Q419 Presentation March 2020 Disclaimer This investor presentation - - PowerPoint PPT Presentation

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Q419 Presentation March 2020 Disclaimer This investor presentation (the Presentation) has been prepared by Joint Stock Company Silknet (the Company). For the purposes of this disclaimer, Presentation shall mean this document,


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SLIDE 1

Q419 Presentation

March 2020

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SLIDE 2

Disclaimer

This investor presentation (the “Presentation”) has been prepared by Joint Stock Company Silknet (the “Company”). For the purposes of this disclaimer, “Presentation” shall mean this document, the oral presentation of the slides by the Company and the related question-and-answer session and any materials distributed at, or in connection with, that presentation. The information contained herein is subject to change without notice and past performance is not indicative of future results. No person shall have any right of action (except in case of fraud) against the Company or any other person in relation to the accuracy or completeness of the information contained herein. This Presentation contains projections and forward looking statements. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this Presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this document speak only as at the date of this Presentation and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements. The contents of this presentation have not been independently verified by or on behalf of the company or by any other independent third party. No representation, warranty or undertaking, express or implied, is made by any of the company, any of their respective affiliates or any of their or their affiliates’ respective members, directors, officers or employees as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the

  • pinions contained herein. None of the company nor any of their respective members, directors, officers, employees, affiliates, advisers or representatives shall have any liability whatsoever (in negligence
  • r otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation does not purport to contain all the

information that may be required by the recipient agency to make an evaluation. The information presented herein is provided as at the date of this presentation and will be deemed to be superseded by any subsequent versions of this presentation. Contacts:

LILI PSHAVLISHVILI

CFO +995-577-149700 bpshavliishvili@silknet.com

ILIA ENUKASHVILI

Head of Strategy +995-577-955540 ienukashvili@silknet.com

MARIAM JAVAKHIA

Deputy CFO, Head o fBudgeting and Reporting +995-598-553335 mjavakhia@silknet.com

2

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SLIDE 3

Silknet at a Glance 2019 Highlights Business Overview Appendix & 2019 Financial Information 1 2 3 4 3 10 20 36

3

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SLIDE 4

Overview

§

One of the leading convergent telcos in Georgia1

  • #1 fixed line with 53% market share1
  • #2 fixed broadband with 31% market share1
  • #2 pay television with 33% market share1
  • #2 mobile with 35% market share1

§

Transformational acquisition by Silknet of Geocell completed in March 2018

§

Network of 4,000km+ fibre backbone across Georgia; FTTH network passing ~55% of households; 96% 4G population coverage

§

Credit ratings: B1 (Moody’s) / B+ (Fitch)

Key financials pro forma acquisition Number of services/SIMs3

222 288 264 1,734 Pay television Fixed broadband Fixed line Mobile

GELm 2016 2017 2018 2019 2019 Commercial revenue 299 319 332 346 346 Carrier services 74 80 67 41 41 Total revenue2 373 399 399 387 387 EBITDA 141 165 188 203 216 EBITDA margin 38% 41% 47% 52% 56%

Source: Company information, GNCC, NBG Note: ¹ Based on the number of subscribers as of 31 December 2019; Pay TV market share does not include mobile streaming application subscribers;

2 Includes GEL4m inter-company eliminations in 2016, GEL9m in 2017 and GEL2m in 2018; 3 As of 31 December 2019.

Silknet at a glance

4

w/o IFRS 16 with IFRS 16

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SLIDE 5

143 109 99 102 2016PF 2017PF 2018A 2019A 299 319 332 346

74 80 67 41

2016PF 2017PF 2018PF 2019A 373 399 399 387

Commercial revenue

141 165 188 203 2016PF 2017PF 2018PF 2019A

§ Increasing trend in commercial revenue mainly due to:

  • Growth in broadband and pay TV segments, coupled with mobile data

growth…

  • …offsetting fixed voice shrinkage
  • Reduction of excise tax on mobile services in 2017 and 2018

§ Downtrend in carrier service revenue driven by reduction of termination rates. Refer to

slide 30

Note: 1 Capex in this presentation represents recurring Capex and is based on balance sheet additions for property, plant and equipment and intangible assets. Capex does not include non-recurring projects: 1) IT transformation of GEL5 million and GEL8 million in 2018 and 2019, respectively 2) spectrum licenses of GEL26 million in 2018 2) Land plot acquisition for HQ purposes of GEL 30 million in 2019 (refer to slide 13). Capex for 2018 does not include Geocell’s Capex for Q1 2018 (pre-acquisition period),

Capex1

EBITDA margin

38%

EBITDA

GELm GELm

47% 41%

% revenue Carrier services

§

Growing EBITDA and margin driven by:

  • Commercial revenue growth
  • Operating synergies partially captured in 2018 and, to almost the full

extent, in 2019…

  • …despite the negative effect of the termination rate changes. Refer to

slide 30

  • …despite GEL depreciation against USD by 11% on a y/y basis (change in

average annual exchange rates)

GELm

38% 27%

Organic growth and operating efficiencies driving EBITDA

5

Revenue

52% 27% 26% Impact of IFRS 16

13

IFRS 16

IFRS 16 was adopted from 1st January, 2019. Impact on EBITDA is positive GEL 13m in 2019

*EBITDA margin without giving effect to IFRS 16

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SLIDE 6

188.5 203.2 165.2 19.7 5.3 22.5 0.3 1.5 2.8 5.0

2017 Organic growth FX Effect Excise tax effect LRIC effect 2018 Organic growth FX effect LRIC effect 2019

6

EBITDA Bridge

  • Some non-organic factors affecting the evolution of Group EBITDA were:
  • Excise tax – mobile revenue in Georgia was previously subject to excise tax. Tax rate decreased from 8 percent to 3 percent in

2017 and was fully abolished in 2018

  • Call termination rate cut – Refer to slide 30
  • Currency movements - GEL depreciated against USD by 1 percent and 10 percent in 2018 and 2019 respectively (calculated on

an annual average exchange rates) +12.0%

  • 0.2%

+3.2%

  • 0.9%

+11.9%

  • 1.5%
  • 2.7%

Percentage changes attributable to each component

+14.1% +7.8%

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SLIDE 7

GELm, w/o IFRS 16

Q1 18 Q2 18 Q3 18 Q4 18 FY 18 Q1 19 Q2 19 Q3 19 Q4 19 FY 19 Commercial Revenue1 79 82 87 84 332 81 83 91 91 346 Carrier Services1 17 20 16 14 67 9 11 11 10 41 Total revenue 96 102 103 98 399 90 94 102 101 387 EBITDA 39 49 53 47 188 45 49 56 53 203 EBITDA margin 41% 48% 51% 48% 47% 50% 52% 55% 52% 52%

