Management Presentation Preliminary Results for FY 2017 Christoph Vilanek, CEO and Joachim Preisig, CFO 1 March 2018 | Analyst and Investor Conference Call 1 | Preliminary results for the financial year 2017 | 1 March 2018
Cautionary Statement This presentation contains forward-looking statements which involve risks and uncertainties. The actual performance, results and timing of the business of freenet AG could differ materially from the expectations regarding performance, results and timing expressed in this presentation. All figures are based on preliminary calculations before final consolidation and completion of the audit. There may therefore be discrepancies to the final financial figures to be published on 22 March 2018 . This presentation does not constitute an offer to sell or a solicitation to purchase any securities of freenet AG. Any such decision must not be made on the basis of the information provided in this presentation. freenet AG does not undertake any obligation to publicly update or revise information provided during this presentation. 2 | Preliminary results for the financial year 2017 | 1 March 2018
2017 was managed under the new structure presented in April DIGITAL LIFESTYLE PROVIDER Core Business TV and Media Business Mobile service providing Business to business services ▪ mobilcom-debitel ▪ Radio broadcasting (UKW, DAB+) ▪ klarmobil ▪ Network services ▪ Digital Lifestyle Services ▪ Transport of public and private TV ▪ Midterm - addressable TV Retail and trade advertising ▪ GRAVIS ▪ Motion TM Business to consumer ▪ Freenet TV / DVB-T2 Adjacent subscribers ▪ freenet.de ▪ waipu.tv / IPTV ▪ freenet digital subscribers ▪ freenet Energy 3 | Preliminary results for the financial year 2017 | 1 March 2018
New EBITDA-high despite significant investments in new business ▪ 2017 determined by stable performance of core mobile business, further growth in Digital Lifestyle services, the launch of both our new TV end consumer offerings ▪ Revenue increased by 4.3 per cent to 3.51 billion euros ▪ Despite significant Marketing and SAC investments EBITDA (excl. Sunrise) rose by 5.7 million Group euros to an all time high of 408.0 million euros ▪ Free cash flow is stated as 342.8 million euros, compared with 341.5 million euros in the previous year ▪ Sunrise contributed 133.2 million euros on EBITDA and 34.4 million euros in Free Cash Flow, net effect after interest was roughly 23 million euros ▪ Growth in Customer Ownership continued by net 60,000 to 9.59 million Mobile ▪ In postpaid business , which is the valuable base for the mobile segment, number of customers Communications could be grown net by 198.000 (+3.0%) to 6.71 million and ARPU was stable at 21.4 euros ▪ In terrestrial TV ( freenet TV ) roughly 1 million subscribers could be acquired after only 9 months ▪ waipu.tv became the IPTV market leader in only 9 months: At the end of 2017, the number of TV and Media registered users was more than 464,000 (excl. 76,000 pre-registered users), and the number of subscribing customers was 102,000 4 | Preliminary results for the financial year 2017 | 1 March 2018
2017 was managed under the new structure presented in April DIGITAL LIFESTYLE PROVIDER Core Business TV and Media Business Mobile service providing Business to business services ▪ mobilcom-debitel ▪ Radio broadcasting (UKW, DAB+) ▪ klarmobil ▪ Network services ▪ Digital Lifestyle Services ▪ Transport of public and private TV ▪ Midterm - addressable TV Retail and trade advertising ▪ GRAVIS ▪ Motion TM Business to consumer ▪ Freenet TV / DVB-T2 Adjacent subscribers ▪ freenet.de ▪ waipu.tv / IPTV ▪ freenet digital subscribers ▪ freenet Energy 5 | Preliminary results for the financial year 2017 | 1 March 2018
2017 mobile market environment without substantial changes ▪ Entire market shrinks in prepaid and thus postpaid is growing ▪ Telefónica struggling with network quality as well as cannibalization from 1&1 and freenet Competition ▪ Vodafone with focus on convergent products as well as DT playing Magenta ▪ Data packages/included volumes continuously growing, roaming contributing its proportion ▪ Prices in discount segments and promotions under pressure but with limited impact on overall Tariff and Price market; top premium end with stable prices and slowly increasing amounts ▪ Online marketers consolidate and loose volume to a large extend to price-comparison portals ▪ Retail very strong with key proposition in subsidized postpaid contract segment Channels ▪ Limited innovation in Hardware with even growing share of the big three – Apple, Samsung, Huawei Hardware ▪ Accessories, watches, IOT growing from small scale 6 | Preliminary results for the financial year 2017 | 1 March 2018
