ludgate room presentation slides1

European VoIP Summit 2016Exploring the Future of Voice Communications

#VoIPSummit

1/03/2016The European VoIP Summit Gold Sponsors: 2

Fáilte roimhWillkommen

WelkomVelkommen

欢迎Bienvenue

Thank you to our Sponsors

#VoIPSummit


Event has doubled in 12 months

• 219 registered from over 60Service Providers

• New Venue • Great selection of Sponsors• Event is “For the Industry, by the Industry”

• Opportunity to learn from peers around Europe

• Plenty of time for networking• Limited death by PowerPoint • Industry leaders speaking

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The Cavell Group

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Supporting businesses in EMEA to evaluate strategic investments, create sustainable service roadmaps & operating models and executing plans

Cavell is a specialist Consulting, Research and Professional Services business, focused on emerging Communications Markets

61/03/2016The European VoIP Summit Gold Sponsors:

What do we do in Cloud Comms Market?

• Key Source for Market Research & Analysis – UK & European Reports

• Commercial & Market Due Diligence

• Product & Go To Market Consulting

• Europe Professional services: Site Survey, Dial Plan testing, Handset install & training

• Content Development – White Papers

Vendors/Investors & Integrators

EMEA Service Providers

7

Trends and Market Information #VoIPSummit

Netherlands is Europe’s most advanced market

3/7/16Copyright Cavell Group 8

“Over 60 identified providers but 75% of seats fall under Top 10”

“Most Penetrated Mainland European Market”

“820k Business Seats in the Market”

“Significant New breed competition & Incumbents”

“Significant success in the SME addressing simple business process improvement proposition through indirect channels ”

“Business Demographics Favorable to Hosted VoIP services”

Belgium starting to look more interesting

3/7/16Copyright Cavell Group 9

“Underpenetrated Market with only 88,300 seats around 10% of Netherlands”

“Set to grow as incumbents Telenet & Proximus both bringing services To market”

“19 Identified Services providers, mixture of local self built Providers and SPs serving multinationals”

“Business Demographics look attractive with large number of SMEs but held back by access to Fibre

A number of players offering simple SIP Trunk and gateways solution not Hosted VoIP

UK Breaks the 2 million Hosted Seat & SIP continues momentum

Hosted VoIP market has grown to a total of 2,175,065 at end of 2015

Hosted VoIP market grown by 266,392 seats in the last six months of 2015. This is annual growth of 525,846 Seats (32%)

The SIP Trunking market had grown to a total of 1,922,510 SIP Trunks

SIP Trunking market had grown by 232,070 Trunks in the last six months of 2015. This equates to 453,131 Trunks added annually (31%)

Growth in Large Enterprise Hosted was slow as we start to see impact of Skype on Market


Mergers and Acquisitions particularly around Contact Centre Assets

3/7/16Copywright Cavell Group 11

November 5th 2015: Magnetic North was purchased by West Corporation, apparently one of the main reasons for purchase, was to gain access to the hosted Contact Centre Assets. This signifies both an increased interest from US companies expanding into the UK, and also a focus on Contact Centre Assets ].

February 8th 2016: Broadsoft announced the acquisition of Transera a cloud contact centre player. This will help them fill a hole in their current portfolio and expertise. Mike Tessler, Broadsoft CEO, commented: “Today’s acquisition brings together the leading cloud unified communications provider with a pioneer redefining contact center performance through omni-channel and big data analytics”.

These two announcements follow 8x8 acquisition of DXI UK in May 2015, which also help them build out there contact center assets. We are also seeing other providers look to

increase their application capability through Acquisition.

Thinkingphones acquired video platform Fuze and rebranded in

November

RingCentral acquired messaging & collaboration player GLIP in

November

Themes Across Europe we are going to explore


Mobility - FMC

Channel Development

Market Consolidation

End of ISDN

WEBRTC/Application

Future Market Development

13

Drivers & Roadblocks to SIP & Hosted VoIP Market Expansion

#VoIPSummit


Panelists

Alan FoyMD, CEO

Samuel De Weaver CTO

Alan MackieProduct Director

Rami HoubbyMDModerator: Rob Kurver

Benelux Analyst

15

European PSTN Switch Off#VoIPSummit


Panelists Gary Pryor Enterprise Sales Director

Steve BestMD, Product Managements

& Strategy

Charles BlighMD

Guy YaffeVP of Business Development

Voice

Moderator: Matt TownendDirector, Research & Consulting


PSTN switch off could dramatically change the speed in which SIP Trunking grows

• Most countries have announced an end date to the PSTN network.

