U.S. Markets closed

Edited Transcript of OBEL.BR earnings conference call or presentation 6-Feb-20 1:00pm GMT

Q4 2019 Orange Belgium SA Earnings Call

Brussels Feb 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Orange Belgium SA earnings conference call or presentation Thursday, February 6, 2020 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Arnaud Marie Julien Castille

Orange Belgium S.A. - Chief Finance Officer

* Koen Van Mol;IR

* Michaël Trabbia

Orange Belgium S.A. - CEO & Executive Director

================================================================================

Conference Call Participants

================================================================================

* David Vagman

ING Groep N.V., Research Division - Research Analyst

* Emmanuel Carlier

Kempen & Co. N.V., Research Division - Research Analyst

* Konrad Zomer

ABN AMRO Bank N.V., Research Division - Equity Research Analyst

* Nayab Amjad

Citigroup Inc, Research Division - VP

* Nicolas Cote-Colisson

HSBC, Research Division - Head of European Telecoms Equity Product, Telecoms, Media and Technology

* Paul Sidney

Crédit Suisse AG, Research Division - Research Analyst

* Roshan Vijay Ranjit

Deutsche Bank AG, Research Division - Research Analyst

* Ruben Devos

KBC Securities NV, Research Division - Senior Financial Analyst

* Stefaan Genoe

Banque Degroof Petercam S.A., Research Division - Head of Equity Research

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, welcome to the Orange Belgium Finance Year 2019 Results. (Operator Instructions) I will now like to hand over to Mr. Koen Van Mol, Investor Relation Director. Sir, please go ahead.

--------------------------------------------------------------------------------

Koen Van Mol;IR, [2]

--------------------------------------------------------------------------------

Thank you, operator. Good afternoon, everyone. So my name is Koen Van Mol. I am heading the Investor Relations team at Orange Belgium since the beginning of this year. I would like to welcome you to the presentation of the results of the fourth quarter and the full year of 2019. Here with me are Michael Trabbia, our CEO; and Arnaud Castille, our CFO. You should all have received our financial communication this morning. The information is also available on our corporate website, together with all other relevant documents related to this result. A Q&A session will follow right after Michael's and Arnaud's interventions, which will give you the opportunity to ask additional questions that you may have. Now I am pleased to leave the floor to Michael.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [3]

--------------------------------------------------------------------------------

Thank you, Koen.

Welcome, ladies and gentlemen. I am pleased to report another solid quarter.

So let's start with an overview of the year on Slide #4. In 2019, we have further built upon our Bold Challenger positioning initiated in 2018 based on simple, generous and worry-free tariffs. We remained true to our promises towards our customers with no price increases, no bad surprise and no need to pay for unneeded services. In the second quarter, we extended our unlimited mobile data tariff plan for use throughout the European Union and made MMS free of charge for our postpaid customers. With the launch of our Love Duo offer in July, we offered an internet and mobile without TV, which was a clear expectation from the market. Lastly, in the fourth quarter, we boosted the data allowance of our Cheetah offer from 8 to 15 gigabytes. And we reached an exclusive partnership for the launch of Google Nest in Belgium.

Let's now have a look at our key results, our key figures for Q4 2019 on Slide 5. Our Bold Challenger positioning contributed to solid commercial results in 2019 and despite more active competition mainly in the second half of the year, we have increased our mobile customer base by 4.5%, reaching about 2.6 million customers. On convergence, the last quarter of 2019 was a record-breaking in net adds with 25,000 new customers. Our Love customer base reached 258,000 customers, which is a 43.5% increase year-on-year.

From a financial perspective, despite significant negative year-on-year effects, we achieved a 4.5% (sic [4.8%] growth of our revenues, with 6.5% growth in retail service revenues in Q4. This performance combined with our efficiency efforts enabled us to deliver 5.5% growth of our Q4 EBITDAaL to EUR 79.6 million. In addition, we maintain our full year eCapEx stable in comparison to 2018.

Going further on Slide 6, you can see that we were able to achieve the upper range of our guidance, both on revenues and EBITDA. Our revenues grew by 3.3% on a full year basis. Compared to a slight growth in guidance and our EBITDAaL, our full year EBITDAaL, resulted in EUR 300.1 million compared to EUR 285 million to EUR 305 million guidance. As guided, the eCapEx remained stable in 2019.

Now let's move on to our operational results. In Slide 8, you will find the results for our convergent offers. As mentioned, the last quarter was record-breaking in net adds with more than 25,000 new Love customers, which is a little bit higher than Q4 28 (sic) [2018]. With 280 -- 258 (sic) [258k] customers, we have 43.5% growth as I mentioned, with a strong contribution of Love Duo, which proved to be a real customer expectation and was a key contributor to this success as it already accounts for about 10% of our convergent customer base only a few months after launch. Today, 15.9% of our total postpaid mobile base is convergent compared to 11.5% one year ago.

