Sunrise Communications Ag Class A · SIX:SUNN
Sunrise Communications Ag Class A — Merger or Acquisition (October 2019)
26 slides from Sunrise Communications Ag Class A's merger presentation, Oct 8, 2019
Slide 1: Key facts regarding freenet assertions
1 Acquisition Q1 2019 of UPC Financial Results Switzerland Key facts regarding freenet assertions 16October 8 May 2019 2019
Slide 2: Disclaimer
2 Disclaimer • The information contained in this 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, and no relia
Slide 3: Key facts regarding freenet assertions
3 Key facts regarding freenet assertions freenet assertion Key facts Public references 1 • Strategic Rationale • Data requirements are ever-increasing and only a company that offers a combination of 5G and high-speed broadband landline • Network test CH connect Of The connections will be able to sat
Slide 4: Key facts regarding freenet assertions
4 Key facts regarding freenet assertions freenet assertion Key facts Public references 1 • The Next • UPC’s high-speed broadband network covers ~60% of Swiss households (~75% along with partner network1)) and is based on • "Shareholder Information Generation Fixed 18,000 km of fibre optic backbone.
Slide 5: Key facts regarding freenet assertions (continued)
5 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 2 • Purchase price and • The transaction is priced at favourable multiples relative to precedent convergence transactions • "SRCG Roadshow implied valuation for Presentation" page 7 on UPC Switzerland
Slide 6: Key facts regarding freenet assertions (continued)
6 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 2 • Valuation Appears • EV/RGU is not a credible valuation metric that is recognised or considered by market investors or analysts, who predominantly use • Refer to appendix page Rich on a Subscriber c
Slide 7: Key facts regarding freenet assertions (continued)
7 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 3 • Operational • The Sunrise Board and management team conducted very thorough due diligence on the business for over a year before the • “Q2 2019 Financial Turnaround Yet to announcement and develope
Slide 8: Key facts regarding freenet assertions (continued)
8 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 4 • Sunrise • Shareholders are value neutral when adjusting Sunrise share price since announcement for dividends paid • Refer to appendix page shareholders lost c. 23-25 CHF0.4bn in value • Prior to an
Slide 9: Key facts regarding freenet assertions (continued)
9 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 5 • Deal risks are fully • The discussions with Liberty Global started with a partially stock-funded transaction, in which Liberty Global would have retained a • "Sunrise Board underwritten by minority
Slide 10: Key facts regarding freenet assertions (continued)
10 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 7 • Sunrise Executive • Since adoption of the so-called Minder initiative by the Swiss electorate in a referendum in March 2013, the executive compensation • Sunrise Corporate Board Stands to of all S
Slide 11: Key facts regarding freenet assertions (continued)
11 Key facts regarding freenet assertions (continued) freenet assertion Key facts Public references 7 • Questionable • The entire Board of Sunrise has been closely involved in the evaluation of the transaction and the oversight of the process for more • Sunrise Reports & Business Practice than a yea
Slide 12: Appendix
12 Appendix Supporting materials
Slide 13: Sunrise is an experienced mobile network operator
1 13 Sunrise is an experienced mobile network operator Sunrise has one of the best mobile networks in Europe. Sunrise is excited about the prospects of 5G, but also aware of its limitations 100% L4Y Share price performance (rebased) 50% L4Y Share price performance (rebased) 74% 61% (18%) Value creat
Slide 14: UPC Switzerland has a well invested and upgradeable high-speed broadband network
1 14 UPC Switzerland has a well invested and upgradeable high-speed broadband network HFC network Outstanding backbone and transmission network • UPC has announced availability of 1GB/s in their entire network on 25-Sep-19 • DOCSIS 3.1 upgrades that will enable speeds of up to 10Gbps over time and d
Slide 15: New Sunrise – securing the broadest and deepest digital infrastructure in Switzerland