§

Organic revenue growth allowed us to maintain the record quarterly commercial revenue in Q4, despite Q3 traditionally being the peak quarter during a year :

  • Double-digit growth in fixed broadband and

pay TV driven by the subscriber base expansion and ARPU uplift following the launch of new packages in Q2

  • Mobile data revenue growth driven by

mobile data traffic increasing by 30% on a y/y basis (refer to slide 23) coupled with new bundled offers with enriched content launched in August 2019

7 Quarterly financials

39 49 53 47 45 49 56 53 20 25 30 35 40 45 50 55 60 Q1 Q2 Q3 Q4 2018 2019

EBITDA

41% 50% 48% 52% 51% 55% 79 82 87 84 81 83 91 91 72 74 76 78 80 82 84 86 88 90 92 Q1 Q2 Q3 Q4 2018 2019 +1%

Commercial Revenue1

EBITDA margin

Performance strengthened through the year

Note: 1 Both, commercial revenue and carrier services are subject to seasonal volatility, especially mobile segment. 2HY is usually GEL 10-15m higher than 1HY. +3% 48% 52% +5%

+8%

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SLIDE 8

57% 43%

EBITDA1 split

Mobile services Fixed services Mobile Margin 55% Fixed Margin 48%

8

Segment performance

Note: 1Figures are without giving effect to IFRS 16. 15% 27% 6% 24% 11% 5% 1% 11%

Total Revenue

Mobile data Mobile Voice Other mobile services Fixed Broadband Pay TV Fixed line Other fixed services Carrier Services Mobile 48% Fixed 41% Carriers 11%

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SLIDE 9

GELm 2019 Revenue 387 EBITDA (w/o IFRS 16) 203 CAPEX (recurring 2) 102 Debt Service (pro forma Eurobonds) 76

5% 25% 70% 95% 75% 30%

REVENUE OPEX (INC LEASES) CASH CAPEX

FX BREAKDOWN

USD/EUR GEL

FX exposure

9

GELm 2 (3) 7 6 GELm (2) 3 (7) (6)

sensitivity

  • 10% GEL 3

+10%

* FX hedging netted

GEL/USD EXCHANGE RATE

2.41 2.45 2.62 2.68 2.69 2.87 2.96 2.87 2.79 31 Mar 18 30 Jun 18 30 Sep 18 31 Dec 18 31 Mar 19 30 Jun 19 30 Sep 19 31 Dec 19 27 Feb 20

70% 8% 16% 6%

GROSS DEBT

USD unhedged USD hedged with cash balance USD hedged with cross-currency swap GEL

Note: 1 2019 average GEL/USD 2.8192. Note: 2 recurring capex is based on balance sheet additions for property, plant and equipment and intangible assets. Capex does not include non-recurring projects: 1) IT transformation of GEL5 million and GEL8 million in 2018 and 2019, respectively 2) spectrum licenses of GEL26 million in 2018 2) Land plot acquisition for HQ purposes of GEL 30 million in 2019 (refer to slide13).

3 GEL/USD or GEL/EUR

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SLIDE 10

Silknet at a Glance 2019 Highlights Business Overview Appendix & 2019 Financial Information 1 2 3 4 3 10 20 36

10

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SLIDE 11

2019 highlights

Network & IT

  • Approximately additional 109K FTTH homes passed in

2019, resulting in the total of c. 600K homes passed or c. 55% of households

  • Accelerated the replacement of the legacy DSL network

with the FTTH technology

  • Continued rollout of ultra high capacity mobile service with

upgrading 32 sites in Tbilisi to up to 1Gbps with pioneering 1800 MHz and 2300 MHz carrier aggregation

  • Additional 233 micro sites in Tbilisi to eliminate “white

spots”

  • Rollout of 17 new macro sites to improve coverage, mostly

in rural areas and in certain areas of Tbilisi

  • Gained access to the country-wide electricity distribution

network across Georgia, after gaining similar rights in Tbilisi in 2018, to cost-effectively reach new FTTH/IPTV subscribers

  • Completed the mobile billing swap – the first step in the IT

transformation

  • 4G population coverage already at 96%, up from 75% at YE

2018

11

Corporate

Exclusive franchise granted from Euronews and establishment of Silk Media Ltd. Change in the ownership structure – direct parent is now a local entity Issuance of debut US$200m Eurobonds (Reg S) and repayment of the bank and other loans Silknet’s Eurobonds dual-listed on the Georgian Stock Exchange Acquisition of a prime land plot in the center of Tbilisi for a new HQ Credit rating confirmed at B+/Stable by Fitch

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SLIDE 12

12 Silknet and Euronews signed a memorandum of understanding with respect to Euronews Georgia, a free-to-air news channel which will be made available in the Georgian language. For this purpose, Silknet created Silk Media Ltd., a 100%-owned subsidiary. Euronews will be in charge of Euronews Georgia’s editorial policy and nominate its news director. Euronews will share its content with Euronews Georgia, while the latter will prepare certain local content which will be shared with Euronews. Launch of the news channel planned in Q2 2020.

Euronews Georgia

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SLIDE 13

13

New HQ plans

Currently Silknet’s HQ is essentially spread over four different buildings in Tbilisi, of which three are Soviet-era carry-overs. As we grow in numbers and complexity, we increasingly require modern office space to further drive operating efficiency and streamline collaboration between different teams. To this end Silknet has resolved to acquire a land plot and build a modern HQ in a central location in Tbilisi which will address the current and future needs of the company. We have acquired a prime 20,397 m2 land plot between the First Republic Square and the Right Embankment. The acquisition price is USD 10m plus contingent consideration of another USD 10m, subject to approval for 60,000 m2 gross buildable area master plan (Development Regulation Plan) from relevant municipal authorities. As the asset was acquired from a related party, the land value was determined and the transaction fairness from the financial standpoint was evaluated by Colliers International, a highly reputable international real estate services company, in compliance with the terms and conditions of the USD 200 m notes. Once the master plan is developed and approved, Silknet intends to finance the construction of the HQ with its own funds. The remaining building rights are expected to be transferred to real estate developers and the construction is expected to be financed separately from Silknet.

