Proximus Sa De Droit Pub

Hello and welcome to the Proximus Q2 Results 2024. My name is Laura and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. I will now hand you over to your host, Nancy Horsens, Investor Relations Lead, to begin today's conference. Thank you.

Thank you. Welcome, ladies and gentlemen, to this Proximus webcast. We have today some ground to cover. So in addition to the second quarter results, we will also spend some time on the strategic announcements of last night. We will, of course, still foresee some time for your questions. Before we get started, let me just introduce the participants on our side. Here with me today, I have the CEO, Guillaume Boutin, the CFO, Mark Reed, the Consumer Lead, Jim Castile, and the Corporate Affairs Lead, Ben Appel. Let's now start the presentation. Guillaume, the floor is yours.

Thank you, Nancy. And with the year now halfway, it's a good time to reflect a moment on some of our major achievements. Overall, I'm very pleased with our commercial achievements so far, showing a continued strong customer growth for our main product groups. Our residential unit, for example, added another 46,000 mobile cards over the past quarter in a very competitive market. For fiber, we activated an additional 40,000 customers, and we continued deploying at high speed to reach a fiber industry footprint of 38%. Our international segment grew its direct margin by 7% in Q2, benefiting from its unique position in the global digital communications market and ready for its growth trajectory. All in all, this has led to our group EBITDA growing by 5.3% for the second quarter, a strong result that fueled our announced guidance upgrade. The past months also have been very eventful. Not only did we close the root mobile acquisition, we also centralized our B2B IT activities into a dynamic new subsidiary, Proximus Next IT, to better serve professional customers in the Benelux. And then, of course, the most recent news, the signing of the Fiber MOU for collaboration in Flanders and Proximus obtaining full ownership of Fabercloud. Overall, our strategic progress is intended to safeguard a sound organic free cash regeneration. We'll do a deeper dive on this in a moment. I already said it, overall we can be very pleased on our performance, with all main results illustrated on this slide. I won't comment on each as we will have a closer look at it, but before that, let's first go to our strategic achievements. Our international segment is already delivering significant profitable growth. Remember, early May, we closed a major transaction, acquiring a majority stake in Root Mobile. We have elaborated on it extensively during our international webinar, now almost two months ago. In short, we have created a unique position whereby we deliver services across the full value chain of digital communications, from connect to engage to protect and this on a global basis. We are proud of our international brands being recognized for their expertise, underlining the leading position for Proximus in taking those great shares of those global markets. The speaking example is a recently signed strategic partnership with Microsoft. As part of this five-year agreement, Microsoft will use the best-in-class CPaaS and AI products of our international platforms and as such further solidify our leadership in the digital communication space. Turning to our domestic market, for which our fiber strategy remains a key driver of a strong commercial performance. In June, we were deploying fiber in 164 cities and municipalities, bringing the fastest internet in Belgium, as was recognized by Okla. Moreover, we continue to innovate and bring now for ultra-fiber customers the latest Wi-Fi technology to further boost the in-house experience. An increasing number of customers can benefit from our gigabit speed offers, with an additional 443,000 homes passed with fiber over the past three months. In June, we are close to the 2 million home pass bar, the milestone we have in the meantime crossed. Just to illustrate our accelerated pace, half of this coverage we achieved over the past two years, while the first million took six years to be reached. Customer traction for fiber clearly continues. Our base of activated fiber lines continue to grow solidly, now counting a total of 481,000. Business success of fiber ambitions, of course, does not stop here, which brings me to the next part of this presentation. We've been waiting for some news on this front for some time now, so I'm excited to share that after several months of constructive discussions, we achieved some major strategic steps in the deployment of fiber for Flanders. Yesterday evening, we announced the signing of two separate agreements. One, we signed an MOU and fiber collaboration with Wire and Telenet. And two, we acquired under personal fiber cloud, the Flemish fiber GV, in which we own approximately 50%. With this, we not only achieved a strategic milestone for the country and the industry, it also creates for Proximus a framework for long-term cash flow generation and competitiveness through increased network utilization, yielding additional wholesale income. These agreements are expected to result in free cash flow covering current dividend levels in 2025-2027, supported by our divestment program, which will scale to 500 million euros. From 2022-2028 onwards, we expect to return to growing annual organic feed cash flow. Let's first take a closer look at the MOU on fiber collaboration. The intended collaboration with WIRE and Telenet stretches over approximately 2.7 million homes across the Flanders region. For the 2 million homes in the medium-dense area, Wire and FiberClar would build complementary fiber networks. 40% of these 2 million would be allocated to FiberClar, meaning about 800,000 homes passed, with part of that already completed today. The other 60% would be allocated to Wire. And of course, both companies would have reciprocal wholesale access. For the 7,000 homes in the more rural areas of the Flanders region, Proximus would start offering services using the HFC network of wire. This would allow us to offer gigabit speed throughout Flanders. Outside of this MOU are the dense areas representing about 900,000 homes, with most of them already covered by Proximus fiber today. The MOU is a step forward towards an optimized fiber rollout in Flanders, providing a path to maximize the utilization while ensuring broader fiber coverage at an accelerated pace. All this would be achieved with a significantly reduced overall investment. Separately, we announced that we are increasing our ownership in FiberClar, going from about 50% to fully ownership now, and this for a total consideration of 246 million euros. Becoming the sole shareholder of FiberClar will allow us to work more closely together and further increase the efficiency and quality of the fiber rollout in Flanders. At the same time, we capture the value generated by synergies. Integration in the group will especially allow for optimized funding costs, and in addition, will create operational synergies. Expect both to total up to an NPV of 100 million euros. While collaboration will for sure bring benefits for Flinders and the industry, it also would secure strong incremental cash generating fundamentals for Proximus from 2028 onwards. While it's clearly too early to share any details, there are some key components inherently driving value. Top of the list will have a massive capex avoidance thanks to an optimized footprint for FiberClar. Moreover, as just mentioned, pouring full ownership in FiberClar would gain both operational and financial synergies, particularly regarding debt management. The high utilization of the