Brasil Telecom

Brasil Telecom
LATAM´s Leading Internet Firm
Agenda
Acquisition of iG
Transaction Summary and Fairness Opinion
Acquisition of iG
Internet
Accomplishments
material
The acquisition of iG positions Brasil Telecom as:
the largest Internet provider in Latin America
among the 15 largest providers in the world
Source: Pyramid Research
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Yesterday, Brasil Telecom published a
announcing the acquisition of iG.
iG
fact
iG is…
Latin America´s largest Internet provider in terms of
number of users
Largest Internet audience in Brazil, with 1.3 million
unique visitors/day
The largest wireless access portal/provider in Brazil
(1 million downloads/month)
Wide portfolio of value-added services, innovating the
market and generating growing revenues
The Internet
Access Provider
First Brazilian portal to offer free Internet access and
e-mail services.
Leader in the “Portal” category
(Source: Ibope NetRatings)
The most used Internet provider by dial-up users in Brazil:
30% of the market. (Source: 15ª Ibope POP, Nov. 2003)
Major Figures
Unique visitors/Day (1)
Active e-mail Accounts
Paid Users (2)
E-mail Accounts(2)
New Users/day (2)
Sources:
WebTrends (daily average April 2004)
iG (Apr. 2004)
(1)
(2)
(2)
1.3 million
7.7 million
160 thousand
Above 18 milion
13,900
Paid Services
SuperiG – Broadband Internet provider. Reached 60
thousand subscribers in April 2004.
SeliG – Largest wireless access portal/provider in
Brazil, focusing on content and applications (games,
chat, SMS etc).
Reached 24 thousand unique
visitors and 1 million downloads in March 2004. Has
partnership agreements with nearly all mobile
operators.
hpG – Hosting services portal. Reached 1.8 million
unique visitors in April 2004. Nominated by INFO
magazine the best site in its category in terms of
“differentiated services” and “quality”.
Paid Services
Acesso Aditivado & BIG Mail – Specialized
services available through monthly subscription. Key
offers include 24-hour technical support, premium email accounts, file storage for remote access, adult
content and Internet connection accelerator.
WiFiG – High-speed wireless service provider
allowing mobile access in numerous places
throughout Brazil, such as airports, hotels, cafés and
restaurants.
iG Shopping – Offers a number of Internetexclusive promotional services and benefits.
Content
Teenagers
Men
Women
Adults
Content and Services
Broadband Access
On line Diary
Value-added
Wi-fi
Portal
Web
Search Engines
Classified Ads (personal, services and goods)
Commercial
Shopping – 26 stores offering various products
On-line Games – free access and downloads
Entertainment
Free Downloads – Games, ring tones and music
Places of Interest – RJ´s city guide and five regional pages
Information
Pastime – more than 130 channels including Pets, Recipes, Cars and
Sports
News – Local and International from O Rio, BBC and NY Times
newspapers, in Portuguese
Free e-mail and hosting
Basic
Free Internet dial-up access
Source: iG, Pyramid Research.
Contribution to BrT´s
Strategy
Brasil Telecom
iG
Launch of Brasil Telecom
Celular´s operations
Selig is the largest wireless
portal in Brazil
Growth of broadband
subscribers base
SuperiG adds 60 thousand
users to the portfolio
BrT´s instant messaging
platform
iG adds 7.7 million active
accounts
Growth outside Region II
3.1 million clients,
especially in RI and RIII
Leverage for advanced
IP services
Voice over IP
Video on Demand
E-commerce
TV Phone
Vetor
Games
Music
Video Chat
Convergence
Security
Impact on BrT
For every R$1 earned in iG, iBest and BrTurbo,
approximately R$2 of traffic and broadband services are
earned by Brasil Telecom
These services have grown at a rate of 30% to 40%1 in
recent years
The largest Internet customer base in Latin America
becomes the commercialization platform of these services.
Around 5 million accesses
Fonte:
(1)
Pyramid research
iG + iBest
iG and iBest together generate
3 billion minutes of traffic per
month in regions I, II and III.
1,8
1,8 bln
bln minutes/month
minutes/month
1,3
1,3 bln
bln minutes/month
minutes/month
BrT leverages its presence in
Regions I and III
+
Subscribers´mix better equalized
Brt gains strong positioning in all
3 Regions
RI
41%
RIII
43%
R II
16%
Interconnection
in Brazil
The estimated potential value for interconnection created by
dial up access in 2004 is R$ 1,9 billion.
