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 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 up to 1 gigabit per second ("Gbps") across our entire footprint. Last week, we announced a binding agreement with Fluvius taking a joint next step in the realization of the data network of the future. 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. As announced in October last year, both companies will incorporate a new independent self-funding infrastructure company (working name “NetCo”), of which Telenet will own 66.8% and Fluvius 33.2%. Combining both companies’ fixed network assets, NetCo will invest in the gradual evolution of their current hybrid fiber coaxial (“HFC”) network infrastructure into a Fiber-To-The-Home (“FTTH”) network, targeting 78% of their combined footprint in Flanders by 2038, through a combination of own build and/or a potential collaboration with external partners. Telenet’s footprint in parts of Brussels and Wallonia will also be included in NetCo and be part of NetCo’s investments. The estimated investment of up to maximum €2.0 billion (excl. termination capex) will be funded through NetCo’s cash flow as well as additional intragroup financing facilities and will therefore not require any incremental external financing. The majority of this investment will be done within the next eight years. NetCo will also focus on upgrading the existing HFC network in areas where FTTH will not be deployed. This will ensure that everyone in Flanders will continue to enjoy the fastest and most reliable internet connection.

On June 1, we finalized the sale of our mobile telecommunications tower business to DigitalBridge, valued at 25.1x EV/EBITDAaL 2021 or €745 million on a cash and debt-free basis. We'll be reinvesting the proceeds for future growth, supporting NetCo's FTTH roll-out.

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. In Q2 2022, we yielded a monthly fixed ARPU per customer relationship of €58.3, which was broadly stable relative to the same period of last year.

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% both on a reported and rebased basis in H1 2022 compared to the prior year period. This was mainly driven by (i) higher staff-related expenses following the mandatory wage indexation in January 2022, (ii) the impact of higher inflation on outsourced labour and professional services and (iii) higher energy costs, leading to an overall increase in network operating expenses.

Targeting 1% revenue and EBITDA growth for FY 2022

Having completed the first six months of the year, we reconfirm our full year 2022 outlook as presented mid-February. Relative to the first half of the year, we expect an improved trend in both our revenue and Adjusted EBITDA performance in the second half of the year, driven by certain price adjustments having come into effect as of mid-June 2022, as well as a continued focus on our operating expenses and tight cost control.

Strong liquidity and long-term debt maturity profile of 6.0 years

At June 30, 2022, we carried a total debt balance (including accrued interest) of €6,297.2 million, of which €1,494.0 million principal amount is related to the € and USD-denominated Senior Secured Fixed Rate Notes due March 2028 and €3,299.4 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 June 30, 2022 also included a principal amount of €331.7 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 as further detailed above under Financial highlights, (ii) the Interkabel Acquisition prior to the closing of the recently announced NetCo transaction in early 2023 and (iii) other leases.

At June 30, 2022, we carried €331.7 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 declines of €14.3 million versus December 31, 2021 and €7.2 million versus March 31, 2022, respectively, reflecting seasonality in some of our scheduled vendor financing payments and negatively 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. 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 6.0 years at June 30, 2022. In addition, we also had full access to €555.0 million of undrawn commitments under our revolving credit facilities at June 30, 2022, with certain availabilities up to September 2026.

Committed to drive attractive shareholder value in 2022 and beyond

Mid-July 2022, we entered into a binding agreement with Fluvius to take a joint next step in the realization of the 'data network of the future'. Both companies’ ambition is to provide speeds of 10 Gbps across the entire footprint in time, for which there is a clear roadmap.

In order to maintain a consolidated net total leverage of around 4.0x throughout the CAPEX-intense build period, in line with Telenet’s leverage policy, the board of directors has decided to reset the Company’s shareholder remuneration policy, effective immediately. The consolidated 4.0x leverage target provides Telenet with additional financial flexibility for prospective value-accretive strategic opportunities going forward.

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.