Wind Tre First Half 2018 Results. 1 August 2018

Transcription

1 Wind Tre First Half 2018 Results 1 August 2018

2 H highlights External environment Market Persistent and intense competition in both mobile and fixed markets Pricing pressure led by new entrant, main operators reacting with second brands and dedicated offers Regulation Other Solar monthly billing cycle applied since April per legal mandate 5G rules issued by authorities; auction scheduled to take place in September 2018 U.S. denial order on ZTE, though now lifted after three months, has slowed Wind Tre s network consolidation and modernization process Internal progress Optimize Integration planning well advanced with cumulative synergies achieved at 245M as of the end of June, corresponding to an annual run-rate of OPEX synergies of 284M out of 490M final target More than 40% reduction in interest expense YoY, resulting in annualized savings of 270M Differentiate Integrate Strategy confirmed in mobile: rational, targeted acquisition strategy focused on value Strategic progress in fixed-line: acceleration on fixed-mobile convergence and strong FTTx growth Radio consolidation re-started with ZTE and Ericsson as partners Several internal projects ongoing to streamline, simplify and merge operational processes 2

3 Strategy update Building an healthier Customer Base Main value driver Customer Value Management empowered Main actions Dedicated M4M & M4S ATL & One2One offers Tailored campaigns for subscribers renewal on tied customer base to increase loyalty Push on upselling opportunities with dedicated fixed/mobile convergent offers Strengthen partnership with smartphone vendors to increase tied customers Offer improvement and portfolio completion Push on tied offers on both brands Accelerate FTTx customer base growth through dedicated local campaigns and POS productivity increase Reinforce convergent offer launching a dedicated hard bundle Focus on business segment both on commercial offer and sales channels, increasing market share once network consolidation is advanced 3

4 Network update Mobile radio ~35% of mobile radio access network target already consolidated & modernized, including Rome, Milan and Bologna Network performance in consolidated areas comparable to the best in Country Introduced Ericsson as 2 nd radio supplier U.S. Department of Commerce lifted Denial Order on ZTE; operations have restarted after three months stop Core network IT Core network consolidation & transformation to TelcoCloud kicked off Network Function Virtualization infrastructure implementation planned for 2019 Consolidation progressing according to plan, delivering expected synergies 4

5 Synergies Network & IT Achieved Plan (M, %) ~60% ~90% 100% Achieved as % of run-rate OPEX Commercial SG&A & HR Cumulative 245M Annual Run-rate 284M M Annual run-rate OPEX synergies FY 2017 H FY 2018E FY 2019E Run-rate CAPEX Network & IT Annual run-rate CAPEX synergies 1 210M Finance Expense 40.4% saving YoY (137M ) in H M annual interest savings on top of 700M total synergies 1. CAPEX synergies are calculated as difference between Wind Tre CAPEX at the end of the plan and the sum of 2016 CAPEX of Wind and H3G on a stand-alone basis 5

6 Financial highlights H Total Revenue 2,771M -10.1% vs H Mobile TLC revenues 1,901M Fixed TLC revenues 516M -8.8% vs H % vs H EBITDA 1 995M EBITDA 1 Margin 35.9% -8.5% vs H on a like-for-like basis +60 bps vs H on a like-for-like basis Op. Cash Flow (EBITDA 1 CAPEX) 535M Net Debt 2 9,576M Leverage ratio 2 4.5x +0.2% vs H FY 2017: 9,695M FY 2017: 4.4x Note: H financial data are reported in accordance with IFRS 15. H figures based on IAS 18 are used for like-for-like comparison purposes (where needed). For further details please refer to back-up slides 1. H EBITDA before approx. 60M of one-off integration costs. H EBITDA before approx. 140M of one-off integration costs 2. Leverage ratio calculated on H LTM EBITDA, under IAS 18, before one-off integration costs of approx. 186M. FY 2017 EBITDA before one-off integration costs of approx. 266M. 6

