Reggefiber 2011: revenue growth 57%, connection costs decline

Tuesday 13 November 2012 | 12:19 CET | Background

The recently released annual report for 2011 from Reggefiber shows a company with extremely high growth. Even with the non-passive assets now deconsolidated (after the sale to KPN), revenue growth is over 50 percent. Capex is also very high, at some seven times revenues. The cost of adding each home passed has fallen by 9 percent to EUR 990. The company is betting on continued 'strong' growth, although the targets for end-2012 appear too optimistic.

Reggefiber recently deposited its 2011 accounts with the Chamber of Commerce. This offers a detailed overview of the KPN associate, which since the sale of some of its operations to KPN is now completely focused on passive infrastructure. Compared to the accounts from 2010, this new report does not include any activities in equipment or services provision to end-customers. The figures on homes passed and homes activated are also slightly different from those published on Reggefiber's website. In order to be consistent, this article is based on the accounts filed with the Chamber of Commerce. 

In 2011 the operator added 293,000 homes passed to reach a total 920,000 (+47%), and the number of homes activated (subscribers) rose by 91,000 to 259,000 (+54%). The number of homes connected, which have a connection to the utilities cabinet but are not yet activated, rose by 49 percent to 745,000 (81% of homes passed, versus 80% in 2010). The network utilisation (active connections divided by total connections) was at 28.1 percent at the end of 2011, versus 26.8 percent a year earlier. Reggefiber was active in 150 municipalities at year-end, versus 94 in 2010. 

Revenues rose 57 percent to EUR 41.3 million. The cost of sales rose 62 percent, leading to a small drop in the gross margin to 87.9 percent. Personnel costs rose at a slower rate (35%), allowing EBITDA to grow 80 percent to EUR 28.8 million. The EBITDA margin was up 8.8 percent points to 69.7 percent. The number of employees was still up 66 percent. The net loss narrowed to EUR 7.4 million, after a large writedown on financial instruments in 2010 which also sharply reduced financing costs in 2011.

Operating cash flow increased four-fold in 2011 to almost EUR 40 million. Investments (capex) totaled EUR 291 million, of which 290 million was in networks (+76%). There was a small positive cash flow of EUR 10 million, due to external financing. The cash position totaled EUR 20 million at end-2011. The ratio of capex to revenues, usually around 10-15 percent in the telecom sector, reached 705 percent at Reggefiber. In other words, capex was around seven times higher than sales, versus 3.8 times in 2010. 

After accepting a loan from the EIB last year, the percentage of shareholders equity in the total assets fell to 38 percent from 50.1 percent in 2010. A new EIB loan this year will reduce that share further towards the target solvency of around 25 percent shareholders equity. 

Surprisingly Reggefiber gives explicit forecasts for 2012. It expects the number of homes passed to continue growing, to 1.32 million, and the number of homes activated to reach 430,000. Revenues are targeted at EUR 69 million, up 67 percent, and EBITDA is expected to grow 78 percent to EUR 51 million, with a margin of 74.4 percent. If we look at the figures as of 30 September, (according to the Reggefiber website: homes passed 1.181 million, homes activated 362,000), the targets for end-2012 seem very ambitious. For the coming years, Reggefiber is counting on continued "strong" growth in revenues and EBITDA, which according to the Mock scale used in the Dutch financial sector, means growth of 20-30 percent per year. 

The figures also provide insight into the capex for passive infrastructure for each home passed. This was EUR 990 last year, down 9 percent from EUR 1,086 in 2010. Per home connected, capex was EUR 1,190. Revenue from passive infrastructure, averaged over each home activated, was EUR 194 in 2011, or EUR 16.14 per month, versus EUR 183 in 2010 (EUR 15.26 per month). 

The recent EIB loan of EUR 250 million opens the way for Reggefiber to continue growing at a high rate. The loan will be used for connecting another 50 municipalities and 500,000 households. Growth will be further helped by the addition of Vodafone and Tele2 as service providers on the network. Speed is of the essence, as the cable operators are quickly taking customers from the DSL market, giving KPN every reason to stimulate the migration from copper to fibre. 


Revenue growth of 57 percent was little changed from the 60 percent registered in 2010, although the comparison is skewed by the inclusion of the services activities in 2010. The utilisation rate on the network is still very low, at 28.2 percent, and did not increase much from the previous year (26.8%). Whereas we were once critical of the rate of investment, 2011 ended up a stellar year with capex at 7x revenues. With the new EIB loan, capex should also be high in 2012. At the same time the loan brings solvency closer to the desired level, putting shareholders equity at around 25 percent of assets. Also positive is the drop in costs per home passed to below EUR 1,000. 

Last year was also important as it marks Reggefiber's transition to a company completely focused on passive infrastructure. Surprisingly enough the company gave very concrete forecasts for 2012, although now that the year is almost over these seem somewhat ambitious. But with Vodafone and Tele2 now active on the network, the expectations are high. 

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