• BT announcement of 2025 will drive change

• Virgin Media have not announced date but are moving towards decommissioning

• Voiceflex and others are advertising the end of ISDN

• Providers will start to move existing customers to SIP


New class of SIP services emerging as SPs look to differentiate

• Currently SIP trunks are generally sold as capacity products, competing directly with

ISDN

• Price falls and increased competition in SIP T is making providers consider new

services

• In recent Cavell whitepaper we mention that around 5% are already sold as

Application based services SIP A (Application) is a Trunking service that focuses on giving the customer access to additional UC applications, including Mobility

SIP C (Capacity) is a Trunking service that is focused on providing a scalable, flexible Voice access service. Providers offering SIP C type service are focused on offering high capacity and highly resilient SIP access

19

Coffee/Tea Break#VoIPSummit

20

Opportunities and Threats from Mobility

#VoIPSummit


Panelists

Ian PattisonInternational CTO, Mobile Division

Ian CooperHead of Communication Products

Jed PellHead of UC One Sales & Nordics

Paul HoldenHead Of UCaaS Enterprise

Moderator: Dominic BlackSenior Market Analyst

22

Empowering the Channel to sell Cloud Services

#VoIPSummit


Panelists

Steve HarrisMD

John WhittyCEO

Tim AlexanderDirector of Partner Sales

Campbell WilliamsGroup Strategy & Marketing Director

Moderator: Matt TownendDirector, Research & Consulting

Sales shift – Supply to Adoption Model

• Genband’s Nuvia Cloud Service was the latest in a series of launches of pay-as-you-go platforms from the likes of Broadsoft, Mitel and other Softswitch providers and traditional IP-PBX manufacturers.

• These launches signify a major change in the supply chain of the industry from a “supply” to an Adoption paradigm.

• The whole supply channel becoming focused on the Adoption of services on a per-user basis.

• Manufacturers/Service Providers and indirect channels are now all reliant on users coming onto the platforms and staying on the platforms and consuming new services.

• There will not be enough channels for all these providers to be successful.

24The European VoIP Summit Gold Sponsors: 1/03/2016

25

Lunch Break#VoIPSummit

26

European Regulation: Risks to the Industry

#VoIPSummit


Presenters

Matthew McDermottDirector EMEA Public Policy

Mark SwarbrickHead of Telecommunications, Markets, and Regulatory Policy

European Regulation: Risks to the IndustryEuropean VoIP Summit - 1 March 2016

Access Partnership 2016

2929

A Year of Change


Europe faces many issues in 2016:

Migrant Crisis “Brexit” Greek sovereign debt

…and the Digital Single Market?

3030

Digital Single Market

The Commission’s Communication on a Digital Single Market for Europe (DSM) is built on three pillars

i) better access for consumers and businesses to online goods and services across Europe

ii) creating the right conditions for digital networks and services to flourish

iii) maximising the growth potential of our European Digital Economy


3131

Telecoms

Battle within the mobile industry as to whether the answer is – to reduce regulation for all, or– increase regulation for VoIP providers

Many MNOs still calling for a “level playing field”…

…and the European Commission thinks they may have a point


3232

DSM Foundations

Net Neutrality

Cybersecurity

Data Protection


3333

Net Neutrality

Every European must be able to have access to the open internet – blocking and throttling the internet will be illegal in the EU

All traffic will be treated equally – no paid prioritisation BEREC guidelines in place by November 2016 –consultation expected later in the year

Netherlands and Slovenia must water down existing laws Review of UK Open Internet Code


3434

Cybersecurity

New network and information security requirements on operators of essential services and digital service providers (DSPs)

Essential services: Energy, transport, financial services, health and drinking water or digital infrastructure

DSPs: Online marketplace, online search engine or cloud computing service

…careful who your customers are


3535

Data Protection/Privacy

A single set of rules now apply across the EU

Fines of up to 4% global turnover

Extends the scope of EU data protection law to foreign companies processing data about EU residents.

clarified "right to be forgotten"


3636

Data Transfer – “free flow of data”

“Safe Harbour”: How do we transfer data now?

Data localisation

What about non-personal data?

Allocation of liability between providers and users to support Internet of Things


3737

Tsunami of Regulation?

Significant amount of new regulation agreed – two year implementation timeline

DSM presents opportunities and risks… …nothing is inevitable


Thank you


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Brussels

Electronic Communications Regulatory Framework

European VOIP Summit – Tuesday 1 March 2016

Current Framework (and 2009 amends)

FRAMEWORK

- Creates the SM- Market reviews-‘Rights of way’ -Competition requirements

ACCESS & INTERCONNEC

TION

- Competitors’ access to networks- Interconnection between networks

AUTHORISATION

- Spectrum management and allocation/licensing

UNIVERSAL SERVICE

- universal service provisions- consumer rights-switching/porting

E-PRIVACY*

- cookies- email privacy- data protection

BETTER REGULATION DIRECTIVE CITIZENS’ RIGHTS DIRECTIVE

EECMA ( EU Regulatory Authority with ‘override power’ over NRAs)

BEREC Regulation (EU Agency - ‘collective’ of NRAs/evolved ERG)

Commission Challenges• Relatively little full infrastructure competition and the extent of upgrades to the highest capacity networks varies markedly;;

• Progress towards more integrated telecoms market is slow and the provision of connectivity to consumers and business remains highly divergent across the Union;;

• Significant difference remain with regard to approaches to spectrum governance and strategies to make spectrum available which cannot be justified solely by differing national circumstances;;

• Online service are increasingly seen by end-users as substitutes for traditional electronic communications services such as voice telephony, but are not subject to the same regulatory regime;;

• Technological and economic developments, such as fixed/mobile coverage, network virtualisation and shift to all IP networks, are likely to profoundly change the functioning of the electronic communications sector.

