Transcript Diapositive 1 - Tioga Venture

New Services and
Opportunities in the
Telecom Industry
Bruce Bowden
| 15 Octobre 2004 |
Agenda
 French fixed telecoms market environment
 Overview of neuf telecom
 New services
Page 2
2003 French fixed telco market
LDCOM estimates
8,000
7,000
17%
1,223
26%
6,000
All alternatives
1,614
M Euros
5,000
France Telecom/Wanadoo
Alternatives’ share
4,000
3,000
6,000
Evolving
quickly
in 2004
2,000
43%
1,000
445
340
4,600
41%
600
500
Residential dial-up
Residential BB
0
Residential voice
Note: excludes 4.2B Euros in revenues (from 0800, cards, public phones, annuaires, noncorporate leased lines) which added to these amounts results in ~20B Euros total market
Business
Page 3
Neuf and Cegetel are the key
integrated fixed-line alternatives
neuf has far superior growth profile; others like Tele2 and Free
are well-positioned in their niches
2003 alternative market: 4.7B Euros
1,800
LDCOM estimates
1,600
Others
1,400
COLT
WorldCom
1,200
M Euros
Cegetel
1,000
neuf telecom
Club Internet
800
Tiscali
Evolving
quickly
in 2004
600
Noos
Free
AOL France
400
Tele2
200
0
Wholesale
Residential voice Residential dialup
Note: net of intercompany revenues
Residential BB
Business
Page 4
FT holds ~75% of the fixed market
and ~90% of value
French fixed
telco market: 20 B€
New entrants
Mkt. share Revenue
Data & Internet
3.5 B€
20%
Voice
(incl. dial-up @ mins.)
35%
0.7
France Telecom
Margin
Value
60%
0.4
80%
3.9
50%
65%
3%
0.2
70%
2.8
Margin
Value
100%
0.3
2.8
100%
2.0
7.2
100%
0.1
5.2
1.9
11.1 B €
Access & Subscriptions
5.4 B €
Mkt. share Revenue
7.2
0.1
95%
5.2
4.8
2.4
15.2
17.6
(24%)
(12%)
(76%)
(88%)
SOURCES: ART, LDCOM ESTIMATES
Page 5
Agenda
 French fixed telecoms market environment
 Overview of neuf telecom
 New services
Page 6
Who is neuf telecom?
 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
Page 7
neuf has grown rapidly both organically
and via acquisition
G
CA
998
1
R
=
3
0
0
-2
+
%
9
1
2
992
Residential: 173M€
551
Business: 390ME
181
111
3
Wholesale: 429ME
38
Note: Figures in US GAAP




8% share of the fixed market
#1 alternative operator for ISPs and other telcos
#1 alternative operator for enterprises
#4 residential alternative operator
Page 8
Growth across all segments
Résultats au 30 juin 2004, US GAAP
Page 9
Neuf has been profitable since inception
101
EBITDA
42
9
0
18
11
4
Net income before
extraordinary asset
write-downs
4
1
-5
- 13
1998
1999
2000
2001
2002
2003
Note: Figures in US GAAP
Page 10
Proven track record as consolidator
Key pro forma financials (at current neuf telecom perimeter)
Millions of Euros

600
500

400
300
200
100

0
-100
-200

-300
-400
-500

-600
-700
H1 01
Revenues
H2 01
Gross margin
H1 02
EBITDA
H2 02
H1 03
Oper. CF
CAPEX
H2 03
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
SG&A
Page 11
Neuf has been funded largely by
operational cash flow and equity capital
In M€
CUMULATIVE CASH FLOWS
FROM INCEPTION TO EOY 2003
Cash flows from operations
707
Tangible and intangible investments
Other net investments (*)
(1 329)
176
Cash flows from investments
(1 153)
Capital increases
Minority interests
Other financing - net of repayments
800
14
43
Cash flows from financing
857
Exchange rate variations
-3
Cash as of 31 December 2003
408
+707
-1153
+857
408
Financing Operations Investment
€ 200 million in CapEx in 2004
(vs. € 130 million in 2003)
Cash
Figures in US GAAP
(*) Acquisitions, net of cash in companies acquired and gains on sales of assets
Page 12
neuf’s shareholders
CSFB Private Belgacom
Equity
Alpha Funds &
8.1%
8.3%
Wendel Inv.
7.3%
Telecom Italia
7.0%
Suez
16.7%
Other
10.0%
Louis Dreyfus
Group &
Employees
42.6%
Artemis-Net
2.2%
PAI
2.0%
Goldman
Sachs
2.0%
Phoenix
Equity
Partners
1.8%
BC Partners
1.6%
Others
0.4%
Page 13
The largest alternative broadband network
2 000 communes
> 50% of the
population covered
Liste des villes demandée
Page 14
Agenda
 French fixed telecoms market environment
 Overview of neuf telecom
 New services
Page 15
Unbundled DSL lines are the key
platform for advanced services
Page 16
Where do we go from here?
Page 17
Faster
 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
Page 18
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 19
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 20
More disruptive: MVNO & F-M
Convergence
French mobile penetration rate is still
relatively low with potential strong
additional growth …
… probably linked to low competition
within market maintaining high
profitability
Penetration rate : 69.5%
Market
share
2003 figures
(+1% Q303-Q104)
France is lagging behind
Revenue
(Bn€)
EBITDA
(Bn€)
Orange
48.8%
17.9
6.6
SFR
35.3%
6.8
1.9
Bouygues
15.9%
3.3
1.0
Stable market share with
30-35% EBITDA return
Source : CSFB
Page 21
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 22
Convergence of fixed and mobile
driven by technology (I)
Broadband Internet strong growth
multiplies access points usable for
mobile calls collect

Strong growth of mobile calls made
in-house or inside workspace …
Emergence of IP technology enables
services platforms convergence

Mobile phone usage by consumers

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
On net « base station » with a 6fold lower
cost than GSM / UMTS cost
Page 23
3
Convergence of fixed and mobile
driven by technology (II)
Hybriphone technology should be available by Q1
2005
Customer value
Hybriphone principles :
 Same handset for all calls (indoor & outdoor)

Simplicity




 Communications between handset and access points
through short range wireless (Bluetooth or WLAN)
 Access points located at home or in workspace

Pay less

GSM
Mobile
Network
Network
interconnexion
required
Fixed PSTN & IP
Network
Bluetooth/Wifi
Access Point
OSP
HLR
Mobile minute = 6X fixed
minute cost
Fixed-operator value


Bluetooth, WiFi
One handset for all calls
One phone number
One voicemail
One bill

Capture revenue (increase ARPU)
& margin on mobile calls
Capture revenue & margin on
mobile incoming traffic
Optimize cost structure
Already tested & being implemented :
• BT in the UK ('Blue Phone' project)
• Hutchinson in Hong Kong
Page 24
MVNO can create major new IT
platform needs
MVNO B : a 'common offer' on
the business segment
MVNO proposal A
Mobile operator responsibility


All network
Traffic management

No direct proposal to become MVNO yet

Commercial partnership for common
offer with Neuf Telecom on the business
segment (<100 employees)
MVNO responsibility





Customer relation (incl. billing)
Customer care
SIM cards (delivered by SFR)
Brand 'Neuf Telecom'
Added value services

VPN Fixed-Mobile

One bill, one customer care

…
MVNO requirements



Minimum yearly traffic
Mobile adapted distribution &
customer care
9 years contract

Already a distribution agreement for the
business segment
Not a full MVNO offer, even though mobile
operator proposes to start discussion on a
possible future network interconnection
Page 25
More content-rich:
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 …
Page 26
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