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Investor presentation. December 2003. The Short Story. December 2003. Transaction highlights. Transaction details. Use of Proceeds. Further broadband access growth - PowerPoint PPT PresentationTRANSCRIPT
Investor presentationDecember 2003
The Short StoryDecember 2003
3
Transaction highlights
Price per share: NOK 25 - 40
Market Cap before issue: 500m – 800m
New Shares Issued: 4,5m – 5,5mIncluding greenshoe (500’ shares)
Gross offering proceeds: 112 - 220 mNOK
Secondary Sale of shares 749’ – 1.150’
Current no. of shares outstanding: 20m
Subscription: 25/11 – 8/12 at 17.00
Allocation: 9/12
First day of trading: 19/12
Transaction details Use of Proceeds
Further broadband access growth
Assuming vertical integration with careful additional investments in new LEOs (horizontal expansion/co-location of equipment), NextGenTel intends to continue investing in new customers by adding necessary new equipment, in order to reach its customer targets.
Investments in IP Telephony
NextGenTel plans to launch IP-telephony in 2004
Other investments and general corporate purposes
Other investments may include new products and services, new sites at co-located LEOs and investments to expand NextGenTel’s content platform.
Strengthening of balance sheet
NextGenTel intends to reduce interest-bearing elements of short term debt
4
Broadband – one of the fastest growing telecom segments in the world …
NextGenTel is perfectly poised to benefit from this huge growth opportunity:
Copper is gold … Platform for existing and future broadband access solutions
No digging ..
Norway has a strong and effectively regulated LLUB regime
DSL is set to win the broadband race in Europe xDSL grows much faster than all other broadband technologies
as it is the most cost effective way to offer broadband to the mass market
Fast growing mass market
Recurring revenues with strong path to profit based on access alone. Strong future additional revenue possibilities related to additional products/services with marginal costs:
Telephony (based on IP)
Video on demand (already offered)
Web TV, etc. (already available)
Reduced marginal investments required as technology improves and costs drop
Complete network built with more than 58,000 customers at present..
Sustainable #2 position in the Norwegian broadband market
This position is important to sustain growth and maximum profitability
A strong player in both the residential and the corporate market
Strong acquisition candidate
The NextGenTel evolution has lots of similarities to that of NetCom
Challenge is to secure a growth from 60,000 – 200,000 subscriber lines over the next four – five years !
5
xDSL - the most cost effective way to offer broadband to the mass market
The most cost effective way to offer broadband to the mass market is to base the solution on existing infrastructure:
The future is Copper-based xDSL today provides for solutions based on ADSL and SHDSL
VDSL (Ethernet over Copper – LRE) will be next wave for short haul applications (< 1.5 km – 10 Mb/s)
Copper has the widest coverage in Europe
Marginal investments expected to continue
dropping
In combination with existing copper
infrastructure and existing telephony services,
NextGenTel is building / offering
its broadband solution to both the
residential and corporate market:
DSL-based
Extensive use of partners
3rd party financing (leasing)
IP all the way home:
Router based
1
120
50
30
30
60
10%
Last mile economics - broadly comparable USD per subscriber per month - last-mile upgrade and CPE capex
Fiber/LAN
Cableupgrade
ADSL
Satellite
LMDS
Capacity utilization
100%
7
12
15
90
15
• 48 port switch and fiber link• Internal wiring of MDU• Ethernet CPE card and cable
• Additional plant and electronics• Max 2000 subs per node• CPE & install
• Local office line testing/install• 576 port DSLAM equipment• CPE & install
• Transponder, no caching• Max 15,000 subs/transponder• CPE & install, PSTN modem
• Base station and installation• Max 1,000 subs per base• CPE and install
Investments included
Source: McKinsey & Company 2000
6
An IP-based Next Generation Telecommunications Network
NextGenTel has aimed at building a Next Generation Telecommunications network:
IP-based
“Plug&Play” access technologies
Fewer components
Strong back-bone / Fibre-based (rented)
Less hierarchical network
2001 2002 2003 2004
10
20
30
40
50
60
70
80
90
100%
2000
Fiber
Colocation
LE equipment
CPE equipment
110
120
2001 2002 2003 2004
10
20
30
40
50
60
70
80
90
100%
10
20
30
40
50
60
70
80
90
100%
2000
Fiber
Colocation
LE equipment
CPE equipment
Fiber
Colocation
LE equipment
CPE equipment
110
120
110
120
Experienced development in costs/investments (not precise)
Backbone
Transmission
Metro rings
Dark FiberWavelengths
SDH/ PDH
Cisco 7200DPTGigaEthernet
Cisco GSRDPT
CustomerPremises
Equipment(CPE)
CiscoNetopia
SHDSL
ADSL
VDSLAccess
??
