belgacom investors roadshow presentation full-year results 2010
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Belgacom Investors roadshow presentationTRANSCRIPT
1
Belgacom Road show presentation Full-year results 2010
Group Highlights
Financials - 2
Operationals - 8
Strategic progress -10
Shareholder return -12
Guidance - 13
2010 Results per segment
Consumer - 15
Enterprise - 23
SDE&W - 30
S&S - 31
BICS - 32
Popular discussion topics
Headcount - 34
Regulation - 35
Legal - 39
Convergence & TV - 40
Mobile Data - 44
Network - 47
Other - 51
2
Belgacom Group Financials 2010 ended with solid financial results
• Strong FY revenue of € 6,603m or +10.2% yoy • Slightly exceeding full-year guidance
• Growth trend largely results from full consolidation BICS & additional MTN business
• Like-for-like*, revenues -0.6% including €121m regulation (-2%)
• Underlying business +1.4% driven by sound CBU results & organic growth BICS
• Operating expenses of € 4,619m, up from last year driven by CoS BICS • FY like-for-like* CoS flat , including positive effect from regulatory measures
• FY HR costs -1.6% like-for-like* as a result of headcount decrease(-553 FTE‟s)
• Q410 down 1.1% in spite of 2% wage indexation in October
• FY non-HR costs up 1.1% like-for-like*
• FY EBITDA at € 1,984m (+1.5%) and margin of 30% • Like-for-like* EBITDA : € -26m or -1.3% YoY, including regulation impact of € -26m
• Like-for-like* margin at 32.4% vs 32.6% the year before
Slide 2 * 2010 result adjusted for full consolidation BICS & contribution of MTN
Belgacom Group Financials
Slide 3
VAR VAR VARQ4/Q4 FY FY
Revenues (1) 1,492 1,504 1,476 1,518 5,990 1,641 1,664 1,640 1,658 6,603 9.2% 10.2% -0.6%
Total OPEX -1,000 -1,002 -982 -1,051 -4,035 -1,146 -1,161 -1,150 -1,163 -4,619 10.6% 14.5% -0.3%
Cost of goods sold -511 -511 -515 -550 -2,087 -662 -674 -651 -655 -2,642 19.2% 26.6% -0.1%
HR-costs -281 -280 -271 -277 -1,108 -274 -275 -281 -278 -1,107 0.5% -0.1% -1.6%
Other expenses -207 -211 -196 -225 -840 -210 -212 -218 -230 -870 2.2% 3.6% 1.1%
EBITDA (1) 492 502 494 467 1,955 495 503 490 495 1,984 6.1% 1.5% -1.3%
EBITDA margin (1)
33.0% 33.4% 33.5% 30.8% 32.6% 30.2% 30.2% 29.9% 29.9% 30.0% -0.9pp -2.6pp -0.2pp
Non-recurring items 0 -62 0 74 12 436 1 0 8 444 - -
Depreciation -174 -178 -169 -185 -706 -194 -206 -203 -206 -809 11.3% 14.6%
EBIT 318 262 325 356 1,261 737 298 287 297 1,619 -16.4% 28.4%
Financial result -37 -23 -30 -27 -117 -28 -26 -26 -22 -102 -18.1% -12.7%
Tax expense -69 -51 -79 -42 -241 -68 -64 -62 -39 -233 -7.2% -3.0%
Net income (Group) 212 188 217 287 904 638 203 195 230 1,266 -20.0% 40.0%
Non-controlling interest 0 0 0 0 -1 2 4 4 7 17 - -
Earnings/share in € 0.66 0.59 0.68 0.90 2.82 1.99 0.63 0.61 0.71 3.94 -20.3% 39.7%
(1) before non-recurring items
(2) 2010 BICS results consolidated at 57.6%
As reportedLike-for-
like (2)
FY09 FY10Q110 Q410Q409in mio € Q109 Q209 Q310Q210Q309
676625
764
597
734
11.4%10.3%
12.8%
10.0%11.1%
0,0%1,0%2,0%3,0%4,0%5,0%6,0%7,0%8,0%9,0%10,0%11,0%12,0%13,0%14,0%15,0%
0
200
400
600
800
1.000
1.200
2006 2007 2008 2009 2010
Capex % of revenue
Group - Investments
Slide 4
• Belgacom invested € 734m or 11.1% of its Group revenues
• 2010 capex was € 137m higher than 2009 driven by:
− Renewal 2G license for the period 2010-2015 (€ 74m)
− Renewal content rights Belgacom TV
− Switch from leasing to buying utility cars
Furthermore, Belgacom continued to invest in:
− Roll-out Move-to-all-IP (€ 50m)
− Roll-out fibre-to-the-curb & installation VDSL2 (€ 32m)
• 2008 incl. exclusive Broadcasting rights Belgian soccer
• 2010 incl. renewal 2G-license
2011 capex estimated in upper-end of 10%-12% of
revenue
Group - Free cash flow
• Strong FCF of €980m, up by €183m from last year
• Positive impact from higher EBITDA, one-offs & timing differences
• One -off cash increase in 2010 from full consolidation BICS (€ 51m) ; 2009 impacted by payment
of fine (€ 66m)
• Lower income tax payments:
− Following legal entity merger, full use of Belgacom SA tax losses carried forward
− Positive timing difference due to lower tax pre-payment ratio
• Partly offset by capex increase (incl 2G license of € 74m for which € 26m paid in 2010)
• 2006 acquisition remaining 25% of Proximus for € 2bn , acquisition Telindus for € 584m
• 2007 disposal of remaining interest in Mobistar and Eutelsal for €242m
• 2008 acquisition Tango and Scarlet for aggregated amount of € 380m
Sound FCF generation
-1,313
1,210
409
797980
-1500
-1000
-500
0
500
1000
1500
2006 2007 2008 2009 2010
Free Cash Flow (in mio €)
Slide 5
(1,716)
980 (702)(30) 16 (1,451)
Net debt December 2009
FCF Dividends Dividends to non controlling interests
Other Net debt December 2010
Group - Net financial position
• Belgacom continues to have a sound financial position with net debt/EBITDA at 0.7x
− Net financial debt decreased by € 265m to € 1,451m
− Outstanding gross financial debt at € 2.1 billion
− Most of the debt maturing in 2011 and 2016
− In order to pre-finance the maturing bonds of 2011, Belgacom issued, in January 2011, a 7
year senior unsubordinated bond of € 500m with a fixed coupon at 3.875%
− In March 2011, BGC invited the holders of the outstanding 4.125% bonds due November
2011 to tender their notes for purchase against cash
− Credit ratings: Standard & Poor‟s A+ ; Moody‟s A1
Slide 6
(in million euro)
2010 performance versus guidance
Guidance met on all metrics
• Guidance slightly exceeded on revenue; met on EBITDA-margin:
− +10.2% revenue growth or slightly ahead of guided range of 9% -10%
− 30% EBITDA margin or fully in line with the targeted margin for 2010
− FY capex fully complies with the guidance of „around 10% of Group revenue, excl renewal 2G license‟
• Reported results include following regulation impact:
− Revenue: € -121m (vs guided impact of „about € -115m‟)
− EBITDA: € -26m (vs guided impact of „less than € -30m‟)
Slide 7
√ √
√
Metrics Outlook 20101 Q110 Q210 Q310 Q410 2010
Group revenue growth Upper-end of range "9% - 10%" 10.0% 10.7% 11.1% 9.2% 10.2%
Group EBITDA margin Targeting a margin of 30% 30.2% 30.2% 29.9% 29.9% 30.0%
CAPEX/Revenue Around 10%2 9.4% 8.9% 8.5% 13.2% 10.0%
1 Before non-recurring items2 Excl CAPEX for 2G-license renewal
8
Belgacom Group Operationals
1 Including mobile customers Luxembourg as from 2008, and including mobile data cards 2 Mobile internet on laptop; excluding internet on smartphone 3 Total number of settop-boxes Slide 8
4,620
5,161 5,318 5,332
2007 2008 2009 2010
Active mobile customers1
(in „000)
Mobile data Cards2 evolution
(in „000)
TV base3
(in „000)Number of Packs
(in „000)
64
114
182
2007 2008 2009 2010
305
506
752
975
2007 2008 2009 2010
153
302
560
870
2007 2008 2009 2010
Fixed Voice customers
(in „000)
3.906 3.710 3.519 3.374
2007 2008 2009 2010
Broadband customers
(in „000)
1.237 1.345
1.520 1.558
2007 2008 2009 2010
Belgacom Group market shares
Slide 9 1 Mobile internet on laptop
9
30% 31% 31%
2008 2009 2010
Digital TV market shareBroadband market share
Mobile customer market share Mobile data cards1 market share
43.3% 42.7% 41.3%
2008 2009 2010
57% 57%62%
2008 2009 2010
49.7% 48.5% 46.3%
2008 2009 2010
Strategic progress
Growth
via
Cross sell
870k multi-play Packs, of which ~9% quadruple-play
Over 45% of consumers have at least 2 products
In 2010 increased focus on Mobile in a Pack
Reinforcing convergence position in SME market through
partnerships (e.g. Belgacom Bridging ICT)
Operational
excellence
