H1 2010 resultsMobistar analyst conference 22 07 2010
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This presentation contains forward-looking statements about Mobistar, in particular for 2010. Although Mobistar believes these statements are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved. Important factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements include, among others, the effectiveness of the mobility centric operator strategy including the success and market acceptance of the mobile voice and date abundance plans, the Mobistar brand and other strategic, operating and financial initiatives, Mobistar’s ability to adapt to the ongoing transformation of the telecommunications industry, regulatory developments and constraints and the outcome of legal proceedings, risks and uncertainties related to business activity.
Cautionary statement
3
During this first semester, Mobistar clearly demonstrated its ability to grow the business
+ 7,5% Turnovergrowth(+4,5% organic)
+40 %Advancedmobile data revenues
+36.000 fix/mobile Internetcustomers
+ 120.000Postpaid customers
all figures vs. H1 2009
April 2010: Consortium including Mobistar presents showcase introducing a platform hosting a wide range of mobility solution such as e-call and road charging
April 2010: Mobistar´s acquisition of KPN Belgium Business completed after Competition Council gives green light and renamed to Mobistar Enterprise Services S.A.
Expand the mobile Invest in new growth areas
May 2010: Truvo (editor Yellow pages) and Mobistar launch a local search engine with free data access for Mobistar client
Feb 2010: Mobistar launches mobile internet in the EU for 2 Euros a day and automatic budget control
Mobistar continues to reinforce its position on its core market and expands into new growth areas
Jan 2010: Mobistar signs m2m partnership with Touring for automatic assistance in the event of theft, accident and breakdown throughout Europe
July2010: Partnerships in place for a launch of the 4P offer and first FUT launched
June 2010: Tellink concludes MVNO contract with Mobistar transferring 65.000 SIM cards to the Mobistar network as from September 2010
April 2010: Mobistar demonstrates first real LTE test network in the Brussels area and announces HSDPA network upgrade to 14,4 Mbps by this summer , 28,8 Mbps Eoy
July2010: Integration of sales force of Mobistar Enterprise Services S.A. into Mobistar sales teams
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LTE
Progress on our core business
6(*) incl . MVNO, excl. MaTMa and Orange Luxembourg customers
(**) Source: Mobistar estimates based on company announcements incl MVNO (restatement for BASE inactivity)
-42 -39-19
-32
54
-21-13-28
18 21
46
-12
40
35
Q1 09
44
Q1 10Q2 09
34
57
Q3 09
-54
3
23
9
13
Q4 09
20
27
Q2 10
Mobistar focus on value and innovative offers continues to attract Postpaid users
MVNO
Prepaid
Postpaid
104 9827
109,0%107,0%107,0%106,0%
Q2 10
109,2%
Q4 09
225
49
Net Adds (k users)
ActivePenetration %
-813
Q1 10
57
107
Q2 09
58
Q3 09Q1 09
44
3
46
12
-54
212
Mobistar*
Active Penetration**
Competition**
Market net adds (except Q2 2010) Mobistar net adds split (k users)
•+ 120.000 Postpaid net adds y-o-y
7
Q2 2010
3.803.449
61%
3.830.161
2008
3.738.604
57%
2007
3.489.859
54%
Q1 2010
Postpaid % of retail base**
Customers on theMobistar network*
62%
2009
3.746.515
61%
(*) excl. MaTMa and Orange Luxembourg customers
(**) excluding MVNO cards
Postpaid weight rose to 62 % of customer baseMore than 70 % of our customers is under loyalty
Prepaid
Laptop cards
MVNO
Postpaid - BUS
Postpaid - RES
Postpaid % retail cust base
Mobistar Customers on the Mobistar network (k users)
8
Mobile handset data (incl. SMS) and improved customer mix continues to drive ARPU increase initiated since Q4 2009
Blended ARPU (incl. visitor roaming, excl Mobile broadband revenues)
12 months rolling ARPU (EUR/month)
+1,36
H1 2010
32,03
Usage
4,41
Price
-3,05
Roaming regul.
