New Services and Opportunities in the Telecom Industry Bruce Bowden | 15 Octobre 2004 |
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Transcript of New Services and Opportunities in the Telecom Industry Bruce Bowden | 15 Octobre 2004 |
Page 3
6,000
600 500
4,600
1,223
445
1,614
340
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Residential voice Residential dial-up Residential BB Business
M E
uro
s
All alternatives
France Telecom/Wanadoo
2003 French fixed telco market
Note: excludes 4.2B Euros in revenues (from 0800, cards, public phones, annuaires, non-corporate leased lines) which added to these amounts results in ~20B Euros total market
LDCOM estimatesLDCOM estimates
17%
43%41%
26%
Alternatives’ share
Evolving quickly in 2004
Page 4
Neuf and Cegetel are the key integrated fixed-line alternativesneuf has far superior growth profile; others like Tele2 and Free are well-positioned in their niches
Note: net of intercompany revenues
2003 alternative market: 4.7B Euros
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Wholesale Residential voice Residential dial-up
Residential BB Business
M E
uro
s
Others
COLT
WorldCom
Cegetel
neuf telecom
Club Internet
Tiscali
Noos
Free
AOL France
Tele2
LDCOM estimatesLDCOM estimates
Evolving quickly in 2004
Page 5
Data & Internet3.5 B€
Voice(incl. dial-up @ mins.)
11.1 B €
Access & Subscriptions5.4 B €
French fixedtelco market: 20 B€
New entrants France TelecomMkt. share Revenue Margin Value Mkt. share Revenue Margin Value
20%
35%
3%
0.7
3.9
0.2
4.8(24%)
60%
50%
70%
0.4
1.9
0.1
2.4(12%)
80%
65%
95%
100%
100%
100%
SOURCES: ART, LDCOM ESTIMATES
2.8
7.2
5.2
15.2(76%)
0.32.8
2.07.2
0.15.2
17.6(88%)
FT holds ~75% of the fixed market and ~90% of value
Page 7
A growing alternative operator in the shrinking French fixed telco market
A profitable challenger: net income positive for 1H04
The company with the most unbundled ADSL lines in Europe
#2 fixed-line telco for French enterprises
A leading innovator in broadband services
Who is neuf telecom?
Page 8
neuf has grown rapidly both organically and via acquisition
CAGR 1998 - 2003 = + 219 %
3 38
111 181
551
992
CAGR 1998 - 2003 = + 219 %
CAGR 1998 - 2003 = + 219 %
3 38
111 181
551
992
Note: Figures in US GAAP
Wholesale: 429ME
Business: 390ME
Residential: 173M€
0
S1 2003 S1 2004
+ 24%
455 M€
564 M€
0
S1 2003 S1 2004
+ 24%
455 M€
564 M€
8% share of the fixed market #1 alternative operator for ISPs and other telcos #1 alternative operator for enterprises #4 residential alternative operator
Page 9
Growth across all segments
Résultats au 30 juin 2004, US GAAP
OperatorsEnterprisesResidential
Total Rev (*)
H1 2003
M€200176
78
455
H1 2004
M€228227109
564
VariationH1 2003 /H1 2004
+ 14%+ 29 %+ 40 %
+ 24 %
OperatorsEnterprisesResidential
Total Rev (*)
OperatorsEnterprisesResidential
Total Rev (*)
H1 2003
M€200176
78
455
H1 2003
M€200176
78
455
H1 2004
M€228227109
564
H1 2004
M€228227109
564
VariationH1 2003 /H1 2004
+ 14%+ 29 %+ 40 %
+ 24 %
VariationH1 2003 /H1 2004
+ 14%+ 29 %+ 40 %
+ 24 %
Page 10
CAGR 1999 - 2003 = + 83 %
1998 1999 2000 2001 2002 2003
0 4
- 13
4 1
- 5
9 11
42
18
101
EBITDA
Net income before extraordinary asset write-downs
Neuf has been profitable since inception
Note: Figures in US GAAP
-20
0
20
40
60
S1 2003 S1 2004
Ebitda Résultat net
45
60
-14
15
-20
0
20
40
60
S1 2003 S1 2004
Ebitda Résultat net
45
60
-14
15
-20
0
20
40
60
S1 2003 S1 2004
Ebitda Résultat net
45
60
-14
15
Page 11
Proven track record as consolidator
Chart shows pro forma key financials of neuf plus 8 acquired businesses since January 1st 2001
