Orange Belgium SA

XBRU:OBEL

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen, welcome to the Orange Financial Results Q4 2021. [Operator Instructions] I would like to turn the call over to Mr. Koen Van Mol, Head of IR. Sir, please go ahead.

[Koen Van Mol, Investor Relations Officer]

Thank you, operator. Good afternoon, everyone. Our apologies to have a little delay due to technical reasons. So my name is Koen Van Mol. I am Head of Investor Relations at Orange Belgium. I would like to welcome you to the presentation of the results of the fourth quarter and the full year of 2021. Here with me are Xavier Pichon, our CEO; and Antoine Chouc, our CFO. You should all have received our financial communication this morning. The information is also available on our corporate website, together with all other relevant documents related to these results. This session will have 2 parts. In the first part, we will go over the results of the fourth quarter and the full year of 2021. And as usual, you will have the possibility to ask questions related to these results after the presentation. After this first Q&A session, there will be a complementary presentation specifically related to the signing of the agreement for the acquisition of VOO. We will close our webcast with a Q&A session explicitly related to this transaction. So now I'm pleased to leave the floor to Xavier.

[Xavier Pichon, CEO & Director]

Thank you, Koen. Welcome, ladies and gentlemen. I hope you're well. We will bring you the latest from Orange Belgium and then present you our results for 2021. So we are commenting the Slide #3. So this quarter, but also the full year has a very strong commercial and financial results. As you can see, the good financial results are mainly thanks to our growth in retail services revenue in combination with efficient cost management. Consequently, we have exceeded our 2021 EBITDAaL guidance that we had announced to the market previously. Antoine will come back later further in details on this financial results, sorry. 2021 has been a year that brought us closer to achieving our strategic ambition and paved the way for our new market positioning with our strategic plan, Orange. We want to be both challenger and leader. We'll use our 2 brands, hey! and Orange, to meet the needs of our customers in our B2C, B2B and the wholesale market segment. Now let's go into the operational highlights of the last quarter, Slide #5. So our GO portfolio has been again doing very well during this quarter. In addition, we improved our offers that also attracted more customers. In November, our most abundant mobile subscription has been renamed the GoExtreme and doubled its data bundle from 30 to 60 gigabytes per month without price increase. Note also, that after reaching the 60 gigabytes limit, customers will continue to use mobile Internet at a reduced speed, which is convenient for most usages. Slide #6. Major event in the quarter was the signature of the agreement with Nethys for the acquisition of 75% less 1 share of VOO SA. The transaction is based on an enterprise value of EUR 1.8 billion for 100% of the capital. This acquisition represents a major step forward in Orange Belgium national conversion strategy. It will increase investment in competition in the communication sector for the benefit of customers and the competitiveness of the Walloon and Brussels regions. We will provide more details on this transaction during the webcast and the complementary presentation, as already indicated by Koen. Slide #7. So let's go to Slide #7, not only we have been improving our GO portfolio, but also our hey! brand as we see the boost. We want to reward the loyalty customers and offer a boost in the data bundle with an increase of 25% each quarter. That's where our customers can double their data bundle after a year. Slide #8. After the integration of its first lab -- 5G lab in Antwerp last October 2021, we have made a partnership with the Grand Poste of Liege, which is a hub dedicated to creative companies and innovation. The objective of the 5G Lab in Liege is to demystify this new technology and demonstrate its possibilities and applications. The lab will also be used to develop and test our innovative and concrete new 5G applications in collaboration with customers prospects and partners. We are now in a position to offer a complete range of innovative services, thanks to an ecosystem that brings together all the Orange Group skills in Belgium known as Orange best of breed. These skills reinforce our ambition to grow in the B2B market, connectivity, value-added services, cybersecurity, IoT, smart cities and also 5G B2B form the winning combination that enable us to address all the needs of companies of all sizes established in Belgium. We are also open to structuring partnerships, and we will continue to contribute to the development of innovative start-ups. Hey! also announcing that we will offer our postpaid Orange and hey! mobile customers access to our 5G network at no extra costs starting as of today. Slide #9. The key achievement of the fourth quarter of 2021 can be summed on this slide. Our positioning contributed to solid commercial results. We have increased our mobile customer base by roughly 4%, reaching about 2.7 million customers. During the last quarter of 2021, we added 12,000 new cable customers as well, reaching 394,000 customers, roughly 400,000, an increase of roughly 21% over the last year. These results contributed to an increase by 5.3% in total revenues, which reached EUR 361 million, whereby the retail service revenue grew by 5.7% to EUR 242 million. Because of the increase in retail services revenues and management of our costs, we were able to increase our EBITDAaL by 10.7% to EUR 95 million. Slide #10. When we take a look at the full year as shown on this slide, so we have increased our revenue by 3.7% and achieved EUR 1,363 million while our EBITDAaL has been increased by 9.1%, reaching EUR 353 million. Slide #11, so we exceeded our 2021 guidance. As you can see, we increased our revenue by 3.7%, in line with our objective low single-digit growth in comparison to 2020. The increase in retail service revenues in combination with the management of our costs have contributed to the result of our EBITDAaL which reached, as we said, EUR 353 million, exceeding the top limit of our range of EUR 340 million. Our e-CapEx reached EUR 204 million within the lower part of the range, which was set between EUR 200 million and EUR 220 million. Slide 13, let's move to the commercial part. So you will find the results for our cable offers. So the last quarter of 2021 was maybe a bit deceptive in our view. So we acquired 12,000 new cable customers who will elaborate on that side. With 394 customers, we have now 20.8% more than the end of 2020. Slide 14 shows steady growth of the mobile postpaid customer base with 24,000 net adds over the last quarter, the main component being the net adds coming from convergent customers. Slide 15, it indicates a decrease in our convergent ARPO and an increase in mobile ARPO. Our convergent ARPO decreased because of our loss due representing a larger part of the customer base. Also, the discount on our mobile tariff plans in the convergence influence did decrease. On the other hand, the mobile-only postpaid ARPO increased by 0.6% to 19.90, thanks to the increase of the out-of-bundle revenues, mainly from roaming. Slide 16. On the regulatory update, we can mention that of course, the spectrum auctions, the royal decree to this respect has been published in December last year, containing reserve spectrum for a potential fourth entrant. The BIPT published a call for candidates and files can be submitted until the 16th of Feb. After that, we will know the number of candidates that will participate to this auction. That being said, I will now leave the floor to Antoine, who will give you more details to the financials.

