Investor & Analyst Meeting
Friday 28 February 2014
Slide 1
Agenda
Introduction
Dominique Leroy - CEO
2013
Group financials
Ray Stewart
Consumer
Business
Dominique Leroy
Jan Manssens
BICS
Daniel Kurgan
strategic focus for 2014 and beyond
Transform & Invest to return to Growth
Dominique Leroy & Geert Standaert
Outlook 2014 & Shareholder return
Ray Stewart
Slide 2
Group Financials
Ray Stewart
CFO
Ray Stewart
Slide 3
Group revenue impacted by regulation, pressure on mobile in segments ; and
in Q4 by lower BICS
revenue
-3.8%
1,644
reported
+20
- 15
- 19
- 14
Q4
+3
1,582
Intra- group
elimination &
S&S
Q4 2013
-2
- 29
-5.0%
2013
Like-for-Like
(in mio €)
Q4 2012
Net Impact
One-off s
2013
Regulatory
impact
Underlying
CBU
Underlying
EBU
BICS
-2.2%
+42
reported
6,462
FY
Underlying
SDE
- 85
- 75
2013
-2.9%
(in mio €)
- 44
-7
-8
Underlying
EBU
Underlying
SDE
Underlying
S&S
+22
+10
BICS
Intra- group
elimination
6 ,318
Like-for-like
FY 2012
Net Impact
One-off s
Regulatory
impact
Underlying
CBU
FY 2013
Slide 4 Slide 4
Good cost management
Operating expenses (total of HR & non-HR) slightly down vs. 2012
Quarterly HR expenses (€ million)
Quarterly Non-HR expenses (€ million)
-5.0%
270
+1.7%
310
290
25 0
256
230
210
226
224
19 0
218
217
278
281
290
Q112
Q212
Q312
270
225
244
250
278
290
283
288
282
Q113
Q213
Q313
Q413
230
216
210
190
170
170
150
150
Q112
FY
Q212
924
Q312
Q412
Q113
-2.3%
Q213
Q313
903
FY’13 non-HR expenses 2.3% lower.
Cost containment more than offsetting the normal cost
inflation.
Q413
1,126
Q412
+1.4%
1,142
FY’13 HR expenses 1.4% higher.
Inflation based salary indexation more than offsetting lower
personnel base
Slide 5
Group Ebitda impacted by regulation and mobile margin pressure. Q4 2013 showing slight
improvement from previous quarters
-3.7%
+16
reported
429
-5
+4
Q4
- 17
413
+8
2013
- 17
-8.3%
(in mio €)
-1
-4
Like for Like
Q4 2012
One-off s
2012
One-off s
2013
Regulatory
impact
Underlying
CBU
Underlying
EBU
Underlying
SDE
Underlying
S&S
BICS
Q4 2013
-4.9%
+35
reported
+36
- 48
1,801
FY
- 47
2013
+4
- 61
(in mio €)
+11
1,713
BICS
FY 2013
- 18
-8.7%
Like-for-like
FY 2012
One-off s
2012
One-off s 2013 Regulatory
impact
Underlying
CBU
Underlying
EBU
Underlying
SDE
Underlying
S&S
Slide 6
EUR 852 million invested, or 13.5% of Group revenue, spectrum
license excluded
Increased network investments vs. 2012:




to maintain network superiority on mobile speed and coverage,
substantially increased bandwidth on fixed network via dlm and vectoring technology
making operations leaner through a simplified network
bought the 800 MHz spectrum for € 120 m
972
753
*
13.5%
8 52
426
234
Q4'12
306 *
Q4'13
FY'12
FY'13
*This does not include the € 120 mio capex paid for a 800 Mhz spectrum
Slide 7
FY 2013 performance versus guidance
Belgacom met its FY guidance for EBITDA and Capex, while the revenue guidance was just missed as
BICS revenue declined in Q4’13.
FY 2013
outlook
FY 2013
reported
Group revenue
Decline between
-1% and -2%
-2.2%
Group EBITDA*
Decline between
-4% and -6%
-4.9%
Capex/Revenue
Between
13% and 14%
13.5%**
Metrics
*Compared to the restated 2012 EBITDA of € 1,801 m, following the retrospective application of IAS19R
** excl. € 120m for 800 MHz spectrum
Slide 8
FY’13 Free Cash Flow of € 505 million
Q4
Free Cash Flow (in mio € )
154
95
Q4'12
Belgacom generated € 95m of FCF in Q4’13, or € -59m YoY.
