090331 Draft Netia Generic Presentation EN

Transcription

Netia SA
Poland’s Leading Altnet
April 2009
www.investor.netia.pl
Some of the information contained in this material contains forward-looking statements.
Readers are cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may differ materially
from those in the forward-looking statements as a result of various factors. For a more detailed
description of these risks and factors, please see Netia's most recent financial report and press
release. Netia undertakes no obligation to publicly update or revise any forward-looking
statements.
2
Netia’s investment proposition
Poland’s largest altnet telco, growing y-o-y at 75% in Q4 2008
and 42% in FY’ 2008 *
Tele2 Polska acquisition completed on September 15, 2008
- Price: 2.8 x expected 2008 EBITDA of PLN 40m
- Integration underway with over PLN 30m annual synergies confirmed
Broadband-driven strategy aiming for 800k subscribers by 2010 and 1 million by
2012:
Subscriber base up to 414k in Q4 2008 from 60k in Q4 2006
36% of net broadband additions in the Polish market in Q4 2008
Market share up from 1.5% in Q4 2006 to 7.6% in Q4 2008
90% share of regulated broadband access among altnets
Over 40% of broadband customers served end-to-end over Netia’s own network
Leveraging competitive advantages of national backbone and residential market know-how
Attractive market growth potential and a positive regulatory environment
Largest altnet for business customers, strongly cash generative
Strong balance sheet and fully funded growth strategy
Experienced management team with shareholder value driven compensation
plans
* Revenue from continuing activities
Netia – Poland’s
largest altnet telco
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
Strong balance sheet
& fully funded
27-28
Stock option plan
29
3
Netia in a snap shot
Fully funded asset base
(PLN’m)
Revenue
EBITDA
2009 F
2008
2007
2006
1,520
1,121
838
862
350
30.0%
(69)
300
25.0%
260
Investment outlays (excl. M&A)
Revenues and EBITDA
260
171
248
171
244
174
(PLN'm)
250
Net M&A
133
37
68
14.6%
237
243
271
18
34
35
44
Q4 2007
Q1 2008
Q2 2008
Q3 2008
7.9%
150
100
Total assets
2,238
Shareholders funds
2,071
2,155
1,928
1,728
1,945
-
95
-
Other liabilities
355
248
211
Net cash
193
Market capitalization (as of Dec. 31, 2008)
934
Enterprise value
741
Debt outstanding
15.6%
16.2%
14.2%
200
222
Revenues
10.0%
0.0%
EBITDA
Q4 2008
EBITDA margin
Broadband and Voice1 clients
1,200
1,033
389.3
Backbone networks (km)
5,002
Metropolitan networks (km)
4,452
600
1,066
1,000
800
396
399
Unbundled local loop nodes
300
133
400
Broadband clients (k)
525
414
200
1,150
1,065
171
102
134
Q1 2007
Q2 2007
218
489
451
422
394
257
292
Q1 2008
Q2 2008
347
414
Q3 2007
Q4 2007
Broadband clients
1
5.0%
58
('k)
Shares outstanding (m)
Voice clients (own network + WLR) (k)
15.0%
369
50
0
20.0%
Q3 2008
Q4 2008
Voice clients (ow n netw ork + WLR)
Clients in own network + WLR (offered from Q4 2007)
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
4
Netia management team
Mirosław Godlewski, Chief Executive Officer, 42, joined Netia in February 2007. Previously
he served as President and CEO in Opoczno SA (2006) and Dec Sp. z o.o., a subsidiary of GATX,
(2003-2005). Earlier, he worked at Pepsi-Cola General Bottlers Poland Sp. z o.o. as General Manager
(2000-2003) and Sales Director (1999-2000); at PepsiCo Trading Sp. z o.o. (1993-1999) and at Polskie
Biuro Badań Marketingowych Sp. z o.o. as Retail Audit Manager (1991-1993).
Mr. Godlewski graduated from the Warsaw Technical University with a M. Sc. in Industrial Management.
He also holds an MBA from Ashridge Management College, Great Britain. Active member of Young
Presidents Organisation.
Jon Eastick, Chief Financial Officer, 42, joined Netia’s management board in April 2006. Previously, he
spent five years as Chief Financial Officer of the then leading Polish mobile operator PTC Sp. z o. o.
Earlier, he worked at Lucent Technologies Poland SA as Country CFO (1998-2001); at PTK Centertel
Sp. z o. o. as Strategy and Financial Planning Manager (1995-1998); and at Arthur Andersen, working in
London and later in Warsaw (1989-1995).He graduated from the London School of Economics and is a
UK Qualified Chartered Accountant.
