Proximus' (BGAOF) CEO Dominique Leroy on Q4 2016 Results - Earnings Call Transcript

| About: Proximus Group (BGAOF)

Proximus Group (OTCPK:BGAOF) Q4 2016 Earnings Conference Call February 24, 2017 8:00 AM ET

Executives

Nancy Goossens - Director, Investor Relations

Dominique Leroy - Chief Executive Officer

Sandrine Dufour - Chief Financial Officer

Phillip Vandervoort - Chief, Consumer Segment

Bart Van Den Meersche - Chief, Enterprise Segment

Geert Standaert - Chief Technology Officer

Daniel Kurgan - Chief Executive Officer, BICS

Dirk Lybaert - Chief, Corporate Affairs

Analysts

Roshan Ranjit - Deutsche Bank

Nawar Cristini - JPMorgan

Ruben Devos - KBC Securities

Nicolas Cote-Colisson - HSBC

Luis Prota - Morgan Stanley

Marc Hesselink - ABN AMRO

Ulrich Rathe - Jefferies

Stefaan Genoe - Degroof Petercam

Michael Bishop - Goldman Sachs

Vikram Karnany - UBS

Usman Ghazi - Berenberg

Parin Shah - Bank of America

Operator

Ladies and gentlemen, good afternoon and welcome to today’s Proximus 2016 Q4 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, Investor Relations. Please go ahead.

Nancy Goossens

Thank you and good afternoon ladies and gentlemen. Thank you for joining us at our quarterly conference call. As a reminder, we have published all the documents on our website, including a full set of slides on the results. As usual, we will not run through those during this call as we trust that you have seen the detailed numbers by now.

So for this call, we will have the usual format. We will go to the Q&A in a couple of minutes. But allow me just to quickly introduce to you the people here on our side. So we have the CEO, Dominique Leroy; we have CFO, Sandrine Dufour; Phillip Vandervoort, for the Consumer segment; Bart Van Den Meersche for the Enterprise segment; the CTO, Geert Standaert; the CEO of BICS, Daniel Kurgan; and also Dirk Lybaert, the Chief Corporate Affairs. They will take your questions in just a minute. But before that, just a short introduction by the CEO. Please go ahead.

Dominique Leroy

Yes, good afternoon, everyone and welcome to our conference call. I am very pleased that we closed 2016 with another solid quarter and have achieved full year EBITDA growth for the second year in a row. I will start by commenting on our domestic business, delivering again a solid performance in spite of the regulatory and competitive headwinds we are facing. In a seasonality promotion intensive quarter, our commercial drives remain solid and we realized a strong uptick of our new product portfolio. End of January, so in about 3 months since the launch date, we counted already 124,000 customers on the four-play offers, Tuttimus and Bizz All-in. Thanks to the success, we have realized good growth in four-play, thereby, further improving our customer mix with increasing both the value and the loyalty of our customer base.

Zooming in on six projects. We realized continued growth, adding 17,000 TV households and 15,000 Internet lines. This was also supported by lower churn levels compared to one year back even with the rising competition. On the mobile side, we achieved very good growth in postpaid, adding 45,000 voice calls in the fourth quarter. Alongside the sound commercial drivers, I am proud that we achieved 5.3% growth of our underlying domestic EBITDA in the fourth quarter. Notwithstanding the significant negative impact from regulations, we kept our direct margins stable. The main contributor to the domestic EBITDA growth was, however, our ability to lower our cost base.

We pursued with the cost reduction initiatives and continued our transformation towards more customer-focused, agile and efficient company. Our fourth quarter domestic expenses ended 4.9% below the prior year. This includes a reduction in workforce expenses, following a lower headcount, mainly as a result of the early lease plan prior to retirement. For BICS, our international carrier services, the fourth quarter EBITDA grew by 8%, with the comparable base becoming easier and BICS also benefiting from a higher level of settlements.

With domestic and BICS combined, we ended the last quarter of 2016 with a 5.5% growth in underlying group EBITDA. Alongside the high focus on reducing our cost base, we also pursued our focus on optimizing a long-term sustainable level of free cash flow. Different initiatives in the business working domain, combined with the growth of our underlying EBITDA resulted in a good free cash flow of €559 million for 2016. This is a 23% increase from last year when excluding the net cash impact of major one-off items. The results achieved so far are proof of the successful execution of our strategy. Building on the accomplishments so far, we will go a step further and execute or renewed Fit for Growth strategy.

Over the next three years, we are strengthening our ambition and aim at accelerating our transformation towards a digital service provider, delivering superior customer experience. We will make our organization fitter, focusing on efficiency and simplification efforts to further structurally reduce all costs. We will grow our core business, offering convergence solutions and the broad content offer to our customers in a value-conscious manner. We will dense the future by bringing fiber to our customers by using the digital platforms and applications for better service and by developing meaningful innovations in partnership with startups. This will enable us to deliver sustainable, profitable growth.

