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Edited Transcript of OBEL.BR earnings conference call or presentation 23-Oct-19 8:00am GMT

Q3 2019 Orange Belgium SA Earnings Call

Brussels Oct 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Orange Belgium SA earnings conference call or presentation Wednesday, October 23, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Arnaud Marie Julien Castille

Orange Belgium S.A. - Chief Finance Officer

* Eric Chang

Orange Belgium S.A. - Director of IR

* Michaël Trabbia

Orange Belgium S.A. - CEO & Executive Director

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Conference Call Participants

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* Alexandre Charles-Edouard Roncier

Exane BNP Paribas, Research Division - Research Analyst

* David Vagman

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

* Emmanuel Carlier

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

* Guy Richard Peddy

Macquarie Research - Head of Telecommunications, Media, and Technology

* Matthijs Van Leijenhorst

Kepler Cheuvreux, Research Division - Analyst

* Michael Bishop

Goldman Sachs Group Inc., Research Division - Equity 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

* Ruben Devos

KBC Securities NV, Research Division - Senior Financial Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Orange Belgium Q3 2019 results. (Operator Instructions) I will now like to hand over to Eric Chang, Investor Relations Director. Sir, please go ahead.

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Eric Chang, Orange Belgium S.A. - Director of IR [2]

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Thank you, operator. Good morning, everyone. This is Eric. I'm one half of the IR team at Orange Belgium. I would like to welcome you to our Q3 2019 Earnings Call. I have with me: my CEO, Michaël Trabbia; and my CFO, Arnaud Castille.

As usual, you should have all received our financial communication this morning. The information is also available on our website. The Q&A session will follow right after Michaël and Arnaud's introductory statements. And on this, I will now leave the floor to Michaël.

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

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Thank you, Eric. Good morning, ladies and gentlemen. I am pleased to report another quarter of sustained commercial results, both change of positioning continues to bear its fruits, despite an active commercial environment with increasing promotional activities from our competitor.

So let's start by highlighting some of our key achievements of the third quarter of 2019. Our mobile postpaid customer base grew by 5.8% year-on-year and exceeds 2.5 million, an increase of 32,000 during the quarter. Talking about convergence, our Love offer continue to demonstrate its success. Convergence subscribers increased by 50% year-on-year to reach 233,000 Love customers. This represents 17,000 new customers during the quarter. Additionally, close to 15% of our postpaid customer are now convergent customer. In July, in line with our brand promise to our customers, we bought another telco convention in the Belgian market by launching Love Duo, our broadband and mobile offer. Consumers are indeed not willing to pay any more for services they don't use. This new offer designed for cost cutters, perfectly fits the consumers' trends towards OTT content that everybody can notice in the worldwide evolution of content consumption. This offer has been very much welcomed by Belgian consumers as we saw a significant increase in our Love order book. Love Duo still had a marginal impact on third quarter's convergence net add figures due to installation time, but we expect to have a higher impact from Q4 onwards.

At the same time, the single-installer process was implemented. Our technician can now access not only the customers' internal cable infrastructure, but also the external equipment, the tab on which the customers drop cable is connected. This allows our technician to connect to the customer in one single intervention in most cases. Our customers benefit from an improved and simplified customer journey, and we benefit from cost savings. Financially speaking, Arnaud will explain, we continue our growth trajectory on revenues and EBITDAaL, despite the significant headwinds that impact us in 2019, which highlights the strength of our core business growth as well as our focus on cost control.

As as last point, I would like to address regulatory matters as you know, BIPT and media regulators are preparing their decision to wholesale tariffs for access to cable networks that is now expected in Q1 2020. During the consultation on the draft decision, we expressed our view that an improved wholesale tariff is absolutely required to allow sustainable competition in the fixed broadband market. In particular, we strongly believe that some improvements are needed to avoid unjustified wholesale price increase over time and to make sure that the cost base for the South cable operator is not overestimated.

Now I would like to hand over to Arnaud for the quarter financial review.

