Poland`s leading alternative telco

Poland’s leading alternative telco
March 2014
Disclaimer
Some of the information included 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.
investor.netia.pl
2
Vision and Mission towards 2020
Finished solutions
responsibility
anytime, anywhere
personalized
Netia, us
We deliver the
world on-line
Delivery of services
digital,
all services,
convergence
power, choice,
connectivity,
communication
By 2020 Netia will profitably grow to be Poland's No.1 on-line gateway through:
investor.netia.pl
•
Delivering integrated and easy to use solutions
•
Providing a superior customer experience, and
•
the Drive of passionate employees inspired by our values
3
Four strategic focus areas for Netia
•
Excellence in processes that run through critical customer touchpoints to deliver customer experience distinctly better than with
the key competitors
•
Streamlining customer processes to optimize operational and
financial performance
•
Recognized & well-perceived brand as a core asset supporting our
strong market position in the Home & Business segments
•
Own access network
infrastructure largely
upgraded to Next
Generation Access (NGA)
•
Migration from regulated &
wholesale access to own
infrastructure once sufficient
local scale has been
achieved to enable valuecreating own network
deployment
•
•
Optimization of network
roll-out cost and risk-sharing
through co-investment &
cooperative arrangements,
offering wholesale services
to third-parties and
leveraging public & EU
funds
IT architecture supporting
seamless & effective delivery
of critical business processes
investor.netia.pl
•
Agile, effective and flexible organization & processes
•
Company values strongly reflected in employee behavior
•
Passion for exceeding customer expectations by going the extra
mile
•
Strong & deep employee empowerment across all organizational
levels
•
Senior and middle management strongly motivated by stock
option plan
•
Portfolio of integrated
solutions that
comprehensively meets the
communication &
entertainment needs of our
Home & Business customers
•
Strong expertise to
consistently design & launch
customer-winning
propositions
•
Ability to design userfriendly & intuitive interface
and deliver effortless user
experience
•
Strong partnerships and
seamless integration of
third-party products &
devices within our solutions
4
Investment proposition
Poland’s telco
consolidating
the market
• 2013 Revenues at ~ PLN 1.9 bn, Adjusted EBITDA at 29% margin and Adjusted FCF at 17%
• Financial leverage at 0.53x 2013 Adjusted EBITDA1
• Dynamically growing scale after exit from equity interest in the fourth mobile operator P4 and Tele2
Polska acquisition in 2008 followed by Dialog and Crowley takeovers in 2011
• Consolidated the local broadband market with 40+ Ethernet acquisitions since 2007, in 2013 acquired
former Aster cable TV networks in Warsaw and Cracow
• Proven integration and cost reduction skills as approximately PLN 250m of annual opex saved since
2009
• Distribution policy announced in 2013 targeting the pay out to shareholders of PLN 0.42 per share
(8.4% yield)2 from 2014 onwards (PLN 0.35 per share distributed in form of a share buy-back tender
offer in 2013)
• Component of WIG30, the new blue chips index on the Warsaw Stock Exchange3
2.5m services in Poland, of which 1,489k fixed voice and 849k fixed broadband at the end of 2013
12.7% market share in fixed broadband and 18.8% market share in fixed voice
Strong focus on 2play and 3play through delivery of integrated telco and media solutions
120k TV services, 69k mobile broadband and mobile voice services combined, growing by 52% in 2013
1.3m homes passed within the reach of NGA (50 Mbs+), recent acquisition of cable networks from UPC
Polska expands NGA reach further to over 1.7m homes passed
Strategic focus on
multi-play services
•
•
•
•
•
Leveraging own network
scale and regulatory
opportunities
• 11k km of fiber backbone and around 16k km of fiber metro rings underpin all operations
• 2.9m homes passed with own network, 4.3m homes passed with LLU and national reach from
regulated wholesale access
• 47% broadband clients and 43% voice clients served end-to-end over Netia’s own networks
• Synergetic network assets allowing to render services in both B2C and B2B
• Market leader in roll-out of LLU (over 700 nodes unbundled, ~170k clients)
investor.netia.pl
1 Status as of Q4 2013
2 Versus a three-month average share price of PLN 5.03 on February 28, 2014
