Orange Belgium SA

XBRU:OBEL

Earnings Call Transcript 2018-Q4

[Operator]

Ladies and gentlemen, welcome to the Orange final year 2018 conference call. [Operator Instructions]I would now like to hand over to Mr. Eric Chang. Sir, please go ahead.

[Eric Chang, Director of Investor Relations]

Good morning, good afternoon, everyone. This is Eric Chang. I'm one half of the IR team. On the call today are Michaël Trabbia, my CEO; and Arnaud Castille, my CFO.As usual, you should have received all the financial communication over the morning. And if not, you can look into our website. A Q&A session will follow right after Michaël and Arnaud's discussion.That said here, I'm leaving the floor up to -- Michaël, up to you.

[Michaël Trabbia, CEO & Executive Director]

Thank you, Eric. Welcome, ladies and gentlemen. I would like to start with an overview of the year, so let's start directly on Slide #4. So 2018 was a turning point for Orange Belgium. We reshaped the country's telecom market with our bold challenger positioning. We basically listened to our customers, they look for new digital habits, and we decided to address some unmet demands of our customers.So during the first half of the year, we launched the first full unlimited mobile and convergent offers in Belgium and the second half of the year showed strong commercial results in mobile and convergence. This clearly validates our bold strategy and our bold positioning as we more than doubled our Love customer base and had a remarkable growth in mobile postpaid.Now turning to Slide #5. I will highlight some of our key achievement of the fourth quarter of 2018. As I mentioned, our bold challenger positioning is paying off. First of all, our mobile operations performed strongly. Secondly, we experienced a strong momentum in the convergent segment and did so without any price promotions. This confirms that our Love convergent plan is attractive and competitively priced. And finally, our commercial success is reflected in the financial results, with increasing revenues and strong growth in adjusted EBITDA. We will go into more detail further in the presentation.But now let's take a look at Slide #7 with our operational achievements. You can see the continuous growth trajectory of our convergent offer, Love, since the beginning of 2017. We added 77,000 new Love customers in 2018 compared to 70,000 in 2017, with a particular strong Q4 net adds of 25,000. Our mobile convergent customers reached 283,000 at the end of 2018 and represent now more than 11% of our mobile customers compared to less than 7% 1 year ago. Just to reiterate, we achieved this performance without any price promotion. We maintain our EUR 39 and EUR 49 offer.We also continued to lower significantly our cable churn rate thanks to process optimization. Obviously, there is still work to be done comparing to sector average, but we will continue our efforts and also benefit from further operational improvements in 2019 such as single installer procedure and nondiscrimination principle that will be implemented.Turning to Slide 8. As you can see, our mobile performance was very solid during the quarter. We added 61,000 new postpaid customers, leveraging both our convergence and mobile-only offer. This is more than 2x more than compared to Q4 2017. Our postpaid mobile customer base increased by a very solid 7% year-over-year. This performance is the proof that our simple and worry-free offers answered real customer expectations.Continuing on Slide #9. It's obviously that the launch of our bold offers with unlimited voice and data drove an accelerated growth in the average mobile data usage per user. Average data consumption in 2018 -- at the end of 2018 reached 3.2 gigabytes, marking a year-over-year surge of 79%. During the year, we focused on improving network coverage where it matters most for our customers, in particular of their home. We can now guarantee to our customers' indoor connectivity by using on top of our network and national network by using tailor-made solution when needed, Femto device or voice-over-WiFi.Turning to Slide #10. You can see the total increase in data traffic considering both the growth of our mobile customer base and the growth in term of average usage. You can see that since the beginning of the year, mobile data traffic -- total mobile data traffic has increased by more than 100%, 116%, so has more than doubled.Slide #12. With one specific word on IoT, where Orange Belgium is leading the way. As you know, our network fully supports most advanced IoT technologies, NB-IoT and LTE-M. We today manage more than 1 million connected objects, with double-digit growth in 2018.Slide #14. Just as you know, customer experience is the heart of our strategy and our strong customer focus orientation definitely contributed to our results in 2018. As I have said, the first part of it is about simple and worry-free offers with our unlimited offers, but also the indoor mobile coverage, which is an important feature for our customers. On top of this, we were recognized by the BIPT, the regulatory body, in terms of customer care as leaders in the Belgium telecom sector.Now I will -- let's hand over to Arnaud to discuss our financial performance.

