Wednesday, June 20, 2018

Telstra Investor Day: Telstra2022 Plan

Highlights from Telstra's Telstra2022 plan:

4 Key pillars

1. Simplify offerings

  • consumer & SME plans from 1800 to core 20
  • all-digital experience (complete migration consumer & 50% of business by 210630
  • to reduce customer service calls by 33% in 2 years and 67% by 21/22

2. Stand-alone infra business

  • establish Telstra InfraCo from 180701, potential demerger when nbn complete or entry of strategic investor; contains fixed, datacenters, fibre, copper, HFC, international subsea cables, exchanges, poles, ducts & pipes; no mobile assets
  • customers: Telstra, nbn, other wholesale
  • 3k employees
  • assets AUD 11b
  • rev AUD 5.5b, EBITDA AUD 3.3b

3. Simplify structure

  • new operating model & organisational structure TBA July 2018
  • to reduce 2-4 management layers
  • to establish Telstra Global Business Services (point of consolidation for all large scale back-of-house processes and functions)
  • to invest in 1500 new roles, Transition Program for 8k job cuts & training program for those who stay (together funded with AUD 50m)

4. Cost reduction program & portfolio management

  • plans asset sales AUD 2b by YE 19/20
  • to increase cost savings by AUD 1b to 2.5b by YE 21/22
  • underlying core fixed costs from AUD 7b in 16/17 to AUD 4.5b by YE 21/22

5G

  • Plans SDN & 5G, network ready 18/19H1, high-demand areas ready YE 19/20

Guidance

  • transistion from current program to reduce revenues AUD 500m over 3 years; incremental benefits from previous investment program AUD 500m
  • target capex/rev 16-18% in 18/19, 14% in medium term
  • expects fixed & mobile market decline 2-3% in 18/19
  • guidance 18/19 (AUD): rev 26.6-28.5b, EBITDA 8.7-9.4b (before restructuring cost 600m), one-off from nbn agreement 1.8-1.9b, capex 3.9-4.4b
  • ordinary dividend pay-out ratio 70-90% of underlying earnings, special dividend from nbn 75% of net receipts; dividend 17/18 22c

Monday, May 28, 2018

Deutsche Telekom Capital Markets Days 2018 - Highlights

Deutsche Telekom Group
  • Guidance 2017-21: uninterrupted growth for revenues (1-2%), adj. EBITDA (2-4%), FCF (10%), capex (excl US) flat (EUR 12.1b), all units contribute from 2019; dividend 2018 to track FCF (70 c/share over 2017), dividend to track adj. EPS from 2019 (EPS from EUR 1.00 in 2018 to 1.20 in 2021), minimum dividend 50c
  • Not on track 2014-18: capex 2014-18 CAGR 1-2% (CAGR 2014-17 6%), opex 2014-18 down (2014-17: EUR 700m indirect costs down vs. target 1.8b)
  • Plans indirect cost cutting (excl. US) from automation & digitalisation, EUR 1.5b by 2021 o/w half non-staff (real estate, legacy IT)
    • o/w 750m Telekom DE, 400m Europe, 100m T-Systems, 200m GHS
    • All-IP complete in Germany by 2019 (consumer) & 2020 (business), Greece 2019, etc.
    • Staff reduction already implemented (incl. phased retirement)
  • Focus
    • Digitalisation: app (Mein Magenta)
    • Portfolio simplification
    • Automation (1500 bots)
    • Data (analytics, AI)
    • IT transformation (harmonised API layer)
    • Real-time operations (IP/BNG, Access 4.0)

