Mobistar Q2: little underlying improvement, cable launch at risk

Friday 25 July 2014 | 14:33 CET | Background

Mobistar, Orange's subsidiary in Belgium and Luxembourg, reported revenues of EUR 312 million for the second quarter. The sharp decline in revenues continued, with a 14 percent fall on an annual basis. EBITDA, excluding restructuring costs, fell 13 percent to EUR 74 million, leading to a slightly higher margin of 23.8 percent, versus 23.5 a year ago. The net profit was down 33 percent to EUR 15 million. Capex totaled EUR 56 million, leading to free cash flow (EBITDA minus capex) of EUR 17 million.

Mobistar's cost-reduction programme ACE2, which targets EUR 50 million in savings this year, achieved EUR 36 million of the target by the end of the first half. The company reiterated its outlook for the full year, for a drop in adjusted EBITDA to EUR 250-280 million from EUR 336 million in 2013 and capex down to EUR 200-210 million from EUR 319 million. It aims for 4G coverage equivalent to the 2G network by the end of 2015. Mobistar said that 4G customers are using 2-3 times the amount of data as 3G customers.

Mobistar confirmed it's ready to offer services over cable networks before the end of 2014. It has developed a cable modem and set-top box. However, it said the wholesale prices offered by the cable operators are not sufficient to offer a cost-efficient, customer-oriented service. Mobistar is pushing for the regulators to intervene to improve the wholesale offer. The market also still faces the threat of a court appeal by the cable operators against the market analyses that led to the decision to open the wholesale market. 


Mobistar Belgium added a net 194,600 Sims in the quarter for a total 5.345 million. This included growth in MVNOs (198,500, mainly Telenet) and machine-to-machine (48,800, a few large contracts), but a continued drop in retail customers. In postpaid, it shed 20,300 customers for a total 2.160 million, and the prepaid total dropped by 32,400 to 878,500. The loss of in total 52,700 retail customers was smaller than in previous quarters, but still more than the 45,100 in the year-earlier period. 

ARPU showed a small recovery on a sequential basis to EUR 23.9 but was still down from EUR 25.6 a year earlier. Total revenues in Belgium fell 13 percent to EUR 301 million, and mobile service revenue was down 10 percent to EUR 246 million. Handset sales fell 27 percent to EUR 29 million, and non-mobile business sales declined 24 percent to EUR 24 million.

The 4G network reached outdoor coverage of 70 percent nationwide and 99 percent in Brussels. Indoor coverage was 42 percent. Mobistar said the service is used by over 300,000 customers. 


Orange Communications Luxembourg posted a 21 percent drop in revenue to EUR 15.1 million, mainly due to the sharp cut in termination rates in February. Service revenue fell 25 percent to EUR 13.0 million. The operator added postpaid customers, but the total subscriber base fell by 1,900 in the quarter to 100,700. ARPU dropped to EUR 40.1. 


Mobistar said it's satisfied with the "stabilisation" of the customer base and service revenues in Belgium. This is somewhat optimistic given the quarterly developments. It stressed the growth in Sims, but this is still entirely due to wholesale and M2M. On an annual basis, the drop in number of Sims hit a new low of 8.8 percent. The overall decline in revenues is still high, even if somewhat less than the two preceding quarters. EBITDA is showing an encouraging underlying development, thanks to the cost reductions. Luxembourg is suffering from the lower MTA rates and its customer base is not growing. 

Mobistar's entry on the cable market should be followed with caution. The cable operators are not exactly cooperating, and it now appears the wholesale offer is inadequate. Even if a launch does occur, it will be some time before the activity adds substantially to Mobistar's results. 

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