Proximus PLC (PROX) Earnings Call Transcript & Summary

Welcome to this webinar. I am Nancy Goossens, the Investor Relations Lead of the Proximus Group. Today, we will put a spotlight on ESG. In this presentation, we will take you through a range of achievements and conditions. As you will discover, this topic is not only close to our heart. It's an integral part of the Proximus strategy. The following speakers will guide us through this webinar, the CEO of the Proximus Group Guillaume Boutin, the Finance Lead Mark Reid the Corporate Affair Lead Ben Appel and Catherine Bals, our Sustainability Lead, Guillaume handing over to you for the first part.

Thank you, Nancy. Hello, everyone. After our Capital Market Day in Jan, it is my pleasure to do a deep dive today on ESG. After all, Proximus plays a key role in the Belgian society. This because of our sector of activity, our history and the number of employees working directly or indirectly at Proximus. We are, by far, one of the largest investors in Belgium and take our societal responsibility very seriously. Our previous strategic cycle delivered a number of great ESG achievements. We have listed a selection of those accomplishments, and we'll take you through them in a more detail in a moment. As explained at the Capital Market Day, we have started a new strategic cycle with Bold 2025. We make bold choices for sustainable value creation, and we make those choices to the benefit of all stakeholders. Bold 2025 is an inclusive and sustainable growth strategy, fully embedding ESG. Like all forward-looking companies, we are fully engaged on green sustainability, diversity and inclusion and a responsible business conduct. We play our part today, but we know that the challenges are massive. We need and want to do more. The Proximus Group also has a unique role to play in providing the infrastructure, the solutions, the trust and security that are increasingly digital societies need to thrive. A new sense of purpose lights that unique role. Broadly building a connected world that people trust, so society blooms. Our sense of purpose is a guide for ESG commitments. They are structured around the 3 dimensions of our purpose: building a connected world, then ensuring that this world is secure and trustworthy and finally, maximizing the complete impact, especially in terms of climate and inclusiveness. Let's have a closer look at each dimension and our commitments. Starting with the first dimension, building a connected world. Here we are at the core of our business. being the best gigabit network for Belgium, developing digital solutions for everyday life and connecting people and devices worldwide. Gigabit networks in fixed means fiber. We launched a successful accelerated fiber rollout plan, building a network that is fully opened for co-used by other players of the market. I am proud of the achievements so far. In June, our fiber population coverage reached 25%. As such, we achieved a sizable head start on competition as we made fiber technology, the fastest Internet connection available to our customers. Our Proximus fiber machine is going full speed but we are not alone in this huge endeavor. We also work with partners, we co-invest and roll out fiber in less dense areas. Our 2 largest joint ventures are Fiberklaar in Flanders and Unifiber in Wallonia. Combined we bring fiber to 2.1 million premises in mid and dense areas. In the scope of this webinar, I would like to draw your attention to our long-term coverage ambition. We believe that everyone should have access to a gigabit network even in remote areas. To ensure that fiber is even more rapidly available to all. I'm convinced that the creation of an effective and rational fiber collaboration and co-investment framework in Belgium is the way to go, this for the benefit of all stakeholders. Fiber is essential to support the digitalization of all Belgium enterprises and more generally, to support Belgium's economic attractiveness, job creation and prosperity. Fiber is also a network that is very durable with much lower impact for the environment all along the chain from the production to maintenance. We aim to improve connectivity in real areas and hence, reduce the digital divide. Particularly in those areas where the connection speed is currently below 30 megabits per second. Proximus is constantly looking for new alternatives to make specific projects possible and economically viable. Various techniques are used based on the typology of the places involved and the nature of the ground. In the German-speaking community, a region with typically very low population density. We together with Ethias and the government of the German-speaking community have set up a private partnership and created a joint venture going by the brand name of GO Fiber. We'll bring fiber to almost all of the 40,000 premises in German-speaking municipalities by end 2026. For more details on our fiber plans and the monetization of it. I invite you to review our Capital Markets Day presentation, that is available on our website. Turning to the mobile side. Our commitment is to provide 5G access to 100% of the Belgian population over the next 2, 3 years. 5G not only brings speed, but is also much more energy-efficient technology, which will help us cope with increase in data usage in a sustainable way. The spectrum we secured in 2022 for the next 20 years, will allow our customers to benefit from a superior experience. And this with 40% less mobile base stations in the future, thanks to our network sharing approach. Of course, we remain attentive to citizens' concerns related to health and radiation. In Belgium, all the regions impose standouts that are significantly stricter than those internationally recommended. We provide consumers with clear information and advice on our corporate website. I now hand over to Mark, who will tell you more about our digital solutions and mix.