Main drivers for the FCF decline are :
-
lower EBITDA,
higher cash paid for Capex
Higher cash paid for income tax
partly offset by a favorable evolution in working capital.
Q4'13
The 800 Mhz spectrum
license acquired in
Dec’13 for €120m will be
paid in yearly installments
, over a 20 year period.
This Capex is not included
in the FCF as it is a noncash transaction. The
annual reimbursement of
€6 m is considered as a
financing activity in the
cash flow statement.
FY
691
- 88
+51
- 74
+5
505
other
2013
- 79
2012
low er EBITDA* income tax
payments
cash paid for cash provid ed
capex
by w orking
capital
* Excluding non-recurring and non-cash related items
Slide 9
Sound financial position
• Net financial debt at € 1,815m, € 214m higher versus end 2012
• The outstanding long term financial gross debt amounted to € 2.1Bio
• Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook
50 5
(701)
(1,601)
(38)
Net debt
December 2012
Debt maturing
FCF
2015
€ 145m
Dividends
2016
€ 950m
25
Non controlling
Net sale of
interests
treasury shares
2018
€ 500m
2023
€ 100m
(1,815)
(6)
Other
2026
€ 73m
Net debt
December 2013
2028
€ 150m
Slide 10
Consumer
Business
Unit Consumer Business Unit
Dominique Leroy
Dominique Leroy
CEO
Slide 11
Consumer Business Highlights
Our convergence strategy remains successful and is materialised through more value for the customer and new
solutions.
Despite a rough 2013 on the mobile market, we returned to customer growth for postpaid thanks to strong
acquisition campaigns and a persistent churn management.
The pressure on mobile prices resulted in mobile revenue decline. Since Q4’13 we see that it is slowly recovering.
The strong performance for TV and Fixed Internet combined with the contribution of Tango and Scarlet partly
compensated for the loss on mobile service revenue.
Our focus will be on growing through the convergence experience and mobile leadership.
Slide 12
CBU revenues
under pressure by mobile disruption, partly compensated by solid fixed revenue and
contribution of Scarlet and Tango
581
7
4
-6
3
-5
-4
- 24
-4.2%
Q4
556
Reported*
2013
(in mio €)
Q4 2012
Regulatory
impact
Fixed Voice
Fixed Data
TV
Mobile Service
Revenue
Subsid iaries
Terminals &
Others
Q4 2013
* like-for -like idem, no one-off effects in Q4
-4.1%
reported
FY
2,321
7
31
15
- 27
2013
- 14
12
-4.4%
(in mio €)
- 103
2,226
- 16
Like-for-like
FY 2012
Net Impact
One-Off s
Regulatory
impact
Fixed Voice
Fixed Data
TV
Mobile Service
Revenue
Subsid iaries
Terminals &
Others
FY 2013
Slide 13
CBU Mobile Service Revenue
Mobile Service revenue showing first signs of recovery in Q4’13, some mobile disruption
effects started to annualise
Mobile service revenue showing first signs of
recovery in Q4’13
CBU Mobile Service Revenue
0%
Q1'12
Evolution re-priced postpaid customers
- 2%
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
- 3%
- 3%
- 5%
- 6%
- 9%
Reported
On comparable basis
- 13%
- 17%
- 14%
- 14%
- 15%
73% of CBU customers re-priced, pace slowing. Financial impact from remaining 27% expected to be low.
Slide 14
Mobile Postpaid
We increased our Postpaid subscriber base by >200K in 2013.
Mobile disruption had significant ARPU impact, though somewhat stabilising.
solid Postpaid net adds
Blended postpaid ARPU showing some stabilisation
postpaid churn back to acceptable levels
‘out of bundle’ revenue dropped with ~50%
stabilising around 10% of total postpaid revenue
20%
10%
0%
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Slide 15
Mobile Prepaid
In a shrinking prepaid market the customer loss is slowing down. Prepaid ARPU is less
impacted.