Slide 9 shows the growth of the mobile postpaid customer base with 31,000 net adds over the last quarter mainly fueled by convergence. Besides the growing convergent customer base, we continue to be able to stabilize our mobile-only customer base.

On Slide 12, you will notice that despite the introduction and success of our Love Duo offer with a lower retail price, our convergent ARPO has increased by 1.6% year-on-year to EUR 76.7. This is the result of our consistent pricing policy without price discounts and the usage of additional options. Our mobile ARPO decreased slightly by 1.6% due to the regulation on intra-EU calls. This effect apart, the increase in access revenues continued to mitigate the remaining decrease in out-of-bundle revenues as a result of the migration towards simple [abundant] (inaudible).

During the course of 2019, a several major events happened. As you can read on Slide 13, Orange Belgium was the first to activate a 5G testing hub for business in Belgium. By creating an open innovation hub, Orange Belgium is starting to use the full potential of 5G technology together with industrial partners on real-life applications. We have chosen the region around the Port of Antwerp because of its industry and wide variety of testing options, including the emission norms.

On the spectrum auction and the 5G license, we believe that there is now a low probability that the auction can take place before 2021. As you are aware via communication on January 31, on 31st, the BIPT announced an exceptional procedure and call for candidates for the attribution of temporary licenses in the 3.6, 3.8 gigahertz band.

Going further on Slide 15, you can see the -- as you are aware, the signature in November 2019 of the mobile radio access sharing agreement with Proximus which will allow us to improve customer experience, decrease energy consumption and get ready to accelerate 5G rollout once the spectrum is allocated. We expect the joint venture to be put in place in the course of 2020 after the decision from the Belgian Competition Authority, which is foreseen in March.

Other event took -- that took place during 2019 was the acquisition of BKM, which was closed end of July 2019. BKM is a nationwide ICT integrator with a solid track record in the SME and CMA market in Belgium.

Turning to Slide 19. We wanted to present our 3-year transformation plan, Bold Inside, that we initiated in the beginning of 2019. This transformation plan will enable us to optimize our way of working and simplify our offers, to keep our costs under control, and to be more agile. We are working on 3 elements: simplification, digitalization and empowerment. In this program, we are simplifying our offers and internal processes, we digitalized more our distribution as well as our customer interactions, and in terms of empowerment, we are giving more end-to-end responsibility, and we are increasing the customer service first contact resolution. As mentioned, this plan has already started in the beginning of 2019 and already proved its contribution in the result of 2019, improving our EBITDAaL in comparison to 2018.

That being said, I will now pass the floor to Arnaud to give more details on the financial figures.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [4]

--------------------------------------------------------------------------------

Thank you, Michael, and good afternoon, everyone. As Michael already mentioned, our financial results are in the upper range of the guidance for the year 2019. With revenues of EUR 1,340 billion we increased with 3.3% on a comparable basis, while our EBITDAaL has reached EUR 300 million, which is an increase of 5.1% in comparison to 2018.

Now let's go a little bit further in detail. If we go to Slide 25, you will see the waterfall of the revenues for Q4 2019. The acquisition of BKM meant our revenues increase with EUR 10 million. So the slight decrease on our mobile service revenues due to lower ARPO were largely compensated by the increase of our convergent service revenues, increasing our retail service revenues by EUR 13.6 million. Our wholesales revenues were decreased due to the intra-EU code regulation and the loss of Telenet as a VNO, which were partly compensated by the MVNO agreement signed with MEDIALAAN. Q4 2019 had a high number of subsidies that we have translated in a higher amount of equipment sales revenues. This resulted in an increase of the revenues by 4.8% in comparison to Q4 2018 on a comparable basis.

In Slide 26, we have the waterfall for our EBITDAaL. The strong performance of our EBITDAaL was driven by higher retail service revenues, increased by EUR 17 million, continuous improvements in the cable operations and cost efficiencies. RAN Belgium started to benefit from its transformation plan initiated in 2019 to improve its operational model. Profitability has improved, and EBITDAaL grew by 5.5% year-on-year on a comparable basis.

Now Slide 27, we were able to keep our eCapEx stable over the year with a variation of only 0.3% to EUR 180 million. Our net debt amounted to EUR 234 million compared to EUR 270 million at the last year. Gearing remains low with net debt to EBITDAaL 0.8x.

