168
6,254 188
6,433 209
6,680 235
25,290 800
6,574 230
6,997 253
6,853 276
7,018 315
27,442 1,074
The detailed Consolidated The detailed Consolidated Financial Financial Statements prepared Statements prepared under International under International Financial Financial Reporting Standards can be Reporting Standards can be consulted on the Belgacom website consulted on the Belgacom website annualreport.belgacom.com annualreport.belgacom.com
MANAGEMENT REPORT
/// page 98
Internal control and risk management systems The Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management. Belgacom has set up an internal control system based on the COSO model, i.e. the internal control integrated framework and enterprise risk management published by the Committee of Sponsoring Organisation of the Treadway Commission (“COSO”). This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring.
Belgacom’s internal control system is characterized by an organization with a clear definition of responsibilities, next to sufficient resources and expertise, and also appropriate information systems, procedures and practices. Obviously, Belgacom cannot guarantee that this internal control will be sufficient in all circumstances as risks of misuse of assets or misstatements can never be totally eliminated. However, Belgacom organizes a continuous review and follow-up of all the components of its internal controls and risk management systems to ensure they remain adequate. Belgacom considers the timely delivery to all its internal and external stakeholders of complete, reliable and relevant financial information in conformity with International Financial Reporting Standards (IFRS) and with other additional Belgian disclosure requirements as an essential element of management and governance. Therefore, Belgacom has organized its internal control and risk management systems over its financial reporting in order to ensure this objective is met.
man, Mr. Pierre-Alain De Smedt, is competent in accounting and auditing. He is a “licenciate” in commercial and financial sciences. He occupied during his career several functions as CFO, CEO and COO. Amongst his nonexecutive functions he is also member of the Audit Committee of Avis Europe. The A&CC’s role is to assist and advise the Board of Directors in its oversight on (i) the financial reporting process, (ii) the efficiency of the systems for internal control and risk management of Belgacom, (iii) the Belgacom internal audit function and its efficiency, (iv) the quality, integrity and legal control of the statutory and the consolidated financial statements of Belgacom, including the follow up of questions and recommendations made by the auditors, (v) the relationship with the Company’s auditors and the assessment and monitoring of the independence of the auditors, (vi) Belgacom’s compliance with legal and regulatory requirements, (vii) the compliance within the organization with Belgacom’s Code of Conduct and the Dealing Code.
1. Control environment
The A&CC meets at least once every quarter.
1.1 Organization of internal control
1.2. Ethics
In accordance with the bylaws, Belgacom has an Audit and Compliance Committee (A&CC), which consists of five non-executive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director.
The Board of Directors has approved a Corporate Governance Charter and a Code of Conduct “The way we do responsible business”. All employees must perform their daily activities and their business objectives according the strictest ethical standards and principles, using the company values (Respect, Can do and Passion) as guiding principle.
The members of the A&CC have sufficient expertise in financial matters to discharge their functions. Its Chair-
annual report| belgacom | management report | FR | NL | UK |
The Code “The way we do responsible business”, which is available on www.belgacom.com, sets out the above-mentioned principles, and aims to inspire each employee in his or her daily behaviour and attitudes. The ethical behaviour is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive. In addition, Belgacom in general and the Finance department in particular have a tradition of a high importance to compliance and a strict adherence to a timely and qualitatively reporting.
1.3. Policies and procedures The principles and the rules in the Code “The way we do responsible business” are further elaborated in the different internal policies and procedures. These Group policies and procedures are available on the Belgacom intranet-sites. Every policy has an owner, who regularly reviews and updates if necessary. Periodically, and at the time of an update, an appropriate communication is organized.
The team of the Corporate Accounting department assumes this accounting responsibility for the mother company Belgacom and the major Belgian companies, but also provides the central support to the other accounting teams. For this centralized support, the organization is structured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expenditures, provisions & litigations, payroll, post-employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group guidelines.
In the financial reporting domain, general and more detailed accounting principles, guidelines and instructions are summarized in the accounting manuals and other reference material available on the Belgacom intranet-sites. In addition, the Corporate Accounting department regularly organizes internal accounting seminars to update finance and non-finance staff on accounting policies and procedures.
The consolidation of all different legal entities into the Consolidated Financial Statements of the Belgacom Group is realized centrally. The Consolidation department defines and distributes information relating to the implementation of accounting standards, procedures, principles and rules. It also monitors changes in regulations to ensure that the financial statements continue to be prepared in accordance with IFRS, as adopted by the European Union. The monthly instructions for consolidation set forth not only the schedules for preparing accounting information for reporting purposes, but also includes detailed deadlines and items requiring particular attention, such as complex issues or new internal guidelines.
1.4. Roles & responsibilities
1.5. Skills & expertise
Belgacom’s internal control system benefits from the fact that throughout the whole organization, roles and responsibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibilities, while on individual level, everybody has a clear job description and objectives.
Adequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient headcount, but also the adequate skills and expertise. These requirements are taken into account in the hiring process, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University.
The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to monitor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department.
For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as senior staff must participate. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and
99
MANAGEMENT REPORT
/// page 100
expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business product & services.
2. Risk analysis Belgacom believes that risk management is fundamental to corporate governance and the development of sustainable business. The group has adopted a risk philosophy that is aimed at maximising business success and shareholder value by effectively balancing risk and reward. The objective of risk management is not only to safeguard the Group’s assets and financial strength but also to protect Belgacom’s reputation. Financial risk management objectives and policies are reported in note 31 of the consolidated financial statements. Risks related to important ongoing claims and judicial procedures are reported in note 33 of these statements. The Enterprise and financial reporting risks are detailed below. The related mitigating factors and control measures are described under caption 3.
2.1. Enterprise risks The Group’s Enterprise Risk Management (ERM) covers the full spectrum of risks (“potential adverse events”) and uncertainties that Belgacom could encounter. Belgacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of company strategic development objectives. It seeks to maximise value for shareholders by aligning risk management with the corporate strategy, assessing the emerging risk from regulation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM is reviewed and updated every year since 2006. This risk assessment and evaluation takes place as an integral part of Belgacom annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the A&CC. Among the risks identified in the ERM exercise of 2011, the following risk categories were prioritized: changing
business model, dependence on rightfully skilled personnel, the competitive environment, dependency on equipment and technology. Changing business model: As a telecom company, Belgacom operates in a dynamic environment that changes rapidly driven by new technological developments and ever changing customer demand. In response, Belgacom’s business model is changing too. It is moving further away from its traditional business, dominated by voice services with high margins. Instead, it is increasingly embracing alternative communications such as WiFi, Mobile Internet and VoIP. This development could potentially impact Belgacom’s future revenue and profit from billing by item, such as voice minutes or SMS. The International Carrier Services segment too is subject to this changing business model, and could see its revenue from Voice traffic under pressure as IP technology makes inroads into traditional communications. The rapid pace of the technological evolution requires internal innovation to be fast as well, which can be prevented by long internal development times hence stalling the launch of new services. Dependence in rightfully skilled personnel: Belgacom depends heavily on the people who work for it: key management, technical employees with the right skills, and well-trained sales people with a detailed knowledge of the Belgacom products and services. Rapid changes in technology and the ceaseless evolution in products and services imply constant shifts in demand for skills, and without effective provisions being made, could leave Belgacom with an inadequate pool of talent. Within the Enterprise segment, for instance, the focus on delivering full end-to-end services increases the need for staff with specific skills and expertise. Competitive environment: Belgium is a small country with only a few large telecom players, among which Belgacom is the incumbent. In such circumstances, market value is vulnerable to disruptive behavior among competitors. A new market entrant or radical price competition could cost Belgacom market share and revenues. For instance, a rapid transposition of an European directive on customer protection might see the Belgian government limit the contract duration of the customer to six months (rather than 12 months), which
annual report| belgacom | management report | FR | NL | UK |
might intensify competitive pressure. Belgacom, however, has always adopted a rational pricing strategy and will continue to be disciplined in its customer offerings. In the fixed business, cable companies are Belgacom’s main competitors. Competition in the mobile market may become more intense now that Telenet Tecteo Bidco (which brings together Telenet and Voo) have obtained a mobile 3G-license. In addition, the value of voice services is further challenged by OTT (Over The Top) players such as Skype on mobile. New OTT players could also put ICS’ revenues under pressure, with Skype, Google, Viber and Rebtel exerting competition and squeezing Voice-traffic margins. Dependence on equipment and technology: The business of Belgacom heavily depends on technical infrastructure such as telecommunication equipment and IT-platforms. Any technical failure could lead to business interruption, potentially with financial consequences and a reputation impact. Belgacom has a nation-wide access network, of which part is in place since a long time – the so-called legacy copper network. Ageing copper cables could increase fault rates and decrease performance. The Mobile network might be subject to technical failures, affecting the quality of service or causing temporary service interruptions, leading to customer dissatisfaction. Another priority is the transformation program “Moveto-all-IP”, which could be subject to delayed implementation and consequently delayed savings from the outphasing of technical buildings.
2.2. Financial reporting risks In the area of financial reporting, in addition to the general enterprise risks also impacting the financial reporting (e.g. personnel), the major risks identified include: new transactions and evolving accounting standards, changes in tax law and regulations, and the financial statement closing process. New transactions and evolving accounting standards: New transactions could have a significant impact on the financial statements, either directly in the income statement or in the notes. An inappropriate accounting
treatment could result in financial statements which do not provide a true and fair view any more. Changes in legislation (e.g. pension age, customer protection) could also significantly impact the reported financials. New accounting standards can require the gathering of new information and the adaption of complex (billing) systems. If not timely and adequately foreseen, the reliability of the financials is put at risk. Changes in tax law and regulations: Changes in tax laws and regulations (corporate income tax, VAT,...) or in their application by the tax authorities could significantly impact the financial statements. To ensure compliance, it is often required to set additional administrative processes up in a short timeframe to collect relevant information or to implement updates to existing IT systems (e.g. billing systems). Financial statement closing process: The delivery of timely and reliable financial statements remains dependent from an adequate financial statement closing process.
