The Euskaltel Group expects to end 2019 with 30,000 new customers and income of €10 million thanks to its expansion plan

  • The Board of Directors agrees the complementary dividend payout of €0.17 per share, against 2018 results, for 9 July.
  • José Miguel García has joined Euskaltel's Board of Directors, representing Zegona and replacing Robert W. Samuelson.
  • Between January and March 2019 the Euskaltel Group registered total income of €171.7 million, EBITDA of €81.1 million and operating cash flow (OpCF) of €46.5 million.

Bilbao, 7 May 2019. The Euskaltel Group has kicked off 2019 working at full capacity on its geographical expansion plan to add value to the company and generate returns for its shareholders. The operator expects to end 2019 with 30,000 new customers and an increase in income of €10 million in the five markets where it is starting to roll out operations: Navarre, León, Cantabria, La Rioja and Catalonia, where its products are being marketed under the agreement signed with RACC.

Francisco Arteche, the Euskaltel Group's CEO, comments: "The Euskaltel Group has begun 2019 by focusing the majority of its resources on our geographical expansion plan. The results achieved to date in these five markets lead us to be very optimistic about the total number of new customers we'll have achieved before the end of the year".

As well as the new customers acquired through the geographical expansion plan, the Group has also attracted new customers through its partnership with MediaMarkt. The Euskaltel Group has recently signed an agreement whereby the operator will sell the products in its convergent offer under the R brand on the German multinational's website and in their shops: premium Wi-Fi, a telephony offer based on the customer's needs and TV services.

Additionally, in the first quarter of 2019 the Euskaltel Group has once again seen profitable growth in the business segment (B2B). The operator has registered growth of 4.7% on a like-for-like basis in this area in small and medium sized companies (SMEs) and large accounts (LAs) compared to the same period in the previous year, resulting in income of €30 million in the first quarter of 2019. The company has posted total turnover of €50 million in the B2B segment, up 1% on the 2018 January to March period.

Arteche, the Euskaltel Group's CEO, points out: "The Euskaltel Group is at the forefront of innovation and digital transformation, and is a key partner in accompanying companies, institutions and individuals through new technological challenges. The company takes its business customers very much into account and aims to offer them the best products and services adapted to their needs, just as it does with its residential customers".

More added value residential customers

In the residential segment the operator has recorded a total of 576,800 customers in Q1 with contracts for fixed-line products, which reflects a rise in users during the first three months of the year and a three-fold increase compared to the fixed-line customer gain recorded in 2018.

The Group ended the first quarter with 2.4 million RGUs (Revenue Generating Units; i.e. individual subscribers who generate recurring income for the company), an increase of 60,000 new product contracts compared to one year ago, which is growth of 2.5%.

As a result of the Euskaltel Group's convergent product bundling strategy, the number of customers with 3P and 4P contracts has reached 70.3% of total customers, up 162 basis points, compared to the figure recorded in the first quarter of 2018, representing an average of 3.7 product contracts per user, compared to 3.6 in the previous year.

The increase in contracts for services and products in the residential segment has led to record penetration rates among the customer base: 86.8% have broadband (up 140 points on the previous period), 82.2% have a contract for mobile phone services (an increase of 325 basis points) and 73.5% have pay TV (a rise of 415 basis points).

By product type, during the first quarter of the year the operator has consolidated its leading position in the mobile phone segment, adding 12,000 new lines and expanding to reach a total of 970,000 mobile lines. The television service gained over 7,000 customers, reaching a total of 424,000 users thanks to the value proposal offered by the Euskaltel Group and the strengthening of the 4K Android TV decoder, as well as the integration of platforms such as Netflix and Amazon. There are also more than 500,000 broadband customers for the first time, thanks to an additional 3,300 customers in the first three months of the year.

Transitional year

On a like-for-like basis, between January and March 2019 the Euskaltel Group registered total income of €171.7 million, EBITDA of €81.1 million and operating cash flow (OpCF) of €46.5 million.

The Euskaltel Group's CEO has clarified that the results in the first quarter of this "transitional year shouldn't be taken as a marker of the overall performance we expect for the entire year, as we are experiencing in these first few months the impact of the efforts made on the expansion and transformation plans, the results of which we'll see throughout the year".

Arteche emphasised: "We always knew that this first quarter of 2019 would be the most difficult of the year and the competitive environment has made it even more complicated. But let's enjoy the growing positive impact of the transformation plans that we're rolling out. Right now we can't see significant changes in the competitive environment, so we expect the second quarter of the year to be similar to the first in financial terms. We are focused on ensuring that our income recovers and, most importantly, seeing the results of our cost saving initiatives during the second half of the year" .