Commission Questions

• Do you think that traditional electronic communication services (such as voice or video telephony, SMS/text message, emails operated by telecoms providers, other services) can be functionally substituted by OTT services or platforms with communication elements(e.g. internet telephony services, web messaging services, webmail services, social media platforms, others)?

• Should all communication services which are functionally substitutable to existing ECS fall under a new common definition for such communications services?

Creating a level playing field?

UK View on OTT• The UK government would advocate taking a principled, light touch approach to the regulation of OTT services.

• We believe that to create a transparent and competitive market, the Commission should also consider deregulation of existing electronic communications services where this does not harm consumer interests, undermine regulatory enforcement powers, or compromise national security, public security or prevention, detection and prosecution of criminal offences.

UK Objectives A stable, but flexible, regulatory framework that can support investment and innovation and

accommodate changes in technology;;

Competition should be encouraged as the most effective way to deliver the desired outcomes and

communication providers need to be able to achieve a return on investment. However the

limitations of competitive markets need to be recognised;;

Communication networks that will meet the needs of users over the next decade to support

competitiveness, economic growth and deliver social benefits. The effectiveness of networks

needs to be judged by the quality of experience enjoyed, or suffered, by the user, be that the

individual consumer or business;;

Every citizen or consumer should have access to an acceptable level of connectivity providing an

acceptable level of quality of service

Consumer empowerment – transparency and awareness of services, Gainer Led Switching

Respects the principle of subsidiarity of Member States

Expected timetable

2nd half '16 - Proposals adopted by College and negotiations commence

1st half '18 - negotiations end and implementation begins

Mid '19 - Implementation deadline ? - the last of the MS implement

47

Best Practices in Mergers and Acquisitions

#VoIPSummit


Best Practices in Mergers and Acquisitions

Michael QuinnFounding Partner – Q Advisors

© Copyright 2016 Q Advisors LLC · All Rights Reserved. | WWW.QLLC.COM

Member FINRA | SIPC

M&A IN THE CLOUD AND MANAGED SERVICES ARENAQ Advisors Presentation to the Cavell Group March 2016

Q Advisors OverviewSection I

51

Q Advisors Overview

• Founded in 2001 to provide financial advisory services

• Focused primarily on Communications, Technology and Media

• Most active managed cloud-based services bank in the industry, based on the number of active clients and deals closed

• Significant experience in structuring and negotiating M&A and financing transactions for private and public companies:

Sell-side and buy-side engagements

Debt and equity financings

Strategic financial advisory engagements

Global reach and capabilities

• Closed over 185 transactions since inception

Total transaction value of approximately $8.5 billion

Over 28 cross border deals

• Offices in Denver, CO and San Francisco, CA

• Team of 15 professionals

• Major-bracket experience coupled with boutique attention

Firm Profile TMT Experts

Cloud Contact Center Solutions

Unified Communications-as-

a-Service (“UCaaS”) / Managed Services

Managed SecurityManaged Network and Infrastructure

Digital Media / Ad Tech

Mobility Services & Applications

Internet of Things (“IoT”)

Collaboration / Conferencing

52

Select Q Advisors Cloud Transactions

ACQUIRED

buy-side advisor

ACQUIRED BY

sell-side advisor

ACQUIRED BY

sell-side advisor

ACQUIRED BY

sell-side advisor

ACQUIRED BY

sell-side advisor

ACQUIRED BY

sell-side advisor sell-side advisor

ACQUIRED BY ACQUIRED BY

sell-side advisor

ACQUIRED BY

sell-side advisor

ACQUIRED

buy-side advisor

M&A Market OverviewSection II

54

M&A Activity on the Rise

• Factors driving the accelerated activity include

Increased adoption of non-premise based solutions by high end SMBs and enterprise customers

Pressure on enterprises to cut capital expenditures

Desire for back up / security redundancy

Customer desire for “One Throat to Choke” or “One Back to Pat” for all communication needs

• Telecom M&A size, rather than volume, has grown over the past five years and is representative of the transformational natureof recent M&A activity

The aggregate deal value for the telecom sector grew from $152.2B in 2007 to $333.7B in 2015, indicating growth of almost 220% 1

