Investor & Analyst Meeting Friday 28 February 2014
Slide 1
Agenda
Introduction Dominique Leroy - CEO
2013 Group financials
Consumer
Business
BICS
Ray Stewart
Dominique Leroy
Jan Manssens
Daniel Kurgan
strategic focus for 2014 and beyond Transform & Invest to return to Growth Dominique Leroy & Geert Standaert
Outlook 2014 & Shareholder return Ray Stewart
Slide 2
Group Financials Ray Stewart CFO
Ray Stewart
Slide 3
Group revenue impacted by regulation, pressure on mobile in segments ; and in Q4 by lower BICS revenue -3.8% 1,644
reported
+20 -15 -19
-14
-2
+3
1,582
Intra-group elimination & S&S
Q4 2013
-29
Q4
-5.0% Like-for-Like
2013 (in mio €) Q4 2012
Net Impact One-offs 2013
Regulatory impact
Underlying CBU
Underlying EBU
Underlying SDE
BICS
-2.2%
+42
reported
6 ,462
-85
FY
-75
2013
-44
-2.9%
(in mio €)
-7
+22
+10
BICS
Intra-group elimination
6 ,318
-8
Like-for-like
FY 2012
Net Impact One-offs
Regulatory impact
Underlying CBU
Underlying EBU
Underlying SDE
Underlying S&S
FY 2013
Slide 4Slide 4
Good cost management Operating expenses (total of HR & non-HR) slightly down vs. 2012
Quarterly HR expenses (€ million)
Quarterly Non-HR expenses (€ million) -5.0%
270
+1.7%
310
290
25 0
256
230
210
226
224
218
217
19 0
278
281
290
Q112
Q212
Q312
270
225
244
250
278
290
283
288
282
Q113
Q213
Q313
Q413
230
216
210
190
170 170
150
150
Q112
FY
Q212
Q312
924
Q412
Q113
-2.3%
Q213
Q313
Q413
903
FY’13 non-HR expenses 2.3% lower. Cost containment more than offsetting the normal cost inflation.
1,126
Q412
+1.4%
1,142
FY’13 HR expenses 1.4% higher. Inflation based salary indexation more than offsetting lower personnel base
Slide 5
Group Ebitda impacted by regulation and mobile margin pressure. Q4 2013 showing slight improvement from previous quarters -3.7%
+16
reported 429
-5
+4
-17
Q4
413
+8
2013
-17
-8.3%
(in mio €)
-1 -4
Like for Like
Q4 2012
One-offs 2012
One-offs 2013
Regulatory impact
Underlying CBU
Underlying EBU
Underlying SDE
Underlying S&S
BICS
Q4 2013
-4.9%
+35 +36
reported -48
1,801
FY
-47
2013
+4
-61
+11
1,713
BICS
FY 2013
-18
(in mio €)
-8.7% Like-for-like
FY 2012
One-offs 2012
One-offs 2013 Regulatory impact
Underlying CBU
Underlying EBU
Underlying SDE
Underlying S&S
Slide 6
EUR 852 million invested, or 13.5% of Group revenue, spectrum license excluded Increased network investments vs. 2012:
to maintain network superiority on mobile speed and coverage, substantially increased bandwidth on fixed network via dlm and vectoring technology making operations leaner through a simplified network bought the 800 MHz spectrum for € 120 m
9 72 75 3
13.5% *
8 52
42 6
2 34
Q4'12
306 *
Q4'13
FY'12
FY'13
*This does not include the € 120 mio capex paid for a 800 Mhz spectrum Slide 7
FY 2013 performance versus guidance Belgacom met its FY guidance for EBITDA and Capex, while the revenue guidance was just missed as BICS revenue declined in Q4’13.
FY 2013 outlook
FY 2013 reported
Group revenue
Decline between -1% and -2%
-2.2%
Group EBITDA*
Decline between -4% and -6%
-4.9%
Capex/Revenue
Between 13% and 14%
13.5%**
Metrics
*Compared to the restated 2012 EBITDA of € 1,801 m, following the retrospective application of IAS19R ** excl. € 120m for 800 MHz spectrum
Slide 8
FY’13 Free Cash Flow of € 505 million Q4
Free Cash Flow (in mio € )
Belgacom generated € 95m of FCF in Q4’13, or € -59m YoY. Main drivers for the FCF decline are :
154 95
Q4'12
-
lower EBITDA, higher cash paid for Capex Higher cash paid for income tax partly offset by a favorable evolution in working capital.
