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 March 31, 2023, we served 2,054,300 unique customer relationships, which represented approximately 57% of the 3,590,200 homes passed by our leading hybrid fiber coaxial ("HFC") network in Belgium and Luxembourg. As mentioned above under 'Important reporting changes', our operational KPIs now include both Eltrona's cable business in Luxembourg as well as TADAAM's off-footprint customer base. 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 Flanders and parts of Brussels as well as parts of Luxembourg.

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 three months ended March 31, 2023, the consolidated monthly fixed ARPU per customer relationship reached €59.4, which was modestly up by 1% compared to the prior year period. The benefit from the mid-June 2022 price adjustment more than offset the continued decline in both video and fixed-line telephony revenue and a higher reallocation of "ONE" FMC bundle revenue from fixed to mobile telephony. Compared to Q4 last year, the ARPU per customer relationship modestly contracted as a result of the Eltrona acquisition which has a materially lower multiple-play customer base and consequently generates a much lower ARPU per customer relationship compared to Telenet.

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

Our operating expenses, which include (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 21% year-on-year in Q1 2023, including the aforementioned acquisition effects. Excluding these inorganic impacts, our rebased operating expenses were up just over 8% year-on-year, reflecting the impact of both higher energy costs and overall inflation on certain of our cost lines.

Anticipating top line growth and stable Adjusted EBITDAaL rebased for full year 2023

Having completed the first three months of the year and looking ahead to the next three quarters, we remain on track to deliver on our financial objectives as presented mid-February. This includes rebased top line growth between 1-2% and a broadly stable Adjusted EBITDAaL compared to last year. As mentioned in the beginning of the year, growth in our rebased Adjusted EBITDAaL will be second-half weighted given the timing of the rate adjustment in June. This is consistent with the growth phasing in 2022. On the investment side, we continue to target a CAPEX/sales ratio of around 26% as we continue to see (i) higher spending on, amongst others, our 5G roll-out, (ii) targeted 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. And finally, we continue to target for FY 2023 an Adjusted Free Cash Flow of around €250.0 million despite the negative Adjusted Free Cash Flow in Q1 2023. 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 5.3 years

At March 31, 2023, we carried a total debt balance (including accrued interest) of €6,565.4 million, of which €1,460.0 million principal amount is related to the € and USD-denominated Senior Secured Fixed Rate Notes due March 2028 and €3,221.4 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 March 31, 2023 also included outstanding liabilities of €391.5 million related to 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. Furthermore, our total debt balance at March 31, 2023 reflected a principal amount of €321.3 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, (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. 

At March 31, 2023, we carried €321.3 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%). Relative to December 31, 2022, the outstanding short-term vendor financing liabilities declined €24.6 million in Q1 2023, reflecting seasonality in some of our scheduled vendor financing payments and negatively impacting our Adjusted Free Cash Flow by the same amount in the 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 5.3 years at March 31, 2023. Our weighted average cost of debt at March 31, 2023, including hedges, was approximately 3.1%, excluding commitment fees, leases, vendor financing and amounts related to mobile spectrum licenses. Finally, we also had full access to €555.0 million of undrawn commitments under our revolving credit facilities at March 31, 2023, 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.