High-value postpaid customer base keeps growing (+3.0% yoy) [in million] 9.60 9.59 9.59 6.71 9.56 6.65 9.53 6.56 6.54 Q4 2016 6.51 Q1 2017 3.03 3.02 3.02 2.95 Q2 2017 2.88 Q3 2017 Q4 2017 Postpaid No frills Customer Ownership Key drivers ▪ Further growth in transaction share of all captive channels (shops, online, app, inbound and outbound) ▪ Sophisticated approach to renewal, tariff- and data-upgrades – transaction migrating more into digital ▪ Intensified cooperation with price comparison portals cutting out 3 rd party ▪ Strong performance of Media Saturn also leading to prolongation of the exclusive partnership Expectation for 2018 – stable customer ownership with growing number of contract customers 7 | Preliminary results for the financial year 2017 | 1 March 2018
Strong Performance in ARPU across all segments – Stable outlook [EUR/month] 2017 2016 21.4 21.4 21.4 FY Postpaid Postpaid-ARPU continues to be stable at 21.4 euros compared with 21.2 euros in Q4 2016. Data revenue share at 35.0 per cent. 3.1 3.1 No-frills-ARPU higher at 2.8 euros / + 0.40 euros above FY 2016 Prepaid-ARPU stable at 3.1 euros in line with previous year. (2.4 euros). 8 | Preliminary results for the financial year 2017 | 1 March 2018
Once again digital lifestyle services with significant growth [in EUR million] Key drivers ▪ Multi-channel integration across all products ▪ Launch of DLS with klarmobil ▪ Improved targeting model to increase conversion rate ▪ Test of new services e.g. SvoD, Smart Frog, IOT or health ▪ Data access complemented with unlimited freenet worldwide WIFI access 9 | Preliminary results for the financial year 2017 | 1 March 2018
Big steps in the further development of the digital transformation Omni channel Strategy Customer Journey Technology ▪ ‚Reserve in Store‘ and ▪ ▪ Implementation of a Onlineshop (hybris) ‚ Delivery in Store‘ concept ▪ chatbot pilot DVB T2 ▪ ▪ ▪ Push of hardware only Customer service self DAB+ ▪ business solving quota ~20% Cloud based IPTV ▪ ▪ Hybrid services (TV & Customizing of mobile network mobile) devices with ▪ Increasing ‚ click & collect ‘ preconfigurated apps, e.g. „Mein - md“, waipu.tv, etc. business (in total 4.7 mio. apps in 2017) Technological Innovation (AI/BI) 10 | Preliminary results for the financial year 2017 | 1 March 2018
Core business expected to be flat in 2018 ▪ Fast data/ LTE to be available for mobilcom-debitel tariffs (not only operator plans as so far) Competition ▪ Further consolidation of online traffic with key portals e.g. price comparison or mediamarkt.de ▪ Even further growing data packages ▪ Customer base in contract supposed to grow again ▪ No frills to stabilize Sales ▪ Upselling opportunities with speed options and more-for-more ▪ New services to be launched or rolled out e.g. freenet.video, freenet WIFI flatrate DLS ▪ But strategic focus on waipu.tv and freenet TV DVB-T2 and Sat, sacrificing short term EBITDA for recurring and sustainable revenues ▪ Expansion of AI initiatives across the entire group (chat bots, self learning customer service, BI) ▪ GRAVIS, freenet Energy and freenet digital with solid and acceptable results Operations ▪ Split of key functions in captive and non-captive units to even better address specific needs and to exploit full potential in multi-channel opportunities Organization ▪ Creation of competence-centers on group level for new technologies and digitalization 11 | Preliminary results for the financial year 2017 | 1 March 2018
2017 was managed under the new structure presented in April DIGITAL LIFESTYLE PROVIDER Core Business TV and Media Business Mobile service providing Business to business services ▪ mobilcom-debitel ▪ Radio broadcasting (UKW, DAB+) ▪ klarmobil ▪ Network services ▪ Digital Lifestyle Services ▪ Transport of public and private TV ▪ Midterm - addressable TV Retail and trade advertising ▪ GRAVIS ▪ Motion TM Business to consumer ▪ Freenet TV / DVB-T2 Adjacent subscribers ▪ freenet.de ▪ waipu.tv / IPTV ▪ freenet digital subscribers ▪ freenet Energy 12 | Preliminary results for the financial year 2017 | 1 March 2018
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