investor presentation – euroz conference march 2009 for

10th March 2009Investor Presentation – Euroz Conference

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2Euroz Conference – 10th March 2009

Today’s agenda

1 – Key highlights

2 – Financial performance

3 – Operational review

4 – Strategy and outlook

5 – Q&A and Appendices

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Strong financial results – net profit up 50%

• Revenue up 75% to $205.0m

• EBITDA up 35% to $31.1m

• EBIT up 35% to $16.9m

• NPAT up 50% to $11.4m

• Strong balance sheet with gearing at 12.0%

• Interim dividend of 3.0 cps fully franked

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Strong operational growth in H1 ‘09

• +30,000 new broadband subscribers added, circa 10% share of all market growth

• On-net customers up 13% to 196,000 due to continued success of Naked

• Naked broadband customers now at 54,000

• VoIP telephone customers up 25% to over 100,000 in line with Naked growth

• Westnet successfully consolidated, FY09 synergies ahead of forecast with upside to come in FY10

• New call centre in Cape Town launched & operating effectively

• Partnerships in place with 3 & ninemsn and ADSL2+ launched in Westnet

• Enhanced content line-up in readiness for IPTV launch in 2009.

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Accelerating financial growth

On track to break $400m revenue in FY09

Low net debt of $22.7m and gearing of 12%

*Note: H1 08 excludes Westnet and $2.0m from stamp duty ruling benefits.

$m H1 09 H1 08* Change

Revenue 205.0 117.1 +75%

EBITDA 31.1 23.0 +35%

EBIT 16.9 12.5 +35%

NPAT 11.4 7.6 +50%

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Growing revenues and EBITDA

Note: H1 05 and H1 06 includes revenues of $17m and $16m respectively from New Zealand business which was sold in H2 06

Note: H1 08 excludes $2.0m benefit from stamp duty ruling

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Fully franked interim dividend of 3 cents per shareF

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Resilient operating cash flows up 46%

$m H1 09 H1 08

Operating cash flow 24.5 16.7

Tax and interest (5.3) 1.8

Capex (12.1) (9.0)

Free Cash Flow 7.1 9.5

• No impact of recession yet on key metrics

• “Must-have” product resilience

• Bad debt % holding steady

• 90%+ of customers paying on credit card or direct debit one month in advance of service

Note: H1 08 excludes $13.9m one-off rebate receipt from line sharing (LSS) settlement

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5 – Q&A

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Increased market share on all productsF

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Successful consolidation of iiNet and Westnet

• Exceeding Year 1 synergies as a result of favourable wholesale negotiation with Telstra

• Expecting to exceed Year 2 synergy target via completion of 40,000 customers migrating to iiNetwork

• New operational management structure in place

• Consolidation of back-office systems on track to complete in H2 FY09

• Other cost control initiatives in place – supplier rationalisation, property rationalisation

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Focus on NPS & 24x7 service is delivering lower churn

Follow the SunCustomer satisfaction – Net Promoter Score

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Successful brand launch in Brisbane

Manifesto campaigns continue to deliver increases in brand awareness and 2x increase in sales

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Naked advantage

iiNet Naked Telstra Optus Naked

Broadband (ADSL 2+)

$49.95Naked DSL Home 14 GB (2Gb On/Off-Peak)

$59.95600MB PlanUsage charged at $150/GB

$49.99Yes My7GB Naked7 GB (anytime)

Phone $0.00 (free)Local: Free UnlimitedNational: Free UnlimitedInternational: From 5c/minMobile: 29c per minNo Call Connection Fee

$20.95 line rentalLocal: 30cNational: $3.00 (up to 20 min)International: From $1/10minMobile: 42c per minCall Connection Fee applies

$19.00 mobile capCapped plan offers $50 included value for standard voice calls (local, national and mobile) and national/international SMS.

Total Monthly Rental $49.95 $80.90 $68.99

Cost of ownershipover 24 months

$1,198.80 $1,941.60(+$742.80 on iiNet Naked)

$1,655.76(+$456.96 on iiNet Naked)

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5 – Q&A

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Our aspiration is to be the leading challenger in the Australian Telecommunications Market

Strategic focus for growth

Differentiating through:

1. Outstanding service2. Cool products and attractive content3. A loved brand4. Leading industry consolidation

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What does it mean?