Now in Slide 28, we focus on our cable operations. Apart from the fact that we have significantly improved our revenues with 69%, we also became EBITDAaL positive in 2019. We have improved the efficiency of our internal processes and started a single installer process, improving our costs but also customer satisfaction. We expect to be cash flow positive in 2021.

Now I give back the floor to Michael.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [5]

--------------------------------------------------------------------------------

Thank you, Arnaud. So now let's move to Slide 30 to talk about the dividend. Taking into account the solid 2019 performance, the Board of Directors of Orange Belgium has decided to propose an increase of EUR 0.10 in comparison to the dividend of last year. So the Board will propose to the general assembly to distribute an ordinary dividend for the financial year 2019 of 60 cents, so EUR 0.60 per share. If approved, the payment of the dividend will be done on 14th of May 2020.

Let's now have a look at 2020 perspective on Slide 32. With our solid momentum and with no more major headwinds ahead, we are confident in our ability to further drive substantial EBITDAaL growth in 2020. We expect further uptake of the postpaid and convergent Love customer base. We will also carry on with our transformation plan, Bold Inside, delivering structural optimization.

In terms of financial guidance, we expect a low single-digit revenue growth in 2020. Taking into account the uptake in customer base, we target an EBITDAaL between EUR 310 million and EUR 330 million. In addition, we expect total eCapEx to remain stable in comparison to last year, excluding the RAN sharing agreement, which should have a limited impact in 2020.

With this, I conclude the presentation, and we can open the call for the Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We have one first question from Mr. Nicolas Cote-Colisson from HSBC.

--------------------------------------------------------------------------------

Nicolas Cote-Colisson, HSBC, Research Division - Head of European Telecoms Equity Product, Telecoms, Media and Technology [2]

--------------------------------------------------------------------------------

Two questions please. First one is on the EBITDAaL bridge for 2020. Actually, there are many moving parts, but can you help us around the kind of tariff scenario for cable you are assuming in your guidance? Also, what is the incremental impact from the brand fees impacting the full year in 2020 compared to 2019? And last on the bridge, if you can help us understanding what could be the contribution from BKM at the EBITDAaL level in 2020? Because it looks like it had a negative contribution in Q4.

My second question is on the network sharing. What do you think about potential risk of a issue being involved and delaying the whole process? And I was also wondering whether the big increase in the dismantling provision in the balance sheet in Q4 had anything to do with this network sharing plan?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [3]

--------------------------------------------------------------------------------

Arnaud will answer to you on the EBITDAaL bridge, and I will take the question on network sharing.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [4]

--------------------------------------------------------------------------------

So EBITDAaL bridge -- with your three question, tariff scenario on cable. As Michael mentioned, we are not going to increase our price on cable. So we will have the same price as 2019, so no increase in price. We of course, we expect a decrease of the wholesale tariff maybe in Q3.

For the brand fees, the net impact compared to 2019, it's about EUR 6 million, so a limited impact compared to 2019.

And eventually on BKM, yes, we had a slight negative impact on Q4 and a slight positive on full year 2019. For 2020, we expect to have a low single-digit percentage of margin on BKM, and we expect revenues of about EUR 50 million in 2020.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [5]

--------------------------------------------------------------------------------

Thank you, Arnaud. So just to clarify the cable timeline, so we expect the decision, the final decision in Q2, and we expect the new wholesale price to be effective as of beginning of Q3, okay.

So on network sharing, as mentioned, we are confident on the outcome. And the decision that has been taken by the Competition Authority mentioned the fact that Telenet did not prove any negative impact of the deal. But still, they had some questions and wanted to -- a deep dive on the agreement to make sure, in particular that there is no risk of sensitive information to be exchanged between the parties. So we are fully cooperating with the BIPT and the Competition Authority on this topic. And we remain fully confident on the -- on this network, this RAN sharing, which I recall is bringing a strong benefit for the customers and the societies, and which is indeed designed to maintain a strong competition between the players, thanks to the fact that we keep our sales platform separated and the spectrum is also not pooled, meaning that at the same place an Orange customer and Proximus customers can have a very different customer experience at the end of the day.

--------------------------------------------------------------------------------

Nicolas Cote-Colisson, HSBC, Research Division - Head of European Telecoms Equity Product, Telecoms, Media and Technology [6]

--------------------------------------------------------------------------------

And on the dismantling provision because there was like a EUR 13 million increase in the balance sheet, anything to do with this, or...

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [7]

--------------------------------------------------------------------------------

No, the decommissioning -- so we have all the provision necessary to face the RAN sharing. So it will be mainly e-development costs for putting in place the new network, but it will be mainly on eCapEx and on 2021.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [8]

--------------------------------------------------------------------------------

So no effect in 2019. Okay.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Next question is from Emmanuel Carlier from Kempen.

