Accelerating future growth with
€300m network investment
Disclaimer
This presentation may contain forward-looking statements. These statements are based on management's current expectations or beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. Such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially from those anticipated or implied in the forward- looking statements. Accordingly, investors are cautioned not to place undue reliance on the forward-looking statements.
This presentation may contain references to certain non-GAAP financial measures, such as Adjusted EBITDA and Capex, and operating measures, such as RGUs, ARPU, Unique subscribers pro forma calculation. These supplemental financial and operating measures should not be viewed in isolation as alternatives to measures of Kabel Deutschland’s financial condition, results of operations or cash flows as presented in accordance with IFRS in its Consolidated Financial Statements. The non-GAAP financial and operating measures used by Kabel Deutschland may differ from, and not be comparable to, similarly titled measures used by other companies. For further information please see in particular the financial statements.
We disclaim any obligation to publicly update or revise any forward-looking statements or other information contained in this presentation. It is pointed out that the existing presentation may be incomplete or condensed, and it may not contain all material information concerning Kabel Deutschland Holding AG or the Kabel Deutschland Group.
€300m network investment program announced
on February 20, 2013
•
Strong growth momentum
−
Delivered on previous accelerated growth plan
−
Customer and market environment encouraging
•
Clear visibility on future network investments
−
Attractive returns
−
Lock in returns earlier
−
Ensure faster growth
•
Terminated Tele Columbus deal
−
Full operational focus on organic growth
−
No integration costs
Context of Program “Alpha”
•
Program “Alpha” to pull forward growth
enhancing network investments of ~€300m
•
Approx. 40-50% spend in FY 2013/14;
the remainder in the following year
•
Compelling economics:
•
Better scalability of P&L as leased
line costs are contained
•
Enabling approx. 2 ppt additional
revenue growth after “Alpha”
Overview of Program “Alpha”
•
Dedicated investments to support new growth busin
esses
−
Positive business cases with significant growth potential
−
Positive effects on customer churn expected
in %
•
Upgrade 95% of networks for Internet & Phone incl.
Docsis 3.0
−
Approx. 10% more sales potential from additional
1m homes upgraded
−
More 100 Mbit/s customers
•
Accelerate fiber deployment to replace leased lines
and roll out of 862 MHz network
−
Improved incremental margins over coming years as
leased line costs are contained
−
Pulling forward the investments also avoids >€20m
costs p.a. compared to a stretched out capex plan
−
Product enhancements for HD, VoD and broadband
through more capacity in 862 MHz networks
€300m
Total investment FY 2013/14 - 2014/15
2
Replacement of leased
lines with own fiber
1
Capacity enhancements
through 862 MHz networks
3
Level 3 network upgrade
4
Roll out of Docsis 3.0
5
Launch of WiFi-offering
6
VoD roll out
Roll out of 862 MHz networks from 30% to >90%
KD physical network spectrum
•
What is the impact?
−
Growth/new products: more HD channels and
e
xtended VoD availability and capacity
−
Increased capex efficiency as twice as much
capacity can be allocated to Internet & Phone;
less node splits required
in MHz
862 MHz upgrade:
30 channels x 50 Mbit/s =
1.5 Gbit/s
300
0
630
862
450
Today
30% of
network
Tomorrow
>90% of
network
•
How to get there?
−
Push fiber into the network to cut amplifier cascades
−
The 862 MHz roll out will be done in coordination
with replacement of leased lines by fiber
Replacement of leased lines with own fiber
Today: predominantly leased line model
•
From central BB POP, fiber lines leased
from DTAG run to network segments
•
Assuming 2x subscribers and 2x traffic/sub
growth in 5 years would require 4x capacity
needed for broadband
•
Own fiber reduces/ avoids
the number of leased lines
from DTAG despite
significant subscriber and
traffic growth
•
Payback of individual
investment cases typically
within 4-5
years
•
Good scalability of network
while reducing cost pressure
in P&L
•
4x as many leased lines
required due to subscriber
and traffic growth and
subsequent node splits
•
High costs due to one-time
and recurring charges for
leased lines
Old game: leased lines @ 630 MHz
= Leased lines = Own fiber
= BB POP (Broadband point of presence)
95% upgrade of Level 3 network and Docsis 3.0
L3 upgrade
Docsis 3.0 upgrade
100%=15.3m
87%
•
1m additional households upgraded for
Internet & Phone
•
Potential for ~10% more broadband growth
Docsis 3.0
Docsis 2.0
71%
90%
•
Approx. 27% more households ready for 100 Mbit/s
•
Higher share of 100 Mbit/s customers (currently
approaching ~40% of gross adds where available)
•
Potential to offer even higher speeds
Today’s upgraded
networks
Additional
network upgrade
100%
~95%
+27%
100%=15.3m
~95%
87%
Unique mobile data value proposition
Unique mobile data offer via
“WiFi on cable”
Homespots
(customer)
Indoor
hotspots
Outdoor
hotspots
•
With WiFi extensions, KD’s Docsis 3.0 fixed network can
evolve into a high performance mobile data network with
−
High speeds and, crucially, high capacity
−
Inbuilt backhaul
−
Presence where people surf today
−
Automatic/integrated log-in/authentication
Mobile data offloading via WiFi for mobile
operators (Wholesale)
•
Complete coverage via wholesale
•
C
ooperation with 3G/4G-Partner
Consumer
Mobile
operators
•
Berlin trial with >400 installed
indoor hotspots and >50 outdoor
hotspots
•
More than 250k sessions on
outdoor hotspots in last six
months
•
Very high demand from partners
to roll out further indoor and
outdoor hotspots
•
Activation of home spots planned
for H2 2013
VoD status today
More growth from VoD roll out
•
Massively increase coverage of VoD ready
network to >7m TV subs
•
Reaching critical mass of VoD ready CPE
•
Marketing to activate customers for service
becomes feasible
•
Benefits are twofold: g
rowth in VoD stand alone
business and reduced churn of TV customers
VoD roll out plan
•
Today ~2.4m TV subs behind VoD ready
network and ~1.4m VoD ready CPE in the field
•
However, only ~200k CPE in VoD ready network
•
O
f which ~10% active users/month
(without marketing efforts)
•
Better than expected KPIs for active users
(e.g., take rates, ARPU)
VoD ready
network
VoD ready
CPE
VoD ready
network
VoD ready
CPE
TV market trends towards non-linear usage
Non-linear TV consumption in Germany
•
Linear TV consumption continues at high
level (~4 hours/day)
•
In addition, growing demand and usage of
non-linear formats
•
KD well positioned to provide non-linear TV
services and participate from future growth
Most wanted TV functionalities
0% 20% 40% 60%
Likes Shopping Personalised recommendations Onlinegaming via TV Additional information on the program Selected Internet services Access to home network/server EPG Internet usage via TV Video-on-Demand Time shift
Source: goetzpartners, 12/2011
Source: AGF/GfK, IHS