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

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Thank you, Michaël. Before going into our financial performance, I would like to remind everyone that BKM acquisition was finalized on the 31st of July. Therefore, we included BKM's 2 months results into the consolidated view. So BKM contributed EUR 0.8 million of EBITDAaL and EUR 7.9 million in revenues. With this acquisition, as you know, we expect to enhance our B2B offering and grow our presence in the ICT and connectivity markets. Regarding our network sharing agreement with Proximus, work is progressing according to plan, and we hope to finalize the agreement by year-end.

Now let's take a look at the financial performance, which once again reflects strong commercial success. Q3 '19, the revenues grew by 2.5% on a comparable basis to EUR 334.3 million, despite the known decrease in MVNO revenues. Retail service revenues continued their growth trajectory, reaching EUR 221.8 million, an increase of 7.1% on a comparable basis. We increased EBITDAaL by 1.1% on a comparable basis. This was achieved through system revenue growth of our core business and efficiency improvement. To put this performance into context, we faced during the quarter about EUR 30 million headwinds, lower MVNO revenues, EU regulation effects and revised the payment of our brand fees in Belgium.

Now taking a closer look at our cable operations. We had a positive EBITDAaL of EUR 2.2 million for the quarter, thanks to improvements in operational efficiency. Nevertheless, our operating cash flow on this cable operations for the first 9 months of the year still remains negative, reaching minus EUR 26.7 million. So we maintain our financial guidance for the full year of 2019. We remain confident we would reach the target announced at the beginning of the year.

With this, I conclude the presentation. Michaël, Eric and I are ready for your questions.

Operator, may I ask you to now open the call for Q&A.

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Questions and Answers

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Operator [1]

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

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

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Two quick questions. Firstly, the impact of the Duo bundles because I can't see the lower ARPU growth than, let's say, in Q3 last year. So I wonder if you could tell us what would have been the ARPU growth without the setup fees. And how do you see ARPU trend into Q4 and next year?

And my second question is in the date on the M&A. I was wondering what are the options you have with Brutélé and VOO. Can you still expect something to happen on your side? And Michaël, what can you offer to local authorities that the others cannot offer?

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

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Arnaud, maybe you can answer on the ARPU, and I will take the question on Nethys, Brutélé.

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

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So on the ARPU, no, the Duo are not linked to -- significantly impact on the ARPU, and because it's just a beginning, and so we don't disclose the number of ARPU of Duo customers, but it's still low at this stage, as Michaël explained, but it's more a comparison vis-à-vis last year. In Q3 2018, we didn't have a discount. So it's more comparable in Q2 2018. We have had still some discounts. So now we are quite comparable with Q3 '18. So it's mainly this discount we have -- we did in Q2 2018. Looking ahead, yes, there will be a less -- a small decrease of ARPU due to Duo offer, but the business model and the EBITDA of the total cable business model will increase because as we explained already, the business model of Duo is more profitable than the business model of Trio, mainly due to the content. We don't have to pay. And the investment because there is no box in our Duo offer. So all in all, customer last time value of a Duo customer is better than a Trio customer. But yes, on ARPU, we can imagine a slight decrease of our ARPU next year, but it will be a very slight decrease.

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

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Yes, and on the question on Nethys, Brutélé, I guess some of you will follow this interesting, the same with a lot of changes and -- almost every day. So it's a little bit difficult to make any kind of forecast on this topic. As you know, there is now things -- in a few days, a new board at Nethys and the new management taking over. So we will need to understand their motivation and intention towards the sale of VOO part of Nethys. What I can say is that as we always mention, we remain interested in these relation. We believe we have a good partnership -- industrial partnership to build together, both with Nethys and Brutélé on the VOO part but we will remain open, and we will look at the evolution, the further evolution on the potential change in the current process run by Nethys.

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Operator [6]

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We have next question from Paul Sidney from Crédit Suisse.

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Paul Sidney, Crédit Suisse AG, Research Division - Research Analyst [7]

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And couple of questions for me, please. And you have an EBITDA positive on the cable operations from the past few quarters. I was just wondering, how do you view the balance between profitability, your retail pricing, subscriber growth, and especially ahead of the bigger push on the Love Duo product?

And then secondly, your Belgian MSR-only trends deteriorated in the quarter, minus 2.7%, partly due to the entry in your calls, but partly, obviously, to mobile revenues being reported in the converged revenue line. I was just wondering, is there any way you could give us a feel for what the mobile revenues are doing in total? Just to get an idea of the underlying trend.

