Orange Belgium SA

XBRU:OBEL

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, welcome to the Orange Belgium Q1 2020 results. [Operator Instructions] I would now like to hand over to Koen Van Mol, Head of IR. Sir, please go ahead.

[Koen Van Mol, Investor Relations Officer]

Thank you, operator. Good morning, everyone. My name is Koen Van Mol, Head of Investor Relations at Orange Belgium. I would like to welcome you to our Q1 2020 earnings call. I hope that you and your relatives are all in good health. Most of you are working from home. Here on the phone with me are Michaël Trabbia, our CEO; and Arnaud Castille, our CFO. As usual, you should have received all information or financial communication this morning. In any case, all the relevant information is also available on our corporate website. A Q&A session will follow right after Michaël's and Arnaud's introductory statements. And I will now leave the floor to Michaël.

[Michaël Trabbia, CEO & Executive Director]

Thank you, Koen, and good morning, ladies and gentlemen. First of all, I hope everything is going well for you and your close ones during this period. At Orange Belgium, we have been and still are profoundly affected by the COVID-19 pandemic. Within this context, our first priority is the protection of our employees, our partners' employees and, of course, our customers, being fully compliant with the decisions and recommendations from the authorities.In addition, we concentrated our efforts on ensuring the service continuity as connectivity is more than ever critical for the Belgian customers, businesses, hospitals and administration. We also believe we have an important social role to support the country in this difficult time. We proactively promoted the "stay at home" message. We supported our customers with a dedicated platform and additional data, and we helped the government to monitor mobility via anonymized data. We provided consistent and meaningful support to hospitals and elderly homes with masks, cyber-security and communication solutions. We also made a joint donation by Orange Belgium, together with the members of its [ executive ] committee in their personal capacity to finance a COVID-19 related unit in Brussels. The lockdown measures have impacted our sales with the temporary closure of the shops, only partially mitigated by the increase of other channels, mainly digital internet. We are preparing ourselves to reopen our shops as soon as it will be possible with all the necessary protection equipment and sanitary measures. Taking into account the remaining [indiscernible] on the COVID-19 impact on the overall Belgian economy, the Board of Directors decided for the sake of prudence to recommend the Annual General Meeting not to increase the 2019 dividend to EUR 0.6 per share as initially foreseen and to adopt a dividend of EUR 0.5 per share, that is to say, unchanged compared to 2018.Our Q1 results were solid from a financial perspective, as Arnaud will comment in a minute, with an accelerated EBITDAaL growth. From an operational perspective, on the 9th of March, we launched our GO, our revamped mobile portfolio, introducing exclusive mobile family discounts and confirming once again our Bold Challenger position. However, this launch has been impacted by COVID-19 lockdown measures. In this context and the competitive environment, Q1 mobile net adds amounted to 9,000.At the end of the first quarter, our customer base, mobile customer base, amounted to 2.6 million customers, increasing by 3.9% year-on-year. Our Love Duo and Trio converted offers continued to attract many new customers. We reached a very good 21,000 net adds in Q1. This is also thanks to the success of our Love Duo that continues to represent around 1/3 of our gross adds and now accounts for 14% of our total convergent customer base. As a consequence, 17.4% of our postpaid mobile customers are now convergent customers, an increase of further 7 points beyond. Due to the delay in installation sites, the lockdown impact on the conversion sales will materialize mainly in Q2 net adds.Finally, I would like to commend the draft decisions with the wholesale cable tariffs that has been recently submitted to the European Commission. This document includes, amongst others, a major change in the methodology of cost recovery compared to the last draft decision. This major change would be massively detrimental for the customers. It appears in the final steps of the processes that would lead to significantly and artificially overcompensate the cable owners' actual costs. In addition, the assumption statement lead to a far excessive and unjustified increase of wholesale tariffs by up to 25% over time. As such, the draft decision would necessarily lead to significant price increases year after year in the Belgian broadband market, also, which is already amongst the most expensive broadband markets in Europe. In the interest of Belgian customers, we urge the European Commission and the regulators to materially improve the draft decision based on the reality of the cost and avoiding any overcompensation.Now I'd like to hand over the floor to Arnaud for the quarter's financial review.

[Arnaud Marie Julien Castille, Chief Financial Officer]