7 Total Revenue & EBITDA 3,083 (Like-for-like comparison) 377 2, % -15.5% -7.9% Revenue (M ) 2,770 2, ,417 2,418 H H IAS 18 H IFRS 15 EBITDA 1 and Margin (M, %) (Like-for-like comparison) 33.7% 34.4% +60bps 35.9% 1, % Total Other CPE Service revenue 10.1% total revenue decline (-313M ) mainly due to: 7.9% service revenue decrease (-206M ) concentrated in mobile consumer segment 15.5% CPE 1 revenue decrease (-58M ) due to lower handset sales offset by increased volumes coming from the fixed-line equipment sales 48M other revenue decline mainly coming from the fixedline segment Highlights 8.5% EBITDA 2 decline on a like-for-like basis (-88M ) due to pressure on top line, partially offset by synergies and cost efficiencies 60bps EBITDA 2 margin increase on a like-for-like basis H H IAS 18 H IFRS 15 Note: H financial data are reported in accordance with IFRS 15. H figures based on IAS 18 are used for like-for-like comparison purposes (where needed). For further details please refer to back-up slides 1. CPE = Customer Premises Equipment 2. H EBITDA before approx. 60M of one-off integration costs. H EBITDA before approx. 140M of one-off integration costs 7

8 Mobile Revenue & EBITDA 2, ,085 (Like-for-like comparison) % -8.8% Revenue (M ) 2,191 2, ,901 1,901 H H IAS 18 H IFRS 15 Total Other CPE Service revenue Highlights 12.1% mobile revenue decrease (-301M ), mainly due to: 8.8% service revenue decrease (-184M ) as a result of highly competitive market impacting both customer base and ARPU 28.3% low-margin CPE revenue decline (-104M ) due to lower handset sales coupled with a tighter credit policy, introduced from second half of 2017, aimed to increase the quality of the customer base EBITDA 1 and Margin (M, %) (Like-for-like comparison) 37.8% 35.9% 34.4% +150bps -8.3% % EBITDA 1 decline on a like-for-like basis (-71M ) due to top line pressure, not completely offset by synergies and cost cutting initiatives 150bps EBITDA 1 margin increase on a like-for-like basis H H IAS 18 H IFRS 15 Note: H financial data are reported in accordance with IFRS 15. H figures based on IAS 18 are used for like-for-like comparison purposes (where needed). For further details please refer to back-up slides 1. EBITDA before integration costs 8

9 Mobile performance Customer base (M) -5.3% H H ARPU ( /month) Reduction in mobile customer base due to highly competitive market characterized by: dedicated offers overall mobile number portability balance worsening with aggressive new market entrant Network consolidation delay negatively impacting Wind Tre s ability to compete and retain customers in non consolidated areas Mobile internet users, at 19.3 million, representing 67% of the customer base Highlights % 10.6 H H ARPU decrease to 10.6 /month (-4.1%) impacted by lower pay-per-use and extra bundle revenue due to increased data allowance, attributable to both monthly billing requirements and market competition Data ARPU at 5.7 /month, stable YoY 9

10 Fixed-line Revenue and EBITDA Revenue (M ) % % 516 H H EBITDA 1 and Margin (M, %) 30.9% -230bps 28.6% % 166 Total Other CPE Service revenue Highlights 2.0% decline in fixed-line revenue (-12M ) due to: 4.1% decline in service revenue (-22M ) as a consequence of the replacement of old ADSL customers with new FTTx subscribers at lower ARPU decrease in other revenue (-35M ) mainly related to one-off adjustment on regulated tariffs registered in H These drivers were partially offset by: higher CPE revenue (+45M ), derived from the new modem/router selling proposition introduced in Q % EBITDA 1 decline (-17M ) mainly impacted by other revenue decline 230 bps EBITDA 1 margin decrease at 28.6% H H EBITDA before integration costs 10

11 Fixed-line performance Customer base (M) % H H Total Direct Indirect Highlights Direct fixed-line customer base slightly increasing (+1.1%) to 2.55 million thanks to continued strong progress on FTTx acquisitions FTTx customers at approx. 26% of direct subscriber base tripled year over year ARPU ( /month) -2.9% % fixed-line ARPU decline (to 27.0 /month), mainly due to a highly competitive environment increasing churn of old customers with higher ARPU coupled with new gross additions with lower monthly fees H H