3. Risk mitigation factors and control measures Belgacom mitigation response strategies depend on the nature of the risk and may often combine various actions, including insurance, increased vendors SLA’S/ liabilities, credit scoring, risk avoidance or active risk management through people, processes and systems. The cost of risk mitigation is considered in determining response strategies. Certain risks are consciously accepted based on their potential limited impact on the Belgacom organization and/or their low level of materiality. Risk such as political, economic, regulatory are beyond Belgacom control and mitigation is limited to responsive actions to limit their impact.
3.1. Enterprise risks From the identified risks in the 2011 exercise, the following risk mitigation factors have been identified and control measures have been taken: Changing business model: To mitigate any negative effect on the Belgacom Group revenue and its business segments, Belgacom has chosen to pioneer new technologies and to offer customers the emerging advantage of convergence - for example by
101
MANAGEMENT REPORT
/// page 102
deploying a country-wide hotspot network in partnership with FON. Belgacom has introduced new pricing plans that match its customers demand for these new ways of communicating – for example with packages of unlimited SMS together with voice and mobile data capacity. In the Enterprise business segment too, where Voice business is contracting, new business models have been developed to compensate, such as cloud computing. ICS is also pro-actively exploring new territories, geographically and technologically. Dependence in rightfully skilled personnel: Belgacom’s future success will be influenced by its ability to attract and retain highly qualified employees. Consequently, to tackle new needs in skills, the Human Resources department has developed customized programs, such as Strategic Workforce planning, or the program for young potentials. Competitive environment: Belgacom is deliberately differentiating itself from the competition, by leveraging its virtualized entertainment offers in the private market and its cloud computing services for professionals. Simultaneously, Belgacom continues to develop its broadband coverage to give its customers the best internet experience. Belgacom has also drawn inspiration from OTT players, launching a content offer adapted to ‘Connected TV’s’, available for non-Belgacom customers as well. Dependence on equipment and technology: Rolling-out a fiber-to-the-curb network was one of Belgacom’s key priorities over the last years, while old copper cables are being replaced and new technologies show a promising evolutionary path for the last mile in copper. Belgacom made the further improvement in the stability of its mobile network a priority as well. The “Network Resilience Program” has boosted the ability to keep the network in operation in the event of failures. In 2011, Belgacom cut the incidence of network problems in half. To prevent problems in the supply chain, Belgacom monitors strictly its service and licence agreements with suppliers and vendors.
3.2. Financial reporting risks In the area of financial reporting, the following mitigating factors have been identified and control measures have been taken:
New transactions and evolving standards: It is the responsibility of the Corporate Accounting department to follow the evolution in area of evolving standard (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analysed. For every new type of transaction (e.g. new product, new employee benefit, business combination), an in depth analysis from a financial reporting, risk management, treasury and tax point of view is performed. In addition, the development requirements for the financial systems are timely defined and compliance with internal and external standards is guaranteed. Emphasis is on the development of preventive controls and setting up reporting tools that enable posteriori controls. On a regular base, the A&CC is informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials. Changes in tax law and regulations: The tax department continuously follows potential changes in tax law and regulations as well as interpretations of existing tax laws by the tax authorities. Based on laws, doctrine, case law and political statements as well as draft laws available etc., an impact analysis is made from a financial perspective and as well as from an operational point of view. Financial statement closing process: Clear roles and responsibilities in the Closing Process of the Group Financial Statement have been defined. During the monthly, quarterly, half-yearly and annual financial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and guidelines. For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail cross-divisional preparatory meetings, deadlines for ending of specific processes, exact date and hours when IT sub-systems are locked, validation meetings and reporting deliverables. For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analysed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analysed by more underlying operational
annual report| belgacom | management report | FR | NL | UK |
drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends, etc.. Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials.
4. Information and communication 4.1. Financial reporting IT systems The accounting records of the Company and most of its affiliates are kept on large integrated IT systems. Operational processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used. The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors.
4.2. Effective Internal communication Most of the accounting records today are kept under IFRS as well as local GAAP. In general, financial Information delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication.
4.3. Reporting and validation of the financial results The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the major affiliates, a validation meeting is organized with the accounting and controlling responsible. On Belgacom group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with historical figures, as well as budget-actual and forecast-actual
analysis. Validation requires (absences of) variances to be analysed and satisfactorily explained. Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the A&CC (quarterly).
