Proximus SA — Earnings Release 2023

Apr 28, 2023

Press release

Brussels, 28 April 2023, 7.00 CET – Regulated information

Proximus Group financial results – First quarter 2023

Proximus kicks off the year in line with expectations, maintaining the strong commercial momentum both on domestic and international markets, and is well on track to deliver upon its full-year guidance.

• Proximus Group Q1 underlying revenue growing by +5.9% YoY.
• Double-digit direct margin growth for international segments Telesign and BICS, respectively +14.2% and +12.7% in Q1.
• Domestic revenue +4.8% to EUR 1,149 million in Q1, with Residential revenue up +5.9% and Business revenue + 6.2%.
• Fiber strategy further scaling: 23% population coverage and 288,000 activated Fiber lines end-March 2023.
• Customer bases further growing for Internet (+11,000), Mobile postpaid (+ 10,000) and convergence (+14,000), net TV customer loss remains contained (-12,000).
• As anticipated, inflationary cost increases lowered underlying Domestic EBITDA, -3.4% year-on-year, with Group underlying EBITDA -3.5% YoY.
• Capex for the first quarter was EUR 312 million, adjusted FCF EUR -79 million.
• Reiterating guidance for full-year 2023.

Read the full Q1 Financial Report here

Highlights Q1 2023

• Proximus' Domestic segment closed the first quarter of 2023 with continued growth for its Internet base by +11,000 subscriptions, and +10,000 Mobile customers in a highly promotion driven competitive context. The success of Residential convergent offers continued, growing by +14,000 customers to a total of 1,061,000, a +5.0% year-on-year increase. Fiber offers gained further traction, with +36,000 active Residential and Business Fiber lines added, bringing the total to 288,000. Proximus managed to contain the net decrease of the TV subscriptions to -12,000 in the first quarter. The Fixed Voice line base further eroded by -51,000 lines.
• Proximus' Domestic underlying revenue was up by +4.8% to EUR 1,149 million. The Residential unit posted a +5.9% revenue increase, resulting from a +4.7% increase in Customer Services revenue and higher revenue from Terminals. Convergent revenue was up +9.2% driven by further customer growth and the inflation-based price adjustments. The first-quarter 2023 revenue of the Business unit grew +6.2% year-on-year. IT equipment revenue was up strongly for the third quarter in a row, following the continued catch-up in chip-supply affected customer installations. The Business Services revenue grew by +0.8% with eroding Fixed Voice revenue more than offset by higher Fixed Data (+3.3%), Mobile (+ 1.8%) and IT Services (+3.6%) revenue. Proximus' Wholesale unit posted an overall -10.7% revenue decrease, largely driven by interconnect revenue loss, with no meaningful margin impact.
• The first-quarter 2023 Domestic EBITDA totaled EUR 405 million, a -3.4% decrease from the same period in 2022. The support from higher direct margin, up by +2.4%, was more than offset by an increase in operating expenses by +8.3%. This was mainly due to cumulating inflationary cost effects on wages, and higher electricity costs. This was in part mitigated by continuing cost efficiencies.

• Telesign closed the first quarter with revenue growing +19.5% to EUR 120 million and direct margin + 14.2% to EUR28 million, while currency tailwinds are starting to moderate. On constant currency basis, this was respectively +16.0% and +5.7%. Growth is continuing for both the Digital Identity and Communication segment. With investments in its growth strategy having increased operating costs, the Telesign first-quarter EBITDA was EUR - 3 million.

• BICS closed the first quarter with revenue +7.1% to EUR 262 million. BICS' Core services revenue was up +11.3% driven by higher mobility services and messaging revenue. Growth services revenue was up +21.9% mainly on strong traction for Cloud services, and low-margin Legacy services revenue increased by +2.5%. BICS grew direct margin by +12.7%, supporting its EBITDA increase of +15%, despite an inflation-based wage indexation impacting the first quarter 2023.

