Q2 2020 Financial Results Orange Belgium July 24, 2020 - - PowerPoint PPT Presentation

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Q2 2020 Financial Results Orange Belgium July 24, 2020 - - PowerPoint PPT Presentation

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Q2 2020 Financial Results Orange Belgium July 24, 2020 Disclaimer This presentation might contain forward-looking statements about Orange Belgium in particular for 2019. Although we believe these statements are based on reasonable

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Orange Belgium

Q2 2020

Financial Results

July 24, 2020

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2

This presentation might contain forward-looking statements about Orange Belgium in particular for 2019. Although we believe these statements are based on reasonable assumptions, they are subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved. Important factors that could cause actual results to differ from the results anticipated in the forward-looking statements include, among others: the economic situation in Europe and more specifically in Belgium, the impact of price adjustments on the customer base resulting from competitive pressure, the evolution of the customer base, the effectiveness of Orange Belgium’s convergent strategy including the success and market acceptance of the voice and data abundance plans in the business segment and of the Orange Internet & TV offers, of the Orange Belgium brand and other strategic, operating and financial initiatives, Orange Belgium’s ability to adapt to the on-going transformation of the telecommunications industry, regulatory developments and constraints and the outcome of legal proceedings, risks and uncertainties related to business activity.

Disclaimer

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3

Section one COVID-19 impact

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4 Orange Restricted

4

Orange Belgium follows the authorities’ recommendations in every step

  • f the lockdown

March April May

Lockdown lifting starts

  • 2-Mar: OBEL takes preventive measures
  • 3-Mar: Government announced lockdown
  • 14-Mar: Shops closed on the weekends
  • 18-Mar All shops closed completely
  • 04-May: Gradual ease of coronavirus

lockdown measures

  • 11-May: All shops reopened
  • 18-May: gradual return to the office

Lockdown starts in Belgium Lockdown continues in Belgium

  • Social distancing remains key:

rearrangement of office space to guarantee the 1.5m distance rule

  • Safety kit distributed
  • Continuous contact with various

government bodies and follow updates and recommendations closely

  • 06-Apr: Shops could be visited in

specific cases only with appointments

  • Social distancing remains key:

rearrangement of shop space to guarantee the 1.5m distance rule

  • Frequent safety audits
  • Safety kit distributed
  • Sanitary measures shared with our

stakeholders

  • Continuous communication at different

levels

  • Measures taken to strictly comply with

health regulations

  • Safety guide developed
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5 Orange Restricted

5

COVID-19 impact in Q2’20: €38.2m total impact on revenues – mitigated on the EBITDAaL

EBITDAaL Revenues Commercial

  • lower acquisition of mobile

customers and convergence

  • Lower incoming

SMS

  • Lower incoming SMS have no

impact on EBITDAaL

  • Declining roaming is

compensated by lower roaming costs

  • Lower equipment sales have

limited impact on EBITDAaL

  • Mitigation measures applied
  • lower handset sales
  • decrease in SMS and roaming

traffic

  • €16.0m
  • Lower visitor roaming
  • €5.8m
  • Lower handset

sales

  • €11.7m
  • Lower B2B revenues due to

frozen project

  • Lower customer roaming - €4.7m
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Section two Q2 2020 Highlights

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Orange Belgium keeps improving its offers during Q2

Download speed increased from 200 Mpbs to 400 Mpbs Offer available to residentials, independents and SoHo

Internet boost Revamping B2B offers (Shape & Fix)

New ultra-fast 400 Mbps internet connection Automatic double data

  • n the

mobile fleet Additional

  • ptions such as

fixed phone or television

As a Bold Challenger, we follow closely the habits of our customers and we know a fast and reliable connectivity is key..

