Neuf Cegetel: 2007 results

Tuesday, March 11th, 2008

Strong growth driven by Mass Market and Enterprises divisions; 600,000 TV users

PARIS — Neuf Cegetel presents its financial results for 2007:

Mass Market division

More than 1,050,000 new broadband subscribers joined Neuf Cegetel in 2007 (around 600,000 of which were as a result of the acquisition of Club Internet). The group has therefore established itself as France’s leading alternative broadband operator with 21% market share at the end of 2007, compared with 17% at the end of 2006. The group acquired 583,000 new customers for its Neuf brand in 2007, an increase of nearly 30% on 2006, while the broadband market as a whole presented further strong growth in 2007 but down slightly relative to 2006 (-12%).

The group managed nearly one million customer migrations in 2007, 70% of which concerned migrations from the AOL and Cegetel brands to the Neuf brand, which now covers 80% of the group’s broadband customers, with the remaining 30% concerning migrations to the group’s flagship 100% Neuf Box service. In the long term, migrations to the Neuf brand will allow for radical simplification of products and management systems, thereby enabling the group to offer the highest standard of service while also optimising its costs. In addition, these migrations – coupled with the many new services launched – allowed for a growth of nearly 10% in broadband ARPU between 2006 and 2007 to over €36 excluding taxes per month in the fourth quarter of 2007.

For 2008, the group is aiming for a revenue growth of over 20% for its Mass Market division, driven by the growth of the broadband market, growth in ARPU and the integration of Club Internet over a full year.

Convergence of networks

In 2007, Neuf Cegetel began the roll-out of an FTTx network for its Mass Market customers, drawing on its experience in the management of fibre optic networks, its ability to develop innovative partnerships with local authorities and government organisations (partnership with Sipperec -‘Délégation de Service Public or DSP-for 13 cities around Paris, agreement with the OPAC social housing agency in Paris to deploy fibre to 100,000 households, DSPs in Rennes, Grand Nancy and Bordeaux) and its experience in sharing networks with other operators. Neuf Cegetel had 130,000 homes connected with FTTx at the end of 2007 and confirms its plan to have a million homes connected by the end of 2009.

Strong growth in operating cash flow; €450 million expected in 2008.

Thanks to significant improvement in margins, the group maintained its commitment in the fourth quarter of 2007 to doubling its operating cash flow between the start of 2006 (€17 million a month) and the end of 2007 (€105 million in the fourth quarter of 2007, equal to €35 million a month). This performance was achieved despite the negative short-term impact of the integration of Club Internet and the cost of migrations to the Neuf brand. The group maintains its target of operating cash flow of around €450 million in 2008.

These cash flows include an ambitious and controlled investment programme, which totalled €414 million in 2007, or 12% of revenue, compared with 11% in 2006. This reflects an acceleration in FTTx deployments, with more than 130,000 homes connected at the end of 2007, major efforts to migrate customers to the Neuf Brand and the growing proportion of subscribers with a Neuf TV set-top box (23% at the end of 2007 compared with 14% at the end of 2006). In 2008, despite the probable continuing slowdown in growth in the broadband market, the group will continue with its investment in the access network, bringing coverage of the unbundled network to 2,000 local exchanges by the end of 2008 (compared with 1,707 at the end of 2007) and stepping up its FTTx roll-out, as part of the plan announced a year ago to connect one million homes between 2007 and 2009 for €300 million.