Capital markets day 20 April 2016

NextGenTel
Holding ASA
Capital Markets Day
Thon Hotel Vika Atrium, Oslo
20 April 2016
Eirik Lunde, CEO
Sven Ole Skrivervik, CTO
Roy Børsheim, director consumer segment
Thomas Gunleiksrud, director corporate segment
Tom Nøttveit, CFO
Agenda
NextGenTel at a glance
Strategic direction
Modernizing the NextGenTel
network
TV in a new age
The housing cooperatives
segment
Expand fiber footprint
The corporate segment
Financials
Summary & Q&A
CMD 20 April 2016
2
NextGenTel
at a glance
CMD 20 April 2016
3
This is NextGenTel Group
• Telio Holding ASA acquisition of
NextGenTel AS in 2013. Group name
changed to NextGenTel in May 2015
• Acquisition of Kvantel in October 2015
• Key product markets – broadband,
VoIP, mobile and TV
• Cost-efficient delivery model fitted to
a mature and competitive market
• VoIP operations in Denmark,
Switzerland and the Netherlands
• Headquartered in Oslo, Norway,
and listed on the Oslo Stock
Exchange as NGT
CMD 20 April 2016
4
This is the NextGenTel Group
Revenues
Customers
427,000
1,400
Customers break-down
Revenues break-down
NOK million
RGUs
Norway
consumers
120,000
46,000
261,000
70
470
Norway
businesses
900
International
xDSL
CMD 20 April 2016
Datacom
TV
5
Fiber
Voice
Strategic
direction
CMD 20 April 2016
6
Strategic focus – ensuring value creation
Priority
Profitable
growth
Value drivers
High-speed
broadband
•
•
•
•
Revitalization of the copper network
Reduce churn and preserve existing base
Higher ARPU and margin
FTTX
MDUs
•
•
•
Large market potential
Revenue growth
Long term customer agreements
Voice
Unified
communication
CMD 20 April 2016
High-speed broadband increases
customer intake and revenues
•
TV
7
•
Up-selling of fixed and mobile voice
solutions to existing and new
customers
•
•
•
New services launched
Attractive to corporate customers
Revenue growth
Modernizing the
NextGenTel
network
CMD 20 April 2016
8
Why copper? Competitive with fiber at a
lower cost
• New technology extends lifetime
of copper
Cheaper
alternative
Extended
lifetime
• Customers indifferent to type of
cable – what matters is bitrate,
price/performance and quality
Competitive
speed and
performance
• Copper competitive with fiber
speed and performance
– more value added
• Reducing churn
• Increasing ARPU
CMD 20 April 2016
9
ADSL, VDSL and Vectoring
Typical speeds vs line length
120
VDSL with vectoring
Close to theoretical achievable speed without noice
Downstream speed Mb/s
100
Average modernized NextGenTel customer
80
60
VDSL with noice from other lines
40
Average NextGenTel customer today
20
ADSL2+
0
0,5
1,0
1,5
Linelength km
DSL speed as a function of linelength
CMD 20 April 2016
10
2,0
2,5
G.fast
Typical speeds vs line length
1200
Downstream speed Mb/s
1000
G.fast 106MHz
800
600
400
VDSL
200
0
0,1
0,2
0,3
Linelength km
CMD 20 April 2016
11
0,4
0,5
Access speed- & capacity on
offer vs customer demands
Mbit/s offered majority of population
100% ~2,25 million households
2020
~1600**
2015
Users’ speed demands in 2020 will be covered by “all” accesses
• Customers needs will be covered by 100+ Mbit/s
• Spectrum constraints may make mobile connections
unstable, unless the government frees up more capacity
(e.g. digital ground network, concession expires 2021) and
big advances in compression technologies
• Normal users will need 200-1000 GB/month
100-1000*
~500***
100-400
20-80
Copper
• DSL
• Vectoring, G.fast
Big users in 2015 (families with children/teenagers)
need at least 30/50
Average measured downloading speed year ’14:
• Fixed access ca. 20 Mbit/s
• Mobile access ca. 13 Mbit/s
20-80
Fibre** & HFC
Mobile***
* 100 Mbit/s normal for vectoring, and G.fast will give up to 1000 Mbit/s for distances very close to the node
** GET today offers 400, plans to offer 1,6 Gbit/s in 2016
*** Telenor has promised to offer 4G+ within the end of 2016 which will offer 300 Mbit/s.
CMD 20 April 2016
12
Modernizing the copper network
How to fill the speed gap?