Thank you, Michaël, and good morning, ladies and gentlemen. So the measures taken following the pandemic crisis may have an impact on the company's financial performance. The first quarter of this year was impacted for a period of about 2 weeks, so it's too early to say how this will impact the rest of the year. But we foresee moderate negative impact in revenues caused by lower gross sales in mobile and convergence -- and conversion, partially offset by a reduction in churn.The decrease in handset sales as well as a decrease in SMS traffic will have an impact on the top line, but not so much on the EBITDAaL. Therefore, we have been very cautious with our costs, which were also reduced through the reduction of the customer acquisition costs. Hence, we expect to have a more limited impact on EBITDAaL over the year. The 2020 eCapex should moderately decrease due to some limitation during the lockdown period. Taking into account this factor, we assume to have a better view on the COVID-19 impact after the second quarter, and we will consider an update of the 2020 financial guidance at that moment. So from a financial perspective, we had another quarter of solid growth, increasing our retail service revenue by 4.6% year-on-year to EUR 223.8 million for the quarter. This growth is mainly supported by the increase of convergent revenues, reaching EUR 51.8 million, which is 35.8% more than the same quarter last year. We have been able to increase our EBITDAaL by 7.6% to EUR 62.2 million, mainly thanks to the increase of retail service revenues and our cost improvement, for example, in the cable operation. Our cable operations had a positive EBITDAaL of EUR 2.5 million, while last year, we still had a loss of EUR 1.1 million. In the light of the Bold Inside program, we have continued to make the necessary efforts to control our costs, which provided its results with stable costs versus last year in a revenue growth context.The launch of our new mobile portfolio will not only lead to simplicity for our customers, but will also help to streamline our processes, aiming at lowering the cost for managing those portfolios. The confirmation of the competition authorities that not additional interim measures are needed for the execution of the mobile for access sharing agreement with Proximus has enabled us to transfer employees to the newly created joint venture, MWings and to start off our agreement.So with this, I conclude the presentation. We are ready for your questions. Operator, may I ask you to now open the call for Q&A.

[Operator]

[Operator Instructions] So we have a first question from David Vagman from ING.

[David Vagman, Research Analyst]

Can you hear me properly?

[Michaël Trabbia, CEO & Executive Director]

Yes.

[David Vagman, Research Analyst]

Yes. Okay. So first question on the regulation, what do you think has happened at the regulatory level, in your view, what could be your legal options regarding the wholesale cable regulation? What could be also the short-term financial impact for 2020? And then the impact on your commercial strategy in the short and long term. So that's one on regulation. And second question on the impact of COVID, potentially, on your Bold Inside gross savings, so the EUR 40 million target, I think you had, when you say that some simplification initiatives could be delayed?

[Michaël Trabbia, CEO & Executive Director]

So I will answer on the regulation part, maybe let Arnaud comment on the financial impact for 2020, and Arnaud will also answer on the Bold Inside question. So from -- on the regulatory topic, obviously, it is something that is not what we expected, yes, for sure. There are legal option. It's a little bit early now to decide on this topic, first, because the final decision has not been taken yet. So we are in the -- even if we are in the last steps of the process, we are still in the -- it still is our decision, and we are still in the consultation mode even if it is the consultation only for the European Commission. But we will consider all options, obviously, when the final decision is taken.On the financial impact for 2020, I will let Arnaud comment. However, what I can mention is that in our guidance, we have been relatively cautious on this topic. And I would like also to remind that even if the wholesale tariff is not as expected, it is still lower than the current wholesale tariff. And the strategy and the market [indiscernible], we are reconsidering our marketing strategy following the decision, which we will obviously wait for the confirmation and the final decision to take any action and decision. But it is obvious that the indication given by the regulators, it is our decision, we will need to take it into account in our strategy. For instance, what we can see is that there is beyond, I would say, the overall -- the level of the tariffs. What we can see is that currently, we have very expensive speed. Of course, I think if we want to go beyond the 100 megabits per second, it's very expensive. So it will have an impact on our marketing on those big -- very high speeds. And second, what we can see is that there is a significant increase over time of the tariffs that will mechanically lead to price increases in Belgium. We are convinced that our competitors are used to this kind of price increase. Up to now, we always pushed back on pricings because we believe they are not justified in the Belgian market where the prices are high already because we believe also that the costs, the reality of the cost does not justify to have more expensive prices. However, if the decision is confirmed, it is certainly something we will need to consider as from next year.Now I will let Arnaud comment on Bold Inside.

[Arnaud Marie Julien Castille, Chief Financial Officer]

And also on the financial impact of the potential new regulation, so as Michaël said, it's always better than the current price, the forecasted price of this potential regulation. As you know, today, on average, the price is about EUR 21 impairment per customer. So -- and we expected as we told you before, an average price of EUR 15 per customer impairment. So maybe, and it's our calculation, and there are a lot of parameters, but our forecast is with this potential new regulation, the unitary wholesale price would be between EUR 17 and EUR 18 a month. So yes, there will be an impact on S2. It's maybe a gap between the EUR 15 we expected and now EUR the 17, EUR 18 we can have in the beginning of July. So all in all, you can do your calculation and that it could be an impact of about EUR 5 million on 2020. Nevertheless, it's still a positive compared to the current one. And as you know, we have a lot of actions to improve our P&L on cable, also operation items on customer service and so. And so I can speak now on Bold Inside and the cable P&L is very linked to this Bold Inside action. So improvement is coming again. But of course, not COVID has 0 impact on our Bold Inside plan. I can say the opposite, because this plan was mainly focused on simplification, digitalization and empowerment. On the 3 topics, we see enormous progress in Orange Belgium even during this COVID crisis. Simplification very key in this crisis. Digitalization, we increased a lot our digital channels compared to after COVID, so thanks to our Bold Inside plan. And empowerment, you need people empowered during this crisis, and we have experienced exceptional behavior of our people because they are very responsible, and it was mainly thanks to our Bold Inside plan on people. So yes, we keep this EUR 30 million savings thanks to Bold Inside. And I think it was key last year even with a growth profile of our revenues and a good trend to put in place this Bold Inside because now you know the COVID prices, the perfect example where simplification, digitalization and empowerment are key in terms of difficulties and the new trends of the market. So -- and I think our GO portfolio is also part of our Bold Inside move. So, no, it's -- Bold Inside is perfectly on track.

