Proximus' (BGAOF) CEO Dominique Leroy on Q2 2016 Results - Earnings Call Transcript

| About: Proximus Group (BGAOF)

Proximus Group (OTC:BGAOF) Q2 2016 Results Earnings Conference Call July 29, 2016 8:00 AM ET

Executives

Nancy Goossens - Director, IR

Dominique Leroy - CEO

Sandrine Dufour - CFO

Phillip Vandervoort - Chief Consumer Market Officer

Bart Van Den Meersche - Chief Enterprise Market Officer

Geert Standaert - CTO

Dirk Lybaert - Chief Corporate Affairs

Daniel Kurgan - CEO, BICS

Analysts

Luis Prota - Morgan Stanley

Daniel Morris - Barclays

Emmanuel Carlier - ING

Ruben Devos - KBC Securities

Stephane Beyazian - Raymond James

Marc Hesselinck - ABN AMRO

Ulrich Rathe - Jefferies

Vikram Karnany - UBS

Nicolas Colisson - HSBC

Usman Ghazi - Berenberg

Operator

Good afternoon, ladies and gentlemen. And welcome to today's Proximus 2016 Second Quarter Results Conference Call. For your information, this conference is being recorded.

At this time, I would like to turn the call over to Nancy Goossens, Director of Investor Relations. Please go ahead.

Nancy Goossens

Thank you. Good afternoon ladies and gentlemen and thank you for joining us on this conference call. I trust you’ve all seen the results this morning. All information including a slide-deck on the results is available on the Investor Relations website of Proximus. Similar to our previous earnings calls, we would like to dedicate as much as possible of the available time to the Q&A. So, that leads me just quickly introduce the people around table here at me. So, we have Dominique Leroy, the CEO; Sandrine Dufour, CFO; Phillip Vandervoort the Chief Consumer Market Officer; Bart Van Den Meersche, the Chief Enterprise Market Officer; Geert Standaert, the CTO; Dirk Lybaert, Chief Corporate Affairs; and Daniel Kurgan, CEO of BICS.

They will take your questions after the opening statement of Dominique. So with this, I’ll turn the word to Dominique. Please go ahead.

Dominique Leroy

Yes, good afternoon everyone. Thank you, Nancy. And welcome to our conference call.

So, let me start by commenting on the performance of our domestic business for which I am proud we could announce another solid quarter.

For the second quarter 2016, our domestic EBITDA grew by a sound 4.1%. One of the drivers was the continued growth of our customer base. In spite of a changing competitive environment, our commercial drivers remained sound with churn levels improving compared to the previous quarter and we maintained solid market share. Moreover, we continued to improve our customer mix by shifting towards more triple and quadruple play offers, increasing both the value and the loyalty of our customer base. The other main contributor to the higher domestic EBITDA was our ability to reduce costs. In line with our Fit for Growth strategy, we continued our transformation towards more customer-focused, agile and efficient Company. In the second quarter, our domestic expenses were reduced by 2.9% year-over-year.

With the early leave plan prior to retirement now activated, we also secured an important enabler to further lower our cost base. In total, 1,855 full time equivalents subscribed to the plan and will leave Proximus over the next five years with the first wave having already departed on 1st of July 2016. In addition, we estimate that over the same periods, a significant number of employees will retire on the legal requirement age. Therefore, the outflow is expected to be around 2,750 full time equivalents by 2020. This doesn't take into account any other natural attrition or external hiring for domains that require specific skills. The first benefits of the lower headcount will start to show in the second half of this year and will contribute to our announced ambition to reduce our cost base by €100 million by 2018.

As we expected, the strong domestic EBITDA was partly offset by a lower EBITDA for BICS. This year, BICS is facing a first comparable base, in particular for this quarter having achieved its record EBITDA one year ago, thanks to some advantages with temporary conditions at that time. The domestic and BICS EBITDA combined led to a 1.7% increase of our underlying Group EBITDA.

Alongside the high attention paid to reducing costs, we also focused on maintaining the sound free cash flow level. The structural changes that we implemented are reflected in the lower cash needed for our business working capital related to receivables, payables and inventory. These, combined with the growth in underlying EBITDA, resulted in a Group free cash flow of €255 million for the first six months. With a sound half year results, we remain well on track to meet our full year guidance of slight growth of Group EBITDA. We also reiterate our expectation to end the year 2016 with slightly growing domestic revenue with a trend for the second half of 2016 expected to be fairly similar to the first half of 2016. We also reconfirm our CapEx estimation for the year to be around €950 million.