• Prerequisite for utilizing new copper
technologies (Vectoring, G.Fast etc)
• One technology per node
• Use of micro-nodes
• Existing larger nodes is extended by smaller nodes
closer to the customer
• One operator per geographical area
• Todays regulatory market 4
• Unbundled copper moves to a VULA product
• VULA = Virtual unbundled local access
• Requires agreement between the operators
since market 4 is already regulated
CMD 20 April 2016
13
Illustration of deployment of micro nodes
New micro nodes
CMD 20 April 2016
Old node
14
Effects for the customer
• Increased speed in two dimensions
• Higher bitrates due to average shorter line-length
• Higher bitrates due to utilization of new technology (vectoring,
G.Fast)
• Makes copper ready for linear TV
• Today very few customers have TV over copper
• TV will be a significant part of the NextGenTel offering
CMD 20 April 2016
15
Modernizing the copper network
Effect on NextGenTel network
Approximately 750
PoP’s per March
2016
Capital markets day 2015
Approximately 300 PoP’s
when copper network
is fully modernized
16
PoP = Point of Presence
Effects for NextGenTel
• For NextGenTel
• Higher ARPU per customer
• Competitor example, significantly higher ARPU compared
to NextGenTel for higher speeds
Produkt (oppgitt i Mbps)
Per
måned
Første år
Altibox Fiberbredbånd 40/40
478,-
5736,-
Altibox Fiberbredbånd 80/80
578,-
6936,-
Altibox Fiberbredbånd 150/150
649,-
7788,-
Altibox Fiberbredbånd 300/300
749,-
8988,-
• Lower churn on the copper customer base
• Churn on fiber is less than 1% per month
• 0.1% improvement in monthly churn gives approximately 3,000 higher
customer-base at the end of a 3-year period
• Higher customer interest in high bitrate copper broadband
• Less CAPEX and OPEX related to copper network as customers are
moved to wholesale, and own network is downscaled
CMD 20 April 2016
17
Revitalized copper – when?
• Negotiations between xDSL operators are being done via
• Bredbåndsforum
• Organized by NKOM, the national regulator
• Bilateral discussions
• LOI signed between Telenor and NextGenTel (30.10.2015) regarding
high-speed pilots in Stord and Garten
• Timeframe
• Agreement between operators in Norway most likely signed in the period
June-September 2016
• First effect on network and customers from Q4 2016
CMD 20 April 2016
18
TV in a new age
CMD 20 April 2016
19
Moving from set-top box to APP-based TV
• TV trend 1
• Evolving away from specialized HW to generic HW
• APP based
• On many types of devices
CMD 20 April 2016
20
Linear TV is moving to OTT
• TV trend 2
• Access independent and screen independent
• From a «closed one way eco-system» to a two-way contextual
interactive user experience
• Social media integration
• Real-time communication with friends watching the same program (first screen or
second screen)
• Service integration (example IMDB)
CMD 20 April 2016
21
OTT in Norway
• Facts for Norway
• 50% of TVs in Norway are connected to internet
• 38% subscribe to minimum one OTT service
Source: NRK
CMD 20 April 2016
22
TV facts - Norway
• 25% watch NRK news live – 25% watch NRK news time shifted – 25% watch recorded NRK news – 25% never
watch NRK news (Source: NRK)
• Close to 30% use the TV-set for other viewing than live TV
(Source: NRK)
• TV is the preferred screen for Netflix (Source: NRK)
• The four big winners in the TV-market
•
•
•
•
Those who control the customer´s broadband subscription
National broadcasters (NRK) delivering content in local language and paid by state/public
National commercial broadcasters (TV 2) with a market position equal to national broadcasters
Owners of premium live entertainment – football, boxing, golf, F1, icehockey
(Source: Strand Consult)
CMD 20 April 2016
23
TV – evolving to a strategic product
• TV is a high-demand product
• TV is a necessity in the MDU market
• NextGenTel broadband portfolio is shifting from medium to high bitrates
• NextGenTel is evaluating future TV partners which can support the needs for a TV
service
TV will be an increasingly important service for NextGenTel
in order to fuel growth both in terms of customer numbers
and revenue
CMD 20 April 2016
24
The housing
cooperatives
segment
CMD 20 April 2016
25
The MDU market
• Total households: 850,000 1)
• Total broadband subscriptions: 620,000 1)
• MDU market approx. NOK 5 billion per year 2)
• Two major players: Get and Canal Digital
• Close to duopoly
• Get and Canal Digital holds about 70% of the total market
• Current market leaders deliver exceptional EBITDA by forcing the customer to
bundle TV and broadband
1)
2)
Based on NKOM report (H1-2015)
Based on ARPU levels from GET, and subs from NKOM
CMD 20 April 2016
26
Forced bundling
• The Norwegian Consumer Ombudsman (CO – “Forbrukerombudet”) has for
several years been working against “forced bundling” of TV and Internet
• The CO has stated that the forced bundling is illegal
• The major players in the MDU market still
bundle TV and Internet in many cases
• Historically TV providers through COAX
Today we all need Internet access, but for
many TV is not necessary anymore. It is
unreasonable that consumers cannot opt
out of the extra cost for TV.
