Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Group service revenues increased by 3.7%, driven by both fixed and mobile consumer segments.
- Business Services revenue showed continued growth, particularly in SME and data solutions.
- Solid EBITDA and free cash flow growth in the first half of 2024.
- Successful strategic initiatives, including the acquisition of Youfone and a partnership with Eneco for sustainable energy.
- Continued expansion of fiber footprint, with 168,000 households added in collaboration with Glaspoort.
Negative Points
- Wholesale service revenues declined by 10%, primarily due to the Youfone acquisition.
- Increased competition in the fixed broadband market, with aggressive promotional activities from competitors.
- Higher costs impacting EBITDA margin, despite revenue growth.
- Challenges in the B2B segment, with a slight decline in Business Net Promoter Score.
- Potential fluctuations in quarterly EBITDA growth rates, with Q3 expected to show lower growth compared to Q2.
Q & A Highlights
Q: Roughly half your wholesale base and only 38% of your B2C base is on copper. Could you give us a sense of to what degree this copper-based sits within your current and planned fiber footprint?
A: We aim to cover 80% of the country with fiber. Today, 60% of the country is covered with fiber, meaning roughly 80% of our copper base will be covered with fiber. The remaining 20% will look for other solutions. Currently, 62% of our copper customers are on fiber, and we aim to migrate all customers in fiber areas to fiber ASAP.
Q: Glaspoort reached agreements to buy 200,000 homes from Delta's footprint. Do you see scope for further similar deals or large-scale consolidation of fiber infrastructure?
A: The planned acquisition of Glaspoort from Delta is an interesting opportunity. We always look at opportunities to buy or build fiber in the Netherlands. This acquisition is currently being reviewed by the regulator. We are open to new opportunities but will wait for the outcome of this deal first.
Q: Can you explain the underlying EBITDA growth in Q2 and expectations for Q3 and Q4?
A: Underlying EBITDA growth in Q2 was around 3% to 3.5%, including Youfone. For Q3, we expect EBITDA growth to be 1% to 1.5%, with Q4 expected to be well north of 3%. This results in an average EBITDA growth of around 3.5% over Q2 and Q3 combined, in line with our full-year guidance.
Q: What are you seeing with competitive dynamics in the consumer business, specifically regarding VodafoneZiggo and your recent broadband price rises?
A: The Dutch market remains competitive, with aggressive promotional activity from Odido, Ziggo, and Delta. We focus on base management and fiber, which is becoming a larger proportion of our base. Our price increases were accepted well by customers, with no significant negative impact.
Q: Can you elaborate on the performance of the B2B segment, particularly the SME growth engine and expectations for the second half?
A: SME continues to perform well, but we expect the double-digit growth to slow down in the second half. Meanwhile, LCE is doing better, and we aim to uplift the entire B2B segment to achieve better revenue growth.
Q: Can you provide more detail on the asset monetizations in Q2 and expectations for future quarters?
A: We sold IP addresses in Q2, which was part of our plan. We expect to sell more next year and possibly in 2026. These sales are recurring income streams and were planned to take place gradually over time.
Q: How are the speed tiers tariffs in mobile working, and what are the medium-term upselling opportunities?
A: Speed tiering has been successful, with more customers choosing higher download speeds and paying more for it. This approach aligns with our strategy of focusing on high-value customers and leveraging our strong network.
Q: Can you explain the weaker performance in the wholesale segment, particularly in broadband and mobile?
A: The decline in wholesale service revenues is mainly due to lower regulated tariffs and discounts given to MVNOs. Broadband service revenue growth is still positive, driven by fiber. We expect wholesale performance to improve in Q3 and Q4.
Q: What is the market value of the IP addresses you plan to sell, and how does this impact your financials?
A: We have committed to sell a significant number of IP addresses this year and next year. The market value is volatile, but we expect to continue these sales in the coming years, providing a recurring income stream.
Q: How do you view the potential impact of changes in the Dutch government on your use of Huawei equipment?
A: We are closely aligned with the government on our approach to non-Western vendors. We have a multi-vendor strategy, with Ericsson building our 5G core network and Nokia handling other domains. We proactively engage with the government to ensure our plans are aligned with national security interests.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