--------------------------------------------------------------------------------

Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [10]

--------------------------------------------------------------------------------

Two questions, one is on the revenue guidance. So you guide for low single-digit revenue growth on retail service revenues. Everyone was expecting a bit more than that. So could you run us through the drivers why you are guiding that low? Is that because you believe the commercial momentum might weaken so much? Or is it because you believe out-of-bundle, that this will continue to have pressure? Or is it just you being cautious at the start of the year? So that's question one.

Question two is on the CapEx, so two questions on that topic. One, how much CapEx related to the RAN sharing do you expect in 2020? And then secondly, what is the absolute eCapEx level that you expect post the RAN sharing? Because I see quite different estimates on that.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [11]

--------------------------------------------------------------------------------

On the first question on the revenue guidance, and I will let Arnaud comment on the Capex. So indeed, we guided towards a low single-digit growth. It is mainly because we want to remain cautious, taking into account the uncertainty on the device sales that can vary from one year to another. We had quite a good year in 2019 in terms of devices. And so we wanted to remain cautious on this topic, to give you the explanation of this guidance. And now, Arnaud, if you can comment on the CapEx?

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [12]

--------------------------------------------------------------------------------

So on RAN sharing as I've just explained, the enablement costs on eCapEx due to the RAN sharing will be very, very limited in 2020, so I may -- maybe less than EUR 20 million in 2020. So -- and I explained, we explained last quarter, the enablement costs, CapEx costs for RAN sharing will be EUR 130 million over about 3 years. Okay, so we're saving over 10 years of EUR 300 million. That -- so the CapEx for the sharing would be about EUR 130 million starting mainly 2021.

--------------------------------------------------------------------------------

Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [13]

--------------------------------------------------------------------------------

Yes, but the -- yes. But how do you look at your mobile CapEx post the network sharing? Because on the one hand, you have some savings on that. On the other hand, to roll out 5G, you need additional investments. So do you believe that the -- let's say, the current CapEx will not go up a lot, and because of the network sharing that might offset the growth in eCapEx that you would normally expect because of the 5G investments?

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [14]

--------------------------------------------------------------------------------

So the timing is different. So you see the timing for the RAN sharing, yes, EUR 130 million over '21, '22, '23. For the 5G, you don't know exactly, and maybe Michael can tell more the starting -- the start of the 5G. But it will be little by little start, not a big start in terms of investment. And we will have the savings on CapEx due to the RAN sharing maybe starting in 2022. So all in all, we don't see a big increase of our CapEx due to the 5G, thanks to a small start, a slight start and the saving of the RAN sharing.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [15]

--------------------------------------------------------------------------------

So looking at 2020, to be absolutely clear, Michael speaking. Looking at 2020, we will have no significant costs on 5G. 5G is not happening this year. So no CapEx on 5G in 2020, and the RAN sharing element will still be limited. And so this will not have a big impact on our CapEx for 2020. And then indeed as Arnaud mentioned, we will synergize our RAN sharing CapEx and our 5G CapEx to make sure that as much as possible, we can have synergies in both operations.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [16]

--------------------------------------------------------------------------------

We mentioned a savings of EUR 40 million per year on run rate OpEx and CapEx, but mainly CapEx for the network.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

Next question is from Mr. David Vagman from ING.

--------------------------------------------------------------------------------

David Vagman, ING Groep N.V., Research Division - Research Analyst [18]

--------------------------------------------------------------------------------

2 question, first one on Bold Inside, could you quantify actually the impact of the Bold Inside for the coming years to 2021, but especially for this year 2020? And what could eventually be the impact on margin logically? That's my first question.

And then secondly, to come back on VOO, actually the VOO tender, could you give us your view on the tender and the likely sale as I understand it, to Providence? Or you intend basically to react -- you apparently, I understand offered a nice price. And how do you view the hive -- or the potential arrival of Providence in terms of competitive dynamic for Belgium and Wallonia?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [19]

--------------------------------------------------------------------------------

So Arnaud will comment on the Bold Inside impact, and I will take the question on VOO.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [20]

--------------------------------------------------------------------------------

Yes. On Bold Inside, in 2019 first, we start to benefit, we started to benefit from Bold Inside, and it was an efficiency of about EUR 30 million. So we expect about the same amount for 2020.

I want just to focus on 2019 to show you how Bold Inside had an impact. You can look at the labor cost of the indirect cost is close to 0 increase despite the increase of our revenues. So we see how we can maintain our costs thanks to Bold Inside. So I don't want to repeat what is it Bold Inside, but it was and it has been around contact avoidance, lean CapEx initiative, distribution costs, our channels, more online sales and so on. So we are going to continue this trend.