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SLIDE 14

14

New products & offerings

§

Convergent service offerings with enriched content – new fixed all-in-one bundles1 now include:

§

Silk Go (mobile streaming app);

§

YouTube for offers ≥ 50 GEL;

§

Amediateka for offers ≥ 75 GEL;

§

>20 sports and movie channels added to the most popular packages

§

Launch of AMEDIATEKA in IPTV and on SilkGO.ge – ~200 top-rated series and ~200 films. Refer to slide 15

§

SilkSat – a direct-to-home (DTH) pay TV for the areas under-served with the IPTV . Refer to slide 15

§

Launch of Silksport.ge, an online video and news portal, with Silknet’s in-house sports channels available

§

Silk Travel Insurance – 5, 10 and 15 day travel insurance policies bundled with international roaming data packs

§

SilkFest –one-day campaigns promoting mobile data usage. Refer to slide 17

§

CDMA service phase-out and migration to GSM

Source: Company information Note:1 announced on 12 December 2019, effective from January 2020;

2 Launch of new tariffs and changes to the existing offers in Q2 and Q3. Refer to slide 15 and 16 of the

9M 2019 presentation – https://www.silknet.com/?module=investors&language=en&attr=inv4&id=3

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SLIDE 15

15

SilkSat

  • Satellite television catering to subscribers still under-served by the IPTV

technology:

  • Full coverage in Georgia
  • >100 popular local and international channels
  • Convergent offer for 18GEL

New Commercial Launches

Amediateka

  • VOD service with ~150 top rated series and ~200 films including HBO

and others

  • Launched in IPTV Q219 as a 3-month free trial for whole base;

Currently – 3 GEL/month;

  • Added to SilkGo.ge in Q3 19
  • Expected to launch in the Silk Go app in Q1 20
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SLIDE 16

Fixed services are highly bundled

  • 89% of B2C FTTH subscribers subscribe to IPTV
  • Most of our fixed broadband subscribers have voice service

Mobile packages are popular

  • C. 40% of B2C subscribers purchase the Meti packages (voice/data/SMS) on a regular basis
  • 54% data penetration, with many subscribers using the Meti packages and/or data packages

Fixed-mobile convergence increasing

§ >18K Silk + subscribers (with >39K SIM cards), or

8.2% of the FTTH B2C subscribers, since the launch

  • f the (essentially) inaugural fixed-mobile

convergent offers in Georgia in Q4 2018

Attractive subscriber base…

Smartphone and data penetration at Silknet

16

Room for growth

Data penetration 54% Smartphone penetration 69%

We promote….

  • …data penetration

within smartphone users

  • …smartphone

penetration within our subscriber base

  • Every smart phone we

sell comes with a 12- month 50% discount

  • n all mobile data

plans

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SLIDE 17

17

SilkFest

We launched the SilkFest campaign in April to promote mobile data usage and increase engagement with our subscribers. Each month we randomly offer attractive one-day promotions. As the result, we see substantially higher engagement in social media and significant increase in data usage.

SilkFest Offers No of Campaigns Activations 25 GEL unlimited pack for 15 GEL! 3 20,367 50% discount on 15GB internet pack! 1 8,938 8 GEL Meti Pack + 1GB bonus! 1 7,198 5 GB internet for half price ! 2 37,763 Unlimited + pack for 20 GEL! 3 15,047 Double 8 GEL Meti Pack! 1 5,043 25 GEL unlimited pack + 1GB for 15 GEL! 1 5,652 8 GB internet for 8 Gel ! 5 104,518 200 minutes for 4Gel; 3GB for 4 Gel ! 1 40,329 Unlimited data for 10 days for 10 GEL 2 11,195 6 GB internet for 7 Gel ! 2 28,883 500 min for 7 Gel! 2 34,445 12 GB internet for 10 Gel ! 1 18,252 9 GB internet for 9 Gel ! 1 18,755 7 GB internet for 7 Gel ! 1 18,768 Unlimited voice for 30 days for 10 GEL 1 7,483 15 GB internet for 10 Gel ! 1 30,184 8 GEL Meti Pack + 3GB bonus! 1 19,213 200 min for 4 Gel! 1 29,377 3 GB internet for 4 Gel ! 1 22,242 7 GB internet for 7 GEL ! Or 500 min for 7 GEL ! 1 35,792 10 GB internet for 9 GEL ! 1 24,719 500 min for 7 GEL ! 1 18,385 Several discounts for internet packages 1 28,557 4 GB internet for 5 GEL ! Or 300 min for 5 GEL ! 1 41,209 25 GEL Meti for 12.5 GEL + 1 GB ! 1 24,308 Several discounts for internet and voice packages 1 114,204 Total 39 770,826

8,484 14,384 25,492 108,425 90,536 78,351 124,614 110,236 210,304 Apr May Jun Jul Aug Sep Oct Nov Dec

Activations by month

1 2 4 4 6 6 7 N of Campaigns 5 4

771 thousand activations in 8 months within 1,245 thousand B2C subscribers

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SLIDE 18

18

Tsinandali Festival

Starting from 2019, Silknet sponsors the Tsinandali Festival, Georgia’s biggest classical music event (similar to Verbier Festival). Gianandrea Noseda, the world-famous maestro, is the musical director of the Festival and it attracted some of the top classical music talent, such as Yuja Wang (piano), Sir Andras Schiff (piano/conductor), Pinchas Zukerman (violin /conductor), etc. The festival also provides young artists from the region to perform alongside famed musicians. Most notably, dozens of artists from the Caucasus and Central Asia participate in the Pan-Caucasian Youth Orchestra, created in conjunction with the festival. The festival is planned to be held annually.

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SLIDE 19

Key CSR activities & sponsorships

§ Strategic directions:

  • Education
  • Culture
  • Sports

§ Key projects and affiliates:

  • National Geographic Georgia: Silknet established N(N)LE NG Georgia which publishes the National Geographic Magazine in the Georgian language and prepares Georgia-

related materials for global use

  • Georgian Ski Federation, Silknet is the general sponsor
  • “Lokomotiv” children’s football academy Silknet is the general sponsor
  • In 2018 Silknet founded N(N)LE Wounded Warrior Support Foundation

19

Silknet for the society

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SLIDE 20

Silknet at a Glance 2019 Highlights Business Overview Appendix & 2019 Financial Information 1 2 3 4 3 10 20 36

20

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SLIDE 21

Customer Satisfaction Technological Leadership Operating efficiency Ecosystem creation

Network

§

Increase FTTH penetration in small towns and rural areas

§

Improve coverage in commercially interesting areas

§

Achieve seamless user experience, including video viewing

§

Decrease number of faults and improve response time

§

Optimal utilisation of available frequencies, including usage of the unique 2.3 GHz band for high throughput

§

Expand LTE coverage

§

Backbone and FTTH rollout efficiency through smart utilisation of third-party infrastructure (MIA, Energo-pro, etc.)