Pro forma revenue CAGR of 12% even during integration; revenue now re-accelerating
SG&A reduced from 61% of revenues to 26% and still shrinking
EBITDA turned around from -45% of revenues to 10.5%
Capex divided by 6; effect of one high-quality network shared by nine businesses
Chart shows pro forma key financials of neuf plus 8 acquired businesses since January 1st 2001
Pro forma revenue CAGR of 12% even during integration; revenue now re-accelerating
SG&A reduced from 61% of revenues to 26% and still shrinking
EBITDA turned around from -45% of revenues to 10.5%
Capex divided by 6; effect of one high-quality network shared by nine businesses
Key pro forma financials (at current neuf telecom perimeter)
Millions of Euros
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
500
600
H1 01 H2 01 H1 02 H2 02 H1 03 H2 03
Revenues Gross margin EBITDA Oper. CF CAPEX SG&A
Page 12
Figures in US GAAP(*) Acquisitions, net of cash in companies acquired and gains on sales of assets
408 +857
+707
-1153
Cash flows from operations
Tangible and intangible investmentsOther net investments (*)
Cash flows from investments
Capital increasesMinority interestsOther financing - net of repayments
Cash flows from financing
Exchange rate variations
Cash as of 31 December 2003
707
(1 329)176
(1 153)
8001443
857
-3
408
In M€
€ 200 million in CapEx in 2004 (vs. € 130 million in 2003)
Neuf has been funded largely by operational cash flow and equity capital
Financing Operations Investment Cash
CUMULATIVE CASH FLOWS FROM INCEPTION TO EOY 2003
Page 13
neuf’s shareholders
Suez16.7%
Telecom Italia7.0%
Belgacom8.1% Alpha Funds &
Wendel Inv.7.3%
Phoenix Equity
Partners1.8%
BC Partners1.6%
Goldman Sachs2.0%
PAI2.0%
Artemis-Net2.2%
Other10.0%
Louis Dreyfus Group &
Employees42.6%
Others0.4%
CSFB Private Equity8.3%
Page 14
The largest alternative broadband network
Liste des villes demandéeListe des villes demandée
2 000 communes
> 50% of the population covered
Page 16
Unbundled DSL lines are the key platform for advanced services
100 000
160 000
250 000
> 300000
400 000
0
100 000
200 000
300 000
400 000
déc-03 Mars Juin Sept Décembre
Abonnés ADSL actifs
Today 40% of lines are for us, 60% for other ISPs
100 000
200 000
350 000
500 000
700 000
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
déc-03 Mars Juin Sept Décembre
Unbundled lines
Page 18
Broadband up to 25 Mbps
Priced based on « free » backhaul
Using a technology already built into our network (same chassis, new chipset)
Commercial launch in early 2005
Virtual
fiber to the home
Faster
Page 19
Cheaper and deeper: VOIP
Cheaper
Lower cost long-haul protocol
Lower cost for retail voice services for an alternative operator
Deeper
Move from single-site to multi-site to PABX
Layer on services Hosted PBX, IP
CENTREX Private numbering
schemes Unified messaging Virtual offices
Page 20
Ups and downs of VOIP
Advantages
Industry momentum in support of IP
Operating cost efficiency
Service complexity Mass customisation of
QoS Incrementality of BP
Drawbacks
Disruptive to the voice market (user cost of voice -70% over 5 years)
Bandwidth anarchy / parasitism
Security Hyperactive
technological advancement (ROI challenges)
Page 21
More disruptive: MVNO & F-M Convergence
Penetration rate : 69.5%(+1% Q303-Q104)
France is lagging behind
70%78%
91% 92% 95% 97% 98%
France
Germ
any
Greec
eUK
Spain
Sweden
Italy
Source : CSFB
French mobile penetration rate is still relatively low with potential strong
additional growth …
… probably linked to low competition within market maintaining high
profitability
Orange 48.8% 17.9 6.6
SFR 35.3% 6.8 1.9