>76% fiber* population coverage end 2010
Targeting 85% service coverage by end 2013
TV footprint of ~90%, ~73% in HD
3G outdoor coverage of ~97%, gearing up Radio Access
Network with Huawei equipment to be ready for LTE
Slide 10 * Fiber to the street cabinet
Move
customers
from single-
play to
multi-play
High
quality
networks &
platforms
Increase
value in BICS
Leading
position
in consolidation
Mobile data
growth
potential
Sharp increase in Smartphone penetration rate
Attractive subscriptions launched leading to significant growth
in number of internet on smartphone-users
Leading position „Mobile internet on laptop‟;182k customers,
up YoY nearly 60%
Belgacom well
positioned to
capture growth
potential
Growth
via
M&A
Disciplined &
consistent
approach
Main focus on Belgian market
Outside opportunities monitored in a disciplined way
Strict valuation criteria, focus on shareholder value
Since 2006, > € 3 billion on M&A: minority Proximus,
Telindus, Tango, Scarlet,…
Strategic progress
Innovation
Address changing needs of customers
Complement our strength with exclusive partnerships giving
access to specific expertise
In 2010: strategic partnerships to further develop Belgacom
Entertainment platform (OnLive, Jinni, Softkinetic & Blinkx)
Sustainability
Commitment on being socially responsible company
Focus: “telecom access for all”, “health” & “climate change”
Reduce Belgacom‟s CO² emissions & help our customers lower
their environmental impact
Belgacom included in Ethibel Excellence Investment Register
Slide 11
Strengthen
leadership
through
selective
partnerships
CSR
embedded
in all
operation
layers
International
Carrier Growth
Belgacom ICS merged with Swisscom ICS and MTN ICS
Belgacom owns 57.6% of enlarged entity, Swisscom 22.4%
and MTN 20%
In top 4 worldwide in terms of voice traffic volume
World leader in mobile data carrier services
Increase
value in BICS
Leading
position
in consolidation
Special focus in 2010 on customer satisfaction led to significant improvements For 2011, customer satisfaction focus maintained & concentrate on simplification
Group – Shareholder return
Committed to attractive shareholder return
Shareholder remuneration policy confirmed: - Belgacom commits to an attractive shareholder remuneration
policy by returning, in principle, most of its annual free cash flow1, to its shareholders.
- The return of free cash flow, either through dividends or share buybacks, will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.
- The shareholder remuneration policy is based on a number of assumptions regarding future business and market evolutions, and may be subject to change in case of unforeseen risks or events outside the company‟s control.
1 Belgacom defines free cash flow as cash flow generated by operating activities, minus capital expenditures and including other investing activities such as acquisitions or divestments. Slide 12
0%
30%
60%
90%
120%
150%
0100200300400500600700800900
1,000
2004 2005 2006 2007 2008 2009 2010
SBB Dividends % of FCF
Total shareholder remuneration
Mio €
0.29 0.50 0.50 0.40 0.50 0,500.55
1.38
1.52
1.601.68 1.68 1.68 1.68 1,68
2004 2005 2006 2007 2008 2009 2010 2011Expected
Interim dividend Extra-ordinary dividend Normal dividend
Dividend per share
1.93
1.52
1.892.18 2.18 2.182.08 2.18
Over result 2010: • The BoD approved to propose to the AGM of 13 April, a
total dividend of € 2.18/share ; of which the normal dividend of € 1.68/share to be paid in April:
−Ex-dividend date: 26 April 2011 −Record date: 28 April 2011 −Payment date: 29 April 2011
• In addition, the board approved a share buyback of max. € 200m to be carried out during 2011- 2012
Over result 2011: • Expected to return annual dividend of € 2.18/share
Group - 2011 Guidance
In 2011 Belgacom‟s results will feel further pressure from regulatory measures.
For the full-year, the negative impact on revenue is estimated to be about EUR
115 million, while on EBITDA-level the negative impact is estimated to be less
than EUR 30 million.
As a result, Belgacom estimates its 2011 Group revenue to show a year-
over-year decline of up to 1%, and its full-year EBITDA to decline up to 2%
compared to last year.
Belgacom will invest in the further development of its fixed and mobile access
network, and therefore expects its 2011 full-year capex-to-sales ratio to be in
the upper-end of the range 10%-12%.
Slide 13
14
Belgacom Company presentation Investor Relations
Full-year 2010 results per business unit
• Consumer Business Unit (CBU) – slide 15 • Enterprise Business Unit (EBU) – slide 23 • Service Delivery Engine &Wholesale (SDE&W) – slide 30 • Staff and Support (S&S) – slide 31 • Belgacom International Carries Services (BICS) – slide 32
Slide 14
15
Consumer – Highlights
Full-year 2010 ended with sound financial results
• FY revenue of € 2,368m or flat on a comparable basis* • 2010 result impacted by regulation (€ -60m or -2.6%)
• Underlying business growing 2.6% yoy driven by data, TV & Tango
• Fixed line revenue impacted by regulation and line loss
• Mobile voice impacted by regulation, positive underlying trend with higher MoU
• Fixed internet +4.4% yoy; customer growth impacted by fiercer competition
• Non-SMS mobile data revenue +11.6% when excl regulation, driven by the success of
mobile data solutions
• Belgacom TV confirming its growth path: FY revenues +36% and customer base +30%
• Operational results supported by the sale of Packs: 870k sold by end 2010
• Lower cost of sales driven by a.o. regulation & product profitability initiatives
• Segment result* +1.1% incl. € -19m regulation impact; contribution margin of 45.3%
Slide 15 *2009 result adjusted for intercompany items & changes in revenue
Consumer - P&L
• Q4 CoS -12.9% like-for-like, FY CoS -1.4% yoy
− YoY trend improved as from Q3
− Positive regulation impact (MTR & Collecting model)
− Product profitability initiatives
− Positive one-time items
• Q4 HR costs down 6.2%, FY HR costs -5.8% yoy
− Decreasing headcount following ongoing programs & natural attrition (-510 FTE‟s vs end 2009)
− Fully offsetting wage indexation (Oct 2010)
• Q4 non-HR +1.8% due to customer centricity program,
FY non-HR -2.3%
• FY segment result +1.1%* to € 1,073m, including € -19m regulation impact
• FY segment contribution margin of 45.3%
• Q4 like-for-like* rev -1.0% due to regulation (€ -23m)
− MTR, Collecting model, Roaming
− Excl regulation, underlying business +2.7%
• FY like-for-like* revenue flat incl €60m regulation, underlying business +2.6%
*2009 result adjusted for intercompany items & changes in revenue & cost allocations Slide 16
591604 602
617
579 589 592 606 590 592 585 600540
550
560
570
580
590
600
610
620
630
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
Like-for-like
CBU revenue (EUR mio)
166174 178
205
158158 166 170
195 180 171 169
100
120
140
160
180
200
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
Like-for-like
CBU Cost of Sales (EUR mio)
89 88 81 87 81 81 82 82
68 75 73 81 65 73 70 83
0
20
40
60
80
100
120
140
160
180
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Non-HR Personnel
CBU Personnel & non-HR costs (EUR mio)
268 266 269244
264 267276
266
45.4% 44.1% 44.8%39.6%
44.7% 45.1% 47.1%44.3%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
220
230
240
250
260
270
280
290
300
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
CBU EBITDA (EUR mio) & Margin
• Total line loss 2010 contained at -129k vs -138k in 2009