§

Convert better network into increased mobile data usage and monetization

§

Optimise capital expenditures and maintenance costs through scale and better vendor management

§

Better subscriber analysis

§

Faster go-to-market

§

Provide market-leading content delivery platforms

§

Decrease costs through system and infrastructure optimisation

§

Harmonise various applications – fixed, mobile, financial and other services

§

One-stop shop for all services

§

Improve shopping experience

§

Increased reliance on digital channels

§

Optimisation of customer maintenance costs

§

Improve offering of devices and auxiliaries

§

Seamless digital experience

§

Convergent products

§

Leadership in innovative products

§

Decrease churn through convergent offers (Silk+)

§

Cross-selling of additional products and services

§

Provide the content subscribers want (Exclusive sports, entertainment, documentaries, etc.), increasingly in Georgian language

§

Make content available on all platforms

§

Leverage premium and exclusive content to drive data usage and monetisation

§

Create social media interaction related to content

§

Provide conveniently and fast financial and other services through digital platforms and the

  • ffline distribution network

§

Increased reliance on digital channels

§

Advanced customer scoring model

§

Decrease churn through service bundling / offering

§

Expand ecosystem to financial and other services Information Technology Distribution Network and Customer Service Product Development Content Financial and Other Services

Silknet’s operating strategy

21

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SLIDE 22

12,000 13,000 14,000 15,000 16,000 17,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019

41 40 44 43 48 49 44 47 52 54 56 56 61 62 57 59 18 20 19 22 21 25 21 24 111 114 118 120 130 135 122 130

Q1 18Q1 19 Q2 18Q2 19 Q3 18Q3 19 Q4 18Q4 19 Total Veon (Beeline) MagtiCom Silknet

Market retail revenue evolution

GELm

Subscribers evolution1

‘000s

Source: GNCC Note: 1 Number of subscribers (SIM cards) at the end of the period;

Mobile

22

§ Q4 was our best performing quarter on a y/y basis, with growth driven by mobile data traffic surge and the price changes effective from August 2019, on the back of the significantly better network. This followed the markedly improved Q3… § … having lagged the competition through 1H due to:

  • Following the feedback from the regulator, price

changes announced in January, 2019 were suspended by Silknet, while Magticom enjoyed the new pricing through the most of the year. Veon may have also benefited from the latter, mostly as a second-SIM solution.

  • In addition, our primary focus was on the ongoing IT

transformation, including the mobile billing swap, as well as the substantial network upgrade whereby we continued 4G rollout and launched the pioneering gigabit-LTE in the center of Tbilisi. Our 4G population coverage reached approximately 96%

Silknet’s monthly retail revenue

GEL ‘000s

Key takeaways

1,824 1,818 1,816 1,775 1,751 1,746 1,748 1,734 1,986 1,963 2,001 1,977 2,079 1,989 2,035 2,015 1,113 1,098 1,127 1,141 1,179 1,208 1,237 1,262

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Silknet MagtiCom Veon (Beeline)

8.0 8.6 9.3 8.6 8.0 8.7 9.9 9.7 8.3 8.8 9.6 8.9 8.5 8.7 9.6 9.0 6.5 5.6 6.3 6.0 5.5 5.9 6.5 6.0

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Evolution of residential ARPU

GEL

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SLIDE 23

1,736 1,576 1,462 1,195 1,261 1,295 1,536 1,696 1,335 1,268 1,201 1,228 1,197 1,092 1,214 1,215 1,385 1,555 2,111 2,603 2,303 2,277 2,237 2,626

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019

4,774 3,503 3,752 4,155 4,567 7,017 3,697 7,140 7,948 6,481 6,121 7,236 7,687 9,960 6,661 9,414 3,491 6,612 3,900 7,538 5,237 9,269 5,727 9,401 16,212 16,596 13,773 18,929 17,491 26,246 16,085 25,954

Q1 18 Q1 19 Q2 18 Q2 19 Q3 18 Q3 19 Q4 18 Q4 19 Silknet MagtiCom Veon (Beeline) Total

929 936 950 937 921 951 984 995 791 780 813 792 763 802 834 826 563 611 654 680 719 762 803 838

400 500 600 700 800 900 1,000

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Silknet MagtiCom Veon (Beeline)

Record y/y growth in mobile data traffic in Q4. Following the on- going 4G network rollout, with population coverage reaching 96% and the launch of pioneering gigabit-LTE, data traffic increased by 30% y/y in 2019

  • The launch of the new packages in August ,hand-in-hand

with the data promotion campaigns, enabled us to explore upselling opportunities and drive customer consumption well above 2GB/m on average

  • Second-SIM data usage encouraged by the price changes in

Q1 2019, with Veon as the main beneficiary

  • According to the GNCC data, Veon’s growth in data traffic

and subscribers in 2019 is mostly attributable to the B2B segment

Source: GNCC Note: 1 As of 31 December; 2 Number of subscribers (SIM cards) at the end of the period.

Key takeaways

‘000s

Evolution of mobile internet traffic

terabytes

Evolution of mobile internet subscribers2

Mobile data usage

23 Silknet’s monthly mobile internet traffic

terabytes

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SLIDE 24

95 124 165 196 235 135 120 90 61 35 11 22 23 21 18 241 266 278 278 288

2015 2016 2017 2018 2019 Total Wireless DSL FTTH

279 279 277 278 281 287 287 288 316 333 356 378 392 406 422 443 173 175 178 181 182 183 182 185

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Silknet MagtiCom Other

24

Key takeaways

  • c.83% household fixed broadband penetration in Georgia1
  • Silknet has 31% subscriber market share1
  • Gradual rollout of fibre to replace the legacy copper and expand footprint in new

geographical areas, followed by accelerated DSL replacement project with FTTH technology starting from 2019

  • Approximately 109K new FTTH homes passed by Silknet in 2019, ~600K homes

passed in total (~55% of households)

  • From 2019, Silknet has gained access to nationwide electricity grid for fibre

deployment, levelling the playing field with the key competition

  • We gained further network deployment headway through the backbone contract

with the MIA

  • In areas where we are present, we grow on par with Magticom, whereas other

players stay mostly flat. However, our approach to the network deployment remains selective and we do not target less densely-populated areas, not chasing headline market-share. ARPU dynamics

  • Substantial growth in ARPU driven by phase out of introductory offers

and price changes effective from Q2 2019.

