TDC expands its cable business by acquiring Get AS. September 15, 2014

Transcription

1 TDC expands its cable business by acquiring Get AS September 5, 204

2 Disclaimer This presentation may include statements about TDC s or Get's expectations, projections, beliefs, plans, objectives, assumptions or future events or performance that are not historical facts and may be forward-looking. These statements are often, but not always, formulated using words or phrases such as "are likely to result", "are expected to", "will continue", "believe", "is anticipated", "estimated", "intends", "expects", "plans", "seeks", "projection" and "outlook" or similar expressions or negatives thereof. These statements involve known and unknown risks, estimates, assumptions and uncertainties that could cause actual results, performance or achievements or industry results to differ materially from those expressed or implied by such forward-looking statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this report. The key factors that may have a direct bearing on TDC s results include: the competitive environment and the industry in which TDC operates; contractual obligations in TDC s financing arrangements; developments in competition within the domestic and international communications industry; information technology and operational risks including TDC s responses to change and new technologies; introduction of and demand for new services and products; developments in the demand, product mix and prices in the mobile and multimedia services market; research regarding the impact of mobile phones on health; changes in applicable legislation, including but not limited to tax and telecommunications legislation and anti-terror measures; decisions by the Danish Business Authority; the possibility of being awarded licences; increases in interest rates; status of important intellectual property rights; exchange-rate fluctuations; global and local. Nothing in this presentation shall be construed as legal, business, investment or tax advice. Furthermore, no representations or warranties are made by TDC, explicitly or implicitly, as to the accuracy or completeness of the information set out in this presentation, and accordingly TDC (i) offers no reliance on the content of this presentation, and (ii) accepts no liability for any errors, omissions or misstatements in this presentation. The information included in this presentation may be changed or amended without notice and TDC does not assume any obligation to update or correct the information included in this presentation 2

3 Acquisition of Get Get business overview and investment highlights Update on domestic business priorities Appendix 3

4 Get highlights and transaction rationale:. Acquisition of Europe s fastest growing cable asset History of double digit revenue and EBITDA growth Leading performance among European cable operators Product and quality leadership 2. Creation of a leading Scandinavian cable business TDC has a long-standing and successful presence in cable through YouSee with more cable know-how than any other incumbent The combination expands TDC s positioning in cable (c. 30% of revenue ) and an increased exposure to the highly attractive Norwegian market 3. Complementary strengths across TV, voice and broadband products Both YouSee and Get have a state-of-the-art network, strong market positions, and best-in-class product offering 4. Substantial synergy benefits from overlapping Norwegian operations and broader cable footprint Commercial benefits through the utilization of Get s dense last mile network for TDC s business customers, and cross sell opportunities due to the complementarity of Get and TDC Norway s existing offering Cost savings through Get s ability to use TDC's Norwegian fibre backbone, as well as multiple opportunities for pan-regional procurement cost savings including content, technology, marketing, network, support agreements and central functions 5. Purchase price of NOK 3.8bn (.7bn) on a debt and cash free basis represents a multiple of 0.5x pre-synergies and 9.3x post-synergies on 205 EBITDA estimate In-line with recent precedents, despite Get's superior growth profile Transaction financed by TDC through a combination of senior unsecured EMTN bonds and hybrid bonds The dividend payout ratio will be adjusted from c. 90% to c. 60% of Equity Free Cash Flow from the financial year Material equity cash flow accretion for shareholders The transaction is expected to deliver more than 0% equity free cash flow accretion already by 206 Pro-forma calculation on 203 numbers 4

5 Creation of a leading Scandinavian cable business The leading Scandinavian cable business Pro forma metrics Provider of most sophisticated digital TV services and highest broadband speed in the region Expected to deploy over 200,000 next generation set top boxes in (DKKbn) PF Revenue EBITDA % margin 33% 46% 37% Total subs ~,200k ~500k ~,700k Total RGUs 4 ~2,000k ~850k ~2,850k Significant subscriber footprint ( 000) 2 2,633 2,077, B2B Homes connected vs. c. 600k homes passed 2 Total cable subscribers, incl. DTV AnTV, BB, FX 3 YouSee figures calculated/estimated standalone figures where YouSee is assumed to operate on an arm s length from TDC 4 Including YouSee mobile RGUs 5

