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NASDAQ GM / TASE – 100 INDEX symbol: IGLD
Eli Holtzman, CEODoron Turgeman, CFOQ1 2007
Internet GoldInternet GoldLeading Israeli communications Leading Israeli communications
and Interactive media Groupand Interactive media Group
Forward-Looking Statement
The statements contained herein that are not purely historical are forward-looking
statements. These forward-looking statements, and
especially those regarding the 012 merger, involve risks and uncertainties and actual
results could differ materially from the results discussed in these statements.
History April 1992 - Euronet Golden Lines emerges as Eurocom
Communications services subsidiary (Information/Satellite/Int’l comm. Services)
January 1996 – commence ISP service
August 1999 – leading Israeli ISP. Public on NASDAQ
2000 – subsidiaries - GoldMind / GoldTrade / IGI / MSN Israel
Q1 2000 – signed partnership with MS / April 2000 – msn Israel is up
Mid 2001 – turn & remain profitable / growth throughout almost all Q’s
August 2004 – ILD service is launched with 015
April 2005 – Dual listed on TASE (Dec. 06 – enters TA100 index)
January 2006 – re-org & re-brand to Smile - GT => SCL / GM => SML
August 2006 – acquisition of 012 Golden Lines from the Fishman Group
December 31st 2006 – 012 deal closing. Actual merger starts
Corporate Structure
Committed to growth…2007 - crossing the 250 M$ revenue line
2006– Build-out of International
VoIP Telephony services
– Expansion of InternetAdvertising
– Expansion of BusinessServices
– 012 acquisition to be completed and operations to be consolidated - Q4/06
2007– 1st full year of the merged
operation
– Continued growth expected in all lines of business (under both ‘smile’ and ‘012’ brands)
Primary drivers:
in us $ millions
301
9843 52 70
0
50
100
150
200
250
300
350
2003 2004 2005 2006 2007Goal *
Organic CAGR = +26%
M&A CAGR = +63%
* post-merger
Israel’s telecommunications market
Cellular, $2.7
Multi-Channel TV, $0.7
ILD, $0.4
Fixed line & data, $1.2
Internet, $0.3
Source: Israeli MoC
2005 total – US$ 5.3 B
In US$ Billion
Competition
Market is rough on new entrants & small players ILD – x-fone 018 / Netvision’s 017 and also 015 ISP – many micro ISP’s who never expanded
* Partner is the only independent cellular player / Eurocom was a co-founder / excellent working relations
Internet Access (k subs)
Internet VAS Residential
Internet Business
e-Advertising (US$ M’)
e-Commerce (US$ M’)
DATA
ILD (m’ $) incl. hubbing
Fix telephony (VOB)
Cellular *
Multi Channel TV
Radio stations
Residential Comm. Equip.
Satellite services
Relative strength
Smile Group
Related companies
Leveraging Strong Positioning
Access Services
Major market share in a stable market
Stronger emphasis on biz sector
VoIP/VOB/TDM Telephony
Two strong brands to drive growth in market share
Commercial penetration of domestic VoB
Online Advertising
We expect our advertising revenues will grow as media budgets continue to shift to the Internet
Efficient merger
1 + 1 = 3…
Significant savings on opex / capex
Efficient management of the two brands
Conservative estimation of 11-14M $/yr savings
1 + 1 = 3
Multiple Synergies between the two companies
Global data networks Roaming services Call centers Fixed domestic
telephony Pre/post paid cards TDM platform
Value Added Services Biz services
Hi level integration
Hi level data security
Dealer network e-Media & e-
Commerce
The Merged Company: A Communications
Powerhouse
Revenues67.557.417.6%277
EBIT **8.95.563%42-45
EBITDA **14.310.537%61-64
Employees(March 31)
1,6592,039Synergy
Q1 2007 F/Y - 2007*
* company’s goals for the 1st full year of merged communications operations** Non-GAAP EBIT & EBITDA - excluding non-cash amortization with respect to the 012 acquisition.*** 2006 figures are on a pro-forma basis
communications activities only
In us$ millions
Q1 2006 %YoY
+
***
Leveraging state of the art telephony infrastructure
To drive further growth
Most sophisticated VoIP platform World class TDM platform Auxiliary platforms (anti-fraud / billing / CRM etc.)
ILD – growing in volume and revenue terms
International voice traffic from Israel - up 9.1% in 2006 vs. 2005(Source: Israeli MOC)
International voice revenues for H1 2006 up 3% vs. H1 2005(Source: IDC)
ILD, $0.4
012 - cash generator
State-of-the-art telephony infrastructure
Solid investment in class 5 fixed telephony No further significant investments required Auxiliary platforms (anti-fraud / billing / CRM etc.)
Fixed telephony Total fixed telephony market in Israel - US$ 1.2B in 2005
012 currently have only ~ 17k subscribers’ lines Our goal ~ 5% market share of this significant segment within 2-3
years Future marketing to rely on existing customer base of ~ 800 k
subscribers
072 - additional growth driver
Fixed line &
data, $1.2
2006/2007: Growth of Online Advertising
continues
19
17
67
1012
02468
101214161820
2002 2003 2004 2005 2006 2007*
Source: PWC IAB Internet Advertising Report, Sept. ‘05
US Internet Advertising CAGR = +26%
Source: Market surveys & IGLD estimates
Israel Internet Advertising CAGR = +48%
& company's estimates
85
50
36
2212
65
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007
*
* Q3/06 - Media market affected by war conditions
in US$ billions
in US$ millions
estimated
Israel’s broadband penetration is among the highest in the world~70% of Israeli households have Internet access ~ 95% are connected via broadband!>40% of users are online >10 hours per week. 2.7M users per day!