[Antoine Chouc, Chief Financial Officer]

Thank you, Xavier, and good afternoon, everyone. It's a pleasure to be with you today. So Slide 18. Our revenues have increased by 5.3% for the quarter to EUR 361.4 million, mainly following the growth in retail service revenues, but also in equipment sales. As you can see, wholesale revenue slightly decreased. If we go directly to Slide 21, you will see the waterfall of our revenues for Q4. In our retail service revenue, we see an increase of 5.7% in comparison to last year, mainly thanks to the increase of our convergent customer base. Also, the growth of our fixed customer base has contributed to the increase of our fixed and IT service revenue. We also had an increase in our mobile-only service revenues explained by the growth of the mobile-only ARPO in combination with a higher customer base. Our wholesale revenues contracted slightly by 0.5%. The increase of sales in equipment that contributed to an increase of EUR 5.5 million in equipment sales and other revenues. Let's now turn to Slide 22. We have the same waterfall for EBITDAaL. The strong performance of our EBITDAaL was driven by higher retail service revenue, which increased by EUR 13.1 million. Orange Belgium continues to manage carefully its cost, and profitability has improved, and EBITDAaL grew by more than 10% year-on-year. On Slide 23, about our CapEx. They increased by 16% for the quarter, and the catch-up was made in comparison to last year, as well as the start of the implementation of the ranching agreement with Proximus. Over the year, there was an increase in the CapEx to EUR 204 million. Our net debt amounted to almost EUR 70 million, gearing remains low with net debt to EBITDAaL at 0.2. Let's now look forward to 2022 and on the Slide 25. In terms of guidance, as in 2021, we expect a low single-digit revenue growth in 2022, taking into account further uptake on our postpaid and convergent customer base. We target an EBITDAaL between EUR 350 million and EUR 370 million. In addition, total e-CapEx is expected to be between EUR 210 million and EUR 230 million. For the outlook, we, of course, did not include the acquisition and integration of VOO. We also have to keep in mind that we would no longer have Mobile Vikings on our network starting Q2. There are also some uncertainties with regards to the evolution of the cost for energy which has been raising importantly over the former periods. The labor cost indexation will also have an important impact on our labor costs, and more importantly than last year's. And of course, COVID-19 may still have an impact in our activities in 2022. Regarding the dividend, the Board of Directors will not propose a new dividend for the financial year 2021 so as to preserve cash for future capital requirements, such as the payment of the spectrum auction that will take place, as Xavier said, at the end of Q2. And of course, for the VOO acquisition, that will lead to post-closing leverage ratio of around 3.5. With this, I conclude this presentation, and we'll open the Q&A session.

[Koen Van Mol, Investor Relations Officer]

Thank you. We will now have the first Q&A session where you will have the opportunity to ask questions specifically related to the results. As mentioned earlier, after this Q&A session, there will be a second presentation with regards to the signing of the agreement with Nethys for the acquisition of VOO. So please limit now the questions related to the results of the fourth quarter and the full year of 2021. Questions regarding to the VOO transaction can be asked in our second Q&A session. Operator, may I ask you to open the floor for questions.

[Koen Van Mol, Investor Relations Officer]

Now we go to the second part of this call. Xavier and Antoine will give more details on the agreement that has been signed, we set this for the acquisition of VOO. So Xavier, please go ahead.

[Xavier Pichon, CEO & Director]

Yes. Thank you, Koen. So we'll bring you the latest and the short intro on this very important topic, of course. So on the 24th in the morning of December 2021, so we announced -- we signed actually and we announced the signing of an agreement with Nethys to acquire 75% minus 1 share in VOO SA. This is an important transaction for Orange Belgium, you know that for years now. It's not a surprise, of course, that we participated in this process, as we have always, and we have always expressed our interest in the acquisition of a cable company in Wallonia with presence in of course Wallonia and Brussels as well. So the signature came -- the signing came after the period of exclusive negotiation, which began on the 22nd of November last year. The negotiation resulted in the signing of an agreement for the acquisition of VOO SA based on an enterprise value of EUR 1.8 billion for 100% of the capital. These acquisition represent a major step forward in Orange Belgian national convergent strategy independently from the evolution of the regulatory framework. It will increase investment and competition in the telco sector for the benefits of customers and the competitiveness of the regions of Wallonia and Brussels. It also provides Orange Belgium an increased fixed and broadband market share and significant synergy potential. In addition, the acquisition of VOO will also improve Orange Belgium positioning to discuss infrastructure projects in the different parts of the country. Antoine will go into more details on this transaction. Please, Antoine, go ahead.

[Antoine Chouc, Chief Financial Officer]