Q4'13
The 800 Mhz spectrum license acquired in Dec’13 for €120m will be paid in yearly installments , over a 20 year period. This Capex is not included in the FCF as it is a non-cash transaction. The annual reimbursement of €6 m is considered as a financing activity in the cash flow statement.
FY
691
-88 +51
-74
+5
505
other
2013
-79
2012
lower EBITDA* income tax payments
cash paid for cash provided capex by working capital
* Excluding non-recurring and non-cash related items
Slide 9
Sound financial position • Net financial debt at € 1,815m, € 214m higher versus end 2012 • The outstanding long term financial gross debt amounted to € 2.1Bio • Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook
50 5
( 7 01)
( 1 ,601) ( 38)
Net debt December 2012
Debt maturing
FCF
Dividends
25
Non controlling Net sale of interests treasury shares
( 1 ,815)
( 6)
Other
Net debt December 2013
2015
2016
2018
2023
2026
2028
€ 145m
€ 950m
€ 500m
€ 100m
€ 73m
€ 150m
Slide 10
Consumer Business Consumer Business Unit Unit Dominique Leroy
Dominique Leroy CEO
Slide 11
Consumer Business Highlights Our convergence strategy remains successful and is materialised through more value for the customer and new solutions. Despite a rough 2013 on the mobile market, we returned to customer growth for postpaid thanks to strong acquisition campaigns and a persistent churn management. The pressure on mobile prices resulted in mobile revenue decline. Since Q4’13 we see that it is slowly recovering. The strong performance for TV and Fixed Internet combined with the contribution of Tango and Scarlet partly compensated for the loss on mobile service revenue.
Our focus will be on growing through the convergence experience and mobile leadership. Slide 12
CBU revenues under pressure by mobile disruption, partly compensated by solid fixed revenue and contribution of Scarlet and Tango 581
7
4 -6
3
-5
-4
-24
-4.2%
Q4
556
Reported*
2013 (in mio â‚Ź) Q4 2012
Regulatory impact
Fixed Voice
Fixed Data
TV
Mobile Service Revenue
Subsidiaries
Terminals & Others
Q4 2013
* like-for -like idem, no one-off effects in Q4
-4.1% reported 2,321
7
FY
31 15 -27
2013
-14
12 -103
-4.4%
(in mio â‚Ź)
2,226 -16
Like-for-like
FY 2012
Net Impact One-Offs
Regulatory impact
Fixed Voice
Fixed Data
TV
Mobile Service Revenue
Subsidiaries
Terminals & Others
FY 2013
Slide 13
CBU Mobile Service Revenue Mobile Service revenue showing first signs of recovery in Q4’13, some mobile disruption effects started to annualise
Mobile service revenue showing first signs of recovery in Q4’13 CBU Mobile Service Revenue
0% Q1'12
Evolution re-priced postpaid customers
-2% Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
-3% -3% -5%
-6%
-9%
Reported On comparable basis
-13%
-17% -14%
-14% -15%
73% of CBU customers re-priced, pace slowing. Financial impact from remaining 27% expected to be low. Slide 14
Mobile Postpaid We increased our Postpaid subscriber base by >200K in 2013. Mobile disruption had significant ARPU impact, though somewhat stabilising. solid Postpaid net adds
Blended postpaid ARPU showing some stabilisation
postpaid churn back to acceptable levels
‘out of bundle’ revenue dropped with ~50% stabilising around 10% of total postpaid revenue 20%
10%
0% Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Slide 15
Mobile Prepaid In a shrinking prepaid market the customer loss is slowing down. Prepaid ARPU is less impacted. Prepaid loss continued, though is slowing since its peak in Q1’13
Prepaid churn remains high with new telco law removing postpaid barriers
Prepaid ARPU impact less significant
Slide 16