The number of deals decreased from 1,925 deals in 2007 to 1,036 deals in 2015 1

• Most active M&A sectors in the telecommunications space include the following:

Hosted UCaaS

Cloud Contact Center Solutions

Managed Network

Security

Cloud Applications

Collaboration

Cloud Computing / IaaS

Over the past 24 months, global merger and acquisition activity in the Hosted UC, Collaboration, Managed and Cloud Services sector has accelerated rapidly

Source: 1) M&A Outlook Survey, KPMG

55

M&A Outlook 2016: Focus on Transformative Acquisitions

• Corporate buyers will continue seeking out transformative M&A related to their cloud strategy

– Enter new line of business

– Expand market presence to new geographic region / country

– Acquire core technology platform or solution

– Acquire customer base, often moving up market into mid-to-large enterprise segments

• Heightened expected activity from the Private Equity partner community in acquisitions across the cloud and managed services landscape

– Preference for recurring revenue model of technology-based businesses

– Often fund transformation of legacy revenue / customer base to cloud-based recurring model

• Traditional Telcos expected to augment existing solution portfolios through acquisitions of cloud platform companies

– Renewed effort to attract SMBs and enterprises through upsell of additional cloud-based managed services

– Proprietary technology often favored as core platform to build cloud and collaboration portfolio

– Bolt-on acquisitions for incremental cloud solutions, complementary customer base and/or expanded geographic reach

• Additional macro-economic factors fueling M&A into 2016 include:

– Buyers seeking inorganic growth given strong balance sheets, access to capital and slow but steady economic growth

– Foreign buyers driven to select U.S. markets and vice versa in select markets in Western Europe and Scandinavia

– Cash-rich consolidators

– Interest rates remain low

Telecom and Technology sectors expected to see the most deals in 2016 and beyond, driven by highly disruptive cloud technologies such as cloud voice, unified communications and applications

Source: 1) M&A Outlook Survey, KPMG

56

M&A Outlook 2016: Valuation Drivers

Strong Sales Channel

Unique Indirect Channel

Relationships

Wholesale / White Label Offerings

Sales Productivity

Quality of Service

Network and Quality (QoS)

Technology / Solution

Proprietary

Cloud Contact Center

SecurityStorageLifecycle

ManagementUCaaS

Collaboration

Integration with Third Party Platforms (via APIs)

RobustCapabilities

Rich Application Suite

Customization (Vertical Focus)

Multi-tenantRedundancyScalability

Tax, language and currency

capabilities

Enterprise Customer

Base

Size (Mid-Market & Enterprise)

Loyalty (Low Churn)

1. 2. 3. 4. 5.

Sales Presence in Key Markets

Automation (Self Service Portals)

Channel visibility into KPIs

Select company attributes that demand a market premium in 2016 and beyond

57

Acquirer Location Target Location Valuation

West Corp U.S. Magnetic North U.K 3.7x LTM Rev

Broadsoft U.S. PBXL Tokyo N/A

8x8 U.S. DXI Limited U.K. 2.1x LTM Rev

Enghouse Canada Reitek Italy N/A

NTT Tokyo Arkadin France 2.6x LTM Rev

NTT Tokyo Virtela U.S. 4.0x LTM Rev

Broadsoft U.S. Finocom Germany 3.6x LTM Rev

8x8 U.S. Voicenet U.K. 2.0X LTM Rev

M&A Outlook 2016: Accelerated Cross Border Activity

Telecom and Technology represent the most active sectors in terms of cross-border deal activity

U.S. Buyers Fueling Transactions1

U.S. and EU Most Active Relationship1

• Global, cross-border M&A activity is at an all time high, hitting a record setting quarterly growth rate in Q4 ’151

Strategic acquirers are paying a premium for expansion outside of domestic markets

Representative Transactions

Source: 1) Baker & Mckenzie

58

Market Rewards Shift to Managed Services

GTT Metrics 12/31/2011 12/31/2012 12/31/2013 12/31/2014 9/30/2015

LTM Revenue $91M $108M $158M $207M $317M

LTM EBITDA $8.4M $12.9M $22.9M $33.6M $55.6M

Significant increase in GTT Communication’s share price and relative valuation metrics has demonstrated market’s positive reaction to managed service-focused acquisitions

GTT Communications, Inc. (NYSE:GTT): Historical Valuation Multiples

Customer Demand Drives M&ASection III

60

Ability to “Move up the Stack” is Key to Success in the Cloud

ProfileØ Employees (1,000+)Ø MRR (>$5,000)Ø Multi-location offices / employees

ProfileØ Employees (100-999)Ø MRR (>$1,000)

ProfileØ Employees (<100)Ø MRR (<$1,000)

Managed Cloud Infrastructure

Managed Cloud Network

Managed Cloud Software / Applications

ServicesØ Cloud Voice & UCØ Cloud Contact CenterØ Conferencing and CollaborationØ Productivity & Vertical AppsØ Mobility