• In aggregate, the Proximus Group underlying revenue totaled EUR 1,486 million for the first quarter of 2023, up +5.9%. The underlying Group EBITDA totaled EUR 432 million, down by -3.5%.
• The Proximus Group CapEx for the first quarter 2023 totaled EUR 312 million, compared to EUR 270 million one year back, excluding spectrum and football rights. Fiber related investments counted for 26% 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 the first quarter included timing effects of IT and Content investments.
• Over the first quarter of 2023, Proximus Group posted a Free Cash Flow of EUR -99 million, or EUR -79 million when adjusted for M&A-related transaction costs. The year-on-year decrease was largely the result of lower underlying EBITDA, higher tax related payments, higher cash paid for capex and the payment of interests on spectrum rights. First-quarter 2023 business working capital needs were lower year-on-year.

Guillaume Boutin, CEO of the Proximus Group:

"I am very pleased with the way we kicked off the year."

This first quarter marks the start of our new bold2025 strategy. Our Domestic operations are delivering good commercial traction in a competitive environment whilst the market growth is moderated. Effective value management of our customer base supported a 4.8% year-over-yearincrease in Domestic revenue. This encouraging momentum, combined with the effects of our cost reduction program, gives me every confidence that we will achieve our objectives for this year.

I'm also very pleased with how our International segments BICS and Telesign have started the year. Telesign continued to grow revenue of Communication and Digital Identity services, expanded its customers base into new geographies and in the first quarter of 2023 Telesign launched the Silent Verification product, which was released in 14 markets. BICS performed well on core Mobility services and high Cloud volumes. This translated into a combined revenue and direct margin increase by respectively 10.7% and 13.1%, contributing significantly to the growth of the Group.

The deployment of the best Gigabit network in the country remains one of the key priorities. In the Brussels region we already reach over 50% of the population, and we currently have Fiber works ongoing in 106 cities throughout the country. With nearly 1.4 million homes and businesses now connectable to Fiber we have reached a coverage of 23% at the end of March. We also successfully launched our Ultra Fiber proposal offering 10Gbps fiber technology in five Belgian cities, with a nationwide launch planned by this summer. The Ultra Fiber offer, the fastest Internet in Belgium, puts us clearly in the lead in terms of download, upload speeds and latency compared to our competitors.

We have continued to shift our customer base towards convergent offers, with residential customers combining Fixed and Mobile products increasing by +14,000 over the past 3 months. For Mobile, as announced last week, we will launch a new portfolio of postpaid plans in May. These plans will allow for more customers, both in the residential and business segments, to benefit from 5G and higher data volumes. We are thereby further addressing the constantly changing customer needs, requiring to be connected anywhere and anytime, effortlessly and without having to worry about data usage.

In an increasingly digital world, data security, cyberdefense and privacy protection are paramount for our customers and are therefore essential elements of our bold2025 strategy. The launch of our sovereign

cloud portfolio with Microsoft and Google will offer our customers all the advantages of the cloud while ensuring the necessary levels of security, adapted to the European sovereignty challenges. This clearly demonstrates Proximus' leadership in this domain. We are proud on the one hand Proximus is amongst ten companies in the world selected by Microsoft to co-develop a sovereign cloud solution based on confidential computing and on the other hand to announce a strategic partnership agreement with Google Cloud to provide sovereign disconnected cloud services in Belgium and Luxembourg, a first in Europe.

The impact that Proximus can have in building a more sustainable world is at the heart of bold2025.We want to be at the forefront. We were therefore delighted to sign up to the Brussels Green Deal last week. Proximus is definitely committed to extending zero-emission deliveries. Besides further reducing our own emissions, we want our suppliers to act accordingly. Today, these account for 80% of our carbon footprint (scope 3). To this end, we have reviewed our 'Supplier Code of Conduct' with a clear request: our suppliers, both existing and new ones, will have to demonstrate their future circularity and zero waste approach, measure their emissions and use renewable energy.

To conclude, the execution of our bold2025 strategy is well underway, and with the results achieved over the first 3 months, we reiterate our 2023 full-year guidance on all metrics. In a context of significant inflationary impacts for 2023 in our domestic markets, we will continue to seek further value optimization, including further price adjustments to be implemented in the second half of the year, across selected residential and business tariff plans.