Okay. Thank you, Xavier. And please let's go directly to Slide #3. I'll start with some highlights on the market and it may not be completely new for most of you. It's always good to start with the basics. So from a broad perspective, Belgium has very attractive macroeconomic figures that support the further development of the fixed network. The number of households has grown over the last 10 years with a CAGR of 0.7%. And today, there are about 5 million households in the Walloon country with a population of a bit more than 11 million people. VOO is present in the region of Wallonia and Brussels. Both regions together account for more than 40% of the total population.Belgium is a forerunner in Europe in terms of ultrafast broadband. Ultrafast broadband is a broadband connection at 100 megabit per second or more. And with the ultrafast broadband coverage of 96%, Belgium is on the third place in Europe. In 2019, about 63% of the subscribers had an ultrafast broadband connection compared with the European average of 46%. In 2020, around half of the customers of -- in Belgium were convergent customers, and this base continues to grow, and therefore, it shows the importance for Orange Belgium to continue to pursue its convergence strategy. Belgium is traditionally a country where cable is omnipresent. Cable access represents 53% of all broadband connections in Belgium. And on the contrary, the rollout of fiber is still at a very early stage. Today, fiber is mainly used to migrate DSL customers to higher bandwidth. Cable already today provides very large bandwidth for broadband satisfying the need of the customers. Let's now turn to Slide #4. The combination of Orange Belgium and VOO will create a leading convergent player, accelerating our convergent strategy, improving our competitiveness at a national level. There will be a combined revenue of around EUR 1.8 billion, of which almost 20% is convergence, 1/3 mobile-only and more than 20% is fixed-only. This all is backed by a high-quality mobile and fixed network. Orange Belgium's national network covers 99% of the population with a very performance 4G network and tomorrow 5G. And as you know, currently, the RAN sharing agreement, which has been deployed, will increase the network quality and optimize the cost. VOO's high-speed cable network is present in Wallonia and Brussels, as I said, covering about 80% of the households in these regions. There are 1.8 million homes passed with HFC, and already almost all of the footprints can have download speeds of 400 megabits per second and more. Slide #5. The acquisition concerns first all the company VOO, the telecom activities of Brutélé, which owns the cable infrastructure in part of Brussels and Charleroi will be integrated before the closing. In addition, it also includes the company BeTV, providing premium TV services, the call center of VOO which is WBCC and also the company ACM which is the carrier division of VOO. Within its footprint, VOO is the second largest telecom operator. VOO offers broadband, payTV, fixed telephony and mobile services through 3 different brands. VOO, of course, had a core brand for fixed broadband, BeTV for premium TV offers and Zuny for digital-driven Internet. Revenues of 2020 were EUR 517 million with an EBITDAaL of EUR 192 million as reported by VOO. The CapEx for 2020 accounted for EUR 139 million. And the company had about 1,500 full-time equivalents and has 22 owned stores. Slide #6. VOO and Orange do have a highly competitive network and brand assets to address the need from different market segments and enable significant cross-selling. While Orange Belgium is strong in mobile with more than 3 million mobile customers, VOO is a strong fixed and TV-based player with around 720,000 customers. This complementarity between the 2 companies will permit to a significant cross-selling of mobile, broadband and premium TV services. The combination will permit strong know-how in fixed mobile and TV services in an increasingly convergent market. Of course, there are important synergies at stake between the 2 companies. The most important synergies comes from the transfer of the MVNO to Orange Belgium's network. This migration doesn't require a change of SIM cards and therefore, has a very limited impact for the customer. The transaction agreement includes clear guidelines that define the new long-term MVNO contract between Orange Belgium and VOO. The revenue synergies are mainly generated cross-selling, I just mentioned it. And the acceleration of convergence for both Orange Belgium and VOO will have other cost synergies that will be created through network, IT and SG&A, but also in procurement as Orange is part of buying the procurement JV which will enable major discounts. We don't foresee cost synergies related to staff as the complementarity between the 2 companies makes our competencies remain necessary for both companies. Regarding CapEx, there will be balanced investments allocated to upgrade the HFC network and by deployment of an open passive fiber network. This will enable to maintain the network leadership and preserve its growth and development over the long run. The most efficient way to reach 1 gigabit per second is to upgrade HFC network from DOCSIS 3.0 to DOCSIS 3.1, to reach a multidecade network of 10 gigabit and beyond, where we progressively deploy FTTH. In order to optimize costs, we intend to perform RAN sharing mainly in the dense areas. We want to contribute to the objectives set by the European Union for heavy households to have access to 1 gigabyte per second by 2030. Slide 8, and let's go a bit further into the highlights of the transaction. There will be the creation of a NewCo, a special purpose vehicle that will be incorporated by Orange Belgium before the closing. Nethys will share -- will sell all its shares of VOO into this NewCo. This will be immediately followed by the acquisition by Nethys of shares in this NewCo, representing 25 plus 1 share on the fully diluted share capital. We've also agreed on the liquidity mechanism. Indeed, Nethys has the possibility to contribute its remaining stake in the NewCo into Orange Belgium shares so as to create one single company. VOO also benefits of an exit mechanism through put options during the 3 years post-closing for its remaining stake. And Orange Belgium has a possibility to call the shares held by Nethys in the fourth year post-closing. In every case, Nethys has a possibility to keep a minority stake up to an equivalent of 10% in the NewCo. With Nethys having a minority stake in VOO, it will also have certain governance rights to guarantee the implementation of the industrial and social projects. These governance rights are related to specific reserve matters, mainly regarding employment as well as network investments. Regarding the financial, this acquisition have been done based on an enterprise value of EUR 1.8 billion, which implies a multiple of 9.5x EBITDAaL before synergies and 6.5x when we include the synergies. In comparable transaction, we see multiples on average of 10.5 per synergies and 8 post-synergies. This transaction will be paid in cash and be financed via intercompany loan from the Orange Group. As we already said, the estimated combined pro forma leverage in 2022 is at 3.5. This transaction, which is also been said by Xavier, will be subject to the authorization of European Commission as well as the contribution of Brutélé TMT business. We expect and hope that the closing could take place in the second half of 2022. In our guidance, we don't take into account currently VOO. And of course, our guidance will be adapted from the moment that VOO is integrated. With this, I end this presentation, and I'd like now to open the floor for further questions on these transactions.

[Operator]

[Operator Instructions] The first question is from Mr. Nicolas Cote-Colisson from HSBC.

[Nicolas Cote-Colisson]

Two short questions, please. The first one is about the moving parts for the EBITDAaL in 2022, because the midrange indicates an extra EUR 10 million this year. So if you can tell us a bit more about the effect of the operating leverage, but also from the RAN sharing. And if you could give us the Mobile Viking impact from Q2 on the full year. And secondly, on the convergent ARPO, it was down 1.3%, but we can see the pace of decrease seems to soften. So how should we see the dynamic in 2022? Do you have increased prices for fixed broadband offers a few weeks ago. What do you plan to do for mobile? And how should we see the ARPO going forward?

