Orange Belgium. Financial Results Q Analysts and Investors Roadshow presentation. Orange Belgium Q Financial Results

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1 Orange Belgium Financial Results Q Analysts and Investors Roadshow presentation 1

2 Disclaimer This presentation might contain forward-looking statements about Orange Belgium in particular for 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. 2

3 Section one Business review Michaël Trabbia Orange Belgium, CEO 3

4 Solid commercial start of 2018 with strong retail service revenue growth Strong underlying adjusted EBITDA impacted by lower MVNO revenues convergent LOVE customers 122 K +19k Quarter-on-quarter Retail service revenues 181m +6.2% Year-on-year Mobile contract customers 2,329 K Mobile only contract ARPO 21.1 Adjusted EBITDA 60.6m Total CAPEX 32m (-1.3 % YoY) + 14k Quarter-on-quarter +0.2 % Year-on-Year % Year-on-year 4

5 Orange Belgium s key growth drivers - the bold challenger Convergence Mobile data monetization Customer experience Double data with Shape & Fix Smartphone IoT/M2M B2C B2B B2C/B2B B2B Digital Orange transformation Thank You 5

6 Convergent highlights Orange Belgium establishes itself as a convergent operator Launch of Fixed phone option Launch of integrated convergent LOVE offer Launch of LOVE double data offer >100K convergent LOVE customers Launch of LOVE unlimited Q Q Q Q Implementation of Easy Switch Start / End of the consultation on draft decision regarding the analysis Decision of court of appeal on 2013 & 2016 tariffs Sports content added to LOVE Wild life content added to LOVE 6

7 Orange LOVE counts 122 thousand customers ~40 % of all new LOVE customers are new to Orange Belgium 110 K B2C Convergent customers 1.5 B2C mobile convergent customers ARPO* B2C convergent customers * Average quarterly Revenues Per Offer (ARPO) of convergent services are calculated by dividing (a) the revenues from convergent offers billed to the B2C customers (excluding equipment sales) over the past three months, by (b) the weighted average number of convergent offers over the same period.

8 Orange Belgium s convergent model drives mobile cross-selling Increased share of mobile convergent customers in total postpaid base ~40 % of gross adds were new customers for Orange Belgium in Q Q LOVE customers 18 Q Q Q Q convergent mobile customers >50 % have an out-of pocket > K Q Q K +30 Q K 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q Q Convergent mobile customers as % of mobile contract customer base (Belgium) Q Q % Q Q Q Q % Q Q Q Q Q Q Q Q Q Q

9 Orange Belgium is also embracing convergence in the B2B-segment by understanding its customers and tailor products & services to their needs Segment Offer Go-to-market CMA SMA Corporate & Major Accounts Small & Medium Accounts Dedicated Service Level Agreements Direct sales Indirect sales SOHO Small & home offices Indirect sales + shops 9 11 K B2B convergent customers 24 K B2B mobile convergent csutomers

10 Orange Belgium & Orange Business Services signed a sales agreement with the objective of extending our B2B services Belgian convergent operator with strong local presence Global integrator of communications products and services Mobile connectivity Fixed connectivity Digital TV services Distribution channels Points-of-sales Brand recognition Boost sales Increased commercial cooperation Increase customer satisfaction A common Orange value proposition Enriched connectivity IoT and data analytics Cyberdefense Business innovation Collaborative workspace Flexible IT IT Services 10 Offer more services A step further towards an IT convergence

11 Orange Belgium s key growth drivers - the bold challenger Convergence Mobile data monetization Customer experience Double data with Shape & Fix Smartphone IoT/M2M B2C B2B B2C/B2B B2B Orange Thank You Digital transformation 11

12 Growing contract customer base and ARPU in Q Sustaining its sound position in a competitive mobile market Launch of KOALA Limited Edition Launch of integrated convergent LOVE offer Launch of LOVE double data offer Launch of smartphone instalment offer Launch of Panther Limited edition Launch of EAGLE unlimited data plan Q Q Q Q Q Implementation Roam-Like-at-Home BIPT confirms Orange Belgium as a customer oriented operator Boosted Easy Implementation prepaid ID-registration 12