3 The new WIG30 index is being published by the Warsaw Stock Exchange from September 23, 2013
5
Netia’s broadband driven transformation
2006 YE
2012 YE
Change
RGUs Fixed voice
~398k
~1,644k
4.1x
RGUs Broadband
~60k
~875k
14.6x
Revenues
PLNm 862
PLNm 2,119
+ 146%
Adjusted EBITDA
PLNm 221
PLNm 591
+ 167%
Adjusted EBITDA margin
25.7%
28.2%
+ 2.5 pp
Adjusted Operating FCF
PLNm 48
PLNm 321
6.7x
Brand Awareness
Netia as a provider of
fixed telco services
Netia as a provider of
Broadband
TV
From a business oriented fixed telco subscale altnet operator to become a major, revenue balanced on-line
gateway synergistically leveraging its assets, brand and country wide presence
inwestor.netia.pl
6
Major initiatives and projects in the past 6 years
Play (P4)
• Minority stake sold for EURm 132 in 2008 (66% profit and annualized IRR of 26%)
• Cash proceeds for Netia’s broadband expansion strategy
Non-core
• International Voice Termination to Mediatel, CATV to Vectra and real estate property disposals
Disposals
Acquisitions
Tele2
Polska
•
•
•
•
Acquired in 2008 for EURm 34 (EV/EBITDA of 1.5x with synergies, 2.8x standalone)
+ 502k voice WLR RGUs
+ PLNm 455 revenues, + PLNm 41 EBITDA standalone for 2008
Synergies of PLNm 45 delivered against original PLNm 30 target
Dialog
Crowley
•
•
•
•
•
+ 1,046k RGUs
+ PLNm 640 revenues
+ PLNm 156 EBITDA standalone for 2011
+ PLNm 130 FCF annual synergies by 2014 (including PLNm 120 EBITDA synergies)
Increase in own network footprint, high multi-play and cross-sell potential
ETTH
Cable
networks
• + 139k ETTH RGUs acquired since 2007
• High-end technology, easy upgrade to NGA
• A complete Cable TV network covering 446k HPs acquired from UPC Polska in May 2013
• Inclusive of recent CATV acquisitions, Netia has advanced plans to expand its NGA coverage
by over 400k to approximately1.7m homes passed
Cost reduction
• PLNm 140 of gross expense annual savings1, +3.5 p.p. EBITDA yoy2 (project ‚Profit’ executed in 2008-2009)
• More agile organization, downsizing unnecessary resources
Klientomania
• Improvements along entire value chain driving NPS3
Company
culture
inwestor.netia.pl
• Huge cultural transformation from a rigid, engineer-driven approach to entrepreneurial-minded teamwork
1 From 2010 onwards
2 Average annual improvement in EBITDA margin in the period 2009-2010
3 Net Promotors’ Score
7
Customer base and market shares
Revenues, EBITDA and OpFCF development
CAGR 2007 – 2013: Revenues +14%
CAGR 2007 – 2013: Adj. EBITDA+22%
PLN m
2,121
1,500
500
6,000
1,876
2,000
1,569
1,506
5,000
1,619
4,000
1,121
28%
29% 30%
32%
34% 35%
35% 37%
38% 38% 39%
42% 42%
40% 41%
43%
44% 44% 45%
45% 46%46% 46% 47% 47% 47% 48%
50%
40%
30%
3,000
838
171
-74
171
304
57
-77
359
160
408
164
2010
2011
591
334
20%
551
311
2,000
1,000
0
0
2007
2008
2009
2012
2013
-500
Revenues
Adjusted EBITDA
OpFCF
10%
14% 14% 14% 14% 13% 13% 13% 13%
11% 12% 12% 12%
10% 11% 11% 11%
9%
8%
9%
8%
7%
5% 6%
3% 3% 4% 5%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13
0%
1
Total market broadband subscribers
Subscriber base
(‘000)
CAGR Q1 2007 – Q4 2013: Netia +8%
CAGR Q1 2007 – Q4 2013: Total market+2%
(k)
7,000
Adoption of
broadband-driven strategy
2,500
1,000
Fixed broadband market share (quarterly)
Netia's market share
Penetration of households
Fixed voice market share (quarterly)
CAGR 2007 – 2013: Broadband subs +25%
CAGR 2007 – 2013: Voice subs +23%
Dialog & Crowley
acquisitions
CAGR Q1 2007 – Q4 2013: Netia +5%
CAGR Q1 2007 – Q4 2013: Total market-1%
(k)
Tele2 Polska
acquisition
2,000
1,745
12,000
1,645
1,489
1,066
1,219
559
500
422
218
875
849
7991
120
68
0
Broadband services
investor.netia.pl
64% 63% 62%
61% 60% 59%
70%
59% 58% 57% 56%
60%
50%
40%
2010
Fixed voice services
2011
TV services
2012
30%
20%
2,000
0
2009
80%
66% 65% 65%
4,000
414
2008
69% 68%
6,000
690
82
51
2007
73% 72% 71%
8,000
912
1,000
90%
76% 75% 74%
10,000
1,500
1,158
79% 78% 77% 76% 77% 76% 76%
2013
Mobile services
20%20% 20% 20% 20% 19% 19% 19% 19%
Total market fixed voice
Netia's market share
Note: For discussion purposes only, more detailed information for reference can be found in Netia Group’s quarterly and annual financial statements and press releases
1 Adjusted OpFCF excluding one-off New Netia integration capex and acquisitions
10%
10% 10% 11% 11% 11% 12% 12% 12% 13%13% 13% 13% 13%
4% 4% 4% 4% 4% 5%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13
0%
Penetration of households
Source: Company
8