[Antoine Chouc, Chief Financial Officer]

Okay. Thanks, Nicolas, for your -- these questions. First, I'll answer to your second question regarding the ARPO. On our convergent ARPO, we target a significant increase of our ARPO, first, because of the price increase we announced in November, and that will be -- that have just been implemented starting 1st of Jan. As a reminder, we increased our Love Duo and Home offers by EUR 2 and our Love Trio offers by EUR 3. So it's more or less a 5% increase. And we also plan to have a slightly different mix of our gross adds compared to this year, as we are to launch a new set-top box that will drive our sales of Love Trio including the TV. That's for the convergent ARPO. For the mobile postpaid ARPO, we target more or less a stabilization of our ARPO. It has -- we may have a slight decrease of our bundled ARPO because of the discount we offer on multi-card advantage, et cetera. But it should be offset by a slight increase of our out-of-bundle revenues in the context where we expect some more roaming revenues. As for your second question regarding some highlights on our EBITDAaL for 2022, clearly, the year-on-year major impact will be the loss of Mobile Vikings revenues starting at the end of Q1, so year-on-year impact when it comes to EBITDAaL of around EUR 15 million. We'll also have a year-on-year significant increase of our energy costs. And we all know that energy prices are skyrocketing, and we had to buy energy at significantly higher prices than what we did and what the prices we secured for 2021. And you had a question on the EBITDAaL impact of our RAN sharing deal. It will be, I would say, not that significant in 2022. The major savings will start from 2023. The main impact of the rent sharing implementation is rather on the CapEx side, and it's clearly the main explanation for the increase of our CapEx guidance for 2022.

[Operator]

Next question is from Mr. David Vagman from ING.

[David Vagman, Research Analyst]

First question on the conversion net adds. They were a bit softer in Q4. What are your expectations for this year in terms of, let's say, run rate? What do you think is achievable? And then on the -- let's say, on the mobile postpaid net adds, how much is your new brand, hey!, contributing? And then last question, on the CapEx guidance for 2022, could you explain breakdown a bit between 5G, normal mobile, let's say, maintenance, CapEx, customer premise equipment, et cetera, give us a bit -- and maybe give us a bit of a more long-term visibility on the cost of the 5G rollout beyond 2022 and taking into account the MWings JV.

[Xavier Pichon, CEO & Director]

I will take your first -- question number 1 -- so on your first question, so related to the convergent net adds, so as I said in my intro, so we are -- maybe the number should be seen as a bit deceptive in our view, maybe in yours as well. What we experienced during the Q4 is, I would say, a slack market not really tensed at the beginning of the Q4. And then, of course, December was a bit more tensed related to the market dynamics. So seeing what has been disclosed yesterday, I think maybe it's going to be a common observation coming from the market. I would say, nevertheless, so we expect to get a bit more higher net adds on a run rate basis for 2022, higher than 12,000, of course, and maybe much more closer than the previous quarter we had in 2021.Just to finish on that point, as it comes to convergence, you know that in the very, I would say, agitated quarters like the Q4 generally in Europe and then in Belgium, so we are moving a bit away from the high level of subsidies. And of course, this is the case at Christmas and around Christmas. This year, it has been the case also from back-to-school to Christmas. So generally speaking, I think Orange is not -- the Q4 -- sorry, it's not the best quarter in a row for Orange every single year. Even last year, we had maybe higher results -- this is the case and a decision we are making constantly just to move away from the high level of subsides. On your question number 2, as it comes to the mobile postpaid net adds. So we are much more satisfied with the net adds, generally speaking, okay? And we are not disclosing specifically the hey! brand figures, but we are happy with, I would say, globally, the launch of hey! We've done that, I would say, last September, and for the moment, every goal and every year, I would say, KPI we had in our mind in our figures are in line with what we are -- in line with what we expected. So far so good. You've seen in my intro in the slide that we are continuously evolve on this offer. And then we've just launched the reward program that will allow customers to double the data bucket in a year. So that's nice. And of course, we do have a lot of interesting perspective on that hey! brand as well. Thanks a lot. I will leave the floor to Antoine on the CapEx guidance question.

[Antoine Chouc, Chief Financial Officer]

So as I said, our CapEx guidance for 2022 is between EUR 210 million and EUR 230 million. We can consider that a normalized CapEx baseline for Orange Belgium would be around EUR 180 million per year. And additionally, we have to take into account the implementation of the RAN sharing. I think we already communicated on the figures of EUR 130 million of implementation costs or this -- including the swaps, so that entering implementation and the swap from Huawei to Nokia. And this amount will be spread over a period of 3 years. So that gives -- taking these 2 components, you arrive more or less in the middle of our range of guidance. I won't disclose, for obvious reasons, the level of CapEx for 5G this year. But it's not included in the RAN sharing figures I just mentioned, but it's included in the guidance. And well, that's what I can say at this stage with -- that's what I can say at this stage.

[David Vagman, Research Analyst]

Maybe as a very quick follow-up on the CapEx. Is it -- to make any comparison with Telenet, which obviously is making quite a step-up on its investment this year, can you explain or reconcile what seems to be quite a difference between you and Telenet? Is it simply the cost efficiencies of the [Indiscernible]? Or is it more related to some different time lines in the implementation, execution of the 5G rollout.

[Antoine Chouc, Chief Financial Officer]

Of course, we are not able to compare our situation with the one of Telenet. What I can tell you is that there is no fiber deployment in this budget and in this guidance. That could be not too different, as we understand that Telenet has communicated on some fiber ambition. So that's an obvious difference between Telenet and us, but I can't say much more about it. And regarding 5G rollout, we always have -- frankly, we have to take into account that if we don't roll out 5G, we would have to invest massively in more capacity for our 5G antenna -- of our 4G antennas -- so all what we invest in 5G won't be invest in 4G. So it's -- we don't think that 5G will lead to a huge increase of our CapEx baseline. Of course, it will use some CapEx, but we will say -- I would say it's completely manageable in the guidance we just issued.

[Operator]

Next question is from Mr. Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Great. Two questions from me. First, just to sort of follow up on the CapEx. Did I hear right? And you're saying that the EUR 130 million RAN CapEx for the 3 years. Is that just sort of fit out? Or did that include some of the 5G? And again, just to clarify, you said that there's no clearly fiber cost in that guidance for 2022. Does that include any of the -- you were doing some of these trials with Fluvius, so there's no CapEx associated with that within your FY '22 guidance? And second question, just on the mobile ARPO. Now you said the trends were supported by some more out-of-bundle revenues roaming this quarter. Are you still seeing the kind of trend that we're seeing through 2021 of customers migrating to higher plans? Is that still a theme ongoing? Or are you seeing that customers are now kind of happy with their data allowance given your new kind of GO portfolio?

