company overview and business model - tmcnet · 2007. 6. 19. · pg. 8 fastweb’s milestones aug...
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June 2005
Company Overview and Business Model
PG. 2
Agenda
? Company Profile
? Latest Results
? Strategic Plan
PG. 3
FastWeb Concept: The Competitive Advantage
? Fibre-based Network infrastructure? Future-proof technology? Scalable Backbone
? Broadband-To-The-Home? A single high-speed connection for integrated voice, Internet and video services
? Integration of multimedia services over IP? Second generation Internet applications: not only text and images, but also high
quality interactive video, telephony and data
PG. 4
CustomerCustomersegmentssegments
ServicesServices
Business
Residential
Voice Video
Different networksused by...
Data / Internet
FastWeb’s Value Proposition
FastWeb
FastWeb’s integratedIP network
Network 2
IncumbentsNetwork 3
Network 1
Network 2
Cable TVs
Network 1
CLECs
Network 1
PG. 5
Business model’s success factors
? Innovative, future-proof technologies? Integration of multimedia services over IP? Strategic deployment of Fibre Optics Infrastructures? Innovative use of xDSL connectivity? Open platforms for VAS implementation
? Creative and aggressive Marketing strategy? Customized, comprehensive service offerings? Any service, any Customer segment? No single killer application: the real killer application is the Service Mix? Combination of Flat Rate and Pay Per Use tariff plans for matching specific
Customer needs
? One step ahead: constant service innovation
PG. 6
Unique Service Offering
Unique Service Offering
Unique Service Offering
Business Customers
Residential Customers
? Employees can work in different branches or at home as if they were connected to the same LAN
? IT departments can more efficiently re-engineer traditional client-server architectures
? SMEs can get an easier and cost-effective access to advanced telephony services with no need for PABX
With bandwidth of up to 1 Gbit/sand FASTWEB’s IP architecture…
… both fiber and DSL clients can…
? Watch broadcast channels, Pay-TV channels and Video-on-Demand content on their TV sets (world-first large scale TV-over-DSL service)
? Use network PVR(VideoREC) and EPG
? Browse the Internet at the fastest speed available (up to 10 Mbit/s)
? Video-communicateat TV quality
PG. 7
Results Overview
? FASTWEB provides voice, Internet connectivity, data transmission and TV services over a single connection by using Fiber-to-the-Home/Office and DSL access technologies
? The company offers its services to both companies and families
Integrated triple play offer
? Founded in September 1999, FASTWEB is the leading alternative operator of fixed broadband telecommunications services in Italy’s main urban areas (~ 22% of the population reached as at 31 March 2005)
? FASTWEB created a fully IP-based network totally independent from the incumbent’s infrastructure
The 2nd wirelinenetwork in Italy
? Recognised pioneer in broadband and triple-play? World first fully IP based network? Trusted supplier for mission critical application
Technological leadership
? Italy broadband penetration lags its European peers but is now among the fastest growing in EU
? No cable operators in Italy, weak infrastructure-based competition
Highly attractive market
? Co-leader with the incumbent in the covered areas? Highest residential ARPU in the sector? Impressive revenue and margin growth since inception
Successful business model
PG. 8
Fastweb’s Milestones
Aug 2003
Multicast over
ADSL Launch
VoD over ADSL
Launch
Mar 2003
VideocomService Launch
Nov 2002Jun 2002
VoIP Class5 Service Launch
Jan 2002
Internet PPU
Launch
xDSL Service Launch
Jul 2001
CountrywideService
Expansion
May 2001
VoD ServicesLaunch
Jan 2001
Consumer ServicesLaunch
Oct 2000Jan 2000
First Business
Customers
Oct 1999
Fastweb’s Foundation
Oct 2001
Multicast ServicesLaunch
PG. 9
2000-2004: Revenue* Growth and Milestones
Jan 2000: First business
customers
Oct 2000: Consumer
services launch
Mar 2001: VoDservices launch
May 2001: Nationwide
service expansion
July 2001: xDSL service
launch
Nov 2001: Access to Socrate and € 955 Mln
financingNov 2002:
Videocommunicationservice launch
Sept 1999: Foundation
Mar 2003: VoDover ADSL
launch
June 2002: EBITDA
breakeven
* Revenues from Italian operations (€ Mln) - Pro-forma figures equal to Group revenues net of HanseNet revenues
Aug 2003: Full TV over ADSL launch Dec 2004: Merger between
e.Biscom and FastWeb and change of company name in FASTWEB
1 52 3
4 5 4 65 7
6 4 6 97 8
1 1 21 2 3
1 4 3
1 7 91 8 6
1 9 7 1 9 4
1 11 7
531
1 5 8
1Q2000
2Q2000
3Q2000
4Q2000
1Q2001
2Q2001
3Q2001
4Q2001
1Q2002
2Q2002
3Q2002
4Q2002
1Q2003
2Q2003
3Q2003
4Q2003
1Q2004
2Q2004
3Q2004
4Q2004
1Q2005
New Business Plan:
Target of 45% population coverage by EoP 2006
PG. 10
Scaglia25%
Market65%
Micheli10%