Piotr Nesterowicz, Business Development and Technology Director, 38, joined Netia in September
2008. Previously he was Managing Director of Tele2 Polska Sp. z o.o. (from 2004). From 1995 to 2004
he worked at McKinsey & Company as a Business Analyst and Associate, an Engagement Manager and
an Associate Principal (Junior Partner). At that time, he was consulting to a number of domestic and
foreign companies mostly from the telecommunications, power and banking sectors. He started his
career in 1994 in Procter & Gamble. Mr. Nesterowicz has a M.A. degree in Management and a Ph.D.
degree in Management and Organization from the Academy of Economics, Wrocław, Poland.
Tom Ruhan, Chief Legal Officer, 45, was appointed to Netia’s management board in April 2006. He has
been the Chief Legal Officer of Netia since March 2003. Prior to his employment with Netia, he worked at
Wardyński & Partners for 12 years in various positions, being Of Counsel immediately before moving to
Netia. During his 12 years there Mr. Ruhan advised on a number of privatisations including, amongst
others, Telekomunikacja Polska SA and also worked on the financial restructuring of Netia. He graduated
in law from the University of Warwick, UK. Mr. Ruhan is a member of the Board of Directors of the
European Competitive Telecommunications Association (ECTA)(www.ectaportal.com), effective January
1, 2009. He is also a Deputy Chairman of SOT KIGEiT (Telecommunications Operators Section of the
Polish Chamber of Commerce for Electronics and Telecommunications).
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
5
Netia shareholders
Third Avenue
Management LLC
24.08%
Free float WSE
35.56%
SISU Capital Ltd.
10.03%
Other institutional
investors
12.01%
3-11
Broadband driven
strategy
12-17
ING OFE
9.49%
Pioneer Pekao
Investment
Management SA
8.83%
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
6
Accelerating revenue growth
New management team and broadband growth strategy have accelerated growth rates
Tele2 Polska acquisition brings a further 40% increase in annual revenue base and positive
incremental EBITDA
Revenues (PLN’M)
PLN 1,400m
PLN 1,520m
+35% yoy
12m pro forma
1400
PLN 1,121m
+42% yoy
1200
1000
PLN 862m
-5.2% yoy
PLN 838m
-2.8% yoy
800
600
400
200
0
2006
direct voice and IN
2007
indirect voice
2008
data
2008 12m
Proforma
interconnection and wholesale
2009 F
other telecommunications revenue
Tele2 Polska contributed revenue of PLN 129m from Sept. 15 to Dec. 31, 2008
Excluding international voice termination (IVT) activities divested in Q1 2008
and the Tele2 Polska acquisition, Netia grew y-o-y by 26% in 2008 stand alone
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
7
Positive regulatory changes
Positive regulatory changes allow Netia to push its offer to more than 10m household and
business customers
Netia’s national backbone network & back-office, brand and business processes are now
leveraged across the whole market
2006
2006 pre
pre regulatory
regulatory access
access
Households(14.2m)
2008
2008 with
with regulatory
regulatory access
access
SOHO/SME (1.2m) Corpo (30k)
Households (14.2m)
SOHO/SME (1.2m) Corpo (30k)
TP Retail:
7.9m
Other altnets: 268k WLR, 24k BSA
Netia: 673k WLR, 227k BSA, 1.3k LLU
TP:
10.1m
Netia:
398k
392k + 90k Ethernet
Other LTOs:
1.0m
1.3m
Netia addressable market is:
8.9m TP lines
392k Netia own lines
WiMAX national license
Ethernet networks acquisitions
(304k homes passed to date)
Netia accessible market was 398k own lines
Subscriber lines:
TP
Netia
Other LTOs
Source: Netia, TP
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
8
Acquisition of Tele2 Polska
completed on September 15, 2008
Revenues and EBITDA margin 1
Transformational
Transformational
change
change to
to
Netia’s
Netia’s market
market
position
position
Netia becomes nearly 3 times larger by revenue than
the next largest altnet
Over 40% increase in annual revenues with positive
incremental EBITDA
Significant potential for cross-selling of broadband, VAS,
and content
(PLN'm)
140
20.4% 20.0%
120
15.6%
100
15.0%
8.2%
8.0%
80
6.6%
5.8%
60
40
89
20
1.2%
92
106
115
111
115
10.0%
115
111
5.0%
0.0%
0
0.0%
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
Revenues
EV of EUR 33.9m
Attractive
Attractive
acquisition
acquisition price
price
EBITDA margin
Market share in Voice 2
2.8 x Forecast 2008 EBITDA of PLN 40m
156 PLN (37 EUR) per customer - comparable to fully
loaded subscriber acquisition costs
Annual synergies expected to be in excess of PLN 30m
(PLN'm)
5%
4.7%
4.7%
4.7%
3.6%
3.0%
3%
2%
4.5%
4.1%
4%
1.8%
1%
0%
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
Major
Major synergies
synergies
straightforward
straightforward
to
to deliver
deliver
20 mln PLN annual network cost savings to be achieved
within 12 months
10 mln PLN annual marketing savings as customers
move to the Netia brand (phase out of the Tele2 brand
in the first 6-8 months)
Improved margins from up to 10% of customers being
switched onto Netia’s fully-owned infrastructure
Economies of scale from combined outsourcing,
absorption of personnel, IT and sales cost optimization
Broadband and WLR clients
('k)
600
500
2
504
500
400
337
400
300
206
200
100
0
0
2
15
7
23
28
34
0
Q1 2007
Q2 2007
Broadband clients
1
502
484
446
Q3 2007
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Voice clients (WLR)
Tele2 Polska stand alone results for the periods earlier than Q4 2008
Only WLR lines of Tele2 Polska were taken to calculation
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
9
Clear number one altnet in voice services
Voice
Voice customers
customers by
by type
type of
of
technology,
Dec.
