Macquarie Communications Infrastructure Group (MCG) ARQIVA PRESENTATION

Transcription

1 Macquarie Communications Infrastructure Management Limited ABN AFS Licence No A Member of the Macquarie Group of Companies Macquarie Communications Infrastructure Limited ABN Macquarie MCG International Limited EC 35258, ARBN No. 1 Martin Place SYDNEY NSW 2000 GPO Box 4294 SYDNEY NSW 1164 AUSTRALIA Telephone Facsimile Internet 19 June 2008 ASX RELEASE / MEDIA RELEASE Macquarie Communications Infrastructure Group (MCG) ARQIVA PRESENTATION MCG today will host a presentation on Arqiva to analysts and fund managers in the United Kingdom. A copy of the Arqiva presentation is attached. For further information, please contact: John Hobson Paul Gregory Head of Investor Relations Public Affairs Manager Tel: Tel: Mob: Mob: john.hobson@macquarie.com paul.gregory@macquarie.com None of the entities noted in this document is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

2 Investor / Analyst visit to Arqiva 19 th June 2008

3 Agenda Tom Bennie Business overview & achievements Digital Switchover Dave Ellis New spectrum & growth opportunities Michael Pitt NGW Integration update Key business metrics & trends Q&A Angus Blackwood Teleport tour 2

4 Arqiva Overview & Achievements Tom Bennie, CEO

5 Arqiva Businesses Arqiva Terrestrial Broadcast Satellite & Media Wireless Access 4

6 Achievements NGW acquired Competition clearance subject to undertakings Digital Switch Over adds 3.7bn to order book Wireless portfolio growth positioning for urban data BT Satellite Broadcast acquired / integration complete Public Safety Mobile Data success with Met. Police Spectrum acquired in 412 MHz & 28GHz band 5

7 Terrestrial Broadcast Multiplex and transmission services on the terrestrial platforms TV transmission: 1,154 UK national TV broadcast site network Analogue TV transmission to 99.7% UK pops Digital TV transmission from 80 sites to 73% UK pops Radio transmission: Transmission for all BBC national and local Radio services on AM, FM, and DAB Transmission for circa 300 national, regional and local Commercial Radio services on AM, FM, and DAB TV multiplexing: Own 2 of the 6 Freeview DTT multiplexes 6

8 Satellite & Media Global satellite & media content management services Scale & worldwide footprint: Acquisition & integration of Inmedia & BT Satellite Revenue growth from 35m to c. 200m in 3yrs 100+ earth stations at 8 teleports: Crawley, Chalfont, Bedford, Docklands, Martlesham, Washington, L.A., Paris Services to Broadcast, Media & Enterprise: Uplink over 400 channels worldwide Playout services Carrier & Enterprise point to point circuits Worldwide Ad hoc services for Sports & News Outside Broadcast Developing market in HDTV 7

9 Wireless Access Largest independent UK site provider Arqiva sites in London (M25) Major site provider for the 5 UK MNOs, telcos, PMR, emergency services, etc >9,000 built sites, about 8,000 are used for cellular 37,000 marketable sites, with heavy urban bias through recently acquired Macropolitan portfolio Arqiva owns ~15% of UK cellular built sites, ~18% of all UK marketed sites Ownership of rest is highly fragmented amongst 300 other major site providers, plus many single-owner sites Provider of design, build and installation services, and backhaul 8

10 Public Safety Communications services partner Managed services provider to Police, Fire, Ambulance, and government agencies: Private networks Terminals, Control rooms Engineering services Mobile Data Met. Police Radiocomms outsource partner since 1999 Airwave provides the communications pipe, Arqiva provides complementary managed services 9

11 Digital Switchover Project

12 The digital switch over Digital Switch Over UK s entire terrestrial television infrastructure which took 30 years to build being replaced and rebuilt within five years 50 years of broadcasting experience and success has led industry to adopt the Arqiva transition plan - designed to deliver minimal disruption to consumers Arqiva is contracted supplier to BBC (two multiplexes), Digital 3 & 4 and SDN Work is underway, first regions will switch over in 2008 and the last in

