TalkTalk Group Investor Presentation

Transcription

TalkTalk Group Investor Presentation
TalkTalk Group
Investor Presentation
February 2010
Overview of demerger
• 
• 
TalkTalkTelecom Group Plc (TalkTalk) : LSE Primary listing
Carphone Warehouse Group Plc (CPW) : LSE Secondary listing
• 
• 
• 
100% demerger
No capital raising by either TalkTalk or CPW
For every 2 existing CPW shares:
−  2 shares in TalkTalk
−  1 share in new CPW
Time Table
• 
• 
• 
• 
Fri. 29 January 2010
Wed. 24 February 2010
Tue. 23 March 2010
Mon. 29 March 2010
Joint sponsors
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• 
Credit Suisse Securities Europe
UBS Investment Bank
Listing
Structure
: Prospectus published
: Shareholder meeting
: Last day of dealing in CPW shares
: Admission of TalkTalk and new CPW shares
TalkTalk board & management
Chairman:
Charles Dunstone Founded CPW in 1989
Took CPW into Telecoms in 2002
CEO:
Dido Harding
Joining March 2010 (from J Sainsbury)
CFO:
Amy Stirling
Joined CPW in 2000
Commercial:
David Goldie
Joined CPW with Opal in 2002
Non-Execs:
Roger Taylor, Deputy Chairman
John Gildersleeve
John Allwood
Brent Hoberman
Jessica Burley
TalkTalk business overview
Leading UK broadband & voice provider:
Key numbers:
Broadband
•  Leading Internet Service Provider
• 
• 
• 
•  High-profile TalkTalk brand
•  Simple, flexible broadband & voice product
offerings, value-for-money tariffs
•  Largest Next Generation Network “NGN”
•  Significant presence in the business market
•  “One company” integration benefits
•  Delivered strong EBITDA and cash flow growth
4.15 million customers
23% market share
72% on own network
Non-broadband
• 
1.1 million customers
Business-to-business
• 
160,000 SME sites served
2009/10 H1 Financials:
Revenue
Incl. Business
EBITDA
Op. FCF
£789 million
£158 million
£107 million
£ 75 million
TalkTalk investment summary
Execu&ng strategy to con&nue strong cash‐flow delivery:   Maintain & grow broadband market share   Drive customer ARPU   Grow data services in the business market   Exploit scale & [email protected] of own network   Deliver Tiscali [email protected] synergies   Strong capex control Progressive dividend policy Business Strengths
Leading UK ISP
4.155 million
TalkTalk
customers
High profile TalkTalk brand
Broadband customer propositions
Builds
Peak
International
Mobile
Security
Off-Peak
Largest “Next Generation Network”
Broadband customer base
4500
4155
4000
3500
3009
3000
2500
2000
1500
1000
500
0
Q307
Q308
Q309
Customers on NGN
Exchanges
Collector Nodes
800Gb
400Gb
10Gb
Core Network
Q310
Largest “Next Generation Network”
UK’s largest all-IP enabled network
  
