Proximus SA — Earnings Release 2018

Mar 1, 2019

Brussels, 1 March 2019, 7.00 CET – Regulated information

Proximus Group financial results – Full year 2018

Proximus Group posts solid commercial performances in a highly competitive market, showing results in line with the guidance

• Proximus Group achieved continuous customer growth for Internet, TV and Mobile Postpaid in 2018, while Fixed Voice and Mobile Prepaid continued to decline
• In the Consumer segment, strong performance of the segmented offers with continued commercial success of Tuttimus, Bizz All-in and Scarlet
• In the Enterprise segment, further growth of ICT business, boosted by recent acquisitions
• Strong year for BICS supported by the successful integration of TeleSign
• Full-year 2018 financial results within guidance: stable full-year Domestic revenue and +2.4% Group EBITDA
• Total investment of EUR 1,019 million, including growing Capex for Fiber for Belgium
• Stable gross dividend of EUR 1.50 per share over the year 2018

Dominique Leroy, CEO of the Proximus Group

We maintained a solid position on the market and delivered on our 2018 outlook, with stable Domestic revenue and our Group EBITDA growing by 2.4%.

Operating in a highly competitive environment, we achieved in the last quarter of 2018 further growth in our Consumer base for Internet, TV and Mobile Postpaid, driven by our ongoing customer centricity efforts, dual-brand strategy and market segmentation approach. In the family segment, our successful year-end campaign attracted many more customers to our convergent all-in offers Tuttimus/Bizz Allin, with the base now reaching 508,000. The revamped mobile portfolio launched 1 November 2018, and the Epic offer designed for millennials drove a sound mobile customer growth. In the price-seekers segment, our no-frills brand Scarlet continued to grow its base, benefitting from a strong increase in brand awareness over the past year and occupying a competitive position on the low-end of the market.

Our Enterprise segment sustained its solid position in the fourth quarter, growing its mobile customer base and benefitting from the enlarged ICT portfolio. Over the past year we have grown our ecosystem of ICT experts, allowing us to offer new meaningful solutions for our Enterprise customers, while supporting the retention of Telecom services.

Our Fit for Growth Strategy, launched in 2014, has proven to be successful, with our underlying EBITDA growing since 2015. We operate in a highly competitive environment within a fast-evolving landscape, and our industry is now reaching a tipping point when it comes to digital. That's why we have adopted a new strategy, "#shifttodigital", as we want to remain relevant to our customers and support enterprises in their digital transformation, while becoming more efficient and agile.

We continue to invest extensively in our infrastructure by expanding our Fiber-to-the-Home footprint, now initiated in 9 cities, upgrading our backbone network, ensuring a high-quality mobile network, improving the overall customer experience and becoming a personalised gateway for access to content.

When it comes to our announced transformation plan, we have started the information and consultation phase with our social partners, with the intention to review our HR rules and to negotiate the potential leave of 1,900 employees over the next 3 years.

In our continuous endeavor to bring new solutions to our customers, we are happy to announce the further enhancement of our millennials offer with Epic combo, available on April 2. This includes fixed and mobile internet access, music and social apps and free viewing of many video platforms, including the Proximus TV app and this on all screens.

Regarding the spectrum auction, we fear for a further delay, potentially putting Belgium at the tail of European 5G deployment, while we would like to support enterprises testing 5G use cases in the context of their digital transformation.

With regards to our expectations for 2019, we anticipate our underlying Domestic revenue to remain nearly stable compared to the prior year. The 2019 underlying Group EBITDA is expected to remain stable with a slight EBITDA growth of our Domestic operations compensating the EBITDA decline of BICS. The Group Capex for 2019 is expected to be stable compared to the 2018 level of around EUR 1 billion. In line with the announced 3-year commitment in 2016, we reconfirm our intention to return to our shareholders a stable dividend of EUR 1.50 per share over the results of 2018 and 2019.

Proximus maintains upward trend in customer base throughout the entire year 2018, with growth for Internet, TV and Mobile Postpaid in every quarter

In a highly competitive setting, Proximus continued to enlarge its customer base in the fourth quarter of 2018, supported by a catching year-end campaign, driving further traction for its Tuttimus/Bizz All-in offers. Proximus achieved good growth in its Mobile Postpaid base as well, supported by its renewed mobile offer and the year-end promotions. Moreover, Scarlet confirmed its strong position as leader in the no-frills segment.