6 Transaction benefits to TDC Creation of a Scandinavian cable leader TDC TDC+Get Cable 22% Cable 29% Entry of TDC into the attractive Norwegian consumer market Revenue Improved diversification and exposure to cable Acceleration of B2B strategy in Norway Increased geographic and product diversification Significant improvement in operational scale and profitability in Norway Geo. revenue split Sweden % Norway 4% Denmark 85% Norway 2% Sweden 0% Denmark 78% Enhanced growth profile Combination will have a positive contribution to growth trajectory Top-line growth to have a positive impact on EBITDA growth and thus equity free cash flow Revenue growth CAGR % -3PF EBITDA growth CAGR % -3PF TDC (3.2%) (.6%) TDC+Get (2.%) (0.3%) Based on 203A figures; YouSee figures calculated/estimated standalone figures where YouSee is assumed to operate on a arms length from TDC 6

7 Substantial synergy opportunity Revenue synergies Addition of Get s last mile to TDC s B2B platform will allow better control and enhanced offering resulting in higher B2B market share Reverse synergies; positive contribution of Get management to spur further development of YouSee Sell Get TV package to current TDC B2B customers in Norway Run-rate synergies DKKm ~55 2 Cost synergies Capex synergies Content cost savings Network (Backbone and last mile complementarity) Media agency agreements Combining network operating center/support desks in B2B Support agreements for net equipment Combined procurement Savings on future backbone spend Capex related to capacity expansion from backbone combination ~05 ~5 NOLs TDC expects to obtain tax savings in Norway from Get's significant net operating losses of c. 2bn NOK The combination of Get and TDC Norway also allows TDC to realise tax savings from its existing Norwegian NOLs significantly faster Total impact of run-rate synergies on OpFCF ~DKK 65m Defined as EBITDA Capex 2 Revenue synergies; Revenue synergies of DKK 80m with an implied EBITDA impact of DKK55m 7

8 Financing and dividend considerations Consideration and Financing Total cash consideration of NOK 3.8bn (.7bn) on a cash and debt free basis The purchase price represents multiples of 0.5x pre-synergies and 9.3x post-synergies, based on 205 EBITDA estimates The transaction is expected to deliver more than 0% equity free cash flow accretion by 206 The acquisition will be financed through a combination of senior unsecured EMTN bonds and hybrid bonds, resulting in a pro forma leverage of 2.9x EBITDA as June 30, TDC will continue to be committed to investment grade rating Dividend policy The dividend payout ratio will be adjusted from c. 90% to c. 60% of Equity Free Cash Flow from the financial year 204, maintaining an attractive dividend yield The revised shareholder remuneration policy leads to an expected dividend per share of DKK 2.50 per share for the financial year 204, of which DKK.50 was paid August 3, 204 Guidance The guidance for EBITDA and Capex will be impacted from the closing of the transaction when Get will be consolidated The acquisition does not change the guidance for 204 in regards to organic revenue development (expected >(3.5%)) Updated full year guidance for 204 will be published in connection with closing of the transaction Expected timetable The acquisition is only subject to competition approval from the Norwegian competition authorities and it is expected to close in Q4 204 ¹ Our guidance for 204 is based on comprehensive financial plans for each individual business line. However, by their very nature, forward-looking statements involve certain risks and uncertainties. The risks and uncertainties are described in more detail in the section on risk factors and in the Safe Harbour Statement in TDC's Annual Report 203; 2 PF leverage of 2.9x assuming EUR 500m of hybrid bond financing with 50% equity credit from credit rating agencies and the remaining in senior unsecured EMTN bonds. A fully senior unsecured EMTN bond financing of Get would imply a pro forma leverage of 3.x EBITDA as of June 30, 204. No final decision re the financing mix between senior unsecured and hybrid bonds have been made at this point in time 8

