Proximus PLC (PROX) Earnings Call Transcript & Summary

Hello, and welcome to the Proximus Q4 2023 Conference Call. My name is Francois, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Nancy Goossens, Investor Relations lead, to begin today's conference. Thank you.

Thank you. Thank you all for joining us today. As usual, we will start the webcast with an introduction by the CEO, Guillaume Boutin, using the presentation that we have published on the website this morning. After that, we will be turning to your questions. And so for the Q&A, we are joined by the CFO, Mark Reid; the Residential segment lead, Jim Casteele; the Business segment lead, Anne-Sophie Lotgering; and the Corporate Affairs lead, Ben Appel. They will be taking your questions in a moment. But first, Guillaume will take you through the highlights of today. Guillaume, please go ahead.

Thank you, Nancy, ladies and gentlemen, also from my side, welcome to this Proximus Group webcast. I will take you through a look back on our achievements over the past year, but also a look forward with our expectations for 2024, as always. Let me start with 2023. And first of all, we have achieved an excellent year in terms of customer growth. We see a customer gain well above our market share for both mobile postpaid and fixed Internet. As a result of our commercial success, we also closed 2023 on a very strong note financially with domestic revenue and EBITDA above our upgraded guidance for the year. Our International segment speaks, and Telesign posted a combined direct margin growth of 4.9% on a constant currency basis. From a Proximus Group perspective, we closed 2023 with better-than-expected EBITDA for this -- for the year-over-year decline mitigated to 1.6%. For both EBITDA and free cash flow, we have seen the trend improving over the past quarters, as you can see on the graph. Just over a year ago, we unveiled our new 3-year strategy, bold2025. And with 2023 as a foundation year now closed, we can look back at some of the achievements. Overall, we have been making strong progress to reach the goals we have set for 2025, this slide lists some of the key metrics and we'll not go over all of them, but we'll touch on some of the most relevant for the past year. Starting with our fiber coverage, which remains, of course, a key objective. I'm pleased that our coverage is progressing very well. Today, we are, together with our partners, actively deploying fiber in 147 cities and municipalities. For Brussels, for which we are rolling out fiber on our own, we have reached already a coverage of about 67%. Regarding potential fiber agreements between Belgium operators and in line with the announcement of the BIPT in October, I can confirm discussions in that directions are ongoing. Looking at the number of homes and businesses passed with fiber, you see illustrated on the left chart that we added nearly 170,000 homes passed in the last quarter of 2023. This brings us to 1.75 million homes passed at the end of 2023. In addition, we have a funnel of 300,000 living units with fiber industry coming from our JVs. Hence, we have fiber in the street for over 1/3 of Belgium's homes and businesses. We also closed a great quarter in terms of gaining active customers on fiber, adding 44,000 over the last 3 months of the year. This brings the total now to 397,000. The success of fiber is also reflected in a strong migration rate remaining close to 70%. Turning now to some of the achievements on our mobile network upgrade. I'm pleased that we have reached 5-week coverage of 40% at the end of 2023. The mobile network consolidation under the lead of MWingz is now on a good track with 2,100 sites consolidated and bringing some first cost benefits. We differentiate from our competitors, amongst others, by leveraging our spectrum portfolio, the largest in the country. We already see this translated in great network quality recognition. The most speaking being Ookla that revealed Proximus download speeds were up to 50% above our mobile network competitors. Turning now to another strategic goal. Proximus has the ambition to become even more digital and hence, more efficient for the benefit of our customers and employees, but also bring cost efficiencies. AI is already actively used to optimize our fiber rollout, but use cases are expanding fast. GenAI is a reality. And already today, we use it to optimize our customer interactions and we make it a daily companion for our employees. And the percent of Proximus developers will be using GitHub Copilots by the end of the year. As for our international ambitions, the transaction to buy a majority stake in the Route Mobile is going as planned. The preparation activities have confirmed our expectation to realize synergies of at least EUR 90 million on an annual run rate basis. With remaining regulatory approvals anticipated to be granted in the near term, we expect transaction closure in the April-May timeframe. Having covered the strategic part, let's move on to the financial and operational results. And I trust that you have already seen the numbers. I will just focus on some key messages. And starting with our domestic segments. I already pointed it out at the start. We are very proud on our commercial performances. Thanks to the Proximus network superiority, our multi-brand strategy and the success of our new mobile portfolio, we achieved another really good quarter in terms of customer growth, and this across all our main product groups, resulting in improved market shares. Zooming in, in our residential units. The sustained strong commercial performance, further supported by price indexations resulted once more in the strong revenue quarter with total revenue up 8.3% year-on-year and services revenue progressing to 6.7% growth. The residential customer services revenue benefited from a strong increase in ARPC, up year-on-year by 6.1%, reflecting the effect of price indexations and the ongoing move from customers to convergent offers. The combination of customer growth and pricing greatly supports our value management. Our price indexations managed well, supporting the good ARPC growth, while churn levels remained well under control. All in all, this is translating into a revenue uplift by 6.7% for the residential services in general and 10.8% for the revenue from convergent services. Our business unit closed to the fourth quarter with total revenue slightly down, driven by lower revenue from IT products, which cycled against a high comparable base in 2022. Business Services revenue, on the other hand, continued its positive trend, up by 3.6%, reflecting the strategic progress we have already made in this area. Earlier this week, we announced our intention to move one step further in our B2B transformation. The ambition to merge our Proximus IT activities with the ones of our existing IT affiliates SpearIT. This to allow for a clear focus and to further strengthen our IT activities. Taking a closer look at the business services revenue, you see another strong