Financial performance and network assets
Dynamically growing business
Netia’s backbone and access network assets country-wide
1
PLN m
Revenue
Growth (yoy%)
Adjusted EBITDA
Margin (%)
EBITDA
Margin (%)
Adjusted Capex3
Adjusted OpFCF
Acquisition outlays
Total capex
Disposal proceeds
Net Cash / (Debt) at YE
2007A 2008A 2009A 2010A 2011A 1 2012A 2
838
-2.8%
171
20.4%
171
20.4%
244
(73)
37
281
na
(37)
1,121
33.8%
171
15.3%
171
15.3%
248
(77)
178
426
460
193
1,506
34.3%
304
20.2%
313
20.8%
246
58
15.7
262
46
240
1,569
4.2%
359
22.9%
586
37.3%
200
159
14.8
215
24
345
1,619
3.2%
408
25.2%
611
37.7%
244
164
978
1,222
9
(539)
2,121
31.0%
591
27.9%
461
21.7%
257
334
9
279
2
(408)
2013A
2014F
1,876
-11.6%
551
29.4%
533
28.4%
240
311
7
280
1
(291)
1,735
-7.5%
505
29.1%
nd
nd
200
305
nd
nd
nd
nd
Netia’s own FO
Netia’s leased FO
Asset backed with modest leverage
PLN m
Total assets
Liabilities
Shareholders funds
Net cash / (debt)
Undrawn loan facilities
investor.netia.pl
2007A 2008A 2009A 2010A 2011A 1 2012A 2
2,071 2,283 2,341 2,568
3,553
3,233
343
355
316
271
1,053
937
1,728 1,928 2,025 2,297
2,500
2,296
(37)
193
240
345
(539)
(408)
208
375
295
81
2013A
3,221
925
2,295
(291)
250
Note: For discussion purposes only, more detailed information for reference can be found in Netia Group’s quarterly and annual financial statements and press releases
1 Including 2 weeks of Dialog’s and Crowley’s consolidation in December 2011
2 Including full year of Dialog's and Crowley's consolidation
3 Excluding M&A and integration capex
Source: Company
9
Netia is present in both Business and Residential market segments
B2B1,2
B2C1,3,5
PLNm
PLNm
300
250
49.2%
50.6%
200
49.4%
54.1%
50.9%
210
197
Q4 2012
Q1 2013
Revenues
60%
192
179
179
Q2 2013
Q3 2013
20%
250
40%
26.8%
23.7%
25.1%
298
286
35%
28.1%
24.9%
30%
25%
200
20%
150
277
270
263
100
10%
50
0%
0
5%
0%
Adjusted EBITDA margin %
•
15%
10%
Q4 2012
Q4 2013
Revenue was PLN 179m in Q4 2013, equal to Q3 2013 and down by
15% y-o-y
Q1 2013
Revenues
Q2 2013
Q3 2013
Q4 2013
Adjusted EBITDA margin %
Revenue was PLN 263m in Q4 2013, down by 2% compared to Q3
2013 and down by 12% y-o-y
•
Number of RGUs: 478k (+2% q-o-q, +5% y-o-y)
•
•
Voice ARPUs under pressure and lower transit revenue due
to MTR declines with offsetting fall in interconnection costs
Falling voice and broadband RGUs by 2% sequentially and
10% y-o-y
•
Substantial growth in TV (by 52% y-o-y and 8% q-o-q) and
progress in on-net broadband
Adjusted EBITDA margin was 50.9% in Q4 2013
•
•
300
30%
0
•
70%
40%
50
•
350
50%
150
100
80%
Sequential drop reflects increased acquisition costs driven
by growing B2B customer base and higher A&P costs
Capital expenditure at PLN 35m in Q4 2013 resulted in Adjusted
OpFCF4 at the level of PLN 56m
investor.netia.pl
•
Adjusted EBITDA margin was 24.9% in Q4 2013
•
ARPUs stable in most product lines and consistent with Netia’s
strategy to focus on high end customers rather than re-price its
services to defend the off-net customer base
•
Capital expenditure at PLN 33m in Q4 2013 resulted in Adjusted
OpFCF4 at the level of PLN 33m
•
Sales focus on on-net broadband and TV services in light of the
continued pricing pressure and deteriorating profitability of WLRand BSA-based services
1 Operating segments reorganized from July 2013 into two major segments: B2B and B2C
2 B2B comprises Business and Carrier customers sub-segments
3 B2C comprises Residential and SOHO customers sub-segments
4 Excluding non-allocated Opex of PLN 50m and non-allocated Capex of PLN 36m in Q4 2013
5 Excluding Petrotel
Source: Netia, public domain
10
We operate across four customer sub-segments
1
New B2C Segment
Residential sub-segment (Restated)
SoHo sub-segment (Restated)
PLNm
PLNm
280
40%
240
35%
90
30%
80
200
21.8%
23.5%
25.6%
25.5%
22.4%
25%
160
120
41.8%
100
45%
38.8%
35.5%
34.6%
34.5%
35%
70
30%
60
256
244
236
228
222
80
20%
50
15%
40
10%
5%
0
0%
Q4 2012
Q1 2013
Revenues
25%
20%
15%
30
20
40
42
42
42
41
41
10%
5%
10
0
Q2 2013
Q3 2013
Q4 2013
Adjusted EBITDA margin %
40%
0%
Q4 2012
Q1 2013
Q2 2013
Revenues
Q3 2013
Q4 2013
Adjusted EBITDA margin %
New B2B Segment
Business sub-segment (Restated)
Carrier sub-segment (Restated)
PLNm
PLNm
160
53.6%
53.9%
55.5%
52.1%
60%
50.8%
140
120
49.1%
51.4%
100
120
40%
100
80
60%
50%
80
154
148
145
30%
141
139
60
20%
40
10%
20
0
0%
Q4 2012
Q1 2013
Q2 2013
Revenues
investor.netia.pl
Q3 2013
Q4 2013
Adjusted EBITDA margin %
50%
37.3%
40.5%
41.3%
40%
60
30%
40
20%
56
20
49
47
Q1 2013
Q2 2013
39
40
Q3 2013
Q4 2013
0
10%
0%
Q4 2012
Revenues
Adjusted EBITDA margin %
Note: Customer segment EBITDAs presented above exceed Netia’s total reported EBITDA due to certain costs being allocated centrally (please refer to notes to financial statements for more details)
Source: Company
1 Excluding Petrotel
11
B2B strength balances recent pressure on low-end part
of the B2C segment
Revenue breakdown in 20131,2
Adjusted EBITDA breakdown in 20131,2
Carriers, 9.5%
Carriers, 11.8%
B2B
B2B
B2C, 42.9%
Business,
31.0%
B2C, 59.5%
Business, 45.3%
- 22.8% on-net
- 36.7% off-net
Comments
Adjusted OpFCF breakdown in 20131,2
•
B2B segment (business customers and carriers)
contributing 40.5% of revenue, but 57.1% of
Adjusted EBITDA and 58.6% of Adjusted OpFCF
•
B2B segment margins supported by higher onnetwork share of RGUs and higher Capex
intensity than the B2C Segment (Residential and
SoHo customers)
•
Residential on-net EBITDA and OpFCF share
much higher than revenue share due to lack of
regulatory access payments
Carriers, 11.3%
B2C, 41.4%
B2B
Business,
47.3%
investor.netia.pl
Note: For illustrative purposes only
1 Excluding non-allocated Opex of PLN 86.0m and non-allocated Capex of PLN 84.8m in FY 2013
12
2 Excluding Petrotel
Products and offering
Residential
SoHo & SME
• Customers served over own network (copper and Ethernet) and
regulated access (LLU, BSA, WLR)
• Customers served over own network (copper and Ethernet) and
regulated access (LLU, BSA, WLR)
• Focus on bundles, especially 3play services (BB+V+TV)
complemented by mobile broadband and VAS
• Focus on business bundles with two main packages
• One Office (up to 10 employees)
• Fixed broadband offered on the ‚best effort’ basis (highest feasible
transfer speed) and mobile broadband with 2/4 GB download limit
• Netia Spot – an innovative Wi-Fi home router solution with
free access to Fon Spots, a global WiFi network
• Business Office (10 employees and more)
• Unified communications solutions
• Focus on 2play services (BB+V)
• Similar offered services to those in Residential plus more
advanced business-friendly solutions including PABX, IP phones,
call centre or teleconferencing
• Netia Player – a multimedia STB (incl. an IPTV/DTT decoder
functions) with content, widgets and multimedia sharing
• Personal TV including HBO GO content (over-the-top solution)
• Cloud and P2P solutions to play an important role in future
• E-store and variety of value-added solutions (incl. virtual disc,
antivirus, fax-server, email and other functionalities)
Corporate
• Customers served primarily over Netia’s own network (capex driven
end-to-end connection to the client’s premises)
Carrier
• Opportunistic wholesale deals leveraging Netia’s own backbone
network and metro fibre rings in major Polish cities
• Offered services dedicated to all main industrial sectors, including
finance & banking, public administration, real estate, FMCG,
transport & logistics, construction, power supply, contact centres
and media
• Voice termination
• Tele-housing
• Duct and dark fibre lease
• Data transmission (IP VPN, MPLS, MetroEthernet)
• IP transit
• Voice (ISDN/POTS, SIP Trunk)
• MPLS
• Co-location services and intelligent network services
•
Dedicated services for Internet Service Providers:
• ICT related solutions (integrated platforms such as NGA, NVA)
• BDI, Metro Ethernet
• NGN (IntegralNet – virtual PABX)
• Leasing of infrastructure
investor.netia.pl
Source: Company
13
Market overview
Fixed line voice1
•
Mobile (voice and broadband)3
Total market of 7.9m lines (-5% y-o-y)
Key market players
•
Penetration of households at ~56%
•
Traditional services rendered based on
POTS / ISDN protocols with quickly
increasing volume of VoIP protocol based
solutions
•
•
ARPUs ranging between operators from
PLN 30 to PLN 50 for large or unlimited call
bundles
Netia’s market share at 19% volume-wise
including ~639k services on own networks
and ~850k services over regulated
wholesale WLR (729k) and LLU (121k) access
Netia
19%
•
56.0m SIM cards in total (voice + data, post- and
pre-paid) (+7% y-o-y)
•
Penetration of population at ~147% (SIM cards), 3G
coverage at ~67% and smartphone penetration at
~27%
TP Group
60%
Multimedia
4%
UPC
6%
•
~4.2m dedicated post-paid mobile broadband SIM
cards (dongles)
•
Fixed-to-mobile broadband substitution level
rather low mainly related to lack of fixed line
infrastructure (mainly in rural areas)
Others
11%
•
•
•
•
Total market of ~6.7m subscribers (+2% y-o-y)
•
