Italian Infrastructure Day
07/09/2017
Agenda
Retelit Overview
Strategy and 2017-2021 Business Plan
Q12017 Financial Results
Retelit is a leading Italian provider of data center services and infrastructure for the telecommunications market
Listed on Milan Stock Exchange since 2000 and on STAR segment since September 2016
The company’s fiber optic infrastructure covers around 10,000 kilometers
Capabilities
A Leading Player of TLC Infrastructure Services
220,000 km
of Fiber Optic Cables (
64,000 km
located in
MAN)
9 Metropolitan Networks and 15 Data Centers
200 Connected cities – 3,150 Connected sites
UNI CEI ISO/IEC 9001:2008
Retelit, E-VIA
UNI CEI ISO/IEC 27001:2006
Retelit, E-VIA
ALLA/NALLA Telecom
Services for NATO, U.S. DoD, DISA/DITCO
Metro Ethernet Forum 2.0 Certification
UNI CEI ISO/IEC 14001:2006
Retelit, E-VIA
Quality & Certifications
3
Pan European Network
More than 18 years in the Telco/ICT businesses
START-UP BUILT FOCUS 2015 TURNAROUND 2012 2014 2011 2008 WIMAX 2003 WIMAX EXIT GROWTH REFOCUS 2000 1999 2005 2007 EXECUTE Rights-of-way agreement with ANAS (State Roads) covering
48,000 km
National TLC license
Construction of fiber backbone
8 MANs in major cities, Data Centers
IPO, Network Investments
Repositioning in Market as Carriers’ Carrier
Financial Restructuring
Leading Carriers’ Carrier in Italy
Increase Customer base: National and International Carriers, ISPs
Execution of Major TLC Projects, International Defence
Strong Financial Performance
Bid for the tender offer of WiMAX licenses launched by the Italian
Ministry of Communications, winning the license for northern and central Italy
Business Unit rented to Linkem (sold in 2013)
Re-focus on Broadband and ICT services for the wholesale market
Increase international network coverage, add new services
Extension to selected enterprise market and public sector
New BoD brings further ICT competences to enrich services offer targeting Corporate and PA
4
Broad Spectrum Market Segments & Clients
National Wholesale Carriers and Service Providers Business Corporate and Public SectorRetelit designs and delivers infrastructure based services maximizing its ultra broadband fiber data transmission network, data center (e.g. cloud) based services to three main market segments:
01
5
International Wholesale
Carriers, OTT and Service Providers Revenues YE2016 by segment 43% 44% 13% Main Customers
02
03
0,0% 50,0% 100,0% Wholesale National 0,0% 50,0% 100,0% Wholesale International 0,0% 50,0% 100,0% BusinessCable’s overall capacity: 40 Tbps Current Retelit entitlement: 5.8%
Cable System completed: 20 out of 20 Landing Points and Singapore extension completed – Ready for Commercial Service on 19 out of 21 Terminal Stations (Hong Kong RFS by Sept – Myanmar RFS by Oct)
Total expected investment €56.3 m (thereof €42.9m already paid by end of Q1 2017, reduced from previous €61.6 m)
6
2
1
Launched a new 100Gbps (Backhaul from Bari CLS to Europe)connectivity product in partnership with BICS, enabling AAE-1consortium members and their Customers to connect at very high capacity and low latency
Commercial offer targeting mainly three type of clients: - OTT (Over The Top) and large global Carrier
- Existing Retelit Customers and potential new Customers in Asia - Members of AAE-1 Consortium
International Cable AAE-1
YTD Total Commitment Order Intake 9,3 M€ from Bics, Colt, Avelacom and from Consortium* 12,7 €M
Strong Stock Performance
