Australian Broadband Services Pty Ltd

Overview

       The Telco / ISP market will be redefined by the rollout of the NBN Opportunities for smaller players to take substantial share in a shifting market Technology has evolved allowing a high level of outsourcing by well managed RSPs Partnered with the world’s largest direct sales company, Cobra Group to implement a proven subscriber growth strategy Management bring over a 100 years in Telco, ISP and online media success to ensure the best in execution Targeting 300K+ subscribers, AUD250M in revenues and top 10 ISP position within 5 years Raising AUD2M in the lead up to an ASX listing in 2012

R2 – Sophisticated Investors

New Funds Equity Share Share Price Cobra Post Cash Value

R3 – ASX Listing (6 -12 mths)

New Funds Equity Share / Dilution Share Price Value Post Listing IRR over 5 years ROI year 5

Deal Structure

$2M 30% $0.25

$500K $6.7M

$6M 31% $0.50

$19M 30% 180%

The NBN For the first time smaller Telco’s and Aggregators will have access to non discriminatory wholesale pricing

Optical fibre to the home will shape the future of content delivery and consumer behaviour Opportunity to target millions of subscribers shifting to optical fibre or engaging for the first time Change of Government may lead to changes in implementation but too expensive to scrap the NBN

Other Networks Telstra and Optus wholesale DSL will continue to service the majority of fixed line broadband customers for some years

The ability to access wholesale supply through Aggregators and out sourced ISP solution providers creates a low variable cost model suited to ABS ABS will target areas due for connection to the NBN within 5 years and ensure a low cost NBN transition without costs associated with incumbent legacy systems

Platform ABS platform to manage product access, payment processing, billing and CRM.

Preferred solution provider Utilibill is proven in Telco sector.

Market Size and Trends Telco market has seen 20 years of strong growth no signs of slowing down

Market Size (Internet Subs)

16 000k 14 000k 12 000k 10 000k 8 000k 6 000k 4 000k 2 000k 0k NBN Other Broadband CY2012 CY2013 CY2014 CY2015 CY2016 *Market size forecast chart for internet subscribers in Australia (excluding internet connections through mobile handsets) based on Australian Bureau of statistics growth trends and premises connection forecasts provided by NBNCo.

Platform

Utilibill HarbourMSP MCR

Wholesale Data

Nextgen Vocus NBN, Telstra, Optus

Phone

Engin (VoIP) Telcoinabox (Mobile) Optus

Key Suppliers

VAS

Aus Power and Gas Get Covered / AVIVA FetchTV  Key wholesale rates negotiated and ready for integration

The Cobra Group Partnered with Cobra - the World’s largest direct sales company

 Extensive telecommunications sales experience  2M+ Telco accounts signed in Australia  7M+ Telco accounts signed in Europe  Success only fee structure ensuring cost base tied to sales  Proven partnership with Australian Power and Gas (ASX: APG)  Seed round investor

SIO Forecast

KPIs

New Subs per mth Churn per year NBN Subs DSL Subs Total Closing Subscribers NBN Market Share Total Market Share 350K 300K 250K 200K 150K 100K 50K 0K CY2012

Year 1

3.5k

0k 4k 21k 26k 1.22% 0.22%

Year 2

5.5k

(3k) 21k 68k 89k 1.85% 0.72%

Closing Broadband Subscribers '000's Year 3

7.5k

(20k) 47k 111k 158k 2.09% 1.22%

Year 4

10.0k

(44k) 87k 147k 234k 2.63% 1.72%

Year 5

12.5k

(70k) 139k 174k 313k 3.18% 2.20% CY2013 CY2014 CY2015 CY2016 PAYG DSL PAYG Optical DSL Optical

Business Strategy Variable cost model directly linked to sales;

 Success only fees for new accounts to Cobra  Transaction based fees for billing, provisioning and customer service platform  Wholesale supply deals linked directly to consumption

Competitive pricing with an unprecedented level of flexibility;

 ‘pay as you go’ data plans increasing customer control over the billing  simple tiered data plans with unlimited switching  bundled VoIP, mobile, wireless broadband and energy  Partnerships with entertainment and media providers to cross promote and bundle media products as the optical fibre subscriber base expands

