June 2019
Disclaimer This investor presentation (the “Presentation”) has been prepared by Joint Stock Company Silknet (the “Company”). For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the slides by the Company and the related question-and-answer session and any materials distributed at, or in connection with, that presentation. The information contained herein is subject to change without notice and past performance is not indicative of future results. No person shall have any right of action (except in case of fraud) against the Company or any other person in relation to the accuracy or completeness of the information contained herein. This Presentation contains projections and forward looking statements. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this Presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this document speak only as at the date of this Presentation and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements. The contents of this presentation have not been independently verified by or on behalf of the company or by any other independent third party. No representation, warranty or undertaking, express or implied, is made by any of the company, any of their respective affiliates or any of their or their affiliates’ respective members, directors, officers or employees as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the company nor any of their respective members, directors, officers, employees, affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation does not purport to contain all the information that may be required by the recipient agency to make an evaluation. The information presented herein is provided as at the date of this presentation and will be deemed to be superseded by any subsequent versions of this presentation. Contacts : LILI PSHAVLISHVILI ILIA ENUKASHVILI MARIAM JAVAKHIA CFO Head of Strategy Deputy CFO, Head o fBudgeting and Reporting +995-577-149700 +995-577-955540 +995-598-553335 bpshavliishvili@silknet.com ienukashvili@silknet.com mjavakhia@silknet.com 3
5 Silknet at a Glance 1 2 10 2019 YTD Highlights Business Overview 21 3 Appendix & 1H 2019 Financial Information 37 4 4
Silknet at a glance Key financials pro forma acquisition Overview § One of the leading convergent telcos in Georgia 1 w/o IFRS 16 • #1 fixed line with 52% market share 1 GELm 2016 2017 2018 1H 2018 1H 2019 1H 2019 Commercial revenue 299 319 332 161 164 164 • #2 fixed broadband with 33% market share 1 Carrier services 74 80 67 36 20 20 • Total revenue 2 #2 pay television with 34% market share 1 373 399 399 197 184 184 • #2 mobile with 35% market share 1 Adjusted EBITDA 141 165 188 88 94 100 § Commercial revenue is expected to increase following the tariff changes EBITDA margin 38% 41% 47% 45% 51% 54% effective from May / June, 2019 § Transformational acquisition by Silknet of Geocell completed in March 2018 § Network of 4,000km+ fibre backbone across Georgia; FTTH network passing Number of services/SIMs 3 >40% of households; 83% 4G population coverage § Credit ratings: B1 (Moody’s) / B+ (Fitch) 1,746 287 279 216 Pay television Fixed broadband Fixed line Mobile Source: Company information, GNCC, NBG Note: ¹ Based on the number of subscribers as of 30 June 2019; Pay TV market share does not include mobile streaming application subscribers; 5 2 Includes GEL4m inter-company eliminations in 2016, GEL9m in 2017 and GEL2m in 2018; 3 As of 30 June 2019 .
Robust financial performance Revenue 1 GELm § Increasing trend in commercial revenue mainly due to: 197 399 184 399 373 36 20 67 80 74 • Retail revenue growth in broadband and IPTV segments… 161 164 • 332 319 …offsetting fixed voice shrinkage 299 • Reduction of excise tax on mobile services in 2017 • Tariff changes in May/June 2019 expected to further PF 1H 18 1H 19 PF 2016 PF 2017 PF 2018 support commercial revenue growth in 2H Commercial revenue Carrier services § Downtrend in carrier service revenue driven by reduction of Impact of termination rates. Refer to slide 32 IFRS 16 EBITDA 1 51%* 47% GELm 41% 6 45% IFRS 16 38% IFRS 16 was adopted from 1st January, 2019. 188 94 165 88 141 Impact on EBITDA is positive GEL 6m in 1H 2019 PF 2016 PF 2017 PF 2018 PF 1H 18 1H 19 § *EBITDA margin without giving effect of Growing EBITDA and margin driven by: EBITDA margin Capex 1,2 IFRS 16 • Operating synergies partially captured in 2018 and, to GELm almost the full extent, in 2019… • …and operating efficiencies in 2017 compared to 2016… • …despite the negative effect of the termination rate 38% changes. Refer to slide 32 25% 27% 143 109 46 PF 2016 PF 2017 1H 19 % revenue 6 Note: 1 Assuming USD/GEL exchange rate of 2.7038 for 1H 2019, 2.5345 for 2018, 2.5086 for 2017 and 2.3667 for 2016; 2 Excluding licenses .
Segment performance EBITDA split Total Revenue 11% 14% 1% Mobile data Carriers 6% 11% Mobile Voice Fixed Other mobile services Mobile Mobile EBITDA 43% 11% EBITDA Fixed Services 46% Margin margin Fixed 46% Pay TV 27% 56% 43% 57% Fixed line Other fixed services Carrier Services 25% 5% Mobile services Fixed services 7 Note: Figures are based on 1H 2019 management accounts and do not include the IFRS 16 impact.
FX exposure FX BREAKDOWN GROSS DEBT 5% USD 12% USD hedged with swap instrument 94% 10% USD hedged with cash balance 70% GEL 30% 73% 70% 30% 6% REVENUE OPEX CASH CAPEX * FX hedging netted USD/EUR GEL sensitivity -10% GEL +10% GELm LTM* GELm GELm GEL/USD EXCHANGE RATE Revenue 386 (2) 2 2.87 2.69 2.68 2.62 EBITDA (w/o IFRS 16) 194 3 (3) 2.45 2.41 Cash CAPEX (w/o spectrum) 104 6 (6) Debt Service (pro forma Eurobonds) 68 6 (6) 31 Mar 18 30 Jun 18 30 Sep 18 31 Dec 18 31 Mar 19 30 Jun 19 * Last twelve month period ending 30 June, 2019 8 Note: average exchange rate of GEL/USD has been 2.6531 for LTM ending 30 June, 2019.
5 Silknet at a Glance 1 2 10 2019 YTD Highlights Business Overview 21 3 Appendix & 1H 2019 Financial Information 37 4 9
YTD 2019 highlights Network & IT • Approximately additional 44K new homes (FTTH) passed YTD 2019, resulting in the total of >500K homes passed or >40% of households • Continued rollout of very high capacity Corporate mobile service with upgrading 15 sites in the centre of Tbilisi to up to 1 Gbps capacity with pioneering 1800 MHz and Exclusive franchise granted from Euronews and establishment of Silk 2300 MHz carrier aggregation Media Ltd. • Gained access to the country-wide Change in the ownership structure – direct parent is now a local entity electricity distribution network across Georgia, after gaining similar rights in Tbilisi in 2018, to cost-effectively reach new Issuance of debut US$200m Eurobonds (Reg S) and repayment of the bank FTTH/IPTV subscribers and other loans • Completed the mobile billing swap – the Silknet’s Eurobonds listed on the Georgian Stock Exchange (category A first step in the IT transformation listing), resulting in a dual-listing • Accelerated the replacement of the legacy DSL network with the FTTH technology • 4G population coverage already at 83% 10
YTD 2019 highlights, cont’d Products § Launch of new tariffs and changes to the existing offers. See slide 14 and 15 § Launch of AMEDIATEKA in IPTV and on SilkTV.com – ~150 top-rated series and ~200 films § Silk Travel Insurance – 5, 10 and 15 day travel insurance policies bundled with international roaming data packs § SilkFest –daily campaigns promoting mobile data usage. See slide 16 § SilkSat – a direct-to-home (DTH) pay TV for the areas under-served with the IPTV § CDMA service phase-out and migration to GSM 11
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