31,
2008
technology, Dec. 31, 2008
Market
Market share
share as
as at
at
Dec.
31,
2008
Dec. 31, 2008
WLR (wholesale line rental)
1,150
1,065
('000)
100%
1 000
80%
Voice lines
750
500
+
3%
5
1
`
72%
60%
40%
17%
20%
422
11%
0%
Netia
Dialog
Others
250
Total voice subscriber lines
0
2007
2008
Traditional direct v oice
Voice ov er IP
2009 Target
WiMAX v oice
('000)
WLR
7 957
1500
1 065
Over 1,065k voice customers served at December 31, 2008
999
1000
579
Over 500k customers acquired in 2008 through Tele2 Polska
acquisition
500
37% of voice customers served directly over Netia’s own access
networks
0
TP Group
Netia
Dialog
Others
Netia has 72% of WLR customers among altnets
Netia aims at 1,150k voice customers (own network+WLR+LLU)
through organic growth by the end of 2009
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
10
Clear number one altnet in broadband services
Broadband
Broadband customers
customers by
by type
type of
of
technology,
Dec.
31,
2008
technology, Dec. 31, 2008
Market
Market share
share as
as at
at
Dec.
31,
2008
Dec. 31, 2008
BSA (bitstream)
525
('000)
100%
414
Broadbabd ports
400
+
%
90
90%
80%
60%
`
40%
20%
218
3%
6%
Dialog
Others
0%
Netia
200
Broadband ports
0
2007
2008
Copper, CATV & LLU
Ethernet
2009 Target
WiMAX Internet
('000)
1000
BSA
2 193
414k broadband customers served at December 31, 2008
Over 28k customers acquired in 2008 through Tele2 Polska acquisition
500
414
46k new customers added in 2008 through Ethernet acquisitions
137
44% of broadband customers served directly by Netia’s own access
networks
0
TP Group
Netia
Dialog
Netia has 90% of BSA share amongst altnets
Netia aims at 525k broadband customers (own network+BSA+LLU)
through organic growth by the end of 2009
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
11
Netia is uniquely positioned to capitalize
on the broadband opportunity
Market
Market leader
leader
among
alternative
among alternative
operators
operators
National
National reach
reach
Existing
Existing business
business
supports
supports growth
growth
436k broadband and over 1m voice customers makes Netia number 1 among Polish altnets
First mover advantage in deregulation – market share in BSA 90% and WLR 72% as of Q4
2008
First in unbundling the TP local loop (133 nodes with 1.3m clients coverage unbundled at
Dec. 31, 2008; 300 nodes and reaching 2.3m lines forecasted for end 2009)
Brand name established nationally in consumer and business markets
National distribution
National backbone network provides capacity and backhaul from interconnection points
National maintenance and delivery capability through Ericsson outsourcing agreement
Cash generative corporate business, offering strong margin and some growth opportunities
Cost optimization underway
Fully funded business plan with substantial headroom on bank facilities
Business
Business
partnerships
partnerships
Ongoing cooperation with „n” HDTV platform to deliver 3play in 2009
Access to 500 retail Play Germanos stores
Netia mobile and convergent products (complementary offering for business clients)
launched through cooperation with Play
Google hosting
Management
Management
Highly experienced management team with Polish telecom market know-how
Proven M&A and regulatory skills
Shareholder value driven compensation plans
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
12
Building blocks of Netia’s growth strategy (1)
(PLN m)
369
400
300
211
229
243
18
34
35
271
Broaden portfolio of services
200
100
44
58
Early entry into LLU and quick roll-out in most attractive areas
0
Revenues
EBITDA
20
08
Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
Internet VAS and content to increase ARPU and customer loyalty
Scalable and de-risked introduction of 3play offer –
bundles and IPTV through partnership with “n”
Mobile and convergent services through partnership with Play
Further profitable growth of Corporate and Whosale segments
20
07
Increase number of customers
Expand distribution and back-office capacity to serve Home market nationally
Aggressive acquisition of broadband customers based on geo-marketing
