TP Group 2Q and 1H 2011 results. Warsaw July 27 th, 2011

Transcription

1 TP Group 2Q and 1H 2011 results Warsaw July 27 th, 2011

2 forward looking statement This presentation contains 'forward-looking statements' including, but not limited, statements regarding anticipated future events and financial performance with respect our operations. Forward-looking statements can be identified by the fact that they do not relate strictly hisrical or current facts. They often include words like 'believe', 'expect', 'anticipate', 'estimated', 'project', 'plan', 'pro forma', and 'intend' or future or conditional verbs such as 'will', 'would', or 'may. Facrs that could cause actual results differ materially from expected results include, but are not limited, those set forth in our Registration Statement, as filed with the Polish securities and exchange commission, the competitive environment in which we operate, changes in general economic conditions and changes in the Polish, American and/or global financial and/or capital markets. Forward-looking statements represent management s views as of the date they are made, and we assume no obligation update any forward-looking statements for actual events occurring after that date. You are cautioned not place undue reliance on our forward-looking statements. 2

3 table of contents 1 2Q 2011 highlights 5 appendices 2 financial review 3 4 comments on outlook and guidance Q&A session 3

4 1 2Q 2011 highlights Maciej Witucki president of the board and CEO

5 steady performance keeps TP Group on a turnaround path pillars of action plan re-focus on core business re-engage with markets re-balance operating model regulary update; limited voice MTR cut for 2011 and 2012 steady commercial progress; 1H mobile adds exceeding 200k & broadband rebound confirmed with ~50k adds year-on-year new ols revamp Broadband: 40Mb/s and 80Mb/s speeds and TVN pay-tv packages launched positive strategic developments; network sharing signed with PTC (~PLN 1bn NFCF benefit till 2015) and Emitel disposal is finalised strong financials; 2Q EBITDA margin* at 37.3%, +0.4p.p. year-onyear, 1H net income at PLN 1.2bn and strong net free cash flows TP appeal of EC fine and appealed against a low USO refund full-year 2011 outlook and guidance confirmed the Management Board of TPSA will propose allocate about half of the proceeds from disposal of TP Emitel share buy back, amounting PLN 800mn 5 *adjusted for gain on disposal of Emitel and increase in provision for European Commission fine, amounting +PLN 1.2 bn and -PLN 0.46 bn respectively

6 progress continued in our main lines of business growing cusmer base (mn) rising share of smartphones in post-paid sales* post-paid data ARPU +29% y-o-y mobile % % 28% 14% 2Q Q Q2010 1Q2011 2Q2011 growing market share in net additions ** rising neostrada sales >6Mb/s 12% 42% 48% broadband 10% 21% 88% 58% 52% -0.7% 2Q2010 1Q2011 2Q2011 2Q2010 1Q Q2011 up 6Mb/s 6Mb/s and faster 6 *tal smartphones in acquisition and retention in the period ** including Orange based on BSA and CDMA, volume market share (source: company estimates)

7 broadband strengthened by high speeds and liaison with TVN 40Mb/s and 80Mb/s broadband speeds launched VDSL (FTTC) technology IPDSLAM CPE CPE fibre Metro Ethernet Switch Cabinet switch copper 40Mb/s and 80Mb/s options priced competitively monthly ARPU comparison (PLN) Speed range <40Mb/s 64Mb/s> Mb/s 50 Mb/s 64 Mb/s Speed range <64Mb/s 120Mb/s> Mb/s 120Mb/s 64Mb/s 120Mb/s Source: TP UKE UPC Polska Vectra TP UPC Polska Vectra Multimedia Average price offered by CATV Polska new options complemented with TVN-based pay-tv rich n TV offer available for TP cusmers 1 dedicated n offer, available only in TV+BB bundle (inc 7HD channels) 7