At launch the ABS product offering;

 Optical Fibre Cap and Pay As You Go Plans  ADSL2+ Cap and Pay As you Go Plans  VoIP phone plans (over the Internet or by dedicated fibre for NBN connected households)  Mobile Broadband Cap Plans  Mobile Phone Cap Plans  In home technology and data insurance

Year 2 product offering for expanded NBN market

;  IPTV and VOD  Online Backup  Virtual Desktop  Power and Gas

Product Offering

Management 100+ years of combined experience in senior roles with Telco and online media companies

 

CEO - Rob Appel

B. A., LLB. (CEO: Chaos Group, Microview, Production Manager: OzEmail) 

Chairman - Ian McGregor

B. BS, CA, FICS. (Chairman: APG , CFO: OzEmail, Unwired)

CTO Services - Andrew Kent

B. Sc, Elec Engineering (CTO: OzEmail, Webcentral, MD: Uunet A Pac Operations) 

CFO - Andrew Cowling

CA., B. Econ, Accounting (CFO: OzEmail Interline, iSOFT, Group Manager: Bigpond) 

Dir Marketing & Sales - Geoff Isaac

B. A. (Dir of Marketing: OzEmail, Unwired, Engin)

KPIs

New Subs per mth Churn per year NBN Subs DSL Subs Total Closing Subscribers NBN Market Share Total Market Share NBN Market Size (premises connected/covered) Total Market Size ARPU (Service Revenue) ARPU Incr EPS Shares on Issue Share Capital Net Cash (excl Share Capital) IRR ROI Headcount

Year 1

3.5k

0k 4k 21k 26k 1.22% 0.22%

Year 2

5.5k

(3k) 21k 68k 89k 1.85% 0.72%

Year 3

7.5k

(20k) 47k 111k 158k 2.09% 1.22%

Year 4

10.0k

(44k) 87k 147k 234k 2.63% 1.72%

Year 5

12.5k

(70k) 139k 174k 313k 3.18% 2.20% 358k 11,731k 1,129k 12,318k $ 76.52 $ 81.00 6% -$ 0.12 $38,667k $7,541k ($5,876k) 30% -68% 13 -$ 0.03 $40,987k $7,541k ($287k) -71% 18 2,229k 12,934k $ 83.28 3% $ 0.19 $44,467k $7,541k $12,544k 39% 23 3,306k 13,580k 4,369k 14,259k $ 86.44 4% $ 89.77 4% $ 0.30 $49,107k $7,541k $15,112k 153% 28 $ 0.44 $52,973k $7,541k $4,089k 180% 33

KPI’s

EBITDA + NPAT

Total Revenue (EBITDA + NPAT Contribution) $m

CY2016 CY2015 CY2014 CY2013 CY2012 -$50,0 $0,0

Revenues EBITDA NPAT

$50,0 $100,0 $150,0 $200,0 $250,0 $300,0 $350,0

CY2012

$13.1M

-$4.8M

-$4.8M

CY2013

$70.8M

-$1.1M

-$1.2M

CY2014

$121.9M

$9.8M

$8.6M

CY2015

$185.1M

$21.5M

$15.0M

CY2016

$256.6M

$34.0M

$23.7M

EBITDA NPAT

Underlying EPS

Underlying EPS

CY2016 $0,44 CY2015 $0,30 CY2014 CY2013 $-0,03 $0,19 $-0,20 $-0,12 CY2012 $-0,10 $-

Underlying EPS

$0,10 $0,20 $0,30 $0,40 $0,50

CY2012

$ -0.12

CY2013

$ -0.03

CY2014

$ 0.19

CY2015

$ 0.30

CY2016

$ 0.44

200% 150% 100% 50% 0% -50% -100%

Return On Investment

153% 180% 39% CY2014 CY2015 CY2016

Return On Investment CY2012

-68%

CY2013

-71%

CY2014

39%

CY2015

153%

CY2016

180%

ROI

P&L Total Services Revenue Hardware Revenue Setup Fees

Total Revenue Revenue incr %

Network & Carrier Costs

Gross Margin

Other Income Customer Acquisition & Service Network, Billing & Hosting Employee expenses Marketing expenses Office costs Administrative expenses Finance costs