• -36k lines in Q4; acceleration vs previous quarters driven by competition
• Total customer base at 1,933k (incl VoIP Scarlet)
• Q4 ARPU at € 20.9 (-3.9% yoy); FY at € 20.7 (-4.4% yoy)
− Regulatory measures & recurring discounts on Packs
− Slightly tempered by price increases
− Q4 ARPU positively impacted by seasonality
Quarterly evolution fairly stable
As from Q2‟10,
• Traffic for the FY at 4,374m minutes or -4.8% driven by line loss
• Traffic in Q4 higher due to seasonality
• Q4‟10 fixed voice revenue of € 124m (or -9.6% yoy)
• FY ‟10 revenue of € 506m or -9.8% driven by:
− Line loss
− Regulation: Collecting model & decline F2M
− Discounts on Packs
Consumer - Fixed voice
Revenue impacted by regulation & line loss
Slide 17
144141 138 138
133
125 124 124
100
105
110
115
120
125
130
135
140
145
150
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Fixed voice revenue (EUR mio)
-43 -37 -29 -29 -33 -30 -30 -36
2,123 2,086 2,057 2,028 2,029 1,999 1,970 1,933
30
530
1.030
1.530
2.030
-50
-30
-10
10
30
50
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Voice line loss & EOP (000)
21.7 21.6 21.5 21.721.2
20.3 20.320.9
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Fixed voice ARPU (EUR/month)
1,2301,124
1,0601,181 1,178
1,052 1,004
1,140
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Traffic (mio min)
• FY customer base at 3,769k or -54k yoy
• Q4 net adds -3k:
− Focus on postpaid+31k , prepaid -30k, MVNO -5k
− Push of Mobile Packs
− Postpaid ratio increased to 42.6% (end 2009 at 40%)
• Q4 ARPU at €14.5 or -4.4% on adjusted basis
• FY ARPU down 2.8% on an adjusted basis to € 14.8
• Decline fully due to regulation
• FY MoU of 106.1, i.e. +3.9% on a comparable basis
• Q4 MoU up by 2.8% YoY
Consumer - Mobile Voice
FY like-for-like* revenue -3.3%; excl regulation revenues slightly up
* 2009 result adjusted for intercompany items Slide 18
170178 179 176
161 165164 171 175 170 168 160130
140
150
160
170
180
190
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
Like-for-like
Mobile voice revenue (EUR mio) • Q4 revenue -5.2% like for like, reported-9.3%
• FY revenue -3.3% like-for like, reported -7.2%
− 2009 included Fix-to-Mob intercompany revenue
− Like-for-like down due to regulation (MTR, Roaming & Collecting model), underlying trend is positive
10 23 19 22-85
728
-3
3,787 3,809 3,829 3,824 3,739 3,745 3,773 3,769
-5.000-4 .900-4.800-4.700-4.600-4 .500-4.400-4.300-4.200-4 .100-4.000-3.900-3.800-3 .700-3.600-3.500-3.400-3 .300-3.200-3.100-3.000-2 .900-2.800-2.700-2.600-2 .500-2.400-2.300-2.200-2 .100-2.000-1.900-1.800-1 .700-1.600-1.500-1.400-1 .300-1.200-1.100-1.000-900-800-700-600-500-400-300-200-10001002003004005006007008009001.0001.1001.2001.3001.4001.5001.6001.7001.8001.9002.0002.1002.2002.3002.4002.5002.6002.7002.8002.9003.0003.1003.2003.3003.4003.5003.6003.7003.800
-86
-66
-46
-26
-6
15
35
55
75
95
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Mobile growth & EOP (000)
107.9112.9
108.9111.8
99.4104.5
100.9 103.2 104.0109.8
104.8 106.0
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 reported
Like-for-like
MOU (min/month)
15.315.9 15.9 15.7
14.515.214.9
15.4 15.5 15.214.9 14.5
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 reported
Like-for-like
Blended net voice ARPU (EUR/month)Blended net voice ARPU (EUR/month)
EOP customers including Belgian residential customers of Scarlet
• Q4 revenue slightly down (-0.6%) to €83m
− Lower activation revenues fully offset impact slight price increase of revamped offer
− FY revenue +4.4% to €337m driven by growing customer base & revamped offer
• Q4 net adds (+6k) impacted by fierce competition
• FY net adds of +38k & total customer base of 1,113k
− Supported by Packs & new internet offer
− Impacted by increased competition
• Q4 ARPU of € 27.6, -4.9% yoy
• FY ARPU of € 28.2 or -1.7% yoy
− More customers benefit from recurring discount on Packs
− Offsetting positive impact of revamped offer
Consumer - Fixed Data
FY revenue +4.4%; customer growth impacted by fierce competition
Slide 19
79 78
8284
85 85 84 83
72
74
76
78
80
82
84
86
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Fixed data revenue (EUR mio)
20 12 18 168 8 6
1,042 1,044 1,057 1,075 1,091 1,099 1,107 1,113
10
210
410
610
810
1.010
3
23
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
3
Broadband growth & EOP (000)
28.628.1
29.1 29.0 28.7 28.528.1
27.6
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Broadband ARPU (EUR/month)
• FY ARPU € 7.1 (+6%) driven by reply effect free SMS resulting in higher inbound revenues
• Q4 ARPU of € 7.5 up vs previous quarters due to seasonality effect
Consumer - Mobile Data
FY revenue +6.5% yoy impacted by regulation
• FY SMS +25.5% to 221.6; Q4 volumes up 19.2% yoy
• Increase driven by pricing plans incl free sms
Slide 20
71
77 7580 80 79 79
84
62
67
72
77
82
87
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Mobile data revenue (EUR mio)
156.0178.7 167.8
201.8215.2 226.5
203.5
240.5
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
SMS (units/month)
6.3
6.8 6.77.1 7.0 7.1 7.0
7.5
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Blended net data ARPU (EUR/month)
• FY revenue +6.5% to € 322m, with Q4 +6.1% yoy
− Including change in allocation credits & discounts
− FY SMS revenue +11%
− Advanced data -9.4% YoY, impacted by financial collecting model
• Advanced data impacted by Collecting model as from Q2 2010
• Excl collecting model adv data revenue +11.6%
2009* 2010 VAR Adj
Mobile data revenue 302 322 6.5%
SMS 235 261 11.0%
Advanced data 67 61 -9.4%
*2009 adjusted for the reallocation of credits & discounts
Belgacom TV
Confirming its growth path: revenues +36% yoy, customers +30%
• +223k new customer in 2010 (+30% vs end 2009)
• +55k new TV customers in Q4
• Growth supported by Packs; in particular Free TV Pack
• FY customer base at 975k incl 135k 2nd streams
• ARPU in Q4 at €19.7
− Down vs ‟09 as a result of lower one time revenues from activations & installation
− Up vs previous quarters due to seasonality
• FY ARPU at €19.7 vs € 20.4 in 2009
• Q4 revenues +23.1% yoy ; FY revenues +35.9%
• Driven by customer growth
• TV remains one of the growth drivers for CBU
Slide 21
29 3034
4044 43
4649
13
18
23
28
33
38
43
48
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
TV revenue (EUR mio)
4933
7589
62 54 52 55
555 589663
752 814 868 920 975
0
200
400
600
800
1.000
1.200
11
31
51
71
91
111
131
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
TV growth & EOP (000)
20.419.2
20.621.3 20.7
19.1 19.3 19.7
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
TV ARPU (EUR/month)
Tango – Mobile activities in Luxembourg
• FY revenue of €99m or +6.1% yoy
• Revenue growth driven by:
− Succesfull launch iPhone4
− Strong sales smartphones
− Migration of customers from prepaid to postpaid
• FY ARPU up €2.1 (or +8.7%) to €26
Slide 22
2323
23
2424
2525 25
20
21
22
23
24
25
26
27
28
29
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Tango revenue (EUR mio)
24.025.1
24.123.5 23.2
26.2 26.027.1
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Blended mobile net ARPU (EUR/month)
245 246252
259 262 260 260 260
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Tango mobile customers EOP (000)
23
Enterprise – Highlights
2010 showing recovery from crisis
• Crisis impact stabilized in 2010 • Revenue decline limited to 2.1%* , including regulation impact of € -39m or -1.6%