8 1H cost base 4.2% down, savings program delivers PLN 105mn classical savings e.g. office space optimisation process simplification e.g. e-invoice tal costs* (PLN bn) -4.2% lower lower property property maintenance maintenance costs costs cleaning, security, repairs rate reduction cleaning, security, repairs rate reduction 33,000 33,000 m 2 2 less less offfice offfice space space in 2H 2011 in 2H mn 1.6mn e-invoices e-invoices per per month month up from 0.6mn last year up from 0.6mn last year consolidation e.g. cusmer care integration 5.0bn 4.8bn 1H H 2011 sale sale of of obsolete obsolete cabling cabling 1,146 ns of copper/other sold in 1H 1,146 ns of copper/other sold in 1H TP-TVN TP-TVN agreement agreement deliver 1 deliver 1 st st savings in 2H savings in 2H strategic cooperation e.g. co-operation with TVN network network sharing sharing signed signed full savings run-rate of PLN ~0.2bn p.a. full savings run-rate of PLN ~0.2bn p.a. 8 * cost base up EBITDA adjusted for gain on disposal of Emitel and provision for fine imposed by European Commission, amounting +PLN 1.2 bn and -PLN 0.46 bn, respectively,

9 network sharing simple idea, big benefits how does it work - general co-operation model Network Management RAN sharing services JV 3rd parties eg field Intervention companies Network Management who does what division of responsibilities process asset ownership network strategy network planning network deployment maintenance contract negotiations T-mobile T-mobile joint-venture company insight RAN RAN sharing sharingagreement agreement and and a a 50/50 50/50 JV JV plan, plan, deploy deploy & manage manage PTK/PTC PTK/PTC networks networks target target is is a a 10,000 10,000 site site co-used co-used network network (~5,000 (~5,000 sites sites each), each), that that will: will: grow grow the the overall overall capacity capacity and and coverage coverage allow allow TP TP switch-off switch-off ~1,4k ~1,4k sites sites joint joint planning planning & deployment deployment save save capex, capex, also also in in case case of ofpotential technology technology shift shift optimised optimised spectrum; spectrum; co-use co-use of of frequencies frequencies 9

10 network sharing benefits free cash flow by PLN 1bn till 2015 targeted network situation by 2015 day by 2015 T-mobile full cost savings run rate of PLN 0.2bn p.a. [cost savings p.a. in PLN billion] future run-rate 6.4k sites shared network of ~10k sites insight capex savings mostly after 2014, [capex savings in PLN billion] 10 network network sharing sharing be be gradually gradually rolledouout until until 2014/ /15 rolled- project project will will benefit benefit net net free free cash cash flow flow by by a a tal tal of of ca. ca. PLN1bn PLN1bnwithin 5 years years cost cost savings savings reaching reaching ca. ca. PLN PLN 0.2bn 0.2bn yearly yearly run-rate run-rate beyond beyond

11 strong 2Q profitability, revenue consistent with full-year outlook in PLN mn 1H2010 1H2011 2Q2010 2Q2011 key points revenue year-on-year 7, % 7, % 3, % 3, % 1H evolution in line with outlook and much better than last year 2Q comparison impacted by force majeure events of last year restated EBITDA* as % of revenues 2, % 2, % 1, % 1, % PLN 46mn savings drive 2Q EBITDA margin up 0.4p.p. 1H EBITDA margin stable vs. 2010, on track for FY outlook 11 capex as % of revenues Net Free Cash Flow % % % 1, % 507 more even capex phasing than last year: benefits investment realisation smaller burden on 2012 NFCF 1H NFCF down only PLN 270mn despite PLN 0.6 bn more payments for prior year capex In line with FY guidance * adjusted for gain on disposal of Emitel and increase in provision for European Commission fine imposed, amounting +PLN 1.2 bn and -PLN 0.46 bn respectively,

12 2 financial review Jacques de Galzain chief financial officer

13 slow market recovery, due MTR cuts market value year-on-year evolution tal telecommunication market* +0.4% +1.4% +0.2% +0.5% insight visible visible impact impact of of SMS SMS MTR MTR cut cut on on market market evolution evolution in in Q 2Q evolution evolution in in line line with with trends trends observed observed in in 1Q 1Q -3.2% 2Q2010 3Q2010 4Q2010 1Q2011 2Q % -5.1% -4.6% 5.6% 3.0% 3.0% 3.1% fixed line** -3.8% -3.5% -3.8% 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 Mobile** *market value is an aggregate of operars retail and wholesale telecommunication revenue, market data are Company s preliminary estimates ** segment value according tal operars revenues, 2Q2011 market data are Company s preliminary estimates mobile mobile market market growing growing slightly, slightly, despite despite SMS SMS cut, cut, due due growth growth in in volume volume and and usage usage MTR MTR impacts impacts year-on-year year-on-year comparison comparison more more clarity clarity on on sale sale of of Polkomtel Polkomtel T T rebranding rebranding without without harm harm market market value value fixed fixed market market down down 3.8% 3.8% continued continued substitution substitution mobile mobile broadband broadband growth growth very very small, small, driven driven by by CATV CATV 13