ServicesØ IaaSØ PaaS / MiddlewareØ Cloud Storage Ø Colocation

Ø Ability to move up the Target Market stack from SMB to mid-to-large enterprise will increase ARPU and reduce churn

Ø Ability to address needs higher up the cloud services stack is key to increased wallet share and creating a differentiated solution

Mid-to-Large Enterprise

SOHO / SMB

Large Enterprise

ServicesØ Cloud NetworkingØ MPLS/VPNØ Network Monitoring

Opportunity to address cloud needs higher up the cloud services and SMB / Enterprise stack to capture greater wallet share and recurring revenue streams

Managed Cloud Services Stack Target Market SMB / Enterprise Stack

61

SMB Supply / Demand Gap for Cloud and Mobility

SMB Supply Demand Gap

More services demanded by SMBs

than current offerings

More services supplied by channels than current

SMB demand

Source: 1) Techaisle

Cloud Solutions1 Mobility Solutions1

SMB demand is especially high for cloud solutions geared toward industry verticals, security, and storage

62

Addressing Service Offering Gaps Through Differentiation

Competitive Differentiators

VERTICAL EXPERTISE

Drivers

• Need to fully depreciate on-premise assets

• Cultural preference of firm• Concern about maturity of

cloud delivery for selected UC functions

• Based on functional or geographic segmentation

MOBILE CLOUD INFRASTRUCTUREHYBRID SOLUTIONS BROAD SOLUTION APPEAL

Drivers

• Users expect full UC functionality across all mobile platforms and operating systems, preferably through fixed mobile convergence (FMC)

• Consumerization of IT (BYOD)

• Multi-tenant PBX platforms designed specifically for mobile carriers (i.e. RingCentral and AT&T)

• True mobile cloud services are device and OS neutral

Drivers

• No single service provider who offers a full, scalable UCaaS and collaboration solution

• In addition to the basic integrated UC offerings, clients expect additional solutions including, but not limited to:‒ Mobile Client‒ APIs for integration‒ Business productivity

applications‒ Integration with business

software‒ Cloud contact center‒ Managed security‒ Storage‒ Managed network

applications

Drivers

• Expectation of service providers to provide expertise in both the technology and subject matter related to the selected industry

• Highly distributed organizations in professional verticals (i.e., retail, legal, medical, insurance, and real estate)

63

Market Valuation Drivers

What is more important: growth or profitability?

Depending on your particular sub-sector within cloud, you will trade on either a revenue multiple or an EBITDA multiple.

QA

64

Public Trading ComparablesTrading Multiples as of 2/23/2016;; (US$ in Millions) Growth

Comparable Companies TEVMarket Cap.

CY 2015Revenue

CY 2015 EBITDA

Gross Profit

EBITDAFWD

RevenueCY 2015Revenue

CY 2015 EBITDA

Managed Cloud Software and Applicat ions

Citrix Systems, Inc. $11,215.3 $10,761.6 $3,275.6 $844.0 85.2% 25.8 % 1.4 % 3.4x 13.3xWest Corporation $5,009.3 $1,791.5 $2,280.3 $651.8 57.4% 28.6 % 1.1 % 2.2x 7.7xRingCentral, Inc. $1,211.0 $1,329.5 $296.2 ($16.1) 70.5% (5.4)% 19.0 % 4.1x NMVonage Holdings Corporation $1,216.1 $1,065.6 $895.1 $93.2 66.9% 10.4 % 2.6 % 1.4x 13.0xEnghouse Systems Limited $972.4 $1,044.3 $292.7 $74.8 68.2% 25.6 % 17.3 % 3.3x 13.0xBroadSoft, Inc. $789.2 $870.9 $270.9 $58.4 70.8% 21.6 % 24.9 % 2.9x 13.5x8x8 Inc. $824.6 $979.2 $195.5 $4.3 73.0% 2.2 % 27.1 % 4.2x NMInteractive Intelligence Group Inc. $578.8 $619.8 $390.9 $10.2 60.7% 2.6 % 12.5 % 1.5x NMinContact, Inc. $523.7 $545.9 $222.0 ($1.5) 51.4% (0.7)% 17.4 % 2.4x NMFive9, Inc. $371.0 $383.8 $126.0 ($8.0) 51.8% (6.4)% 22.2 % 2.9x NM

Mean 65.6 % 10.4 % 14.6 % 2.8x 12.1xMedian 67.6 % 6.5 % 17.4 % 2.9x 13.0x

Managed Cloud Infrastructure

Cognizant Technology Solutions Corporation $30,772.9 $34,434.9 $12,420.6 $2,515.5 40.1% 20.3 % 12.2 % 2.5x 12.2xRackspace Hosting, Inc. $2,893.4 $2,719.5 $2,000.3 $673.1 66.2% 33.6 % 6.1 % 1.4x 4.3xInterxion Holding NV $2,678.4 $2,129.5 $412.3 $182.8 60.3% 44.3 % 14.1 % 6.5x 14.7xInternap Corporation $468.8 $110.3 $321.0 $80.8 47.2% 25.2 % (1.9)% 1.5x 5.8x