Scaglia30% Market
43%
AEM12%
Micheli15%
Scaglia35%
Market22%
Partners7%
Micheli36%
2000-2005: Corporate Evolution
64.4% 33.0%30.8%
67%
Mgmt
4.8% 100%
Sha
reho
lder
sG
roup
Stru
ctur
eO
ther
Bus
ines
ses
From a partnership to a true Public Company
Simplifying Group’s Structure
Streamlining Group Activities
2000-2002 2003-2004 2005
FASTWEB group structure has evolved maintaining strong priority on transparency and simplicity toward capital markets
PG. 11
93
237
456
720
2001 2002 2003 2004
16,621 16,466 15,996 16,130
2001 2002 2003 2004
Line rental Voice Dial Up Internet Broadband Business Network Services
FASTWEB Overperformance in Growing BB Segment
Italian Annual TLC Fixed Spend (€ Mln)
FASTWEB Italian Operations Revenues (€ Mln)
0%
+50%
-15%
-8%
+1%
2001-2004 CAGR%
+98%
Source: Industry Research
?Positioned since inception
on the only fast growing
fixed line market segment
?Broadband bundled with
the other components of
business and residential
telecom spending (Access,
Voice, Business data
services)
?Exploited broadband
capacity to create new
revenue streams (TV,
Video, other VAS)
2001-2004 CAGR%
+50%+40% +62%
PG. 12
15%
20%
16%
12%
5%
Broadband Market Shares
?Telecom Italia is taking the highest share, as its services are deployed with national coverage
?FASTWEB is co-leader with TI in the covered areas, making immediate expansion a compelling opportunity
Broadband Penetration on Covered Market (2004 EoP) Market Shares of Total Broadband Market (2004 EoP)
Source: Companies' financial reports / ASSINFORM Report 2005
100% = 4.45 Mln BB Connections
(*) FASTWEB Penetration on Areas Covered since 4 years
(**) FASTWEB Penetration on Areas Covered since 2 years
(***) Overall FASTWEB Penetration
TI FASTWEB All Other Players
(***)
(**)
(*)
100% = number of households passed
TI Retail70%
3,115,000
Other6%
Tiscali5%
215,000
Wind8%
341,000
FASTWEB11%
496,000
PG. 13
Infrastructure Based Operator Business Model
?FASTWEB created an IP based end-to-end infrastructure that already enables to generate a 75%
gross margin and that will allow to reach slightly better economics than incumbents
constrained by legacy technologies and know-how
0%
5%
10%
15%
20%
0% 10% 20% 30% 40% 50% 60%
Resellers Business Model
Incumbents Business Model
Selected European Incumbents (2005E) (*)
Average European Incumbents (2005E) (*)
FASTWEB projected 2010
Infrastructure Operator Expansion Phase
EBITDA Margin %
Cap
ex/ S
ales
Rat
io % BT
FT
DT
PT
TEFTI
FASTWEB
Source: Company’s estimates based on publicly available information
PG. 14
Unique Positioning of FASTWEB’s Business Model
FASTWEB’s high operational leverage is due to…
End-to-end infrastructure ownership and control
ARPU
~ € 900/year residential ARPU
> € 8,000/year Small business ARPU
~ € 2,000/year SoHo ARPU
Opex
Semi-fixed cost structure
Highly capital intensive with high barriers to entry
Both business and residential markets served by the network
Single fully integrated IP network with no legacy technologies and IT systems to be maintained
Selective geographical coverage Triple play approach coupling higher ARPU with more convenient commercial offer
Gross Margin
~ 75% Gross Margin on both residential and business segments
PG. 15
Customers Pay Back Time
Residential Single Play (**)
Residential 2&3 Play (*)
SoHoSME
ARPU
Gross margin
Capex
Pay Back Time (months)
~ € 8,000 ~ € 2,000 ~ € 900 ~ € 300
75% 75% 70% 75%
~ € 3,500 ~ € 850 ~ € 500 ~ € 170
~ 7 ~ 7 ~ 10 ~ 8.5
? All market segments show attractive economics
* Includes Video and TV components** To be launched in the 2nd half of 2005
PG. 16
Agenda
? Company Profile
? Latest Results
? Strategic Plan
PG. 17
1Q 2005 Highlights
4.8 Mln households reached (22% of Italian population) following the opening of new cities such as Como, Viterbo, Rieti, Asti, La Spezia, Latina, Forlì and expansion in existing areas
Smooth ongoing process for the achievement of the 7 Mln goal by year end
46k new customers in the period, in line with the record quarter achieved in 1Q 04
Success arising from previously opened areas
Commercial activities in new cities started only at quarter end
Stable marginality in a quarter of
?new operating expenses related to coverage expansion
?lower IRUscontribution
Proceeds from share capital increase provides ideal financial position to implement new business plan
New € 950 Mln long term financing facility with a more than halved cost of debt
Coverage New Subs Margins Financial Structure
First Quarter of New Business Plan Implementation
PG. 18
New Areas Openings Snapshots
?Formalisation of a standard process for the opening of a new city
?General agreement with TI to access ~ 300 COs
?In depth analysis of available infrastructure and digging requirements in all new areas
?Accurate planning of equipment purchasing
One off planning activities
Sales ActivitiesPre-Launch Activities