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The Jupiler Pro League will be available to all Orange customers, convergent and mobile, for 5 years as from August 2020

Orange Belgium is the first player signing a distribution agreement allowing to make the Jupiler Pro League available for its customers The 3 existing Eleven Sports channels remain included in the standard digital TV package without any additional fee Orange Love Duo and mobile customers will be able to subscribe to Eleven Sports monthly OTT passes to watch Belgian football online This content will be available at reasonable prices, without customers having to pay for additional content in large content bundles

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Q2 2020 Key achievements

Mobile contract

  • excl. M2M

2.6 m

3.1% yoy

Convergent customers

288 k

+33.6% yoy

Net additions

+ 7 k + 8 k

Mobile contract

  • excl. M2M

Convergent customer

  • f total

postpaid mobile base is convergent

17.8%

Belgium

*based on 2019 comparable figures

Belgium Belgium Belgium

Revenues

€302.8 m

  • 7.9%* yoy

Retail service revenues

€221.0 m

+2.1%* yoy

EBITDAaL

€86.0 m

+9.7%* yoy

eCapex

€29.8 m

  • 30.7% yoy
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Section three Operational Results

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Convergence: customer base increase in spite of the COVID-19 impact +8k

Love customer net adds,

  • 47.7% yoy

1.6

SIM cards per convergent customer

  • f total postpaid

mobile base is convergent (Q2’19: 13.6%)

17.8%

Customers Net adds

+33.6%

Love customers yoy variation Love (‘000) Convergent mobile (‘000)

15%

  • f convergent

customer base is Love Duo

20

Q4 2018

14

Q2 2018 Q3 2018

19 258

Q2 2019

25

Q1 2019

233 16 17 180

Q3 2019

155 25

Q4 2019

21

Q1 2020

8

Q2 2020

136 200 216 280 288

Q1 2019

462 283 20 36

Q2 2018 Q3 2018

41

Q4 2018

33 25

Q2 2019

30

Q1 2020 Q3 2019

39

Q4 2019

40 12

Q2 2020

411 207 243 317 342 372 451

* *

*Impacted by COVID-19

* *

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Growth of the mobile postpaid customer base within a competitive landscape and COVID-19 impact

B2C mobile convergent Mobile only (incl. B2B mobile convergent)

Customer base (‘000)

4 7 33 33 11 22 25

  • 2
  • 24
  • 4

Q1 2020 Q2 2019

7 31

Q3 2019

32 26

Q4 2019 Q2 2020

9

Net adds (‘000)

319 294 2,222 2,227 Q2 2019

2,594

2,229 Q3 2019 352 Q4 2019 385 2,202 2,198 Q1 2020

2,548

396 Q2 2020

2,579 2,516 2,588

+3%

*Impacted by COVID-19

* * * *

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Mobile prepaid: continued decline in Q2 mainly due to COVID-19 effect

557 553 532 511 483

Q2 2020 Q1 2020 Q2 2019 Q3 2019 Q4 2019

  • 13%

Customer base (‘000)

  • 4
  • 4
  • 21
  • 21
  • 28

Q2 2019 Q3 2019 Q4 2019 Q2 2020 Q1 2020

Net adds (‘000)

* * * *

*Impacted by COVID-19

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Mobile: Average mobile data usage close to 5 GB

0.5 0.1 EoP 2013 1.3 0.3 0.3 EoP 2014 EoP 2018 4.5 EoP 2019 EoP 2017 2.5 3.3 1.8 4.1 EoP 2Q19 1.3 4.1 4.9 EoP 2016 EoP 2Q20 0.9 EoP 2015 0.9 3.7 3.2 0.6 +120% +57% +55% +35% +79% +38% +21% On total users base On smartphone user base Q1 15 Q3 15 Q1 14 Q3 17 Q2 15 Q1 18 Q1 17 Q2 14 Q3 14 Q1 16 Q4 14 Q4 15 Q2 16 Q3 16 Q4 16 Q2 17 Q4 17 Q2 18 Q3 18 Q4 18 Q1 19 Q1 20 Q2 19 Q3 19 Q4 19 Q2 20 +27% 4G 3G

Average mobile data usage (GB) (excl. MVNO) Total mobile data traffic evolution (Gb)

(excl. MVNO)

96%

% 4G in total traffic (Q2’19: 95%) Total mobile data traffic yoy increase

+27%

Average mobile data usage (smartphone), +21% yoy

4.9 GB

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Slight decrease in B2C convergent ARPO and in mobile-only ARPO

76.8 77.7 76.7 75.9 75.6 +4.1%

Q3 2019 Q2 2019

+1.3% +1.6%

Q4 2019

  • 1.9%

Q1 2020

  • 1.5%

Q2 2020

Quarterly B2C convergent ARPO (€)

Convergent yoy

Quarterly mobile only ARPO (€)