The larger customer base resulted in a fairly stable market share for Fixed Internet of 46.4%, a further increase for Digital TV with +0.5 p.p., reaching 37.3%, and a +0.4 p.p. growth for total Mobile to a market share of 39.3%.

The Enterprise segment finished 2018 with a 4.1% year-on-year increase of its mobile customer base and with a 4.5% ICT revenue growth, benefitting from acquired companies strengthening the Proximus ICT portfolio.

• TV customer base grew by 50,000 in 2018, reaching 1,611,000 end-2018 (+ 3.2% year-on-year).
• The number of Fixed Internet customers totaled 2,026,000, with +43,000 lines added over the entire year (+2.2% year-on-year).
• By the end of December 2018, the total amount of Fixed Voice lines was 2,516,000, a decrease of 108,000 lines or -4.1% over the last year.
• Mobile Postpaid customer base grew by 134,000 cards in 2018 (+3.5% year-on-year), to a total of 4,016,000. The number of Prepaid cards totaled 822,000 (-134,000 cards or -14.0% year-onyear), while a net amount of 119,000 M2M cards were added in 2018 (+9.8% year-on-year).
• In 2018, Proximus attracted 149,000 customers to its all-in offers Tuttimus/Bizz All-in, closing the year with 508,000 subscribers.
• 58.3% Convergent households and small offices, increased 2.0 p.p. year-on-year.

Proximus closed 2018 with stable Domestic revenue, achieving a 1.9% Domestic underlying EBITDA increase driven by higher direct margin

In 2018, Proximus posted a stable EUR 4,458 million Domestic underlying revenue. The revenue was primarily supported by the ongoing expansion of the TV, Internet and Mobile Postpaid customer base, despite a highly competitive landscape. The Group ICT revenue showed good progress (+4.4%), driven by a strengthened portfolio, including the acquisition of several small, specialized ICT companies. Furthermore, Proximus benefitted from a continued positive revenue evolution in Advanced Business Services (+6.2%) and a revenue increase for Tango (+3.9%). These favorable evolutions offset the continued revenue erosion from Fixed Voice and Mobile Prepaid, and the lower Wholesale revenue.

The Domestic underlying direct margin was up by 1.0%, reaching EUR 3,366 million end-December, including a net loss in roaming margin of EUR 30 million, with the roaming out price regulation especially

impacting the first half of the year. The Domestic direct margin benefitted from the growing customer base, focus on value management and acquired ICT companies, partly offset by lower wholesale direct margin.

Proximus' Domestic expenses totaled EUR 1,653 million for 2018, fairly stable in relation to the prior year (+0.1%). Company-wide efforts to achieve structural cost efficiencies compensated for the increased workforce expenses related to inflation-based wage increases and acquisitions in the ICT domain.

The Domestic underlying EBITDA grew by 1.9% to a total of EUR 1,713 million. This was driven by direct margin generated by Proximus' growing customer base, more than offsetting the EUR -30 million net decline in roaming margin.

BICS realizes double-digit direct margin growth as well as strong EBITDA increase in 2018, with TeleSign largely contributing to the uplift

In 2018, BICS' direct margin progressed to EUR 317 million, a year-on-year increase of 13.5% thanks to the successful integration of TeleSign. The ongoing decline of Voice services was more than offset by a strong increase in Application-to-Person messaging volumes and by the realization of direct cost synergies between BICS and TeleSign.

This led to a strong EBITDA for 2018, totalling EUR 154 million, 7.7% above that of 2017.

Proximus achieves fourth consecutive year of Group underlying EBITDA growth, closing 2018 with a 2.4% increase

Over the year 2018, the underlying revenue of the Proximus Group totaled EUR 5,804 million, a 0.5% improvement compared to the prior year. This includes a stable revenue from Proximus' Domestic operations, and a 2.0% increase for BICS.

The 2018 Group underlying direct margin improved by 2.0% to total EUR 3,683 million for the entire year.

The Proximus Group operating expenses totaled EUR 1,816 million in 2018, a 1.6% increase compared to 2017. The efforts to keep a strong focus on structurally improving the cost base were offset by the operational costs from acquired companies, with TeleSign elevating costs in BICS, and ICT companies in the Enterprise segment. The additional expenses from TeleSign and acquired ICT companies aside, Proximus posted a slightly declining cost base.

