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2013 Supplier Awards Event


WELCOME

Supplier Day

15/10

Guy De Poortere Vice President SCM


Agenda Subject

Speaker

Belgacom Intro

Ray Stewart CFO

Facts & figures

Ray Stewart CFO

Innovation as a driver for success

Laurent Claus VP Customer ICT Services

Partnership, a way to innovate

Dominique Leroy EVP CBU

Duality of innovation and sourcing in a global market

Bruno Chauvat EVP Strategy & Content

Innovation in Supply Chain Management

Guy De Poortere VP SCM

SEPTEMBER Friday

16


BELGACOM INTRO

Supplier Day

15/10

Ray Stewart Chief Financial Officer


How did Belgacom perform so far in 2013 FACTS AND FIGURES

Supplier Day

15/10

Ray Stewart Chief Financial Officer


Belgacom Performance over first half 2013 • Financial results H1 on track to meet FY guidance o o o

Revenue -0.9% YoY Ebitda -4.1% YoY Capex/revenue 11.7%

• Operating conditions very challenging o o

Stiff competition & New Telecom law led to Mobile disruption European regulation measures on Roaming significantly impacting revenue & ebitda

• Belgacom well positioned to face challenging market dynamics o o o

Successful mobile retention/acquisition actions Solid performance of Belgacom Fixed business Convergence strategy providing solid support


H1 2013 HR and Non-HR expenses • Cost evolution unbalanced versus revenue trend • Structural cost inflation turns costs management into a key challenge for Belgacom 1 ,2 00

Non-HR expenses ( € million)

0 .1 5 0 .1 4

1,200

HR expenses ( € million)

0.15 0.14 0.13

0 .1 3

0.12

0 .1 2

1,000

1 ,0 00 0 .1 1

-1.5%

8 00

0 .0 9

0 .0 7

450

443

0.1

800

0 .0 8 6 00

0.11

+2.4%

0 .1

600

0.09

559

572

0.08 0.07 0.06

0 .0 6

0.05

0 .0 5

400

4 00

0.04

0 .0 4

0.03

0 .0 3

200

2 00

0.02

0 .0 2

0.01

0 .0 1 0

0

Ytd June 2012

Ytd June 2013

0

0

Ytd June 2012

Ytd June 2013


H1 2013 Group Revenue (mio €)


H1 2013 Group direct margin (mio â‚Ź)


H1 2013 Group Ebidta (mio €)


Invest in high quality fixed and mobile network to maintain leadership in convergence Accelerated network investments in 2013 o o o

maintain network superiority on mobile speed and coverage, increase the bandwidth on fixed network via DLM and vectoring technology make operations leaner through a simplified network 15.0% 14.0%

1,200

11.2%

11.7%

13.0% 12.0%

1,000 11.0% 10.0% 800

9.0% 8.0% 7.0%

600

6.0%

400

360

370

5.0% 4.0% 3.0%

200

2.0% 1.0%

0

0.0%

Ytd June 2012

Ytd June 2013


H1’13 Free Cash Flow of € 136 million impacted by income tax payments and lower ebidta Lower FCF result of: Free Cash Flow

(in mio € )

980

797

788 691

a timing difference in income tax payments lower EBITDA

409 289 136 2008

2009

2010

2011

2012

Ytd June'12

Ytd June'13


Sound financial position with one of the lowest debt levels in European telecom sector • Net financial debt at € 2,027m • The outstanding long term financial gross debt amounted to € 2.1Bio • Credit ratings: Standard & Poor’s A; Moody’s A1 – both stable outlook

(1,601)

Net debt December 2012

136

FCF

(538)

Dividends

(38)

14

(1)

(2,027)

Non controlling interests

Net sale of treasury shares

Other

Net debt June 2013


Retention actions stabilised mobile churn Consumer Mobile Churn postpaid

prepaid

Clear effect New telecom law Q1'12

Focus on mobile in H1 through positioning of Proximus network quality, proactive retention and acquisition actions