Telekom DE
  • Behind on cash contribution target 2014-17 (2% vs 2.7%)
  • Guidance: revenue growth >1% (MSR 2%, BB 3-4%), adj. EBITDA growth 2.0-2.5%, cash contribution growth 4-5%, capex flat (EUR 4.2b)
  • Target SME revenues EUR 6.5b by 2021E (2017: 6.0)
  • Indirect cost cutting: EUR 300m from automation, 250m from operational excellence, 200m from platform retirement.
  • Drivers
    • Convergence: MagentaEins (HH penetration Europe from 21% (2017) to 40% (2021))
    • Multi-brand mobile: focus on premium brands; IoT, 5G
    • Leverage fiber & TV investments: TV share 50% YE 2021; wholesale revenue CAGR 2017-21 2%, wholesale end-users CAGR 2017-21 1% to 12.3m, wholesale ARPA CAGR 2017-21 2% to EUR 13.5)
    • Customer service: 24 hr problem solving from 66% (2017) to 80% (2021); TRI*M score to 64 by 2021E (2017: 59)
  • Broadband 
    • >50 Mb/s coverage 62% YE 2018E, 95% YE 2019
    • High-speed (50-250 Mb/s) coverage 80% (95% incl. wholesale) YE 2019 (70% access to 100 Mb/s based on vectoring; super-vectoring from 18H2 for 105-250 Mb/s for 15m HH YE 2018, 28M HP by YE 2019)
    • To launch FTTH 2018, ramp up to 2m HH/annum from 2021 (given the right regulatory conditions), possibly in co-investment)
    • IRR target FTTH/B 7.5%
    • Target market share 30% by 2021E
  • Mobile: 27k sites (to add 2k/annum), 80% FTTS; mobile base stations to grow from 27k (2017) to 36k (2021) incl. small cells in urban areas, LTE population coverage from 94% (2017) to 98% (2019), 99% (2020)

Systems Solutions
  • Outlook 2017-21: rev CAGR 1%, adj. EBITDA CAGR 5%, margin 8-10%, capex stable (EUR 400m)
  • T-Systems to return to growth (based on IoT, cloud computing, security solutions), cash contribution break-even by 202E
  • Cost savings >EUR 300m
  • Transformation 2018-21
    • Portfolio focus: 3 clusters
      • Core: fixed & mobile
      • Growth: ICT, IoT, security, road charging, digital solutions, public cloud managed services, SAP
      • Classic IT: managed infra services & private cloud, SI
    • Sales revitalisation
    • Delivery integration
    • Overhead reduction (8 to 5 management layers)

T-Mobile US
  • Outlook 2018: postpaid net adds 2.6-3.3m, adj. EBITDA $11.4-11.8b, capex $4.9-5.3b 
  • Focus
    • Un-carrier
    • Beyond smartphone: Music Freedom, BingeOn, Netflix On US, layer3 TV, 5G, IoT
    • Simplicity & digitalisation 
  • Cost savings >$1b over 3 yr 

Europe (GR, HU, HR, SK, MK, ME, PL, CZ, AT, RO, AL)
  • Outlook 2017-21: revenue CAGR >1%, adj. EBITDA CAGR 1-2%, cash contribution CAGR 2-4%, capex stable (EUR 1.8b).
  • Indirect cost reduction EUR 400m by 2021 (120m from operational efficiency, 50m from simplification, 90m from digital customer interaction, 100m from leaner structure (incl cross-border synergies)).
  • FMC: HH penetration from 26% (2017) to >50% (2021), revenue CAGR 2017-21 25% to EUR 1.7b
  • FMCC (cloud): penetration VSE/SMB 31% (2017) to >50% (2021), revenue CAGR 2017-21 10%
  • FTTH/B 
    • Coverage 17% (2017) to 30% (2021)
    • FTTH/B capex
    • FTTH/B capex EUR 100m (2017) to 300m (2021)
    • HP additions 250k (2017) ramp up to 750k per annum (2021)
    • BB revenues EUR 3.6b by 2021E (2017: 3.2b)
  • Mobile base stations European subsidiaries from 41k (2017) to 47k (2021) incl. small cells (macro cells adds 1k/annum), LTE coverage 99% by 2021