13 4G smartphone penetration increased to 61 % of total customer base Orange Belgium constitutes a top 4G network in BE Active smartphone penetration % of active smartphone users / total base 4G coverage: 99.9% (Belgian population) 63% 69% 74% In MB 46% Q Q Q Q Active 4G smartphone penetration % of active 4G smartphone users / total base In MB 19% 35% 50% 61% 13 Source : Open Signal Q Q Q Q1 2018

14 Average mobile data usage/month of smartphone users up by 47% yoy Data usage is an individual journey, but everyone seems to want more of it Orange Belgium s average mobile data usage per month +47% +35% - Double data for all LOVE customers +55% - Eagle unlimited +56% % EoP 2013 EoP 2014 EoP 2015 EoP 2016 EoP 2017 EoP 1Q17 EoP 1Q18 On total user base On smartphone user base 14

15 Mobile data usage growth increased by +60 % yoy 90 % of total data consumption is 4G traffic 90 % 4G data 80 % 4G data 4G users 1.8 million Orange Belgium 62 % 4G data 4G 61 % of total base 4G launch 4G 3G 3G Total traffic up >10 times since 4G launch Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q

16 Confirmed mobile only ARPO growth thanks to value management Impact of EU-roaming is more than compensated by mobile data monetization Mobile only contract excl. M2M ARPO (in ) 0.2% Mobile only blended excl. M2M ARPO (in ) 2.9% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Mobile only prepaid ARPO (in ) 3.3% Q1 17 Q2 17 Q3 17 Q4 17 Q Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

17 Mobile only prepaid Mobile only contract excl. M2M B2C Mobile convergent Orange Belgium Q Financial Results Q mobile contract net adds (+14K) increased strongly yoy Mobile only customers are becoming convergent mobile customers Quarterly customer base evolution (in 000) Quarterly net adds (in 000) 65 Q Q Q Q Q ,185 2, ,179 2,178 2, Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 B2C mobile convergent Mobile only contract Q1-17 Q2-17 Q3-17 Q4-17 Q Q Q Q Q Q1-18

18 Leveraging 15 years of IoT/M2M experience to seize the future With the arrival of big data and AI, IoT/M2M is coming at age 5G 1, M2M SIM cards (in k) Q16 1Q17 1Q18

19 First nationwide network in Belgium to support Internet of Things Reaching immediately nationwide coverage both indoors and outdoors Orange Belgium s Narrow Band-IoT (NB-IoT) and LTE-M network can connect millions of everyday objects to the Internet as it is designed for IoT applications that are low cost, use low data rates, and require long battery lives 19

20 Orange Belgium s key growth drivers - the bold challenger Convergence Mobile data monetization Customer experience Double data with Shape & Fix Smartphone IoT/M2M B2C B2B B2C/B2B B2B Digital Orange transformation Thank You 20

21 Meet customers expectations with a best-in-class digital experience Its all about customer experience, revenue growth & operational efficiency Design Phase Salesforce & Vlocity Implementation Phase Implementation & Run Phase This program aims at offering an integrated, omni-channel user experience: on the desktop at home, on mobile devices on the go, over the phone with a customer service agent and in the Orange stores. New advanced capabilities of digital selling, self-service and marketing, will boost value and increase efficiency 21

22 Increasing usage of Big Data to better understand customers needs Orange Belgium is progressively rolling out a big data platform: Benefitting from the data provided by its network, sales, customer service and customers consumption patterns to optimize its offers. Customer Base Management Improved customer experience Efficiency Fraud e.g. better management of 1to1 campaigning e.g. Improved customer network experience e.g. optimization of energy used by network e.g. early detection of bad payers The use of big data also allows more targeted investments in the network, improvements in churn management, as well as an increased effectiveness of revenue assurance and fraud detection. 22

23 Orange Belgium kicked off the first season of Orange Fab Open innovation driving mobile innovation International accelerator Orange s worldwide footprint 60 Subscriptions 3 selected scale ups Aiming at commercial synergies 23