Bouygues 15.9% 3.3 1.0
Stable market share with30-35% EBITDA return
Market share
Revenue(Bn€)
EBITDA(Bn€)2003 figures
Page 22
Convergence of fixed and mobile driven by customer needs Telephony becomes personal and portable. Using a phone
means more and more using a 'Mobile phone' 16% of households are now mobile only France Telecom will launch fixed-mobile bundles before the end of
the year
SIgnificant mobile vs fixed line substitution
Customers expect "universal" usages : Voicemail, directory, navigator, …
Indoor usage of mobile phones as a continuity of service is growing (already ~30% of mobile calls)
Some customer segments need fixed-mobile integrated offers Consumer need for more simplicity regarding telecom providers
Futur Telecom already proposes fixed-mobile bundles for the business segment
Cegetel business offer includes SFR mobile offer with bundled prices (special rates for calls between employees)
… a single customer care ? a single bill? VPN rates ? …
Page 23
Convergence of fixed and mobile driven by technology (I)
Broadband Internet strong growth multiplies access points usable for
mobile calls collect
Emergence of IP technology enables services platforms convergence
Strong growth of mobile calls made in-house or inside workspace …
Mobile phone usage by consumers
On net « base station » with a 6fold lower cost than GSM / UMTS cost
Full IP networks already enable voice and data intergated services
Voicemail / directory available for consultation over computer or IP phone
…
Fixed and mobile network integration will add mobile sevices
Universal voicemail Unified SMS / MMS
… that can be captured by fixed operator through millions of residential and corporate modems or routers
Page 24
Convergence of fixed and mobile driven by technology (II) Hybriphone technology should be available by Q1 2005
Fixed PSTN & IPNetwork
MobileNetwork
OSP
Bluetooth/WifiAccess Point
Bluetooth, WiFi
GSM
Hybriphone principles :
HLR
Simplicity One handset for all calls One phone number One voicemail One bill
Pay less Mobile minute = 6X fixed
minute cost
Customer value
Fixed-operator value
Capture revenue (increase ARPU) & margin on mobile calls
Capture revenue & margin on mobile incoming traffic
Optimize cost structure
Network interconnexion
required
Same handset for all calls (indoor & outdoor)
Communications between handset and access points through short range wireless (Bluetooth or WLAN)
Access points located at home or in workspace
Already tested & being implemented :• BT in the UK ('Blue Phone' project)• Hutchinson in Hong Kong
3
Page 25
MVNO can create major new IT platform needs
Customer relation (incl. billing) Customer care SIM cards (delivered by SFR) Brand 'Neuf Telecom' Added value services
All network Traffic management
Minimum yearly traffic Mobile adapted distribution &
customer care 9 years contract
MVNO responsibility
Mobile operator responsibility
MVNO requirements
Not a full MVNO offer, even though mobile operator proposes to start discussion on a
possible future network interconnection
No direct proposal to become MVNO yet
Commercial partnership for common offer with Neuf Telecom on the business segment (<100 employees)
VPN Fixed-Mobile
One bill, one customer care
…
Already a distribution agreement for the business segment
MVNO proposal A MVNO B : a 'common offer' on the business segment
Page 26
Starting this Fall in unbundled zones
40 chains in digital quality
Paired with digital terrestrial TV (Télévision Numérique
Terrestre or TNT)
… and a few surprises …
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