Israel’s online ad budgets are low compared to exposure –ad budgets always follows ratingInternet Advertising in Israel is currently > 6-7% of overall media spending (~ $900M in 05’) - growing fast
SEARCH - additional growth potential: US search revenues - 40% of total e-Adv. much higher than in Israeli market
Smile.Media – Content & Portal
BrandsPropertyIGLD’s
ownershipDescription
msn-Israel50.1% SML(49.9% MS Corp.)
Hebrew language portal Messenger, Hotmail Israel & MSN Search Israel
start100%General portal & Search engine
nirshamim100%Academic portal
zahav.ru100%Russian language portal
V-games100%Games content portal
TheMoney100%Lead-generation financial portal
tipo52%Children’s portal
seret51%Cinema portal
yahala51%Arab-language portal
Radius100FM50%Leading Israeli radio station
portal
SML NetworkExclusive
marketing rights
E-advertising network in 4 portals
netexSearch engine & directory
goopYouth portal
Leading e-Commerce
Brands
PropertyIGLD’s %Description
P1000100%
One of Israel’s top 4 e-Commerce sites
Outlet for >100 of Israel’s largest consumer product suppliers
Growing revenues, positive EBIT Low-risk commission model with
fulfillment directly from suppliers
LMT50% Leading Israeli on-line travel site
getprice51%
Leading Israeli price comparison site
dbook50% Leading Bookstore
Paid content
marketing rights
Online magazines, newsletters, recruitment & jobs search and other content services
3.5
18.9 19.2 21.2 23.3
67.5
4.84.53.93.9
22.4 23.1 25.1 27.8
72.3
Q1 06 Q2 06 Q3 06 Q4 06 Q1 07
Media ** Communication
Revenues
1 0.8 0.7 0.8 0.8
1.4 2 2.2 2.4
8.6
2.4 2.8 2.9 3.2
9.4
Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 *
Media ** Communication
us$ in millions
EBIT
Quarterly Growth
us$ in millions
Two pure-play subsidiaries
** Presented on carve-out basis with respect to group’s reorganization
* Non-GAAP EBIT - excluding non-cash amortization with respect to the 012 acquisition.
6 8 11 16 24
37 4459
82
27798
7052
43
301
2003 2004 2005 2006 2007*
Media *** Communications
Revenues
3216
2
5 4 5 8
39
45**
6 67
11
2003 2004 2005 2006 2007*
Media *** Communications
us$ in millions EBIT
Two pure-play subsidiaries
Annual Growth
* Ebitda goal for 2007 ~ 72 / estimate for finance exp. ~ 9.6
*** Presented on carve-out basis with respect to group’s reorganization
**Non-GAAP EBIT - excluding non-cash amortization with respect to the 012 acquisition.
Balance sheet overviewAs of March 31,2007
Total assets350
Total liabilities284
Total shareholders’ equity66
in us$ millions
Total Debt Short-term88
Total Debt Long-term105
Total finance Debt (including us$ 40M convertible bonds)
193
ComparablesInteresting market opportunity…
KCSA to send new slide
As of May. 18 2007
Q1 07/ Q4 06
Ticker IGLD Sify PCNTF SINA SOHU IIJIShare price $14.36 $8.36 $9.91 $37.00 $25.00 $7.67
CommunicationsRevenues (M$) 67.4 30.1 49.2 114.2
EBITDA 14.1 2.1 3.4 17.2Market cap (M$) N/A N/A 134.0 626.8price to revenues multiple N/ A N/ A 0.7 5.5price to EBITDA multiple N/ A N/ A 9.7 36.5
MediaRevenues (M$) 4.9 2.9 56.4 33.1EBITDA 1.1 0.2 13.3 6.2Market cap (M$) N/A N/A 2,017.9 917.1price to revenues multiple N/ A N/ A 8.9 6.9price to EBITDA multiple N/ A N/ A 37.9 147.2TotalRevenues (M$) 72.3 33.0 49.2 56.4 33.1 114.2EBITDA 15.3 2.3 3.4 13.3 6.2 17.2Market cap (M$) 298.7 354.4 134.0 2,017.9 917.1 626.8price to revenues multiple 1.0 2.7 0.7 8.9 6.9 1.4price to EBITDA multiple 4.9 38.5 9.7 37.9 36.8 9.1
Goal: to become Israel’s Leading Full
Suite Alternative Service
Provider
Technology Value added services
VoB & business integration
VoWi-Fi / Wi-MAX
IP seamless mobility
IPTV
e-Commerce & paid content
International Long Distance (ILD) & Internet Access
Portals & e-Advertising
20091997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081996
Strong Shareholders / Dedicated Management
Public ~ 42% (updated May 20, 2007)
Eurocom Communications ~ 58% Focused, communications-oriented controlling parent group Leading Israeli private communications group representing
exclusively Nokia, Panasonic, GE and more Also holds equity in radio stations, DBS TV service provider,
satellite communications, cellular and more
Closely-knit, results-oriented management team Most all level of management grows from within Experienced upper level management
Investment highlights
Leading Communications Group
Today: controls 1/3 of its markets with a continuously growing market share
Tomorrow: entering new markets
Positioned to lead rapidly growing media markets
over 30 portals & e-Commerce sites
High rate of market growth
Working from strong cash generating platform
All activities in both companies are major cash generators
Merger anticipated to save ~ US$ 11-14M in exp/inv
No difficulty in servicing loan (fin. exp. ~15% of Ebitda)
Proven management & ownership
Both company's management teams, working together with Eurocom (as controlling shareholder), have proven capable of carrying out aggressive growth / leadership strategies
Thank you!