Sunrise Communications Ag Class A · SIX:SUNN
Sunrise Communications Ag Class A — FY2018 Earnings Presentation
47 slides from Sunrise Communications Ag Class A's earnings presentation, Feb 28, 2019
Slide 1: 2018 Results & UPC Switzerland Acquisition
1 2018 Results & UPC Switzerland Acquisition 28 February 2019
Slide 2: Agenda
2 Agenda Summary 2018 Review Q4 Financials Outlook UPC Switzerland Acquisition Q&A
Slide 3: Summary
3 Summary Olaf Swantee CEO Entering growth mode in 2018, after stabilization in 2017 – 5% higher dividends proposed
Slide 4: Summary
4 Summary • FY’18 confirms Sunrise’s transformation into • FY’19 guidance with revenue and adj. EBITDA growth Switzerland’s quality challenger • Cash flow volatility due to spectrum and landline • Growth investments paying off, leading to strong access investments, as highlighted previously customer
Slide 5: 2018 Review
5 2018 Review Olaf Swantee CEO Growth investments driving market share gains and EBITDA growth
Slide 6: 2018: Confirmed quality challenger position by continued growth investments
6 2018: Confirmed quality challenger position by cont’d growth investments … • Outstanding mobile network with leading • NPS strongly up since introduction in 2013, • FY’18 with balanced mobile tariff refresh dropped call ratios, 43Mbit/s average evidenced by No. 1 ranking of ‘large and ‘more for mo
Slide 7: Enabling one of the world's best mobile networks
7 … enabling one of the world’s best mobile networks Outstanding connect network test 1) Strong BILANZ telecom ranking 2018 2) 100 % reached of max points Swisscom Sunrise Mobile: Internet: TV: 90 Salt Sunrise 22.5 Sunrise 23.0 Sunrise 23.0 80 Swisscom 20.8 Swisscom 21.0 Swisscom 21.0 70 Salt 19.7 U
Slide 8: Driving market share gains in 2018
8 … driving market share gains in 2018 Mobile Postpaid net adds 2018 1) 135 In ‘000 Sunrise Swisscom UPC Salt 35 Internet net adds 2018 1) Sunrise Swisscom UPC 30 TV net adds 2018 1) Sunrise Swisscom UPC 1) Salt: no internet/ TV net adds published by Salt; Salt and UPC net adds are based on actuals
Slide 9: Sunrise with EBITDA and dividend growth
9 Sunrise with EBITDA and dividend growth Strong B2B and customer 2.3% Service revenue growth 1 0.5% momentum driven by growth investments, now MTR 4 -3.2% impact able to over compensate for -4.0% Dividend per share -5.2% lower ARPUs -2.7% +40% FY’15 FY’16 FY’17 FY’18 2.3% Reached organic growth 0.8
Slide 10: Q4 Financials
10 Q4 Financials André Krause CFO Adjusted EBITDA growth and highest postpaid net adds since 2010
Slide 11: Strongest postpaid net adds since 2010
11 Strongest postpaid net adds since 2010 Postpaid mobile net adds (‘000) Prepaid mobile net adds (‘000) 42 14 Secondary 31 31 30 31 (data) -10 11 11 9 8 Primary 28 -30 20 20 21 23 -40 -39 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 -50 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 • Postpaid with strongest net adds since 2010,
Slide 12: Growing internet and TV customer base
12 Growing internet and TV customer base Internet net adds (‘000) TV net adds (‘000) 12 11 13 9 9 9 7 7 8 6 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 • Internet continues to grow customer base: Sunrise • TV with solid growth: Sunrise now has 244k TV now has 457k internet subscripti
Slide 13: Financial Overview Q4
13 Financial Overview Q4 excl. IFRS 15 1) • Revenue down -4.6% due to hardware and Total revenue: Service revenue 2): Revenue hubbing (both low margin) (CHFm) • Service revenue up +1.9% driven by customer -4.6% +1.9% growth in postpaid and internet/TV; Q4 above Q3 509 486 373 380 run rate (+1.4% YoY
Slide 14: Outlook
14 Outlook Olaf Swantee CEO Growing EBITDA and taking it to the next level with 5G
Slide 15: 2019 outlook: operational objectives
15 2019 outlook 2018 achievements 2019 objectives • Market share gains confirmed Sunrise as the • Use acquired spectrum to roll out 5G quality challenger; achieved balanced mobile tariff • Further diversify landline access via MBB, which refresh despite competitive environment Operational has attrac
Slide 16: Taking it to the next level with 5G
16 Taking it to the next level with 5G 4G leadership led to great momentum Continue success story with 5G • Dec 17: speed record • Record breaking 96% 4G 5G demo area coverage • Jun 18: 1st Swiss 5G • Solid base for 5G trial live network • Nov 18: 1st ski resort live with standardized 5G • 31 Mar 19
Slide 17: 5G financial impact
17 5G financial impact 2019 Capex driven by accelerated 5G monetization 5G roll-out CHFm; Capex excl. spectrum and landline access 1) • Customer momentum driven by network leadership 295 • 5G smartphone customers will be charged an extra fee 44 243 252-292 • Mobile broadband (MBB) roll-out 45 46 38