And of course as you mentioned, our margin in terms of all absolute value, in our guidance, you can see that, but also in terms of relative value will increase.

--------------------------------------------------------------------------------

David Vagman, ING Groep N.V., Research Division - Research Analyst [21]

--------------------------------------------------------------------------------

And so you said -- when you said 30, 3-0, that's...

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [22]

--------------------------------------------------------------------------------

Yes, it's the growth efficiencies.

--------------------------------------------------------------------------------

David Vagman, ING Groep N.V., Research Division - Research Analyst [23]

--------------------------------------------------------------------------------

Growth efficiencies?

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [24]

--------------------------------------------------------------------------------

Of course, we need to support the growth of our revenues. But we have a growth efficiencies of EUR 30 million. It's about the same level we experienced in 2019.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [25]

--------------------------------------------------------------------------------

Okay. So on VOO, as you may have seen, this is a complex and still evolving topic. There has been a number of new elements since last year now. So we have been participating and proposed an offer on the process on VOO together with the Orange Group because we believe we have a strong industrial proposition to -- and a strong industrial project together with VOO, which is in our view, the best solution and the best project from the asset.

We have learned later in 2019 that an agreement has been signed in May between Nethys and Providence, which was quite a surprise for everybody. And then as you have seen, there has been the government, the Wallonian government took the decision to cancel a number of sales. And following this, the full management and the full Board of Nethys was -- were dismissed and replaced by new -- by new ones. The new management and the new Board of Nethys mentioned that the sale -- the agreement that had been signed by the previous management with Providence was abnormal, mentioning clearly that the price was not the best priced proposed. And mentioning also clearly that the capital and the stock that would have been given to the former management was not normal conditions as those people were not supposed to be executive manager of the asset.

At end of the day, they still decided to continue and with few renegotiation on those elements. They still decided to continue with Providence, which can indeed raise a number of questions. We have no more comments on this topic for today up to now.

--------------------------------------------------------------------------------

David Vagman, ING Groep N.V., Research Division - Research Analyst [26]

--------------------------------------------------------------------------------

Okay. But you -- that means that all options are still open, that...

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [27]

--------------------------------------------------------------------------------

Yes, it does.

--------------------------------------------------------------------------------

Operator [28]

--------------------------------------------------------------------------------

Next question is from Mr. Paul Sidney from Credit Suisse from London.

--------------------------------------------------------------------------------

Paul Sidney, Crédit Suisse AG, Research Division - Research Analyst [29]

--------------------------------------------------------------------------------

Just two questions for me, please. Firstly, you've been reporting a very good a wireline and mobile subscriber trend for many quarters. And you're guiding now for 2020 strong EBITDAaL growth. I just wondered, is there -- the way to view your strategy, is it to find a nice balance between subscriber growth and profitability growth? I think that's been core to your success over the last 12, 18 months.

And then secondly, the BIPT is looking to issue these provisional 5G licenses. I just wondered, during the time line that potential applicants need to apply by the end of the month, do you think there's any appetite for a new entrant to try and gain 1 of these provisional licenses? And actually a follow-on from that, do you think there's any business case for a fourth entrant now?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [30]

--------------------------------------------------------------------------------

Thank you. So on the first question, indeed we consistently look at how to improve our customer base while being profitable. I mean it's -- we have a clear challenger positioning in the market. And we believe there is room in the Belgium market to continue to challenge our competitors, especially in the broadband part as there are, as you know, quite high prices and price increases that are done also every year by our competitors. So we have a good opportunity to continue with a solid commercial performance, taking into account this situation.

At the same time, we have a clear focus on profitability. And that's why, as you can see on the cable business, we are improving quarter after quarter the financial of our cable operation. We are now EBITDA -- EBITDAaL positive on the cable stand-alone. And still, we expect an improvement in the wholesale price in order to be able to reach cash flow positive as of 2021.

This is important. And the best indication that the price and the regulations still need to be improved is the fact that Orange Belgium is still the only player who is using it, which is I think a good sign that it still needs some improvement.

So yes, to answer your question, we balance subscriber growth and profitability. As you can see in our results, and you can see now both our convergent revenues and our mobile revenues, you can see the solid, consistent growth of our retail service revenues at the end of the day.

On the -- your question about 5G, so indeed the BIPT proposed some temporary licenses which is -- what is positive is that the BIPT and the government are aware of the importance of 5G and the need to push and to find a solution on 5G. But it is fair to mention that these temporary license are not -- is not enough to have a real 5G rollout in Belgium. So we are still talking about some tests of some limited rollout, to be able to roll out a 5G network in Belgium, which represents hundreds of millions of euros of investment.

