Proximus PLC
Q3 2021 Earnings Call Transcript

Published: 30 Oct 2021

[Operator Good afternoon ladies and gentlemen and welcome to the Proximus’ Q3 2021 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, Group Investor Relations. Madam, please go ahead.Nancy Goossens Thank you and welcome everyone. Thank you for joining us. We will start the session as usual by an introduction by the CEO, Guillaume Boutin. After this, we will turn to your questions.For the Q&A session, we are also joined by the CFO, Mark Reid; Jim Casteele, the Chief of the Consumer unit; Anne-Sophie Lotgering, Chief of the Enterprise unit; the CTO, Geert Standaert; Dirk Lybaert, the Chief Corporate Affairs; and the CEO of BICS, Matteo Gatta. They will be happy to take your questions in a moment. But first, Guillaume, let me take through the highlights of today. Guillaume, please go ahead.Guillaume Boutin Thank you, Nancy. Good afternoon to all of you and welcome to this conference call of the Proximus third quarter results. So, before getting to the financial and operational overview of the past quarter, I’d like to spend a few minutes on the progress we have made in our Inspire 2022 strategy. As a quick remember, we have four key strategic pillars as shown in the slide.We are in full execution mode and has been making progress on all fronts. I won’t elaborate on all of them, but let me highlight just a couple of notable steps that we achieved in our strategic execution. An essential part of a strategy is about building the best gigabit network for Belgium and about bringing the superior network experience to our customers. Both 5G and fiber are crucial. And this is a combination of the two that will be a game changer to the industry and bring undisputed product superiority to Proximus. The great work of our fiber teams has been acknowledged by the Broadband World Forum and we proudly received the award of Fiber Operator of the Year worldwide.While it is progressing very well with our fiber rollout with a simultaneous active deployment in 18 cities for our Proximus standard footprint, in addition our 2 JVs, Fiberklaar and Unifiber kicked off construction in 6 cities. And this is only just the start as our fiber callout is picking the pace and we have already announced deployment in minimal cities and municipalities. With that, we are remaining well on track for ambition to cover at least 70% of Belgium by 2028. Specifically, in the last quarter, we have kept the strong pace even over the summer audited period, with another 65,000 additional home passed. This brought us to a total of $686,000 of home passed and at end of September are just over 11% of all of the Belgium premises.As for mobile, we want to build the most efficient and future proof network to offer the best customer experience. Already today, the Proximus network is recognized as being a superior quality. As you know, 5G spectrum auctions have not yet taken place in Belgium. Things are moving in with the auction plan now mid-2022, although we will have to wait for the agreement between the federal government and the regions to confirm that timeline. In the meantime, Proximus remains the only operator in the country with a life commercial 5G offer.Using the re-farming of the 2,000 megahertz 3G spectrum, plus on the B2B side of 5G innovation platform is gaining a lot of traction, allowing customers across the country to test the full potential of 5G in a collaborative way. Our growth strategy is articulated around product superiority through our networks, as I said, but as well as on innovation. During this quarter, we have launched Banx, a sustainable and fully digital banking experience imagined by Proximus and powered by Belfius. This app is a combination of technological know-how and sustainability. Thanks to the unique CO2 dashboard developed in partnership with the economy. This way, customers can evaluate their spending not only in Europe, but also in CO2 and adopt more sustainable habits.Staying with Belfius, we also officialized the launch of Beats, the offer combining banking offers and telecom services. As such, Proximus services will now be sold in thousands of touch points of Belfius. On the B2B side, we have launched auge that stands for augmented energy. This smart building application platform is a collaboration between Proximus, BESIX, and I.LECO. It connects a physical building to a series of useful digital applications that allow us to optimize energy consumption and to reduce your carbon footprint. Still in B2B, about 1 month back, we have announced our agreement with HCL. This IT infrastructure agreement will bring us economies of scale, best practices, experience and expertise in the cloud domain. It will not only allow us to assure the development of the best customer offer, but we make it also sure that we are able to retain strong strategic influence in the cloud domain. Moreover, the agreement brings financial benefits, thanks to a lower cost of ownership, which we estimate to go down by around 20%.Last but not least, we continue our efforts to support a green and digital version with a few new initiatives. The first one is digital, digital inclusion alliance sponsored by Proximus and BNP Paribas Fortis, together, with about 30 other companies, public bodies and social organizations. It’s mission is to narrow the digital divide in Belgium. Another point to highlight is the support Proximus provided to the one region after the severe floods of mid-July. I am proud of our field engineering and support teams. We have been working day and night in very challenging conditions to restore our infrastructure in the impacted areas, ensuring that customers could reconnect with family and friends.Turning now to the second part of my introduction, I am sure you have looked at our research already closely. So let me just focus on some of the key achievements starting with the commercial momentum. Over the past quarter, we once more posit growth for all our main customer bases, with a strong mobile growth adding 58,000 mobile accounts. For both Internet and TV, we grew our respective customer bases by 5,000 subscriptions each. The slower