12 CAPEX CAPEX (M, %) (Like-for-like comparison) 19.9% 17.6% CAPEX 1 on revenue (LTM) 17.6% decline in CAPEX on a like-for-like basis due to delay in network consolidation and modernization roll-out activities (ZTE ban) Network KPIs Mobile % ~97% 4G/LTE population coverage ~35% sites consolidated with significant network performance improvement Fixed ~70% LLU direct coverage ~60% FTTx coverage H H IAS 18 H IFRS 15 ~36,100 km of fiber optic backbone Note: H financial data are reported in accordance with IFRS 15. H figures based on IAS 18 are used for like-for-like comparison purposes (where needed). For further details please refer to back-up slides 1. H1 CAPEX on revenue (LTM) under IAS 18 12

13 P&L Highlights H H H vs. H like-for-like* (M ) IAS 18 IFRS 15 IFRS 15 Impact IAS 18 Change Change (%) Highlights Revenue (Service rev. & CPE/HS rev.) 3,001 2,737 (0) 2,737 (264) (8.8)% Other Revenue (48) (58.9)% Total Revenue 3,083 2,771 (0) 2,770 (313) (10.1)% EBITDA before integration costs 1, (42) 952 (88) (8.5)% Integration costs (140) (60) - (60) 80 (57.1)% EBITDA (42) 892 (8) (0.9)% Depreciation & amortization (766) (718) 52 (666) 100 (13.1)% EBIT before exceptionals % Impairment/write off and revised useful life on NTW assets to be dismissed (855) (373) - (373) 482 n.a. EBIT (721) (156) 10 (147) 574 n.a. Finance income (3) (5.6)% Including revised useful lives (in line with roll-out plan) related to network infrastructures to be modernized and to be offered to Iliad (full effect spread between 2017 and 2018) Finance expenses (339) (202) - (202) 137 (40.4)% Effect of refinancing of the capital structure Net foreign exchange gains/(losses) (2) (1) - (1) 1 (50.0)% EBT (1,008) (308) 10 (299) 709 n.a. Income Tax (42) (9) (3) (12) 30 n.a. Net Result (1,050) (317) 7 (311) 739 n.a includes (25) M deferred tax assets adjustment due to decrease of tax rate in Luxemburg * like-for-like comparison based on 2018 and 2017 financial data both following IAS 18 standard. For further details please refer to back-up slides 13

14 Capital structure (M ) As of Dec. 31, 2017 As of June 30, 2018 Change June 30, 2018 on H LTM EBITDA Cash and Equivalents (612) (862) (250) (0.4x) Bank Loan 2,970 2, x EUR Senior Secured Notes ,619 1, x EUR Senior Secured Floating Rate Notes ,242 2, x EUR Senior Secured Notes ,760 1, x USD Senior Secured Notes ,665 1, x Derivatives and Other (16) 0.0x Total External Net Debt (excluding Intercompany Loans) 9,695 9,576 (118) 4.5x LTM EBITDA 1 2,211 2,123 Total External Net Debt / LTM EBITDA 1 ratio 4.4x 4.5x Intercompany Loans Total Net Debt 10,319 10,173 Total Net Debt / LTM EBITDA 1 ratio 4.7x 4.8x 1. H LTM EBITDA, under IAS 18, before one-off integration costs of approx. 186M. FY 2017 EBITDA before one-off integration costs of approx. 266M. 2. Intercompany credit towards former WAHF: approx. 1,140M at year end 2017 and approx. 1,191M in H1 2018; Intercompany loan towards former 3 Italia S.p.A. and former H3G Italy investments S.a.r.l.: approx. 1,764M at year end 2017 and 1,788M in H

15 Gross debt breakdown and maturity profile 1 M Average interest rate 2 ~2.7% 2,250 1,950 1,625 1,750 1,700 (USD 2,000 M) Euribor % Euribor % Euribor % 2.625% Euribor % 3.125% 5.00% Term Loan A EUR SSNs EUR FRNs EUR SSNs USD SSNs 1. Notional amounts. USD tranche has been converted at Cross Currency Swaps /USD Exchange Rate 2. Nominal annual interest rate including hedging costs 15