[Arnaud Marie Julien Castille, Chief Finance Officer]

Thank you and thank you, Michaël. Good morning, ladies and gentlemen. So as Michaël mentioned, we are in a very good shape with all of our commercial growth drivers performing well. From the financial point of view, revenues keep growing and adjusted EBITDA is also improving.So let's dive a bit deeper into each of those financial KPIs. Let's go through the financial, starting with the Slide 17. This slide provides a high-level view of our achievements this quarter. Firstly, Q4 '18 revenues grew 5.1% to EUR 342 million, thanks to an increase in retail services. Our convergence services performed strongly as revenues increased 95% year-on-year, driven by an increase in subscriber as well as ARPO. Secondly, profitability has improved. Adjusted EBITDA grew 11% year-on-year during the fourth quarter. That was driven by increasing revenues and cost management.On cost efficiency, we have set our focus on convergence operations. We were able to reduce the EBITDA loss of the business from EUR 3.5 million in the fourth quarter of 2017 to EUR 1.5 million this quarter. We achieved that despite a growing convergence subscriber base.The chart at the bottom shows that we are maintaining CapEx discipline. On an annual basis, we achieved to maintain a stable operating cash flow at EUR 107 million with a slightly less EBITDA, but in the same time a slightly less CapEx, showing again our capacity to generate cash from our operations. Our net debt amounted to EUR 264 million compared to EUR 313 million at the end of 2017. Gearing remains low with net debt-to-EBITDA 0.9x.Now about the guidance. We met our 2018 year guidance despite the reducing MVNO revenues and the impact of the EU roaming.Now I will ask Michaël to talk about our expectation for next year, 2019.

[Eric Chang, Director of Investor Relations]

For this year.

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes, for this year. Thank you, Arnaud. So let's move to Slide 24. As you can see, we expect a slight growth in revenues in 2019 taking into account further uptake on our postpaid and convergent customer base. We target an adjusted EBITDA between EUR 285 and EUR 305 million in light of headwinds such as the decrease in MVNO revenues, the international call impact with the new regulation, and the starting payment of the brand fees, starting as of May. As a reminder, we expect to achieve cable EBITDA breakeven by the end of the year 2019.In addition, total CapEx is expected to remain stable in comparison to last year. And the final word to mention that during 2019 fiscal year, we will adopt the IFRS 16 accounting standards.With this, I conclude the presentation and ready to take your question.

[Operator]

[Operator Instructions] We have one first question for Mr. Paul Sidney from Crédit Suisse.

[Paul Sidney, Research Analyst]

I had 2 questions please. Firstly, you say your convergent customer base growth was achieved with very little promotion. I think you said that in Q3 as well. But can we just understand a little bit better the balance between subscriber growth and profitability? Is there a promotional budget and you see how much subscriber growth you can get with that or is it -- do you have subscriber growth targets and you spend as much to achieve that? And then the second question just on -- postpaid mobile growth obviously very strong over the last 12 months. Is it possible to give us an idea of the offers, the most popular offers over the past 12 months and that these postpaid customers are moving on to? Even giving us a split of the gross adds over the last 12 months by your different offers?

[Michaël Trabbia, CEO & Executive Director]

So on convergence and promotion, to be precise what we mentioned is that we did not have price promotion, so no discounts, temporary discounts to our offer as we did in 2017, for instance, for a limited number of months we gave a EUR 10 discount to our customers. And why do we do -- why do we stop this? First, because the attractiveness of our offer is very good and our customers are more and more aware. And the awareness of Orange Belgium as a good provider and a strong provider for internet and TV is growing, so we have seen no necessity to enter into discount practices. And by the way, we have very little discounts overall because we focus on good prices from the start and not on artificial discount for some months. And you see that with this policy we achieved nevertheless more net adds in 2018 than in 2017, showing that we don't need those discounts. Now could we have more customers? Maybe we can always have more customers. But for us what's important is and in particular in convergence is to have rather a stable and steady flow of new customers. Because the activation and the installation, we need to have operational elements, installer capacity that needs to be managed. So it's important for us to have rather stable activation through the year rather than peak during some period of time. And then we also focus on the P&L. That's what we mentioned in 2018 and that's what we did. Arnaud mentioned about the cable P&L improvement. And we are committed to focus on the P&L of our cable activities. On the mobile, it's fair to say that the 2 most popular offers in 2018 were the 2 new offers that we launched in the beginning of the year, meaning our Eagle high-end offer at EUR 40 with unlimited voice and data; and obviously even most important our Koala offer, that's mid-range offer at EUR 20 with unlimited voice and 4 gigabytes. And clearly, those offers really drove the performance and the commercial performance throughout the year, in particular in H2 as the Koala offer was launched in June.