67,51% 14,37% 8,35% 9,77% Market Bousval s.a. Selin SpA OthersShareholders’ structure
*Shareholders’ Agreement signed on December 2014 among HBC, Selin SpA, La Società Privata, Alberto Pretto, Luca Pretto, Laura Ziggiotto **Last three months
7
• From STAR admission - 26thSeptember 2016 - up to date
• Performance Retelit +86%
• Overperformance vs FTSE Mib +52% • Overperformance vs FTSE Star +44%
Price (September 4th, 2017): € 1.37
Market Cap (September 4th, 2017): € 225.4
Average Daily Volume: 1,062,898**: STAR SEGMENT 0 50 100 150 200 250 300
Investment Case
8PROVEN
TRACK
RECORD
POTENTIAL
VALUE
GROWTH
Excellent business reputation
Innovative services based on its own infrastructure
Committed management, with good track record in the sector and business oriented
ICT market growing with a good pace in selected areas (internet based services and applications)
Partnership with major global players
2017-2021 BP with a realistic and consistent growth
1
3
TECHNICAL
CAPABILITIES
2
Solid, value adding, infrastructure
Quality of Services from pre-sale to assurance
Technology up-to-date
Agenda
Retelit Overview
Strategy and 2017-2021 Business Plan
Q12017 Financial Results
Global ICT Macro trend: Strong Growth Potential
10
% internet User on Population Connected Device per person
(Units)
Average Data Connection Speed (Mbps) – Fixed Copnnections
Average traffic per person (Fixed and Mobile) - GB
Digital IT New Enabler: Focus on the Cloud
11 IoT A v e ra g e e x p e c te d g ro w th (1 5 -2 0 ) O v e r 2 5 % 2 0 -2 5 % 1 0 -1 5 % 5 -1 0 % Current Size Global Market 15-20B€ 20-50B€ 50-75B€ 75-100B€ Cyber Security >100B€ Cloud Mobile Business Big DataSource: Assintel 2016, IDC, Gartner, Forrester, Expert interviews, Analyst reports, Bain analysis
CAGR 2015-2020 + 17% to 390B$
WESTERN EU ITALIA WESTERN EU ITALIA
TLC Italian Business Market – Filling the Gap
12
Connected Device per person (Units)
Average traffic per person (Fixed and Mobile) - GB % internet User on Population
)
Average Data Connection Speed (Mbps) – Fixed Copnnections
*Source: Cisco
• Major Italian gap towards
other European Countries
• PA connectivity and
digitalization were the major
drivers of the Italian Digital
Development
• Government Actions to
support Italian Digitalization:
-
Ultrabroadband Plan
-
Digital Growth Strategy
Ultrabroadband Plan – Infratel Ultra-Broadband
SECOND TENDER
FIRST TENDER
Regions involved: Abruzzo e Molise, Emilia Romagna, Lombardy, Tuscany e Veneto for a total contribution amount over €1.4 bn
Submitted an offer for lot 2 Emilia Romagna
(minimum price of the tender €232 M).
Enel Open Fiber was awarded for all 5 lots.
THIRD TENDER
Expected in the coming weeks. Concession to build and operate a passive ultra-broadband infrastructure in white areas
e-via has participated in the first 2 tenders acting as a contractor in the context of a constituting RTI with the creation of a target company in the event of an award
APPEALS
The appeals of Telecom Italia and Fastweb were rejected by the TAR. The European Antitrust Help division has decided to open a case following an appeal by Telecom
Italia. 13
Regions involved: Piedmont, Valle D’Aosta, Liguria, Friuli e Prov. di Trento, Marche, Umbria, Lazio, Campania, Basilicata and
Sicily for a total contribution amount over
€1,25 Bn.
Submitted an offer for lot 2 Friuli Venezia
Giulia and Prov. Autonoma di Trento (minimum price of the tender €169 M).