14 Group revenue in line with outlook, expected improve in 2H TP Group revenue evolution y-o-y (in %) -4.7% -3.9% -1.2% MTR SMS cut -3.7% -4.9% 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 insight 1H 1H revenue revenue down down by by 4.3%, 4.3%, compared compared -7.5% -7.5% in in 1H 1H Q 2Q up up by by 1.6% 1.6% quarter-on-quarter, quarter-on-quarter, 2Q 2Q comparison comparison last last year year affected affected by by SMS SMS MTR MTR cut cut and and force force majeure majeure in in TP Group revenue evolution (in PLN mn) 3, % -5.4% +1.6% % 3,790 mobile mobile up up by by 3.2%, 3.2%, excl excl regulary regulary impact impact driven driven by by strong strong growth growth in in number number of of cusmers; cusmers; +506, ,000 year-on-year year-on-year 2Q 2Q was was another another quarter quarter of of strong strong net net adds adds 2Q2010 yoy % change regulary impact pre-regulary fixed line contribution pre-regulary mobile contribution 2Q2011 contribution yoy % change of TP Group revenue stable stable trends trends in in fixed fixed segment segment slow slow broadband broadband pick-up pick-up due due low low season season fixed--mobile fixed--mobile substitution substitution remains remains an an important important adverse adverse facr facr 14

15 mobile segment revenue up by 3.2% excl. regulary impact mobile segment revenue* evolution y-o-y (in%) Orange value market share evolution y-o-y (in%) ** MTR SMS cut -0.2% +1.7% +6.4% +2.2% +0.9% 31.5% 30.6% 31.0% 30.8% 30.8% 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 mobile segment revenue* evolution (segment statury in PLN mn) 1, % % % +2.4% % 1,967 insight 1H 1H revenue revenue growing growing by by 1.5% 1.5% year-on-year: year-on-year: due due growing growing cusmer cusmer base base (+3.6% (+3.6% yoy) yoy) despite despite impact impact of of SMS SMS MTR MTR and and roaming roaming cuts cuts Orange Orange maintained maintained value value market market leadership leadership 2Q2010 regulary impact yoy % change cusmer base impact retail price & usage equipment & others 2Q2011 contribution yoy % change of segment revenue 28% 28% share share of of smartphones smartphones in in post-paid post-paid sales sales as as appetite appetite for for smartphones smartphones is is confirmed confirmed 15 * incl. revenue from fixed services provided by PTK **company s estimation, 2010 data reviewed up--date data from PLAY

16 200k mobile additions in 1H drive cusmer base >14.5million mobile net adds (in 000) cusmer base evolution (in 000) % 51.6% 14, % +2.6% 14,535 6,791 6, % 7,238 7, % 52.1% 2Q2010 3Q2010 4Q2010 1Q2011 2Q Jun Jun 2011 prepaid postpaid retail ARPU evolution (PLN/month) insight Q2010 3Q2010 4Q2010 1Q2011 2Q2011 cusmer cusmer base base continues continues growth growth at at 3.6% 3.6% year-on-year, year-on-year, despite despite a a competitive competitive market market resilient resilient retail retail ARPU ARPUdespite price price pressure pressure 2Q 2Q usage usage growing growing by by 1.3% 1.3% year-on-year year-on-year 2Q 2Q post-paid post-paid data data ARPU ARPU +29% +29% vs. vs. last last year year ARPU ARPU recovering recovering by by 4% 4% since since 1Q 1Q