• Underlying business only down by 0.5% YoY, while this was 3.1% for 2009
• ICT revenue growing 3.3% YoY, while down in 2009 by 2.4%
• Mobile MoU for full-year 2010 -1.8%*, while in 2009 down by 5.9%
• Regulation impacting revenue by € -39m, but due to CoS decrease EBITDA impact
limited to € -3m
• Fixed voice line erosion contained, revenue impacted by lowered F2M tariffs
• Mobile Voice usage improving, revenue impacted by regulation
• Stable Broadband customer base in highly competitive and saturated market
• Revenue growth in Non-SMS mobile data tempered by pricing, a.o. due to EU
regulation on Data roaming, in spite of growing volumes
• Cost of Sales positively impacted by regulatory measures
• Contribution margin of 50%, slightly down on like-for-like basis
Slide 23 *2009 result adjusted for intercompany items
Enterprise - P&L
• FY 2010 CoS of € 685m; -1.6% vs last year*
• Positive effect regulation: MTR and Collecting model premium rate services
• Segment result of € 1,212m or -1.6% YoY
• Like-for-like, segment result -3.6% YoY
• FY impact regulation limited to € -3m
• FY contribution margin of 50% versus 50.8%*
− x
• HR-expenses FY 2010 of € 375m; -1.1% YoY
• Headcount end 2010: 5,263 FTEs, i.e. -65 FTEs YoY
• Non-HR expenses up by 5% to € 149m for FY 2010
• Q4‟09 expenses included positive one-time effect
• Q4 revenue : -3.2%*, incl. € 15m regulation impact
• FY 2010 revenue of € 2,421 million; -2.1% YoY*
• FY regulation impact € -39m
• 2010 underlying revenue -0.5%, vs 2009 -3.1% (crisis)
Slide 24
640626
602
632
633 619 596 625 615 610 590 606540
560
580
600
620
640
660
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
like-for-like
EBU revenue (EUR mio)
198
184174
192
183 173 161 180 183 175 163 164140
150
160
170
180
190
200
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
like-for-like
EBU Cost of Sales (EUR mio)
95 94 94 96 91 93 96 95
41 39 33 29 36 35 39 40
0
20
40
60
80
100
120
140
160
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Non-HR Personnel
EBU personnel & non-HR costs (EUR mio)
306310
301 315 306 308 292 306
47.7% 49.4% 50.0% 49.7% 49.7% 50.4% 49.5% 50.6%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
50,0%
55,0%
-5
45
95
145
195
245
295
345
395
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
EBU EBITDA (EUR mio) & Margin
* Like-for-like, i.e. compared to 2009 adjusted for intercompany items
Enterprise - Fixed Voice
Fixed Voice line erosion contained, revenue impacted by regulation
• 2010 line erosion of -51k vs -53k in 2009
• Q4 2010 line loss of 14k driven by ao. delayed effect from bankruptcies
• FY 2010 Fixed Voice traffic of 3,145m min; -5.7% YoY
• Stable decline over the quarters
• Q4 traffic -5.7% YoY
• FY ARPU Fixed Voice of €30, i.e. -2.7% YoY
• Negative regulation impact: F2M & Collecting model
• Slightly offset by price indexation
• FY 2010 revenue of € 539m, -6.1% YoY
• Impacted by:
− lowered F2M-tariffs on 1 August 2010 (MTR-linked)
− collecting model Premium Rate Services
− line erosion and lower usage
Slide 25
148144
139 142 141136
130 132
110
115
120
125
130
135
140
145
150
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Fixed voice revenue (EUR mio)
-15 -14 -11 -13 -14-11 -11 -14
1,529 1,515 1,504 1,491 1,477 1,466 1,455 1,440
-100
100
300
500
700
900
1.100
1.300
1.500
1.700
1.900
-20
0
20
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Voice line loss & EOP (000)
31.3 30.930.1
30.9 30.930.2
29.029.7
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Fixed voice ARPU (EUR/month)
901837
770828 848
790727
781
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Traffic (mio min)
Enterprise - Mobile Voice
Revenue impacted by regulation; usage further improved
• 75k mobile customers added in 2010
• Strategic choice to focus on high-value SME customers
• FY 2010 Mobile Voice ARPU of € 33.1, -11.4% YoY*
• Regulation: MTR, Roaming and Premium rate numbers
• Success mobile voice price plans including free calling
• FY MoU of 319.2, -1.8% YoY *
• YoY variance improving over the quarters
• Solid MoU Q4: success of pricing packages/close user groups & some seasonality
Slide 26
• FY 2010 Mobile Voice revenue of €502m; -5% YoY*
• Regulation impact increased over the quarters
• Q4 2010 revenue -6.3% YoY, mainly due to MTR-cut
146 144
135 135
138 137 127 128 129 130 124 120100
105
110
115
120
125
130
135
140
145
150
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
like-for-like
Mobile voice revenue (EUR mio)
3021 20 24 25
19 14 17
1,170 1,190 1,211 1,235 1,252 1,271 1,286 1,303
500
600
700
800
900
1.000
1.100
1.200
1.300
0
20
40
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Mobile growth & EOP (000)
355.4 354.5
329.3
346.6
332.8 333.0
309.8325.7 319.7 321.8
305.6327.3
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 reported
Like-for-like
MOU (min/month)
42.1 40.737.6 37.2
34.8 34.5
40.2 38.9
35.6 35.132.4 30.9
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 reported
Like-for-like
Blended net voice ARPU (EUR/month)Net voice ARPU (EUR/month)
* Like-for-like, i.e. compared to 2009 adjusted for intercompany revenue
Enterprise - Fixed Data
Stable Broadband customer base in saturated, competitive market
• Professional broadband customer base flat to last year:
− Saturated market
− Highly competitive
• FY 2010 ARPU of € 39.1, -2.2% YoY
− Success of consumer Packs, incl internet at discount
− Partly offset by “Bizz Options”
-
• FY 2010 revenue of € 392m, -2.3% YoY
• SME and self-employed signing up for advantageous CBU-Packs incl internet at discount
Slide 27
101 100 100 10099 98 98 98
90
95
100
105
110
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Fixed data revenue (EUR mio)
2-2 -1
4
01
0 -1
445 443 442 446 445 446 446 445
30
80
130
180
230
280
330
380
430
-4
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Broadband growth & EOP (000)
40.1 39.8 40.1 39.7 39.4 39.1 39.0 38.7
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Broadband ARPU (EUR/month)
* SMS excluding free usage
Enterprise - Mobile Data
SMS growth continued; price pressure on advanced mobile data
* Like-for-like, i.e. Compared to 2009 result adjusted for intercompany items
• Continued increase in number SMS
• Seasonality effect in Q4
• FY ARPU of € 12.2 or 5.7% lower than 2009
• FY 2010 revenue of € 185m, + 2.8% YoY*
− SMS revenue up by 4% to € 76m
− Advanced Data up by 2% to € 109m
• Advanced Data: revenue H2 2010 impacted by EU regulation to prevent bill shocks
• Increase in volumes offset by lower ARPU
Slide 28
4346
4847
4547 47 46
35
37
39
41
43
45
47
49
51
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Mobile data revenue (EUR mio)
64.7 68.4 68.6 76.5 74.6 77.0 74.785.5
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
SMS (units/month)
12.412.9
13.412.9
12.1 12.5 12.311.9
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Net data ARPU (EUR/month)
2009* 2010 VAR Adj
Mobile data revenue 180 185 2.8%
SMS 73 76 4.0%
Advanced data 107 109 2.0%
*2009 adjusted for reallocation of credits & discounts and eliminated intercompany revenue
FY 2010 revenue of € 692m; + 3.3% YoY
• Solid yoy growth for first three quarters; 2009 impacted by the crisis
• Some recovery from crisis visible as of Q4 last year
• Q4 2010 flat to 2009
• Good 2010 performance of Telindus International
Enterprise - ICT
Full-year revenue up by 3.3%
Slide 29
171166
153
181174 172
167
179
135
140
145
150
155
160
165
170
175
180
185
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