quarter while realized for IT services, up by 7.1%, mainly from recurring services, where growth was driven by smart network cloud, security and smart mobility. Moreover, we continue to achieve good growth in fixed data and mobile revenue. And finally, our wholesale unit, for which the year-on-year revenue decline remained mainly the result of the ongoing decrease in interconnect revenue with no meaningful margin impact. This brings me to the total domestic revenue for which we achieved a sustained strong growth, up by 3.5% for the fourth quarter driven by Services revenue, for which the growth further improved to a 5.1% increase. Turning now to the domestic operating expenses. In line with our expectations, we still faced significant inflationary cost effects. Moreover, the strong commercial momentum also drives higher customer-related OpEx. And thanks to our ongoing cost efficiency program, we could in part offset the cost headwinds overall, resulting in our OpEx being up by 8% for Q4. Let's take now a closer look at the main moving parts, starting with the progress made of the plan to realize EUR 220 million of cost efficiencies by 2025. In 2023, we have already delivered EUR 95 million of cost savings across the 3 axes that we are targeting. In the middle of the slide, you see that the exposure to inflation impacts for wages have started to come down. And for electricity, we expect the peak to be now behind us and turning into a small tailwind for 2024. At the same time, the continued commercial success is also driving higher customer-related costs. To name just a few examples, think of back of fixed costs related to fiber activations or higher sales commissions linked to the strong growth customer gains we experienced. This brings me to the total domestic EBITDA, which turned to a positive year-on-year variance of 0.9% -- sorry, with increase in direct margin more than offsetting the fourth quarter OpEx increase. Turning now a moment to the international part of our results. And taking an aggregated view on our 2 international segments, BICS and Telesign we see that while revenue was down year-on-year, the direct margin was still positive. The move from SMS towards alternative channels has a visible impact on the revenue, though it's less impactful on the margin. Therefore, currency effects aside, we posted a 4.9% direct margin growth for BICS and Telesign combined. For Telesign, specifically, Q4 also cycled against an exceptional end of year 2022. This was driven, amongst others, by traffic peaks created by some well-known game releases. Think of Call of Duty, World of Warcraft, or League of Legends. Nonetheless, with the fourth quarter 2023 direct margin of EUR 31 million, Telesign continued to show growth on previous quarters, though with a more limited seasonal year and uplift for 2023. Leaving currency effects aside, the direct margin remained nearly stable year-on-year. From a full year perspective, Telesign direct margin was up by 9.4% for '23 on a constant currency basis. Overall, communication volumes continued to grow and also the level of sales bookings have seen a significant positive evolution. Moreover, for the year to come, Telesign is well positioned for the evolution towards omnichannel. This supports our expectation that Telesign will continue its growth trajectory in 2024 with a direct margin growth of over 10%. OpEx, the trends further shows how they are cycling against an exceptionally strong performance in 2022. This is especially the case for legacy voice. Besides USD currency headwind, voice is impacted by the erosion of international voice volumes and a change in destination mix with a notable revenue decrease for 1 specific country, yet with a very limited impact on margin. This brings me to the group results. And this slide sums it up for the group with a strong performance of domestic in the fourth quarter driving the group revenue and direct margin increase. Overall, the group EBITDA turned to a year-over-year growth of 1.4%. The same view for the full year 2023 showing that our strong direct margin growth offset a large part of the higher OpEx. As such, limiting the year-over-year decrease in group EBITDA to minus 1.6%. Turning to the group CapEx with -- for 2023, a total of EUR 1.32 billion invested. The increase in Q4 is largely fiber-driven with a high level of favorability in the last quarter also impacting the CapEx to connect and activate our fiber customers. As shown on earlier on the highlights slide, the adjusted free cash flow recovered over the year, bring us to a free cash flow of EUR 61 million in 2023. Compared to 1 year back, the main moving parts are higher tax-related payments, interest payments on long-term debt and spectrum as well as higher equity injections in the fiber JVs, partly compensated by lower business working cap needs and the payments of EUR 30 million received from Immobel. To conclude on 2023, I'm very pleased that we were able to exceed the financial objectives we had set despite the challenging inflationary macroeconomic environment. I'm also pleased to confirm our Board of Directors approved the proposal to the AGM to return a gross dividend of EUR 1.2 per share of the result of 2023 with remaining EUR 0.70 per share to be paid on the 26th of April. I will now take a look at what is coming for 2024. And we listed here what will be the key focus for us in 2024 in no particular order. One focus point will be to keep a strong commercial momentum by building on our own strength. The clear strength in our network superiority on which we will further build while we'll also be working towards fiber collaboration in the country. We'll be ready for upcoming changes in the market structure and we will continue our cost efficiency plan as well as our asset sales program. On the international front, we'll be closing the Route Mobile transactions, and we'll be working to initiate synergies. We are still investing significantly in our growth. But as part of bold2025 plan, the CapEx investment is now coming down from its peak. The group net debt-to-EBITDA ratio for 2024 is expected to be around 2.7x. We'll update this after closing of the transaction with Route Mobile, yet we expect this to remain in a comfort zone. Furthermore, as we announced before, as part of our 3-year dividend policy, we expect to return of the result of 2024 a gross dividend of EUR 0.60 per share. This brings me to the last slide, covering also our other 2024 guidance metrics. In line with our bold2025 ambitions, we expect a growth of up to 1% of our domestic segment revenue and EBITDA in 2024. This, in spite of anticipated initial headwinds from the new expected market structure. Including BICS and Telesign, we confirm our ambition to return the group EBITDA to growth up to 1% for 2024 on an organic basis. We'll provide you with an update on our international and group expectation when the Route Mobile transaction is closed. With this, I have covered my introduction, so we can now turn to your questions.