[David Vagman, Research Analyst]

And maybe a very quick follow-up on the COVID -- sorry, on the wholesale cable impact. You talked about the EUR 5 million. Would you also expect lower acquisition, maybe because of the fact that you cannot be as high as you would have wanted to be in the back-to-school period, so in H2? Is it something that you [indiscernible] or that you budget?

[Michaël Trabbia, CEO & Executive Director]

I will answer on this topic. So Michaël speaking. First, as Arnaud mentioned, there is an impact on the wholesale tariffs. But you also need to understand, and we also -- we always mention this, and Arnaud remind me this topic, the improvement in cable is linked partly to the wholesale, also through our own efficiency, our own improvement in operation, which continued, Arnaud reminded me very clearly. Our transformation is going on well at a very good rhythm and indeed, we believe that the current COVID period, are there accelerate for us. It's -- we see this is as a strong accelerator for digital transformation and cultural transformation, which is very positive.Then on your question on the back-to-school. We have committed to our customers not to increase our prices in 2020. So we will remain to this commitment. We will consider price increase as from 2021.

[Operator]

So we have another question from Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Three for me, please. Just going back to the COVID impact, you state limited impact so far this quarter. Looking at some of the KPIs, particularly the mobile ARPU trends, we've seen a slight acceleration in the decline. Can you give us a sense of what's actually happened to the kind of roaming volumes that you have seen? And also any color which we may have for the first few weeks of cable. And if you could remind us, what percent of your revenues are roaming revenues? Secondly, on the ICT business now, you obviously are in the process of integrating the BKM business, which I think this quarter slightly weaker and understandable. Anything you could tell us here about contracts any potential payment delays or request for payment delays there? And thirdly, again, appreciate the launch of your GO portfolio did happen during the lockdown or just after lockdown. Could you give us a sense of any of the trends which you saw through January and February? Because I think the mobile adds this quarter are quite weak, again, bearing in mind, the launch of that new portfolio. But anything you could say around the Jan-Feb trends would be great.

[Michaël Trabbia, CEO & Executive Director]

Thank you. So I will let Arnaud answer on the first question on the mobile ARPU and ICT. And maybe I will start with the last question on the group office. So the latter has been actually just before the confinement, 10 days or so before the confinement. And obviously, the confinement affected the performance. It is also fair to mention that we are seeing that the shops, the digital channels are still the main channel, the main acquisition channel for Orange Belgium, even -- so we have, mentioned in our confirmation plan target to increase our digital channels. It is not yet fully there. So it is true that we have been impacted probably more due to this situation. We believe our GO portfolio and our GO [indiscernible] are very attractive for the customer. It's also something that is interesting for us because it creates, and it's the first time, it creates an interest, a strong interest and strong incentive for the customers to combine using SIM in their contract, which existed for the convergence, but did not exist for the mobile. So we believe it is an opportunity, and it's what we see. It is an opportunity to up-sell customers, and we get more -- to get the family mobile -- more of the family mobiles in the contract to join Orange. And what we see today, it's indeed something that is also interesting from an ARPU perspective because as you are probably seeing, the benefits come from the 2 higher carriage plans. So it is also an incentive to go for the more abundant data offers.And on ARPU? Yes, on ARPU, Arnaud?

[Arnaud Marie Julien Castille, Chief Financial Officer]

Yes. So yes, we saw a slight decrease by 2.5% on mobile ARPU. And although the roaming impact -- honestly, so we don't disclose the roaming revenue, but I can tell you, it's less than 3% of our total revenue. So we don't see a big impact. It's a small one on our ARPU. But you know that for example, the SMS impact, because in Belgium, the SMS are very expensive, but because there is a symmetrical action between operators, there is no impact on our EBITDAaL. But what I want to say is that the SMS impact is bigger, even bigger than the roaming impact. So honestly, roaming is not big and so we don't see a big impact in roaming. And again, roaming, there is also the roaming from our customer, the cost which will be lower also during this COVID period. So not a big impact. And honestly, the biggest impact was the regulation on the international calls last year. So ARPU is quite solid in mobile. On ICT, so we don't have, at this stage, a big business in ICT. It's mainly the business from BKM, the company we bought last year. So it's a good business, but still low compared to our total revenues. We disclosed last year, it's EUR 50 million revenues. So yes, BKM is impacted by the project in ICT. But in BKM, there is not only the project, but also the maintenance, the [indiscernible]. So all in all, no, ICT and B2B issues will not be a big impact. On the B2B business, there is one hot topic, but maybe it's a little bit too early to know and to discuss something about, it's about the bad debt. Of course, there will be an impact on our -- in the B2B market in Belgium, so we need to look at it very closely and to try to forecast an impact. But today, it's a little bit too early to give you some details about that. But ICT business, not very big in Orange Belgium. But be careful with the bad debt on our B2B customers as any business in Belgium for any company, of course.

[Roshan Vijay Ranjit, Research Analyst]

Okay. Just to follow-up on the bad debt point. Maybe I missed it in the release, but have you taken any provisions for the bad debt this quarter?

