bce acquisition of ctv september 10 2010
TRANSCRIPT
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Acquisition of CTVAnalyst Conference Call
September 10, 2010
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George Cope
President & Chief Executive Officer
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Transaction overview
Acquiring 100% of CTV 15% equity stake in The Globe and Mail
maintained
$1.3B equity value for additional 85% stake
$1.7B in proportionate debt
9.9x proportionate EBITDA multiple
Woodbridge/Thomson Group to take $750Min BCE common stock at closing
Consistent with capital structure objectivesand credit policy
Ratings expected to be maintained
Expected closing in mid-2011
Immediately EPS and FCF per shareaccretive
Enhances dividend growth model
Television
Radio
Acquiring Canadas #1 media company
CTV
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CTV is Canadas #1 media company
SpecialtyChannels
BroadcastTelevision
Radio
Digital
Leading portfolio of 30 Specialty television channels
Canadas #1 Specialty channel, TSN as well as RDS,Discovery, Comedy, Much Music and MTV
Canadas most watched network for the 9th straightyear, with 8 out of the Top 10 programs (adults 25-54)in 2009/2010
Well positioned to benefit from improving economy andstrengthening advertising market
Broadcast rights for 2012 Olympics
34 radio stations throughout Canada including CHUMFM, Canadas #1 FM station
Online and mobile destinations for top propertiesincluding CTV, TSN and CHUM FM
CTV.ca is the #1 television portal in Canada foronline video
Strong and experienced management team
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Strategic context and rationale
Communications landscape has changed dramatically in the last five years Cable competitors increased media ownership and expanding into wireless
Sports and news genres deregulated in late 2008; Internet and mobile unregulated
Adoption of mobile TV/video is set to accelerate rapidly
Terrestrial and mobile broadband technology now enabling a new world of TV/video
Video is integral to Bells product offering and a key growth driver
Video now accounts for approximately 40% of Bells Residential revenues
Commercial roll-out of IPTV underway
Mobile TV launched -- growing roster of exclusive sports content including NFL and NHL
What has
changed?
Financialand
strategicrationale
Acquiring 100% of premier media and broadcasting assets at an attractive valuation
Attractive valuation compared with recent media transactions, including Shaw/Canwest
Strong competitive interest in asset
Advances Bells strategic imperatives
Secures access to Canadas best content and accelerates 3-screen distribution platform
Extends leadership in mobile video with premier sports, news and music properties
Hedges against increasing programming costs
More than levels the playing field with integrated cablecos as we compete for customers
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Industry structure in 2006
Video
content wasa separatebusiness
Video waslargely
viewed on 1screen
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Industry structure today
Videocontent is
part of anintegratedbusiness
Videocontent is
now viewed
on 3+screens
Launchedon Sept.9
Launching
Acquisition substantially strengthens our competitive position
LaunchedIPTV and DTH
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Regulatory considerations
Video Platform
RegulatoryClassification
Cable andSatellite
Internet Mobile
Conventional
Must CarrySpecialty
Video-On-Demand
Pay-Per-View
Regulated
Sports / NewsDeregulatedin Oct. 2008
NotRegulated
NotRegulated
Todays regulatory and technological environment allows integrated players toleverage content ownership for differentiated offers across all three screens
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Multi-platform viewing is growing
Internet
Mobile
Watched a 30-60 minute TV showon a website in past monthNear ubiquitous broadband
and increasing speeds
enabling dramatic increasein on-line viewing
Watched a video clip on a mobile phonein past month
Deployment of new wirelessnetworks and proliferation ofsmartphones stimulating
mobile viewing
>20%
Source: Solutions Research GroupConsultants Q1 2010
>30%
Enhanced access to content will accelerate multi-platformdistribution
of Canadians on-line
of Canadians with cellular
phones or smartphones
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Bell TV / Video is a key growth driver for Bell
