Proximus SA — Earnings Release 2023

Jul 28, 2023

Press release

Brussels, 28 July 2023, 7.00 CET – Regulated information

Proximus Group financial results – second quarter 2023

Proximus continues to deliver excellent domestic commercial results in the second quarter and with the acquisition of Route Mobile secures a strategic transaction that accelerates its international growth

• Proximus Group Q2 underlying revenue +4.0% YoY, underlying EBITDA -3.7% YoY.
• Domestic revenue +4.2% to EUR 1,147 million in Q2, with Residential revenue up +4.2% and Business revenue +2.9%.
• Fiber strategy further scaling: 25% population coverage and 322,000 activated Fiber lines end-June 2023.
• Excellent commercial performances on all product lines: Mobile postpaid (+48,000), strong Internet (+13,000) and convergent customer growth (+16,000) driven by Fiber, net loss in TV customer base well contained (-3,000).
• In line with expectations, inflationary cost increases impacted underlying Domestic EBITDA, -3.5% year-on-year.
• International segments BICS and Telesign grew direct margin, at respectively 1.0% and 8.2% at constant currency.
• H1'23 CapEx of EUR 612 million, on track for full-year expectation.
• H1'23 Adjusted FCF of EUR -99 million, impacted by phasing of VAT and income tax payments. H2'23 will return to positive ground, supported by underlying business trends and the sale of the Proximus headquarter.
• Reiterating guidance for full-year 2023. Domestic revenues expected to be at the upper end of the given range of +1% to +3%.

Read the full Q2 Financial Report here

Highlights Q2 2023

• Proximus' Domestic segment closed the second quarter of 2023 with an excellent growth in Mobile Postpaid, +48,000 net adds, boosted by the customer traction for newly launched Mobile Portfolios. Proximus' enlarging Fiber footprint drove a sustained strong growth for its Internet base (+13,000), in a slowly growing market. The combined success of the new Mobile offers and Fiber is also reflected in the Residential convergent offers, growing by +16,000 customers to a total of 1,078,000, a +5.4% year-on-year increase. End-June 2023, the number of active Residential and Business Fiber lines totaled 322,000, of which +34,000 were added in the second quarter 2023. With churn seasonally low, the net erosion was well contained for both TV subscriptions, ( -3,000), and Fixed Voice subscriptions (-32,000).
• Proximus' Domestic underlying revenue was up by +4.2% to EUR 1,147 million. The Residential unit posted a +4.2% revenue increase, resulting from a +4.2% or EUR 19 million increase in Customer Services revenue and revenue from Terminals being higher by EUR 7 million. Convergent revenue was up +7.7% driven by further customer growth and the inflation-based price adjustments of May 2022 and January 2023. The second-quarter 2023 revenue of the Business unit grew +2.9% year-on-year. Overall, in spite of ongoing Fixed Voice pressure, Business Services revenue sustained its positive trend, up by +0.8%, driven by IT Services (+6.6%) and Fixed Data (+2.3%). IT equipment revenue, returning to normal business tendencies, was up by EUR 12 million. Proximus' Wholesale unit posted an overall -4.1% revenue decrease, driven by low margin interconnect revenue loss, while Wholesale Services revenue was up +6.9%.

• Confidential Not for you? Notify the sender and delete. See more on https://www.proximus.com/con https://www.proximus.com/confidentiality fidentiality • The second-quarter 2023 Domestic EBITDA totaled EUR 416 million, a -3.5% decrease from the same period in 2022. The support from higher direct margin, up by +2.5%, and ongoing company-wide cost efficiencies, was more than offset by inflationary cost effects. This includes the increase in electricity costs and the year-on-year effect from cumulating wage indexations, which is expected to gradually soften over the next 2 quarters.

• Telesign closed the second quarter with revenue growing +18.9% to EUR 128 million and direct margin + 3.4% to EUR 28 million, including adverse currency effects. On constant currency basis, this was respectively +21.9% and +8.2%. Growth is continuing for both Digital Identity and Communication segments. With material investments in Telesign's growth strategy having reached their peak, the year-on-year increase is slowing down. Telesign's second-quarter EBITDA was EUR -3 million.