- Gry Nergård, Norwegian Consumer
Ombudsman (CO)
Photo credit: Forbrukerombudet
CMD 20 April 2016
27
The consumer needs
• A housing community consists of many different consumers with different needs
• The trend is that consumers watch less linear TV and more streaming services 1)
• More people spend time on the Internet and social media
1)
• Why should the consumers need to pay for their neighbor's needs?
1)
Norwegian media barometer, Statistics Norway (Statistisk Sentralbyrå)
CMD 20 April 2016
28
NextGenTel has changed the game
• We give our customers the freedom of
choice by unbundling TV from Internet
• Tailor-made, consumers can choose what
they want, independent from their
neighbors
• We prepare for future needs by
installing fiber and modernizing the
infrastructure
• Offer best price/performance on
broadband, TV subs, OTT, mobile and
VoIP subscriptions
CMD 20 April 2016
29
The value proposition
• A housing community with 100 apartments
• Current vendor has a contract period of 60 months
• Current vendor (TV and Internet access bundle):
Products
Cost per unit/month
Total cost per month
Total cost over 5 year contract
TV
NOK 280,-
NOK 28.000,-
NOK 1.680.000,-
Broadband
NOK 248,-
NOK 24.800,-
NOK 1.488.000,-
Total pr unit
NOK 524,-
NOK 52.400,-
NOK 3.168.000,-
• Approx. 15% does not watch linear TV
• NextGenTel moves the cost of individual needs from the housing communities
shared costs to the individual consumers
• NextGenTel savings for the housing community:
Cost
Savings per unit/month
Savings per month
Total savings over 5 year contract
Moved cost from shared cost
NOK 280,-
NOK 28.000,-
NOK 1.680.000,-
«Wasted» TV cost (15%)
NOK 280,-
NOK 4.200,-
NOK 252.000,-
CMD 20 April 2016
30
Expand fiber
footprint
CMD 20 April 2016
31
Three equal size access technologies
• DSL customer base is
expected to stabilize
from revitalization of the
copper network
• FTTH will rise, also in the
MDU markets
• We expect coax to be
replaced by fiber over
time
CMD 20 April 2016
32
Fiber network owners
Customers in ‘000
~100
~135
~550
~90
~100
6
~315
2
Nationals
• Lyse* (205)
• Telenor (~110)
Regionals
• Get (~40)
• NTE (35)
• BKK (20)
• Eidsiva** (15)
• Tafjord (14)
• Broadnet (~10)
Small regionals/
locals
* Includes Lyse Fiber (80), Viken Fiber (110) and Signal (16)
** Fibre customers in Eidsiva Bredbånd. Fibre network owned by local utilities
CMD 20 April 2016
33
Total
NextGenTel growth strategy
~100
~550
Customers in ‘000
~135
~90
~315
~100
6
2
Nationals
• Lyse* (205)
• Telenor (~110)
Telenor
available
for NGT
Regionals
• Get (~40)
• NTE (35)
• BKK (20)
• Eidsiva** (15)
• Tafjord (14)
• Broadnet (~10)
Small regionals/
locals
Partly
available
through
regulations
Available
for NGT
* Includes Lyse Fiber (80), Viken Fiber (110) and Signal (16)
** Fibre customers in Eidsiva Bredbånd. Fibre network owned by local utilities
CMD 20 April 2016
34
Total
The corporate
segment
CMD 20 April 2016
35
NextGenTel corporate segment
Product/services
NextGenTel
revenues
(mNOK)
Total market
size (mNOK) 1)
Datacom
347
4,005
Mobile & fixed voice
143
7,952
500
11,957
NextGenTel: Datacom & fixed broadband, growth from newly launched mobile IN
services – unified communications
Kvantel: Network services, primarily to system integrators and telecom operators
(wholesale)
1) Source:
CMD 20 April 2016
36
NKOM 2014
Market overview & positioning
Positioning of key market players 2011- 2016
•
Historically, NextGenTel has been a
niche supplier of plain mobile &
VoIP services to the small
office/home office segment. Price
has been the main selling point.
