eaccess Limited 9427 Mid-Year Results for Fiscal Year Ending 3/2006 4/2005 9/2005

Transcription

1 eaccess Limited 9427 Mid-Year Results for Fiscal Year Ending 3/2006 4/2005 9/2005 November 8 th, 2005

2 2 I. FY2005 Mid-Year Financial Results Overview Page 3 II. FY2005 Mid-Year Financial Results Page 8 III. Business Strategy Page 16 IV. Summary Page 27

3 3 I. FY2005 Mid-Year Financial Results Overview Page 3 II. FY2005 Mid-Year Financial Results Page 8 III. Business Strategy Page 16 IV. Summary Page 27

4 4 FY2005 Mid-Year Financial Results Summary ADSL /ISP Business Mobile Business Strong mid-year financial results Revised up full-year earnings forecasts Achieved lower than expected ADSL churn rate Delay in Metal Plus service area expansion Expect a gradual recovery in subscriber addition in the 2H Formal application for a mobile license submitted in 9/2005 Completion of the capital alliance with TBS Financial Adoption of consolidated financial statements from 9/2005

5 FY2005 Mid-Year Financial Results ADSL ISP revenue increased by 12% YoY and operating profit increased by 4% YoY. Smaller-than than-expected start-up costs of the Mobile business FY2004 Mid Year ( 2004/4 9) ADSL/ISP Non consolidated ADSL/ISP FY2005 Mid Year ( 2005/4 9 ) Mobile Consolidated Increase (decrease) / Changes ADSL/ISP Revenue billion billion billion 3.28 billion +12 % Operating profit 4.58 billion 4.77 billion billion 3.95 billion 0.19 billion +4 % Recurring profit 4.00 billion 4.00 billion billion 3.08 billion 0 billion 0 % Net Income 3.67 billion 3.42 billion billion 2.50 billion billion -7 % EBITDA billion billion billion 9.57 billion 0.12 billion +1 % Capex 5.78 billion 2.88 billion 2.88 billion billion -50 Depreciation 5.68 billion 5.61 billion 5.61 billion billion -1 Capex was pushed back to the 2H Increase in ADSL ISP operating profit and EBITDA Start-up costs of the mobile business was smaller-than than-expected 5

6 6 FY2005 Full Year Financial Forecasts Upward revision from higher ADSL/ISP business revenue and profit contribution Previous FY 3/2006 Forecasts (non consolidated) Revised FY3/2006 Forecasts (consolidated) ADSL/ISP Mobile Non Consolidated ADSL/ISP Mobile Consolidated Revenue billion billion billion billion Operating Profit 9.50 billion billion 7.00 billion 9.60 billion billion 7.20 billion Recurring Profit 8.00 billion billion 5.50 billion 8.20 billion billion 5.50 billion Net Income 5.20 billion billion 2.70 billion 5.90 billion billion 3.20 billion EBITDA billion billion billion billion billion billion CAPEX 7.50 billion 0.50 billion 8.00 billion 8.20 billion 1.30 billion 9.50 billion Depreciation billion billion billion 0 billion billion Due to area expansion of Metal Plus service Upfront capex for mobile business Upward revision of net income

7 Mobile Business Update emobile Ltd. Following an increase in emobile s s capital, emobile was spun off as a full operating subsidiary from Oct 1, Mobile License Financing Submitted the application for a full commercial mobile license on Sept 29, Completed 10 billion yen financing from TBS together with an additional 15 billion yen financing from eaccess. emobile s s total equity reached 55 billion yen. Plan to expand further emobile s s capital. Field Trials Collecting data from the 1.7GHz band FDD trials (including HSDPA trials) in preparation for the commercial service. emobile Full preparation to enter the mobile market. 7

8 8 I. FY2005 Mid-Year Financial Results Overview Page 3 II. FY2005 Mid-Year Financial Results Page 8 III. Business Strategy Page 16 IV. Summary Page 27

9 Adoption of Consolidated Financial Statements Mobile business start-up costs were included in eaccess (non-consolidated) in 1H. Mobile business costs will be separated from eaccess but included d in emobile in 2H. eaccess non consolidated emobile * 1H ADSL ISP business Mobile business Segment ADSL ISP business eaccess consolidated Mobile business (*)Cost incurred for emobile establishment eaccess non consolidated emobile 2H ADSL ISP business Segment ADSL ISP business Mobile business eaccess consolidated 9

10 10 Subscriber Growth Slower growth in net subscriber addition in 1H due to a delay in Metal Plus service. Expect a gradual subscriber recovery in 2H due to service area expansione thou. Subscribers ISP Subscribers ADSL Subscribers 2,200 2,125 2,153 2,164 2,167 2,159 2, ,800 1,665 1,600 1,400 1,200 ISP Subscribers Narrowband Subscribers Non-eAccess broadband subscribers Excluding eaccess ADSL subscribers ADSL Subscribers 1, ,665 1,778 1,828 1,850 1,867 1, /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q

11 11 Revenue Growth Revenue decreased due to the ARPU dilution from increasing low-end subscribers. Underlying operating profits and margins were unaffected by slower revenue. ( million) Acquisition of AOL Japan NTT line sharing charge reduction impact is approx. 200 million 16,000 14,957 15,385 15,458 15,219 15,132 14,000 12,000 12,108 10,000 8,000 6,000 4,000 2, /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q Non consolidated Consolidated* * Consolidated financial statements are adopted from the mid-year period for the fiscal year ending March 31, Although 1Q 2005 figures were previously reported as non-consolidated, 1Q 2005 figures were adjusted to consolidated figures for comparative purposes.