Penetration of households at ~48%
•
ARPUs ranging between operators from
PLN 40 to PLN 60 depending on competitive
environment and technology
•
Expected to continue to be the main
internet access type in Poland through 20142
•
Netia’s market share at12.7% volume-wise
including ~ 387k services on own networks
(copper, Ethernet, PON) and ~447k services over
regulated wholesale BSA (277k) and LLU (170k)
access
Key market players
Plus
19%
Others
7%
Mobile broadband speeds today significantly
lower compared to fixed broadband and with a
download limit (rechargeable with an extra fee)
Orange
24%
Play
27%
LTE roll-out rather minor at this stage in Poland
Netia had ~26k mobile broadband and ~42k
mobile voice services at the end of Q4 2013
Orange
34%
UPC
13%
Multimedia
7%
•
Total market of ~11.3m households
(-3% y-o-y)
•
Penetration of households at ~81%
•
SAT and CATV represent 57% and 41% of all
access types, respectively
•
ARPUs ranging between operators from PLN 30
to PLN 60 for a stand alone offer comprising 3080 channel package including premium offer
Netia
13%
Others
26%
•
Vectra
7%
•
1 Status as of Q4 2013
T-Mobile
23%
Pay TV3
Fixed line broadband1
investor.netia.pl
Key market players
in mobile broadband
2 Source: Analysys Mason, 2008
Digital terrestrial FTA TV (DVB-T) and
analogue switchover to DTT in 2013 country
wide eliminate low end package incentives
for many customers
Key market players
Cyfrowy
Polsat
31%
nc+
20%
TP
6%
Other
CATV
18%
UPC
11%
Netia
Vectra
1%
7%
Multimedia
6%
As at the end of Q4 2013 Netia served ~120k
PayTV customers
3 Status as of Q4 2013 (source: companies data, Netia estimates)
14
NGA and 3play deployment
NGA and IPTV characteristics and current status
•
High speed broadband transfer on VDSL (up to 50Mbs), FTTB (up to
100Mbs) and PON (up to 1Gbs)
•
Capability to deliver 3play and HD IPTV / streaming content to
customers with simultaneous high speed broadband transfer
•
Personal TV concept including VOD and PVR functionalities, widgets
and potentially new features with dedicated Wi-Fi connection in the
household
•
~120k TV customers today
•
IPTV coverage not limited to NGA but also feasible on ADSL2+
•
Smooth streaming technology expands availability of 3play beyond
the IPTV network coverage
NGA upgrade roll-out status update
•
•
•
NGA and IPTV potential coverage for Netia post Aster CATV
acquisition
With ongoing upgrades1
December 31, 2013
('000 homes passed)
Cu
ETTH
PON
Homes passed
(HP)
1,682
657
148
NGA HP
TV ready HP
NGA HP
TV ready HP
897
236
148
1,138
406
148
897
263
167
1,138
433
167
Total
CATV
Total
Pro forma
% of Total on-net HP
LLU
2,487
1,281
1,692
1,327
1,738
446
-
-
400
400
2,933
1,281
1,692
1,727
2,138
4,930
44%
-
58%
2,163
59%
-
73%
2,163
Total
7,863
1,281
3,855
1,727
4,301
Note: TV Ready HPs based on ADSL+, LLU and ETTH (with bandwidth +14 Mb/s) come on top of NGA HPs thus
producing the total TV (3play) potential for New Netia’s addressable market (homes passed)
Note: For illustrative purposes only
Multifunctional TV approach fully in line with Netia’s strategy
1,281k NGA ready HPs able to render 3play at December 31, 2103
•
~897k VDSL upgraded HPs on copper networks
•
~236k FTTB upgraded HPs on ETTH networks
•
~148k over PON fiber networks
Netia Group targets ~ 1,720k NGA HPs inclusive of the acquisition of
cable network from UPC Polska from May 2013
NGA potential of the combined Netia Group comparable to the
leading Polish cable operator
Maximising NGA and IPTV coverage, optimizing capex
•
•
2011 roll-out capex at only PLN 12m as focused on VDSL cards to
existing DSLAMs and ETTH upgrades in Netia
2012 roll-out capex at around 40m as focused on VDSL cards to
existing DSLAMs in Dialog, shortening of copper loops and ETTH
upgrades in Netia (extra 450k NGA ready HPs)
investor.netia.pl
15
Netia leverages own network and regulatory access
opportunites to maximise growth potential in all segments
Own networks
Regulatory access
Strong assets base
•
•
•
•
•
•
•
•
•
Backbone fiber network of approximately 10,980km
• Own backbone network of approximately 3,580km
• Leased backbone network of approximately 7,400km
Metro fiber network of approximately 16k km (incl. 13,500 km of own network),
Metropolitan fiber infrastructure in 48 biggest cities of Poland
Over 140 C/DWDM sites in all major cities
SDH network based mainly on Alcatel (Huawei and Lucent also used)
(2,000+ SDH sites with STM -16 and STM -64)
Two independent networks (Ethernet and IP) carrying all packet traffic
• Carrier Ethernet and Metro Ethernet for L2 services
• 320+ Ethernet nodes with 10Gbps uplink
• 120+ Ethernet nodes with 1Gbps uplink
• 1,450+ access nodes with 1Gbps uplink (incl. 870+ ADSL and 580+ VDSL)
• IP core network for other services
• 39 Core IP nodes with 100Gbps, 40Gbps and 10Gbps uplink
• 4 POI (in 3 major cities) with 2 International IP Transit Providers
6 VoIP switches, 28 PSTN switches
Access network based on variety of solutions (FTTH, FTTB, ETTH, FITL, VDSL, ADSL)
5 Collocation Centers (Tier III class)
International point of interconnect in Cieszyn (route to Prague and Frankfurt)
LLU model offers excellent opportunities
•• NETIA
controls
delivered
over
speeds,
Value
Netia bills
2playservices
revenues
for voice
andDSLAM
4Mb/s(i.e.,
Internet
service
atAdded
~ 61 PLN1
Services
like
IPTV,
VOD,
PVR
)
• Netia pays TP 22 PLN monthly line rental fee
•• At
the margin
end of Q3
2011 Netia served 175k LLU clients (an average of 260 clients
Gross
64%
node)has to invest in its own DSLAM (~200K PLN / node)
• /Netia
• NETIA
controls services delivered over DSLAM
LLU
roll-out
•
Speeds 5.0m TP lines with 700 DSLAM in 2008-2011
• Target to unbundle
• Value Added Services like IPTV, VOD, PVR
Regulated BSA/WLR access strategy
••
••
•
••
••
•
•
1 selling
Single
playVoice
customers
represent
base
forPLN
cross
TP offers
& 2 Mb/s
Internetafor
~76
1 margin LLU services (shared LLU)
Migration
1play
(BSA)
customers
to PLN
higher
Netia billsof
voice
and
Internet
for ~ 72
began
in Q2to2009
Netia pays
TP ~26 PLN for Internet and 20 PLN for WLR
Migration
of ~2play
customers to full LLU access from November 2009
TOTAL cost
46 PLN
100k
clients
migrated
Gross margin 36% in total by the end of Q3 2011
Netia does not invest in DSLAM
Netia can only resell services offered by TP i.e. bandwidths
Planned evolution of Netia clients by technology
Consolidation opportunities in Ethernets
•
•
••
•
••
••
•
Netia controls all elements of access network =
no
„lastcontrols
mile” access
fees to third
parties
Netia
all elements
of access
network =
Potential
for ARPU
increase
VoIP services (up-selling)
no „last mile”
access
fees towhen
third introducing
parties
Synergies
from theARPU
acquired
Average Internet
at ~ Ethernet
43 PLN networks (scale, infrastructure,
organization)
to the improvement
of results
acquisition
Potential for leading
ARPU increase
when introducing
VoIP after
services
Organic
growth
increased
penetration
acquired
homes passed
Synergies
from through
the acquired
Ethernet
networksof(scale,
infrastructure,
(approximately
523k) to the improvement of results after acquisition
organization) leading
Investment
dedicated
to services
upgrade
coverage expansion
Fast client service
– Internet
activation
andand
maintenance
Gross profit margin of ~ 70%
VDSL / ADSL
VDSL
ADSL / ETTH
•
BSA
investor.netia.pl
lease
VDSL / ADSL
LLU
ETTH
ETTH
LLU
ETTH
VDSL
FTTx
own network
Cu
ADSL
Cu
2010
1 Based on a standard comparable 2play contract, for illustrative purposes only
BSA
NGA
NGA
2020
Source: Company
16
Regulatory environment changes since 2006
2006 pre regulatory access
Households(14.2m)
TP
Netia
Q4 2013 with regulatory access
SOHO/SME (1.2m)
Corpo (30k)
Households(14.2m)
SOHO/SME (1.2m)
Corpo (30k)
TP1 4.8m Voice + 2.3m Broadband
Netia 729k WLR, 277k BSA, 170k LLU
Other altnets 572k, WLR 53k BSA, 2k LLU
10.1m Voice + 1.7m Broadband
398k Voice + 60k Broadband
Netia 639k Voice + 402k Broadband
Other altnets 1.0m
Other altnets 0.7m
Netia addressable market today is:
• WiMax national license
• Ethernet networks acquisitions
• 7m active TP lines plus dormant lines
• 639k Netia own lines (2.4m homes passed)
Regulated access monthly fees
Full LLU costs
(Internet + voice)
PLN 22
Fee set by regulator, unchanged since 2007
Shared LLU costs3
(Internet)
PLN 5.81
Fee set by regulator, unchanged since 2007
Voice wholesale cost (WLR)
PLN 20
Fee set by regulator, unchanged since 2007
From October 2012
up to 1 Mb/s
up to10 Mb/s
20 Mb/s
‘Cost plus’ formula subject to
margin squeeze test
PLN 21.222
PLN 23.114
PLN 32.702
Internet wholesale cost (BSA)
Until October 2012
‘Cost plus’ formula subject to
margin squeeze test
investor.netia.pl
0.5 Mb/s
1 Mb/s
2 Mb/s
6 Mb/s
10 Mb/s
20 Mb/s
PLN 19.052
PLN 21.222
PLN 25.662
PLN 26.762
PLN 29.732
PLN 32.702
1 TP lines in retail (excluding wholesale to altnets) Source: Company, TP, UKE, press releases
2 The amount of a wholesale charge is unfrozen. However there is a price cap resulting from a margin squeeze test
3 A client should have an active voice service or pay a line maintenance fee of PLN 30 gross
4 Result of the price squeeze test of TP SA’s retail offer
Source: Company
17
New distribution policy from February 2013
•
While remaining interested in a number of potential acquisition targets, Netia presently sees no likely short-term
transactions and therefore implemented the following new distribution policy:
•
In 2013 the Company returned to its shareholders PLN 144.0m in the form of various tranches of share buy-backs,
including PLN 128.1m distributed through the buy-back of 4.15% of the Company’s share capital at a substantial
premium of PLN 8 per share (a Proforma equivalent of PLN 0.35 per outstanding share)
•
Based on its free cash flow projections, Management estimated that the Company may distribute up to
PLN 146m from 2014 onwards (pro forma PLN 0.42 per outstanding share) with some scope to moderately
increase payments over time whilst allowing debt leverage to increase towards 1.0x Adjusted EBITDA over the
medium term
•
Depending on the evolution of distributable reserves in Netia SA, which stand at PLN 377m at December 31,
2013 and represent the key constraint on future distributions, Management may use dividends or offers to
purchase shares directed to all shareholders or capital redemptions to facilitate payments to shareholders
investor.netia.pl
Note: The above distribution policy was announce d on February 21, 2013
18
2014 Guidance and Distribution Policy
2014 Full Year Guidance
Distribution Policy
Unchanged Policy
Based on its free cash flow projections, Management estimates that
Revenues (PLNm)
1,735
the Company may distribute up to PLN 146m, pro forma PLN 0.42
Adjusted EBITDA (PLNm)
505
per outstanding shares from 2014 onwards with some scope to
Adjusted EBITDA margin
29%
moderately increase payments over time. Leverage may rise to 1.0x
Adjusted EBIT (PLNm)
75
EBITDA in the medium term to facilitate such payments.
Proposal for 2014
Capex (PLNm)
200
Adjusted OpFCF (PLNm)
305
• Management is proposing a PLN 0.42 dividend payout
• Management is considering proposal of a new share buy-back
The above financial guidance excludes the impact
of one-off integration costs and one-off integration
Capex related to Dialog and Crowley acquisitions
programme to maximise future flexibility in the form of payment
•
No RGU guidance for 2014 as Management focuses on product features, restructuring and cost reduction.
Nonetheless on-net RGUs expected to grow
•
Mid term strategic financial guidance (under review since Q3 2013) is being withdrawn pending the 2014 strategic
planning round including new MB Members responsible for B2B and B2C
investor.netia.pl
19
Netia shareholders and stock performance
Share price performance since launch of broadband driven
growth strategy (April 2007)
Shareholder structure
180%
ING OFE
17.0%
160%
140%
120%
Third Avenue
Management
14.3%
Free float
44.6%
100%
80%
60%
40%
SISU Capital
12.7%
Aviva OFE
5.8%
Shareholder
Number of shares (m)
ING OFE
Third Avenue Management
SISU Capital
Aviva OFE
PZU OFE
Free float
Total
% Capital
% Votes
59.1
16.98%
16.98%
Enterprise value (as of March 5, 2014)
49.8
44.3
20.2
19.3
155.2
347.9
14.32%
12.74%
5.82%
5.54%
44.60%
100%
14.32%
12.74%
5.82%
5.54%
44.60%
100%
Market capitalisation (as of March 5, 2014)
Bank debt and accrued interest (as of December 31, 2014)
Cash and short term deposits (as of December 31, 2014)
Shares outstanding (m)
Share price (3m average price as of March 5, 2014)
Daily volume average (k shares) (as of March 5, 2014 YTD)
PLN/EUR spot rate as of March 5, 2014
investor.netia.pl
Source: Company
April/14
October/13
April/13
October/12
April/12
April/11
mWIG
October/11
Netia
October/10
April/10
October/09
April/09
April/08
October/08
As of February 28, 2014
October/07
0%
April/07
PZU OFE
5.5%
20%
PLN m
EUR m
2,026.7
484.2
1,736.0
414.7
384.1
91.8
93.4
22.3
347.9
347.9
4.99
1.19
534
534
4.1860
nm
20
Management team
Mirosław Godlewski, Chief Executive Officer, 47, 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. Member of the supervisory boards of SEG (the
Polish Association of Stock Exchange Issuers) and ABC Data SA. On February 19, 2014 Mirosław Godlewski decided to stand-down, remaining in his
position while the Supervisory Board search for a suitable replacement and will stand down on August 31, 2014 or earlier if his replacement is able
to take over his responsibilities at an earlier date.