So, this was the final point I wanted to make. And we're therefore happy to answer your questions now. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We have a question from Luis Prota from Morgan Stanley. Please go ahead.

Luis Prota

Yes, thank you. I have two questions please. First one is on your thoughts on the tariffs from Mobistar and the -- sorry, carriage Orange Belgium and the Convergent packages from Telenet, how they compare with Proximus and whether you see any need for data sharing plans and any big change in market dynamics recently? And the second question is on the early leave plan. I am trying to figure out how -- what's the calendar of leavers. So, I just want to confirm that the €53 million provisioned in the second quarter is just for those above 60 years old and eligible before July the 1st. And if we assume a cost of €255 million for the whole of the plan, the cost per employee will be like €155,000. And while making the math that gives us that probably around 50% of the people will be leaving in 2016 and then 30% in 2017 and so on. So, just wanted to confirm these numbers and see whether my numbers are right. Thank you.

Unidentified Company Representative

So, if I understood this -- if I understood the question correctly, then, you would like to have some information how the Orange offer and the Telenet VOO offer, how they compare to Proximus, is that correct?

Luis Prota

Yes, whether you think that the prices are disruptive or not and whether you have comparable tariffs to those and whether, on the back of those new tariffs, you have seen any change in the market dynamics recently or really is nothing…?

Unidentified Company Representative

So, on the prices, are they disruptive or not, I think there is no major market disruption on the prices going on. It is clear on the Orange offer that price seekers in the past, they had two options. They had one option in the past which was Scarlet; and they now have a second option, and in some cases, the technical installation cost might prevent them. So, it’s not the price disruption I think from a technology perspective, there could be some advantages for cable customers to move to Orange and not go through the installation costs.

From a pricing perspective, as I said, it’s not really disrupting at this point in time. If you look at WIGO, the offer of sharing data also it’s not directly disruptive; it’s relatively complex for the customers to meet the calculations. Sharing data is something that the market has to learn and that is new to the market. Customers will have to do their calculations to see whether it’s beneficial for them or not. So, did it change any market dynamics that we did see in Telenet’s reported WIGO transfers in the first nine days; we did see those happening in the market as well, and to monitor very closely. On Orange, those are very low numbers at this point in time, and we don’t see real impact on Proximus.

Dominique Leroy

So, recent question of the accounting impact on the early leave plan, we’ve put the details per quarter estimated over the entire period on page 14 of the documents which you may have seen. You should note that accounting rules on the IFRS take us to take into account the impact of people who are leaving the Company 1st of July in our book; then we need to take to spread the inactivity period of the employees who’re going to stay with us for a certain period of time over the future years. So that’s why we are spreading it over time. And I don’t think you should try and calculate per employee costs. Be aware that for instance in Q2 this year, it will be employees leaving us as of the 1st of July but it’s also netting some positive elements we were able to obtain in the negotiation of the collective agreement with the employees. So, the 53 million that you have in Q2 is a net impact, and you see that you have each of the quarter. So, for instance, balance of the year to be 33 million in Q3, 33 million in Q4 and to a total of 255 over the next four years.

Luis Prota

Thank you. But, it’s more or less about right, like 50% of the people will be leaving throughout 2016 and then 25% to 30% in ‘17 and so on. So, I am trying to figure out how do I have to account for the savings in the next few quarters and years, and the cash outflow as well? The accounting is clear, but in terms of the calendar is what I’m trying to figure out.

Dominique Leroy

You saw that we had that -- there was going to be 1,855 FTEs leaving us over the next five years. And when you add the people leaving pension on a regular basis, we come to 2,750. And you should take roughly a base of more or less 500 per year, just to give you a -- sorry 500 FTEs per year, which should give you an idea of the [indiscernible] that you should use in the model.

Operator

Thank you. Our next question is from Daniel Morris from Barclays. Please go ahead.

Daniel Morris

Yes, good afternoon. Thanks for taking the questions. I’ve got two please. Firstly, just wondering if you can make some comments on the EBITDA guidance, which you obviously didn’t change. That was looking fairly conservative. You took 2% in 1H; and I know there are revenue headwinds in the second half of this year, also the cost tailwinds. I was just wondering why no change and is just waiting to see how 3Q turns out? Second question just a little follow-up on the comments and the question on roaming. I just wondered what are you seeing in terms of elasticity so far, are you seeing strong shift in consumer behavior or is it really too early to be seeing that kind of thing? Thank you.