Backbone
Transmission
Metro rings
Dark FiberWavelengths
SDH/ PDH
Cisco 7200DPTGigaEthernet
Cisco GSRDPT
CustomerPremises
Equipment(CPE)
CiscoNetopia
SHDSL
ADSL
VDSLAccess
??
7
xDSL: Set to win the broadband race.......
The broadband market is expected to grow strongly during the next 3 - 4 years
Early movers: 2000 – 2002
Mass market adoption: 2003 Norway is among the fastest growing xDSL nations
in Europe (Forrester: 45% penetration in 2008
DSL dominates in Norway, the Nordic Countries and in Europe:
Strong expected future growth:
ADSL penetration Telia, TDC and Telenor
0 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
16 %
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
Sh
are
of
hou
seh
old
s
Telia (ADSL/ LAN) TDC Telenor
Source: Norsk Telecom & various others
Broadband Access by Technology
0
50 000
100 000
150 000
200 000
250 000
300 000
Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03
Fixed access Internet by cable xDSL
Source: Post og Teletilsynet (Norway)
Growth in total number of broadband households Europe 2002-2003
0 % 20 % 40 % 60 % 80 % 100 % 120 %
AustriaDenmarkBelgium
GermanyPortugalFinlandSweden
SwitzerlandNetherlands
NorwaySpainI taly
UKLuxembourg
France
Source: Forrester
Europe residential broadband
0
10
20
30
40
50
60
02 03 04 05 06 07 08Source: ForresterResearch, June 2003: Europe's Broadband Shifts to profit
Mil
lion
su
bs
cri
be
rs
OtherCableADSL
8
High potential – more than 1 mill. broadband lines in 2008 ?
High potential for DSL:
~ 650,000 – 900,000 subscriber lines in 2008.
Telenor estimates to have 500’ - ‘ 600’ xDSL subscribers within 2008.
Given sustained market share of ~22-25%, this implies 145’-180’ subscriber lines for NextGenTel in 2007 - 2008.
Further upside in future broadening of offerings (VDSL, VoD, Telephony, etc.).
ADSL > ISDN; ADSL follows similar growth as that experienced for ISDN and could have a much bigger potential
Main drivers:
Faster Access
Fixed price
Free usage
Entertainment Serv.
Online gaming
Source: Norsk Telecom
Norway residential broadband
0
100
200
300
400
500
600
700
800
900
1000
02 03e 04e 05e 06e 07e 08eSource: Forrester
Mill
ion
su
bsc
rib
ers
ISDN and ADSL customer uptake
-
100
200
300
400
500
600
700
800
900
1995 1996 1997 1998 1999 2000 2001 2002
Cu
sto
mers
(1
00
0)
ISDN subscriptions
ADSL subscriptions
ISDN year
ADSL year 2000 2001 2002 2003E
Source: Ovum
Corporate vs. Residential DSL forecasts
0100000200000300000400000500000600000700000800000900000
2002
2003
2004
2005
2006
2007
2008
No
. o
f li
nes
0 %
5 %
10 %
15 %
20 %
Residential lines
Corporate lines
Split
9
Business model ensuring profitability on access alone ….
A holistic approach to the exciting broadband market: Access
ISP
Services:
VPN, etc.
Contents (facilitator):
V-o-D, etc.
Future offerings:
Telephony, etc.