Leading position in Bitstream
Optimization of existing WiMax investments
Selective acquisition of high quality Ethernet access networks
Up-sell of WLR to Bitstream and CPS customers
* Revenues excluding IVT (international voice termination) activities disposed during Q1 2008
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
13
Building blocks of Netia’s growth strategy (2)
22001
100–
-220
0111
Net profits and FCF positive
Continue cost reduction and efficiency improvement
Focus on Infrastructure Based Access and 2 or 3 play customers
Increase contribution from large broadband base by content &
e-commerce services
Consider further consolidation of the market and mobile for residential
customer base
20
2009
09
Increase customer value to drive profitability
Increase coverage of LLU and migrate Bitstream / WLR customers onto LLU
Cross-sell of 3play, mobile and convergent services
Maintain high EBITDA margin from Corporate & Wholesale
Integrate Tele2 Polska and continue acquisitions and integration of local Ethernet networks
Execute cost reduction initiatives and increase efficiency with economies of scale
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
14
Netia’s roadmap for broadband customer growth
Market
Shares
Netia
Netia -- Poland
Poland
Broadband Subscribers
25%
1,000
FORTHNet 20.0%
15%
Netia's network
LLU/BSA
Iliad
Ethernet networks
Fastweb (1)
Netia
Q26
Q25
Q24
Q23
Q22
Q21
Q20
Q19
Q18
Q17
Q16
Q15
Q14
Q13
Q12
Q11
2012F
Q9
2010F
Q10
2008
Q8
2007
Q7
2006
Q6
0%
0
Q5
5%
Q4
200
Netia 7.6%
Q3
10%
Q2
400
Fastweb 12.1%
Q1
600
Q0
(' 000)
800
Forthnet
Comparable markets and altnets(2)
Iliad
Iliad -- France
France
100%
Launched LLU Q4 06
90%
200
80%
3,000
2,500
70%
150
60%
50%
100
50
n.a.
n.a.
n.a.
0
2001
2002
2003
2004
2005
2006
2007
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
100%
Launched LLU in
2002
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
Fastweb
Fastweb -- Italy
Italy
0
1,400
80%
1,200
70%
60%
800
40%
600
2001
2002
2003
2004
2005
2006
2007
400
20%
10%
0%
1,000
50%
30%
Announcement of LLU
strategy January 2005
1,600
90%
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%
Forthnet
Forthnet -- Greece
Greece
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%
(' 000)
Iliad 18.4%
20%
0
70%
60%
50%
40%
30%
20%
10%
0%
2001
2002
2003
2004
2005
2006
2007
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 January 2005
(2) Actuals through 3Q 2007; 4Q 2007 forecast per Merrill Lynch December 2007 Broadband Matrix
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
15
Netia builds momentum in its broadband expansion
Broadband ports
Data revenue rate of change
525
500
70%
61%
414
('000)
400
347
50%
292
300
49%
46%
51%
38%
257
218
57%
56%
60%
40%
27%
30%
200
13%
20%
100
12%
10%
0
16%
15%
8%
8%
9%
1%
0%
Q4 2007
Q1 2008
Q2 2008
Copper, CATV and LLU
Q3 2008
Ethernet
WiMAX
Q4 2008
2009 Target
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
change y -o-y
BSA
change q-o-q
Blended Broadband ARPU
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08
(PLN)
120
100
Broadband net adds (k)
Broadband net adds
share
Total broadband market
share (customers)
41
32
37
46
39
36
54
67
16%
15%
25%
21%
18%
26%
42%
36%
2.4%
3.0%
3.8%
4.5%
5.1%
5.7%
6.6%
7.6%
80
60
40
20
0
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08
Source: Netia, TP, Netia historic figures include acquisitions
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
16
Broadband marketing & distribution also supports
sales of voice via WLR (wholesale line rental)
Voice revenue rate of change
Voice lines
1,033
128%
1,065
110%
108%
1 000
('000)
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
1,150
1 200
88%
63%
68%
800
27%
48%
600
422
451
489
8%
400
-1%
-5%
-3%
-1%
3%
-11%
-9%
-11%
-10%
-6%
-12%
200
22%
2%
28%
1%
change y -o-y
change q-o-q
0
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Own network
`
Q4 2008
2009 Target
WLR net adds share
WLR
44%
50%
46%
42%
40%
Total voice lines (within Netia’s own network and WLR)
reached 1,065k at Q4 2008
Additional voice service sales to come from LLU and Ethernet
2play customers
