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 December 31, 2022, we served 2,008,800 unique customer relationships, which represented approximately 58% of the 3,436,700 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.

In July 2022, we announced a binding agreement with Fluvius, taking a joint next step in the realization of the data network of the future (working name "NetCo"). In November 2022, it became clear that the NetCo transaction had to be notified to the European Commission. As a result, we expect the actual launch of NetCo to be delayed until the summer of 2023. NetCo's ambition is to provide speeds of 10 Gbps across its 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 €2.0 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.

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

For the year ended December 31, 2022, the monthly fixed ARPU per customer relationship reached €59.4, which was broadly stable compared to the prior year. While the ARPU per customer relationship was boosted by the favorable impact of the August 2021 and mid-June 2022 price adjustments, growth was almost fully offset by the continued decline in both video and fixed-line telephony RGUs and a higher reallocation of "ONE" FMC bundle revenue from fixed to mobile telephony.

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

Our operating expenses, which include our (i) network operating expenses, (ii) direct costs, (iii) staff-related expenses, (iv) sales and marketing expenses, (v) outsourced labor and professional services and (vi) other indirect expenses, increased 5% for the year ended December 31, 2022 compared to 2021, including the aforementioned acquisition effect. Excluding this inorganic impact, our rebased operating expenses were up 2% year-on-year, reflecting the impact of both higher energy costs and overall inflation on certain of our cost lines.

Full year 2022 outlook achieved on all metrics despite inflationary headwinds, following a strong year-end. Anticipating top line growth and stable Adjusted EBITDAaL rebased for full year 2023.

Heading into 2023, we will tightly monitor our cost base in light of the 11% mandatory wage indexation in Belgium effective January 2023, which will result in a significant increase in our staff-related expenses. In addition, we expect to incur higher energy costs compared to 2022 during which our energy costs increased sharply by approximately 70% as a result of the war in Ukraine. We took advantage of the market turmoil in Q4 to increase the proportion of energy spend covered under fixed price contracts from approximately 45% at the end of September last year to approximately 90% currently. We intend to absorb these inflationary pressures through continued digital savings, tight cost control and targeted rate increases to offset the aforementioned impacts. With that, we expect healthy top line growth between 1 and 2% for 2023 on a rebased basis, while we target broadly stable rebased Adjusted EBITDAaL over that same period which would be similar for Adjusted EBITDA.

In 2022, our CAPEX intensity increased to approximately 25% of revenue driven by the start of our 5G investments, continued investments in our data and digital platforms as well as targeted fiber investments in certain areas. For 2023, and excluding the effects of the NetCo transaction, we expect our CAPEX to revenue ratio to be around 26% as we continue to see (i) higher spending on amongst others our 5G roll-out, (ii) targeted standalone fiber deployments and trench sharing opportunities as in 2022 and (iii) preparatory investments in IT and product development to prepare for the launch in Wallonia in early 2024.

This translates into a lower Adjusted Free Cash Flow as compared to 2022 when we achieved an Adjusted Free Cash Flow of €409.0 million. For the full year 2023, we target an Adjusted Free Cash Flow of around €250.0 million. With that, our dividend floor of €1.0 per share (gross), or €108.6 million in aggregate, remains well covered. 

Strong liquidity and long-term debt maturity profile of 5.5 years

At December 31, 2022, we carried a total debt balance (including accrued interest) of €6,654.9 million, of which €1,473.7 million principal amount is related to the € and USD-denominated Senior Secured Fixed Rate Notes due March 2028 and €3,252.8 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 December 31, 2022 also included a principal amount of €345.9 million related to our vendor financing program as further detailed below. 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 as further detailed above under Financial highlights, (ii) the long-term emphyotic lease with Fluvius for the use of its HFC network covering approximately one-third of Flanders prior to the anticipated closing of the NetCo transaction which we expect by summer this year and (iii) other leases. Finally, our total debt balance at December 31, 2022 also included outstanding liabilities of €399.7 million concerning the mobile spectrum licenses following last year's multiband spectrum auction as we have opted for annual deferred payments over the lifetime of each license as opposed to advance payments.

At December 31, 2022, we carried €345.9 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%). In line with our FY 2022 outlook, the short-term debt under our vendor financing program remained broadly stable compared to December 31, 2021 (€346.0 million) and represented a €4.0 million decrease versus September 30, 2022, reflecting seasonality in some of our scheduled vendor financing payments and negatively impacting our Adjusted Free Cash Flow by the same amount in the fourth quarter. We anticipate a broadly stable evolution in 2023 compared to December 31, 2022, as embedded in our FY 2023 Adjusted Free Cash Flow outlook, yet with a certain seasonality in some of our payments from quarter to quarter.

Except for our vendor financing and mobile spectrum commitments, all of our floating interest rate and foreign exchange currency risks 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 5.5 years at December 31, 2022. Finally, we also had full access to €555.0 million of undrawn commitments under our revolving credit facilities at December 31, 2022, with certain availabilities up to September 2026.

Committed to drive attractive shareholder value

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 described below.

In July 2022, as part of the NetCo transaction announcement with Fluvius, which is pending regulatory approval, the board of directors decided to reset the Company’s shareholder remuneration policy in order to maintain a consolidated net total leverage of around 4.0x throughout the CAPEX-intense fiber build period. Over the 2023-2029 period, the board of directors decided upon an annual dividend floor of €1.0 per share (gross) to be paid annually in early May following shareholder approval at the statutory AGM in April. As such, the board of directors ensures a balanced approach with continued regular dividends whilst investing for future growth. After this build period, including 5G roll-out, the CAPEX intensity is expected to materially decrease and return to normalized historical levels, leading to substantial Adjusted Free Cash Flow growth and providing scope for significantly higher shareholder disbursements. At that point in time, the shareholder remuneration plan will be re-evaluated by the board of directors.

The board of directors has now decided to propose to the Annual General Shareholders' Meeting in April 2023 to approve the payment of a gross dividend of €1.0 per share (€108.6 million in total). The proposed dividend will be paid using existing cash and cash equivalents and is in line with the Company’s reset dividend floor of €1.0 per share (gross). If approved by shareholders, the dividend will be paid in early May.