5. Supervision and assessment of internal control The effectiveness and efficiency of the internal control are regularly assessed in different ways and by different parties:
• Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indicators and monitoring of those.
• In order to have an objective review and evaluation of the activities of each organization department, Belgacom’s Internal Audit department conducts regular audits across the company’ operations. The independence of Internal Audit is ensured via its direct reporting line to the Chairman of the A&CC. Audit assignments performed may have a specific financial processes scope but will also assess the effectiveness and efficiency of the operations and the compliance towards the applicable laws or rules.
• The A&CC reviews the quarterly interim reporting and the specific accounting methods. The main disputes and risks facing the Group are considered; the recommendations of internal audit are followed-up; the compliance within the company with the Code of Conduct and Dealing Code is regularly discussed.
• Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an external audit. In general, this audit includes an assessment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolidation. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the A&CC.
103
MANAGEMENT REPORT
/// page 104
Other information Rights, commitments and contingencies as of 31 December 2011 Disclosures related to rights, commitments and contingencies are reported in note 33 of the consolidated financial statements.
Use of financial instruments Disclosures related to the use of financial instruments are reported in note 31 of the consolidated financial statements.
Circumstances which may considerably impact the development of the Group Circumstances which may considerably impact the development of the Group are reported in the section internal control and risk management systems of the management report.
Research and development activities In general, the research and development activities cover 4 key steps in the adoption cycle of a technology or of a service based on technology: • Study of the technology’s potential: determination of the technological and commercial opportunities and its positioning in the technology portfolio; • Introduction of the technology: as the technology is selected, an engineered solution is necessary for deployment, exploitation and day-to-day management; • Evolution of the technology: once deployed, the technology will continue to evolve in accordance with its potential and market demand; • The preparation of the introduction of new services. In 2011, the research and development activities covered the following: • Study of the potential of new technologies: - Further detailed studies on solutions to migrate from traditional technologies to a fully IP based network. More specifically the solutions for replacing PSTN
and ISDN (Access Gateway, ISDN Access Devices) were investigated on their technical, economical and operational feasibility, and preparations have been started for the future introduction of IPv6 in the data network. - Fibre to the Home study (FTTH): technical and economic studies have been further conducted to determine the most appropriate evolution path, taking into account evolution of users’ bandwidth needs. - Study of the solutions to optimize the data traffic handling on fixed networks, in order to ensure the best Quality of Service. - Belgacom has a continuous focus on the “Green” aspect. With “Green ICT” and “ICT for Green”, Belgacom actively participates in reducing our own environmental impact, as well as the impact of others. Several areas are being investigated (e-prescription, smart grids, ...) • Introduction of new technologies: - The mobile technology of the next generation - LTE (Long Term Evolution) - was introduced by Belgacom in 2011, providing customers even much higher download and upload throughput. - Furthermore “Quality of Service” has been developed and even higher data-rates have been implemented on the 3G network in order to further improve customer experience. - By implementing FON, Belgacom enlarged significantly the possibility to access fixed internet outside the own residence. • Evolution of the technology in terms of improvement and existing services extension such as: - The IPTV platform (TV over IP) has been further enriched and improved with a new user interface and new possibilities to record TV programs. It has become possible to watch TV on multiple screens: apart from a TV screen, it is now also possible to watch TV programs on laptop, smartphone and tablet. - VDSL2: this technology continues to be deployed and additional functionalities are being analysed and developed to further increase its potential. New pro-
annual report| belgacom | management report | FR | NL | UK |
files have been introduced to extend the coverage for HD Television. Belgacom went also in a partnership with Alcatel Lucent to jointly develop improvements on VDSL2 technology (Vectoring), which will further enhance the capacity and throughput of the VDSL2 network. • The preparation of the introduction of new services: - Belgacom completed the roll-out of a fiber-based pilot network in Kortrijk. Test users were provided with high-speed access. As such a “Living Lab” has been created which will enable application developers to test new applications and services in a real-life environment with a representative number of test users. - In the area of mobile payments (using a mobile phone to pay for a wide range of services), Belgacom has taken multiple initiatives in developing new services i.e. Belgacom launched the possibility to pay parking sessions by scanning QR codes. - Belgacom is developing a Cloud infrastructure offering on-demand integrated business services, and an open API framework providing access to unique functions of our network in an easy and structured way. This allows third parties in a partnership model to create new innovative services and drive new revenues through their own brands. Belgacom collaborates with universities, industrial partners and several other bodies, such as I.B.B.T. (Interdisciplinair Instituut voor Breedband Technologie), I.W.T. (Agentschap voor Innovatie door Wetenschap en Technologie) and the H.G.I. (Home Gateway Initiative Forum). Belgacom takes part in several User Committees for S.B.O. (Strategisch Basis Onderzoek) research projects.