Launch of 4G for all in January Combined with a differentiated and high-end abundant offer is showing promising results 4G access for all
High-end abundant offer SMART 50
4G in Brussels
x 2.5 active 4G users >50 €
26-50€
4G traffic increase
0-25 €
+ 68% Approx. 25% of data traffic is situated in the Brussels Region Differentiated offer in function of pricing plan
Upside potential higher than possible cannibalisation
End February already >31% population coverage Slide 17
Mobile pressure partly offset by solid performance of Fixed Internet…
Fixed internet customer evolution net adds
total
28 23
1,159
1,169
1,181
1,193
1,203
1,219
1,235
26.9 € +3.6%
18 13
1,210
Fixed internet ARPU evolution
17
15
8
10
13
12
10
3
7
9 Q1'12
-2
Q1'12
26.9 € 26.4 € 26.4 € 26.5 € 26.1 € 26.3 € 26.7 €
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q4'13
4.5% Revenue increase in 2013
Driven by growing customer base & price changes
Slide 18
…and Belgacom TV Belgacom TV customer evolution net adds 60
1,254
total
1,301
1,340
1,386
1,412
1,428
1,447
1,479
40
43
1,600 1,400
+6.7%
48
Belgacom TV arpu evolution
1,200
46 1,000
39 31
26
20
16
19
800
400
Q2'12
Q3'12
Q4'12
Q1'13
75% of CBU Internet customers have Belgacom TV
Q2'13
Q3'13
18.6 € 18.7 € 19.0 € 18.2 € 18.3 €
600
0
Q1'12
17.6 € 17.6 €
18.1 €
Q4'13
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
13.3% Revenue increase in 2013
Continuously evolving customer usage experience
TV Replay Test phase in Wallonia Launched in Flanders
Content Passes, VoD, …
TV Everywhere Evolution active users
Slide 19
Our convergence strategy remains Belgacom’s main force‌. CBU pack evolution CBU Pack Net adds
% Packs with mobile voice component
CBU Packs
1,150 1,050 950
918
950
970
993
1,008
1,023
1,040
70 60
884
50
850
40
750
650
30
550
20
10
450 350
43
34
32
20
22
16
15
17
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Revenue generating units (RGU)
0
All Packs contain 3G mobile internet volume (smartphone, tablet or laptop)
Up to 6 mobile subscriptions in a Pack
All Packs include TV Everywhere (on 3G, 4G, Wi-Fi)
Pilot launch of Belgacom Cloud 5G
storage volume in Pack
Slide 20
Human interaction
…as well as our diverse and locally anchored distribution channel Belgacom Centers
Partners
Contact Centers
50% ‘convergent’ agents
Consumer electronics & telco specialists
133 shops
Digital interaction
Website
10% of Sales via website
Device
~870K downloads in 2013
Slide 21
Consumer Enterprise Business Unit Business Unit Jan Manssens VP Enterprise Business Planning Dominique Leroy
Slide 22
Enterprise Business Highlights
EBU stood its ground in 2013, which was a very challenging year, marked by a difficult economic & competitive environment. EBU continued mobile customer growth through network differentiation and competitive pricing. We see first signs of recovery on mobile service revenues since Q4’13, though re-pricing still ongoing. In IT we managed to slightly grow in a stagnating market. The benefits of Telco – IT convergence are materialising. We create value through cross-selling and there is a positive impact on customer loyalty. In 2014 EBU therefore continues its strategy. We focus on maintaining our Telco leadership by differentiation through convergence and servicing while we grow in adjacent IT. Slide 23
EBU revenues pressured by mobile disruption and roaming regulation 579 -8
-4
557
-1
-3.8%
Q4
-7
-3
Mobile Service Revenue
Terminals & Others
Reported*
2013 (in mio €) Q4 2012
Regulatory impact
Fixed Voice
Fixed Data
ICT
Q4 2013
*like-for -like idem, no one-off effects in Q4
-4.2% 2,294
reported
