The fiber and convergence leader in Northern Spain. January 2018

Transcription

1 The fiber and convergence leader in Northern Spain January 2018

2 Disclaimer This presentation (the "Presentation") has been prepared and is issued by, and is the sole responsibility of Euskaltel, S.A. ("Euskaltel" or "the Company"). For the purposes hereof, the Presentation shall mean and include the slides that follow, any prospective oral presentations of such slides by the Company, as well as any question-and-answer session that may follow that oral presentation and any materials distributed at, or in connection with, any of the above. The information contained in the Presentation has not been independently verified and some of the information is in summary form. No representation or warranty, express or implied, is made by the Euskaltel Group (including Euskaltel, S.A., R Cable y Telecomunicaciones Galicia, S.A.U. and Parselaya, S.L.U. and its subsidiaries (Telecable Capital Holding, S.A.U. and Telecable de Asturias S.A.U.), nor by their directors, officers, employees, representatives or agents as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions expressed herein. 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3 The leading platform in the north of Spain Geographical complementarity Key metrics Subs 1 : 284k Population 2 : 2.7m Subs 1 : 153k Population 2 : 1.0m Subs 1 : 350k Population 2 : 2.2m Addressable market (inhabitants) ~ 6m Homes passed (000 ) ~ 2,200 Subscribers ~ 790k Wi-Fi spots > 400k 31% 42% 83% 39% 63% 68% Total group: c.790k subs 39% 42% 77% 1 Market position (in respective regions) Mobile penetration (3Q17) Broadband mkt share (2015) Pay TV mkt share (2015) Key achievements Consistently leading market position in our regions From a single region company to a multi-region platform Shareholder remuneration initiated Value-accretive M&A delivered Now Source INE, CNMC, Company internal estimates Notes: 1. Total subscribers (Residential + business) figures as of Sept data from INE 3. 3 rd operator in the Basque country 4. 4 th operator in Asturias Financial discipline preserved Sector-top operating and financial metrics maintained 3

4 Strategic milestones Initial Public Offering Jul-15 Acquisition of R Cable Nov-15 Platform creation Dec-15 / Today 1 Successful IPO of the first Spanish cable company 1 in history Transformational transaction in Euskaltel 1 history 1 Acquisition of the remaining independent regional cable business 2 Fully consistent with consolidation strategy 2 Support of highly reputed institutional investors 3 Highly value accretive with cash flow impact over 20% 2 Largest independent convergent cable platform in Spain 4 Synergies delivered on time and revised upwards 3 Strong after market performance of the stock 5 Support from institutional equity and debt investors ( 255m equity raising and 900m debt raising) 3 Governance support with the incorporation of Zegona s and John James international expertise Note 1. On a Spanish stock exchange 4

5 We have built a 2x larger business since IPO Subscribers ( 000) EBITDA 1 ( m) OpCF 3 ( m) Mobile penetration (%) EBITDA margin (%) As % of revenue (%) 53% 76% 49% 48% 35% 31% >2x >2x ~2x IPO 3Q 2017 IPO 3Q 2017 LTM PF 2 2 IPO 3Q 2017 LTM PF Notes 1. Unaudited figures. Adjusted for management fees, M&A expenses, transaction bonuses and other extraordinary items (+ 2.8m in 2016) 2. Unaudited preliminary pro-forma figures for the acquisition of Telecable 3. Throughout the presentation, OpCF defined as (EBITDA capex) 5

6 Strong operational and financial profile while doubling size Statutory figures IPO (Mar-15) FY2015 FY2016 Current (LTM 3Q17) 3P / 4P (%) 57.6% 63.3% 65.8% 67.6% KPIs Mobility (%) % 71.7% 77.2% 76.1% ARPU ( ) EBITDA ( m) 156m 167m 281m 290m EBITDA Margin (%) 48.7% 47.8% 49.0% 49.5% OpCF ( m) 113m 114m 185m 192m Financial statements OpCF margin (%) 35.1% 32.6% 32.2% 32.7% Net income 3 ( m) 37m 7m 62m 47m EPS 3 ( ) Eq. CF per share 3 ( ) Notes: 1. Mobile penetration as a percentage of fixed-line customers 2. For the residential segment 3. Statutory figures including extraordinary and non-recurrent elements 4. EqCF per share at IPO calculated as of 31-Dec

7 The regional integrated telecommunication champion 1 2 Undisputed leading fiber and convergence operator in the Basque Country, Galicia and Asturias Supportive macro dynamics across regional footprint with broader improvement in telecom dynamics 7 3 Strong and experienced management team supported by anchor shareholder base Benefitting from strong emotional attachment and high-quality client base 6 Best-in-class margins and cash flow generation underpinned by a prudent financial policy 4 State-of-the-art fiber network fully invested, providing best-in-class service and acting as an entry barrier 5 Growth momentum underway focused on the lifetime value of the client 7

8 Business Residential 1 Undisputed leading operator Basque Country Galicia Asturias Market Share Market Share (1) Market Share % 36% 38% 46% 28% 29% 30% 39% 20% 31% 39% 16% Market Share Market Share (1) Market Share (1) % 35% 33% 35% 23% 27% 12% (1) SoHo SMEs & Large Accounts Fixed Source: Company estimates and CNMC data. Market share in their respective footprints. (1) Ranking based on market share over cabled areas (2) 2016 data for all segments and region, except B2B Telecable which accounts for

9 1 on the back of a fully convergent offering Residential Segment Successful migration towards 3P/4P driving an increase in value per customer RGUs /Sub 3.04x 3.29x 3.43x 3.49x ARPU ( ) (proforma for Telecable acquisition) 59% 65% 67% 68% % 31% 28% 27% % 34% 39% 41% Q17 4P 3P Q17 9

10 2 Supportive macro dynamics Price war bringing down ARPUs below EU average leading to a rapid shift towards convergence driving market consolidation, content investments and capex and resulting in tariff inflation and sector recovery Spanish Telecom market (1) historical revenue growth (%YoY Introduction of heavily discounted Movistar Fusión bundles Vodafone acquires Ono for 7.2bn Orange acquires Jazztel for 3.3bn High end 4P bundles pricing improved 19% for Orange, 35% for Telefonica and 47% for Vodafone since Q2-14 A C A C 0.0% (0.5%) (1.6%) (0.9%) 0.5% 1.8% (6.2%) (6.0%) (4.8%) (5.1%) (5.3%) (3.3%) (3.0%) (7.3%) (7.5%) (8.8%) (9.8%) 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Proportion of 3P / 4P bundles almost triples from 24% in 2012A to 67% Three main national operators initiated c. 3.3bn football rights and c. 9.2bn network upgrade investment plans Sources: CNMC, IMF and Company Filings. Notes: (1) Spanish TMT market includes the following segment as defined by CNMC: fixed telephony, broadband, Pay TV, Business communications, Wholesale, Mobile, TV advertising, Other TV and other revenues. A = Announcement; C = Closing 10

11 2 Market context : data and TV driven market with increased competition Contribution to growth Spanish telecom sector 1,2 CAGR 11A-21E 04.0% 4.0% 2.0% - (2.0%) (4.0%) (6.0%) (8.0%) (2.3%) (3.4%) (5.5%) (3.0%) 1.1% 1.1% 1.3% 1.3% 1.2% 0.5% (0.1%) Mobile data Fixed broadband Pay-TV Mobile voice & messaging Fixed telefony Total revenue growth (0.8%) 0.5% 0.6% 1.9% (2.8%) (0.9%) 02.0% - (2.0%) (4.0%) (6.0%) (8.0%) (10.0%) (12.0%) 1.4% 2.1% 0.6% 1.2% E 2018E 2019E (3.8%) (4.8%) (6.9%) (8.9%) (9.5%) Data and TV driving moderate industry growth Moderate growth expected for the coming years Source Arthur D. Little (2015), CNMC Notes: 1. Revenue growth over the 2011A E period calculated as the evolution of the aggregated revenues of the 5 main Spanish competitors (Euskaltel, Movistar, Vodafone, Orange, MásMovil). The series has been adjusted for Ono and Jazztel acquisitions by Vodafone and Orange. Estimates for 2017E-2019E based on a selection of broker projections for each of the above mentioned companies growth excluding Euskaltel, Masmovil and Orange growth growth excludes Masmovil 11

12 /month 3 High valuable, longstanding customer base and best-in-class brand perception 120 Distribution of our customer base within our ARPU bands 1 Average seniority of the group s client base Brand recognition % 45% Approachable and close 8.00 Group average 8.6 years Op.1 Op.2 Op.3 Op Best quality of service 40 ARPU: Op.1 Op.2 Op.3 Op I trust more than others 0 < > Op.1 Op.2 Op.3 Op.4 ARPU ARPU Note 1. ARPU as of 3Q 2017 of the combined entity (Euskaltel + R Cable + Telecable) 2. Kantar media independent study (period of study 1H17) Highly valuable customer base The one I like most Op.1 Op.2 Op.3 Op.4 12

13 4 Fully invested network - Best-in-class fiber network Coverage (%HH) 87% 55% (6) 72% 35% 39% 61% 36% (1) 81% 47% % of EuroDOCSIS % 100% 100% c.50% 92% 100% c.96% 100% (2) 100% Access capacity (MHz) (3) Households per node (avg.) c.500 c.280 c.585 n.a. c.580 c.580 c.450 n.a. c.500 Fully-owned backbone network (4) (5) 4G license via SFR via BASE via Optimus via Vodafone Future-proofed network supports success-based capex and 17% capex over revenues as medium term target Source: Company filings. (1) In Core regions (as defined by Telecolumbus). (2) EuroDOCSIS NGN. (3) In August 2014, announced upgrade to 1 GHz in Flanders by

14 Gbps 4 Fully invested network - Euskaltel network vs. FTTH challenge Symmetry not a threat and Our network is highly recognised by independent third parties Broadband traffic evolution since Jan-15 (Upload vs Download) September 2017 ranking Growth (%) 100% 91% % (13%) Jan-15 Sep-15 May-16 Jan-17 Oct Weekly average download 2.5 Weekly average upload Previous year - Weekly average download Previous year - Weekly average upload Source: Netflix ISP Speed Index 14

15 5 Lifetime value of customers Residential segment Unrivalled coverage with the fastest broadband offering The speed leader with the only ultra-fast broadband offering across the entire region (100% DOCSIS 3.0 network) Ongoing upgrade to DOCSIS 3.1 Highly attractive and competitive mobility proposition Full-service, leading MVNO Competitive and innovative tariffs to address real customer needs The most complete and innovative TV proposition High-quality and comprehensive content offering covering different customer groups needs with possibility of adding premium channels Superior fiber coverage in the Basque Country, Galicia and Asturias (2,350k homes passed) Wide offering of commercial speeds, ranging from 50Mbps to 350Mbps Largest WiFi network in the Basque Country, Galicia and Asturias with more than 350k hotspots allowing for data for clients OTT platform offered by Telecable: - live coverage of Champions League and Europa League football matches First hybrid 4K/UHD set top box in Spain Competitive prices offering best value for money and superior service to competitors Enhanced offering providing a superior and differentiated user experience (PVR, VoD, TV Everywhere) Increased penetration of superior quality services (HD, catch-up TV, VOD, network PVR, start over, time shift...) Q RGUs: 492k (1) Q RGUs: 915k (1) (76.1% penetration over fixed customers) Q RGUs: 394k (1) Convergent offer with a leading value proposition focused on the lifetime value of the client (1) Pro-forma for Telecable acquisition 15

16 5 Leading business segment providing diversification Diversified through significant B2B (1) presence based on strong and unique positioning pillars Business revenues as a % of total revenues (2) PF 1 27% Strong and local brand 2 27% High technical capabilities in their respective footprint 3 21% Fully oriented offering based on addressing specific customer needs by sector and client 4 12% Tailor made and complex solutions 5 6 6% 5% Dedicated sales force and customer care to deliver best results and services Clear strategy to leverage superior infrastructure, brand and customer service to win in Business Sources: Company filings. (1) % of B2B revenues over total revenues as of 1H-17 LTM revenues (2) Pro-forma for Telecable acquisition 16

17 6 Resilient top line across business segments Proforma revenue evolution Revenue outlook ( 3.5m) / (0.5%) Stable - Low single digit revenue growth 9.3m revenue without margin m / +0.8% growth Mainly due to loss of Basque country government contract Residential Stable net subscriber evolution preserving current market share Target churn below 14% amid implementation of specific measures in Galicia and Asturias ARPU growth linked to attractive value proposals Increase 3P&4P penetration in existing customer base New services will include Increase mobile offering and penetration in Asturias Improved TV functionalities and 4K Deco New products penetration: Home connectivity, on-street Wi-Fi Revenue of new regions to amount for 5% of total revenue by 2022 Around 10-15% subscriber penetration over targeted new regions Business 2015A 2016A 3QLTM 2017 Residential Business Wholesale and other Adjusted for revenue without margin Growth YoY (%) SoHo will mirror similar trends than residential Renewed commercial push in SMEs and LA targeting to drive superior growth rates than residential over the medium term Penetration of hybrid-cloud, security, big data and alliances Targeted commercial offering in new expansion areas Source Company information Note: 1. Change of accounting method in 2016: revenue without margin no longer accounted for (2015 revenue without margin included in 713m revenue at 9.3m) 17

