Analyst Presentation Half year results 2007 20 July 2007
Agenda Business Review H1 2007 - B. Moschéni Financial Figures H1 2007 - W. De Laet Outlook FY 07 & Conclusions - B. Moschéni 2
3 Business Review H1 2007 B. Moschéni
In a competitive market, Mobistar realized 88K net adds in H1 2007 (*) 800 93.0% (**) 95% Net market Growth (in K active cards) 700 600 500 400 300 200 100 0 90.5% 83.9% 81.3% 107 88 2004 2005 2006 H1 2007 90% 85% 80% 75% 70% % Active Mobile penetration Mobistar Competition Active Mobile Penetration 4 (*) including MVNO customers (**) Company estimate
Continued net gain MNP in H1 2007 (with Mobistar still as the only net MNP winner on the market) -22,288 +85,213 +19,897-65,316 +22,371 234,568 Total MNP +22,143 +2,834-19,309-443 5
Postpaid as % of customer base further increased to 53.4% end H1 07 3000000 2,912,806 3,139,224(*) 3,199,735(*) Mobistar Customers 2500000 2000000 1500000 1000000 44% 51.4% 53.4% 500000 0 2005 2006 H1 2007 Postpaid RES Postpaid BUS Prepaid Highest proportion of postpaid customers in the market Net growth in postpaid for almost 50% due to net growth in the business market 6 (*) Excluding MVNO customers, ~40,000 as at end H1 07; ~13,000 end 2006
Value share growth maintained, up to around 35% (*) 80% 60 50.6% 40 34.6% ~ 35% 20 14.7% 0 2001 2002 2003 33.3% 2004 2005 2006 H1 2007 7 (*) Company estimate
Customer base management : churn evolution under control in a competitive market 30% Evolution average churn rate (excluding migrations post- to prepaid) 25% 20% 15% 29.2% 27.7% 10% 19.1% 21.6% 19.2% 20.3% 5% 0% 2004 2005 2006 Q1 2007 Q2 2007 H1 2007 8
Regulatory and pricing impact on ARPU (*), compensated by important increase in usage 40 / month / MONTH 39.05 38.75-2.42 +0.57 38.02 36.64-1.68-0.74-4.92 5.49 36.90 35 34.68 30 2003 2004 2005 H1 2006 2006 MTR decrease Roaming on net Rev/min Usage H1 2007 9 (*) 12 months rolling ARPU
Upward trend in traffic confirmed, mainly driven by migration to postpaid and by prepaid consumption increase (*) Average traffic/customer/month 160 Average usage/month 120 80 40 0 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Voice SMS 10 (*) Traffic includes both traffic out and in
Strong growth in mobile data revenues 120 100 Mobile Data revenues +15.7% 80 m 60 40 20 0 H1 2006 H1 2007 SMS/MMS p-to-p premium SMS GPRS/EDGE (incl. WAP) Mobile data revenues up to 17.4% of mobile service revenues in H1 07 (from 15.4% H1 06) non-sms mobile data represent 16% of total mobile data revenues Supported by the successful uptake of Blackberry and Mobile Office Cards in the Business market Orange World usage in Residential market 11
Postpaid ARPU: from 59.6 to 49.5 / month 70 60 50 40 30 20 59.6-2.6 56.9-0.6-6.5-0.4 49.5 10 0 H1 2006 MTR H1 2006 proforma roaming price - 7.5 rev/min (domestic) AUPU H1 2007 12 Lower usage profile of pre- to postpaid migrations Price pressure in the business market (limited elasticity)
Prepaid ARPU sustained / month 18 16 14 12 10 8 6 4 2 0 17.2 16.5 16.1-1.1-0.1 H1 2006 MTR H1 2006 proforma -4.4 + 0.5 + 5.0 roaming rev/min AUPU H1 2007 Usage advantage linked with re-load frequency Usage increase mainly linked with strong success of Tempo Music offer 13
Mobistar Strategy Mobile Centric RESIDENTIAL Fix Mobile Substitution Mobistar as a preferred mobility provider, i.e. mobile centric player BUSINESS Mobile Centric Convergence Mobistar as the total convergent mobility solutions operator, for mobile-centric organizations 14
