Telio Holding ASA Q1 07 presentation Eirik Lunde CEO Oslo, May 4th, 2007 Kyrre Grinde-Andersen CFO
Telio Holding ASA Leading European broadband telephony provider Committed to improving user experience and reducing cost to subscribers Innovative products and services based on scalable, access independent technology platform World renowned technology experts Headquartered in Oslo, listed on OSE with ticker telio
Q1 07 highlights Continued Customer Growth Subscribers: 132,100, up 5,000 (4%) in Q1 Revenues: NOK 88.4 million, up 34% compared to Q1 06 Operating Profits, best ever Operating profits of NOK 4.1 million Gross margin stable, OPEX continues to scale Healthy cash position: NOK 109 million Customers & distribution Decreased TM activity in order to secure best quality of the customers and to ensure profitable growth Satisfactory underlying customer growth in Norway partly offset by cancellations from Q4 sales Strong customer growth in Denmark and the Netherlands On target to launch SMB
Contents Financial results Norway Mobile VoIP International Other events
Overall subscription inflow in Q1 07 000 subscribers 132.1 127.1 114.8 101.8 90.3 78.1 66.7 54.3 22.0 Q4 04 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Norway Denmark Netherlands Mobile
Continued revenue growth, +34% compared to Q1 06 NOK mill. 66.1 69.4 75.8 84.0 88.4 36.7 45.6 51.8 27.8 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07
Stable revenue per subscriber for VoIP Norway NOK 307 312 295 284 294 296 283 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 VoIP Norway
Stable average monthly gross margin per subscriber for VoIP Norway NOK 154,4 12,0 166,4 - + + 156,4 163,1 166,1 166,8 166,4 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Subscription Fee Loss on free calls Margin from non free calls Incoming termination Margin on subscription per customer Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 VoIP Norway
Scaling continues improved quarterly opex* per subscriber** (excl. s&m and share based payment) NOK 415 368 316 301 287 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 * Opex excludes Sales&marketing, amortization of subscriber acquisition cost and Share based payment ** billable subscriber (Musimi includes number of customers that used the account during the quarter)
Profit & Loss statement NOK 000 Q1 07 Q1 06 var Ytd Q1-07 Ytd Q1 06 var Sales 87 163 66 121 32 % 87 163 66 121 32 % Other revenues 1 215 77 1478 % 1 215 77 1478 % Total revenue 88 378 66 198 34 % 88 378 66 198 34 % Cost of connections and traffic charges (37 408) (29 930) 25 % (37 408) (29 930) 25 % Salaries&Personell costs (10 155) (9 003) 13 % (10 155) (9 003) 13 % Selling&Marketing costs (12 191) (7 754) 57 % (12 191) (7 754) 57 % Other expenses (13 156) (15 232) -14 % (13 156) (15 232) -14 % Depreciation and amortisation (11 394) (6 440) 77 % (11 394) (6 440) 77 % Operating profit (loss)/ebit 4 075 (2 161) 289 % 4 075 (2 161) 289 % Finance costs (432) (816) 47 % (432) (816) 47 % Profit (loss) before tax 3 643 (2 977) 3 643 (2 977) Gross margin 58 % 55 % 58 % 55 % Ebitda 15 469 4 279 261 % 15 469 4 279 261 % 18 % 6 % 18 % 6 %
Contents Financial results Norway Mobile VoIP International Other events
Moderate net growth in Norway due to aggressive Q4 sales Increase of approx. 1,600 VoIP subscriptions to a total of 95,700 subscriptions A number of customers that were acquired through TM channel in Q4, cancelled during Q1. Total underlying customer intake during the quarter was 8,300 measured after mandatory regret period 44,3 VoIP Subscriber growth Norway 000 subscribers 87,0 94,1 95,7 79,0 73,0 64,4 55,3 Overall good performance in all channels. TM channel now under control again as defined as goal at Q4 presentation Most new subscribers sold on 12 month contracts 22,0 2004 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07
Still an immature market
1,126,000 broadband connections vs. 360,000 broadband telephony connections
Telio s market share