[Antoine Chouc, Chief Financial Officer]

I'll answer to your question. Thanks. Just to make it clear, the EUR 130 million we communicated on the RAN sharing, it includes the setup, the implementation, all the enablement costs for the RAN sharing and the swap -- the cost associated to the swap from Nokia to Huawei -- from Huawei to Nokia, sorry. But of course, there is no fixed investment in it. There is no 5G in it. It's only the pure cost of the implementation of the RAN sharing. And I remind you that it will -- of course, it's an important investment for Orange Belgium, but it will create massive synergies and savings, and it will be a very value-creative project. Regarding your question on fiber in Fluvius, you know that what we are doing in the north since a few years with Fluvius, it's only -- we are only working on the active part. We are not participating to -- and there is no CapEx of fiber rollout in Flanders with Fluvius. Fluvius has a CapEx and we only rent for our clients some lines to be able to provide them with FTTH connection. So there is no CapEx except for the installation cost, but it's not material at all. Regarding your second question, we still have customers migrating to a higher tariff plan, especially at the end of the year, thanks to the success of the launch of our GoExtreme and some promotion at the launch of this new tariff plan and we saw some upselling, especially from our GO Plus customer base to this Go Extreme offer. That's what I can tell you. It's -- and of course, it drives an increase of -- a slight increase of the ARPO. But at the same time, we have some -- some intense competition on the middle of the market, and we have still something like 50% of our clients on the -- our Go Plus offers. So it's a -- we have sometimes to do some promotions if we want to remain attractive on this -- the middle range of the market that also has an impact on the ARPO.

[Operator]

Next question is from Mr. Emmanuel Carlier from Kempen.

[Emmanuel Carlier, Research Analyst]

Yes. Three quick questions for me. The first one is on the cost savings program that you have. Could you quantify the savings that you expect for this year and 2023? The second one is on CapEx -- so you mentioned the one-off cost of EUR 130 million. Could you remind us of the phasing? I think in the past that you kind of mentioned around EUR 50 million, I think, this year, similar levels in 2023. And from then on, that it would move down. And then the final question I had is on the dividend policy. Could you share with us the kind of formula that the Board is using to decide if dividends will be paid or not. I understand it's linked to the leverage. So yes, would you start to pay a dividend again if net debt to EBITDA would, for example, be a bit below 2x.

[Xavier Pichon, CEO & Director]

Thanks, Emmanuel. Xavier speaking. I will take your last one, number three, on dividend policy. So of course, we shared, of course, and we'll share with general [Indiscernible] as well, the fresh dividend policy we are able just to manage starting 2022 for the year 2021. As it has been said by Antoine, so we will face several cash out even. The first one would be related to the spectrum auction offers depending on -- of course, our goals and the way we'll -- and the market, I would say, will manage the auction. And then point number two, of course, the proceeds of the VOO acquisition will elaborate on later on. And then, of course, as we aim to get the formal approval from the antitrust competition authorities by the end of the year, okay, then, of course, the proceeds might be paid at the same time. So related to these both structural events, so the Board has decided to propose to the general assembly to remove the dividend from EUR 0.50 to EUR 0 for this year 2022. And that's it. I will leave the floor to Antoine for your...

[Emmanuel Carlier, Research Analyst]

Yes. Sorry. Could I follow up on that? What would make the Board decide next year, for example, that would be again be a dividend? Is it leverage that needs to drop below a certain threshold or...

[Xavier Pichon, CEO & Director]

I don't know. I don't know, actually. So it's not honest just to answer your question so far. Of course, it will be decided by the Board at the moment, I don't know. Sorry for that. So for your first and second question, I leave the floor to Antoine.

[Antoine Chouc, Chief Financial Officer]

I'll start with your question first -- Emmanuel, I'll start with your question on cost savings. And I like first to point out that we achieved net savings this year despite the baseline that was already quite low in 2020, especially because of the technical unemployment. So that's -- it means concretely that our commitment to deliver EUR 30 million of gross savings translated into net savings this year. And I'd like to highlight this because I think it's a major achievement and a good proof of our commitment to tight cost control. As we said previously, we confirm for 2022 this target of having EUR 30 million gross savings. The problem is, as I said, we have quite a significant lines expense of OpEx that will rise in 2022, especially our energy costs and the impact of the indexation for our labor cost. So it doesn't mean that this EUR 30 million of gross savings will be translated into net savings next year. And we rather foresee a kind of stabilization of our indirect cost base. How to achieve that? First, digitization is a key driver of this program. We have a deep ongoing IT transformation [Indiscernible]. We already have communicated on it, and that will deliver by the end of the year some significant savings on the -- in our B2B operations. We will keep on improving the digitization of our sales and our customer contracts. The more we increase our digital sales, the more we can streamline our distribution network and reduce our A&P spending. So we have many initiatives to boost our online sales, and we target around 70% of online sales by 2025. And we have a high ambition and we have many projects to deliver this goal. And by the way, the introduction of hey!, which is a completely digital channel will contribute to this objective. Second pillar of our cost saving program is, as I mentioned earlier, the RAN sharing deal with Proximus that will deliver on the medium-term 20% of net reduction of our network OpEx by 2025, thanks to less rental cost, thanks to energy savings, et cetera. And at the same time, remember that we will improve the quality of our network. And last but not least, we hope to have what we call as part of Orange cost efficiency program, which target our general expenses, our property expenses. For instance, we think -- and it's not -- we think we already had some property savings because the post-COVID way of working will enable us to free up some space in our HQ and that we increase the severance of our headquarters. So that's what I can say to answer your first question on the costs. Regarding the CapEx, I don't think we already communicated in -- on a detailed phasing of this EUR 130 million of cost for this -- for the RAN sharing program. But what we said that it will -- this cost will be spread over more or less 3 years, 3.5 years. And to give you an idea, we really started the implementation of RAN sharing in June 2021. So to give you some indication of what could be impact -- a rough indication of what could be the impact in 2022.

[Emmanuel Carlier, Research Analyst]

2022 you mean?Yes. So the question was that the one-off costs will be the highest in 2022.