2
FY
-54
2013
9 -12
-8
2,198
-26
(in mio €)
-7
-4.3% Like-for-like
FY 2012
Net Impact One-Offs
Regulatory impact
Fixed Voice
Fixed Data
ICT
Mobile Service Revenue
Terminals & Others
FY 2013
Slide 24
EBU mobile differentiation strategy successful mobile churn under control & subscriber base increased with >140k cards
% EBU Packs with mobile voice component
Continued customer growth in a highly competitive, saturated market
26%
8%
Mobile Acquisition EBU (K cards) Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
10%
10%
Q3'13
Q4'13
1,633 1,589
Mobile churn EBU
1,549 1,449
1,470
1,486
1,516
1,413 5
10
8
14%
10 12
10
25
11 Q1'12
Q2'12
11
11 5
19
Q3'12
Q4'12
Q1'13
Mobile Net Adds
28
32
36
Q2'13
Q3'13
Q4'13
M2M Net Adds
Park
17%
8
12%
11%
11%
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
14%
Q2'13
Slide 25
EBU mobile revenue under pressure further erosion to be controlled mobile service revenue showing first signs of recovery in Q4’13
adv. data revenue showing upward trend with regulation impact lessening EBU advanced data YoY % growth
EBU Mobile Service Revenue -5% Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
-7%
-2% -4%
-7%
-11% -9% -13%
-12%
-13%
16%
Reported
-9%
13%
9%
On comparable basis
-12%
Q1'12
SME ‘out of bundle’ revenue down ~50%, stabilising around 10% of total SME mobile revenues
Q2'12
-6%
-8%
-7%
-7%
Q3'12
Q4'12
Q1'13
Q2'13
-3% Q3'13
Q4'13
Evolution re-priced SME customers
20%
~55%
63%
~50%
10%
~35%
0% Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'13
Q2'13
Q3'13
Q4'13
Slide 26
IT of strategic importance for EBU clear benefits on Telco convergence EBU’ IT: total revenues (mio €) and Telindus France (potential disposal in 2014)
Benefits IT – Telco convergence are materialising
1
new EBU growth
• IT = 32% of EBU total 2013 revenues • pure cloud + 12% full year 2013 • security +43% full year 2013
2
cross-sell effect
• in >80% of cases cloud, LAN or UC customers, also have at least one telecom service
churn reduction effect
• telco+IT customers have significantly lower telco churn • customers with 4 to 5 IT products/services, have nearly no telco churn
3
Slide 27
EBU’s strategy is Telco/IT convergence making it concrete with an example: New Way of Working New Way Of Working (NWOW) =
Convergence fix + mobile voice / data / video: secure and anywhere network access. managed and secured devices: laptops, tablets & smartphones applications: e-mail, portals, video conferencing, collaboration tools
Organize business around people by creating flexible workplaces facilitating collaboration between all stakeholders.
Servicing E2E servicing
As-a-service delivered ‘as-a-service’ with a fixed fee per user per month
security and privacy assurance guaranteed SLA’s self service tools
Slide 28
Consumer Business Unit
BICS Daniel Kurgan CEO
Dominique Leroy
Slide 29
BICS Products and Services Sending End user
Service Providers • Fixed Operators
Local partner • Fixed Operators
• Mobile Operators
• Mobile Operators
• MVNOs
• OTTs
Wholesale only,
• xSPs
International only
• Voice
• Mobile Data • Capacity & Infra-struct ure
Receiving End user
• xSPs
Collecting & terminating international voice traffic all over the world
MESSAGING:
Ensuring worldwide interoperability for SMS & MMS
ROAMING:
Transport: Signalling, 3G (data) roaming exchange (GRX), IPX Enabling / Processing: “plug & play”, roaming hub, VAS
Terrestrial, submarine, satellite (managed) bandwidth Slide 30
Global Presence Network
• 100+ Points of Presence (PoPs) • Ownership in 40 submarine cables • Satellite connectivity to “hard to reach” countries
