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Mobistar - Financial results 2014

Mobistar 2014 Financial ResultsMobistar 2014 Financial ResultsMobistar 2014 Financial ResultsMobistar 2014 Financial Results

Analysts & Investors PresentationFebruary 4th, 2015


This presentation contains forward-looking statements about Mobistar, inparticular for 2015. Although Mobistar believes these statements are based onreasonable assumptions, these forward-looking statements are subject tonumerous risks and uncertainties, including matters not yet known to us or notcurrently considered material by us, and there can be no assurance thatanticipated events will occur or that the objectives set out will actually beachieved. Important factors that could cause actual results to differ materiallyfrom the results anticipated in the forward-looking statements include, amongothers, the impact of the price adjustments on the customer base resulting fromthe competitive pressure, the evolution of the customer base, the economicsituation in Belgium, the effectiveness of Mobistar convergent strategy includingthe success and market acceptance of the voice and data abundance plans, theMobistar TV and broadband offers, the Mobistar brand and other strategic,operating and financial initiatives, Mobistar’s ability to adapt to the on-goingtransformation of the telecommunications industry, regulatory developments andconstraints and the outcome of legal proceedings, risks and uncertainties relatedto business activity.

2


a leading telecom operator

Mobistar is one of the leading telecom operators of the Belgian and Luxembourg marketsMobistar is one of the leading telecom operators of the Belgian and Luxembourg marketsMobistar is one of the leading telecom operators of the Belgian and Luxembourg marketsMobistar is one of the leading telecom operators of the Belgian and Luxembourg markets

Jean Marc HarionJean Marc HarionJean Marc HarionJean Marc HarionChief Executive Officer

Ludovic PechLudovic PechLudovic PechLudovic PechChief Financial Officer

Siddy JobeSiddy JobeSiddy JobeSiddy JobeDirector Investor Relations

& Corporate Finance

Mobistar ManagementMobistar ManagementMobistar ManagementMobistar Management

3


A successful transformation in 2014JeanJeanJeanJean----Marc Marc Marc Marc HarionHarionHarionHarion, , , , Chief Executive Officer


key achievements in 2014

Cable regulation activation

Concept store Antwerp

MobilineMobifleet

1M active M2M SIM cards

pilotpilotpilotpilot

4G@BXL

5


Jean Marc HarionJean Marc HarionJean Marc HarionJean Marc HarionChief Executive Officer

“Our transformation plan is delivering strong results and reinforces Mobistar. We are today ready to improve our performance and face the challenges that are ahead of us. We have successfully

transformed Mobistar and are ready to rebound.”

6


• retail customer base back to growth

• #1 network: 41% network share

• #1 in 4G: 88% coverage

• #1 in 4G: half a million customers

• #1 in NPS Telco Customer Service

• 1st operator to use cable regulation

• 50 m€ net Opex savings overachieved (ACE2)

• Financials Results in line with high-end guidance

our main business achievements in 2014

7


• Taking control of distribution with own channels

• Digitalization of end-to-end customer experience

• IT outsourcing to gain cost efficiency

• Best Tariffs, price transparency, best devices

• Improved customers trust and loyalty

• Postpaid customers growth

• Pave the way for future cable market entrance

our main transformation 2014 achievements

8


Focus on some major achievements


Leadership in Mobile

� Best 4G network in Belgium

� N° 1 in B2C Postpaid customers

Pioneer in Disruptive

Convergence

� N° 1 provider of regulated cable

� N° 1 vendor of 3.0 mobile connectivity

Best Customer Experience

� Best telco customer experience

� N° 1 service channel amongst telcos

Best Industry Efficiency

� 30 M€ savings in 2013

� 50 M€ yearly saving in cost structure in 2014

reminder: our 4 strategic priorities

10


99% coverage in Brussels in May and

pilot in Mechelen

undisputed largest 4G coverage€153m investments to support network extension at fast pace

Leadership in

Mobile

Mobistar 4G network coverage evolution (800 + 1800 MHz, focus on in-door )