Thank you, Guillaume. One of the great impact of 5G is that it unlocks innovation. Together with partners, we have set up 3 5G innovation labs. In these environments, customers can test and validate their 5G projects in practice. In 2022, we realized 14 innovation use cases and have a lot of promising projects ongoing. Talking about innovation, many innovative solutions and apps that people already use every day are enabled or powered by Proximus without them always realizing it. To help tackle the mobility challenge, our subsidiary Be-Mobile, is behind the traffic information broadcasted in the media every day. The 4411 mobility app counts 4 million registered users. With crowd control management, public services, including the police can better anticipate risks linked to crowd movements. Such solutions have been used in port and cycle races, such as the Tour of Flanders or the Tour de France in the year where it started in Brussels. On the climate and environmental challenges, our impact goes well beyond our own net 0 commitment that we will cover a bit later. In 2022, Proximus solutions enabled its customers to reduce their carbon footprint by 741 kilotons. Besides our network being a key enabler for homeworking and online conferencing -- we have many other smart solutions, just to name one, Proximus, B6 and ILECO created OGE, a smart building application platform. Among others, it can reduce the energy bills by up to 20%. In the health care domain, we have, of course, our Doktr offering secured video consultations and for which we have collaborations with mutualities, doctor associations and insurance companies. We also work closely with health care sector to develop smart solutions using 5G smart glasses or virtual reality. Recently, Proximus supported used Brussels in creating a high-tech ambulance for inter-hospital transport. Training emergency personnel is also becoming much easier due to advances in virtual reality. Proximus and its partners have developed a virtual reality training program for emergency personnel using smart glasses and connected through 5G. This allows them to familiarize themselves with emergency and stressful situations in order to become better prepared for real-life situations. With our BICS subsidiary, we're connecting literally the world. BICS mission is to break down the barriers of international communication and connect every person application or thing wherever they are, simply and securely every day, over 5 billion mobile subscribers and more than 150 million connected things enjoy borderless communications across 180 countries, thanks to BICS global footprint. BICS carries close to 50% of the world's mobile data traffic, 24 billion minutes of voice calls and 21 billion SMS every year. Around 5% of the world's population, 450 million people live in an area without mobile infrastructure. These people are excluded from all the educational, social and economic advantages that a connected world can offer. Last year, BICS and LYNK, the world's leading satellite direct to phone telecom service provider announced a partnership to ensure mobile coverage in remote and offshore areas using satellite technology. Back to you, Guillaume.

The second dimension of our ESG commitment is trust. Trust in the technology and in the company that give people access to that technology. Our commitments to our stakeholders on building trust in digital are to firstly ensure cybersecurity for our customers, second, to support Europe in achieving data sovereignty. And the third commitment is about good covenants, further embedding the highest standards of ethics and compliance in everything we do. Proximus, we continue to build on its deep rooted local expertise to advance cybersecurity to the benefit of all. In the current geopolitical context with an increasingly central role of digital technologies and companies operations cyber defense is more important than ever. We grow and share our expertise through a series of associations and bodies with a common ambition to innovate and learn faster than cybercriminals. To stay at the top of our game, we are exploring the promising field of quantum cytographic thanks to properties of fiber networks, specialties called Quantum keys, can be used to encrypt and encrypt messages. This new encryption techniques enable Embraceable security. After successful tests, we are actively contributing to an ecosystem that includes industrial partners and academic experts to deepen our expertise. In June 2023, together with Nokia, we made a demo of a quantum safe network on a fiber network in Belgium. Research is moving fast. Over to you, Mark.

In April 2022, we launched Proximus ada, our innovation expertise center dedicated to artificial intelligence and cybersecurity. We started with 50 experts, and we aim to grow to more than 100 local experts by the end of 2024. We want to make of Proximus ada, a European reference and develop a local ecosystem to boost the uptake of digital technology across society, but also to build a safer digital space for users and society. What a few people know is how important BICS is in fraud prevention on a global scale. It's fraud prevention hub carries around half the world's data roaming traffic and analyzes millions of internal and external data points. BICS uses AI solutions to identify potential threats and global fraud trends, BICS blocks fraudulent attempts before they reach the potential victims having saved operators an estimated EUR 2.2 billion to date. We are committed to further strengthen our role in global fraud prevention. Our U.S.-based subsidiary, Telesign, offers solutions that are complementary to BICS. Telesign focuses on user identification. It allows enterprises and their customers to act with confidence knowing that the digital interactions are safe and trusted. Telesign invest in multiple domains of identity access management, such as account onboarding and account integrity to further reduce the presence of fake and unreliable users. It is one of the key growth domains for the coming years with very direct benefits for all stakeholders involved. Our role in the field of digital identity will be reinforced after the closing of the transaction with [indiscernible] Mobile. A second important commitment for digital trust is the work we do in sovereign cloud solutions. Proximus was the first to propose sovereign cloud solutions that will allow its customers to fully benefit from the advantages of public clouds while ensuring the high level of data protection required by the EU. We have signed a partnership with Google to create a disconnected cloud first in Europe. With our other partnership with Microsoft, we are now able to meet all the needs of our customers in terms of sovereignty. Proximus will thus make it possible to protect the country's critical data from the physical network to the software operation, including data storage and processing. It is now my pleasure to hand over to Ben for the third very important commitment we make on trust.