Fix-to-mobile substitution in Residential market : Success of Mobistar @Home @Home: the benefits of a mobile phone, better price than fix at home Customer benefits : - For all your calls: 1 phone, 1 address book - Easy to use - Save on your Belgacom fee - No clogged line at home Evidence of success 45,000 @Home contracts sold by end June 2007 (launched in March 07) @Home customers show 50% increase in traffic to fix phones Traffic to fix represents 30% for @Home customers (vs. 12% in total base) 15
Fix-mobile convergence in Business market : Success of One Office Voice Pack One Office Voice Pack :1 st bundled voice offer in the B2B market, from commercial to contract convergence Customer benefits: - Important savings on mobile and fix bills - One contract and one customer service for the mobile & fix Success of Voice Pack proves that business market wants to benefit from fix-mobile convergence advantages Strong take-up (launched in May 07): ~30% of Mobile Voice gross adds Attracting high-value customers Combining fix&mobile in a pack strengthens the positioning in the fix voice market 16
17 Financial Figures H1 2007 W. De Laet
Consolidated income statement : Stable EBITDA margin and slight increase in net profit Mio H1 2007 H1 2006 % Total Statutory Revenues (*) 761.8 772.0-1.3% Total Turnover 747.2 758.1-1.4% Total Service Revenues 720.9 736.8-2.2% Cash Expenses -459.8-463.1-0.7% EBITDA 302.0 308.9-2.2% In % of service revenues 41.9% 41.9% Depreciations and amortizations -81.5-91.3-10.7% EBIT 220.5 217.6 +1.3% Net financial charges 1.4 0.3 N.A. Corporate Taxes -71.2-70.1 +1.6% Net income 150.7 147.8 +2.0% EPS ( ) 2.38 2.34 1.7% 18 (*) includes other revenues (14.6m EURO in H1 2007 and 13.9m EURO in H1 2006)
Revenue evolution breakdown 736.8-2.2% -1.9% +1.7% +0.2% -2.2% 12.6 1.8 720.9-16.0-14.3 H1 2006 Incoming Revenues Roaming on-net Billed revenues Other H1 2007 Net regulatory impact on revenues more than -4% on revenues (negative roaming on-net due to anticipative lower roaming wholesale tariffs as of Oct 06) 19
P&L Mobile Activities : EBITDA margin maintained Mio H1 2007 H1 2006 % Total Turnover (*) 704.3 715.3-1.5% Mobile Service Revenues 678.2 694.0-2.3% Cash Expenses -415.5-420.4-1.2% EBITDA 302.8 307.9-1.7% In % of service revenues 44.7% 44.4% Depreciations and amortizations -80.8-90.4-10.6% EBIT 222.0 217.5 +2.1% 20 (*) includes handset sales (26.1m EURO in H1 2007 and 21.3m EURO in H1 2006)
P&L Fix activities : Strong improvement versus H2 2006 Mio H1 2007 H2 2006 H1 2006 % (H1 07 vs. H1 06) Total Turnover 43.5 40.9 43.7-0.5% Fix Service Revenues 42.7 41.7 42.8-0.2% Cash Expenses -44.2-48.1-42.7 +3.5% EBITDA -0.7-7.3 1.0 N.A. In % of service revenues -1.7% -17.5% 2.3% Depreciations and amortizations -0.8-0.4-0.9 EBIT -1.5-7.7 0.1 21
Details on evolution consolidated cash expenses 500 450 400 350 300 250 200 150 100 50 Mio Euro 0 220.9 212.6 23.4 27.5 144.6 150.3 70.3 66.4 H1 2006 H1 2007 Interconnect & other sales costs Handsets/RT costs Non-headcount costs Headcount costs Interconnect costs down to 22.5% of service revenues (from 23..2%) Mainly costs of handsets in line with revenue increase Flat sales commissions although more postpaid activations (gross adds & migrations) Effect of outsourcing contract with Ericsson Universal Services charges No Discounted Stock Purchase Plan in 2007 Effect of outsourcing contract with Ericsson implemented in May 2007 (FTE from 1,661 EOY 06 to 1,521 end H1 07) 22
