Partner Communications Company Ltd. Company presentation Q1 2010

Transcription

1 Partner Communications Company Ltd. Company presentation Q1 2010

2 g This presentation includes forwardlooking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Safe Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "project", "goal", "target" and similar expressions often identify forwardlooking statements but are not the only way we identify these statements. All statements other than statements of historical fact included in this presentation regarding our future performance, plans to increase revenues or margins or preserve or expand market share in existing or new markets, reduce expenses and any statements regarding other future events or our future prospects, Harbor are forwardlooking statements. g We have based these forwardlooking statements on our current knowledge and our present beliefs and expectations regarding possible future events. These forwardlooking statements are subject to risks, uncertainties and assumptions about Partner, the macro economic environment, consumer habits and preferences in cellular telephone usage, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments. Statement For a description of some of the risks we face, see "Item 3D. Key Information Risk Factors", "Item 4. Information on the Company", "Item 5. Operating and Financial Review and Prospects, "Item 8A. Consolidated Financial Statements and Other Financial Information Legal and Administrative Proceedings" and Item 11. Quantitative and Qualitative Disclosures about Market Risks in the form 20F filed with the SEC on March 22, In light of these risks, uncertainties, assumptions, and the global recession, the impact of which is still unknown, the forwardlooking events discussed in this presentation might not occur, and actual results may differ materially from the results anticipated. We undertake no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise.

3 Agenda 1. Partner in a Nutshell 2. The Israeli Telecommunications Market 3. Partner s Financial and Operational Results 4. Partner s Strategic Direction 3

4 Partner Today A Company with Key Assets A leading cellular company operating in Israel under the orange brand The strongest telecom brand in Israel A 32% estimated market share The highest industry ARPU, leader in content & data revenues Outstanding customer service Significant customer interaction Operational excellence Attractive dividend yield A company committed to shareholders return Addressing new areas of activity: ISP, fixed telephony and Media 4

5 New Ownership Structure g In October 2009, Scailex Corporation completed the acquisition of the controlling equity interest in Partner from Hutchison Telecom (through its subsidiary Advent) g Scailex is an Israeli company whose shares are traded on the Tel Aviv Stock Exchange (SCIX) and are quoted on "Pink Quote" (SCIXF.PK). Scailex currently operates in two major domains of activity: n The sole import, distribution and maintenance of Samsung mobile handset products and accessories primarily to the three major cellular operators in Israel n Management its own financial assets Ilan BenDov 70.25% Ilan BenDov 0.95% Partner's Ownership Structure Scailex, 44.76% Suny Telecom 8.55% Public, 45.61% Suny, 1.40% Leumi Partners, 4.96% Israeli Holders, 3.27% SCAILEX OWNERSHIP Suny Electronics 78.03% SCAILEX CORPORATION LTD. Institutions 0.73% Public 21.02% Public 20.47% 5

6 Q1/10 Highlights Financial Results g Revenues of NIS 1.6 billion ($ 427 million) g Revenues from content and data were NIS 261 million ($ 70 million), or 19% of service revenues g EBITDA of NIS 619 million ($ 167 million), representing 39% of total revenues and 46% of service revenues g Record net income of NIS 337 million ($ 91 million) g Record quarterly dividend of NIS 330 million ($ 89 million) g 169% growth (vs. Q1 09) in the fixed line business revenues to NIS 43 million ($ 12 million) Operational Performance g Addition of 26K new subscribers g Addition of 76K 3G subscribers g ARPU of NIS 145 ($ 39) 6

7 Partner Creates Value for its Shareholders g Since 2005 the Company has returned approximately NIS 6.4 billion ($1.7 billion) to its shareholders n Buyback of 18% of Partner s shares in 2005 (approximately NIS 1.1 billion) n Buyback in 2008 in an amount of NIS 351 million n Approximately NIS 3.6 billion dividend distributed since 2005 n NIS 1.4 billion one time dividend in 2010 g Dividend policy of at least 80% payout ratio in ,000 Return to Shareholders (NIS m) NIS millions 1,500 1, ,400 1,091 1, Dividend announced Buy back One Time

8 Orange shops and orange stores g Partner completed most of the implementation of a new nationwide distribution channel g Replaces the former (3 rd party) distribution channel g More than 70 contact centers, highly efficient, owned and managed by the company n 33 Service Centers n 9 Orange Shops n 36 Orange Stores g Increased productivity g Concept stores g Sale of cellular, ISP, VOB services 8

9 Agenda 1. Partner in a Nutshell 2. The Israeli Telecommunications Market 3. Partner s Financial and Operational Results 4. Partner s Strategic Direction 9