pace compared to prior quarters broadly resulted from less customer rotation and the severe floods, while our overall customer initiated churn was down from the previous year. We continue to do well in the higher value consumer segments as demonstrated by the growing number of fiber subscriptions. By end of September, we had 104,000 households enjoying the advantages of fiber. We expect this to build up going forward as the fiber rollout continues to accelerate.Convergence is core to our strategy. And we see our flex offers providing continued support to drive an increasing number of multi-mobile customers in our base. There is benefits to the overall RGUs and consequently drives ARPC app. With the convergent ARPC significantly above the overall average, the ongoing move to conversions is value creative. As a result of the growing importance of conversions in our revenues and customer base, we see indeed growing ARPC up by 0.6% year-over-year. From a high comparable base in 2020 as last year, we benefited from an exceptional high usage, mainly on fixed voice traffic.Now, turning to our B2B unit, which is holding quite well, despite the ongoing intense competitive dynamics in the market. Let’s first have a look at the ICT domain. In the mix of our ICT revenues, we achieved 4.3% growth in IT services demonstrating that our B2B transformation is being well-managed. The recent trends in digital adoption are bringing such opportunities. In this context of converge, telco and ICT solutions and our emerging end-to-end servicing offers are gaining traction.In contrast, revenue for low margin assets products declined. This has mainly resulted from shortages in chipset supplies, which implied that some of our hardware products could not be delivered to our customers. Within the B2B telco domain, we maintained good revenue momentum for internet and especially mobile services, which was up by 2.9%. Thanks to a growing volume, but the ARPU decline remains mitigated. The fixed voice part continued to erode. Even through the ARPU, evolution was kept positive, supported by the pricing acquisition and the rather non-switch traffic credited to the vaccination centers.For wholesale, you see on this chart in the middle that we turned around an historical declining trend in our wholesale broadband part supported by a fiber rollout. Wholesale revenues from fixed and mobile services are not stabilizing. Overall, this part of our domestic business is still very limited today, which means that it’s a significant growth opportunity for the future. This brings me to the total domestic revenues for the third quarter, 0.8% down supported by the ongoing sound operational performance and the contribution of Mobile Vikings. As demonstrated on the slide, the decline for large part resulted from low margin revenues from interconnect and ICT hardware. Furthermore, as expected, fixed voice usage has come back from its unusual high levels in 2020.Now, turning to the international activities, starting with TeleSign, data is positioned at a unique intersection between digital identity and communication to booming markets. And this combination makes it the only one stop shop for fraud management, authentification and access management and security pass, which is essential to enable the trust that is required in all our digital lives of today. TeleSign ended the third quarter with a strong performance on new signed contract. We can see some of the names on the page. TeleSign is attracting all major internet players like TikTok or Viber. In addition, TeleSign continued its geographical expansion, bringing its digital identity solutions in both Europe and Asia.The financial results show another strong sales quarter with revenue up by more than 20%. The newly signed contracts will continue to support the double-digit revenue growth for the remainder of the year. As we communicated before, we expect TeleSign to end the year with around 20% of revenue growth and direct margin offering 10% on constant currency. So, significant investments in the acceleration of this growth profile are ongoing. Nonetheless, TeleSign keeps the positive EBITDA.Q3 was clearly a strong quarter for BICS. The core services posted a material revenue increase, thanks to a combination of high messaging volumes and a favorable destination mix reflecting the trading nature of this part of BICS business. We also saw international travel picking up in particular within Europe and a strong traction for cloud communication services. At the same time, BICS continued its firm cost control, all-in-all leading to 15.8% increase in EBITDA for the quarter.Moving now to the operating cost of the group, I just want to highlight that our domestic CapEx remains well under control, with increase related for the quarter to 0.4% on an organic basis and thanks to our ongoing cost efficiency program. This brings me to the EBITDA for the group totaling for the third quarter €457 million, a decrease from last year by 2.6% or minus 4% on organic level and moderating in line with our expectations. As for our CapEx level, the acceleration of the fiber product is raising the total investments for the first 9 months of 2021, all according to our plan. Fiber is now representing one-third of our total group CapEx overall. Besides fiber, we also stepped up investment in the area of digitization and IT transformation. And we also have some more CapEx coming from the increased customization mainly linked to the fiber migrations. The free cash flow generation remains strong over the quarter with €146 million on an adjusted basis bringing the total normalized free cash flow to €408 million.So in conclusion, I am very pleased with where we stand today in terms of our results and progress on our strategy. Our organic and domestic revenues remains broadly on track while we kept strong momentum on international businesses. We continue to monitor the global supply chain shortages that can have an impact on low margin and revenues. In addition, we keep a high focus on a company-wide cost program and we remain on target to achieve €400 million of cost savings back in 2025. So, overall, very confident