Group Development (part of GHS)
  • Outlook 2017-21: revenue CAGR 3%, adj. EBITDA CAGR 3-4%, cash contribution CAGR 3% (-4% incl. site-roll-out at Deutsche Funkturm), capex flat at EUR 300m (+17% incl. site-roll-out) 
  • T-Mobile US: un-carrier 
  • T-Mobile NL 
    • "Still a long way to go" (SR & EBITDA)
    • Unlimited mobile de-risked, based on capacity expansion
    • Unique incentive scheme
    • Cost cutting 30% of overhead FTE (non-customer-facing) (from early 2017)
    • Initiated towers carve-out (stay at DT)
    • "Dutch market needs LT-viable maverick"
  • Deutsche Funkturm: creating European TowerCo by insourcing tower assets NL, AT, etc.
  • DTCP (Venture Capital)
  • BT stake

Technology & Innovation: 5G
  • Mobile capacity/speed upgrade (i.e. a better 4G). Economic rationale: efficiency gain (opex).
  • FWA to complement FTTH/FTTB in (sub)urban areas. Economic rationale: more cost-efficient & faster time-to-market than FTTH/FTTB (capex). Note: capex 30-50% lower, but FTTH/FTTB TCO better after 20 years (FWA higher opex).
  • Selected new products/solutions (massive IoT or services based on extremely low latency). Economic rationale: new revenue streams (e.g. campus networks).

Monday, May 14, 2018

Vodafone to acquire Liberty Global assets


Vodafone acquires Liberty Global assets for EUR 18.4b o/w 10.8 cash, 7.6 existing Unitymedia debt.
  • Operations
    • DE (Unitymedia; together 25m HP = 2/3)
    • HU (1.8m HP = 43%)
    • RO (3.1m HP = 41%)
    • CZ (1.5m HP = 33%)
  • Valuation
    • EV EUR 18.4b
    • 10.9x EBITDA 2019 (pre synergies)
    • 8.6x EBITDA (post synergies 5 yr)
    • 12.5x OpFCF (post synergies 5 yr)
  • Closing
    • To close mid 2019
    • Break-up fee EUR 250m payable to Vodafone, or payable to Liberty if for antitrust issue.
  • Synergies
    • Cost/capex synergies (network integration, IT/billing simplification, procurement, consolidating overlapping functions) 535m EUR/yr from yr 5 (before integration costs)
    • NPV EUR 6b (after integration costs) o/w rev synergies NPV EUR 1.5b (from cross-selling)
    • Integration cost EUR 1.2b (in first 5 yr).
  • Accreditive to FCF from yr 1.
  • Increases targeted net debt/EBITDA to 2.5-3.0x (pro forma at high end).
  • Liberty Global to provide transitional services to Vodafone (IT, TV platform tech, connectivity, other support) max. 4 yr; pro forma EUR 128m in 2019.

Monday, April 30, 2018

T-Mobile US acquiring Sprint: doing 5G-based FMC after all

T-Mobile US (DT 62%) acquires Sprint (SoftBank 83%)
  • $26b in shares (no cash out), EV $59b: 9.75 Sprint for 1 T-Mobile US (1 Sprint = 0.10256 T-Mobile US = $6.62), EV combination $146b
  • DT to own 42% (voting rights 69% incl. perpetual proxy from SoftBank; SoftBank has certain veto & info rights), SoftBank 27%, to be consolidated by DT
  • synergies NPV $43b (net of $15b integration costs) from network integration & build-out (incl. 5G), sales & marketing, store fittings, advertising, customer support, repairs & logistics, efficiencies in internal IT & billing; run-rate savings >$6b from 2024 (assuming effective from YE 2018; excl. IFRS 16 effects)
  • to close 19H1, subject to DoJ, FCC, security authorities; no break-up fees
  • John Legere CEO, Mike Sievert COO & President, Timotheus Höttges Chair, DT to appoint 9 (incl. 2 indie) of 14 Board members, SoftBank 4 (incl. 2 indie)
  • outlook & dividend DT 2018 unchanged, positive effect on EPS after 3 yr, leverage to exceed 2.0-2.5x (2.9 YE 2019), expects max. 1 notch downgrade (current Moody's Baa1/neg., S&P BBB/stable, Fitch BBB+/stable), return to 2.0-2.5 (i.e. 2.5) by 2021 (1.8 in 3-4 yr)
  • T-Mobile US to redeem all shareholder loans from DT (to reduce directly by $8b to $6.6b)
  • T-Mobile US to pursue Un-carrier strategy; "... will be able to roll out 5G technology more quickly and better than either T-Mobile US or Sprint would have been able to do alone. To do this, the intention is to focus on convergence products combining fixed and mobile communication offerings, a portfolio with which Deutsche Telekom is already very successful in Europe"
  • to invest $40b in first 3 years; to employ more staff than the two previous companies put together (from call center capacity in rural areas, network build-out, maintenance, new stores)