This brings me to our financial outlook for 2017. The impact from regulation and especially Roam-Like-At-Home will mitigate our financial growth. In spite of a more important negative impact from regulation, we expect our domestic revenue to remain nearly stable to 2016 and our group EBITDA to grow slightly. We also reiterate our expectations to end 2017 with around €1 billion CapEx, including our Fiber for Belgium presented in December last year. We also confirmed that we intend to pay a stable yearly dividend of €1.5 per share over the periods 2017, 2018 and 2019.

With this, I have covered both our 2016 results and our 2017 guidance. So, we are happy to answer your questions now. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Roshan Ranjit of Deutsche Bank.

Roshan Ranjit

Hi, good afternoon. Just two questions please. Just regarding the Tuttimus progression, can we just get a sense of the mix of new ads versus up-sell and where the up-sell is coming from, I guess, mainly be triple-play, subset mobile and barter. Also any single play ads, which are moving up. And secondly, just on your network build-out, I think you are quite clear in your December call. Is it okay just to get a refresher of your stance on co-investment and the scope to potentially accelerate the build-out given it is quite long dated? Thank you.

Bart Van Den Meersche

So, on your first question we launched Tuttimus on October 17 with quite important campaigns around Tuttimus, we did not talk about [indiscernible] triple play or a single play and as a matter of fact, the Internet single play, we simply don’t offer anymore. So the first two months, we had very strong focus on Tuttimus and we saw very strong uptick with our existing park and I am lumping here Tuttimus and Bizz All-in together, Bizz All-in being the equivalent for small enterprise. And as Dominique mentioned, as our CEO mentioned, 124,000 conversions while not just conversions, but a large part of those are conversions done in the first 2.5 months. There is the majority of that is clearly convergence similar to what we saw on – with Telenet on the first two months. If we extend that to more recent insights, we see a very healthy mix of new acquisitions versus conversions. But the focus was on quadruple-play and we see our existing triple-play –double-play, triple-play customers adding – converting to Tuttimus and adding the Fixed Voice. So, we see an increase of the average RGUs per household as you see in our reporting. And in the quadruple-play, we are not at 4.82 RGUs per household. We see also the revenue per household going up in average and of course assuming they are adding on average to the fixed voice in many – in most of the cases, so very strong uptake on – up-sell on RGUs. Very good tearing on mobile and on fixed, and I think that internet show sums it up and very good acquisition, but that’s much more recent since the focus of Q4 was on conversion.

Dominique Leroy

Okay. And to your second question is on the network, so we announced indeed in December a major investment plan in fiber, Fiber for Belgium plan, where we see will be investing additional €3 billion – not an additional, but €3 billion in the deployment of fiber over the next 10 years. Of that the purpose is to reach 85% of enterprises and 60% of households. As we have announced that you probably heard that Orange stated, they are interested in doing some co-investment with us. The answers I gave Orange today because I received a letter from their CEO and the official answer I gave is one to the CEO is the following that on the dense area where our current investment plan is focused on we want to continue to develop the fiber investments on our own, but we are very open to do co-investments in the sense that if it enables us to bring fiber to a bigger parts of Belgian households. So in that sense, we are open to co-investments, but not in the dense area.

Operator

Thank you. The next question is from Nawar Cristini of JPMorgan.

Nawar Cristini

Thank you very much. So just a follow-up on the new Tuttimus portfolio piece, so we can see this morning that it seems to have had a positive impact on fixed line losses, in particular, we have seen on the consumer side, the fixed line came back to positive territories, is there a trend emerging there or am I reading too much into it and how should we think about the run rate of fixed line/losses in 2017, please. And then my second question is about Voo, there is a lot of noise about the governance issue at Voo, which may or may not bring a change of shareholder there, I wanted to ask about your market share on broadband in Wallonia if you are able to share that data point. And then more generally, how do you think about protecting the business and how would you think about putting in place positive actions to preempt any change of the competitive environment in Wallonia, if that were to happen at some point? Thank you very much.

Bart Van Den Meersche

So to follow-up on Tuttimus, we clearly see that positive impact on the fixed line. We stopped serving the fixed line as the fixed line as such, but we really sell it as an experience in the back. If you want to call your mother in law, who is spending the winter in Spain here, evenings and weekends, you can call her and speaking what’s the back, which is totally different stories on selling a fixed line. If we see our pickup of Tuttimus, indeed, it is a very strong pickup and we have not seen it weakening at all over the period since the launch. So I think from that perspective, that evolution of the fixed line, hence the evolution of Tuttimus, we see that continue. And as I mentioned where the end of – beginning of the launch was focusing mainly on conversion we really now see strong pickup on new customers as well.