Dominique Leroy

So, first on the guidance, what can I say, I think the guidance is slightly growth of EBITDA and I think this is still what we're aiming for. We want to -- we have been relatively light in terms of commercial activities in Q2; I think we will be a bit more present in the rest of the year. So that's also important to take into account. And for the rest revenue, [ph] the only thing I can say is that the current consensus which is around 1.3% EBITDA growth is probably slightly conservative.

Unidentified Company Representative

And on roaming, on the roaming elasticity, so indeed we started off from the assumption that in the past, few people paid a lot on roaming charges and we migrated that to or we expect to migrate that to many people using roaming at volumes closer to home. So, what we see happening today is that that elasticity is -- and of course, it's early days, but that elasticity is manifesting itself. Elasticity has actually two components, it is the amount of roaming volume that is used by the individual; and then the second component is the amount of individuals using the roaming. Both sides are increasing quite nicely in June, July. And we still see quite a good upside potential on the amount of people roaming. The awareness of roaming is not yet fully installed in the consumer base. We see a nice uptake of the amount of people roaming, but there still is quite a potential there.

Daniel Morris

Many thanks.

Bart Van Den Meersche

So, maybe I can add something to that is that -- so next, we have the roaming regulation impact, of course. There is indeed elasticity in the volumes. But then we have another effect that plays, is that due to I would say the terror threat, there are less people travelling. And not only there are less people travelling, but those who are travelling are staying more in Europe. And so that is another effect that we see in our roaming income.

Operator

Thank you. Our next question is from Emmanuel Carlier from ING. Please go ahead.

Emmanuel Carlier

Yes. Hi, good afternoon. Three questions, first of all on domestic revenue. Do you expect a similar growth rate in the second half versus the second quarter or do you expect a bit of a slowdown because of roaming and cable and maybe also ICT which was pretty strong in Q2? Secondly, on the cost savings plan, you guide for 100 million savings for 2015-2018 but you give guidance on the people that will leave over a five-year period. So, why not giving a guidance of cost savings target over 2015-2020? And then lastly on cable, Orange Belgium is subsidizing the activation and installation cost. So, one of the barriers to change or to leave Proximus has gone away by that. So, do you see a pick up on churn after that move? Thank you.

Unidentified Company Representative

Maybe I'll cover first on the consumer side the revenue roaming impact and Orange Belgium, and then may be Bart can add to that his perspective on ICT. First of all, if you look at the mobile services revenue, Bart highlighted the fact that the -- I highlighted the fact that the elasticity is manifesting itself and Bart highlighted the fact that the revenue is impacted by the mix. If you look at the numbers that revenue impact by the country mix where people roam is substantially -- if people would have roamed in the countries that they usually go on vacations, it would be on mobile services revenue growth numbers. So, is there people start behaving differently and start travelling to the different countries, I mean the overall economic situation then will tell us. But there, we don't see a big threat from the roaming regulation. As I mentioned, we see opportunity.

Coming to the Orange installation cost and may be going back to the first question, if you look at the impact that we see, we're gaining market share, we're gaining market share in digital TV and in fixed internet. So, we don’t see the impact at this point in time. The installation cost is not just the installation that the customer themselves will have to do and that can be subsidized by Orange, but it’s also I mean installing couple of cables in the house and opening the road [ph] and things like that. On the second component of our revenue, there is no reason to believe that there will be a sudden change in the revenue trend.

Bart Van Den Meersche

Then maybe on the ICT, so you’re seeing that we have a very strong quarter in ICT with a growth of 14% in EBU. The ICT is of course a different business than the telco business and it’s less recurring business. So, you’ve seen that on ICT part of that growth, an important part of the growth has been achieved with a number of large product deals. So, these are of course not recurring every quarter. And so that’s something that you have to take into account. Now, we have at the same time also growth in services and we continue to focus on services. But the product growth is more volatile of course than the recurring business.

Dominique Leroy

As a general remark on revenue, I mean we have been relatively explicit I think on the guidance for revenue where we expect for the second half of the year revenue growth in line with what we have realized for the first half of the year. So, it means that indeed what we have [technical difficulty] we will already be able to compensate on the product at least that is where we guide to.

