Proximus Earnings: Revenue Up 4%, but EBITDA Declines Due to Inflation; Guidance Maintained

Proximus´ underlying group revenue increased by 4.0% year on year organically in the second quarter, reaching EUR 1.5 billion driven by good performance both domestically and internationally. Management commented that the market overall remains competitive, with competitors still doing promotional activities and the inflationary environment favoring price-seeking brands. Despite revenue growth, Proximus saw underlying EBITDA going down 3.7% year over year (EUR 446 million) as inflation is biting into the company´s profits. Higher costs came from higher electricity costs and cumulative wage indexations. Management expects wage indexation to soften during the second half of the year. Financial guidance of 1% to 3% growth in domestic revenue and a 3% EBITDA decline was unchanged. We are maintaining our fair value estimate of EUR 14 per share. We are aware of the medium-term uncertainty Proximus faces, with the entrant of Digi as a fourth mobile operator, however, we believe the market is pricing in an overly pessimistic scenario in the shares. Our forecasts already assume long-term mid-single-digit pressures in the mobile market and limited margins expansion. Still, we plan to revisit our forecasts soon.