17 stable trends in fixed segment fixed segment revenue evolution y-o-y (in%) insight -8.7% -7.5% -7.0% -7.8% -8.3% 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 fixed segment revenue evolution (segment statury in PLN mn) 2, % % +0.7% -8.3% revenue revenue trends trends comparable comparable with with previous previous quarters, quarters, driven driven down down by by fixed fixed voice voice broadband broadband base base up up by by 50k 50k year-on-year year-on-year o o4 4 th th consecutive consecutive quarter quarter of of growth growth o o 14,000 14,000 net net additions additions in in 2Q, 2Q, o o 40Mb/s 40Mb/s and and 80Mb/s 80Mb/s speed speed options options launched launched boost boost growth growth ,098 TV TV base base approaching approaching 600k 600k subscribers subscribers almost almost 26% 26% of of broadband broadband cusmers cusmers new new package package with with n n foster foster growth growth 2Q2010 fixed voice data wholesale and other 2Q2011 yoy % change contribution yoy % change of segment revenue 17

18 broadband growth confirmed, fixed line loss again limited TP Group retail broadband accesses* (in 000) TV cusmer base evolution (in 000) 20.0% 21.9% 23.8% 25.1% 25.6% 2,261 2,269 2,286 2,297 2, Q2010 3Q2010 4Q2010 1Q2011 2Q2011 retail lines evolution (in 000) -2.1% -3.0% -3.2% -2.9% -2.6% Q2010 3Q2010 4Q2010 1Q2011 2Q2011 retail lines net evolution % avg of retail lines base 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 TV penetration in TP retail broadband cusmers insight Total TV cusmers o/w pay TV cusmers** broadband broadband growth growth confirmed; confirmed; +14k +14k in in 2Q 2Q bring bring tal tal +50k +50k year-on-year year-on-year net net adds adds market market share share >21% >21% TV TV base base exceeded exceeded 25% 25% penetration penetration in in broadband, broadband, growing growing cusmer cusmer loyalty loyalty slower slower pay-tv pay-tv growth growth in in anticipation anticipation of of new new offer offer fixed fixed line line decrease decrease limited limited ~2.6% ~2.6% per per quarter quarter 18 *Including CDMA and Orange Freedom ** includes TP s M-, L packages, Orange Sport and HBO

19 2Q EBITDA margin** above 37% mark, up by 1.2p.p. since 1Q TP Group EBITDA evolution (in PLN mn) EBITDA margin (in %) 19 EBITDA 2Q2010 revenue decrease excl. regulary impact FX impact within operating expenses other opex* cost optimisation program 1, net regulary impact on EBITDA +1 interoperar costs excl. regulary impact* -3 activity impact on commercial expenses* restated** EBITDA 2Q ,414 gain on disposal of Emitel increase in provision for European Commission fine EBITDA 2Q , ,144 insight 2Q 2Q Group Group EBITDA EBITDA margin** margin** up up by by 0.4p.p. 0.4p.p. since since last last year, year, above above the the 37% 37% mark mark mobile mobile margin margin up up by by almost almost 2p.p. 2p.p. since since 1Q 1Q despite despite PLN35mn PLN35mn one-off one-off costs costs TPSA TPSA in in 2Q 2Q fixed fixed revenue revenue remains remains a a main main drag drag on on EBITDA EBITDA as as expected, expected, no no regulary regulary impact impact on on EBITDA EBITDA other other opex opex down down due due non-recurring non-recurring items items PLN PLN 46mn 46mn savings savings drive drive cost cost base** base** down down by by 5.5% 5.5% since since last last year year * excluding FX impact and effect of cost transformation program ** adjusted for gain on disposal of Emitel and increase in provision for European Commission fine imposed, amounting +PLN 1.2 bn and -PLN 0.46 bn respectively, *** excluding the -PLN 1.1bn impact of revision of the provision for the DPTG dispute, recorded in 3Q % 31.3% 38.5%*** 34.9% 36.1% 29.3% 28.9% 28.2% 37.3%** 30.1% 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 Mobile TP Group (restated)

