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ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road Applications Paolo Cerini (Bain & Company) Business Plan.

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Presentation on theme: "ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road Applications Paolo Cerini (Bain & Company) Business Plan."— Presentation transcript:

1 ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road Applications Paolo Cerini (Bain & Company) Business Plan Analysis

2 2 Business Model: EETS Service Provider role EGNOS/GALILEO OPERATING COMPANY EETS PAN-EUROPEAN SERVICE PROVIDER OPERATING COMPANY GNSS SERVICE PROVIDER Guaranteed service END USER/CUSTOMER (Private + Business) Service bundle Service fee Fee per bundle TOLL CHARGER 1, 2…N CONTENT PROVIDER TELCO % Fee on toll collected Toll Collected Payment for usage INFRASTRUCURE OWNER PUBLIC INSTITUTIONS Service/product flows Economic flows Fee per Add-on Add-on Service Toll Collected The EETS Service Provider has a key role as it is the link between all the players along the Value Chain and it is involved in all economic and service exchanges

3 3 Offer Structure Private Business Basic Package Add- On HW Services Smart OBU without GUI Wireless GUI EFC E-CALL EFC E-CALL Fleet Management/ Tracking and Tracing Theft management Traffic info system Navigation services/ active re-routing HW Services GINA Service Provider offer has been structured as a basic package with a set of add-on services (VAS) that can be purchased separately Two customer segments have been identified: Business (i.e. commercial vehicles) and Private (i.e. passenger cars) Theft management Traffic info system Navigation services/ active re-routing

4 4 Addressable end-user market Analysis perimeter: all the countries belonging to EU27. Business Case has analysed last available data relevant to the European market of cars, buses, light commercial vehicles, light, medium and heavy trucks, using CAGR of last 4 years to project data Business Segment Potential Circulating trucks in Europe Private Segment Potential Circulating cars in Europe

5 5 Market Penetration Commercial Strategy -Area 1- Central-Southern EU: Germany, France, Italy, Spain, Portugal and Austria -Area 2 -Benelux & Great Britain: Netherlands, Belgium, Luxemburg, UK, Ireland -Area 3 - Northern Europe: Denmark, Sweden, Finland, Latvia, Estonia and Lithuania -Area 4 - Eastern Europe: Poland, Czech Rep., Slovakia, Slovenia, Hungary, Romania and Bulgaria -Area 5 - Mediterranean Island: Greece, Malta, Cipro In order to define a progressive penetration plan, five geo-clusters have been defined using the following criteria: - Geo-adjacency and Trans European Network (TEN-T) priority axis - Actual Road Charging scheme - Upcoming Road Charging projects Area 2 Area 1 Area 3 Area 4 Area 5

6 6 Revenues Generation Potential Business + Private Segment Business SegmentPrivate Segment Price Market Penetration Price Market Penetration Market Share Total Potential Market (Mln) Total Market Penetration (%)

7 7 Revenues streams evolution Business + Private ( ) Revenues streams break down Launch of GINA Offer for private segment User-fee Business Add-on VAS Business Motorway % fee Urban % fee User-fee Private Add-on VAS Private End-user fees remain the most important revenues stream accounting for ~65% of total revenues Private segment revenues up to 30% of total revenues

8 8 Cost Structure evolution Business + Private ( ) The cost structure remains approximately constant along the Business Plan horizon Cost structure at steady-state condition (2030) amounts to ~ 1080 M€ Telecom costs are the largest cost items, for ~55% of total costs (including VAS)

9 9 EBIT at steady-state condition Business + Private (2030) Steady-State (2030) EBIT is around 16% of total revenues Telco costs are the largest cost item accounting for about 46% of total revenues, followed by OBU costs accounting for about 14% of total revenues EBIT build-up in 2030 Variable Costs Fixed costs

10 10 Free cash flow analysis Business + Private Operative Free Cash flow positive after 6 years from start-up Cumulative FCF positive from 2025 (10 years after start-up) Operative Free cash flow Launch of GINA Offer for private segment

11 11 Sensitivity analysis Business + Private segments 485 M€ M€ M€ M€ 309 M€ 147 M€ Base Case NPV* Base case plus (+10 % penetr.; +5% price) Base case plus (+10 % penetr.; +5% price) Low Penetration (-30 % penetr.) Low Penetration (-30 % penetr.) Worst case (-20 % penetr.; -10% price) Worst case (-20 % penetr.; -10% price) Best case (-30% Comm. cost Best case (-30% Comm. cost Best case plus (-30% Comm. cost; free OBU from 2021) Best case plus (-30% Comm. cost; free OBU from 2021) * Discounted at 8% WACC; Economic Conditions M€ M€ M€ M€ Positive FCF 29 B€ M€

12 12 Conclusions Significant business opportunity with a good profitability in the long term (EBITDA at regime condition about 20% of Revenues) with two major issues:  Long break-even period that requires a significant start-up financial stress (cumulative FCF positive after 10 years)  High Sensitivity to price change Monthly end-user fees are by far the most important source of revenues: toll chargers % fee have a very limited impact Largest cost items are Telco costs followed by OBU related costs:  Likely to decrease (best case scenarios very probable)  Alliance with Technology and Telco providers is key Value Added Services represent a good opportunity to enlarge the business beyond toll collection service

13 13 Next Speps Customization of the general Business Plan conducted so far for a specific potential service provider Detailed analysis with Service Providers of specific Value Added Services to be offered as a bundle or on demand


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