We need some key elements that are not met today, which are first one, long-term visibility. I remind that the European Commission requests 20 years license for 5G. I mean it is not possible to invest hundreds of millions of euros without long-term visibility.

The second element is to have enough bandwidth and for the players, and the industrial players, we mean that -- we need about 100 megahertz in the 3.4, 3.8 gigahertz band, which is not what is forecast in the temporary licenses that are mentioned. And it is really key that the operators have enough spectrum to answer to market needs, to answer to data traffic increase for now and for the future. Because those -- this additional spectrum is -- the spectrum is a scarce resources. The additional spectrum comes now, but we will not have more spectrum in the short to midterm to expect. So it is absolutely critical that this spectrum is allocated to people who are going to use it and we are going indeed to answer to the market needs.

That is why in particular we are requesting, we are requesting and we are asking for a rollout obligation associated to this spectrum. It is in our view, critical to prevent any speculation on this scarce and important spectrum.

Now on the new entrant. I mean I have nothing more to add, I mean, to what we already mentioned. We continue to believe that there's no business case for a new entrant to come in Belgium. And this element on the temporary license doesn't change anything on this.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

Next question is from Mr. Roshan Ranjit from Deutsche Bank.

--------------------------------------------------------------------------------

Roshan Vijay Ranjit, Deutsche Bank AG, Research Division - Research Analyst [32]

--------------------------------------------------------------------------------

Two questions -- two for me, please, firstly, just circling back to one of the previous questions on the EBITDAaL bridge for 2020. Now you've had the 2 delays from the BIPT on the wholesale access fee. So in your base case, are you still assuming the rate remains unchanged? Because if I'm [playing] off as advocate here, the delay, second delay could suggest that the BIPT may be looking to revise the rate.

And secondly, on your convergent offerings, you, I think, have said the 10% splits off the dual-play product. Are you seeing much downspin from your triple-play base to that dual-play offering. And long term, how should we think about that split going forward?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [33]

--------------------------------------------------------------------------------

So on the cable wholesale rate, what we expect is to have a stable cable wholesale rate in the first half of the year. Because as mentioned, we expect a decision in Q2 to be effective in the price as of Q3. We still expect an improvement in the wholesale price as of Q3. Now this is not the only element in the cable improvement that we forecast, so this is one of the improvement. We have continuous improvement in our operations and our customer service, in our installation costs that we are delivering. And you can see that in our figures, in our quarterly figures, we continue to improve them, also on our own, working on our processes. So we forecast stability in H1, we forecast improvement in the wholesale price in H2, but this is only one element on the global cable profitability.

Now on the share between Duo and Trio. So we, what we see today is that roughly one out of 3 new customers take the Duo offer. We expect that this trend is rather a growing trend over time. I mean we expect that more and more customers are interested in this Duo proposition with the growing OTT consumption that we can see everywhere in the world. So the 10% share today that we have on Duo is expected to grow, and we can expect midterm to have indeed 1/3 of the customer base to be on this product.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

Next question is from Ms. Nayab Amjad from Citi.

--------------------------------------------------------------------------------

Nayab Amjad, Citigroup Inc, Research Division - VP [35]

--------------------------------------------------------------------------------

On cable, can you update us on the profit per subscriber with a bit of breakdown of the associated costs? Also, can you tell us the breakdown of the cable CapEx per subscriber, and how much that changed for the last Duo offer?

And my second question is on last year again as well. What has been the impact in ARPO and margins as a result of Love Duo offer? And how -- have you seen many new subscribers on this -- is there cannibalization of the existing base? Are you seeing new subscribers coming through?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [36]

--------------------------------------------------------------------------------

So just on...

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [37]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [38]

--------------------------------------------------------------------------------

Arnaud will go ahead, and I will maybe comment on cannibalization.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [39]

--------------------------------------------------------------------------------

On the business case of Love Duo and Trio and maybe the difference -- the gap between both, as mentioned we have now in 2019 a positive EBITDAaL. And in terms of unitary EBITDAaL per customer, it's an average of about EUR 3 per customer, EBITDA. Of course behind, we have to invest. And now with investment, the CapEx, it's just above EUR 300 per customer, okay? It's an improvement compared to the last figures we disclosed, thanks to one installer and thanks also to the part of Duo in our customer base. So EUR 3 per customer in terms of EBITDAaL and EUR 300 for investment per customer.

Now between Duo and Trio, the figures are better for Duo in terms of investment, but less in terms of EBITDAaL, so I don't want to disclose too much on it. But on average, the CapEx for Duo would be below EUR 200; and for Trio, about EUR 300. So there is a saving of EUR 100, big picture, between Trio and Duo.