Retelit at the top for profitable growth
Source: Bain’s work on companies financial statements and Retelit’s figures (pre-closing 2016). Peers’ figures Acantho, Infracom, McLink, Brennercom, Clouditalia 2016; the rest 2015
14
Last period Revenue growth1
Business Plan 2017-2021: Strategy
AAE-1 Submarine
Cable
International
Wholesale
Leverage AAE-1 investmentStrengthen current leading position with extended international capacity
Increase market share
Business
Act for Service and open new path
Enlarge the Customer base to Corporate Customers
New Cloud offering and Business model
National Wholesale
Fit for Service
Faster and more profitable growth leveraging on current assets
Infrastructure optimisation
15
Global positioning
Establishing a new alternative hub to connect Europe to fast growing markets (e.g. India and Far East)
International Coverage
National
Wholesale
Business
(Data center and Cloud)
AAE-1 Submarine Cable
International
Wholesale and Business Market trend
CAGR ’16-’21:
Source: Retelit on Bain analysis and IDC figures
16
-1.1%
Reference Market for TLC wholesale and Telehouse
)
CAGR ’16-’21: +3.3%
Reference Market for Business: SMEs
2.593 2.516 2.476 2.436 2.387 2.339
792 796
806 823 842 861
2016 2017e 2018e 2019e 2020e 2021e
Termination, Access, Collection, etc. Leased circuits, dark fiber, backbone
3,312 €M 3,282 €M 3,259 €M 3,385 €M 3,229 €M 3,200 €M 1.716 1.811 1.909 2.000 2.080 2.145 1.012 1.014 1.024 1.039 1.059 1.063
2016 2017e 2018e 2019e 2020e 2021e
Internet Access IP-VPN, Ethernet, Legacy Data Services
2,825 €M 2,728 €M
2,932 €M 3,039 €M
Growth above reference market
2014 2015 2016 2017
0,7 2,8 5,4 7.8
17
Source analysis Bain on Retelit Figures , AgCom, bilanci aziendali, Analysys Mason
Market share trend Wholesale Tlc
(+ 1.1% in four years years)
YoY '15-'16 -0.7% Retelit Market €M 36 39 43 45 . 10.3% 803 €M 794 €M 792 €M 4.5% 4.9% 5.4% 2014 2015 2016 Total Market Retelit Market share
796 €M
5.6%
2017
Market share trend Business
(+ 2.4% in four years)
Retelit Market €M 93.0% YoY '15-'16 -1,5% 287 €M 276 €M 274 €M 0.2% 1.0% 2.0% Total Market Retelit Market share2.8%
Italian market 2017
18
Total Market (fiber)
€714 m
Total Market
€82 m
Total Market
€1,014 m
A D D R E S S A B L E M A R K E T T A R G E T M A R K E T S H A R E 2 0 1 7 T O T A L M A R K E T€71 m
10%
27%->30-34%
€82 m
100%
27% -> 27-29%
€274m
27%
2%-> 2.5%-3%
NATIONAL
WHOLESALE
INTERNATIONAL
WHOLESALE
BUSINESS
Digital IT New Enablers 2017
19 IoT Cyber Security Cloud Big Data Mobile Busin. CONNECTIVITY HW and EQUIPMENT SW and IT SOLUTIONS IT SERVICES IC T T R A D IT IO N A L S E R V IC E S+
++
+++
++
+
+
+++
+++
=
+
+
+++
++
+++
+++
++
+++
++
++
+++
*Source: CiscoAAE-1 Business Drivers 2017
20
• Development of global network (Backbone expansion/diversity)
• Content Access (Internet, Cloud Connect)
• Data Transmission services on Eurasia
• European backhaul DC/Exchange access
Fields of Play
Drivers/Business Needs
2017 revenues mainly expected to come from IRUs contracts
Expected Cumulated revenues in 2017-2021 around €63/68 m
with an EBITDA margin expected in a range of 55% - 65%
AEE-1 Market 2017
Internet Users (millions)
World’s Largest Traffic Routes
11-12 29 44-46 11 14.6 20-23 37-39 2015 2016 2017 2020 2021 44-46 75 89-93 42 49.6 60-63 81-84 2015 2016 2017 2020 2021
Business Plan 2017-2021: Revenues and EBITDA Targets
21
2021 TARGETS - DETAILS
€mln
Actual Results BP 2016-2020 BP 2017-2021
Revenues
2021E Revenues €89-93 m, CAGR +13%
Better revenues mix compared to previous plan
Anticipation of IRUs for the cable
AAE-1 related cumulated expected revenues 2017-2021: € 65-70 m
EBITDA
2021E EBITDAs €44-46 m, CAGR +27%
