Euskaltel presents its results for the 1st quarter of 2016, its first set of consolidated results as a telecom group

Bilbao, 28 April 2016. Euskaltel, which completed a historic 2015 with its IPO and subsequent incorporation of Galicia's leading operator R to create the leading operator in the north of the State, today presented its results for the first quarter of 2016. This is the first quarter for which the new group has presented consolidated data since the merger, featuring increases in revenue, customers and profitability and confirming market confidence in the IPO and the acquisition of R, the company's major corporate milestones in 2015.

Euskaltel posted income of 142.3 million euros in the first quarter of 2016, vs. 79.6 million euros earned by the company in the first quarter of 2015. If R's earnings during the same period are added in, the group increase is 2.3%. This was mainly accounted for by a 4.7% increase in the household segment, and a 1.4% increase in the corporate segment.

This helped achieve solid growth of operating results, with EBITDA standing at 69.1 million euros compared to 37.7 million euros the previous year. With the sum of EBITDA by Euskaltel and R in the first three months of 2015, the group's EBITDA increased by 9.3%. Margin over revenue was 48.6%, compared to 45.6% during the first quarter of 2015.

Solid cash conversion brought the group's operating free cash flow to 47.5 million euros, vs. 28.6 million euros the previous year, a substantial increase in comparison to any previous period. The Euskaltel group is European leader in terms of its cash flow conversion ratio - 68.7% - when the best performances in the sector are around 60% Europewide.

Net profit in the first quarter of 2016 was 14.6 million euros, with 1.2 million euros booked in the first quarter of 2015.

Net borrowings at the end of the first quarter of 2016 fell to 1,353 million euros, 4.9 times leverage over EBITDA, compared to 5.1x during the last quarter. According to Euskaltel's estimates, its substantial cash generation capacity means the operator can expect to complete 2016 with a debt ratio of less than 4.5x EBITDA, which could signal the start of distribution of dividends to shareholders by 2017.

A change in the trend: net increase in the customer base

From the business point of view, the group balance sheet for the first quarter of the year shows 1,500 new landline/mobile household customers compared to the previous quarter. This marks a turning point and a change in the trend within the sector in recent years. The Euskaltel group finished the first quarter of 2016 with a total of 547,000 household customers, 1.5% more than the same period the previous year.

There was also a major increase in high-value products taken up by new customers, 81% of whom take up packages of 3 and 4 products.

Over the last year, the group's customer base expanded in all areas of business, with 153,000 new products taken on, rising by 9.1% against the previous year. These were chiefly accounted for by extraordinary growth in pay-to-view TV and penetration by mobile business.

115,000 new mobile lines and 30,000 new pay-to-view TV customers

The group added 30,000 new users to its pay-to-view TV customer base - 13.4% more than the first quarter of 2015, and 2.6% more than the last quarter of 2015. 60% of new customers in the first three months of the year also took up the television service, taking TV penetration with respect to the total customer base up by 7 points to 52%, as against 45% a year ago.

The group's TV business strategy focuses on high added-value services (PDR, VoD, Replay, the "Rebobina" rewind service etc.) and Premium contents (the "Canal+Series" service and the "Canal+Estrenos" premiere channel) to boost customer satisfaction and consumption.

This was also a most positive quarter in terms of mobile telephony in both the household and corporate segments, adding 115,000 new lines - a 19% increase compared to the previous year - to maintain the group's dominance of these areas of business. Moreover, 74% of the group's landline customers also have at least one mobile phone with the operator.

More than 20% of the operator's total mobile traffic is via its outdoor WiFi network, which has boosted customer experiences and connectivity at any location.

Customer loyalty: lower churn and more 3/4 product contracts

Customer loyalty increased on the strength of successful mobility strategies and other strategies to provide high added-value converging services in accordance with the needs of each customer segment: churn ratio fell from 14.8% to 13.5%, underlining the new group's competitive clout.

The company's convergence strategy favoured high added-value products based on service packaging, bringing the percentage of customers with 3 or more services to 64.3% of the total, as against 57.6% in the first quarter of 2015.

This also increased the number of products per customer (from 3.1 in the first quarter of 2015 to 3.4 in the first quarter of 2016).

Revenue from the corporate segment rose by 1.4% with respect to the same period the previous year. The corporate strategy concentrates on new high added-value facilities such as cloud, hosting and cybersecurity services.

Here the SOHO segment accounts for 40% of total company revenue, rising by 3.4% over the last year along with the household segment.