Treasury shares Disclosures related to treasury shares are reported in note 15 of the consolidated financial statements.
Major risks and uncertainties Major risks and uncertainties are reported in the section internal control and risk management systems of the management report.
Capital management The purpose of the Group’s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual consolidated cash flow before financing activities (or “Free Cash Flow”), to its shareholders. The return of free cash flow either through dividends or share buybacks, will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. Over the two periods presented, the Group didn’t issue new shares or any other dilutive instrument.
Post-balance sheet events Disclosures related to post-balance sheet events are reported in notes 33 and 39 of the consolidated financial statements.
On behalf of the Board of Directors, Brussels, 1 March 2012.
Didier BELLENS President & CEO
Michel Moll Director
105
GLOSSARY
/// page 106
Glossary 2G – Mobile network of the second generation (GSM), allowing both voice and data transmission with low throughput 3G – Mobile network of the third generation (UMTS – Universal Mobile Telecommunications System), allowing both voice and data transmission with higher throughput
Annualized mobile churn rate – The total annualized number of SIM cards disconnected from the Belgacom Mobile network (including the total number of port-outs due to mobile number portability) during the given period, divided by the average number of customers for that same period Belgacom TV ARPU – Includes only customer-related revenue and takes into account promotional offers, divided by the number of households with Belgacom TV BICS – Belgacom International Carrier Services is a joint venture between Belgacom, Swisscom Fixnet, and MTN, and is responsible for international carrier activities
to be installed within the company itself now operate from outside it at external data centers. This means that companies only use the services available on these computer systems, without having to worry about maintaining the equipment themselves
CRF – Corporate Research Foundation CSR – Corporate Social Responsibility CWS – Carrier and Wholesale Technologies DECT – Digital Enhanced Cordless Telephone – home cordless phone
DSL – Digital Subscriber Line (DSL) is a family of technologies that provides digital data transmission over the wires of a local telephone network EBITDA – Earnings before Interest, Taxes, Depreciation, and Amortization
EBU – The Enterprise Business Unit provides services to our professional customers ELIx – Employee Loyalty Index
and Telecommunications
EMF – Electromagnetic Fields. Propagation of electric and magnetic energy through the air
Broadband ARPU – Total ADSL revenue,
ETNO – European Telecommunications Net-
BIPT – Belgian Institute for Postal services
divided by the average number of ADSL lines for the period considered, divided by the number of months in that same period
Broadband lines CBU – Includes the Belgian residential lines of Scarlet as from Q1 2009
Broadway project – Project launched end 2003, deploying a fiber network (fiber-to-thestreet cabinet) and VDSL, which today allows for speeds up to 30 Mbps. As such this project is an important enabler for fast Internet and Belgacom TV CBU – The Consumer Business Unit takes care of our residential customers
CEP – Code of Ethical Purchasing Cloud computing – The word “computing” refers to the technology which helps to manage information better and the term “cloud” refers to the storage of the data on the Internet. The computer systems which once used
work Operators’ Association is the principal policy group for European electronic communications network operators. ETNO’s primary purpose is to establish a constructive dialogue between its member companies and decisionmakers and other actors involved in the development of the European Information Society to the benefit of users
Fixed Voice ARPU – Total voice revenue, excluding activation and payphone-related revenue, divided by the average voice access channels for the period considered, divided by the number of months in that same period FSC – Forest Stewardship Council is an international NGO and a certification system that provides internationally recognized standardsetting, trademark assurance and accreditation services to companies, organizations, and communities interested in responsible forestry. The FSC label provides a credible link between responsible production and consumption
of forest products, enabling consumers and businesses to make purchasing decisions that benefit people and the environment as well as providing ongoing business value
GeSI – Global e-Sustainability Initiative brings together leading ICT companies – including telecommunications service providers and manufacturers as well as industry associations – and non-governmental organizations committed to achieving sustainability objectives through innovative technology. GeSI fosters global and open cooperation, informs the public of its members’ voluntary actions to improve their sustainability performance, and promotes technologies that foster sustainable development
GHG Protocol – The Greenhouse Gas Protocol is the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions GRI – Global Reporting Initiative. This framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. In addition to the criteria described in the chapter “About our CSR Reporting”, GRI relies on the following criteria: Balance – The report reflects positive and negative aspects of the organization’s performance to enable a reasoned assessment of overall performance. The report discloses both favorable and unfavorable results and topics
Comparability – The reported information is presented in a manner that enables stakeholders to analyze changes in the organization’s performance over time, and could support analysis relative to other organizations. The report and the information contained within it can be compared on a year-to-year basis