[Operator Instructions] The first question comes from the line of Nicolas Cote-Colisson from HSBC.

The first one is about the domestic market. Because you grew your revenue, your convergent ARPU, I should say, by more than 6%, same for the service revenue. If you can help us identifying what comes from indexation and from upsell? And maybe how you see the mix forward as you may have less support from price side now that inflation is fading. And I also wonder how upselling works with the perspective of a new entrant? And my second question relates to the medium-term forecast. I wonder if you are still committed to deliver a higher EBITDA in 2025 compared to 2022 as you announced 1 year ago? I'm just trying to assess whether you -- what you are expecting in terms of the new entrant impact, this year is in line with what you were expecting a year ago.

Nicolas, let me take the first question on indexation. I think you've been aware we've put through 2 price rises in 2023. And so you could probably think of 4% net, but it's a range. So that's probably I think that's how I think about it. I'll let Jim talk about the upsell. And in terms of EBITDA, I think the way we're looking at it is we've completed very successful in our view, the first year of bold2025. And we have the guidance up twice in the year, and we beat that in this set of results for 2023. Our commitment to return to growth despite the competitive environment in 2024. Again, we're confirming that again today, and we're super confident of that guidance. On 2025, we're not providing specific guidance, but there's nothing from the Capital Markets Day that we're diverting from at this point. So that's where we are. Jim, do you want to touch on the upsell?

Thanks, Mark. Do you hear I me? I suppose. So on the upsell part, so this is Jim speaking on the upsell part. So first of all, I think, as you know, we are executing on a multi-brand strategy. And one of the -- the main elements that we have been working on over the last months is increasing premiums of the Proximus brand so that we can increase the brand equity linked to Proximus, which will help in the upsell brand story. And then, of course, the market in Belgium is also a lot about convergence where -- with the Proximus brand, but also with Mobile Vikings. We can bundle with attractive strong fiber offers, which will help also to create upsell opportunities not only in terms of positioning of the brands, but also within the brands. We can now use fiber as a way to create incremental value for our customers.

If I just may, just a quick follow-up on that. Because you still have some pressure on the 4-play. That's not surprising. I suspect it's still coming from TV erosion. But you still have good momentum on the 2 and the, 3-play packages. So can you just tell us a bit more about how this rebalancing towards 2-play and 3-play affects the gross margin, but also want to take into account the difference in churn. How does it affect the EBITDA margin big picture?

