Westnet Acquisition Investor Presentation
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Westnet Acquisition Investor Presentation 6th - 8th May 2008 For personal use only Investor Presentation May 2008 1 Acquisition of Westnet Deal Parameters Consideration of $81 million to acquire all the shares in Westnet for 100% cash settlement on 18 May 2008 $41 million placement – supported by major shareholders (Amcom Telecommunications Limited and AAPT) Balance from cash and $50 million undrawn debt facility Retention of existing staff and management team Clear Rationale for Acquisition Accretive transaction pre synergies Opportunity to leverage iiNet scale and infrastruture Cements position as 3rd Largest ISP in Australia and clear leader in WA Acquisition of best-in-class service and organic sales capabilities Complementary metro and regional customer bases For personal use only Investor Presentation May 2008 2 Westnet Financials* Revenue by Product 5% 13% ADSL 18% 56% Dialup Corporate Telephony Satellite Other 2% 6% Source: Westnet management accounts Other key metrics (1) Historic Capex of $2-3m p.a. on IT & property infrastructure Property, Plant and Equipment of $7.0m as at 31 March 2008 No debt & cash of $2.0m as at 31 March 2008 Source: Westnet financial and management accounts For personal use only Investor Presentation May 2008 3 Attractive Acquisition Multiple For personal use only Investor Presentation May 2008 4 Westnet Background General Specific Perth based ISP, established in 1994 More than 10% WA market share 6th largest ISP in Australia – one of Predominantly wholesaling Telstra and the last significant subscriber bases Optus in Australia without network Significant regional presence – 40% 100% privately owned – 4 equal main Metro / 60% Regional shareholders Consistent winner of best-in-class ISP Well established and respected service awards leadership team 1,000 strong national reseller network For personal use only Investor Presentation May 2008 5 Westnet Subscribers Source: Westnet management accounts Other key metrics ADSL ARPU consistent with iiNet – $51 per subscriber per month Very low churn / loyal customer base – ADSL averaging 1.3% per month Strong historical growth – 23k net increase in ADSL customers in 2007 Dial Migration – 1/3 of customers leaving dial being successfully converted to ADSL For personal use only Investor Presentation May 2008 6 Combined Scale Combined revenues of c$375 million and significant scale Revenue by State 3% 2% 11% WA 15% 50% QLD NSW VIC 19% SA / NT Other Sources Source: iiNet and Westnet management accounts iiNet management accounts as at 30 April 2008 Westnet management accounts as at 31 March 2008 For personal use only Investor Presentation May 2008 7 Clear No 3 in Australia ...and the market leader in Western Australia 3,000 Top ISPs by Broadband Subscriber Numbers (000’s) 2,500 2,000 1,500 1,000 500 0 *All competitor subscriber numbers estimates as at Dec 2007. IIN+Westnet as at 31 Mar 2008 For personal use only Investor Presentation May 2008 8 Logical fit iiNet Westnet Proven infrastructure leverage Strong regional presence & Brand Largely fixed cost network/bandwidth Loyal growing customer base & low churn Innovative ADSL2+ & Naked DSL High performing reseller channel VoIP Great hosting platforms Strong metro presence & Brand Wholesale b2b capable Advanced business products Solid gaming presence Cultural focus on plain-talking genuine service For personal use only Investor Presentation May 2008 9 Deal Synergies Significant value from the acquisition of Westnet is flowing from expected synergies Synergies Substantial synergies from scale benefits of iiNet infrastructure and improved costs from Telstra Wholesale Reduced transmission costs through the use of iiNet’s infrastructure Significant bandwidth savings via agreements with Pipe Networks Excludes synergy opportunities from supplier integration and other operating costs For personal use only Investor Presentation May 2008 10 Integration Strategy A simple integration • Operate Westnet independently and continue to grow the Westnet brand & customer base • Unique culture and service focus, critical to retain Westnet management and staff • Joint management to identify opportunities to leverage iiNet infrastructure and combined scale • No legacy networks and existing billing platform is both robust and scalable • Opportunity for Westet to offer innovative new products (VoIP, Naked DSL and SME/SOHO products) • iiNet customers who cannot get ADSL may be able to get Westnet satellite Form an exciting new culture from the best of both organisations For personal use only Investor Presentation May 2008 11 iiNet Trading Update 1st Half FY08 • Record first half EBITDA • Declared 3cps interim dividend result • Delivered cost base • Reduced dependency on certainty Telstra • Strong net cash position • Re-entered M&A activity • First to offer Naked DSL • On-net customers exceed 150,000 2nd Half FY08 Update • Strong growth in Naked DSL to 17,552 customers • Cape Town call centre implementation well on-track • Leading