June Company Overview and Business Model

Transcription

1 June 2005 Company Overview and Business Model

2 Agenda Company Profile Latest Results Strategic Plan PG. 2

3 FastWeb Concept: The Competitive Advantage Fibre-based Network infrastructure Future-proof technology Scalable Backbone Broadband-To-The-Home A single high-speed connection for integrated voice, Internet and video services Integration of multimedia services over IP Second generation Internet applications: not only text and images, but also high quality interactive video, telephony and data PG. 3

4 FastWeb s Value Proposition Customer segments Business Network 2 Network 1 Network 3 FastWeb s integrated IP network Different networks used by... Incumbents CLECs Residential Network 2 Network 1 Network 1 Cable TVs FastWeb Voice Data / Internet Video Services PG. 4

5 Business model s success factors Innovative, future-proof technologies Integration of multimedia services over IP Strategic deployment of Fibre Optics Infrastructures Innovative use of xdsl connectivity Open platforms for VAS implementation Creative and aggressive Marketing strategy Customized, comprehensive service offerings Any service, any Customer segment No single killer application: the real killer application is the Service Mix Combination of Flat Rate and Pay Per Use tariff plans for matching specific Customer needs One step ahead: constant service innovation PG. 5

6 Unique Service Offering With bandwidth of up to 1 Gbit/s and FASTWEB s IP architecture both fiber and DSL clients can Employees can work in different branches or at home as if they were connected to the same LAN IT departments can more efficiently reengineer traditional client-server architectures SMEs can get an easier and costeffective access to advanced telephony services with no need for PABX Business Customers Unique Service Offering Residential Customers Watch broadcast channels, Pay-TV channels and Videoon-Demand content on their TV sets (world-first large scale TV-over-DSL service) Use network PVR (VideoREC) and EPG Browse the Internet at the fastest speed available (up to 10 Mbit/s) Video-communicate at TV quality PG. 6

7 Results Overview The 2 nd wireline network in Italy Founded in September 1999, FASTWEB is the leading alternative operator of fixed broadband telecommunications services in Italy s main urban areas (~ 22% of the population reached as at 31 March 2005) FASTWEB created a fully IP-based network totally independent from the incumbent s infrastructure Technological leadership Recognised pioneer in broadband and triple-play World first fully IP based network Trusted supplier for mission critical application Integrated triple play offer FASTWEB provides voice, Internet connectivity, data transmission and TV services over a single connection by using Fiber-to-the-Home/Office and DSL access technologies The company offers its services to both companies and families Highly attractive market Italy broadband penetration lags its European peers but is now among the fastest growing in EU No cable operators in Italy, weak infrastructure-based competition Successful business model Co-leader with the incumbent in the covered areas Highest residential ARPU in the sector Impressive revenue and margin growth since inception PG. 7

8 Fastweb s Milestones Fastweb s Foundation First Business Customers Consumer Services Launch VoD Services Launch Countrywide Service Expansion xdsl Service Launch Oct 1999 Jan 2000 Oct 2000 Jan 2001 May 2001 Jul 2001 Multicast Services Launch Oct 2001 Internet PPU Launch Jan 2002 VoIP Class5 Service Launch Jun 2002 Videocom Service Launch Nov 2002 VoD over ADSL Launch Mar 2003 Multicast over ADSL Launch Aug 2003 PG. 8

9 : Revenue* Growth and Milestones Oct 2000: Consumer services launch Sept 1999: Foundation May 2001: Nationwide service expansion July 2001: xdsl service launch June 2002: EBITDA breakeven Mar 2003: VoD over ADSL launch New Business Plan: Target of 45% population coverage by EoP Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2005 Jan 2000: First business customers Mar 2001: VoD services launch Nov 2001: Access to Socrate and 955 Mln financing Aug 2003: Full TV over ADSL launch Nov 2002: Videocommunication service launch Dec 2004: Merger between e.biscom and FastWeb and change of company name in FASTWEB * Revenues from Italian operations ( Mln) - Pro-forma figures equal to Group revenues net of HanseNet revenues PG. 9

10 : Corporate Evolution FASTWEB group structure has evolved maintaining strong priority on transparency and simplicity toward capital markets From a partnership to a true Public Company Shareholders Micheli 36% Scaglia 35% Partners 7% Market 22% Micheli 15% AEM 12% Scaglia 30% Market 43% Micheli 10% Scaglia 25% Market 65% Group Structure Simplifying Group s Structure Mgmt 4.8% 64.4% 33.0% 30.8% 67% 100% Other Businesses Streamlining Group Activities PG. 10