EBITDA Margin from 29.4% to around 50% thanks to a better revenues mix
CAGR 13%
CAGR 27%
Revenues
€mlnEBITDA
+20-26%
Business Plan 2017-2021: Revenues and EBITDA
22
Revenues by Market
Profitability By Market
National Wholesale: EBITDA margin range 27% - 32%
International Wholesale: EBITDA margin range 27% - 32%
Business: EBITDA margin range 30% - 35%
AAE-1: EBITDA margin range 55% - 65%
Moving forward
towards a more profitable
revenues mix
(9-11) 75 96-101 11.5 8.1 20-23 69-72 2015 2016 2017 2020 2021
Net Financial Position - Net Cash
Business Plan 2017-2021: NFP (net cash) and Capex Targets
Investments
Five years 2017-2021 cumulated Capex of €83-88 m of which approx. € 22-24 m for AAE-1
23
2021 TARGETS - DETAILS
€mln €mln
Actual Results BP 2016-2020 BP 2017-2021
Financial Structure
2021E NFP with positive net cash for €96-101 m
Lower backbone investments commitments due to BICS partnership on
European Backhaul * Five years cumulated capex 2016-2020
** Five years cumulated capex 2017-2021
92-94* 83-88**
30.2 34.7 25-28
103-108*
2015 2016 2017 2020 2021
BP 2017-2021: Guidance 2017
2017 TARGET
Business
Drivers
24
To grow above current market rate in the National and International Wholesale gaining market
shares from other competitors
To increase penetration in the Business Market leveraging on the customer base segmentation,
the “Smart SaaS Program” and enlarging the offer of Managed Infrastructure and Data Centers
Services
By leveraging onto BICS partnership building on current momentum prior to imminent ready for
commercial services of the cable AAE-1
Revenues
€60-63 m (+21% /+27% vs. 2016)EBITDA
€20-23 m (+37%/+63% vs 2016)NFP (net cash)
€ 20-23 m(more than double vs 2016)
EBIT
€6-9 m (+172%/+309%)Capex
€ 25-28 m (-29%/-20% vs 2016)Agenda
Retelit Overview
Strategy and 2017-2021 Business Plan
Q12017 Financial Results
Q1 2017 Highlights
26
GROUP
FINANCIALS
Participation to the 2nd Infratel tender on ultra broadband
Joined the Open Hub Med consortium the new telecommunications hub in Sicily complementing the AAE-1 cable in Bari
1
3
OPERATING
ACTIVITY
2
More than 360 active clients, of which 129 National Wholesale, 61 International Wholesale and 171 Business customers
Order intake in Q1 2017 amounted to €11.1m (Total Contract Value) +72% vs Q1 2016
AAE-1 cable completed lay-down from Marseille to Singapore
Strong growth of all economic-financial figures
Total Revenues €13.6 m (+ 9% vs Q12016)
EBITDA €4.2 m (+ 22% vs Q12016)
Net Profit almost doubled at €1.0 m
EBIT More than Doubled vs. Q1 2016
PROFIT & LOSS
CASH FLOW
27
Strong improvement of all economic figures
:
•
Revenues + 9%
•
EBITDA + 22%
•
EBIT with a twofold increase
Net profit of €1.0 m vs €0.5m Q1 2016
Strong cash flow generation continue
BALANCE SHEET
€000 Q1 2017 Q1 2016 REVENUES 13,561 12,402 EBITDA 4,157 3,401 EBITDA MARGIN 30.7% 27.4% EBIT 991 416 NET PROFIT 988 528 €000 Q1 2017 YE 2016 FIXED ASSETS 176,975 175,637 NFP - net cash 8,736 8,095 EQUITY 136,250 135,357 €000 Q1 2017 Q1 2016Cash Flow from Operating Activities 4,120 3,310
Net changes in Current Assets/Liabilities 5,499 (2,273)
Net Cash flow from Operating Activities 9,619 1,037
Cash Flow from Investing Activities (8,782) (5,477)
Cash Flow from Financing Activities 11,744 6,045
-00 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
April '15 May '15 June '15 July '15 Aug '15 Sept '15 Oct '15 Nov '15 Dec '15 Jan '16 Feb '16 March '16 April '16 May '16 June '16 July '16 Aug '16 Sept '16 Oct '16 Nov '16 Dec '16 Jan '17 Feb '17 March '17 Recurring One off
Steady Recurring Revenues Growth
28
€000
+13% CAGR (Recurring Revenuess)
+32%
Cumulated growth from January 2015 (rec.
