eircom Results Presentation

November 29, 2013

Herb Hribar – CEO eircom Group

Richard Moat – CFO eircom Group

First Quarter FY 13/14 Results Presentation

© eircom

This presentation contains information and documents for information purposes only. They do not constitute or form part of, and should not be construed as an advertisement, an

offer or an invitation to subscribe to or to purchase securities of eircom Finance Limited or any of its subsidiaries, holding companies and subsidiaries of its holding companies

(together the “Group”) nor are the information or documents contained thereon meant to serve as a basis for any kind of contractual or other obligation. This presentation does

not constitute a prospectus or a prospectus equivalent document.

By reviewing the information in this presentation you agree to the terms of this disclaimer.

This presentation should not be treated as giving investment advice. No specific investment objectives, financial situation or particular needs of any recipient have been taken into

consideration in connection with the preparation of this presentation.

This presentation may include forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act

of 1933 regarding certain of the Group’s plans and its current goals, intentions, beliefs and expectations concerning, among other things, the Group’s future results of operation,

financial condition, liquidity, prospects, growth, strategies and the industries in which the Group operates. These forward looking statements can be identified by the fact that they

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‘plan,’ ‘seek,’ ‘continue,’ ‘target,’ ‘goal,’ ‘would’, or their negative variations or similar expressions identify forward looking statements. By their nature, forward-looking statements

are inherently subject to risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Group cautions you that

forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the

industries in which the Group operates may differ materially from those made in or suggested by the forward-looking statements contained in the presentation. In addition, even if

the Group’s results of operations, financial condition and liquidity and the development of the industries in which the Group operates are consistent with the forward-looking

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This presentation has not been approved by any regulatory authority. This presentation has been prepared by, and is the sole responsibility of, the Group and has not been

independently verified

Disclaimer

2

Agenda

Trading Q4 FY 13/14

Key themes for FY14

Q&A

Business update

Economic update

3

Business highlights

© eircom

Business highlights

• Continued EBITDA stability

• Significant capability delivered:

– 600,000 premises passed with fibre ahead of

schedule and extending footprint to 1.4 million

premises

– First to market with 4G services

– TV launched enabling TV triple play and unique

quad play

• Continued postpay growth driving improved mobile

profitability despite SAC investment. Prepay churn

remains high

• Strong Wholesale growth partially offsetting Retail

fixed access losses

• Competitive intensity creating challenges in delivery

of B2B stabilisation and growth

• Cost transformation on track – IE scheme to deliver

further 1,100 FTE reduction

• Continued progress but trading conditions are

intense and significant challenges remain

4

© eircom

Agenda

Trading Q4 FY 13/14

Key themes for FY14

Q&A

Business update

Economic update

5

Business highlights

© eircom

The Irish economy continues

to show positive signs

6

UNEMPLOYMENT CONTINUES TO FALL

CONSUMER SENTIMENT RISING

IMPROVEMENT IN RETAIL SALES VOLUMES

BUSINESS SENTIMENT RISING

0

20

40

60

80

100

-80-60-40-20

020406080

100

90

100

110

120

11%

12%

13%

14%

15%

16%

• Ireland set to make clean exit from Troika bailout

• However, budget 2014 implemented €2.5bn of cuts; €0.9bn tax rises & €1.6bn spending cuts

– Included within the budget was the full removal of the DSP telephone allowance

Source: Ibec, CSO,

E&Y economic eye

winter forecast

© eircom

Agenda

Trading Q4 FY 13/14

Key themes for FY14

Q&A

Business update

Economic update

7

Business highlights

© eircom 8

Group fixed line: Launch of new

products and services to drive growth

FIXED ACCESS ‘000 FIXED BROADBAND ‘000

NETWORK INVESTMENT

• Extending to 1.4 million premises by Jul ‘16

• 600,000 premises passed Sep ’13 ahead of

schedule

• 700,000 by Dec ‘13

• Uncongested speeds of up to 70Mb/s

• Speeds of up to 100Mb/s by Jan 14

RANGE OF NEW SERVICES

• High speed fibre broadband launched

in May ‘13 - 66,000 customers to date

• TV launched Oct ‘13

• Triple play bundles with TV launched

• Quad play bundles now uniquely

available in Ireland

• Fixed/mobile bundles launched

Oct ‘12 & continue to grow - 38,000

customers to date

459 461 455 451 447

202 204 208 218 230

661 665 663 668 677

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Retail Broadband Wholesale Broadband