Timeliness – Reporting occurs on a regular schedule and information is available in time for stakeholders to make informed decisions
annual report| belgacom | glossary | FR | NL | UK |
Clarity – Information is made available in a manner that is understandable and accessible to stakeholders using the report
ISO 14001 – Standard that provides the requirements for an environmental management system
Accuracy – The reported information
ISO 27001 – Security Management Stand-
should be sufficiently accurate and detailed for stakeholders to assess the reporting organization’s performance
ard: the basic objective of the standard is to help establish and maintain an effective information management system, using a continual improvement approach
Reliability – Information and processes used in the preparation of a report should be gathered, recorded, compiled, analyzed, and disclosed in a way that could be subject to examination and that establishes the qua lity and materiality of the information
G-Xchange – G-Xchange, Inc. (GXI) is a wholly-owned subsidiary and the mobile commerce arm of Globe Telecoms, a leading telecom service provider in the Philippines HD – High-Definition HDTV – High Definition television HR – Human Resources ICNIRP – International Committee on Non Ionising Radiation Protection
ICT – Information and Communication Technologies
IDTV – Interactive Digital Television IP network – An IP network is a computer network made of devices that support the Internet Protocol (IP)
IPP – Investors in People: standard making it possible to build up a complete picture of how a business is managing its people and where it can make improvements
IPTV – Internet Protocol Television is a system through which digital television service is delivered using the architecture and networking methods of the Internet Protocol Suite over a packet-switched network infrastructure
IPX – Internetwork Packet Exchange ISAT – The Interactive online Self Assessment Tool is a tool that enables employees to measure their stress level, determine the factors that cause and maintain stress, and thus help them, with their managers, to solve the issue
ISO 9001 – Standard that provides a set of standardized requirements for a quality management system
ISP – Internet Service Provider IT – Information Technology LAN – Local Area Network LTE – Long Term Evolution M2M – Machine-to-Machine MaIP – Move to All IP Mobile active customers – Includes voice and data cards. Active customers are customers who have made or received at least one call or sent or received at least one SMS message in the last three months. Prepaid customers and MVNO customers are fully segmented as CBU customers
Mobile net ARPU – Calculated on the basis
107
PUE – Power Usage Effectiveness is a metric used to determine the energy efficiency of a data center. PUE is determined by dividing the amount of power entering a data center by the power used to run the computer infrastructure within it. PUE is therefore expressed as a ratio, with overall efficiency improving as the quotient decreases toward 1 S&S – The Staff & Support Unit brings together all the horizontal functions that support the Group’s activities SAR – Specific Absorption Rate: unit for measuring the quantity of electromagnetic energy that is absorbed by the human body when a mobile phone is used. The maximum allowed SAR in Europe is 2 W/kg in accordance with the ICNIRP guidelines
SDE&W – Service Delivery Engine & Wholesale groups together the network and IT services and offers services to other operators and suppliers
SIP – Session Initiation Protocol SME – Small and Medium Enterprises UoU (Units of Use) – Voice minutes of use + SMS (where one SMS equals one minute) per active customer per month
of monthly averages for the period indicated
USO – Universal Service Obligation
Monthly net ARPU – Equal to total mobile
VDSL – Very High Rate Digital Subscriber
voice and mobile data revenues, divided by the average number of active mobile customers for that period
VDSL2 – Very High Speed Digital Subscriber
MoU (Minutes of Use) – Duration of all calls from or to Proximus, per active voice customer, per month
MTN – The MTN Group Limited is a multinational telecommunications group, operating in 21 countries across Africa and the Middle East
MTR – Mobile Termination Rate NFC – Near Field Communication NGO – Non-governmental organization. Legally constituted, non-governmental organizations are created by natural or legal persons with no participation or representation of any government
Line (advanced version of ADSL) Line 2 is an access technology that exploits the existing infrastructure of copper wires
VOD – Video On Demand VoIP – Voice over Internet Protocol WAN – Wide Area Network WEEE – The Waste Electrical and Electronic Equipment Directive (WEEE Directive – EU) aims to reduce the amount of electrical and electronic equipment being produced and to encourage everyone to reuse, recycle and recover it WIFi – Local wireless network
General information Corporate name and legal form
Our report is printed on Satimat Green coated paper, made out of 60% recycled fibers, 40% FSC virgin fibers. Vegetable-based ink and non-solvent adhesives are used. The printing plates and ink recipients are recycled. The waste paper is collected and then compressed and recycled by authorized bodies. The printer is FSC and PEFC certified.
Editor-in-chief: Philip Neyt Vice President Public Affairs and M&A Bd du Roi Albert II/ Koning Albert II-laan, 27 B - 1030 Brussels Conception and coordination: Anne-Françoise Streel Corporate Communication Project Manager Design and prepress: Chris Communications www.chriscom.be Printing: Snel Pictures: Jean-Michel Byl, Arnaud Ghys, Getty images, Corbis Reporters and Belgacom
Visit Belgacom’s website: www.belgacom.com Belgacom’s annual report is also published in Dutch and in French.