Official launch in March: 230 cities

with >50% coverage

11


Mobistar operates the largest network

Belgium Brussels

• % pop outdoor: • % pop indoor: 81%81%81%81%

• % pop outdoor: • % pop indoor: 64 %64 %64 %64 %

#1 #1

% pop outdoor : 99%99%99%99%(source: Proximus website 29.09.14)

% pop outdoor: 66%66%66%66%% pop indoor: 40.2%40.2%40.2%40.2%

(source: Proximus website 01.12.14)

% pop outdoor : 56%56%56%56%(source: Base website 13.05.14)

% pop outdoor: 56%56%56%56%(source: Base website 29.09.14)

(source : Mobistar, Jan 2015) (source : Mobistar, Jan 2015)

12

Situation on 9/01/ 2015


Leadership in

Mobile

#1Outdoor coverage

88% *

#1Indoor coverage

64% *

17.7MbpsAverage

download speed **

14 MbpsAverage

upload speed **

Mobistar leader in 4G coverage

Source 1: * Population coverage based on sites on air end of 2014Source 2: ** Commsquare, January 2015

13


Mobistar leader in 3G coverageand in Voice performance

Leadership in

Mobile

3G/2G

#1Voice callscompleted **

3G

#1=Outdoor coverage

99% *

#1Indoor coverage

91% *

9.1 MbpsAverage

download speed **

2.5 Mbps Average

upload speed **

HD VoiceOnly operator in

Belgium **

Source 1: * Population coverage based on sites on air end of 2014Source 2: ** Commsquare, January 2015

14


facilitating 4G access for our customersfrom network and plans to devices and services

most attractive4G tariffplans

devices

richest devices portfolio

services &financing

15

Leadership in

Mobile

tariffsnetwork

largest 3G and 4G coverage

best services


749 798 833 874

5.500

4.000

3.500

3.000

2.500

2.000

1.500

1.000

500

7.500

7.000

6.500

6.000

0

5.000

4.500

96

Q4 2014

71,3%

1.557

111

Q3 2014

70,7%

109

1.552

99

Q2 2014

71,1%

109

1.509

101

Q1 2014

70,5%

111

1.311

103

Mobistar Postpaid % retail cust basePostpaidPrepaidMatmaLaptop cardsMVNOOLU

3,840

Belgium,incl. MVNO

5,150

3,836

5,345 5,472

3,892

5,444

3,915

16

Leadership in

Mobile

Mobistar largest mobile network in Belgium5.5 million SIM connected cards = 41% market share


4G customers base is growing fastgrowing customer appetite for 4G services

Leadership in

Mobile

Active 4G Mobistar users share of total subscribers base

Potential target: > 3m 4G users

X 4X 4X 4X 4

X 2X 2X 2X 2

Average data trafficper technology

Total customers

Mobile data

customers

4G custo mers

17


Mobistar prepaid & postpaid customers base excl. M2M & MVNO

4G experience catalyzing data growthdata usage x2.5 in 1 year

Data usage per active Mobistar customer in 2014

Leadership in

Mobile


4G already 34% of total data consumption4G customers weighting for 16% of the base

19

Mobistar prepaid & postpaid customers base excl. M2M & MVNO

Mobile data consumption per technology and per customers

4G 34%

66%

500k(16%)

#customers

Leadership in

Mobile


4G usage driving Mobistar ARPU Growthmobile data monetization thanks to personalized usage control

• Thanks to a high focus on value value value value managementmanagementmanagementmanagement, improved customer customer customer customer loyalty loyalty loyalty loyalty and data usage data usage data usage data usage development. development. development. development.

• MyMobistarMyMobistarMyMobistarMyMobistar app help customers control their data consumption.

• Personal CheckPersonal CheckPersonal CheckPersonal Check----Up Up Up Up proprietary solution help customers proactively help customers proactively help customers proactively help customers proactively select the best bundle select the best bundle select the best bundle select the best bundle to fit with their needs.