Slide 31
Market Segments
Voice
Mobile Data
Capacity
24 B€ 1%
2 B€ 9%
3 B€ n.a.
3-5%
30-40%
>20%
• CAPEX intensity
Low
Low
High
• Labour intensity
Low
Low
Low
Leader - #2
Leader - #2
“Niche”
• Market size
• Profitability (EBITDA margin)
• BICS Position
• 2012 revenue • CAGR bottom line (mid-term)
Slide 32
VOICE commodity in declining trend, managed to protect margins •
-•
Part of business is volatile: 2014 revenue to decline YoY due to end of commercial agreement of limited duration
Growth of Peer to Peer VoIP (Skype) impedes market volume growth
•
Termination rate downward trend pressures revenue and margins
•
Currency fluctuation (mainly EUR/USD) impacts revenue and margin
•
OTT are also new voice customers (Skype Out, Google Voice, …)
•
BICS has the best traffic mix with very high emerging markets exposure (AMEA)
+•
Very limited CAPEX requirements to scale it up; BICS has done all the main investments (NGN, OSS & BSS)
mass volume, low profitability, in decline
Slide 33
Mobile Data volume growth but price pressure
-
+
•
Increasing competition in attractive segment. Price pressure on the core services
•
Messaging and Roaming transactions still growing steadily
•
Opportunities provided by new segments (OTT, MVNO), new applications (Machine to Machine, Application to Person) and technology evolution (4G)
•
BICS’ unrivalled customer base is a USP
global market growth, fierce competition, need for differentiation
Slide 34
Going Forward create more value
Extend the product portfolio with a set of value added services : business intelligence, fraud protection and remediation, advanced roaming features‌
Leverage on the footprint and the customer base (400+ GSM operators)
Improve the mix with lower revenue but high margin products
new services are the catalysts for long term bottom line growth
Slide 35
Strategic priorities Dominique Leroy CEO
Ray Stewart
Slide 36
Strategic Priorities : ‘Fit for Growth’
Grow
Back to sustainable growth Customer Experience
Transform
Good to Gold culture Simplification
Invest
Efficient Organisation
Brand differentiation
Leader in convergent services Seamless network and IT
Slide 37
Invest
Access networks
To build the foundation of our next wave of growth • Maintain mobile leadership and further deploy 4G • Push legacy copper network to max capabilities (vectoring, DLM) • Gradually introduce FTTH
IT and systems
• • • •
Push digital (e-sales, e-services) Renew selling and ordering Support end-to-end processes Improve systems stability and (cyber) security
Convergence services
• • • •
Build seamless fixed-mobile hand-over Push TV replay, TV everywhere Leverage cloud, unified communication and collaboration Develop ICT as a service and security
Brand image
• •
Enrich entertainment offer Introduce new CPE for better in-house experience
We estimate our annual investment needs to be around €900m over the coming years to cover network, convergence, new services and content needs Slide 38
Transform Develop superior customer experience
• • • •
Product usage experience (TV Everywhere, FON, …) Touchpoints experience (call centers, technicians, …) End-to-end process (first time right) 360°customer communication quality
Simplify to structurally reduce cost
• • • •
Products and services portfolio Network IT and platforms E sales and services
Build efficient organization
• • • •
Simpler and leaner organization for faster decision Reduction of resource costs leveraging pension wall Right talent at right place Real performance management
Improve brand differentiation
• • •
Address different segments with differentiated offers (Scarlet) Push convergence via triple-play, quad-play and ICT services Reinforce brand investment
To support the transformation and commercial brand image, we foresee about € 20m exceptional spending (mainly opex) in 2014. As from 2014, we ambition to keep workforce cost at least flat over the next 5 years, while pursuing additional cost savings building up to another €100m annually by 2018 (HR and non-HR opex).
