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

Our hybrid fiber-coaxial (“HFC”) cable network spans the Flanders region, covers approximately 61% of Belgium by homes passed and includes the metropolitan centers of Antwerp and Ghent and approximately two thirds of Brussels following the acquisition of SFR Belux, which we acquired on June 19, 2017. Our cable network (the "Combined Network") consists of a dense fiber backbone with local loop connections constructed of coaxial cable with spectrum used up to 1.2GHz, powered by the EuroDocsis 3.0 and 3.1 technology with data downstream speeds of up to 1 Gbps across the entire footprint. We own around two-thirds of the cable network in Flanders and Brussels, while operating the remaining one-third through a long-term emphyotic lease with Fluvius until 2046. At the end of October, we also concluded a non-binding term sheet with Fluvius on the evolution of our HFC network infrastructure in Flanders towards the “data network of the future”.

Our mobile network consists of 3,200 macro sites, covering the whole of Belgium. We invested around €250 million since the acquisition of the third-largest mobile operator BASE in 2016 to modernize existing sites. On top of this, up to 1.000 additional relay sites will have been built by end-2020. This positions our mobile network as one of the best performing according to BIPT data from October 2020, with average down -and upload speeds of nearly 100 Mbps and more than 25 Mbps respectively. We also successfully launched new Voice-over-WiFi -and Voice-over-LTE services, improving indoor coverage and delivering HD sound quality.

Proven ability to drive ARPU through strong brand equity and FMC-led growth

The ARPU per customer relationship, which excludes our mobile telephony revenue and certain other types of revenue, is one of our core operating statistics as we seek to obtain a larger share of our customers' telecommunication and entertainment spending. For the nine months ended September 30, 2021, the monthly ARPU per customer relationship reached €59.0, representing a healthy increase of just over 1% compared to the prior year period. Growth in the ARPU per customer relationship was underpinned by (i) a greater share of higher-tier broadband subscribers in our mix, (ii) the favorable impact of the October 2020 and August 2021 price adjustment, (iii) a higher proportion of multiple-play subscribers. These factors were only partly offset by a greater proportion of revenue being allocated to mobile telephony from our recently launched "ONE" FMC bundles compared to our legacy bundles.

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 almost 4% on a reported basis for the nine months ended September 30, 2021 and reflected changes to the IFRS accounting treatment of certain content-related costs for our premium entertainment packages and the Belgian football broadcasting rights because of changes related to the underlying contracts. On a rebased basis, our 9M 2021 operating expenses remained broadly stable compared to the prior year period. This was predominantly driven by a 5% rebased decrease (€19.9 million) in our direct costs, which partially offset (i) higher other indirect expenses, (ii) higher staff-related expenses and (iii) higher network operating expenses.

Targeting sustainable profitable growth of 6.5-8.0% OFCF CAGR 2018-2021

Over the past years, we have proven our ability to convert a stable and well-balanced top line into robust Adjusted EBITDA and Adjusted Free Cash Flow growth. We aim to deliver sustainable profitable growth over the 2018-2021 period, targeting an Adjusted EBITDA less property & equipment additions CAGR towards the mid-end of 6.5 to 8.0% over the 2018-2021 period. Our outlook excludes the recognition of capitalized football broadcasting rights and mobile spectrum licenses and excludes the impact of IFRS 16 on our accrued capital expenditures. The healthy growth in our Operating Free Cash Flow should drive sustained Adjusted Free Cash Flow growth over the period.

Strong liquidity and long-term debt maturity profile of 6.8 years

At September 30, 2021, we carried a total debt balance (including accrued interest) of €5,527.0 million, of which €1,404.3 million principal amount is related to the € and USD-denominated Senior Secured Fixed Rate Notes due March 2028 and €3,093.5 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, 2021 also included a principal amount of €362.9 million related to our vendor financing program, while the remainder primarily represents lease obligations associated with the Interkabel Acquisition and other leases. 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 6.8 years at September 30, 2021. In addition, we also had full access to €555.0 million of undrawn commitments under our revolving credit facilities at September 30, 2021, with certain availabilities up to September 2026.

Committed to drive attractive shareholder value in 2020 and beyond, enabled through robust Adjusted Free Cash Flow conversion

Building on the shareholder remuneration policy as initially introduced at our December 2018 Capital Markets Day and as tightened at the end of October last year, the Special Shareholders' Meeting in December 2021 approved the payment of a gross intermediate dividend of €1.375 per share (€150.4 million in total, based on the number of dividend-entitled shares outstanding at the date of the press release). The aforementioned intermediate dividend is intended to be complemented by a gross dividend of €1.375 per share next year, subject to board and shareholder approval at the April 2022 AGM and assuming no significant changes in our business or regulatory environment and leverage framework. If and when approved, the latter dividend would then be paid early May next year.

Telenet’s board of directors firmly supports the Company’s strategy and remains committed to drive sustainable long-term shareholder value. In line with Telenet’s shareholder remuneration policy and leverage framework, the board of directors has approved a share buy-back program of up to €45.0 million, equivalent to up to 1.1 million shares (the “Share Repurchase Program 2021”), effective mid-November up to April 30, 2022.

The commitment to repurchase its own shares underpins the board’s confidence in Telenet’s growth profile and the Company’s appealing intrinsic valuation. In light of today’s announcements and considering potential future M&A opportunities, the board of directors reaffirms its intention to continue to execute the €2.75 per share dividend floor (gross), as evidenced by its proposal to pay a €1.375 per share gross intermediate dividend in early December 2021.