• Both drive customer mix fromdata topdata topdata topdata top----up to richer data bundlesup to richer data bundlesup to richer data bundlesup to richer data bundles

20

Blended ARPU increase YoY in Q4:1st time in more than 3 years

MyMobistar and Personal Check Up help customers adapt their data plans to usage

24.3 Euros

Leadership in

Mobile


““““With Panther 60 Mobistar allows its customers to fully fully fully fully benefit from the benefit from the benefit from the benefit from the greatest mobility greatest mobility greatest mobility greatest mobility advantages of 4G”advantages of 4G”advantages of 4G”advantages of 4G”

21

Leadership in

Mobile

international mobile data increaseboosted by 4G, attractive plans and smartphones penetration

Countries covered with Mobistar4G roaming agreements

Mobistar 4G international roaming traffic evolution in EU 28

>>>> 95% 95% 95% 95% of Mobistar customers data roaming usage


opening the cable market for competitiontoward phased launch of Mobistar cable offers in 2015

• Internal users’ test:

• 80% would recommend the service

• External users’ test:

• Charleroi first, extended to other cities

• 1st Mobistar customers activated in

January

• pre-registration open

• Phased commercial launch in 2015:

• once retail minus mechanism

calculation clarified by regulators

Ultra-fast

Internet

Digital TV

+


Convergence


Retail price IT

23

VAT

Fixed line

Content

Non

regulated

services

Retail Minus (23%)

Internet + TV whole sale price

DecoderModem2nd screenWifiPromo

Cable wholesale price –current

estimation

Retail Minus (23%)

Cable wholesale price – final Regulation application

retail Minus to be applied within Regulation key condition to allow effective competition


Convergence


#2

Shape & Fix Telephony

Best Mobile Network

Mobile Voice for all

Mobile Data for all

ApplicationsTabletsMDM

24

Shape: a new portfolio for B2B customersabundance “for all”, per company seat


Convergence


fixed to Mobile Substitution innovationa number of innovative services addressing various segments

25


Convergence


Offer the best customer experience

on the market

#3

26


“Have A Nice Day”Mobistar new loyalty program, launched in April 2014

>350.000 engaged customers

Surprise and delight our customerswith exclusive gifts

Many “HAND” operations in H2,amongst which 2 major concerts



• Concept Stores Antwerp, Liège… & Brussels

• 68 shops refitted

• 90% 3rd party partner contracts renegotiated

• Launched in October 2014

• Mobistar Products & Services

• Portfolio extended to energy, security

• ‘Shops in shop’ in 25 MediaMarkt stores

• ‘Shops in shop’ in 35 Carrefour Hypers

distribution channels transformation completefocused on service and improved customer journey

27



end-to-end digitalization of customer journeymobile apps, revamped web site, shops digitalization…

28


2014 Opex savings objective overachieved 2015: End-to-end focus on transversal causes for Non-Quality


Doing together:

Transversal Non Quality chasing

Doing Better:

Vertical Transformation

Doing less &

cheaper

2015

2014

2013

29


Financial review 2014Ludovic Ludovic Ludovic Ludovic PechPechPechPech, , , , Chief Financial Officer


(a) see below for EBITDA restatements

in in in in €€€€mmmm 2014201420142014 2013201320132013 Var.Var.Var.Var. CommentsCommentsCommentsComments

Service Service Service Service revenuesrevenuesrevenuesrevenues 1,115.3 1,252.9 -11.0%• €37.6m regulatory impact in FY 2014• 4Q14 underlying erosion limited to -1.1% c.b.

Consolidated turnoverConsolidated turnoverConsolidated turnoverConsolidated turnover 1,249.2 1,461.3 -14.5%• 70% of consolidated revenues decrease

attributable to regulation, handset sales and fix legacy business

Direct CostsDirect CostsDirect CostsDirect Costs -564.4 -713.2 -20.9%• distribution overhaul brings expected savings

while gaining back control over our channels

Labor CostsLabor CostsLabor CostsLabor Costs -135.9 -145.3 -6.5% • -17% headcount reduction incl. IT outsourcing