[Operator]

So we have another question from Mr. Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

My first question would be, in the convergence sales, in the up-sell process, what percentage of that up-sell process is actually into existing subs and what is essentially subscribers that are really new to Orange Belgium? And the second question is, 5G has been delayed. First question is, does this change your network strategy in any way? Does it change -- does it have any business impact at all? And also do you think just based on sort of what the political situation is and how it's evolving whether the new entrant debate could come back when the auction actually sort of starts to firm up again? And my last question if I may, could you quantify the wholesale headwind in 2019 both for revenues and EBITDA?

[Michaël Trabbia, CEO & Executive Director]

Okay, so on the first 2 question, and Arnaud will answer on the last one. So on your first question about the convergence customer. We have roughly, say, a big 1/2 that is existing customers, so let's say around 60%. And around 40% of new customers. So this is -- and that's what we mentioned, convergence is a tool. At the same time, to retain existing customer that may be attracted by bundle offers by competition and also to attract new customers. So it is something that we demonstrate. Regarding 5G and 5G calendar, it's a little bit too soon to say. There is still a lot of uncertainty in the calendar of 5G auction in an uncertain political context in Belgium. What is for sure is that the auction will not be launched in 2019 and the auction may be even delayed to late 2020. It's difficult to have a clear view and a definitive view on this. So regarding the impact on the potential fourth entrant and our network strategy and CapEx, well, for the moment in any situation we did not anticipate to have a strong CapEx and to have significant CapEx increase in the network in 2019, 2020, so it's not a big change for the moment. What's important is to have visibility and to make sure that those auctions will take place. Indeed what's even more important is the condition of those auctions. Obviously, it's uncertain now if the new government will change the condition on this particular topic. Obviously, we clearly advocate strongly that the condition should be reviewed as a discriminatory condition to favor a new entrant in Belgium would have big consequences in the market and might hamper players' ability to invest as fast as needed in 5G. On the third question, Arnaud?

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes, the third question, the wholesale impact on 2019 is quite easy. As you remember, we have a loss of EUR 30 million in 2018. It was -- it will be a loss of EUR 20 million in 2019. It's minus EUR 40 million from Telenet because you know Telenet left our network in 2018. So no revenue coming from Telenet this year. And it will be compensated by -- partially compensated by the new MVNO of MEDIALAAN. As you know, we signed MVNO agreement last year with MEDIALAAN, is a content provider in Flanders in Belgium. So -- and it is disclosed in our guidance 2019.

[Ulrich Rathe, Senior European Telecommunications Analyst]

Could you just clarify, is this a 100% drop through to EBITDA...

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes.

[Ulrich Rathe, Senior European Telecommunications Analyst]

Of any offsetting items?

[Unknown Executive]

Yes, yes. Exactly, yes.

[Operator]

So we have another question from Mr. Nicolas Cote-Colisson from HSBC.

[Nicolas Cote-Colisson]

I've got a couple of questions on costs, starting with cable costs. I was wondering, what was the cost of the double installation fee at present and what kind of savings we should expect in 2019? And another question on your indirect costs. You mentioned in the press release that digital transformation and advertising costs were up by about EUR 10 million in Q4. What kind of digital transformation costs should we expect in 2019, please?

[Michaël Trabbia, CEO & Executive Director]

So maybe I give you just a short view on digital transformation and Arnaud will answer on the cable cost. So on digital transformation, obviously it's something that we are busy at. What we expect is to gain first agility in our time to market, which is an important feature, and also to have more digital offers, meaning in the way we commercialize them. So there is a clear ambition to improve the mix of sales that is done by digital and telesales. And also in the way we interact with our customers. So that's the main elements that we expect from this digital transformation. Arnaud, on the cable cost.