11 FASTWEB Overperformance in Growing BB Segment Italian Annual TLC Fixed Spend ( Mln) 16,621 16,466 15,996 16, % +40% +62% Line rental Voice Dial Up Internet Broadband Business Network Services FASTWEB Italian Operations Revenues ( Mln) CAGR% 0% +50% -15% -8% +1% Source: Industry Research CAGR% Positioned since inception on the only fast growing fixed line market segment Broadband bundled with the other components of business and residential telecom spending (Access, Voice, Business data services) % Exploited broadband capacity to create new revenue streams (TV, Video, other VAS) PG. 11

12 Broadband Market Shares Broadband Penetration on Covered Market (2004 EoP) 100% = number of households passed Market Shares of Total Broadband Market (2004 EoP) 100% = 4.45 Mln BB Connections 20% (*) 15% 16% (**) 12% (***) TI Retail 70% 3,115,000 FASTWEB 11% 496,000 5% Wind 8% 341,000 TI FASTWEB All Other Players (*) FASTWEB Penetration on Areas Covered since 4 years Other 6% Tiscali 5% 215,000 (**) FASTWEB Penetration on Areas Covered since 2 years (***) Overall FASTWEB Penetration Source: Companies' financial reports / ASSINFORM Report 2005 Telecom Italia is taking the highest share, as its services are deployed with national coverage FASTWEB is co-leader with TI in the covered areas, making immediate expansion a compelling opportunity PG. 12

13 Infrastructure Based Operator Business Model FASTWEB created an IP based end-to-end infrastructure that already enables to generate a 75% gross margin and that will allow to reach slightly better economics than incumbents constrained by legacy technologies and know-how 20% Capex / Sales Ratio % 15% 10% 5% 0% Infrastructure Operator Expansion Phase Resellers Business Model Incumbents Business Model Selected European Incumbents (2005E) (*) Average European Incumbents (2005E) (*) FASTWEB projected % 10% 20% 30% 40% 50% 60% BT DT FT TI TEF PT FASTWEB Source: Company s estimates based on publicly available information EBITDA Margin % PG. 13

14 Unique Positioning of FASTWEB s Business Model FASTWEB s high operational leverage is due to End-to-end infrastructure ownership and control Highly capital intensive with high barriers to entry Both business and residential markets served by the network Single fully integrated IP network with no legacy technologies and IT systems to be maintained Selective geographical coverage Triple play approach coupling higher ARPU with more convenient commercial offer ARPU ~ 900/year residential ARPU > 8,000/year Small business ARPU ~ 2,000/year SoHo ARPU Gross Margin ~ 75% Gross Margin on both residential and business segments Opex Semi-fixed cost structure PG. 14

15 Customers Pay Back Time All market segments show attractive economics SME SoHo Residential 2&3 Play (*) Residential Single Play (**) ARPU ~ 8,000 ~ 2,000 ~ 900 ~ 300 Gross margin 75% 75% 70% 75% Capex ~ 3,500 ~ 850 ~ 500 ~ 170 Pay Back Time (months) ~ 7 ~ 7 ~ 10 ~ 8.5 * Includes Video and TV components ** To be launched in the 2nd half of 2005 PG. 15

16 Agenda Company Profile Latest Results Strategic Plan PG. 16

17 1Q 2005 Highlights First Quarter of New Business Plan Implementation Coverage New Subs Margins Financial Structure 4.8 Mln households reached (22% of Italian population) following the opening of new cities such as Como, Viterbo, Rieti, Asti, La Spezia, Latina, Forlì and expansion in existing areas Smooth ongoing process for the achievement of the 7 Mln goal by year end 46k new customers in the period, in line with the record quarter achieved in 1Q 04 Success arising from previously opened areas Commercial activities in new cities started only at quarter end Stable marginality in a quarter of new operating expenses related to coverage expansion lower IRUs contribution Proceeds from share capital increase provides ideal financial position to implement new business plan New 950 Mln long term financing facility with a more than halved cost of debt PG. 17