Tuesday, March 13, 2018

Iliad 17Q4: targets maintained, to bid for 5G spectrum in Italy

Most targets were reiterated.

17Q4

  • div 2017 68c
  • acquired 50% stake in Sepia (housing Telecom Reunion Mayotte) in 2017
Targets fixed
  • LT 25% market share BB
  • grow FTTH subs 300-500k/yr from 2018
  • 9m FTTH HP YE 2018, 20m FTTH HP YE 2022
Targets mobile
  • add 2k sites in 2018
  • 3G coverage 95% & 4G (all incl 1800 band) 90% YE 2018
  • LT 25% market share mobile
Group targets
  • EBITDA margin up in 2018, EBITDA margin FR 40% by 2020
  • capex FR 2018 EUR 1.4-1.5b (excl. spectrum & new Freebox launch)
  • FCF (EBITDA - capex) FR >EUR 1b from 2020 from lower national roaming charges (2G & 3G with Orange, expires YE 2020), improved mobile subs mix, nationwide mobile network by 2020
"Almost ready for launch in Italy"
  • in place: infra (10k km backbone) & interconnections, offers & mkt plan, distr. network, full team, testing for QoS
  • launch summer 2018
  • to bid in 5G auction 2018 (700 & 3600/3800 bands)
  • investments Italy 2017: € 314m (o/w 50 for spectrum from Wind Tre, 220 for 1800 licenses renewal until 2029)
  • target: EBITDA break-even at <10 market="" share="" span="">
FTTH strategy
  • virtuous model, first benefits from 18H1
  • medium dense areas (co-finance model) capex < 1000 EUR/home
Macro
  • French corporate tax rate (33%) to 28% in 2020, 25% in 2022

Wednesday, February 07, 2018

Orange BE 17Q4 highlights: Luxembourg impairment, underlying high growth


  • Impairment Orange LU 17.9m
  • MSR -3.3% (+2.9% excl MVNO impact, +6.7% excl MVNO & RLAH impact)
  • Adj EBITDA -21% (-1.8% excl Wallon pylon deal; +11% excl Wallon deal & RLAH impact)
  • Opex related to BB+TV 13.4m (~x2)
  • Rev MVNO-loss impact (Telenet) 2017 on rev -9.1m (17Q4 -15.3m), RLAH impact -36.4m (o/w -8.4m in 17Q4)
  • EBITDA impact MVNO-loss -7.5m, impact RLAH -7.3m
  • Cable business 2017 EBITDA impact -18.5m
  • NB-IoT & LTE-M nationwide
  • Launches unlimited mobile data/voice/SMS plan 180212 (a first in BE)
  • Targets 2018
    • adj EBITDA 280-300m (incl MVNO loss impact -30m on rev [also lost Lycamobile, will lose VOOmobile]
    • RLAH impact on rev -26m & on EBITDA -17m
    • capex (excl cable) flat
    • focus on oper efficiency
    • mid-term BB market share target 10%
    • div 2017 50c
    • started using network data (dropped calls) to identify & target eligible residential customers for a femtocell
    • Big Data for targeted network investments, churn mgt, rev assurance/fraud detection
    • plans one-stop shop (fixed & mobile) for businesses, coop with Orange Business Services