[Arnaud Marie Julien Castille, Chief Finance Officer]

I think there were 2 questions on cost from Nicholas. Total -- so the increase by EUR 10 million of our cost, indirect cost in our P&L for Q4. So yes, it mainly is the impact of the IT. To be honest, there is some seasonality impact of this IT. And it's not only IT, also advertising and promotion. So the impact is quite -- the impact of the transformation it's not the EUR 10 million. And do you remember? Last year in Luxemburg we have EUR 3 million impact -- one-off EUR 3 million impact on indirect cost in Luxemburg in 2017. So to summarize the impact of this IT, which is mainly cloudification of our IT solutions from CapEx to OpEx, it's below EUR 5 million. So it's not a big impact for this year, 2019. On cable, yes, the one installer will decrease our installation cost. You have to know in the EUR 400 -- today the EUR 400 CapEx for an installation, 1/2 of this amount come from our modem and box and 1/2 come from the installation. And the one installer, we expect to have this one installer only in Q3. So the impact will be low for our CapEx. But yes, we can decrease the EUR 200 per installation, but it will be at the end of the year and we can expect I think about 25% of decrease compared to 2 installers installation.

[Nicolas Cote-Colisson]

Okay, that's very clear. If I may, can I just ask you a very quick question about your ability to replicate Telenet products on the wholesale side? I was wondering what you were thinking about the Yugo offer launched yesterday and could you have technically a similar offer?

[Michaël Trabbia, CEO & Executive Director]

Well obviously, we looked at this new offer. We have the ability to replicate Telenet offers obviously thanks to regulation. For the moment, our focus is rather to launch internet-only offers. As you have seen, Yugo is still an offer with TV, with obviously digital TV and over-the-top TV, but still with TV. Our focus for 2019 is rather to target and address a segment that we believe is not well addressed today in Belgium, which is the broadband-only segment, and that's our focus for 2019.

[Operator]

So we have another question from Mr. Emmanuel Carlier from Kempen.

[Emmanuel Carlier, Research Analyst]

Three questions from my side; first, on CapEx. So we don't know when 5G will come in, but you probably know already what the additional investments from 5G will be. Could you quantify that, please? Then secondly, on out of bundle revenues, is that something that you could quantify to us how much revenue you still generate from that? And then I had a last question -- or do I have it? Yes, yes. On the profitability, so could you give us a little bit more color on profitability at the mobile side of high-end versus low to mid-end tariff plans? Is there a substantial difference in the gross profit margin you generate on that?

[Michaël Trabbia, CEO & Executive Director]

Maybe I give a word on 5G and, Arnaud, you can comment on the out of bundle and profitability and if you want to add something also on CapEx. On 5G, it's difficult to assess cost today for several reasons. First, we did not have our RFP yet. We did not select our provider. And it will also depend on the rhythm of the rollouts of the 5G, which may depend also of the market condition and the opportunity that we have. So it's really early to talk about this. And obviously, this may also -- this is clearly impacted by the choices we will make on the supplier, the vendor that we will select. And the strategy to introduce 5G, that is also -- that may depend also on the choice of the provider. So we are not in a position today to give you more information about the total amount of CapEx that is needed for 5G. Obviously, it will be -- as I mentioned, it will not affect significantly 2019 obviously, but 2020 will be very limited impact. And after that, it's very also likely that this will be split over several years and not in only 1, 2 or 3 years. Arnaud, on...

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes. As you know, we don't split our ARPO between out of bundle and access, but I can disclose the trend. We decreased the out of bundle by more than 20% this year. So you can see how your -- simplified offer has had a very big impact on this out of bundle. And of course, that has a big impact on the churn. We don't disclose the churn. But of course, the main reason for call has been the problem of bill shock. So thanks to the big decrease of out of bundle, more than 20%, that has a big impact on our cost. On the -- and of course the loyalty of our customer. The profitability between a high-end and a low-end customer, of course, the profitability is higher for a high-end customer due to its consumption. But more relevant is the simplification of our offer. Thanks to the 2 main unlimited offer, the Eagle and the Koala, with unlimited voice, we deceased a lot the customer service cost due to this simple tariff offer. So it's mainly the main point for us to have simple offer with the right level of data to limit again the bill shock, the call for consumption, broadband so on. So it's simple offer which can give the best margins.