-0,98
MTR decrease
-0,00
H1 2009
31,65
FY 2008
32,35
-0,98
31,54
Q1 2010
31,86
Q2 2010Q2 2009 Q4 2009Q3 2009
31,3131,65
32,032,3%
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8 months after the rebranding, Orange Luxembourg continues its positive trend
79%70%
H1 2010
81
H1 2009
80
Prepaid
Postpaid
mix Postpaid
Customers on the Orange Luxembourg network (k users)
H1 2009
34,240,1
H1 2010
+17%
Blended ARPU (incl. visitor roaming)
12 months rolling ARPU (EUR/month)
10
Oxygen
Progress on our growth initiatives
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• Confirmed leader in Smartphone sales with a share in excess of 25 %
• Average mobile data consumption +50% from 3MB to 5MB/month
• iPhone data plan users +33%
• Average iPhone mobile data consumption > 100 MB/month
In 2010 Mobistar continues to introduce segmented mobile data handset offers resulting in increasing usage and activity rate
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On MATMA, our latest international commercial success have brought the IMC above the threshold of 100,000 signed SIMs
Speed camera alert devices
Coverage: Benelux
55,000 SIMs 100,000 Matma cards
signed
Smart metering
Coverage: UK
24,000 SIMs
Medical monitoring solutions
Coverage: Europe & USA
15,000 SIMs
Industrial security solutions
Coverage: Europe & USA
15,000 SIMs
Intelligent electrical plugs
Coverage: France
Beginning of the roll-out
Smart metering
Coverage: UK
6,000 SIMs
•IMC = International machine-to-machine Competence Center
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In the meantime, Mobistar is consolidating its leadership on theBelgian market
• Vending machines, 2,500 SIMs
•Market size MATMA in Belgium (est. 250 000 cards)
Market leader with 60% market share, 70% value share
•Recent deals/ Showcases
• Prisoner bracelets 2,000 SIMs
• Belgian consortium on road charging ( and e-call )
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• Mobile data revenues up to 31% of mobile service revenues in H1 2010 (from 28% in H1 2009)
• Non-SMS mobile data represent 8% of total mobile service revenues (vs. 6% in H1 2009)
• Supported by the successful uptake of
• Strong uptake in usage of Smartphone
• SMS abundance offers
• Strong take up Internet Everywhere (from 47 k to 93 k cards y-o-y)
• Leader in MaTMa applications with close to 150,000 cards
0
20
40
60
80
100
120
140
160
180
200
220
H1 2010
8%
31%
4%
20%
H1 2009
6%
28%
H1 2008
Mobile data uptake (in Mio EUR)
This strong commercial focus resulted in an accelerating growth of advanced data from 38% to 42%
adv data as % mobile service rev
data as % mobile service rev
SMS Person to Person
SMS Premium
Mobile data handset and PC
MATMA
+ 38%
+ 42%
15
Total Non Mobile revenues (M€)
2217
22
H1 2009
44
5
17
H1 2010
64
7
18
Mobistar Enterprise Services S.A.
Fix Residential
Fix Business
Wholesale
Non mobile revenues increased to 64 Mio driven by organic growthand consolidation of MES, despite declining wholesale activity
• Driven by targeted promoted ADSL customer base grew from 29.243 to 45.113 clients
• On top of this, the fix ADSL network hosts more than 150.000 ADSL wholesale broadband customers leveraging Mobistar investments in the fix network
• In the business segment, Mobistar activated more than 3.000 full pack (data, voice, mobile) after 1 year launch and 30.000 voice packs (voice, mobile)
• Mobistar Enterprise Services S.A. (ex-KPN Belgium Business) recorded 22 Mio EUR revenues (Data, Voice, Carriers and ADSL Wholesale contract)
+ 7%
+ 26%
- 20%
16
Progress on convergence in residential
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From Mobistar’s vision to offer a new experience…
Any contentAny content
Any sourceAny source
Any screenAny screen
Anytime, Anytime, anywhereanywhere
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M*ADSLM*ADSL
…to a state of the art technology in collaboration with solid partners to provide a complete hybrid solution
TV platform
Access control
Linear TV channels
VoDVoDEPG data
EPG data
•Hybrid Setup Box Hardware
• Dual DVB-S tuner, one DVB-T tuner
• IP interface (IPTV)
• High performing PVR
• Full HD, Dolby Digital, and 3D Ready
• EcoPower performance
Interactive TVvia DVB-Svia DVB-Tvia IPTV
Catch-up
Catch-up
•Livebox
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Services can be accessed via a very intuitive user interface (carousel navigation) and via simple widgets
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Your Smartphone becomes your new TV remote control, Everywhere !