20 1H net income at PLN 1.2bn, thanks capital gains in million PLN 1H2010 1H2011 change EBITDA 2,892 3, % depreciation and amortization -1,906-1, % impairment of non-current assets % operating income 981 1, % net financial costs % of which foreign exchange gains / (losses) % income taxes % net income 610 1, % net income (restated)** % # of shares (weighted average, in millions) 1,336 1,336 - insight PLN PLN 1bn 1bn net net income income in in 2Q 2Q brings brings 1H 1H PLN PLN 1.2bn, 1.2bn, as as compared compared 0.6bn 0.6bn last last year year 1H 1H depreciation depreciation affected affected by by PLN PLN 125mn 125mn charge charge due due mobile mobile network network swap swap income income tax tax down down PLN PLN 44mn, 44mn, with with low low effective effective tax tax rate, rate, as as sale sale of of Emitel Emitel did did not not impact impact Group Group tax. tax. EPS (in PLN per share, basic & diluted) % 20 * including discounting expenses ** adjusted for gain on disposal of Emitel and increase in provision for European Commission fine imposed, amounting +PLN 1.2 bn and -PLN 0.46 bn respectively,

21 net free cash flow in line with full-year guidance in million PLN 1H2010 1H2011 change 2Q2010 2Q2011 change net cash flow from operating activities before income tax paid and change in working capital o/w exchange rate effect on derivatives paid, net 2,555 2, % 1,300 1, % % x change in working capital n/a % CAPEX* % % CAPEX payables % n/a income tax paid % % net free cash flow after tax paid 1, % % as % of revenues 14.9% 12.0% -2.9ppts 17.8% 13.4% -4.4 ppts sales of assets % % proceeds from sale of subsidiaries, net of cash - 1,637 n/a 1,637 n/a other investing activities n/a -6 7 n/a FCF before financing 1,182 2, x 719 2, x 21 * excluding capex financed by lease

22 consequences of Emitel disposal sale of Emitel is an element of Group s strategy of non-core assets disposal proceeds amounted PLN 1.7bn (11x 2010 EBITDA) gain on the disposal amounted PLN 1.2bn, positively impacted EBITDA and net income transaction will not impact cash flow target, as proceeds from sale of assets are not included in net free cash flow Emitel s results were fully consolidated by the Group, and therefore it will report 2H results vs. pro-forma (Emitel as an external partner in 2H 2010) the Management Board of TPSA will propose allocate about half of the proceeds from disposal of TP Emitel share buy back, amounting PLN 800mn TP Group 2010 as reported in million PLN 3Q2010 4Q2010 FY2010 revenues 3,898 3,957 15,715 restated EBITDA 1,500** 1,380 5,772** CAPEX 597 1,401 2,716 TP Group 2010 pro-forma in million PLN 3Q2010 4Q2010 FY2010* revenues 3,824 3,881 15,565 restated EBITDA 1,457** 1,342 5,691** CAPEX 557 1,368 2, *TP Emitel consolidated in TP Group in 1H and treated as an external entity in 2H ** excluding the -PLN 1.1bn impact of revision of the provision for the DPTG dispute, recorded in 3Q2010

23 3 conclusions Maciej Witucki president of the board and CEO

24 TP Group reconfirms 2011 outlook & guidance FY outlook and guidance reminder status comments outlook on trends market & revenue evolution (yoy) EBITDA margin affected by new MTR cuts, revenue is anticipated decline by at least 2%* but not more than 4.5%* EBITDA margin anticipated between 36%* and 37%* confirmed confirmed better year-on-year revenue evolution expected in 2H than -4.3% in 1H H revenue reported vs pro-forma EBITDA margin* outlook range reiterated, inc. expected strong commercial activity in 4Q capex sales capex anticipated between 17% and 19% of revenue*, broadband investment program continued confirmed full-year capex revenue ratio expected wards the lower end of the outlook guidance net free cash flow net free cash flow expected of at least PLN 2.4bn* confirmed NFCF target reconfirmed * excluding exceptional items, impact of claims and litigation, change in consolidation scope and unpredictable regulary impact 24

25 conclusions 2Q marked by strong financial performance and strategic developments underlying results in line with outlook and guidance asset disposal brings net income PLN 1.2bn for 1H network sharing bring additional NFCF of ~PLN1 bn within 5 years commercial developments give confidence for the future mobile momentum maintained progress in broadband, with 21% net adds share, still below ambitions new high speeds and TV content facilitate broadband growth our 2H commercial agenda is focused on: increasing the pace of broadband growth modifying our sales engine for the big cities building good ground for faster growth in

