090929_Netia TAM Value Conference

Fastest growing telecom in Poland
Third Avenue Management Value Conference
New York, October 2009
Poland has gone through enormous transitional change over the past 20 years
Yesterday
Today
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40m people craving for liberty... … 40m consumers asking for freedom of choice
Third Avenue Value Conference, NYC, October 2009
2
Netia operates in an attractive, crisis resilient Polish economy and fast changing,
dynamically growing telecom industry
Poland
Netia
3x larger than second altnet
Member of European
Union as of May 2004
~38.1 million inhabitants
8% market share in broadband,
11% market share in voice
Gdynia
Słupsk
Gdańsk
Koszalin
Tczew
Starogard
Gdański
~14.2 million households
with low (~34%) but fast
growing broadband
penetration
Szczecin
~10.0k km of fiber network
(backbone + metropolitan rings)
Poland-wide
Grudziądz
Stargard
Sczeciński
Piła
Bydgoszcz
Toruń
Włocławek
Płock
Modlin
Poznań
Kalisz
Sieradz
GDP per capita of USD
~17.8k and growing
Łódź
Radom
Puławy
Kępno
Wrocław
Lublin
Starachowice
Brzeg
Kielce
Opole
Polish economy resistant
to crisis – unique EU
country registering GDP
growth in 2009 (+1%)
~1.1 million voice customers
Warszawa
Konin
Tarnowskie Góry
Katowice
Rybnik
Own FO
LL FO
Cieszyn
Tychy
Kraków
~0.5 million broadband
customers
Ostrowiec
Świętokrzyski
Recently launched mobile
services, IPTV starting soon
Bielsko-Biała
Operations across all customers
segments: Business, Carrier,
Residential
Market share in broadband
from 1.5% in Q4 2006
to 8.1% in Q2 2009
Third Avenue Value Conference, NYC, October 2009
3
Netia is uniquely positioned as the leading alt operator on the Polish telecom
market to leverage its national reach versus competitors
Market leader
among alternative
operators
Largest number of broadband and fixed voice customers among Polish altnets
Market share in broadband and voice wholesale access of 88% and 65% respectively
Sole active unbundler in Poland - 158 nodes with 1.65m clients coverage
Brand name established nationally in B2C and B2B markets
National reach
National backbone network provides capacity and backhaul
National maintenance and delivery outsourced through Ericsson
Cash generative corporate business
Existing business
supports growth
Cost optimization underway
Fully funded business plan with substantial headroom on bank facilities
Ongoing cooperation DTH platforms to deliver 3play soon
Business
partnerships
Access to 500 retail sales stores
Netia mobile and convergent products launched
Google hosting
Highly experienced management team
Management
Proven M&A and regulatory skills
Shareholder value driven compensation plans
Third Avenue Value Conference, NYC, October 2009
4
Netia replicates similar success stories of altnet broadband providers all over
Europe with particular focus on high margin 2play and 3play services
Netia (Poland)
Market share development of altnet peers
Market Shares
Broadband Subscribers
25%
800
20%
600
15%
400
10%
91
94
Netia's netw ork
LLU/BSA
Ethernet netw orks
Iliad
Forthnet (Greece)
Fastw eb
Iliad (France)
90%
200
80%
3,000
2,500
70%
150
60%
100
50
n.a.
n.a.
n.a.
0.2%
0.4%
0.6%
0.8%
1.2%
1.8%
2.3%
2.8%
4.1%
5.9%
7.7%
9.8%
12.8%
16.2%
19.5%
23.4%
26.3%
50%
0
Year
20011 Year
20022 Year
2003 3 2004
Year 4 2005
Year 5 2006
Year 6 2007
Year 7
Number of Company's Subscribers (‘000)
1,500
40%
30%
20%
1,000
500
10%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2,000
Launched
unbundling
0
100%
Year 1 2002
Year 2 2003
Year 3 2004
Year 4 2005
Year 5 2006
Year 6 2007
Year 7
2001
Q26
Q24
Q22
Q20
Q16
Q18
Forthnet
1,400
80%
1,200
70%
1,000
60%
50%
800
40%
600
30%
400
20%
10%
Announcement of
unbundling
1,600
90%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Netia
Fastweb (Italy)
100%
Launched unbundling
1.0%
1.4%
1.7%
2.5%
3.2%
3.9%
4.6%
6.9%
8.5%
9.6%
11.5%
15.3%
18.0%
20.3%
22.6%
26.8%
30.2%
31.9%
34.4%
38.3%
42.4%
44.9%
47.2%
51.3%
55.3%
57.6%
60.9%
62.0%
250
Q14
2012F
Q12
2010F
Q10
0%
2009F 3
200
100%
90%
80%
0.9%
1.1%
1.5%
2.0%
2.4%
2.8%
3.7%
5.0%
6.3%
8.0%
8.9%
11.2%
13.7%
15.8%
17.5%
22.7%
25.3%
26.5%
27.8%
32.0%
33.6%
35.5%
36.8%
39.4%
42.3%
44.3%
46.7%
48.0%
2008
5%
Q8
2007
Netia 8.1%
510
Q6
2006
Fastweb 12.1%
Q4
0
Iliad 18.4%
Q2
229
60
37
99
81
200
Forthnet 20.0%
Q0
(' 000)
1 million subs
1,000
0
70%
60%
50%
40%
30%
20%
10%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Year
Year 3 2004
Year 4 2005
Year 52006
Year 6 2007
Year 7
20011 Year
2002 2 2003
BB Penetration of Households (%)
Source: Merrill Lynch Research, Informa, Company Financials
1 Nationwide market share. Fastweb Fibre to the home network covered only ca. 4mm homes until nationwide LLU roll out commenced in Jan ’05