ICT revenue (EUR mio)
Service Delivery & Wholesale - P&L
• Like-for-like CoS down 26.2% to € 46m
• Positive impact from financial collecting model
• Q4 HR expenses +11.5%
− Wage indexation & net increase FTE (+73 FTEs)
− Q4‟09 low due to special tax reductions
• Q4 Non-HR yoy variance no longer impacted by swap RAN to Huawei equipment as this started in Q4‟09
Quarterly evolution fairly stable
• FY EBITDA at -€109m
• FY revenue of € 342m, or like-for-like* -1.7% yoy
− Decline fully due to regulation (€ -22m)
− Excl regulation revenue+4.7%
• Q4 like-for-like* -6.6% incl € 9m regulation
*2009 result adjusted for intercompany items & changes in revenue Slide 30
98 94 94 100
88 87 85 89 94 85 79 830
20
40
60
80
100
120
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported
like-for-like
SDE&W revenue (EUR mio)
50 50 47 45 51 48 53 50
48 43 42 51 50 50 52 50
0
20
40
60
80
100
120
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Non-HR Personnel
SDE&W personnel & non-HR costs (EUR mio)
-16-18
-13 -18-23 -23
-36
-27
0
0
0
0
0
0
0
-40
-35
-30
-25
-20
-15
-10
-5
0
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
SDE&W EBITDA (EUR mio)
1618 18
20
15 15 15 18 15 10 10 100
5
10
15
20
25
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
2009 Reported like-for-like
SDE&W Cost of Sales (EUR mio)
Staff & support - P&L
• FY revenues of € 35m, slightly up +4.6% yoy
− a.o. driven by slightly higher capital gains realised on sale of buildings
• FY personnel cost of € 165m or fairly stable vs 2009
• Non-HR expenses of €192m or -6.1%, including effect of company-wide cost focus
Slide 31
7
12
68
10
710
7
-1
1
3
5
7
9
11
13
15
17
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
S&S revenue (EUR mio)
41 4142 42
41
43
41 40
36
37
38
39
40
41
42
43
44
45
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
S&S Personnel costs (EUR mio)
50 4943
6150
45 4552
0
10
20
30
40
50
60
70
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
S&S non-HR costs (EUR mio)
International Carrier Services P&L
• Volumes continued stable increase
− Positive impact additional MTN business
− Voice volumes +31%
− Non-voice volumes +46%
• FY revenues of €1,610m; incl Q4‟10 of €402m
− Positive effect full consolidation & MTN ICS contribution
− Organic revenue +3.9%, including +4.7% in Q4‟10
• Reported FY gross margin +58.4% incl full conso effect
• Organically, Voice margin pressured by competition & exchange rate fluctuations
• Non-voice margins up, increased leadership in mobile data
• Reported EBITDA of €129m positively impacted by full conso & contribution MTN
• Lower operating expenses largely offset pressure on gross margins
• FY EBITDA margin at 8%, slightly down to 2009
Slide 32
217 227 228 221
378414 415 402
0
50
100
150
200
250
300
350
400
450
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
ICS total revenue (EUR mio)
1923
17 2028
32 34 36
8.7% 10.0%
7.4%8.8%
7.4% 7.7% 8.1%8.9%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
-2
3
8
13
18
23
28
33
38
43
48
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
ICS EBITDA (EUR mio) & Margin
20 24 20 2133 33 32 34
12 17 15 14
19 23 28 24
0
10
20
30
40
50
60
70
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Voice Non-Voice
ICS direct margin (EUR mio)
4,498 4,707 4,805 5,3065,923 6,254 6,433 6,680117 119 149
164 168 188 209 235
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Minutes SMS/MMS
ICS volumes (in mio)
33
Belgacom Company presentation Investor Relations
Ytd September 2010 results in detail
• Consumer Business Unit (CBU) • Enterprise Business Unit (EBU) • Service Delivery Engine &Wholesale (SDE&W) • Staff and Support (S&S) • Belgacom International Carries Services (BICS)
Popular discussion topics • Headcount – slide 34 • Regulation – slide 35 • Legal – slide 39 • Convergence – slide 40 • Belgacom TV – slide 41 • Mobile Data – slide 44
• Network – slide 47 • BICS – slide 51 • Debt position Belgacom – slide 54 • Shareholder structure – slide 55 • Belgian economy – slide 56 • Customer centricity – slide 57
Slide 33
Slide 34
• Belgacom decreased its
headcount considerably
over the years
• About 40% of headcount
has civil servant status,
no new civil servant
contracts since 1997
Group - Headcount
Benefitting from headcount reduction programs
• FY HR costs of € 1,107m, i.e. ~24% of Group costs & ~17% of Group revenue
• HR costs -1.6% yoy, like-for-like1 driven by fewer headcount (-496 FTE‟s)
− Ongoing headcount reduction programs (-571 FTE) & natural attrition (-241 FTE)
− Partly offset by increase (+316 FTE) due to acquisitions, full consolidation BICS & recruitment
business-critical functions
• Q4‟10 HR costs impacted by 2% wage indexation (October 2010 – Belgacom SA)
• 2011: January non-Belgacom SA +June2 Belgacom SA, additional 2% wage indexation
• In 2011, Tutorship program will continue but some business critical hiring will be done
1 BICS consolidated at 57.6% 2 Source: Federal planning Bureau
5000
10000
15000
20000
25000
YE96 YE97 YE98 YE99 YE00 YE01 YE02 YE03 YE04 YE05 YE06 YE07 YE08 YE09 YE10
PTS
- 6,300 FTE
BeST
- 4,160 FTE
Telindus
+ 2,600 FTE
Tutorship
FMS
2006-2012: - 3,900 FTE
Move to IP
supporting
lower
headcount
End‟10
16,308
FTE
7.2
4.623.94
2.46
9.02
11.43
1.08
Before* 01-Aug-10* 01-Jan-11* 01-Jan-12 01-Jan-13
MTR-Glidepath in €ctProximus Mobistar Base
*excl VAT, including inflation Rates 2012-2013 excl VAT, final rates will be corrected for inflation
• Glidepath in place since June 2010 leading to full
symmetry by 2013
• Any MTR decrease reflected in F2M tariffs of BGC
• Mobistar & Base filed separate appeal against decision:
• On 15 Feb 2011, Court took its decision in
suspension procedure & rejected all the claims
• Annulment procedure is still ongoing
MTR regulation impact 2010
• Cut 1 Aug 2010, lowering asymmetry with Base & Mob.
• MTR impacts revenue of all mobile players; EBITDA impact limited for BGC due to reduced asymmetry
• Actual impact on 2010 financials: − Revenue: € -39m − EBITDA: € -3m
MTR regulation impact 2011
• Carry-over impact from cut 1 Aug 2010
• 1 Jan 2011 MTR‟s further reduced
• Estimated impact on 2011 financials: − Revenue: ~ € -80m − EBITDA: < € -15m
Regulation - 1
Mobile Termination Rates (MTR)
Slide 35
€ct Before* 01-Aug-10* 01-Jan-11* 01-Jan-12 01-Jan-13
Proximus 7.2 4.62 3.94 2.46 1.08
Mobistar 9.02 5.05 4.29 2.62 1.08
Base 11.43 5.81 4.90 2.92 1.08
% change
Proximus -36% -15% -38% -56%
Mobistar -44% -15% -39% -59%
Base -49% -16% -40% -63%
Assymmetry
Mobistar-Prox 25% 9% 9% 7% 0%
Base-Prox 59% 26% 24% 19% 0%
Final decision on MTR
Big drop in asymmetry as from August
2010
100
80
50
1 July '09 1 July '10 1 July '11
Wholesale Data Roaming (€ct per Mb)
Slide 36
Roaming regulation impact 2010
• 2010 was impacted Carry-over impact from lower
rates on 1 July 2009
• Roaming rates voice further decreased on 1 July 2010
• Data roaming rates regulated at wholesale level,
prices went down on 1 July 2010
• Actual impact on 2010 financials: − Revenue: € -24m − EBITDA: € -22m
• In addition, revenue impacted by measures taken to prevent bill shocks: financial limit of €50/m (VAT excl.)
Roaming regulation impact 2011
• Carry-over impact from lower rates on 1 July 2010
• Voice and data roaming rates will further decrease on
1 July 2011
• Estimated impact on 2011 financials: − Revenue: ~€ -10m − EBITDA: ~€ -10m
Regulation expires on 30 June 2012. Rules to be reviewed by 30 June 2011.