  
PSTN
Backhaul


Core
1Gb – 10Gb
circuits
Street
Cabinet
Access network
(open - regulated)
WEB
2000 exchanges
fully unbundled :
• MPF : voice & data
• SMPF : data
• Ethernet : B2B
  85% pop. Coverage
  Services capability
  Scalable backhaul
Business market presence
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Provider of fixed and mobile, voice and data services for the SME market
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Generated £158 million revenue in 1H 2009/10
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Services mainly branded “Opal” - estimated 10% share of fragmented market
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Recognised for excellent customer service
Opal “Connect”
Opal “Consult”
Opal “Partner”
•  Direct-to-market - broadband/voice access and services
•  160,000 SME sites served
•  Direct-to-market - diverse, bespoke voice/data solutions
•  Direct sales teams and product support, targeting mid-market
•  White-label, wholesale products to 500+ business resellers
•  Recent launch of wholesale Ethernet services on NGN
Integration – “one company”
•  On track to deliver £40‐£50 million annual synergy benefits by end FY 2011 •  [email protected] efficient [email protected] plaSorm: “ONE”
Synergy opportunity
Exchange infrastructure
•  Optimise equipment within each exchange
•  Accelerate customer migration onto LLU network
Backhaul infrastructure
End of FY2010
On plan
•  Establish extensive & efficient infrastructure
•  Targeting March 2011 completion
On plan
Billing and CRM platforms
•  Migrate residential customers onto “Trio” billing platform
and single CRM platform
Back office
•  One London head office for TalkTalk, AOL & Tiscali
Completed
Brand
•  Marketing focus on TalkTalk brand only
Completed
•  (AOL loyalty brand retained)
On plan
Strong EBITDA and cash-flow growth
* Pro-Forma TalkTalk Group
** Guidance for FY 2010
Driving growth
Broadband market
•  More than 1.0 million new connections forecast in 2 years
Source : Ofcom Telecommunications Market Data (2006-2009), thereafter Ovum forecasts 2009 and Office of National Statistics
Increasing ARPU
“Boosts” drive ARPU growth
25.00
Broadband ARPU £/month
23.80
24.00
23.00
22.00
21.20
21.00
20.00
Pipeline of new services
19.00
Performance & control 18.00
17.00
16.00
Security & Support 15.00
Q1 08
FY07/08
Q3 09
Q1 10
Q3 10
Corporate opportunity
•  Exploit SME market’s [email protected] to IP‐based services and growth in data traffic •  Drive sales of products/services built on Group’s NGN •  Business‐grade ADSL, wide‐area Ethernet •  Leverage own network to grow share of SME market/expand margins Large HQ
Data Centre
Ethernet
Ethernet
Large
office
Mid-sized
office
Small
office
Market evolving :
Leased
ADSL
Volume of connections
Leased
ADSL
Volume of connections
Scalable network
Network delivers sustainable [email protected]@ve advantage •  Customer bandwidth [email protected] expected to grow [email protected] by 2013 Ave. peak bandwidth per
customer
160
140
120
50%
100
R
CAG
80
144
60
96
40
20
64
43
0
09/10
•  Off‐net BTW IP Stream (IPSC) charged on basis of bandwidth •  TalkTalk unbundled network (LLU) scaled to manage expected growth 10/11
11/12
12/13
IPSC
£14.00
LLU
£1.50
Future products & services
IP-TV
•  Member of proposed “Project Canvas”:
•  Partners :
•  Establishing common standards
•  Building open, internet-connected TV platform
•  Acquired Tiscali IP-TV service
•  re-branded TalkTalk
•  insight into technology & business models
MVNO
•  Simple, value-for-money voice and data propositions
Fibre opportunity
Market developments
•  Competition Commission appeal - 2009 LLU/MPF price rises
•  Digital Britain
•  Illegal file-sharing – obligations on ISP’s
•  50p phone tax
•  Next Generation Access - fibre
Current market environment
•  Range of possible wholesale providers
Virgin Media
• Fibre/cable passes 50% of UK homes
• Serves 3.77 million broadband customers
BT Openreach
Local developments
• Fibre build-out started
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FTTC planned to 30% cabinets by 2012
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FTTH planned to 10% homes by 2012
• Significant local fibre projects under way
BT Fibre network impact
TalkTalk NGN
Copper
street
cabinet
Backhaul


“FTTH”
Fibre
street
cabinet
“FTTC”
Core
Initial Openreach product poor
LLU
IPStream
(2009)
GEA
IPStream
(2002)
Provide own modem / own CPE in one box