[Antoine Chouc, Chief Financial Officer]

Yes. But with also a significant impact in 2023.

[Operator]

Our next question is from Mr. Alexander Caldwell from Jefferies.

[Alex Caldwell, Equity Associate]

I just wanted on the spectrum auction coming up, I wondered if you are planning on paying for the fee upfront or spreading it over time. And I wondered if you could give your updated thoughts on a potential fourth B2C player coming into the market. And my second question would just be on pricing dynamics going forward. I just wondered what your thoughts on potential price rises following the increase late last year with inflation where it currently is and rising cable wholesale regulatory fees.

[Xavier Pichon, CEO & Director]

Thanks, Alex. I will take the first one on spectrum one-off. So first, I would say that, as I said, so now it's going to be, I think, for real. By the end of the Q2, we expect to be on the field and to participate in this auction around June, as it has been said. Of course, we will fill the file by the end of the month. And then related to the question you had on the potential fourth entrants, I know that has been said yesterday by others that anyway, we'll know the number of potential participation by end of February or mid-March. So that's going to be, of course, an important, I would say, news, as we said. We will also pursue our strategy just to make sure that our interest in the future will be, of course, safe relative to our customer needs and traffic. On the pay off, Antoine, maybe...

[Antoine Chouc, Chief Financial Officer]

Yes, I can confirm that we will pay one shot, the spectrum auction -- the spectrum. And as we always done at Orange Belgium, we have some interesting financing conditions, thanks to a shareholder loan from Orange Group. So I can confirm that it won't be spread over time. Regarding the pricing dynamics, as I said, we raised our cable prices by 5%. In the context, we had a lot of inflation and increasing wholesale tariffs, so we were a bit forced to do so. It's -- we are now -- it's not -- we are assessing the impact on our commercial dynamic. First, we still have the most competitive projects in the market with the best value for money. And of course, if our -- if there is our cable wholesale costs keep -- are still on the rise, then we will, at some point in time, reconsider the pricing of our offers. But it's not something we could do now just after such an increase.

[Operator]

Next question is from Mr. Santos Palacios from Polygon.

[Santos Palacios]

I wanted to ask about the decision to go towards half yearly reporting rather than quarterly reporting given that anyway, we're going to be able to see the numbers and you're going to have to prepare them for the Orange reporting, so we will be able to see how you're doing anyhow in the reporting that your major shareholders have. So why this decision.

[Xavier Pichon, CEO & Director]

So obviously, it comes to the liquidity of the shares of Orange Belgium shares, the same, I would say, since the group has made its takeover bid, of course, early this year, so the liquidity is very, very low. So we decided and the Board decided to shrink a little bit the financial communication, so it's that. So we are now sticking and we will stick to the Belgium law allowing us just to publish our results twice a year only. And that's it, of course. And I would say the answer of your question is exactly what you've just said. So you will be able to see, I would say, our figures within our result numbers as well. So that's it. It has been decided by the Board. And of course, we will stick into it.

[Operator]

The next question is from Mr. Martin Hammerschmidt from Citi.

[Martin Michael Heinz Hammerschmidt, Research Analyst]

I ask 2, if I may. So the first one on the hey! brand. What's your strategic rationale behind offering such big data boost and also 5G? Aren't you sort of afraid that this might lead to some down trading on your main brand? And the second one is on the cable net adds, I mean, as already highlighted earlier that you expect them to recover on a quarterly basis. But do you expect of the market's growth to slow down post sort of corona uplift in the coming years? And then maybe attached to that is have you -- what kind of churn have you seen on the back of the cable price increase?

[Xavier Pichon, CEO & Director]

Thanks, Martin, for your question. Of course, the first one, I will be very shy because, of course, we don't need just to provide such marketing details in our strategy. So as I said, we decided to expand the number of segments, we will tackle in the future. So of course, hey! related to individuals only, okay, we'll have some fresh and continuous changes, and of course, improving moves. So this is the case. This is why we decided just to launch some reward program expanding drastically the data bundle, and that's it. And of course, we will pursue this trend. Sorry, on your point number two, which is the cable net adds on a run rate basis, as I said, so we've been a bit disappointed about the Q4. We'll see by the end of next week, I guess, whether it's -- it has been a market dynamic or maybe some, I would say, number a bit deceptive within Orange. Seeing what has been said yesterday by Telenet, maybe it's going to be related to the market, I don't know, or both at the end. Maybe COVID surprisingly, despite of dynamic for Q4, I said that October and November were not so tensed. That's so sure that it has been related to telcos only, but okay, we'll see in Belgium. Nevertheless, as we said, we are intending to increase a little bit the run rate net adds on cable next year, maybe as we've done in the past for Q1 to Q3, maybe a bit less than Q3 because Q3 this year was really fantastic. So we'll see. I'm not so sure that it's going to be related to COVID at the end, okay, fingers crossed. But I hope that now we will move to a kind of new normal COVID situation. Even if Belgium is one of the most, I would say, tough country in terms of COVID policy so far, but we are, of course, having some maybe greater goals for 2022 better than the Q4. So we'll see. In terms of impact -- related impact to the price increase on churn, the churn -- the Q4 churn number is, I would say, strictly speaking, a bit higher than the other quarter related to the high volume of net adds in the market, and then of course, helped by the high level of CDs. But so far, so good, okay? Even on NPS and then on the churn, okay, we haven't had any major impact. And the numbers for December were, of course, satisfactory on that side.

[Martin Michael Heinz Hammerschmidt, Research Analyst]

On the churn, I was more referring to churn in January given the price increase came in effect on the 1st of January.

[Xavier Pichon, CEO & Director]

Sure. No worries, I would say. So the churn rate is managed. And after a slight increase just at wholesale price either NPS, so we've been back to the normal run rate churn rate. So no worries.

[Operator]

Thank you, sir. We have no other questions for these parts.

[Operator]

[Operator Instructions] The first question is from Mr. Joshua Lau from BNP Paribas Exane.