Regulation - 2
Mobile voice and data EU-roaming regulation
95
49 46 43 39 3543
24 22 19 15 11
44
30 28 26 22 18
Before regulation
End Aug'07 End Aug '08 July '09 July '10 July'11
Voice Roaming (€ct per minute)Retail Outgoing Retail Incoming Wholesale Outgoing
39
1121
4
Before regulation 1 July '09
SMS Roaming (€ct per sms)Retail Wholesale
Tariffs before regulation are indicative averages of European tariffs, mix of postpaid/prepaid and residential/business
Slide 36
• As from 1 April 2010, financial collecting model for
Premium Rate Services
• Following circulars issued end 2009 by Ministry of
Finance concerning VAT on Premium Rate Services
and Tax on chance games
• Applicable for services where Belgacom collects on
behalf of a third party content provider
Collecting model impact 2010
• From April revenue no longer considered as full
revenue of BGC & only margin booked as revenue
• Actual impact on 2010 financials: − Revenue: € -56m − EBITDA: no impact
Collecting model impact 2011
• Carry-over impact in Q1 2011
• Estimated impact on 2011 financials: − Revenue: ~ € -20m − EBITDA: no impact
Regulation - 3
National directive on Premium Rate Services
Collecting model for premium
rate services
Slide 37
Zoom-in on new LLU & Bitstream prices
New LLU prices
• In Aug‟102, the BIPT decided to: − Lower monthly price for full unbundling by ~20% − While keeping the price for shared access stable
• New price for LLU is at the low EU end
• BGC lodged annulment procedure against the decision
New Bitstream prices
• In Aug‟102,the BIPT also set new prices for ATM Bitstream, and took a final decision on Ethernet Bitstream & VDSL2 bitstream
• For VDSL2, a 15% mark-up is currently applied
Regulation - 4
Other regulatory measures
Slide 38
New LLU and Bitstream prices
1 LLU: Local Loop Unbundling (BRUO) 2 On 10 November 2010, the BIPT has communicated an erratum to its decision of Aug, setting with retroactive effect until 15 Aug
the new monthly prices
Impact 2011 from other regulatory measures
• Some other regulatory measures will impact the 2011 financials: o.a. the new LLU1 and bitstream prices
• Estimated impact on 2011 financials: − Revenue: ~ € -5m − EBITDA: ~ € -5m
BIPT decision of 2010
EUR Before 2010
Full unbundling 9.29 7.78 Shared access 0.85 0.87 ATM bitstream 14.31 12.72 Ethernet bitstream - 11.48 VDSL2 bitstream - 13.94
On-net case: damage claim Base/Mobistar
Belgacom introduced motion in respect of expert panel following 2nd preliminary report
• Damage claim filed in 2003 by KPN Group Belgium (Base) & later also by Mobistar, claiming that BGC: − applied termination charges that were too high − abused its dominant position by applying too low prices for on-net calls (Prox-to-Prox calls)
• In May 2007, the court considered it was not in a position to make a decision on the alleged existence of
a price squeeze & anti-competitive network effects. Two experts were appointed to examine: − whether such practices existed, − whether they produced anti-competitive effects and − what damages could have been caused to the claimants
• The panel filed 2 preliminary reports (in Oct 2009 & Dec 2010) in which they considered: − Base & Mobistar underperformed as compared to the results and market shares they would have
achieved in an efficient market (assumption: in a perfectly competitive market, market shares are symmetrical).
− The 2nd report introduced new elements o.a. a constant profitability benchmark for the whole period based on the UK market (1999-2004) during which UK operators were in a different phase of development than the Belgian market
− Alleged impact on Mobistar & Base could amount to € 1,840m.(2nd report)
• BGC has submit its detailed observations and criticisms. In the 2nd report, the vast majority remained unanswered & Belgacom‟s own expert reports were largely disregarded
=> BGC introduced a motion with the court in respect of the expert panel, requesting their
recusal/replacement. This motion is to be dealt with by the court in the near future
Legal – Damage claim Base/Mobistar
Update on status
Slide 39
153231
302384
560
741
870
3351
26 2744 52
31
70
10692 88
66 63
0
100
200
300
400
500
600
700
800
900
1.000
0
50
100
150
200
250
Q4'07 Q2'08 Q4'08 Q2'09 Q4'09 Q2'10 Q4'10
Packs evolution since launch ('000) net adds total
Slide 40
Group - Convergence
Execution of consistent convergence strategy paying-off
Example of triple-play Pack @ € 62.46/month1
Fixed line with free “happy time” option – free calling
to fixed lines after 5 pm & on weekends
Internet Favorite – Download speed of 25Mbps,
upload 3.5 Mbps, 100 GB volume
Belgacom TV Comfort, renting
settop-box included
Customers save €18.5/month
1 New prices as from 1 January 2011; incl VAT
Example of triple-play Pack @ € 72.46/month1
Mobile subscription including 55 minutes Any Time
Any Network
Internet Favorite – Download speed of 25Mbps,
upload 3.5 Mbps, 100 GB volume
Belgacom TV favorite, renting settop-box included
+ 2 thematic bouquets
Customers save €27.5/month
Single double Triple QuadrupleMultiplay overview residential customers
> 45% of customers have ≥ 2 BGC products
Number of Quad-play customers growing steadily to 9%
Growing proportion of mobile Packs
Multiplay overview residential customers
< 55% single play
Belgacom19%
Cable78%
Satelite 3%
Belgian Total TV market - market shares
• ~ 4.7 m households in Belgium
• Digital TV penetration Belgium of ~57%*
• Belgacom present in all regions
• Belgacom TV coverage ~90%
• Belgacom Digital TV market share of 31% − Share in total TV market: 19% − Belgacom 2nd player in DTV market
• Belgacom TV subscriber base of 975k (i.e.
households + multiple streams) fairly evenly
spread North/South
• Digital TV market penetration & market share
Belgacom:
Belgacom TV
Market overview
Flanders Telenet-zone
WalloniaVoo-zone
Brussels Numéricable
Bel
ga
com
-zo
ne
Competitive landscape
31% DTV market
share
* Source: Company figures & estimates, competitor press releases Slide 41
Digital
57%
Analoge
43%
31%
• Strong customer growth since launch in June „05 − In 5 yrs time Belgacom gained 975k* TV
subscribers, representing 839k households − Customer gain supported by Packs incl.TV − Unique market positioning with “Free TV” claim
• ~60% of CBU broadband customers have a TV
subscription
• FY 2010 TV revenues amounted to €182m
− 36% revenue increase yoy driven by the growing customer base
− TV now represents about 8% of CBU revenues
• ARPU per household grew significantly since
launch − Growing customer base lowers impact of
promotions − Services (VoD,„bouquets‟, football...) adding to
ARPU
Belgacom TV
An international recognized success story
Slide 42 * Corresponds to the number of Belgacom TV settop boxes
215
43
86
143
182
2005 2006 2007 2008 2009 2010
Belgacom TV revenue evolution (in mio €)
1032 29 37
10
4258 56
44 42 5263
4934
7489
62 54 52 55
42140
305
506
752
975
-3 0 0
-1 0 0
1 0 0
3 0 0
5 0 0
7 0 0
9 0 0
1 .1 0 0
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
1 4 0
1 6 0
Q405 Q206 Q406 Q207 Q407 Q208 Q408 Q209 Q409 Q210 Q410
Evolution TV base* since launch ('000 EOP) net adds Total
+30% TV
customers yoy
11.9 12.6
16.618.5
21.319.7
Q405 Q406 Q407 Q408 Q409 Q410
Evolution TV ARPU since launch
Slide 43
Soccer
Bouquets
=
Basic pricing of
€18.5/month
Incl. settop box
( €6/month)
“All Foot”
€19.95/month
“My Club”
€9.95/month
Per match
€5-€10
Additional
channels
as from
€5/month
Pause TV,
recording,
Instant rewind
Movies on
demand
€2-€6.5
HD movies
from €4-€7
Belgacom TV
From TV towards entertainment
Rich offer: 90 channels, incl HD
VOD >1300 movies
Advanced functionalities
Onlive: interactive entertainment, cloud computing & online gaming
in3Depth Systems (Softkinetic): expertise in 3G gesture recognition
Jinni: personalized search-and-recommendation engine
blinkx: video search engine
MUBI: Belgacom expanded its TV film catalog with 300 MUBI films (films for lovers of independent, foreign and classic films)
Building a next generation TV experience, supported by selective partnerships
A complete & competitive
offer
3D TV demo
March‟10 live
transmission
football match
Two 3D demo
channels
Belgacom
Entertainment
Create
Openness
ShareEmotions
Bring the Human
Touch
Enjoy Diversity
Anticipate the Future
• BGC Group generated € 507m revenues from mobile data; or +5.1% yoy
• Yoy variance has been impacted by regulatory measures:
- EU-regulation on data roaming
- Collecting model for Premium Rate Services
• Mobile data includes both SMS & non-SMS data:
- SMS revenue increased 9.4% yoy to € 337m driven by success of pricing plans including free SMS
- Non-SMS (i.e. advanced data) showed a decline of 2.4% yoy to € 170m driven by regulatory measures. Excl regulation, revenues increased ~7% driven by the success of Mobile internet solutions
• Reported FY Mobile data ARPU:
- For CBU, increased 6% yoy to € 7.1
- For EBU amounted to € 12.2 or -5.7% yoy
Mobile data - 1
Mobile data on Group level
* Mix of SMS and advanced data
Mobile data ~30% of Mobile service revenue
Advanced data ~35% of
Mobile data revenue
Slide 44
6,5 6,3 6,1 6,4 6,3 6,8 6,7 7,1 7,0 7,1 7,0 7,5
12,4 12,3 12,5 12,5 12,4 12,9 13,4 12,912,1 12,5 12,3 11,9
Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410
Mobile Data ARPU * CBU EBU
268 308 337
172174 170
2008 2009 2010
Mobile data Group revenue evolution (in mio €) SMS Non-SMS
440482 507
62%
38%
Belgacom Mobistar
Mobile data - 2
Zoom-in “Internet on Laptop” & “Internet on Smartphone”
* Total subscriptions for internet on laptop
49,00064,000
87,000114,000
139,000
182,000
Q208 Q408 Q209 Q409 Q210 Q410
Belgacom Mobile Internet customer base*
+60% yoy
Slide 45
For CBU: Comfort @ €14.99/month For EBU (SME): Comfort @ €10.32/month
(incl VAT) (ex VAT)
- 1GB included - 15h included
- Extra usage: €0.03/MB - Extra usage: €2.06/hour
(if no BGC internet subscription: €19.99)
iPad Anytime@ €24.99/month Pay &Surf: iPad10€
incl 1.5GB 4 days; 500 MB
Special pricing
plans for iPad
For CBU:
Option on postpaid voice:
Comfort @ €9.99/month (incl VAT)
- 250MB included
- Extra usage: €0.03/MB
Pay&Surf for prepaid voice @ €3
- 25MB included
For EBU (SME):
Internet and voice bundle:
Bizz Smart 35 @ €35/month (ex VAT)
- 400 MB included
- Extra usage: €0.0248/MB
-150 voice minutes / free to fixed lines
Mobile
Internet on
Laptop
Mobile
Internet on
Smartphone
InternetOn GSM
Try it!