Mean 53.5 % 30.9 % 7.6 % 3.0x 9.2xMedian 53.7 % 29.4 % 9.1 % 2.0x 9.0x

Managed Cloud Network

Level 3 Communications, Inc. $27,594.3 $17,439.3 $8,247.4 $2,606.2 48.2% 31.6 % 2.9 % 3.3x 10.6xZayo Group Holdings, Inc. $9,247.9 $5,718.4 $1,442.6 $845.5 69.9% 58.6 % 23.5 % 6.4x 10.9xGTT Communications, Inc. $729.9 $522.4 $372.7 $75.8 42.8% 20.3 % 79.6 % 2.0x 9.6x

Sources: Capital IQ, SEC Filings, Press Releases and Q Advisors LLC Estimates Mean 53.6 % 36.8 % 35.3 % 3.9x 10.4xMedian 48.2 % 31.6 % 23.5 % 3.3x 10.6x

Operat ing Metrics Margins (LTM) TEV Mult iple

65

Recent M&A Trends and Activity (US$ in Millions)

Date Buyer TargetImplied TEV

LTM Revenue

LTM EBITDA

LTM Revenue

LTM EBITDA

Managed Cloud Software and Applicat ions02/14/2016 CallTower Inc. SoundConnect, LLC $6.7 $5.1 NA 1.3x NA02/07/2016 BroadSoft, Inc. Transera NA $7.8 NA NA NA12/21/2015 Momentum Telecom, Inc. Alteva, Inc. $21.7 $30.6 ($1.4) 0.7x NA12/09/2015 Interactive Intelligence Group Inc. Anveshan Techsolutions Private Ltd. NA NA NA NA NA12/01/2015 Marlin Equity Partners;; Presidio Partners LiveOps Cloud Platform NA NA NA NA NA10/31/2015 West Corporation Magnetic North $41.0 $11.1 $4.1 3.7x 10.0x09/01/2015 Vonage Holding Corporation iCore Networks, Inc. $92.0 $71.0 $7.0 1.3x 13.1x05/15/2015 Vonage Holding Corporation gUnify LLC NA NA NA NA NA05/01/2015 AdEPT Telecom plc Centrix Limited $15.9 $13.6 $3.8 1.2x 4.2x04/01/2015 Vonage Holding Corporation SimpleSignal, Inc. $25.3 $13.7 NA 1.8x NA03/03/2015 Enghouse Systems Limited CDRator A/S $18.5 $17.3 NA 1.1x NA12/15/2014 Vonage Holding Corporation Telesphere Networks $114.0 $40.0 NA 2.9x NA12/11/2014 BAE Systems Silver Sky $233.0 $75.2 NA 3.1x NA12/11/2014 CenturyLink, Inc. Cognilytics, Inc. NA NA NA NA NA10/31/2014 Fusion Telecommunications PingTone Communications $10.1 $8.1 $1.0 1.2x 10.1x10/09/2014 Apax Partners ExactTarget $764.0 $328.8 $47.1 2.3x 16.2x09/14/2014 Cognizant Technology Solutions TriZetto Corporation $2,700.0 $676.4 $190.0 4.0x 14.2x05/14/2014 Interactive Intelligence Group Inc. OrgSpan $14.3 NA NA NA NA05/06/2014 inContact, Inc. Uptivity Inc. $41.4 $21.1 $2.6 2.0x 16.0x04/21/2014 West Corporation Reliance Communications $76.5 $27.0 NA 2.8x NA01/27/2014 Spire Capital Partners Telekenex NA NA NA NA 6.0x01/21/2014 NTT Communications Arkadin $510.0 $200.0 NA 2.6x NA12/31/2013 Fusion Telecommunications Broadvox $32.1 $30.9 $5.4 1.0x 5.9x12/16/2013 BroadSoft, Inc. f inocom AG $9.0 $2.5 NA 3.6x NA12/03/2013 Premiere Global Services Via-Vox $52.4 $22.0 NA 2.4x NA12/02/2013 8x8 Inc. VoiceNet Solutions $18.4 $9.0 NA 2.0x NA11/15/2013 Vonage Holding Corporation Vocalocity Inc. $129.5 $44.5 NA 2.9x NA09/27/2013 WideOpenWest Networks Bluemile, Inc. $20.0 $8.9 $2.9 2.2x 6.9x09/04/2013 Premiere Global Services ACT Teleconferencing $44.0 $40.0 NA 1.1x NA08/12/2013 BroadSoft, Inc. Hosted IP Communications $26.3 $6.0 NA 4.4x NA

