Telenet.be
 
 
 
 

Investment Proposition

 
 

Reasons to invest

Reasons to invest

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Leading HFC and 4G+ converged network infrastructure, underpinned by a targeted and well-balanced investment strategy

At September 30, 2022, we served 2,014,700 unique customer relationships, which represented approximately 59% of the 3,427,000 homes passed by our leading hybrid fiber coaxial ("HFC") network across our Flemish and Brussels footprint. Our cable network consists of a dense fiber backbone with local loop coaxial cable connections and spectrum of up to 1.2 GHz. Through both EuroDocsis 3.0 and 3.1 technologies, we offer data download speeds of 1 gigabit per second ("Gbps") across our entire footprint. We announced in July 2022 a binding agreement with Fluvius, taking a joint next step in the realization of the data network of the future (working name "NetCo1"). Both companies’ ambition is to provide speeds of 10 Gbps across the entire footprint in time, for which there is a clear roadmap through a mixture of both HFC (DOCSIS) and fiber technologies. NetCo plans to invest up to €2 billion to build the leading fixed network, targeting to cover 78% of our footprint with fiber by 2038 with approximately 70% of premises connected in 2029. We will actively seek opportunities for further network rationalization and CAPEX optimization. Our NetCo plan is fully funded and will be independent from external financing. NetCo is well positioned to attract additional strategic and/or financial investors given its market-leading market penetration of close to 60% and its attractive financial profile. This project must now be notified to the European Commission. Due to this notification, the parties expect that the actual launch of NetCo will not take place early next year but rather by the summer of 2023, as soon as the Commission’s clearance is granted.

Proven ability to drive ARPU through strong brand equity and fixed-mobile convergence-led growth

In Q3 2022, we yielded a monthly fixed ARPU per customer relationship of €60.3, which was up nearly 3% relative to the same period of last year, mainly driven by the June 2022 price adjustment.

Disciplined cost control and continued focus on generating operating leverage through digital transformation

Our operating expenses increased almost 4% for the nine months ended September 30, 2022 compared to the prior year period and were up 3% year-on-year on a rebased basis. This was mainly driven by (i) higher staff-related expenses following the mandatory wage indexation in January 2022, (ii) higher energy costs, leading to an overall increase in network operating expenses, (iii) the impact of inflation on outsourced labour and professional services and (iv) higher other indirect expenses. Looking at full year 2022, we still expect our operating expenses to decrease 5% year-on-year, excluding staff-related expenses, energy costs and the impact of certain non-recurring M&A transactions. Half of the 5% decline is driven by the impact of digitization.

Targeting 1% revenue and EBITDA growth for FY 2022

Having completed the first nine months of the year, we reconfirm our full year 2022 outlook as presented mid-February and our financial performance over the first nine months of the year shows we are on track to deliver. We do not expect the inclusion of Caviar Group in our consolidated financial information as of October 1, 2022 to meaningfully impact the below mentioned rebased growth rates.

Strong liquidity and long-term debt maturity profile of 5.8 years

At September 30, 2022, we carried a total debt balance (including accrued interest) of €6,906.8 million, of which €1,561.5 million principal amount is related to the € and USD-denominated Senior Secured Fixed Rate Notes due March 2028 and €3,454.2 million principal amount is owed under our 2020 Amended Senior Credit Facility with maturities ranging from April 2028 through April 2029. Our total debt balance at September 30, 2022 also included a principal amount of €349.9 million related to our vendor financing program, while the remainder primarily represents lease obligations associated with (i) the June 1, 2022 sale of our mobile tower business to DigitalBridge resulting into a 15-year MLA, (ii) the Interkabel Acquisition prior to the anticipated closing of the NetCo transaction we announced mid-July this year and (iii) other leases. Finally, our total debt balance at September 30, 2022 also included outstanding liabilities of €392.4 million concerning the mobile spectrum licenses following the recent multiband spectrum auction as we have opted for annual deferred payments over the lifetime of each license as opposed to advance payments.

At September 30, 2022, we carried €349.9 million of short-term debt related to our vendor financing program, all of which is maturing within less than twelve months and which carries a margin of 195 basis points over EURIBOR (floored at 0%). This represented increases of €3.9 million versus December 31, 2021 and €18.2 million versus June 30, 2022, respectively, reflecting seasonality in some of our scheduled vendor financing payments and positively impacting our Adjusted Free Cash Flow by the same amount in both periods. For the full year 2022, we continue to anticipate a broadly stable evolution from December 31 2021, as embedded in our FY 2022 Adjusted Free Cash Flow outlook, yet with a certain seasonality in some of our payments from quarter to quarter.

All of our floating interest rate risk and foreign exchange currency risk have been hedged until the maturity of such debt instruments through a series of derivatives, improving the visibility on our future Adjusted Free Cash Flow and minimizing exposure to financial market fluctuations. Excluding short-term liabilities related to our vendor financing program, we face no debt maturities prior to March 2028 with a weighted average maturity of approximately 5.8 years at September 30, 2022. In addition, we also had full access to €555.0 million of undrawn commitments under our revolving credit facilities at September 30, 2022, with certain availabilities up to September 2026.

Committed to drive attractive shareholder value in 2022 and beyond

As detailed during our September 2022 Capital Markets Day, our long-term consolidated ambition is to drive growth in both ARPU and our customer base, translating into healthy top line growth. Through increased digitization, we expect our operating costs to further decrease over time, boosting our Adjusted EBITDA. After the NetCo network build and upgrade, we expect a significantly lower CAPEX intensity across both our NetCo and Telenet businesses, translating into robust Adjusted Free Cash Flow growth and growth in our shareholder remuneration profile from our current policy.

As announced mid-July this year, Telenet's board of directors has opted for a balanced shareholder remuneration policy during the investment cycle (annual gross dividend per share of €1.0 during the 2023-2029 roll-out period) with upside potential (through extraordinary dividends and/or share buy-backs) from either a partial NetCo divestment and/or our ability to optimize the FTTH investment plan.