Proximus Q4 2024: Solid Performance Amidst Competition and Leadership Transition

Proximus has maintained its market leadership in the Belgian telecom space, showing consistent growth in its Q4 2024 results. The company’s financials reflect solid performance, though the competitive landscape continues to evolve. The rise of low-cost competitors, such as Digi Belgium, and the ongoing leadership transition may shape Proximus' future performance. Despite these challenges, analysts point to Proximus' strong fundamentals and strategic moves as justifying a stock price target between €15 and €20.

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 has 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 2023 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.