FiberClar network would bring additional wholesale revenue from wire, partially balancing out the costs going the other way. A higher and faster fiber coverage will also allow for a faster decommissioning of a copper network, which is, as you know, costly to maintain. The intended collaboration would provide us access to the HFC and fiber networks of wire, which will sustain and enhance our retail commercial fiber momentum. The charts of this slide illustrate our expected free cash flow trajectory. we make the distinction between two main timeframes, the investment period, running until 2027, and the timeframe beyond. Starting with this year, 2024, on the left-hand side, the work illustrates how we go from the estimated adjusted free cash flow, which is the ballpark of our company-compiled consensus, to the full-year free cash flow estimate, including the effect of the acquisitions. Following the under-percent ownership of FiberCloud, will consolidate the capex on our balance sheet. This leads to an estimated total group capex for 2024 of around 1.36 billion euros. The capex increase replaces the expected equity injections in FiberCloud, therefore limiting the free cash flow impact. Expected average annual free cash flow over the period 2025-2027 is already growing significantly reaching a level that covers the current dividend supported by our divestment program. The CAPEX relief offered by collaboration will kick in, and we expect to return to growing annual organic free cash flow. Besides our expectation to continue to grow domestic EBITDA, we also we see support from our international segment, while our capex levels will be coming back to normalized levels. This transaction, therefore, allows us to provide significantly longer-term visibility and de-risking as we will enjoy gigabit network coverage with no additional capex required by then. The funding of the FibroClark transaction will have a limited and temporary impact on the net debt to EBITDA ratio. For 2024, we expect this to be around 3.1 times and should stabilize around three times as of next year. A strong deleverage is expected to start from 2029 onwards. In terms of process, you can expect the FiberClar transaction to be closed shortly. As for the intended Fiber collaboration, reaching a final agreement is subject to regulatory and antitrust approvals. The formal investigation by the Belgium Competition Authority has just started with involvement of the BIPT and the outcome could be expected somewhere towards the end of this year. Moving to the next and final part of this presentation with a quick overview of the second quarter results. Starting with our domestic segment. As I already pointed it out at the start, our second quarter domestic operations demonstrated once more solid growth, supported by our attractive product offerings and effective multi-brand strategy. Our strong commercial results combined with our pricing strategy led to another strong revenue growth for our residential unit, up by 5.3% in total, with revenue from services increasing year-over-year by plus 6.3%. The revenue from residential services was still supported by two price indexations, as well as by the ongoing customer growth, especially in the conversion base. For business unique, revenue was growing by 4.8%, with revenue from business services continuing the growth trajectory up by plus 2.2% for the second quarter. The growth in business services revenue was driven by a sustained positive revenue trajectory for fixed data and IT services. Our wholesale revenue followed a similar trend as before, with a revenue decline fully related to low-margin interconnect revenue, while our fixed and mobile wholesale services were up just over 9%. This brings me to the total domestic revenue, for which we achieved a sustained strong growth, up by 4.6% for the second quarter, driven by an equal 4.6% increase in services revenues. Turning now to the domestic operating expenses, which were up 3.8% from last year and continuing the improving trend following the further moderation of the inflationary cost effects. Bringing it all together, our domestic EBITDA showed a strong growth year-over-year by 5.1%, driven by the increase in direct margin. Turning now a moment to the international part of our results, our international segment closed the second quarter with a solid growth in its direct margin. Before getting into detailed results, let me first frame some of the key drivers that are supportive of this. With WootMobile, we now have a unique exposure to the fast-growing APAC region for our CPaaS services, which more than compensate for the currently more difficult US and EU markets. Two, we have omni-channel solutions that allow us to recapture some of the disappearing SMS traffic, with omni-channel typically coming at higher margins. Three, the loss of SMS volumes is to a great extent related to A2P, so application-to-person traffic, for which the impact and margin is limited. Four, besides CPaaS, digital identity and mobility services are also growing revenue and direct margin. And as a last point, although P2P voice and messaging is typically a declining market, we achieved to limit the direct margin impact of this. Turning now to the numbers. Two or three global brands, PIX, Telesign, and RootMobile, We achieved to grow our international direct margin by 7.0% on pro forma basis, driven by communications and data services. Driven by the DM growth, the international EBITDA increased year-over-year by 6.5%, again on a pro forma basis. Zooming in for a moment on communications and data services, which is a product group including CPaaS, DI, and mobility services. Here, we posted a 9.5% growth in direct margin on a pro-farmer basis. Besides omni-channel recapturing part of the SMS transition, especially in the APAC region, the margin also benefited from new customers and large contracts going live. Digital identity experienced robust growth with a net retention rate at 116%. And mobility services did good as well, driven by higher travel volumes. In contrast, over the same period, the revenue was down by 6.2% on a pro-pharma basis, demonstrating that this concerns especially low-margin CPaaS messages. For second international product group, P2P voice and messaging, direct margin was down slightly, all due to lower voice volumes. in an inherently declining market. This brings me to the group results. Our traditional slide brings it all together, with the group EBITDA up by 5.3% on a profound basis, with both the domestic and international segments contributing. The capex over the first half of 2024 totalled 585 million euros, which is a decline for last year, in line with the pace of the Proximus-owned fiber build. Our free cash flow for the first half of 2024 stood at minus 114 million euros on adjusted basis, with the variance from last year mainly being timing effects in working capital needs, partially compensated by a higher underlying EBITDA and lower cash for CAPEX. In conclusion, we have closed the first half of 2024 on a high note, with strong growth realized for domestic revenue and EBITDA, as well as for the group EBITDA. We therefore can, with confidence, raise our 2024 guidance for this matrix, as shown on the slide. Following the full ownership in Faber-Clar and the resulting consolidation on the balance sheet, we are reviewing our expectation for the group capex to around 1.36%. billion euros for 2024. The funding of the transaction will have a limited and temporary impact on the net debt to EBITDA ratio for 2024, expected to be around 3.1 times. Our three-year dividend policy we set for 2023 to 2025 remains unchanged. With this, I have covered my presentation, but we can turn now to your questions.