1 15 New Sunrise – securing the broadest and deepest digital infrastructure in Switzerland Technology Sunrise access Download speed (Mbit/s) Swiss household coverage Expected future evolution Mobile BB • Own mobile network can be used for Mobile Broadband Up to 900 MBB ~100% (MBB); 5G roll out to pu
Slide 16: Fixed line network highly complementary to 5G
1 16 Fixed line network highly complementary to 5G The convergence of fixed and mobile communications is, and will be, an important trend in the development of EU communications over the long term. The complementarity of the two technologies is likely to be essential to progress further with 5G. The
Slide 17: Attractive valuation compared to precedents
2 17 Attractive valuation compared to precedents Favourable multiples relative to precedent convergence transactions even when based on trough FY’19 financials and more so when considering low Swiss interest and tax rates EV / EBITDA1) – UPC Switzerland EV / OpFCF1) – UPC Switzerland ~11.0x ~22.5x 9
Slide 18: Illustration of Swiss premia due to lower interest and tax rate
2 18 Illustration of Swiss premia due to lower interest and tax rate CHFm EU Switzerland Revenue 100 100 EBITDA 50 50 % margin 50.0% 50.0% Capex (18) (18) % capex intensity 18.0% 18.0% NWC 0 0 Tax1) (7) (5) % tax rate2) 27.5% 18.0% Interest (8) (4) % cost of debt3) 4% 2% Net debt4) 200 200 Leverage5
Slide 19: EV / RGU and EV / Customer multiples clearly justified by UPC Switzerland's higher value
2 19 EV / RGU and EV / Customer multiples clearly justified by UPC Switzerland’s higher value Swiss customers while EBITDA and OpFCF metrics compares even more favourably RGU = Individual service Customer = Unique Customer Relationship, OpFCF / RGU (CHF) subscriber Average OpFCF / Customer (CHF) irr
Slide 20: EV/Customer regression analysis
2 20 UPC’s EV / RGU and EV / Customer are in line with precedents based on customer value and at a discount when adjusting for the Swiss premium Regression against EV / RGU Regression against EV / Customer 3,000 6’000 UPC Switzerland UPC Switzerland EV/Customer 2,500 R2= 95.5% 5’000 R2= 96.3% UPC Sw
Slide 21: Fairness of transaction confirmed by ValueTrust fairness opinion
2 21 Fairness of transaction from a financial perspective confirmed by ValueTrust fairness opinion freenet assertion Key facts ValueTrust fairness opinion • The ValueTrust fairness opinion does not indicate significantly more downside than upside but rather considers more downside cases in its simul
Slide 22: UPC Switzerland – 2019 H1 results in-line with Liberty's turnaround plan
3 22 UPC Switzerland – 2019 H1 results in-line with Liberty’s turnaround plan Ahead of Sunrise expectations leading to CHF10-15m higher FY’19 OpFCF expectation • RGU net adds, revenue, OCF targets achieved UPC Switzerland revenue (CHFm) 2) Turnaround • Success in major investments in UPC TV, 1 Gbps
Slide 23: Sunrise has outperformed peers historically
4 23 Sunrise has outperformed peers historically Total Shareholder Return Indexed dividend adjusted share price performance (last 4 years %) (last 4 years) 120% Current trading level in line with pre- announcement (CHF77 now vs CHF77 100% at announcement1)) share price despite technical- and freenet
Slide 24: Broker perspectives on M&A premium and stock overhang
4 24 Broker perspectives on M&A premium and stock overhang Prior to announcement, brokers have included an element of M&A premium into Sunrise's target price. Post announcement in February, some analysts are pointing to a stock overhang weighing on Sunrise from freenet's stake M&A premium embedded i
Slide 25: Broker perspectives on the transaction
4 25 Broker perspectives on the transaction “The new financing structure significantly reduces the capital Select Research - Standalone vs. New Sunrise Valuation increase but also lowers the cost of debt, resulting in a very attractive FCF/share accretion already by 2022 and expected to double by 20
Slide 26: Are freenet's interests aligned with all Sunrise shareholders?
26 Are freenet’s interests aligned with all Sunrise shareholders? freenet originally supported the UPC transaction at the time the CHF6.3 all-cash offer was made to Liberty and also approved the 1 prior CHF4.1bn rights issue (as a Sunrise Board member) Subsequently, freenet requested that Sunrise or
Sunrise Communications Group — Merger or Acquisition (October 2019) on 6ix