13 Transmitter Site Detail 1154 Transmitter Sites 51 Main Stations 200 Large Relays Small Relays 12

14 Current Analogue and Low Power Digital TV Delivery 13

15 Current Analogue TV Delivery Primary Analogue Coverage 14

16 Current Analogue TV Delivery Secondary Analogue Coverage by relay 15

17 Current Analogue and Low Power Digital TV Delivery Low Power Digital Coverage 16

18 High Power Digital Delivery at DSO Analogue and low power Digital shut down 17

19 High Power Digital Delivery at DSO High Power Digital Turned on 18

20 High Power Digital Delivery at DSO High Power Digital Turned on 19

21 DSO Timetable - Current 2008/09 20

22 DSO Timetable /09 21

23 DSO Timetable /09 22

24 DSO Timetable /09 23

25 DSO Timetable /09 24

26 DSO Timetable /09 25

27 DSO Programme Summary 15 regions, 1154* sites, 50% Arqiva, and 50% NGW Region Sites Arqiva NGW Main Relay Main Relay Switchover Border Jun-09 West Country Nov-09 Granada Nov-09 Wales Mar-10 STV North Oct-10 West Mar-11 STV Central Apr-11 Central Sep-11 Yorkshire Sep-11 Anglia Nov-11 London Apr-12 Meridian Jul-12 Tyne Tees Oct-12 Ulster Nov-12 Channel Islands Mar-13 TOTAL * Note 4 sites transmit in both horizontal and vertical polarisation making

28 DSO execution Caldbeck (Border region) 27

29 New Caldbeck mast Membury 152.4m Telecom Tower 190.5m Eiffel Tower 316.9m New Caldbeck 337m 28

30 New mast: facts and figures Height 337.2m (existing mast 314.3m) Total weight of steelwork Approximately 300 tonnes (existing mast approximately 100 Tonnes) Total volume of concrete in foundations 1110m3 Total Weight of Concrete in foundations 2676 Tonnes Design wind speed at top of mast 68m/s (155mph) 15m total capex investment 29

31 Caldbeck site development programme New foundations Autumn 06 Mast build complete September 07 Antenna build Summer 08 Transmitter installation complete March 09 Relay station re-engineering complete April 09 Switch over June 09 30

32 New Caldbeck mast construction Video footage 31

33 Spectrum & growth opportunities Dave Ellis, Strategy Director

34 Growth Agenda DSO delivery Integration of NGW Leveraging new scale Spectrum opportunities Separation from NTL Building Satellite business Planning & winning DSO Building Arqiva 800m 600m Arqiva Revenue Growth E 400m 200m 0m E (exc NGW) 2008E (inc NGW) 33

35 UK Mobile market evolution & growth UMTS (3G) Introduced 2003 >80% UK coverage GSM (2G) Introduced 1991 Continued growth >90% UK coverage HSPA (3.5G data) Introduced 2005 <20% UK coverage GPRS (2.5G data) Introduced 2001 >90% UK coverage WiMAX (data) Introduced 2007 <5% UK coverage TACS (Analogue Mobile Phone System) Introduced 1981 Decommissioned Long Term Evolution In development Initial adoption Maturity In decline 34

36 Digital Dividend Review (DDR) Digital Switchover (DSO) releases valuable UHF spectrum Today post-dso Spectrum for Analogue TV & 6 DTT muxes Currently non-broadcast use Spectrum for 6 DSO muxes Spectrum released by DSO Currently non-broadcast use 35

37 DDR technology agnostic auction New spectrum creates a breadth of infrastructure opportunities Lower Block applications: Digital TV multiplex (SD/HD) Mobile TV Local TV Wireless broadband Wireless microphones Low power applications Upper Block applications: Digital TV multiplex (SD/HD) Local TV Mobile telephony Wireless broadband / WiMAX Wireless microphones Low power applications 36

38 New spectrum is not confined to the DDR Ofcom focus on release of best use of a scarce asset Capacity 3,000 2,500 Planned Spectrum Auctions Radar Propagation Refraction 2,000 MHz 1,500 1,000 UHF UK allocation Mobile / WiMAX Bluetooth DECT S-DAB Aeronautical Mobile Digital PMR Defence T-DAB TV Analogue radio Various 37

39 Near-term spectrum releases New infrastructure opportunities Band Auction Possible Applications L-Band May 2008 Mobile TV / Satellite / Backhaul 2.6GHz 900MHz late 2008 / early / 2010? 3g expansion / 3g LTE / WiMAX Re-farming of 2g spectrum DDR UHF for DTT, Mobile TV, 3g, WiMAX Multi Public Sector Spectrum Holdings Review 38

40 NGW Integration Michael Pitt, CFO

41 Arqiva / NGW merger Brings together the two halves of the single national TV network DSO single point ownership de-risks the programme Arqiva becomes a Freeview multiplex operator Wider growth opportunities, doubles the size of Arqiva Arqiva re-financed, funding secured for DSO and growth Hold Separate continues until final signing 40

42 UK Competition Commission update - 1 Current status of CC findings Conditional approval of behavioural remedies package. Still subject to finalisation but largely points of detail now Divestment option (divestment of NGW broadcast business only) remains until undertakings made binding. Hold separate in place til then Three week consultation process before final draft of undertakings issued. No material changes expected, but possible further customer comment No firm timings or drop dead date. Earliest expectation of Regulatory Settlement is late July. Hold separate would then lift, and business integration commence - synergies will be achieved later than in acquisition plan, but customer discounts delayed too 41