36%
36%
30%
24%
20%
10%
0%
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Proforma with Tele2 Polska for full Q3 2008
Cross-sale of voice and Internet service reduces average
costs to serve and increases margins
Voice ARPU
100
Voice net adds (k)
(4)
2Q 07
3Q 07
(2)
(2)
4Q 07
27
1Q 08
30
2Q 08
38
3Q 08 4Q 08
544
32
(PLN)
80
1Q 07
60
40
20
0
Q1 07
Total voice market share
3.5%
3.5%
3.6%
3.9%
4.2%
4.5%
9.7%
10.1%
Q2 07
Q3 07
Blended
Q4 07
Q1 08
Direct
Q2 08
Q3 08
Q4 08
WLR
Source: Netia, TP, Netia historic figures to Q2 2008 excludeTele2 Polska
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
17
Polish broadband market upside
(1)(2)
2010E
2010E BB
BB penetration
penetration upside
upside (households)
(households) (1)(2)
3363
Approx. 660k new households per
year available for broadband
connection during 2009 – 2010
2068
387
350
260
191
172
112
Austria
Norway
Portugal
Sweden
Denmark
Finland
Italy
Poland
UK
Spain
France
0
Germany
Portugal
Poland
Italy
Greece
Finland
Belgium
Austria
Spain
Germany
Sweden
Europe
UK
France
Switzerland
Denmark
Netherlands
Norway
404
0%
Belgium
0%
405
10%
Switzerland
10%
1 000
423
20%
Netherlands
20%
971
30%
Greece
30%
1243
40%
1319
40%
2 000
1570
50%
40,4%
50%
60%
40,4%
64,6%
70%
53,8%
65,9%
66,8%
67,2%
69,0%
69,9%
3 000
69,4%
60%
70,5%
70%
4 000
80%
73,5%
82,9%
80%
88,7%
90%
83,0%
90%
88,8%
100%
88,8%
100%
3748
(1)
Broadband
Broadband penetration
penetration (1)
3Q08A
2010E
PC Penetration on Households 2008
PC Penetration on Households 2010
Source: Merrill Lynch Broadband Matrix except Poland, Netia estimates
Note: Western European Countries forecasts for 2008E and 2010E as of Q3 08 per Merrill Lynch Broadband Matrix Q4 2008;
Poland forecasts and estimates as of Q3 08 by Netia
(1) Always excludes Ethernet Networks
(2) Represents Households with Broadband Penetration in 2010E minus Households with Broadband Penetration in 2008E
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
18
Broadband market is fragmented
1
Broadband
Broadband subscribers
subscribers –
– Q4
Q4 2008
2008 1
Growth
Growth opportunity
opportunity for
for Netia
Netia
Netia Copper/ Fibre Network
Total 5.4m
Continue to expand penetration of ADSL to
existing 200k residential customer lines and
170k business customer lines
TP – Regulatory Access
19%
27%
Bitstream Internet Access
87%
Upsell voice – VoIP and wholesale line rental
(WLR)
Migrate to LLU
6%
Up-sell IPTV and cross-sell mobile services
Ethernet Networks
40
41%
Bolt-on acquisitions
High capacity local networks
CATV
Others
TP Group
Netia
Ethernet networks
Upsell VoIP and upgrade for IPTV
Integrate
Cable TV
Netia 3-play has opportunity to compete with
multi-play offers
Source: Netia, PMR
1
According to TP data, total number of broadband subs as of December 31, 2008 was 5.54m
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
19
Extending Netia’s broadband infrastructure with
Ethernet acquisitions
Ethernet game plan:
Acquisition (town)
Price/sub (PLN)
No. of subs.
1. Lanet (Wrocław)
1,225
8,233
2. Komnet (Wrocław)
1,298
7,254
3. Magma (Wrocław)
1,255
6,328
4. Akron (Wrocław)
695
1,151
5. Netis (Jastrzębie)
908
4,447
6. 3VNet (Brzeg)
593
665
7. Zielona Burza (Trzebnica)
761
598
8. Inet (Brzeg)
757
1,257
9. Verizone (Wrocław)
659
1,040
10. Ozimek Net (Ozimek)
500
513
11. Ikatel (Wrocław)
930
572
12. Interbit (Tczew)
1,059
3,246
13. Punkt (Opole)
1,174
4,367
14. Cybertech (Białystok)
1,124
15. Connect (Białystok)
973
3,535
Integrate onto Netia platforms and supply
connectivity over Netia core network
Upsell Netia voice and content services
Increase penetration of households passed
– currently 27% of 304k
Acquisitions completed in Q4 2008:
Acquisition (town)
Price/sub (PLN)
16. Seal-Net (Kluczbork)
800
937
17. Netster (ŁomŜa)
649
1,068
18. Ticom (Tarnowskie Góry)
700
819
19. Air Bites (14 cities)
850
24,486
929
6,261
785
33,571
20. Easy Com (Góra)
Average:
4,630
1
Organic growth
Average:
1
1,100
47,826
Note: Acquisition price per subscriber in historical transactions depicted above
includes net cash of the target as of the acquisition date
1
No. of subs.