Dominique Leroy

Okay. So concerning Voo governance issues, I think it’s true that there is a lot of first in the press around governance issue by politicians or active people being remunerated in some mandates for Voo. To be honest I think for the time being, we do not see that there will be willingness from the government in the South to sell Voo. What we see currently – but to be honest, I also only read the press as you do, but what we see is that there is a very strong new governance that will be put in place, making sure that the practice in the company are in line with the new governance trying to have more transparency. Also on the figures and the way the company is run. But at this stage, we do not reach – there is any willingness to separate Voo from the Netflix Company. And so far, I think it’s still risk to us, but we do not see this risk being very much increased short-term. But as you will do, I will continue to read the press and follow that as well, because I have no specific information prime hand on that one. Market share growth then in Wallonia, it’s true that it’s the reverse of Flanders, where in Flanders, Telenet is the dominant player on the Internet and also the TV market. If you look at the Wallonia, we are more dominant players in terms of Internet. So in that sense, I think we have a strong position in Wallonia. And we will try to maintain it. What can we do to prevent competitive environment changing, I think not a lot. I think we have to continue to run our business well to make sure that we continue to push projects on the convergence 4-play and with Tuttimus, that we also have an alternative on the low end side of the market with Scarlet. And in that sense, we can I think rightly complete with Voo on one hand and with Orange on the other hand. And the strategy we have on the whole country and I think we will just pursue it. So far, it has given us good results.

Operator

The next question is from Ruben Devos of KBC Securities.

Ruben Devos

Yes. Good afternoon, two questions for me. In terms of roaming, I thought the roaming guys of 61 million was quite substantial comparing it to some of the lowest your competitors have published, the press release mentioned you have multiplied volumes with last year by the price decrease by the regulator, so is it therefore safe to assume that there is some upside as you would negotiate wholesale tariffs with your peers across Europe, therefore achieving lower effective wholesale tariffs. And then the second question on enterprise, so broadened RPUs, the decline throughout 2016, I understand that for broadband, much has to do with the out phasing and migration of legacy products and offering new solutions, but could you give an idea of how you are in migrating your back book to these new offerings and at what point you believe this turns to stabilize and also at what point would you expect to sort of gain pricing power, let’s say, introduce fiber in the business footprint? Thank you.

Dominique Leroy

Okay. So your first question on the roaming impact. I think first, relative to others, two comments on one. First comment is Belgium with other countries where [indiscernible] weight of roaming is certainly higher than what you can see in the countries that has to do with the size of the country that has to do with the fact that people are traveling more abroad. And in this respect, the weight of roaming as a percentage of revenue and mobile service revenue is certainly higher than what you can see in other geographies. And then comparing Proximus to other domestic players, the exposure might be higher as well due to the weight of our corporate customers and corporate customers which have the higher proportions while of their mobile revenue services, which is exposed to the European roaming. And to your point, the impact that we have shown here is just showing the gross impact of the prices with the price effect that’s without any elasticity element and we are entering in 2017 a period, where we will have I would say, normal revenue and we will have the [indiscernible] as well. So this is a bit different from what we have seen in 2016.

Operator

The next question...

Bart Van Den Meersche

Then no, there was a question on enterprise. Also the second question. So regarding the out-phasing of legacy products in the fixed Internet, so it’s indeed so that we have – and I told you that in the previous quarter also that we still have a number of legacy – old legacy products that we are progressively phasing out, which are high ARPU, old legacy Internet products and so that we are phasing out towards more attractive price offerings for our customers. We expect this to still go on in 2017, but at the same time, indeed, we will have more and more the positive effect of the fiber rollout and we already had this slightly in 2016 where we increased the numbers of fiber connections, but mainly point-to-point connections. In 2017, we tend to increase the number of fiber connections and do it so in that context and go further in that same direction, but the rollout of the fiber is announced by Dominique.

Operator

Thank you. The next question is from Nicolas Cote-Colisson of HSBC.

Nicolas Cote-Colisson

Yes, thank you. Two questions, please. Can we just have a follow-up on the roaming costs, especially on the wholesale side? I was just wondering if you can give us more color on how it works and how it impacts the wholesale revenue and costs and whether you can benefit from some partnerships with Vodafone or others. On co-investment, I was just wondering, can you start with Orange Belgium rapidly or will it require the regulator to first set to kind of framework before you can start co-investing? And last on EBU, the data revenue turned negative in Q4 year-on-year. I was wondering if there was any particular issue this quarter or is that just kind of a quarterly glitch? Thank you.