Nicolas, what you have to keep in mind, and that's relatively new on the Proximus side, is now that we have fiber, we can actually start tiering differently our convergent offers than we had to do in the past, where we were only able to work with either mobile, fixed voice, TV and Internet. And now on Internet, we can really create additional value, and we see also from market service, but also in our sales results that differentiating speed on Internet offers is really helping to create additional value. So it's no longer about only looking at the 1P, 2P, 3P, 4P, but also within 2P and 3P, we can really create also incremental value to our fiber network.

The next question comes from the line of David Vagman from ING Belgium.

Just maybe first to clarify on the impact of price increase this year. Did I understand correctly that it's a 4% average price increase, if you can just come back on that. And then on B2B, could you come back on the carve-out of the IT services part and explain us the rationale a bit in more detail. And maybe the change, let's say, in governance or management, does it mean we should expect IT to be IT Services division to be sold or merged? What is really the driving force here? So is it like cross-selling -- sorry, cost flexibility? Would you feel actually losing cross-selling opportunities? And then last question on the International segment and especially Telesign, what is your view on the move of Bird's -- MessageBird's on pricing and the SMS, which were quite a bit dramatic, let's say?

David, thank you for the questions always. Yes, on this year's price rise, I mean, it's been announced in the market. It's fairly straightforward to work out. But yes, 4% is a good proxy for that one. I don't know, Jim, do you want to take the next one and so on, on B2B?

Anne-Sophie, if you can take that one?

Yes. Of course, it's Anne-Sophie Lotgering, responsible for the enterprise market. So indeed, we've announced at the beginning of the week, our intention to carve out our IT activities out of Proximus and actually merge them with the existing IT activities of the affiliate called SpearIT and create a new IT integrator for the corporate market so that we're able to really capture the growth of IT in an operating model that enables it. To come to your question with regards to convergence, absolutely for those corporate customers, we continue on focusing on convergence. And as part of the intention to carve out, there will be a specific practice that will enable the management of all of our outsourcing contract that includes telco and IT, but also any of the future opportunities that we would have from a telco and an IT standpoint. In terms of management, which I think was your second question, the idea would be as of the 1st of July, once the discussion with the unions have taken place, that we would have 2 members of the Proximus leadership squad heading up the enterprise activity, 1 specifically for telco and the SME market, which needs for more standardized solutions with Renauld Tilmans and myself, who will be responsible for the corporate market from a convergence standpoint, but also more specifically managing the carve-out of the IT business.

Okay. And does it mean so that we will have the IT services, but also you're still managing more the corporates or the large corporate entities?

Yes, correct. So both responsibilities because again, it makes a lot of sense and we need to continue on pitching and ensuring the convergence story to our customers, which is what they require, both from a telco and IT perspective in a customized manner.

So if you step back a bit, our engines are telco B2B engines and our IT B2B engines are going to be best-in-class and that the engines. And then on the go-to-market, we're going to have, of course, a convergent segment approach with Anne-Sophie [indiscernible] more responsible for the low end of the market, but with a convergent approach on both cases. So we want to make sure that we have the best engines, but also we have a unified approach when it comes to segmentation and customer relations. On international, on the MessageBird, as CEO, I don't want to comment too much on it. I think it's just a bit of a marketing noise for not a lot of reality on the market. That would be my answer to that question.

Next question comes from the line of Roshan Ranjit from Deutsche Bank.

Okay. I've got 3, please. Firstly, just circling back to the International segment. Now we saw a slight tougher quarters, as you highlighted, that follows on from what we saw in Q3. Do you see these kind of trends, and I think you highlighted certain country mixes carrying on in the early part of '24, or are there kind of early signs that is stabilizing or even recovering. Secondly, on free cash flow, I know you don't specifically guide on this metric. But we will be seeing, as you've guided to the CMD, a large portion of asset sales over the coming years. We saw this delayed HQ sell from Q4. Any visibility you could give us on the phase-in through '24 or '25 would be super helpful. And what is the latest on the HQ sale piece? And lastly, I guess, the message you gave at the CMD around CapEx was -- and you highlighted today was a normalization post the peak fiber rollout. Now your guidance for '24 is just over EUR 1 million come off the total CapEx spend. We think a bit further out to '25, a lot more of the spend is going to be dedicated towards connection, which, I guess, is going to be significantly lower than the rollout. Now I guess the question is, should we be seeing a bigger step down '25 versus '24 than what we see in '24 versus '23, and therefore, CapEx falling below the EUR 1 billion mark?

