PT Link Net Tbk Company Presentation August 2017 - 1H 2017 web
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Table of contents 1. Company overview 2. Key investment highlights 3. Key financial overview 4. Appendix 1
Link Net – The gateway to Indonesian consumer homes Targets large and Leading NGBB(a) fast growing affluent provider in Indonesia segment(b). Large with ~1.9m Homes subscriber base (~1.1m passed and >10yrs RGUs) with low and track record stable churn Innovation led Strong enterprise premium product portfolio offering offering supporting with the government, premium ARPUs financial institutions with 97% (With IDX as a bundling rate flagship customer) Strong growth Technology trajectory – 18% neutral, future proof revenue CAGR(c) state-of-the-art with 59% EBITDA network margin along with abundant with resilient capacity balance sheet Source: Company data as of 1H 2017 (a) NGBB: Next Generation Broadband (b) 4.9m addressable homes – Based on addressable market of AB SES households as defined by Nielsen (2015 definition of SES classification) (For Greater Jakarta, Greater Surabaya and Bandung) 3 (c) 2014 – 2016
NGBB provider of SCALE, operating in the most attractive metropolitan areas of Indonesia Total addressable (3 cities) AB HH’s: 4.9m(a) Medan Total LN 1H 2017 homes passed: 1.90m(c) • Addressable households(a) : 292k Total cable length 1H 2017: 24,861 km(c) Batam • Potential Homepass(b) :53k Bandung 1 5% • Addressable households(a): 318k • Homes passed: ~97k 1 18% • Estimated coverage ratio: ~31% Greater Surabaya • Cable length: ~985km • Addressable households(a): 909k • Homes passed: ~349k Greater Jakarta 1 77% • Estimated coverage ratio: ~37% • Addressable households(a): 3,644k • Cable length: ~3,120km • Homes passed: ~1.46m • Estimated coverage ratio: ~40% • Cable length: ~20,756km Bali • Cable length: ~100km • Focus on hotels Source: Company data as of 1H 2017 1 City homes passed / Total homes passed (a) Based on addressable market of AB SES households as defined by Nielsen (2015 definition of SES classification) – For Greater Jakarta, Greater Surabaya and Bandung (b) Based on internal company data survey (in absence of Nielsen) (c) For Greater Jakarta, Greater Surabaya and Bandung 4
Key investment highlights Large and attractive market in one of the most underpenetrated and fastest growing 1 broadband market globally(a) 2 1 A leading NGBB provider of scale with a proven and credible track record Best-in-class, future proof state-of-the-art network with abundant capacity for 1 3 future data growth Superior and innovative product offerings cementing premium ARPU position 4 1 and driving IOT(b) adoption 5 1 Best in class financial profile with potential leverage capacity Highly experienced management team with strong shareholder support 6 1 (Lippo group and end-to-end TMT ecosystem) (a) Most underpenetrated and fastest growing broadband market globally out of the top 20 largest global economies – Media Partners Asia (b) IOT – Internet of Things 6
1 Indonesia – A large & exciting TMT market on the cusp of explosive growth Rapid population and GDP/capita growth in Indonesia(a) Increasing urbanisation with GDP concentration in cities(b) (m) Increasing urbanisation Urban vs rural GDP concentration Real GDP per capita (US$) % of national population % of national GDP 8,248 11,134 11,790 12,500 13,230 13,920 14,740 Urban Urban 53% Population (m) 71% 74% 86% +18% 265 268 +12% 256 258 261 263 47% 243 Rural Rural 29% 26% 14% 2010 2015 2016 2017 2018 2019 2020 2010 2030 2010 2030 Explosive growth in Indonesia’s Broadband and Pay TV Underpenetrated Broadband and Pay TV segments(c) markets(c) Broadband penetration (2016) Pay TV penetration (2016) Broadband Pay TV (Subscription revenues(d) (US$m)) ADSL NGBB DTH IPTV Cable DTT (%) 55% 36% 441 778 1,526 227 539 742 (No of subscribers, ‘000) ~5.0x ~4.0x 11% 9,270 1% 9% 0.4% 2% 5,750 5,674 2% 7% 4,372 7% 1,982 1,666 IN APAC average IN APAC average 2011 2016 2020 2011 2016 2020 (a) Source: EIU (b) Source: McKinsey Global Institute (c) Source: Media Partners Asia Asia Pacific includes Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam 7 (d) Subscription revenue is defined as the revenue earned from recurring subscription in exchange for the provision of broadband and Pay TV services to subscribers