Dominique Leroy

So, on the wholesale and the roaming cost, we have a set of agreements with many carriers, among which by the way, Vodafone, of course. Remember that we have a structure in Belgium, which is asymmetrical. We actually received more roaming in traffic than we generate roaming out traffic. So, when we negotiate we have this in mind. And so we are trying to make sure that we slow down as much as possible the decrease of the wholesale tariffs. Having said so, the new regulatory environment with the latest announcement on the wholesale price cap for data in Europe with the trend going down is something that is already roughly in line with the pricing structure we have for 2017. So, concerning the co-investments, I think it’s obviously true that we first need to have a key regulation framework, first of all, from the new European telco reform where co-investments is mentioned, but of course, it’s not yet finalized and then we will have to see how this is translated locally. To be also transparent, I don’t think overall our intention to co-invest on the very short term with us, because I think today they are very much focused on their products development. The question is much more if we do more investments, would there be an opening to co-invest and in that sense, we are open, but to be honest, I don’t think it will happen on the very short-term and we will anyhow needs to wait for the right regulatory context.

Bart Van Den Meersche

And then on your question for EBU, the fourth quarter fixed data, it is indeed so that Q4, there is a slight negative trend in Q4, but that is due to a number of one-offs. Actually, we had a number of one-offs, positive one-offs in Q4 of 2015 and a number of negative one-offs in 2016, so this is not structural.

Operator

The next question is from Luis Prota of Morgan Stanley.

Luis Prota

Yes, thank you. The first question is a follow-up on the new convergent propositions on the strong take-up of Tuttimus. But with also convergent products from Telenet and Orange, I am just wondering if you had something similar to the portability statistics that we use in mobile, but for these convergent products. So basically, what I am trying to get our sense is on how many single-play clients you are taking from competition into your convergent product, but also how many single-play Proximus clients are lost to your peers convergent products and why? What are the dynamics behind that? So that’s the first question. Second question is if you have any update on the tax reform in Belgium? And finally, a follow-up, again, on roaming, I know you are not going to give guidance going into 2018, but just theoretically, there should be – my understanding is that there should be further roaming impact in 2018 as roaming is going to fully disappear from the second half and you still have some elasticity in the first half ‘17. But I suspect that in ‘18, the impact is going to be lower anyway as most of the impact is concentrated in the third quarter ‘17 when everything will be off. I don’t know whether that is about right or not. Any comment would be very helpful? Thank you.

Bart Van Den Meersche

So, I think I mean I cannot give you all the numbers that you gave there, but I can give you some proxies that would highlight where we are heading with that. If we look at our postpaid results, we have added 27,000 postpaid customers that was our best quarter in the year. That was driven, yes, certainly also by the joint offers, but definitely by our new Tuttimus portfolio. We did see, of course, I mean, the aspiration of base mobiles and standalone mobiles by WIGO. I mean, we have observed that. But we have also revamped our Mobilus offer with the free app boost that was really capable of countering that. So, I think the postpaid – 27,000 postpaid is one sign, but also the very strong tearing that is on to the portfolio is I think another good proxy for how Tuttimus is absorbing the mobiles. Then I think another component that could highlight some of the aspiration capability of Tuttimus is the market share evolution. If you look at digital TV, if we look at fixed internet market shares, we have seven – the last seven quarters in a row on digital TV, Proximus has gained market share. And the last five quarters in a row, Telenet has lost market share. So again, there many of our customers are coming towards us. And then I think the other component that I can give you is that – in a quadruple-play, but again, I mean it’s only two months in the market, but we see a very healthy number of 4.82 RGUs in our quadruple-play and everything in a quadruple-play above 3, of course, is mobile, so we are at 1.82 mobile for Tuttimus customers, per convergent customer. I think those are the few highlights that show that Tuttimus is a good absorber for fixed on mobile and for mobile on fixed and for growing revenue-generating units per customer.

Dominique Leroy

Okay. On your second question on tax reform in Belgium, unfortunately, we do not have much visibility for 2017. We don’t expect that it will help our effective tax rate this year. And 2016 in this respect was quite a low ETR achievement. And in your third question on the roaming, you are correct, in your assumption that in 2018 – as of June 2018, we shouldn’t see anymore the impact of the end of Roaming-Like-At-Home, in that sense, we expect much slower negative impact for this 2018 year.

Operator

The next question is from Marc Hesselink of ABN AMRO.

Marc Hesselink

Yes, thanks. Initial question is on the guidance, which is slight growth in EBITDA, but you have a bit of feel on the difference between the consumer segment and the enterprise segments and [indiscernible] expect some more competition in the enterprise segment. And therefore, will it be fair to say that most of that growth for the group was coming from the consumer side? Then second question on free cash flow, very strong in 2016, could you give a little bit of a feel what you expect for changes to the working capital and provisions for 2017 and therefore, if your free cash flow given that your CapEx will be higher, but your EBITDA also will be higher, what will it do directionally year-over-year. And finally, coming back on the comments you made earlier on Voo, you said you are still at risk if there would be a change of ownership, could you explain that, because I always thought that relatively aggressive, so why would it be a risk if there is a change of ownership? Thanks.

Sandrine Dufour

Okay. So first question on the guidance, you may have noticed that we do not breakdown our segments EBITDA. We manage them through the direct margin and then we manage our operating expenses. So this nearly flat guidance on revenue translating somewhat similar pattern for direct margin. And the major driver for growth will come from the continued efforts that we plan to do on reducing on net OpEx. As you know, we have guided for the year €150 million net OpEx reduction in 2015, 2019 and we will continue along this trajectory in 2017. As for free cash flow, we do not plan to give any guidance on our free cash flow. What we said in December is that we aim to be able – despite the increase in our CapEx to generate free cash flow that will cover our shareholder remuneration. We will certainly continue to manage actively the working capital. As you know, I think we are able to meet the benefits of the optimization of our working capital. Our target here is to maintain our position and to make sure we can cover our dividend with cash flow generation.

Dominique Leroy

So coming back on Voo to highlight a bit more context for people that are not sitting in Belgium, Voo is a subsidiary of a company, which is owned by municipalities, where you have gas, electricity, telecom and some media content. This whole company is in the hands of Wallonia regions. Because of that, there is not a lot of visibility on the figures and on the remuneration because we are not listed on the stock exchange and there is not a lot of publications on the company. There has been a lot of press [ph] recently about the fact that some politicians were remunerated for the mandate in the company without a lot of transparency, sometimes relatively high amount without effective work. So it has created a lot of hazard around the company in the South. There has been some rumor and speculation that because of that, the company that needs to be – to become more transparent is one way of doing it was potentially to do some stock listing of the company, which would mean that a potential small change of ownership. So far, as today, there is more an inquiry, an official inquiry to see how we can run the company with more transparency. But the short-term change of ownership risk that was highlighted by one of your colleague in a question previously, we don’t think it will come that fast because it is more today about keeping the current structure, but putting more transparency on the government and not going into a stock listing. So I hope that clarifies a bit of the question. It’s a difficult context to explain, but the whole structure comes from the fact that the company is a utility company owned by municipalities and therefore, not so much transparency and visibility, neither on the number, neither on the remunerations.

Operator

The next question is from Ulrich Rathe of Jefferies. Mr. Rathe, your line is open.

Ulrich Rathe

Can you hear me now? Hello.

Dominique Leroy

Yes.

Ulrich Rathe

Sorry. Three questions, please. My first one is on so you are guiding for a – you are indicating a roaming impact, which is essentially a calculated number of the regulated impact, I was just wondering when you actually guide or set out your business plan, what you actually assume to be the actual impact. In other words, what degree of elasticity do you actually expect and what the – what are the actual prices, so the net impact of that would be quite interesting maybe on EBITDA, more interesting than on revenues. The second question is, in fixed voice I think a previous questions have highlighted the fact that there is no intake and you sort of pointed out that you are throwing agents a bundle you are no longer selling, the single play product, I was just wondering to what extent is this throwing a product that ultimately the customer doesn’t want and you are more or less forcing them to do it. In other words, do you have indications that people actually enjoy this, do you see usage on that product or is it effectively a price rise of an unwanted legacy product. And my third question is in EBU, could you comment on the acceleration of the service revenue decline, I think it was minus 8% in the quarter, is this sort of something odd in the quarter, is it just a roaming effect and how will this unfold in 2017 from your point of view? Thank you.

Dominique Leroy

Okay. So there is certainly now a budget and plan, some elasticity impact as well in the volumes that potentially go beyond the calculating impact that. We have seen this in 2016. We expect to see this as well in 2017. And with the new regulation, this comes with higher COGS because we have no more revenue, but we have to pay the wholesale price. Now on the other side, we have also roaming new, which benefits from elasticity because our neighboring countries are observing the same trend. And so this is the balanced impact that we take into account in our real projections.