Total Expenses EBITDA

Depreciation and amortisation expense

Profit before income tax

Income tax expense

Net Profit/Loss after Tax

Year 1 $7,566k $3,357k $2,209k

$13,132k

$0k Year 2 $57,293k $8,383k $5,161k

$70,837k

$0k ($11,228k) ($55,882k)

$1,904k $14,955k

$33k $13k ($4,592k) ($11,473k) ($151k) ($106k) ($1,285k) ($184k) ($131k) ($214k) ($166k)

($6,690k) ($16,072k) ($4,786k) ($1,117k)

($20k) ($325k) ($1,052k) ($40k)

($4,806k)

$0k

($4,806k)

($2,334k) ($600k) ($195k)

($1,157k)

$0k

($1,157k)

Year 3 $125,677k $9,280k $5,328k

$140,286k

$0k ($107,963k )

$32,323k

$96k ($15,643k) ($121k) ($3,349k) ($738k) ($235k) ($371k) ($2,153k)

($22,514k) $9,809k

($57k)

$9,752k

($1,137k)

$8,615k

Year 4 $205,996k $10,311k $5,292k

$221,599k

$0k ($170,328k )

$51,272k

$379k ($20,498k) ($136k) ($4,413k) ($926k) ($315k) ($423k) ($3,439k)

($29,771k) $21,501k

($73k)

$21,428k

($6,428k)

$15,000k

Year 5 $297,933k $11,207k $5,165k

$314,304k

$0k ($243,089k )

$71,215k

$823k ($25,500k) ($151k) ($5,642k) ($987k) ($372k) ($480k) ($4,910k)

($37,219k) $33,996k

($89k)

$33,906k

($10,172k)

$23,734k

P&L

Balance Sheet

Balance Sheet ASSETS

Cash Inventory Accounts Receivable, net Total Current Assets Plant & Equipment, net

Total assets LIABLITIES AND SHAREHOLDERS EQUITY

Accounts Payable Income Taxes payable

Total Current Liabilities Total Liabilities COMMITMENTS AND CONTINGENCIES Shareholders Equity

Additional paid up capital Accumulated profit/(deficit)

Total Shareholders equity Total Liabilities & Shareholders Equity Year 1 Year 2 Year 3 Year 4 Year 5

$1,665k $1,312k $2,785k $5,762k $133k

$5,894k

$1,378k $1,522k $6,085k $8,986k $173k

$9,158k

$13,922k $1,671k $8,137k $23,730k $197k

$23,927k

$36,574k $1,790k $8,835k $47,200k $204k

$47,404k

$48,204k $1,833k $29,496k $79,533k $195k

$79,729k

$3,261k $0k $3,261k

$3,261k

$7,682k $0k $7,682k

$7,682k

$12,698k $1,137k $13,835k

$13,835k

$18,642k $3,672k $22,313k

$22,313k

$25,331k $5,572k $30,904k

$30,904k

$7,541k ($4,907k)

$2,634k

$7,541k ($6,065k)

$1,476k

$7,541k $2,551k

$10,091k $5,894k $9,158k $23,927k

$7,541k $17,550k

$25,091k

$7,541k $41,285k

$48,825k $47,404k $79,729k

Cash Flow Cash flows from Operating Activities Adjustments to reconcile net profit/(loss) to net cash used in operating activities

Depreciation Hardware COS Allowance for Bad & Doubtful Debts Loss/(Gain) on disposal of Plant & Equipment

Changes in assets and liabilities

Inventory Accounts Receivable Accounts Payable Accrued Expense incr/(decr) in income taxes payable/receivable, net increase in deferred income taxes

Net cash used in operating activities Cash flows from Investing Activities

Miscellaneous Income Sale of Plant & Equipment Purchase of Plant & Equipment Interest Income Net cash used in investing activities

Cash flows from financing Activities

Payments under finance lease obligations Payments of dividends Interest Expense Proceeds from Bank Overdraft Fund Raising Expense Proceeds from Common Stock issued