18 6 Stable gross margin and strong focus on efficiencies to improve cost structure Proforma gross margin outlook ( m) Gross margin as a % of sales (%) EBITDA margin (%) Proforma EBITDA outlook ( m) 72.8% 74.7% 74.8% 46.7% 48.3% 48.1% % % 78.5% 75.2% 47.3% % % 49.6% 46.8% 49.5% 70.8% 71.9% 46.8% 44.1% 45.0% 69.8% 67.4% 41.4% 64.2% 2015A 2016A 3QLTM A 2016A 3QLTM 2017 Total PF gross margin Total PF EBITDA EBITDA margin Adjusted for revenue without margin Efficient management of Content and ITX costs driving gross margin over 75% in the medium term Integration synergies and structure optimisation driving EBITDA margin c.50% in the medium term TV strategy focused on functionality and customer experience with disciplined approach to new content investment Renewed commercial effort in brand equity and expansion Unified organisation leading to leaner and more flexible operations Sufficient data allowances under current host agreements to mitigate ITX costs growth Systems integration, network management and talent management driving structure optimisation 18

19 6 Stable capex with future spending linked to commercial success and expansion plan Proforma capex Capex breakdown and outlook Capex (as a % of sales) 18.5% 16.9% 17.1% Business as usual capex < 17% revenue % 20.8% 18.5% 17.7% Business integration and strategic projects investments 20m - 25m ( accum.) 17.4% 17.7% 16.1% 15.2% 14.3% 2015A 2016A 3QLTM 2017 Total Footprint expansion investments 20m (excluding SAC) ( accum.) Recurrent capex to remain in the 16-17% revenue range once platform integration has concluded Business as usual capex expected to remain below 17% of revenue Source Company information Additional extraordinary capex to be incurred in period corresponding to business integration, strategic projects and footprint expansion investments 19

20 6 Rapid deleveraging, supported by best in class EBITDA and cash conversion Strong EBITDA performance with remaining future upside EBITDA margin (%) (1) + Historical Operational FCF generation 48% 48% 48% 46% 37% 34% As % of EBITDA 59% 67% 64% 67% 67% As % of Sales 28% 33% 32% 33% 32% K + R + T Liberty Global Com Hem Telenet Nos Numericable PF 2H 15 1H 16 2H 16 1H 17 9M 17 driving superior cash flow conversion Historical Net Debt and Net Debt/EBITDA (3) OpFCF conversion (2) and as % of Sales (1) 31% 30% 22% 18% 12% 13% 64% 63% 4.8x 4.7x 4.4x 4.2x c. 4.5x 48% 37% 35% 35% 2.6x 1,358 1,307 1,223 1,185 1, PF 417 1H H H17 Q317 Note: Company data (1) 1H-17 LTM numbers (2) OpFCF = EBITDA-CAPEX (3) Leverage shown including synergies. Excluding synergies, leverage equal to 5.1x and 4.7x at R Cable and Telecable closing respectively 20

21 6 Strong support from debt and equity capital markets Pre-IPO IPO + Debt refinancing R Cable acquisition + Debt refinancing Repricing of the institutional tranche Commercial paper 1 Acquisition of Telecable Debt refinancing Total debt ( m) 500m 900m Up to 200m 437m 835m Total equity placed ( m) 840m 255m 250m 5.5% 4.6x 4.4x 4.3x 4.6x 4.6x 3.5% 3.5% 3.2% 3.1% 3.0% 2.8% 1.5x 2.7x Dec-14 Jun-15 Nov-15 Sep-16 Jun-17 Jul-17 Current Average cost of debt Leverage BB- Oct-15 Aug-17 B1 Source Company information Note: 1. Commercial paper issued as of Mar-17 21

22 7 Anchor shareholder base Shareholder structure 55% 21% 15% 9% 10% Kutxabank Zegona CF Alba Free-float Board of Directors (1) VP & Lead Director Chairman CEO Proprietary director Executive director Independent director (1) Proprietary directors in the Board of Directors representing Kutxabank (2), Zegona (1) and Corporación Financiera Alba (1) 22

23 Conclusion 1 Euskaltel has delivered its ambitious organic and inorganic targets in record-time since the IPO 2 Euskaltel has become a real multi-region platform, deeply rooted in its core markets, but fully prepared to grow and enter new markets 3 We are competing in an evolving scenario that offers new challenges, but also great opportunities 4 5 We have defined a clear and comprehensive strategy focused on value generation through customer experience, growth and efficiencies, to which the entire organisation is committed The results of the implementation will offer sustained mid/long-term value creation potential to our shareholders 23

24 Thank you