Slide 39
Grow
Regain market shares
Leverage convergence value
Capture new growth potential
• • •
•
Exploit mobile leadership Improved broadband experience Roll-out fiber in greenfield and gradually in brownfield to offer the ultimate broadband experience Superior customer experience (web, shops of the future, …)
• • •
Deliver solution-centricity to unlock value in EBU Exploit upselling potential to quad-play Leverage seamless network integration and convergent applications
• • • •
Pursue data monetization Leverage entertainment platform Seize the opportunities of cloud and security Be selective in development of new innovative services
We ambition to return to top line and EBITDA growth within 2 years Slide 40
Network and Simplification Geert Standaert EVP Service Delivery Engine & Wholesale
Ray Stewart
Slide 41
Network & simplification strategy Invest and transform to return to growth
Strategic focus is to invest in our Access Networks, in Simplicity and in better Customer Service
Invest in Mobile
Maintain our mobile network leadership by using all our assets while coping in an intelligent way with the strong mobile data growth
Invest in Fixed
Push our legacy copper network to maximum capabilities while gradually introducing FTTH in function of copper network renewal
Transform to reduce cost
Accelerate simplification of networks to decrease operational costs and employ new IT enablers to simplify products & processes for better customer service & higher efficiency
Slide 42
1
Invest in Mobile
Maintain mobile network leadership Belgacom is determined to maintain its mobile leadership through continued investment
Best mobile 3G network
Best mobile 4G network
• Significantly better 3G indoor coverage in comparison with competition
• Further improvement of 3G indoor coverage by addressing weak spots and coverage on railway lines
• First to reach 50% outdoor population coverage and first to deploy 4G in Brussels (11/02) in line with adapted regulations • Nationwide 4G coverage by EO 2014
3G indoor coverage 1
Number of Belgians reached with 4G coverage 2
Belgacom
Mobistar
Base
1
92.9%
89.3%
89.0%
Proximus
BASE
5,800,000
4,200,000
Mobistar
Result based on Q4 2013 national drive test conducted by independent agency CommSquare | 2 Number of Belgians reached with 4G coverage on 21/02/2014. With Mobistar 4G in test phase no data is available
Slide 43
1
Invest in Mobile
Zoom-in: importance of Brussels in Mobile business High business importance of large urban area of Brussels with nearly a quarter of all data traffic of Belgacom driven by this area. Therefore, important to be a first mover in 4G seen high market potential
Best mobile 3G network in the Brussels region
Best mobile Voice network in the Brussels region
• High concentration of large enterprises and European & International institutions in capital of Europe
• 350.000 commuters working in the Brussels region every day next to 1.1 million inhabitants
• Strongly positioned in Brussels with substantially better 3G indoor coverage vs competition
• High quality mobile voice network in Brussels with 40% less interrupted voice calls vs competition
3G indoor coverage in Brussels Region 1
Proximus
96.8%
Mobistar
Base
1
Level of non-interrupted calls in Brussels region 1
93.3%
87.8%
Proximus
Mobistar
Base
Result based on Q4 2013 national drive test conducted by independent agency CommSquare measured throughout the 19 communes of the Brussels Capital
97.5%
95.5%
95.8%
Slide 44
1
Invest in Mobile
Best mobile experience for our customers Belgacom to bring the best mobile experience possible to its customers in a technology agnostic way through implementation of 4G speed tiering and through introduction of seamless convergence of network connectivity
Speed tiering with 4G for everyone
Seamless convergence of network connectivity
• All customers with 4G capable devices will have access to 4G through 2 different experience levels
• Employ our fixed assets for better mobile experience with our nationwide network of 800.000 WiFi hotspots (EO JAN)
• TIER 1 customers to benefit from maximum 4G capabilities while TIER 2 customers enjoy a 4G experience capped at 20 Mbps
• Implement seamless handover of device-connectivity between fixed & mobile via intelligent steering and EAPSIM technology
• With quickly emerging need for 4G, high focus required to 1 avoid over-investment in 3G capacity passed forecasted
inflection 2 • Through tiering, ~10% of 3G data traffic on 4G capable