16 CEO Final remarks Generating good momentum and progress in fixing the basics across our key customer touchpoints Network consolidation to re-start leveraging both ZTE and Ericsson; completion expected by 2019 Strategy pillars confirmed: value vs. volume, exiting low margin offers, improving offer transparency, accelerating Fixed-Mobile Convergence across the consumer and business segments, FTTx coverage enhancement Addressing policy challenges with the relevant stakeholders both as an industry as well as issues specific to Wind Tre New leadership team in place with a clear sense of direction, purpose and urgency 16

17 Thank you Q & A

18 Back-up

19 From IAS 18 to IFRS 15 (1/2) In adopting IFRS15 Wind Tre opted for the modified retrospective approach which implies: 2018 figures: IFRS15 compliant 2017 figures: unchanged IAS18 compliant Proper disclosure of Beginning of Period balances and P&L adjustments are provided in relation to figures affected by IFRS15 adoption Beginning of Period adjustment Recurrent adjustment Revenue Bundle offers Activation fees IFRS15 adoption limited to direct sales channel Revenue allocation with Stand-alone Selling Price method in line with current revenue recognition model Activation fees will be allocated to the separate performance obligations included in the offer Revenue recognized consistently with the timing of the separate performance obligations None 7M Deferred income None Not relevant 19

20 From IAS 18 to IFRS 15 (2/2) Beginning of Period adjustment Recurrent adjustment EBITDA 1 (M ) Impact mainly due to commissions on non-lock-in offers (mobile only) to be treated as an asset 95M Asset recognition ( 43 ) Customer Acquisition Costs H (IFRS 15) from OPEX to CAPEX D&A (M ) Q (IAS 18) Amortisation of these assets will be represented below EBITDA H (IFRS 15) IFRS 15 variance H (IAS 18) Amortization period is on a straight line basis and consistent with the relevant average life of such customer segment None (1,091) (1,039) H EBITDA before approx. 60M of one-off integration costs; H EBITDA before approx. 140M of one-off integration costs. 20

21 Mobile Focus on internet performance Mobile internet revenue (M ) Highlights % 713 Slight decrease of internet revenue (-6M ) negatively affected by increased data allowance H H Mobile internet customer base 1 (M, /month) stable 19.3 stable 19.3 Data ARPU Stable mobile internet users 1 at 19.3 million, representing 67% of total customers Stable Data ARPU at 5.7 /month 64% 67% Percentage on total CB H H Mobile internet users include customers that have performed at least one mobile internet event in the previous month 21

22 Fixed-line Focus on broadband performance Broadband revenue (M ) % 296 Highlights 3.5% fixed-line broadband revenue decline (-11M ) due to the replacement of old ADSL customers with new FTTx subscribers at lower ARPU H H Broadband customer base and ARPU (M, /month) ARPU -5.1% 1.1% fixed-line broadband customer base growth driven by acceleration on convergence and FTTx with FTTx gross additions almost tripled vs % broadband ARPU decrease (reaching 20.7 /month) % 2.41 mainly due to substitution of old customers with legacy offers and higher ARPU with new gross additions at a lower monthly fee due to competitive environment H H

23 Disclaimers Rounding Certain numerical figures set out in this results presentation, including financial data and percentages, have been subject to rounding adjustments and, as a result, the totals may vary slightly from the actual arithmetic totals and could differ from the consolidated financial statements of Wind Tre. Forward-looking statements This document contains predictions of events and future results of Wind Tre that are based on the current expectations, estimates and projections regarding the sector in which the company operates and on the current opinions of its management. These elements have by their nature a component of risk and uncertainty, because they depend on future events taking place. It should be noted that the actual results may differ significantly from those announced due to a multiplicity of factors, including global economic conditions, the impact of competition, and political, economic and regulatory developments in Italy. Investor relations department ir@windtre.it