979 964 940 917 896

387 392 400 414 431

1,366 1,356 1,340 1,331 1,327

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Retail Access Lines Wholesale Access Lines

© eircom

• Key enabler for quad play

• 34 channel entry level package for €10 per

month

• Content delivering c. 80 channels

• Add on services including Setanta Sports,

BT Sport, Sky* Sports and Sky Movies

• Intuitive PVR & engaging UI

TV launched in Oct 13

enabling quad play

* Sky Sports 1, Sky Sports 2, Sky Movies Premiere, Sky Movies Showcase, Sky Movies

Disney, Sky Movies Family, Sky Movies Action & Adventure, Sky Movies Comedy 9

© eircom © eircom

Mobile profitability: Further EBITDA growth in Q1 FY14 while

delivering significant postpay growth

10

EBITDA

€2m

2%

€9m

9%

Q1 FY13 Q1 FY14

GROWTH/CHURN

• Continued postpay growth – 86k YoY & 24k

in Q1 FY 14

• 36% of base is now postpay customers –

from 27%

• Strong performance in business mobile

• Postpay churn improvements

• Prepay churn challenging

IMPROVING CAPABILITY

• 4G services launched covering

38% of the population

• Upgrade to Dual Carrier on 3G

42Mbit/s in Dublin, Cork,

Limerick & Galway

IMPROVED COVERAGE

• Deployment of U900 to 74%

population, improving our 3G

footprint and in-building speeds

NETWORK

© eircom

First Irish operator to launch 4G in Ireland

delivering average download speeds of 21Mb/s

• Highly positive feedback

• 26% population coverage

at launch

• 38% population coverage

at November ‘13

• 50% population coverage

by June ‘14

• 19 4G devices available

• Establishing eircom as

a technology leader

11

© eircom

Cost transformation:

€68m run rate savings achieved

1 Excludes SAC and Phonewatch opex 2 Q4 normalised level of opex (excl one-offs) was €137.6m - run rate equivalent of €68m saving vs FY12 opex of €618m1 3 Run rate of €100 million by Q4 of FY14 compared to FY12

QUARTERLY OPEX1 FY 14A (000’S) HIGHLIGHTS

• YoY opex Improvement of €17m

• Run rate equivalent to a €68m2 saving

over full year opex of €618m1 in

FY11/12

• 908 reduction in FTE employees YoY

(including reversal of the 9DF)

EFFICIENT COST BASE CRITICAL

• Fixed & Mobile sectors remain highly competitive

• ARPU’s and revenues coming under pressure

• Cost reduction essential to deliver the plan

KEY DELIVERABLES FY 14

• Opex reduction of €100m by Q43 FY 14 (vs. FY 12)