§

Significant pricing difference still remains between Tbilisi and other

  • areas. Further expansion in small towns and rural areas may lead to
  • verall ARPU decline

Subscribers evolution2

‘000s

Silknet’s subscribers by key technologies

‘000s

Source: GNCC Note: 1 As of 31 December 2019; 2 Number of subscribers at the end of the period; 3 Total market including Silknet

Fixed broadband

17.4 17.3 17.4 17.6 18.0 18.7 18.7 18.9 17.4 17.3 18.0 18.4 18.2 18.8 19.1 19.4

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Market Silknet

Residential ARPU evolution3

GEL

20 22 20 23 21 24 22 24 24 29 25 31 26 31 28 33 10 11 10 11 10 12 11 12 54 62 55 65 57 67 60 69

Q1 18 Q1 19 Q2 18 Q2 19 Q3 18 Q3 19 Q4 18 Q4 19

Other MagtiCom Silknet

Revenue evolution

GELm

3

slide-25
SLIDE 25

Revenue evolution

GELm

12.9 13.2 13.4 14.0 14.2 14.6 15.0 15.2 13.3 13.4 13.4 14.3 15.0 15.5 16.8 16.6 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Market Silknet

8 10 9 10 9 11 9 11 10 13 11 14 12 14 13 15 4 4 4 4 4 4 4 4 22 27 23 28 24 29 26 30

Q1 18 Q1 19 Q2 18 Q2 19 Q3 18 Q3 19 Q4 18 Q4 19 Silknet MagtiCom Other Total

213 216 213 213 213 216 217 222 264 276 298 309 311 317 329 347 106 102 98 100 99 99 98 95

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Silknet MagtiCom Other

Key takeaways

  • c.60% household pay television penetration
  • Silknet holds 33% subscriber market share1 compared to 31% in fixed

broadband on the back of the superior content offering and successful service bundling

  • Substantial growth in ARPU in 2019 mainly driven by price changes

effective from Q2 2019 and phase-out of introductory offers

  • Most of the Magticom’s growth comes from low-density rural areas

where Silknet is not present

Subscribers evolution1

‘000s

Source: GNCC Note: 1 Number of subscribers at the end of the period; Excluding mobile streaming application subscribers;

2 Total market including Silknet

Pay television

25

2

ARPU evolution

GEL

slide-26
SLIDE 26

§

Approximately additional 109K new homes passed in 2019, more than 600K homes passed in total, or >55% of households

§

Gained access to the country-wide electricity distribution network across Georgia, after gaining similar rights in Tbilisi in 2018, to cost-effectively reach new FTTH/IPTV subscribers § The company has decided to accelerate the replacement of the legacy DSL network with FTTH technology. Substantial portion of the DSL subscribers already switched to FTTH in 2019 and are expected to further phase out within the course of 2020. § Abandoned the fixed-wireless and mobile service on the obsolete CDMA

  • technology. Offered to migrate the remaining subscribers to the GSM

technology. Unparalleled network coverage …

Over 4,000 km inter- and intra-city connectivity and sole operator with border- crossing network

Fixed network

26

Key takeaways

slide-27
SLIDE 27

Population coverage1 Territory coverage1 Number of base sites1,2 2G (GSM) c.99% c.89% 1,429 3G (UMTS) c.98% c.72% 1,582 4G (LTE) c.96% c.42% 1,274

Mobile network

27

  • LTE coverage, providing the highest data speed to c.96% of population, substantially expanded with the

deployment of LTE on 800/900 MHz, 1800 MHz and 2.3 GHz in 2H 2018 and 2019 (project ongoing, see below), after the Geocell acquisition

  • The 2019 mobile network roll-out programme completed successfully. 4G population coverage reaching

its targeted rate of >90%. Additional 233 micro sites were launched in Tbilisi, improving the coverage especially in “white spot” areas like metro stations, undergrounds, etc. Additional 17 new macro sites launched to enhance coverage mostly in rural areas and in certain areas of Tbilisi, further footprint expansion expected in 2020.

  • Rollout of very high capacity mobile service with upgrading 32 sites in the city center and other high-

traffic areas in Tbilisi to up to 1 Gbps capacity with pioneering 1800 MHz and 2300 MHz 3-carrier

  • aggregation. As a result, monthly data traffic on these sites increased substantially.

Key takeaways

Source: company information, GNCC Note: 1 company infromation; 2 GSM/UMTS/LTE network coverage, excluding CDMA

Coverage and sites LTE coverage map at YE 2018 LTE coverage map at YE 2019

slide-28
SLIDE 28

Unique content portfolio via exclusive contracts

§ Unrivalled sports proposition with exclusive rights to the Champions League, Spanish La Liga,

Europa League, NBA basketball, various tennis tournaments and other sports content

§ A betting-related internet-only service gained rights to the English Premier League from the 2019-

2020 season. We regard this as a one-off event

§ Virtually exclusive rights for Setanta sports channels (Setanta and Setanta +) with various sports

tournaments including German Bundesliga, Italian Serie A, French Ligue 1, Formula 1, Ultimate Fighting Championship and other sports content

§ Exclusive rights to 25 Russian-language entertainment channels § Attractive VOD/ streaming offering through Amediateka on an exclusive basis § Sports content including our in-house sports channels already available at silksport.ge and

silkgo.ge

§ We continue to evolve our content offering with Euronews Georgia, expected to launch in 2020 § Digital pioneer in the Georgian market and continuously developing streaming applications for

Android, iOS and PC. Renewed SilkGo app expected to be launched in 1H 2020

Source: Company information

28

slide-29
SLIDE 29

Objectives

§

Deeper subscriber analysis

§

Faster go-to-market

§

Better customer service

§

More efficient use of resources

Expected to be completed in 1H 2020, subject to the Coronavirus situation

Systems deployed

§

Convergent business support system (billing, CRM, etc.)

§

Mediation

§

Provisioning

§

Interconnect billing

§

Network and services inventory

§

Workforce management

§

Order management

§

Whale Cloud, an Ali Baba affiliate, is the principal vendor

§

The project is supervised by Sofrecom, a subsidiary of Orange

Key players

IT Transformation

29

slide-30
SLIDE 30

National call termination rates, GEL 0.011

Source: company information, GNCC Note: 1 From 2018, no excise tax is levied on local call termination and only VAT applies. Excise tax on mobile call was decreased from 8% to 3% in 2017 and abolished from 2018

Spectrum auctions Spectrum auctions

§

In the next 3-5 years (before the 5G is standardised and spectrum is made available), Silknet does not expect to require more spectrum

§

2300 MHz may be harmonised and the licence modified

  • 800: recently awarded 2x5 MHz
  • 900: 2x11.8 MHz, of which 2x5 MHz currently used for 3G outside Tbilisi and Batumi; LTE launched in Batumi and Tbilisi; the

remainder is used for 2G

  • 1800: 2x30 MHz, of which 2x20 MHz used for LTE and 2x10 MHz for 2G
  • 2100: 2x15 MHz currently used for 3G
  • 2300: 50 MHz, currently used for mobile 4G and fixed wireless broadband

Current (incl. taxes) From 1 July 2018 (excl. taxes) From 1 January 2019 (excl. taxes) Mobile 3.50 1.81 0.75 Fixed local (intra-city) 2.00 0.99 0.28 Fixed transit 2.00 1.01 0.32

§ Up to GEL 9 million decline from 2017 to 2018 § Up to GEL 24 million decline from 2018 to 2019