[Joshua Lau]

I had a couple of questions regarding the proposed fiber upgrades and strategy around that. So if we think about what Telenet said, they are going to start the Fluvius NewCo spin-off and use, we presume, some of the funds from that to upgrade quite significant parts of the cable network to fiber? And first question is, do you have a kind of rough estimate or give us a sense of how much of the network you intend to switch from DOCSIS to fiber in the longer term? So even on a 10-year view would it be helpful?And then the second question is, what's your position regarding partnerships with other cable operators within Belgium or inviting third parties in to help finance those kind of upgrades. It would be great to get a sense of both of those points.

[Xavier Pichon, CEO & Director]

Thanks, Joshua. So as it comes to your first question, so yes, you mentioned Telenet and the operation with Fluvius, I think we'll be roughly speaking, in the same position at the end. But of course, so far, we can't reach out to the VOO tech company or tech guys just to make sure whether their network would be or not modernized, I would say, at any location and what would be the plan. Actually, so far, we don't know. So we have targeted a kind of top-down plan, which will allow us to increase as soon as we can, either the coverage and the speed of this HFC network so far. So it's a top-down, of course, technical plan. It's not a bottom-up one, aiming just to get 1 gig minimum for roughly 60% of the population by the end of 2026. So this is our, I would say, first goal, just to make sure that we will be able to tackle, I would say, the marketing story either for the VOO, but Orange customer. The first challenging Proximus, of course, in the multi-gigabit rate. So this is it. As soon as we can, and then after the approval from the antitrust authorities, we'll start working on it, of course, but this is something that will be done, we hope, early next year or by the end of the year. And that's it. We'll see what would be, I would say, the technical features and the precise mix between the cable modernization DOCSIS 3.1 and then, of course, the fiber rollout. Related to your point number two, there are, of course, some room of maneuver in every region on that side. As we said, this is our strategy. This is of Orange, I would say elsewhere in the operation. So we are aiming to get some, I would say, maneuver on that side. We do have some convergent policy, multi-gigabit policy, either on mobile and fixed. And of course, taking into account that after the grant, we will be able just to acquire some fixed multi-gigabit network. Our goal will be -- maybe in a good position to negotiate partnership either in Brussels and also in Walloon regions. So we'll see. This is exactly what we said for years at [Indiscernible], and this is something we'll do. But this is a bit, I would say, a bit short at the end as of today just to explain what we do because we need to work on that. What we've done with the signing of VOO, in our view, help us to expand our multi-gigabit coverage for the customers. And that's the most important thing. Our strategy is a nationwide one. So we will, of course, do our best efforts to lean on that side, maybe in the year 2023.

[Joshua Lau]

Great. And so just one clarification, you talked about getting to 50% of network upgrade to 1 gigabit per second. What's the current -- what percentage of the VOO network currently supports 1 gigabit per second speeds.

[Xavier Pichon, CEO & Director]

I think it's a bit less in our view, in our estimation, okay? But as I said, we have not worked with VOO, okay? We are not allowed to do so. So we will answer your question after the approval of the antitrust competition authorities. That's it. We will see that.

[Operator]

Your next question is from Mr. Nicolas Cote-Colisson from HSBC.

[Nicolas Cote-Colisson]

Is there a dividend policy for the remuneration of the minority shareholders? Or alternatively, how do you value the exit price in the [Indiscernible] contracts?

[Antoine Chouc, Chief Financial Officer]

That's not something we can comment at this stage. We have some, of course, defined a dividend policy in the contract, considering that we'll have we commit to pay out some dividends below a certain threshold. Clearly, at the beginning of the operation, the leverage will be too high to margin paying out such a dividend. And once it comes below -- at the level or below what the usual target -- leverage target of the group, we could start paying out dividends. That's the main idea, but I can't say much more about it at this stage.

[Xavier Pichon, CEO & Director]

Okay. So sorry for that, okay. We're not, of course, specifically [indiscernible] We can't disclose.

[Nicolas Cote-Colisson]

I may try my luck maybe on the follow-up on the CapEx side of things because -- any comments about what it takes to upgrade the network. So I'm a bit surprised that the due diligence doesn't give you more access to the nitty gritty of the network. So I was wondering, at least in your calculation, should you assume or should we assume a step-up against the EUR 170 million run rate of CapEx that VOO currently has?

[Xavier Pichon, CEO & Director]

No, actually. So when I say that we have not had access to a specific detail on that side. I'm sure that is in the team, and I was not part of the team, and Antoine neither. So okay, maybe they had some, of course, precise or not precise, but generate figures, okay. That's why we've elaborated a top-down plan. And our goal, I would say, for the moment is to reach out to 65% or 60% of 1 gig minimum for -- by the end of 2026. Of course, it has been elaborated on figures, of course. What I'm saying that we haven't had access to the micro zoning, of course, and this is related to macro zoning and so we need to work on it. And of course, as soon as we can, we will work on it, just to make sure that we will be able to build the optimal mix between the HFC modernization and the FTTH rollout, of course. And that's it. So we can't answer properly, okay? The situation and the run rate we are giving to you, and we gave and we put in our business case, of course, is strong, okay, but it has to be, I would say, reassessed precisely when we will have information. That's it.

[Operator]

Next question is from Mr. David Vagman from ING.

[David Vagman, Research Analyst]

Zooming on the EBITDAaL synergies of EUR 85 million, I think, over 7 years, if I'm correct, could you break it down a bit further between MVNO, the revenue synergies, OpEx and then CapEx? And in particular on revenue synergies, could you tell us what are your market share ambition in the VOO footprint concerning fixed and mobile? I mean, when we are looking for a convergence at the level at Telenet and Proximus, what are the ambition there basically? So that's my first question. And then secondly, on the partnership, just in your earlier answer to one of the questions, you mentioned that there could be this with your ambition to expand multi-gigabit coverage nationwide and potentially by 2023. Could it lead to potentially some significant equity contribution, equity investment from your part?