Always On – Fixed Price – Faster ! Best price/performance …
Free usage …
Speed …
Router (incl. features & functionality)
Competitive offerings to: Residential market
Corporate market
Low cost volume marketing & sales channels (Web and Call Centre)
The broadband experience …
10
NextGenTel’s product leadership
Best price/performance:
Pure IP based solution
Powerful router solution
Free use (no download limitations)
Higher bandwidth (704 850 kb/s / 3 x up-stream compared to competition)
V-o-D / live web TV streaming
The focus on both residential and corporate users gives;
Market availability
Volume (scaleability) / Logistics (LE home offices)
Holistic service development for the networking community
Shorter path to profitability (aggressive cost base)
11
Selected milestones & achievements
Raised approx mNOK 320 in equity Extreme focus on execution (processes & measurements)
Selected milestones:
Cisco strategic partner fall 00 (equipment financing)
10.000 lines in operation Jan 02
IBM strategic partner spring 02 (Services, equipment financing)
20.000 lines in operation June 02
EBITDA positive in Q3 – 2002 (monthly)
~35.000 lines in operation December 02
~ 44.000 lines in operation March 03
~ 58,000 lines in operation October 03
Major corporate home PC agreements Strong improvement in earnings through 2003 and in estimated
future earnings
Proven business model, recurring revenue, limited downward risk
Total Operating quarterly revenues 2001- Q3 2003
-
10 000 000
20 000 000
30 000 000
40 000 000
50 000 000
60 000 000
70 000 000
80 000 000
90 000 000
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03
Total quarterly EBITDA 2001- Q3 2003Prognosis from Q3-2002
(35 000 000)
(30 000 000)
(25 000 000)
(20 000 000)
(15 000 000)
(10 000 000)
(5 000 000)
-
5 000 000
10 000 000
15 000 000
20 000 000
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03
Total quarterly EBIT 2001- Q3 2003
(30 000 000)
(25 000 000)
(20 000 000)
(15 000 000)
(10 000 000)
(5 000 000)
-
Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q 3-03
Total Gross Margin 2001- Q3 2003
(5 000 000)
-
5 000 000
10 000 000
15 000 000
20 000 000
25 000 000
30 000 000
35 000 000
40 000 000
45 000 000
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03NextGenTel subscriber lines
0
10 000
20 000
30 000
40 000
50 000
60 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2001 2002 2003e
NextGenTel
Total quarterly EBIT 2001- Q3 2003
(35 000 000)
(30 000 000)
(25 000 000)
(20 000 000)
(15 000 000)
(10 000 000)
(5 000 000)
-
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03
Total Operating quarterly revenues 2001- Q3 2003
-
10 000 000
20 000 000
30 000 000
40 000 000
50 000 000
60 000 000
70 000 000
80 000 000
90 000 000
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03
Total quarterly EBITDA 2001- Q3 2003Prognosis from Q3-2002
(35 000 000)
(30 000 000)
(25 000 000)
(20 000 000)
(15 000 000)
(10 000 000)
(5 000 000)
-
5 000 000
10 000 000
15 000 000
20 000 000
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03
Total quarterly EBIT 2001- Q3 2003
(30 000 000)
(25 000 000)
(20 000 000)
(15 000 000)
(10 000 000)
(5 000 000)
-
Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q 3-03
Total Gross Margin 2001- Q3 2003
(5 000 000)
-
5 000 000
10 000 000
15 000 000
20 000 000
25 000 000
30 000 000
35 000 000
40 000 000
45 000 000
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03NextGenTel subscriber lines
0
10 000
20 000
30 000
40 000
50 000
60 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2001 2002 2003e
NextGenTel
Total quarterly EBIT 2001- Q3 2003
(35 000 000)
(30 000 000)
(25 000 000)
(20 000 000)
(15 000 000)
(10 000 000)
(5 000 000)
-
Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03
12
NextGenTel is the major challenger to Telenor …
Sustained installation pace of approx. 4,000 gross lines per month
~160 LEOs / COs in operation / Approx. 850,000 subscriber lines reached
In addition, 350,000 – 500,000 lines reached via Telenor Wholesale agreement
> 25 % market share (compared to Telenor – increased in Q3-2003 to 26.8 %)
139 employees (f.t.eq.)
Offices in Bergen, Oslo, Trondheim, Kristiansand and Stavanger.
~ 11 % SME customers (lines)
~ 89 % Residential customers (lines)
~ 30 % of revenue generated by SMEs
Facts Market share vs. Telenor
Source: NextGenTel & Telenor
NextGenTel’s ambition is to sustain its # 2 position
NextGenTel market share vs. Telenor (no. of lines (DSL))
020 00040 00060 00080 000
100 000120 000140 000160 000
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3
2001 2002 2003D
SL
- n
o.
of
lin
es
0,0 %
5,0 %
10,0 %
15,0 %
20,0 %
25,0 %
30,0 %
35,0 %
Telenor (total)
NextGenTel (total)
Market shareNextGenTel vs.Telenor
13
Favourable market position ….