Q2'12

Q3'12

Q4'12

Q1'13

Q2'13

Enterprise Mobile Churn

> 60% postpaid customers on new mobile tariff plan

effect in EBU much less pronounced Q1'12

Q2'12

Q3'12

Q4'12

Q1'13

Q2'13


H1’13 Focus on mobile: retention and aquisition Mobile customer evolution 2 net adds

1 00

5,543

total

5,504

Net adds Postpaid

5,416

80

5,364

5,410

128

1 30

89

5 ,4 00

46

0

61

80

5 ,2 00 40

45

Net adds Prepaid & MVNO

5 ,6 00

60

20

Supported by tactical joint offers & strong marketing actions

Split Postpaid - Prepaid

41

5 ,0 00 30

4 ,8 00

-39

- 20

-44

- 20

4 ,6 00

-52

- 40

-16 -80

4 ,4 00 - 60

- 70

-88

- 80

- 10 0

Q3'12

Q4'12

-82 -113

- 12 0

4 ,0 00

Q2'12

-72

4 ,2 00

Q1'13

Q2'12

Q2'13

1 50

Q3'12

Q4'12

Q1'13

Q2'13

Net adds Consumer Prepaid Net adds Consumer Postpaid

93

1 00

50 50

5.5%

26

17

- 50

23.6%

-37

-44

Mobile

+Tango

0

40.4%

-68

-80

- 10 0

-82

-108 - 15 0

Q2'12

market shareâ‚

Q3'12

Q4'12

Q1'13

Q2'13

EBU Net Adds 50

45

40

36 30

35

30.5%

33

30

21

25

16

20

15

10

5

0

Q2'12

Q3'12

Q4'12

Q1'13

Q2'13


Mobile offers became more abundant and simplified


Clear Postpaid ARPU impact While Prepaid ARPU remains fairly stable Consumer blended ARPU: Split Prepaid - Postpaid 27.3 €

28.9 €

Blended Postpaid ARPU

26.6 €

.0 2 7 0 €

24.1 €

24.4 €

.0 2 2 0 €

Blended Prepaid ARPU .0 1 7 0 €

14.2 €

13.6 €

14.4 €

13.3 €

14.0 €

Q2'12

Q3'12

Q4'12

Q1'13

Q2'13

Since the Telco law came into force, the Consumer Postpaid ARPU decline clearly accelerated.  

.0 1 2 0 €

.0 0 7 0 €

Initial loss high-value postpaid customers Re-pricing effect ( ~60% of the Postpaid customer base has been re-priced to new tariffs) Prepaid (lower ARPU) moving to Postpaid

In contrary, the Prepaid ARPU was not impacted by the new Telco Law. Enterprise blended ARPU 0 .0 €

0 .0 €

37.2 €

35.5 €

0 .0 €

33.9 €

31.5 €

30.8 €

The Enterprise Business experiences a more general ARPU decline driven by:   

0 .0 €

0 .0 €

0 .0 €

0 .0 €

0 .0 €

Q2'12

Q3'12

Q4'12

Q1'13

Q2'13

Regulation More abundant offers Churn of high-usage customers in the last quarter of ‘12


Solid performance of fixed products


Convergence strategy: key advantage in challenging market


INNOVATION as a Driver for Success

Supplier Day

15/10

Laurent Claus Vice President Customer ICT Services


Innovation As Key Value Enabler What We Have Achieved In 2013 Innovation driving mobile leadership and fixed speed evolution while simplifying Mobile

Fixed

Simplification

— 3G+ network upgrade

— Dynamic Line Management

— Network simplification on track

— 4G network roll-out

— Preparation for Vectoring

— New IT foundations on track

— Activation FTTH test-customers

— Higher network & IT stability


Innovation as a Driver for Success Prepare for the Smart Operator Era Due to pressure on our revenues, cost efficiency programs are here to stay. Hence, we need to be smarter and work more together while still bringing better experiences. 1 SMART NETWORKS

SMART 2

SMART INNOVATION

3 SMART OPERATIONS


Innovation As A Driver For Success Smart Networks Smarter network investment through increased intelligence & better alignment with future Be smarter in Mobile