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

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Okay. So on the question on cable, I will give you a few highlights. Well, as we mentioned, Love Duo is not yet significant in the figures in the net adds for the Q3, but the others are very good. So we can expect, indeed, an increase of the overall run rate that we have on the Love figures. On the profitability, what we can mention is we expect and we also mentioned this earlier, we expect the Love Duo profitability to be at the same level or even better than the Love Trio. So all in all, we expect no volume with level of profitability that is the same or a little bit better for the Duo. Arnaud

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [9]

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That's a good question. Be careful, you spoke about the mobile-only service. It's only the customers who don't have a cable connection. But some of our mobile -- big part of our mobile customers, 14% have cable connection. This turnover -- this revenues for those mobile customers are in the convergent service part. So you have to look at the 2 lines, convergent service and mobile-only service. Yes, the mobile-only service is decreasing by 2.2%, but the convergent service is increasing by 54.2%. And all in all, you can see the increase of the retail service revenues were mainly cable and mobile, increasing by 7.1%. So it's mainly the decrease of the mobile-only service is mainly explained by people switching from a mobile-only offer to a convergent offer. And today, it's 14% of our customers.

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Paul Sidney, Crédit Suisse AG, Research Division - Research Analyst [10]

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Can I just have a quick follow-up, please? And should we expect any reduction in the cable wholesale rate to improve the profitability of your cable operations, i.e., would you love to keep the benefit rather than pass it on to consumers? At least, initially.

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

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Yes. Michaël speaking. We have this question several time, and we have always been very consistent on this topic. Stating the fact that even if we are now EBITDA positive on our cable operations, we still are cash flow negative, meaning that our first ambition, indeed, is to reach the overall profitability on our cable standalone operation. Now obviously, I will not comment on potential price move that can depend on market condition. But our first focus, once again, is to reach profitability or at least to 0 profitability on the standalone part of our convergent product. Obviously, the mobile part is profitable, but it is important for us that the cable part of our convergent offer become also profitable. So yes, we expect a decrease. And as you know, the draft decision that has been published by the regulators, foresee some decrease in the wholesale price, we will see the final outcome of the decision. So this was forecast since the start, and we already anticipated this evolution when we launched our services and when we launched our offers because we knew that the cost base of this operation was much lower and would allude to have a decrease in the wholesale pricing. So obviously, we made some forward pricing, and which now is a justified and confirmed by the evolution that we see in the regulation.

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Operator [12]

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Your next question comes from David Vagman from ING.

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David Vagman, ING Groep N.V., Research Division - Research Analyst [13]

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So first question on the -- maybe on the guidance range. So you've decided to keep the guidance range, which is still a bit large at this stage of the year. Could you give us some indication, let's say, let us better understand today, what are the key element profit driver which would lead you to land either on the high side or the low end of the range? That's my first question.

And then on second question, on the launch of Love Duo, could you clarify in the order book that you said, whether you see Love Duo, let's say, add in to net adds? Or whether it adds into the Love Trio net adds at this stage?

And then last question on the single-installer issue. Do you still see an impact? Should we still expect an impact in Q4?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [14]

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So Arnaud will answer you on the guidance, and I will take the question on Love Duo.

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [15]

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Yes. On the guidance, we confirmed the guidance. So we are confident on this guidance. But you have to see the seasonality of our cost. And if you look at the cost of Q4 2018, you can imagine what guidance -- where we are going to be at the end of the year. And don't take the EBITDA of Q3 to imagine the EBITDA of Q4. There is a seasonality in our activity. As you know, end of year, it's a strong commercial activity. So this year, it will be still the case. So no, I think to date, the guidance is -- we are confident, and we don't want to change the guidance at this stage.

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [16]

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On your question on Love Duo, what we see is that it's mainly extra customers, meaning that the Love Trio level of sales are more or less maintained. It's not that impacted by Love Duo, so this is the good news. It's mainly extra customer that we manage to attract, thanks to this offer. And then on the question on the single installer, I would say that operationally speaking, now the process is more or less fully working. And obviously, during the launch, we had some progressive launch. It's on-field operation, so we need to be a little bit cautious. And the installation has been impacted in particular in July and a little bit in August. But now we are back, I would say, to a full potential on our installation, which is positive. Obviously, we will continue to benefit from the financial improvement of the single installer. And also our customers will also continue to benefit from an improved installation process. That's what I can comment on this single installer.