Thank you, Mark. For all companies building trust demands good business conduct, data privacy and data protection are a material topic for Proximus. Proximus is fully invested in the protection of personal data of our customers with a community of about 100 privacy ambassadors across organization, an expert legal team and an independent data protection office. Proximus also holds 4 ISO 27001 certifications for specific services offered to enterprise customers. Proximus has a strong overall governance model. For matters not explicitly regulated by the 1991 law, Proximus is governed by the Belgian Commercial Companies Code. Our corporate governance charter is in line with the Belgian Code on corporate governance, and any important changes are explained during the general shareholders meeting. The Board of Directors defines Proximus policy and strategy and monitors the company's operational management under the leadership of the CEO. The CEO is the only executive in the Board and 7 out of the 14 board members are independent. Board members are appointed for renewable period of 4 years with a maximum of 12 years in total. And next to the gender and other visible diversity criteria, we strive for diversity in skills and backgrounds. A relationship agreement with the Belgian states and the public affairs policy ensure that the rules of engagement with a majority shareholder and with public authorities are clear. The Board of Directors and the Proximus leadership team all act in the interest of the company's long-term value for the stakeholders. Every 3 years, we do an assessment of the Board of Directors with an external party and act on the learnings. The next assessment is planned for 2024, and the Board and all the committees play a role in the ESG steering and oversight. I want to stress, in particular, the importance of ESG criteria in the management's variable pay. For 2023, we reinforce a green sustainability criteria in the short-term incentive and ad agenda diversity elements to the long-term incentive. Checks and balances are in place to foster ethical behaviors. The Proximus code of conduct and the company policies are communicated to the teams. Awareness and adhesion to the code of conduct and the key policies are built among others, via mandatory e-learning. Compliance controls are in place and when issues are found they are investigated and reported to the Audit and Compliance Committee. The whistleblowing system already in place will be further improved also in the group's affiliates. And to close on the ethics and compliance topic, the supply chain is another major focus area, starting with the comprehensive supplier code of conduct. Any material noncompliance with this code may result in the termination of the suppliers' business relationship with Proximus. To further reduce any risk of Belgian labor law violation, in the context of the large-scale fiber deployment, Proximus and the joint venture partners adopted a specific social responsibility charter, among others, minimizing the number of subcontracting layers. Proximus is also a member of the Joint Audit Corporation, an association of 27 telecom operators joining forces to verify, assess and develop the social responsibility implementation across the manufacturing centers of the most important ICT multinational suppliers. Let's now dive into the third dimension of our ESG commitments. Our commitments for the Bloom society are all about contributing to a greener and more inclusive society being -- going all in, in the fight against global warming. Investing in digital accessibility, inclusiveness and upskilling and stimulating and inspiring and inclusive work environment. I now give the words to Catherine. We will tell you more on our commitments for the planet.