market consolidation • On track to exceed first half EBITDA and NPAT result For personal use only Investor Presentation May 2008 12 Summary • A logical and value accretive deal pre synergies • Significant savings by leveraging iiNet’s infrastructure and scale • Upside from complementary cultures, products, markets & capabilities For personal use only Investor Presentation May 2008 13 Indicative Placement Timetable Event Date ASX Trading Halt commences Pre-market Tuesday, 6 May 2008 Book Build opens for Placement Tuesday, 6 May 2008 Roadshow Melbourne & Sydney Tuesday & Wednesday, 6-7 May 2008 Firm Bids for Placement Shares 6pm (AEST) Wednesday, 7 May 2008 Allocations advised to successful bidders 7pm (AEST) Wednesday, 7 May 2008 Letters of Offer sent 7pm (AEST) Wednesday, 7 May 2008 Return of signed Acceptance Advices Thursday, 8 May 2008 ASX announcement of Placement & Westnet acquisition Thursday, 8 May 2008 DvP Settlement of Tranche 1 of Placement Wednesday, 14 May 2008 EGM to approve Placement Friday, 13 June 2008 DvP Settlement of Tranche 2 of Placement Monday, 16 June 2008 For personal use only Investor Presentation May 2008 14 Appendices Regulatory Update For personal use only Investor Presentation May 2008 15 Regulatory Update FTTN / NBN • Tender process ongoing. Regardless of the way this RFP is being handled, the assurances in place are as requested by industry • ‘Open Access’ examples given are appropriate based on access seekers’ need to operate the network as if it was their own • Bidders will be required to provide a full wholesale suite of products (ULLS/LSS equivalents) • Bidders will be required to provide access seekers with the ability to differentiate their products (unlike ADSL-L2 or L3) • Bidders will have to offer effective open access with no preference to themselves. (Unlike existing TEBA, MDFs, backhaul, truck rolls…) • Bidders will be required to be able to transfer services and customers ACCC draft proposal re. TLS Wholesale Pricing • Draft decision announced 30th April • ACCC seeking comments over next 6 months and will then adjudicate and issue outcome • 12 months transition period to form any suitable migration process • Intent seems wholly focused on forcing migration to ULL – potential interaction with FTTN unknown For personal use only Investor Presentation May 2008 16 Network choices Structural separation model State Local Neighbourhood Exchange Coppe r Node Pillar Fibre • Equivalent Access for all • Choice of interconnect locations Competitive access points • Control of QoS for VoIP, Video… • Preserve a copper option For personal use only Investor Presentation May 2008 17 Network choices Monopoly model State Local Neighbourhood Exchange Node Pillar Fibre • Resale only • No Control of QoS for VoIP, Video… No Competitive access points • No copper option from exchange • Service differentiation only For personal use only Investor Presentation May 2008 18 Tender Requests Request for Proposals to roll-out and operate a National Broadband Network for Australia 1.1.10 Proponents should submit arrangements for open access to their networks, including measures or models to ensure equivalence of access prices and non-price terms and conditions, and arrangements for allowing access seekers to differentiate their service offerings to customers 1.3.1.10 The Commonwealth’s objectives for the NBN project are to establish a national broadband network that … facilitates competition through open access arrangements that ensure equivalence of price and non-price terms and conditions, and provide scope for access seekers to differentiate their product offerings 1.4.1. (a) Proponents should, as a minimum, provide a service description for each wholesale service to be offered by the NBN ... Amongst other things, Proponents should include …the extent to which the service is compatible with equivalent existing … and arrangements for seamless transfer of existing services and applications to the new service where appropriate. For personal use only Investor Presentation May 2008 19 Tender Requests (cont’d) Request for Proposals to roll-out and operate a National Broadband Network for Australia 1.4.1. (b) Wholesale services should be taken to include the full range of wholesale services including facilities access, interconnection, basic access (including bitstream), transmission (including backhaul) and other wholesale … and other services. 1.5.14 The Government is therefore determined to ensure that appropriate open access arrangements are in place to promote competition and ensure efficient investment. In this context it will be important to ensure that access is provided on equivalent price and non-price terms and conditions. 1.5.16 If a Proponent proposes to supply both wholesale and retail services it should demonstrate what structural measures or models it proposes be put in place and maintained to prevent inappropriate self- preferential treatment and ensure that effective open access is achieved on the terms required by the Commonwealth. For personal use only Investor Presentation May 2008 20 .