Proximus SA — Earnings Release 2021

Oct 29, 2021

Press release

Brussels, 29 October 2021, 7.00 CET – Regulated information

Proximus Group financial results – Third quarter 2021

Proximus continues to grow its main customer bases in the third quarter and expects to end the year with Group EBITDA in the mid to high end of its guidance range

• Strong commercial quarter for Mobile Postpaid, +58,000 cards, and Fiber +14,000 Customers.
• Convergent customer base grew by 11,000, convergence rate rising to 62.5%.
• Expanding Fiber roll-out to a total of 686,000 HP, footprint crossing 11% of total premises.
• Underlying Domestic revenue of EUR 1,085 million, -0.8% year-on-year.
• TeleSign continued double-digit revenue growth, +22.1% for Q3, +21.4% on constant currency basis.
• BICS sees revenue growing for all product groups, total Q3 revenue + 12.6%.
• Underlying Group EBITDA totaled EUR 457 million, -2.6% compared to the year before.
• Solid nine months normalized FCF of EUR 408 million.
• Full-year 2021 Group EBITDA expected in the mid to high-end of guidance range.
• Board of Directors approved interim dividend of EUR 0.5 per share, to be paid in December 2021

Read the full Q3 Financial Report here

Highlights Q3 2021

• Proximus Group closed the third quarter of 2021 with a strong commercial performance for Mobile, adding +58,000 Mobile postpaid cards, and growing its core Fixed Telecom services, +5,000 Internet and +5,000 TV subscriptions. Within the Consumer segment, the traction for higher-value offers continued, growing the convergent base by +11,000 customers to a total of 1,174,000, +6.1% compared to 12 months ago. An additional +14,000 Consumer customers signed up for a Fiber offer, bringing the total up to 104,000. Over the third quarter, +119,000 customers opted for a Flex offer, bringing the total Flex subscriptions to 738,000. Reflecting changing customer needs, the Consumer base for Fixed Voice lines eroded by -38,000.
• Over the third quarter of 2021, Proximus posted for its Domestic segment underlying revenue of EUR 1,085 million, -0.8% from the preceding year. Excluding the revenue contribution from Mobile Vikings, the organic Domestic revenue was down by -2.1%. This reflected Consumer telecom services revenue cycling against a high comparable 2020 base, which benefitted from high-traffic volumes. Within the Enterprise unit, low-margin ICT hardware revenue was affected by the global chip shortage, whereas its transformation continued to deliver ICT Services revenue growth. The B2B Mobile service revenue was up by 2.9%. Revenue from Fixed and Mobile Wholesale services remained almost stable (-0.6%), while Interconnect revenue was down, with no margin impact.
• Proximus' Domestic EBITDA totaled EUR 424 million for the third quarter of 2021, -3.2% below the previous year. On organic basis, the Domestic EBITDA was down by -4.0%, primarily resulting from lower organic Domestic direct margin, in line with the revenue decline. Tight cost control limited the organic increase in Domestic expenses to 0.4%.

• TeleSign closed another strong sales quarter with revenue up +22.1% (21.4% on a constant currency basis) to EUR 87 million, driven by both Programmable Communications (CPaaS) and Digital Identity services. The third quarter of 2021 ended with a strong performance on newly signed contracts, which will continue to support double-digit revenue growth for the remainder of the year. TeleSign's ongoing investments in its growth strategy were reflected in its EBITDA, totaling EUR 5 million for the third quarter of 2021, or -28.1% from one year ago.

• BICS posted a +12.6% revenue increase to EUR 263 million. BICS' Core revenue was up by +20.8% as a result of high A2P volumes combined with a continued favorable destination mix. This mix also benefitted the Legacy services, which grew by 6.5%. The Growth services of BICS posted a +31.0% revenue increase, driven by strong traction for cloud communication. BICS' EBITDA totaled EUR 28 million for the third quarter of 2021, + 15.8% on a higher Direct margin, while the operating costs remained stable year-on-year.

• In aggregate, the underlying Group EBITDA for the third quarter of 2021 totaled EUR 457 million, down by -2.6% compared to the prior year, or –3.3% on an organic basis.
• Proximus' accrued capex, excluding spectrum and football broadcasting rights, over the third quarter 2021 totaled EUR 239 million, bringing the total over the first nine months of 2021 to EUR 736 million. The year-on-year increase by EUR 108 million was in large part driven by the accelerated Fiber deployment, bringing the Fiber footprint to just over 11%, or 686,000 homes and businesses passed by the end of September 2021.
• Over the third quarter of 2021, Proximus Group posted a Free Cash Flow of EUR 146 million, bringing the total FCF over the first nine months of 2021 to EUR 276 million, or EUR 408 million on a normalized basis. This compares to a normalized FCF of EUR 507 million over the first nine months of 2020.

Guillaume Boutin, CEO of the Proximus Group:

"Third quarter results keep us well on track to meet our ambitions for the year, with organic Group EBITDA expected to land in the mid to upper part of our guidance range."

