WIND Telecomunicazioni First Half 2015 Results Delivering Solid Performance August 7, 2015
1H 2015 Highlights Revenues EBITDA Op. FCF (EBITDA CAPEX) NFI Deleveraging WIND - 3 Italia Merger Total revenue of 2,160 million, down 5.7% YoY due to decline in service revenue and certain one-off items recorded in 2Q14 Mobile service revenue down 2.7% YoY showing a continuous improvement in quarterly trend (2Q15-2.2%, 1Q15-3.3%, 4Q14-6.7%) and outperforming its peers Mobile internet revenue confirming double digit growth up 16% Fixed broadband LLU revenue up 0.9% EBITDA at 804 million, declining by 7.1% YoY mainly due to the impact on the full quarter of the towers transaction; on an underlying basis, excluding impact of towers transaction, EBITDA declines 5.7% with a trend in line with 1Q 2015 and with total revenue decline EBITDA margin at 37.2% net of towers transaction stable YoY Continued strong Op. FCF of approximately 940 million in 1H15 LTM Net Financial Indebtedness at 10,097 million vs. 10,651 million as of December 31, 2014 Net debt / EBITDA at 5.8x Completed refinancing process started in 2014 with a total annualized interest saving of approximately 340 million 162 million related to 2015 and 2016 LTE liability to Italian State, pre-paid at the end of April with cash on hand 50-50% Joint Venture between WIND and H3G Italy announced yesterday will create the 1 st mobile operator in Italy 2
WIND-3 Italia Merger: Creating the 1 st mobile operator in Italy New Era for Italian Telecoms Mobile Market Share* 36% More than 31 million mobile customers and 2.8 fixed customers of which 2.2 million broadband N 1 mobile operator in Italy with a combined market share of approximately 36%* Leading fixed-line alternative broadband operator in Italy Enhanced convergence opportunity thanks to a larger scale Innovative, integrated fixed and mobile services to consumer and B2B customers Improved distribution footprint and CRM opportunities 34% 34% 35% 32% 29% 2010 2011 2012 2013 2014 1Q 2015 WIND + 3 Italia Telecom Italia Vodafone Investment and Innovation Superior customer experience through best-in-class service quality and focus on digital innovation Enlarged and improved network Accelerated roll-out of 4G/LTE services Expansion of LLU footprint and fiber offering * As of March 2015, excluding MVNO s 3
WIND-3 Italia Merger: Main Financial KPIs Value Creation Pro-forma 2014 revenue of approximately 6.4 billion 700 million annual run-rate cost synergies of which 90% expected by third year post-closing In excess of 5 billion NPV cost synergies expected, net of integration costs Deleveraging Target Improved leverage: 4.9x Net debt / EBITDA at signing Rapid deleverage expected over next years targeting a Net Debt / EBITDA of 3.0x ( bln) Pro-Forma Revenue (2014) (times) Net Debt / EBITDA 1.7 * Source: CSC (Sep 14), ISTAT (Nov 14) 4.6 6.4 5.6 x 4.9 x 3.0 x WIND 3 Italia Pro-Forma WIND 1Q 2015 WIND + 3 Italia 1Q 215 Target 4
WIND-3 Italia Merger: Key Transaction Highlights Highlights Transaction Structure 50-50% JV of VimpelCom (VIP) and CK Hutchison Holdings (CKHH) VIP to contribute WIND with its existing debt CKHH to contribute 3 Italia on a cash and debt free basis No further cash contributions expected from VIP or CKHH Transaction conditional on parties being satisfied with regulatory approvals Timing Expected closing within next 12 months subject to receiving clearance from relevant authorities Filing with European and Italian authorities Management Company to be led by Maximo Ibarra, with an experienced combined management team Governance Substantive shareholder agreement to ensure successful JV Board consisting of 6 directors (3 nominated by VIP, 3 by CKHH) Chairman rotating every 18 months, with casting vote to ensure no grid lock, first appointed by CKHH VIP CKHH 50% 50% Holdco WIND 3 Italia 5