[Arnaud Marie Julien Castille, Chief Financial Officer]

At this stage, no, other than the current one. We have some process to -- with some provision on bad debt. But at this stage, end of Q1, no specific provision, against a future bad debt.

[Michaël Trabbia, CEO & Executive Director]

A quick comment. We don't see yet a significant increase in bad debt, but we remain cautious because, indeed, there is a lot of uncertainty. It will depend on how long the crisis will last. It will depend on the measures that are taken by the government. And hopefully in Belgium, there are strong measures to support economy. So it is more about uncertainty than about something that has materialized always.

[Operator]

So we have another question from Michael Bishop from Goldman Sachs.

[Michael Bishop, Equity Analyst]

I've got actually one follow-up on the last question and then one other question, please. So could you discuss your overall B2B exposure, perhaps within that, how much of that exposure is focused on SME and SOHO? And could you just give us a little bit more detail about any of the sort of early signs you're seeing there? I mean it sounded from me as the last question, that effectively, some SMEs and things might be slowed down or stopping payments. But do you think there's decent fiscal support in Belgium to mitigate? But I'd like to get any extra color? And then a second quick question is just whether you have any later thoughts in terms of spectrum auctions in Belgium.

[Michaël Trabbia, CEO & Executive Director]

Thank you. So I will let Arnaud answer on the B2B exposure and what we can see today, but we already answered on this. There's a lot of uncertainty on what will happen, and I would then answer on the second a bit -- spectrum auction a bit.

[Arnaud Marie Julien Castille, Chief Financial Officer]

We don't disclose mostly our B2B size business -- business size. So -- but what I can say, our B2B business, as I said, today is mainly on connection, mobile and fixed connection. So the main issue, again, is maybe not about project and [ so on ] but about bad debt. And I think -- we, Michaël and me, we are quite clear. Today, we haven't experienced some impact on our business, but of course, we don't know at this stage, but maybe there will be an impact. SME is important on our B2B business. So again, we don't disclose the size of this business in Orange Belgium. But in Belgium, there are a lot of a lot of SMEs compared to other countries. They are quite good SMEs in a good health in Belgium. But of course, they are the main topic of this crisis. The main -- so we have to pay attention to that. And we know we can help in terms of payment with SME. But again, too early, too early at this stage.

[Michaël Trabbia, CEO & Executive Director]

Yes. So you have understood, I guess. It's the main uncertainty, and that's why we remain cautious. That's now on the consequences of the crisis. It's the main important thing about what will happen to the overall economy. What we see up to now is that our customers continue to use our service and that they need it more than ever. So it's not that they stop using our services. The uncertainty is rather on the [ control ]. Uncertainty is rather on the potential bankruptcy impact. And so it's very determined on the duration [ fatigue ] and the support -- all the support measures that are taken by the authorities and Belgian federal state. So it's all -- both the federal, but also the [indiscernible], and there are a lot of measures there. So the efficiency of those measures will be indeed very important.On the spectrum, so this -- the situation in Belgium is still a little bit complex, let's put it that way. We have still no auction planned for real and industrial solution of spectrums. There has been a number of attempts by several players to try to move forward on this topic. So we are still in the same situation, meaning that there is a temporary spectrum that the BIPT regulator wants to grant. So it should, for possibly for candidates for the distribution of temporary licenses in the 3.6-3.8 gigahertz band. It is a little bit strange to be honest because it is a temporary license that are supposed to expire at the start of the usage rights of the real auction spectrum, this is a normal auction spectrum. We can still -- it is supposed to be able to last, at the latest, up to 2025 with very limited bandwidth because as far as we understand it should be able to get 40 megahertz and the spectrum would be allocated to all the players who ask it. For us, it is an issue because there is no guarantee that the spectrum will be unique. Just to remind you that there 5 applicants in this process, the 3 MNOs but also 2 company -- product companies, [indiscernible], which is an ICT company; and [indiscernible], which is a small B2B player. So we are concerned about this because there is no guarantee that this [indiscernible], which is especially allocated for up to 2025 is really new [indiscernible]. We believe that today, the conditions are not met to as an industrial rollout of 5G in Belgium, very worrying for us, and we really push pricing. We are really promising 5G in Belgium. I believe we have the most ambitious rollout of 5G in our [indiscernible] B2B companies. We are convinced that B2B will be certainly one of the most important 5G applications. We are the most advanced technology speaking. We just activated, for instance, the network splicing, a feature in this set. We have a lot of industrial partners. This is something that is very important. We see the use case, and we see the benefits for the industry [indiscernible]. To date, the conditions are not met in our view to have a real rollout of 5G in Belgium.

[Operator]

So we have another question from Nayab Amjad from Citi.

[Nayab Amjad, Vice President]

Just on the dividend, what are the key factors, besides being prudent, driving the dividend decision from reducing it from EUR 0.6 to EUR 0.5, and given that the financial outlook has been maintained for now? And what should we expect for dividend going forward? And my second question is on -- I just wanted an update on the profit per subscriber and cable, with a bit of breakdown in associated costs. And you said you have 1/3 of the customers -- cable customers on last year. Can you help us understand if these are mainly coming from, is this mainly cannibalization of existing base? Or are these new customers?

