Mobistar published mixed 4Q results but all the attention will probably go to the very weak 2012 outlook.
Mixed 4Q results: service revenues are down 0.5% y/y to € 378.1m, 1% to 2% below our and CSS estimates due to weaker-than-expected Belgian service revs (down 0.6% y/y and 1% below CSS). As expected, handset sales are strong (€ 54.4m, helped bythe iPhone 4S launch) and they are even slightly better than CSS expectations (€ 52.6m). All this leads to total sales that are up 0.2% y/y to € 432.5m, still 1% below CSS. The € 129.2m in EBITDA (34.2% margin) is down 1% y/y but 2% ahead of our and CSS expectations. The net result is however down 26% y/y to € 52.5m, 7% below CSS, due to accelerated depreciation of network equipment.
Subscriber numbers are fairly weak. Mobistar lost 8.8k own clients during the quarter on a net basis (vs 15k to 20k adds expected y us and CSS), as the growth in postpaid is not sufficient to offset the big drop in prepaid. Mobistar highlights a very competitive market environment in prepaid (Base, MVNOs). MVNO customers (+61.5k q/q) are stronger than expected indeed. The ARPU is down 5.5% y/y to € 29.54 (Euros, not drachmas), more or less in line with expectations. Mobistar signed up 7.5k Starpack clients during 4Q, thereby just achieving the (lowered) 2011 target of 25k Starpack adds.
Disappointing outlook: the 2012 outlook comes in way below expectations, as Mobistar guides for up to 2% sales decline (vs. stable to slightly higher sales expected by us and CSS), € 460m to € 500m in EBITDA (we and CSS were at € 519m, with a € 507m/€ 534m range), and a € 170m to € 195m net result (KBCS/CSS: € 223m/€ 220m, range € 204m/€ 231m). Mobistar estimates the negative impact from regulation (MTRs and roaming rates) on 2012 EBITDA at around 22m (compared to € 530m in 2011 EBITDA), showing that also competitive pressure (and investments) will weigh on profits this year.
Mobistar will propose a € 3.70 gross dividend over 2011 (9.2% gross yield), down from € 4.30 last year. Taking into account the FY12 guidance, the dividend over 2012 will probably further drop to between € 2.8 and € 3.25.
Our View & conclusion: The 4Q release again highlights that Mobistar is a suffering mobile-focussed player in a converging world. Mobistar’s answer to this challenge, the Starpack converged offer, fails to gain traction and Mobistar only signed up 25k clients during 2011. Mobistar attributes this to a cumbersome activation process and expects to benefit from the regulators’ initiatives to open up the Belgian cable networks (effective towards the end of this year). We are not convinced this will turn the Starpack into a gamechanger for Mobistar.
We expect our and consensus profit forecasts to be reviewed down up to 20%. We maintain our Hold rating but our target will be lowered in line with our forecasts and we expect the share price to be under pressure today. At the midpoint of the guidance range, Mobistar would be trading at 5.6x EV/EBITDA12E (based on yesterday’s closing price) versus the sector average of around 5x. Analyst meeting at 2pm CET.