Outlook

Outlook

Having delivered a solid financial performance over the first nine months of 2019, we confidently look ahead and feel comfortable raising our revenue outlook for the full year. Even though the trend in our rebased revenue has worsened in the third quarter versus both Q1 and Q2 due to a full quarter impact of the MEDIALAAN MVNO contract loss and certain regulatory headwinds, our rebased revenue over the first nine months of the year held up relatively well with a more than 1% decline year-on-year. As a result, we now expect a less outspoken rebased revenue decline of around 2% for the full year versus around 2.5% previously. All other financial metrics remain unchanged for the full year, including a rebased Adjusted EBITDA decline of 1-2%(b), a 16-18% increase in Operating Free Cash Flow(c) and an Adjusted Free Cash Flow between €380 and €400 million(d,e).

Year-to-date, our Adjusted EBITDA modestly contracted by 1% on a rebased basis. In line with our rebased top line trend, we have also started to face an accelerated adverse trend in our rebased Adjusted EBITDA as of Q2 2019. We expect this trend to continue for the next two quarters as the aforementioned contract loss has started to impact both our revenue and Adjusted EBITDA since early April 2019. In addition, we expect the year-on-year decline in our rebased Adjusted EBITDA to be more outspoken in Q4 2019 due to seasonally higher programming costs at De Vijver Media and a tougher comparison base relative to a strong Q4 last year. For the full year, we still anticipate our Adjusted EBITDA to contract between 1 and 2% year-on-year in 2019 on a rebased basis. Excluding the lower contribution from our MVNO business, our Adjusted EBITDA performance in 2019 would have been broadly stable on a rebased basis.

As mentioned before, 2018 represented the peak in our investment cycle given the continued upgrade of our fixed and mobile infrastructures. Given the substantially lower capital intensity in 2019, we target robust Operating Free Cash Flow growth of 16-18% year-on-year in 2019. For 2019, we anticipate Adjusted Free Cash Flow between €380.0 and €400.0 million. Our 2019 Adjusted Free Cash Flow performance will be impacted by (i) a substantially lower contribution from our vendor financing platform as we aim to stabilize our platform relative to a €93.7 million net positive contribution in 2018, (ii) a negative working capital impact from the reduced capital intensity, (iii) higher cash taxes given our higher pre-tax profitability and (v) higher cash interest expenses relative to 2018 as a result of higher debt balances in connection with last year's extraordinary dividend and as 2018 was impacted by the phasing of our cash interest and derivative payments.

Finally, we continue to target a healthy Operating Free Cash Flow CAGR(a) of 6.5 to 8.0% over the next three years (excluding the recognition of football broadcasting rights and mobile spectrum licenses, and excluding the impact of IFRS 16 on our accrued capital expenditures) as announced during the December 2018 Capital Markets Day.

For more information on our 2019 outlook we refer to the Q3 2019 Investor & Analyst Toolkit.

1 Our rebased FY 2018 revenue, Adjusted EBITDA and Operating Free Cash Flow changed as compared to May 2, 2019 to include a seven-month contribution from De Vijver Media from €2,553.9 million, €1,368.2 million and €712.4 million, respectively.

((a) A reconciliation of our Operating Free Cash Flow CAGR over the 2018-2021 period 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 EBITDA guidance for 2019 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.

(c) Excluding the recognition of football broadcasting rights and mobile spectrum licenses and excluding the impact from IFRS 16 on our accrued capital expenditures.

(d) A reconciliation of our Adjusted Free Cash Flow guidance for 2019 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.

(e) Assuming certain payments are made on our current 2G and 3G mobile spectrum licenses in Q4 2019 and the tax payment on our 2018 tax return will not occur until early 2020.