that we – that for our organic underlying corporate EBITDA, we land in the mid to upper part of our guidance range. And with the fiber rollout progressing very well, we reiterate our full year outlook and CapEx close to €1.2 billion, excluding spectrum and football rights.With this, I have come to an end of my introduction. And we can now go to your questions.Question-and-Answer Session Operator [Operator Instructions] We have a first question from David Vagman from ING. Sir, please go ahead.David Vagman Yes, good afternoon everyone and thanks for taking my question. First, on your fiber rollout in tenders, what is your reaction to the incoming deal on – with the network which is supposed to be fully open looking for partnership and strategic investor? Does it make you rethink your strategic option with tenders? Would this push you to be more open to strategic partnership today with all inspection to get them on your network? That’s my first question. Then secondly, on your FTTH rollout cost or do you think you will compare to this JV, let’s say, Telenet. So, [indiscernible] Telenet’s using client to believe that they can achieve material [indiscernible] cost? I am curious about that. And last question from my side, what is now the state of affairs on the mobile spectrum auction as the Council of States validated the legislation of spectrum and what is your view on the recent change decision by the federal government on the reservation? Thank you.Guillaume Boutin So, to start with your first question on Telenet’s [indiscernible], so first, I think this is really an announcement that do confirm that we have the right strategy around fiber. And I think the fact that we speed up and accelerated the rollout of fiber throughout Belgium was really the right thing to do for Proximus. And there is only one future proof technology going forward, which is fiber. So currently, it’s a little bit too early to make a lot of different comments on the announcements. But of course, it did not come as a surprise as you may imagine. And a few points around that. First, we already said that we wanted to build an open fiber network. And we are equally open for discussion when the time would be appropriate. Telenet says they will be open, which we see as a positive, but it will time – of course, it will take some more time, of course, on their end to get to fully functioning network, you know that you need first to finalize the MOU and then you are going to have to get a security approval. So, it could take some time. And we are not going to adapt our strategy for the time being, we will continue the acceleration. We are going to beat 300K new fiber products this year. We shared with you that we are going to be close to 600K new products next year and we are going to meet that objective and continue to accelerate on that fiber rollout. So, that’s not impacting the way we are going to continue accelerating our fiber rollout.Yes, so that’s little bit about where we stand. We want to build an open network. We are open for discussions. They said they wanted to build an open network and will also be open for discussion. So, let’s see where it goes, but for the short-term really acceleration of the rollout is clearly what we have to do. Building this rollout, machine them and skinning it is very, very difficult to do it, it takes time and think we have a clear advantage today, a time advantage. And the faster we go, the better it is for Proximus shareholders. And so it’s a race. And as you know when you were the first to plant the fiber flag in the given region or cities or municipalities, I think you are getting a very important advantage. So, that’s little bit of what I wanted to say on the first internet deal. You had also the question on the cost rollout and Geert you can answer to that question.Geert Standaert What I would say is that we are, I think we are very well positioned with respect to fiber-to-the-home costs, which dare to say that we will be the best ones on deploying this fiber in cost efficient way. And there are a number of reasons to that. First of all, that is our topology, you know that we work with two types of topologies at point to multipoint and point to point that is extremely tuned to the situation that we are in. So, in high dense, we go to point to multipoint, which allows us to do a fiber rollout with minimal trenching. In more of the beyond the high dense, there we do that end through point to point. We have been working with our partners that our trusted partners now since years. So, our learning years there is fully over and I hope that you might have noticed that even while we scale fiber rollout, we are even further reducing the unit costs. So each year, we are doing better. And for the footprint now, so we came from above the thousand or around the thousand, we are now at 940 to deploy our standalone footprint. The other thing is that with the JVs, we signed those JVs up with partners that came as well with experience and expertise. And we see now that because those JVs are now launched that indeed the best practices that we have from both parties, we blend these together, but it’s not only about the topology, the engineering, the partnership and the trust with the relationships, the capacities that you have built, 2,500 people now active on this program. We go very far for example, on everything, which is process. With processes, we use AI, we use process mining. So, in all the aspects of this topology, I think we are pretty leading. Now, if I talk as well with some of the consultants that see fiber rollouts happening elsewhere, etcetera, they see that we absolutely should not be shy about the way we do that now. So, that’s why I am pretty confident and I think that we are ahead of competition.Guillaume Boutin So David, then on your third question related to the spectrum option, in fact, two questions in that part. So the first takeaway on the current text apps, were indeed approved up to the level of the federal government. If we look at the latest version of these texts, we compare it with the initial proposal effect, what we see is that on the reservations for the new