Bart Van Den Meersche

So what we have done on Tuttimus is indeed, we start highlighting the fact that this is a fixed line, but highlighting specifically the benefits of what you can have. So I mean the international calling and using on weekends is definitely something that is very much appreciated and the free calling, the fixed and mobile is definitely very much appreciated. Now, it is true that there will be probably lower consumption by certain consumers, but the overall advantage of what they can do with fixed line is very much appreciated. Now, will there be a shift in technologies and there definitely will be a shift in technologies over time in the fixed line will migrate to Voice-over-IP and then later on to probably other services in the future. The importance for us is to have the customer with its quadruple play with us, so that we can guide them through that convergence of technologies on our platform. Similarly 2G has made place for 3G and 3G is making place for 4G and obviously, the evolution of technology. It is the use that people get from it that we want to highlight what technology we fulfill it with. At this point in time, we will change from to-date to the future. But we want the customer with all these communication experiences with us in a quadruple play.

Phillip Vandervoort

And then on your question on the evolution of the mobile services revenue in EBU, it is so indeed that in Q4, you will see that the decline is a bit higher than in Q3 legging to three elements. One, you have the effect of roaming of course, so that you have seen as of Q2, more in Q3 and then in Q4. In Q3, we have I would say a little bit more elasticity in volumes than we have in Q4, because there is less holidays and there is also one week less than the year before because the Christmas holiday – there was only one week in 2016. Second is the changing travel or the changed travel behavior, where indeed less people are traveling and less people – when they travel, they travel mainly to Europe and not rest of the world due to the terror threats. But there is also a certain element under this increasing competition pressure. This is also happening in the markets. So those are the three elements that explained the impact.

Operator

The next question is from Stefaan Genoe of Degroof Petercam.

Stefaan Genoe

Yes. Thank you. Two questions, Orange Belgium indicated that in their bundled offer, they saw mainly customers coming from the different operators, we do not really see this in your numbers, could you indicate on which product lines you see most impact on and which brands you see most impact from Orange Belgium and how this is perhaps different in Flanders versus Wallonia? And second question on the B2B, how do you see competition going into 2017? Competition has been quite pronounced. As indicated, they want to move quite strongly in 2017 in the B2B segment. Could you indicate for B2B how you see competition in 2017? Thank you.

Phillip Vandervoort

So on Orange, they have done their gross greens. Let’s take into consideration that there is growth of the fixed and the digital TV markets. So they have taken a nice part of that growth. We have not seen churning out towards Orange. We haven’t seen that on the Proximus nor the Scarlet side, but on the gross gain side, it is clear that Orange has taken a position. If we look at that’s probably technology-driven, it is easier to migrate towards Orange from VOO or TNS from a cable operator and that is what we, indeed, see as well in the market shares. So in summary, we see Orange activity on the gross gain side. We see them taking parts of the growth of the markets and we see them fitting into Telenet and VOO customers. No really big difference between the north and the south makes a little bit more on the northern parts than in the south, but no remarkable difference there.

Bart Van Den Meersche

And then your question on B2B and how competition is evolving and how I see this. Quite honestly, I don’t see a difference than last year, because they were very outspoken also last year that they would affect the enterprise markets and it’s the same this year. And so we try to anticipate that by differentiating as much as possible. So differentiation is really the key elements against competition to sustain our leadership and we have been successful in doing so in 2016 and we have all the – how will I say the intent to do so also in 2017. When I talk about differentiation, it’s on different elements. It’s not one element. I mean, it’s a combination of many elements. First and most importantly, definitely customer centricity and customer experience. So, we are putting a lot of efforts on delivering the best customer experience in the markets. By the way, we have launched therefore also an important business transformation project that we call EXCITE that should deliver the best customer experience in every touch point that the customer has with us. Second, we want to offer the best SLAs in the market and one of the most important in that context is business continuity. Business continuity is still the most important priority for enterprises. Third is, of course, we do want to do that based on the high-quality of our networks. In mobile, I think it has been proven many times that we have the best network in the market. We were the first in 4G. We were the first in 4.5G. And by doing so, we have been able even to reinforce our position in mobile. Fixed, of course, we are putting a lot of efforts on fiber, so Fiber for Belgium and the rollout for B2B is very important where we see a lot of traction. Fourth, we fully leverage convergence, convergence in between telco – in between fixed and mobile, but also telco and IT and deliver end-to-end solutions and that is how would I say increasingly important in the markets, where customers expect these end-to-end solutions. Fifth is sales, what I would call, sales and service in coverage. We have a very important coverage from customs with account managers, with every service people. And sales experience is still the number one influence around buying behavior. Sixth is a very high focus on innovation, innovation to develop new revenue sources, but also to be relevant to our customers in that context you have Internet of Things, you have data analytics, you have enabling company, digital service company, digital service provider, security, very important smart city, smart mobility. And seven, I would say, cost efficient organization. So, we like the whole group we are working our costs and making sure we have the best cost search. Last but not least, I would say also be proactive and try to anticipate disruption as much as possible and that’s what we are doing. So, are we going to be impacted by this interruption? Probably yes, but we try to minimize the impact by doing what we did until now.