Bell TV / Video Continued product leadershipsupports profitable and growingvideo business
National DTH footprint with growing base
of ~2M subscribers
Accelerated roll-out of fibre enablinglaunch of IPTV
HD leader in Canada with 108 channels
Expanding Bell TV Online
Accelerates adoption of mobile TV withmobile video exclusives
Nationally: NHL Hockey and NFL Football
Regionally: Montral Canadiens, Vancouver
Whitecaps, TIFF2010(1)
~40%
~20%
2005
Bell TV / Video now generates more revenue than Residential home phone
Video as % of Bells Residential revenues
Bells Video revenues
$976M
$1,679M
(1) Last twelve months ended June 30, 2010
+72%
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Rising content costs
Video Content Costs
~$600M
2010E2005
~$350M
Video content is the fastestgrowing cost for Bell
Programming now accounts for 40%of total Residential video costs
CTV is one of Bells largest suppliersof video programming
CTV represents a natural hedge against increasing content costs
~10%CAGR
Bell also spends $200M+ on
advertising annually
Acquisition enables more efficientuse of advertising dollars
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Investments in broadbandnetworks and services
National wirelessbroadband networkwith speeds up to
100+ Mbps
15+million
screens
in 2015
The future of Bell TV
delivering an integratedviewing experience
Bell TV Anytime, Anywhere
National DTHnetwork with
leading HDposition
5 million +homes IPTVenabled
+/
TV
Enhanced multi-platform
distribution for CTV
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Transaction advances Bells 5 Strategic Imperatives
Accelerate Wireless Extending lead in mobile video/TV with premier sports,news and music properties
Invest in BroadbandNetworks and Services
Leveraging fibre and wireless broadband investmentsfor superior video experience
Improve CustomerService
Offering Canadians the best television serviceanywhere and anytime
Leverage Wireline
Momentum
Access to product differentiation through content
positions Bell TV as a leader in multi-platform viewing
Achieve a CompetitiveCost Structure
Hedge against increasing television programming costsand advertising expenses
100% ownership enables Bell to maximize strategic andoperating synergies with CTV
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Siim Vanaselja
Chief Financial Officer
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Attractively valued transaction
Current Ownership Structure
CTV(incl. Globe & Mail)
Woodbridge(40%)
Torstar(20%)
Bell(15%)
OTPP(25%)
CTV(excl. Globe & Mail)
Globe & Mail
Woodbridge(85%)
Bell(100%)
Bell(15%)
New Ownership Structure
Key Details
Full ownership of CTV Remaining 85% equity stake being acquired
Maintaining 15% equity stake in Globe and Mail
Total enterprise value of ~$3.2B for 100% of CTV 9.9x proportionate EBITDA multiple
Valuation compares well with recent media industrytransactions
Transaction financed with surplus cash,
committed debt financing and BCE shares $750M in BCE common stock to Woodbridge
Immediately EPS and FCF per share accretive
Transaction consistent with capital structureobjectives and credit policy
Addition of CTV improves Bells growth profile
Expected closing in mid-2011
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CTV financial profile
(1) Last twelve months ended August 31, 2010. Figures are consolidated,exclude the Globe & Mail and adjusted for one-time items.
Immediately EPS and FCF pershare accretive, even beforesynergies
100% access to CTV cash flows
Improves Bells growth profile
Limited impact to Bells EBITDAmargin and capital intensity
CTV is well positioned to capturebenefit of improving advertisingmarket
CTV to become a business unitintegrated within Bell
CTV Financials (1)
Revenues $1,870M
EBITDA $385M
Capital Intensity 4.0%
Simple FCF $310MMargin 16.6%
Margin 20.6%
Capital expenditures $75M
Accretive transaction that supports dividend growth model
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Summary
Acquiring 100% of Canadas premier media asset at an attractive valuation
Communications landscape has changed dramatically in the last five years
Video/TV is important to the future of Bell Canada
Adoption of Mobile TV is set to accelerate
Commercial launch of IPTV underway
Acquisition consistent with capital structure policy and enhances dividendgrowth model
Industry structure, technological advancement and regulatory changeintroduces new opportunities with Bells ownership of high-demand content