Jon Eastick, Chief Financial Officer, 47, 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). Mr. Eastick graduated from the London School of Economics and is a UK Qualified Chartered Accountant.
Tom Ruhan, Chief Legal Officer, 50, 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 Chairman of
the Board of Directors of the European Competitive Telecommunications Association (ECTA)(www.ectaportal.com). He is also a Deputy Chairman of
SOT KIGEiT (Telecommunications Operators Section of the Polish Chamber of Commerce for Electronics and Telecommunications) for a third threeyear term of office and is a member of the Arbitration Committee (Komisja Rozjemcza) of KIGEiT. In addition, Mr. Ruhan is a member of the Auditing
Committee (Komisja Rewizyjna) of the Polish Chamber for Electronic Communications (PIKE).
Miroslaw Suszek, Chief Technical Officer, 49, was appointed to Netia’s management board in May 2012. Prior to commencement of his cooperation
with Netia, he served from 2004 as Chief Operating Officer and management board member of UPC Polska, the largest cable TV operator in Poland.
As COO he was responsible for such areas as customer care, subscriber service, service installation, logistics, vindication and settlements as well as
maintenance and development of the HFC telecommunication network. From 2001 to 2004 Mr. Suszek worked as New Services Development
Director in Wizja TV, a satellite TV operator, and then as Project Director and Development Director in UPC Polska.
Mr. Suszek graduated in Electrical Engineering from the Warsaw University of Technology (Politechnika Warszawska). He also holds the diploma of
Executive MBA from Warsaw University of Technology Business School (Szkoła Biznesu Politechniki Warszawskiej) in partnership with London
Business School, HEC School of Management and Norwegian School of Economics and Business Administration.
investor.netia.pl
Tomasz Szopa, Residential Market General Manager, 44, joined Netia’s management board in February 2014. From 2010 to 2012 he served as Market
Director, B2B-SOHO and Individual Client, in Polska Telefonia Komórkowa Centertel Sp. z o.o. for the entire Telekomunikacja Polska Group. Previously,
from 2001 to 2005, he worked in Polska Telefonia Komórkowa Centertel Sp. z o.o. as Director of the Office for Own and Franchise Salons and
Director of the Office for Sales Strategy Development. From 2005 to 2006 he was Director of Managing B2B-SOHO Channels and Individual
Customers in Telekomunikacja Polska SA. From 2007 to 2010 he was self-employed. Prior to joining Netia he was Management Board member in
Hoven Sp. z o.o., a provider of integrated solutions in solar technology and renewable energy sources. Mr. Szopa graduated in Politics, SocialAdministrative Politics from the Silesian University. He also completed post-graduate studies in Finance for Management from the Silesian
University.
21
Key managers highly incentivised
Stock option plan for 2011-20201
•
•
•
•
•
The highest number of options which can be granted:
27,253,674
•
The highest grant per annum:
3,893,382
out of which the options which can be granted to the Management Board :
1,946,691
The highest number of shares which may be issued under the new stock option plan:
13,626,837
Options may be exercised within the defined open periods and not earlier that three years from the grant date and not later than on
May 26, 2020
As well as three years’ service, option vesting is dependent on delivering business goals set by the Supervisory Board
7.3m options were outstanding as of December 2013, with strike prices ranging between PLN 4.54 and PLN 6.00 with the earliest vesting date
in 2014
The Management Board hold significant shareholdings2
•
•
•
•
3
Mirosław Godlewski , Chief Executive Officer
Jon Eastick, Chief Financial Officer
3
Tom Ruhan , Chief Legal Officer
Mirosław Suszek, Chief Operating Officer
investor.netia.pl
577,385
429,114
529,790
-
1 New stock option plan was adopted by Netia’s supervisory board on February 25, 2011
2 Status as reported in FY2013 financial statements
3 Including shares held by a closely related company
Source: Company
22