• Record on your TV Decoder
• Browse EPG
• Set Reminder
• Share with Friends
• and watch Mobile TV
Home late?
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Oxygen
Progress on convergence in business
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The B2B convergence project is on track and commercial teams have been merged
1. Mission:
• KPN B2B renamed to Mobistar Enterprise Services S.A.
• White label (SP’s) and wholesale (carriers grade) business
• Located in Wemmel (till end of 2011)• Mobistar
• Retail business to consumer and business customers
• Located in Evere
2. Synergies:• Customers: One face to the customer –
common sales approach• Costs: leverage platforms on both companies• Competences: leverage know how, best
practices, common way of working
3. Consequences:• Transfer of activities between MES and Mobistar• Continuation of integration teams for the
coming period
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Product strategyMobistar and MES product portfolio fits well together
Mobile Voice Internet Fix Data
Mobile Business
Fix CorporateFix EnterpriseFix Business
One Office Voice Pack
SIP Trunking
Fix Voice
One Office Full Packs
Corporate Internet
Ethernet
IP VPN(QoS)
Colocation
Teleworking
Mobile Data
Mobile BroadbandInternet EverywhereBusiness Everywhere
One Office Fix Packs
Hosting
Mobile Business for Corporate
Mobile MultimediaBlackberry BESBlackberry BISConnect Mail
Connect Mail & Surf
Mobistar product portfolio in B2B MES product portfolio in B2B Coming soon
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LTE
Conquests 2015
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Orange recently announced its 5 year action plan
• Aimed at setting out the challenges and perspectives• Clarifying the Group’s business activities • Regaining a sense of conquest and pride within the company
H1 2010
results
H1 2010
results
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In Belgium, make Mobistar “Best Loved” means:
By 2015 Mobistar will be celebrated
• by its customers as the trusted leader in personal(ized) communication and services
• by its people as the best ICT employer
• by society as a true contributor to an innovative progress and an environmental development
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Oxygen
Regulatory update
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• 2G license 5YR renewal fee of 76 Mio EUR payable at expiry of the license (28 Nov 2010) or yearly installments
• Through extensive backhauling upgrade program significant upgrade of the 3G/HSDPA download speed are being implemented during 2010
• 14,4 Mbps by the end August• 28,8 Mbps by the end of this year
• 89% of the Belgian population is now covered by Mobistar’s fast 3G+ (HSPA) network.
• By combining our 3G+ coverage with our EDGE coverage (99% of the Belgian population) customers receive the best broadband experience.
• Possible evolutions consider are• Refarming (UMTS 900mhz, LTE 1800Mhz) • Acquisition of additional LTE spectrum bands in case of
mobile data traffic acceleration vs forecast
Close to 100 Mhz of spectrum have been secured to coverfuture Mobistar traffic increase, LTE seen as an evolution
2 x 12 Mhz
2 x 20,8 Mz
2 x 15 Mhz (FDD)
Max 2 x 20 Mhz
900 Mhz
1800 Mhz
2100 Mhz
2600 Mhz
Mobistar spectrum holdings
•till 2015
•till 2021
To be auctioned 2010-2011
• Following BIPT decision to decrease MTR on August 1st 2010 , Mobistar has filed an appeal (annulment and suspension) on July 14th
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Q1 results
H1 2010
results
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Mobistar consolidated P&L continues to show organic growth
Mio € H1 2009 H1 2010 % H1 2010 (excl MES
%
Total Revenues 778 835 7.3% 813 4.5%Total Turnover 762 819 7.5% 797 4.7%Total Service Revenues 713 761 6.7% 739 3.6%Cash Expenses -500 -553 10.7% -534 6.8%EBITDA 278 282 1.1% 279 0.4%In % of service revenues 39.0% 37.0% 37.8%Depreciations and amortizations -81 -83 3.2% -80 -1.2%Net finance income -3 -2 -21.5% -2 -21.2%Tax expense -66 -64 -4.1% -64 -4.2%Net profit 128 132 3.0% 134 4.2%Diluted earnings per share (in €) 2.14 2.21 3.0% 2.23 4.2%
Mobistar consolidated income statement
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SMS abundance, non-mobile revenues and MES/Orange Luxaffiliates offsets voice price pressure and regulatory effects
16
15
MES
819
Orange Lux
3
Billed and HS Rev.