• Further FTE reductions to secure 2,000 exits

– Recent IE Scheme to deliver further 1,100

• Significant operating site consolidation

• Shared services consolidation

• Drive operational efficiencies

12

159 159

153

148

165 165

159

154152 149

146

133

133

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

€m

Actual 11/12

Actual 11/12 (Gross 9DF)Actual 12/13

Actual 13/14

© eircom

Incentivised exit scheme to deliver FTE

reduction of 1,100 by Dec ‘14

1Mixture of opex & capex exits

Targeted incentivised

exit (“IE”) scheme to

deliver remainder of

2,000 targeted

resource reduction

Accelerated exits

give more certainty to

planned rightsizing

and cost savings

Short term backfill

required to meet

customer demands

and maintain customer

experience

1,100 exits1 - 80% by

Dec ’13

Average tenure of

35 years

Cost of €180 million

€145 million by Jun ’14 &

€35 million by Dec ’14

Av. cost 1,100 IE exits - €164k

Av. cost all IE exits - €140k

Delivers streamlined

& flexible organisation

No further IE schemes

expected

13

© eircom

Agenda

Trading Q4 FY 13/14

Key themes for FY14

Q&A

Business update

Economic update

14

Business highlights

© eircom

Trading highlights

3 months to September 30, 2013

15

• Q1 EBITDA of €119m highlighting continued

stabilisation

• Pressure on fixed Line revenues, in both

Consumer and B2B, partially offset by

Wholesale growth

• Group access line losses of 4k in quarter, down

from 15k last year - growth in group broadband

of 9k

• Strong growth in mobile postpay – 24k net adds

in Q1, 86k net adds in year - but continuing

prepay weakness

• Mobile EBITDA up €6m versus last year, despite

increased SAC investment to drive long term

sustainable growth

• Strong cost control – €17m saving YoY – Q1

annualised savings €68m

• Continued investment in growth programmes

during Q1 - €73m incurred capex , up 39% YoY

• Maintaining strong liquidity – closing cash

€324m

YoY comparison adjusted to exclude results from Phonewatch in Q1 FY 13

© eircom

Group EBITDA

1The EBITDA results of Phonewatch Limited, which was disposed of in May 2013, are excluded in the results for

the quarter ended 30 September 2012. For information purposes only the results for Q1 FY 13 for Phonewatch

were revenue of €7 million, operating costs of €4 million and EBITDA of €3 million 2 Numbers in the above tables have been presented to the nearest million and therefore totals presented above

may vary slightly from the actual arithmetic totals of such information

16

• Group EBITDA of €119m was

€1m behind budget and prior

year.

• Group revenue €323m was 1%

below budget and 9% down on

the prior year quarter

– Fixed revenue down 10%

reflecting reduced fixed line

access volumes and traffic

usage in the period

– Mobile revenue down 5%

reflecting reduced MTRs /

ARPUs and reduction in

prepay base offset by strong

growth in postpay base

• Mobile SACs €1m higher than

budget due to strong postpay

growth

• Group operating costs of €140m

were broadly in line with budget

and 11% lower than in prior year

quarter reflecting strong

performance on cost

transformation

• Fixed EBITDA 6% down on prior

year, in line with expectations,

while mobile EBITDA has grown

strongly in the period

Q1 v Budget v Budget v Prior Year1 v Prior Year

FY 14 Better/(Worse) Better/(Worse) Better/(Worse) Better/(Worse)

€m €m % €m %

Fixed Revenue 249 (1) (1%) (29) (10%)

Mobile Revenue 86 (0) (0%) (5) (5%)

Eliminations (11) 0 0% 2 15%

Group Revenue 323 (2) (1%) (32) (9%)

Cost of Sales (64) 1 1% 13 17%

Gross Profit 259 (1) (0%) (19) (7%)

% Margin 80.2%

Pay Costs (63) 1 2% 8 11%

Non Pay Costs (77) (2) (3%) 9 11%

Operating Expenses (140) (1) (0%) 17 11%

Group EBITDA 119 (1) (1%) (1) (1%)

Fixed 111 (1) (1%) (8) (6%)

Mobile 9 1 6% 6 275%

© eircom

Monthly trading to September 30, 2013

Actual Operating Costs (€m)

1

Avg: €40m Avg: €40m

1 Includes €2m corporate finance costs 2 FY 13 data presented above includes results from Phonewatch up to the date of disposal in May 2013 17

117123118120115107

116113115104110108106

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Aug 1

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51 52 51 54 5248

5248 49

4448 47 45

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41 42 4037

40 39 42 41 42 40 40 39 40

Sep 1

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Oct 12

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Ma

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92 94 91 91 93 88 94 89 9184 88 86 85

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• The business has

continued to perform in line

with management

expectations showing

EBITDA stability over the

last five quarters

• During the quarter, monthly

EBITDA remained

relatively constant in the

range €39-€40m.

• Continued pressure on

fixed line revenues and

margins in both consumer

and B2B segments,

partially offset by growth in

wholesale

• Strong focus on reducing

operating costs over the

period

Actual EBITDA (€m)

Actual Revenue (€m) Actual Gross Margin (€m)

© eircom

38.2 37.9 38.0 38.0 37.8

16.3 16.0 17.5 16.8 16.0

45.8 45.4 46.4 46.1 45.9

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Retail PSTN Retail Broadband

Retail Blended ARPU

Fixed line KPIs - retail

18

17.8%16.5%

20.5%21.9% 21.4%

24.1 %

20.8 %

25.1 %26.6% 27.2 %

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Consumer Access Churn (%)Consumer Broadband Churn (%)