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David Vagman, ING Groep N.V., Research Division - Research Analyst [17]

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And maybe a very quick follow-up on the single installer. Do you already see a benefit in term of churn from the single -- the move to the single-installer process in terms of time to installation once it's all up and running?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [18]

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It's a little bit too early to comment on this because, as you know, we started the single installer in July, process, and then there is an installation time, and there has been also progressive deployment on this procedure. But we can expect, indeed, that the improvements in the customer journey translates not maybe in churn improvement, but incretion improvement because identities, the delay between the contract that is signed by the customer and installation. So it's not yet a customer, it's not yet in the net adds, but this is more the pressure, which obviously come with some cost because we incurred some cost in the -- at the start of the process, even if it's not the full cost. So it's rather the pre-churn that we could expect to improve, thanks to the single installer.

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Operator [19]

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Your next question comes from Ruben Devos from KBC Securities.

Sorry, we have the next question from Emmanuel Carlier from Kempen.

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Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [20]

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Three questions from my side. First of all, coming back to Love Duo, it's good to hear that the order book is strong. But could you be a bit more specific about what it could mean in terms of converged net adds on a quarterly basis. Should we be thinking to get an acceleration towards 25,000, 30,000. So yes, if you could give a bit of guidance on that?

Secondly, on OpEx savings, I think it's fair to say that you are a bit more focused on savings, if I read the press release. If I look at peers, I think there are many peers with EBITDA margins rather of 30% or even higher. Could you comment a little bit on what you expect in terms of profitability in the long term? Or give a bit of disclosure on OpEx savings you expect?

And then the last question is on the fourth entrant. So I know that this file is a bit close, but could you comment if you continue to educate politicians on why fourth entrant is not good for the market because the federal discussions are ongoing. So it's probably very important to continue to pass on that message to politicians.

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [21]

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So I will take the question on Love Duo and on the fourth entrant, and Arnaud will answer you on the EBITDA and margin and the long-term view.

Well, on Love Duo, what we indicated in the first place is that we expected more or less 1/3 of the market to be interested by this offer. And this is more or less in line with what we see in the first month in the orders, meaning that you can consider that we have more or less 1/3 of the order that are on the view. And I mentioned just earlier that we had little impact on Love Trio, so it's mainly, maybe not fully, but mainly extra customers. So I guess that it gives you some elements to make your forecast and estimation.

On the fourth entrant, well, indeed, it's a topic that is less, I would say, visible and open and discussed for the moment, including that critical level. Obviously, it is still a topic on which we are very cautious and very active. What I can say is that obviously, the federal government is not yet formed, and they will have a stronger -- they will have the decisive -- the decision on this. Still had -- Flemish government has been formed. And in the traditional agreement at the Flemish level, there is one mention about 5G, which is rather positive because as mentioned that support to 5G with the will to decouple this 5G auction from the potential fourth entrant. Obviously, it is only the Flemish government and the decision is at federal level, but we know that this is also the same parties that are going to discuss. So you see that we continue to be very active on this important topic. Even if, as you mentioned, we see less, I would say, political pressure on this topic for the moment.

Arnaud, short-term efficiency and more long term.

So on a short term, you are right now. Our cost are in -- are stable. For example, the labor is a good example. Now you know we are in a country where there is inflation of salaries. Despite these inflation, we have a stable labor cost in Q3. So it's good people management and workforce management. In terms of indirect cost, we have an of about EUR 4 million that you know compared to next year we have the brand fees for EUR 4 million. And with the seasonality effect of Q2 in Q3, for EUR 4 million effect, so it's a decrease somewhere of our indirect cost. And as we explained, with improvement on the cable P&L, but also we've -- our customer care improvement on the whole, it's -- thanks to simplification of our offer, a better customer journey in terms of mobile and cable. And at the end of the day, it's a less cost due to the better customer journey. It's also less cost and less churn, thanks to better offer with less bills, for example, because, yes, we have experienced a slight decrease of our ARPU, but it's because the out-of-bundle decrease, but the bundle increase. And we are sure this new ARPU and new offer are a direct impact on our cost because now it's peace of mind for our customers. And thanks to this peace of mind, we have less cost in customer service.