Prepaid loss continued, though is slowing since its
peak in Q1’13
Prepaid churn remains high with new telco law removing
postpaid barriers
Prepaid ARPU impact less significant
Slide 16
Launch of 4G for all in January
Combined with a differentiated and high-end abundant offer is showing promising results
High-end abundant offer SMART 50
4G access for all
4G in Brussels
x 2.5
active 4G
users
>50 €
26- 50€
4G traffic
increase +
0- 25 €
68%
Approx. 25% of data traffic is situated in
the Brussels Region
Differentiated offer in function of
pricing plan
Upside potential higher than possible
cannibalisation
End February already >31% population
coverage
Slide 17
Mobile pressure partly offset by solid performance of Fixed Internet…
Fixed internet customer evolution
net adds
total
28
23
1,159
1,169
1,181
1,193
1,203
1,219
1,235
26.9 €
+3.6%
18
13
1,210
Fixed internet ARPU evolution
17
15
8
13
10
12
10
7
3
9
Q1'12
-2
Q1'12
26.9 €
26.4 €
26.4 € 26.5 € 26.1€ 26.3 € 26.7 €
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q4'13
4.5% Revenue
increase in
2013
Driven by growing customer
base &
price changes
Slide 18
…and Belgacom TV
Belgacom TV customer evolution
net adds
60
1,254
40
total
1,301
1,340
1,386
1,412
1,428
1,447
Belgacom TV arpu evolution
1,479
1,400
+6.7%
48
43
1,600
1,200
46
1,000
39
31
26
20
19
16
Q3'12
Q4'12
75% of CBU
Internet customers
have Belgacom TV
Q1'13
Q2'13
Q3'13
Q1'12
Q2'12
18.3 €
Q3'12
Q4'12
Q1'13
18.6 €
18.7 €
19.0 €
Q2'13
Q3'13
Q4'13
800
400
Q2'12
17.6 €
18.2 €
600
0
Q1'12
17.6 €
18.1€
Q4'13
13.3%
Revenue
increase in
2013
Continuously evolving customer usage experience
TV Replay
Test phase in Wallonia
Launched in Flanders
Content
Passes, VoD, …
TV Everywhere
Evolution active users
Slide 19
Our convergence strategy remains Belgacom’s main force….
CBU pack evolution
CBU Pack Net adds
% Packs with mobile voice component
CBU Packs
1,150
1,050
950
918
950
970
993
1,008
1,023
1,040
70
60
884
50
850
40
750
650
30
550
20
10
450
43
34
32
20
22
16
15
17
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
350
0
Revenue generating units (RGU)
All Packs contain 3G mobile internet
volume
All Packs include
TV Everywhere
Up to 6 mobile subscriptions in a
Pack
Pilot launch of Belgacom Cloud
(smartphone, tablet or laptop)
(on 3G, 4G, Wi-Fi)
5G storage
volume in
Pack
Slide 20
…as well as our diverse and locally anchored distribution channel
Human interaction
Belgacom Centers
Partners
50%
‘convergent’
agents
Consumer electronics & telco
specialists
133
shops
Website
Digital interaction
Contact Centers
10% of
Sales
via website
Device
~870K
down-loads
in 2013
Slide 21
Consumer
Enterprise Business Unit
Business
Unit
Jan Manssens
Dominique Leroy
VP Enterprise Business Planning
Slide 22
Enterprise Business Highlights
EBU stood its ground in 2013, which was a very challenging year, marked by a difficult economic & competitive
environment.
EBU continued mobile customer growth through network differentiation and competitive pricing. We see first
signs of recovery on mobile service revenues since Q4’13, though re-pricing still ongoing.
In IT we managed to slightly grow in a stagnating market. The benefits of Telco – IT convergence are
materialising. We create value through cross-selling and there is a positive impact on customer loyalty.
In 2014 EBU therefore continues its strategy. We focus on maintaining our Telco leadership by differentiation
through convergence and servicing while we grow in adjacent IT.