Sources: Capital IQ, SEC Filings, Press Releases and Q Advisors LLC Estimates Mean 2.2x 10.7xMedian 2.2x 10.1x

Operat ing Metrics TEV Mult iple

66

Recent M&A Trends and Activity (cont’d)(US$ in Millions)

Date Buyer TargetImplied TEV

LTM Revenue

LTM EBITDA

LTM Revenue

LTM EBITDA

Managed Cloud Infrastructure07/06/2015 Koninklijke KPN N.V. IS Group BV NA NA NA NA NA12/31/2013 Redcentric InTechnology Managed Services Limited $104.7 $62.1 $12.6 1.7x 8.3x05/07/2013 Telecom Corporation of New Zealand LimitedRevera Limited $82.7 $41.8 $10.9 2.0x 7.6x01/29/2013 Cogeco Cable Inc. Peer 1 Network Enterprises, Inc. $599.7 $141.4 $30.1 4.2x NA04/06/2012 Adapt Services eLINIA WebServices $20.7 $15.8 NA 1.3x NA03/17/2012 Taldor Computer Systems GlassHouse Technologies $174.9 $116.1 ($6.2) 1.5x NA

Mean 2.1x 8.0xMedian 1.7x 8.0x

Managed Cloud NetworkAnnounced Charter Communications, Inc. Time Warner Cable Inc. $77,468.6 $23,007.0 $7,956.0 3.3x 9.9x01/07/2016 Videotron Ltd. Fibrenoire Inc. $125.0 NA NA NA NA12/12/2015 Xplornet Communications Platinum Communications Corp. $9.5 $8.3 $1.5 1.1x 6.3x10/22/2015 GTT, Inc. One Source Networks, Inc. $175.0 $74.6 $13.9 2.3x 12.6x10/16/2015 Interoute Communications Limited Easynet Limited $617.8 $345.7 $58.7 1.8x 10.5x04/01/2015 GTT, Inc. Megapath, Managed Services Business $152.3 $124.0 $20.0 1.2x 7.6x12/23/2014 Telstra Corporation Limited Pacnet Limited $697.0 $472.0 $111.0 1.5x 6.3x11/18/2014 Koninklijke KPN N.V. Reggefiber Group B.V. $990.0 NA NA NA NA10/01/2014 GTT, Inc. UNSi $37.8 $55.0 NA 0.7x NA07/02/2014 Zayo Neo Telecoms SAS $78.9 $39.5 $7.3 2.0x 10.8x06/16/2014 Level 3 Communications, Inc. TW Telecom Inc. $7,491.4 $1,591.0 $518.3 4.7x 14.5x05/01/2014 Columbus Communications Lazus S.A.S $146.0 $33.0 $17.0 4.4x 8.6x04/21/2014 Birch Communications Cbeyond $326.5 $463.4 $71.0 0.7x 4.6x01/10/2014 NTT Communications Virtela Technology Services $525.0 $131.3 NA 4.0x NA12/31/2013 Time Warner Cable DukeNet Communications $600.0 N/A $60.0 NA 10.0x

4.7x 14.5x0.7x 4.6x

Sources: Capital IQ, SEC Filings, Press Releases and Q Advisors LLC Estimates Mean 2.3x 9.2xMedian 1.9x 9.9x

Operat ing Metrics TEV Mult iple

67

1. Managed network providers acquiring software and application providers

– Masergy’s acquisition of Broadcore and Global DataGuard; recently looked at acquiring a proprietary cloud contact center solution

– NTT’s acquisitions of Arkadin and Virtela

– CenturyLink’s acquisition of Savvis

2. Non-traditional managed services players acquiring software and application providers:

– Ricoh’s recent acquisition of MindShift Technologies

– Mitel’s acquisition of Aastra Technologies

– ShoreTel's acquisition of M5 Networks

– Konica Minolta’s acquisition of All Covered

3. Managed software and application providers acquiring additional software services:

– West’s recent acquisition of Magnetic North, a proprietary cloud contact center solution

– Vonage’s recent acquisitions of Vocalocity, Telesphere, iCore SimpleSignal and GUnify, all cloud business voice and UC application providers

Masergy’s Cloud Strategy

NTT’s Cloud Strategy

Recent M&A Strategies: Moving up the Cloud Services Stack

2012 – Broadcore: added core platform to grow cloud voice services and UC2015 – Global DataGuard added managed security software solution 2015 – Recently looked at acquiring cloud contact center technology

Description: Global MPLS and managed network provider serving global enterprisesStrategy: To become one-stop solution provider for enterprise communications

2014 – Virtela: added core platform and network to grow cloud services in the U.S. and globally2015 – Arkadin: added rich collaboration suite of services

Description: Japan-based traditional data and network servicesStrategy: Aggressively acquiring up-market solutions in Europe and the U.S. to capture growing business cloud market