On the long term, yes, some mobile operators are margin of 30%. But as you know, we are in a wholesale model because we have no fixed networks. So we have to pay in OpEx this network. So no investment, but in OpEx, we have a big part of our cost, which are wholesale cost. So you can't compare. But yes, we see the improvement looking ahead of our margins from this 26%. Again, thanks to offer simplification. We think we can continue to improve the simplification of our offer. We are going to change the distribution channel mix. We have to be more on web and telesale. We are going to close some shops.

Customer service. We try to organize more and more, the customer service in the different BU, B2B and B2C. As an example, now the customer service is no longer an independent BU, but it's implemented. It's HBU. So now all our manager have their own P&L. So it's not only focus on top line and sales and marketing for the business but is also the full control of their P&L. So yes, we think there are a lot of improvements in the next year, yes. So I'm not going to give you our strategy in terms of cost efficiency, but it's in our plan. And yes, we see an improvement of our margin, but always in a wholesale model, and because we have no fixed network.

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Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [22]

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And is it something you're intending to guide on more specific in the coming quarters? Or in terms of savings?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [23]

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We are going to -- yes, maybe in the full year disclosure, we are going to give you the efficiency. We are going to do in 2020. So far, we disclosed year-after-year about EUR 30 million efficiency. It could be an amount -- close to this amount for 2020, yes. And -- but you know, next year, we'll not have this impact of MVNO, year-on-year impact. So it's the reason why we're seeing, yes, our margin is not a disclosure at this stage. But we think our margin will increase next year.

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Operator [24]

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Next question comes from Nayab Amjad from Citi.

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Nayab Amjad, Citigroup Inc, Research Division - VP [25]

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I have 3 questions, please. On cable, can you give us a profit per subscriber with a bit of breakdown of the associated cost? Also, can you tell us the breakdown of cable CapEx per subscriber? And how much would that change for the last Duo offer?

My second question is on the BIPT's proposed wholesale rate. What is your view on the risk that the final wholesale price is may be higher than those proposed as it has happened in the past?

And my third question is on the mobile network sharing agreement with Proximus. What is the update on that? And Telenet expression interest to be involved? Is this something which is still being considered?

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [26]

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Okay. On the first question.

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

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Yes, unitary cost for cable. As every quarter, we are going to give you precise figures, and you will see the improvement. But -- so all in all, the EBITDA, the unitary EBITDA for our cable customers, so without the mobile part of those customers, is between EUR 2 and EUR 3, okay? And it's explained by the ARPU. The ARPU, and wholesale of about at this stage EUR 20, EUR 21. The content cost of EUR 9. Some repair for about EUR 2. And customer service and other costs of about EUR 6. So you see, we are now positive in EBITDA, but only EUR 2 or EUR 3 per customer. And we have to invest in acquisition for about EUR 330 per customer. EUR 330 per customer. So we see already a slight improvement in terms of CapEx because the last disclosure was more EUR 350. So thanks to the new installer and again, an improvement in our process. This full investment is EUR 330. We will have an improvement in the coming quarter, thanks to the Duo offer because there will be no longer box for those customers.

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [28]

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On two other questions. So on the BIPT final outcome on the wholesale rate. Well, what we can say is that we strongly believe that, and we advocated for this, and we see that the results of the model and the result of the cost base that indeed, there has been a huge work that has been done by BIPT. And that lead to significant decrease in the wholesale rate, at least, in the north of the country, which is perfectly justified by the cost base to be taken into account. What we also mention is that we expected some improvements, in particular in the -- to avoid unjustified wholesale price increase. You know that there are some KPIs or some elements to be taken in the formula that we need to monitor closely including the peak bandwidth that needs to be taken into account and also the cost, the price. So it will say price in the south that we believe is still too high. So that is why we can't comment. Obviously, we will wait for the final outcome. But we believe that the regulatory is doing a good job with in-depth analysis will also some support on this very detailed work that is being done. So it's, I would say, no more just a price decision from the Board but it's a decision that is linked to analysis, cost model, methodology and that is being followed by the regulator.

