Rostelecom · RUS:RTKM
Rostelecom — Conference Presentation (December 2013)
26 slides from Rostelecom's conference presentation, December 2013
Slide 1: Strategy Update
Strategy Update December 2013 www.rt.ru
Slide 2: Agenda
Agenda 1 Rostelecom strategy update Sergey Kalugin, CEO 2 Creating T2-RTK Holding - national mobile player Maria Florentieva, Vice President, Strategy and Investor Relations 3 Q&A 2 www.rt.ru
Slide 3: 1. Rostelecom strategy update
1. Rostelecom strategy update 3 www.rt.ru
Slide 4: Rostelecom business mix
Rostelecom business mix Fixed-line business Revenue, RUB bn Fixed-line RGUs(1), mln 281 28,5 27,1 261 Rostelecom (consolidated) Revenue and OIBDA, RUB bn 270 9.2 8.2 5.9 6.6 321 301 11 2011 2012 2011 2012 Revenue Telephony B2C+B2B 39.0% 37.0% Revenue from project "Election" Broadband B2C+B2B Pay TV
Slide 5: Rostelecom strategic priorities
Rostelecom strategic priorities Fixed-line business Mobile services business Accelerated expansion of fiber last Joint venture with Tele2 Russia - creation mile to unlock value of the largest fixed- of a national mobile operator line network in Russia Sufficient scale to compete with MTS, Mega
Slide 6: Russian TMT market forecasts: key segments
Russian TMT market forecasts: key segments Fixed and Pay TV Digital media and advertising IT and ICT services RUB bn RUB bn RUB bn 568 +1% 489 +13% 507 +15% 528 78 +22% 88 +29% 109 +3% 93 49 +13% 56 99 +12% +23% +12% 195 87 108 267 78 –6% 250 29 25 +11% 26 70 25 +1% 15 50 182 195 282 +14% 191 +5% 15
Slide 7: Rostelecom current position in B2C segment
Rostelecom current position in B2C segment Pay TV • Rostelecom is the leader in Pay TV subscribers¹, mln Market share, %, 3Q2013 Pay TV market. Company’s revenue market share in Rostelecom 8.8 IPTV reached 55% in 7.5 MTS 3Q2013 6.6 36% 21% ER-Telecom 5.9 • IPTV is the key growth driver 11% Akado in
Slide 8: Key strategic pillars of Rostelecom fixed-line business
Key strategic pillars of Rostelecom fixed-line business 1 Technological leadership in IP networks Fibre network rollout Increase capacity of backbone and regional networks 5 2 Differentiated Efficiency increase offerings Capex optimisation Focus on development of with strong focus on unique
Slide 9: High speed access
1 High speed access From single-point roll-out today… …to systematic approach to network development xDSL PON New strategy for household coverage – “Broadband conveyor”, which involves cluster-based roll-out, covering all households in city regions. Single-point roll-out is only allowed in up to 2
Slide 10: Development of differentiated offerings for B2C subscribers
2a Development of differentiated offerings for B2C subscribers Effect of bundled services on the level of churn Differentiated tariffs for Inter-regional and international calls Telephony 1.00 p.p. Telephony Bundling with Broadband and Pay TV services Telephony + BB 0.65 p.p. to reduce churn and
Slide 11: Pay TV segment strategy
2b Pay TV segment strategy 1 Increase speed and network capacity in order to switch subscribers to bundled Network improvement in services with higher ARPU Distributors Content providers Broadcasters order to increase ARPU Examples: roll out FTTH VDSL networks in Europe, upgrade of cable network
Slide 12: B2B and B2Gs products development
2c B2B and B2Gs products development Large corporate clients SME Package solutions for companies with Full Package Products for sub- requirements of large, high capacity, segments reliable and secure networks Package: Broadband + fixed voice, Core services: VPN, WAN, option – VPN + hosting B
Slide 13: Implementing client service best practices
3 Implementing client service best practices Key initiatives Targets Unified call-center on the base of common IT infrastructure 90% calls processed at first attempt Call center Unified call number for client services and client call rebalancing system 95% client satisfaction Unified SLA r
