Continued Success. Well on Track for Turnaround. Deutsche Bank 7th Italian Telecoms Conference Milan, May 17, 2006

Transcription

1 Continued Success Well on Track for Turnaround Deutsche Bank 7th Italian Telecoms Conference Milan, May 17,

2 Disclaimer The following presentation is provided to you (each referred to hereafter as a Recipient ) for information purposes only and should not be relied upon by the Recipients and no liability, responsibility, or warranty of any kind is expressed, assumed or implied by Weather Investments and/or Wind Telecomunicazioni S.p.A. for the accuracy, inaccuracy, interpretation, misinterpretation, application, misapplication, use or misuse of any statement, claim, purported fact or financial amount, prediction or expectation (together referred to as Information ) and does not constitute an offer to sell shares or other securities or the solicitation of an offer to buy shares or other securities, nor shall there be any offer or sale of shares or other securities in any jurisdiction in which such offer or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. In addition, we also draw each Recipients attention to the fact that this presentation contains forward-looking statements regarding Weather Investments and/or Wind and its future business. Such statements are not historical facts and may include opinions and expectations about management s confidence and strategies as well as details of management s expectations of new and existing programs, technology and market conditions. Although Weather Investments and/or Wind Telecomunicazioni believe their opinions and expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, not all of which will be exhaustively explored in this presentation or elsewhere. Accordingly, the Recipients should not regard such statements as representations as to whether such anticipated events will occur nor that expected objectives will be achieved. The Recipients are reminded that all forward-looking statements in this presentation are made so on the date hereof and for the avoidance of doubt Weather Investments and/or Wind Telecomunicazioni S.p.A. does not undertake to update any such statement made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. For the avoidance of doubt, Weather Investments and/or Wind Telecomunicazioni S.p.A. does not accept any liability in respect of any such forward-looking statements. No liability, responsibility, or warranty of any kind is expressed, assumed or implied by Weather Investments and/or Wind Telecomunicazioni S.p.A. for the accuracy, inaccuracy, interpretation, misinterpretation, application, misapplication, use or misuse of the figures quoted, including but not limited to direct, indirect, consequential, inconsequential, residual, specific or unspecified damages. The breakdown between fixed and mobile segment has been obtained through an estimated allocation of shared costs, and does not arise from a cost accounting system. This breakdown may not be used for the purpose of determining two separate cash generating units/segments. 2

3 Where we were last year In Spring 2005 the European telecoms sector was ready for a significant wave of consolidation - in-market, international (both mature and emerging markets) We predicted that Orphan assets, such as Wind, O2, Amena and KPN, would not be able to remain in the market independently and compete effectively against the large global players - would eventually consolidate or disappear Of those mentioned, only KPN is still independent (and in play?): Wind was purchased by Weather Investments O2 was purchased by Téléfonica of Spain Amena was purchased by France Télécom. Trend is continuing Offer for TDC by financial sponsors consortium MTC acquisition of CelTel Recent offer of MTN to purchase Investcom LLC 3

4 Weather as consolidator Weather is a unique telecoms operator focused on consolidation and management of diversified operations across geography, business model and market maturity. Weather consolidation philosophy: Synergies mainly relative, but not limited, to procurement Management proven entrepreneurial track record and expertise in turning around inefficient companies and capturing high growth opportunities International truly international approach and culture with ability to crossfertilise competencies and technologies across markets Financial companies with inefficient cost structure but with strong cash flow generation potential, attention to price paid for companies Performance high margin markets and/or high growth markets that can generate cash flow over time New licenses / acquisitions in emerging markets Existing assets in emerging markets Restructuring opportunities in mature markets A customer / market value oriented company 4