Okay. Now, on your question now on the forecast, we gave a five-year for the early leave plan because people who were eligible to take this plan were people older than 55 years. So, the plan is spanned over a five-year period, and we gave you the entire estimating the number for this plan. On our cycle of forecast, we always operate on the three-year basis. And so, we will be working before the end of the year on our 2016, 2019 three-year plan. And I am sure we’ll be in a position to come back and speak about this by February next year.

Emmanuel Carlier

If I may follow-up on that last point, if I look at the pension permit that you are showing, then you see that quite some people do retire in the next coming years. So, is it a fair assumption that on a five-year basis that the level of net OpEx savings should be, I would say, much higher than the 100 million that you’re guiding for the first three-years?

Dominique Leroy

Well, it’s true that beyond 100 million net savings which we announced for 2018, a chunk of this is secured by this early leave plan. But the benefit of the early leave plan will continue to grow beyond 2018, you’re correct.

Operator

Our next question is from Ruben Devos from KBC Securities. Please go ahead.

Ruben Devos

Yes, good afternoon. Two questions from me please; the first one on the network. Obviously you’ve stepped up investment for this year with a majority of CapEx going to your fixed network. But, given your target of identifying your fiber network and upgrading the VDSL through vectoring and bonding, I was wondering what this would actually mean in terms of your network investment budgets post 2016. And then, if you could remind me what speeds you’ll be able to deliver once these projects are finalized in the mid to long-term. Second question, on B2B, to come back on B2Bs, you said that most of the growth comes from ICT, while the traditional telco services are more volatile. There is not a lot of visibility for the business segment, none of the Belgian telcos is providing much granularity let’s say. Could you discuss the market dynamics here in terms of churn in competitive intensity and whether you’d expect that turns we see today will continue going forward? Thank you.

Unidentified Company Representative

First of all on your question on the networks, I’ll start maybe with mobile. You have seen that we have indeed invested this year a lot in further coverage expansion that we are pretty close even to the 100% on our outdoor 4G coverage. We have best performance on coverage, best in the market, not only on outdoors but also on indoors and deep indoors. And this is crucial for customer experience. But may be more important than that we also measured more than 100 parameters where we try to measure the real customer experience and this on voice, on mobile searching and mobile video. And in 90% of those parameters, Proximus brings best experience.

Now, it is true that part of the 4G investments, they are behind us and that's on the mobile side. We can expect that the number of our investments will in the coming next years a bit slow down. Of course afterwards, you know that new technologies are in front of us and where we talk not only about 5G but more as well about 4.5G. And based of course on the data patterns, data growth patterns that we will see, we will have to step into those new technologies as well.

On the fixed side, we're doing two things. We're of course further rolling out our vectoring. Vectoring, we’re not at 60% coverage and we will further extend that this year and also still we do part next year. Average speeds are now at about 67 megabits per second, and it is as such that today about 40% of our customers they can have 100 megabit per second line. For us, this 100 megabit is in the coming years a kind of bandwidth, hygienic bandwidth that we're aiming for. Meanwhile, we will also start testing what we call ultra vectoring and so that is the vectoring using 35 megahertz. We will start our first field trials by the end of this year and more extensive field trials will be then done by end of 2017 where we aim to further boost those speed levels. Our current intention is to do 35 megahertz rollout where we aim speeds at 200 megabits per second.

Now, what we do in the same time is that -- and we've announced that as well in the past is that we're also accelerating of fiber footprint and mainly Fiber to the Business. And as there we see nevertheless positive market signs, our plan is to keep pace in those investments. Now, if we net that all up, it is not as such that we can say that towards the near future that we expect that our CapEx will go down, but there will be effectively a rebalancing between the different types of investments.

Bart Van Den Meersche

And your question on the market dynamics; was your question specifically related to ICT?

Unidentified Analyst

No, well, I was just -- I was just wondering because you know the major driven has been ICT, but of course you said that the traditional telco services, there is more like a volatile environment, as you said before. So, I was just wondering, there is not a lot of information, not a lot of detail disclosed by none of the telco operators. So, if you could just discuss the market dynamics in general in terms of churn and just the intensity since -- quite vocal in breaking into the solar and SME market and the same goes for oil [ph] basically.