Thank you. As a reminder, if you would like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To redraw your question, please press star 2. You will be advised when to ask your question. We will now take our first question from David Bergman of ING. Your line is open. Please go ahead.

Yes, hi, good afternoon and thanks for taking my question. The first is on the free cash flow outlook beyond 2027. I'm a bit surprised by the ballpark figure to be slightly above, or so it seems, above 300 billion euros, despite the significant step up in CapEx and then your deal, very nice deal, FibreSar deal with Telenet, so Telenet getting on your network. So is this free cash flow of 300 million euros and maybe a bit more, is it supposed to move up significantly after 2030? Or could you explain, basically, why is this on you being cautious because of DG arriving in Belgium? Is it because you deduct minorities in international? Or is it simply reflecting high wholesale costs internationally? and maybe not that high wholesale revenues, or still high capex, so basically. Second question, when I look again at the free cash flow and the 300 million plus, is it correct to say that, let's say, more than half would be coming from the international activities, when I'm basically computing, let's say, using your guidance from the international data? investor day. So the free cash flow conversion, TBD margin, and so forth. And maybe last question on the CapEx post-2027. Should we see a significant step down? Is it correct to assume that it would be a major step down in CapEx, or let's say maybe even less than a billion euros after 2027? Thank you.

David, let me take those. So first of all, on the free cash flow 28 and beyond, I think, again, on the presentation, we clearly state it's an average. And I think we also have a point in there that we expect it to be growing post that period because of the economics of the fiber collaboration. So I think that's where we are. I think hopefully it's appreciated that we've given you that visibility. Clearly, you know, we are in a position right now where We're super happy with the agreement we've come with the regulators and Liberty. And so again, it's hopefully giving you the directional element of where our free cash flow will be. And again, I think maybe point you to that we fully believe that'll be fully organic by that point. I think in terms of the international, I think again, you can use that. I think there's no difference in terms of what we're thinking on the international business as Guillaume pointed out in results are very positive on direct margin EBITDA perspective of Q2 and we continue to see a great trajectory to hitting our guidance for 24 and beyond on international And then on CAPEX, and again, I don't think we'll, you know, we're not disclosing exactly the years. But again, I think, you know, you can think of around, you know, something around 900 million in terms of the period between now and 2028 in terms of the introduction of fibroclor. So I think that's probably it.

Okay. And thanks. Very useful. Maybe a quick follow-up on the whole silicoast you were mentioning. So you have this HSC deal with wire in rural areas in Flanders. Is it correct to assume or to extrapolate that there would be a similar solution in Wallonia? And is it included in your 2028, 2030 free cash flow outlook?

I think we are not going to comment on the discussions ongoing on Wallonia. I think there are two different situations. The situation of Proxibus in Flanders is super different from the situation of Proxibus in Wallonia, so it might be that there are also different outcomes on those discussions. So I'm not sure we can really extrapolate what's happened in the north for what could happen in the south.

Okay. Thanks, Clément.

Thank you. And we'll now take our next question from Joshua Mills of BNP Paribas. Zane, your line is open. Please go ahead.