For the P&L, for the EBITDAaL, you can do your calculation. As you know, the price of Duo is only EUR 34 compared with price of EUR 49 for Trio. And of course for Duo, we don't have content cost, okay? So all in all, of course the customer lifetime value of a Duo is better than the customer lifetime value of a Trio.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [40]

--------------------------------------------------------------------------------

Yes. So we are -- as Arnaud mentioned, we are very happy with the Duo. So the more Duo we have, the better. And to answer on your question on cannibalization, we see only limited cannibalization on our Trio existing customer base. So it is really, really a vast, vast majority of new customers that join us on this Love Duo offer.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

Next question is from Mr. Ruben Devos from KBC Securities.

--------------------------------------------------------------------------------

Ruben Devos, KBC Securities NV, Research Division - Senior Financial Analyst [42]

--------------------------------------------------------------------------------

Just to come back on the revenue guidance, I was wondering whether there would be any other elements aside from the device sales you've mentioned, that has led you to come with a low single-digit revenue guidance. I mean, you'll have a full year impact of BKM, full year impact of MEDIALAAN. And obviously the trends in retail service revenues are strong. So yes, it would be great if you could help us understand whether there may be some other headwinds in 2020 that we should take into account.

Then as a quick question, given the success of Love Duo, I was wondering whether you could share the broadband-related ARPO, so if you strip out the mobile component there? Is it also being supported by the sale of additional options and fixed line services as you've mentioned in the press release?

And then lastly, always curious to hear whether you could give an update on the annual contribution of MEDIALAAN in 2020 that you expect.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [43]

--------------------------------------------------------------------------------

So on your first question on the revenue guidance, I will answer. I'll repeat what I said. There is no other element that -- some cushion linked to the device equipment sales. So we had a very good year 2019 in device sales. We prefer to be cautious and not to expect to have the same level of device sales in 2020. But we have no other elements that would jeopardize -- no negative effect that we anticipate for the rest and especially on our retail service revenues. So that's only a difference of -- between probably what you have in your Excel sheets, the only difference we might have is on the device. Arnaud, you want to comment further?

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [44]

--------------------------------------------------------------------------------

Yes on the ARPO of the convergent. Of course on mobile, the mobile part of this ARPO is comparable to the ARPO on mobile-only. A little bit better, but the improvement of the convergent ARPO is mainly due to the revenue coming from setup and connection fees. And the impact of the Duo, you can maybe calculate, but it's 10% of our base. So the impact, it's about EUR 1 ARPO so -- on average. So all in all, yes, connection fees, setup fees are the main impacts for an increase of our ARPO.

And the last question -- excuse me, it was on MEDIALAAN. So we think the impact, the positive impact of MEDIALAAN year-on-year would be close to EUR 10 million.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Next question is from Mr. Stefaan Genoe from Degroof Petercam.

--------------------------------------------------------------------------------

Stefaan Genoe, Banque Degroof Petercam S.A., Research Division - Head of Equity Research [46]

--------------------------------------------------------------------------------

Two small follow-ups, one on the last question on MEDIALAAN, the EUR 10 million impact. Just to be sure, is that the delta versus last year or the impact this year?

And then secondly, coming back on Providence, VOO. Not to talk about potential negotiations, but suppose that Providence would acquire VOO, how do you think -- what do you think would be the strategic implications for Orange? Do you think you would have to make adjustments to strategy, et cetera, given what they have for example done in Spain with (foreign language)? Could you give some color there?

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [47]

--------------------------------------------------------------------------------

So just quickly on MEDIALAAN, yes, it's a gap between 2019 and 2020. And the full impact, it -- would be about 20 -- the value for 2020 will be 25, about EUR 25 million. But the gap is EUR 10 million.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [48]

--------------------------------------------------------------------------------

So on your second question on the Providence potential impact on the market, well first, it is a little bit early to comment on this topic as this is not yet closed, and we don't know what would be the strategy of Providence. Obviously, we might expect potentially new elements, new strategy coming from them. For sure, what we can expect is that they might drive efficiencies first in the business in order to improve the cash generation, which look quite obvious. And then they might have a different strategy. They might have a value strategy. As we can see in the north of the country with premium strategy, investing in -- with more investment in quality and trying to drive the prices up. But at the end of the day, what we understand from what we read in the press is that Providence would not be a long-term investment in -- a long-term investor in Belgium and VOO, at the end of the day, in a certain period of time around 5 years. That's what we read in the press, exit and try and probably sell the asset. It's really assumption. We cannot give any more element. It's the only element we can comment now.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

(Operator Instructions) We have another question from Mr. Konrad Zomer from ABN AMRO.