Retail, more important as Broadband Telephony matures >90 % marketshare in retail channel Telio retail channels Narvesen, Smart Club, Elkjøp og Expert among others Increased sale in retail channel with 39 % in Q1 2007 Low regret rate High customer involvement (provision rate)
Attacking new segments SMB launch Target market approx. 191,000 customers Current penetration of IPphone services is 0.38% (1,764 customer) Targeted segment 1-5 lines Value proposition Simple priceplan Value for money Easy to install Good quality Commercial soft launch in June Ramp up of sales efforts in August TM Retail 5-50 companies Go to market Agents PbX/ICT dealers WEB 1-5 companies
Contents Financial results Norway Mobile VoIP International Other events
Focus on profitability for Telio Mobile Prices for Telio Mobile was changed from March 1, 2007 Minimum invoice of NOK 69 Positive gross profit Number of subscribers 8,200 subscribers end Q1 Decrease of 500 compared to Q4 000 subscribers 4,2 7,0 8,7 8,2 Cross-sales activities during Q2 Q2 06 Q3 06 Q4 06 Q1 07
Mobile VOIP - encouraging Beta results Continued improvements to service as result of constructive customer feedback from beta test From technology point of view, Telio FMC is nearly ready for larger deployment Remaining issues: Price of terminals and availability of simpler, lower end terminals Final product packaging to be defined and supported by the back-office systems Both issues are being addressed and second half of the year will bring larger scale deployment
Contents Financial results Norway Mobile VoIP International Other events
Subscriber traction continues in Denmark Healthy growth 000 subscribers 7,2 Customer Service Establish in Denmark to improve customer satisfaction 3,2 5,3 Tellio Launch of service for small business segment planned after summer 1,7 1,0 0,4 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07
Clearer visibility in Netherlands Best quarterly growth in the Netherlands ever 000 subscribers Net add of 2,000 new subscribers, in total 7,800 subscribers 65% increase of net customer growth in Q1 compared to Q4 1,6 3,2 3,8 4,6 5,8 7,8 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07
Contents Financial results Norway Mobile VoIP International Other events
Legal/financial issues VAT No news since Q1 04 Telio has not included any VAT effects in Q1 accounts Status on VAT will be re-evaluated each quarter Telio terminating IC tariffs under scrutiny by Norwegian Post and Telecommunications Authority (NPT) Decision by NPT 28.02.2007 that Telio should lower terminating prices to Telenor level from 01.05.2007 Decision is appealed to the Ministry of Communications (SD) Appeal is being treated, but no news of when it is to be expected finalised SD decided 24.04.2007 that Telio does not need to lower prices before appeal has been treated Telio has appealed the Labs 2 verdict to Borgarting lagmansrett
Outlook Increased investments in sales in order to acquire more new customers Market growth outlook: new broadband phone subscribers in Norwegian market will increase with 100% in 2007/2008 according to NPT Further strengthening of the sales organization New Sales and Marketing director Pål Andre Fredriksen starts May 16 Extensive experience from the telecom industry and proven product and sales management track record from Telenor, Tele2, and Ventelo Revised contracts with TM agencies to ensure better quality of customer intake SMB launch
Positive outlook in the broadband telephony market, Aftenposten April 29, 2007
tns Gallup broadband telephony customer survey March 2007
tns Gallup broadband telephony customer survey March 2007
Q1 07 highlights Continued customer Growth Subscribers: 132,100, up 5,000 (4%) in Q1 Revenues: nok 88.4 million up 34% compared to Q1 06 Operating Profits, best ever Operating profits of nok 4.1 million Gross margin stable, OPEX continues to scale Healthy cash position: nok 109 million Customers & distribution Decreased TM activity in Norway to ensure profitable growth Satisfactory underlying customer growth in Norway partly offset by cancellations from Q4 sales Strong customer growth in Denmark and the Netherlands On target to launch SMB