Indirect CostsIndirect CostsIndirect CostsIndirect Costs -274.0 -267.1 +2.6%• -5.2% indirect costs evolution year-on-year before

€21.4m increase in operational taxes

Restated EBITDA Restated EBITDA Restated EBITDA Restated EBITDA (a) 274.9 335.7 -18.1% • 77% of EBITDA erosion caused by regulatory impact and operational taxes

(in % of service revenues) 24.6 % 26.8 %

EBITDA EBITDA EBITDA EBITDA 255.4 317.1 -19.5%• restructuring costs reflecting transformation

efforts on IT outsourcing, distribution and redundancy(in % of service revenues) 22.9 % 25.3 %

CAPEXCAPEXCAPEXCAPEX 215.3 199.0 +8.2% • acceleration of network investments (resulting in #1 network in Belgium with first 4G coverage)

(in % of revenues) 19.3 % 15.9 %

Operating cash flowOperating cash flowOperating cash flowOperating cash flow40.1 118.1 -34.0%

• reflecting EBITDA erosion and intensified effort on 4G roll-out and network investments

(EBITDA - CAPEX)

full year key financialscost transformation mitigating top line erosion

31


regulatory impactprogressively fading out with EU roaming left in 2015

32

Revenuesimpact

EBITDAimpact

29 26 26

60 30 3411

1215

FY15

14

FY14

38

FY13

60

FY12

59

FY11

74

MTREU Roaming

20 19 199

13 157

3810

25

343338

€€€€230m impact in FY14 compared to FY10230m impact in FY14 compared to FY10230m impact in FY14 compared to FY10230m impact in FY14 compared to FY10

€€€€130m impact in FY14 compared to FY10130m impact in FY14 compared to FY10130m impact in FY14 compared to FY10130m impact in FY14 compared to FY10


consolidated turnover70% of top line erosion attributable to regulatory, legacy fix and handset sales

consolidated revenues year-on-year evolution(in %)

1,249

1,4241,461

----174174174174((((----12,2%12,2%12,2%12,2%))))

2014Aservice revenues (non-mobile)

-35

service revenues (mobile)

-65

2013cbregulatory impact

-38

2013A

-75

handset sales

33

Cb: Comparable basis


24.323.923.923.424.024.925.726.0

14Q413Q413Q313Q213Q1

+1.0%+1.0%+1.0%+1.0%

14Q314Q214Q1

blended mobile ARPU (Belgium)ARPU stabilization driven by tariff mix and 4G data usage

quarterly ARPU (a)

(in euro per month per user)

34

Mobistar prepaid & postpaid customers base excl. M2M, IEW & MVNO


1Q154Q14

-1,1%

-4,5%

3Q142Q141Q144Q133Q132Q131Q134Q123Q122Q121Q12

Service revenue growth excl. regulationService revenue growth

service revenues year-on-year evolution(in %)

v-shaped recovery confirmed quarter after quarterthe repricing is now largely absorbed and value management paying-off

35

~0.5m 4G customer base

growing

Positive postpaid net adds with+6k in Q4

Mobile ARPU stabilization with 1.0% growth in Q4

Exploding data usage with

+185% growth


restated EBITDA87% of service revenues decline now compensated by cost savings

restated EBITDA year-on-year evolution(in %)

75

275

296310

336 ----14141414((((----4,5%4,5%4,5%4,5%))))

2014Aoperating taxes

-21

2014cbindirectcosts

15

labor costs

9

direct costs

service revenues

-113

2013cbregulatory impact

-25

2013A

(a) Indirect costs excluding labor and operating taxes (pylon tax and spectrum fees)

36


1Q134Q123Q122Q121Q12 1Q154Q14

+5,7%

-5,3%

3Q142Q141Q144Q133Q132Q13

+12,3%

Restated EBITDA excl. regulatory

Restated EBITDA Restated EBITDA excl. regulatory & tax

restated EBITDA year-on-year evolution(in %)

v-shaped recovery confirmed quarter after quarterthe efficiency program accelerates the return to growth of the EBITDA