121022
H1 09 Group
Turnover
762
H1 10 Group
Turnover
22
Good elasticity to roaming decreases
Essentially driven by SMS abundance and increase in postpaid
customer base
Mobistar group turnover evolution breakdown (in Mio EUR)
Volume effectPrice effect
Customer Roaming
National Incoming
•Visitor Roaming
Voice/SMS decreases more than compensated by mobile data uptake, MVNO and handset revenues
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In Belgium, Mobistar continued to invest in fix activities whilepreserving the value creation in mobile
Mio € H1 2009 H1 2010 %Total Revenues 713 748 4.9%Total Turnover 699 733 4.9%Total Service Revenues 652 677 3.9%Cash Expenses -425 -460 8.3%EBITDA 288 287 -0.2%In % of service revenues 44.2% 42.4%
Mobistar Mobile Income Statement
Mio € H1 2009 H1 2010 %Total Statutory Revenues 46.5 66.0 41.8%Total Turnover 44.2 64.0 44.8%Total Service Revenues 44.2 64.0 44.8%Cash Expenses -58.3 -75.2 29.0%EBITDA -11.8 -9.2 -21.7%In % of service revenues -26.6% -14.4%
Mobistar FIX Income Statement (incl MES)
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Orange Luxembourg continued to deliver the profitable growth
Mio € H1 2009 H1 2010 %Total Revenues 21.8 25.4 16%Total Turnover 21.8 25.3 16%Total Service Revenues 18.4 21.4 16%Cash Expenses -19.5 -22.0 13%EBITDA 2.3 3.4 48%In % of service revenues 12.5% 15.9%Depreciations and amortizations -4.1 -3.6 -11%Net finance income -0.5 -0.2 -60%Tax expense 0.4 0.3 -25%Net profit -1.9 -0.1 -95%
Orange Luxembourg Income Statement
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Total cash expenses Mio EUR
16
553
500
22
Orange Lux
Handset/RT Costs
253230Interconnect
& OtherSales Costs
53
66
135
483
H1 2009
58
66
155
531
H1 2010
HeadcountCost
Non-Headcount
Cost
The increase in cash expenses is mainly driven by interconnection, network roll-out, handset sales and MES Q2 integration (19,7 M EUR)
Orange Luxembourg• More interconnect costs linked to overall traffic increase and additional incoming
revenues and carrier transit
• More handsets costs in correlation with the handsets sales increase
Non-headcount cost• Higher dealer remuneration driven by postpaid volumes & contract
extensions• Exceptional expenses related to MES S.A., cost associated move to new
building and strategic partnership FT• Increase in Advertising & Promotion• Optimization of costs following Mobistar’s transformation program • Occupancy, consultancy and maintenance expenses related to MES
Headcount costs• Mobistar’s headcount remains flat. The investment in new lines of
business and owned shops is fully financed by efficiency gains• Negative indexation of Jan 1, 2010• MES 130 FTE impact amounts to 1,8 Mio EUR
Interconnect and other costs of sales
• Increase of Interconnect costs +9% YoY (vs +14% for incoming revenues) mainly driven by SMS abundance retail offers partially compensated by customer roaming regulation.
• MES mainly driven by wholesale and B2B activities
Handsets & RT costs
• In line with increase in handset sales, with a mix in favor of high-end devices / smart-phones
35
Odyssey transformation programs delivers according to the objectives set at the beginning of the year
(e.g. Mobile Data, Fix Program, revenue engineering)
(e.g. IT Renewal)
(e.g. Customer care, distribution and organization)
More than 100 Mio EUR
2010-2012
•* Transformation includes capex and opex, savings includes recurring cost reductions as well as cost avoidance
Gross saving objective 2010 Gross saving objective
2010 objective
realized H1 2010
58%
42%
~ 33 Mio EUR
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Capex driven by microwave deployment and further 3G roll-out leading to a 89% outdoor / 62% business indoor HSPA coverage
Capex (in M EUR) Capex as % of service revenues
6
5250
7%
9%
11%
10%
55
2009
146
4
H1 20102008
160
2
61
2 1
H1 2009Sales and real estate
CAPEX/year
Orange Lux
MES
Network and IT
CAPEX/service rev.