entrant, the correction that was made by the government is minimal. We have 2x 35 megahertz in the first proposal, we now have 2x 30 megahertz, only 5 megahertz in the 2100 band that they took away. But for the rest, the amount of reserved spectrum for potential for entrant is still very material. So, it allows both B2C or B2B entrant to the market. So that’s a first remark. Second remark that they introduced indeed in the new text kind of waterfall approach. So they offer the possibility for new entrants to take the full pack. And if there is someone who is ready to take the full pack of the spectrum, other candidates do not get anything, but if there is no one, taking the full pack then operators can do cherrypicking and that is a bit written I would say to the measure of [indiscernible], where they are interested in having only the 700 megahertz. So, that is well possible with the new text. So still, we still have to see and wait, who is candidate for that spectrum.Now, on the procedure, it’s correct, your statement to say that there was a negative advice of the Council of State is correct, the Council of State indeed made the remark that the government does not sufficiently demonstrate the necessity to have a fourth entrant. So, the famous Article 52, we are always talking about the gospel says that the motivation of the government is insufficient on that element. We know that the government has sent new texts to the Council of State, has asked the Council of State to review those new texts in an urgent way. So within 30 days, latest news we have is that the Council of State has informed the government that they are not capable to answer within that short delay and that they would go for the normal delay, which would bring us to the end of year to have that advice of the Council of State. We had a discussion with the Minister said that even if the advice comes by the end of the year, she still believes that the auction can take place in the month of May, June next year. But if indeed, it’s end of the year, it will rather be June than May. You know that there is still one important step to take for the government that is in consultation that committee between the region and the federal state. That consultation committee is planned on November 24. So a bit before they will now have the final advice of the Council of State. So I am not sure how the government will deal with that.David Vagman Yes. No, exactly if I may a quick follow-up indeed or can it be that they basically decide with the Coordination Committees, they don’t have the advice of the Council of State? I don’t really get. So that seems like the sequence is a bit illogical.Guillaume Boutin Yes, I think that’s probably because they were quite public to say that this consultation committee would take place on November 24. I think with the latest news, we have probably they will also postpone that consultation committee. I find it hard to take a decision at that level without an approval of the final texts.David Vagman Okay. Thanks very much. Thanks, everyone.Operator Thank you. Next question from Nicolas Cote-Colisson from HSBC. Sir, please go ahead.Nicolas Cote-Colisson Thank you. I have got a couple of questions. Just as a follow-up, Guillaume, you said about fiber its arrays. So, my question is do you think there is room for the joint venture to accelerate further, especially Flanders in a way to get the opportunity for Telenet to convince other tenants in the future? And maybe more generally around fiber, would you mind sharing your view about vertical integration, because you have stated in the past that you would own 70% to 80% of your fiber network. So, do you think that the control of the infrastructure is preferable compared to a situation where you could save further CapEx? And I may have a follow-up on TeleSign as well.Guillaume Boutin Alright. So first, on the fiber rollout, so what we always say that we want to be as fast as possible, it’s true for our Proximus rollout, which is also true for the JV rollout. So, the plan is just to go at max speed. So, if we can do faster also with the JV, we are going to try to rollout that network even faster. But we know what it takes to skate the machinery of rolling out fiber. So, it’s really what we are in our plan that we share with you at the beginning of the year, during the Investor Day is very, very ambitious plan in terms of speed to rollout. But if we can bid that, we’d be more than happy, especially if it’s achieved through our partners and the JVs. So that’s probably the first answer to your question. On the integration between the network and the services, this is quite important. And really, I am convinced that telco is still for a long period of time is going to be a game of product superiority. And when you know that when you have the superior product, especially in mobile and fixed and Wi-Fi 6, internet, low latency, when you can combine the quality, purity and pull the product superiority on a daily basis, you have the competitive edge, which is really, really important. So, I am a true believer that there is value in keeping network and services very close to one another. And that’s really what I think and others could have different opinion, this is not mine. And that’s why we – as I joined as a CEO, I always said, I wanted to come back to the DNA of Proximus and the DNA of Proximus is building networks. And that’s why we launched this amazing, ambitious program in reaching 70% of fiber rollout in less than 8 years. And that’s why I do believe that integration between services and network is so important. It does not mean that we can be open, open to accept those operators to participate and to be also using our network, but that’s a different story. I think integration, I think we – the competitive edge that integration between services and network is getting to you was the history of telecom and will continue to be the future success of operators going forward.Nicolas Cote-Colisson Thank you very much. And just a quick one on TeleSign, which is looking at the gross margins as a kind of a constant erosion quarter after quarter. So, can you tell us a bit