march 19, 2019 - iliad sa · 2019-03-19 · scaling up our fiber advantage 13 group’s number of...
TRANSCRIPT
March 19, 2019
Disclaimer
• This document has been prepared by Iliad S.A. (the "Company”) and is being furnished to you solely for your
information and personal use.
• This presentation includes only summary information and does not purport to be comprehensive.
• The information contained in this presentation has not been subject to independent verification.
No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on,
the fairness, accuracy, completeness or correctness of the information or opinions contained herein.
• None of Iliad S.A., its affiliates or its advisors, nor any representatives of such persons, shall have any liability
whatsoever (in negligence or otherwise) for any loss arising from any use of this document or its contents or
otherwise arising in connection with this document or any other information or material discussed.
• This presentation contains forward-looking statements relating to the business, financial performance and results
of Iliad S.A. These statements are based on current beliefs, expectations or assumptions and involve unknown risks
and uncertainties that could cause actual results, performance or events to differ materially from those described
in such statements. Factors that could cause such differences in actual results, performance or events include
changes in demand and technology, as well as the ability of Iliad S.A. to effectively implement its strategy.
• Any forward-looking statements contained in this presentation speak only as of the date of this presentation. Iliad
S.A. expressly disclaims any obligation or undertaking to update or revise any forward-looking statements
contained in this presentation to reflect any change in events, conditions, assumptions or circumstances on which
any such statements are based unless so required by applicable law
2
2018 – Transition to a New Era of Growth
3
2018 – Transition to a New Era of Growth
4
Ramp-up of innovation and connectivity
Strong economic resilience
Unique success story in Italy
Revised offer portfolio with value segmentation
New and diversified management team
More comprehensive loyalty policy
A year of transformation
Launch of new innovative Freebox
1m FTTH subscribers reached in January 2019
+722k subscribers on the Free Unlimited 4G Plan
Revenues of €4.9bn, up 1.6%
(excl. handsets)
Revenues in France down -1.1% (excl. handsets)
Growing EBITDA in France, Capex policy delivering
+13% in net Profit for France
2.8m subscribers
€125m in revenues
Second most successful mobile launch in Europe after Free Mobile in France in 2012
France – A Revamped Model
5
A New Commercial Strategy
6
Better Distribution
At the cutting edge of Innovation
More segmented Pricing
New HR policy aligned with our
growth story
Enhanced Connectivity
Efficiency in Loyalty
Better Segmentation
7
Less Promotions
Better Distribution
More Connectivity
More Innovation
• Mobile pricing and strategy aimed at maximizing the number of subscribers on the Free Mobile Unlimited 4G Plan
• Intermediate €8.99 package for first 12 months
• Proactive migration policy from €2 plan
• Improve segmentation in Fixed towards the high-end segment
• FTTH
• Freebox Delta
New Distribution & Loyalty Paradigm
8
Before 2018 and beyond
• Online distribution as the cornerstone of our distribution strategy
• Free Centers largely devoted to after-sale services
• Product-centric culture: “self-service” distribution
• Very limited loyalty policy
• Repositioning our Free Centers, less passive / refocusing on sales and customer services
• Re-balancing distribution channels: Flash Sales as one of many channels, more active in terms of digital marketing
• Customer-centric strategy: loyalty programs
Innovation Leadership
9
10G Fiber
xDSL + 4G
Wifiac 4400 MU-MIMO
1TB NAS server
Devialet sound system
Security pack with anti-
intrusion system
4K HDR
HD+ TV channels
Tactile remote control
Smart Home
1Gbps Freeplugs
Netflix
Up to 600 TV channels
Amazon Alexa
New TV interface
New Freebox app
Unlimited newspapers
with LeKiosK
And even more…
Strong HR Activity to Accompany our Growth
10
• Increase the number of staff for FTTH rollouts andcustomer connections
• 3,000 Free employees devoted to FTTH in France
• Strengthen our capabilities in innovative services
• 100 Scaleway employees hired in 2018 to develop new products and services
• Integration of 200 Jaguar Network employees in 2019
• New management team put in place in May 2018
• Helping employees invest in the Company (plan to be announced in H1 2019)
• Diversified and heterogenic Group with 63 nationalities
3,000New staff
in 5 years
Group Performance in a Nutshell
11
FTTH Mobile Group Finance
+722,000 subscribers on the
Free Mobile Unlimited 4G
Plan(1)
1m FTTH subscribers –
doubled in one year
-347,000 subscribers overall (out of 23 million)
Mainly on low-ARPU offers
Bounce back in revenue growth
for France expected in H1
2019
(1) 50/100GB for non-Freebox subscribers
Broadband
12
Scaling Up our Fiber Advantage
13
Group’s number of FTTH subscribers
• FTTH subscriber base almost doubled in 2018
• 1m FTTH subscribers reached in early 2019 as per September guidance
• Monthly net adds reached 50k a month in Q4
• >30% net adds market share in Q4, i.e. more than our overall Broadband market share
>30%
FTTH net adds market share – Q4 2018
2017 9M 2018 Q4 2018
20k / month
30k / month
50k / month
Group’s monthly FTTH net adds
310k
556k
1.0m
2016 2017 Jan-19
Unrivalled Alternative Operator for FTTH
14
• 10m connectible sockets
• New co-financing partnerships (Covage, Altitude, Axione…)
• Free’s FTTH offers now available in 90 French départements
• N°1 alternative operator - 1st
million FTTH subscribers reached after 12 years
• It will take only 2 years to double this number!