CAPEX evolution 120 15.1% 16.0% 100 13.2% 12.6% 14.0% mio 80 60 40 20 90 109 0 69 9.4% 69 96 58.3 4.0 9.7 44.6 8.1% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% % of service revenues 0 H1 2005 H2 2005 H1 2006 H2 2006 H1 2007 0.0% CAPEX/semester Network IT other CAPEX/service revenues 23
Cash Flow Statement : Distribution of all cash generated Mio H1 2007 H1 2006 % EBITDA 302.0 308.9-2.2% CAPEX -58.3-69.2-15.8% Change in Working Capital +82.1-16.6 N.A. Capital increase 0.0 0.3 N.A. Purchase own stock 0.0-0.6 N.A Net financial charges 1.4 0.3 N.A. Corporate Taxes -71.2-70.1 +1.6% Free cash flow before Dividend payments and capital movements 256.0 154.9 65.3% Dividend payments -284.8-152.2 +87.1% Available Cash Flow -28.8 2.7 N.A. 24
Balance Sheet Mio Fixed Assets Current Assets Cash and Cash equivalents TOTAL ASSETS Net Equity Provisions/long-term liabilities Long Term Debt (*) Short Term Debt Current Liabilities TOTAL EQUITY AND LIABILITIES Net Debt / (Net Cash) H1 2007 804.6 229.2 57.3 1,091.1 628.9 15.3 0.0 21.3 425.6 1,091.1-36.0 2006 827.9 221.9 68.0 1,117.8 763.8 14.0 0.0 2.4 337.6 1,117.8-65.6 25 (*) Revolving credit facility of 250 mio still available
26 Outlook FY 2007 B. Moschéni
Impact Roaming regulation versus estimates Original Roaming Assumptions Retail Regulation MTC as of 1 July 2007 No regulation MOC Wholesale Anticipative IOT reduction as of Oct 2006 IOT regulation as of 1 July 2007 Effective Roaming regulation Retail Regulation MTC as of Sept 2007 Regulation MOC as of Sept 2007 Wholesale Intra-group IOT further reduced as of July 2007 IOT regulation as of 1 September 2007 8.0% Mobile service revenue growth in Belgium after regulatory impact (%/y) 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 2004(a) 2005(a) 2006(e) 2007(e) Impact MTR reduction: -5% Impact roaming -3% 27
Voxmobile : a success story 1/07/2003 Creation of VOXmobile GSM network Roll-out WLAN Roll-out Main challenger in the business market Take-over by Mobistar 91,000 customers (20% market share*) 2003 2004 2005 2006 2007 Commercial launch : own UMTS services GSM services based on a national roaming agreement Launch of innovative and convergent offers «Data flat fees» «All-inclusive packages» (Mobile abundance) «All in One packages» (Mobile+Fix+ADSL) 28 * Source : company data and Luxembourgian regulator annual report
Impressive growth and break-even after 2 yr (k Euro) 2004 2005 2006 Areas of cooperation Sales* % growth 6.9 19.1 177% 27.7 45% -> Develop Be-Lux large account approach with cross-border offers EBITDA -7.6-6.1-0.8 -> Supply, interco and roaming optimization Net Income* -9.3-9.3-5.8 -> Refunding via Mobistar 29 (* Excl. handset sales)
Conclusions and Guidance FY 2007 Strong ambition to further extend value share Mobile market value in Belgium to be negatively impacted by regulatory measures (MTR & Roaming): market value impact of around -7 to -8% Mobistar Total revenues expected to decrease by 2 to 4%, outperforming expected market evolution (-5 to -6%) Stable EBITDA margin Net income evolution in line with revenues CAPEX/sales around 11% 30
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