more about the revenue mix and when and how auto recruitments you are making an investment in your products you are making could invert the direction of travel at the gross margin level? Thanks.Guillaume Boutin Yes. I think we – as I said during the presentation and we are keeping 2010 to 20% growth for the full year on revenues and 10% growth on direct on constant currency basis. I think the version you can see quarter-over-quarter is not significant. On the long run, we – what we – what is important to see that the bookings are there is a new customer that are being acquired, since Q1 is just increasing. So this is going to fuel the revenue trends and direct margin of them of next year. But we are very confident that TeleSign is going to be on the growing trajectory for the years to come both in terms of revenues and direct margin, because they are on the booming market and protection of digital identity and security pass. Those markets are really growing very, very fast and will be one of the leader of those markets and we are very, very confident that we can grow even faster than the market trends both at revenue and direct margin levels. Of course, we are investing in the go-to-market at the moment and also in the product, because we want to scare the workforce with 80% of the revenues of TeleSign are made in the U.S., 20% elsewhere. I think there is a huge opportunity to grow geographically. Also, in terms of segment today, it’s only the biggest platforms of the internet that our customers affirm of TeleSign. We could expand that to the more rural end of the market using APIs to use as it manifests as a fantastic score or platform of TeleSign also for smaller sites and apps and enter the value chain, progression is also a way to further develop the activity of the company. So, we can expand geographically. We can move up the value chain and we can address different segments going to the smaller size customers. So there is only better opportunities to continue to develop TeleSign on a profitable manner. And so with the mix of our digital identity products being more and more important going forward.Nicolas Cote-Colisson Thank you very much.Operator Thank you. Next question from Roshan Ranjit from Deutsche Bank. Sir, please go ahead.Roshan Ranjit Good afternoon, everyone. Thanks. Thanks for the questions. I have got three please. Very, very quick ones. Firstly, just to follow-up on the fiber and I guess [indiscernible] and Telenet aside, you have got two JVs, which are going to be ramping up their rollout, I guess imminently or one this quarter. Would you be open to having further JVs with other financial investors, clearly cognizant of the discussions around overlap and exclusivity, but is that a – is that an option? If there is we have seen obviously good interest and good demand from the infrastructure side. Secondly, on the CapEx, Guillaume, you said that you are really accelerating the rollout on the fiber front. I saw CapEx came in a bit lower this quarter then expectations then again, I am aware that you are reiterating your full year guidance, is there anything to read into the slight slowdown this quarter on the CapEx front or is that some form of seasonality? And then lastly just on the cost side, you have maintained in a very tight control on the non-workforce expenses on the domestic side. Is there – you don’t want me, is there any benefit from the Mobile Vikings integration? Is there any synergies there or is that just underlying tight cost control on the non-workforce side? Thank you.Guillaume Boutin So first, on the JVs, we said when we announced the creation of the 2 JVs that at some point we wanted to develop the ownership of the network. That’s also really important. So on the long run we want to be the one of – also the fiber network or JVs. That’s the way we have constructed the two JVs, at the moment. What we said also that we were open for to welcome industrial partners in the JVs, but I don’t think we need at that moment other financial partners. But of course, if as I said, strategic partners, this is something we said as from the start, we welcome discussions with every strategic partner that would be willing to discuss with us and that’s it. And as I said before, I think this is just a message that didn’t get conveyed yesterday. So, we see where it goes at the end. On the CapEx, I will – Mark.Mark Reid Thank you. Thank you. Let me take the CapEx questions. So maybe start off with Q3, it was exactly in line with our expectations. There are – there is a bit of seasonality during the summer, specifically in the fiber build as the construction industry tends to take a period of that off. And then as you start to see the sequential rise in Q4 again on a normalized year, we would normally see that as transformation projects effectively start to come out of the kind of maturation phase to be fully capitalized. And we also have some timing on content rights that would normally come in Q4 over Q3. And that’s nuance this year on top of that effectively, as you are well aware, the ramp up to get to our targets for fiber increases in Q4. And so that effectively flows through in terms of the sequencing that you should think of. And then probably the last point is the mobile consolidation point. So, again, the ramp up there has been – is progressing and we will start to see kind of bigger numbers in CapEx related to that in Q4. So, that really kind of is how you bridged the sequential piece. If I then touch on Mobile Vikings in terms of OpEx there is not material synergies on the operating OpEx side. I think there is a lot of learning and cross-pollination across the bands, which we really value. On the COGS side, obviously, MNO side will be a large synergy as and when we move off that.Roshan Ranjit That’s quite – that’s helpful. Thank you.Operator Thank you. Next question from Ulrich Rathe from Jefferies. Sir, please go ahead.Ulrich Rathe Yes, thank you. I have two please. The first one is at the Telenet conference call yesterday management suggested that your fiber rollout is mostly GPON as they understand it and that this sort of gives them the ability to not push