1 Targeted expansion strategy into high GDP and population areas focusing on the most lucrative and fastest growing demographics Operating in provinces with high GDP Operating in cities with high population % of Total national 17% 15% 13% 3% population 31.7 7.1 2.5 255 GDP (millions) 2015 GDP (US$ bn) 150 Per km2 in 2015 127 79,432 115 30 18,378 14,745 134 Jakarta East Java West Java Rest of (a) (a) (c) Indonesia(b) Greater… Greater… Bandung Indonesia Households in Link Net's operating cities (d,e) 9.2% A Fast growing AB segment A 27.9% 17.8% B 23.2% C AB segment less price sensitive and very upgradable B 35.0% 49.8% D C Unsatisfied demand for quality broadband and premium 22.8% entertainment experience D 14.4% 2010 2015 Affordable entry level packages also available for C1 segment AB : 27% AB : 63% Source: Media Partners Asia, Biro Pusat Statistik (BPS), Nielsen (Assuming 4 pax per household) and Company data (a) Key cities in East Java include Gresik, Bangkalan, Mojokerto, Surabaya, Sidoarjo, Lamongan and West Java includes Bandung Link Net target markets (b) Rest of Indonesia figure is the average of the remaining top 12 provinces as per BPS excluding Jakarta, East Java and West Java (c) Greater Jakarta include Bogor, Depok, Tangerang, Bekasi. Greater Surabaya include Malang, Gresik, Sidoarjo (d) Cities include Greater Jakarta, Greater Surabaya and Bandung 8 (e) Based on Nielsen 2015, Monthly expenditure (A – IDR5m and above, B – IDR3m to 5m and above, C – IDR2m to 3m, D – IDR1.5m to 2m)
2 The preeminent NGBB provider in Indonesia, with proven track record and driving adoption of Internet of things …with Link Net as a leading provider of broadband and IP Large and fast growing market with strong demand(a)… services driving the adoption of Internet of Things… % ADSL Subs. of total BB subs 90% 90% 75% 52% 1Gbps 9,270 2016-20 Telkom P0 3 100 CAGR : Mbps Mbps 4,470 32.5% 5,750 …and the anchor provider to affluent AB households in Indonesia’s top 3 metropolitan cities 1,450 3,814 Others(c) Homes Passed(c) 414 Link Net 1.9m 1,982 240k 2.8% P0 193 4,800 ADSL & FTTH 17m 4,300 3,400 Others(c) 635k Subs. 1,789 547k market 3 Key Metropolitan Cities share(b) P0: FTTH 2011 2014 2016 2020 1,370k (d) Across 15 cities ADSL (000) Cable & FTTx (000) Note: NGBB defined as Next Generation Broadband (a) Source: MPA 1H2016 (b) Source: TLKM and Link Net based on 1H 2017 earnings call report / disclosure (c) Source: “Others” Homes passed data sourced from news articles and internal company data. Subs market share “Others” data from MPA (MNC Play, Biznet, MyRepublic, and Indosaat Ooredoo 9 (d) Source: calculated based on 1H2017 earnings call percentage of fiber versus non-fiber subscriber
2 Established presence provides foundation for premium ARPUs and core subscriber base Despite increasing competition, Link Net has continued to expand its network, enlarge its subscriber base whilst maintaining its premium ARPU Increasing penetration rate despite increased competition and Increasing homes passed enlarged network size Coverage ratio(1) 29% 34% 37% 39% 1,826 1,909 ('000) 1,673 1,433 28.5% 28.7% 27.4% 27.3% 2014A 2015A 2016A 1H 2017A 2014 2015 2016 1H 2017 Link Net broadband penetration Growing RGUs with stable churn Maintaining premium ARPU vs peers(2) ('000) (IDR '000) 2.2% 2.3% 2.2% 2.3% 415 407 419 402 Premium 1,024 1,075 ARPU 890 344 341 vs peers 755 503 528 310 433 363 392 457 521 547 2014A 2015A 2016A 1H 2017A 2014 2015 2016 1H 2017 Broadband Cable TV Churn Link Net P0 Source: Company data and various public sources (1) Coverage ratio derived by dividing homes passed by 4.9m estimated addressable homes in Greater Jakarta, Greater Surabaya and Bandung (2) For P0, ARPU represents the last quarter ARPU in 2015 and 2016 10