Revenuess)
April '15 May '15 June '15 July '15 Aug '15 Sept '15 Oct '15 Nov '15 Dec '15 Jan '16 Feb '16 March '16 April '16 May '16 June '16 July '16 Aug '16 Sept '16 Oct '16 Nov '16 Dec '16 Jan '17 Feb '17 March '17Total Q1 2017 Recurring 2,871 2,903 2,965 2,991 2,995 3,029 3,085 3,140 3,137 3,189 3,192 3,194 3,278 3,327 3,329 3,346 3,393 3,424 3,469 3,535 3,593 3,632 3,678 3,702 11,012 One off 227 512 495 433 304 616 489 633 1,502 484 684 1,598 704 325 851 624 397 856 320 465 864 263 346 1,892 2,501 Total Operating Revenues 3,098 3,415 3,459 3,424 3,299 3,645 3,574 3,773 4,639 3,673 3,876 4,792 3,982 3,652 4,180 3,970 3,791 4,281 3,789 4,000 4,457 3,895 4,024 5,594 13,513
March’17 over performance due to delivery of a large International Wholesale contract
1,002 5,137 6,202 12,341 1,497 6,703 5,313 13,513 Business International Wholesale National Wholesale Total Q1 2016 Q1 2017
Int’l Wholesale As the Main Contributor to Revenues Growth
29
• Total Revenues up 9% to €13.6 m
• Strong momentum towards development of Wholesale International market: Revenues +30% YoY due to the release of a one-off large contract (approx. 1,2 €M)
• Strong improvement of the Business segment: Revenues + 49% YoY confirming momentum
• National Wholesale recorded lower IRUs delivery levels compared to Q1 2016 expected to be offset in Q2 due to significant orders intake
Operating Revenues by Segment
Total Revenues Q1 2017 vs. Q1 2016
Operating Revenues by Segment
€000€000 €000 +30% -14% 12,402 2,874 (1,702) (13) Revenues Q1 2016 TLC Services & M-link IRUs and Network maintanance other Revenues Q1 2017 13,561 1,497 11% 6,703 50% 5,313 39% Business International Wholesale National Wholesale 13,513 +49% +9%
New Orders driven by International Wholesale and Business
30
New Orders by segment*
New Orders by services*
Note: * Based on Total Contract Value
€000 €000
• New orders generated in Q1 2017 for a total contract value (TCV) of €11.1 m, 72% up vs. Q1 2016
• National and International WH are driving growth
3,401 4.157 1,159 (59) (5) (334) (42) 183 (147) EBITDA Q12016 Increase in Revenues Costs of access and interconnection Emoluments directors and auditors Maintenance Personnel costs Other operating costs Consulting and external services EBITDA Q1 2017
EBITDA Grew by 22%
31 €000• EBITDA +22% YoY to €4.2 m mainly
due to a better Revenues mix and
higher
margin
generated
by
value
added services
• EBITDA Margin from 27.4% to new
high at 30.7%
• Interconnection
costs
increased
relatively less than the increase in
Revenues
• Maintenance increased due to network
development activities, mainly in relation
to AAE-1
• Consulting
and
external
services
increase due to greater recourse to
outsourced technical services
EBITDA Q12017 VS Q12016
Revenues & EBITDA
€000 33,410 35,219 37,296 38,966 37,167 42,104 49,592 13,561 28.0% 30.4% 25.9% 26.8% 21.3% 26.2% 29.4% 30.7% 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Cash Generation Remains Highly Positive
32
Investments in the quarter amounted to €4.4 m mainly due to:
€2.4 m investments mainly in infrastructure of fiber-optic network and backbone