5 OTH Milestones Compounded annual growth in subscribers of 70% since year end 2000 March 1998 Acquisition of 51% of ECMS in partnership with FT and Motorola Sept Acquisition of controlling stake in JMTS - Fastlink (Jordan) April 2000 Purchase of 80% stake in Telecel (12 licenses in Sub Saharan Africa) April 2000 Purchase of 38.6% stake in PMCL - Mobilink (Pakistan) July 2000 Primary listing on CASE and GDR program on LSE Jan 2001 Acquisition of Motorola shares in ECMS, JMTS and PMCL July 2001 Acquisition of greenfield license in Algeria March 2002 Acquisition of greenfield license in Tunisia Oct 2002 Joint Venture with Wataniya Telecom in Tunisia Dec 2002 Sale of Fastlink (Jordan) for US$ 423 million May 2003 OTH finalizes sale of 9 GSM Assets in Africa Oct 2003 OTH awarded greenfield license in Iraq s Central Region April 2004 Divestiture of Loteny (Ivory Coast) September 2004 OTH purchased 100% of Sheba Telecom in Bangladesh January & May 2005 Buy out Minorities in Algeria & Tunisia March 2005 OTH in JV with Telecom Egypt wins fixed line license in Algeria July 2005 Buying out All Minorities in Iraq September & December 2005 Divestiture of Oasis Telecom (DRC) & Libertis Telecom (Congo Brazzaville) December 2005 Acquisition of 19.3% Interest in HTIL Gaining Operations Expertise Extending Geographic Presence Narrowing Strategic Focus Subscribers (000 s) ,116 4,051 4,343 7,660 14,500 30,383 Number of Licenses Revenue (US$ in millions) ,119 1,966 3,226 EBITDA (US$ in millions) ,022 1,358 Net Income (US$ in millions) (10) (95)

6 Financial and Operational Overview Subscribers (Proportionate) Consolidated Revenues Consolidated EBITDA ( 000) 24,000 20,000 16,000 12,000 8,000 4,000 4,077 CAGR: 135% 8,589 22,466 (US$ in millions) 3,500 3,000 2,500 2,000 1,500 1, ,120 CAGR: 70% 1,966 3,226 (US$ in millions) 1,400 1,200 1, CAGR: 66% 1,358 0 YE 03 YE 04 YE 05 0 YE 03 YE 04 YE 05 0 YE 03 YE 04 YE 05 Subscribers (Proportionate) Consolidated Revenue Consolidated EBITDA 28% 13% 17% 3% 32% 9% 10% 41% 43% Djezzy (Algeria) Mobilink (Pakistan) Mobinil (Egypt) Tunisiana (Tunisia) Iraqna (Iraq) Banglalink (Bangladesh) Others 13% 23% D jezzy (Algeria) Mobilink (Pakistan) Mobinil (Egypt) Tunisiana (Tunisia) Iraqna (Iraq) Banglalink (Bangladesh) Other GSM Non-GSM Revenue 15% 21% D jezzy (Algeria) Mobilink (Pakistan) Mobinil (Egypt) Tunisiana (Tunisia) Iraqna (Iraq) Other GSM Non-GSM Revenue 6

7 Key GSM Subsidiaries Relative Contribution 2005 Contribution Economic Interest Consolidation Method Subscribers ('000) Market Share Revenues EBITDA % Market Position $ % $ % EBITDA Margin 87.68% Full Consolidation 7,109 67% #1 of 3 1,074 33% % 54% 88.69% Full Consolidation 11,119 56% #1 of % % 41% 31.26% Proportionate Consolidation* 6,696 52% #1 of % % 50% 50.00% Proportionate Consolidation 2,258 43% #2 of % 65 5% 42% % Full Consolidation 1,850 41% #1 of % % 70% % Full Consolidation 1,222 12% #3 of % (39) na na Notes: All figures in US$m unless otherwise stated. All figures and market share statistics & subscribers are at 30 September * OT consolidates MobiNil at 45.35% 7