•
Comprehensive product release
within unified communication
services. NextGenTel meets the
future demand for SME’s and the
public sector.
Large
companies
Niche
Full service
SoHo
CMD 20 April 2016
37
Business – new IN-Voice services
• In Q1 2016 NextGenTel launched a hybrid MVNO setup and a new IN-Voice
platform enabling NextGenTel to grow its business in the corporate SME and
public tender market place.
• Full Cloud based PBX switchboard; Mobile & Sip
Trunk with Skype for business Integration
• No physical installation needed
• All in one platform
• Advanced conferencing solution
• Uses preferred One-number – full presence, use
any device
• PC, tablet, mobile phone, desk phone
• User defined profile management
• Datanet – secure VPN voice services
• Full self-service solution for customers and
partners
CMD 20 April 2016
38
Customer value proposition (UC)
MARKET OUTLOOK
Realized Customer Benefits
67%
Productivity
54%
Opex Savings
68%
Efficiency gains
62%
•
~25 % annual
growth
Collaboration
Source: Gartner/IDC
CMD 20 April 2016
Segment is growing at an impressive
pace
39
•
Higher ARPU than traditional voice
services, additional recurring revenue
•
Lower churn – less competition and
more integrated services
•
Recurring revenue from
• Mobile services
• IN Services
• SIP-Trunk
• Data net
Kvantel – business model
•
•
• New and modern value chain
for production and delivery
enables seamless delivery of
complex solutions
•
• Delivery model designed to
best fulfil the needs of the
system integrators
• Seamless fiber wholeselling
through best in class OSS/BSS
CMD 20 April 2016
40
Best fiber coverage in
Norway
Secured through tight
collaboration with more
than 60 regional fiber
owners
Combined with fully
owned xDSL national
network
Kvantel acquisition: marks the start
for NextGenTel’s next phase of growth
• ~500 mNOK B2B player
• SME’s procure data communications
services from outsourced IT company
– or with Mobile-/IN node provider
• With the acquisition of Kvantel –
NextGenTel has secured a solid position for
further growth in B2B
• Strengthened position to leverage
wholesale business towards professional
partners, system integrators and IT
companies. «One-stop shopping».
CMD 20 April 2016
41
Financials
•
•
•
CMD 20 April 2016
Planned opex and capex reductions
Financial structure
Financing
42
Opex – planned reductions
•
Efficiency gains from implementation of new business support system (Q3/Q4 2016)
•
Plan to reduce total opex to 29% of revenues by end 2017 (estimated effects of NOK 5 and
10 million in 2016 and 2017 respectively)
(NOKm)
80
70
40%
Kvantel
acquisition
35%
NGT
acquisition
60
30%
50
25%
40
20%
30
15%
20
10%
10
5%
0
Q1'13
Q2'13
Q3'13
Personnel exp
CMD 20 April 2016
Q4'13
Q1'14
Other opex
Q2'14
Q3'14
Q4'14
Total opex/revenues
43
Q1'15
Q2'15
Q3'15
Q4'15
Personnel exp/revenues
0%
CAPEX – planned reductions
•
Quarterly variations in capex depending on maintenance needs, customer inflow, changes in
customer equipment, development projects etc
•
Capex/sales was 9.3% in 2015
•
Plan to reduce capex by NOK 15 million in 2016 and further reduce capex/sales below 7% during
2017
(NOKm)
35
30
12,0 %
32
31
28
25
10,0 %
28
8,0 %
20
6,0 %
15
4,0 %
10
2,0 %
5
0
0,0 %
Q1'15
Q2'15
Q3'15
CAPEX
CMD 20 April 2016
CAPEX/sales
44
Q4'15
Financial structure
•
•
•
The acquisition of NextGenTel AS increased total balance significantly
A share issue in connection with the acquisition gave the Group an equity ratio
of 15% at the end of 2013
Continuous dividends have kept equity low 1)
(NOKm)
Development equity, total balance and equity ratio
1 200
60%
NGT
acquisition
1 000
Kvantel
acquisition
50%
800
40%
600
30%
400
20%
200
10%
0
0%
2008
1)
2009
2010
2011
2012
2013
Cumulative dividends of NOK 21.75 per share. Cumulative EPS of NOK 18.75 per share.