3 Solid technology ecosystem with state of the art network Future proof network with abundant bandwidth capacity and high level of network redundancy Headend Distribution hubs Node Subscriber premises ~25,000 km of cable across Indonesia Fully owned fiber backbone and last mile(a) Has access to a total of 780 Gbps of International Offering a superior quality network: bandwidth capacity - Low average home-to-nodes ratio (~360 homes per node)(b) Owns and operates >5 Tbps fiber lines to Singapore - HFC: Fully DOCSIS 3.0 enabled capable of speeds up to gateway 1Gbps. Easily upgradeable to DOCSIS 3.1 - FTTH: In white areas for speeds >10 Gbps Source: Company information - Innovations to reach less densed areas (a) Limited exceptions for certain last mile owned by property developers (b) Source: Media Partners Asia 11
Winning price–value range of broadband and video 3 content packages Catering to a large addressable market from a large C population to a fast growing AB segment 1 Gbps 167 channels 5,100 IDR '000 (US$)(1) 200 Mbps 167 channels 3,139 100 Mbps 167 channels 75 Mbps 2,195 (US$364) 167 channels 1,669 32 Mbps 20 Mbps 167 channels (US$224) 4 Mbps 12 Mbps 144 channels 869 103 channels 122 channels (US$157) 589 (2) 399 (US$119) 239 (US$62) (US$28) (US$42) (US$17) Family D'Lite Elite Supreme Maxima Ultimate Infinite Mach 1 1 2 3 4 5 6 7 8 n Entry-level n Basic package n Incremental add-on n Package targeted n Designed for heavy n Highest tier packages, offering the highest speed possible combined package offering offering for packages which for consumers who users of high with dedicated premium customer and technical service for users that for subscribers with subscribers with deliver faster are looking for full speed internet who demand the best service available basic Internet and basic Internet and Internet and more access to high require full access TV Channel needs TV channel needs TV channel genres speed Internet and to all channels all channels Profitability margins are similar across all packages from entry-level to most premium tier package Source: Company data as of Jul 2017 (1) USD/IDR exchange rate of 14,000 (2) Wireless Docsis 3.0 Modem (previously Docsis 2.0) and HD STB for FAMILY and D’LITE & Wireless Docsis 3.0 Wi-fi Modem and X1 4K STB (previously X1 HD STB) for ELITE up plus FirstMediaX 12 Note: All price is including CPE rental All price exclude 10% VAT
4 Premium ARPU maintained based on proven track record of product innovations and upselling Combination of push and pull strategies Superior innovation-led product strategy to drive conversions and upselling (No. of upgrade transactions each year) 2016 2015 1 Gbps 200 329,031 Mbps 2013 265,560 100 Mbps 2012 162,981 30 Mbps 2016 • SMART STB X1 4K 2009 (Android) 10 Mbps • STB 4K Ch 2007 • Fix – Wireless Bundle 2014 2015 2016 3 Mbps • My FirstMedia App 2015 • FM SMART LIVING • FMX • SMART STB X1 197,570 2013 2014 HD (Android) • FM Go (OTT) • FM TV • Speed Booster Anywhere 125,483 1H 2016 1H 2017 Multi-Screen Interactive Ultra High Definition Bringing Convenience TV Anywhere SMART Living Experience with next Resolutions to Subscribers via with FMX generation cable OTT STB My FM App Source: Company data Note: Upgrade transactions refers to any type of upgrade transaction a Link Net subscriber enters into which results in his overall ARPU increasing 13