Operator

The next question is from Michael Bishop of Goldman Sachs.

Michael Bishop

Yes, thanks. Good afternoon. Just two questions, please. Firstly, following up on a couple of the questions on potential co-investment in the non-dense areas, clearly, there is going to be a range, but is it possible to give us a sense of the cost per home of rolling our FTTH as you go into the non-dense areas. So maybe if you were to say do another 10% or 20% of Belgium homes be on the 50% indicated before December? And then secondly, just around that, should we assume that your sort of cost threshold to pass those homes is similar to the one you have announced and therefore you would need the equivalent co-investment percentage from Orange Belgium to get your costs down to being in line with what you have announced already? And then just a quick point around cost-cutting, it seems like you are making very good progress on growth extension. Should I read that there is potentially a good level of cost-cutting to come beyond the €150 million that you have indicated between 2015 to ‘19 as well? Thanks very much.

Sandrine Dufour

Okay. So, on your first – actually even second question, I think it’s a bit premature to get into this type of detail. I would suggest that we first have these discussions with potential co-investment partners. And as Dominique said earlier, it’s not going to be short-term, so it’s premature to answer any question on the cost per connecting the home in these areas and the framework into which we would operate. On your third question on cost-cutting, I think it’s maybe worth reminding that when we gave you guidance at the end of last year on our €150 million net OpEx ambition for 2019, we had a pretty good view at that time of what we were able to deliver for 2016 and so we are updating and actually even upgrading the previous guidance in this number. So, I think we are sticking for the time being to this ambition for the next years.

Operator

The next question is from Vikram Karnany of UBS.

Vikram Karnany

Yes, thank you. I have got few questions. First thing in terms of the 4G data usage overall in Belgium remains low and for you, I see it’s around 1.2 gig, which represents clearly a good growth opportunity. But when I look at the 30% year-on-year growth, it’s still low in terms of run-rate compared to your peers like Orange Belgium. So, I was wondering if you could highlight any of the factors that leads to kind of the structural low growth for you and how do you plan to stimulate the usage going forward? Then in terms of the prepaid drag as a result of this new legislation, do you expect the trend to worsen further in the first half of ‘17? And finally, in terms of the cost reduction plan, is it possible to breakdown what sort of impact is expected in 2017? And if there is any cash related restructuring cost to it? Thank you.

Bart Van Den Meersche

So on 4G data, I mean, compared to some other countries, it is low, compared to the U.S., it is high. It depends on what structure there is in the market. I think we see a very steady growth. And talking about the stimulation of usage, one of the things that we observed is I mean, we have migrated the majority of our customers to the new Mobilus. In Tuttimus, they also have the same free application. What you see there is that indeed the other bundle goes down for a while and then people start using the data more and more and more. And what you then see is after a few months that starts flattening out again and then it’s starting to go up again. So, it is pretty much getting people – getting the customers – making used to use data and we see through our efforts and through our plans and facts, but that is working. If we look at prepaid ID, will it worsen, yes I mean let me give you a few – a little bit more color on that. We did indeed saw that continued decline of the prepaid market. We have and that was driven to a large extent indeed by the ID law. We have put in place in the Belgium market the best identification process in place if you compare it with the different ways how you can get your ID certified. We have four, five different ways that we can touch every single customer we have, the way I have spoken and very clearly of communicating with our customers. But that volume pressure will continue. Now, give you maybe one number, I mean, 40% of our customer base, we have been able to identify and there is also a large extent of cards that are being used for the lawnmower and the alarm central and the garage doors, etcetera, etcetera. So those we cannot touch. We are driving that migration to postpaid and full control and we are driving that to a very specific communication. Up to today, we are losing less than we predicted, but we will have volume go continue to go up or continue to go down on prepaid definitely, but we think we have put all our measures in place and proactive contacts already today have 40% of our prepaid customers contacted and secured.

Sandrine Dufour

And your last question on the cost reduction expectation. So out of 150 million we delivered in the first year 2016 and the remaining, we expect to do roughly a third in 2000 – sort of what remains to be delivered in 2017. And to your question whether there are any restructuring costs behind these efforts, remember what we said on how we account for the early leave plan cost is being spread over a certain period of years and it’s accounted for below the underlying EBITDA and we had disclosed the expected provision for 2017, which is in the tune of €70 million for 2017.

Operator

Thank you. The next question is from Usman Ghazi of Berenberg.