Estimated effect on carrier services revenue:

§ Negative GEL 1.5 million from 2017 to 2018 § Negative GEL 5.0 million from 2018 to 2019

Estimated effect on EBITDA:

Regulations and spectrum

30

slide-31
SLIDE 31

Silk Road Group is one of the leading private investment groups active in the Caucasus and Central Asian regions with interest in different sectors of the Georgian economy and net tangible assets worth over USD400m(1)

Transportation Telecommunications & financial services Real estate, hospitality & Entertainment Energy §

Silk Road Group transportation business connects Georgia with Central Asia through access to infrastructure, terminals, rail tank cars and containers

§

Silk Road Group operates in the Telco industry through Silknet, the leading convergent operator

§

After Silknet’s acquisition of Geocell, Silk Road Bank is intended to power Silknet’s mobile financial services

§

Silk Road Group owns a real estate portfolio (developed and undeveloped properties and lands) valued more than USD220m

§

10 years of experience in hospitality & entertainment (hotels, restaurants, casinos, clubs, sport centers, etc.)

§

The group operates a run-of-the- river hydroelectricity plant with an installed capacity of 9.8MW Source: Company information Note: 1 As of 31 December 2016

Solid and supportive shareholder

31

slide-32
SLIDE 32

Rhinestream Holdings Limited (Malta) JSC Silknet GEL188m PF EBITDA 2018

100%

Qarva Ltd. N(N)LE NG Georgia Novus Ltd. (currently inactive) WiMax Georgia Ltd. (currently inactive) “Qarva Limited” Malta LLC

Silknet and Geocell merged in Nov 2018

51% 49% 100%

Source: Company information

Aleksi Topuria George Ramishvili David Borger

100% 58.81% 9.04%

Ultimate beneficial shareholders

David Mamulaishvili

27.15% 5.00% 100%

Silknet Holding Ltd. (Georgia)

100%

Owned by the management of Qarva Ltd.

PF corporate structure

32

N(N)LE Wounded Warrior Support Fund

100%

Silk Media Ltd. (Euronews Georgia)

100%

slide-33
SLIDE 33

§ Acquisition of WiMax Georgia (fixed wireless broadband) § Acquisition of a 85% stake in GMN (pay TV channels) § Acquisition of a 51% stake in Qarva (software, operation & maintenance support for IPTV) § Acquisition of remaining 15% stake in GMN § Established by JSC United Telecom, Adjara Telecom Ltd. and Wanex Ltd

2009

Source: Company information Note: 1 Following merger, the Group owned F48 and F54 spectrum licences § Silk Road Financial Group. acquired a 59% stake in the now. named Silk Road Bank.

2010 2011 2012 2015 2017

Acquisitions Other developments

§ Acquisition of Novus (TV broadcasting rights) § Launched IPTV services. § Agreement signed with Servicenet to

  • utsource

maintenance of cable network, acquisition of new subscribers and new network rollout § Acquisition of Geocell (mobile) § Acquisition of Global TV group § Merged with Vtel Georgia1 (fixed wireless broadband) § Founded NG Georgia (National Geographic magazine) § Issuance of Silknet 2017 bond § Became public in Georgia § Launched FTTH services

  • Issuance of Eurobonds and

refinancing all bank loans

  • Shareholder loan partial

conversion to equity

2013 2014 2016 2018 2019

Silknet’s development

33

  • Franchise for Euronews

Georgia and establishment

  • f Silk Media Ltd.
slide-34
SLIDE 34

Merger approved by the regulator, rebranding Launch of convergent offers Completion of acquisition Appointment of management team preparation of financial planning appointment

  • f external advisor to assist in the integration

process Low-band LTE in Batumi 800 MHz licence awarded Low-band LTE in Tbilisi 800 MHz regional deployment Completion of legal merger

Source: Company information

Acquisition of Geocell

Other developments

20-March April May June July August September October November December

Acquisition and merger timeline

34

slide-35
SLIDE 35

Convergence

Most of the synergies kicked in from Q4 2018

§ Human resources: § Expat management replaced by the existing experienced Silknet team § Parallel functions merged and the management structure stabilized § Remuneration harmonized §

Processes unified

§

Distribution network unification on track

§

Focus on Silknet as the main convergent bran

§

Network maintenance efficiency

§

Support services rationalized

35

Key integration initiatives and synergy drivers:

slide-36
SLIDE 36

Silknet at a Glance 2019 Highlights Business Overview Appendix & 2019 Financial Information 1 2 3 4 3 10 20 36

36

slide-37
SLIDE 37

GEL m, w/o IFRS 16 31 Dec 2018 31 Dec 2019 w/o IFRS 16 31 Dec 2019 with IFRS 16 ASSETS Non-current assets Property and equipment 370 378 378 Intangible assets and contract costs 212 200 200 Other non-current assets 33 42 42 Investment property

  • 30

30 Rights-of-use assets

  • 53

Prepayments related to IRU contracts 11 10 10 Total non-current assets 626 659 712 Current assets Inventories 22 11 11 Prepayments related to IRU contracts 2 2 2 Trade and other receivables 38 37 37 Cash and cash equivalents 9 75 75 Total current assets 72 125 125 TOTAL ASSETS 698 785 837 EQUITY AND LIABILITIES Equity Share capital 68 84 84 Additional paid-in capital 25 8 8 Accumulated losses (18) (61) (64) Equity attributable to owner of the Company 75 31 28 Non-controlling interests

  • TOTAL EQUITY

75 31 28 LIABILITIES Non-current liabilities Loans and borrowings 376 618 618 Subordinated loan 31

  • Promissory notes

37

  • Lease liabilities
  • 45

Trade and other payables 18 13 13 Advances received related to IRU contracts and subscribers 15 15 15 Total non-current liabilities 476 646 691 Current liabilities Loans and borrowings 37 17 17 Trade and other payables 87 68 67 Advances received related to IRU contracts and subscribers 23 22 22 Lease liabilities

  • 12

Total current liabilities 147 107 118 TOTAL LIABILITIES 623 753 810 TOTAL LIABILITIES AND EQUITY 698 785 837

a)

On 2nd April 2019 company issued US$200m Eurobonds and refinanced all outstanding bank loans and promissory notes.

ü

Transaction costs of US$3.9m deferred over a 5-year period, which resulted in the carrying amount of US$196.1m

ü

During the 2019 company repurchased it’s Eurobonds in amount of US$2.6 m

§

On 16th May 2019 part of the shareholder loan was converted into equity and the remainder repaid. Repayment of shareholder loan counts towards ‘restricted payments cap’ stipulated under US$200m Eurobond.