Commercially viable third-party/self- install
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
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
Decide on access technology
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
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
Full control of line speed / features / DLM
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Ability of e.g. offer multicast, FMC,
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
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
Ability to fault diagnose electronics in own domain
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Price not dependent on speed delivered
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/
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Flexibility for ISP
• No current plans to roll out • Limited customer access and demand Financial overview
P&L – FY 2009/10
FY 2010 (1)
£m
Guidance
Revenue
Flat y-o-y plus £300m Tiscali
Broadband and non-broadband
Business
Plus 3-5%
296
307
21-22.5%
SAC and marketing
22.1%
(126)
EBITDA
EBITDA %
1,385
1,089
EBITDA pre SAC and marketing
EBITDA pre SAC and marketing %
FY 2009 (2)
181
13-14%
13.1%
Depreciation and amortisation
(57)
EBIT
124
EBIT %
(1) 
(2) 
Including Tiscali
Restated for change in SAC accounting policy
8-9%
9.0%
Operating cash flow - FY 2009/10
£m
FY2010 Guidance
FY2009
EBITDA
171
Working capital
(29)
Capex
Operating free cash flow (1)
(1)  Excluding exceptionals
Approx. 6% total revenue
(107)
120
35
Financial overview
•  Opening net debt in range £480 - £500 million
•  Dividend 3.2 pence/share (£29 million) to be paid March 2010
•  Cash Corporation Tax expected to be minimal until FY2013
•  Strong EBITDA and Operating Cash flow growth
TalkTalk investment summary
Execu&ng strategy to deliver strong cash‐flow growth:   Maintain & grow broadband market share   Drive customer ARPU   Grow data services in the business market   Exploit efficiency & [email protected] of own network   Deliver Tiscali [email protected] synergies   Strong capex control Progressive dividend policy APPENDIX
CPW dividend history
5.0
4.25
4.5
4.35
4.65
4.0
3.25
3.5
(p)
3.0
2.5
2.50
2.0
1.5
1.0
0.5
0.0
FY2006
FY2007
FY2008
FY2009
FY2010
Net debt & borrowing facilities
TALKTALK
GROUP PLC
£550m
Revolving Credit
Agreement 2013
100%
shareholding
CPW GROUP PLC
(Loan facilities:
minimum £650m)
c£100m
New Bilateral
Facility
100%
shareholding
TALKTALK
GROUP LTD
& other subsidiaries
Demerger structure
Carphone Warehouse
TalkTalk Telecom
Group PLC
100%
TalkTalk Group
Group PLC
100%
Freehold property
48.5%
50%
Best Buy Europe
Virgin Mobile France
* Not eligible for FTSE Index inclusion
Mechanics of demerger
Step1: Scheme of arrangement
A Shares
Step2: Reorganisation
B Shares
A Shares
New CPW Plc
B Shares
New CPW Plc
CPW Plc
CPW Plc
Best Buy
Europe
Virgin Mobile
France
Freehold
property
TalkTalk
Group
Best Buy
Europe
Virgin Mobile
France
Freehold
property
TalkTalk
Group
Mechanics of demerger (continued)
Step3: Demerger
Best Buy
Europe
Existing shareholders
Existing shareholders
New CPW Plc
TalkTalk Group Plc
Virgin Mobile
France
Freehold
property
Old CPW Plc
TalkTalk
Group
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Tax clearance obtained
Scheme document and 2 prospectus
Demerger complete by end of March 2010
Executive Board biographies
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Charles Dunstone is currently chief executive officer of Carphone Warehouse and is chairman of TalkTalk. As
the founder of Carphone Warehouse he was instrumental in creating the TalkTalk Business following the
acquisition of Opal in 2002. Since then he has directed the continued development of the TalkTalk Business to
become one of the leading fixed line voice and broadband telecommunications businesses in the UK. Following
the Demerger, he will also be chairman of New Carphone Warehouse. He is also chairman of the Prince’s Trust
and a non-executive director of The Daily Mail and General Trust Plc and Independent Media Distribution Plc.
Charles has been a TalkTalk Director since 20 January 2010.
• 
Dido Harding is the proposed chief executive officer of TalkTalk. Prior to her appointment Dido was Sainsbury’s
convenience director, having been appointed to Sainsbury’s operating board in March 2008. Dido joined
Sainsbury’s from Tesco PLC where she held a variety of senior roles both in the UK and international businesses.
Prior to this, she worked at Kingfisher plc and Thomas Cook Limited where she gained considerable retail
experience. She was appointed as a non-executive director of The British Land Company PLC in January 2010.