The autonomous public-sector company Belgacom is a Société anonyme de droit public/Naamloze vennootschap van publiek recht (limited liability company under public law) as defined by the Law of 21 March 1991 on the reform of certain public-sector commercial undertakings and organized under the laws of Belgium. The Company is subject to the statutory and regulatory provisions of commercial law applicable to companies limited by shares in all matters not expressly determined by (or by virtue of) the Law of 21 March 1991 or specific legislation of any kind.
Registered Office Belgacom SA under public law Bd. du Roi Albert II 27 B-1030 Brussels VAT BE 0202.239.951 Brussels Register of Legal Entities
Consultation of the issuer’s documents The public documents concerning the issuer can be consulted at the registered office.
Date of constitution The company was established as an autonomous public sector company, governed by the Law of 19 July 1930 setting up the Belgian National Telephone and Telegraph Company, the RTT (Régie des Téléphones et Télégraphes/Regie van Telegraaf en -Telefoon).
sector – that may contribute, directly or indirectly, to the achievement of its corporate objects; 4. to provide radio and television broadcasting services.
Disclaimer This communication contains forward-looking statements, including statements about the Company’s beliefs and expectations. These statements are based on the Company’s current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any of them in light of new information or future events, except to the extent required by Belgian law. The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements.
For further information: Philip Neyt Vice President Public Affairs and M&A Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 86 84 E-Mail: hello@belgacom.be
For CSR information:
The transformation of Belgacom into a SA of public law was implemented by the Royal Decree of 16 December 1994, which was published in the Belgian Official Gazette on 22 December 1994, and went into effect on the same day.
Loïc Van Cutsem Corporate Social Responsibility Manager Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 93 55 E-Mail: csr@belgacom.be
Objectives of the Company
For financial information:
As described in Article 3 of the Articles of Association, the Company’s objects are: 1. to develop services within the field of telecommunications in Belgium or elsewhere; 2. to take all actions aimed at promoting, directly or indirectly, its activities or ensuring optimal use of its infrastructure; 3. to acquire participating interests in bodies, companies or associations – whether existing or to be created, Belgian, foreign or international, and public or private
Nancy Goossens Vice President Investor Relations Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 82 41 Fax: +32 2 201 54 94 E-Mail: investor.relations@belgacom.be
Financial Key Figures Full Year Income Statement (EUR million)
2004
2005
2006
2007
2008
2009
2010
2011
Total income before non-recurring items Non-recurring income Total income EBITDA(1) before non-recurring items EBITDA(1) Depreciation and amortization Operating income (EBIT) Net finance income / (costs) Income before taxes Tax expense Non-controlling interests Net income (Group share)
5,540 0 5,540 2,394 2,353 -742 1,611 -27 1,584 -508 152 922
5,458 238 5,696 2,214 2,098 -726 1,372 64 1,436 -339 139 959
6,100 0 6,100 2,149 2,149 -802 1,347 104 1,451 -358 121 973
6,065 0 6,065 2,077 2,031 -774 1,256 1 1,258 -300 0 958
5,978 8 5,986 1,990 1,905 -743 1,161 -109 1,053 -254 -1 800
5,990 74 6,065 1,955 1,967 -706 1,261 -117 1,144 -241 -1 904
6,603 436 7,040 1,984 2,428 -809 1,619 -102 1,517 -233 17 1,266
6,406 11 6,417 1,912 1,897 -756 1,141 -106 1,035 -262 17 756
Full Year Cash flows and Capital Expenditures (EUR million) Cash flows from operating activities Cash paid for acquisitions of intangible assets and property, plant and equipment Cash flows from / (used in) other investing activities Free cash flow(2) Cash flows from / (used in) financing activities Net increase / (decrease) of cash and cash equivalents
2004
2005
2006
2007
2008
2009
2010
2011
1,899 -556
1,883 -696
1,643 -676
1,581 -625
1,552 -764
1,406 -597
1,666 -734
1,551 -757
78
389
-2,279
255
-380
-12
48
-7
1,421 -1,658
1,575 -1,102
-1,313 751
1,210 -720
409 -570
797 -1,030
980 -728
788 -1,051
-237
473
-562
490
-161
-233
252
-264
As of 31 December Balance sheet (EUR million)
2004
2005
2006
2007
2008
2009
2010
2011