On the run sharing, as you know, Telenet, as you mentioned, Telenet in the first time asked us to discuss the opportunity to join the run sharing agreement with Proximus. We answer positively to this request to discuss. So we were and still are ready to have this kind of discussion, our understanding and our current understanding, however, is that they are not willing anymore to enter into this discussion.

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Operator [29]

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Next question comes from Alexandre Roncier from Exane.

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Alexandre Charles-Edouard Roncier, Exane BNP Paribas, Research Division - Research Analyst [30]

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I was just wanting to come back on commercial intensity and promotional environment heading into Q4. You said during the Q2 conference call that you were willing to probably step up commercial and promotional intensity into H2. I was just wondering, because it seems that the market has been relatively rapid to that regard. So are you expecting to increase your spending for Christmas period? Any color on that will be very helpful.

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [31]

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Okay. Thank you. So on this topic, indeed, we have seen some increased promotional activities, meaning some discounts for 3 months, 6 months that has been much more present in our competitors, especially from the back-to-school. So that's what we see. Indeed, Q4 is usually a very active quarter. So we expect this to be still the case this year. But I cannot comment anymore on our end of year plan. What we can say is that we don't expect Q4 2019 to be different in the competitive activity as we used to have.

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Operator [32]

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Your next question comes from Michael Bishop from Goldman Sachs.

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Michael Bishop, Goldman Sachs Group Inc., Research Division - Equity Analyst [33]

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Most of my questions have been answered, so just a quick one on B2B. I was just wondering what your wider ambitions are in B2B, following the acquisition?

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [34]

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Why don't you answer?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [35]

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Yes, Okay. So maybe I'll comment and Arnaud can give you the financial for BKM more specifically. So on B2B, we have indeed some strong ambition. We believe that we have an opportunity to grow and to increase our market share in the market that is dominated by the incumbent. And that's why we are working on our B2B to address and to be able to take this ambition and to take those market shares. And we are working more specifically, first on our portfolio, and that's where the BKM acquisition is concerned because we believe that for the B2B customers, it is not only about connectivity anymore, but we need to be able to offer some key services as a unified communication collaboration solutions for our B2B customers. Our B2B customers, they require more and more solution rather than just connectivity solution, but somehow per employee, being able to offer them the whole set of services they need to integrate and support their employees from connectivity to collaborative solution to be able to work efficiently in the company. So this is the first step. It's about portfolio, and we continue on this topic. We have some, indeed also some work on security solutions that are also very important for our customers. And the second level that is key for B2B is the distribution. And on this also, we are working on our distribution and our B2B distribution to improve the efficiency of our distribution. So these are the 2 main elements we are working to support our ambition in B2B. And maybe, Arnaud, you want to remind the -- more specifically and more financially speaking, the BKM figures so that you are very well aware of the impact on our results and for the future.

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [36]

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So we disclosed for the past turnover of EUR 42 million in 2018. So the figure for this year will be comparable. As you can see now, we disclosed in IT and integration service line this turnover. So for the end, but it will be only the turnover over 6 -- 5 months from end of July to end of December. But for the coming year, you can imagine a slight increase of this EUR 42 million turnover for 2018, thanks to the synergies we are going to do between BKM and Orange. For BKM and this IT integration service, it will mainly be the cross-sell of the ICT solution of BKM to the customer of Orange Belgium. So the full year impact in revenue will be higher than the EUR 42 million we disclosed. And in terms of EBITDA, it will be higher than the single-digit margin we disclosed in the past, thanks to synergies between Orange and BKM. So -- but again, on 2020, we'll disclose a little bit more at the beginning of next year. And impact of the synergy will start in 2020.

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Michael Bishop, Goldman Sachs Group Inc., Research Division - Equity Analyst [37]

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Okay. Great. And do you have any sense just -- I know it's difficult to define sometimes, but a sense of your market share in enterprise, both in mobile and fixed in terms of the total size of the market from a revenue perspective?

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [38]

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Well, what I can tell you is that on the fixed, we are still very low in market share as we are in the B2C, by the way. On the mobile, we are a more significant player, indeed. And our market share is close to 30%.

