Outlook

In April 2016, we presented our Vision 2020 strategy to be the leading converged connected entertainment and business solutions provider in Belgium. The targeted and complementary acquisitions of (i) the nationwide mobile operator BASE Company NV in February 2016, (ii) SFR's Brussels and Luxembourg-based cable business ("SFR Belux") in June 2017 and (iii) the leading B2B integrator Nextel more recently (pending regulatory approval from the relevant competition authorities) demonstrate that we are on track to deliver on our strategy. Furthermore, we remain focused on providing a great product and service experience to our customers through superfast and reliable fixed and mobile connectivity solutions, complemented with our innovative all-in-on converged "WIGO" bundles and a leading 360 degree premium entertainment experience. In April 2016, we also painted a medium-term profitability outlook for our business, targeting a 5-7% rebased Adjusted EBITDA CAGR over the 2015-2018 timeframe. As 2018 will be the final year within this medium-term guidance framework, we are pleased to report we are well on track to deliver as mentioned below.

For the full year 2018, we anticipate stable revenue growth on a rebased basis. Our full year 2017 revenue and Adjusted EBITDA have been rebased to take into account (i) a full twelve-month contribution from SFR Belux (as opposed to 6.5 months actually reported in 2017), (ii) the transfer of both JIM Mobile and Mobile Vikings to MEDIALAAN, which was a regulatory prerequisite from the European Commission in 2016 for the BASE acquisition, (iii) the impacts from the new IFRS 15 accounting framework and (iv) the sale of Ortel. Our 2018 outlook does not yet capture the impacts from the Nextel acquisition as this is pending regulatory approval as mentioned above. Our rebased top line growth will continue to be impacted by certain adverse regulatory headwinds and the intensely competitive environment, which will be partially offset by solid growth in our underlying cable subscription revenue and a higher contribution from our B2B business and commercial MVNO partnerships.

Having delivered a solid 6% rebased Adjusted EBITDA growth in 2017 (versus our mid-single-digit outlook) on the back of certain advanced synergies related to the BASE acquisition, we are targeting a robust 7-8% Adjusted EBITDA(a) growth on a rebased basis for 2018. Our full year Adjusted EBITDA(a) will be positively influenced by the continued synergies from the BASE acquisition, including lower Full MVNO-related costs as we aim to complete the full onboarding of our Full MVNO subscribers to the Telenet network at the end of Q1 2018. In addition, we will continue to focus on carefully managing our overhead expenses and indirect spend. Given the estimated 2018 rebased Adjusted EBITDA(a) growth, we are now targeting an improved Adjusted EBITDA(a) CAGR of 6-7% over the 2015-2018 period versus 5-7% previously (2015 rebased Adjusted EBITDA of €1,096.6 million).

As far as our accrued capital expenditures are concerned, 2018 will be the final full year in our investment cycle characterized by relatively high investments on the back of (i) our five-year €500.0 million "Grote Netwerf" HFC network upgrade program, (ii) our €250.0 million investment in the modernization of our acquired mobile network, (iii) a full-year inclusion of SFR Belux, including on-top investments to improve the customer experience in Brussels and Wallonia, and (iv) the start of our IT platform upgrade plan, leading to additional innovative digital capabilities and cost opportunities going forward. Having upgraded approximately 67% of our cable nodes at the end of 2017, we continue to be on track to complete our "Grote Netwerf" project by mid-2019 as communicated before. As for our mobile network, we succeeded in modernizing approximately 87% of our macro sites at the end of 2017 with incremental spend to be substantially completed by mid-2018. Consequently, we are targeting our accrued capital expenditures to represent around 26% of our revenue for the full year 2018, with a firm commitment to decrease our accrued capital expenditure levels as of 2019.

Finally, we expect a healthy growth in our Adjusted Free Cash Flow(b) for 2018 to €400.0-420.0 million driven by (i) robust Adjusted EBITDA(a) growth as mentioned above, partially offset by higher capital expenditures, (ii) lower cash interest expenses as a result of the December 2017 refinancing and (iii) continued growth in our vendor financing platform through which we are able to extend payment terms for certain strategic suppliers.

(a) A reconciliation of our Adjusted EBITDA guidance for 2018, and our Adjusted EBITDA CAGR for 2015-2018, to a EU IFRS measure is not provided as not all elements of the reconciliation are projected as part of our forecasting process, as certain items may vary significantly from one period to another.

(b) A reconciliation of our Adjusted Free Cash Flow guidance for 2018 to a EU IFRS measure is not provided as not all elements of the reconciliation are projected as part of our forecasting process, as certain items may vary significantly from one period to another.

Outlook FY 2018

 

(a) A reconciliation of our Adjusted EBITDA guidance for 2018, and our Adjusted EBITDA CAGR for 2015-2018, to a EU IFRS measure is not provided as not all elements of the reconciliation are projected as part of our forecasting process, as certain items may vary significantly from one period to another.

(b) Excluding the recognition of football broadcasting rights and mobile spectrum licenses.

(c) A reconciliation of our Adjusted Free Cash Flow guidance for 2018 to a EU IFRS measure is not provided as not all elements of the reconciliation are projected as part of our forecasting process, as certain items may vary significantly from one period to another.

(d) Assuming the tax payment on our 2017 tax return (excluding the tax prepayment of Q4 2017) will not occur until early 2019.