5,1

33

4,1

80 6,3

34

5,2

99

6,0

93

7,8

12

9,1

36

6,8

92

9,9

51

6,4

48 8

,95

7

7,1

06

5,2

26

Se

p 1

2

Oct

12

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Ma

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Jun 1

3

Jul 13

Au

g 1

3

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3

979 964 940 917 896

459 461 455 451 447

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Retail Access Lines Retail Broadband Lines

Total Retail Lines (000’s) Fixed Line Churn (%)

Retail Access Line Losses ARPU (€)

• Competitive environment

within consumer and B2B

remains intense

• Average rate of retail fixed line

losses at 7k per month in Q1

compared to 8k in Q4 FY13

and 6k in Q1 FY13

• Recent announcement of full

removal of DSP subsidy from

1 Jan 2014 will maintain

pressure on churn

• Retail Broadband lines

declined by 4k in the quarter

but fibre take up starting to

have an impact on base

stabilisation

• In Q1, eircom was first

operator to launch unique

quad play including fibre

broadband - key enabler of

return to retail broadband

growth

• ARPU for Q4 was in line with

the prior year and the previous

quarter, contributing to relative

stability in EBITDA

performance over the last

quarter

© eircom

Fixed line KPIs - wholesale

19

387 392 400 414 431

202 204 208 218 230

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Wholesale Access Lines

Wholesale Broadband Lines

17.9 18.0 18.3 17.5 17.7

29.8 29.9 29.9 29.7 29.3

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

WLR ARPU WLR & BITSREAM ARPU

3,3795,366

7,334

14,15817,225

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

WLR net growth

2,506 1,8843,621

10,06311,944

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Broadband net growth

Wholesale Lines (000’s) ARPU (€)

Wholesale Access Line Growth Wholesale Broadband Growth

• Strong growth in wholesale

has partially offset declines in

Retail

• Wholesale access lines grew

by 17k or 4% in the quarter

and by 44k or 11% compared

to last year

• Wholesale Bitstream

(Broadband) grew by 12k or

5% in the quarter which drove

overall Group broadband

growth of 9k lines or 16k YoY

• Wholesale growth equals

approximately 80% of Retail

losses – historical rate was

23%

• Retail and Wholesale

combined share of the fixed

broadband market was ~65%

at June 30, 2013

• Wholesale business critical to

ensuring that eircom network

retains scale and is the

national network of choice for

operators in the market

© eircom

785 770 735 702 676

295 316 331 357 381

1079 1086 1076 1,059 1057

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Prepay Subscribers Postpay Subscribers

21 21

15

2624

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Postpay Subscribers Growth

Mobile KPIs

1 Includes Mobile Broadband and M2M 20

19.7 19.1 17.7 18.4 17.3

42.4 41.338.8 39.4 38.0

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Prepay Postpay

52.7 %56.8 % 58.6 % 57.5%

59.0 %

19.7%17.0% 16.1% 15.7% 16.3%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Prepay Postpay

Total Handsets (000’s) Postpaid Growth (‘000)

Mobile Churn (%) Prepaid vs. Postpaid ARPU1 (€)

• Strong rate of postpaid growth

maintained with net adds of

24k in the quarter

• At end Sept 13, total postpaid

subscribers were 381k, an

increase of 86k YoY

• Postpay ARPU decline from

€39.40 in Q4 FY13 to €38

attributable to MTR reduction

on 1 July

• Reduced rate of ARPU decline

going forward as MTR

reductions bottoming out

• Postpay churn reduced from

19.7% in Q113 to 16.3% in

Q114

• Prepay handset subscribers

declined by 26k during the

period driven by pre to post

migrations (12k in the quarter)

and high levels of customer

churn

• 36% eircom subscribers on

postpaid contracts - up from

27% as at Sept 2012 and 34%

as at June 12

© eircom

1 Excludes cost of sales, non-cash pension charge, non-cash lease fair value credits, amortisation, depreciation, and exceptional items

FY 13 includes operating costs in relation to Phonewatch up to the date of disposal in May 2013 2 For indicative purposes includes impact of reversal of 9-day fortnight working arrangement in Oct 12 – 450 FTE 3 Approximate targeted FTE by Dec ‘14