Network Creation
Commercial Organisation
Implementation steps
Communication and PR
t0t-1t-2t-3
? Time effective launch of new areas and immediate commercial success thanks to:
? 5 years know how leading to unique planning expertise
? Local Authorities’ awareness of innovation and development opportunities generated by FASTWEB leading to strong cooperation in network deployment and commercial launch
? Strong territorial approach in communication (local ADV, events, institutional relationships)
PG. 19
542496
457418
377
1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005
Customer Growth and Composition
Customers (thousands) Customers by Segment
? 46k net additions in 1Q 05, above the 40k quarterly run rate experienced in 2004
? New areas released at quarter end – success achieved mainly in old cities
+44%
Families85%
Companies15%
PG. 20
158179 186
197 194
1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005
Revenue Growth and Composition
Group revenues (€ Mln) Revenues by segment
? Revenues continue to show significant growth rates year-on-year
? IRUs contribute for ~ 2% of total revenues in 1Q 2005 vs ~ 6% in FY 2004
? Change in revenue mix determined by seasonal effects of the business segment
+23%
Families49%
of which IRU 2%
Companies51%
PG. 21
46,752,8
57,362,1 60,4
1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005
29,6% 29,5%30,9% 31,5% 31.1%
1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005
EBITDA and EBITDA Margin Quarterly Growth
EBITDA (€ Mln) EBITDA Margin (%)
? EBITDA continues to grow significantly on a year-to-year comparison
? Notwithstanding significant expansion into new areas, EBITDA margin shows year on yearimprovement
+29% + 1.5 p.p
PG. 22
(92,7) (96,3)(88,1)
(6,9)
(56.4)*
1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005
75,7
820,2814,4726,6
630,4
Mar 04 Jun 04 Sep 04 Dec 04 Mar 05
Free Cash Flow and Net Debt Evolution
Free Cash Flow (€ Mln) Net Debt Evolution (€ Mln)
? Positive cash flow evolution, despite new phase of expansion started in 1Q 05
? Extremely sound financial position, thanks to new capital resources
* 1Q 05 Free cash flow does not include commissions on the right issue as it was finalised in the first week of April
PG. 23
806 802 805 829 828
102 109 829896
908 911 903 925 910
Mar 04 Jun 04 Sep 04 Dec 04 Mar 05Telecom Services Video Services
357 353 345 359 342
Mar 04 Jun 04 Sep 04 Dec 04 Mar 05
Residential ARPU Evolution
? Confirming ARPU in the € 900/year region
? Current slow down of video services take-up slightly impacting overall ARPU
? Focused advertising campaigns and extension of VoD offer are the next planned steps tofurther increase TV services appeal
Total residential ARPU (€ /year) ARPU of Video Customers (€/year)
PG. 24
Agenda
? Company Profile
? Latest Results
? Strategic Plan
PG. 25
Key Achievements and New Strategic Highlights
2000 - 2003 2004 2005-2010
Start up phase successfully completed
Proved sustainability of an infrastructure based triple play approach
Positioned as both market and technological leader
4.0 Mln home passed EoP(18% of population)
Beaten FY targets set one year earlier:? Customers: 496 k? Revenues: 720 € Mln? EBITDA: 219 € Mln
Sustained technological leadership
Broadband market leader in the covered areas
Booming Broadband market
Favourable competitive landscape
Opportunity to anticipate growth
Becoming the #2 fixed line Telecom operator with strong long term competitive position (45% of population by 2006 and 60% of telecom spending)
PG. 26
Geographical Expansion
Covered Areas 2004 EoP
Acceleration of geographical coverage (Homes passed Mln)
Covered Areas 2006 EoP (Exp.) 3 Mln new homes
expected to be passed
in 2005 and a further 3
Mln expected by the end
of 2006 reaching 10 Mln
homes passed (approx.
45% of Italian
population and 60% of
telecom spending)
4
7
10 10
2004 2005 2006 2010
Accelerated targets
PG. 27
10%
12%
17%
22%24%
12%
2004A 2005E 2006E 2007E 2010E 2013E
Double & Triple Play Single Play
Market Penetration and Customers Targets
?Long term penetration at over 20%. Initial decrease in market penetration due to significant
enlargement of covered areas
Addressable Market (HH’m)
4 7 10 10 10 10
Customers Target (’000)Market Penetration Target (%)
700
1,200
1,650
2,2002,400
496
2004A 2005E 2006E 2007E 2010E 2013E
Double & Triple Play Single Play
PG. 28
IT & Systems
12%Other10%
New Coverage
33%
Customer Driven
45%
Customer Driven
67%
Other12%
IT & Systems
21%
Capex Analysis
?Following completion of geographical expansion in 2005-2006, highly flexible and scalable
capex plan due to additional-customer-driven capex representing over 60% of total projected
investments
Penetration Growth (2007-10) Cumulated CapexGeographical Expansion (2005-06) Cumulated Capex
100%= 1.4 Bln 100%= 1.4 Bln
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