• The Mobistar network had 4,965 sites at the end of June 2010, 616 of which were shared.
• In line with its backhauling upgrade plan, Mobistar deployed 525 microwave links.
• In the first quarter of 2010, Mobistar has launched its IT-renewal program. This program targets a fully integrated customer care, service delivery and billing system in order to improve the total cost of ownership and time to market
37
Organic cash flow grew with 2% to 200 M EUR
MES Incl. (*)Mio € H1 2010 H1 2010 H1 2009 YoY evol.
MES Incl.YoY Evol MES Excl.
EBITDA 282 279 278Financial result -2 -2 -3Change in working capital 0 10 12Interest paid / received 0 0 0Tax paid -26 -26 -29
Net cash from operating activities 254 261 258 -1.7% 1.1%Purchase of intangible and tangible assets -55 -54 -61Proceeds from sale of equipment 1 1 0
Net cash used in investing activities -54 -53 -61 -11.6% -14.1%
Organic Cash Flow 200 209 197 1.4% 5.8%
Partner financing activities 0 0 -1Acquisition of subsidiary, net cash acquired -63 -65 0Flows from long-term borrowings 35 35 -25Current portion of amounts payable > 1YR falling due < 1YR -4 -5 -21Short-term loan subsidiaries 0 -8 0others 2 2 1Free cash flow before dividend payments and capital movements
170 168 15112.3% 11.3%
Dividend payments -174 -174 -151Available Cash Flow -4 -6 0
Free Cash Flow Generation
MES Excl. (**)
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Sound balance sheet resulting in a net debt of 323 M EUR
Mio € H1 2009 H1 2010Non-current assets 875 922Current assets 261 287Deferred tax assets 7 7Cash and cash equivalents 10 6TOTAL ASSETS 1,153 1,222Net Equity 441 300Long-term provisions and trade payables 15 21Deferred Tax Liabilities 0 1Short Term Debt 298 329Current Liabilities 400 571TOTAL EQUITY AND LIABILITIES 1,153 1,222Net Debt / (Net Cash) -265.5 -323.0
Balance Sheet
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Upgraded guidance
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We continued deliver organic growth while at the same time investing in all the areas of the telecom market in order to achieve our goal to become a complete convergent telecom company
Major improvements vs our guidance
Revenue and EBITDA still negatively driven by regulatory decisions
MTR decision delayed with 1 month decreasing the negative impact on revenue to 33 M EUR (vs 40 M EUR) and EBITDA close to 17 M EUR (vs 20 M EUR)
Roaming revenue impact of around 27 M EUR confirmed
Revenue and EBITDA positively driven by
Integration of 9 months MES S.A. activities
Organic and more in particular mobile data growth stronger than initially anticipated
Revenue and EBITDA continues to be impacted by investment in growth initiatives
Launch of innovative interactive Quadruple-play offerings confirmed with an associated commercial investment of 15 M EUR
In addition, organic cash flow will be positively impacted due to a revised schedule of tax payment
Strong H1 2010 performance
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Total Turnover
Ebitda
Capex/sales
Net profit
Organic cash flow*
Around 10%7,4%Equal to 10%
200 M EUR
132 M EUR
282 M EUR
+ 7,5% ( 819 M EUR )
H1 2010 actuals
between 330 - 350 M EUR
between 225 – 245 M EUR
between 520 - 540 M EUR
around 5 % increase
New 2010 guidance
between 260 - 280 M EUR
between 210 – 230 M EUR
between 500 – 520 M EUR
in line with 2009 (1 567 M EUR)
Old 2010 guidance
* Organic cash flow defined as net cash flow from operations less acquisitions of tangible and intangible assets, excluding spectrum license fee and acquisition of subsidiary
With this strong H1 2010, Mobistar is in a position to increase its guidance on all KPI’s
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