I'll take the International. So indeed, we, as mentioned in the comments of the slide deck, we saw one particular customer that was delivering a lot of revenues, but very little margin in 2022, not being a customer anymore in 2023. So you have that year-over-year difference. But more importantly, I think this is the transition towards SMS to omnichannel communication platform that is really driving the key element of the revenue decrease with very limited impact on the direct margin here. You have to realize that it's an opportunity for the industry because if we can capture that omnichannel opportunity, it will be more efficient for our customers that are the big into the platform, so the big game platforms or the big finance and fintech customers because they have to pay less for better service because it's going to be an orchestrated omnichannel delivery platforms. And that's what we will provide together with Telesign and Route Mobile, that is one of the key leader in that omnichannel delivery platforms with the Ocean platform they have launched a few months ago. So if we capture the right way the transition towards omnichannel, and I think we are super well positioned to capture the transition, the move from SMS only to omnichannel delivery capabilities is a very important opportunity for the group. And as you know, the right metric to look at when you look at our international activities being Route Mobile tomorrow, [ Pickx ] today and Telesign today is not to look at the revenue line, but to look at direct margin line. This is really where we think that the performance should be assessed. And last point on international. I think this is what we indicated that also, on the slide deck. I think we are quite confident for the DM growth of Telesign for next year, driven by omnichannel, but also driven by digital identity performance that is really going well, both in terms of DM growth, but also in terms of bookings of new customers, and the trend there is extremely important. That's, of course, before the additional boost effect that will come from the Route Mobile integration.

Thank you Roshan, thank you for the question. On free cash flow, let me say a couple of things. I think, first of all, you're right, we don't guide on adjusted free cash flow, first of all. Second of all, as we said at the Capital Markets Day, there are asset disposals in that number. And so the asset disposals are progressing as we expect. But clearly, there are timing elements to that, and I can't disclose those at the moment. So I think we will not be providing guidance on free cash flow. But again, I think the way also going on to the CapEx, we just landed our first year of bold. We've done what we said we would do. And our guidance for 2024 is again in line with what we talked in Capital Markets Day. So when I talk about CapEx, we talked about where the CapEx would evolve to. And I think we've made good with that commitment today. We're not providing guidance for 2025 at this point, clearly. But I think the Capital Markets Day commitments that we've made good on so far, I think, gives us a good track record on our performance to date. So that's what I would give you in terms of comments on your 2 questions.

Great. If I could just go back to Guillaume's answer on the International business. I think last month, Route Mobile commented on their Q3 results. And I think there were citing a couple of industry headwinds and a slightly muted performance in Q3. Is that kind of related to the -- that shift, the SMS to omnichannel shift? Or is there anything kind of else going on specifically within Route Mobile?

For me, it's a bit too early to comment on the Route Mobile performances. But I think that what Rajiv said publicly indeed, the switch from -- the shift from -- or the switch from SMS only channel to towards omnichannel is something that we need to transition. But once we have transitioned, then I think it's going to be very nice for the ones that are able to capture that opportunity. And as I said, I think with -- what Route Mobile has announced, have launched, I think we are -- when -- I think VULA is well positioned to keep the opportunity, to be confirmed by Rajiv. But I think that also for us having the ability to acquire that company and benefiting from those new capabilities when the deal will be closed is again, is a fantastic opportunity. Plus, I have to say, and I think we should also reiterate that statement. I think we have been preparing the closing of the deal since July last year. And I think it is also important that you understand that we have very good now visibility, and we can now confirm that the synergy level that we want to achieve will be north of $100 million for the -- linked to the integration of Route Mobile within the Proximus -- yes, Route Mobile within the Proximus, that's correct. So confirming the $100 million of synergies going forward.

The next question comes from the line of Joshua Mills from BNP Paribas Exane.

I had a couple on the competitive outlook. So you've talked about the guidance this year, anticipating the launch of BT and IT that in the second half. But during the Energy Global Conference call and the guidance that Telenet would imply they're going to be investing a lot more in marketing in the Polonia region. And it also looked like at the end of the resolving the IT issues, which led to a weaker performance than that and probably helps you in 2023. So the question there is will you be expecting competition to pick up a bit going into the 2024 period? And have you seen anything yet? And then the second question is just on Digi. If you could give us an idea of your expectations in terms of the timing of their launch, how you set up for the MVNO business would also be helpful. And finally, just to make sure I can sneak the third one in. How important is the May 15 deadline that the BIPT has set for Fiber-to-the-Home care investment? Should we be expecting some kind of update from the other players on co-investment for that? Or does it not really matter if it slips into later in the year?