43 UK Competition Commission update - 2 Main terms of Undertakings reminder No significant changes since last investor briefing. Discount levels unaltered Pricing: 17% off existing radio MTS/NA contracts; 3.25% off existing analogue and low power digital TV contracts Specific fixed price reductions on all high power DTT MTS/NA TV contracts Contract renewals to be on same terms as existing, or customer can choose cost-orientated FRND terms Enhanced minimum service levels and service credits for all customers Super credit regime (up to 10% of annual contract value) in place of contract termination rights Appointment of independent Adjudicator to address issues raised by customers and inspect Regulatory Accounting Option for customers to acquire stranded assets at depreciated replacement cost at the termination of contract Impact on bank facilities Current expectation is that a repayment of between 2 and 3% of drawn facilities will be repaid out of existing funds upon Regulatory Settlement 42

44 Integration summary financial position Deferral in the programme caused by delay in lifting of Hold Separate Majority of one off costs are incurred in Year 1 Net cash costs in Year 1 are expected to be in the region of 20-30m, costs include: staff severance, outplacement, retraining, relocation & redeployment property costs integration of finance systems managing process change Early synergy benefits will be in payroll and other operating costs 43

45 Financials & commentary Michael Pitt, CFO

46 Arqiva Financial Results (MUKBHL) BT SBS acquisition drives revenue growth 6 Months to 31 December m m Change Terrestrial Media % Satellite Media % Wireless Solutions % Public Safety (19.9%) Revenue % COS - Fixed Space Capacity 2 (8.1) (54.3) 567.5% COS - Other (42.8) (45.4) 6.2% Other operating charges 3 (53.2) (60.8) 14.3% Total Costs (104.1) (160.5) 54.2% EBITDA % EBITDA Margin 36.5% 28.1% (8.4%) 1 Impacted by the termination of ntl contracts 2 Fixed Space Capacity is cost of transponder leases for both broadcast and onward sale of capacity as standalone product figure excludes 4.4m one-off costs associated with NGW and UK Competition Commission inquiry 45

47 Satellite & Media Managed decline of space segment & international growth will grow margins Managed decline of low margin space segment contracts, coupled with growth in uplinking and other services will drive improved margins Significant beach-heads now established for growth in a global distribution business; 32% of revenue now derived outside of UK Space Segment Revenue Satellite Revenue FY08E 60m 50m USA & Other 15% 40m 30m 20m Europe 17% 10m UK 68% 0m 2008E 2009E 2010E 2011E 2012E 2013E 46

48 Terrestrial Broadcast high-power DTT Contracts Long term high-power DTT contracts (c.25 years) with BBC, D3&4 and SDN with combined order book of c. 3.7bn BBC high-power DTT contract: Contract to 2031; Order book c. 2.2bn; Fixed price contract for the provision of network access and MTS; RPI applies from 2008 to 2014, thereafter RPI-1.5%; Electricity is a pass-through cost, increases are at BBC risk D3&4 & SDN high-power DTT contracts (contracts have broadly similar terms): Both contracts to 2034; Order book of c. 1.1bn for D3&4 and 480m for SDN; Contracts are for the provision of network access and MTS (RPI-2%)/2 applies from 2008 on MTS, with RPI from 2006 on network access; Electricity is a pass-through cost, any increases are at customer risk Labour (field maintenance) is likely to rise by wage inflation, (broadly matching RPI), however efficiencies are expected as newer equipment is likely to require less ongoing maintenance 47

49 DSO Programme Capex Overview Expenditure Phasing Entire TV DSO Programme expenditure forecast at c. 700m Network Access & MTS Arqiva & NGW Financed via debt facility Combined NGW Arqiva Forecast expenditure Arqiva & NGW, to June m / 13% entire programme 0 FY06 FY07 FY08E FY09E FY10E FY11E FY12E FY13E Cumulative DSO Capital Expenditure Forecast expenditure to June 2008 behind target due to impact of inclement weather over 2007 summer period, however acceleration measures are in place to maintain the schedule FY06 FY07 FY08E FY09E FY10E FY11E FY12E FY13E Combined NGW Arqiva 48

50 Arqiva debt facilities As at 31 December 2007: Total bank facilities of 3.4bn, of which 2.6bn drawn Undrawn capex facility of 682m available to fund DSO and growth opportunities Sufficient headroom on bank covenants EBITDA: Net Debt ratio of 8.9 (lock up requirement < 11.75) Cashflow: interest cover ratio of 1.65 (lock up requirement > 1.25) 49

51 Business Summary Blue chip customer base, reputation for customer service & Order Book gives security of underlying revenues NGW integration will realise synergies New spectrum gives opportunities for growth 50

52 Q&A