Europe's fastest growing communications service provider in 2017 May 2018 0
The Masmovil management team Successfully established a strong telecom business in Spain Meinrad Spenger Chief Executive Officer Co-founder of Másmóvil Vast experience in running, acquiring and staffing telecom businesses Strong track record of delivering growth from both organic initiatives and M&A Javier Marin Chief IR & Corporate Finance +25 years of experience in corporate finance Joined the Company in 2015 Backed by strong shareholder base with PE style management incentive package 1
INDEX Masmovil at a glance Strong telecom market momentum Successful and credible challenger MM! Positioning Superior financial and operational performance 2
Company highlights The 4th telecom operator in Spain One of the fastest growing Telco operators in Europe Nimble challenger outgrowing major players in the market Significant room to grow Top-tier infrastructure in both fixed and mobile Strong track record of profitable growth and value creation Since 2015 1Q 2018 Since 2015 2018 3 Postpaid Mobile lines +28% 4.2m Service Revenue +30% 1.1bn Fixed BB lines +19x 647k EBITDA +161% 300m Market capitalization +10x 2.4bn 1 Source: Company Information 1 Calculated on 20m shares outstanding; 2 Market Data as of 27 th April, 2018, 3 According to guidance. 3
Confident in 2018 guidance We reiterate confidence in FY18 targets given 1Q18 performance. Guidance for 2018 1Q18 On track? Service Revenues Growth in Service Revenues of more than 10% vs. FY17 +16% YoY Recurrent EBITDA Recurrent EBITDA (before one-off costs) of 300M 75M Subscribers Total combined net increase in fixed broadband lines and mobile postpaid lines by more than 800k +400k Net Capex Net Infrastructure Capex of 305M 125M SOURCE: Company 4 4
Key milestones Evolved from a start-up to the 4 th telecom operator Acquisition of PEPEPHONE 2018 Acquisition of Jazztel/Orange REMEDIES Start of FTTH rollout 2016 MASMOVIL FOUNDED Launch of mobile services 2015 Acquisition of YOIGO 2006 2008 5 Source: Company information
Strong track record of profitable growth Mobile Postpaid (m lines) Fixed Broadband ( 000 lines) 2.97 +12% 3.34 +17% 3.90 +7% 4.16 1 2 2015 2016 2017 1Q18 +28% 646 502 x4 122 x3 35 2015 1 2 2016 2017 1Q18 Service Revenue ( m) EBITDA ( m) 779 +8% 838 +20% 1,007 +10% 1,108 +16% +100% 238 +26% 300 103 119 1 2 2015 2016 2017 2018 3 1 2 2015 2016 2017 2018 4 6 Source: Internal information; 1 Aggregated; 2 Proforma; 3 Annualized 1Q18 Service Revenue. 4 Annualized 1Q18 EBITDA
Our infrastructure MASMOVIL s services based on own fixed & mobile network Comprehensive service portfolio Mobile network 85% population coverage 100% 4G upgraded +2 mobile networks (NRA 1 agreements) Fixed network 11M FTTH BUs Own network > 3.7M BUs + Wholesale access agreement >18M xdsl BUs (wholesale access) Fixed and mobile services for residential and enterprise customers Source: Company Information 1 NRA stands for National Roaming Agreement 7
Strategic pillars MASMOVIL is committed to client centric approach 1 Customer first 2 Multi-brand strategy 3 Premium offering at fair prices 4 Digitalization of customer interaction 5 Entrepreneurial culture 8
Multi-brand strategy Different brands and positioning, but the same underlying philosophy: Customer first Premium brand Empowering customers and homes through worldclass technology Essential connect Full connectivity with excellent and affordable services Digital brand Offering to digital community based on clear principles Global brand Best deals for international customers in Spain 9
Leadership in Net Promoter Score (NPS) 1Q18 Yoigo has the best NPS of all peers, reflecting highest customer satisfaction NPS* Peer 1 Peer 2 Peer 3 Peer 4 +38-5 +6-4 +1 50 Promoters 23 30 26 29 Detractors 12 28 24 30 28 Our client focus is leading to better customer satisfaction * Difference between promoters (9,10) and detractors (1-6) SOURCE: GfK 1Q18 10