[Michaël Trabbia, CEO & Executive Director]

Okay. So I will answer on the dividend and part of the cable, and I will let Arnaud maybe give you the breakdown on the cable. So on the dividend, we are very clear. The Board of Directors decided to adopt a cautious approach. So there is nothing in the current results, neither in our current expectation. We mentioned what we understand the expectation we have up to now for the 2020 year. I remind the expectation, we foresee moderate negative impact in revenues, no cumulative impact in EBITDAaL and a moderate [indiscernible]. So obviously with this, there is -- it's not the reason to lower the dividend. The reason is the uncertainty that we are seeing, and the Board of Directors wanted to take a cautious approach in that regard. It does not obviously prevent further, I would say, change in the dividend as on [indiscernible]. It's a cautious approach that we are taking now as at many companies due to the uncertain [indiscernible] nothing to see is something that will materialize [indiscernible]. Then on the cable, on the cannibalization part, we see little cannibalization. So it's mainly new customers that joined us on the Love Duo offers. I have also to remind you that, obviously, we are still a small player. We have still small market share in the broadband market. So obviously, it is quite normal that the customer remaining are loyal [indiscernible], mainly on [indiscernible].So I will let Arnaud answer on the breakdown. Arnaud?

[Arnaud Marie Julien Castille, Chief Financial Officer]

Sorry, sorry, sorry. So as every quarter, I give you the breakdown for our EBITDA, unitary monthly EBITDA by cable subscriber. So we don't disclose the ARPU for cable, but you can imagine, it's about EUR 41 per month. We have EUR 21 about, on average, wholesale cost per month. And about EUR 10 in repair, remuneration. So a gross margin of about EUR 10, and about EUR 7 in terms of customer service and other -- IT and other costs. So it's an EBITDA of EUR 3 per month at this stage. And so of course, this EUR 3 per month will improve thanks to about the EUR 3, EUR 4 we can gain on wholesale with a potential new regulation. And again, thanks to our Bold plan, an improvement of our customer service and other costs. So it's the answer, it's about EUR 3 per month. That's it.

[Operator]

So we have another question from Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

My first question is, could you give us your interpretation why the wholesale cost for those changed? So we've heard the BIPT talking publicly about industrial policy intent or sort of accelerating and improving the competition in the Belgian market. So what happened here? Did you just underspend on lobbying? Or did the government try to protect the Proximus fiber rollout by making sure that market prices are staying high and that's the reason? Or what's your interpretation why this is all happening in this particular form? My second question is, can you comment on the amount of churn reduction you are seeing during the lockdown period? I mean you're probably a month into it, and I was just wondering whether you have a number for that already. And my last question is more clarification. When you are saying that you started to transfer employees into the RAN sharing JV, how do you account for that? Is that an equity associate net of the P&L or is this recharged and then popping up -- and then these people are popping up in your OpEx. Just wondering how that's treated in the accounting line.

[Michaël Trabbia, CEO & Executive Director]

Thank you. So I will let Arnaud answer on the churn reduction, even if, I guess, he will not give you a lot of details on this topic. And on the JV accounting roles, on the first question, on the change, the strong change in methodology ambition, why? Honestly, we don't want to speculate on this topic. So what we see clearly is that the outcome is not a fair it is to overcompensate the cost, actually to be clear, for instance, the decision, the [indiscernible] decision, consider that the cable network would be somehow renewed every 25 years. Since that, the cable owners would need to change the [indiscernible] every 25 years, which is obviously not the case, which is happening -- which is not happening anywhere in the world, not happening either in Belgium. So this is purely artificial at [ theory ], which leads to wholesale tariffs that are very expensive, even more expensive than some FTTH wholesale tariffs in other countries. And there is also very challenging assumption that leads to significant increase over time, which are not justified. I think I mentioned earlier, a 25% increase on some wholesale tariffs. Do you know one telco in the world this [indiscernible] network on [indiscernible] network that sees an increase of its costs, of its network costs of 25% over 3 years certainly about a network that is already rolled out, it's not a new network that they did. So we see something that is clearly very surprising, in our opinion, completely and dangerously [indiscernible], okay? So I will not speculate on the why. I will mainly try, and that's what we do, to explain the situation to explain why it is not justified, to explain the impact on this because this will have big impact on the Belgian market, and the Belgians need to know what this [indiscernible] decision will imply in their life in the coming year. I think that in the current context, everybody has recognized that connectivity is absolutely key for everybody. And in the current context, also, people are cautious with their cost and very concerned. And I guess that a lot of people will be concerned by the implication of the price -- the price increase that this [ decision ] would lead to if contract.Then Arnaud, maybe on the other questions.