Mobile data - 3
Belgacom well positioned to capture mobile data growth
Slide 46
Mobile Network
WiFi
Femto
Macro DATA
VOICE
3G
Fix DSL Network
• 55% of private mobile data is consumed at home
• Opportunity to redirect data from Mobile network to fixed network
High-quality 3G-network & strategic option to offload data to sustain customer experience and keep investments under control
Slide 47
Fixed Network - 1
Nation-wide, high-quality fixed network
• ADSL : 99.85 % - world record
• Strategic decision end 2003 to invest in FttC* (Broadway project)
• Enabler for organic growth and innovation, answering customer needs
• Deploying high-quality & nation-wide VDSL coverage: − End 2010 >76% FTTC* population coverage ; further extended to reach 85%
service coverage by end 2013 − VDSL : up to 30 Mbps
• Quality DSL network, driving TV coverage − Belgacom TV ~89% − HDTV service coverage: 73%
• So far ~€ 550m invested in Broadway
Local exchange / Central Office
Street cabinet &Remote optical platform
= fiber
= copper
2) VBB
4) Pair bonding
5) FTTH
Homes / businesses
1) 17 MHz
3) DSM3) DSM
1. Increase spectrum
2. Reduce copper distance
3. Neutralize interference between copper pairs
4. Use of several pairs
5. Use of fiber end-to-end in the network
Compression
Further maximise network efficiencies:
Access network toolkit & compression techniques
“Boost the Copper strategy”
Reconfirmed
* Fiber to the Curb
Slide 48
Fixed Network - 2
Move to all-IP program
• Continued roll-out of MaIP project, a business transformation project entailing a full re-engineering of the network, IT-systems & processes
• € 101m invested since launch in 2008, of which € 50m in 2010
Realizations 2010: improved monitoring & diagnostic services, launch of new sales support tool for residential market & new “from quote to cash” application implemented for ICT Belgium
• Enabler for long term headcount efficiencies
• Future out phasing of ~10% of local exchanges
MobileMobile
From
To
AccessNetwork
CPE
AccessNetwork
CPE
ATM/SDHATM/SDH
PSTNPSTN
InternetInternet
TVTV
VoDVoD
IPEthernetDWDM
ROP
Video onDemand
TVBroadcasting
Internet
Video onDemand
TVBroadcasting
Internet
Dedicatedinfrastructure
per service
Dedicatedinfrastructure
per service
Sharedinfrastructure for all services
Sharedinfrastructure for all services
Future prooffixed/mobileintegration
Future prooffixed/mobileintegration
Little convergence capabilities
Little convergence capabilities
ISDN
ADSL
SDSL
ADSL2+
Leased Lines
Ethern.& SDH
ISDN
ADSL
SDSL
ADSL2+
Leased Lines
Ethern.& SDH
VDSL2
UMTSHSDPA
Centra
l Offic
e
Voice
Mobile
Data / LL
Fibre
Aggre
gatio
nPoin
t
IMS
+
SDP
Mobile
VoIP
Future Services
Objectives MaIP:
• Replace legacy technologies which become end-of-life by IP based alternatives
• Transform our IT stack to improve efficiency and reduce waste by automation, 360° view on customer, avoiding rework and automated repair analysis
• Transform the customer interaction model by more customer self management
Network simplification
Slide 49
Network - Mobile
Nation-wide, high-quality mobile network
• 2003 – strategic decision to invest in 3G
• Current Radio access network (RAN) being replaced by state-of-the-art single RAN hybrid product providing a simplified, high capacity, high performance and future proof network − Keep network superiority − Lower the cost of adding extra transport technology − Act swifter to strategic changes − Go for Long Term Evolution (LTE) reusing part of the equipment
Voice/Circuit
GPRS :30 to 50 kbps EDGE :
150 à 200 kb/s
UMTS :128 to 384 kbps
HSDPA :A few Mbps
Spectrum efficiency
1995 2005 2010
HSPA +: A few 10Mbps
50-100Mbps
EDGE Evolution:10-14 Mbps
• Leader in coverage − GSM sites covering
99.98% of Belgian population
− 3G sites covering 97% of Belgian population
• Leader in speed − Drive tests show best
data transfer speed of 3 operators − Best in class in upload
speed
Leader in coverage
& speed
Spectrum
Belgian situation & upcoming spectrum auctions
2G spectrum
900 MHz & 1800 MHz
•Belgian operators allowed
to deploy UMTS in 900
MHz spectrum (more
efficient in rural areas)
•Tacit extension: BGC has
to pay €74m for 2010-
2015; via annual
payments. BGC filed
annulment procedure.
3G spectrum
2100 MHz
•Proximus, Mobistar & Base
each have 1 UMTS license
•3 licenses expire in 2021
•BGC paid € 150m
•BIPT intends to auction 4th
license in June 2011; all
reserved for 4th entrant;
unless spectrum remains
available
4G spectrum
2600 MHz
•To be assigned: auctions
expected mid-October 2011
•Available spectrum: − 2 x 70 MHz paired
spectrum − 1 x 45 MHz unpaired
spectrum
Digital dividend
790 MHz – 862 MHz
•Spectrum that is freed up
by switching from
analogue to digital
terrestrial TV broadcast.
