Proximus: Reducing Fair Value by 21% on Higher Competition and Lower Revenue and EBITDA Forecasts

We are reducing our fair value estimate for Proximus to EUR 11 per share from EUR 14 after making more-conservative medium- and long-term revenue and EBITDA forecasts. We expect competition in the Belgian market to heat up with the entrance of Digi, which is known for its aggressive behavior in Spain, Romania, and Italy. We also expect more competitive pressure in broadband coming from Orange in the southern part of Belgium, Wallonia. Proximus' main competitor there, Voo, has historically been underfunded, but with its acquisition by Orange, we expect it will step up investments and try to win market share. We now assume slight annual revenue declines for Proximus, compared with slight increases previously, and margin pressure. Our terminal-year EBITDA margin stands now at 29% compared with 30.3% previously. Our narrow moat rating is unchanged, as we estimate Proximus will still generate returns on invested capital above its cost of capital, although the gap between the metrics is now smaller.