Slide 23
EBU revenues
pressured by mobile disruption and roaming regulation
579
-8
-4
557
-1
-3.8%
Q4
-7
-3
Reported*
2013
(in mio €)
Q4 2012
Regulatory
impact
Fixed Voice
Fixed Data
ICT
Mobile Service
Revenue
Terminals &
Others
Q4 2013
*like-for -like idem, no one-off effects in Q4
-4.2%
2,294
FY
reported
2
2013
- 54
9
- 12
-8
2,198
- 26
(in mio €)
-4.3%
-7
Like-for-like
FY 2012
Net Impact
One-Off s
Regulatory
impact
Fixed Voice
Fixed Data
ICT
Mobile Service
Revenue
Terminals &
Others
FY 2013
Slide 24
EBU mobile differentiation strategy successful
mobile churn under control & subscriber base increased with >140k cards
% EBU Packs with mobile voice component
Continued customer growth
in a highly competitive,
saturated market
26%
8%
Mobile Acquisition EBU (K cards)
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
10%
10%
Q3'13
Q4'13
1,633
1,589
Mobile churn EBU
1,549
1,516
1,449
1,470
1,486
1,413
5
10
8
14%
10
12
10
25
11
Q1'12
Q2'12
11
11
5
19
Q3'12
Q4'12
Q1'13
Mobile Net Adds
28
32
36
Q2'13
Q3'13
Q4'13
M2M Net Adds
Park
17%
8
12%
11%
11%
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
14%
Q2'13
Slide 25
EBU mobile revenue under pressure
further erosion to be controlled
mobile service revenue showing first signs of recovery in
Q4’13
adv. data revenue showing upward trend with regulation impact
lessening
EBU advanced data YoY % growth
EBU Mobile Service Revenue
- 5%
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
- 7%
- 2%
- 4%
- 7%
- 11%
- 9%
- 13%
- 12%
- 13%
16%
Reported
- 9%
13%
9%
On comparab le basis
- 12%
Q1'12
SME ‘out of bundle’ revenue down ~50%, stabilising
around 10% of total SME mobile revenues
Q2'12
-6%
-8%
-7%
-7%
Q3'12
Q4'12
Q1'13
Q2'13
-3%
Q3'13
Q4'13
Evolution re-priced SME customers
20%
~55%
63%
~50%
10%
~35%
0%
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'13
Q2'13
Q3'13
Q4'13
Slide 26
IT of strategic importance for EBU
clear benefits on Telco convergence
EBU’ IT: total revenues (mio €) and Telindus France (potential disposal in 2014)
Benefits IT – Telco convergence are materialising
1
new EBU growth
• IT = 32% of EBU total 2013 revenues
• pure cloud + 12% full year 2013
• security +43% full year 2013
2
cross-sell effect
• in >80% of cases cloud, LAN or UC customers, also have at least one telecom service
3
churn reduction effect
• telco+IT customers have significantly lower telco churn
• customers with 4 to 5 IT products/services, have nearly no telco churn
Slide 27
EBU’s strategy is Telco/IT convergence
making it concrete with an example: New Way of Working
New Way Of Working (NWOW) =
Convergence
Organize business around people by creating flexible workplaces facilitating collaboration
between all stakeholders.
Servicing
 fix + mobile voice / data / video:
secure and anywhere network access.
 E2E servicing
 managed and secured
devices: laptops, tablets & smartphones
 security and privacy assurance
 applications: e-mail, portals, video
conferencing, collaboration tools
As-a-service
 delivered ‘as-a-service’ with a fixed fee
per user per month
 guaranteed SLA’s
 self service tools
Slide 28
Consumer
Business
Unit
Dominique Leroy
BICS
Daniel Kurgan
CEO
Slide 29
BICS Products and Services
Sending
End user
Service Providers
Local partner
• Fixed Operators
• Fixed Operators
• Mobile Operators
• Mobile Operators
• MVNOs
• xSPs
• OTTs
• xSPs
Receiving
End user
Wholesale only,
International only
• Voice
• Mobile Data
Collecting & terminating international voice traffic all over the world
MESSAGING: Ensuring worldwide interoperability for SMS & MMS
ROAMING:
Transport: Signalling, 3G (data) roaming exchange (GRX), IPX
Enabling / Processing: “plug & play”, roaming hub, VAS
• Capacity &
Infra-structure
Terrestrial, submarine, satellite (managed) bandwidth
Slide 30
Global Presence Network
• 100+ Points of Presence (PoPs)
• Ownership in 40 submarine cables
• Satellite connectivity to “hard to reach” countries
Slide 31
Market Segments
Voice
Mobile Data
Capacity
24 B€
1%
2 B€
9%
3 B€
n.a.