For years, Proximus has been playing a very important societal role, through our networks, our support to Belgium in times of crisis and our commitment to a net zero planet. To that end, Proximus has signed the European Green Digital Coalition, aiming at reaching net zero carbon emission by 2040, 10 years ahead of the Paris agreement. It is just one example of the steps Proximus is taking to meet the climate ambitions already anchored in our strategy. This is becoming even more relevant, as we are confronted with the consequences of climate change like the heavy flooding in the South of the country this summer. I'm proud of our field engineering and support teams who have been working day and night in very challenging conditions to restore our infrastructure in the impacted areas, ensuring that customers could reconnect with family and friends.

From a commercial perspective, we achieved a strong mobile growth for our Domestic operations, adding 58,000 Mobile cards over the third quarter. For both Internet and TV, we grew our respective customer bases by 5,000 subscriptions each. The slower pace, compared to prior quarters, broadly resulted from less customer rotation and the severe floods, while overall the customer-initiated churn was down from the previous year. We continued to do well in the higher-value Consumer segments, as demonstrated by our convergent and Fiber-based offers. By end-September, a total of 104,000 households enjoyed one of our Fiber offers, of which 14,000 new Fiber subscribers in the third quarter. We expect this success to build up, as our Fiber roll out continues to accelerate.

Our Fiber program is progressing very well, with another 65,000 new premises passed bringing us to a total of 686,000 or a coverage of over 11% of Belgium. In line with our ambitious plan, we are further increasing capacity to obtain a 10% annual build coverage at cruise speed. With the two joint ventures Fiberklaar and Unifiber having set up construction works in 6 cities, we are well on track to cover at least 70% of Belgian households and enterprises with Fiber by 2028.

Within the professional market, our Enterprise unit held up well. Despite intense competitive dynamics, our B2B mobile service revenue was up by 2.9% thanks to a growing volume and controlled ARPU

decline. The transformation to converged ICT services continues at pace with growing higher-margin IT services revenue in the quarter. Going forward, we expect to further strengthen our competitive offerings with, among other things, our recent strategic Cloud partnership with HCL.

Domestic underlying revenue was -0.8% lower than the preceding year, supported by the ongoing sound operational performance and the inclusion of Mobile Vikings in the Proximus family. This decline mainly resulted from low-margin revenue from Interconnect and ICT related to delays in global supply chain deliveries of hardware. Furthermore, as was expected, the Voice usage has come back from its unusual high levels in 2020, for both consumer and enterprise.

Our BICS segment achieved a strong third quarter, growing revenue by 12.6%. BICS' Core services revenue posted a material revenue increase thanks to a combination of high A2P messaging volumes and a favorable destination mix, reflecting the trading nature of this part of BICS' business. We also saw International travel picking up, in particular within Europe, and a strong traction for Cloud communication services. Combined with ongoing cost control, this led to a 15.8% increase in EBITDA.

TeleSign posted another strong sales quarter, with revenue up by 22.1%. The growth was driven by both business lines: Programmable Communications and Digital Identity services. The third quarter of 2021 ended with a strong performance on new signed contracts, which will continue to support double-digit revenue growth for the remainder the year.

Overall, I am very pleased with our results and progress on our strategy over the first nine months of the year. Financially, the organic underlying Domestic revenue remains broadly on track while we kept strong momentum on our international businesses. We continue to monitor the global supply chain shortages that can have an impact on low-margin product & handset revenues. In addition, we keep a high focus on our company-wide cost program, on target to achieve EUR 400 million gross savings by end 2025. Therefore, we are confident that for our guidance on organic underlying Group EBITDA, we will land in the mid to upper part of our guidance range. With the Fiber rollout progressing well, we reiterate our expectation to end 2021 with close to EUR 1.2Bn Capex, excl. spectrum and football rights.

As a last point, I'm happy to announce the Board of Directors approved interim dividend of EUR 0.5 per share, to be paid in December 2021".

Key figures

Operationals ('000) Net adds in the quarter			Park at end of quarter
	2020	2021	%	2020	2021	%
Fiber Home Passed	45	65		391	686	75.4%
Consumer customers
Convergent	16	11		1,107	1,174	6.1%
Fiber (activated)	8	14		56	104	84.7%
Group (subscriptions/SIM cards)
Internet	14	5		2,122	2,163	1.9%
TV	11	5		1,663	1,707	2.6%
Fixed Voice	-54	-50		2,273	2,049	-9.9%
Mobile Postpaid (excl. M2M)	57	58		4,234	4,611	8.9%
M2M	106	165		2,192	3,198	45.9%
Prepaid	-16	-20		639	709	10.9%