2015 Market and Macro Trends ( mln) ( bln) Total Market Value Trend* 13.5-3.1% 25.9 25.1 13.0 12.4 12.2 2014 2015E Mobile Fixed Highlights 2015 TLC Market Value expected to decline low single digit with an improving trend GDP expected to grow 0.7% in 2015 Unemployment expected to improve in 2015 but youth component over 40% still a concern GDP Growth** Unemployment Trend** (%) (%) 1.4 1.5 0.7 1.3 1.2-0.4 0.7 * Source: 2013 CSC (Sep 14), ISTAT 2014 (Nov 14) 2015E 2016E 2017E -1.7-0.4 12.2 12.1 12.7 12.5 12.7 12.3 DEF 12.0 11.8 ISTAT 11.4 11.4-1.9 DEF ISTAT 2013 2014 2015E 2016E 2017E * Total Market excluding handsets ** Sources: Italian Government s Preview Note to DEF 2015 (Apr 15), ISTAT (May 15) 6
Outperforming in Mobile Data Mobile Internet Revenue Highlights ( mln) Strong performance in data revenue with double digit growth YoY 269 +16.0% 312 Mobile internet customer base continues to increase +13.5% 1.4 GB average monthly usage of active customers: 4G data customers monthly data usage 1.5 times the average data user Mobile Internet CB* Upselling Growing Data Demand** (mln) 9.7 +13.5% 11.0 (GB month) 1.1 1.2 1.3 1.2 1.4 1.4 Basic bundle allowance 1 GB 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 * Mobile Internet includes customers that have performed at least one mobile Internet event in the previous month ** Mobile average data usage measured on mobile Internet users 7
Steaming Ahead on Digital Innovation Digital Style All Inclusive Music powered by Inclusive Games powered by digitally native segment Self Care Areas Access increase 78% YoY Digital top ups +56% YoY, All dedicated to Confirmed to be the fastest telecommunication company on answering customers via Facebook My WIND App for Apple, Android and Windows Phone devices downloaded more than 8 million times from its launch My WIND App Digital Home & Life Digital Home & Life concept in Rome and Milan: (mln) Smartwatch Wellness Music Smart Home Google Play and Windows Phone Store +180% 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 Revenue share model with Google play and Windows Phone Store : +64% revenue in 1H15 vs. 1H14 Cumulative downloads from both Google Play and Windows Phone Store +180% 8
Network Coverage and Capacity Deployment Mobile Network CAPEX LTE population coverage at 42.8% HSPA network fully developed: 98.0% population ( mln / %) 15.8% 17.9% LTM CAPEX / revenue coverage with 95.8% of population at 21 Mbps and 45.5% at 42 Mbps GSM network completed: 99.9% population coverage with GPRS/EDGE nationwide coverage Fixed Network and Backbone 1,462 LLU sites: c. 62% direct population coverage in all major Italian cities New LLU expansion plan under implementation up to 500 new sites Solid fiber optic backbone of 22,300 km, supporting both fixed and mobile businesses 309 358 9
Solid Mobile Commercial Performance (mln) Customer Base -2.3% 21.9 21.4 Highlights Mobile customer base at 21.4 million declining 2.3% YoY Stable market share ( / %) 38.6% ARPU 41.6% % Data on Total Total ARPU stable YoY at 11.0 increasing versus previous quarter after more than 5 years trend of decline in the overall market, confirming WIND s expectation of market recovery 11.0 stable 11.0 Data ARPU accounting 42% of total ARPU increasing 8% completely offsetting the decline in voice ARPU 10
Stable Performance in Fixed-Line Voice Subscribers Broadband Subscribers ( 000) 2,902 2,814 ( 000) -1.0% 2,415 2,391 Direct +1.5% 2,180 2,212 487 422 Indirect Dual-play Subscribers Highlights ( 000) +3.9% 1,881 1,954 Fixed customer base decline mainly due to contraction of indirect segment as a consequence of the company focus on the direct CB Direct customer base marginal decline (-1.0%) Fixed Broadband customers up 1.5% with solid LLU performance Higher value dual play customers increasing 3.9% to almost 2 million customers 11
1H 2015 Financial Performance