INDEX Masmovil at a glance Strong telecom market momentum Successful and credible challenger MM! Positioning Superior financial and operational performance 11
Movistar led rush to discounted convergence Market profitability suffered as a result, which drove a wave of consolidation Masmovil was the final piece of the consolidation wave which has created a true 4 player market Movistar Fusion price ( ) 79-47% 42 7.2bn 3.8bn Before Oct-12 Dec-14 Spanish Market EBITDA ( bn) 1 12-33% 8 1.5bn 0.8bn 2010 2014 Source: Company Information 1 Includes VOD, TEF, Orange, Yoigo, Jazztel and Ono 12
Operators focused on investments to upgrade network infrastructure Higher speeds at higher prices: More-for-More strategy Residential FBB customers evolution (Millions) Spanish Market CAGR 3.9% 9.7 10.4 10.8 11.1 11.6 23% 2.2 3.1 4.6 6.0 7.7 66% 76% 7.5 7.3 6.2 5.1 3.9 34% 2013 7% 2014 5% 2015 2% 2016 5% 2017 YoY Growth DSL NGN (FTTH+HFC) Other Source: CNMC reports and Broadband coverage report by Spanish Ministry 13
that allowed for tariff inflation National operators are now focused on generating a return on M&A and Capex investments Low-end 3P & 4P bundles price evolution ( /month) +44% +30% +20% Convergent ARPU evolution ( /month) +6% +7% 75 80 78.2 79.8 81.8 81.6 81.6 84.8 87.6 86.1 65 60 53 54 55 70 68 61 59 56 59 64 61 55 60 53 68 63 57 52 52.6 53.8 54.9 54.7 55.0 57.7 58.7 58.3 43 47 44 47 45 48 42 ene.-15 abr.-15 jul.-15 oct.-15 ene.-16 abr.-16 jul.-16 oct.-16 ene.-17 abr.-17 jul.-17 oct.-17 ene.-18 abr.-18 1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 Fusion #0 One S Love Sin Límites Fusión Series (excontigo) Fusión + Ocio One M Love Esencial Fusion Orange Source: Company Information 14
and thus service revenue recovery Service revenue growth turning positive after a painful period of decline Service Revenues Spanish Retail Telco Market YoY Growth (1Q13 4Q17) -0.8% 0.9% -0.3% 0.2% 0.5% 1.8% 1.1% 0.8% 0.9% 1.0% -1.9% -3.8% -6.6% -4.8% -5.2% -5.6% -6.4% -7.3% -7.7% -10.2% IV/2017 III/2017 II/2017 I/2017 IV/2016 III/2016 II/2016 I/2016 IV/2015 III/2015 II/2015 I/2015 IV/2014 III/2014 II/2014 I/2014 IV/2013 III/2013 II/2013 I/2013 Source: CNMC and MM estimates for Q4 2017 15
INDEX Masmovil at a glance Strong telecom market momentum Successful and credible challenger MM! Positioning Superior financial and operational performance 16
Masmovil is a small but credible challenger Significant room to grow Market Share 2017 Mobile Subscribers Broadband Subscribers EBITDA 10% 33% 33% 24% 20% 15% 3% 3% 30% 43% 30% 30% 19% 17% 60% 27% 3% 30% Source: Company Financial Quarterly Data Note: Vodafone closes its FY in March, hence H2 for them ends Q1.18. For the sake of comparison we utilize latest HY available 17
Top tier network assets on par with TEF, ORA and VOD 4G Mobile Availability 1 FTTH Broadband Coverage (m) 97% 95% 96% 98% 19.2 20.1 20.5 9.9 8.5 10.9 10.2 12.0 7.1 Wholesale 3.7 Own Source: Latest company results, MM! estimates, assuming optimum non overlap for Orange FTTH 1 Best estimates of population coverage for end 2017 18
Top tier network assets on par with TEF, ORA and VOD Comparable offering to Big 3 s product suite 3G 4G DSL FTTH 50 FTTH 300 TV Pending 2018 Source: Company Information, Open Signal Mar May 2017 19
The remedies were the first step to compete effectively in the Spanish broadband market FTTH network Acquisition of c.880k 1 FTTH BUs located in 13 densely populated urban areas in Spain (Madrid, Barcelona, Valencia, Seville & Malaga) FTTH footprint equivalent to Orange and Vodafone pre-merger Quick time-to-market FTTH network net price: 20M Orange will operate the network for a transition period of 12 months National coverage from day one ADSL network Bitstream access to Jazztel s ADSL network (18m BUs) with interconnection in a single national concentration point Melilla Ceuta Duration: 8 years (initial 4 years with option to extend by 4 years) FTTH & ADSL ADSL 1 As of June 2017 20