Financials (EUR million)	3rd Quarter			Year-to-date
	2020	2021	% Change	2020	2021	% Change
Group Revenue (underlying)	1,368	1,400	2.4%	4,091	4,137	1.1%
of which Domestic	1,094	1,085	-0.8%	3,251	3,250	0.0%
of which BICS	234	263	12.6%	727	740	1.8%
of which TeleSign	71	87	22.1%	198	241	21.7%
Group Direct Margin (underlying)	899	895	-0.5%	2,686	2,679	-0.3%
of which Domestic	827	819	-1.0%	2,464	2,463	0.0%
of which BICS	56	60	7.2%	173	169	-2.4%
of which TeleSign	19	20	4.6%	58	57	-3.2%
Group Expenses (underlying)	-430	-438	1.7%	-1,275	-1,316	3.2%
of which Domestic	-389	-395	1.4%	-1,156	-1,191	3.1%
of which BICS	-32	-32	0.7%	-96	-92	-3.3%
of which TeleSign	-12	-15	22.0%	-34	-42	25.9%
Group EBITDA (underlying)	469	457	-2.6%	1,410	1,362	-3.4%
as % of revenue	34.3%	32.6%	-1.7 p.p.	34.5%	32.9%	-1.5 p.p.
of which Domestic	438	424	-3.2%	1,308	1,272	-2.8%
of which BICS	24	28	15.8%	77	76	-1.3%
of which TeleSign	7	5	-28.1%	25	14	-42.7%
Group EBITDA (reported)	490	466	-4.9%	1,486	1,403	-5.6%
Net income	160	116	-27.4%	469	358	-23.7%
Accrued capex (excl. spectrum & football rights)	210	239	13.8%	628	736	17.2%
FCF (normalized)	253	146	-42.2%	507	408	-19.5%
Net Debt (end of period)	n.r.	n.r.		-2,041	-2,526	-23.8%

• Group revenue, Direct margin, Operating Expenses and EBITDA include intersegment eliminations.

• Normalized FCF excludes M&A impacts but includes Fiber equity injections.

• Mobile Vikings has been included in the Proximus Group consolidated financial statements as a fully consolidated subsidiary since 1 June 2021. This transaction affects the comparability of the figures for the current period with the prior-year figures. Where relevant, the comments in the report refer to the organic variance.

• The mobile park includes customers acquired on 1 June 2021 related to the acquisition of Mobile Vikings, increasing the Mobile Postpaid base by 191,000 and the Prepaid base by 144,000.

Outlook 2021 and shareholder return

Proximus concluded the first nine months of the year with organic underlying Domestic revenue remaining broadly on track but continues to monitor the global semi-conductor supply shortage that might have a further adverse impact on revenue from terminal sales and ICT hardware. As this is low-margin revenue, Proximus remains well on track for its organic underlying Group EBITDA outlook, expected to land in the mid to upper part of the guidance range EUR 1,750-EUR 1,775 million.

With the Fiber rollout project on track, Proximus reiterates its expectation to end the year 2021 with accrued Capex excl. spectrum and football rights close to EUR 1.2 billion.

Guidance metric	FY20 Actuals	FY21 Guidance	Q3'21 YTD Actuals (excl. Mobile Vikings)
Underlying Domestic revenue	€ 4,356M	Close to the 2020 level	€ 3,230M
Underlying Group EBITDA	€ 1,836M	Mid to upper part of € 1,750-1,775M	€ 1,358M
Capex (excluding Spectrum & football rights)	€ 1Bn	Close to € 1.2Bn	€ 736M
Net debt / EBITDA	1.28X	< 1.6X	nr

Note: following the reporting changes (see full report, section 9.1), the full-year 2020 underlying Domestic revenue was adjusted accordingly. The fullyear 2021 guidance remains unchanged.

Proximus reiterates its intention to return over the result of 2021 and 2022 an annual gross dividend of EUR 1.2 per share, to be considered as a floor.

On 27 October 2021 the Proximus Board of Directors approved to return to the shareholders a gross interim dividend of EUR 0.50 per share. Net dividend (30% withholding tax assumed): EUR 0.35/share

• Ex-coupon date: 8 December 2021
• Record date: 9 December 2021
• Payment date: 10 December 2021

More information on www.proximus.com/investors

Investor Relations department: +32 2 202 82 41

Nancy Goossens Eline Bombeek

About Proximus

Proximus Group (Euronext Brussels: PROX) is a provider of digital services and communication solutions operating in the Belgian and international markets. Delivering communication and entertainment experiences for residential consumers and enabling digital transformation for enterprises, we open up a world of digital opportunities so people live better and work smarter. Thanks to advanced interconnected fixed and mobile networks, Proximus provides access anywhere and anytime to digital services and data, as well as to a broad offering of multimedia content. Proximus is a pioneer in ICT innovation, with integrated solutions based on IoT, Data analytics, cloud and security.

Proximus has the ambition to become the reference operator in Europe through next generation networks, a truly digital mindset and a spirit of openness towards partnerships and ecosystems, while contributing to a safe, sustainable, inclusive and prosperous digital Belgium.

In Belgium, Proximus' core products and services are offered under the Proximus and Scarlet brands. The Group is also active in Luxembourg as, under the brand names Tango and Telindus Luxembourg, and in the Netherlands through Telindus Netherlands. The Group's international carrier activities are managed by BICS, a leading international communications enabler, one of the key global voice carriers and the leading provider of mobile data services worldwide. With TeleSign, the Group also encompasses a fast-growing leader in digital identity services, serving the world's largest internet brands, digital champions and cloud native businesses.

With 11,423 employees, all engaged to offer customers a superior experience, the Group realized an underlying Group revenue of EUR 5,479 million end-2020.

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