Market shares Norwegian xDSL 2Q-03
63%
21%
6%
4%
3%
3%
Telenor
NextGenTel
Others
BlueCom
Tiscali
Tele 2
NextGenTel has a favourable market position: First mover in Norway (rapid growth)
Clear # 2 broadband and DSL player in Norway (> 20 % overall DSL market share, > 18% overall broadband market share)
NGT covers approx. 50% of Norwegian households (own network ~45%)
Attractive player in a Nordic consolidation
Strong anticipated growth (low overall penetration in Norwegian market (11% Vs 65% coverage)
Markedsandeler i det norske bredbåndsmarkedet (anslag pr Q2 2003)
Andre47 %
Andre7 %
Telenor Avidi8 %
Telenor Plus45 %
UPC12 %
NextGenT18 %
Tiscali2 %
Song0 %
Tele22 %
Bluecom5 %
Catch2 %
Source: Norsk Telekom Source: PT
14
NextGenTel – Owners / Board of Directors
Board of Directors:Shareholder Shares %
Geocapital V L.P. 4 261 074 21.3%
Northzone III AS 3 114 043 15.6%
Venture Partners Multimedia Fund III 2 007 054 10.0%
Geocapital Eurofund L.P. 1 877 636 9.4%
Borea AS 1 717 258 8.6%
Vital ASA 944 606 4.7%
DnB Investor AS 615 524 3.1%
Nordea Liv AS 548 103 2.7%
TV2 Invest AS 527 171 2.6%
Vikerud Venture AS 526 122 2.6%
Fritz Rieber 407 734 2.0%
Vesta Forsikring AS 371 223 1.9%
Olav Stokke 349 345 1.7%
Lars Erik Larssen 328 164 1.6%
Morten Ågnes 298 788 1.5%
Odd Kristen Høydalsvik 298 788 1.5%
Bjørn Nilsen 298 788 1.5%
LGT 267 088 1.3%
NGT Management Invest I AS 206 053 1.0%
NGT Management Invest II AS 203 337 1.0%
Other shareholders 832 100 4.2%
Total shares outstanding 20 000 000 100.0%
NextGenTel Holding ASA – proforma shareholder structure
• Bjørn Stray, Partner, Northzone Ventures, Chairman
• Arve Johan Andresen, Partner, Northzone VenturesDifferent Northzone investment units owns approximately 26% of the shares in NextGenTel
• Lawrence Lepard, Partner, Geocapital Partners. Different Geocapital investment units own approximately 31% of the shares in NextGenTel
• Eric Huygen, Independent board member. Huygen owns approximately 0.3% of the shares
• Fritz Rieber, Borea. Borea owns approximately 9% of the shares in NextGenTel. In addition, Mr. Rieber personally owns approximately 2% of the shares in NextGenTel
• Bengt Thuresson, independent board member
• Olav Stokke, CEO NextGenTel.
• Lars Erik Larssen, CFO NextGentel
Mr Stokke and Mr Larssen together with the founding partners of NextGenTel owns approximately 11% of the shares in NextGenTel
15
Income Statement
NextGenTel Group, pro forma Q1-Q4 Q1-Q3 Q3
All figures in NOK 1.000 2000 2001 2002 2002 2003 2002 2003
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
P&L figures:
Operating revenues 110 30 247 147 481 96 034 208 426 38 784 76 091
Cost of goods sold 0 28 597 76 770 50 343 100 822 19 172 36 266
Other operating costs 24 620 96 489 99 838 76 510 73 345 26 682 26 824
EBITDA (24 510) (94 839) (29 127) (30 819) 34 258 (7 070) 13 001
Depreciation and amortization cost 167 11 374 47 460 33 846 66 117 11 545 23 541
EBIT (24 667) (106 213) (76 587) (64 665) (31 858) (18 615) (10 540)
Net financial items 887 (3 512) (21 060) (14 250) (25 883) (6 219) (7 103)
Operating profit/loss before tax (23 790) (109 725) (97 647) (78 915) (57 490) (24 834) (17 643)
Net profit/(loss) for the period (17 146) (79 038) (70 306) (56 819) (41 393) (17 880) (12 703)
16
Balance Sheet and Cash Flow
NextGenTel Group, pro forma Q1-Q4 Q1-Q3 Q3
All figures in NOK 1.000 2000 2001 2002 2002 2003 2002 2003
Balance sheet figures:
Total long-term assets 10 947 165 387 390 977 379 556 420 319
Total current assets 65 013 24 384 46 301 39 687 53 490
Total assets 75 960 189 771 437 278 419 243 473 809
Total equity 60 860 43 896 80 951 71 437 85 552
Total long-term liabilities 0 101 633 234 801 253 568 228 431
Total short-term liabilities 15 100 44 242 121 526 94 237 159 825
Total equity and liabilities 75 960 189 771 437 278 419 243 473 809
Cash flow figures:
Net cash flow from operations (17 820) (87 305) 745 (30 835) (8 751) 16 957 25 184
Net cash flow from investments 0 (141 540) (315 940) (185 075) (149 156) (137 656) (51 177)
Net cash flow from financing 78 000 173 774 313 093 220 588 157 005 97 544 20 860
Net cash flow 60 180 (55 071) (2 102) 4 678 (903) (23 155) (5 133)