On Monday, the public company Proximus will announce how heavily it will cut its dividend.
What does Proximus say about its dividend on Monday? At the end of 2020, Proximus was in the newspaper’s dividend overview The time still in second place, after Telenet but ahead of the National Bank. After all, Belgian investors love dividend stocks. But that is not without danger.
Telenet has meanwhile cut its dividend by two-thirds, halving its share price. The National Bank even cancels its dividend while the share price was almost divided by three. And Proximus will face the hour of truth on Monday.
The share price of Proximus has already halved. Analysts expect the dividend to be cut by a fifth on Monday. ING Bank’s telecom specialists even expect a cut by a third. The 1.20 euros gross per share would fall to 0.80 euros (0.56 net) and remain at that level in the coming years. The reasoning behind the stronger cut that ING expects is that Proximus wants to reserve some margin to take into account the effect on profits of the entry of a fourth player in the market.
Despite the share price halved since the end of 2020, ING Belgium has Proximus on sale. It’s not the only one. Most stock exchange houses have a sell advice. The dramatic performance of Belgian telecom stocks contrasts with the state of affairs of telecom players abroad. The French Orange (ex-France Telecom) held its own, while the Dutch KPN saw its share price rise by a fifth.
The pressure on the Belgian telecom sector is the result of the heavy investments that both Proximus and Telenet have to make in fiber optics to offer fast internet. At the same time, their revenues are under pressure as consumers save on their subscriptions. That pressure will increase when the Romanian Digi becomes active together with Citymesh in 2024. This fourth player has already said that it will have both a mobile and a fixed offer.
ING also notes that something has changed for Proximus in Wallonia. Because Orange took over cable company Voo, competition would increase. Telenet wants to offer its own product on Voo’s cable. In Flanders, Proximus has the advantage for the time being that it is rolling out its fiber optic network, while Telenet has been running in circles for three years. The joining of forces between Telenet and Fluvius must receive the green light from the European Commission. It may not be until halfway through this year before there comes.
The question is also who earns the most money from the telecom investments. “At the moment nobody knows how to make money with 5G. I hope it doesn’t turn out as bad as with 4G. The operators then invested hundreds of millions in their networks. But it was Apple, Samsung and Facebook and other big players who made a lot of money from it,’ said John Porter, CEO of Telenet recently. Trends.
At the same time, customers want to save on their telecom bill. Porter says by proactively proposing cheaper formulas, he wants to prevent customers from leaving. This makes it difficult for telecom companies to increase their turnover. ING expects Proximus to lose 300,000 customers in the mobile market to newcomer Digi between 2024 and 2026. Proximus will also have to pay more to its fiber joint venture with EQT Infrastructure.
Proximus would continue to invest 1.3 billion euros annually in the coming years. That is without the costs of the 5G spectrum and football rights. In the coming years, gross operating profit before leasing costs would drop 3 percent per year. Expectations for Monday’s capital markets day are not particularly high. Deutsche Bank points out that on the investor’s previous day, in March 2020, Proximus cut its dividend by 20 percent from EUR 1.50 per share to EUR 1.20. “A new cut is in the air,” says Deutsche Bank.