Bart Van Den Meersche

I think what I said is that the ICT market is more volatile, not the telco market. So, the ICT market is more volatile for two reasons. One, there is quite some product deals, I mean that is binary, I mean you make it or you don't make it; and second, there are much more players. So, we have a lot of players in the ICT market. So that is for the ICT market. As far as the telco market, it's a less diversified market in a sense that we have the main players that you know of. I think there is no secret that both Telenet and Orange are trying to enter more into the enterprise market and that they are targeting the enterprise market. As I always said, we anticipate that and we try to sustain our leadership. And for the time being that’s what we’re doing.

Ruben Devos

Okay. So, so far you’ve been basically able to defend your market share in the small to medium enterprise segment or how has that evolved?

Bart Van Den Meersche

So, for the time being, we’re pretty indeed sustaining that and so for instance in mobile, we’re still growing. So, we had 9,000 net adds in this quarter. So, we’re still gaining market share there.

Operator

Our next question is from Stephane Beyazian from Raymond James. Please go ahead.

Stephane Beyazian

Thank you. Two questions if I may. The first is, I was quite intrigued by the fact that the roaming impact, the 6 million is actually also what Mobistar, if I am correct, reported. So, I was just wondering, do you think it’s a factor of definition or you’ve done a better job since you have a bigger customer base than them? So, any comment, any color on possible differences in elasticity, volume elasticity in your opinion? My second question, could you just comment a little bit on the percentage of customers who currently are making top-ups for data and what have been your sort of top selling plans recently and/or the change in the mix of your top selling plans lately, just trying to understand the dynamic behind 4G traffic in the market? Thank you.

Dominique Leroy

So, on your first question regarding the 6 million impact, to be sure with you, I have no clue how they calculate their 6 million. What I can say is the way we calculate it which is basically taking the volumes of last year applying the price impact of this year. The 6 million doesn’t take into account the elasticity impact that could be triggered by the price decrease.

Operator

Our next question is from Marc Hesselinck from ABN AMRO. Please go ahead.

Marc Hesselinck

Thank you. First question is on the business segment, still doing fairly well, even if you take out the ICT part. You see another European market that there is a lot of price pressure in the segments. If there is something structurally different here in the Belgium market or are you doing something structurally different while you’re able to keep prices at least stable? And secondly, what is your outlook for direct margins and consumer? I can imagine, there are quite a lot of moving parts. So, the roaming obviously in the second half of the year but also still something like single play ForEx [ph] customers, but therefore also more multiplay which should be good. What’s your view like all the moving parts on the direct margin because we saw some improvement in the first half of the year; can we still expect that in the second half of the year? And then, the final question is on the refinancing. If I am correct, there is quite large bonds redemptions this year. What do you think will be your impact on the -- what can be your new financing rates there?

Bart Van Den Meersche

Okay, so first question, first of all, thank you for asking the question in front of my boss. But, no, are we doing something structurally different, quite honestly, yes, we are. We are working very structurally on all the different levers that we believe are differentiating us from our competitors, but that is -- it’s not one element. I mean, it goes from of course our network leadership; it’s our coverage, I mean our accounts coverage with our account managers, with our indirect. We’re focusing very much on markets on customer satisfaction and that means services. SLAs, we have I think the best -- I can say the best SLAs in the markets. We’re focusing on end-to-end servicing. So, all those elements together and then next to that of course we have our ICT, so I think we have today in terms of convergence, we’re not only playing convergence in terms of fixed mobile choice data but also convergence between telco and IT, which becomes more and more important in the context of cloud computing. And we’re focusing very much on innovation. You have seen what we’re doing in terms of machine-to-machine, IoT, we’re working very hard on data analytics, we’re working very hard on security. So overall, what we’re trying to do is be much more relevant to our customers than what our competitors are doing. And that’s the objective what we have and that’s how we continue and that’s how we want to sustain our leadership.

Unidentified Company Representative

So, the first component on revenue of devices, that market is slow; there is a substantial less amount of devices being sold. And we expect that to continue for the rest of the year. If we look at the direct margin dynamics that you are talking about, I think our multi-play and our convergence strategy reflects well how we're driving our overall revenue and our direct margin. Our TV [ph] revenue trend is driven by that convergence strategy. If you look at our multi-play, revenues are growing for the multi-play, are growing by 3.1% year-over-year. And if you look at the revenues for quadruple and triple-play households, they represent today 65% of the total cost of revenues. And they're growing respectively by 8% and 4.5%.