10 The Israeli Telecom Market Leadership of the Cellular Industry g g g By end 2009, the Israeli telecom market represents revenues of approximately NIS 32 billion, of which 59% are attributed to cellular Partner generated more than NIS 6 billion revenues in 2009, more than any other telecom area. Partner ~ 20% of total telecom market MCTV, 11.5% ISP, 5.2% Internet access, 3.9% ILD, 5.2% Transmission, 3.6% Cellular, 58.6% Revenues 2009 Subscribers EOP 09' CAGR 09' 12' Cellular 18,938 9, % Fixed telephony 3,892 3, % ISP 1,673 NA 2.5% MCTV 3,728 1, % ILD 1,677 NA 0.5% Internet access 1,273 1, % Fixed telephony, 12.0% 10 * Based on 2009 companies reports and Partner's estimates. Transmission 1,156 NA 6.0% Total 32,337 New short term addressable market for Partner

11 Regulatory Environment g Pending hearings with the Ministry of Communications n Possible 84% reduction in interconnect tariffs in 2010, followed by additional reductions in Reductions are expected to have a material adverse effect on the Company s earnings* n Limitation on exit fees that the cellular operators may impose on their private customers n Site sharing between a new operator and the existing cellular operators for an interim period as well as the provision of national roaming services g MVNO licenses are about to be issued g A new committee (Haiak committee) has been set up to check Bezeq s fixed line tariffs and operations n Committees recommendations might introduce a new regulatory regime that will open the fixed line market for competition a potential upside 11 * For additional details on the possible reductions and their impact on the Company s earnings, please see the Company s PR dated May 4, 2010 and May 5, 2010.

12 Regulatory Opportunities ILD Regulatory status/ Partner activity g Following the MOC recent ruling on the ILD IC charging method + release of MVNO regulations Expected TTM Market Size MidShort term 1.6B market ISP g Partner s new ISP business line Short term 1.6B market Fixed voice g Partner s new VOB business line Short term 4B market Transmission g WLR* policy under MOC review g Med1 fiber optics Network MidShort Term 1.2B market Access g WLR* policy under MOC review MidShort Term 1.2B market MCTV g Following Bezeq NGN, the average HH bandwidth is expected to increase to +10MB, allowing OTT IPTV Long Term 3.7B market Additional Topics: Progressive decrease of the royalties to the government (down to 1% in 2010) Corporate tax rate from 31% in 2006 to 25% in 2010 with further potential decrease to 16% in * WLR Wholesale Line Rental 12

13 The Cellular Market in Israel Partner Cellcom Pelephone MIRS Start of Operations No. of Subscribers * 3,068k 3,313k 2,789k ~480k Major Shareholder Scailex Corporation IDB Group Bezeq (Alovitz) Altice (Patrick Drahi) Technology GSM, UMTS, HSDPA, HSUPA GSM, TDMA, EDGE, HSDPA, HSUPA NAMPS, CDMA, HSUPA iden Q1 10 Estimated Market Share (subscribers) * Pelephone 28.8% Mirs 4.9% Partner 31.8% 2009 Estimated Market Share (revenues) ** Pelephone 28.4% Mirs 5.3% Partner 32.1% 3,500 3,000 2,500 2,000 1,500 Subscriber Growth * 3,074 3,187 3,259 3,313 3,042 3,068 2,884 2,898 2,603 2,450 2,668 2,860 2,470 2,721 2,789 2,300 2,529 2,622 2,649 2,260 2,340 2,103 2,427 2,287 1,850 1,837 2,132 1,955 1,378 1,513 1,762 1,318 1,458 Cellcom 34.4% Cellcom 34.2% 1, , Q * As of Q1 10, in thousands (based on companies report and Partner s estimates) ** Cellcom and Pelephone based on companies 2009 reports. Mirs revenues are based on Partner s estimates Partner Cellcom Pelephone

14 Agenda 1. Partner in a Nutshell 2. The Israeli Telecommunications Market 3. Partner s Financial and Operational Results 4. Partner s Strategic Direction 14

15 Key Business Indicators Subscriber Growth (EOP, in 000 ) 3G Subscribers & Content Revenues 3,500 3,000 2,500 2,000 1,500 1, ,837 2,103 2,340 2,529 2,668 2,860 2,898 Change in subscribers recognition policy 3,042 3, Q1 10 1,400 1,200 1, ,355 1, % 16.8% % 12.7% 10.1% 7.6% 8.7% Q1 10 3G subs Content rev as % of service rev 30% 25% 20% 15% 10% 5% 0% ARPU and MOU* Quarterly Churn Rate ARPU in NIS Minutes 6% 5% 4% 3% 2% 5.1% 4.4% 3.9% 4.3% 4.8% 3.9% 4.2% 4.8% 5.2% Q1 09 Q1 10 ARPU MOU 1% 0% NP Launch Dec 2007 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 * From 2008 the calculation of ARPU has been modified to include revenues from sales of extended handset warranties, in line with the industry standard. This has the effect of increasing ARPU for 2008 and 2009 by approximately 2 NIS