37

Value based management

driving profitable growth

Top line sequential

improvement

Regulatoryimpact

fading out

ACE2 €50m cost savings target exceeded


564

700

----19,4%19,4%19,4%19,4%

20142013

cost base transformation: net opex savings€50m net opex savings target exceeded

252267

20142013

----5,6%5,6%5,6%5,6%

direct costsexcluding regulatory impact(€13m OPEX reduction)

non labor indirect costsexcluding operating taxes(€22m OPEX increase)

38


cost base transformation: improved company agilityheadcount reduction in a serene and improving social climate

----259259259259((((----17%17%17%17%))))

2014

1.283

2013

1.542

headcount in Belgium (end of period)

136145

----6,2%6,2%6,2%6,2%

20142013

labor costsexcluding restructuring(€9m redundancy costs)

(incl. OLU)

39


cost base transformation: fueling growth engineOPEX savings reinvested in growing the top line

40

544

594

2014Agrowth(c)

initiativesgross

savingsadversefactors(a)

21

2013A

(a) increase in operational taxes in 2014 and price indexation in 2015(b) including over €50m net non-labor OPEX savings from ACE2 and €9m labor costs savings(c) including innovation, customer acquisition and customer loyalty program

cost base excluding interconnection charges and cost of goods sold(in euro millions)

544

gross savings

growth(c)

initiatives2015Eadverse

factors(a)2014A

ILLUSTRATIVEACTUAL FIGURES

resourcesresourcesresourcesresourcesreallocationreallocationreallocationreallocation

€71m net OPEX savings (b)


capital expensessustained investment in network to consolidate our 4G leadership position

(a) excluding licenses

• 71% of total group CAPEX allocated to network

• #1 3G and 4G network coverage

• #1 4G network in Brussels

• ambitious 4G roll-out plan confirmed in 2014/15

215

199

20142013

+8,2%+8,2%+8,2%+8,2%

41

total capital expenses(in euro millions)


consolidated net incomenet income impacted primarily by EBITDA decline

in in in in €€€€mmmm 2014201420142014 2013201320132013 Var.Var.Var.Var. insightinsightinsightinsight

Reported EBITDAReported EBITDAReported EBITDAReported EBITDA 255.4(22.9 %)

317.1(25.3 %)

-18.1 %

Dep. & Amort. -194.5 -188.3 +3.3 %• reflecting the acceleration of the 4G roll-out

and new licenses

Operating incomeOperating incomeOperating incomeOperating income 60.9 128.7 -52.7 %

Financial results -8.8 -7.9 +11.4 %• reflecting the increase in long-term

borrowing for the €120m cost of the 800MHz spectrum

Tax -8.8 -43.6 -73.7 %• reflecting the decrease of taxable income

and investment tax deduction• regional pylon tax non-deductible

Net incomeNet incomeNet incomeNet income 43.3 83.6 -50.5 %• net profit per share decreased from 1.46

euro to 0.72 euro

Net financial debtNet financial debtNet financial debtNet financial debt 536.7 556.0 -3.6 %

NFD/Restated EBITDANFD/Restated EBITDANFD/Restated EBITDANFD/Restated EBITDA 2.0 1.7

Organic cash flowOrganic cash flowOrganic cash flowOrganic cash flow 29.7 -59.1 na

42


Outlook 2015JeanJeanJeanJean----Marc Marc Marc Marc HarionHarionHarionHarion, , , , Chief Executive Officer


Best mobile networkand best-in-breed fixed network

Devices range and services

Open Content, Apps and APIs

mPayment and cloud storage

44

Mobistar positioning:the Trusted Connectivity company


our 5 strategic priorities for 2015 – 2020:

Leadership in Mobile

� Best 4G network in Belgium

� N° 1 in network share


Convergence

� N° 1 convergent challenger on the consumer market

� N° 1 convergent challenger on the enterprise market


� Best Telco customer experience

� N° 1 NPS in all customer touch points


� Best in class Telco in outsourcing model

� Self finance innovation thanks to efficiency gains

Team Member’s Engagement

� Create a digital and open working environment

� Best in Class in offering career opportunities


in 2015, Mobistar will be back to fixed connectivity

For Consumers… … and small Enterprises

New Pack

46

Ultra-fast

Internet

Digital TV

+


2014 2015

=

in 2015, Mobistar will stabilize its restated EBITDA

47


2015 full year guidanceMobistar aims at stabilizing its financials in 2015 and reiterates the sameguidance as last year