12 12 EBITDA Trend Consolidated EBITDA declined slightly due to higher mobile business start-up costs. ADSL/ISP EBITDA margin remained strong at 34.1%. EBITDA and EBITDA margin trend (Consolidated Basis EBITDA and EBITDA margin trend (ADSL/ISP Only ( million) EBITDA ( million) 37.4% 38.3% EBITDA margin (%) 8, % 40.0% 8, % 32.6% 32.0% 31.0% 38.3% 36.6% EBITDA ADSL ISP EBITDA margin (%) ADSL ISP 34.2% 34.1% 32.6% 40.0% 6,000 4,529 5,730 5,625 5,042 4,874 4, % 6,000 4,529 5,730 5,625 5,042 5,206 5, % 4, % 4, % 2, % 2, % /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q 0.0% /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q 0.0% Non consolidated Consolidated* * Consolidated financial statements are adopted from the mid-year period for the fiscal year ending March 31, Although 1Q 2005 figures were previously reported as non-consolidated, 1Q 2005 figures were adjusted to consolidated figures for comparative purposes.

13 13 Operating Profit Trend Consolidated operating margin was flat while ADSL/ISP business operating margin continued to improve to 16.1% Operating profit and Operating margin trend Consolidated Basis Operating profit and Operating margin trend ADSL/ISP Only ( million) 5,000 4, % 18.6% 17.5% Operating profit Operating profit margin 13.2% 13.1% 13.0% 20.0% 15.0% ( million) 5,000 4, % 18.6% 17.5% Operating profit ADSL ISP Operating margin (%) ADSL ISP 16.1% 15.3% 13.2% 20.0% 15.0% 3,000 2,000 1,793 2,785 2,695 2,036 1,990 1, % 3,000 2,000 1,793 2,785 2,695 2,036 2,331 2, % 1, % 1, % /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q 0.0% /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q 0.0% Non consolidated Consolidated* * Consolidated financial statements are adopted from the mid-year period for the fiscal year ending March 31, Although 1Q 2005 figures were previously reported as non-consolidated, 1Q 2005 figures were adjusted to consolidated figures for comparative purposes.

14 14 Quarterly Capex and Operating FCF Trend Continued expansion in consolidated operating free cash flow. Expect higher capex in 2H due to Metal Plus service area expansion. Consolidated Capex Trend Consolidated Operating Free Cash Flow Trend ( million) 5,000 4,000 3,000 2,045 2,000 3,750 1,690 Acquisition of AOL Japan 2,408 1,574 1,746 ( million) 5,000 4,000 3,000 2,484 2,000 1,980 4,050 2,634 3,128 3,558 1,000 2,045 2,060 1,574 2,408 1,746 1,132 1,132 1, /1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q 2004/1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q EBITDA - Non consolidated Consolidated* Non consolidated Consolidated* Operating Free Cash Flow EBITDA Capex * Consolidated financial statements are adopted from the mid-year period for the fiscal year ending March 31, Although 1Q 2005 figures were previously reported as non-consolidated, 1Q 2005 figures were adjusted to consolidated figures for comparative purposes.

15 15 Balance Sheet Maintained high cash position (pro-forma basis after TBS transaction at 118 billion yen) Increase in consolidated net cash position As of March 31, 2005 As of September 30, 2005 Balance (Non-consolidated) Share of Total Balance Consolidated Share of Total Cash and cash deposit billion 77.6 % billion 78.5 % Debt billion 71.5 % billion 71.9 % Net Debt billion billion -- Total Shareholder s Equity billion 21.1 % billion 21.2 % Total Asset billion % billion % Net Debt/Equity ratio(%) % % % of total asset is cash and cash deposit Net cash increased by 0.8 billion from March 2005

16 16 I. FY2005 Mid-Year Financial Results Overview Page 3 II. FY2005 Mid-Year Financial Results Page 8 III. Business Strategy Page 16 IV. Summary Page 27

17 ADSL ISP Business 17

18 ADSL Business Strategy Speed and Monthly charges* Mbps 6,000 8,000 yen Mbps 4,000 6,000 yen FTTH CATV 3.4 million million Strategy to increase ADSL subscribers 1 50Mbps 2,000 5,000 yen ADSL 14.1 million 47 1) To maintain low churn rate 2) To accelerate dial-up users migration 3) To promote ADSL services to firsttime Internet users 64kbps 2,000 yen Dial Up 10.0 million 33 (As of June 2005 Non Internet user Total : Approx. 30 million Source: MIC *1 Speed and monthly charges are based on the average price of top 5 ISPs. *2 Monthly price is for individual houses, and includes monthly modem rental charges. 18