Net cash provided by/(used in) financing activities Incr/(decrease) in cash

opening cash

Closing Cash

Cash Flow

Year 1 ($4,839k)

$20k $3,498k $153k $0k ($4,810k) ($2,938k) $3,261k $0k $0k $0k

($5,655k)

$0k $0k ($153k) $33k

($120k)

$0k $0k $0k $0k ($560k) $8,000k

$7,440k $1,665k

$0k

$1,665k Year 2 ($1,170k)

$41k $8,595k $981k $0k ($8,805k) ($4,281k) $4,422k $0k $0k $0k

($219k)

$0k $0k ($81k) $13k

($67k)

$0k $0k $0k $0k $0k $0k

$0k ($287k)

$1,665k

$1,378k Year 3 $9,656k

$57k $9,471k $2,013k $0k ($9,620k) ($4,065k) $5,016k $0k $0k $0k

$12,528k

$0k $0k ($81k) $96k

$16k

$0k $0k $0k $0k $0k $0k

$0k $12,544k

$1,378k

$13,922k Year 4 $21,049k

$73k $10,301k $3,217k $0k ($10,421k) ($3,915k) $5,943k $0k ($3,894k) $0k

$22,354k

$0k $0k ($81k) $379k

$299k

$0k $0k $0k $0k $0k $0k

$0k $22,652k

$13,922k

$36,574k Year 5 $33,083k

$89k $10,847k $4,596k $0k ($10,890k) ($25,256k) $6,690k $0k ($8,271k) $0k

$10,888k

$0k $0k ($81k) $823k

$742k

$0k $0k $0k $0k $0k $0k

$0k $11,630k

$36,574k

$48,204k

Valuation Models

IRR

30% NPV of cashflows

Cost of capital

Discounted Cashflow ROI

EPS

Net Profit after tax Shares On Issue EPS

Valuation Guide Per SIO

Ausbbs Market Cap Value Per Share

Market Guide Per SIO

Iinet TPG Average * As at Sep 2011 YR 0 ($7,541k) $13,595k 15% $7,541k YR 0 YR 1 ($5,876k) YR 1 ($5,110k) -68% YR 1 ($4,806k) $39,827k $ -0.12 YR 2 ($287k) YR 3 $12,544k YR 4 $15,112k YR 5 $4,089k YR 2 ($217k) -71% YR 2 ($1,157k) $42,147k $ -0.03 YR 3 $8,248k 39% YR 3 $8,615k $45,627k $ 0.19 YR 4 $8,640k 153% YR 4 $15,000k $50,267k $ 0.30 YR 5 $2,033k 180% YR 5 $23,734k $54,133k $ 0.44 YR 0 YR 1 $41,793k $ 1.05 Subs at Dec 2010 $650k $516k Market Cap $425,000k $1,344,000k YR 2 $144,482k $ 3.43 Value per Sub $654 $2,605 $1,629 YR 3 $257,640k $ 5.65 YR 4 $380,718k $ 7.57 YR 5 $510,318k $ 9.43

Application of Funds - Cash Flow to Listing R2 Funding Cash flows from Operating Activities

Inventory Accounts Receivable Accounts Payable incr/(decr) in income taxes payable/receivable, net increase in deferred income taxes Net cash used in operating activities

Cash flows from Investing Activities

Purchase of Plant & Equipment Interest Income Net cash used in investing activities

Cash flows from financing Activities

Interest Expense Net cash provided by/(used in) financing activities Incr/(decrease) in cash

Closing Cash

Application of Funds

6 months to 30 June 12

$2,000k ($1,084k) ($918k) ($864k) $1,290k $0k $0k ($1,575k) ($136k) $9k ($127k) $0k $0k ($1,702k)

$298k

R2 – Sophisticated Investors

New Funds Equity Share Share Price Cobra Post Cash Value

R3 – ASX Listing (6 -12 mths)

New Funds Equity Share / Dilution Share Price Value Post Listing IRR over 5 years ROI year 5

Deal Structure

$2M 30% $0.25

$500K $6.7M

$6M 31% $0.50

$19M 30% 180%

Question