[Arnaud Marie Julien Castille, Chief Financial Officer]

Yes. The first one was about the churn. So yes, we don't disclose our churn. But yes, there is an impact on this churn, the reduction of this churn. So every operator in the Belgian market are a big part of their sales with physical channels, so it's true for Orange Belgium, but true also for our competitors. So we don't know exactly, we don't know, at this stage, the figures -- the data figures of our competitors. But I think it could be a little bit symmetrical this churn impact. So it's a reduction, but it's -- we think it's symmetrical between all the operators. At this stage, we don't see a competitor in advance in terms of digital channel. And the reason why Bold Inside is very, very focused on this digital tool to be able to be in advance compare our competitors. And the second question was about MWings and the way how we are recharge of the people. So yes, there is a saturation on people, not only people, it's also on other cost of this company. So it will be in our P&L exactly as our cost -- network cost today. And as you know, it will be saving in the next years. So for you, in terms of P&L, it will be totally transparent, where we will have costs coming from our own cost and cost coming from MWings, which will be in charge of the maintenance will be in chart of the beam and so on and so on. So it's regarding OpEx and CapEx from MWings, this new sharing company.

[Operator]

So we have another question from Paul Sidney from Crédit Suisse.

[Paul Sidney, Research Analyst]

Can you hear me okay?

[Michaël Trabbia, CEO & Executive Director]

Yes.

[Arnaud Marie Julien Castille, Chief Financial Officer]

Yes.

[Paul Sidney, Research Analyst]

Okay. Great. And I had 3 questions, please. Firstly, on the comments you made about considering offsetting higher cable wholesale costs by potentially putting price increases through in '21. Were you really talking about higher-spec broadband offers being more expensive than your current offer? Or would you actually consider putting a back book price increase through -- across your existing base? And then secondly, just interested to get your comments on your attitude towards reselling Proximus' fiber. Obviously very open to giving access to yourselves and others. Just wondering what sort of cost considerations then you would think about there, not just the wholesale rates, but also the costs of integrating your network with theirs as well. And then just lastly, just a big picture question. Do you think sort of medium to long term, any changes in customer behavior could actually be a net positive for the industry in terms of lower churn, customers wanting higher-spec bundles? I know it's obviously a fairly big picture question, but just interesting to hear your thoughts.

[Michaël Trabbia, CEO & Executive Director]

Thank you. So I will answer the 3 questions. On the first question, it is clear and maybe to make it absolutely clear, yes, there is an impact on higher speed. But there is also an impact over time on the nominal prices -- the nominal price and on our mainstream offer. So yes, it is something we will need to consider if the decision is unchanged. And once again, it is not something that we wanted to do. We are opposed to price increase in Belgium because we believe they are not justified. We believe this is something that is very [indiscernible] to the Belgian customer, who pay way too high for their broadband access. It is not justified by the cost. When you look at all the benchmark in other countries, the prices are already very high. And here, we are talking about increasing, again, the wholesale price, which will lead us to consider, as I mentioned, price increase, so into back book price increase as from, 2021. We have not taken any decision yet, not saying anything. I'm just saying that it is something we will need to consider as from 2021 if the decision is mentioned, okay?On the fiber topic, we have mentioned, as from 2017, that we are open to work together with [ Telenet ], including Proximus, to support a rollout of fiber in Belgium. So this is not new. We have seen the openness in Proximus' last Capital Market Day, which we see positively. I must say that up to now, it has not yet materialized in concrete talks, but we remain open on this topic, as we have been since 2017. On the cost consideration -- on the other cost consideration on this fiber topic, I would say that there are costs [indiscernible], for sure. It's not the same modem that you can use, for instance, we have to have a solution for the TV, which is different. In the cable, you need the [ coaxial ]. But those costs are -- I would say, they are significant if you do this for small customer base, they are relatively small if you consider bigger volumes. So it really depend on the ambition that you put there. They can be perfectly manageable with high volumes. They can be more problematic if it's only for small volumes. That's why we are looking at ambitious roll out, an ambitious plan, and we are not interested in any small -- when the ambition is too small, okay?On customer behavior and churn, honestly, it is really difficult to assess. What we have seen is that in other markets, for instance, you can have very high churn when everybody is convergent, take Spain, for instance. So it's difficult to assess. It depends on the market situation. It depends on the player behavior. It depends on the [indiscernible] and the strategy. It is, for me, a little bit difficult to assess. What we can see indeed is that we manage -- talking about Orange, we managed to drive down the churn of our convergence customers, which was quite high in the beginning, which is normal. And there is a new service, a new offer with also new customers, but we know that new customers tend to churn more than existing customers. So we continue to improve -- what I can say on this topic is we continue to improve the churn of our convergent customers. And that's also a topic by the way on our GO offer, which is the family offer, because we believe we can expect also a similar benefit of churn improvement that what we see with the customer thanks to a lower churn than a customer with only one.

[Operator]

So we have another question from [indiscernible] from [indiscernible]

[Unknown Analyst]

A couple of questions from my end. First of all, could you give some guidance on the operational trends in fixed and mobile that you have seen since the lockdowns, so since mid-March? Secondly, on the impact of corona, is it fair to say that the negative EBITDA effect will be fully offset by lower CapEx or even that lower CapEx can be down a bit more than the drop in EBITDA? Then on cable regulation, so the regulator has changed his view, I think, 3 times in 12 months. What is the probability according to you that the cable regulation, as presented 2 weeks ago, will change again? And if so, why do you believe that? And then lastly, on group, if you could just give an update if anything is moving on that front?