The percentages of total traffic in Regions I, II e III are 32%,
28% e 40% respectively (Source: Pyramid)
R$ 607 million
Regional
R$ 532 million
R$ 760 million
Interconnection
Potential Revenue
iG’s and iBest’s combined interconnection traffic has a potential
value of R$ 900 million/year in the regions I and III
Region I
Region III
Total
iBest
159
112
271
In 2004 (R$ Million)
iBest + iG
iG
273
432
373
485
646
917
Possible Future
Scenarios
Maintenance of current scenario after 2006
Internet market leadership:
Consolidation of the position in Internet dial up
market
Integration with broadband customer base
Migration to paid Internet after 2006
Brasil Telecom has a strong brand, a solid customer base
and scale to:
offer paid Internet
competitive price
with
the
market´s
most
offer Internet content and services that retain
customers
and
generate
value-added
services
revenues
Unbundling
Competition in the broadband industry already exists through
other communication networks, even without considering STFC
Network unbundling.
Brasil Telecom has requested Anatel to grant it access to Cable
TV networks, making access outside Region II feasible.
Broadband access is not, by itself, a differential
Brasil Telecom is strengthening its segmented content and
value-added services offers
The key to conquer and retain the customer base is access
integration (also outside Region II), content, value-added
services and other communication services
Competition
Portal
Content
Dial-up
Access
Broad
Band
Mobile
Services
WiFi*
√
√
√
√
√
√
Terra
√
√
√
√
√
√
UOL
√
√
√
√
√
Yahoo
√
√
√
AOL
√
√
√
MSN
√
√
* Wireless Fidelity
√
√
Transaction Summary and
Fairness Opinion
Transaction
Summary
Acquisition
of 63% of iG´s total capital for US$ 100,7 million; BrT and
BTP´s joint-stake of 72.45% at the end of the transaction
Funds
administered by Opportunity hold 27.55% of iG´s total capital.
This stake is not being sold
The
offer, considering the amount offered to each share class, is
equivalent to US$137,75 million for 100% of equity
Contemplating
Fairness
cash of R$ 47 million or US$ 16,1 million
Opinion prepared by NM Rothschild & Sons
Rothschild
undertook scenario analyses, sensitivity analyses, market
multiples and comparable transactions
Fairness
Opinion does not consider operational synergies
Evaluation
Scenarios
Fairness Opinion Range
Offer Amount1
Scenario A
Base Case
181
161
Revenues - 25%
142
128
WACC + 1%
149
166
WACC - 1%
Base Case
Scenario B
200
176
181
Revenues - 25%
167
150
WACC + 1%
187
168
WACC - 1%
Multiples
204
226
198
EV/EBITDA
195
139
EV/Revenues
189
160
100
125
150
Source: Rothschild
Note 1: Equivalent offer amount for 100% of equity (US$137,75 million)
175
200
225
250
Implicit Multiples
Analysis
2003 A
Scenario A
Base case
Revenues - 25%
WACC - 1%
WACC + 1%
Scenario B
Base case
Revenues - 25%
WACC - 1%
WACC + 1%
Rothschild Interval
Maximum
Minimum
Market Multiples
Median
Transaction BrT/iG
Implicit Multiples
EV/Revenues
2004 E
2005 E
2003 A
EV/EBITDA
2004 E
2005 E
EV/Clients
2003 A
2,84x
2,18x
3,15x
2,59x
2,15x
1,65x
2,38x
1,96x
1,91x
1,53x
2,12x
1,75x
15,0x
11,5x
16,6x
13,7x
13,0x
10,0x
14,3x
11,8x
10,7x
8,6x
11,9x
9,8x
$50
$38
$55
$45
3,24x
2,62x
3,59x
2,96x
2,45x
1,98x
2,71x
2,24x
2,18x
1,76x
2,42x
1,99x
17,1x
13,8x
18,9x
15,6x
14,8x
11,9x
16,4x
13,5x
12,2x
9,9x
13,5x
11,2x
$57
$46
$63
$52
3,04x
2,06x
2,30x
1,56x
2,05x
1,45x
16,0x
10,9x
13,9x
9,4x
11,5x
8,1x
$53
$36
3,18x
2,15x
1,79x
17,4x
11,5x
8,5x
$440
2,24x
1,70x
1,51x
11,8x
10,2x
8,5x
$39
Source: Rothschild
Implicit EBITDA multiples and revenues from the evaluation are in line with market multiples
Client multiples are not comparable since public companies from the sector have a higher ARPU than iG´s (i.e. since
they provide paid services)
End