3-5%
30-40%
>20%
• CAPEX intensity
Low
Low
High
• Labour intensity
Low
Low
Low
Leader - #2
Leader - #2
“Niche”
• Market size
• Profitability
(EBITDA margin)
• BICS Position
• 2012 revenue
• CAGR bottom line
(mid-term)
Slide 32
VOICE
commodity in declining trend, managed to protect margins
-
+
•
Part of business is volatile: 2014 revenue to decline YoY due to end of commercial agreement of limited duration
•
Growth of Peer to Peer VoIP (Skype) impedes market volume growth
•
Termination rate downward trend pressures revenue and margins
•
Currency fluctuation (mainly EUR/USD) impacts revenue and margin
•
OTT are also new voice customers (Skype Out, Google Voice, …)
•
BICS has the best traffic mix with very high emerging markets exposure (AMEA)
•
Very limited CAPEX requirements to scale it up; BICS has done all the main investments (NGN, OSS & BSS)
 mass volume, low profitability, in decline
Slide 33
Mobile Data
volume growth but price pressure
+
•
Increasing competition in attractive segment. Price pressure on the core services
•
Messaging and Roaming transactions still growing steadily
•
Opportunities provided by new segments (OTT, MVNO), new applications (Machine to Machine, Application to Person) and
technology evolution (4G)
•
BICS’ unrivalled customer base is a USP
 global market growth, fierce competition, need for differentiation
Slide 34
Going Forward
create more value
Extend the product portfolio with a set of
value added services :
business intelligence, fraud protection and
remediation, advanced roaming features…
Leverage on the footprint and the customer
base (400+ GSM operators)
Improve the mix with lower revenue but high
margin products
new services are the catalysts for long term bottom line growth
Slide 35
Strategic priorities
Dominique Leroy
CEO
Ray Stewart
Slide 36
Strategic Priorities : ‘Fit for Growth’
Grow
Back to sustainable growth
Customer Experience
Good to Gold
culture
Transform
Simplification
Invest
Efficient Organisation
Brand differentiation
Leader in convergent services
Seamless network and IT
Slide 37
Invest
Access
networks
To build the foundation of our next wave of growth
• Maintain mobile leadership and further deploy 4G
• Push legacy copper network to max capabilities (vectoring, DLM)
• Gradually introduce FTTH
IT and
systems
•
•
•
•
Push digital (e-sales, e-services)
Renew selling and ordering
Support end-to-end processes
Improve systems stability and (cyber) security
Convergence
services
•
•
•
•
Build seamless fixed-mobile hand-over
Push TV replay, TV everywhere
Leverage cloud, unified communication and collaboration
Develop ICT as a service and security
Brand
image
•
•
Enrich entertainment offer
Introduce new CPE for better in-house experience
We estimate our annual investment needs to be around €900m over the
coming years to cover network, convergence, new services and content
needs
Slide 38
Transform
Develop superior customer experience
•
•
•
•
Product usage experience (TV Everywhere, FON, …)
Touchpoints experience (call centers, technicians, …)
End-to-end process (first time right)
360°customer communication quality
Simplify to structurally reduce cost
•
•
•
•
Products and services portfolio
Network
IT and platforms
E sales and services
Build efficient organization
•
•
•
•
Simpler and leaner organization for faster decision
Reduction of resource costs leveraging pension wall
Right talent at right place
Real performance management
Improve brand differentiation
•
•
•
Address different segments with differentiated offers (Scarlet)
Push convergence via triple-play, quad-play and ICT services
Reinforce brand investment
To support the transformation and commercial brand image, we foresee about € 20m exceptional spending (mainly opex) in 2014.
As from 2014, we ambition to keep workforce cost at least flat over the next 5
years, while pursuing additional cost savings building up to another €100m
annually by 2018 (HR and non-HR opex).