26 5 Q&A session

27 6 appendices

28 capex up 10.6% year-on-year TP Group key investment areas in 2Q2011 (in %) IT software&hard ware 28% other 9% core network 12% 2G/GSM, 2% Service platforms 1% UKE arrangement 3G/EDGE, 6% Fixed broadband *, 42% o/w MoU** related capex, 31% insight capex up year-on-year thanks faster execution of investment projects 42% capex dedicated fixed broadband commitments wards Regular realised with a ~33k lines safety buffer TP Group capital expenditure evolution (in PLN mn) accumulated broadband production ( 000 lines) , Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 2Q2010 3Q2010 4Q2010 1Q2011 2Q realisation commitment wards UKE *including capex for cusmer premises equipment ** MoU - Memorandum of Understanding signed with UKE

29 strong balance sheet maintained net debt evolution (in PLN mn) insight 3, net debt / EBITDA* at 0.2-1,638 available available liquidity liquidityposition: cash cash & equivalents equivalents at at PLN PLN bn bn unused unused credit credit lines lines at at PLN PLN bn bn back-up back-up facility facility at at PLN PLN bn bn net gearing** 21% 31 December 2010 net free cash flow sales of subsidiaries -83 1,191 net gearing** 8% other 30 June 2011 effective effective hedging hedgingpolicy solid solidcredit rating rating A3 A3 // BBB+ BBB+ with with stable stable outlook outlook PLN PLN 2bn 2bn dividend dividend paid paid on on July July 7 th th,, *annualized EBITDA, excluding the PLN 1.1bn revision of the provision for the DPTG dispute, recorded in 3Q2010 ** net gearing after hedging ratio = net debt after hedging / (net debt after hedging + shareholders equity)

30 appendices I. glossary 30

31 glossary (1/3) 31 ARPL ARPU AUPU BSA CATV Catch-up CPE CPS/CS DLD DSLAM DTH DVB-T DVB-H EBITDA F2M FTE FTTH Average Revenue per Line Average Revenue per User Average Usage per User Bit Stream Agreement Cable Television A type of VoD where broadcasters make programming available for streaming Cusmer-premises equipment Carriers Pre-Selection/ Carriers Selection Domestic Long Distance Calls Digital Subscriber Line Access Multiplexer Direct To Home Digital Video Broadcasting - Terrestrial Digital Video Broadcast - Handheld Operating income + depreciation and amortization + impairment of goodwill + impairment of non-current assets Fixed Mobile Calls Full time equivalent Fiber To The Home

32 glossary (2/3) 32 HFC HSDPA HSPA ICT ILD IP TV IVR LC Liquidity Ratio LLU LTE LTO MoU wth UKE MTR MVNO Net FCF Net gearing Hybrid Fibre Coax High Speed Downlink Packet Access High Speed Packet Access Information and Communication Technologies International Calls TV over Internet Procol Interactive Voice Response Local Calls Cash and unused credit lines divided by debt be repaid in the next 18 months Local Loop Unbundling Long Term Evolution (3GPP 4G technology) Local Telecommunication Operar Memorandum of Understanding signed with UKE Mobile Termination Rates Mobile Virtual Network Operar Net Free Cash Flow = Net cash provided by Operating Activities (CAPEX + CAPEX payables) net gearing after hedging ratio = net debt after hedging / (net debt after hedging + shareholders equity)

33 glossary (3/3) 33 NGA NGN POS POTS PVR RIO RLLO RUO SAC SDI SMP USO UKE VAS VDSL VoIP WLL WLR Next Generation Access Next Generation Network Point-Of-Sale Plain Old Telephone Service Personal Video Recorder Reference Interconnection Offer Reference Leased Line Offer Reference Unbundling Offer Subscriber Acquisition Costs Permanent (Rapid) Access Internet Significant Market Power Universal Service Offer Office of Electronic Communications - Regular Value Added Services Very High Speed Digital Subscriber Line Voice over Internet Procol Wireless Local Loop - a term for the use of a wireless communications, the "first mile" Wholesale Line Rental