9,110
Total at Dec. 31, 2008
90,507
Note: Acquisition price per subscriber in recent transactions depicted above
does not include net cash of the target as of the acquisition date
Simple averages
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
20
Regulatory conditions in Poland
Fixed
Fixed subscription
subscription resale
resale (WLR)
(WLR) cost
cost
PLN 20 (‘Retail minus’ formula)
Bitstream
Bitstream wholesale
wholesale prices
prices
PLN 24-26 (‘Retail minus’ formula)
Full
Full LLU
LLU costs
costs (monthly
(monthly fees)
fees)
PLN 22
Shared
Shared LLU
LLU costs
costs (monthly
(monthly fees)
fees)
PLN 5.81
Source: Netia
On December 1, 2008, the Polish Regulator introduced a new Reference Unbundling Offer which reduced the fees for LLU
monthly access from PLN 36 to PLN 22 (ful LLU) and from PLN 13 to PLN 5.81 (shared LLU)
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
21
Wholesale service over TP’s network
WLR
Netia PSTN
TP
Switch
TP offers
Voice & Internet for
110 PLN
TP
DSLAM
Netia bills voice
and Internet for ~ 90 PLN
BSA
Netia pays 49% of TP retail
to TP for Internet and 47% of
monthly fee for WLR
TOTAL ~ 49 PLN
NETIA IP Network
- Internet Access
Wholesale strategy:
Single play customers represent a base for cross selling
Migration to higher margin LLU services expected at the
turn of Q2 and Q3 2009 (migration tests underway)
Netia plans to migrate more than 20k BSA and WLR
clients to LLU by the end of 2009
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
• Netia does not invest in DSLAM
• Netia can only resell services
offered by TP, i.e. bandwidths
& fully funded
27-28
Stock option plan
29
22
Local loop unbundling
Netia bills
Double Play Revenues
~ 90 PLN
TP
Switch
Netia pays TP
22 PLN monthly
line rental fee
TP
DSLAM
NETIA
DSLAM
Target to unbundle
5m TP lines with 500
DSLAM in 2008-2010
Targeting 300 nodes
unbundled by 2009
year-end
Netia has to invest in
its own DSLAM
135 nodes unbundled
as at Feb. 24, 2009
~ 200K PLN / node
NETIA controls services
delivered over DSLAM
- speeds
- Value Added Services
like IPTV, VOD
NETIA IP Network
- Internet Access
- Carrier Class VoIP
LLU roll-out:
2.5k double play LLU
clients acquired
organically at Feb.
24, 2009
Migration of wholesale customers planned at the turn of Q2 and Q3 2009
Monthly line rental fee for full LLU reduced in December 2008 from PLN 36 to PLN 22
Monthly fee for shared LLU at PLN 5.81 when customer keeps TP phone service
One-time LLU installation fee at PLN 55.51
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
23
Business customers generate strong EBITDA
and positive cash flow
Corporate
Corporate
market
market segment
segment
SME/SOHO
SME/SOHO
market
market segment
segment
Increased focus on high IRR
Rapid increase in number of
Opportunistic
Targeting stable revenues
Tight cost control and focus
OneOffice
P4 transmission project
High EBITDA and low capex
projects
on reduction of capex/sales to
improve FCF
Mobile and convergent offers
using Netia service provider
SOHO/SME clients – 23% up
y-o-y to 97k in Q4 2008
as
primary
simplified and standardized
offer to SME/SOHO clients
Mobile and convergent offers
Wholesale/Carriers
Wholesale/Carriers
market
market segment
segment
approach to
increase utilization of assets
and capacity
projects
using Netia service provider
Leverage expanded reach of
regulated access
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
24
Strong cash flows from Netia’s own networks
Free
Free Cash
Cash Flow
Flow
% of own network sales
30%
25%
20%
15%
25.6%
25.3%
10%
22.2%
17.4%
5%
15.2%
10.4pp
7.9 pp
14.3%
7.9pp
0%
2006
2007
EBITDA margin
(PLN'M)
CAPEX & IT (% of rev enues)
EBITDA
EBITDA 2006
2006
862
64
25.3%
1
200
13
Operating FCF margin
EBITDA
EBITDA 2007
2007
300
250
2008
10
0.7
(PLN'M)
EBITDA
EBITDA 2008
2008
21
250
817
25.6%
(PLN'M)
127
22.2%
59
66
150
355
221
100
218
100
5
5
0
14
209
171
100
13
10
192
171
50
0
0
EBITDA as
raported
-69
12
150
50
50
-50
41
150
865
24
200
200
129
250
Other income Other expense
Other
gains/(losses),
net
SOP
BSA & WLR
start-up
EBITDA own
networks
EBITDA as
raported
Other income
Other
gains/(losses),
net
SOP
BSA & WLR
start-up
Tele2 Polska
contribution
Sustainable
EBITDA
-100
EBITDA as
Impairment
License
Adjusted
Other
raported
charge
provions
EBITDA
gains/(losses),
3-11
Other incomeOther expense
SOP
Broadband driven
strategy
12-17
EBITDA
own
networks
Revenue
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