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Valuation Drivers

• ARPU

Bigger is Better

Ability to upsell additional services Larger clients typically have less churn

Higher ARPUs allow buyers to use increased leverage

• Proprietary Platform vs. Reseller Model

Positioning yourself as a tech company vs. a services company• Contracted Revenue

Longer contracts are more valuable

Customer tenure shows Quality of Service• Number of Services Sold to Embedded Customer Base

Avoids being a one trick pony

Cross-sell opportunities for acquirers• Churn

• Sales Channel

Direct

Channel % of Residual

• Geographic Reach

Ability to serve multi-locations customers

As companies think about preparing for sale or acquiring a complimentary target, the following valuation drivers should be considered

69

Know your strengths and weaknesses and prepare a story around each

Best Offense is a Good Defense

Growth

Size

Churn

Metrics

Geographic

Reach

EBITDA

Margin

Gross

Margin

Target

Market

ARPU

Customer

Concentration

Bookings

Trends

70

One Size Does Not Fit All Purchasers

Size and Location of Customer Base

One Source’s appeal to GTT was due to multi-location, enterprise customer base

Magnetic North filled a product hole for West

Ability to Leverage Sales Channel of

Acquirer

Simple Signal provided Vonage with a strong indirect

channel

Market leading premiums require a differentiator or a

perfect fit with a buyer White paper for each Buyer

Proprietary Delivery Scheme

OSS

Provisioning

Not all Revenue and EBITDA Will be Treated with Same Multiple

71

Most Active Cloud and Managed Services Acquirers

Equipment ProvidersConsolidators Solution Providers

72

Market Rewards Transition to Commercial Cloud UC & Collab

Date 6/13 12/13 6/14 12/14 6/15 12/15

LTM Revenue 0.7x 0.8x 1.0x 1.0x 1.3x 1.6x

LTM EBITDA 5.0x 7.5x 12.5x 11.4x 12.7x 15.2x

Share Price1 $2.83 $3.33 $3.75 $3.81 $4.91 $5.87

Source: CapitalIQ and SEC Filings (1) Share price as of the last trading day of the month

Significant increase in Vonage’s share price and relative valuation

metrics has demonstrated

market’s positive reaction to its shift

“up market” to higher-end SMB and enterprise accounts as

well as its ability to offer richer and more

complex cloud services

Vonage Holdings Corporation (NYSE:VG)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

EBITDA M

ULTIPLE

REVENUE MULTIPLE

Pure Residential

How to Prepare Yourself for a SaleSection IV

74

Preparing for a Process – Part I

Customers

• Review major customer contacts ahead of any process

• Identify potential renewal opportunities in order to reduce the number of customers out of term or on a month-to-month basis

• Mitigate potential price compression or loss of a material customer during due diligence

• Goal to maximize future revenue under contract, and reduce the perceived risk of churn / revenue loss post-deal

ü Identify any customer concentration

ü Longstanding customer relationships and revenue under contract will maximize value

Financial

• Identify specific areas of cost savings, synergies available post-transaction, and their effect on pro-forma profitability

• Review commitments for facilities, office space, and network related locations to determine transferability and / or long-term need

• Prepare a detailed contracted revenue waterfall analysis if it is a strong selling point for the Company

• Obtain clear understanding of tax liabilities and how they will be funded

ü Maintain steady growth in revenue

ü Reduce network costs

ü Strengthen operating margins

Checklist Value Realized

75

Preparing for a Process – Part II

Sales

• Identify key sales agents and partners, and assess the transferability of the relationship and contractual terms

• Highlight trends in the Company’s sales pipeline, including the near-term opportunity to up-sell or cross-sell additional products into a growing customer base

ü Identify key third-party sales accounts

ü Ability to define and meet realistic sales goals throughout a process

Data Room

• Make sure all licenses with vendors are up-to-date

• Ensure all interconnection and telecom contracts are in force and executed

• Understand consents needed from contract counterparties

ü Facilitates clean representations and warranties

ü Reduces escrow amount and holdback periods

Checklist Value Realized

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How to Prepare Yourself for a Sale (cont’d)

Don’t bury your head in the sand…..

1. Enhance / Align current cloud offerings with needs of SMBs and enterprises, either organically or through acquisitions

2. Track and measure KPIs over time and gauge impact of incremental investments

3. Know your strengths and weaknesses and prepare a story around each

No better time than now to:

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Coffee/Tea Break#VoIPSummit

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Future of the Voice Market#VoIPSummit

Panelists

80

Simon BurckhardtMD EMEA

Mike WilkinsonVP Market Offers

Frank BlaauwSenior Manager Voice

Business Services

Guy MillerDirector of Next Generation

Voice Services 1/03/2016The European VoIP Summit Gold Sponsors:

Moderator: Dominic BlackSenior Market Analyst

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Closing Remarks#VoIPSummit

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