devices can be already pushed to 4G in 2014
• Employ intelligent steering to assure highest data experience 1 on mobile devices by selecting best available network • Clever off-load strategy through transparent handover of 2 device connectivity from WiFi to WiFi, WiFi to 3G/4G or
3G/4G to WiFi
Slide 45
2
Invest in Fixed
Dynamic investment track ahead of us Push our legacy copper network to maximum capabilities while gradually preparing for the introduction of Fiber-To-The-Home (FTTH) in Brownfield areas in function of copper network renewal Speed evolution in Mbps 2014 to >2018
up-to
Download speed
6
1000 Mbps
FTTH in Brownfields areas Trial 2014 in function of copper network renewal
up-to 200 Mbps
5 FTTH in new zonings
Start Q1 2014
up-to 100 Mbps
up-to
4 Vectoring + Dynamic Line Management for Vectoring 3
70 Mbps
2
Vectoring on VDSL2 for customers < 700 m
Vectoring on VDSL2 for customers < 400 m
Start Q2 2015
Start Q1 2015
Start Q1 2014
up-to 50 Mbps
30 Mbps
1
Dynamic Line Management on VDSL2
Done Q1 2013
VDSL2 Slide 46
2
Invest in Fixed
Step
1
Dynamic Line Management & Step
2
Vectoring
After 2.5 years of intensive engineering efforts in close collaboration with Alcatel-Lucent the Vectoring technology has been proven to work on our network. Mass roll-out started at beginning of 2014
Fast track Dynamic Line Management (DLM)
Vectoring working live on our network today DONE Q1 2013
DLM monitors stability of lines and dynamically applies maximum possible speed when a line is sufficiently stable
1 • To up-to-50 Mbps speeds – One third of our VDSL2 lines already receives a 50 Mbps speed
2 • 30% higher average speed experience – Thanks to DLM, the average speed experience increased with 30%
START Q1 2014
Vectoring technology cancels crosstalk in the copper cables resulting in a significant bit rate increase of copper lines
1• Vectoring is working – Vectoring works on our network with 70 Mbps download speeds at videograde quality
2• Roll-out started – Mass deployment started to activate Vectoring for customers < 400m (60% of population)
Slide 47
Invest in Fixed
2
Zoom-in: Vectoring working live in our network today Belgacom is First in the World with nationwide activation of the Vectoring technology on an existing VDSL2 network for a significantly better broadband experience
Powerful vectoring technology
Results from the technical field trials
In-depth technical field trials were conducted involving 1000+ customers with both moderate, high and excessive crosstalk
Through cancellation of crosstalk on a VDSL2 line, Vectoring proofs to enable remarkably higher speeds
Effect of enabling Vectoring on VDSL2 lines part of the Technical Field Trials (in Mbps)
140 120 100 80
60
Attainable bitrate in Mbps0
160
Capping at 70 Mbps videograde speed
technical field trial synchronised to 70Mbps TO
2 • Videograde quality maintained – 98% of vectored lines adhere to the required high-quality videograde criteria of IPTV
40
FROM
20 Attenuation
0
0
1 • Speed boost to 70 Mbps – 98% of Vectored lines < 400m in the
2
4
6
8
10
12
14
3 • No impact on installed-base – Performance of existing modem installed base is fully maintained after Vectoring activation
16
Slide 48
2
Invest in Fixed
Step
3
Vectoring optimization & Step
4
DLM on top
To further increase bandwidth the Vectoring technology will be further optimized to support higher ranges while Dynamic Line Management (DLM) will be employed on top of Vectoring to reach up-to-100 Mbps speeds
Further optimization of Vectoring technology
Dynamic Line Management on top of Vectoring
START Q1 2015
START Q2 2015
Extend Vectoring capabilities beyond 400 meter through further optimization of the technology (between 400700m)
1• 80% of population – Through this evolution, 80% of population will benefit from Vectoring speeds
Belgacom is the only operator with the in-house developed technology DLM that brings speed at maximum line capabilities
2
Towards 100 Mbps – DLM will be applied on top of our Vectored lines to increase speeds to up-to-100Mbps in videograde quality
Slide 49
2
Invest in Fixed
Step
5
FTTH in new zonings & Step
6
FTTH in Brownfields
Belgacom will deploy Fiber-To-The-Home (FTTH) deployment in new residential zonings and will gradually and selectively introduce FTTH in function of the step-by-step renewal of our copper network
FTTH in new zonings
FTTH in brownfields START Q1 2014
Fiber deployment costs are comparable to copper deployment for new residential zonings
•1