Key figures

Operationals ('000)	Net adds in the quarter			Park at end of quarter
	2022	2023	2022	2023	%
Fiber
Homes Passed	95	91	909	1,373	51.0%
Activated retail lines	25	36	170	288	68.8%
Residential customers
Convergent	15	14	1,011	1,061	5.0%
Group (subscriptions/SIM cards)
Internet	15	11	2,193	2,227	1.6%
TV	11	-12	1,732	1,697	-2.0%
Fixed Voice	-53	-51	1,951	1,759	-9.9%
Mobile Postpaid (excl. M2M)	38	10	4,689	4,827	2.9%
M2M	182	92	3,547	4,069	14.7%
Prepaid	-25	-16	664	606	-8.8%

Financials (EUR million)	1st Quarter
	2022	2023	% Change
Group Revenue (underlying)	1,404	1,486	5.9%
of which Domestic	1,097	1,149	4.8%
of which BICS	245	262	7.1%
of which Telesign	100	120	19.5%
Group Direct Margin (underlying)	917	947	3.3%
of which Domestic	836	857	2.4%
of which BICS	60	67	12.7%
of which Telesign	24	28	14.2%
Group Expenses (underlying)	-469	-515	9.7%
of which Domestic	-417	-452	8.3%
of which BICS	-33	-36	10.8%
of which Telesign	-22	-31	38.9%
Group EBITDA (underlying)	448	432	-3.5%
as% of revenue	31.9%	29.1%	-2.8 p.p.
of which Domestic	419	405	-3.4%
of which BICS	27	31	15.0%
of which Telesign	2	-3	nr
Group EBITDA (reported)	465	445	-4.4%
Net income	120	94	-21.6%
Accrued CapEx (excl. spectrum & football rights)	270	312	15.6%
FCF (adjusted)	33	-79	nr
Adjusted net fin position (excl. lease liabilities)	-2,674	-2,870	-7.3%

• Group revenue, direct margin, Operating Expenses and EBITDA include intersegment eliminations • Adjusted FCF excludes M&A impacts but includes Fiber equity injections.

Reiterating 2023 full-year guidance

Based on the first quarter 2023 financial results and the company's best estimate for the remainder ofthe year, the guidance for full-year 2023 is reiterated.

• Domestically Proximus will deploy its multi-brand strategy, continued convergent leadership and value management to capture revenue growth, with 2023 Domestic revenue expected to grow by 1% to 3%.
• For 2023 a significant headwind from inflation is expected, leading to a year-on-year underlying Domestic EBITDA decline of around -3%. To mitigate the effects of inflationary pressure on OpEx, Proximus is activating its second wave of cost savings, with EUR 220 million over the 3-year period 2023-2025.
• 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 a high single-digit direct margin growth for 2023
• In aggregate, Proximus expects 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, primarily due to Fiber CapEx to pass, connect and activate Fiber customers and investments in Mobile for the ongoing mobile network consolidation and 5G roll-out. Inflation impacts on CapEx will be managed through CapEx optimization and efficiency programs.
• 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.

	FY22	YTD23	FY23
Guidance metric	Actuals	Actuals	Outlook
			1/16/2023
Underlying Domestic revenue	€ 4,478M	+4.8%YoY	+1% to +3% YoY
Domestic underlying EBITDA	€ 1,665M	-3.4%YoY	Around -3% YoY
International direct margin	€ 377M	+13.1% YoY	High single digit growth
Underlying Group EBITDA	€ 1,786M	-3.5% YoY	Around -3% YoY
CapEx (excluding Spectrum & footballrights)	€ 1,3Bn	€312M	Peak at around € 1.3Bn
Net debt / EBITDA	1.5x (Proximus) 2.3X (S&P)		Around 2.6X (S&P)

Shareholderreturn

The Annual Shareholders' Meeting of April 2023 approved the return to the Proximus shareholders of gross EUR 1.2 per share. The normal dividend of EUR 0.70 per share is payable on 28 April 2023.

This brings the total paid dividend over the result of 2022 to EUR 387 million.

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 EUR1.20 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

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.