Hi, guys. Thanks for taking my questions. I had a few, please. I was going to focus on the FiberClark transaction because I think that's the one which is probably getting the most pushback today. So the first question related to this is, what was the rationale for reconsolidating this business now, just two years after you set up an off-balance sheet joint venture? And then related to that, how do you justify the 160 million euro premium being paid to EQT based on the buyout price versus what they're putting with equity? And finally, if we look forward, you still have a number of other joint ventures related to fibre in other parts of the country. Is this the kind of template which you would be adopting when you look to reconsolidate those? Or is there a reason why in this circumstance there is such a high premium being paid? Second question, just more of an operational one. On the wholesale co-investment with Telenet, have you already identified the 60% to 40% split of areas? And does the mechanism simply mean that where you build, they pay you, and where they build, you pay them on equal terms? And then finally, just coming back to... the CEO contract extension, it looks like there's now a much bigger focus in terms of fixed compensation on the international business, which is clearly quite small in the scope of Proximus today. I just wondered if you could comment on how that may affect your strategy and also if you can give us any colour on how remuneration targets have laid out in the 2023 annual report might have been changed as well. Thank you.

Josh, let me start. So I think I'll try and put the rationale and the value on the EQT. So look, I think we've talked about this before. I think ownership is super important to us. And I think the ownership economics of a fully utilized network, I'm sure you can understand that. I think the other element is, again, as we've now very, very sure in terms of the alignment of incentives between ourselves, Liberty, and the regulator, and I think that really gives us confidence in terms of the next period in terms of getting to the long form. I think that also helps by the fact that it's the three of us. I think if you look from a valuation perspective, again, I think if you take comparables across Europe, there's very few networks that will be able to have this kind of utilization rate, a surety on overbuilt risk that this network will have once we get to the long form. And so therefore, again, we feel economic value is worth it at this point. And then we add on top of that the synergies that we announced today on the on the acquisition of the additional share, again, those will accrue clearly to us. So I think that's how we think about it, but I mean, Guillaume, I don't know if you want to add anything to that on that first part.

No, the first part, no, no, I think what I would love to say is more your second question is that, you know, again, I said it just previously, but starting point of the city of Proximus in the north and in the south and Brussels are completely different. So what happened in the north on the way we took back control of the GV we had in the north cannot be extrapolated for the rest of the country. neither on the German-speaking community or in the Walloon region. That's extremely clear and important to note.

And then, Josh, again, on the terms of the MOU, again, I think we've been very explicit in terms of the details we've shared with you in terms of the allocation and the footprint and how we're going to use each other's technology. We're not going to divest. We're not going to... divulge any further details on the terms at this point, because clearly we're still in a long-form time negotiation. So that's a little bit where we are on that. So hopefully, as I think we've provided a lot of detail today in terms of you to be able to work out how this is going to work.

On my new contract, obviously no effect or no impact on the strategy of the group with the new remuneration framework.

Thank you. We'll now move on to our next question from Dhruva Shah of UBS. Your line is open. Please go ahead.

Hi, thank you. Thanks for taking the questions. Two questions, please. First is, could you provide an update on the competitive dynamics in the domestic business across Belgium? And I'm just interested to hear in particular if you're seeing any impact from Telenet entering Wallonia at a lower price point than Proximus, and also if you're seeing anything from Digi And then second question, you've seen very strong domestic growth in Q1, Q2 off the back of price rises and good commercial momentum. But just looking at the guidance and what it implies mechanically, this suggests a declining EBITDA for the second half of the year. So could you just break down for us how much of this decline or forecast decline is due to the lapping of price rises versus the potential impact for Digi's entry or if there's anything else to consider? Thank you very much.

So hello, this is Jim Castile for Consumer. So on the launch of internet and television from base in Belgium, because it's not, of course, not only in Wallonia, but it's a nationwide launch. So far, as you can see in the results, we don't really feel that impact. Also linked to the fact, of course, that we already have been executing on a multi-brand strategy for several years now. We're next to our Proximus brand, We also have Scarlet and Mobile Vikings as alternatives where Scarlet is well positioned versus base in terms of positioning of the market. And at the same time, over the last years, we've also been working on increasing the premiumness of the Proximus brand, linked, of course, to the deployment of 5G, the spectrum that we bought, the fiber experience that we bring to our customers, investments in Wi-Fi technology, in our digital platforms, et cetera. And so we're convinced that by bringing Proximus to a more premium positioning, and then at the same time, our multi-brand strategy, makes us well positioned to cope with the changes that we see today in the market.

Yeah, on the guidance, so I think, you know, we're super happy with the first half of the year. I think in terms of the main components or guidance for the second half, I think you struck the main two or three. I think price is the vast majority. We start to lap the price, as you noted. We have put some digit assumptions in there. Again, we're not seeing, you know... Huge amount of activity there. So, you know, that may be on the conservative side. We had a contract in the enterprise side that we're also lapping. And terminals revenue also, we're lapping some hard comparables from last year. But I think the way I would think about it really is it's primarily the price rise annualization. a bit of assumptions in terms of the market, the conditions that may exist in the second half. But again, as I'm sure Jim will say, as we've been trading through July, trading continues to be strong. So we're very comfortable with our guidance. Thank you.

Thank you. And we'll now take our next question from Titus Kwan of Bank of America. Your line is open. Please go ahead.

Good afternoon, everyone. Thanks a lot for taking my questions. A couple from me, please. I would say three of them. The first one, quick one, just on the 2025 to 2027 free cash flow guidance where you mentioned that your increased 500 million divestment program will benefit the reported free cash flows. Is there any way to kind of give us an indication how much of these 500 million will be divested throughout 2025-2027? Or maybe ask differently, how much kind of cash proceeds have you received so far? Then a second question would be on your CapEx guidance, including FiberClar and the actual Fiber rollout throughout the period until 2027. The FiberClar rollout is that going to be kind of quite equally weighted throughout the years. I'm just asking because your initial plan was for your own rollout to drop significantly and gradually over the next couple of years. But your new CAPEX envelope is basically stable for the next four years. Kind of how can I reconcile that? Will you also accelerate your initially planned rollout or is there some other delta within the CAPEX guidance? And then very, very brief question just on the transaction, on the FibreCloud transaction. If the regulator does not approve your cooperation with Telenet, can you back out? Would you back out? Is that an option? Thank you.

Just let me take a discussion on the 25 free cash flow guidance on the divestment. So where are we on divestments? So we've increased the number to 500 million. In terms of the timing, clearly these are M&A-type processes, and so clearly the timing is difficult. But one element I can give you that maybe helps you in terms of time is, I would say in the advanced negotiations of around 40%, we're in a process of another 45%. And so of that 500 million, there's 85% of it you know, insight, right? I think that's where we are. The remaining part is, you know, we clearly identified and we're, you know, running, starting to understand where the timing of that process will be. So it's difficult to call exactly, but I think the pieces that are in our control are well in, you know, under process. In terms of how far, how much we've raised so far, we had $30 million in I think that's well disclosed in our accounts where we had $30 million cash in for the sale of our headquarters building in December 2023. In terms of CapEx guidance, so I think, you know, I mentioned earlier on the call, you know, we're going to take on, you know, just around $900 million of the FiberClar CapEx. Again, I'm not going to disclose fully the timing of that, but there are going to be elements that were discussed with the regulator by the timing and the phasing of the build, which will dictate exactly where that phasing is, and it's not fully agreed at this point. But I think, again, you can probably, given our 2024 guidance and the number we gave you for 25 to 27, you can probably work fairly close to it. And then, Guillaume, do you want to take the last one? The question was

On the regulatory discussion and what kind of comfort we have that we get through that discussion with the regulator, I think we are confident. I think we have been interacting with the authorities to make sure the principles of the MOU are aligned with their expectations. And I think that if you look at the communication issued by the regulator this morning, it has been confirmed um that you know based on that emu the bipd and the bma are launching the um investigation so i think we we are quite uh confident that we uh uh that uh that uh meu will get to uh a closing moment that uh where where we are if it's uh it's not happening we you know we we are back to uh uh competition uh uh on the on the infrastructure but uh i think this is uh not a healthy situation for neither the country, neither wire, neither approximate, neither the regulator. So I think there is all incentivization for all parties to get to an agreement on that deal based on the detailed MOU that we shared with the regulator last night.

Okay, thank you. But in the worst case, you would still roll out on balance sheet then?

Yeah, then we continue the rollout, but there is probably no situation where you're going to have overbuilt in the country. That's for sure. It's fully realized and agreed in between all stakeholders. So I think there is very high confidence on ourselves to get to a conclusion of the deal. Just to go back on the free cash flow guidance beyond 2028. I think first, we never guided on the international activities beyond 2026. That's a bit where we are. So extrapolation of what is going to be those international activities beyond 2026 is a bit difficult to say. And it could be a fast-growing segment of the first. That's the first element. When we look at the free cash flow generation beyond that period, we say in the presentation, it's clearly stated that it's an annual average organic free cash flow. And we're also clearly stating in the presentation that that free cash flow will be growing from 2028 and onwards in the later years. That's something that you also need to take into account when you look at that period post-2028.

Thank you. Thank you. Thank you. And we'll now take our next question from Nunavut of Bernstein. Your line is open. Please go ahead.

Hi, good afternoon. Thank you for the opportunity as well to ask questions. Three from my side, but I think I'll pretty straightforward also, mostly focus on this fiber announcement. The first one is in terms of the areas that will be passed by FiberClar. It's my understanding that Telenet will still have the cable network active in those areas. Is there some sort of incentive to make them switch? Because you can see from my perspective that they might want to save some money and some wholesale costs. Is there any sort of incentive for each of the parties to switch to fiber? The second question on the 700,000 homes where you now have access to wholesale to cable, I assume this is not really a technology used before. Does this have any sort of costs or preparation in terms of customer premise equipment, in terms of this new technology? Just to understand, because my understanding is you've not used this technology before. Then just the third one is a quick clarification, because in the past we used to see a lot of targets about 95% fiber coverage in Belgium. I'm assuming that target has now been pretty much dropped. but there will still be quite a few rural areas in Belgium. If you could just comment on that, if there's any developments on that. Thank you.