5 Highly attractive financial profile with potential leverage capacity Revenue by segment (IDR in billions) 842 719 57 47 2,954 308 262 2,564 199 2,136 165 477 1,086 410 144 940 2Q 2016 2Q 2017 795 Broadband Cable TV Others 1,670 1,460 1,651 1,197 1,393 102 85 607 2014A 2015A 2016A 519 Broadband Cable TV Others 942 789 Source: Company information 1H 2016 1H 2017 Broadband Cable TV Others 14
5 Highly attractive financial profile with potential leverage capacity EBITDA Net Profit (IDR in billions) (IDR in billions) EBITDA margin (%) Net Profit margin (%) 59.8% 59.1% 28.5% 29.7% 976 490 834 397 1H 2016 1H 2017 1H 2016 1H 2017 Capex (IDR bn)(1) Net Cash with potential leverage capacity(2) (IDR in billions) 154 452 408 531 377 1H 2016 1H 2017 Total Cash Total Debt Net Cash Source: Company information (1) Capex represents additions to property and equipment (2) Total cash and debt position as of June 30, 2017. Total debt mainly comprises vendor financing 15
Section 3 Key financial overview
Profit and loss summary As at June 30 2Q ended June 30 (IDR bn) 1H 2016 1H 2017 2Q 2016 2Q 2017 Revenue 1,393.1 1,650.6 719.3 841.6 EBITDA 833.6 975.6 434.8 502.6 D&A (294.8 ) (314.1) (149.7) (158.6) Operating Profit 538.8 661.5 285.1 344.0 Margin % 38.7% 40.1% 39.6% 40.9% Finance Income 6.6 7.7 3.6 3.6 Finance Cost (17.5) (17.8) (10.4) (9.9) Share in Loss of Associate - - - - Profit Before Tax 527.9 651.4 278.3 337.7 Tax Expense (130.5) (161.2) (68.8) (83.6) Net Profit 397.4 490.2 209.5 254.1 Margin % 28.5% 29.7% 29.1% 30.2%
Balance sheet summary As at Jun 30 As at Jun 30, (IDR bn) 2016 2017 Current Assets Cash and Cash Equivalents 453.9 531.0 Trade Receivables 291.3 419.5 Total Current Assets 782.4 1,006.7 Non-Current Assets Property and Equipment - Net 3,663.5 3,916.9 Total Non-Current Assets 3,963.1 4,286.0 Total Assets 4,745.5 5,292.7 Net Cash of IDR 376.9 bn Current Liabilities Payables 122.1 247.9 Current Maturities of Long-Term Debt & 38.7 42.4 Finance lease payable Total Current Liabilities 566.6 890.5 Non-Current Liabilities Long-Term Debt – Net of Current Maturities 143.1 111.8 Total Non-Curent Liabilities 245.4 235.2 Total Liabilities 812.0 1,125.8 Total Equity 3,933.5 4,166.9 Total Liabilities and Equity 4,745.5 5,292.7
Section 4a Appendix
Introduction: Link Net’s deep and experienced management team Irwan Djaja, Chief Executive Officer § Over 23 years of experience in auditing, consulting and corporate finance in various industries § Holds two doctorate degress in Management and Law § Earned numerous accounting professional certifications § Has numerous leadership roles in leading successful companies under Lippo’s TMT pillar to growth. Previously CFO and CEO First Media, CEO Berita Satu, CFO Link Net Timotius Sulaiman, Chief Financial Officer Meena Adnani, Content Director § Over 21 years of experience in auditing, accounting in big five accounting firms, various § Over 23 years of experience in media, content and marketing and legal councel leadership experience roles in multimedia and telco companies including Orange TV, § Previously EVP, Content Development and Business Affairs in First Media, Tbk Nokia Siemens Network, and Mobile-8 Telecom § Holds a master degree in Management § Previously, Director and CFO in PT Internux (Bolt! 4G LTE) Sutrisno Budidharma, Sales Director Desmond Poon, Chief Technology Officer & Product Director § Over 27 years of extensive experience in leading product sales teams in banking and § Over 22 years of experience in technology, media and networked branch management in the banking sector § Previously VP/Head, Home Solutions and Architecture (SHINE) in StarHub Ltd § Previously Business Development and Direct Sales Director in PT Link Net, Tbk Singapore Liryawati, Chief Marketing Officer Agus Setiono, New Roll Out (“NRO”) Director § Over 23 years of experience in area of marketing, sales and retail FMCG, major § Seasoned leader in operations, marketing in major foreign bank with more than 28 electronic