Bilbao, 25 February 2016. The Basque telecommunications operator Euskaltel posted its 2015 Financial Statements today, showing a historic year that featured two major corporate milestones: the Company's IPO and its purchase of Galician cable operator R.
From the business perspective, Euskaltel had an extremely positive year compared to 2014, mainly due to an excellent performance by mobile business, which added almost 100,000 new lines in 2015 to make the company the most popular mobile option in Basque households, and also to 1.76% growth in broadband products - where Euskaltel has the largest share of the market - and 5.78% growth in TV products, leading to a major increase in converging services with 3 and 4 products, now accounting for 65.1% of the products taken up.
2015 confirmed the changing trend in business, which had already been glimpsed in the residential market at the beginning of the year. This is the first year since 2012 that Euskaltel has increased its earnings - 327.8 million euros, compared to 321.2 million euros the previous year. Including R's earnings in December, after the Galician cable operator merged with Euskaltel, income rose by 8.8% to 349.4 million euros.
Euskaltel's adjusted EBITDA - which does not include expenditure on the IPO or the R Cable purchase - stood at 158.1 million euros in 2015, up by 1.5% against 2014. Consolidated EBITDA climbed by 7.1% to 167 million euros, with margin over revenue at 47.8%. These results point to successful management of operating costs and the efficiency measures established in previous years.
Adjusted net profit for the year stood at 49.6 million euros, up by 16.9% against the previous year, when the figure was 42.4 million euros.
Including the extraordinary outlay on the IPO and purchase of R, extraordinary net profit was 7.2 million euros.
Investment during the year stood at 46.9 million euros, up by 11% compared to the previous year. Adding in R's investment in December, the investment package totalled 53.1 million euros, rising by 10.9 million euros against the previous year, an increase of 25.9%.
Investment increased because Euskaltel undertook or was beginning to undertake some major projects in 2015. The greater outlay was due to plans to deploy 51,000 residences and 37 industrial complexes, migration of fixed voice platforms to IP solutions, higher broadband speeds, the Euskaltel WiFI project, new TV functions and initial work on rolling out Euskaltel's own 4G network. These projects are technological ground-breakers focusing on customers, giving them better services in the years ahead and boosting the company's future commercial offer.
The operating cash flow conversion ratio was 68.2%, ahead of similar European companies in the sector. The adjusted operating cash flow was 111.3 million euros, rising to 113.8 million euros on the consolidated balance sheet including R's earnings, up by 0.2% against the previous year.
The improvement to the cash flow conversion ratio was chiefly thanks to Euskaltel's own new-generation fibre network and to the company's business strategy, allowing the operator to concentrate investment on maintenance and increasing its customer base instead of new capital-intensive projects.
Euskaltel Chairman Alberto García Erauzkin said “2015 was a historic year for Euskaltel, the year of transformation to turn an idea into reality: making the company the leading telecommunications operator in the north of the State. We have joined forces to consolidate our leadership, to continue to create wealth and make a contribution to job creation and opportunities for technology development within our society. This combination of forces has produced consolidated results that faithfully reflect our activity, because we have now come together to form a single company”.
Fernando Ojeda, Euskaltel CEO, said “our cash flow conversion ratios set us apart from the rest, making us leaders with respect to similar European companies. For every euro of adjusted EBITDA we generate, we convert 0.68 euro into cash flow”.
He also feels one key component is “our leadership of the mobile and broadband market in the Basque Country, and solid growth in TV and landlines. This confirms our commercial strategy in recent years for the residential market and the SOHO segment, the main objective of which was to gain new customers in high-value 3P and 4P packages, in a bid to maximise customer value”.
The Basque Country has experienced many of the same economic trends in Spain in recent years; however, since it has a heavily industrialised economy and is one of the country's wealthiest regions, it has demonstrated more sturdiness and recovery capacity than the State as a whole, and Basque GDP has outperformed Spanish GDP in terms of growth in four out of the last six years. Euskadi is also consolidating its economic recovery, and GDP grew by 1.4% in 2014 and by 2.8% in 2015 (source: Eustat).
Euskaltel achieved these results amid an enormous transformation in the telecommunications sector between 2011 and 2015. The market was particularly affected by extraordinary pressure to converge landline and mobile services and cut prices considerably.
The sector witnessed business consolidation at state level, driven mainly by operators concentrating on the mobile segment acquiring fibre operators.
Finally, the emphasis is now on high-speed Internet services, where Euskaltel clearly leads the Basque market with the largest ultra-fast broadband customer base. Following the launch of the 350 Mbps facility in 2015, the Basque Country is the Community with the greatest accessibility to high-capacity networks, and is now on a par with other countries such as Switzerland, Belgium, the Netherlands and Luxembourg.
In the year ended 31 December 2015 Euskaltel continued to boost its maximum added-value convergent services packages with its existing residential customers and also with new customers.
R Cable's strategy in terms of marketing and a focus on the residential market is practically identical to Euskaltel's. The addition of R's residential customer portfolio brought the customer count in the consolidated group at year-end to 545,502, compared to Euskaltel's 296,023 customers at the end of 2014. R Cable contributed 249,345 customers to the consolidated total.
This brought the portfolio of customers with 3 and 4 products at year-end to 65.1% of total customers, while penetration of these customers with high added value accounted for 55.3% at year-end 2014.
Positive net growth was also observed among residential customers, and the number of products contracted rose by 101.96% - 998,871 products were taken up by Euskaltel customers, and 810,849 by R's residential customers.
Growth was driven by a sound performance and a better mobile offer, facilities for purchasing handsets in instalments, and launch of the 4G data service. This excellent performance was also observed among residential customers with post-paid mobile services. Numbers rose from 273,906 products in 2014 to 702,892 in 2015 (335,006 of which were contributed by R), with a larger percentage of mobile customers (49.1% in 2014 vs. 71.7% in 2015).
Numbers of broadband customers also increased (171,730 additional customers compared to 2014, with 1.76% year-on-year growth at Euskaltel), as did TV customers (125,437 more customers against the previous year, with 5.78% year-on-year growth at Euskaltel).
As a result, the Products/Customer ratio increased considerably in 2015 (3.0 in 2014 vs. 3.3 in 2015).