Thank you, Ben. Our first commitment is to achieve net 0 emissions by 2040. This through clear and ambitious greenhouse gas emission reduction targets. Our net 0 ambition has been validated by the science-based targets initiative, and we were the first large Belgian company and a third Telco worldwide to get that validation. By 2030, we commit to a decrease by 95% of our Scope 1 and 2 emissions. If you look at our 2022 footprint, you see that mainly resides in a value chain. The so-called Scope 3. In the Scope 3, our emissions are highly concentrated within our procurement activities, accounting for 85%. To achieve the targets related to Scope 1 and 2, that is our direct and indirect own emissions linked to electricity and fossil fuels, we mainly act on 3 fronts. We are extremely vigilant regarding our electricity consumption and have a series of measures in place to keep it under control despite the increase in demand of bandwidth and data. For example, through the consolidation of our mobile network, we can switch off mobile sites when phasing out old network equipment, like legacy voice switches, we incorporate new energy-efficient technologies. We are also replacing technical buildings with extremely compact units. We are investing to remove the use of fossil fuels by replacing fossil fuel heating systems with alternative technologies. Additionally, we are focusing on further electrifying our fleet. Since recently, only EV cars can be chosen as management cars. On the technical fleet, we still have a challenge for the heavy-duty events as no alternatives are readily available on the market. Finally, we were already 100% renewable electricity since 2019, and we continue our efforts to further improve our impact by maximizing self-production, primarily through solar panels and by gradually moving towards the right mix of PPAs. I'd like to stress that we are 1 of the only 3 Belgian corporations that are member of the RE100 initiative. On Scope 3, we aim for 60% reduction by 2030. To achieve this ambitious target, we are transitioning to sustainable sourcing as a standard practice through our recently launched supplier engagement program we cooperate with our top 150 suppliers to help them establish emission reduction targets that are just as ambitious as our own and to transparently disclose their progress annually. These goals are translated into contractual clauses. For key strategic suppliers, we continuously identify areas of improvement and we invite our suppliers to commit to them while supporting them in improving their CO2 management. With these actions, we position ourselves as a key enabler for climate action in our value chain. Internally, as a second lever for our Scope 3 reductions, we focus on environmental sustainability price by embracing the circle of principle. Sourcing less and sourcing right. We have the ambition to be truly circular by 2030. In 2022, Proximus recycled or reused 87% of its waste, and we are working towards 90% by 2025. With regards to fixed devices, we rely on equity sign. For example, we launched an Internet box with a casing entirely made of recycled plastics. Compared to the previous quarter, it uses 24% less electricity and has a 30% lower environmental footprint per unit. We also refurbished more than 683,000 devices, such as modems, decoders and WiFi boosters in 2022. More than 90% of these modems and the coolers are perfectly usable again. We turned these devices to the market up to 4x before they recycled by reputable partners such as Umicore. Another example to further reduce electronic waste is our encouragement of consumers to return their unused mobile devices. In 2022, we collected more than 121,000 smartphones for refurbishment or recycling. As a final point, environmental criteria such as eco design, repairability, recyclability and energy efficiency are added in requirements towards our suppliers and in supplier evaluations. I'll give the word back to Guillaume for digital inclusion.

Thanks, Catherine. Another key commitment of Proximus is to invest in digital accessibility, inclusiveness and upskilling. According to the 2022 digital inclusion barometer of the King Baudouin Foundation, digital execution risk to affect 46% of Belgians of all ages and backgrounds and can be found in a lack of access, skills or confidence in their abilities. It is a complex multifaceted challenge that we cannot tackle alone. That's why we choose to work with partners for a greater impact. On this slide, I would like to highlight 2 initiatives in particular. Together with BNP Paribas, Proximus is a driving force behind digital an ecosystem of over 100 companies, social organizations and government bodies working together for greater digital inclusion in Belgium. Together with Paradigm, which manages the digital transformation of the process region, our advisers experts are offering their skills and expertise free of charge to the Brussel's Digital Public Spaces, the DPS. In these places, the most vulnerable, less digitally equipped citizens can use computer equipment and attend IT initiations and trainings. Other experts will provide advice on cybersecurity, training to DPS employees and make a full verification of the security of DPAs infrastructures. Proximus also supports education initiatives to develop digital skills, both inhibition and internationally. One of the initiatives that I've got the chance to participate in is our collaboration with Charge Focus on Internet Safe and [ Fund. ] Like 200 other colleagues, I animated a workshop with primary school kids on how to behave safely on the Internet and social media. Last but not least, diversity and inclusion is for me personally as CEO, a very important topic. This is also an important element of our company culture. We promote a positive work environment where everyone can be their authentic self in this way, we create a work environment that fosters creativity and that reflects the diversity of our customers, market and society at large. Inclusion is also about helping our employees to continuously grow and develop. On average, every employee received just over 42 hours of trading throughout 2022. We have now covered all of our key ESG commitments, commitments that are fully embedded in our strategy and can be directly linked to 7 of the UN's sustainable development goals. On top of the direct impact on people and the planet, implementing our ESG strategy is also value accretive. Our commitments are generating new revenues, reducing our operating costs or mitigating enterprise risks. With the Proximus team and the Board, we are convinced that growth must be sustainable and inclusive and that is the only way to create real long-term value. Lance, back to you.

Thank you, Guillaume. We are nearing the end of this webinar. Before we close some additional information we'd like to share. As you have heard, a lot of work has been done and we are pleased to see that is also showing in our ESG ratings. Among the many alliances and initiatives that we are part of we are especially proud to have been selected as one of the companies in the Bell ESG Index. On the reporting front, we are, of course, reporting according to the current standards and preparing for CSR deal. Just a quick word on sustainable finance before we really close. We issued our first green bond back in November '21 and under a sustainable finance framework reviewed by Sustainalytics. Proximus continues to have a considerable, sustainable project portfolio for which it could be decided to raise further sustainable financing. We hope you found this webinar useful. Conscious of time, we have only given you some highlights on ESG. More information can be found on the Investor page of proximus.com. hank you for watching this video. Should you have questions after this session, we kindly invite you to Sentis to [email protected].