• In the nPerf performance survey for 2018, Free was the operator with the best overall score for FTTH in 2018
• Fastest download speed (453Mbps) with lowest latencies (10ms)
Growing coverageSoaring adoption –
New conquest toolFastest Bandwidth
Mobile
15
49 Mbps45 Mbps
34 Mbps 33 Mbps
Op. 1 Op. 2 Op. 3
2.4k
2.0k
1.3k
0.8k
Op. 1 Op. 2 Op. 3
1 21
861
4,418
Op. 1 Op.2 Op.3
Building a Future-Proof Mobile Network
16
N°1 in terms of site rollouts in 2018(1)Free is leveraging its full range of frequencies -
Number of sites equipped with 700Mhz
RAN-sharing
Excellent for 4G download speed(2) One of the highest 4G data usage in Europe
4.9GB
8.4GB
10.9GB
Dec-16 Dec-17 Dec-18
(1) ANFR(2) nPerf survey of mobile internet connections in Metropolitan France – Q4 2018
A Clear Focus on the Unlimited 4G Plan(1)
• Harsh Mobile market in 2018, causing the Group to lose 254k subscribers
• Focus on maximizing the number of subscribers on the Free Mobile Unlimited 4G Plan(1) to create additional value
• 722,000 net adds for the Free Mobile Unlimited 4G Plan(1)
• Successful proactive migration policy, accelerating migrations from the €2 Plan to the Free Mobile
Unlimited 4G Plan(1)
(1) 50/100GB for non-Freebox subscribers 17
7.8mFree Mobile
Unlimited 4G Plan(1)
+722k
5.7m€2 Plan
-975k
13.5m
subscribers
Paving the Way for 5G
18(1) nPerf survey of mobile internet connections in Metropolitan France – Q4 2018
Getting ready for the 5th generation of standards
Boosting network performance
Connected cars, Health, etc.Internet of Things Smart cities Fixed over wireless, particularly in rural areas not covered by FTTH
Supporting digital transformation
• Large band in 700MHz acquired in 2015
• Almost systematic use of fiber backhauling to connect our sites – More than 90% of sites fiber-backhauled in urban areas
• Auction for high-band frequencies expected in H2 2019
• Up to 10x faster than 4G
• Up to several Gbps (vs 45Mbps in 4G as of Q4 2018(1))
• Handling the explosion of data usage –x2.5 in 2 years
B2B
19
Entry into the B2B Market
20
• Combination of Iliad’s high quality network with Jaguar’s unique know-how
• One of the largest B2B operators in France, focused on SMEs
• 1,000 B2B clients
• 3rd-largest French IP operator
• 7,000km of private fiber
• 800+ peerings in Europe
• 10,000 sq.m of owned datacenter capacity
• Access to a €9-12bn market
• Iliad will leverage on its strategic and best-in-class assets
• 10m connectible sockets – 20m by 2022
• 15,000 mobile sites to date
• 8 datacenters with a total capacity of 50,000 sq.m
Italy
21
2.8m
3.6m
0.4m0.2m
<0.1m
Undisputed Commercial Success in Italy
22
• No existing Broadband subscriber base in Italy
• Successful upscaling strategy – offerings enriched
and strong pace of net adds continued
Nine in ten
Brand Awareness
• Nearly 90% of people interviewed were already
aware of the Iliad brand as of January 2019, vs
12% in May 2018
• Brand built on simplicity, innovation and trust
• A clear media strategy relying on TV, social
media and strong word-of-mouth
2018 2012 2007 2006 2006
First 7 months net mobile additions
Innovative and Agile Nationwide Distribution Model
23
11 Shops
c.140 Corners
> 500 SIM-card dispensers
Sisal & Lottomatica for
top-up
Physical distribution Online distribution
• Leveraging French know-how in terms of online distribution
• Web application user-friendly on all devices
Save the Date…
24
ItalyFTTH Mobile4G / 5G
Capital Markets Day coming in mid-April…
B2B
FY 2018 Financial Results
25
2018 Financial Achievements
26
Group revenues returned to growth in H2 2018
+1.6%(1) for FY 2018
(1) Excluding handset sales
EBITDA in France > €1.8bn
Margin almost 38%
Solid debt profile with strong liquidity
>€1.8bn liquidity position
France
27
2,726 2,638
1,898 1,937
4,615 4,566
FY 2017 FY 2018
• Top line impacted by an unprecedented level of competition
• Growing mobile revenues billed to subscribers (+4%) thanks to good recruitments on the Free Mobile Unlimited 4G Plan(2)
• Low point reached in Q4 2018
• Other impacts
• Negative impact of VAT