EBITDA margin
& fully funded
27-28
Stock option plan
29
25
Netia continues to invest now for future growth
20%
29%
22%
244
248
2007
2008
(PLN'M)
250.0
200.0
17%
260
173
150.0
100.0
50.0
0.0
2006
Network & IT
P4
2009 F
Broadband and WiMax
Capital investment spending overall was broadly flat in 2008 versus 2007
Higher IT spending in support of new services has resulted in stable overall
spending on the existing network and IT
The stable broadband spending reflects lower spending on WiMAX and
increasing utilization of previously rolled out capacity to carry data traffic,
offset by the first year of LLU roll-out
P4 project roll-out is nearing completion
% of Revenue
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
26
Netia is fully funded to grow through 2010
Rate of cash burn or return to FCF positive depends on growth decisions
PLN ’M
2008
Telecom licenses, net
2007
2006
110
14
129
15
147
16
-
150
141
PP&E, gross
4,123
4,028
3,896
PP&E, net
1,416
1,409
1,458
Other non-current assets
348
132
85
Cash
193
58
144
Other current assets
202
178
164
2,283
2,071
2,155
328
234
192
-
95
-
27
14
19
1,928
1,728
1,945
375
205
200
WiMAX licenses, net
P4 investment
Total assets
Current liabilities (excl. debt)
Debt
Other non-current liabilities
Shareholders funds
Debt funding undrawn
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
27
Medium term outlook
25% EBITDA margin is the key target
2010
2010 -- 2012
2012
5% - 10%
Revenue growth (CAGR)
EBITDA margins
at 20%
at 25%
2010
2012
Net profit by
2010
Free cash flow positive by
2010
Capex to sales down to 15% by
2011
1 million broadband subscribers
2012
Guidance as published on February 10, 2009
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
28
Netia’s stock option plan
for management and key employees
Strike price
PLN 3.50
PLN 5.50
PLN 7.00
PLN 8.25
Other
Participants
Members of the Management Board
8,333,500
11,200,000
8,400,000
8,400,000
271,814
36,605,314
Employees * and former MB
members
3,284,750
5,439,000
4,207,000
300,000
432,059
13,662,809
11,618,250
16,639,000
12,607,000
8,700,000
703,873
50,268,123
Total
Exercise date:
until December 20, 2012
Maximum number of shares issuable under the SOP:
of which number of shares already issued:
18,373,785
5,054,520
Where options are exercised at a market price above the relevant strike price,
the participant receives a number of shares equivalent to the value of the difference.
* Management Board have discretion to issue up to 1.6 million of PLN 3.50 options and 3.6 million
of higher priced options to senior management
Update as of Q4 2008
3-11
Broadband driven
strategy
12-17
Attractive market
growth potential
18-23
Cash generative
business franchise
24-26
& fully funded
27-28
Stock option plan
29
29
2008 Performance
Update as of Q4 2008
30
Key achievements in FY2008
Netia delivering strong revenue and EBITDA growth
- 34% increase in full year 2008 versus 2007 revenue base
- 75% increase in Q4 revenue base y-o-y
- 225% increase in Q4 EBITDA y-o-y
Tele2 Polska acquisition completed in September 2008
- Price: 2.8x original estimated 2008 EBITDA of PLN 40m
Revenue growth y-o-y
80%
70%
60%
50%
40%
30%
20%
10%
0%
- 133 nodes unbundled at December 31, 2008
27.8%
6.1%
Q1 08*
Q2 08*
Q3 08*
EBITDA quarterly development
50
40
30
- Increasing pace of new sales of 2play services
- Potential to up-sell services to single play BSA/WLR customers
(to be subsequently migrated to higher-margin LLU)
Q4 08*
(PLN' M)
60
Netia leads LLU roll out in Poland
41.5%
21.8%
Q4 07
- Significant increase in scale of operations
- Integration in full swing with over PLN 30.0m expected synergies
74.9%
57.6
43.8
20
10
33.8
35.4
Q1 08
Q2 08
17.7
0
Q4 07
Q3 08
Q4 08
- LLU migration tests with TP underway
(plan to migrate over 20,000 BSA clients in 2009)
Netia’s core growth strategy fully funded
- Disposal of P4 and focus on broadband-driven strategy
- Rapidly falling cash burn (FCF break-even expected in 2010)
- Seeking flexibility for larger acquisitions or share buy-backs
Recently further increased guidance for FY2009
* Revenue from continuing activities
31
Key events for Netia in FY2008
Regulatory environment
July 2, 2008
Decision on lower BSA
activation fee issued by UKE
for Netia.
September/October, 2008
UKE issued market
decision obliging mobile
operators to reduce MTRs.
May 20, 2008
Decision on flat interconnect rate
(PSI) issued by UKE for Netia.