So this is Jim speaking for the residential segment. So thank you for the question. So I think indeed, the competition for the moment is already quite intense also in Wallonia. If you look at what the Orange Group is investing with Voo and [MEA]. In Wallonia, it's already a very intense competitive environment. So in that sense, I think our current multi-brand strategy, as you have seen in the results, continue to deliver those good results. And of course, we will continue to monitor the market, like we always do, without being too aggressive and staying rational. And so one of the things that we have done end of January to react to the competitiveness in the market is updating the portfolio of Mobile Vikings, especially in the EUR 20 price point and the EUR 29 price point. So of course, new players always heating up the market a bit more, but with our multi-brand strategy and also the investments that we're doing in fiber, but also in 5G, where we can claim a product superiority also supported by external benchmarks makes us confident that we will be able to continue to deliver good commercial traction going forward. And then, of course, on the IT issues of Telenet has been a question I got, I think, over the last 3 quarters. I think if you look at the performance of Proximus also versus the other players in the market, I think we can say that we have delivered very good results, and we are convinced that this is due to the performance of our multi-brand strategy or investments in fiber and 5G. And then, of course, if something happens at competition, this has an impact on all players in the market. The only thing I can say is that Proximus as a group has delivered the strongest in the market in Q4. Guillaume, do you take -- I took the question on Digi, on the fourth entrant? So I think on the potential, I think it's waiting time. I think we all expect them to come, but we don't know when. And we're already, when they come with our multibrand and all the investments that we have been doing, especially also like I said in one of the questions before, investing a lot in the premiums of the Proximus brand so that we can strengthen that positioning when a new entrant would come in the market.

Yes, we are really focusing on our strengths, focusing on the preparation, and we'll be ready when they come. On fiber, the 15th of May is indeed an important date for the BIPT. Because as you know, they state that they wanted to have seen significant progress in discussions at the date that they can assess whether we continue those discussions or we should switch to the plan. I think we -- that date, so we want to make sure that we can, at least, if possible, present something to them because we are discussing today. So we are putting a lot of energy to entertain those discussions, management time and effort. I think it would be not so great, if not to be able to present something in front of the BIPT. So I think that's the objective. I think that we jointly have with a lot of stakeholders, we are putting a lot of effort to get there. Are we going to be able to be there for the 15th of May? It's still a bit too early to say that. But we are putting management time and effort to -- on those discussions. And of course, you can imagine that I cannot share more at this stage because of the ongoing decisions and the interactions we are having with the different stakeholders.

Got it. And I mean, just hypothetically, if you weren't to present something at that point in time, what's the downside? Is it that you move into a new regulatory cycle and there'll be discussion around wholesale charges? Or is it just the miss opportunity and that you won't get more kind of support from the regulator? I'm trying to look -- understand whether this is an upside risk that you may be able to capture or if you do not hit that target, there will be downside to your plans?

No, I think it's a bit too early to comment it. I think let's see whether we can land on a collaboration framework and then the consequences of that landing can be shared with you and you can understand those sequences. But I guess it's a bit too early to put scenarios where there are some moving pieces at that very moment. So I would not -- I think it would not be wise to bid on scenario as we speak because there is a lot of moving pieces. So not to be able to answer to that question.

The next question comes from the line of Polo Tang from UBS.

I've got a few clarification questions around free cash flow. The first one is, can you talk about the trajectory of the fiber JV equity payments going forward and could you give some sense in terms of how this number may or may not change if you agree fiber partnerships in cooperation with other operators? And just the second part in terms of the free cash flow question is, can you comment on how we should think about the movement in working capital for 2024? So will it be a headwind or a tailwind? So I see that there was a positive EUR 154 million working capital benefit in 2023. So I'm just trying to understand if this reverses. And then maybe just one last question in terms of cost of goods. So specifically, your broadband wholesale costs. So given that a growing part of your fiber footprint is from JVs, could you clarify what the broadband wholesale cost was in 2023 and how we should think about the evolution of this going forward?