• Continuing decrease in incoming revenues due to SMS/data cannibalization (with no impact on margin)
• More selective handset policy pushing handset revenues down - no impact on margin
Mobile
+2.1%
Revenues (excl. handsets)
Broadband
-3.2%
28
In €m(1) Net of intra-Group sales, incl. IFRS 15(2) 50/100GB for non-Freebox subscribers
(0.2%)
(3.5%)
H1 18 H2 18 H1 19
Returning to Growth in 2019
29
Growth in revenues in France
1,777 1,807
FY 2017 FY 2018
• Strong financial resilience, demonstrating that we’ve got our assertive capex strategy right
• EBITDA margin growing despite a very competitive market (+1.3pt vs 2017), at 37.9%
• Strong increase in Mobile profitability
• Diminishing roaming costs
• Improving subscriber mix
• Broadband profitability under pressure, but will improve thanks to upscaling strategy
EBITDA
30
+1.7%
37.9%36.6%
In €m
Essentially Growth and Success-Based Capex
31
1,4601,555
2017 2018
FTTH
+
Mobile
-
Other
In €m
Italy
32
Successful Launch
33
Revenues: €125m
Essentially recurring monthly fee
EBITDA: -€52m
Interconnection costs
Marketing/advertisingexpenses to build the brand
Rental costs, customer care, people…
Capex: €603m
€342m paid to Wind/Tre
and Italian State for frequencies
€261m for the network (1st
sites, MOCN, interconnections, etc.)
Strong commercial performance
2.8m subscribers in 7 months
Building a Leading Nationwide Mobile Network
34
• Sites
• 2,500 sites secured, of which 1,500 already equipped
• Contracts signed with Cellnex and Inwit
• Rollout focused on densely populated areas to maximize traffic coverage
• Balanced frequency portfolio – 265MHz
• Acquired during the 5G spectrum auction
• 2x10MHz in the 700MHz band
• 20MHz in the 3.6-3.8GHz band
• 200MHz in the 26.5-27.5GHz band
• Wind/Tre remedy package – 35MHz duplex
• 10,000km backbone covering all main Italian cities
Group
35
0.8%
(0.5%)
1.8%
0.5%
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
4,860 4,891
FY 2017 FY 2018
Group Revenues
36
Group revenues (€m)
+0.6%
Growth in Group revenues
Group Profitability
37
Group net Profit (€m)Group EBITDA (€m)
(1) Profit for France on a comparable basis, i.e. excluding impact of Italy and eir
• Positive impact of France: +€30m
• Negative impact of Italy: -€52m
• Growing profit for France (+13%)
• Offset by start-up losses in Italy and negative impact of eir
330
405
476
2017 2018
1,777 1,755
FY 2017 FY 2018
Negative impact of Italy:
-€121m
Negative impact of eir:
-€25m
+13%
1,725
(1,444)
(1,555)
(261)
(605)(306)
(441)
OpFCF CapexFrance
CapexItaly
SpectrumCapex
(Fr & It)
Taxes Other FCF
2,449
3,9831.4x
2.3x
FY 2017 FY 2018
Ambitious Capex Program Backed by Solid Balance Sheet
• €1,725m in Operating Free Cash Flow
• Capex amounting to €1,555m(1) in France and €261m(1) in Italy
• €605m for spectrum
• €441m in “Other” cash outflows, including for the acquisition of the stake in eir in April 18
Group FCF (€m) Net Debt (€m) & Leverage (x EBITDA)
(1) Excluding spectrum payments
• Net debt of around €4.0bn at end-December
2018, totalling 2.3x EBITDA
• Comfortable headroom and financial flexibility (leverage covenant at 3.5x EBITDA)
• Strong liquidity position of over €1.8bn, with
cash and undrawn revolving credit facilities
38
A Healthy and Well-Balanced Debt Profile
39
Debt maturity profile (€m)Average maturity: 5 years
Average cost of debt: 1.6%
>80% of debt at fixed rate
• In 2018, Iliad successfully
• Issued €1,150m of bonds
• Renegotiated and extended its €500m term loan and €1,650m RCF
• Secured new bank financing commitments for €350m
68 77
572
706
579
699 699
49 49 49 49 40
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Strategic Review of our Mobile Infrastructure Under Way
40
>100 sites
<100 & >50 sites
<50 sites
Key figures (2019PF)Free towers footprint
Total: c.5.7k sites
Strengthen our investment capacity & improve the financial efficiency of our infrastructure
• Increased infrastructure mutualisation and faster rollouts
• Capex optimization
• Better capital efficiency
Guidance
• Broadband
• Achieve a 25% share of the Broadband and Ultra-Fast Broadband market in the long term
