Proximus: The State-Backed Backup Plan with 7% Gross Yield and 15% Currency Upside.

Proximus: A Quiet Backup Plan Delivering 7% Gross Yield and Currency Upside

The State-Backed Backup Plan with 7% Gross Yield and 15% Currency Upside. Proximus currently offers investors a solid gross dividend yield of around 7%, translating to approximately 5% net return after typical 30% taxes. For U.S. investors, this income becomes even more attractive when considering the roughly 15% gain from the euro-to-dollar exchange rate—turning €1 of dividends into about $1.16.

Backed by the Belgian government’s 56% ownership, Proximus acts as a secure, state-supported investment—a quiet backup plan in uncertain markets. Its stable cash flow and steady dividends, combined with currency advantage, make it an increasingly popular choice for investors seeking dependable returns with lower risk.

On top of its strong European base, Proximus is strategically investing in India’s rapidly expanding telecom market—a high-growth region poised for explosive development. With India's economy growing at 6.5% in the 2024–25 fiscal year and a robust 7.4% expansion in Q1 2025

A Rising Star Amid Market Turbulence

While the U.S. stock market faces economic headwinds and uncertainty, Proximus has quietly but consistently been moving in the right direction. The company’s commitment to innovation, network expansion, and shareholder returns makes it a compelling option for those looking to diversify their portfolios with a dependable, income-generating stock.

No Real Threat from Digi

The recent entry of Digi, a Romanian telecom operator, into the Belgian market sparked concerns over increased competition. However, the reality tells a different story. Digi’s aggressive pricing, including a budget-friendly €5 monthly plan with calls, SMS, and 15 GB of mobile data, initially caused a short-term dip in Proximus stock. However, Proximus quickly turned this situation into an advantage by securing a five-year national roaming agreement with Digi, allowing the newcomer to use Proximus’s robust network infrastructure. This move not only reinforces Proximus’s market dominance but also ensures it benefits from Digi’s presence rather than being threatened by it.

Moreover, Digi has encountered significant hurdles since its launch. From customer service complaints to network reliability issues, the newcomer has struggled to establish itself as a serious contender. The Belgian telecoms ombudsman has reported a wave of complaints regarding Digi’s service quality, further diminishing concerns that it could significantly impact Proximus’s stronghold in the market.

A Secure and Attractive Investment

For investors seeking a reliable, dividend-paying stock, Proximus checks all the right boxes. The company boasts a well-established position in Belgium’s telecom sector, consistent financial performance, and a clear commitment to rewarding shareholders. Unlike high-risk, high-volatility stocks, Proximus offers the stability and dependability that dividend-focused investors crave, making it a prime choice in uncertain times.

As global markets shift and investors look for safer havens, Proximus stands out as a compelling alternative one that not only weathers competition but turns it into an opportunity for further growth. With its strong fundamentals and steady dividend payouts, Proximus is more than just a backup; it’s a strategic investment for those prioritizing long-term financial security.

1. Financial Performance and Growth

Proximus’ Q4 2024 financials reveal steady performance, with domestic revenue increasing by 3.2%, reflecting continued demand for its services. EBITDA remained stable, and the company’s international business, including Proximus Global, showed impressive growth, with a 37% increase in direct margin. However, cost pressures and increased competition, particularly from low-cost providers like Digi, may weigh on future margins.

Notably, the company achieved its 2025 EBITDA target one year ahead of schedule. While Proximus has a strong track record of executing its financial goals, ongoing market shifts require continued vigilance.

2. Market Dominance and Network Positioning

Proximus continues to lead the Belgian market with its extensive fiber and 5G network, covering over 2.2 million homes and providing nearly 70% indoor 5G coverage. This infrastructure gives Proximus a competitive advantage over its rivals. However, the entry of Digi Belgium, a budget-friendly telecom operator, has intensified competition in the market, forcing Proximus to further differentiate itself with superior network quality and customer experience.

Digi, which is already offering highly competitive pricing plans, could potentially be integrated into Proximus in the future, much like how Proximus has handled previous acquisitions. Digi's business model of offering low-cost services makes it an attractive target, much like Scarlet in 2008.

3. Strategic Acquisitions: A History of Growth

Proximus has a history of strategic acquisitions that have bolstered its position in both the Belgian and international markets. These acquisitions have helped diversify its services and expand its network. Here’s a quick overview of key acquisitions over the years:

• Scarlet (2008): In 2008, Belgacom (later rebranded as Proximus in 2014) acquired Scarlet NV, a Belgian telecom operator focused on low-cost services.
• TeleSign (2017): In 2017, BICS acquired TeleSign, a U.S.-based company specializing in mobile identity and communication services.
• Fiberklaar (2020): In 2020, Proximus partnered with local investors to form Fiberklaar, focusing on constructing fiber-optic networks in Belgium.
• BICS (Full Ownership - 2021): In 2021, Proximus acquired the remaining shares of BICS from MTN and Swisscom, becoming the sole shareholder.
• Route Mobile (2023): In July 2023, Proximus acquired approximately a 58% stake in Route Mobile, a global cloud communications platform provider, for $718 million.
• Fiberklaar (2024): In July 2024, Proximus reached an agreement with EQT Infrastructure on the acquisition of its majority stake in Fiberklaar.

With a history of acquiring complementary businesses, Proximus may look at potential future acquisitions, such as Digi, to further solidify its leadership position in the Belgian market.

4. Leadership Changes and Strategic Direction

Proximus is in the midst of a leadership transition, with its current CEO set to depart in mid-2025. The company has indicated that a smooth transition will be prioritized, with two new CEOs expected to be appointed. This transition could bring new strategic directions to the company, but it also introduces a period of uncertainty, particularly for investors concerned about strategic shifts.

The company’s ongoing "Bold2025" strategy, aimed at further investments in network infrastructure and cost efficiencies, will continue to guide Proximus' actions during this period. However, the leadership change could influence the company’s ability to execute its plans and adapt to new market realities.

5. Dividends and Cash Flow Management

Proximus has committed to maintaining its dividend policy, offering €0.60 per share in 2024 and 2025. This stable dividend, along with solid cash flow management, makes the company appealing to investors seeking predictable returns. However, Proximus’ heavy investment in its network infrastructure, including its fiber and 5G projects, could place some strain on cash flow. Managing the balance between network investment and shareholder returns will be critical in the coming years.

6. Valuation and Stock Target Range

Given Proximus’ solid revenue growth, its extensive fiber and 5G network, and its history of successful acquisitions, many analysts believe that the stock is undervalued. The €15–€20 target range is based on Proximus’ future earnings potential, which is supported by its strong financials and continued investments in high-demand services. However, the company must continue to manage competition and execute on its strategic goals to ensure that these targets are met.

The presence of new competitors like Digi, as well as the potential for future acquisitions, adds some unpredictability to the stock’s trajectory. Whether Proximus can maintain its growth and market position will depend on its ability to adapt to market changes, successfully integrate future acquisitions, and manage costs in the face of competition.

Conclusion

Proximus’ Q4 2024 performance highlights its strong financial position and continued investment in infrastructure. The company’s market dominance, particularly in fiber and 5G, provides a solid foundation for future growth.

Proximus’ history of strategic acquisitions, ranging from Scarlet in 2008 to Route Mobile in 202,3 demonstrates its ability to adapt and grow through consolidation. Digi, with its low-cost service model, could very well be the next potential acquisition, much like Scarlet was over a decade ago.

With the right execution of its strategic plans and leadership transition, Proximus remains well-positioned to meet its €15–€20 stock target in the medium term, although external market factors will likely continue to influence its path.