Jan
Feb
March 19, 2008
Disposal of IVT (international
voice termination non core
asset) to Mediatel for PLN
13.6m consideration.
Mar
Apr
November 4, 2008
Approval by UKE of new
IC and BSA reference offers
for incumbent (TP).
October 14, 2008
UKE decision regarding WLR
introduction for Netia.
May
June
July
Aug
Sept
November 28, 2008
UKE issued new RUO
with lower LLU fees for
incumbent (TP).
Oct
Nov
Dec
April 30, 2008
Disposal of P4 stake for EUR
131.8m consideration to Netia
partners in P4 project.
September 15, 2008
Acquisition of Tele2 Polska for EUR 31.4m
consideration (plus additional price component
depending on performance).
December 31, 2008
Netia unbundled in total
133 LLU nodes of
incumbent’s (TP)
network.
December, 2008
Acquisition of AirBites, Easy Com and Ticom ethernet
networks and earlier 2 smaller ethernet assets (Netster
and Seal-Net). Total M&A activity in 2008 FY
amounted to PLN 45.1m cash outlays for ethernet
acquisitions.
Netia key milestones
32
Netia continues to be TP Group’s toughest competitor
in broadband
Broadband net adds – TP Group
Broadband net adds – Netia
(K)
(K)
80
80
6
17
60
60
34
40
40
70
28
4
8
57
20
17
0
Q4 2007
Source:TP
(PLN)
12
Q1 2008
30
27
5
5
7
Q2 2008
Q3 2008
Q4 2008
TP
20
34
35
Q4 2007
Q1 2008
33
27
26
Q2 2008
Q3 2008
0
Q4 2008
Netia - Tele2 Polska acquisition
Netia - Ethernet acqusitions
Netia - organic growth
Orange
Blended broadband ARPU
Bitstream SAC
(PLN)
300
90
80
70
60
50
40
30
20
10
0
250
200
150
264
100
187
182
164
Q2 2008
Q3 2008
196
50
0
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q4 2007
Q1 2008
Q4 2008
Bitstream SAC
33
Financial performance
Tele2 Polska acquisition was completed on 15 September 2008
2008
(PLN’ 000)
3Q
2Q
1Q
2008
2007
2006
Revenues from continuing activities
y-o-y % change
369,056
271,159
243,483
228,696
1,112,394
780,884
nm
79.4%
41.5%
27.8%
21.8%
42.5%
na
nm
Revenues
369,056
271,159
243,483
237,470
1,121,168
838,025
862,057
Gross profit
116,333
73,720
51,926
55,676
297,655
200,473
232,182
57,576
43,829
35,436
33,800
170,641
170,682
221,284 1
15.6%
225.7%
16.2%
21.2%
14.6%
(43.1%)
14.2%
(38.1%)
15.2%
0.0%
20.4%
(22.9%)
25.7%
(34.7)
(14,683)
(22,714)
(33,230)
(29,079)
(99,706)
(103,840)
(341,384)
Share of P4 start-up losses
--
--
--
(22,625)
(22,625)
(165,237)
(30,724)
Profit on sale of P4
--
(46)
353,427
353,381
--
(10,096)
(18,586)
314,581
(55,294)
230,605
(268,881)
(378,355)
2,283,479
2,260,204
2,169,214
2,062,256
2,283,479
2,070,651
2,155,359
Net (debt)/cash
192,685
232,736
324,017
(105,264)
192,685
(37,300)
143,586
Available credit lines
375,000
375,000 2
375,000 2
120,000
375,000
205,000
200,000
EBITDA / Adjusted EBITDA1
Margin
y-o-y % change
EBIT
PAT
Total assets
1
2
4Q
--
--
EBITDA for 2006 excluding the impact of an impairment charge on non-current assets and cancellation of El-Net’s license fee liabilities
Including PLN 100m available at the Company’s option
34
New 2009 guidance reflects attained scale
and focus on profitability
New
New
Previous
Previous
525
--
1,150
--
300
--
1,520
1,500
EBITDA (PLN’m)
260
225
Capital investment (excl. M&A) (PLN’m)
260
280
Broadband subscribers (‘000)
Voice service customers (own network + WLR) (‘000)
Unbundled local loop (LLU) nodes
Revenues (PLN’m)
Guidance as published on February 10, 2009
35
Summary
Broadband strategy driving revenue and profit improvements
2009 focus on driving double play services, LLU roll-out, Tele2 Polska
integration and cost reductions
New outlook for 2009:
Revenue exceeding PLN 1.5 billion
EBITDA increase by 52% to PLN 260m
Netia to be net profitable in 2010
Netia is fully funded
flexibility to consider acquisition opportunities
exploring options to accelerate remitting cash to shareholders
36
Thank you for your attention
37

090331 Draft Netia Generic Presentation EN

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