[Michaël Trabbia, CEO & Executive Director]

Thank you. So I will answer all the question. On the fixed and mobile operational, what we see is the impact -- we have an impact on sales, and we have an impact on share, okay? So -- but one has mitigated a little bit the other. However, we believe we are quite -- a little bit not dependent on the shop. So that will -- so we accelerate and we push a lot on digital interface, which are growing quite fast. That we push also and -- as soon as possible, and we believe that also a lot of customers are expecting to go back to the shops. And there are some elements that are much less used content, so when you buy a device, change your device to something that is complex in the confinement period. However, on the figures, you have to take into account that there is a delay between the sales and the net adds in the fixed, which is not existing or much less existing in the mobile. So you can add a little bit of delay between the moment of the impact and the materialization in the net add figure obviously, which is not the case for the mobile. So for the mobile, we have seen the impact, I would say, as from the beginning of the confinement. On the fixed, we have not yet seen the impact in the net adds, and we expect to see some impact in Q2.On the EBITDAaL operating cash flow, let's be very clear on this topic, we mentioned that we see a more limited impact on EBITDAaL, which is our expectation for 2020. It's not what we -- only what we saw until now, it's our expectation up to now of the expected 2020 result. We expect a moderate decrease of -- in CapEx, okay? So now that we also mentioned that there are a lot of uncertainties. So this is our vision up to now. This is our vision of 2020 but up to now. And once again, we discussed earlier about, for instance, the B2B and the topic about the businesses in Belgium and how they will be assessing. But up to now, you can do your evaluation then on the operating cash flow. But what we say is more limited impact on EBITDAaL and moderate impact on the eCapex. So it is not, up to now, our vision is not [ invigorating ] our present cash flow.Then on the third question on the probability of change. Well, actually, we don't know. I don't bet on probability. What I mentioned is we are in the last step, so it is obviously not difficult to have significant -- or it is no, I would say, uncertain difficulties -- uncertain to have significant change. However, when I see the potential impact, especially over time because I think most of the impact is mainly as from 2022, 2023, which will be very unreasonable already today, but I can say to become really, really something difficult for the customer by the end of the day because once again, it is about price increase for the customers. And what we have seen is until Orange Belgium came into the broadband market, that you can always pushed the prices. So we believe that it is something they will probably continue to do. So what we say is that from this perspective and we've clearly made this perspective very clear for the regulator and the politics to take their responsibility and take the right decision. Obviously, we will adjust our marketing and our strategy based on the final decision that would be [ additive ], okay?Then on VOO. What we can mention is that, as you know, we have filed a legal file on this topic because we are concerned about the condition of the sales of VOO [ could bounce ]. What is new is that [ since we are in policy ], Telenet finally decided to join this file. That's the first element. And second element is that we discover as we do every month, every week, every day, almost, on this topic new elements tending to show strong issues in this process essentially, for instance, like you say, agreed to reimburse EUR 7 million indices based on the work that has been done [indiscernible] that was not up to the standard of [indiscernible]. And especially, [ quickly ] one of this one, while the one of this work, while -- and support to the same of VOO. So what I can mention also is that the audience on this topic will be held with a few weeks delay finally to June, beginning of June because of the COVID context and also the Telenet joining the file that it will be so quite soon now. And so we will see what will be the decision on this date.

[Operator]

So we have another question from Ruben Devos from KBC Securities.

[Ruben Devos, Senior Financial Analyst]

I've got 2 questions left. First one is just on there are scenarios that we'll have another wave of infection in the future, potentially leading to reinstatement of the lockdown measures. Considering the issues you're seeing today in terms of growing subscriber base, I was wondering how you're thinking around not only managing this crisis, but how you may be preparing for potential future lockdowns? That's the first question. And second one is a bit of a bigger picture question. On the back of this crisis and how it leads to major changes in the way of working and how corporates are running their operations currently, I was curious whether the developments, in your view, may lead to structurally different customer behavior, once all of this is behind us.

[Michaël Trabbia, CEO & Executive Director]

Okay. Thank you. So on the first question, what we saw is that actually, we were very agile and ready to adapt to the lockdown. All of our employees -- most of them, with very few exceptions, are able to work from home as from day 1. And by the way, we already anticipate -- we anticipated on this topic before the confinement. So it is something that we are able to manage not only for us, but also for our partners, our call centers, our IT partners, our network partners. So we have made the demonstration. We are able to amend the company to manage the network, to manage the operations in the lockdown period. So we will see what will be the evolution over time. But for us, resilience is something key, is a critical element for us, and I think that we demonstrated that we can manage all of that. Obviously, all the lockdown affect is the sales, which is true for everybody. But we are working very hard to increase our capacity of our digital and telesales events.On the way of working -- okay, I'm not sure if I understand your question is about our own way of working or how the customer behavior. What we can say is that is that internally, indeed, we see an acceleration of the future transformation thanks to the pricing in terms of how -- basically if you compare the prices. And what we see also is we saw a massive change in the confirmation of our customers, obviously, linked to the confinement but we can also expect maybe some more focus of some customers, especially B2B customers, on I would say [ resilience ] solution, which we can bring to them. We have connectivity, we also secured a solution, [ divested it ], which is something we are bringing to our customers. The collaboration and communication to [indiscernible], we have also a strong solution that we can [ bring to them ]. So that can also be, I would say, but it is a little early to see this. It is my anticipation, B2B customers to be more concerned and to put more focus on [ resilience ] and on the tools that are needed to continue to grow with some complex and digital plans.