• Leading challenger means growing broadband market share to >15%

• Outstanding service – lifting net promoter score to world class >50%

• Cool products – 1 new product per month released to customers

• Strong brand – prompted awareness at >90% & unprompted at >70%

• Content – launch of IPTV in 2009, expanded “Freezone” and new website

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Our progress so far – broadband market shareF

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Our progress so far – net promoter scoreF

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Our progress so far – product developmentF

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Coming soon - IPTV

• Set top box trial underway

• Dual free-to-air digital tuners

• Electronic program guide

• Pause live TV and series recording (PVR)

• IP streaming channels

• Internet connectivity

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Our progress so far – brand awareness

• Traditional WA market maintaining presence

• Sydney campaigns have raised iiNet’s unprompted awareness

• Brisbane Manifesto campaign has significantly raised awarenessF

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Looking forward

• DSL still the dominant technology

• Continue our infrastructure expansion

• Our focus is on service, brand, and content

• Product innovation is a key differentiator for us

• Potential opportunity to reduce costs as a result of ACCCreview of fixed line wholesale regime

• Organic & inorganic growth opportunities

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Summary

• Attractive market – household utility with long term growth profile

• Consistent strategy in play – service, brand and content

• Effective execution – organic and inorganic

• Conservative balance sheet with headroom for growth

• Well positioned to grow shareholder value

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Q&A

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Continued growth in customers

• Naked growing on-net and VoIP• Westnet growing off-net and

fixed phone

Note: Subscriber numbers are pro forma in prior periods for acquisition of Westnet.

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Continued growth in ARPU and margin

• Growth in on-net ARPU as a result of higher mix in Naked customers

• Off-net growth as a result of move to higher speed, greater value plans

• Fixed phone improved through richer Westnet base

• VoIP call usage increasing

• Margin improvement driven by continued focus on network cost reduction and on-net migration

Note: Gross cost is network and carrier cost only and excludes allocated depreciation, amortisation and employee expenses.

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Assembling the P&L

Average Subscribers

‘000

ARPU

$

H1 09 Revenue

$m

AMPU

$

H1 09 Gross Margin

$m

On-net 184.6 53.66 59.4 31.47 34.9

Off-net 202.3 49.30 59.8 13.67 16.6

Dial 92.6 16.96 9.4 14.81 8.2

Fixed line phone 136.0 55.30 45.1 17.70 14.4

VoIP 90.2 9.94 5.4 5.27 2.9

Other (hardware, setups, wholesale etc.) 25.9 8.7

TOTAL 205.0 85.7

Allocation of D&A (10.9)

Allocation of overheads (30.9)

Gross margin per Appendix 4D 43.9

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Glossary of Terms

Term Description

Annex MA one-off business broadband product that once enabled allows upload speeds up to 2.75Mbps which is double the current speed of ADSL2+

ARPU Average monthly revenue per user

Dark Fibreor unlit fibre is the name given to individual fibres that have yet to be used within cables that have been already laid. They are hence not yet connected to any electronic device, and are only there for future usage

DSL, DSL2+Digital Subscriber Line or xDSL, is a family of technologies that provides digital data transmission over the wires of a local telephone network. DSL2+ extends the capability of the basic DSL in providing faster speeds

DSLAM Digital Subscriber Line Access Multiplexer is a device that connects a customer DSL line to iiNet’s infrastructure

FTPMeans File Transfer Protocol – a network protocol used to transfer data from one computer to another through a network such as the internet

FTTH Means fibre to the home – this was the predecessor title for the now called National Broadband Network (NBN)

IPTV Internet Protocol Television is the provision of digital television over the Internet

LSSLine Sharing Service. A wholesale product provided by Telstra which allows iiNet to transmit data across the copper telephone line between the customer’s residence and the exchange

Mobile DataBroadband supplied by a wireless digital modem sold to customers as a separate plug-in USB device for computers

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Glossary of Terms

Term Description

Naked DSLPrior to its release, a customer would have to purchase a phone line and pay line rental in order to have an ADSL service active. Naked eliminates the need to pay line rental yet still have a VoIP telephone service as backup for making calls if required

Net Promoter Score

A measure of customer recommendation levels that has a direct correlation with future customer growth. NPS is calculated by asking a sample of customers how likely they are to recommend the brand to others.

Off-Net A customer that is provided a DSL service through another network (usually Telstra Wholesale)

On-Net A customer that is provided a DSL service through the iiNetwork

PSTNPublic switched telephone network. The traditional copper network built to provide fixed line telephony in most developed countries

SIP TrunkingStands for Session Initiation Protocol which allows internet telephony service providers and telecommunications carriers to deliver a single data connection to an enterprise, upon which voice, internet, email and video can travel

VCC Virtual Call Centre – a call centre where the representatives are geographically dispersed.

VDSL2Very high speed Digital Subscriber Line providing higher speeds over copper than ADSL2+ but over shorter distances

VoIP Voice over Internet Protocol –routing voice conversations over the Internet or any other IP based network

VPN Virtual Private Network

WLR Wholesale Line Rental – Telstra’s fixed telephone wholesale service

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Some of the information contained in this presentation contains “forward-looking statements” which may not directly or exclusively relate to historical facts. These forward-looking statements reflect iiNet Limited’s current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside the control of iiNet Limited.

Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from iiNet Limited’s current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained herein with caution.

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investor presentation – euroz conference march 2009 for

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