Thank you. Let me take those. Again, I'm going to be able to limit the commentary given our discussion on our guidance free cash flow. In terms of JV equity contributions, I think we gave some guidance in -- or we did give some guidance at the Capital Markets Day. We were tied under that in 2023. I think there's no really again difference from what we told you at the Capital Markets Day. That number will evolve in our BAU plan of rolling out fiber with the joint ventures approximately in line with homes passed trajectory. So I think that doesn't change. In terms of does that get affected if we get to a collaboration deal, again, that depends on what type of collaboration deal and the component parts of that. So I'll let you think through that one. In terms of business working capital, indeed, we had a nice tailwind from business working cap in 2023. A big portion of that was inventory. So as we built up inventories during the COVID period and the chipset shortage to protect ourselves from stock out and making sure that we can deliver to customers, that unwound in 2023. So again, it's more transitory in nature. And so I think that probably gives you a guidance on which way that will go in 2024. In terms of COGS, the number is not significantly material in 2023. But again, as you can imagine, as we -- as the joint venture fiber in our business as usual plan continues to ramp up through joint ventures and our customers grow at the pace that we're acquiring them on fiber, those COGS numbers will increase. But as I said, again, you can take the baseline is it's not very material in 2023 and the increase will go in line with what passed and the network filling rate that we will get from our joint ventures. I can't give you too much more details on that, but that is directionally what you should be...

The next question comes from the line of Kris Kippers from Degroof Petercam.

One main remaining, actually. If you look at guidance you provide on the cost savings following the EUR 95 million you realized in '23, how is the split over the last -- the remaining 2 years? Is this equally split or back-end loaded? And to what extent is it skewed towards personnel savings given of course the, you could call it, aging personnel that you've got at the company?

In terms of the phasing, I think as I said, first of all, we're very pleased with the progress in '23. Delivering 95% was a great achievement by the team. I mean I think you can think of it, there's not a significantly different phasing in the last 2 years, so you can kind of split it broadly. In terms of personnel, again, we continue to be super focused on driving efficiencies in terms of efficiencies and in improvement in customer interactions through digital means, GenAI, AI in general. And that does give us the ability to take advantage of workforce costs externally. We continue to have a significant external workforce contract that we could flex reasonably effectively. But as we said, we also have a retiring population that we will use the efficiencies in that mechanism to help us. But we don't disclose massively the going-forward split of how the savings will come, but it will be sizable in terms of the workforce element.

Okay. Just as a follow-up on the commercial momentum. Given that it's quite strong, does it also imply that the customer on-boarding as an extra cost in '24? Or is it just not to be expected?

I think you should -- again, we had a very successful year, as Jim explained, in 2023 in terms of commercial momentum. You saw the customer costs there. Again, our revenue guidance is provided on the basis of the market change that we'll take. So I think you can expect slightly reduced customer on-boarding costs because of that market change in 2021.

[Operator Instructions] The next question comes from the line of Konrad Zomer from ABN AMRO - ODDO BHF.

I've got 2. The first one is on the planned sale of your headquarters to Immobel. You got the EUR 30 million last year. And I know you're not going to comment on the specific timing of asset disposals. But has anything changed in terms of the likelihood of this sale going ahead according to the original announcement? And the second question is on the revenue decline in Telesign. You've mentioned the switch from SMS to omnichannel. This is obviously not new to something that suddenly emerged in Q4. Nevertheless, the reported revenue line was quite significantly down year-on-year, even taking into account the tough comps. It was significantly below consensus. I was a little bit surprised about the size of the decline. And I'm wondering if, let's say, you get approval to acquire Route Mobile in a few months' time and you're going to integrate that, how are you going to change that trend from SMS to omnichannel? Because within Telesign, a lot of revenues still depend on SMS, obviously.

On the headquarters question, as I said, when we're talking about the free cash flow, the asset disposals are progressing as we expect. So there's really no update on what we gave in December at that point. So I think that's fairly straightforward. Guillaume, do you want me to do that one on the Telesign?

On the Telesign, I think I got to -- I'm going to repeat what I said. I think looking at the revenue lines for Telesign is not the right metric to look at because you should really look at the direct margin. This is the best way to assess the evolution of the company. It's been muted in terms of growth, flat in Q4. Full year, close to 10%. And we are guiding for above 10% evolution, positive evolution of the direct margin for next year. So I think that what you have seen in Q4 will not be the entire story of 2024 because we -- on a standalone basis, we see Telesign growing by 10% the DM side. I think the -- if you look at the Q4 specifically, there is a duration of the move to omnichannel that's something that the industry is seeing. And especially for Telesign, we had a very good quarter, our difficult comp in Q4 2023. But again, with still data DI revenue is growing extremely strongly, double-digit DM growth. And going into 2024, we are confident that on a standalone basis, again, we will achieve more than 10% of DM growth of the company, which is a healthy growth for the assets. So with Route Mobile again, we're going to mainly focus on DM and EBITDA because that's really where we should focus for the new combined entity, the combination of Route Mobile and then Telesign. And as you may have seen in H2, Telesign was with a positive EBITDA. Route Mobile is also positive in terms of EBITDA. I think the comment of the 2 will be a positive EBITDA story. On top of that, you're going to have more than $1 million of synergies. So I think this is -- the way you should look at the Route Mobile acquisition, it will contribute very significantly on the growth of the DM -- of the international activities and contribute significantly on the growth of the EBITDA of the international activities compared to where we are today.

