Solid Q1 EBITDAaL growth Updated dividend in the COVID-19 context

Press release
Embargo until 23 April 2020 at 7:00 am
Regulated information

Financial information for the first quarter of 2020

Solid Q1 EBITDAaL growth

 Updated dividend in the COVID-19 context

• Mobile postpaid customer base +3.9% yoy on quarterly net-adds of 9k 
• Convergence customer base +40.0% yoy on quarterly net-adds of 21k
• Q1 Revenues¹ +1.9% yoy / Retail service revenues¹: +4.6% yoy
• Q1 EBITDAaL¹ +7.6% yoy

COVID-19 impact

• Lockdown impacted commercial and operational dynamic. Temporary closure of shops has impacted the acquisition of new customers for mobile and convergence, as well as handset sales. However, churn has improved. Additionally, roaming and SMS traffic as well as ICT projects have decreased, whereas voice traffic has increased.
• Uncertainty remains in regards to the COVID-19 measures and the impact on the Belgian economy.
• Currently, Orange Belgium expects the COVID-19 context to have a negative moderate impact on 2020 revenues, and a more limited impact on 2020 EBITDAaL thanks to low EBITDAaL impact of handset, SMS and roaming revenues, as well as cost control. The 2020 eCapex should moderately decrease due to some limitations during the lockdown period. 
• Orange Belgium will consider an update of its 2020 financial guidance after the Q2 period, with more visibility on the COVID-19 context.
• Taking into account the current context and uncertainty, the Board of Directors recommends to the AGM not to increase the 2019 dividend to €0.60 per share as initially foreseen and to adopt an unchanged dividend of €0.50 per share.

Q1’20 Belgium operating highlights

• Strong convergence net-adds confirm attractiveness of the Love Duo/Trio offers. Orange Belgium added 21k subscribers (+8.1% yoy) and reached 280k Love customers (+40% yoy). Love Duo still represents one third of the gross adds. The convergent mobile subscriber base represents 17.4% of mobile postpaid customers, up 470 bp vs Q1’19. Due to the delay in installation time, the COVID-19 impact on Q1 March sales will materialise mainly in Q2.
• Mobile postpaid customer base grew despite competitive environment and COVID19 impact. The mobile postpaid customer base grew by 9k to 2.6m subscribers (+3.9% yoy). The launch of the new GO mobile portfolio in March, introducing the first family mobile offer in Belgium, has been impacted by COVID-19 lockdown measures.
• B2C convergent ARPO decreased slightly by 1.9% yoy to €75.9 as the result of the growing Love Duo customer base with a lower price point, which already represents 14% of Love customers.
• Mobile-only postpaid ARPO declined slightly by 2.5% yoy to €20.3, as a result of lower out-of-bundle revenues due to EU regulation for international calls, as well as COVID-19 effects on SMS and roaming, partly offset by migration to higher tariff plans.

Orange Belgium: key operating figures

	Q1 2019	Q1 2020	change
Mobile postpaid customer base (in ‘000)	2,490	2,588	3.9%
Net adds (in ‘000)	21	9	-58.3%
Mobile only postpaid ARPO (€ per month)	20.8	20.3	-2.5%
Convergent customer base (in ‘000)	200	280	40.0%
Net adds (in ‘000)	20	21	8.1%
B2C convergent ARPO (€ per month)	77.4	75.9	-1.9%
Convergent mobile customer as % mobile contract customer base	12.7%	17.4%	470 bp

Q1’20 consolidated financial highlights

• Revenues increased by 1.9% yoy¹ to €333.9m mainly driven by improved retail service revenues (+4.6% yoy¹) supported by higher convergence services (+35.8% yoy), compensating lower wholesale revenues (-2.1% yoy). Wholesale revenues decreased mainly due to lower incoming SMS revenues (-€4.8m) which have no impact on EBITDAaL, partially compensated by higher MVNO revenues.
• EBITDAaL increased by 7.6% yoy¹ to €62.2m, mainly thanks to increasing retail service revenues, improved cable operations and cost efficiencies as a result of our Bold Inside transformation plan. Cable operations’ EBITDAaL had a positive result of €2.5m this quarter vs a €1.1m loss in Q1’19, but negative cash flow of -€6.3m (vs -€13.4m in Q1’19).