•Part of digital dividend
could be used for telecom
services
•No clarity on the digital
dividend yet
Proximus
2 x 12
Mobistar
2 x 12
Base
2 x 10.8
Proximus
2 x 15
Mobistar
2 x 15
Base
2 x 22
2x
5.8
2x
5,8
Free
2 x 11.4
72
Proximus
2 x 15
Mobistar
2 x 15
Base
2 x 15
1x
5 1x5 1x5
Free
2 x 15 1x5
Will be available
2 x 70 1 x 45
800 MHz
900 MHz
1800 MHz
2100 MHz
2600 MHz
International Carrier Services BICS delivers best in class global solutions
• Active in the international carrier market since 1997
• January „05: spin off of Belgacom ICS as an independent affiliate of Belgacom
• Since Dec „09 JV held by Belgacom, Swisscom & MTN
• In top 4 of largest operators worldwide in terms of voice traffic volume*
• World leader in mobile data carrier services (SMS, MMS, GPRS Roaming, Signalling…)
• 650 customers, incl. > 250 mobile operators
• > 99 points of presence (PoPs) in 47 cities and 33 countries, 9 Metropolitan area networks
• Participations in 75 submarine cables
• Offices in Brussels, Bern, Monaco, New York, Dubai and Singapore
*company estimates
57.6%22.4%
20%
BICS ownership
Slide 51
Sender Receiver
Belgacom Swisscom
MTN Fixed operators
Mobile operators xSP‟s
Fixed operators Mobile operators
xSP‟s
VOICE: collecting & terminating international voice traffic
MESSAGING: ensuring interoperability for SMS & MMs
ROAMING: full set of services to enable roaming traffic
CONNECTIVITY: transport of Signalling, roaming GPRS, IPX and the provisioning of tailored, high-quality bandwidth solutions
MOBILE FINANCIAL SERVICES
July 2005: JV with Swisscom in exchange
for 28% of ownership and joint control.
February 2006: Outsourcing
agreement with MTN regarding MTN‟s international Voice &
Data traffic
November 2006: Partnership
between BICS and Omantel for delivering
high quality traffic
May 2008: Next step in partnership of
BICS with Omantel, investing jointly in the
Europe – India Gateway
December 2009: MTN contributes its international
carrier services to BICS
Until year-end 2009, BICS was jointly controlled & therefore proportionally consolidated
• In Q4‟09 BGC booked a non-cash capital gain of € 74m; classified as non-recurring revenue
= net result of MTN contribution at 57.6%, minus dilution BICS book value (going from 72% to 57.6%)
As from 2010, Belgacom acquired control & BICS became fully consolidated
• In Q1‟10 BGC booked a non-cash capital gain of € 436m; classified as non-recurring revenue
= re-measurement of BICS at fair value through P&L
• Financial results BICS booked at 100%: increasing Belgacom Group financials
• Group net income corrected via minority interest
Slide 52
International Carrier Services Impact of MTN transaction on financials
9,75312,209
13,84116,232
19,858
26,090
2005 2006 2007 2008 2009 2010
Volume growth (in mio)
713 736 746 812892
1,610
2005 2006 2007 2008 2009 2010
Revenue growth (in mio €)
International Carrier Services
BICS grew significantly over the last 5 years
• Strong revenue growth driven by successful
partnerships, boosting volumes
• Proportion of BICS revenue in Belgacom Group
revenue grew from 13% in 2005 to 24% end 2010,
impacting the Belgacom Group margin
• 2010: Growth of BICS at typical lower margin
continued and is impacting the Group margin in two
ways:
- As a result of the full-consolidation as of 1 Jan „10
- A growing organic business
*Proportionally consolidated until end 2009 @ 72%
*Total BICS volumes, i.e. @ 100% Slide 53
27 33
5364
78
129
3.8% 4.5%7.2% 7.9% 8.7% 8.0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
50,0%
0
20
40
60
80
100
120
140
2005 2006 2007 2008 2009 2010
Evolution EBITDA & EBITDA marginEBITDA Margin
2010 full- consolidation & MTN ICS
• Belgacom continues to have a sound financial position
• Average interest on LT loans/debt for 2010: 4.77%
• Most of the debt is maturing in 2011 & 2016
• In order to pre-finance the maturing bonds of November 2011, BGC issued on 31 January 2011:
- 7 year senior unsubordinated bond of €500m
- with a fixed coupon of 3.875%
- maturing 7 Feb 2018
• In March 2011, BGC invited the holders of the outstanding 4.125 per cent bonds due November
2011 to tender their notes for purchase against cash: BGC will pay a cash purchase price of
€51,050 for each €50,000 in nominal amount
Slide 54
Debt position Belgacom
Carrying
amount
Nominal
amount
Maturity
date
Interest rate
payable
Effective
interest rate
(mio €) (mio €) (b)
Floating rate borrowings JPY (a) 85 73 Dec-96 Dec-26 1.21% 1.21%
Fixed rate borrowings
EUR 745 750 Nov-06 Nov-16 4.38% 4.50%
EUR 174 200 Nov-16 4.38% 7.16%
EUR 125 125 Dec-13 6.00% 6.11%
JPY (a) 85 73 Nov-95 Nov-15 6.18% 6.18%
JPY (a) 92 72 Dec-95 Dec-15 6.21% 6.21%
Total unsubordinated debentures 1,306 1,292(a) converted into a loan in EUR via currency interest rate swap
(b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2010
Non-current unsubordinated debentures as of 31 December 2010 are summarised as follows:
Shareholder structure
Belgian state owns ~ 53.5%
Shares %
shares
%
Voting
%
Dividend
Belgian state 180,887,569 53.5% 56.3% 55.8%
Free float 140,595,072 41.6% 43.7% 43.3%
Own shares 16,542,494 4.9% - 0.9%
338,025,135 shares, of which 321,482,641 Outstanding
• Limited liability company under public law - Belgian state main shareholder: 53.5%
- Legal obliged threshold: 50%+1 share
- Last elections June 2010, government formation ongoing
- Minister of Public Companies: Inge Vervotte
- 14 Boardmembers, 50% state-appointed
• Free float 41.6% - Main shareholders located in US, UK, Benelux,
France & Germany
• Treasury shares 4.9% - Under Belgian law, companies prohibited from
owning >20% of outstanding share capital
- Part of own shares held for personnel incentives: Options and DSPP
Slide 55
Belgian State 53.5%
Free Float 41.6%
Own shares 4.9%
Source: European Economic forecasts (Autumn 2010 & interim forecast 2011) & Federal Planning Bureau 1 GDP – percentage change on preceding year 2 Number of unemployed as a percentage of total labour force 3 Index of consumer prices – percentage change on preceding year
Macro economic environment
Belgium & Euro area
Slide 56
1.0%
-2.8%
2.0% 2.0% 2.0%
0.4%
-4.1%
1.7% 1.6% 1.8%
1 2 3 4 5
Belgium Euro area
GDP growth (%)1
2008 2009 2010 20122011
7.0%7,9%
8.4% 8.4% 8.7%7.5%
9.5%10.1% 10.0% 9.6%
1 2 3 4 5
Belgium Euro area
Unemployment rate (%)2
2008 2009 2010 20122011
4.2%
2.1%
3.3%
1.9%3,3%
0.3% 1.5%2.2%
1.7%
1 2 3 4 5
Belgium Euro area
Inflation (%)3
2008 2009 2010 20122011 -12.8%
-7.2%
6.4% 5.3%
-0.5%
13.5% 13.8%
8.7%
5.2%
-0.1%
-4.9% -4.3%
-11.6%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Bankruptcies in Belgium (%)Jan 2010 - Jan 2011
• Belgian economy following Germany • Growth likely to remain above EU average
Projected inflation driven by increasing energy prices
Belgium : Budget deficit from
6% in ‟09 to 4.6% in‟10 2011 est. @~4.1%.
Debt ~100% of GDP
Customer is King: act on 3 layers
Become Belgian operator with best service
+ +
• Quality of execution • New expert teams • Evening installations and
repair • Predictive treatments
• Simplify activation costs structure
• 1st reminder for free • Simplify product portfolio
• Drastically reduce waiting times
• Call centres open until 10pm for support
• Personalized follow-up • Confirm appointments • New support site (EVA)
Improve operations Simplify Be accessible
Customer Centricity
Change Customer Experience
“This communication might include some forward-looking statements, without
limitation, regarding Belgacom‟s financial or operational results, certain strategic
plans or objectives, macro-economic trends, regulation, future market conditions
and other risk factors. These forward-looking statements rely on a number of
assumptions concerning future events and are subject to uncertainties and other
factors, many of which are outside Belgacom‟s control. Therefore the actual future
results may differ materially from those expressed in or implied by the statements.
Readers are cautioned not to put undue reliance on forward-looking statements,
which speak only of the date of this communication.
Belgacom disclaims any intention or obligation to update and revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.“
Cautionary statement regarding forward-looking statements
Slide 58
For further information: Belgacom Investor Relations e-mail: [email protected] Tel: +32 2 202 82 41
http://www.belgacom.com
Slide 59