Dido is expected to take up her role as chief executive officer of TalkTalk before TalkTalk Admission.
• 
Amy Stirling is currently chief financial officer of the TalkTalk Business and is chief financial officer of TalkTalk.
Amy joined Carphone Warehouse in 2000 and became chief financial officer of the TalkTalk Business in 2006.
Amy has over 10 years’ experience in the telecommunications industry and has played a key role in the
management and integration of those significant businesses acquired by the TalkTalk Business prior to taking up
her current position. Amy has been a TalkTalk Director since 20 January 2010.
• 
David Goldie is group commercial director of TalkTalk. David has over 25 years’ experience in the
telecommunications industry and has carried out a number of senior roles within the TalkTalk Group since he
joined Carphone Warehouse in November 2002 following the acquisition of Opal. He has considerable knowledge
of the TalkTalk Business having been its chief executive officer between 2005 and June 2008 during which time
he also served on the Carphone Warehouse Board. Since then, he has focused on major commercial projects,
corporate development and the TalkTalk Group’s regulatory affairs. He has been a TalkTalk Director since 20
January 2010.
Non-Executive Board Biographies
• 
Roger Taylor is currently chief financial officer of Carphone Warehouse and is deputy chairman of TalkTalk. Roger
has been in his current role since January 2000. He has played a key role in the creation and growth of the
TalkTalk Business both organically and through taking the lead role in a number of strategic acquisitions. He
therefore has an invaluable understanding of how the TalkTalk Business operates. Following the Demerger, he will
also be chief executive officer of New Carphone Warehouse. Roger has been a TalkTalk Director since 20 January
2010.
• 
John Gildersleeve is a non-executive director of TalkTalk. John joined the Carphone Warehouse Board in June
2000 and became non-executive chairman in July 2005. He was appointed a non-executive director of The British
Land Company PLC in September 2008. Previously, he was an executive director of Tesco PLC until he retired in
February 2004. He was chairman of Gallaher Group PLC until April 2007 and chairman of EMI Group PLC until
September 2007. Prior to this he was a non-executive director of Vodafone Group PLC from 1998 to 2000. He will
also become non-executive deputy chairman of New Carphone Warehouse. John has been a TalkTalk Director
since 20 January 2010.
• 
John Allwood is a non-executive director of TalkTalk. John was previously chief operating officer and latterly
group finance director of Mecom Group plc. Prior to this, he was managing director of Telegraph Media Group
Limited. Formerly, he was chief executive of Orange UK and also chief executive of Mirror Group plc. John is
currently a member of Exeter University Council and chairman of Market Evolution Limited, a specialist media
consultancy. He is also a non-executive director of New Carphone Warehouse. John has been a TalkTalk Director
since 20 January 2010.
Non-Executive Board biographies
• 
Jessica Burley is a non-executive director of TalkTalk. Jessica has over 20 years’ experience in the advertising
and publishing industry and is currently a non-executive director of Jacques Vert Plc. She is currently a nonexecutive director of the Audit Bureau of Circulation, although she will have left this role by the time of TalkTalk
Admission and until recently, she was managing director of The National Magazine Company. Prior to this, Jessica
was chief operating officer for ACP-NatMag. She previously held senior positions at Financial Times Business, a
subsidiary of FT Group, and Future Publishing Limited. Jessica has been a TalkTalk Director since 20 January
2010.
• 
Brent Hoberman is a non-executive director of TalkTalk. Brent co-founded lastminute.com in April 1998 with
Martha Lane Fox. He was lastminute.com’s chief executive officer until it was sold in 2005 during which period he
had overseen the company’s flotation on the London Stock Exchange in March 2000. Brent has subsequently
founded mydeco the innovative online service for home design and furniture. He is also a Governor of University
of the Arts, London, a non-executive director of Guardian Media Group, non- executive chairman of Where Are
You Now? Limited, a member of the Business Council for Britain and a Young Global Leader for the World
Economic Forum. Brent also continues to be an angel investor in several other internet companies. Brent has
been a TalkTalk Director since 20 January 2010.

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