[Xavier Pichon, CEO & Director]

Thank you, David. So I will start with your question #2. So as I said, so we are for years aiming to get some multi-gigabit access in every single region, okay? This is not fresh. This is not huge. It's not breaking news, okay. We've said that for years, even if we were with Antoine out of the company. So of course, what has been signed on the 24th of December will help us, and we will leverage our net. That's it. It's a bit early, it's very early just to see whether we would have or not equity and with what partner. And we will, I would say, partnering, of course. So very, very -- what we know and it's related to our ambition that we want to play a more important and structural role nationwide, okay? Our strategy is not related to, I would say, regions, okay, or 1 or 2 regions. We want to play as we are doing for years now nationwide. And what we are saying that we will, of course, leverage on the VOO signing to make sure that we will give access to a gigabit fixed network and broadband network, our customers nationwide. That's it. When I say '23, it's maybe much more because, of course, as we are aiming to be granted for approval by the antitrust competition authority by the end of the year, okay, maybe we'll start working on mid-2023. I can't say that we will sign something in 2023, of course. Maybe we will, maybe we won't, we don't know.

[Antoine Chouc, Chief Financial Officer]

I think the question from David, on the EBITDAaL -- on the synergies, sorry. I'm sorry, if I may disappoint you a little bit, David, but we will not disclose the full breakdown of the synergies and the EUR 85 million of EBITDAaL impact on the run rate we already communicated on. What I can tell you is that the main bucket -- and I insist on the main bucket -- is coming from the MVNO, the transfer from MVNO activities of VOO on the Orange Belgium network, but also significant revenue synergies, cross-selling, upselling, increasing of an increasingly convergent customer base that we aim at. And regarding the cost synergies, I'd like to insist on the huge procurement savings that we think we will be able to achieve after the due diligence process. We identified a very significant room for improvement to that regard and especially thanks to the power of our JV with Deutsche Telekom buy-in. So that's on top of, of course, all the cost savings you could imagine in terms of A&P, et cetera, A&P spending, et cetera, et cetera, communication and that's a major bucket of cost synergy, too.

[David Vagman, Research Analyst]

And if I may, a very quick follow-up on the, let's say, the commercial strategy post-merger, assuming it is approved. Could you tell us a bit more on what would be your degree of aggressiveness to take share in the Walloon market and the part of Brussels?

[Xavier Pichon, CEO & Director]

I think if I can be a bit, David, I think you're pushing your luck, as Nicolas has done some minutes ago. Of course, first, we don't know so far. As I said, we haven't had access to any specific detailed figures and so on. And then, of course, we'll start working on it after having being granted by the antitrust authorities. There is no way just to start working on it prior to the granting. That's it. So sorry to be deceptive as well in a row. We've been deceptive with Antoine, sorry, for that on your questions, but we -- of course, we can't say anything on it.

[Operator]

Next question is from Mr. Martin Hammerschmidt from Citi.

[Martin Michael Heinz Hammerschmidt, Research Analyst]

So could you maybe share with us your initial thoughts on how you want to fill the network in Wallonia? And regarding that, is like a collaboration with Telenet something you would be actively pursuing? Or would you sort of let them come to you if they want to -- and then also on your early days, but on pricing, you've seen VOO losing market share over the last few years and with quite some attractive prices. So do you think that an underlying issue going on that goes beyond just the network quality that you want to fix and would you -- sort of your initial thought is something maybe on pricing as well? And then the second question would be on the FTTH strategy outside of the GO footprint. So I think you have these 15,000 pilots, the pilot project in Brussels. Is that still something so that you're pursuing? Or has the VOO transaction essentially finished that and your focus will fully be on developing the network in the south?

[Xavier Pichon, CEO & Director]

Thanks, Martin. I'm not too sure to catch your -- the first part of your first question, which is to us how you want to sell the network in Wallonia, is it that?

[Martin Michael Heinz Hammerschmidt, Research Analyst]

Fill the network, not sell, you just bought it. Just to fill the network with...

[Xavier Pichon, CEO & Director]

Okay. So I would say, as I said, so DNA of the Orange Group and the Orange affiliates is to, of course, count on a premium network positioning within the country, which was not, of course, obviously the case for the fixed network so far at Orange Belgium. So this is something, as soon as -- of course, as soon as we can do that, okay, we'll find a way to get this premium at the end, either around the broadband, but also on the convergent network. So this is something we'll monetize either on the retail, but also on the wholesale if we do have some takers on that side. Coming from your second question, we are -- of course, we had, I would say, the view just to set up some pilots just to make sure whether we would be able to roll out fiber. Of course, we'll put this up, maybe on all 4 several months, as of course, we need to stand focus on the antitrust process so far. And then, of course, we'll see maybe during the Q3 or Q4, whether we would complete this park or digging into a more whole project within the VOO network as soon as we can. So we'll see. It's not yes or no so far. This is a question we might have on the table, but nothing has been decided yet.

[Operator]

Next question is from Mr. Alexander Caldwell from Jefferies.

[Alex Caldwell, Equity Associate]

I just wondered if you could talk around the antitrust inspection of -- or review of the deal and whether or not you think they're looking at it at a national level or a regional basis and thoughts on potential remedies that could come from this? And then I just wondered, is there any long... [Technical Difficulty]

[Operator]

The participant has disconnected. So we have a next question from Mr. Santos Palacios.

[Santos Palacios]

It was pretty late to the same question on the antitrust investigation. So obviously, in Wallonia, they're going from 3 competitors to 2. And my question is whether you will be -- you will have a dual brand strategy, I assume so. And whether you think that there could be revenue imposed for this transaction, which Telenet seems to imply that they see as potential. What would you offer?

[Xavier Pichon, CEO & Director]

Thanks, Santos. And I guess even if Alex was cut off, I think as you said, this might be the same question. So as it comes to the antitrust, of course, we can't comment a lot on that. This is something, of course, we will work on. And then, of course, as I said and as we said, okay, we are aiming just to get the final approval by the end of the year. We heard yesterday that as we said previously by Telenet that they are aiming to, I would say, be an active player in Wallonia. So we'll see, okay? When you say that we will move from 3 to 2, not so sure. And then last but not least, we do believe that, of course, this move and this separation will increase a lot of the competition within the country nationwide. So we'll see. We can't really comment on it, okay? We'll see in the coming months on this side.

[Operator]

[Operator Instructions] Sir, we have no other questions.

[Xavier Pichon, CEO & Director]

Okay. Then this ends the analyst call for today. Thank you very much for your participation. Would you have any further questions, please don't hesitate to contact the IR team. And as said, we will now have our next results publication on the 22nd of July for the half year results of 2022. Thank you very much.

[Operator]

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