The next question comes from the line of Nuno Vaz from Societe Generale.

Three quick ones from my side. One is just a clarification on your domestic EBITDA guidance for this year. Last year, you gave a very useful color, which is to give what was the percentage headwind you expected from the net inflation impact. If I remember correctly, it was around 9% this last year. So I was wondering if you could give us the same for this year, and I think that will be quite useful. And another question relating to EBITDA. If you -- I understand that you included in this guidance some market condition changes. I was wondering if you might give the guidance excluding these market conditions or what sort of impact are you reflecting? And second question is on the CapEx, the CapEx decline you expect. Is this all coming from fiber CapEx decline? Or is some other decline in the other CapEx embedded as well. If you could explain a bit better what is driving the decline? And then wondering if on the expectation of the DG wholesale agreement, if you're building any extra capacity? Or is everything unchanged despite this agreement? Then finally, just some confirmation on the JVs. You said that at least the equity financing hasn't changed from the CMD, but wondering if the overall CapEx might have changed from the CMD? I believe you originally guided for around EUR 2 billion for Fiberklaar and EUR 1 billion for Unifiber. I understand now that you've had a lot more homes or connected a lot more homes. So just wondering if the cost per home might have changed. And also curious about the take-up if it's very different or what's the difference versus your own fiber rollout?

Okay. Let me try and take, [ I think, 4 or 5 of those and then Guillaume maybe ]. On EBITDA guidance, I think the wage indexation is fairly straightforward. It's public. We had a wage indexation of around 2% in December 2023, which clearly laps. And then the next one is forecasted to arrive in May or June in 2024. So you can kind of think 2x 2%, but calendarized clearly there. Then in terms of what do we include in market conditions. Again, clearly, we're not going to give guidance on that, but we have included what our view of the impact of the new entrant and any impact on the aside with Telenet entering that. In terms of achieving equity injections, I didn't say it didn't change. The number was still slightly lower in 2023. And so some of the phasing is altered a small bit, but I think the general direction is fine. In terms of the overall CapEx, again, we are not providing any guidance on that, but it's any further updated guidance that what we told you in Capital Markets Day. But again, the overall cost per build hasn't altered from what we were expecting. The team will continue to find efficiency to offset any inflation and now inflation is actually going in the right direction for us. So I think that's a little bit where we are. I don't know on Digi wholesale. Guillaume, do you want to take that?

No, no need to be extra capacity. We have not only more customers than our competitors, but we're also more spectrum than our competitors. Because as you know, we have bought enough spectrum to absorb our needs for the years to come and also providing better experiences to our customers. So no need to add or to create more. No cost around building more capacity to welcome Digi on our network.

Sorry, I missed the CapEx question. I mean it's mostly the fiber own build, but we clearly also -- and again, I think if you look back in some of our previous communications, we're kind of past what we call the development CapEx peak. Over the last 2 years, we've been doing slightly more elevated development CapEx. So you can think of agents, back-end IT infrastructure refreshes. That's also now passed this peak and on its way down. So I think that's -- those are probably the 2 big elements. Customer CapEx obviously goes the other way, which is all related to the success we're seeing in the market of migrating and acquiring customers. Those are probably the 3 big movements that you can expect.

To answer the last question on commercial traction on the JV footprint. So there, of course, it's early days. But for the moment, we see similar traction on JV footprint versus the Proximus fiber footprint. Of course, you have to take into account as these are early days, that you have to compare this in terms of filling rate with the early days of the Proximus footprint as well. But from a commercial point of view, we see a similar traction, which is not illogical. Because in the end for the consumer, he doesn't have to know on which footprint the fiber is being deployed.

There are no further questions. So I hand back to your host to conclude today's conference.

Thank you. Thank you all for joining us. Thank you for your questions. Should there be any follow-ups, you can reach out to Adrian or myself. We will be happy to help you out. Wish you all a lovely weekend. Bye.

Thank you for joining today's call. You may now disconnect your lines.