Operating cost breakdown

21

€87m €85m €84m €80m €77m

€73m €73m €70m

€60m €63m

€160m €157m €154m

€140m €140m

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Total Non Pay Costs Total Pay Costs

5,110

450

5,560 5,444

4,9294,705 4,652

3,500

Q1 13A Q2 13A Q3 13A Q4 13A Q1 14A Q2 15E

FTE 9 day fortnight

2

3

Operating Costs1 (000’s) Full Time Equivalent Headcount

• Operating costs flat on Q4 FY 13

but €20m lower than prior year

quarter (€17m including

phonewatch)

• Pay Costs €10m lower year on year

• Prior year pay costs included c.€6m

savings from 9 day fortnight which

was reversed in October 2013

• Pay cost savings driven by

substantial headcount reductions of

908 FTE compared to the prior year

quarter (ex impact of 9DF of 450

FTE

• FTE of 4,652 at end of Sept 13

compared with 5,560 (adjusted for

9DF) at end of Sept’12

• Non-pay costs down €10m YoY

and reduced by €3m during the

quarter ended Sept ’13

• Current VL scheme will deliver

further 1,100 headcount reduction

by Dec ‘14 – deliver targeted right

sized organisation of c.3,500 FTE

• Gives more certainty to delivery of

savings, in both pay and capex

costs, already included in the plan

© eircom

€39m €39m €44m€54m

€46m

€14m €21m€27m

€45m

€28m

€144m

€53m

€204m

€71m

€99m

€73m

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14

Capex¹ NGA Spectrum

Capex breakdown

Capex % Revenue2

1 Incurred capex 2 Includes spectrum investments in Q2 FY 13

22

14.6%

56.5%

21.0%

29.7%

22.7%

• Incurred capex of €73m in Q1

FY14 compared to €53m in same

quarter last year

• Continued focus on growth

programmes

– €28m spend on rollout of NGA

fibre network

– €46m spend on network and

BAU capex and spend on

other key programmes

including IPTV, 4G and next

generation billing system

• FY13 and FY14 are peak years of

capex investment, with NGA

rollout and 4G largely complete

by FY15

© eircom

eircom maintains strong cash balance

23 1 Other operating cashflow includes €(1)m WC and €(2)m tax,

Operating +€21m

Financing -€21m

© eircom

Pension Update

• Minimum Funding Standard (wind up basis)

- Main Fund satisfied MFS at 30 Sept 2013 (110% cover)

- No Funding proposal required, no cash call

• Triennial Funding Valuation (in progress for value date 30 Sept 2013)

- Past obligations: Current expectation is that outcome will be broadly square

- Future obligations: Circa 1,100 exits expected by Dec 2014 will reduce future accrual and funding

costs

• Floor on contributions of €20m per annum expires on 31 Dec 2013 and future funding rate will

be reset as part of outcome of actuarial funding request to Board

• IAS 19 Deficit

- Deficit of €844m at the end of quarter 1 FY14 due to prescribed discount rate use for liabilities

(AA- Corporate Bond Yield 3.55%)

- No Debt on the Employer, no funding proposal, no cash call

• Full update to be provided in Q3 FY14

24

© eircom

Agenda

Trading Q4 FY 13/14

Key themes for FY14

Q&A

Business update

Economic update

25

Business highlights

© eircom © eircom

Delivery of FY14 imperatives underway

COST TRANSFORMATION

• Secured headcount reductions – 1,950

• Non pay savings

• Drive operational efficiencies

• Deliver €100m savings by Q4

FIXED LINE RETENTION MOBILE PROFITABILITY

• Network improvement:

3G & 4G

• Postpay momentum,

utilising 4G advantage

• New propositions to

reduce prepay churn

• Fibre

- Over 100,000

customers Jun ’14

- 1,000,000

premises Jun ‘14

• TV launched Oct ‘13

• Triple & quad pay bundling Oct‘13

GROWTH

• Wholesale

• Mobile for business

• Cloud & ICT

• Datacentre

26

© eircom

Agenda

Trading Q4 FY 13/14

Key themes for FY14

Q&A

Business update

Economic update

27

Business highlights

Thank you

28