too hard, because they have 1 gigabit per second on DOCSIS 3.1 anyway. So essentially, they sort of argued that if you were to go to [indiscernible] that would put potential pressure on them implicitly I said that, but Proximus GPON would. Could you comment on that technology question please? The second one is a more general one. I mean, open networks are of course a sort of a hint to the regulator, but at the end of the day, if everybody works together to remonopolization of the network, and in particular, in Belgium, I think much of the regulatory approach over the last 20 years has been informed by the fact that there are two competing infrastructures across the whole country. And the regulator’s approach has been driven by that. So, is that – it changes because everybody starts to work together that potentially could change the regulator’s approach. Do you see it that way? And do you see that as a benefit also from a regulatory point of view, from your point of view, of course to two networks or do you think these are not concern to the regulator and ultimately, the industrial policy of trust getting the whole country followed up as quickly as possible is the overriding concern? Yes, thank you.Mark Reid Okay, this is CFO. I will take your first question. So, on the GPON, GPON in fact, is a technology that we are currently offering to our customers and there is a commercial proposal indeed that is today up to 1-gig. But the technology itself is able to support up to 2.5-gig. Now, besides that, what I want to say that is that all the physical equipment that we are installing in the streets on the facades, in the trenching up to the houses, supports more than a GPON technology. So, there is different versions that are already there in other countries like the XGS-PON, which goes up to 10-gig and even we were front running at world level to show in Antwerp this year that we could run already 25-gig on a fiber line in our production network. So, I would say is that fiber is really the technology that is capable to deliver multi-gig speeds, where up to 10-gig is already in other countries kind of the new standards, but it’s even capable to go further than that. And I was very pleased as well to see that there we were world premieres in Belgium to even show that on our live production network that if we want to, we can go up to the 25-gig. And again, nothing of the costs that we have made for all the deployments in the streets has to be changed for that. And the only thing that needs to happen is that you need to upgrade some carts at your technical buildings and of course, the equipment that you are installing at the customer premise, which is of course as you can imagine, a minor type of part of the investment.Guillaume Boutin And it goes back also to your second question, we want to differentiate ourselves based on product superiority. And this is what the thing I am repeating for quite a while now, we want to be perceived as and to deliver the best product experience – internet experience for all Belgium premises. So, we are holding out a network today which can support the latest technologies. So, I think you stay tuned you are going to see much more further evolution of our commercial offers in the coming quarters. We also want to have sufficient footprint coverage before also accelerating the marketing communications. So far, we are really targeted and really using a local approach to communication, but it could evolve as we continue to hold out the network and you are going to see that probably happening next year. That’s one.Second, I think in all the discussion we have had with the regulator, I think they always been pushing for a framework that would encourage the rollout of the gigabit fiber network as fast as possible, but also as far as possible. So, that’s clearly the aim of the regulator, it’s creating a framework that will encourage the players to reach 100% of gigabit coverage as soon as possible for the country. That’s really I think the main driver that dictates the regulatory strategy of Belgium. That’s one. Second, it might be that in some areas, we see two networks, some other bits, especially in the most dense part of the country, but we see what will be the strategy of the [indiscernible], but we are not against having a full of competition on infrastructure on the dense areas. I think this is good and healthy for the markets, but I think the less dense areas, it probably does not make a lot of sense to have too many infrastructure competing for the same volumes of data. So this is little bit where I stand. But I think to come back to your first question, the main priority for the regulator which is good, because it’s also our main priority is to cover as fast as possible the Belgium homes with gigabit technologies.Ulrich Rathe That’s very helpful. Can I just follow-up on that last point. So in the less dense areas in Belgium, the situation would go prospectively from today two networks to in the long-term on network in your vision, how would that affect the regulatory environment in your view?Guillaume Boutin I think first we are not yet there. This is for the moment there is only one fiber network being hauled out in Belgium, which is one of Proximus. It’s a bit too soon to comment on what would be the position of the regulator. But I think if we can show that we have a vision to go fast and quick over the maximum of homes of Belgium, I think we can have a very constructive discussion with the regulator.Ulrich Rathe That’s helpful. Thank you very much.Operator Thank you. The next question is from [indiscernible] from Exane. So, please go ahead.Unidentified Analyst Hi guys. Thank you for the question. A few for me. The first was following up on a comment that Telenet made yesterday during the conference call, which is that whenever someone in the in the Belgium market takes a trench, all operators have the right to come and lay a duct. I just wanted to check that that’s your understanding of the situation and whether you are already allowing the cable operators to kind of gain access when you do those kind of works. And following up as part of this on the comment