Orange Belgium Group: key financial figures

	reported	comparable1		comparable	reported
in €m	Q1 2019	Q1 2019	Q1 2020	change	change
Revenues	318.2	327.7	333.9	1.9%	4.9%
Retail service revenues	205.7	214.9	224.8	4.6%	9.3%
EBITDAaL	58.0	57.8	62.2	7.6%	7.1%
margin as % of revenues	18.2%	17.6%	18.6%	100 bp	38 bp
eCapex	-36.9	-36.9	-35.1	-4.8%	-4.8%
Operating cash flow2	21.1	20.9	27.0	29.6%	27.9%
Net financial debt	252.1		229.0		-9.2%

1. Comparable base includes BKM 2019 before acquisition
2. Operating cash flow defined as EBITDAaL – eCapex
   

Michaël Trabbia, Chief Executive Officer, commented:

Everybody has been profoundly affected by the COVID-19 pandemic. In this global crisis context, our main priority is the protection of our employees, our customers, suppliers and subcontractors, as we comply fully with the decisions and recommendations of the competent authorities. In addition, we concentrated our efforts on ensuring service continuity as connectivity is more than ever critical for Belgian consumers, businesses, hospitals and administration. Finally, we believe we have an important societal role to support the country in this difficult time. We proactively promoted the “StayHome” message, we supported our customers with a dedicated platform and additional data, and we helped the government monitor mobility via anonymised data. We also provided concrete and meaningful support to hospitals and nursing homes, with masks, cyber-security and communication solutions. Orange Belgium together with the members of its Executive Committee in their personal capacity made a joint donation to finance a COVID-19 middle care unit.

On 9 March, we launched GO, our revamped mobile portfolio, introducing exclusive mobile family discounts, and confirming once again our Bold Challenger position. Our Love Duo and Trio convergent offers continued to attract many new customers.

However, the lockdown measures have impacted our sales, with the temporary closure of the shops, only partially mitigated by the increase of other channels, mainly digital and telesales. We are preparing to reopen our shops when it becomes possible, with all the necessary protection equipment and sanitary measures.

In April, the regulator submitted its draft decision on the wholesale cable tariffs to the European Commission, including amongst others, a major change in the methodology of cost recovery compared to the last draft decision that would be massively detrimental for customers. This major change in the final steps of the process would mean significantly over-compensating cable owners’ actual costs. In addition, the assumptions made lead to a far excessive and unjustified increase of the wholesale tariffs by up to 25% over time. As such, the draft decision would necessarily lead to significant price increases year after year in the Belgian broadband market, although it is already amongst the most expensive broadband markets in Europe. In the interest of Belgium customers, we urge the European Commission and the regulators to materially improve the draft decision, based on the reality of the costs and avoiding any overcompensation.

Arnaud Castille, Chief Financial Officer, stated:

The measures taken following the pandemic crisis will impact on the company’s financial performance. The first quarter of this year was impacted for a period of about two weeks, so it is too early to say how this will impact the rest of the year. But we can imagine an impact on revenue, caused by lower gross adds in mobile and convergence partially offset by a reduction in churn. The decrease in handset sales will have an impact on the topline but may also see a rebound after the crisis. Therefore, we managed to adjust our costs, which were also reduced through the decrease of the customer acquisition cost. Hence, we only expect a limited impact on EBITDAaL over the year. We will re-evaluate the COVID-19 impact and the potential change to our guidance after the second quarter. Additionally, Orange Belgium has a robust balance sheet with a leverage of 0.8.

The launch of our new mobile portfolio will not only lead to simplicity for our customers, but will also help to streamline our processes aiming at lowering the costs for managing those portfolios.

In the light of the Bold Inside programme we have continued to make the necessary efforts to control our costs, which provided its results with stable costs versus last year in a revenue growth context.

The confirmation of the competition authorities that no additional interim measures are needed anymore for the execution of the mobile network access sharing agreement with Proximus has enabled us to transfer employees to the newly created joint venture, MWingz and to start the implementation of our agreement.

Attachment

• ENG OBEL_ER_2020 Q1 FV

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