The Euskaltel Group – comprising the Euskaltel, R, Telecable and Virgin telco brands – has published its Q1 2021 results, which consolidate growth in its key operating indicators, with a significant increase in the Group’s customer base, exceeding the record figures seen in recent quarters, and with revenue growth of 1.4 per cent compared to the previous year.
It is worth noting that these results have been obtained in a year characterised by the Covid-19 pandemic, which has affected all social and economic sectors and has consequently had an impact on the telecommunications industry.
Despite this, in Q1 2021, the Euskaltel Group has consolidated its solid customer base growth, hitting a new record of 847,000 mass market customers, an increase of 10.2 per cent compared to those registered in Q1 2020. This growth is in both the landline and mobile phone customer base, reflecting the strength of the high-value customer portfolio.
The successful penetration of the Group’s national brand – Virgin telco – and the consolidation of its traditional brands – Euskaltel, R and Telecable – in their regions, have contributed to this solid growth. The Group’s national expansion project through the Virgin telco brand, launched at the height of the pandemic on 20 May, is exceeding all initial forecasts month on month, confirming the success of its strategic plan. In just 10 months on the market, Virgin telco has brought in over 100,000 customers -80,000 landline and 21,000 mobile users- and has generated more than €10.5 million of Euskaltel’s total revenue.
As well as expanding its customer base, Virgin telco continues to increase the number of services per customer and ARPU. In particular, ARPU has risen over 10 per cent since the brand’s launch 10 months ago, and the number of services contracted per customer has grown more than 23 per cent to 3.1 products and services per customer.
At the heart of Virgin telco is a policy of placing the customer at the centre of its offering, allowing customers to decide which products and services they want to subscribe to and adapting its deals to the interests of customers.
On this basis, Virgin telco continues to be the most innovative operator in the market, adding new product and service deals to its bundles so as to offer ongoing value to its customers. As part of its aim to attract high value customers, it launched “Virgin Family” in the first quarter of the year, which continues to grow by including unlimited data, and is the most attractive bundle on the market. It has also offered “Wi-Fi mesh” to households, giving customers maximum Wi-Fi power in their homes. Content from the Amazon Prime service has also been included in its TV deals.
As part of these unique initiatives focused on putting the customer at the centre of its strategy, Virgin telco yesterday announced a landmark agreement with Amazon, whereby its customers can subscribe to service bundles (internet, mobile and TV) through Amazon.es.
New customer record
As a result, the Group has set a new customer base record, with over 847,000 mass market customers, reflecting a 10 per cent increase compared to Q1 of the previous year, with more than 78,000 new customers. Of the Group’s total mass market customers, 737,000 are landline users and 110,000 are mobile-only customers.
The number of high-value product and service subscriptions in the homes of Euskaltel Group customers now stands at a record high of over 3 million. Customers in the residential segment have subscribed to 204,000 new services compared to Q1 of the previous year. The portfolio of high added-value customers on 3P and 4P contracts continues to reflect the industry’s highest levels, showing its strength with an average of 3.60 products per user.
Mobile telecommunications has seen the greatest growth in Q1 compared to the prior year with 137,000 new service contracts, followed by ultra-fast broadband with 78,000 more service contracts than in March 2020. TV subscriptions are up by 9,000, with customer base penetration of over 70 per cent. Landline services grew again in the fourth quarter.
The Business market sees the biggest revenue jump on record, with a notable increase of 9 per cent compared to Q1 of the previous year, up to Euros 32.3 million and a customer base of 16,000 companies. This growth has been underpinned by the strong demand for quality services and assistance required by businesses, which has become more noticeable during the pandemic.
The company’s financial position at the end of the quarter is solid
The social and economic consequences of Covid-19 have had an impact on the industry. The Group’s EBITDA has been affected by the growth of Virgin telco, customer retention campaigns which, despite impacting on ARPU, have meant that 75 per cent of customers belong to formal loyalty programmes, and the suspension of talks to renegotiate wholesale agreements as a result of the takeover bid launched by MásMóvil. The Euskaltel Group has closed Q1 with EBITDA of €73 million.
With continuous and solid cash flow generation, a low cost of debt (2.6 per cent) and average debt maturity of 3.4 years, the company’s financial position at the end of the quarter is solid. The Group has maintained its solid growth in both customer base and revenues, has successfully continued with the national expansion plan through the Virgin telco brand, has started to upgrade the cable network to FTTH in customers’ homes, has continued to pay dividends to its shareholders, and, despite all this, has kept its net debt stable.
It should be noted that the customer retention campaigns rolled out at the end of 2020 by the Group in response to stiff market competition successfully reduced churn. Thanks to these campaigns, 75 per cent of mass market customers in the traditional regions (Basque Country, Galicia and Asturias) currently belong to a Euskaltel loyalty plan. In Q1 2021, churn consequently dropped by 20 per cent, which will lead to continued customer base growth and will reduce customer support costs, with estimated annual savings of €15 million. While these actions had an impact on mass market ARPU, this effect has now stabilised.
The Euskaltel Group’s fibre optic network gives coverage to over 24m homes
Throughout Q1 2021, the Group continued to expand its fibre network footprint to 24 million homes nationwide, driving Virgin telco’s rapid growth in the market.
Increased network coverage and enhanced network management are key drivers for continued, profitable growth in the company’s customer base and reflect the company’s enormous potential for growth and profitability.
At the same time, this quarter saw the start of the plan to upgrade the coaxial cable network to FTTH at Euskaltel, R and Telecable. This upgrade will be rolled out to 480,000 homes in this first phase. A total of 45,000 households in 30 towns in the Basque Country, Galicia and Asturias have currently benefited from this upgrade.