On the first one, I think, as you can imagine, we cannot disclose details of the MOU that has been discussed in the parties, but you can imagine that there are incentivization to build, so incentivization to migrate customers. So, you know, rapidly, the decision will be that when you have one network, one fiber network, you're going to have all the customers on that network. That's the way you should look at it. In terms of preparation to go on coax, I think it's not a technology we don't know. It's a technology we don't use. And, of course, you know, wire is already ready to accept wholesale customers because they have – Orange as a customer. So on their side, I think they are quite ready to welcome Proximus. And for us, it would be a limited amount of investment to be made, but super limited in the context of Proximus to be able to service coax for customers. but also a fantastic opportunity to win market shares because in the areas where we're going to have access to that new network, our market shares are limited in terms of size, and that opportunity to win shares will be also present in those areas compared to the situation of today, which is an upside that we think we can capture as well. Then on the fiber coverage in Belgium, I think it will depend on the way our government, the Belgian government, will look at the subsidization of the rollout. I think, as we always stated, of course, having one network helps the economics of the fiber build, but to go up to 95%, we're going to have to to create a framework where you need to be helped, supported by subsidization to get to this kind of level. I think what we achieved with that agreement is that we will offer the possibility for Proximus customers to access the Gigabit network in Flanders as of tomorrow. That's a bit the good news for our customers. In terms of whether we're going to be using, for 95% of the country, fiber of coax, it seems to be decided. And of course, other ways will be rationally, we're going to be extremely rational in the way we're going to take those decisions to use either coax or to develop fiber networks. It will also depend on the support we're going to receive from government. But we all know that to go beyond 81% of coverage you need probably some support to bridge the gap between 81 and 95.

Thank you. That's very clear. Thank you.

We'll now take our next question from Justin Fennell of NextGen Research. Please go the height.

Yeah, hi, thank you. Hope you can hear me okay. Could you give us any insight into how you expect the respective fibre networks that you're building in the semi-dense to be regulated? Do you think it's going to be retail minus or do you think it's going to be a cost model that the regulator... basically requests or forces you to adopt. And then on your leverage, you obviously have a three times target. Is that a hard ceiling or is there a scope for you to run above three times for a period, given that your credit rating is BBB plus? Thanks very much.

Let me take the leverage one first. So, I mean, Justin, you're right. You know, we give guidance. The three was we wanted to operate the blue three. I think, you know, we announced today because of, you know, getting access to a path towards this collaboration deal, we're going to temporarily go above that with the inclusion of FiberClar. Again, I think we were clear that, you know, we see this as a temporary solution. Elevation above that level and that we expected to come down and to around that for a couple of years. And then we see a deleveraging period once we return to the free cash flow levels that we talked about earlier on this call. So that's where we are, where there's no hard target. Again, I think we've always been in constructive discussions with our rating agencies and we'll explain to them fully this deal. But again, we feel it's a very temporary element above three in 2024, and we expect our conversations to discuss that in the next coming weeks.

On the regulation and the semi-dense areas, I think what we look come with that deal, and it's a good thing. It's a long-term visibility on the way the regulators will look at the different networks. So in the discussion we had with our regulators, what was super important for us is that long-term visibility. And we get that in that agreement. So we'll get that visibility on the way they want to manage the fiber network in terms of regulation for the next, hopefully, 10 years. The way we look at that, so it will be regulated, but with a long-term visibility, which helps navigate and maximize the value creation for everyone. I think this is our expectations, and there is no reason why those expectations should not be heard and met by the regulators.

Thanks. Can I just follow up? I mean, in terms of read between the lines, you say you expect it to be regulated. That's just a cost-plus model, or am I reading too much into what you just said?

I think the regulator said also that they don't want to change the way they look at the cost to access, the price to access the network, and they don't want to change the methodology. So I think we are seeing that framework, and I think this is a fair way to assess the economics of accessing networks for our customers. I think we are seeing that mindset. The good thing, again, is that we're going to have visibility for a long period of time on the fees and the conditions to access the different networks of the different operators. Thank you.

Thank you. Once again, as a reminder, if you would like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. Thank you. We will now take our next question from David Logman, once again from ING. Your line is open. Please go ahead.

Yes, thanks. Thanks for giving me again the opportunity to ask questions. And sorry to come back on the free cash flow 2028 and 2030. I heard well your comment that this is an annual average and it's growing. So do we have to understand that there is actually basically the possibility that in, let's say, you have a big discrepancy between these three years, and then is it because you still have quite a bit of capex or any particular region impacting significantly, let's say, 2028, and then that you would have quite a significant capex, sorry, not capex, exiting this period, so let's say 2030. So I'm trying to figure out basically What is a bit of normalized free cash flow level for the group? So that's my first question. Then secondly, if I do the math quickly for FiberClar, and thanks for the indication that there is still like 900 million euros of capex to, let's say, to invest. If I look at FiberClar, I have the impression that they've already invested something like, let's say, 450 million euros, something like that. It would give a capex per premise per household at €1,700. It seems quite a bit above the initial capex guidance of CyberClar of €2 billion for 1.5 million households. Any particular reason why we're landing at a higher cost or capex per home past? Thank you.

Yeah, David, on the 28 to 30, I mean, look, again, I don't think we're going to talk too much more, disclose too much more on that. I don't think there's nothing else mature, you know, we don't have another CapEx significant investment after that period, so there's nothing there. The FiberClar CapEx build will be, you know, almost fully done by 2028. So that's how, you know, we should be returning to more normalised capital X levels. And that's why, again, over that 28 and beyond period, we've said it's an average and it's growing, right? And it's organic. So I think that's the way you should think about it. On the fibroclar mass, I think there's a couple of things. You know, I think it highly depends on, you know, the footprint. That footprint, the medium dense is a difference in, you know, where it is in that medium dense. And I think the other elements you need to kind of work into is, you know, we have fiber in the street, which we disclose, which is not just you know, Fibre's home past built and ready for service. And so that also has to play into your numbers. So I think that's probably the way to think about it.