9 Acquisition of Get Get business overview and investment highlights Update on domestic business priorities Appendix 9

10 Leading fiber-based entertainment and communication company in Norway Leading fiber-based entertainment & communication company in Norway Serving ~500k households with ~850k services (RGUs) ~50% of customers based in the capital, Oslo Market share of 22% in TV and 7% in broadband 60%+ of total subscriber base is composed of low churn MDU s (in Oslo MDU s represent 87% of subscribers) High-speed broadband with advanced video/tv entertainment services Get coverage Partner coverage Transport ring End-to-end hybrid-fiber network with growing coverage ~600k homes passed (~/4 of Norwegian households) National coverage through branded service to 3 partners Strong operational and financial performance ~840 employees Operating breakdown Revenue breakdown 203 Subscriber breakdown 203 Partners 0% Broadband 32% Others 7% TV 52% SDUs 2 24% Partners 4% MDUs 62% Innovation leader Speeds of up to 200 Mbps; launching 500 Mbps; First in Europe to test Gbps on HFC Most advanced TV box Fully integrated and well-invested network (EuroDOCSIS 3.0) First in Norway with triple play MDU: multi dwelling units 2 SDU: single dwelling units 0

11 History of double digit revenue and EBITDA growth Get Financial performance (NOKm) EBITDA Revenue 2,437 CAGR: 3 2,3,663,922 Revenue 3%,452,297, , EBITDA 7% Broadband roll-out D4ALL (Digital for all): Digital platform roll-out D4ME (Digital for me): Leadership in personalized entertainment Note: numbers for Get AS audited as per NGAAP numbers for Thor Norway Topco AS group as per NGAAP, numbers for Thor Norway Topco AS group as per Management accounts (EBITDA represents management accounts which may differ from IFRS due to exceptional items charged below EBITDA in the management accounts)

12 Leading performance among European cable operators Revenue growth (CAGR )¹ Strongest growth in RGU (CAGR )² 2.6% Total Get A Revenue CAGR of 2.6% (9.9% organic) 7.3% 3.5% 2.7% 2.5% 2.%.7% 9.9% 9.2% 7.5% 3 4 (3.3%) 5 6.% and blended ARPU (CAGR ) 2.9% 0.0% 5.2% 4.6% 4.4% 0.3% 2.0%.8% ³ (0.8%) 5 Includes organic and inorganic growth 2 Excluding mobile RGUs 3 Excludes impact of Virgin Media acquisition 4 Excludes mobile 5 Based on DTV ARPU. Source: company reports 2

13 Key differentiating factors explain Get s unique position vs. European peers Structural growth Strong Norwegian economy ARPU / Household expenditure,2 3.2% MS by technology 3 Cable/Fiber DSL/Other Growing market Get has room to grow due to low share of wallet 2.2% 68% 4% Early adopters of new technology 32% 59% Peers Stable customer base High-quality customer base B2C customers consist of 7% Multi- Dwelling Units¹ (building associations) with long-term contracts 87% of contracts with less than 500 Dwellings/contract Churn at ~5% Subscriber breakdown (203) Partners 4% SDUs 24% MDUs 62% Churn Q 204.5% Peers 4 5.0% GET At the forefront of TV/Broadband product launches Superfast broadband Up to 200Mbps Product and quality leadership Advanced TV box Get box synonymous with PVR in Norway Best customer service in the Norwegian market Strong Get brand recognition Rich content 50 channels with flexible offering Leading functionality Highly advanced box with PVR, modem, Wi-Fi and VoIP All content on all devices (multi-screen) Consumer market ARPU as of 203; 2 Defined as the market value of all goods and services, including durable products purchased by households as of 202; 3 Consumer fixed broadband market share by technology; 4 Consist of ComHem, Virgin mobile, Ziggo, Telenet; 4 Consist of ComHem, Virgin mobile, Ziggo, Telenet, Numericable 3

14 Multiple avenues for growth Revenue (NOKm) MOBILE INTERNET Digital for All: Digital platform roll-out Digital for me: Leadership in personalized entertainment Broadband TV B2B Network expansion Up-selling MDU subs Increased bundling New product launches 2, E 4