• BICS closed the second quarter with revenue down by -1.1% to EUR 267 million, with the USD currency headwind impacting its topline. Overall, growth rates are normalizing from an exceptional 2022 which was boosted by the global post-Covid travel uptake. BICS' Core services revenue was up +8.1% for the second quarter 2023 driven by higher mobility services and messaging revenue. Growth services revenue was down from a high base by -6.3% as well as low-margin Legacy services revenue, -6.8%. BICS grew direct margin by +1.0%, and maintained a stable OPEX, resulting a +2.8% increase in EBITDA, despite an inflation-based wage indexation impact since 1 January 2023.
• In aggregate, the Proximus Group underlying revenue totaled EUR 1,495 million for the second quarter of 2023, up +4.0%. The underlying Group EBITDA totaled EUR 446 million, down by -3.7%.
• The Proximus Group CapEx for the first-half of 2023 totaled EUR 612 million, compared to EUR 557 million one year back, excluding spectrum and football rights. Fiber related investments counted for 29% of the total CapEx, with CapEx for Proximus' own Fiber build coming down from its peak in 2022, while the CapEx to connect and activate customers increases. Moreover, the Mobile network (RAN) consolidation between Proximus and Orange Belgium is ongoing, and Proximus increased its investments in Digitalization and IT transformation.
• Over the first six months of 2023, Proximus Group posted a Free Cash Flow of EUR -124 million, or EUR -99 million when adjusted for M&A-related transaction costs. The year-on- year decrease by EUR 99 million was driven by lower underlying EBITDA, higher tax payments and interest-related payments on spectrum rights, while Business Working Capital needs were lower. With the first half of 2023 adjusted Free Cash Flow reflecting year-on- year phasing in VAT and income tax payments, the adjusted Free Cash Flow will return to positive ground in the second half of 2023, supported by underlying business trends and the sale of the Proximus headquarter.

Guillaume Boutin, CEO of the Proximus Group:

Proximus has delivered an excellent Domestic commercial performance in second quarter, whilst having taken a major step in becoming one of the worldwide leaders in digital communications

The strong commercial momentum over the past 3 months demonstrated our ability to rapidly adapt to changes in our domestic market: our new mobile postpaid portfolio launched in May boosted our mobile customer growth to +48,000 in the second quarter 2023. In addition, our successful "You got the Fiber" advertising campaign and the launch in April of our unrivaled 10Gbps technology, nationwide as of July, have supported the success of our Fiber offers, adding 34,000 additional active Fiber customers during the second quarter. The continued commercial traction along with our pricing strategy translates in a sustained strong revenue growth, with Domestic revenue increasing year-on-year by 4.2%.

In parallel, the deployment of our Gigabit network in Belgium, is progressing well. End June, Proximus reached a national coverage rate of 25%, with nearly 1.5 million homes and businesses connected to the Fiber network. Proximus is several years ahead in the deployment of Multigig Fiber technology –setting itself apart from its competitors through delivering the fastest Internet connections. To ensure that Fiber is even more rapidly available to all, I'm calling for an effective and rational Fiber collaboration and coinvestment framework in Belgium, for the benefit of the whole country.

Turning to our international segments, I am delighted to confirm a similarly solid commercial momentum with Telesign on the one hand, delivering robust sales bookings (+31% YoY) and continuing to post double digit revenue growth of 21.9% at constant currency from its Communication and Digital Identity services. Moreover, the value of its customer base continues to progress with a 117% Net Revenue Retention rate.

BICS, on the other hand, after an exceptional 2022 growth trend, which was boosted by the global post-Covid travel uptake, continued to perform well on its core Messaging and Mobility services, whereas legacy services evolution reflects the inherently declining Voice market.

On top ofthese commercial achievements, I'm really proud that we have announced a strategic transaction which will materially accelerate our international activities. The acquisition of a majority stake in Route Mobile, a global CPaaS player listed in India is transformational for the Proximus Group. Indeed, the transaction will make us one of the world's leading companies in the fields of digital communications (CPaaS) and digital identity (DI). With Route Mobile and Telesign, the Group now holds two strong and highly complementary global assets, both from geographical and product expertise points of view. This strategic move will help to support our growth over the coming years with substantial effects on the Groups value creation, reflected in annual EBITDA synergies of at least €90 million, 3 years after the closing of the transaction.

To conclude, we continue to implement successfully our bold2025 strategy, with important milestones achieved both in our Domestic and international markets over the second quarter of 2023. For the second half of the year, besides closing the transaction with Route mobile, we will focus on maintaining a strong commercial momentum through leveraging our Gigabit networks and preparing for the new entrant.

Overall, I am very pleased with what has been achieved during the first half of the year, in an everchallenging macroeconomic environment. We are therefore confident of reiterating our 2023 full year guidance on all metrics. Domestic revenues growth is even expected to be at the upper end of the given range of +1% to +3%, largely thanks to better than expected revenues from devices sales and IT hardware over the first six months of the year.

Operationals ('000)	Net adds in the quarter			Park at end of quarter
	2022	2023	%	2022	2023	%
Fiber
Homes Passed	122	110		1,031	1,483	43.8%
Activated retail lines	23	34		194	322	66.0%
Residential customers
Convergent	11	16		1,022	1,078	5.4%
Group (subscriptions/SIM cards)
Internet	8	13		2,202	2,240	1.7%
TV	-1	-3		1,731	1,694	-2.1%
Fixed Voice	-46	-32		1,905	1,727	-9.4%
Mobile Postpaid (excl. M2M)	52	48		4,741	4,875	2.8%
M2M	154	112		3,701	4,180	13.0%
Prepaid	-2	-23		662	583	-12.0%

Table 1: Key Figures

Financials (EUR million)		2nd Quarter			Year-to-date
	2022	2023	% Change	2022	2023	% Change
Group Revenue (underlying)	1,437	1,495	4.0%	2,841	2,982	4.9%
of which Domestic	1,101	1,147	4.2%	2,198	2,296	4.5%
of which BICS	270	267	-1.1%	515	529	2.8%
of which Telesign	107	128	18.9%	208	247	19.2%

Confidential - Not for you? Notify the sender and delete. See more on https://www.proximus.com/confidentiality https://www.proximus.com/confidentiality

Group Direct Margin (underlying)	931	951	2.1%	1,848	1,898	2.7%
of which Domestic	840	862	2.5%	1,677	1,718	2.5%
of which BICS	68	68	1.0%	127	135	6.5%
of which Telesign	27	28	3.4%	52	56	8.5%
Group Expenses (underlying)	-468	-505	7.8%	-937	-1,019	8.8%
of which Domestic	-409	-446	8.8%	-826	-897	8.6%
of which BICS	-35	-35	-0.7%	-68	-71	4.9%
of which Telesign	-28	-31	14.1%	-50	-62	25.1%
Group EBITDA (underlying)	463	446	-3.7%	911	879	-3.6%
as % of revenue	32.2%	29.8%	-2.4 p.p.	32.1%	29.5%	-2.6 p.p.
of which Domestic	431	416	-3.5%	850	821	-3.5%
of which BICS	33	33	2.8%	59	64	8.3%
of which Telesign	0	-3	nr	2	-6	nr
Group EBITDA (reported)	473	447	-5.5%	938	892	-5.0%
Net income	122	94	-23.4%	243	188	-22.5%
Accrued capex (excl. spectrum & football rights)	287	300	4.4%	557	612	9.8%
FCF (adjusted)	-36	-20	45.4%	-3	-99	>100%
FCF (reported)	-44	-24	44.4%	-15	-124	>100%
Adjusted net fin position (excl. lease liabilities)	n.r.	n.r.		-2,846	-3,121	-9.6%

• Group revenue, Direct margin, Operating Expenses and EBITDA include intersegment eliminations • Adjusted FCF excludes M&A impacts, includes equity injections in Fiber JVs and includes assets sales.

Reiterating 2023 full-year guidance

Based on the financial results over the first six months of 2023 and the company's best estimate for the remainder of the year, the guidance for the full-year 2023 is reiterated. Based on higher-thanexpected revenue from Terminals and IT hardware over the first half of 2023, the growth of Domestic revenue for the full-year 2023 is expected to land at the upper-end of the range of "+1% to +3%".

With the anticipated significant headwind from inflation being confirmed, the underlying Domestic EBITDA outlook remains unchanged, with an expected full-year decline of around -3%. Proximus' cost savings program, targeting a EUR 220 million cost reduction over the 3-year period 2023-2025 remains on track and successfully mitigates inflationary cost effects.

The International activities provide a unique growth pathway for Proximus, allowing it to take leadership positions in double-digit growth markets. Proximus expects its International segments BICS and Telesign to deliver combined a high single digit direct margin growth for 2023, excluding currency headwinds affecting the Telesign Direct margin.

In aggregate, Proximus reiterate its expectation to end the year 2023 with an inflation-driven decline in Group underlying EBITDA of around -3%.

Proximus expects its Group CapEx to reach its peak of around EUR 1.3 billion in 2023. In line with its investment plan, Fiber CapEx to pass customers is trending down year-on-year, while there is higher CapEx need to connect and activate Fiber customers. In addition, the CapEx reflects investments in Mobile with the mobile network consolidation and 5G roll-out ongoing. Inflation impacts on CapEx are being managed through CapEx optimization and efficiency programs.

Confidential - Not for you? Notify the sender and delete. See more on https://www.proximus.com/confidentiality https://www.proximus.com/confidentiality The Net Debt/EBITDA ratio for 2023 is expected to be around 2.6X, allowing for sustained solid investment-grade credit ratings and near-term financing at low interest rates.

Table 10: outlook 2023
Guidance metric	FY22 Actuals	YTD23 Actuals	FY23 Outlook
Underlying Domestic revenue	€ 4,478M	+4.5% YoY	Upper end of +1% to +3% YoY
Domestic underlying EBITDA	€ 1,665M	-3.5% YoY	Around -3% YoY
International Direct Margin	€ 377M	+6.6% YoY (in constant currency)	High single digit growth
Underlying Group EBITDA	€ 1,786M	-3.6% YoY	Around -3% YoY
CapEx (excluding Spectrum & football rights)	€ 1,3Bn	€612M	Peak at around € 1.3Bn
Net debt / EBITDA	1.5x (Proximus) 2.3X (S&P)	NR	Around 2.6X (S&P)

International Direct Margin: Telesign and BICS Direct Margin combined. Company FY projections on DM exclude currency fluctuations on Telesign Direct Margin.

Shareholders return policy 2023-2025

In line with the bold2025 strategy and deriving shareholder return policy, Proximus intends to return over the result of 2023 a stable gross dividend of EUR 1.2 per share, provided a financial performance delivery in line with its strategic plan.

Over the result of 2024 and 2025, Proximus will rebase its dividend level to EUR 0.60 per share. The rebased sustainable dividend level incorporates all currently known macro and inflationary headwinds, as well as expected changes in market structure. The proposed dividend is reviewed and submitted to the Board of Directors on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

More information on www.proximus.com/press

Press Relations department: +32 2 202 44 44

Haroun Fenaux +32 476 60 03 33 Fabrice Gansbeke +32 472 050 702

Investor Relations: +32 2 202 82 41

investor.relations@proximus.com

About Proximus

Proximus Group (Euronext Brussels: PROX) is a provider of digital services, communication and ICT solutions operating in the Belgian and international markets. Our purpose, 'Boldly building a connected world that people trust so society blooms', is our guiding star in delivering delightful communication and entertainment experiences for residential consumers and in enabling next generation digital innovations tailored to businesses.

Proximus aims to build the #1 gigabit network for Belgium, combined with technology assets that enable digital ecosystems, while fostering an engaging culture and empowering ways of working. These exceptional strengths pave the way to deliver long-term value for stakeholders; they allow Proximus to contribute to an inclusive and sustainable digital society, delight customers with an unrivalled experience and achieve profitable growth both locally and internationally.

In Belgium, Proximus' core products and services are offered under the Proximus, Mobile Vikings and Scarlet brands. The Group is also active in Luxembourg, 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 authentication and digital identity services, serving the world's largest internet brands, digital champions and cloud native businesses.

With 11,634 employees, imbued with Proximus' think possible mindset and all engaged to offer a superior customer experience, the Group realized an underlying Group revenue of EUR 5,909 million end-2022.

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