Okay, thanks. And when you say, Mark, that the CAPEX will be done by 2028, you mean done in 2027 and then little CAPEX in 2028?

David, I'm not going to pick a year, but I think, you know, hopefully you can get directionally where we are on that 2028 to 2030. number and as I said, we're going to come back once the long form is done and hopefully you understand that there's only certain amounts that we can disclose at this point and we're still going to need to finish the long form but we're super happy with the fact that we've got to this step. This is a major step in terms of aligning the three parties and creating value for for, you know, the regulator, society, liberty, and ourselves. And so hopefully you guys can get that, get this information and understand that on the... Okay.

Okay, no, sure. Thanks, Mark. I think you also understand why I basically want to understand whether there is potentially a big upside in free cash flow down the road also for this period. Thanks.

Thank you. And we'll now take our next question from C.E. Hay of City. Your line is open. Please go ahead.

Hello. Good afternoon. I hope you can hear me okay. I just had one question and just another clarification. The question I have is on your access disposal. I think you announced a plan at the beginning of 2023 and now we're almost one year and a half and then and then I think the proceeds that we achieved is $30 million. Just wondering if you can just share with us what's the lesson learned that you have on your assets disposal, and should we still think that the initial $400 million achieved by the end of 2025 is still a valid timeline? And the second question is, how will you file the cash cutouts that you added from 5 o'clock? Are they annual cash, annual capex? What I'm trying to understand is that for next year, so will you expect this 160 million? I'm sorry, I said it won't potentially double, have a double the size for this year.

Thank you. Sorry, the line was really bad, but let me try, and if I don't get the question. In terms of disposals, as I said earlier, I think to a question, we are in process for 85% of the now uplifted 500 million. And so that means almost half of it is actually in what I'd call a negotiation phase. The other 40% is in a process. And the remainder, the small part of it is in planning and, you know, is not going to take three years to execute. So I think in terms of, and I'm sure you understand, running these processes can take time and, you know, the ability to forecast when they will close is difficult. So I think that's what I would say on that first part. On the FibreClar, again, the FibreClar cash capex, I think the question was around the $160,000. million a year and was that an appropriate level for the next few years? I think the answer to that is yes.

Thank you very much.

Sorry, the line was really bad.

Thank you and we'll now take our next follow-up question from Joshua Mills of BNP Paribas. Please go ahead.

Hi guys, thanks. A couple of quick applications. On slide 18, I just want to Triple check. So there is a difference, if I'm correct, between the free cash flow definitions on the middle chart, which do include asset proceeds, and then the one on the right-hand side, which exclude any M&A and asset proceeds. If you could just confirm that the right-hand chart doesn't include anything of M&A, that would be helpful. Secondly, I know you gave some disclosure on how many of your fiber lines are built through JVs in the presentation on slide 10. Could you maybe just give us an update on how many homes have been built by FiberCloud already within the, I think, 280 odd million, which the 12% of the 2 million would suggest? That would also help us do some maths on the capex. And then finally, sorry to come back on my initial question about the reason for reconsolidating the the joint venture at this point, I'm more interested about whether you'll do this again. And if so, what would the justification be? How do you weigh up the benefits of deconsolidating these fiber bills, as you clearly set out a strategy two, three years ago, versus buying them in now? Is it simply a change of control clause and something to do with the relationship between you and FiberCloud, which meant when you did this deal with Telenet, you had to do this? Or has something fundamentally changed in your thinking about the benefits of fully owning these networks rather than doing the joint ventures? I just really want to understand whether this is something that will come back with Polonio and some of the other rural areas. Thanks.

Yeah, so Joshua, let me talk about the slide and the earnings. So I think on the slide on the left, we clearly provide a walk from our adjusted free cash flow in 2024. which again, you know, includes divestment, right? And we've had this discussion several times, so that includes divestment. And then, you know, we walk that from, you know, the inclusion of FibreClar and the eventual, you know, acquisition of RightMead Root Mobile, which gives us our reported free cash flow. On the right-hand side, again, two nuances there, the free cash flow of 25 to 27, As we said in the notes, it includes the divestments. It clearly says that scaling up divestment programs from 400 to 500 to support the free cash flow level. And again, it's, you know, why we're so confident in being able to kind of meet the dividend coverage is that, you know, we've got, as I said, 85% visibility of the divestments to support that free cash flow. And that free cash flow clearly, because we're taking FibroClar on, on the balance sheet during that period is why you're seeing it being negatively affected and then offset by the... On the 28 to 30, we have no divestments in there. It's purely organic. And again, I think I mentioned that early in the period. From that period onwards, we purely have organic free cash flow growth from the business. So hopefully that's clarified that point. Other questions? On the homes past, on FibreClar joint ventures, again, we haven't disclosed that number. Again, I think you can see the total joint ventures. And again, FibreClar is probably the lion's share, is probably the way to think about it. So hopefully that points you in the right direction. And then on the reconsolidation of others, Guillaume, do you want to take that question?