If you look at the operational indicators on that, triple-play, quadruple-lay, household play represent 45% of the total household base, and they're growing at a very steady strong amount of 6% on a very large install base. We can go further in looking at 87% of the households that have multiple plays do have those impact and 63% of the households are convergent and they combine mobile and fixed. So, we continue to drive that. And linking that to the top ups question that was asked, that is indeed a way we drive our customers from a lower-end plan towards a convergence pack so that they have additional data in those packs. So that roughly -- we confirm that strategy, we confirm that approach, and it's resulting in market share both on the fixed and internet -- on TV and internet.

Dominique Leroy

Okay. Regarding your question on refinancing, so it’s true we have the debt maturing in November this year for €675 million and we currently have a gross debt of €2.4 billion and we ended Q2 with a net debt of €2 billion. So basically, this means we have cash, and this cash would grow till the maturity period end of November this year. So, we're considering a repayment of debt and not necessarily reissuing a bond at this point in time because we can afford it and especially because of the term’s yield curve that you're familiar with negative rates for cash, exploring wider this way to make sure that we can secure a strong decrease of our financial expenses next year.

Marc Hesselinck

Okay, that's clear. I think and may be as a one follow-up on the British [ph] one, so all the things combined, you expect despite some headwinds in the second half of the year that the direct margin should further improve over the year-end and may be also in coming years.

Unidentified Company Representative

No, I didn't say it will improve dramatically. I think our approach is really working and it will stay there, and we will count on that margin levels. What I was highlighting was on the devices, which is a zero margin business for us that market has been under pressure and it whether it will evolve or not, I mean geopolitical situation will and economical situation will tell. But that's a zero margin business.

Operator

Thank you. Our next question is from Ulrich Rathe from Jefferies. Please go ahead.

Ulrich Rathe

Three questions please, the first one is on the ICT business. Could you first explain what you mean by large product deals? Are they sort of big service deals or meaning sort of big hardware sort of box deals? And related to that, has the ICT margin -- but of course you are not disclosing, but has that margin been very different this quarter compared to usual quarters because of these product deals? That would be my first question. Second one, please, on the early leavers. You seem to be saying that the uptake of the offer was a bit lower but that you also have now clear visibility that a lot of people, more people than you initially thought would retire on the normal years. How do you get there, how do you get to this 250 sort of number that you mentioned at the beginning; is this because you actually have indications from people that this would happen or where do you take that from?

And my last question is on the CBU KPIs on the intake, which was probably in the soft side and fixed and TV and broadband, and you mentioned that you haven’t marketed very much in the second quarter and that you will ramp up maybe marketing in the second half. Would you expect the KPIs to reaccelerate in the current competitive environment? Because there are three questions, can I just also -- hopefully from my ledger but there was a prior question which you didn’t answer I think from Stephane about your top selling plans in mobile. I think that’s an interesting question you didn’t answer, not sure whether you would be willing to go back to that one as well. Thank you.

Unidentified Company Representative

Coming to your first question, when I talk about large product deals, I mean indeed mainly hardware product deals and that means indeed lower margin deals than the services deals. Now, in terms of what that means for your margin, so what you have now is you’ve seen that our direct margin in total has grown, also in [indiscernible] that is a growth in absolute value. But then, I mean we always make a distinction for ourselves and between recurring businesses, one time -- recurring services, one time services and product deals. So, it’s true that this quarter, we have a higher percentage of product deals that makes -- that absolute value will grow in direct margin. In percentage, there is a decrease because there are more product deals.

Dominique Leroy

So, if you look at the early leave plan, so it’s true that the take-up rates on the plan is lower than we had anticipated, but I think the main reason for that is that people while looking at the early leave plan really ask the real possible pension age. And so in that sense, we realize that because of lot of people that are entitled to explain our people with a very long career at the Company, they were able to take their pension on the relatively short periods. So, the first year of the plan, we will see more people taking normal pension and so not taking the early leave plan, which means that for us it’s good because it’s less cost and we don’t need to afford the early leave plan for those people. But in terms of exit ratio, we come to the same amount where we have 1,865 full time equivalents taking up early leave plan. And we have an additionally around 900 people that they’ve highlight very clearly which was not the case in the past that they will take their pension during the same period. And that’s why we said that we will have around 500-550 full time equivalent leaving the Company for the next five years. And that comes back to the same savings but the positive news is it is less upfront investments to get there.

