Westnet Acquisition Investor Presentation
6th - 8th May 2008 For personal use only use personal For
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 use personal For
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 use personal For
Investor Presentation May 2008 3
Attractive Acquisition Multiple For personal use only use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
Investor Presentation May 2008 14 Appendices
Regulatory Update For personal use only use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
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 use personal For
Investor Presentation May 2008 20