Slide 18: Financial outlook 2019
18 Financial outlook 2019 FY’19 guidance 1) • Service revenue supported by B2B and cont’d customer momentum in mobile postpaid, Higher internet, and TV • Revenue CHF 1,860 - 1,900m revenue • Revenues of low-margin hardware and hubbing to • Adj. EBITDA CHF 608 – 623m remain volatile • Capex CHF 420–
Slide 19: UPC Switzerland Acquisition
19 UPC Switzerland Acquisition Olaf Swantee, CEO André Krause, CFO Creating a stronger and more valuable Sunrise
Slide 20: Transaction highlights
20 Transaction highlights Sunrise to acquire UPC Switzerland for CHF6.3 billion Clear #2 player in mobile, TV, fixed broadband and fixed voice strengthening position as the leading converged challenger and true Swiss champion Secures superior next generation fixed network infrastructure to drive enh
Slide 21: Compelling value enhancing in-market combination
21 Compelling value enhancing in-market combination 1 • Create a fully converged challenger nationwide with scale across all elements of the 4P bundle Reinforces Sunrise's • #2 player in mobile, TV, fixed broadband and fixed voice with the scale to drive innovation, invest in new services and pursue
Slide 22: UPC Switzerland — a strong 3P provider
22 UPC Switzerland — a strong 3P provider Switzerland's #2 fixed broadband and TV provider1) Strong and growing B2B business2) Internet New Sunrise TV New Sunrise CHFm Total: 3.8m 30% Total: 4.3m 31% 19% 26% 169 Switzerland Switzerland 155 12% Switzerland 5% Other 69% Other 69% Note: As of Q3'18 Dec
Slide 23: UPC Switzerland — superior next generation network
23 UPC Switzerland — superior next generation network HFC network Outstanding backbone and transmission network • Network currently based on DOCSIS 3.0, with partial migration to DOCSIS 3.1 planned for 2020 • Clear roadmap to 1Gbps speed speed via DOCSIS 3.1 upgrades that will enable speeds of up to
Slide 24: UPC Switzerland — leading entertainment offering
24 UPC Switzerland — leading entertainment offering New industry leading Video Platform – UPC TV: • Launched in October 2018 • 4K box, cloud based • Fast zapping, full trick play Voice control 4K + cloud Early results show • Voice control remote (incl. Swiss German) excellent NPS achieved • New UPC
Slide 25: UPC Switzerland — strategic growth initiatives
25 UPC Switzerland — strategic growth initiatives Comprehensive measures to improve current trajectory Strategy Key initiatives Outlook • UPC Switzerland standalone Improve TV experience with new • Introduction of New UPC TV with significantly enhanced pre-synergies financial Entertainment platform
Slide 26: New Sunrise — the leading converged challenger
26 New Sunrise — the leading converged challenger New Sunrise (B2B and B2C)1) Ingredients to win Customer experience leveraging our best offer mix of Mobile Broadband TV2) mobile, broadband, entertainment and service - personalized ‘000 SIMs (Post-paid) ‘000 RGUs ‘000 RGUs to the customer based on i
Slide 27: New Sunrise — broadest and deepest digital infrastructure in Switzerland
27 New Sunrise — securing the broadest and deepest digital infrastructure in Switzerland Expected future Technology Sunrise access Download speed Swiss household coverage evolution Mbit/s Mobile BB • Own mobile network can be used for Mobile Broadband Up to 900 MBB ~100% (MBB); 5G roll out to push u
Slide 28: New Sunrise — growing in B2B
28 New Sunrise — growing in B2B Bringing together 2 proven and complementary B2B operators Challenges before acquisition Opportunities from acquisition Customers with more complex Leading integrated telecom provider needs than retail customers for SoHo and SME companies Difficult to target as some B
Slide 29: Significant value creation through cost and revenue synergies
29 New Sunrise — significant value creation through cost and revenue synergies with ~CHF2.8 billion NPV 1) Year 3 synergies estimates2) (CHFm) NPV1) (CHFbn) ~2.4 ~0.4 ~2.8 453) 235 35 10 190 90 55 COGS SG&A Capex Other Cost & Capex Revenue Total • Fixed network • Removing • IT & network • Central al
Slide 30: Synergy benchmarking
30 Synergy benchmarking UPC MVNO plus Sunrise fixed access provide large relative cost saving opportunity Cost & Capex synergies as % of combined cost base (COGS + Opex + Capex) 20% 8% 17% 18% 23% 13% 13% 27% n.a. 20% 25% 22% 32% High relative synergies due to 11.7% significant wholesale / MVNO Sign
Slide 31: Attractive valuation compared to precedents