complemented now with our own development and the renegotiated global agreement with Orange We have continued to expand the footprint from the remedies reaching 2.1m BU s by the end of 2017 and 5.1m BU s as guidance 2018 The renegotiated global agreement with Orange has the following elements: + NRA Site Sharing Data Transmission Improvement of the economic conditions of the existing mobile National Roaming agreement which is extended Revisions to the terms of the current Site Sharing agreement including access to approximately 5,600 mobile sites creating the option to double cost-efficiently the size of MASMOVIL s own mobile network Amendments to the current national Data Transmission agreement with improved unitary pricing and reasonable minimum commitments FTTH Co-Invest agreements with Orange to increase footprint to 6.5M BUs over the next two years Modifications and improvements to the existing wholesale bitstream contract for the usage of Orange s FTTH network encompassing over 8 million BU. 21
Our convergent momentum is accelerating MASMOVIL FTTH footprint at 11 million Building Units Bitstream FTTH (Million BUs) Own +5% +16% +7% 10.4 10.9 +20% +643% 9.0 7.0 7.5 8.3 7.1 ADSL (Million BUs) 20 0.9 0.9 4Q16 6.0 1.0 1Q17 6.2 1.3 2Q17 7.5 1.5 3Q17 2.1 4Q17 3.7 1Q18 Wholesale ADSL remedies Convergent launch fuels operating momentum 36 647 145 131 93 78 77 8 28 2015 (1) 1Q16 2 2Q16 2 3Q16 2 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 31-Mar-18 3 47 Source: Internal analysis and estimate & CNMC 1 Aggregated 2 Proforma Quarterly Net MM s BB lines adds 22
4 th Operator Comparable European success stories EBITDA ( m) 833 921 1.204 1.284 1.490 2011 2012 2013 2014 2015 EBITDA 1 ( m) 240 341 424 483 2012 2013 2014 2015 EBITDA 2 ( m) 224 329 488 640 803 2011 2012 2013 2014 2015 EBITDA 3 ( m) 85 108 116 160 210 2014 2015 2016 2017e 2018e Source: Company information 1 Data is converted to EUR from PLN based on the spot rate of PLN/EUR4.214 as of 7 December 2017; 2 Data is converted to EUR from GBP based on the spot rate of GBP/EUR1.171 as of 25 August 2016; 3 Mobile business only; broker research 23
INDEX Masmovil at a glance Strong telecom market momentum Successful and credible challenger MM! Positioning Superior financial and operational performance 24
Multi-brand approach provides Significant Flexibility in go-to-market strategy... Selected pricing comparison for Main brands Yoigo Avg. Discount to Big 3 NMC NMC NMC NMC Mobile Only 26 ( min, 7GB) 29 (200 min, 6GB) 32 ( min, 8GB) 36 ( min, 12GB) 19% NMC FTTH 50/ADSL 53 ( min, 7GB) 68 ( min, 10GB) 65 ( min, 5GB) 63 ( min, 10GB) 19% NMC FTTH 300 63 ( min, 7GB) 80 ( min, 10GB) 77 ( min, 5GB) 73 ( min, 10GB) 18% Reference for Comparison Note: NMC = no minimum contract. Yoigo prices as per 09/05/18. Competitors prices updated 09/05/18. 25
with attractive price points combined with data rich bundles Selected pricing comparison for Second brands Mobile Only 12 (150 min, 2GB) 13 (150 min, 1,5GB) 15 (100 min, 6GB) 11 (120 min, 1GB) 10 ( min, 3GB) FTTH 50/ADSL 45 ( min, 8GB) 55 ( min, 8GB) 41 ( min, 10GB) 41 ( min, 6GB) - 2 FTTH 300 55 ( min, 8GB) 66 ( min, 8GB) - - - Reference for Comparison Note: Not included other postpaid pricing plans (International pricing plans and voice buckets with no data allowance); Excluded 2P Broadband gross adds 2: 400Mbps 26
INDEX Masmovil at a glance Strong telecom market momentum Successful and credible challenger MM! Positioning Superior financial and operational performance 27
Best in class operating results Postpaid Mobile (million lines) Fixed Broadband ( 000 lines) 3.42 3.52 +22% 3.71 3.90 4.16 +223% 504 647 370 280 200 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Source: Company Information 28
and financial results Service Revenues ( m) EBITDA ( m) 228 245 +16% 262 271 265 59 +67% 64 70 75 45 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 +15% +19% +19% +20% +22% EBITDA Margin Source: Company Information 29