With the higher direct margin offsetting the increased expenses, Proximus posted an underlying EBITDA of EUR 1,866 million at Group level for 2018, an increase of 2.4% compared to 2017.

Proximus' 2018 FCF totaled EUR 451 million, or EUR 501 million when excluding the cash-out related to the acquisition of subsidiaries in the ICT domain.

Proximus maintains high investment pace, focusing on digitalization, networks and overall customer experience

Proximus invests extensively in enhancing its networks and improving the overall customer experience. In 2018, Proximus invested EUR 1,019 million. The deployment of its future-proof network in the context of the Fiber for Belgium project kicked off early 2017, with the roll-out ongoing in 9 cities in 2018. Proximus also invested extensively in its IT systems and digital platforms and in further enhancing its mobile network. In addition, it ensured attractive content for its TV customers.

Mobile data usage shows a continued strong uptake, with for the fourth quarter the average monthly usage going up to 2.2 GB per user, and the annual total traffic increasing by nearly 60%. Proximus therefore continues to invest in its mobile network to guarantee the best mobile experience for its customers. In 2018, Proximus focused on further improving the coverage experience of its customers, especially in indoor. In the fourth quarter 2018, Proximus covered 99.5% of the population (indoors), and has been

confirmed by BIPT as best Belgian operator for both indoor and outdoor coverage. The continuous network optimizations and the introduction of VoLTE (Voice over LTE/4G) in 2018 allow Proximus to be the bestin-class Belgium operator in terms of voice quality as well as for the fastest call set-up.

With regard to mobile data, OpenSignal presented the Mobile Video Experience Award to Proximus on 24 October 2018 for delivering the best Overall Video Experience in Belgium.

2019 outlook

2019 and comparable base of 2018 are both under IFRS15. The underlying numbers exclude the incidental impacts and include lease depreciation and interest as from 2019, neutralizing the IFRS16 impact. Acquisitions of Rights of Use in application of IFRS 16 will not be part of Capex.

Guidance metrics	FY 2018 Actuals	FY 2019 Outlook
Domestic underlying revenue	€ 4,460 million	Nearly Stable
Group underlying EBITDA	€ 1,865 million	Stable
Capex	€ 1,019 million	Stable

In line with the announced 3-year commitment in 2016, Proximus expects to return over the result of 2019 a gross dividend per share of EUR 1.50.

Proximus anticipates its 2019 underlying Domestic revenue to remain nearly stable compared to the prior year. The 2019 underlying Group EBITDA is expected to remain stable relative to 2018. Within the mix, Proximus expects a slight EBITDA growth of its Domestic operations to be offset by an unfavorable EBITDA effect on BICS following a renewed agreement¹ with MTN. This includes a progressive insourcing by MTN of the transport and management of its traffic within the Middle East and African regions, while BICS will remain MTN's preferred provider for International Voice and Messaging services to and from the rest of the world.

The Group Capex for 2019 is expected to be stable compared to the level of 2018.

¹ Subject to MTN Board ratification

Read the full Q4 Financial Report

More information, at the Investor Relations department: +32 2 202 82 41 investor.relations@proximus.com

About Proximus

Proximus Group is a telecommunication & ICT company operating in the Belgian and international markets, servicing residential, enterprise and public customers. Proximus aims to open up a world of digital opportunities so people live better and work smarter. The company is at the heart of the digital revolution, delivering communication and entertainment experiences for residential consumers and enabling digital transformation for enterprises. Through its best-quality integrated fixed and mobile networks, Proximus provides access anywhere and anytime to digital services and easy-to-use solutions and is a gateway to multimedia content. Proximus is a pioneer in ICT innovation, with integrated solutions that have a positive impact on society and the environment, based on Internet of Things (IoT), Data analytics, cloudification, and security. With 13,385 employees, all engaged to offer customers a superior experience, the Group realized an underlying Group revenue of EUR 5,804 million end-2018.

Proximus (Euronext Brussels: PROX) is also active in Luxembourg through its affiliate Proximus Luxembourg and in the Netherlands through Telindus Netherlands. BICS is a leading international communications enabler, one of the key global voice carriers and the leading provider of mobile data services worldwide.

For more information, visit www.proximus.com & www.proximus.be