company, and telco years of experience in technology, media and networks § Previously worked in Philip Morris International, Coca Cola, Samsung Electronics and § Previously VP of Cards Marketing in Citibank Indonesia was a CMO for PT Internux (BOLT! 4G LTE) Edward Sanusi, Operations Director Ferliana Suminto, Director of Corporate Resources § Over 21 years of experience in managing technology related business models for § Seasoned leader with more than 23 years of experience in finance, business software development, ISP, Cable TV, Social Media and system integration development, information and communication technology, including an exposure in § Previously Director/CEO in PT Plexis Erakarsa Pirantiniaga (PlasMedia) UPH and PT. Matahari Putra Prima § Previously CFO in PT. Indonesia Media Televisi. Complementary skills and expertise with strong domestic and international track record Source: Company information 20
Key corporate milestones Jun 2011 • CVC invested in Link Net • Link Net acquired certain 2014 - 2017 network and related assets 2007 – 2008 from First Media Launch of broadband services and bundled packages 2002 Sole provider to IDX of remote trading network 2000 2013 Launch of Internet 2014 - 2017 services • 2014: Fully marketed secondary placement (Oct 2014) • 2016: Offer 1Gbps high speed 1999 Internet connectivity 2011 Launch of Cable 2013 • 2017: Shareholding (As of Jun TV services 30, 2017) 2010 • 1 million homes passed – First Media: 34.8% • Expanded network to Greater Surabaya and – CVC: 34.4% Bandung – Public: 30.8% 2010 • First to offer 100 Mbps to Launch of HD 1999 2000 2002 2007 – 2008 the residential sector Network ownership under First Media Network ownership under Link Net 2010 Jun 2011 2012 2013 2014 2015 2016 1H17 Number of homes passed (‘000) 506 655 933 1,194 1,433 1,673 1,826 1,909 Source: Company information 21
Link Net industry accolades and awards Service Quality Indonesia WOW Brand Top Telco Award 2017 2015 & 2017 2014-2016 • Diamond (First Rank) •Silver Champion • Top Fixed Internet Pay TV Category • for Pay TV Category, Category • by Service Excellence • 2015 & 2017 • From Itech Magazine and • Gold Champion for Fixed ISP Magazine • Carre-CCSL Category, 2015 • From Markplus Inc Indonesia Most Innovative Customer Loyalty Award Net Business Award 2017 Promoter Leader Award 2016 Advertising, Printing, and Media Category Pay TV & Broadband/Fixed ISP category From Warta Ekonomi SWA magazine, 2011-2016 Brand Finance plc Brand Rating PEFINDO25 Index Net Promoter Leader 2015 Frost & Sullivan Top Brand Award 2015 (01/08/2015 to Award 2011-2014 Indonesia Excellent 2012-2014 31/01/2016) Awards Word Of Mouth Marketing Award Corporate Image 2015 Award 2012-2014 22
Lippo’s Technology Media and Telecommunications businesses are an end-to-end ecosystem Cable Wireless Broadband & 4G LTE Document Data Broadband Optic Network Network Management Center (Radio frequency) Satellite Operator Technology Telecom System (Connectivity) Integrator (Infrastructure) Technology In Building Media & Telecom Services VSAT IT & BP Outsourcing & E-Payment Media Cable, Digital & Satellite TV (Content) E-Commerce Content Production Cinema Print & Online Source: Company information Media
Link Net could generate synergies with Lippo’s various business segments Successfully built SCALE and rooted LEADERSHIP in Indonesia High-growth sectors Combined Revenue US$ 4.9 billion Provider of world-class Partner of choice for Largest private service Market leader in strategic Gateway to reach products and services to reputable global group in Indonesia sectors in Indonesia Indonesia consumers Indonesian consumers institutions FINANCIAL SERVICES PROPERTY MALLS RETAILS TECHNOLOGY MEDIA HOSPITALITY HEALTH CARE EDUCATION TELCO PROPERTY Source: Company information 24
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