[Emmanuel Carlier, Research Analyst]

If I may ask another question. I think you mentioned 1 year ago that according to a survey around 30% of the households which have interest in the broadband-only offer. Do you have a more recent data point on that topic?

[Michaël Trabbia, CEO & Executive Director]

We are still on this estimate. What we see is that in countries where internet-only offer launched and promoted and pushed, they are quite successful, and we can see a significant part of the customers who are not ready to pay even an extra EUR 10 for the TV. So for us, it's encouraging and we believe we are the best -- in the best position to push for this kind of offer in the market.

[Operator]

We have another question from Mr. David Vagman from ING.

[David Vagman, Research Analyst]

Maybe could you give us your current understanding on the BIPT cost model for wholesale cable and how it could be evolving and in particular the cost split between TV and broadband? So if you know a little bit more given that we have the consultation and I think it's still ongoing. And then maybe a word on the potential mobile ARPO evolution in 2019. Should we model some further pressure after the decline we saw in Q4?

[Michaël Trabbia, CEO & Executive Director]

On BIPT cost model, for the moment we have a EUR 20 wholesale price, as you know. The BIPT consultation is talking about cost, not about price. And it -- the costs in the consultation, as you have seen, have been estimated between EUR 17 and EUR 18 when you take into account the transport. We believe however that in this cost model there are some hypotheses that need to be challenged and we will do it in the consultation. In particular, we believe that there are some important costs that are today fully amortized and that should be fully amortized in the model. So I think that the model is a good one. But obviously that depending on the hypotheses that you take, you can lead to a very different conclusion. So we will argue and we believe we have strong arguments there that the costs taken into account should be much lower than in the -- than those mentioned in this first -- in this consultation. We don't have indication about the next step and the decision that will be taken by BIPT, but we maintain our ambition and our feeling that at the end of the day the cost should not be higher and should be rather around EUR 15 as we disclosed. Now when you're talking about the difference between the broadband-only compared to the full wholesale offer, well, there it's really dependent on the hypotheses that you take on your model. In the current cost model, the BIPT highlighted a little difference of cost between the broadband-only and the broadband and TV. At the same time, the BIPT mentioned that the price could be different and there might be some more difference between the different level of service. And you can think about the TV, but you could also think about, for instance, higher speed for broadband. So it is possible that at the end of the day the price are more different than what the cost model directly implies. On the ARPO maybe, Arnaud, you want to answer?

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes, there is the mobile-only ARPO and there is convergent ARPO. We don't give guidance in terms of ARPO. But we don't see a decrease of mobile-only ARPO because we are sure to offer to our customer the right offer. And we see again an increase in terms of data consumption. So we believe we can continue to up-sell our customer to the best level of data consumption. So maybe stable ARPO on mobile. But on convergent, next year we think we will have more fixed customer because we can add the fixed telephony on our convergent offer, TV, internet, mobile and fixed. So a little bit more. And we don't see at this stage -- but I don't want to give you our marketing policy for 2019 -- we don't see a lot of promotion because, as Michaël said, our offer is today very attractive compared to our competitors. Our competitors are continuing to increase their prices. On the contrary, we have stable prices. So all in all with less people in our customer base with all promotion we see maybe a slight increase in terms of convergent ARPO.

[Michaël Trabbia, CEO & Executive Director]

Maybe one additional comment. I mean, what's mentioned here is valid for internet and TV offer. Obviously, for the internet-only offer the ARPO will be lower, but this will not come at the expense of profitability.

[David Vagman, Research Analyst]

That's very clear. And when you say that you expect actually not much promotion activity or, let's say, a stable promotion activity, don't you think that competition might intensify in 2019 in Belgium with, let's say, more promotion from your competitors?

[Michaël Trabbia, CEO & Executive Director]

We are in the market since now 2016. Obviously, we saw that our competitors reacted with rather a discount policy. At the same time, we see that they keep increasing their prices on the bundles. We believe that a big part of their value lies in their -- in this element. So we don't anticipate a significant change there, meaning that high promotional and discount activities, but not necessary a drop in the pack prices and the real prices I would say after the discount period.

[David Vagman, Research Analyst]

Even, let's say, taking into account the latest bundles that we saw over the -- yes, maybe the last weeks?