UnidentifiedCompany Representative

So, but we will ramp up in H2. Q2 is a rather slow quarter for us historically. We have not done large promotions, despite lots of activities from competition, as you mentioned, rebranding [ph] was quite visible and Telenet WIGO launch. Despite that low activity from our side, we gained market share. Typically in the larger part of the year, we do have quite some activity, some commercial activities in the market. We will continue to do that, but not just on fixed but across our portfolio. When you’re asking about the top selling plans in mobile, the top selling plans in mobile is the low rent; it’s on the smart 15. But we have a 30% top gear acquisitions. And it’s mainly joint offer driven and that leaves us with an increasingly healthy spark.

Operator

Thank you. We have a next question from Vikram Karnany from UBS. Please go ahead.

Vikram Karnany

Yes, hi. Thank you. I’ve got a couple of questions, firstly in the enterprise, if I look at your mobile ARPUs overall, it was down like 4% sequentially and annually as well, which is sharper than the drag you saw in the consumer segment. I am wondering if you are seeing some sort of competitive pressure building up in Q2, which probably explains a decline beyond the roaming explanations you gave earlier. Secondly, on the early leave program, I mean of the planned workforce reduction of 2,750, can I check if you can disclose mix between civil servants and other employees? Thanks.

Unidentified Company Representative

So, on the mobile services revenue, the future decline that you see by 1.6% is fully explained by the roaming regulation. If you look at it in detail, if you would exclude the roaming regulation, you would observe a healthy 4% growth for postpaid. But in addition, we also see a very different travel mix, as Bart mentioned a while ago. Actually in the more exotic destinations, we see simply 50% less of the travelers there. If you would make construction of those components, then you would be actually in a growing ARPU on postpaid.

Coming on the roaming regulation elasticity, we definitely -- as I mentioned before, we definitely expect to further increase the number of roamers as well as the usage per roamer. And in June, we already observed increases in both in terms of individual users as in volume per users. So far, basically there is volume growth to be seen but the real take up is yet to come. So, we do see some of that roaming effect disappearing. But as you described, the mobile services revenue is 100% driven by roaming. And if you take it -- if you're comparing us to some of the competition, then you have to realize that the way ARPU or way some of the ARPU is calculated is not always the same for us in the ARPU calculation on mobile services. We do have included -- we include the roaming impact immediately, so we have the full impact in June and July where some of our competitors, they are spreading it out over rolling 12 months, you should be taking into account comparing -- if you want to compare likes for likes.

Dominique Leroy

For your second question, I understood well that you're asking how much civil servants were in the early leave plan versus other.

Vikram Karnany

Yes.

Dominique Leroy

Okay. So, it's close to around 85%. So, it's the vast majority of civil servants.

Operator

Thank you. We have a next question from Nicolas Colisson from HSBC. Please go ahead.

Nicolas Colisson

Thank you. You mentioned earlier in the call that you want to be more active in the second half from a commercial point of view. So, my question I guess is how confident you are in your capacity to protect the value in the current customer base or marginally, do you see some pricing power in the market the same way Telenet increase prices every year?

Unidentified Company Representative

Be more active in the second half or in the third quarter, this is going to be pretty much in line with what we do every year. As I said before, our multi-play and convergence strategy is well reflected in our cross play reporting. That is driving our revenue trend and our convergence strategy. So, if you look at the strength of the brand, if you look at the strength of our product, we're very confident that we can continue to maintain a very strong position in the market. If you look at, referring to a previous question all the investments that have been made in the network, our network coverage, our 4G coverage, our speed, all those are components that drive up our confidence that we definitely will be able to maintain our convergence approach and our multi-play approach and we're confident that we'll have more and more, as reported in the household reporting that you can see that we'll have more and more people converging in convergent packs as we stated.

Dominique Leroy

I can add on the pricing that we have two-point strategy. So, we have Scarlet which is low fill, low price brand and we have Proximus brand where we always go for more for more. So in that sense, I think we will still be able as we use to do in the Belgium market to have a differentiated strategy and go with pricing, offering more value to customer for the main brand and making sure that we are price competitive on the low-end segment with Scarlet. So, I don’t see any reason why we should change the way the market has behaved in the past where Orange which is more on the low-end will contest with Scarlett and where the Telenet and Proximus brands are competed in their segments with the same more-for-more strategy.

Nicolas Colisson

That makes sense. Do you mind if I just follow-up? I think you said something in the line that the consensus forecast of EBITDA growth of about 1.3% this year, you were seeing it was conservative, is that correct?

Dominique Leroy

The current EBITDA consensus 1.3% is slightly conservative I said.

Nicolas Colisson

Okay, I’ll take it that way. Thank you.

Operator

Thank you. We have no further questions for the moment. [Operator Instructions] We have a question from Emmanuel Carlier from ING. Please go ahead.

Emmanuel Carlier

I have still one question left actually on the fixed line losses that was in line with Q1 of this year, but it was higher compared to previous quarters. And I thought that Q1 included a one-off. I’m just wondering if something has changed there and if you think that the current run rate is the one that you should expect for the coming quarters. Thank you.

Dominique Leroy

Sorry, Emmanuel. Can you please repeat your question, we didn’t get that one.

Emmanuel Carlier

Okay. So, the fixed line losses I think were down something like 30k in Q2; in Q1, it was similar. But if we would compare with last year, last year it was much lower. So, I am wondering if going forward, we should expect something more like 30k or if there is one-off included in Q2.

Unidentified Company Representative

If you compare to last year, there was a snow effect. What we see is an evolution that’s in line with the market decline. We observed national erosion on the install base. And so, we’re up-gearing with triple and quadruple play unbundling. But, if you look at that delta, that was snow driven.

Operator

Thank you. We have a next question from Usman Ghazi from Berenberg. Please go ahead.

Usman Ghazi

Hello, thank you for taking my question. I have two questions please. The first one, I just wanted to follow-up on the EBU mobile trends. When you say that the less traffic I guess to international destinations because of the terror threat had an impact and you mentioned exotic locations, I would have assumed that that would have largely impacted the consumer segment rather than an explanation for why the business mobile ARPU has come under pressure. That was my first question. The second question was on the cash cost for the early leaver program. I mean, if I kind of try and back out what the annual cash cost is implied by the provision that is being taken, this €255 million, it’s pretty low, right? I mean for each one of those 1,855 employees, it comes up to around €15,000 to €20,000 per annum. So, is it that the government is taking part of the burden? Thank you.

Bart Van Den Meersche

On your first question, so the enterprise mobile trends, I think there are three elements that play in this. So, first, you have the roaming regulation impact, as we positioned earlier on, and that is definitely also having an impact in the enterprise market because we have of course quite some roaming. Second is this, what I said, the changing travel behavior where as mentioned earlier, we have less people travelling and still we see this also in the enterprise markets. And we have less people going to exotic destinations or out of Europe destinations and that counts also for the enterprise market. There is a third element that plays of course and that is competitive pressure, as I mentioned you earlier, as Orange as Telenet are targeting the enterprise market and so there is indeed increasing competitive pressure there.

Usman Ghazi

Okay. Thank you.

Dominique Leroy

On your question on the cash costs for the early leave plan, the way you should look at it is that it's cash accretive as of this year because basically the saving that we're making is that every people -- every employee who will be inactive, we will pay them 75% of their base salary. So, the cash saving that we're making is the difference between this and the full costs. And this will spread over the period at the reason of people leaving us.

Usman Ghazi

Is it that the provision will grow over time as more people leave, the 255 million will actually become a higher number?

Dominique Leroy

You have the detailed provision page 14 of the document, which is quarter-by-quarter. So, you can see it. And this is more linked to IFRS rules, so different from the cash impact.

Usman Ghazi

Can I just have one last follow-up, would it -- is it right that the provision at the moment is being taken at 255 million and then as we proceed through Q3, Q4 next year that 255 million just grows by the charges that have been laid out?

Dominique Leroy

I don't have the document I am referring to, but basically I can read the provision, which is being booked in Q2. So, it's 53 million in Q2, 33 million Q3, 33 million in Q4 as I mentioned, and then, it's 74 million 2017, 44 million 2018, and 19 million in 2019 for a total of 255 million.

Operator

Thank you. We have no further questions. Thank you.

Nancy Goossens

Okay. Thank you. So, I think we can end this call. Thank you everybody for participating. If you would have any follow-up calls, you can contact the Investor Relations team. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!