Revenue and EBITDA Total Total Revenue Highlights ( mln) 2,290-5.7% 2,160 216 180 2,074-4.5% 1,981 Other rev. + CPE TLC service revenue Total revenue declining 5.7% YoY mainly due to a decline in service revenue and certain one-off accounted in 2Q 2014 Service revenue decreasing 4.5% mainly due to the fixed-line business, but confirming the quarter-onquarter improvement in trend ( mln / %) EBITDA / Margin 37.8% 37.2% -7.1% 865 804 EBITDA declines 7.1% YoY to 804 million due to the impact on the full quarter of the tower transaction; on an underlying basis, excluding the impact of towers transaction, EBITDA declines 5.7% with a trend in line with 1Q 2015 and with total revenue decline EBITDA margin at 37.2% due to towers transaction net of which it would have been stable YoY 13
Revenue and EBITDA Mobile Total Revenue Highlights ( mln) 1,660-4.8% 1,580 194 155 1,465-2.7% 1,425 Other rev. + CPE TLC service revenue Total mobile revenue declining 4.8% with a further improvement in service revenue trend Service revenue down 2.7%YoY showing a significant improvement in trend QoQ (2Q15-2.2%, 1Q15-3.3%, 4Q14-6.7%) ( mln / %) EBITDA / Margin 41.7% 40.4% Strong performance in mobile Internet with revenue up 16.0% EBITDA decreasing 7.8% due to the impact on the full quarter of the tower transaction -7.8% 692 639 EBITDA Margin at 40.4% due to the towers transaction impact net of which it would have been almost stable 14
Revenue and EBITDA Fixed-Line Total Revenue Highlights ( mln) 631 22-8.1% 580 24 Other rev. + CPE Total fixed-line revenue declining 8.1% YoY with 609-8.8% 556 EBITDA / Margin TLC service revenue service revenue decrease of 8.8% due to the decline in voice volumes as a result of the decrease in pay per use traffic coming from the increased penetration of bundles ( mln / %) 27.4% 28.4% EBITDA at 165 million decreasing 4.5% YoY mainly due to the decline in revenue -4.5% 173 165 EBITDA margin increasing 1.1 p.p. to 28.4% 15
P&L Highlights ( mln) 1H 2015 1H 2014 P&L 1H 2015 Change (%) Highlights Revenues 2,103 2,186 (3.8)% Other revenues 57 104 (45.2)% Total Revenues 2,160 2,290 (5.7)% EBITDA 804 865 (7.1)% D&A (104) (612) n.m. EBIT 700 253 n.m. Financial Income and expenses (276) (695) n.m. EBT 424 (442) n.m. D&A impacted by the capital gain arising from the towers transaction in 1Q 2015 Financial Income reflects interest savings resulting from 2014 and 2015 refinancing transactions Income Tax (57) 39 n.m. Increase in Income tax due to higher taxable income Net result 367 (403) n.m. 16
Capitalization Cap Table 1H 2015 ( mln) As of Dec 31, 2014 As of June 30, 2015 June 30, 2014/ LTM EBITDA Cash and Equivalents (203) (76) (0.0x) Bank Loan 1,874 672 0.4x Total Bank Debt 1,671 596 0.3x Senior Secured Notes 2019 149 149 0.1x Senior Secured Notes 2020 4,751 5,716 3.3x Total Bank Loan + SSN 6,571 6,461 3.7x Senior Notes 2021 4,086 4,293 2.5x Ministry LTE Liability 163 - - Derivatives and Other (169) (657) (0.4x) Total Net Debt excluding Intercompany Loan 10,651 10,097 5.8x Intercompany Loan to WAHF (997) (1,057) (0.6x) Total Net Debt 9,654 9,040 5.2x Cash Net Debt 9,822 9,661 Interest Accrued 167 165 Fees to be amortized (166) (130) Derivatives MTM (169) (657) LTM EBITDA 1,743 17
Highly Efficient Debt Maturity Profile ( mln) 1H 2015 575 425 3,513 3,779 150 700 775 2015 2016 2017 2018 2019 2020 2021 Tap to SSN 2020 + FRN 2020 New Senior Credit Facility New Senior Secured Notes 2020 Senior Secured FRN Senior Secured Notes 2020 New FRN 2020 New Senior Notes 2021 Notional amounts. USD tranche has been converted at CCS EUR/USD Exchange Rate 18
Thank You Q&A 19
Disclaimer This document contains forward-looking statements, as the phrase is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to, among other things, future market developments and trends, anticipated benefits from the Italy transaction, the ability to complete the Italy transaction and anticipated interest cost savings. The forward-looking statements included in this presentation are based on management s best assessment of the Company s strategic and financial position and of future market conditions and trends. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of economic volatility, unforeseen developments from competition, governmental regulation of the telecommunications industries. 20