Usman Ghazi

Hi, good afternoon everyone. Thank you for taking the questions. I have four questions, please. The first question was just on the pricing model for fiber, I mean has anything been communicated on whether households will pay an upfront connection fee or not. The second question was on roaming, some of your – I mean, not the Belgian competitors, but some of your peers have indicated that they will not, for example give the Roam-like-at-Home to all the corporate customers on day one and the Roam-like-at-Home will be made available over time as contracts renew and so I was just wondering what Proximus’ stance on that is and what the impact includes giving this to all the corporate customers or whether this will be impact over time in the business segment. The third question was just on potential for price increases in mobile to offset some of the impact? Actually, I will leave it at that. Thank you.

Bart Van Den Meersche

So on your first question we clearly drive fiber through enterprise where customers will be benefiting mostly from the increased peak, the latency and the symmetricity of the offer. I think overall, the network in Belgium is very good. If you look at the Netflix ISP Index sits around worldwide is number one, Belgium worldwide is number two and in Belgium, we are number one. So we are offering already to our customers a very, very solid infrastructure. So what we will – how we will position ourselves is from a speed perspective, we will allow ourselves not to be discredited anymore compared to our competition, so we will put ourselves on the same speed as the competition. The Tuttimus project will be at a similar price at the same price actually and the customers will have an option or are having an option to get a speed boost for an additional fee. So that’s how we are pricing the product. We are taking a two step approach for the connection in the home, I mean the physical connection in the home. It is when we are opening the roads and when we are active in the streets, we offer to various customers a free installation or free termination of the fiber in their home and that is while we are doing the works. Once those works are offered and the customers will have to pay for the connection in their home. So that is basically our approach on – for the consumer business.

Phillip Vandervoort

Then your question on roaming and the impact for corporate customers, we are implementing roaming like at home as of day one in line with regulation. Now, what we have is that sometimes we have bundles where for customers, there is a number of data bundle that is including as well Europe, top destinations are rest of the world. But those bundles remain valid and applicable then for top destinations the rest of the world, but we are applying roaming-like-at-home for Europe as of day one like regulation is important.

Bart Van Den Meersche

And on the third question, the potential price increase on mobile to offset the impact, not directly in our plan specifically for that. What we do see is the Roam-like-at-Home and data consumption increase where customers of course when they are traveling will have their Google Maps active and they will be on TripAdvisor looking for where is the next restaurant. And for that, there will be more data consumed, it will get people more used to using data also in their home location and that increases the opportunity for us to do up tearing and to migrate people either with their mobile in our packs where we offer more data or towards a higher tier in the kind of mobile standalone.

Operator

Thank you. The next question is Parin Shah of Bank of America.

Parin Shah

Hi. Thank you very much for the question. I just have two maybe slightly bigger picture questions. Just on towers, do you have any plans for monetizing you tower portfolio and maybe using the proceeds to accelerate your fiber build. And the second question is, is there a meaningful way in which you can differentiate yourselves in a 5G world, how do you think about network investments, is this more about trying to kind of go alone or do you see a lot of potential for co-investment considering the amount of spectrum, kind of auction and the number of small cells that needs to be invested in? Thank you.

Sandrine Dufour

So no question on towers, we do not have any plans to dispose of our towers. I think just maybe one word on that balance sheet. I don’t think we have an issue in terms of being able to fund any fiber plan. We are probably one of the lowest year incumbent in Europe who is one time our net debt to EBITDA and there are certainly available first from very cheap rates to fund any CapEx program.

Phillip Vandervoort

Then with respect to 5G, it is for sure already with our Fiber for Belgium plans, one assets and crucial assets that we to bring in place is the fiber at home, because 5G will be about small cell densification. But these small cells will be fiber backhauled. We set at the end of last year, that while we will do the fiber-to-the-home rollout, that we will foresee the necessary flexibility points so there is a synergy between fixed and mobile and mobile becomes fixed. With respect to potential for co-investment that is too early to make any comment about that.

Operator

Thank you. We have a final question from Ulrich Rathe of Jefferies.

Ulrich Rathe

Thank you. I was just really following up on the earlier questions. You helpfully highlighted the components of the net impact of the Roam-like-at-Home regulation on your financials, I was just wondering whether you are willing to sort of share how this all ultimately adds up in your business plan net, is it a drag, is it even a support, I don’t really know, what assumption you sort of realistically make, I understand elasticity is actually quite high? So that’s really the main question, yes. Thank you.

Sandrine Dufour

Yes. I think it’s clearly a drag on our business, that’s for sure. I mean the net impact we give, the gross impacts we gave is not far from the net impact.

Operator

Thank you. We currently have no further questions.

Dominique Leroy

Okay. I think that we can end the call for now. Thank you very much. If there would be any follow-up questions, you can contact Investor Relations team. Thank you and have a good weekend.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you all for attending. You may now disconnect.

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