Slide 39
Grow
Regain
market shares
Leverage convergence
value
Capture
new growth
potential
•
•
•
•
Exploit mobile leadership
Improved broadband experience
Roll-out fiber in greenfield and gradually in brownfield to offer the ultimate broadband experience
Superior customer experience (web, shops of the future, …)
•
•
•
Deliver solution-centricity to unlock value in EBU
Exploit upselling potential to quad-play
Leverage seamless network integration and convergent applications
•
•
•
•
Pursue data monetization
Leverage entertainment platform
Seize the opportunities of cloud and security
Be selective in development of new innovative services
We ambition to return to top line and EBITDA growth within 2 years
Slide 40
Network and Simplification
Geert Standaert
EVP Service Delivery Engine & Wholesale
Ray Stewart
Slide 41
Network & simplification strategy
Invest and transform to return to growth
Strategic focus is to invest in our Access Networks, in Simplicity and in better Customer Service
Invest in Mobile
Maintain our mobile network leadership by
using all our assets while coping in an
intelligent way with the strong mobile data
growth
Invest in Fixed
Push our legacy copper network to maximum
capabilities while gradually introducing FTTH
in function of copper network renewal
Transform to reduce cost
Accelerate simplification of networks to
decrease operational costs and employ new IT
enablers to simplify products & processes for
better customer service & higher efficiency
Slide 42
1
Invest in Mobile
Maintain mobile network leadership
Belgacom is determined to maintain its mobile leadership through continued investment
Best mobile 3G network
Best mobile 4G network
• Significantly better 3G indoor coverage in comparison with competition
• Further improvement of 3G indoor coverage by addressing weak spots and
coverage on railway lines
• First to reach 50% outdoor population coverage and first to deploy 4G in
Brussels (11/02) in line with adapted regulations
• Nationwide 4G coverage by EO 2014
3G indoor coverage 1
Number of Belgians reached with 4G coverage 2
Belgacom
Mobistar
Base
1
92.9%
89.3%
89.0%
Proximus
BASE
5,800,000
4,200,000
Mobistar
Result based on Q4 2013 national drive test conducted by independent agency CommSquare | 2 Number of Belgians reached with 4G coverage on 21/02/2014. With Mobistar 4G in test phase no data is available
Slide 43
1
Invest in Mobile
Zoom-in: importance of Brussels in Mobile business
High business importance of large urban area of Brussels with nearly a quarter of all data traffic of Belgacom driven by this area. Therefore, important
to be a first mover in 4G seen high market potential
Best mobile 3G network in the Brussels region
Best mobile Voice network in the Brussels region
• High concentration of large enterprises and European & International
institutions in capital of Europe
• 350.000 commuters working in the Brussels region every day next to
1.1 million inhabitants
• Strongly positioned in Brussels with substantially better 3G indoor
coverage vs competition
• High quality mobile voice network in Brussels with 40% less
interrupted voice calls vs competition
3G indoor coverage in Brussels Region 1
Proximus
96.8%
Mobistar
Base
1
Level of non-interrupted calls in Brussels region 1
93.3%
87.8%
Proximus
Mobistar
Base
Result based on Q4 2013 national drive test conducted by independent agency CommSquare measured throughout the 19 communes of the Brussels Capital
97.5%
95.5%
95.8%
Slide 44
1
Invest in Mobile
Best mobile experience for our customers
Belgacom to bring the best mobile experience possible to its customers in a technology agnostic way through implementation of 4G speed tiering and
through introduction of seamless convergence of network connectivity
Speed tiering with 4G for everyone
Seamless convergence of network connectivity
• All customers with 4G capable devices will have access to 4G through 2 different
experience levels
• Employ our fixed assets for better mobile experience with our nationwide network
of 800.000 WiFi hotspots (EO JAN)
• TIER 1 customers to benefit from maximum 4G capabilities while TIER 2
customers enjoy a 4G experience capped at 20 Mbps
• Implement seamless handover of device-connectivity between fixed & mobile via
intelligent steering and EAP-SIM technology
•1 With quickly emerging need for 4G, high focus required to avoid over-investment
in 3G capacity passed forecasted inflection
2• Through tiering, ~10% of 3G data traffic on 4G capable devices can be already