2 Actuals through 3Q 2007, 4Q 2007 forecast per Merrill Lynch December 2007 Broadband Matrix
3 2009 forecast is 510k broadband clients via organic growth only, excluding potential Ethernet networks acquisitions
Third Avenue Value Conference, NYC, October 2009
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Netia occupies undisputed no.1 position among Polish alternative telecom
operators in terms of fixed broadband services
Broadband services by type of technology as of YE2008
Broadband ports as of Q2 2009
600
+
500
414
400
`
400
('ooo)
Broadband ports ('000)
414
%
23
218
+
%
90
347
300
257
218
227
510
200
100
200
99
0
91
459
441
102
36
0
64
134
41
22
68
171
71
24
72
99
37
75
128
292
151
227
248
260
510
202
43
52
52
91
92
90
78
81
83
82
84
87
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
37
75
84
2007
2008
Copper and CATV
Ethernet
WiMAX
LLU
2009
Target
BSA
Regulated
access
0
Copper, CATV & LLU
Ethernet
2009 Target
WiMAX Internet
Altnets’ market shares in wholesale broadband
(as of Q2 2009)
BSA
Outstanding dynamics in broadband
subscribers growth driven by residential
First mover advantage in broadband
wholesale with already accumulated
88% market share
100%
88%
80%
60%
40%
20%
Scale advantages more visible every day
3%
9%
0%
Netia
Dialog
Others
Source: Company, public information
Third Avenue Value Conference, NYC, October 2009
6
Netia also holds no.1 position in terms of fixed voice services provided by
altnets to business and residential customers country-wide
Voice customers by type of technology as of YE2008
Total voice subscriber lines as of Q2 2009
1 065
('000)
Voice subscribers ('000)
673
600
422
+
600
400
3%
15
451
489
31
64
102
391
387
387
422
673
711
731
1200
1,200
200
400
399
396
394
391
391
391
391
0
` 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009
Q1 2007 Q2 2007 Q3
377
365
Own
Własna
network
sieć
0
2007
Traditional direct voice
642
800
800
200
1,105
1000
1 000
1,065
1,129
1,033
1200
+ 13%
1 200
2008
LLU & VoIP
WLR
Scale in fixed voice attained by acquisition
of Tele2 Poland in late 2008
WLR
Regulated
access
Wholesale voice market shares among altnets
(as of Q2 2009)
2009 Target
WiMAX voice
LLU (VoIP)
2009
Target
100%
80%
Voice subscriber base supports up-sell
of broadband and in future IPTV
60%
Leading position in voice wholesale
with already accumulated 65% market share
20%
40%
65%
19%
16%
Dialog
Others
0%
Netia
Source: Company, public information 1 Wholesale line rental
Third Avenue Value Conference, NYC, October 2009
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Netia's strategic focus is on expanding products and services while generating
FCF and profits in the next few quarters
Revenues (USDm)
EBITDA (USDm)
120
Q3 2008
130.3
Q2 2008
131.0
94.6
Q1 2009
Q2 2009
0
Q2 2009
Q2 2008
Q3 2008
Subscribers (‘000)
5
1,200
6.3
1,000
-7.8
-12.7
-10
800
600
347
400 292
200
414
441
459
1,129
'000
0
-5.8
Tele2 Poland acquisition
September 2008
489
0.04
Q4 2008
1,105
Q1 2009
1,066
Q4 2008
Operating FCF (USDm)
-5
24.2
15.3
12.4
0
24.4
20.1
10
1,033
40
84.9
80
128.7
20
-
Unlevered assets of more than USD 770 million
Around USD 57 million in net cash at Q2 20091
Q2 2008 Q3 2008
Q4 2008 Q1 2009 Q2 2009
Broadband subscribers
Voice subscribers (own network + WLR)
Undrawn credit facility of circa USD 100 million
1 Net cash plus treasury bonds at market value
Third Avenue Value Conference, NYC, October 2009
8
Equity markets have begun to endorse Netia's value creation potential as
successful implementation of Netia's ‘profitable growth’ strategy, driven by
broadband services, is delivered quarter after quarter
140%
… Netia’s strategy starts
bearing fruits (LTM)
Mcap: ~USD 550 million today
120%
100%
80%
60%
40%
Considerable investment in
transformational strategy …
20%
0%
Apr-07
Jul-07
Oct-07 Jan-08
Apr-08
Jul-08
Netia
Oct-08
Jan-09 Apr-09
Jul-09
Oct-09
mWIG
Netia’s successful execution of announced strategy started turning skeptics into believers
Growth in scale of operations with focus on efficiency gains and migration of customers
to higher margin services continues to drive value accretion
Third Avenue Value Conference, NYC, October 2009
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Drivers for further value growth at Netia
Targeting 1 million broadband customers by 2012
EBITDA margin expansion from 20% to 28% by 2012 through:
Volume
Multi-play penetration
Migration to higher margin local loop unbundling
Company-wide cost reductions
Capex set to fall from 2011 once unbundling roll-out completed
Potential for further in-market consolidations in the telecommunications sector
Transition to FCF and net profit positive in 2010 likely to widen investor base
Third Avenue Value Conference, NYC, October 2009
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