[Michaël Trabbia, CEO & Executive Director]

Well, when you see the latest bundle, we don't have the feeling that the price of those bundles are a threat to the attractiveness of our offers.

[Operator]

We have another question from Mr. Ruben Devos from KBC Securities.

[Ruben Devos, Equity Analyst]

I've got one on the guidance for total revenues. Similar to what we've seen in the past, you indicate to see slight growth in 2019, but that's on the total revenue side, which also includes the more volatile equipment sales and MVNO revenues, let's say. So I was wondering if you strip those out, could you share your thoughts on the evolution of the core retail service revenues for 2019 and what sort of growth rate seems achievable for that business? Then second one is just a follow up on the cost development of the cable business. We've seen a good improvement in Q4. Just -- could you give us a sense of the level of improvement coming from reduced wholesale tariffs and from overall efficiencies as you build the cable? And then regarding your cable guidance for 2019 being that you'd breakeven on the EBITDA level, does that assume a continuation of the current wholesale tariffs or does that sort of build upon a new scenario following the conclusion of your market analysis?

[Michaël Trabbia, CEO & Executive Director]

Okay, Arnaud, maybe you can answer.

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes.

[Michaël Trabbia, CEO & Executive Director]

And I will maybe comment on the expectation on...

[Arnaud Marie Julien Castille, Chief Finance Officer]

Wholesale.

[Michaël Trabbia, CEO & Executive Director]

Wholesale.

[Arnaud Marie Julien Castille, Chief Finance Officer]

Wholesale price. Okay. So your first question, our core retail revenue and core revenue for 2019, I let you to do the calculation, but it's quite simple. If I may. We expect to stay dynamic in terms of net adds for next year on the mobile side and on the cable side. As we have just explained, we're quite optimistic on ARPO mainly on conversion side compared to the increase of our competitor. So all in all mainly it's the impact of the increase of our customer base, not maybe so far from the increase in 2018. That increase will explain mainly the increase of our core revenue, retail service revenues. On cable and profitability on this cable business, I like to disclose every quarter our improvement in terms of cable profitability. You know in Q3 we disclosed a unitary margin, EBITDA margin per customer close to minus EUR 13 per customer. At the end of this year, it will -- it was -- excuse me, at the end of 2018, it was minus EUR 10 per customer and it would be 0 we think at the end of 2019. So I will let Michaël to speak about our focus in terms of wholesale price or what we see. But it's not only decrease of the wholesale price or the slight decrease we focus of the wholesale price, it's mainly wholesale price -- the decrease of the wholesale price of last August it will be a full impact for 2019, coming from EUR 26 to EUR 20.3 per month per customer. So that will have a big impact on our P&L on full year. And again, Michaël is going to speak about maybe a slight decrease compared to the current price. And again, some efficiency. Michaël said our churn is still too high in the cable. So we are going to decrease our churn. We're going to decrease our repair. We're going to decrease our call, a big call avoidance policy. We've now a customer journey which is improving day after day. So all in all, it's all the line of our P&L. And I spoke about the ARPO, the top line. Also per customer, it will be better this year than next year.

[Michaël Trabbia, CEO & Executive Director]

Yes, maybe to add on this. As you mentioned, Arnaud, the expected change in the wholesale price is not the main driver of our ambition to reach breakeven EBITDA on cable. It's one of them, but it's not the main one. We have once again our own efficiency and improvement of processes. And there is also -- and it's good to mention the operational improvement that are brought by the regulation last year, in particular the single installer and also the nondiscrimination principles that will be implemented as of mid-2019. And those elements, they are operational, but they drive costs for us and they are also very important in that perspective. So to answer you, yes, we included some improvement in the wholesale price, but it's not the main driver to reach the breakeven ambition that we mentioned.

[Arnaud Marie Julien Castille, Chief Finance Officer]

And of course, it's EBITDA breakeven, no?

[Ruben Devos, Equity Analyst]

Yes. Just a small follow up if I may. I noticed that in the press release that there were some core procedures started by the cable operators. I was just wondering whether that could delay the implementation, let's say, of the new -- yes, of the new regulation mid-2019 and therefore possibly the launch of a potential -- yes, rather than a standalone offer?