pushed to 4G in 2014
1• Employ intelligent steering to assure highest data experience on mobile devices
by selecting best available network
2• Clever off-load strategy through transparent handover of device connectivity
from WiFi to WiFi, WiFi to 3G/4G or 3G/4G to WiFi
Slide 45
2
Invest in Fixed
Dynamic investment track ahead of us
Push our legacy copper network to maximum capabilities while gradually preparing for the introduction of
Fiber-To-The-Home (FTTH) in Brownfield areas in function of copper network renewal
Speed evolution in Mbps 2014 to >2018
up-to
Download speed
6
1000 Mbps
FTTH in Brownfields areas Trial 2014
in function of copper network renewal
up-to
200 Mbps
5 FTTH in new zonings
Start Q1 2014
up-to
100 Mbps
up-to
4 Vectoring + Dynamic Line Management for Vectoring
3
70 Mbps
2
Vectoring on VDSL2 for customers < 700 m
Vectoring on VDSL2 for customers < 400 m
up-to
50 Mbps
30
Mbps
1
VDSL2
Dynamic Line Management on VDSL2
Done Q1 2013
Start Q1 2014
Start Q1 2015
Start Q2 2015
2
Invest in Fixed
1
Step Dynamic
Line Management & Step Vectoring
2
After 2.5 years of intensive engineering efforts in close collaboration with Alcatel-Lucent the Vectoring technology has been proven to work on our
network. Mass roll-out started at beginning of 2014
Fast track Dynamic Line Management (DLM)
Vectoring working live on our network today
DONE
Q1 2013
DLM monitors stability of lines and dynamically applies maximum possible speed
when a line is sufficiently stable
1 • To up-to-50 Mbps speeds – One third of our VDSL2 lines already receives a 50 Mbps
speed
2 • 30% higher average speed experience – Thanks to DLM, the average speed
experience increased with 30%
START
Q1 2014
Vectoring technology cancels crosstalk in the copper cables resulting in a
significant bit rate increase of copper lines
1• Vectoring is working – Vectoring works on our network with
70 Mbps download speeds at videograde quality
2• Roll-out started – Mass deployment started to activate Vectoring for customers < 400m
(60% of population)
Slide 47
2
Invest in Fixed
Zoom-in: Vectoring working live in our network today
Belgacom is First in the World with nationwide activation of the Vectoring technology on an existing VDSL2 network for a significantly better broadband
experience
Powerful vectoring technology
Results from the technical field trials
Through cancellation of crosstalk on a VDSL2 line, Vectoring proofs to enable
remarkably higher speeds
In-depth technical field trials were conducted involving 1000+ customers with
both moderate, high and excessive crosstalk
Effect of enabling Vectoring on VDSL2 lines part of the Technical Field Trials (in Mbps)
1 • Speed boost to 70 Mbps – 98% of Vectored lines < 400m in the technical field trial
160
120
100
Attainable bitrate in Mbps0
140
Capping at 70 Mbps
video-grade speed
synchronised to 70Mbps
TO
2 • Videograde quality maintained – 98% of vectored lines adhere to the required high-
80
quality videograde criteria of IPTV
60
40
FROM
20
maintained after Vectoring activation
Attenuation
0
0
2
4
6
8
10
12
14
3 • No impact on installed-base – Performance of existing modem installed base is fully
16
Slide 48
2
Invest in Fixed
3
Step Vectoring
optimization & Step DLM on top
4
To further increase bandwidth the Vectoring technology will be further optimized to support higher ranges while Dynamic Line Management (DLM) will be
employed on top of Vectoring to reach up-to-100 Mbps speeds
Further optimization of Vectoring technology
Dynamic Line Management on top of Vectoring
START
Q1 2015
START
Q2 2015
Extend Vectoring capabilities beyond 400 meter through further optimization of
the technology (between 400-700m)
1• 80% of population – Through this evolution, 80% of population will benefit from
Vectoring speeds
Belgacom is the only operator with the in-house developed technology DLM that
brings speed at maximum line capabilities
2
Towards 100 Mbps – DLM will be applied on top of our Vectored lines to increase
speeds to up-to-100Mbps in videograde quality
Slide 49
2
Invest in Fixed
5
6
Step FTTH
in new zonings & Step FTTH in Brownfields
Belgacom will deploy Fiber-To-The-Home (FTTH) deployment in new residential zonings and will gradually and selectively introduce FTTH in function of the
step-by-step renewal of our copper network
FTTH in new zonings
FTTH in brownfields
START
Q1 2014
Fiber deployment costs are comparable to copper deployment for new residential
zonings
•1
