Brussels, 26 July 2005 - Mobistar (Euronext Brussels : MOBB) today presented its results for the first half of 2005. At the end of the first six months of the year, the operator strengthened its position in a highly competitive market by strongly increasing the proportion of postpaid customers in its customer base and confirming growth in its mobile business.
Double digit growth in services revenues
Service revenues reached EUR 684 million, growth of 10.5% compared with EUR 618.9 million as at 30 June 2004.Turnover in mobile phone activity increased by 10.6% to EUR 633.3 million, against EUR 572.4 million a year before. Turnover in fixed/data activity rose to EUR 50.7 million, an increase of 3.9% compared with EUR 48.8 million at the end of the first half of 2004.
Consolidated turnover as at 30 June 2005, which includes profits from the sale of mobile phones, rose to EUR 703.6 million. That represents an increase of 8.9% compared with the results of the first six months of the previous financial year, limited by the decision of the Commercial Court in Antwerp that the combined sale of mobile phones and call credits would not be permitted after 11 January 2005. The fall in sales of mobile phones did not, however, have any impact in terms of profitability inasmuch as these sales do not generate a profit margin for the operator.
Total revenue in the first half-year rose to EUR 716.6 million. It amounts to an increase of 8.7% compared with the EUR 659.3 million achieved at the end of the first half of 2004.
Strengthening the customer base and consolidation of the ARPU
As of 30 June 2005, Mobistar had 2,867,522 active customers, constituting an increase of almost 8% compared with the first six months of the previous year. This growth occurred mainly within the postpaid customer base, now almost 40% of Mobistar's active customer base. It is all the more positive in that it entails the migration of a growing part of prepaid card users into the postpaid customer base.
This trend in the ratio of the prepaid to the postpaid customer base, together with the growth in the operator's market share in the business segment, strengthens the average monthly revenue per user (ARPU), which has increased by almost 2% to EUR 36.87 per active customer per month, despite strong competitive pressure in the market and the reduction, in November 2004, of the mobile terminating rate (MTR). The prepaid ARPU amounted to EUR 17.52, against EUR 17.86 at the end of the first six months of the previous financial year. The postpaid ARPU was EUR 62.06, against EUR 67.23 the year before.
Product development and strengthening the commercial approach
The favourable trends in the operator's results during the first half of 2005 are associated with the particular development of the Mobistar product - tariff plans and services - based on a commercial approach which resolutely aims to get closer to the customer.
The "Mobistar VIP" formula, launched in the course of the last quarter of 2004, responds to the desire for transparency and simplicity expressed by customers. This solution is based on a linear sliding tariff and a range of privileged services, and is advantageous for any user consuming more than 250 minutes of call time each month. By 30 June, almost 100.000 customers had opted for this tariff plan.
The "My Life" product, which was launched last May, enables users to construct their own tariff plan based according to their own needs. "Mobistar My Life" consists of a basic formula, together with one or more options combining call credit modules and SMS packages. This 'à la carte' tariff plan constitutes a first in Belgium.
Mobistar has also developed a series of products designed to promote customer loyalty, essential in a market such as the Belgian telephony market. "Tempo Plus" thus enables users of prepaid cards to benefit from a 10% discount on calls to 10 favourite numbers, whatever the time, the day, or the network they are calling.
In its desire to promote an image and access representative of the quality of its services, the operator has also undertaken an in-depth review of the positioning of its brand. This has led to an evolution in the communication of Mobistar. Its campaigns are based on more serene and more universal language and aesthetics which are appropriate to the maturity of the company. It will take shape in the new design of the operator's own points of sales, which will be rolled out progressively during the second half of 2005.
Evolution in profitability
The Mobistar Group recorded an increase of 6.5% in the consolidated EBITDA as at the end of the first half-year. It reached EUR 283.8 million, an increase of EUR 17.4 million compared with EUR 266.4 million as at the end of the first six months of 2004. The consolidated EBITDA margin is 41.5% of service revenues, a slight fall compared with the margin of 43% achieved as at 30 June 2004.
The mobile telephony activity presents a favourable EBITDA, increasing by 10.9% to EUR 277.1 million, 43.8% of service revenues, stable versus 43.6% a year ago.