[Michaël Trabbia, CEO & Executive Director]

Okay. We don't anticipate this. There has been one legal case that has been rejected by the court recently, so there was a request to suspend the decision. This request was rejected by the court. And we believe that the decision that has been taken and the one that will be taken, the BIPT is very careful at the legal security of those decisions.

[Operator]

So we have another question from Mr. Matthijs Van Leijenhorst from Kepler Cheuvreux.

[Matthijs Van Leijenhorst, Analyst]

First question is on your convergence customer intake. Obviously, Telenet witnessed some migration issues in its SFR footprint since Q3, so I was wondering how many of your customer intake is from the SFR footprint. And then secondly, last 2 quarters your postpaid mobile intake has been quite impressive, except there is also some pressure on the ARPO. Part of that is related to out of bundle. But I was wondering, the subscriber intake, could it also be related to the fact that you are more active -- have become more active in the B2B business and therefore we also see some pressure on the ARPO? Those are my questions.

[Michaël Trabbia, CEO & Executive Director]

Thank you. So 2 good questions indeed. On the first one, it's fair to say that there has been a visible impact on our figures with the SFR opening and it's fair to say that we capture more and more customers from Telenet and it's clear and is something that will continue. We have a clear incentive to target more Telenet customers than Proximus customers. So this is absolutely clear. And it's also linked to the fact that we probably have more incentive as we might have in the past that could rebalance a little bit the situation for us and allow us to have a more balanced approach. So that's on the first question on cable customers. And the second one, yes, it's both B2C and B2B. And it's fair to mention that our B2B figures have improved, so the growth is also partly due to growth in B2B, where obviously the ARPO is a little bit more under pressure as you mentioned. So this capture indeed I would say both B2C and B2B evolution.

[Operator]

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

[Stefaan Genoe, Head of Equity Research]

Stefaan Genoe, Degroof Petercam. Two questions. First, could you remind us of the addition in brand fee that you will see this year and next year? And secondly, today there was a newspaper article on Belgium IT service company Cegeka that could be looking to bid for the 5G spectrum in a new consortium. How do you look at this? Do you believe this increases the likelihood of a foreign player coming into the market? Or could you imagine also the existing telco operators in Belgium being part of such cooperation with a business company like Cegeka? And then perhaps a third question also. Your Koala offer has been very successful this year. What has been the most important competitive reactions from Proximus and Telenet and even VOO on this offer in recent months and have you seen more impact from competition in recent months on this offer?

[Michaël Trabbia, CEO & Executive Director]

Okay. Arnaud, you want to answer the first question and I will take the 2 other ones?

[Arnaud Marie Julien Castille, Chief Finance Officer]

Yes of course. So on brand fee, the impact in 2019 will be EUR 10 million. So there is maybe a complex calculation on brand fee, so I'm going to simplify the calculation for you. It's 1.6% of our revenues, but not all our revenues. So you can take 80% of our revenues. So it's 1.6% of 80% of our revenues on an annual basis, okay. So EUR 10 million beginning in May, EUR 10 million in 2019.

[Michaël Trabbia, CEO & Executive Director]

Okay. Then on 5G and Cegeka announcement. We see -- first, we don't believe that there is a business case for a company offering only B2B services and industrial services. We see this debate coming in Germany. As you know, we believe that this is I would say something that is not -- that has not a business case because we leverage obviously our network for all customers. The investment that are needed, they are important. And it would be I would say not efficient to reserve some spectrum that is highly needed to cope with the increasing demand in data for only a portion of customers and a portion of territory. So we don't see this as the way to go. And from what I saw in the press, I also saw that Cegeka did not intend to roll out a network themselves. They were rather mentioning they were looking for partners. And I don't think that those partners ready to invest in some kind of network have been identified so far. The on the Koala. Obviously, the attractiveness and the success of this offer was first linked to the fact that voice unlimited was until quite expensive in Belgium and now thanks to our Koala offer it is much more affordable for the vast majority of our customers together with a significant data bundle. Our competitors reacted and I would say they are more or less depending on the brand and so on. They more or less joined or get close to our offer. For us which was important was to lead the market. And I think this is something that clearly has a big value for our customer and for the image of Orange brand in Belgium, which is improving thanks to our ability to be the first movers to give those improvement to the Belgium customers.