15 Acquisition of Get Get business overview and investment highlights Update on domestic business priorities Appendix 5

16 Strategic initiatives to drive results for TDC s core business are well under way Commercial initiatives Integrated solutions to change the game Push household solutions with new TV packages, catch-up, access everywhere, Play 3.0 and bundles Accelerate TDC One in B2B and increase fiber market share Focus on digitalization of TV base Digital transformation of TDC Group Stable, attractive self service to reach a significant online service share Companywide digitalization and automation to improve the customer experience and reduce costs Personalized buying experience Seamless cross-channel customer experience Customer recognition and synchronized e2e communication Proactive fault correction Differentiate service strategies Early results Launch of new integrated solutions Telmore Play launched with 25,000+ sign-ups within first 9 weeks with more than 60% are new Telmore customers Unlimited Unlimited Use of 2 services Talk Unlimited Text New TDC TV portfolio with advanced STB, with more than 4k net adds since February launch YouSee Play ready to launch in October with advanced TV, films & music on the go Strong results from regional go-to-market field trials TDC business fiber campaign Launched in 204 Q2 with FY gross-add target already realized by the end of June 3x fiber intake vs. pre-campaign run-rate 4x increase of existing customers access revenue after getting fiber Digital transformation under way TDC and YouSee customers motivated to sign up to digital communication to accelerate digital enablement of base in line with Danish public sector initiative 22 digitization initiatives to roll-out in 204 An integrated seamless consumer platform containing up to 00 high quality channels online and in apps, with an extensive film and tv-series archive (5,000 rental movies) as well as an extensive music library with 20mm+ songs 5 GB Data 4G Speed ( ) ) Online share of volume sales for B2C 6

17 supported by ambitious network build out plan and transformation of TDC s operating model Operational initiatives Accelerated network roll-out Accelerate network roll-out of high speed broadband and 4G Access strategy aligned with regional commercial go-to-market strategy Results Ambitious network build out plan well underway Roll-out complete in Zealand, including Copenhagen, covering c. 50% of the population Q2 204 outdoor 4G cov. to 85% of DK population Region C Q4 4 Q 5 Huawei Ericsson Region A Completed Transformational initiatives Developing the future operating model Analyze scope for outsourcing/offshoring of more tasks across TDC Group Improve cost efficiency, scalability, capabilities and quality for TDC Region B Q3 4 Q 5 Future Operating Model continuously executing Contract signed with Sitel for take-over of 800 employees introducing new stronger lever for 205 Ongoing analysis of other areas across TDC Group ) Online share of volume sales for B2C 7

18 Updated TDC Equity story 2 3 Leading Scandinavian communications and home entertainment company Focused strategy in core Scandinavian market Delivering superior communication and home entertainment products to customers through seamlessly integrated solutions Highly advanced infrastructure Superior domestic 4G mobile network coupled with an advanced and continuously upgraded Scandinavian network based on a future proof cable, DSL and fiber footprint Sustainable and stable financial performance Diversified revenues from mobile, TV and fixed line across customer segments Operational efficiency improvements enabling strong EBITDA margins and significant free cash flow generation 4 Attractive shareholder remuneration policy Attractive dividend payout ratio of approximately 60% of EFCF with the option of topping up with share buy backs if not compromising rating targets 5 Investment grade credit profile Committed to investment grade rating 6 Disciplined Scandinavian M&A policy Potential M&A activity within the current Scandinavian footprint and not compromising rating target 8

19 Acquisition of Get Get business overview and investment highlights Update on domestic business priorities Appendix 9

20 Financial strength across key metrics 203 results (in DKK bn, unless %) Combined Revenue EBITDA EBITDA margin 4.6% 45.8% 4.9% CapEx CapEx/Revenue 5.0% 2.6% 5.6% OpFCF Defined as EBITDA - Capex 20

21 Strong Norwegian economy Continued GDP Growth Consumer price inflation (CPI) Norway 0.7% Western Europe.6%.5% 2.3% 2.8% 2.2% 2.0% 2.8%.4% 2.0% 2.0% (0.2%) 08-'3 CAGR 3-'6 CAGR 0.3% Q '4 Area: 385k sqkm Population: 5,09k GDP / capita ahead of other WE countries Nominal GDP per capita ($ 000) Oslo: 634k (2%) Households: 2,259,000 Low unemployment rate: 3.3% GDP/capita: $03k > 2x Western European average Healthy public finances NO DK SE NL BE DE FR UK Public debt <30% of GDP Source: Global insight, Statistics Norway 2