8 Key Highlights of Strategic Partnership with HTIL Transaction Orascom Telecom Holding ( OTH ) has acquired a 19.3% equity stake in Hutchison Telecommunications International Limited ( HTIL ) for US$ 1.3 bn in cash Governance and other rights commensurate with investment have been agreed with Hutchison Whampoa Limited ( HWL ) Strategic Fit Similar strategic focus on large markets with low mobile penetration No overlap with OTH s markets Unique entry point into some of the world s largest and fastest growing mobile markets Population under license areas of ca. 1.5 billion Hutch Essar is one of India s leading mobile operators with a market share of ca. 19% (a) Binding Partnership Attractive Valuation Board representation HTIL and key operating companies Standstill agreement with HWL Binding strategic co-operation agreement with HTIL Acquisition price of HK$ 11.0 per share vs HK$ 10.9 as of closing Wednesday 21 st, % and 2% premium on 3 months and 1 month average price of HTIL Improved Leverage Over Suppliers HTIL/OTH combine buying power to achieve better pricing from suppliers NPV of potential capex savings estimated to be between US$ 300 to 500 million (a) Proforma for BPL acquisition 8

9 Transaction Rationale and Strategic Fit Transaction Rationale Unique opportunity to gain exposure to India and other attractive mobile markets Potential to secure capex synergies through increased purchasing power due to scale effect of combined procurement of network equipment and software Shareholders agreement with HWL with pre-emption and other rights providing the potential for next step acquisitions of the remaining stake Standstill & right of first refusal improve potential path to control Exposure to favourable growth and profitability from some of the largest and fastest growing mobile markets in the world Strategic Fit Similar operating strategy with complementary presence Mobile operations in 8 non-overlapping markets with obvious fit in geography, risk profile, growth and margins Entry to India: 53% stake in one of only four mobile operators in India to have nationwide coverage Both parties to pursue similar strategy of profitably expanding in large underserved markets On a combined basis, both operators control mobile operators in fifteen countries with license coverage over ca. 2bn people As at 31 December 2005 Covered pops (bn) Aggregate subs (m) OTH HTIL Total Existing OTH markets HTIL markets Source: Company websites 9

10 Why Wind? Synergies Joint procurement expands purchasing base thus increasing bargaining power Management Improvement of management execution Leverage fixed-line assets previously neglected Exploit convergence opportunity Financial Opportunity for efficiencies through optimal capital structure and working capital Strict cost control Value through deleveraging Change of mentality, legacy issues (part of non-telecom group) Performance attractive Italian telecommunications market: high margins in mobile untapped growth potential in broadband technologically advanced market (access to 3G technology) fixed-line experience for emerging markets Equity value growth driven by the restructuring and deleveraging of Wind 10

11 What has been accomplished so far Change of culture with greater focus on execution and speed of delivery Change of senior management (with 1 notable exception): CEO, CFO, COO, Head of Fixed line Business Unit, Head of Regulatory Affairs, etc. Ongoing refocus on processes streamline, simplify or dispose of (outsource or shut down) Delivered capital expenditure synergies and strong control on costs and working capital management Focus on distribution channels Create a Fixed-line & Internet business unit to ensure accountability on performance targets while positioning Wind as the convergent operator in the eyes of the customer 11

12 Capex Savings through Technical/Network Support Weather strategy optimizing Capex & Opex without affecting the quality of service or the commercial objectives. 1. OTH used its strong relation with the vendors and its current Framework Agreements based on the large purchasing power of the group which led to significant discounts. Some of these discounts were applied on existing contracts already signed by Wind based on the old prices 2. A technical assessment was mutually conducted with the Wind team to reduce the quantities without affecting the commercial objectives through optimizing the design and architecture of the network Based on (1) & (2) above, an overall Capex reduction of 250M was achieved in 2006 budget part of which was reivested in additional equipment OTH was able to help Wind in subtantially reducing the forecasted Capex for the 3G rollout till by revising engineering and adding new vendors IT cost optimization and rationalization exercise that led to a Capex saving of over 50M in 2006 budget 12

13 Wind highlights 2005 adjusted revenues (1) : 4,661m 2005 adjusted EBITDA (1) : 1,502m Fixed line 38% Mobile 62% Fixed line 19% Mobile 81% From 2003 to 2005: 6.3% growth From 2003 to 2005 : 61.5% growth Third largest Italian mobile operator Second largest Italian fixed line operator by revenues One of two integrated fixed and mobile network operators in Italy Leading internet service provider Number one Italian portal: Libero (1) Revenues net of turnover contribution, Adjusted EBITDA net of turnover contribution and other provisions Note: Revenue breakdown excludes other revenues, EBITDA breakdown adjusted for turnover contribution only Breakdowns include reclassification of wholesale revenues 13