§

Equity impact of existing loan refinancing:

ü

Early payment penalty as a result of bank loan refinancing GEL 7.1m

ü

As a result of prepayment, difference between amortised cost and nominal amount of Geocell syndicated loan GEL6.8m booked as loss per IFRS

ü

As a result of prepayment, difference between amortized cost and nominal amount of promissory note GEL4.5m booked as loss per IFRS

ü

As a result of shareholder loan redemption the difference between amortized cost and nominal amount of GEL2.4m booked as loss per IFRS

Note: The Company has initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application

1 2 1 2 3

Statement of financial position

37

3

slide-38
SLIDE 38

Source: Company information Note: 1 Other than the debt disclosed above, the company has unused credit facility (RCF) of US$20m with the sole purpose to serve coupon payments of US$200m Eurobond, in addition to letters of credits & guarantees with the aggregate amount of GEL29.2m (most of these guarantees are part of the company’s ordinary course of business and are already included in working capital (trade payables));.

a)

On 2nd April 2019 the company issued US$200m Eurobonds and refinanced all outstanding bank loans and promissory notes.

ü

Transaction costs of US$3.9m deferred over a 5-year period, which resulted in the carrying amount of US$196.1m

ü

During the 2019 the company repurchased its Eurobonds in amount of US$2.6 m

ü

On 16th May 2019 a part of the shareholder loan was converted into equity and the remainder repaid. Repayment of shareholder loan counts towards ‘restricted payments cap’ stipulated under US$200m Eurobond.

Capital structure

38

28.7 34.5 571.4 2020 2021 2022 2023 2024 Silknet Private Placement Bond Silknet 2017 Bond Eurobond

Leverage 2.75X EBITDA GEL203m Net Debt GEL560m

1 2

Facility (GEL m) 31 December 2018 31 December 2019 Eurobond

  • 571.4

Silknet 2017 Bond 34.4 34.5 Silknet Private Placement Bond 26.8 28.7 Geocell Shareholder Subordinated Loan 30.5

  • Geocell Syndicated Credit Agreement

261.5

  • Geocell Subordinated Credit Agreement

26.9

  • Geocell Loan

25.7

  • Silknet Loan

37.6

  • Promissory notes

37.3

  • Gross debt

480.7 634.6 Cash and cash equivalents (9.3) (74.9) Net debt1 471.4 559.7 Leverage 2.50 2.75

1 2

Debt maturities

slide-39
SLIDE 39

Note: 1 The company has reviewed the useful lives of CPE (Customer Premise Equipment) and certain other equipment in Q219 and applied retrospectively staring from January 1 2019, Q119 information has not been restated and the cumulative effect has been charged to Q219.

Statement of profit or loss

39

GEL m 2018PF 2019A 2019A Q119 Q219 Q319 Q419 w/o IFRS 16 with IFRS 16 w/o IFRS 16 w/o IFRS 16 w/o IFRS 16 w/o IFRS 16 Revenues: Commercial revenue 332.2 346.2 346.2 80.6 83.5 91.6 90.2 Carrier services 67.0 41.0 41.0 9.3 10.7 11.1 10.0 399.2 387.2 387.2 89.9 94.1 103.0 100.2 Costs and expenses: Depreciation and amortisation (111.7) (103.1) (111.7) (30.4) (21.8) 1 (25.2) (25.7) Salaries and benefits (64.1) (58.1) (58.1) (13.8) (13.6) (13.8) (17.0) Other expenses (37.3) (31.4) (31.4) (9.2) (6.2) (8.2) (8.3) Purchased services (51.9) (31.9) (31.9) (7.1) (8.2) (7.9) (8.1) Interconnect fees and roaming expense (39.0) (17.8) (17.8) (4.6) (4.4) (4.0) (4.8) Network management and maintenance costs (18.5) (15.7) (15.7) (3.7) (3.2) (3.2) (5.6) IPTV content costs (10.0) (11.2) (11.2) (2.4) (2.9) (2.9) (3.1) Rent expenses under operating leases (22.9) (21.7) (9.2) (5.5) (5.5) (5.5) (5.2) Advertising and marketing (4.9) (8.0) (8.0) (2.0) (2.6) (1.6) (1.8) Costs of SIM cards, scratch cards and other cost of sales (4.5) (2.8) (2.8) (0.6) (0.4) (0.9) (0.9) Bargain gain from acquisition 41.8

  • Profit from operating activities

76.3 85.2 89.3 10.6 25.2 29.8 19.6 Finance income 2.8 4.3 4.3 0.7 1.2 1.5 1.0 Finance costs (54.1) (97.2) (104.1) (15.6) (37.8) (19.2) (24.6) Net foreign exchange loss (24.5) (33.5) (34.3) (2.8) (34.1) (16.3) 19.7 Net finance costs (75.8) (126.4) (134.1) (17.7) (70.7) (34.1) (4.0) (Loss)/profit before income tax 0.5 (41.2) (44.9) (7.1) (45.6) (4.2) 15.6 Income tax expense (0.9) (1.2) (1.2) (0.9) (0.2) (0.1) (0.1) (Loss)/profit and total comprehensive income for the period (0.4) (42.5) (46.1) (8.0) (45.7) (4.3) 15.5

§

The finance costs in 2019 include the impact of the loan refinancing:

ü

GEL 7.1m early payment penalty as a result of the bank loan refinancing

ü

As a result of the prepayment, the difference between the amortised cost and the nominal amount of the Geocell syndicated loan GEL6.8m booked as loss per IFRS

ü

As a result of the prepayment, GEL4.5m difference between the amortised cost and the nominal amount of the promissory note booked as loss per IFRS

ü

As a result of the shareholder loan redemption, GEL2.4m difference between the amortised cost and the nominal amount booked as loss per IFRS

1 1

slide-40
SLIDE 40

Statement of cash flow

40

GEL m Q1 Q2 Q3 Q4 2019 Cash flows from operating activities Cash received from subscribers 91 97 107 107 402 Cash received from other telecom operators and for IRU contracts 8 8 7 8 31 Salaries and benefits paid to and on behalf of employees (11) (14) (13) (17) (55) Interconnection fees and expenses paid (3) (4) (3) (3) (13) Purchase of inventory (6) (4) (7) 51 (11) Taxes paid other than on income (10) (17) (14) (19) (60) Income tax paid (1) (0)

  • (1)

Network management and maintenance costs paid (3) (2) (4) (2) (11) Other operating expenses paid (24) (25) (23) (9) (81) Net cash from operating activities 42 39 50 71 202 Cash flows from investing activities Acquisition of property and equipment (11) (21) (24) (34) (89) Acquisition of investment property

  • (30)

(30) Acquisition of intangible assets (9) (9) (11) (10) (39) Proceeds from disposals of property and equipment 1