Leading recruiter of mobile subscribers MASMOVIL is leading the league table for mobile client acquisitions Net portability (2015-1Q18; 000) 139 64 43 68 12 188 2015 (1) 1Q16 (2) 2Q16 (2) 3Q16 (2) 4Q16 2016 (2) 1Q17 2Q17 3Q17 4Q17 31-Dic- 2017 65 54 142 139 398 215 1Q18 National net portability Ranking 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 #2 #1 #3 #2 #1 #3 #2 #1 #3 #2 #1 #3 #2 #1 #3 #2 #1 #3 #2 #1 #3 #2 #1 #3 #2 #1 #3 Source: Internal analysis and estimate & CNMC 1 Aggregated 2 Proforma 30
Evolution of mobile postpaid + broadband lines Record growth to reach c.6 million lines. Broadband and postpaid lines up by 400k in 1Q18 Net adds Broadband + Mobile postpaid +946k +400k Broadband lines Mobile postpaid 4.41 0.12 3.34 +77k +87k 4.67 0.20 3.42 +78k +95k 4.82 0.28 3.52 +93k +192k 5.07 0.37 3.71 +134k +190k 5.51 0.50 3.90 +143k +257k 5.94 0.65 4.16 0.95 1.05 Mobile prepaid 1.03 0.99 1.10 1.13 FY16 1Q17 1H17 9M17 FY17 1Q18 SOURCE: Company; CNMC 31
Broadband access split by technology FTTH share is growing and represents for the first time more than 50% of total broadband base 1Q17-1Q18 WIMAX 15% 25% 32% 42% 52% FTTH 83% 73% 67% 57% 47% ADSL 1Q17 2Q17 3Q17 4Q17 1Q18 SOURCE: Company; CNMC 32
Change in Net Debt and Net Debt / EBITDA Overall leverage remains low at 1.2x (excluding convertibles) M Change in net debt Leverage 3 Debt/annualized EBITDA 14 356 2016 Full year 2017 Full year 1Q18 13 4.9 5 2.8 59 2.2 2.1 265 1.1 1.2 2017 Net Debt 1 CF from Operations Cash One-offs Acquisitions Other 2 1Q18 Net Debt 1 Including convertibles Excluding convertibles 1 Excluding convertibles 2 Includes PIK interest on junior debt, and cash interest accrued but yet to be paid. 3 Leverage calculated as Net debt excluding convertibles divided by annualized Recurrent EBITDA (1Q18 x 4 or 300M ) SOURCE: Company 33
Net Capex Guidance for 2018 Just 50M (13%) of capex is recurrent infrastructure investment and 75% is growth related FY18; M c.13% c.55% c.12% c.20% 385 45 305 80 210 50 Recurrent infrastructure Fixed network development (1) Strategic projects Net Capex Infrastructure Commercial (2) Total Net Capex Recurrent Non recurrent (1) Net of the sale of IRU s (2) Estimate since commercial capex will depend on Company s growth. Note that around 55M of commissions are now not considered as Capex under IFRS15. SOURCE: Company 34
Capex clearly oriented to growth MASMOVIL invested 155M in 1Q18, mainly for the expansion of its own FTTH network c.75% dedicated to fixed network development and c.19% for commercial Capex 1Q18; M c.19% c.4% c.75% c.2% 155 3 125 30 116 6 Recurrent infrastructure Fixed network development 1 Strategic projects Subtotal infrastructure Commercial Total Net Capex 1 Net of the sale of IRUs. Related to increase of own FTTH network by 2.1 M BUs to a total of 3.7 M BUs SOURCE: Company 35
Capex driving profitable growth CPE, installation costs CPE, logistic the SAC for FMC is capitalized Broadband subscriber growth Capitalized amount depends on the number of new broadband subs, technology, new or existing fibre home and underlying sales commissions. Based on the current sales mix, ~ 275-300 of capex per broadband gross add is a good estimate Fully discretionary Infrastructure Investment Case by case and supported by attractive investment returns Fixed FTTH roll-out: Per BU around 70 depending on area and involvement of partner Mobile network: Depending on network build out strategy Maintenance, IT, etc. 50m p.a. Source: Company Information 36
Bright outlook Clients First Capitalizing on increasing data traffic demands through leveraging high quality network assets and disciplined approach to pricing Relentless focus on customer service aim to be the customer champion in Spain Value Creation Mobile business continues to grow on a standalone basis Minimal penetration of current fixed footprint with runway for growth our momentum increases each month with improved execution Brand Variety Effectively address different segments in Spain through current portfolio of brands Digital Leader Establish MASMOVIL as digital leader Network Coverage Continue to increase mobile and FTTH network coverage using partnership agreements and own deployment 37