Be smarter in Fixed

Exponential mobile data growth demands for increased network intelligence to control required high investments in capacity

+60% in 6 months APR 2012

JUN 2013

users X 2 in 1 year

Further extension of our high-speed network footprint through maximal alignment with our envisioned future target destination

More non-linear demand AUG 2011

AUG 2013

+80% in 2 years


Innovation As A Driver For Success Smart Innovation In Services Smart differentiation through new convergent innovative services on top of our networks Be smarter in new services innovation

Be smarter in Partnerships for innovation

New convergent services with a differentiating customer experience through smart combination of our networks & technologies

New type of strategic partnerships to bring innovations faster to the market

MOBILE

+

FIXED

+

ICT

SHARED RISK

SHARED VALUE


Innovation As A Driver For Success Smarter Operations Simplify for more lean operations while converging to an omni-channel experience Towards more smarter operations

Smarter optimization of operational costs

Network simplification to decrease operational costs and new IT to bring a more efficient omni-channel customer experience

Optimization of operational maintenance, support and workforce costs in line with industry reality of declining revenues

LEAN SEAMLESS SEAMLESS + = Operations Platforms experience

MAINTENANCE COST

WORKFORCE COST


Innovation As A Driver For Success Summary SMARTER through more collaborative partnerships


The Supply Chain Awards SUSTAINABILITY


PARTNERSHIP A way to innovate

Supplier Day

15/10

Dominique Leroy Executive Vice President CBU


CBU strategy: 4 pillars to reach our ambitions LEADER IN MOBILE VIA •

Proximus brand Revamp

THE BEST CONVERGENCE EXPERIENCE THROUGH

Best network strategy

Convergent devices

Grow and monetization of data

Convergent network

Scarlet to address price seekers

Convergent content

Boost the customer experience

INNOVATION THROUGH PARTNERSHIPS

Reduce our cost

Find new revenues sources

Increase loyalty

SIMPLIFICATION TO


CBU strategy : innovation pillar Device, network and application – gradual evolution to partnership allowing : • Belgacom to benefit from global player expertise • The customers to benefit from best convergent experience

Better customer experience

Simple & agile company

More efficient

Evolution from pure vendor management to partnership

Faster Arrow 1


Customer context: Device partnership All devices - fix & mobile - are key enablers for our new services

Partnership efficiency in organization - Collaboration process -

Music

Photos Calendar

Contacts Mail & social network

Partnership expertise in portfolio - Selection of innovative products -

‌

Implement CPFR tools (Collaborative Planning, Forecasting and Replenishment)

Partnership expertise in marketing - Synergies in communication -

Growing importance of devices as enablers of our access & enabler of our convergence Benefit from global player expertise


Customer context: Network & partnership

Co-development Partnership on VDSL2 System Level Vectoring technology

Belgacom will likely to be the first to deploy it at large scale, as from early 2014

Boost the customer experience of Belgacom Internet and TV products

Thanks to the partnership with FON, Belgacom was the first in Belgium and among the first TelCo in the world, to offer free global WiFi network sharing

Every Belgacom broadband customer gets unlimited free access to all Belgacom 700k Fonspots in Belgium, and to 12 Mio FONspots around the world

Partnership to improve time to market & to increase reach


Innovator in application & content Search new revenues sources and increase loyalty Protection

Entertainment

Develop a new umbrella to better protect and assist our customers starting with: • Device insurance • PC Security • Home Control

Maintain & develop ARPU in an increasing OTT context through : • TV content • TV Everywhere • Music • VOD & SVOD

Example of successful partnership : Norton They went beyond their expected role & supported us in the sales & marketing domain (training, incentive & participation in the outbound calls campaigns)


Example of marketing/communication Win-win collaboration Clear support to our Network Superiority claim

A tram as less “conventional� and cost efficient medium ( with local impact)