  • 1

2 Acquisition of subsidiaries, net of cash acquired

  • Issue of loans
  • Interest received

1 2 (0) 3 Net cash used in investing activities (19) (28) (33) (73) (153) Cash flows from financing activities Proceeds from borrowings

  • 529

2 99 630 Repayment of borrowings (2) (366)

  • (99)

(467) Bank commissions for early repayment of loans

  • (7)
  • (0)

(7) Interest paid (10) (4) (2) (34) (50) Net interest paid on hedge

  • (1)

(1) Repayment of subordinated loan

  • (30)
  • (30)

Repayment of subordinated loan interest

  • (5)
  • (5)

Repayment of promissory notes

  • (43)
  • (43)

Lease payments

  • (11)

(11) Dividends paid (2) (3)

  • (5)

Net cash from financing activities (15) 72

  • (48)

9 Effect of exchange rate changes on cash and cash equivalents

  • 6

2 (1) 7 Net increase in cash and cash equivalents 8 89 19 (50) 66 Cash and equivalents at the beginning of the period 9 17 106 125 9 Cash and cash equivalents at the end of the period 17 106 125 75 75 Note: 1 The Company has changed the approach of classifying cash flow items into ‘Purchase of inventory’ and ‘Acquisition of property and equipment’ groups in Q419, the classification change was applied retrospectively, starting from January 1, 2019. The cash flow for the preceding quarters has not been restated and the cumulative effect has been charged to Q419.

slide-41
SLIDE 41
  • 2019 financial statements prepared based on audited financials
  • 2018 pro forma financials prepared by the company
  • 2017 pro forma statements prepared based on audited financials
  • 2016 pro forma financials prepared by the company based on audited financials
  • EBITDA – calculated by adjusting profit from continuing operations to exclude following items:
  • Finance costs and finance income
  • Corporate income tax and any other taxes related to the distribution of dividends
  • Depreciation, amortization, revaluation, impairment (losses / reversals) of non-current assets
  • Net foreign exchange gain/(loss), including gain/(loss) on hedging instruments, currency forward contracts

and any other gain/(loss) attributable to changes in foreign currency exchange rates

  • Specific items as explained below:

Specific items are identified by virtue of their size, nature or incidence. Specific items represent a) income or loss related to the sale or write off of non-current assets and any other non-cash items; b) non-recurring, non- underlying or non-operating income or costs that are either material by nature or size (such as bargaining gain on business acquisition, business acquisition related costs, costs related to fundraising and the listing of the Group’s securities, write off of issued loan, one time professional fees, etc.).

Sources of financial information

Sources of financial information

41

slide-42
SLIDE 42

0-19 26% 20-29 13% 30-39 14% 40-49 13% 50-59 13% 60+ 21% 0-19 20-29 30-39 40-49 50-59 60+

(0.5)% 1.8% 1.8% 2.1% 2.3% 2.6% 3.0% 3.7% 3.8% 4.0% 4.9% 5.0%

Ukraine Estonia Latvia Czech Republic Russia Lithuania Romania Moldova Poland Armenia Georgia Turkey

7.1% 7.5% 6.4% 6.0% 10.4% 11.6% 10.9% 12.1% 7.2% 7.1%

2010 2011 2012 2013 2014 2015 2016 2017 2018 9M 19

Gross Domestic Product Attractive demographics with c.40% of population below 30

Age distribution, as of 1 Jan 2019 (%) FDI as % of GDP

Source: Geostat Note: Geostat changed accounting methodology to a new Standard of National Accounting (SNA 2008), rebased GDP to year 2015 from year 2010 and recalculated GDP data from 2010 to 2018

Comparative real GDP growth rates

% (2006–2016 average) GDP per capita Nominal GDP (USDbn) and real GDP YoY growth (%)

12.2 15.1 16.5 17.2 17.6 14.9 15.1 16.2 17.6 12.8 6.2% 7.4% 6.4% 3.6% 4.4% 3.0% 2.9% 4.8% 4.8% 5.2% (4)% 0% 4% 8% 12% 16% 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M 19

Sound and attractive macroeconomic environment

Foreign Direct Investments

42

slide-43
SLIDE 43

Fiscal reform

  • On 13 May 2016, Georgian Parliament passed a bill on corporate

income tax reform mainly shifting the moment of corporate taxation (15% corporate profit tax) from when taxable profits are earned to when they are distributed

  • As a result, reinvested profit is not taxed, and distribution of dividends

is taxed at the source of payment

  • The law is effective for tax periods starting on or after 1st January 2017

Sources: GeoStat, GNTA, MOF Note: 1 Tourists, same-day and other; Note: Geostat changed accounting methodology to a new Standard of National Accounting (SNA 2008), rebased GDP to year 2015 from year 2010 and recalculated GDP data from 2010 to 2018

Key data (2018)

Georgia at a glance

43

Area 69,700 sq km Population 3.7m Nominal GDP (GELm) 44,599 Nominal GDP (USDm) 17,597 Nominal GDP growth 9.4% Real GDP growth 4.8% Inflation (average) 2.6% FDI as % of GDP 7.2% Unemployment rate 12.7% Public debt as % of GDP 30.9% Total international arrivals1 8.7m Country rating (S&P/Moody’s/Fitch) BB/Ba2/BB

slide-44
SLIDE 44

Global Corruption Barometer Business Bribery Risk Ease of Doing Business Economic Freedom Index

% admitting having paid a bribe last year (2016) 2019 ranking 2019 ranking 2019 ranking

1 2 6 7 9 18 22 25 28 33 34 40 41 47 64 124

New Zealand Singapore USA Georgia Norway Estonia Germany Kazakhstan Russia Turkey Azerbaijan Poland Czech rep. Armenia Ukraine Brazil

3% 7% 7% 9% 12% 15% 16% 17% 18% 24% 24% 27% 29% 29% 34% 38% 38% 42%

Germany Georgia Poland Czech Rep. Slovak Republic Latvia Montenegro Bulgaria Turkey Lithuania Armenia Bosnia & Herz. Romania Kazakhstan Russia Ukraine Azerbaijan Moldova

4 7 12 16 35 37 42 60 64 68 71 80 98 147

Switzerland UK USA Georgia Latvia Bulgaria Romania Azerbaijan Hungary Turkey France Italy Russia Ukraine

1 2 6 13 14 19 21 25 27 34 35 40 74 79 110 123 126

New Zealand Norway UK Singapore Estonia France Ireland Japan Georgia Czech rep. Italy Poland Armenia Azerbaijan Russia Turkey Kazakhstan

Top 8 in Europe region out of 44 countries up from 16th in 2016 and 112th in 2006 Georgia is on a par with EU member states Sources: Transparency International, Heritage Foundation, World Bank, Trace International

Attractive environment for doing business

44

slide-45
SLIDE 45