Mid term plan: Capex Net Capex in 2020 is expected to be c.40% of the estimated level for 2018, once the current FTTH plan with 6.5M own BU s is completed 2017-2020; M Net Capex 385 c.40% of the level of 2018 221 210 Last year of current FTTH development plan ~150 88 2017 2018 2019 2020 Commercial Capex & Other FTTH Capex Note: Net Capex includes Commercial Capex, the final size of which will depend on the commercial performance of the Company SOURCE: Company 38
Mid term plan: Revenues & EBITDA Total Revenues are expected to grow at double digit CAGR 18-20, with Recurrent EBITDA margin above 25% 2018-2020; M Total revenues Recurrent EBITDA Double digit Total Revenues CAGR 18-20 1,650-1,800M More than 25% CAGR EBITDA growth 460M - 480M 1,430M 300M Recurrent EBITDA Margin 26%-29% 2018 2020 2018 2020 SOURCE: Company 39
INDEX Appendix 40
Supportive shareholding base Shareholding structure Market Cap: 2.4bn 2 Fidelity 9% Providence 4% Other syndicate 1% Onchena 17% Free float 35% Other BOD 14% Other investors 10% Global Portfolio Investment 10% Source: Company Information 2 Calculated on 20m shares outstanding; 2 Market Data as of 27 th April, 2018 41
Balance sheet overview Net Debt Calculation Net debt slightly up vs 4Q17. Leverage remains low at 1.1x Recurrent EBITDA (excluding convertibles) (Million ) 1Q18 Short term commercial paper 1 Senior debt 524 Bonds 28 Junior debt 107 Providence convertible 119 ACS convertible 142 Other debts 17 Cash & Equivalents (321) Net debt as per Company 617 Providence convertible (119) ACS convertible (142) ND per Company excl. Converts 356 Leverage (x Recurrent EBITDA) (1) 1.2x (1) Leverage calculated as Net debt excluding convertibles divided by EBITDA of 300M (1Q18 Ebitda x 4 or Ebitda guidance) Adjusted Earnings per Share (fully diluted) Adjusted Earnings per Share on a fully diluted basis (33 million shares) reached 0.81 in 1Q18 (Million ) (except EPS) 1Q18 Fully diluted number of shares (million) 33.4 o.w. PEP shares in Convertible 8.2 o.w. ACS shares 4.8 Source: Company Information 42
Legal disclaimer This document and the conference-call webcast (including the Q&A session) may contain forward-looking statements and information (hereinafter, the Statements ) relating to MASMOVIL IBERCOM, S.A., and or MASMOVIL Group (hereinafter indistinctly, MASMOVIL, the "Company or the Group") or otherwise. These Statements may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, Company s results and other aspects related to the activity and situation of the Company. The Statements can be identified, in certain cases, through the use of words such as forecast, "expectation", "anticipation", aspiration, "purpose", estimates, plan or similar expressions or variations of such expressions. These Statements reflect the current views of MASMOVIL with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by MASMOVIL before the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission. Except as required by applicable law, MASMOVIL does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof, including changes in the Company's business or business development strategy or any other unexpected circumstance. This document and the conference-call (including the Q&A session) may contain summarized, non-audited or non- GAAP financial information. The information contained herein and therein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including any other documents released by the Company that may contain more detailed information. Neither this document nor the conference-call (including the Q&A session) nor any of their contents constitute an offer to purchase, sale or exchange any security, a solicitation of any offer to purchase, sale or exchange of any security, or a recommendation or advice regarding any security.. 43