you made about the point to multipoint networks? How much of the – how many of the homes in Belgium, do you think are going to have to dig trenches to when you do the fiber build out? So, that’s kind of a couple of questions together, I guess. And then the second thing, just regarding the announcement and confirmation that Telenet is launching a strategic review of their tower assets, how do you think that could potentially impact the market, the potential for fourth entrant and can you just give us an update on your own thinking around your own mobile infrastructure? Thank you.Guillaume Boutin I will take your first two questions. So in detail, so in Belgium, when you are doing trenching, in fact you need to make this public in advance to all other infrastructure players that are out there, not only telecom players, but also energy players. And then they can decide in fact to join those trenches. So, we see that sometimes happening, of course, the speed that we are now working and doing deployments everywhere in that many cities. Sometimes we see that other parties go with us, but it’s not like, I would say kind of the normal that is happening. Now, of course we can do the same. So, when we see energy providers, for example open up trenches and we are interested there as well because it fits into our design. We can as well participate to that, but that is a common way of working in Belgium. With respect to the trenching and how much trenching you need to do that is of course highly depending in which topology you are, when we were in high dense. We could with our designs limit that really to a few single digits, two meters, three meters per home pass or at a level of trenching. Now, of course, as you go towards the more lower dense then of course, that you will see higher numbers like that. What we have done in our topology and that is different that’s what we have understood yesterday as well is that, in fact, we have combined point to multipoint and point to point. And a point to multipoint is tuned in high dense in such a way that you can do the maximum on façade. And we have become really – I can say really good in that to reduce the trenching and the meters of trenching in this domain. When you go more beyond the high dense, of course, there – also in high dense you have to know for example, 60% of the living units off in MDUs. And but when you go to beyond to higher dense there, of course, people living in MDUs especially you have more what I will call isolated houses. So, there of course the mix is a bit different. Now, the topology that we are making is a topology that allows very easily to decide, okay, where do we trench, where do we put on façade and also where can we do things on pilots. And we can very smoothly and frictionless kind of make a combination of these three methodologies, which makes that I could say with respect to trenching, I really believe that, that we have minimized that optimally.Jim Casteele On the tower sales of Telenet, I think this is more a question for Telenet, I don’t see that tower sales impacting the way of force could consider enter into Belgium in terms of regulatory framework to access to the towers, it’s known. It’s something that is publicly published on the BIPD website. So, I don’t know why the announcement of yesterday could favor probability or enhance the probability of having a force looking at the Belgium market?Unidentified Analyst Great. Thank you.Operator Thank you. Next question is from Martin Schmitz [ph] from Citi. So, please go ahead.Unidentified Analyst Yes. Thank you very much. I just have a couple as well. On the broadband targets, that you sort of announced on the last E&D at €2.1 million by the end of next year, in order to get there, you would need to accelerate the net debt quite a bit, I know you have just talked about the new commercial offers launching soon. So, are you planning to increase your commercial activity beyond just launching offer, but also maybe in terms of pricing to reach that goal or are you willing to step back a little bit from that target? And then on the second part – and the second question is on the last E&D you also announced a couple of €700 million in terms of profitability [indiscernible]. We hadn’t seen so much at the moment. And as far as I can remember, so if you could give us an update on that one please? Thank you.Jim Casteele Thank you, Martin. This is Jim speaking. So indeed, on the target for the €2.1 million it stood up today. We have a minor delay on that. At the same time, we are confident that we are going to be able to reach that target or to stay very close to that target by the end of 2022. As you know, and as you have seen, we are continuously accelerating the deployment of fiber. And fiber deployment is really an important driver to get to that target and to the point of heat as well. And the question is linked to the performance of fiber versus the coax technology, we will be able, as of somewhere next year, to really start making a technological difference between both to the point of [indiscernible] to really show that we have a product superiority from a technological perspective versus cable. So, that’s what we have continued to work and to aim for. So, that’s the plan.Guillaume Boutin Hi Martin. On the – on your second question, I think we have continued to look at our balance sheet. I think you are very clear that we have a very strong balance sheet and for telcos and we look at our asset portfolio on a regular basis and you would expect us to do. But in terms of the mix of debt and asset sales, that’s not something that we are currently – we are disclosing at that level. But as we would always be looking at this is to optimize that as we go forward. So, that’s where we are on that overall item.Unidentified Analyst Thank you. And if I could just sneak in a third one, on the cost side, we seem to have inflation and possibly salaries and also energy costs. To what extent do you think you can offset them with price increases and at the same time win market share? And if you could confirm what the – how high the indexation of wages will be from next year? Thank you.Guillaume