18 New Areas Openings Snapshots One off planning activities Formalisation of a standard process for the opening of a new city General agreement with TI to access ~ 300 COs In depth analysis of available infrastructure and digging requirements in all new areas Accurate planning of equipment purchasing Implementation steps Pre-Launch Activities Sales Activities Communication and PR Commercial Organisation Network Creation t -3 t -2 t -1 t 0 Time effective launch of new areas and immediate commercial success thanks to: 5 years know how leading to unique planning expertise Local Authorities awareness of innovation and development opportunities generated by FASTWEB leading to strong cooperation in network deployment and commercial launch Strong territorial approach in communication (local ADV, events, institutional relationships) PG. 18

19 Customer Growth and Composition Customers (thousands) Customers by Segment +44% Companies 15% 1Q Q Q Q Q 2005 Families 85% 46k net additions in 1Q 05, above the 40k quarterly run rate experienced in 2004 New areas released at quarter end success achieved mainly in old cities PG. 19

20 Revenue Growth and Composition Group revenues ( Mln) Revenues by segment +23% Companies 51% 1Q Q Q Q Q 2005 Families 49% of which IRU 2% Revenues continue to show significant growth rates year-on-year IRUs contribute for ~ 2% of total revenues in 1Q 2005 vs ~ 6% in FY 2004 Change in revenue mix determined by seasonal effects of the business segment PG. 20

21 EBITDA and EBITDA Margin Quarterly Growth EBITDA ( Mln) EBITDA Margin (%) +29% p.p 46,7 52,8 57,3 62,1 60,4 29,6% 29,5% 30,9% 31,5% 31.1% 1Q Q Q Q Q Q Q Q Q Q 2005 EBITDA continues to grow significantly on a year-to-year comparison Notwithstanding significant expansion into new areas, EBITDA margin shows year on year improvement PG. 21

22 Free Cash Flow and Net Debt Evolution Free Cash Flow ( Mln) Net Debt Evolution ( Mln) 1Q Q Q Q Q 2005 (6,9) 630,4 726,6 814,4 820,2 (56.4)* (92,7) (96,3) (88,1) 75,7 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Positive cash flow evolution, despite new phase of expansion started in 1Q 05 Extremely sound financial position, thanks to new capital resources * 1Q 05 Free cash flow does not include commissions on the right issue as it was finalised in the first week of April PG. 22

23 Residential ARPU Evolution Total residential ARPU ( /year) ARPU of Video Customers ( /year) Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Telecom Services Video Services Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Confirming ARPU in the 900/year region Current slow down of video services take-up slightly impacting overall ARPU Focused advertising campaigns and extension of VoD offer are the next planned steps to further increase TV services appeal PG. 23

24 Agenda Company Profile Latest Results Strategic Plan PG. 24

25 Key Achievements and New Strategic Highlights Start up phase successfully completed Proved sustainability of an infrastructure based triple play approach Positioned as both market and technological leader 4.0 Mln home passed EoP (18% of population) Beaten FY targets set one year earlier: Customers: 496 k Revenues: 720 Mln EBITDA: 219 Mln Sustained technological leadership Broadband market leader in the covered areas Booming Broadband market Favourable competitive landscape Opportunity to anticipate growth Becoming the #2 fixed line Telecom operator with strong long term competitive position (45% of population by 2006 and 60% of telecom spending) PG. 25

26 Geographical Expansion Covered Areas 2004 EoP Covered Areas 2006 EoP (Exp.) 3 Mln new homes expected to be passed in 2005 and a further 3 Mln expected by the end of 2006 reaching 10 Mln homes passed (approx. 45% of Italian population and 60% of telecom spending) Acceleration of geographical coverage (Homes passed Mln) Accelerated targets PG. 26

27 Market Penetration and Customers Targets Long term penetration at over 20%. Initial decrease in market penetration due to significant enlargement of covered areas Market Penetration Target (%) Customers Target ( 000) 22% 24% 2,200 2,400 17% 1,650 12% 10% 12% 1, A 2005E 2006E 2007E 2010E 2013E 2004A 2005E 2006E 2007E 2010E 2013E Double & Triple Play Single Play Addressable Market (HH m) Double & Triple Play Single Play PG. 27

28 Capex Analysis Following completion of geographical expansion in , highly flexible and scalable capex plan due to additional-customer-driven capex representing over 60% of total projected investments Geographical Expansion ( ) Cumulated Capex Penetration Growth ( ) Cumulated Capex 100%= 1.4 Bln 100%= 1.4 Bln Other 10% IT & Systems 12% IT & Systems 21% Customer Driven 67% New Coverage 33% Customer Driven 45% Other 12% PG. 28