Update on Optus Consumer Division Mar 2002 Investor Presentation
Significant changes to the Pay TV industry Substantial consumer benefits • Better deal for Pay TV viewers • Enhances competition in consumer voice/data markets Sustainable future for Pay TV industry Improves returns for Optus • Optus MSG obligations assumed by FOXTEL • Long term deal for satellite capacity • Primary focus: Mobile and Business
Deal to revolutionise pay TV - subject to ACCC approval Optus MSG obligations assumed by FOXTEL • FOXTEL and Optus content available over both companies’ platforms • Commencing 1st November 2002 - until 2010 • Optus will also take sports programming from FOXTEL – from April 2002 Optus reduces cost of programming • Continues to provide pay TV over broadband • Bundled with voice/data Optus leases transponder capacity on C1 satellite to FOXTEL for DTH services • Commencing 2003
Substantial consumer benefits Better deal for pay TV viewers • Full range of content available • Competition in retail delivery Enhances competition in voice and data • Enhances Optus’ ability to compete with Telstra in consumer markets • Optus will continue to offer innovative bundled voice/data/TV packages
Sustainable future for pay TV in Australia Current industry structure not sustainable • Content costs much higher than comparable markets • Fragmented sub scale content origination Lessons from overseas markets Cable DTH Regional monopolies Single national player US (down from two) UK Regional monopolies with Single national player BSkyB as key content BSkyB supplier Competing cable networks Two players restricted to Australia - today – split content supply separate markets Competing cable networks Two players restricted to Australia - future – non-exclusive content separate markets supply
Optus Consumer Business • Revenue of A$1bn 20% of total Optus (annualised) revenues • Broadband HFC is largest Voice: local/LD and most valuable part of Data: cable modem Consumer Pay TV: bundled • Fully digital two way Passes 2.2m homes network - 750MHz in Sydney, Melbourne broadband - 559,000 and Brisbane customers Note: all financial data as at 31 December 2001
Improving operating performance - Strategic objectives: scale and returns Strong broadband revenue Strong broadband customer growth growth internet revenues Broadband customers 17% +24% Broadband & 559 440 479 355 44% multiple 34% customers on HFC Dec 00 Dec 01 Dec 00 Dec 01 Bundling – capital efficient growth Telephony Cable Modem Pay TV 0.5m 50,000 270,000
Improved margins for Optus Pay TV • Improved margins in pay TV Estimated annualised EBITDA benefit: A$30m p.a. from Nov ’02 • Long term satellite Estimated annualised transponder leases revenues: A$40m p.a. from mid 2003
Next steps on transaction Secure ACCC approval Secure necessary approvals under relevant third party contractual commitments (e.g. content providers) Content arrangements commence 1 November if approvals obtained
Consumer: way forward TV content improved and cost based stabilised Improve profitability and returns • Substantial improvements in EBITDA and operating cash Focus on capital - efficient growth through bundling • Reduce capex spend in Consumer to approximately A$100-150m p.a. by FY’04 Substantially reduce Optus net cash requirements • Consumer responsible for approximately one third of total funding requirements* * Based on Optus cashflows for 9 months to Dec’01
Significant changes to the Pay TV industry Substantial consumer benefits • Better deal for Pay TV viewers • Enhances competition in consumer voice/data markets Sustainable future for Pay TV industry Improves returns for Optus • Optus MSG obligations assumed by FOXTEL • Long term deal for satellite capacity • Primary focus: Mobile and Business
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