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Operator [39]

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Your next question comes from Matthijs Van Leijenhorst from Kepler Cheuvreux.

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Matthijs Van Leijenhorst, Kepler Cheuvreux, Research Division - Analyst [40]

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The first question is on this network sharing agreement. Are there any regulatory hurdles to take because I believe in the Czech Republic, the same deal was canceled because of regulatory concerns. And the second question is, could you give some color on your dividend policy because if I look at consensus, many people do believe that you are increasing your dividend over the coming years. But you also will have the spectrum auction. And in case, you will see this network sharing agreement, you also will have some front up or some costs upfront. So could you give some color on your dividend policy for the next year -- next couple of years?

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Arnaud Marie Julien Castille, Orange Belgium S.A. - Chief Finance Officer [41]

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So on the run sharing, we don't have any agreement to get to implement the run sharing. So this is clear. It's not like M&A acquisition where you need to have a pre-approval by competition authority. There are national at European level to see difference. So we don't have this kind of element. Obviously, we -- in the implementation of the run sharing, we make sure that we can answer to potential concern on competition. We believe on the contrary that this deal is pro-competitive and pro-consumer. So that's exactly what we implement with an improved coverage, improved quality of service for the customer. And at the end of the day, this will support accelerated 5G rollout in Belgium. Then obviously, we are aware of the situation in Czech Republic. We believe that the situation in Belgium is very different and cannot be compared to this situation.

On the dividend policy, well, obviously, it's a little bit early to comment on the decision that will be taken by the Board next year. What I can tell is that we have always mentioned the fact that the Board is willing to, indeed, distribute a dividend according to the generation of cash flow. And taking into account the expecting -- the expected potential requirements, cash requirements that we need, so you have mentioned some of them. So this will be a discussion that we will have at the Board level in the beginning of next year. Indeed, we have been cautious in our dividend policy, as you have seen in order to make sure we can sustain the dividend. We will assess the situation, taking into account the cash flow generation, the business improvement that is there, as you can see. And also the cash requirements that we can expect in the future.

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Operator [42]

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Your next question comes from Ruben Devos from KBC Securities.

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Ruben Devos, KBC Securities NV, Research Division - Senior Financial Analyst [43]

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My apologies, there seems to be some technical issues before, but do you hear me now? Hello, do you hear me now?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [44]

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Yes. Yes, we can hear you.

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Ruben Devos, KBC Securities NV, Research Division - Senior Financial Analyst [45]

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Okay. Great. So yes, 2 questions from my side. Just following up on the finalization of the mobile network sharing agreement, which seems to be on schedule. I was just curious where you could fine-tune the guidance on the setup cost that you expect for 2020? I'm also curious to have an update on how many mobile sites you currently own? And how does it expect it to change after the mobile network sharing deal?

And then secondly, it's noticeable that in the last few years, you sort of reported that a relatively big gap between depreciation and amortization, around 18% of sales and then CapEx at 14%. So it would be great if you could give some indication, what do you think that's sort of sustainable. And very curious to get some indications on how we should see the CapEx road map for going forward?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [46]

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Okay. Thank you. So I think Arnaud will answer most of your question. Maybe one comment on the site for the run sharing, what we indicated, and we did not communicate the number of sites because this is not a disclosed information that what we communicated is the fact that we anticipate to be able to increase around 20%, the number of sites for each company. We have a similar, let's say, a number of sites. So that's what I can comment or that can give you an idea of the number of sites we would be able to decommission in this sharing. Even if in some situation, we have already some co-located sites because as with any player in the market, we are sharing already passive network where it is relevant. Arnaud, you want to comment on the CapEx side?

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

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So I remind you the figure for this sharing and just to give over 10 years. That is a saving of EUR 300 million over these next 10 years. Your question on the setup cost in 2020 because the main part of the setup cost are the enablements of our shared network. And because in 2020, we are going to set up the JV. We will have a little share, site in 2020. So we don't expect a big amount of enablements in 2020. The full setup cost for the JV and for the sharing was EUR 130 million over the next 3 years. So -- and with start -- real start for this sharing only during the second semester of 2020. So the impact will be light in 2020. Yes, we'll see an increase of our CapEx due to this setup cost, but quite a light increase in terms of CapEx. So we'll disclose at the beginning of the year. This impact that will not be a big impact, and it's just a portion of this EUR 130 million, less than 1/3 of this amount because we start the sharing only in the second semester of 2020.

In terms of percentage of CapEx. So in 2020, as I mentioned, there will be an increase in absolute value of our CapEx due to this sharing, but it's too early to disclose the trend of our revenue, too early to disclose the percentage of CapEx on sales. But in a pro forma view, we don't see an increase of our CapEx in 2020 without the sharing and in -- even in 2021. And so at this stage, we see quite a stable CapEx in a pro forma without sharing. But of course, the sharing has a big impact in our CapEx, mainly in 2021 and with the 5G and the strategy with the sharing. So again, too early to disclose precise figure. But for 2020, we imagine in a pro forma base, a stable CapEx.

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Operator [48]

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There are no questions in the queue. (Operator Instructions). We have next question from Guy Peddy from Macquarie.

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Guy Richard Peddy, Macquarie Research - Head of Telecommunications, Media, and Technology [49]

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It's Guy Peddy. Just a quick question. So as you come back to this issue, the single installation, can you talk about what's that's done for your capacity or ability to actually deliver and the pace at which you can deliver connections. Has it actually slowed it down because you're having to do a lot more yourself? Or is that a process? And is it getting quicker? And do you think you'll need to add more engineers into your platform in order to continue to sustain the growth rates going forward?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [50]

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So thank you for your question. Indeed, in the first time, the single-installer implementation had some impact on our installation capacity. It has been limited during the progressive take up of the single-installer process. However, now that is done, we expect the single installer to have a positive impact. Obviously, this means that our technicians will have more work to do. But this will -- this is only marginal because there is already on site. This can be done marginally speaking. And it is positive because in some situation for instance, in the past, we needed to also have a (inaudible)installer coming. In some situation, the work was not done or was not done correctly or not at the right time. So we need to spend another time, our technician. So at the end of the day, it's able to decrease the number of intervention per customer. So all in all, the impact is positive on cost, obviously, because we don't pay any more from the cable intervention, but is also positive for the customer experience and the overall work from our technicians is quite marginal. And is also mitigated by the FG improvement that brings -- this brings into the process avoiding errors, mistakes that leads to extra interventions .

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Operator [51]

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We have a new question from Emmanuel Carlier from Kempen.

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Emmanuel Carlier, Kempen & Co. N.V., Research Division - Research Analyst [52]

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Two very quick questions. One on the regulation. What is the reason that the cable regulation decision is delayed from Q4 towards Q1? And when do you believe the fiber regulation will come up?

And then secondly, on VOO, I can see that you could generate quite a lot of synergies from acquiring VOO. On the other hand, yes, you will have to pay quite a high price for that as well on your market cap. Given that your organic growth story is that good, why do you not just continue focusing on organic growth instead of M&A?

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Michaël Trabbia, Orange Belgium S.A. - CEO & Executive Director [53]

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Thank you. So on regulation, the reason for the delay that has been communicated by BIPT is the volume of comments that they have to take into account and to consider before taking the final decision. So this is, once again, very precise work that is being done. And this is the reason that has been given by BIPT taking into account limited resources, obviously, at their side. But we don't believe that this has another impact than a delay we experienced already in the past, this kind of delay due to the work to be done and the high level of comments that is being made. So no more elements to be given on this one. On the VOO, indeed, you are right, meaning that our standalone strategy is working and is positive. So we are not in a necessity to buy VOO. It is an opportunity. So obviously, you're also right mentioning the synergy. So we believe that there are a number of synergies putting together the cable network and customers and our operations, in particular our strength in the mobile. So this is an opportunity for us to create significant synergies. However, it is not a necessity for us. So this means that we will certainly not buy and pay any price for the asset, we are indeed interested. We can create synergies and -- but we will only do this deal if we are convinced, it can create value.

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Eric Chang, Orange Belgium S.A. - Director of IR [54]

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Well, ladies and gentlemen, thank you very much. Ana and I remain at your disposal for further questions on this. We thank you for your participation.

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Operator [55]

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