FTTH in Greenfields – FTTH Greenfield development and
pre-equipment of new residential zonings
TRIAL
2014
Prepare for FTTH in Brownfield areas to allow gradual replacement of the legacy
copper network over time
2 • FTTH in Brownfields – Small scale FTTH trial will be prepared and started
Slide 50
3
Transform to reduce cost
Network simplification on track with 650.000 lines migrated
Network Simplification aims at simplifying our network & decreasing operational costs and generates savings as of year one growing to 35M€ recurrent
savings as from 2018
DONE
Fixed Voice consolidation
3.700.000 PSTN equivalent lines to migrate and 1000
250.000 customer lines to be migrated by end of 2014
switches to be removed by 2018
while securing professional data revenues
• 410.000 PSTN equivalent lines have been
• 242.500 customer ATM lines have been
migrated
• 2014: Migrate 640.000 PSTN equivalent lines
PLAN
Fixed Data consolidation
and 200 switches (which is approximately 1 per
working day)
migrated
• Finalize 100% of migrations by 2015
Technical Building outphasing
Outphasing & selling of 30 technical and office buildings
(saving of 250.000 m² technical floor space; 23% of
total)
• 19 buildings were notified to BIPT; 6 buildings
sold in 2013 (31M€ cap gain)
• Further building sales planned
• Expected capital gains in 2014 about the same
amount as 2013
Slide 51
3
Transform to reduce cost
IT enablers for higher efficiency & simplicity
Employ new IT enablers to simplify products & processes for better customer service & higher efficiency
IT to enable a converged customer experience
Full convergence of IT architecture with IT platforms to support a horizontal product
Drive higher efficiency & simplification through transformation in a converged environment
portfolio instead of vertically siloed products
with lean operations
1 • New selling environment – New selling & ordering tools for call centers & shops
with product catalogue for simplified portfolio
2
IT to enable higher efficiency & simplicity
• Higher customer touch point experience – Better e-servicing experience,
improved quotations, more customer friendly billing lay-out, aligned pre-period
billing for mobile & fixed,…
3 • More efficient field force – Solve issues more proactively and remotely through
complete view on devices in customer home
• Reduce order introduction time with 50%
• Increase automatic order handling with 25%
• Reduce customer complaints with 25%
• Improve predictability of timely delivery of solutions with 50%
• Reduce repair field interventions with 15%
Evolution towards a Digital Belgacom through strong e-transformation to become a more
accessible and open company for our customers in terms of finding, buying, servicing and billing
Slide 52
Conclusion
Ray Stewart
CFO
Ray Stewart
Slide 53
2014 Outlook
Revenue:
•
Core business (excl. BICS): 1% to 2%
revenue decline, assuming continued
stability in the Belgian Mobile market.
•
BICS: 2014 revenue could be 10% to 15%
lower versus 2013, though should only have
a minor impact on Belgacom Group EBITDA.
Group EBITDA:
•
Decline by
3%-4%
Group Capex:
•
About €900 m
Guidance includes:
• Capital gains for about the same amount as in 2013
• About € 20m exceptional spending(mainly opex) on transformation & commercial brand image; offset
by an accounting alignment within the company for capitalisation of network installation activities for
customer connections as from of 1 January 2014.
Guidance excludes: effects of potential disposal of Telindus France for which Belgacom is in exclusive
dialogue with Vivendi.
Slide 54
Shareholder return
On 27 February 2014, Belgacom’s Board of Directors approved:
For the year 2013: To propose to the Annual Shareholder Meeting of 16 April 2014 to return to the shareholders a total
dividend of EUR 2.18 gross per share, of which EUR 0.50 per share was paid in December 2013 and EUR 1.68 per share
is payable in April 2014:
• Ex-coupon date: 22 April 2014
• Record date: 24 April 2014
• Payment date: 25 April 2014
Furthermore, Belgacom’s Board of Directors intends to continue to award Belgacom’s shareholders with an attractive
and sustainable dividend. Therefore the Board of Directors intends to pay out a stable yearly dividend of EUR 1.50 per
share (interim dividend of EUR 0.50 and ordinary dividend of EUR 1.00) for the next 3 years to come, provided
Belgacom’s financial performance is in line with its expectations.
Slide 55
Q&A
Investor & analyst meeting
Friday 28 February 2014
Slide 56