Brand visibility for both parties


Call Center Partners Customer Care and Customer Help Center

Inbound Calls Administration Outbound Campaigns

Inbound Calls Outbound Campaigns E-mail services

Inbound Calls Outbound Campaigns

Inbound Calls Outbound Campaigns

Inbound Calls Administration Outbound Campaigns Chat services E-mail services

Belgacom’s Call Center partners need to provide the necessary flexibility to reduce waiting times for customers requiring service or help, even at peak moments. • Avoids customers calling back • Improves customer satisfaction: fast response to customer demand


Numerous success so far allowing to embody and drive convergence in the Belgian market

“STRONGER TOGETHER “

Partnerships are about : • Long term vision, instead of succession of tactical actions • Growth generation • Global vision, all product lines • Innovation


The Supply Chain Awards

QUALITY AND SECURITY OF SUPPLY


Duality of innovation and sourcing in a global market

Supplier Day

15/10

Bruno Chauvat Executive Vice President Strategy & Content


Renewal is the 21st century model of sustainable development In 2012, we said : Future is unpredictable…but we can anticipate it

Who knew Lady Gaga before 2008 ?


Renewal is the 21st century model of sustainable development

2013

2009 2013 : but it is always more unpredictable‌

Hanna Montana @Disney

Miley Cyrus @VMA


Renewal is the 21st century model of sustainable development

2013

2009 2013 : but it is always more unpredictable‌

Hanna Montana @Disney

Miley Cyrus @VMA

Early enough to lead or too late to survive ?


Innovation is the competitive advantage to survive in our industry


Innovation is the competitive advantage to grow even faster...

Early enough to lead or too late to survive ?


Innovating under different angles

- Business model discontinuity

- Innovation across the value chain and category killers - Bring scale to reach everyone everywhere


Innovation should manage the legacy - Simplification - Smooth migration - Backward compatibility - Upward compatibility


Together we shape the future


Conclusion


The Supply Chain Awards

INNOVATION


INNOVATION in Supply Chain Management

Supplier Day

15/10

Guy De Poortere Vice President SCM


Strategic Priorities For 2013 Our strategy is to be the leader in convergence Will increase focus and speed up investments in our priorities:

1 Customer Experience

2 Simplification

3 New Services

Enabled by our people and our suppliers Time To market

Value chain

Quality Performance

Innovation

CSR

Risk Mgt


Belgacom SCM Growth Path 2012-2013 What did we deliver and how to meet & exceed BU challenges & expectations? From Price to Cost focus 1

2

From TCO to Value focus

3

Transactionally integrated

4

5

Internally integrated

6 Externally integrated

Transaction towards value & innovation Availability Transaction orientation

Price

Synergy

XF Sourcing

Integration

Value

Commercial orientation

Purchasing coordination

Process orientation

Supply chain orientation

Value chain orientation

Contribution to competitive advantage

Time


Observations / Expectations

Observations SCM has a pivotal role in... Controlling costs & assets

Suppliers are key in innovation

Value creation & innovation


Four Rings Of Innovation

Business model

Product & services

Process

Technology


First Ring Of Innovation Technology Innovation

WHAT? Launched by M.D.I. this worlds 1 st car to run on air with an air engine fixed on its back


Technology Innovation Belgacom Vectoring

100 Mhz

50 Mhz


Second Ring Of Innovation Process Innovation Example Fashion Retailer ZARA Zara can design, produce & deliver in 15 days flat

Collects 85% of full price versus 65% competition

5 fingers touching the factory & 5 touching the customer


Process Innovation Belgacom One Warehouse • Serial number tracking of devices throughout the E2E Supply Chain • A formal handover is tracked when changing responsibility • A central management system to view at all times the status of a device


Third Ring Of Innovation Product & Service Innovation


Product & Service Innovation Belgacom Easy Access


Fourth Ring Of Innovation Business Model Innovation


Business Model Innovation Belgacom 11

Business partnering model

Joint business platforms

Beyond traditional operating models


Four Key Dimensions Of Successful Supplier Interaction

Customer of choice

Exchange Quality of Communication

Cross functional SRM

Pro-activity roadmaps


We invite you‌


Belgacom Supplier Day 2013