48

275

guidance range (02/14)

2014Aguidance range (10/14)

265275

2014cb growth initiatives

gross savings

opening base

regulatory impact

2014A

280

250260

280

Dynamic resourcesDynamic resourcesDynamic resourcesDynamic resourcesreallocationreallocationreallocationreallocation

restated EBITDA(in euro millions)

ILLUSTRATIVEACTUAL FIGURES

“restated EBITDA of between 260 and 280 million euros “restated EBITDA of between 260 and 280 million euros “restated EBITDA of between 260 and 280 million euros “restated EBITDA of between 260 and 280 million euros excl. any expenses related to the cable opportunity.”

273

2015 consensus

guidance range (02/15)

280

260


Q&A


DATEDATEDATEDATE LOCATIONLOCATIONLOCATIONLOCATION BROKERBROKERBROKERBROKER ROADSHOW / ROADSHOW / ROADSHOW / ROADSHOW / CONF.CONF.CONF.CONF.

10 February 2015 Paris ESN / CM CIC Management Roadshow

4 March 2015 Brussels ING Management Roadshow

6 March 2015 Amsterdam KBC Management Roadshow

11 March 2015 Milan Euronext / Petercam Belgian Conference / IR

18/19 March 2015 London Citigroup TMT Conference

24 March 2015 Boston Macquarie Management Roadshow

25 March 2015 New York Petercam Management Roadshow

26 March 2015 New York Bank Degroof Management Roadshow

1Q 2015 Roadshow Schedule

50

Appendix

• Before any impact related to the cable opportunity• Operational cash flow = EBITDA – Net Investments

full year guidance 2014 achieved

in in in in €€€€mmmm Q1 Q1 Q1 Q1 2014201420142014

Q2 Q2 Q2 Q2 2014201420142014

Q3 Q3 Q3 Q3 2014201420142014

Q4 Q4 Q4 Q4 2014201420142014

2014201420142014 Old 2014 Old 2014 Old 2014 Old 2014 outlookoutlookoutlookoutlook

New 2014 New 2014 New 2014 New 2014 outlookoutlookoutlookoutlook

Service RevenuesY-o-Y

278.1(-16.2 %)

283.3(-12.3 %)

276.7(-10.1 %)

277.2(-4.5 %)

1,115.3(-11.0 %)

Restated EBITDARestated EBITDA margin/Y-o-Y)

66.1(23.8 % / -33.2 %)

74.3(26.2 % / -13.2 %)

77.3(27.9 % / -14.8 %)

57.2(20.6 % / -5.3 %)

274.9(24.6 % / -18.1 %)

250250250250-280* 260260260260-280*

Net Result 9.2 15.0 12.3 6.8 43.3

Net Investments 37.4 55.6 45.3 77.6 216.0 200-210 200-210

Operational Cash Flow*

27.1 17.0 25.3 -29.9 39.5

52


2014 EBITDA restatementsfrom restated EBITDA to reported EBITDA

in in in in €€€€mmmm 2014201420142014 2013201320132013 insightsinsightsinsightsinsights

Restated EBITDA(as percentage of service revenues)

274.9(24.6 %)

335.7(26.8 %)

Labor relatedor redundancy costs

-8.5 -9.8 • labor contract terminations

Non-labor relatedor restructuring costs

-10.9 -8.8• distribution contract termination and IT

outsourcing costs

Reported EBITDA(as percentage of service revenues)

255.4(22.9 %)

317.1(25.3 %)

53


Investor Relations:Investor Relations:Investor Relations:Investor Relations:• [email protected]• +32 2 745 80 92• corporate.mobistar.be

@pressmobistar@harion

www.linkedin.com/company/3673

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