The EBITDA from fixed/data activity underwent a perceptible decline, largely due to the costs associated with the launch of broadband activities, and to the evolution of the mix of activities within fixed telephony. At the end of the first half of 2005, it represented EUR 6.7 million, 13.2% of service revenues.
Mobistar's consolidated half-year net profit increased by 14.5%. It reached 19.8% of service revenues, or EUR 135.3 million, a net profit per share of EUR 2.15 (not diluted) . As at the end of the first half of the preceding financial year, the net profit of EUR 118.2 million represented a margin of 19.1% of service revenues, being equivalent to EUR 1.88 per share (not diluted).
This favourable trend in Mobistar's profitability is explained both by the improvement in the mix of prepaid and postpaid customers within the active customer base and the growth in earnings associated with it, and by the effort made by the company and its partners to meet the requirements of customers within the times and under the conditions they expect.
Investments in cutting edge infrastructure in line with customer expectations
Total investments by Mobistar in the course of the first half-year rose to EUR 90 million, 13.2% of service revenues. That sum, which represents an increase of over 50% compared with investments of EUR 57.3 million during the first half of 2004, relates mainly to renewal and optimisation of the operator's network infrastructure.
Mobistar has in fact engaged in a very ambitious network modernisation programme, which will provide it with a virtually new network at the cutting edge of technology by the end of the year. In practical terms, this project involves replacement of Base Station Controllers (BSC), finalised in February 2005, modernised radio masts (BSS) and the use of unique technology developed by Nortel Networks, completion of which is underway, as well as the deployment of EDGE technology.
The significant development of the network will enable Mobistar to offer high output, capacity and a noticeable improvement in coverage across the whole of Belgium by the end of the year. As a result of the deployment of EDGE, Mobistar is the first in Belgium to launch mobile phone television.
The operator is also continuing to deploy its 3rd generation network (UMTS), conform with plans drawn up when the licence was obtained from the Institut Belge des Postes et Télécommunications (IBPT). The objective is to reach 30% UMTS coverage of the population of Belgium before the end of 2005.
Free Cash Flow
In the course of the first half of 2005, Mobistar generated a consolidated free cash flow before dividend payment of EUR 164.5 million, against EUR 129.9 million a year before. The balance of EUR 38.1 million after payment of the dividend enabled a reduction of the net financial debt to EUR 110.4 million as at 30 June 2005, a reduction of 26.2% compared with the 149.6 million posted on 30 June 2004.
Perspectives
In commercial terms, Mobistar is pursuing its strategy based on a segmented approach to the market, enabling it to offer services users require based on their individual needs, expectations and characteristics. In this context, the operator will launch an integrated distribution network in order to get as close as possible to its customer base. Mobistar expects to have 5 exclusive points of sales by the end of the year.
The operator is also pursuing the development of solutions integrating the growing convergence of technologies, which is becoming increasingly evident in the telecommunications sector. As announced at the beginning of the year, Mobistar will launch a range of broadband services intended for the general public by the end of the year.
Taking into account the strong competitive pressure in the market, Mobistar expects that the growth in service revenues at the end of the financial year will continue in line with the first half-year, with an increase in the order of 10%.
Despite the anticipated increase in commercial expenses in the course of the second half-year, and despite the costs related to the launch of its broadband activities, the operator anticipates important growth (high single digit growth) in net profit for the 2005 financial year compared with the 2004 financial year, as revalued following IFRS norms.
Report of the auditor, following a limited examination of the interim consolidated financial information of Mobistar S.A. as at 30 June 2005
We have proceeded with a limited examination of the interim consolidated financial information, closed on 30 June 2005, of the company Mobistar, which shows a total balance sheet of EUR 1,158.6 million and a net profit for the period of EUR 135.3 million. This interim consolidated financial information was drawn up in accordance with 'International Financial Reporting Standards'.
Our mission was defined as to certify the periodical information provided by the company. Our mission was carried out in accordance with the guidelines of the Institut de Reviseurs d'Entreprises governing limited examination. This examination consists principally of the analysis, comparison and discussion of the financial information and was consequently less extensive than a full inspection of the consolidated accounts, the objective of which would be to certify the consolidated accounts. Accordingly, we are not in a position to certify the interim financial position set out above.
This examination did not disclose factors which require significant correction of the consolidated interim position.
Brusels, 25 July 2005
Ernst & Young Company Auditors S.C.C. (B 160) represented by Herman Van den Abeele
Auditor