Slide 14: Organizational transformation
4 Organizational transformation Organizational Centralisation of support functions: IT, backoffice, etc. transformation Creation of competence centers at macro branches level initiatives Outsourcing of certain business functions and related optimisation of organizational structure Developmen
Slide 15: Focus on improvement of operational and investment efficiency
5 Focus on improvement of operational and investment efficiency Procurement optimization CAPEX / Revenue, % -52% Backbone 500 240 ‘000 RUB per 1 km 2012 2H2013 -36% Last mile (fiber) 6,2 4,0 ‘000 RUB per 1 port 24% 2012 2H2013 20% -49% Set-Top-Box (STB) 3,5 18% 1,8 ‘000 RUB ~17-18% 2012 2H2013 Headc
Slide 16: Focus on shareholder value
Focus on shareholder value Revenue OIBDA margin Target: 3-4% CAGR over next 5 Target: 100-200 bps improvement years over next 5 years Focus on Broadband and IPTV Focus on centralization of support offering (fibre + unique content functions + operational efficiency offering) improvement Achieve
Slide 17: 2. Creating T2-RTK Holding – national mobile player
2. Creating T2-RTK Holding – national mobile player 17 www.rt.ru
Slide 18: Joint venture with Tele2 Russia: transaction highlights
Joint venture with Tele2 Russia: transaction highlights Rostelecom and Tele2 Russia to merge their mobile assets to form a new national mobile operator T2 RTK Holding (or “JV”) in the largest in-market consolidation in Russian telecom space Subject to receipt of necessary regulatory and corporat
Slide 19: Transaction structure
Transaction structure 1 Stage 1 – transfer of mobile subsidiaries 2 Stage 2 – transfer of integrated mobile assets Other Other VTBC VTBC investors investors 50% 50% 50% 50% Tele2 Russia Holding AB Rostelecom Tele2 Russia Holding AB Rostelecom 74% / 55% 26% / 45% 55% / 55% 45% / 45% 100% Integrated m
Slide 20: Transaction rationale (1/4)
Transaction rationale (1/4) Key considerations Strategically important transaction for Rostelecom Reinforce Rostelecom’s mobile strategy by creating mobile operator with sufficient scale to compete nationwide Rostelecom is expected to be the largest single beneficial owner in the JV – Pre-emptiv
Slide 21: Transaction rationale (2/4)
Transaction rationale (2/4) Re-positioning Rostelecom’s mobile assets through JV with Tele2 Russia Benefits for Rostelecom Key combination parameters Increased scale Rostelecom Tele2 Russia – Over 37m subscribers mobile – Over 16% market share (by subscribers) Regions 35 41 Full national license
Slide 22: Transaction rationale (3/4)
Transaction rationale (3/4) Substantial synergy potential Area Synergies Upsell existing Tele2 Russia subscribers high speed mobile data packages Cross-selling fixed line services to mobile subscribers Revenue Converged proposition for Rostelecom subscribers: offer mobile services bundled with
Slide 23: Transaction rationale (4/4)
Transaction rationale (4/4) Release of cash flows at Rostelecom level Revenue 2012 (RUB bn) Net debt as of 3Q’13 (RUB bn) 100% 13% 13% 100% 87% 16% (41) 84% (34) 321 208 281 174 Rostelecom as is Rostelecom mobile Rostelecom less mobile Rostelecom as is Rostelecom mobile Rostelecom less mobile assets
Slide 24: Indicative transaction timetable
Indicative transaction timetable Key transaction docs Transfer of standalone Transfer of Integrated Fully Completion of signed and transaction assets by Rostelecom assets and licenses by integrated transition period announced and Tele2 Russia Rostelecom operations STAGE 1 STAGE 2 INTEGRATIONAL PHASE
Slide 25: 3. Q&A
'Y Rostelecom More possibilities 3. Q&A 25 | www.rt.ru
Slide 26: Disclaimer
Disclaimer By attending any meeting where this presentation is made, or by reading any part of this presentation, you acknowledge and agree to be bound by the following: This presentation has been prepared by OJSC Rostelecom (the “Company”). This presentation is strictly confidential to the recipi