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NASDAQ GM / TASE – 100 INDEX symbol: IGLD Eli Holtzman, CEO Doron Turgeman, CFO Q4 2006 Internet Gold Leading Israeli communications and Interactive media Group
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2 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.
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3 History April 92’ - Euronet Golden Lines when Communications market starts liberalization process. 1st line of activity – Audio text. Terminated after 2 yrs. 1993 - EDC - Euronet Digital Com. – private data lines via satellite - EIC - Euronet Int’l Com. – limited service via call back - EDC / EIC terminated ~ 1996 Jan 96’ – commence ISP service Aug 99’ – 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 05’ – Dual listed on TASE (Dec. 06 – enters TA100 index) Jan 06’ – re-org & re-brand to Smile - GT => SCL / GM => SML Aug. 06’ – acquisition of 012 Golden Lines from the Fishman Group January 2007 – 012 deal closing. Actual merger starts
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4 Corporate Structure
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5 Committed to growth… 2007 - crossing the 250 M$ revenue line 2006 – –Build-out of International VoIP Telephony services – –Expansion of Internet Advertising – –Expansion of Business Services – –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 Organic CAGR = +20% M&A CAGR = +47% * post-merger
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6 Israel’s telecommunications market Source: Israeli MoC 2005 total – US$ 5.3 B In US$ Billion
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7 Competition Business Overview and Strategy cont. 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
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8 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 $/yr savings
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10 1 + 1 = 3 Multiple Synergies between the two companies Global data networks Roaming services Call centers Fixed domestic telephony Pre/post paid cards TDM platform Value Added Services Biz services Hi level integration Hi level data security Dealer network e-Media & e-Commerce
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11 The Merged Company: A Communications Powerhouse Revenues 81.2169.3250.5272 EBIT 7.619.827.440-43 EBITDA 12.73547.760-63 Employees (February 28, 2007) 7281,1601,888Synergy Total 2006* * pro-forma F/Y - 2007** ** company’s goals for the 1st full year of merged communications operations SCL communications activities only In US$ millions
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12 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) = cash generator
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13 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 ~ 15k 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
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15 2006/2007: Growth of Online Advertising continues Source: PWC IAB Internet Advertising Report, Sept. ‘05 US Internet Advertising CAGR = +21% Source: Market surveys & IGLD estimates Israel Internet Advertising CAGR = +38% & company's estimates * * 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 rating Internet Advertising in Israel is currently > 6-7% of overall media spending (~ $900M in 05’) - growing fast SEARCH - additional growth potential: US search revenues - 40% of total e-Adv. much higher than in Israeli market
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16 Smile.Media – Content & Portal Brands Property IGLD’s ownership Description msn-Israel 50.1% SML (49.9% MS Corp.) Hebrew language portal Messenger, Hotmail Israel & MSN Search Israel start100% General portal & Search engine nirshamim100%Academic portal zahav.ru100%Russian language portal V-games100% Games content portal TheMoney100% Lead-generation financial portal tipo52%Children’s portal seret51% Cinema portal yahala51%Arab-language portal Radius100FM50%Leading Israeli radio station portal SML Network Exclusive marketing rights E-advertising network in 4 portals netex Search engine & directory goopYouth portal
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17 Leading e-Commerce Brands PropertyIGLD’s % Description P1000 100% One of Israel’s top 4 e-Commerce sites Outlet for >100 of Israel’s largest consumer product suppliers Growing revenues, positive EBIT Low-risk commission model with fulfillment directly from suppliers LMT 50% Leading Israeli on-line travel site getprice 51% Leading Israeli price comparison site dbook 50% Leading Bookstore Paid content marketing rights Online magazines, newsletters, recruitment & jobs search and other content services
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19 Revenues US$ in millions EBIT Quarterly Growth US& in millions Two pure-play subsidiaries
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20 Revenues US$ in millions EBIT Two pure-play subsidiaries Annual Growth * Ebitda goal for 2007 ~ 71 / estimate for finance exp. ~ 9.5
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21 Effective Balance sheet overview* Total assets 332 Total liabilities 287 Total shareholders’ equity 45 in US$ millions Total Debt Short-term 70 Total Debt Long-term 71 Total effective finance Debt 141 * Post bonds issuance
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22 Comparables Interesting market opportunity… KCSA to send new slide
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24 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 2009199719981999200020012002200320042005200620072008 1996
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25 Strong Shareholders / Dedicated Management Public ~ 37% Eurocom Communications ~ 63% 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
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26 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!
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