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Rebounding BICS plans for decline of roaming empire

Few telecom firms had such an impressive rebound from COVID-19 as BICS. In the depths of the pandemic, the international carrier part of Belgium's Proximus saw revenues slump 8.2% during 2020, to less than €1.1 billion (US$1.1 billion), as planes vanished from the sky and the roaming empire crumbled. Fast forward to the first six months of 2022 and BICS is reveling in the resumption of old habits. Sales over the period rose nearly 8% year-on-year, to about €515 million ($515 million), and profitability has soared.

"There is a tailwind linked to traveling but also a change in cash flow that is more linked to growth pools," said Matteo Gatta, the company's CEO, on a call with Light Reading. "That is reflected in some of the analyst estimates, which means for us it will be more challenging to meet those expectations."

Proximus' share price this year (€)
(Source: Google Finance)
(Source: Google Finance)

Gatta succeeded Daniel Kurgan as the BICS boss in early 2021 and is staring at the same list of problems as his predecessor. Despite the performance bump that has come from recent international travel, the operator's legacy business – where it still generates most of its sales (55% of them for the first half) – has the operational equivalent of long COVID with zero chance of recovery. Revenues from voice services are being throttled by competition, regulation and the shift to newer technologies.

A separate "core" unit made about €200 million ($200 million) in first-half sales from various mobility services, such as application-to-person messaging and providing roaming platforms. This was an 8.5% improvement on the year-earlier half. But in the foreseeable future, when there are no prior-year lockdowns to flatter performance, the outlook is "low-single-digit" growth, says Gatta.

CPaaS steps

The goal, as under Kurgan, is to compensate elsewhere. Hence a push into analytics, the Internet of Things (IoT), fraud prevention, security and other areas, which has been going on for several years. Sales across these combined "growth" activities rocketed 76% for the recent first half. But they may have received a boost from takeover moves, with BICS closing the acquisition of 3m Digital Networks, an Indian software company, in February. And their contribution is still a relatively small 6% of first-half revenues.

The somewhat modest ambition is to sustain sales growth across these various activities at a double-digit rate over "the foreseeable future," in Gatta's words. A current focus area is CPaaS (communication platform as a service) – essentially a cloud-based chat, messaging or other type of comms application.

"We are about to launch our CPaaS platform, which will be multichannel," promised Gatta. The recently acquired 3m Digital Networks, described as a CPaaS company, is likely to aid that launch.

It is not the first BICS has acquired. Back in October 2017, BICS completed the $230 million takeover of Telesign, a Californian software company boasting CPaaS expertise in fraud prevention for Internet companies. It has been a high-flyer for Proximus, growing its revenues by 57% in 2020, to around €273 million ($273 million). Were it not for Telesign, the sales decline at BICS that year would have been a stomach-lurching 18%.

Yet Telesign is no longer a part of BICS. After Proximus bought out minority shareholders in BICS last year, Telesign was spun off in preparation for a public listing. Announced in December, this was supposed to come through a $1.3 billion tie-up with North Atlantic Acquisition Corporation, a so-called SPAC (special purpose acquisition company) with $380 million in trust. But the deal was aborted in July, leaving Telesign as a distinct entity under Proximus ownership.


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Echoing statements issued at the time, Gatta blames the "market situation" for that deal's collapse. "Valuations are extremely low at the moment, very much below our expectations," he said when asked if BICS was itself still in the market for acquisitions. "There are many options out there and we're keeping an eye on market developments."

Investors may be wondering how the CPaaS strategy of BICS now differs from that of Telesign, a company BICS originally bought to further its CPaaS ambitions. "Telesign is about engagement and identity and our angle is more toward the collaboration and care part," said Gatta. "One of our differentiations on CPaaS will be a truly multichannel approach where voice is an important component. We come with platforms for mobility and IoT and voice that we can use in the context of CPaaS."

Good times for profitability

Fortunately, Telesign was never integrated with BICS but ran as a standalone unit, making last year's separation much easier. And while the move deprives Gatta of a fast-growing business, his company's strong rebound from the pandemic means there is money to invest.

"BICS is a business where legacy funds the new," said Gatta. "Through our ability to create value through legacy in a declining market, we are able to fund transformation."

Higher traffic levels post-COVID, a changing mix of services and the automation of some internal processes have all helped to fatten margins in the last year. The direct margin at BICS hit 24.7% for the recent first half, up from 22.8% a year earlier, while the company's earnings margin (before interest, tax, depreciation and amortization) grew 1.4 percentage points over this period, to 11.5%.

A glance through the last annual report issued by Proximus shows that employee numbers at BICS dropped from 505 in 2018 to 450 last year. From a staffing perspective, it has been overtaken by Telesign, which grew from 222 to 504 employees in those three years.

"We're embedding interfaces and APIs that help us to integrate customers and to automate certain internal processes," said Gatta. "That's important when you deal with large logos in the digital space."

In the meantime, he can look forward to a few more months of rebound.

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— Iain Morris, International Editor, Light Reading

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