Thursday, February 01, 2018

KPN Q4: FTTH to migrate to PON technology after 2018

Details from the main release

  • Outlook 2018
    • Adj EBITDA flat, capex 1.1b, FCF up (excl TEF DE div), div 12 c/share; Telefonica DE stake 8.6%
  • IFRS 15
    • recognition & measurement of revenues
    • different timing of revenue recognition for handset transactions via direct & indirect channels, and a higher threshold probability in revenue related disputes
    • revenues for handsets sold via direct channels are recognized in the P&L as nonservice revenues at date of the transaction, matching the associated handset costs. Revenues (nonservice) and fees (SAC) for handsets sold via indirect channels are no longer recognized in the P&L, but reported in the balance sheet. The threshold in revenue related disputes (variable consideration) is raised, meaning that revenues are only recognized when highly probable (>75%), up from >50% under IAS 18)
    • impact (from 180101): adj rev -130m, adj EBITDA -100m, FCF unchanged, equity (at 170101) +285m
  • Q&A
    • RLAH more favorable than expected (wholesale costs, VR income, data usage grew multiple (>3x)), effect 2018 comparable (shorter yoy effect but expanded usage)
    • Expects Business Market stabilisation in 1-3 yr
    • 3.5 GHz band crucial for 5G
  • Technology update
    • Fiber reduces latency to 6 ms (DSL 14 ms, LTE 20-26 ms)
    • FTTH reaches 2.3m HH, new build FTTH only, AON in 2018, thereafter migration to PON (not for existing lines), plans access on 3rd party FTTH
    • Stepped up FTTO (after regulation ended)
    • FTTS reaches 80%
    • Bonded V Plus roll-out from 18Q2 (>400 Mb/s), cabinets suitable for VDSL & FTTH, local loop typically 150 meters
    • Hybrid DSL/LTE has 1400 subs (Nijkerk trial), average download 6 to 73 Mb/s (note: DSL is needed for IPTV & fixed IP address, LTE for peaks & streaming)
    • LTE-M nationwide by 18Q2
    • Plans 4 5G pilots: urban, rural, transport & logistics, automotive ("4G connects people, 5G connects society")
    • Plans VoWiFi
    • Network integration
      • Access
        • 1. Combine (hybrid access): FTTC/FTTH & DSL/LTE
        • 2. Massify (facilitate massive device comms)IoT over LoRa, LTE-M and 4G M2M
        • 3. Verticalise (5G for verticals): eMBB (broadband), mMTC (massive), URLLC (latency)
      • Core
        • 4. Rationalise (simplification): all-IP
        • 5. Virtualize (increase scalability, reduce time-to-market): NFV (generic cloud hardware, faster time-to-market) & SDN (smart routing)
        • 6. Decentralise (content closer to consumer): CDN at 161 metro locations (for content caching, core-network offloading, improves experience), edge computing (for 5G, improves latency for automotive, e-health, smart industry)
    • Simplification: phase 3 of simplification will follow (savings 1 & 2 relative to 2016: 570m EUR/yr)
    • IT simplification: originally for 80k subs, invisible for customers, focus on a single My KPN app, focus on open source, added 150 developers in 2017 (total 30 nationalities), time-to-market (halved to 7 days) to be halved again

Wednesday, January 10, 2018

Tele2 acquires Com Hem: target 'untapped customer demand'

