Proximus Earnings: Stock Rises on Strong Third Quarter and Upward Guidance Adjustments

Proximus PROX raised its 2023 guidance for domestic revenue and domestic and group EBITDA following a strong quarter for the company, sending the stock up 3% on the day. While Proximus’ underlying group revenue only increased by 1.1% year over year organically in the third quarter, domestic revenue increased 4.3% to EUR 1.2 billion thanks to strong performance in the residential and business segments. Management raised domestic revenue growth expectations to between 3.5% and 4.0% from 1.0% and 3.0%. We are maintaining our EUR 14 fair value estimate.

Overall group EBITDA was down 0.4% to EUR 458 in the quarter, and domestic EBITDA was down 0.7%, largely the result of higher costs as inflation continues to drive up costs. Group and domestic margins grew 4.4% and 4.8%, respectively, helping to offset some of the increased operating costs. Looking at third-quarter results and expectations for the rest of the year, management raised both group and domestic underlying 2023 EBITDA guidance to a loss of 2% from a loss of 3%.

Proximus is in the framework of a mobile wholesale exclusive five-year agreement with Digi/Citymesh to offer mobile wholesale access. We are also aware of the medium-term uncertainty Proximus faces, with the entrant of Digi as a fourth mobile operator. Our forecasts already assume long-term mid-single-digit pressures in the mobile market and limited margins expansion.