€1.8 m related to the investment in the AAE-1 Project (of which € 1,0 m payed in the period)
The current extension of the national fiber-optic network is over 9,860 km
Total investment for the AAE-1 project as of 31 March 2017 is €42.9 m (out of total expected €56.3 m) of which €35.8 m (out of total expected USD 45 m) related to payments to AAE-1 Consortium
Positive NFP at €8.7 m vs €8.1 m at YE 2016 thanks to strong operating cash generation partly offsetting new investments capex
Senior debt for a total of €30 m (€21 m + optional €9 m) provided by Unicredit, MPSFS and BPM currently drawn for €21 m
NFP Q1 2017 VS 2016 (cash view)
€000 €000
Net Financial Position (net cash)
8,095 9,619 (8,782) (196) NFP YE2016 Operating cash flowCAPEX Cash out Other NFP Q1 2017
Capital Investments Breakdown by Division
33
€000
Retelit invests capital to create value, measured in recurring Revenues and EBITDA growth. Business as is Growth capex plus Network Development capex grew from 66% of total capex in 2014 to 82% in 2016 and to 93% in Q1 2017
• Growth capex is supporting medium to long-term progress to enable services for one or more customers/contracts • Network Development is capex related to short-term success-based investments
• Maintenance is capex required to maintain the current operational service level (“proxy” for infrastructure obsolescence level)
€000
Business As Is
AEE-1 Cable
Cash Ebitda
34
Cash EBITDA
Retelit recognizes to P&L in the first year of an IRU contract only 30% of the total contract revenues with 100% of cash collected upfront and the remaining revenues equally allocated over the following year of the IRU contract
(€/1000)
2014
2015
2016
03.2017
a)
EBITDA
7,920
11,043
14,576
4,157
- IRU annual revenue
(3,321)
(5,250)
(6,259)
(942)
+ IRU Tcv Delivery "no O&M"
4,494
7,846
11,657
487
+ KBC e GEM transactions charges
2,032
-
-
-TOTAL Adjustment
3,205
2,596
5,398
(455)
b)
Cash EBITDA
11,125
13,639
19,974
3,702
Delta b) - a) 3,205 2,596 5,398 (455)
Delta % a) vs b) 40% 24% 37% -11%
Capex Business as is
10,687
14,167
18,505
2,630
Cash Ebitda - Capex
438
(528)
1,469
1,072
Cash EBITDA Q1 2017
adjustment due to a lower number of IRUs released in the quarter. IRUs growth expected to return significantly
positive in upcoming quarters
Contacts
35IR CONTACTS
IR Manager Dario Pardi inv.relations@retelit.it Phone +39-02-202045.1 Fax +39-02-202045.225 Viale Francesco Restelli, 3/7 20124 Milan Italy IR Consultant Vincenza Colucci CDR Communication Srl Tel. +39 335 6909547 vincenza.colucci@cdr-communication.it Media Consultant Angelo Brunello CDR Communication Srl Tel. +39 329 2117752 Angelo.Brunello@cdr-communication.it Website: http://www.retelit.it Linkedin: https://www.linkedin.com/company/retel Twitter: @Retelit Institutional: September 27th, 2017 Retelit H1 2017 November 9th, 2017 Retelit Q3 2017Business & Wholesale:
September 25-27th
Submarine Networks World
October 13th VEM Bologna October 24-26th Capacity Europe
RETELIT ON LINE
NEXT EVENTS
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