Merger announcement & presentation:
  • Acquires Com Hem
    • HH coverage 60%, 1100 employees
    • Results TTM: rev SEK 7.1b, adj EBITDA SEK 2.9b, OFC SEK 1.8b)
    • Merger, Tele2 absorbs Com Hem.
    • Cash (per share: SEK 37.02 SEK) + stock (per share: 1.0374 B-shares) = SEK 6.6b + 26.9% of Enlarged Tele2 = 146 SEK/share (11.8% premium over 180109 closing price, 15.9% premium over -30 trading days)
    • To issue 184.8m new B-shares, total 687.6m shares (o/w 22.8m A, 664.8m B); Kinnevik (to own 27.3% & 41.9% of votes) supports (lock-up 6 mo after completion).
    • To close 18H2 (latest 190331).
    • Refers to EC, prepared to effect pro-competitive measures if required to complete the merger.
  • Total synergies
    • 50/50 from costs (mostly opex) & rev (complementary, cross-selling)
    • Total 900m SEK/annum in yr 5 (65% in yr 3, 80% in yr 4)
    • Integration costs SEK 600m
    • Rentention bonus 12-24 mo base salary for mgt & key employees
    • Accreditive to FCF from yr 1.
  • Management
    • Anders Nilsson (Com Hem) to replace Allison Kirkby as CEO.
    • New Board to be chaired by Georgi Ganev (Tele2), >= 2 Com Hem members (incl Andrew Barron).
  • Targets
    • Increase shareholder remuneration.
    • Target leverage remains 2.0-2.5 (at closing net debt/EBITDA TTM 2.8).
  • Rationale
    • Untapped customer demand
    • Value accreditive
    • Complementary, complete proposition to improve customer satisfaction & loyalty
    • Greater scale & diversification
    • Unlock synergies
    • Revenue & CF diversification
  • 2017
    • Dividend 2017E: 4 SEK/share for Tele2, 6 SEK/share for Com Hem.
    • Combined results TTM: rev SEK 31.8b, adj EBITDA SEK 9.2b, OCF SEK 6.1b.
    • Sweden 72% of revenues & 78% of EBITDA (TTM).
    • Market shares in Sweden pro forma: 28% mobile, 22% FBB, 39% DTV.

Tuesday, January 09, 2018

Altice strategy update: USA spin-off, Europe disposals, both deleveraging

  • To spin-off Altice USA (incl Altice Technical Services US; 67.2%; excl Netune stake) by end 18Q2; 0.4163 Altice USA shares (A (1 vote) or B (25 votes)) for 1 Altice share, CEO Dexter Goei. Altice USA free float from 10.3 to max 42.4% (voting from 0.6 to 47.2%), Next to hold 51.2% of votes.
  • Altice Europe to reorg into France (incl FOT; bought from Int for EUR 550m o/w 300m cash), International (Meo, HOT, DomRep, Teads), Pay TV (content, sports rights, other premium content: Discovery, NBCU), Dennis Okhuijsen CEO
  • Separate mgt teams, Patrick Drahi control of both (President Europe, Chairman USA) via Next.
  • Altice USA plans $1.5b cash dividend prior to spin-off from Optimum facilities o/w EUR 900m for Altice Europe (o/w 625m for debt, to retain 275m).
  • Altice USA plans $2b SBB after spin-off.
  • Altice Europe strategy: turnaround in FR, PT; optimising performance, invest in infra, monetising content (various pay TV models & ads); non-core asset disposals (towers; DomRep; Switzerland; int wholesale voice to be sold).
  • Altice France 17Q4prel: revenue declines in B2B, wholesale, equipment, FY 2017 rev -2%, target opFCF 2018 EUR 1.6-1.7b (incl 300m pay TV content expenses & 200m drag from French VAT changes); Altice Europe net debt pro forma at 170930 EUR 31.0b (5.4x EBITDA TTM), targets 4x leverage.
  • Altice USA strategy: investments in networks & video product, simplification, improved customer service, improve rev growth, complete opex synergies, Altice One (platform), FTTH & MVNO (on Sprint) completion.
  • Altice USA 17Q3 pro forma incl planned div: net debt $22.7b, leverage 5.8x EBITDA TTM, target leverage 4.5-5.0x (reduced from 5.0-5.5).