20.6 21.2 20.4 20.3 19.7 7.1 6.7 6.9 6.7 6.4

  • 2.6%
  • 2.5%

Q1 2020 Q4 2019

  • 3.2%

Q2 2019

6.4

Q3 2019

  • 1.6%
  • 4.6%

Q2 2020

7.1 6.7 6.9 6.7

Postpaid (mobile-only) Prepaid yoy Postpaid

* * * *

*Impacted by COVID-19

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Regulatory update (1/2)

  • 25 November 2019: Orange Belgium and Proximus signed an agreement to establishing a 50-50 JV on

radio mobile access network sharing, covering 2G, 3G, 4G and 5G technologies

  • 10 January 2020: CA provided the BIPT an additional period of 2 months during which they can further

assess the agreement

  • 16 March 2020: the period during which interim measures applied expired
  • 1 April 2020: the employees of Proximus and Orange Belgium were transferred to the JV, named Mwingz
  • The procedure on the merits is ongoing

Cable Regulation Wholesale Pricing Network sharing agreement with Proximus

  • 27 May: CRC published its final decision on new cable wholesale tariffs entering into force on 1 July
  • Orange Belgium takes note of the final decision of the regulators, and:

Regrets that the EC’s comments have only marginally resulted in changes to the draft decision Considers that the wholesale charges, especially for the high-speed internet access services, will remain significantly above ‚fair charges‛ to the detriment of consumers Requests the regulators to monitor closely the effects of this decision on the price evolution for Belgian customers; and to initiate a review of the wholesale prices as soon as a negative effect is observed

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17 the proposal to increase the reserve price for the 3.6 GHz spectrum band

  • End 2019, the BIPT launched a consultation regarding various spectrum related matters mainly to deal

with intermediate and/or associated spectrum matters

Spectrum and 5G auction

  • The structural auction for the mobile spectrum is not expected before H2 2021
  • A call for candidates for the remaining 2.6 GHz license of 2 X 15 MHz expired mid May. Citymesh has

submitted an application which BIPT will now examine in more detail

  • 10 June: the BIPT launched a consultation on the request of a five-year extension of Gridmax’s licence for

spectrum in the 3.5 GHz band until 6 March 2026. The consultation ended on 13 July 2020

  • 15 July: the BIPT granted five operators (Orange, Proximus, Telenet, Cegeka and Entropia) temporary usage

rights in the 3.6-3.8 GHz band. Each operator gets 40 MHz. with usage rights starting 1 August .The licenses expire at the start of the usage rights of the auctioned spectrum

  • Orange Belgium considers that spectrum allocations should go along with long-term visibility, together with

deployment obligations in order to ensure that operators effectively invest in networks and use spectrum in an efficient and effective way

  • No commitments on a review of the applicable EMF-norms, while resistance against 5G appeared

the extension of the 900 MHz, 1800 MHz and 2100 MHz licenses beyond the current expiry date of March 2021 the new framework for private ‚5G‛ licenses in the 3.8-4.2 GHz band

Regulatory update (2/2)

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18 Orange Restricted

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Empowerment Digitalization Simplification

  • Launch new GO offer portfolio
  • Migration from legacy offer

started

  • Renegotiation of IT & Network

contracts with partners

  • Focus on non-physical sales

channels (boosted by COVID-19 context)

  • Increase of customer digital

interactions

  • eShop launched
  • End-to-End responsibility
  • Initiatives to develop agile way
  • f working within the
  • rganization
  • First call resolution

3 year transformation plan:

Q2’20 update

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Section four Financial Results

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Retail service revenues: solid growth despite COVID-19 impact

207.0 221.8 222.8 224.8 221.0 +9.6%

Q2 2019 Q4 2019

+7.1%

Q3 2019

+4.6% +6.5% +2.1%

Q1 2020 Q2 2020

Retail service revenues (€ m)

Retail service revenues yoy (comparable basis)

* *

*Impacted by COVID-19

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Convergent service revenues: strong growth

41.0 44.3 48.2 51.7 54.6

Q4 2019 Q3 2019

+54.2% +69.9%

Q2 2019 Q1 2020

+35.8% +47.7% +33.2%

Q2 2020

Convergent service revenues (€ m)

Convergent service revenues yoy

* *

*Impacted by COVID-19

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Mobile only service revenues decreased due to convergence uptake and COVID-19 impact

Mobile only service revenues (€ m)

153.3 155.4 150.5 148.4 142.3 +0.1%

Q2 2019 Q4 2019 Q3 2019

  • 2.2%
  • 2.5%
  • 3.9%

Q1 2020

  • 7.2%

Q2 2020 Mobile only service revenues yoy

* *

*Impacted by COVID-19

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23 23

Orange Belgium Group: Q2 2020 strong EBITDAaL growth continues

Q1’19 and Q2’19 figures on a comparable basis Q1’20 and Q2’20 figures affected by COVID-19

Q1 Q2 Q3 Q4 2020 328.7 333.9 369.5 327.7 334.3 2019 302.8 Label Label

1,360.1 636.6

2020 79.6 57.8 78.4 83.6 86.0 2019 62.2

299.4 148.2

Revenues (€ m) EBITDAaL (€ m)

+1.9% +7.6%

  • 7.9%

+9.7%

*

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Revenues evolution (€ m)

+9.8 +13.6 Q2 2020

  • 11.0

Q2 2019 Reported BKM

  • 16.0

Q2 2019 Comparable +2.0 Retail service revenues +1.6 +302.8

  • 11.7

+4.6 Wholesale revenues +1.4

  • 5.8

+318.9 +328.7

  • 18.8

Equipment sales + Other revenues

  • 7.9%

Convergent service revenues Mobile service revenues MVNO

+

Fixed & IT service revenues

Revenues growth driven by increase in retail service revenues

Other SMS Roaming

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EBITDAaL evolution (€ m)

+26.7 +7.0 +4.6 Labor costs

  • 25.9

Q2 2019 Reported

  • 0.1

Revenues

  • 11.7
  • 18.8

Q2 2019 Comparable BKM +78.9 +78.4 +86.0 Q2 2020

  • 0.5

Direct costs Indirect costs +9.7% +

EBITDAaL increased thanks to higher retail service revenues and cost efficiencies

Retail service revenues Wholesale revenues Equipment sales and

  • ther

revenues

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7.3

Q2 2019

13.1%

11.0 22.5 31.9

9.8%

Q2 2020

42.9 29.8

  • 30.7%

Cable capex incl. CPE, IT & Network, etc. Core capex Total capex to total revenues ratio

eCapex (€ m) Net debt

€181.3 m

Net debt/EBITDAaL

0.6x

Q2 Q2 2020 eCa Capex

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Revenues EBITDAaL: eCapex: Operating cash flow:

€35.1 m €6.4 m €7.3 m

  • €0.9 m

+35% +€4.0 m

  • 34%

+€7.8 m

Variations

Q2’20: Cable fin inancials on the wa way y to be be cash flo low w po posit sitiv ive

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Section five 2020 guidance

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Initial Guidance

Revenues growth EBITDAaL eCapex Low-single digit growth vs. 2019 €310-330 m Stable vs. 2019

(excluding the RAN sharing agreement)

Updated 2020 guidance

Updated Guidance

Slight decrease in revenues vs. 2019 on a comparable basis €310-330 m Slight decrease vs. 2019

(including the RAN sharing agreement)

  • Reduced headwinds in comparison to 2019
  • Brand fees: full year impact
  • MVNO revenues: full year impact of Medialaan
  • Final decision on cable regulation applicable as of July
  • Savings with our Bold Inside program
  • COVID-19 impact: decrease in SMS traffic, roaming traffic, handset

sales, B2B IT & Integration services, potential B2B bad debt, in parallel to the mitigation measures applied

Outlook

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Revenues growth EBITDAaL eCapex

Updated 2020 guidance follow-up

Updated Guidance

Slight decrease in revenues vs. 2019 on a comparable basis €310-330 m Slight decrease vs. 2019

(including the RAN sharing agreement)

Q1’20

+1.9% €62.2m

  • 4.8%

H1’20

  • 3.0%

€148.2m

  • 18.7%

Outlook

  • Reduced headwinds in comparison to 2019
  • Brand fees: full year impact
  • MVNO revenues: full year impact of Medialaan
  • Final decision on cable regulation applicable as of July
  • Savings with our Bold Inside program
  • COVID-19 impact: decrease in SMS traffic, roaming traffic, handset

sales, B2B IT & Integration services, potential B2B bad debt, in parallel to the mitigation measures applied

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Section six Q&A

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Orange Belgium

Q2 2020

Financial Results

July 24, 2020