Boutin So, just on overall inflation? Again, I think we have – we are quite well hedged in many respects, in terms of kind of long-term contracts on various domains. I think on energy, we are hedged through the full part of 2022 and partially to 2023. So, we have no worries there. I think we have talked on a couple calls now in terms of our overall program, of €400 million of gross cost savings through 2025. So, that program continues to be a focus for the management team and really kind of one of the main levers for mitigating our hedge against inflationary costs. So, we continue to progress there and it’s going very well so far. In terms of pricing and maybe Jim you can jump in here. But again, we continue to look at that very carefully as you would expect us to do. And we expect to pass pricing at levels that have been – we have been training out in the past. So, I think that’s basically where we are.Unidentified Analyst Thank you very much.Operator Thank you. There are no more questions for the moment. [Operator Instructions] We have a new question from Arish Roger. Sir, please go ahead.Unidentified Analyst Yes, thanks. So, for the time, I would like to come back to the spectrum auction, please. When you discuss the integrity of where the process is, and where it’s confusing. If you take a step back and look at the – at where are these proposals, what these proposals would boil down to today. How concerned are you that you would have to deal with a new entrant in 2 years time?Guillaume Boutin Sorry. It is difficult to say something which is a belief or not based on facts. I think there is still tension between the regions and the Federal governments on the matter. I think when you had it as a press envision after the announcement of last week, you had [indiscernible] happy. And you had some other period that we are less happy. So, we just know that it is economic space for fourth entrant is quite committed today compared to where the market was 4 years or 5 years ago, that’s one. Second, it doesn’t make a lot of sense from a societal point of view to create overcapacity to create a new network where there is no need in terms of traffic or data. So, you are creating overcapacity in those days and those words. And it’s a question mark for me. And that’s – and again that’s today is [indiscernible] mentioned are already acting on our network and using network of Proximus to service B2B customers. And we probably continue to do it, whether they get some spectrum or just get MVNO access to the Proximus network. So, I think that competition is already there. So, we can really manage that probably if there is spectrum. So, I am not that worried. I think they see some lot of discussions to be happening in the coming weeks. And I think we are – never been so close to get some more clarity. But I think we still have to wait a bit to be – to get some full clarity on how it will be organized.Unidentified Analyst Thanks for the color. Thank you.Operator Thank you. We have a new question from Nicolas Cote-Colisson. Sir, please go ahead.Nicolas Cote-Colisson Yes. Thank you. It’s going to be a short one. Obviously, you spoke about the performance of the quarter, the broadband net adds were a bit weak while mobile was very strong. Can you give us an indication on the progress so far in the current quarter? Thank you.Jim Casteele So this is Jim again. So, in – from a commercial perspective, the third quarter is always a rather slow quarter, because of the holiday season, especially on the broadband side, and then typically picks up with the back-to-school promotions. And so we continue to grow in the premium segment of the market, which is visible on the combination of internet and TV. And as you said, also a very good performance on mobile, which is again driven as well by continued migrations of our flex portfolio on our existing customer base. On the Internet part itself, what we have seen there is that, of course, in July, we had quite severe flooding. And they were in part of the region which has impacted our performance on the one hand, a little bit more churn, because unfortunately, some people lost their homes. At the same time, we also had to reorient quite some capacity to repair in that environment to make sure that our customers got back to service as soon as possible. And of course, this impacts your installation capacity to connect new customers. So, in that area, we had a bit of additional delay on connecting new customers. And we also saw somewhat softer commercial performance at the lower end of the market. So, this is what has driven a bit on the Internet performance. And the mobile performance is of course, not impacted by the flooding, because you don’t have any physical installations to be done. And we continue to see good traction of flex both on migration new customers and the joint offers in the back-to-school campaign also continue to function very well. So, that explains a bit in detail the different views on postpaid versus the broadband part.Nicolas Cote-Colisson Thank you.Operator Thank you. Last question is from Martin Hammerschmidt. Please go ahead.Martin Hammerschmidt Thank you. On CTMS [ph], I think they wanted to launch MVNO services by the end of September on newer network, haven’t anything since. So, maybe if you could just quickly update on the latter there? Thank you.Guillaume Boutin Yes. They launched already on our network. And but it’s very small operation. So, for the moment we – there is no visible effect on the markets. Already, activity is very strong as if for the moment. It can scale and it can further develop, but for the moment, there is no impact on the markets whatsoever.Martin Hammerschmidt Thank you.Operator Thank you. There are no more questions in the queue. We will therefore hand over the call to Nancy Goossens, Director, Group Investor Relations for closing comments.Nancy Goossens Thank you all for your participation. I wish you a lovely weekend. Should you have any follow-up questions, you can reach out to me Thank you.Operator Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you all for your participation. You may now disconnect.:]