Balance sheet total Non-current assets Investments, cash and cash equivalents Shareholders' equity Non-controlling interests Liabilities for pensions, other post-employment benefits and termination benefits Net financial position
5,368 3,963 406 2,223 407 760
5,831 3,808 884 2,221 370 1,010
7,300 5,504 327 2,391 8 886
7,325 5,072 785 2,520 6 831
7,782 5,564 618 2,271 5 777
7,450 5,505 408 2,521 7 677
8,511 6,185 627 3,108 235 565
8,312 6,217 356 3,078 225 479
110
534
-1,636
-1,167
-1,835
-1,716
-1,451
-1,479
2004
2005
2006
2007
2008
2009
2010
2011
2.57 358,612,854
2.78 345,406,186
2.87 338,621,113
2.87 334,017,553
2.45 326,179,820
2.82 320,475,553
3.94 321,138,048
2.36 319,963,423
0
300
200
78
352
0
0
100
Full Year Belgacom share - key figures Basic earnings per share (EUR) Weighted average number of ordinary shares(3) Share buyback (EUR million)
Full Year Data on employees Number of employees (full-time equivalents) Average number of employees over the period Total income before non-recurring items per employee (EUR) Total income per employee (EUR) EBITDA(1) before non-recurring items per employee (EUR) EBITDA(1) per employee (EUR)
2004
2005
2006
2007
2008
2009
2010
2011
16,933
16,335
18,180
17,833
17,371
16,804
16,308
15,788
17,108
16,388
18,163
17,920
17,465
16,878
16,270
15,699
323,847
333,034
335,869
338,441
342,291
354,917
405,859
408,046
323,847 139,945
347,577 135,103
335,869 118,294
338,441 115,883
342,746 113,934
359,322 115,849
432,685 121,953
408,760 121,764
139,945
135,103
118,294
113,320
109,058
116,551
149,247
120,834
Full Year Ratio's Return on Equity(4) Gross margin(5) Net debt / EBITDA before non-recurring items
2004
2005
2006
2007
2008
2009
2010
2011
42.6% 73.6% 0.0
43.1% 71.5% -0.2
40.7% 67.1% 0.8
38.8% 66.8% 0.6
37.5% 67.0% 0.9
35.6% 65.2% 0.9
30.9% 60.0% 0.7
24.9% 60.7% 0.8
1. Earnings Before Interests, Taxes, Depreciation and Amortization. 2. Cash flow before financing activities. 3. i.e. excluding Treasury shares
4. The net income and the Shareholders’ equity are adjusted to exclude the non-recurring income /expenses and the related tax impacts. 5. The gross margin is adjusted to exclude non-recurring income.
Key Financial events 2004
Belgacom IPO E xtensive launch Broadway project (Fibre & VDSL)
2006
Acquisition of Telindus Group Sale of stake in Neuf Cégétel Launch of EUR 1.65 billion bond A cquisition of Vodafone’s 25% share in Proximus ICS outsourcing deal with MTN
2008
ivesture of all non-core presences of D Telindus International A cquisition of Scarlet, Tango and Mobile-for E xclusive broadcasting rights for Belgian soccer
2010
I ntegration of Belgacom and some of its subsidiaries in one legal entity – impacting segments but neutral on Group level B ICS fully consolidated following acquisition of control, effective as from 1 January 2010 B elgacom concludes strategic partnerships with OnLive (gaming), Jinni (search engine) and In3Dept systems (3D-gesture recognition)
2005
Launch Belgacom TV E xclusive broadcasting rights for Belgian soccer Disposal of shares in Eutelsat B elgacom ICS concludes Joint Venture with Swisscom ICS, proportionally consolidated B elgacom sells Belgacom Directory Services, Expercom and liquidated Infosources
2007
emaining stake in Mobistar (acquired via R Telindus group transaction) sold A cquisition of Dutch storage specialist ISIT
2009
ICS and MTN combine their International Carrier B Services A ctivity of WIN SA sold
2011
Telindus France acquires Eudasys Divesture Telindus Spain Belgacom acquires 4G-license B elgacom issues new 7-year senior unsecured institutional bond for EUR 500 million S uccessful early bond buyback operation, followed by redemption in cash of remaining balance of the November 2011 EUR 775 million notes
Key figures Revenue (in EUR million) before non-recurring items
6.4
EUR billion revenue
5,990
6,603
Share in 2011 Group revenue per BU 5% SDE&W
6,406
2009
1,955
2010
35% CBU
2011
2011 EBITDA contribution per BU (in EUR million)
1,984 1,912
-92 SDE&W
29.8%
122 bics
1,185 EBU 2009
2010
2011
2011 Capex per BU (in EUR million)
Capex (in EUR million) 734
777
51 S&S
597
22 BICS
134 CBU 18 EBU
of revenue invested
552 SDE&W 2009
2010
2011
Free Cash Flow (in EUR million)
EUR million free cash flow
-328 S&S
1,025 CBU
EBITDA margin
788
24% BICS
36% EBU
EBITDA (in EUR million) before non-recurring items
12.1%
1% S&S
Net financial position (in EUR million)
980 797
2009
788
2010
2011
(1,451)
788
(701)
Net debt December 2010
FCF
Dividends
(24)
(86)
Net Dividends acquisition to non controlling of treasury shares interests
(5)
(1,479)
Other
Net debt December 2011
Discover the online version of this annual report at annualreport.belgacom.com