--------------------------------------------------------------------------------

Konrad Zomer, ABN AMRO Bank N.V., Research Division - Equity Research Analyst [50]

--------------------------------------------------------------------------------

Just one, if the wholesale rate tariffs would come down to, let's say EUR 15 from the current level of just above EUR 20, how much do you think you would be able to maintain within your own company and how much might still be, well, diminished because of additional expense or potential price impacts from competition?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [51]

--------------------------------------------------------------------------------

Okay. So on this topic, we have been consistently saying that if our first focus was to increase the profitability, we are very happy with the current commercial trend. We are adding around 15,000 to 25,000 new customers and new convergent customers every quarter, which is good. So we have no issue with the attractiveness of the offer. And we need to improve the profitability. So that's -- that is still valid. Obviously, we cannot anticipate a potential move from competitors, but we are happy with the current commercial trend.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

We have another question from Mr. Paul Sidney from Credit Suisse.

Mr. Sidney, your microphone is open. (Operator Instructions) We have another question from Mr. David Vagman from ING.

--------------------------------------------------------------------------------

David Vagman, ING Groep N.V., Research Division - Research Analyst [53]

--------------------------------------------------------------------------------

Just on the potential intention that you might have to launch a broadband-only offer in 2020 or actually in the coming years, what is your thinking right now? Could it delaying the timing of the launch of such an offer to regulation and the implementation?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [54]

--------------------------------------------------------------------------------

Indeed, this is clearly in our philosophy. I mean, we clearly want to promote offers and where we can decouple the product and services where it is possible. For the moment, it is not possible as the cable business case is negative in a stand-alone basis. But it is clear that with an improved or wholesale retail price, we want definitely to propose this broadband-only offer to the market. And you will allow me to keep a little bit of uncertainty on the exact timing for commercial reasons.

--------------------------------------------------------------------------------

Operator [55]

--------------------------------------------------------------------------------

We have another question from Mr. Emmanuel Carlier from Kempen.

--------------------------------------------------------------------------------

Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [56]

--------------------------------------------------------------------------------

Two quick questions, one is on the churn. What is the churn? Or how will the churn evolving on your converged space? And then secondly, what is the risk in your opinion that we might see an expensive spectrum auction in Belgium?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [57]

--------------------------------------------------------------------------------

So on the first question on the churn, the churn rate is -- we don't communicate on the churn rate. But what I can tell, what I can comment is that it is improving consistently and steadily. Obviously, as our customer base is increasing strongly, the impact in volume of the churn of the customer base is increasing. It is mitigated partly thanks to the decrease of the churn rate, but the churn total the amount of customer is indeed increasing, which means that we are -- and you see our net adds results. That means that we are able to increase significantly the number of gross adds. And that's exactly what we do.

And your second question, sorry, I don't remember? It was on...

--------------------------------------------------------------------------------

Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [58]

--------------------------------------------------------------------------------

On the spectrum auction that is coming up, what is the risk to get towards an expensive spectrum auction?

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [59]

--------------------------------------------------------------------------------

Okay. Well, it is not the main risk that we see for the moment because there are some -- I mean first, it's difficult to comment because we don't have the final decision. This will be the new government that will decide on the exact elements on the spectrum auction. From what is on the table now, it is not the main risk as there is some minimum spectrum that is guaranteed at -- there is some spectrum cap that at least for minimum, our spectrum would prevent from, I would say, crazy prices. Our main focus today is to make sure that the spectrum is allocated to players that are going to invest and to roll out network and to avoid speculation with this spectrum.

--------------------------------------------------------------------------------

Operator [60]

--------------------------------------------------------------------------------

(Operator Instructions) We have no other questions. Sir, back to you for the conclusion.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [61]

--------------------------------------------------------------------------------

Yes, just before the conclusion, I just would like to have the one element about network sharing. I said it would be the -- the enablement cost would be below EUR 20 million. So those investments of course depend on the timing of our sharing. Nevertheless, the net impact between our own investment and the investment of the sharing would be below EUR 10 million. But I may -- vis-a-vis our guidance, it would be below EUR 10 million in terms of increase of our investment.

--------------------------------------------------------------------------------

Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [62]

--------------------------------------------------------------------------------

Okay. So thanks, Arnaud, for clarifying. So to be finally clear, you have our EBITDAaL guidance, which is EUR 310 million to EUR 330 million. And we have a stable eCapEx guidance excepted limited impact of RAN sharing. And Arnaud just mentioned, it would be rather lower than -- around EUR 10 million, so to be absolutely clear on this topic.

With that, I would like to thank you for attending this call and speak to you soon. Thanks.

--------------------------------------------------------------------------------

Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [63]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [64]

--------------------------------------------------------------------------------

Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.