16 Financial Performance Total Revenue US GAAP IFRS in NIS millions Q Q Q Q Q Revenues 1,412 1,514 1,575 1,578 1,587 Cost of Revenues , Gross Profit ,000 6,000 5,000 4,468 5,141 5,123 5,607 6,114 6,302 6,079 SG&A Other income Operating Profit Financial Costs net Income Taxes Net Income NIS millions 4,000 3,000 2,000 1, : First decrease in Interconnect tariffs 1,412 12% 1, Q1 09 Q1 10 EBITDA US GAAP IFRS SG&A US GAAP IFRS NIS millions 2,500 2,000 1,500 1, ,298 2, % 39.0% 2, % 1, % 1,576 1,569 1, % 32.9% 30.9% 30.7% 30.6% 12% Q1 09 Q % 35% 30% 25% 20% NIS millions 6,000 5,000 4,000 3,000 2,000 1,000 5, % 506 5, % 454 5, % 491 6, % 623 6, % 678 6, % 677 1, % 11.1% 156 1, Q1 09 Q % 12% 10% 8% 6% 4% 2% 0% 16 EBITDA EBITDA margin Revenues SG&A SG&A margin

17 NIS millions High Financing Capacity NIS millions Net debt / EBITDA 1 3,500 3,000 2,500 2,000 1,500 1, ,000 1,600 1, , , ,022 US GAAP EBITDA CAPEX 3 1,934 1, ,409 2,764 US GAAP 1,480 2, ,780 1,548 1, IFRS 2,102 IFRS 3, Q1 10 Net Debt Net debt / EBITDA NIS millions Fixed Assets CAPEX / Revenue 2 6,000 5,000 4,000 3,000 2,000 1,000 20% 4, , % 377 5,141 5, % 11% ,607 8% 6,114 9% 6,302 8% 6,079 9% Revenues CAPEX CAPEX margin ,412 Q % 1,587 5% The net debt as of 31, March Does not include dividend payable. US GAAP IFRS 2 The Fixed Assets CAPEX numbers refer to the Cash Flow from investing activities for the years In 2008 and later, it refers to acquisition of property and equipment. 3 The CAPEX numbers refer to acquisition of property and equipment and Increase in intangible assets Q % 20% 15% 10% 5% 0% Q1 09 Q1 10

18 Agenda 1. Partner in a Nutshell 2. The Israeli Telecommunications Market 3. Partner s Financial and Operational Results 4. Partner s Strategy 18

19 Partner s Strategy Focus on Mobile Centric while Broadening Portfolio Maintaining Wireless Leadership Internet Content New Communication services Market Share ARPU Brand Facilitate cost reduction and efficiency improvement Mobile and Nomadic Content as a growth engine Source of differentiation Move up along the value chain ISP Fixed Telephony New telecom areas 19

20 Remaining Mobile Centric g Increase in mobile content consumption g Data cards: complementary and DSL substitution g Location based services: GPS g Enterprise mobile services: s, fleet management, M2M, etc. 20

21 Entering The Home The Rationale of Becoming an ISP and Fixed Line Provider g ISP and VOB markets size ~NIS 5 B g VOB is becoming mainstream technology g VOB and mobile synergy: FMS/FMC g Off load of data traffic from MBH to wireline infrastructure g Increase stickiness g Presence in the customer premises is important: Home gateway & SLA g Leverage of Partner s existing market presence & brand 21 g Requires limited CAPEX investment

22 Local and internation al features & TV series The leading music store in Israel Games arena offering games for heavy and casual gamers Forums, blogs, user generated video, talkbacks Mobile content Community & ugc Games VOD Music A rich Mix of TV, Music, UGS and Mobile Content A leading Mobile content store

23 PRI and Transmission Approximately 1400 km of distributed nationwide optical network aimed at business sector and for cellular network needs Broad network avenue by four axes length mutually backed up Full optical monitoring of all network routes Communication stations (PoP) in major business centers 23

24 In Summary Partner offers a top quality network, an excellent customer service, the number one brand in the Israeli telecom industry and a wide variety of value added services Future sources of growth Fixed Telephony and ISP Increase in data and content revenues Strong cash flow, and a significant dividend yield 24

25 keep in touch Oded Degany VP Corporate Development, Regulation & IRO Emanuel Avner VP finance and CFO Investors Web Site: