Belgian telecom market Q4: Telenet strongest as Proximus looks to FTTH, Orange to cable

Thursday 23 March 2017 | 16:51 CET | Background

The top three Belgian operators generated total revenues of EUR 2.078 billion in Q4 2016. After correcting for Telenet's takeover of Base at the start of the year, underlying growth was 1.1 percent. Proximus and Telenet gave similar guidance for 2017, targeting stable revenues. Both are investing heavily in their networks, removing some of the worries of a duopoly. Both are also using content to differente. Orange aims to grow its cable base to 400,000 customers within five years. As a nationwide cable operator, it will most likely win over customers on the low end of the market. 

In this analysis, we exclude SFR BeLux, as its parent company Altice has not published results for the Belgian subsidiary and SFR is also the subject of a takeover offer from Telenet. Post Luxemburg is also left out, as it has not yet published annual results. The figures from Proximus and Orange do include Luxembourg. 

The top-3 recorded a combined EBITDA marging of 36.0 percent in Q4, up slightly from a year ago, but lower than in the two previous quarters. Their investments were relatively high, with capex at 28.4 percent of revenue or a total EUR 591 million. Free cash flow (EBITDA minus capex) was stable year-on-year, at just 7.6 percent of revenue. 



Telenet in the lead

Looking at the most important financial indicators, we see that Telenet is performing the best of the three. The differences with Proximus are small. 

  • Growth was highest at Telenet, even after correcting for Base (+2.1%). Proximus, excluding the international arm BICS, grew by 0.9 percent. Orange underperformed, with a drop of 0.4 percent, as its entry on the cable market was not yet reflected in sales. Orange did report an acceleration in cable customer growth late in Q4. 
  • Telenet scored the best in terms of EBITDA margin, and despite the low figure for a cable operator of 41.9 percent, was well ahead of Proximus at 35.9 percent. Orange is at a much lower level, with a margin of 24.4 percent in Q4, due to the costs of the new cable services, limited scale and not owning its own fixed network.
  • Capex increased to a relatively high level for all three players: Proximus was at 27.5 percent of revenue, Telenet 33.2 percent and Orange 22.2 percent. 
  • The low EBITDA margins (and as such high opex) and high capex resulted in the low free cash flow. Proximus posted free cash flow at just 8.4 percent of revenue, Telenet was at 8.7 percent, Orange only 2.2 percent.

  • Little difference in customer growth

    The quarterly changes in customer numbers (consumer and business combined) show little difference across the operators. Telenet is losing customers, the same as most cable companies, but is still selling more services to existing customers. A similar picture is evident at Proximus, which is losing fixed lines but winning broadband and TV subscribers. Orange showed its first strong growth on the cable market. On the mobile market, Telenet was the main winner in postpaid, while all three lost substantial numbers in prepaid. 

    • TV: Proximus +17,000, Telenet -11,100, Orange BE +16,600.
    • Broadband: Proximus +14,000, Telenet +7,400, Orange BB +16,600
    • Fixed telephony: Proximus -8,000, Telenet +4,400, Orange BE -800.
    • Mobile postpaid: Proximus +7,000, Telenet +33,100, Orange BE +9,300.
    • Mobile prepaid: Proximus -40,000, Telenet -61,200, Orange BE -30,400.
    • Luxembourg mobile: Proximus -1,000, Orange BE +1,200.
    • M2M: Proximus +10,000, Orange BE +50,500.
    • MVNO: Orange BE +50,800.

    Looking ahead, Proximus is continuing with its cost-savings plan and also ramping up investment, in for example FTTH (the 'Fiber For Belgium' initiative). This is expected to lead stable domestic revenues and a slightly higher EBITDA in 2017, as well as an unchanged dividend. In terms of content differentiation, it's mainly about football (with a new national rights deal to be decided in the coming weeks). Telenet has healthy ambitions and is focusing on improving its networks. Telenet also expects flat sales and a small increase in EBITDA in 2017, but sees room for a share repurchase. Telenet is developing its own content to set itself apart in the TV market. Orange meanwhile has started paying dividends again and targets further growth in the cable market. 

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