[Operator]

So we have another question from Stefaan Genoe from Degroof Petercam.

[Stefaan Genoe, Head of Equity Research]

Yes, Stefaan Genoe, Degroof Petercam. Two questions, please. First, on the fixed network, you indicated on the new regulation that you expect price increases going forward. To what extent do you fear that the convergence competitors will use this price inflation on the fixed to keep mobile prices under pressure or below inflation going forward? That's one. And then second, could you indicate us the impact of installations of the lockdown on your convergence connections to new customers, how has this impacted Q1 then I mean the technical implementation of it and connection? And how do you expect this to impact Q2?

[Michaël Trabbia, CEO & Executive Director]

Thank you. So I will answer on the 2 questions. So obviously, I will not bet on our competitors' strategy. That's their decision. What I can see is that they also have their own, I would say, challenges, with some of them, for instance, with the high debt threshold, which is always something to take into account and also others that are ready to strong investments. So we will see. I will not bet on the competitor strategy. But what I can say is that up to now, we have seen our competitors constantly pushing prices up. So I see no reason at this stage to consider, they would not -- they would change this strategy, which we placed for the moment on the impact on installation during lockdown. So we have seen limited impact in Q1 as we were -- many installation are still possible. So we can still install customers because it is very important indeed for our customers to have connectivity even more in this confinement period. Obviously, we saw a slowdown in the installations, also linked to the sales slowdown. So it will affect Q2. It depends, I would say, mainly on the sales element, on the sales part. So the more the sales are limited, the more then the installation -- we will have less customers to install. During Q2, we will see, we might also recuperate a little bit, but it is difficult to assess not knowing exactly how the situation will evolve. So it's a little bit early to comment on this. But indeed we have a slowdown in installation that we currently -- which is -- are not in the full capacity of installation today.

[Operator]

So we have another question from [ Baden Coles ] from Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

Simon from Barclays. You sort of touched on it, you said you're open to working with Proximus. And given the cable wholesale pricing, how that looks to be implemented and the inflation that seems to be built into the model, but also the fact that wholesale costs for Proximus' fiber looked pretty high as well, I'm just wondering, does this accelerate your desire to look at co-investment and are you looking to do that already? And if you are, how would you look for finance and such investment? Would it be just through the balance sheet because you have a strong balance sheet today? Or could you potentially look at tower monetization or from other routes to finance such an investment?

[Michaël Trabbia, CEO & Executive Director]

Thank you. So the -- let's be clear, the fiber topic and our fiber consideration is not linked to the cable wholesale decision. Once again, I mentioned that in 2017, we are called on this topic to work together to roll out fiber in Belgium. And it is not linked for also one very simple reason. If the time line is very different, we are talking -- when we talk about fiber, we are talking about the network that will be all right and anyhow it will take years and years, more than 10 years to have significant coverage. So anyhow, this cable will remain for 3 to 5 years minimum. The main way to access the market and to provide solution to the customer, we have been absolutely clear on this topic. So there is absolutely no relation together. And we consider our fiber a strategic opportunity, and we have been considering this since the start. Now there is announcement by Proximus that they want to accelerate on this topic [indiscernible]. We are, once again, open to this topic, though we need to see how and when it will materialize. But anyhow, the time line will be different, and I will not be in a position to switch from cable to fiber asset now. This is not something I know -- how to finance this, it's very early to comment on this because it's very dependent on the potentially [ government ] we could find as, once again, no decision yet on this topic. So it is very early to comment. But indeed, as you mentioned, we have a strong balance sheet, and we have no issue -- we have no cash issue. But I will not comment more than this topic -- more than this on this topic because as we say it would be very different the discussion and if an agreement is found somewhere, we will see, on this topic.

[Operator]

So we have another question from Martin Hammerschmidt from Jefferies.

[Martin Michael Heinz Hammerschmidt, Equity Analyst]

Yes. I just have one quick question, please, which is a follow-up to a previous one. Could you give us some indication on where your gross adds in mobile and, in particular, in cable, where they are coming from? So from which operator do you mostly gain customers? And maybe related to that, could you give us an indicative split and maybe also by geography? That would be helpful.

[Michaël Trabbia, CEO & Executive Director]

Okay. So on this topic, what we can see is that on mobile, we were historically more present in the South and in Brussels than in Flanders. In the cable in Poland, it's much more balanced geographically speaking. Now on the origin of the customers, what we see on cable is that we attract more customers from Telenet on the cable players done from the incumbent. And it is something, by the way, that it is quite normal because it is simpler. Also installed customer is already a cable customer. So we indeed have no reason to change this trend and not to push towards -- pushing more towards Telenet customers. So that's exactly what we do as we have no incentive from the cable operator to do differently.

[Operator]

Okay. So we have no further questions. [Operator Instructions] So it seems that we have no further questions. So I give the floor back to Mr. Koen Van Mol. You have the floor.

[Koen Van Mol, Investor Relations Officer]

Thank you very much for your questions. If you would be -- any further information that you would require, please don't hesitate to contact us at a later stage. So thank you very much, and goodbye.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.