[Operator]

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

[Roshan Vijay Ranjit, Research Analyst]

Just a quick one on your CapEx guidance, where you're guiding to stable for '19. Could you give us a flavor of how your agreement with Fluvius fits in here? I acknowledge that it is limited at present, but is there a scope for further expansion? Are the other partners willing to maybe co-invest or rather you co-invest with? And secondly, on the mobile side. I saw that the regulator has increased the emissions limit in Brussels. Now that is still significantly below the European average of 40 volts per meter. Is there still a debate there to increase it further or is this the hard stop for the regulator?

[Michaël Trabbia, CEO & Executive Director]

Yes, so on your first question...

[Arnaud Marie Julien Castille, Chief Finance Officer]

Stable CapEx for 2019.

[Michaël Trabbia, CEO & Executive Director]

Yes, stable CapEx.

[Arnaud Marie Julien Castille, Chief Finance Officer]

And the Fluvius aspect...

[Michaël Trabbia, CEO & Executive Director]

And Fluvius book.

[Arnaud Marie Julien Castille, Chief Finance Officer]

Topic.

[Michaël Trabbia, CEO & Executive Director]

Well, as you know, the Fluvius proof-of-concept is proof-of-concept. So it's related to a very limited number of households. It's a few thousand households. So the CapEx for us are limited. And they are included in the guidance that we communicated. So it's something that for the moment with the book has no significant impact on our CapEx. And obviously then it will depend on the decision by Fluvius to go beyond and to develop and expand this rollout further, but it's not the situation for the moment. And then we will have to assess the profitability -- the compared profitability between the current cable offer and fiber offer. For us what's important is to promote open model, open wholesale model with a fair price. And Fluvius has the advantage to be a wholesale-only company and to allow us to have more active part of the offer. So in the Fluvius, we have our own active equipment, which allow us to differentiate more and to provide the services we want to the customers. So that's why we support and we wanted to participate to this proof-of-concept. On your second question, sorry I don't remember it. It was about?

[Unknown Executive]

Emissions in Brussels.

[Michaël Trabbia, CEO & Executive Director]

The emission norm in Brussels, yes. So first we welcome the intention and the draft legislation to increase the emission norm in Brussels. It still need to be fully confirmed and fully passed, because the intention is good, but obviously we need to go until the end. It's a first step. We know that in the longer term we will need -- and it's true not only in Brussels, but also in the other regions in Wallonia and Flanders -- we will need improvement, further improvement in the emission norms to allow us to benefit from the full range and the full capacity of the 5G. With the current evolution in Brussels and the situation in Flanders and Wallonia, we can start rolling out 5G. But if we want to benefit from the full capacity of 5G, we will need further improvement and the norms gets closer to the worldwide norms.

[Roshan Vijay Ranjit, Research Analyst]

Okay, that's very clear. Just a quick follow up, sorry, on your CapEx point. Are you able to share with us any of the components of the co-investment, any levels of -- I don't know -- is there a certain level of market share you need to take, any wholesale fees which you would pay to Fluvius? Any details you could share there, please?

[Michaël Trabbia, CEO & Executive Director]

So for the Fluvius case, once again it's very limited. It's a few thousand households. And we can decide on a very local basis whether we take or not some commitment there. But yes, it includes minimum commitments, which is linked to our expected market share in this broadband market. So we take there a commitment in line with our expected market share. and As you know, we communicated already on our ambition to reach 10% market share in the broadband and TV market and maybe we can go a little bit higher when we have access and when we can put our own equipment and we can have I would say more facility and more partnership spirit with our network partner, which is the case with Fluvius. So that's the model indeed we have and it also comes with a very reasonable wholesale price, monthly wholesale price.

[Operator]

We have another question from Mr. Emmanuel Carlier from Kempen.

[Emmanuel Carlier, Research Analyst]

Yes, sorry, my question have already been answered.

[Operator]

[Operator Instructions]

[Eric Chang, Director of Investor Relations]

Thank you very much, ladies and gentlemen. If that's it, then Michaël, Arnaud and I are available for your further calls. Thank you very much for participating and see you in -- talk to you in about 3 months -- or earlier actually. But thank you.

[Arnaud Marie Julien Castille, Chief Finance Officer]

Thank you.

[Operator]

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