I think... you know, I try to give you a bit where we are. I think, again, what happened in the north cannot be extrapolated on the south. And why we wanted to gain ownership of Faber-Klein in the north, because you have that split in between the two players, the split in between wire on one side and proxy on the other side. And we wanted to make sure that we control our fair share of the network. because we believe that the value creation of controlling that network going forward is going to be massive for us. And that's why we decided to control the percent of Faber Cloud. In the South, again, the situation is fully different. We are in a situation where we have a share of network ownership that is already quite significant. And it might not be that we want to come to the same conclusion in terms of we need to own the percent of fiber GV in the South, because we already are in a very sound situation in terms of network ownership. As you know, network ownership for incumbents is important, and Mark said it as well, and so we want to make sure that we own a large majority of the fiber networks of the country, including the part of the country where we can compete on infrastructure. So including zone A, zone B, and zone C, we want to own a strong majority of that network for our customers. And that's the plan we are going out. In the north, we decided to get under percent ownership because we wanted to secure the right ownership for Proximus on the long term in terms of fiber plugs. In the south, if you take the ownership we already have today, we are in a very good situation. I'm not sure that we want to increase that or to improve that situation. I think at least it is not something that I foresee in the near term.

Okay, great. Thank you very much.

Thank you. And we'll now take our next follow-up question from Justin Fennell of NextGen Research. Please go ahead.

Yeah, thank you again. I suppose it's the same question that others have asked, but in a slightly different way. Can you explain why you're buying FibroClar now? Why are you buying the 50% now? Why not wait for the regulatory review to be completed. It feels like there was some sort of technical reason why you had to buy it in, but maybe that's wrong. And secondly, on the asset disposers, the 500 million, I guess some of these assets you're going to be leasing once you've sold them. It might be perhaps the data centers. Is there a lease cost that we should be thinking about versus the 500 million of cash in? Thank you.

Justin, let me take the first one. I mean, there are different flavors of that, obviously. So maybe let me take the headquarters building. I think we've talked about this before. The plan for the headquarters building is to dispose of 100,000 square meters and shrink to 42,000 square meters, something like that. So clearly we get that type of transaction. We get a cash in. But we also, because the operational synergy, we actually end up in a total cost of ownership with the lease that's actually, you know, there they're about in terms of the actual operation of that entire building prior to that. So, you know, there's elements where there are clearly operating costs or lease costs that come back in. There are also elements where that's not the case, where there'll be, you know, clear, straight disposals and no lease pack. So I think there's In that 500 million, there is a mix of that type of activity. And again, in the free cash flow projection we've given you, that is all worked in. So I think there's no additional lease cost that you should think of on top of this, of these free cash flow projections, given the 500 million divestment. On FiberClar, why now, Gim, do you want to do that?

I can take it. So I said... Ownership on networks is important for us. I think for us, because of that deal, which is likely to happen, very likely to happen, because we have got a good conversation with the regulator, because we've got a good conversation with Liberty, because we think that it makes sense for all parties to get there. I think this is something that we trust is going to be a reality in the coming months. At the end of the day, there are not a lot of options for all players to get to that collaboration situation. If we step back and look at the complexity to get to this kind of outcome, I think it made a lot of sense to have three partners around the table, Liberty, Proximus, and Regulator with 100% aligned incentives. I think the chance of a better outcome for us was huge. and he's higher in that situation. And the step where we are today, where we have a publicly announced MOU, where you have support for that deal coming from all angles of the country, from politicians, from regulations, also from wire and tenement, that was also extremely important. placed by the announcement of yesterday. I think we are creating something unique, but we want to get long-term benefit from that situation. So for that, we want to be exposed as network owners to the benefit of that deal. That's why we wanted to secure the fact that we get the right ownership of the fiber networks in the north of the country. Again, the situation is different in the South, and I will repeat it. There is no... Starting points are different, so outcomes might be also different, and there is something that you should really consider, you know, leaving that call. So that's a bit what I wanted to see, and we think we have a good deal. We are well positioned to... to meet the value creation that we have set, the target that we have set to ourselves. The fact that we own Faber-Clar today is also a good thing for learning the discussions. And you can see obvious reasons for that. And again, the deal is something good for everyone, for customers, And that's something that we don't talk a lot about today, but that deal is also a way for us to secure access to gigabit networks for all of our customers. And today, if you look at the decision we have today, that's not the case. So now we have secured that for our customers in Flanders. Kent is good for the country and politicians, I think, of all countries. or part of the political spectrum are behind that deal. It also creates a condition to discuss whether the collaboration could be even broader. And do we need to also overbuild in other parts of the country? That is a question that could be asked also by politicians at some point, because we have opened the way for a fiber collaboration, why limit that collaboration to only part of the country, a question that needs to be also discussed in the coming months. And as I said, it's also a win for our partners. So I think this is something which creates, that maximizes our chances to extract a lot of value from our fiber investments.

Thank you. Thanks very much.

There are no further questions, so I'll hand back to your host to conclude today's conference.

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