• Have 20m connectible FTTH sockets by end-2022
• Increase the FTTH subscriber base by over 500,000 subscribers per year
• Mobile
• Roll out some 2,000 new sites in 2019
• Achieve a 25% share of the mobile market in the long term
• Finance
• Return to revenue growth in France in 2019
• Speed up EBITDA growth in France in 2019
• Generate EBITDA margin in France (excl. B2B and equipment sales) of over 40% in 2020
• Have 2019 Capex in France (excl. frequencies) in line with 2018 Capex figure
• Achieve an EBITDA less Capex figure in France (excl. B2B) of more than €800m in 2020 and around €1bn in 2021
41
• Have 3,500 equipped sites at end-2019
• Generate a negative contribution to consolidated EBITDA in 2019 above that recorded in 2018, as business growth speeds up and the mobile network is rolled out
• Achieve EBITDA break-even, with a market share of less than 10%
Q&A
42
Appendices
43
Group KPIs
Subscriber KPIs Dec. 2017 Dec. 2018
- France Broadband 6,520k 6,427k
o/w FTTH subscribers 556k 983k
- France Mobile 13,695k 13,441k
o/w Unlimited 4G Plan 7,060k 7,783k
o/w Voice Plan 6,635k 5,658k
Total number of subscribers - France 20,215k 19,868k
- Italy Mobile - 2,837k
Total number of subscribers - Group 20,215k 22,705k
Other KPIs - France (end of period)
Broadband ARPU (incl. promos) €33.9 €31.8
FTTH connectible sockets 6.2m 9.6m
Average monthly 4G data usage 8.4GB 10.9GB
44
Equity & Liabilit ies Actif
in €m FY 2017 FY 2018
Total equity 3,374 3,606o/w minority interests 10 15
Long-term financial liabilities 2,168 3,407Other non-current liabilities 714 1,567Non-current liabilit ies 2,882 4,974
Short term provisions 44 35Short-term financial liabilities 497 757Trade & other payables 1,610 1,880Other current liabilities 8 -Current liabilit ies 2,160 2,671
Total equity & liabilit ies 8 ,416 11,252
Assets Equity & Liabilit ies
in €m FY 2017 FY 2018
Goodwill 215 215Intangible assets 2,705 3,938Property, plant & equipment 4,417 5,358Other non-current assets 87 448Non-current assets 7,424 9,959
Inventories 31 90Trade & other receivables 725 972Other current assets 0 34Cash & cash equivalents 216 181Current assets 972 1,277
Assets held for sale 20 15
Total assets 8 ,416 11,252
Balance Sheet
45
• Increase in PP&E related to FTTH and mobile rollouts
• Increase in intangible related to 5G spectrum acquisition in Italy
• Increase in other non-current assets related to the acquisition of the stake in eir
• Increase in long-term financial liabilities due to new financing (bonds and bank commitments)
• Increase in other non-current liabilities related to the acquisition of 5G spectrum in Italy
Overview of Iliad’s FTTH Rollout
Horizontal rollout
• Fiber is drawn from the optical node to the foot of buildings, through ducts
Connectible FTTH sockets
• Horizontal rollout and in-building wiring has been completed
• 9.6m connectible FTTH sockets at end-December
• 20m by end-2022
FTTH connected subscribers
• A connectible FTTH socket becomes a connected subscriber when the in-home installation has been made
• 1m subscriber mark reached in January 2019
• More than 500k new subscribers per year from 2019
ON
ON
ON
SP
SP
46
Focus on the Co-financing Scheme in Medium Populated Areas
Building Operator
ON
SP
1 2
3
3
Backhaul
costs
Co-financing of
lines
In-home
connection
€
47(1) Based on Iliad’s FTTH current target market share in co-financing areasON: Optical NodeSP: Sharing Point
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
FTTH Driving Market Share Gains
• 9.6 million connectible sockets as of end-December, +55% YoY
• 20m by end-2022
• Extended co-financing in PIN areas – Free’s FTTH offers now available in 90 French départements
Free’s market
share
ZTD(1) ZMD(1) PIN(1)
7m
sockets
14m
sockets
Rest of
France
Systematic joint investment
Sole investment
Agreements signed with Axione, Orange, Covage, Altitude
and many local authorities
Strong
potential
Shared investment
48(1) ZTD: Densely-populated areas / ZMD: co-financing areas / PIN: co-financing areas + public subsidies