Deutsche Telekom AG · XETR:DTE
Deutsche Telekom — Merger or Acquisition (September 2009)
21 slides from Deutsche Telekom's merger presentation, Sep 8, 2009
Slide 1: Combination of Orange UK & T-Mobile UK: Creating a new mobile champion
Combination of Orange UK & T-Mobile UK: Creating a new mobile champion 8 September 2009
Slide 2: Deutsche Telekom Disclaimer
Deutsche Telekom Disclaimer This presentation contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They include, among others, statements as to market potential and financial guidance statements, as well as our dividend outl
Slide 3: France Telecom Disclaimer
France Telecom Disclaimer This presentation contains forward-looking statements that reflect the current views of the management of France Telecom S.A. (“France Telecom”) with respect to future events. They include, among others, statements as to market potential, synergies and financial guidance. T
Slide 4: Transaction highlights
Transaction highlights • France Telecom and Deutsche Telekom plan to merge Orange UK and T-Mobile UK • 50:50 joint venture with balanced governance structure • Key transaction terms agreed, subject only to confirmatory due diligence Key • T-Mobile UK to be contributed to the JV on a cash free, debt
Slide 5: Transaction rationale
Transaction rationale 1 • Creating a new champion in the UK mobile market – #1 player with a combined market share of 37% (2008 PF) – Serving key mobile market segments: from business customers to prepaid/postpaid consumers and wholesale customers Emergence – Best positioned for convergence offering
Slide 6: Transaction rationale (cont’d)
Transaction rationale (cont’d) 3 • Significant synergy potential: NPV of net opex and capex savings in excess Costs of £3.5bn – Opex run-rate synergies of £445m per annum savings – Capex run-rate synergies of £100m per annum through integration • Large and readily achievable synergies in network & I
Slide 7: The Joint Venture will create the new #1 player in the UK mobile market
1 The Joint Venture will create the new #1 player in the UK mobile market UK mobile subscribers market shares Total UK mobile employees by operator (2008PF combined)¹ (2008PF combined)² New JV PF 6.2% 5.8% 19,029 + 6,132 13,133 10,350 23.0% Pro forma 37.0% 12,897 + 28.0% Total UK mobile subscribers
Slide 8: The new venture will benefit British consumers, boost innovation and enhance competition
2 The new venture will benefit British consumers, boost innovation and enhance competition • The biggest, fastest and widest network A new, • Enhanced quality of coverage including indoors and in rural areas compelling • Most innovative and best handset portfolio, products & services customer offer
Slide 9: Over £3.5bn NPV of synergies, net of integration costs
3 Over £3.5bn NPV of synergies, net of integration costs Annual Run-rate Opex and Net Capex Savings (£m) 445 100 Run-rate 155 34% Savings 545 145 33% (post 2014) 145 33% Network & IT Distribution & Other Costs Total Opex Net Capex Total Pre-tax Savings Marketing Savings Savings Savings Savings Cash
Slide 10: Sources of synergies and integration costs
3 Sources of synergies and integration costs Sources of synergies Related integration costs • Site rationalisation and modernisation • Site decommissioning • Backhaul, backbone and core network • Costs of terminating supplier contracts Network consolidation & IT • Combining 2G and 3G network • Netwo
Slide 11: Network/IT: large savings from combining existing 2G and 3G networks
3 Network/IT: large savings from combining existing 2G and 3G networks and jointly extending 3G network coverage 2G network 3G network (co-sited with 2G) 13k stations 10k stations 7k stations 7k stations 99% pop. coverage 98% pop. coverage 94% pop. coverage 80% pop. coverage of some ing s 2 an tl i
Slide 12: Network/IT: substantial radio access and core network synergies
3 Network/IT: substantial radio access and core network synergies Opex savings • Fewer radio sites in combined network – Reduced rental expenses Annual – Better leverage to negotiate site locations and Run-rate Significant synergies rental fees opex are achievable given – More opportunities for co-s
Slide 13: Distribution/Marketing: Gradual integration
3 Distribution/Marketing: Gradual integration Transition period (2010-2011) Integrated branding strategy (from 2012) Initial co-existence of two strong brands … Roll-out of branding strategy in H1 2012… • Decision on branding strategy will be made in H2 2011 for implementation in H1 2012 – JV manage
Slide 14: Distribution/Marketing: Improved distribution platform and more efficient commercial spend
3 Distribution/Marketing: Improved distribution platform and more efficient commercial spend Distribution network strengthened by integrating best store Own shops network1 formats & locations • Significant rationalisation of overlap in premium locations 120 – Savings of c. £35m per year 433 • Reduct
Slide 15: JV strategic direction and future ambition – become the #1 for customer experience
3 JV strategic direction and future ambition – become the #1 for customer experience in the UK Direction Ambition • Implement one network platform • Become #1 in network quality & deliver network synergies of service • Continued progressive migration – A powerful driver for reinforcing customer of 2
Slide 16: Transaction structure designed to achieve 50/50 JV
Transaction structure designed to achieve 50/50 JV Balanced contributions to JV Post closing structure £1.25bn debt to FT France Deutsche Telecom Telekom Gross Tax Losses c/f of at least £1.5bn Orange UK Mobile 50% 50% + T-Mobile UK Orange UK + Broadband 50% share in 3UK network JV Orange-T-Mobile £
Slide 17: Key governance principles – joint control and streamlined decision making
Key governance principles – joint control and streamlined decision making • Equal representation from France Telecom and Deutsche Telekom Board – 2 representatives from France Telecom, 2 representatives from Deutsche Telekom of directors – 2 executive directors (CEO and COO) • Deutsche Telekom nomin
Slide 18: Pro forma impact – France Telecom
4 Pro forma impact – France Telecom • Orange UK will be accounted for as discontinued operations by signing at the latest • After closing, the JV will be accounted for using the equity method – Deconsolidation of UK operations increases Group EBITDA margin Key • Current guidance of €8.0bn of Organic
Slide 19: Pro forma impact – Deutsche Telekom
4 Pro forma impact – Deutsche Telekom • T-Mobile UK will be accounted for as discontinued operations by signing at the latest • After closing, the JV will be accounted for using the equity method – Deconsolidation of UK operations increases Group EBITDA margin Key principles – Share in JV net income
Slide 20: Expected transaction timetable
Expected transaction timetable New Signing of exclusivity Signing of definitive Closing branding & announcement documentation strategy PHASE I PHASE II INTEGRATION PHASE 8 weeks H1 2010 18 months H1 2012 SEP OCT Confirmatory due diligence Definitive transaction documentation Prepare competition • Im
Slide 21: Summary: Creating a new mobile champion in the UK
Summary: Creating a new mobile champion in the UK 9Clear market leader with pro forma subscriber market share of 37% 9World class management team committed to deliver #1 market profitability 9Significant benefits and the most innovative services for UK consumers 9Best 2G and 3G networks 9Significant
Deutsche Telekom — Merger or Acquisition (September 2009) on 6ix