Update on Optus Consumer Division Mar 2002 Investor Presentation - - PowerPoint PPT Presentation

Update on Optus Consumer Division Investor Presentation Mar 2002

Significant changes to the Pay TV industry

Substantial consumer benefits

• Better deal for Pay TV viewers
• Enhances competition in consumer voice/data markets

Sustainable future for Pay TV industry Improves returns for Optus

• Optus MSG obligations assumed by FOXTEL
• Long term deal for satellite capacity
• Primary focus: Mobile and Business

Deal to revolutionise pay TV

• subject to ACCC approval

Optus MSG obligations assumed by FOXTEL

• FOXTEL and Optus content available over both

companies’ platforms

• Commencing 1st November 2002 - until 2010
• Optus will also take sports programming from FOXTEL –

from April 2002 Optus leases transponder capacity on C1 satellite to FOXTEL for DTH services

• Commencing 2003

Optus reduces cost of programming

• Continues to provide pay TV over broadband
• Bundled with voice/data

Substantial consumer benefits

Better deal for pay TV viewers

• Full range of content available
• Competition in retail delivery

Enhances competition in voice and data

• Enhances Optus’ ability to compete with Telstra in

consumer markets

• Optus will continue to offer innovative bundled

voice/data/TV packages

Sustainable future for pay TV in Australia

Cable DTH US Regional monopolies Single national player (down from two) UK Regional monopolies with BSkyB as key content supplier Single national player BSkyB Australia - today Competing cable networks – split content supply Two players restricted to separate markets Australia - future Competing cable networks – non-exclusive content supply Two players restricted to separate markets

Current industry structure not sustainable

• Content costs much higher than comparable markets
• Fragmented sub scale content origination

Lessons from overseas markets

Optus Consumer Business

• Revenue of A$1bn

(annualised)

• Broadband HFC is largest

and most valuable part of Consumer

• Fully digital two way

network - 750MHz broadband - 559,000 customers 20% of total Optus revenues Voice: local/LD Data: cable modem Pay TV: bundled Passes 2.2m homes in Sydney, Melbourne and Brisbane

Note: all financial data as at 31 December 2001

Improving operating performance

• Strategic objectives: scale and returns

Strong broadband customer growth

17%

Broadband customers 559

Dec 00 Dec 01

+24%

44% multiple customers

• n HFC

34% Broadband & internet revenues

Dec 00 Dec 01

479 440 355

Strong broadband revenue growth Bundling – capital efficient growth Telephony Cable Modem Pay TV 0.5m 50,000 270,000

Improved margins for Optus Pay TV

• Improved margins in pay TV
• Long term satellite

transponder leases Estimated annualised EBITDA benefit: A$30m p.a. from Nov ’02 Estimated annualised revenues: A$40m p.a. from mid 2003

Next steps on transaction

Secure ACCC approval Secure necessary approvals under relevant third party contractual commitments (e.g. content providers) Content arrangements commence 1 November if approvals

• btained

Consumer: way forward

* Based on Optus cashflows for 9 months to Dec’01

TV content improved and cost based stabilised Improve profitability and returns

• Substantial improvements in EBITDA and operating cash

Focus on capital - efficient growth through bundling

• Reduce capex spend in Consumer to approximately

A$100-150m p.a. by FY’04 Substantially reduce Optus net cash requirements

• Consumer responsible for approximately one third of total

funding requirements*

Substantial consumer benefits

• Better deal for Pay TV viewers
• Enhances competition in consumer voice/data markets

Sustainable future for Pay TV industry Improves returns for Optus

• Optus MSG obligations assumed by FOXTEL
• Long term deal for satellite capacity
• Primary focus: Mobile and Business

Significant changes to the Pay TV industry