19 19 ADSL Business Promotional Plan Maintain low monthly churn Monthly churn rate improved to 1.75% in 2Q from 1.89% in 1Q Introduce more retention measures Migration of dial-up users to ADSL 3.00% 2.50% 2.00% 1.50% 1.00% Trend of monthly churn * 1.54% 1.54% 1.69% point 1.82% 1.89% 1.75% Metal Plus Service: Expect a gradual recovery in subscriber addition in 2H due to area expansion from approx.800 GCs to approx.1,400 GCs by the end of March Launch New Metal Plus Net DION ADSL10 Services on 11/10/2005. Promotion with ISPs: Introduce a new 50M plan with So-net. Promote Nifty light plan for low-end users. Promote high end services at retail stores. Promotion to first-time Internet users Provide new bundled service with on-line trading accounts. 0.50% 0.00% *Average of monthly churn rate in quarter 2004/1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q

20 20 ISP Business (AOL) Strategy Increase in AOL Broadband Ratio AOL broadband migration rate was around 28% in September, up from 21% in March Improvement of AOL DIARY (Blog service) Introduced designers template, capacity increase, new blog articles and organized special events to promote AOL DIARY usage. Page view per week doubled in 9/2005 compared to 6/2005. AOL Broadband Migration Trend 12.8% 16.2% 29.1% 7%point increase 27.9% 29.1% 25.0% 19.2% 21.3% 1Q/2004 2Q/2004 3Q/2004 4Q/2004 1Q/2005 2Q/2005 4Q/2005 (Before Acquisition) Forecast Margin and profit expansion Focus on margin and profit expansion by renewing network structure, sales channels and ADSL/AOL synergy effect.

21 emobile Strategy 21

22 emobile Ltd. emobile was spun off as a full operating subsidiary from October 1, 2005 Name emobile Ltd. Business Focus Date of establishment Representative Capital shares and Capital reserve Mobile Broadband Business January 5, 2005 Representative Director Sachio Semmoto Billion yen Capital Reserve: billion yen Shareholding Structure eaccess Ltd Tokyo Broadcasting System, Inc. (TBS) 14.0 As of October 31,

23 23 emobile Business Plan Summary Service Schedule Plan Launch limited area data service by March Launch nationwide voice services by March Expect 5 million subscribers within 5-year 5 from the service launch. Capex Plan Expect to spend up to 300 billion yen to build a nationwide network which could accommodate 5 million subscribers. Financing Plan Raise capital through third party placement equity financing. Completed 55 billion yen equity financing at the end of October Plan to expand further emobile s s equity. Capex is expected to be funded by a combination of debt financing.

24 24 Capital alliance of emobile Completed 10 billion yen capital alliance with TBS. Other alliance partners 10 billion yen 45 billion yen In Negotiation Impact of TBS capital alliance 1 segment broadcasting Content service over mobile network Commercialization of integrated broadcasting and data communication services Equity Financing Debt Financing Bank Leasing Companies Financial Institution

25 25 1.7GHz FDD Field Trial Preparation for the full nationwide commercial roll out Purpose Gain knowledge and gather data to prepare for the full nationwide commercial roll out. Time From May 2005 Area Results Tokyo (Setagaya, Shinjyuku) Achieved good transmission of Voice, Packet, and HSDPA Antenna Base Station Route for through put measurements

26 26 Exhibition of Concept mockups at a Retail Store Next generation concept handset display booth at major retail electronics ectronics store Concept handset display at prime retail outlet. Gathered questionnaires from consumers on services and pricings. *The handsets are concept mock up of emobile service.

27 27 I. FY2005 Mid-Year Financial Results Overview Page 3 II. FY2005 Mid-Year Financial Results Page 8 III. Business Strategy Page 16 IV. Summary Page 27

28 28 FY2005 2H Strategy ADSL/ISP Business <ADSL business> Expect a subscriber increase by (1) providing bundled service with KDDI s Metal Plus services, (2) expanding service areas and (3) promoting dial up user to migrate to ADSL. <ISP business> Margin and profit expansion by improving synergies between ADSL and ISP divisions. Mobile Business Expect to be granted a full mobile commercial license. Commence preparation for the commercial service. Plan to achieve a fully funded business plan for emobile before the service launch.

29 29 Disclaimer This presentation has been prepared by eaccess Ltd. ( the Company ). This presentation contains forward-looking statements, which are subject to risks, uncertainties, and assumptions. This presentation is being presented solely for your information and is subject to change without notice. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, actuality, fairness, or completeness of the information presented. The Company accept no liability whatsoever for any losses arising from any information contained in the presentation. This presentation does not constitute an offer or invitation to purchase or subscribe for any shares of the Company, and no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment.