Robi-Airtel merger 2 February 2016
Introduction
Axiata is pleased to announce that Robi is leading the Bangladeshi telecom market consolidation, with the merger of Airtel. The completion of the merger is subject to relevant approvals. Axiata has consistently emphasized its focus on in-market consolidation as a key value driver across its footprint. 1. 2. 3. 4.
In-country In-cou ntry consolid consolidatio ation n of the highly competit competitive ive and crowded crowded 6-player 6-player market market in Bangladesh Bangladesh will will improve improve long long term sustainability of the industry industry.. Robi wil willl strengthen strengthen its #2 posit position, ion, and drive drive mobil mobile e data throug through h scale. scale. Spectrum Spectr um : Merged Merged entity entity will will have 39.8M 39.8Mhz hz relativ relative e to 19.8Mh 19.8Mhz z of Robi – – 15/20Mhz is adjacent to robi Synergy: Syne rgy: Robi Robi can benefi benefitt from synerg synergy y opportuniti opportunities es such such as asset asset reuse, reuse, wider wider network network coverage coverage,, and greate greaterr sales, sales, service and distribution reach.
The transaction highlights Axiata’s prudent investment philosophy 1. 2. 3.
Valuat aluation ion is based based on sum of the parts methodol methodology ogy looking looking at at specific compon component ent of the assets assets which drive drive the specific specific valuation blocks Based on Axiata’s FY14 proforma, immediate marginal accretion accretion to revenue, neutral impact on EBITDA, and with PATAMI accretion in the medium term. On a proforma proforma basis for for Robi, the transa transaction ction is immedia immediately tely revenu revenue e accretive accretive,, whilst whilst EBITDA EBITDA and PA PATAMI will will be accretive within the 2nd and 3rd year of merger merger,, respectively
The transaction will be a first of its kind in terms of scale and complexity in the Bangladeshi telecommunications industry i ndustry.. 1. 2.
Robi’s managemen managementt team will secure immediate benefits benefits and ensure the smooth integration of Airtel’s operations to deliver a win-win for all stakeholders. Robi can also leverage on Axiata’s seasoned management team which has a successful integration track record in Sri Lanka, Cambodia and Indonesia.
Summary transaction structure
Current shareholding structure
Axiata Group Berhad
Pro forma shareholding structure
NTT Docomo Inc.
91.6%
8.4%
Axiata Group Berhad 68.7%
Robi Axiata Limited
Transaction structure
Indicative timeline and main completion conditions
NTT Docomo Inc.
25.0%
6.3%
Robi Axiata Limited
Axiata Group Group is entering entering into an agreement with Bharti Airtel to combine both companies’ companies’ mobile operations in Bangladesh.
Transaction to be funded by issuance of new equity in Robi to Bharti.
Transaction consideration
Bharti Airtel Limited
Absorption of proportionate proportionate debt into into merged entity. entity.
MergeCo is valued in the approximate range between USD1.85bn to USD2.20bn USD2.20bn
Post merger, Axiata, Bharti and NTT Docomo will own 68.7%, 25.0% and 6.3% respectively in Robi.
Conditional agreement is executed with closing subject to obtaining condition condition precedents including Bangladesh High Court, Bangladesh Telecommuni Telecommunication cation Regulatory Commission (BTRC) and Ministry of Posts & Telecommunications (MoPT) approvals.
Transaction is expected to close in 2Q 2016.
Compelling transaction rationale
1 STRATEGY: Incountry consolidation
2
3
INDUSTRY: Improves market structure SYNERGY: Synergy opportunities
4
SPECTRUM : 20Mhz (900/1800/2100)
5
FINANCIALS: Prudent transaction
With acquisition of #4 player Airtel, Robi becomes a strong #2 player with increased subscriber and revenue market share estimated estimated at ~29% and ~30% respectively respectively..
Strengthens position in key markets of Chittagong-Comilla-Dhaka Chittagong-Comilla-Dhaka (CCD) regions; significant market share growth in rest of t he regions.
Strengthens position in the youth segment.
Consolidation Consolidation in highly competitive and crowded 6-player market will result in a more rational market.
Improves long term sustainability of the industry.
Wider 2G and 3.5G network coverage in Bangladesh, and larger tower portfolio.
Wider geographic reach with extensive sales and distribution channels
Asset reuse – reuse – Tower, radio and transmission Infrastructure.
Availability Availability of an additional additional carrier in 2100MHz; 2100MHz; and 10MHz in 1800MHz 1800MHz band which which is contiguous to Robi’s current spectrum holding along with 5MHz in 900MHz band.
Prudent transaction focused on enhancing shareholders’ value value over the medium term.
Based on Axiata’ on Axiata’s marginal accretion to revenue, neutral impact on s FY14 proforma, immediate marginal EBITDA, and with PATAMI accretion in the medium term.
1
STRATEGY: In-country consolidation to create a credible and strong #2 player
Robi
Airtel
MergeCo
> 25% RMS
3
3
4
4
3
2
2
15-25% RMS
2
4
<15% RMS
4 3
1
NRMS=National Revenue Market Share Source: BTRC reports, market intelligence
4
3
Market position
1
2
INDUSTRY: The proposed merger will improve the market structure and long term sustainability of the industry Pre & Post merger CMS trend
Market subscriber trend Penetration 56%
63%
73%
76%
84%
24.5% 17.1% 13.7%
11.2% 5.8%
2011
2012
2013 Sub Base
4.8%
2014 2015 E Growth
Post Merger Legal Day 1
87%
2016 F
18.9% 7.1%
27.8%
42.7%
21.0% 6.2%
21.4%
7.3%
7.6%
25.3%
25.7%
24.7% 24
24.7%
41.4%
42.8%
42.3% 42
42.3%
2015 E
2016 F
21.6%
22.3%
7.3%
26.6%
41.2%
2011
2012
GP
2013
Bangl al al in ink
2 01 4
Airt el el
Robi
29.0%
Mer ge ged Co
Pre & Post merger RMS trend
Market revenue trend
Post Merger Legal Day 1
12.7%
12.9%
7.1% 4.5%
2011
2012
2013 Revenue
3.9%
2014 2015 E Growth
18.3% 5.8% 22.6%
53.2%
20.6% 6.8% 24.0%
22.8%
8.4% 1 9.9% 19
48.6%
48.9%
23.4% 7.4% 20.7%
23.8% 6.5% 21.7%
30.3%
4 8. 8.1%
48.1%
2015 E
2016 F
21.7%
3.5%
2016 F
2011
2012 GP
2 01 3
Banglal in ink
48.6%
2014 Ai rt rtel
Robi
Merged Co
3
SYNERGY: Combined network will have wider 2G and 3.5G network coverage to achieve best data network
Robi cov coverag erage e map (2015)
Airtel coverage map (2015)
MergeCo cove MergeCo coverage rage map (Steady state)
2G Coverage
2G Coverage
2G Coverage 3G Coverage
3G Coverage
3G Coverage
2G Sites
3G Sites
2G Sites
3G Sites
8,850
3,800
5,250
2,700
3
SYNERGY: MergeCo will have wider geographic reach with extensive sales and distribution channels, and lower cost to serve
Enhanced retail coverage
Improved quality of distribution
Lower cost to serve
SIM selling outlets likely to increase by 20-25%
Recharge POS likely to increase by 20-30%
Store footprint likely to increase by 15-20%
Stronger distributors distributors due to larger scale of business
Improved distributor viability in challenger markets
Synergies in distribution infrastructure
Lower operational and distribution costs due to increased scale
5
FINANCIALS: Axiata: Immediate accretion to revenue, and enhances shareholders’ value over the medium term
Impact on Axiata from this transaction:
Revenue
FY2014 proforma proforma revenue accretion accretion of 4%.
EBITDA
FY2014 proforma proforma EBITDA neutral.
PATAMI
PATAMI accretive ac cretive from f rom 2018 onwards.
ROIC
Marginal impact.
5
FINANCIALS: Robi: Immediate revenue accretion of 20-25% in FY16
Impact on on Robi from this transaction: transaction:
Revenue
EBITDA
FY16 accretion of 20-25%.
Marginal dilution in FY16 due to integration cost.
Accretive from FY17 FY17 onwards. onwards.
PATAMI
ROIC
Accretive from FY18 FY18 onwards. onwards.
Accretive in FY18. FY18.
Axiata has proven track record with in-country consolidation and integration We have successful integrated Dialog-Suntel, Hello-Smart and XL-Axis
Roadmap for successful integration People de development
Network op optimization
Service im improvement
• Ensure effective onboarding and engagement
• Deliver superior network coverage and quality
• Strengthen and simplify product portfolio
• Provide extensive development opportunities in a high growth environment
greater • Achieve greater economies of scale and efficiency
• Widen sales and service network
Customer experience enhancement
• Create best in class customer experience by integrating best practices from both organizations
Axiata has proven success with in country consolidation and integration Sri Lanka
Cambodia
Indonesia
Conclusion: Merger is in line with Axiata’s long term strategy, financial objectives and M&A criteria
Long term strategy
Financial objectives
M&A criteria
Long term commitment to core markets.
In line with Axiata’ with Axiata’s s M&A strategy for in-country consolidation
Based on FY14 proforma, immediate marginal accretion to revenue and neutral to EBITDA.
PATAMI accretion ac cretion from fr om 2018 onwards. o nwards.
Brownfield investment.
Management control retained.
Growth market in Bangladesh, especially mobile internet.
Thank Tha nk You www.axiata.com Contact IR at
[email protected]