31 Attractive valuation compared to precedents Favourable multiples relative to precedent convergence transactions even more so when considering low Swiss interest and tax rates EV / EBITDA1) EV / OpFCF1) 22% 30% 23% 28%2) 30% 25% 18% 1.7% 1.7% 0.8% 0.8% 0.6% 3.3% (0.3%) 12.7x 12.4x 12.1x 27.4x 3) 1
Slide 32: Prudent combined leverage @ ~2.7x post run-rate synergies
32 Prudent combined leverage @ ~2.7x post run-rate synergies 1) Targeting investment grade leverage in the medium-term Combined net debt Dec-18 (CHFbn) ~2.7x including run- rate synergies1) Leverage2) 2.0x 3.0x 2.7 3.6 0.3 3.8 (4.1) 1.2 Sunrise net debt UPC Switzerland Cash payment Rights issue Othe
Slide 33: Fully underwritten transaction funding
33 Fully underwritten transaction funding Combination of debt and equity to maintain prudent capital structure Transaction EV CHFbn Fully Underwritten Rights Issue CHFbn Enterprise Value 6.3 Rights Issue ~4.1 of which UPC Switzerland net debt of which cash payment to LGI ~2.7 contributed1) 3.6 of wh
Slide 34: Attractive combined financials
34 Attractive combined financials 1) Expected enhanced margins and cash flow generation support existing dividend policy and de-leveraging profile, and drive accretion from year 1 Combined revenues1) (CHFm) Combined adj. EBITDA1) 2) (CHFm) Combined adj. OpFCF1) 3) (CHFm) 32% 49% 39% 60% 62% 61% 1,29
Slide 35: Expected closing during the second half of 2019
35 Expected closing during the second half of 2019 27 February 2019: Transaction signing and announcement. Q4 and FY 2018 results release 10 April 2019: AGM Q2/Q3 2019: Regulatory approval and EGM Second half of 2019: Transaction closing
Slide 36: Creating a stronger and more valuable Sunrise
36 Creating a stronger and more valuable Sunrise 1 Creating a stronger converged challenger in the attractive Swiss market with scale to compete and innovate 2 Attractive price paid vs precedent transactions, 10.9x adj. OpFCF1) post run-rate cost & capex synergies and before integration costs 3 In-m
Slide 37: Q&A
37 Q&A ?&!
Slide 38: Appendix
38 Appendix
Slide 39: Implied valuation multiples reconciliation
39 Implied valuation multiples reconciliation UPC Switzerland financial metrics (2018) CHFm Sunrise reporting Liberty Global reporting EV 6,300 6,300 OCF1) 732 732 EBITDA adjustments2) (1) - Central opex allocations3) (32) (32) Central capex allocations4) (62) - - - Adj. EBITDA (post central allocat
Slide 40: Overview of combined capital structure
40 Overview of combined capital structure Sunrise Combined CHFm, unless stated otherwise (FY’18A) Adjustments (FY’18A) Maturity Maturity profile (CHFm) Sunrise Term Loan B (“TLB”) Sunrise 1,410 (910) 500 2024 Sunrise CHF notes 200 (200) - UPCB Finance IV Ltd 5.375% ($) - 1,122 1,122 Jan-25 1’353 UPC
Slide 41: Overview of combined financials
41 Overview of combined financials Dec-18, CHFm Sunrise UPC Switzerland Combined1) Revenue 1,876 1,296 3,173 % growth 1.2% (3.7%) (0.9%) Reported EBITDA (Sunrise) / OCF (UPC Switzerland)2) 602 732 1,335 EBITDA adjustments3) (1) (1) (3) Central opex allocations4) - (32) (32) Central capex allocations
Slide 42: Sunrise and UPC Switzerland adj. eFCF
42 Sunrise and UPC Switzerland adj. eFCF Dec-18, CHFm Sunrise UPC Switzerland Comments • ~CHF155m run-rate2) cost synergy impact; ~CHF45m run-rate3) EBITDA-equivalent EBITDA1) 601 637 impact of revenue synergies Change in NWC (49) n/a Capex (303) (245) • ~CHF35m run-rate2) capex synergy impact Cash
Slide 43: UPC Switzerland key financials
43 UPC Switzerland key financials 2018 1Q 18 2Q 18 3Q 18 4Q 18 FY18 Subscribers/RGUs (000s)1) Data 727 714 701 688 688 Telephony 530 525 519 514 514 Total video 1,159 1,124 1,104 1,073 1,073 o/w basic video 490 464 452 432 432 o/w enhanced video 669 660 651 640 640 Mobile 122 129 138 146 146 Other o
Slide 44: Have a sunny day
Have a sunny day
Slide 45: Contact Information
45 Contact Information Investor Relations Uwe Schiller uwe.schiller@sunrise.net Stephan Gick stephan.gick@sunrise.net Contact www.sunrise.ch/ir investor.relations@sunrise.net +41 58 777 96 86
Slide 46: Disclaimer
46 Disclaimer • The information contained in this investor presentation has not been independently verified and no representation or • The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, in any warranty, express or implied, is made as to, an
Slide 47: Disclaimer
47 Disclaimer • This document and any materials distributed in connection herewith (including • Statements made in this Presentation may include forward-looking statements. any oral statements) (together, the “Presentation”) do not constitute or form a These statements may be identified by the fact
Sunrise Communications Group — FY2018 Earnings Presentation on 6ix