Euskaltel ups TV subs as it readies for Virgin launch

The Euskaltel Group – comprising the Euskaltel, R and Telecable brands – has published its Q4 results, which it says “confirms the positive results achieved in both customer base and profitability growth as a result of the efficient management initiatives implemented as part of the company’s strategic roadmap”.

The fifth largest Spanish telco has met its financial targets for the fourth quarter of 2019. The operational and financial improvements implemented have enabled the company to close 2019 with its key operational and financial indicators on the up once again.

The company closed 2019 with annual figures of 669,671 fixed network customers on the mass market, growth of 8,757 new customers, completing its fifth consecutive quarter of customer growth compared to the loss of users reported in the previous two years (in 2018 there was a drop of 3,500 customers). 2019 has been the first in the last three years to see the fixed service customer base grow in each quarter of the year.

In 2019, Euskaltel Group customers signed up for a record number of 3.69 products per user on average, establishing the Group’s position as convergent operator of high-value phone, fixed-line and mobile broadband, and pay-TV bundles.

The positive trend continues in the business segment with a notable increase in customers to 15,263 SMEs and large accounts, which is the result of the unified sales strategy based on alliances with the market’s key players and the product offering through the FTTH network.

EBITDA stands at €344.5 million, up 2.4 per cent on the previous year, with an outstanding increase in the final quarter of the year (92.2 million compared to 86.8 million in Q3, an increase of 10.2 per cent), due to the accounting in the last quarter of the lower cost of having renewed its wholesale agreements), and maintaining the year-over-year growth that it had already reached in the previous quarter.

Furthermore, the EBITDA margin has risen to 50.3 per cent of revenue compared to last year’s 48.6 per cent -an increase of over 300 basis points – maintaining its benchmark position among European companies in the sector. This ratio is the result of efficient cost management, as detailed in the company’s roadmap.

Euskaltel has turned this growth in profitability into greater cash generation. Operating cash flow has thus increased to €190.3 million compared to €182.9 million the previous year (4 per cent higher), with a revenue margin of 27.8 per cent compared to 26.4 per cent in 2018 (growth of 130 basis points).

The Group’s high-value customer base continues to grow. The number of products under contract in the residential segment increased by 81,172 compared to the previous year, with 2.85 million products under contract at the 2019 reporting date.

By product type, the Group consolidates its lead position in the mobile phone segment by adding 46,900 new lines, while broadband products increase by 17,700 new lines and there are 21,669 new TV users, thanks to the 4K decoder and the inclusion of access to the most requested OTT platforms and services by users from the remote control. Significantly, the Group’s TV penetration is almost 80 per cent of its customer base.

As a result of customer growth and a stable ARPU, the company has continued the positive trend that began in previous quarters and has seen positive revenue growth of 0.7 per cent in the fourth quarter of 2019, compared to the same period in the prior year. This positive revenue growth reverses the negative trend seen over the last four quarters and confirms the well executed roadmap presented in June 2019 whereby the main aims were to introduce efficiency measures to the traditional business and adopt the preparatory measures required to expand the company’s business on a national level.

The Euskaltel Group has thus ended the year having implemented and completed the planned key efficiency measures, including:

• The restructuring and integration of the Group’s three regional management structures into one single executive team that manages all of the company’s business.
• Changes to the company’s sales strategy, including the inclusion of new sales channels which have resulted in significant sales growth and a decrease in the unit cost per transaction.
• The creation of a single technical platform which is currently integrating the company’s three technical infrastructures into one single, efficient platform that will support the company’s national expansion.

By applying these measures, total operating costs have been significantly reduced and the company’s operating margin has increased. Furthermore, the roadmap’s other primary objective has been achieved by hitting the key national expansion milestones. These achievements include the following:

• Renewed and improved wholesale agreements with Orange and Telefónica with significantly improved terms that enable the company to offer services on a national level under extremely advantageous conditions.
• The Euskaltel Group is prepared to grow in the 85% of the Spanish market that it does not yet operate in. The company therefore expects that in the first half of 2020 the Group will be able to access over 18 million homes in Spain, including its local markets, using its own network or via the wholesale agreements with Orange and Telefónica.
• The signing of a trade mark licensing agreement with the Virgin Group to use its brand as part of the company’s national expansion plans. Given its strong brand recognition and its excellent attributes, the Virgin brand will be a key asset to speeding up the company’s national expansion plans.

The achievement of these milestones alongside internal preparations will enable the company to begin its national expansion in the coming weeks. The business plan will be announced on March 10th, including the operational and financial targets for the company’s national expansion.