CMD 20 April 2016
45
2014
2015
Equity
Total balance
Equity ratio
Financial structure
•
•
•
•
Interest-bearing debt equal to 44% of total balance
Net interest-bearing debt/EBITDA = 1.4
Equity ratio of 15%
Credit facility of 50 mNOK (unused)
(NOKm)
Balance sheet composition 31 Dec 2015
900
800
Equity
700
600
500
Non-current
liabilities
Non-current
assets
400
300
200
100
0
Current liabilities
Current assets
Cash
Assets
CMD 20 April 2016
Equity & liabilities
46
Total interestbearing liabilities:
376 mNOK
Financing – terms and covenants
Initial loan
Loan balance 31
Dec 2015
Term
Installments
NOK 250 million
NOK 175 million
5 year
Semi-annual
NOK 25 million
NOK 140 million
NOK 140 million
3.5 years (parallel
to existing loan)
Semi-annual
NOK 10 million
“Bullet” (remaining loan
balance after 3.5 years)
of NOK 80 million
Interest rate:
• 3m NIBOR + 2.75% until 30 June 2016, reduced to 3m NIBOR+2.50% thereafter (covenant: 17.5% equity ratio)
• Interest rate swap (hedge):
Date
Oct 2016
Jan 2017
Oct 2017
Jan 2018
Oct 2020
Amount (mNOK)
117.5
72.5
17.5
0.0 (maturity)
Swap rate
2.30%
3.20%
Key financial covenants
Equity ratio
15.0% until 31 March 2016, 17.5% thereafter
Leverage (Net debt/EBITDA)
31 Mar 2016: < 2.00
30 Jun 2016: < 1.75
31 Dec 2016 and thereafter: < 1.50
Capex
CMD 20 April 2016
NOK 150 million (annually)
47
Strategic focus – ensuring value creation
Priority
Profitable
growth
Value drivers
High-speed
broadband
•
•
•
•
Revitalization of the copper network
Reduce churn and preserve existing base
Higher ARPU and margin
FTTX
MDUs
•
•
•
Large market potential
Revenue growth
Long term customer agreements
Voice
Unified
communication
CMD 20 April 2016
High-speed broadband increases
customer intake and revenues
•
TV
48
•
Up-selling of fixed and mobile voice
solutions to existing and new
customers
•
•
•
New services launched
Attractive to corporate customers
Revenue growth
Q&A
CMD 20 April 2016
49
Disclaimer
•
By reading this document (the “Presentation”), or attending any oral presentation held in relation thereto, the recipient agrees to be bound by
the following terms, conditions and limitations.
•
The Presentation has been prepared by NextGenTel Holding ASA (the “Company”) exclusively for information purposes. The Presentation does
not constitute, and should not be construed as, an offer to sell or a solicitation of an offer to buy any securities of the Company in any jurisdiction.
•
The release, publication or distribution of this Presentation or the information contained herein may be restricted by law in certain jurisdictions,
and persons into whose possession this Presentation comes are required to inform themselves about and comply with any such restrictions.
•
The information contained in the Presentation has not been independently verified. While this information has been prepared in good faith, no
representation or warranty (express or implied) is made as to the accuracy or completeness of any information contained herein. None of the
Company or its subsidiary undertakings, affiliates or advisors, or any such person’s directors, officers or employees shall have any liability for any
loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection with the Presentation. The recipient
acknowledges that it will be solely responsible for its own assessment of the market and the market position of the Company and that it will
conduct its own analysis and be solely responsible for forming its own view of the potential future performance of the Company’s business. The
content of this Presentation are not to be construed as legal, business, investment or tax advice. Each recipient should consult with its own
professional advisors for any such matters and advice.
•
This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or
the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not
historical facts, sometimes identified by the words “believes”, “expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”,
“anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions
and views of the Company or cited from third party sources, are solely opinions and forecasts which are subject to risks, uncertainties and other
factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results,
performance or achievements that are expressed or implied by statements and information in the Presentation, including, among others, risks or
uncertainties associated with the Company’s business, segments, development, growth management, financing, market acceptance and
relations with customers, and, more generally, general economic and business conditions, changes in domestic and foreign laws and regulations,
taxes, changes in competition and pricing environments, and fluctuations in currency exchange rates and interest rates. None of the Company
or any of its subsidiary undertakings, affiliates or, advisors, or any such person’s directors, officers or employees provides any assurance that the
assumptions underlying such forward-looking statements are free from errors nor do any of them accept any responsibility for the future accuracy
of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation,
except as required by law, to update any forward-looking statements or to conform these forward-looking statements to our actual results.
•
The securities of the Company have not been, and will not be, registered under the United States Securities Act of 1933 (the "U.S. Securities Act"),
and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the U.S. Securities Act.
•
This Presentation is dated 20 April 2016. Neither the delivery of this Presentation nor any further discussions of the Company with any of the
recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date.
•
This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of
Norwegian courts.
CMD 20 April 2016
50