24 Orange Thank You develops customers that are more loyal Best Reward Loyalty program for both postpaid and prepaid customers Orange Thank You boosts the community feeling of Orange Belgium s customers Orange Thank You has a positive impact on churn management Orange Thank You contributes to an improved Net Promoter Score The use of the Orange Thank You-cinema promotion is picking up strongly 24 Thanks to the successful Christmas campaign the # of engaged customers peaked More and more prepaid customers are making use of Orange Thank You

25 Section two Financial results overview Arnaud Castille Orange Belgium, CFO 25

26 Retail service revenues 181m Adjusted EBITDA 61m +6.2% % Year-on-year Year-on-year Total CAPEX 32m -1.3 % Net debt 296m Core CAPEX 21m +2.4 % 26 Year-on-year -8.7 % Year-on-year

27 Orange Belgium Group key financial figures Revenues (in m) Adjusted EBITDA (in m) +0,9% -11.5% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 CAPEX (in m) Adjusted EBITDA CAPEX (in m) -1.3% % Q1 17 Q2 17 Q3 17 Q4 17 Q Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

28 Solid commercial start of 2018 with strong retail service revenue growth Retail service revenues, split in categories (in m) +6.2% The increase in revenue was achieved despite the significant headwind of the expected 10.5 million euros lower MVNO revenues and the 7.9 million euros gross impact of EU roaming regulation Revenues ( m), split in categories +0.9% 10 Q Q Q Q Q Convergent service revenues Mobile only service revenues Fixed only service revenues IT & Integration Service The strong growth in retail service revenues is driven by the progressive positioning of Orange Belgium as a convergent national player and the successful more-for-more -mobile data monetisation Q1 17 Q2 17 Q3 17 Q4 17 Q Retail service revenues Equipement sales Wholesale revenues Other revenues

29 Strong retail service revenue growth despite EU-roaming impact growth realized thanks to convergence and more-for-more propositions Retail service revenues year-on-year evolution in million euros +6.2% +11.4% Q Retail service revenues 181.3m % (yoy) m (yoy) excl. EU-roaming regulation: % (yoy) m (yoy) Q Regulatory impact Q comparable basis convergent services mobile only services fixed only services IT & integration services Q Mobile service revenues are presented net of EU roaming gross impact

30 Strong underlying performance thanks to solid revenue and cost control, impacted by 10.5m lower MVNO revenues and 7.2m EU roaming impact Adjusted EBITDA evolution in million euros -11.5% -1.1% 68 Q Adjusted EBITDA 60.6m 19.6 % of revenues % (yoy) -1.1 % yoy excl. EU-roaming impact Wholesale cable access fee - TV content - Device m (yoy) - 0.7m excl. EU-roaming impact Q Regulatory Impact Q comparable base Revenues Direct costs Labor costs Indirect costs Q

31 Total capex under control with cable capex efficiency increasing Further network investment normalization after accelerated 4G roll-out Q Total CAPEX 31.8m -1.3 % yoy 10.4 % of revenues 10.6% % 10.4% % Core CAPEX 21.2m +2.4 % yoy Q Q Cable capex incl. CPE, IT & Network, etc. Core capex Total capex to total service revenues ratio

32 Orange Belgium key financials Strong underlying results balanced by MVNO, EU roaming and cable impact 32 in m Q Q Var. (%) Insight Retail service revenues % Revenues % Direct costs % Labor costs % growth driven by increasing convergent customer base and the successful more-for-more -mobile data monetisation increase in convergent customers triggering higher expenses related to cable wholesale access connectivity and content higher customer equipment expenses in line with the higher equipment sales driven by the headcount increase following the acquisition of several distribution partners in 2017 Indirect costs % driven by lower IT & network, general and other indirect expenses. Adjusted EBITDA % (in % of revenues) 19.8 % 22.5 % Reported EBITDA % (in % of revenues) 19.3 % 22.5 % CAPEX % (in % of revenues) 10.4 % 10.6 % Operational Cash Flow (EBITDA - CAPEX) % mainly impacted by the expected 10.5 million euros lower MVNO revenues and the 7.2 million euros gross EBITDA impact of EU roaming regulation. the underlying adjusted EBITDA shows a strong year-on-year increase cable capex stable yoy despite higher cable volumes cable refurbishment process progressively improved