There are two important events from Q1 which strengthen the Group's efficiency and sustainability. On the one hand, the operator won the unanimous support of banks to refinance its debt, achieving a significant improvement in the financial conditions that allow it to move forward with its business in a safe and sustained manner throughout this year. Some of Spain's main banks have signed the debt refinancing: Santander+Popular, Caixabank, Kutxabank, BBVA, ING, BNP, Abanca, Crédit Agricole CIB, Sabadell, Laboral, Liberbank, Bankinter, CIC Iberbanco and Bankoa. Looking forward to 2022, the Euskaltel Group therefore expects a reduction in net debt to below 3.5x Ebitda.

On the other hand, and also during the first quarter, the Euskaltel Group has partnered up with Masmóvil and Phone House for the purchase of mobile phones by setting up the company Medbuying Technologies Group. This company will centralise the purchase of mobile terminals, routers and other telecommunications accessories by these three companies. The Euskaltel Group decided to take part in this project to increase the quality of the products it offers to customers.

Netflix and Amazon Prime Video on the 4K decoder

In terms of TV, the Euskaltel Group launched the integrated payment of Netflix in its 4K Android TV decoders at the end of 2018 and it now has a market share of over 80% in the 4K Android TV platform. In the first quarter of 2019 the operator has continued to strengthen its policy of strategic alliances with the main market players in order to offer the best customer service for its TV, Wi-Fi and mobile phone products. During Q1, the operator launched Spain's first integrated Amazon Prime Video service in its 4K Android TV decoder. Over 80% of Euskaltel Group TV customers with this decoder watch this type of content, doubling consumption in comparison with users of more traditional devices.

Distribution of a complementary dividend on 9 July

The Euskaltel Group's Board of Directors has agreed the complementary dividend payout of €0.17 per share, against 2018 results, for 9 July 2019.

It is important to note that at the general meeting held on 1 April, shareholders also approved the proposed distribution of profit for the Euskaltel Group and the dividend distribution for the year ended 31 December 2018. The final dividend to be distributed to shareholders following approval at the Annual General Meeting is €0.31 per share, which is equivalent to a return of 4.2% over the weighted average share price in 2018 and 11.5% more than the prior year.

Euskaltel's Board of Directors agreed in October 2018 to pay an interim dividend to the Company?s shareholders against 2018 profits for a gross amount of €0.14 per share outstanding with dividend rights, which was paid out on 7 February 2019.

Subsequently, the Board of Directors agreed to submit for approval by the General Meeting a complementary dividend of €0.17 per share to be paid out on the date agreed at the next meeting of the Board of Directors held following the General Meeting. The dividend payment date has been confirmed as 9 July 2019.

This is the third consecutive year that a dividend has been paid out since the company was floated on the stock exchange in July 2015. Furthermore, this dividend distribution demonstrates the Group's commitment to its shareholders and reinforces the objective to add value to investors.

José Miguel García joins the Board of Directors, representing Zegona

During the presentation of Q1 results, Francisco Arteche welcomed José Miguel García, who has joined Euskaltel's Board of Directors representing Zegona and replacing Robert W. Samuelson. Arteche emphasised that "we are certain that his in-depth knowledge of the Spanish market will be extremely relevant in helping the company overcome the current complicated market conditions and in offering an attractive, creative and valuable strategy to our shareholders".

José Miguel García began his career as a telecommunications and technology consultant at Lincoln Scott International (Australia). Over the last 30 years he has undertaken the role of CEO in 16 different countries including in Australia, Europe, South America and the USA. In 2018 he successfully took part in the acquisition of SQRRL and Briefcam by Amazon and Canon, respectively. In 2016 and 2017 he was a board member and vice-chairperson for the Millicon Group and a strategy consultant at the Orange Group (having been hired directly by the deputy CEO) in the transformation of European business units to the fixed-mobile convergence offering.

He was CEO of Jazztel, the Spanish telecommunications company, from 2006 to 2015. Before he joined Jazztel in 2006, Mr García worked mainly at Cable & Wireless, where his roles included: CEO of Spain and Portugal, executive vice-chairman in Europe, CEO in Panama and managing director in the UK and Ireland. Prior to these roles, he was executive chairman and CEO in Spain and Portugal of Case Technology, a company that he co-founded and subsequently managed through its acquisition by Cable & Wireless, Plc. in 2000. He has also been a strategic investor and advisory board member to several start-ups around the world over the last 25 years. He has a degree in electrical and electronic engineering and a master's degree in digital communications from Monash University in Melbourne.

Euskaltel - Communication
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