14 The Mobile Business Unit (m) Subscribers/market share 16,4% 17,0% 18,5% 19,1% 13,7 14,0 11,6 8,7 9, Q1 06 Market share Noi Customer Base growth ('000) Feb 04 Jun 04 Dec 04 Jun 05 Dec 05 Mar 06 Key results Strong increase in number of subscribers coupled with an increase in market share Higher penetration of Noi customers Increase in more profitable on-net traffic and recurring revenues from monthly fees Progressive shift to Wind as a primary SIM Low subscribers acquisition costs with no handset subsidies ARPU stable over 2005 at 18.8, notwithstanding termination rate cut in September 2005 (without, underlying ARPU in Q4 05 would have grown by 1.1) Effective promotion of i-mode and VAS addon packages Improved brand awareness through successful advertising campaign UMTS roll-out ahead of licence requirements Asymmetric termination rates confirmed 14

15 The Fixed-line Business Unit ('000) (000s) Voice subscribers Q1 05 Q2 05 Q3 05 Q4 05 Q CS CPS Direct Broadband subscribers Key results Strong increase in direct customer base - higher margin and loyalty Stabilization of CPS customer base and decrease in CS customer base Increased usage and ARPU through segmented bundled offers at competitive prices i.e. TuttoIncluso Impressive broadband growth driven by price-performance proposition i.e. of 12 Mbps broadband service Significant improvement in broadband penetration and ULL access No.1 Italian internet portal, Libero, with over 21 million registered users, a unique sales channel to migrate NB to BB 2004 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Note: All revenues and EBITDA adjusted for turnover contribution 15

16 Our Strategy Going Forward (1/2) Maintain our customer / market driven approach and avoid falling into the technology trap Leverage our fully integrated and convergent infrastructure to maximise economies of scale and scope Optimise operating and capital expenditures to maximise cash flow and return on investment Continue to grow and increase the profitability of mobile business On-net strategy (Noi) Complete roll-out of UMTS network in line with license requirements and commercial demand Strengthen distribution network and CRM 16

17 Our Strategy Going Forward (2/2) Capture market share, grow revenues and increase the profitability of fixed-line business Continue to focus on operating efficiencies and synergies Efficient procurement strategy and streamlining of operations Expand integrated / convergent service offerings Increase focus on bundled fixed-mobile offers 17

18 Mobile Strategy Continue to grow in the market with a focus on value and service level, improving the quality of distribution and reaching excellence in brand equity Leveraging on-net products Improving distribution chain Commercial cost efficiency Strong and efficient advertising Increase service quality Mobile broadband 18

19 Fixed-line Strategy Focus on Direct market through LLU coverage expansion and commercial push Enhance margins and increase loyalty through Double and Triple Play services (Voice + ADSL + IP-TV) Further margins improvement through cost efficiency Sales and Communication focused on dual-play services (higher weight of Inbound channels pushed by Advertising) Branding strategy: repositioning Infostrada as the operator brand and Libero as the product brand IP-TV: high end offering premium packages, high definition TV, Video on Demand and personal video recording 19

20 Wind key historic milestones ENEL/FT/DT form Telecom JV Mobile/Free Internet service launched Merger with Infostrada Agreement with NTT DoCoMo to introduce i-mode in Italy UMTS launch Fixed line and GSM licenses awarded UMTS Licence Acquisition of part of Blu s assets Financial independence achieved Acquisition of Wind by Weather Investments 20

21 Weather Telecom structure Enel S.p.A. Weather Investments II S.r.l. Other investors 26.1% 71.1% 2.8% 100% Weather Capital S.àr.l 50% + 1 share Weather Telecom 100% Wind Acquisition Holdings Finance S.p.A. 100% Wind Acquisition Finance S.p.A. 100% 21