33 Net financial debt decreased 28.2 million euros yoy to reach 295.5m implying a sound net financial debt / Reported EBITDA ratio of 1.0x. (in million euros) Q Q Q Q Q Q Q Q Q Q Q Q Q Net financial debt Net financial debt / Reported EBITDA ratio 33

34 Section three 2018 guidance 2018 financial guidance and outlook Dividend proposal 34

35 2018 financial guidance under IAS 18 reiterated guidance translated under IFRS 15 considering a decreasing subsidies trend 2018 Guidance under IFRS 15 Revenues To slightly grow vs Adjusted EBITDA under IFRS mio Core capex excl. cable Stable vs Outlook Further uptake of the postpaid and convergent LOVE customer base Focus on operational efficiency Expected regulatory improvement of the current financial and operational conditions for cable wholesale access MVNO revenues are expected to decline by 30M Gross EU roaming impact of 26M on revenues and of 17M on adjusted EBITDA Corporate income tax in Belgium to decline from % in 2017 to % in 2018 and 25.00% in

36 Section four Q&A 36

37 Appendix 1 Key financial figures Orange Belgium Group s consolidated key figures Q Q Q Q FY 2017 Q Revenues (mio ) Retail service revenues Adjusted EBITDA (mio ) Adjusted EBITDA / Revenues 22.5% 25.7% 25.4% 21.4% 23.7% 19.8% Reported EBITDA (mio ) Reported EBITDA / Revenues 22.5% 25.9% 29.0% 20.8% 24.5% 19.3% Consolidated net profit (mio ) Net profit per ordinary share ( ) Net investment (mio ) Net investment / Revenues 10.6% 14.8% 11.9% 22.7% 15.1% 10.4% Operational cash flow (mio ) Organic cash flow (mio ) Net financial debt (mio ) 37

38 38 Appendix 2 Orange Belgium s figures (customers in thousands) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 convergent KPIs customer base convergent customer base (excl. MVNO) on cable B2C convergent customer base (excl. MVNOs) on cable B2B convergent customer base on cable quarterly ARPO (per month, in euros) B2C convergent ARPO na na na na na na na na 71.9 mobile KPIs customer base mobile customers (excl. MVNOs) 3,767 3,780 3,771 3,797 3,759 3,779 3,790 3,855 3,857 - contract 2,954 2,991 3,017 3,073 3,083 3,130 3,182 3,265 3,275 - M2M excluding M2M 2,217 2,235 2,238 2,248 2,251 2,272 2,287 2,315 2,329 - prepaid mobile customers (excl. MVNOs) 3,767 3,780 3,771 3,797 3,759 3,779 3,790 3,855 3,857 - B2C convergent (excl. mobile broadband) mobile only 3,759 3,765 3,746 3,748 3,694 3,690 3,681 3,717 3,694 - M2M contract excluding M2M 2,209 2,220 2,214 2,200 2,185 2,182 2,179 2,178 2,166 - of which B2B convergent mobile customers prepaid MVNOs customers 1,817 1,907 1,990 2,041 1,997 1,930 1, quarterly ARPO (per month, in euros) mobile only blended ARPO na na na na mobile only contract excl. M2M ARPO na na na na mobile only prepaid ARPO na na na na fixed KPIs customer base number of voice lines broadband customers FTTx and cable customers xdsl LTE for fixed and others internet features TV

39 Appendix 3 Orange Luxembourg s figures 39 (customers in thousands) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 convergent KPIs customer base convergent customer base (excl. MVNO) B2C convergent customer base (excl. MVNOs) B2B convergent customer base quarterly ARPO (per month, in euros) B2C convergent ARPO na na na na na na na na na mobile KPIs customer base mobile customers (excl. MVNOs) contract M2M excluding M2M prepaid mobile customers (excl. MVNOs) B2C convergent mobile only M2M contract excluding M2M prepaid MVNOs customers quarterly ARPO (per month, in euros) mobile only blended ARPO na na na na mobile only contract excl. M2M ARPO na na na na mobile only prepaid ARPO na na na na fixed KPIs customer base number of voice lines broadband customers FTTx and cable customers xdsl LTE for fixed and others internet features TV

40 Investor Relations Siddy JOBE Director Treasury & Investor /company/orange-belgium 40