FTTH in Greenfields – FTTH Greenfield development and pre-equipment of new residential zonings
TRIAL 2014
Prepare for FTTH in Brownfield areas to allow gradual replacement of the legacy copper network over time
2 • FTTH in Brownfields – Small scale FTTH trial will be prepared and started
Slide 50
3
Transform to reduce cost
Network simplification on track with 650.000 lines migrated Network Simplification aims at simplifying our network & decreasing operational costs and generates savings as of year one growing to 35M€ recurrent savings as from 2018
DONE
Fixed Voice consolidation
Fixed Data consolidation
Technical Building outphasing
3.700.000 PSTN equivalent lines to
250.000 customer lines to be migrated
Outphasing & selling of 30 technical and
migrate and 1000 switches to be
by end of 2014 while securing
office buildings (saving of 250.000 m²
removed by 2018
professional data revenues
technical floor space; 23% of total)
• 410.000 PSTN equivalent lines have
• 242.500 customer ATM lines have
• 19 buildings were notified to BIPT; 6
been migrated
been migrated
buildings sold in 2013 (31M€ cap
gain) PLAN
• 2014: Migrate 640.000 PSTN equivalent lines and 200 switches
(which is approximately 1 per working day)
• Finalize 100% of migrations by 2015 • Further building sales planned
• Expected capital gains in 2014 about the same amount as 2013
Slide 51
3
Transform to reduce cost
IT enablers for higher efficiency & simplicity Employ new IT enablers to simplify products & processes for better customer service & higher efficiency
IT to enable a converged customer experience
1
Full convergence of IT architecture with IT platforms to support a
Drive higher efficiency & simplification through transformation in a
horizontal product portfolio instead of vertically siloed products
converged environment with lean operations
• New selling environment – New selling & ordering tools for call centers & shops with product catalogue for simplified portfolio
2
• Higher customer touch point experience – Better e-servicing experience, improved quotations, more customer friendly
billing lay-out, aligned pre-period billing for mobile & fixed,… 3
IT to enable higher efficiency & simplicity
• Reduce order introduction time with 50% • Increase automatic order handling with 25% • Reduce customer complaints with 25% • Improve predictability of timely delivery of solutions with
50%
• More efficient field force – Solve issues more proactively and remotely through complete view on devices in
• Reduce repair field interventions with 15%
customer home
Evolution towards a Digital Belgacom through strong e-transformation to become a more accessible and open company for our customers in terms of finding, buying, servicing and billing Slide 52
Conclusion Ray Stewart CFO
Ray Stewart
Slide 53
2014 Outlook Revenue:
Group EBITDA:
Group Capex:
•
Core business (excl. BICS): 1% to 2% revenue decline, assuming continued stability in the Belgian Mobile market.
•
•
•
BICS: 2014 revenue could be 10% to 15% lower versus 2013, though should only have a minor impact on Belgacom Group EBITDA.
Decline by 3%-4%
About €900 m
Guidance includes: • Capital gains for about the same amount as in 2013 • About € 20m exceptional spending(mainly opex) on transformation & commercial brand image; offset by an accounting alignment within the company for capitalisation of network installation activities for customer connections as from of 1 January 2014. Guidance excludes: effects of potential disposal of Telindus France for which Belgacom is in exclusive dialogue with Vivendi.
Slide 54
Shareholder return
On 27 February 2014, Belgacom’s Board of Directors approved: For the year 2013: To propose to the Annual Shareholder Meeting of 16 April 2014 to return to the shareholders a total dividend of EUR 2.18 gross per share, of which EUR 0.50 per share was paid in December 2013 and EUR 1.68 per share is payable in April 2014: • Ex-coupon date: 22 April 2014 • Record date: 24 April 2014 • Payment date: 25 April 2014 Furthermore, Belgacom’s Board of Directors intends to continue to award Belgacom’s shareholders with an attractive and sustainable dividend. Therefore the Board of Directors intends to pay out a stable yearly dividend of EUR 1.50 per share (interim dividend of EUR 0.50 and ordinary dividend of EUR 1.00) for the next 3 years to come, provided Belgacom’s financial performance is in line with its expectations.
Slide 55
Q&A Investor & analyst meeting Friday 28 February 2014
Slide 56