Press release
Neuf Cegetel: double-digit organic growth in the fourth quarter.
Paris, 8 February 2008. Neuf Cegetel has reported its (unaudited) revenue figures for the fourth quarter showing:
- Total revenue growth of 20% to €911 million. Slightly over 10 points of this increase came from organic growth, with the remainder reflecting the impact of the acquisitions of AOL and Club Internet.
- The strong momentum of the Mass Market (growth of 64%, including organic growth of 27%) and Enterprises (growth of 8%) divisions.
- In the Mass Market division: the further rapid growth in the broadband client base to 3,224,000 at 31 December, and in broadband ARPU, which stood at over €36 excluding taxes over the quarter as a whole (versus €35 expected).
- In the Enterprises division: the success of the data offers, with 173,000 sites connected at 31 December; close to 40% of new links being installed are now for voice over IP.
Over 2007 as a whole, the Group’s revenues advanced by 16% to €3,348 million.
|
Revenues, in millions of euros |
Q4 2006 |
Q4 2007 |
Q4 2007 / Q4 2006 |
FY 2006 |
FY 2007 |
FY 2007 / FY 2006 |
|
Group |
760,3 |
911,0 |
+19,8% |
2 897,2 |
3 348,2 |
+ 15,6% |
|
- Mass Market |
260,8 |
428,1 |
+64,1% |
872,1 |
1 437,9 |
+64,9% |
|
- Enterprises |
250,7 |
269,8 |
+7,6% |
970,7 |
1 039,1 |
+7,0% |
|
- Wholesale |
248,9 |
213,1 |
-14,4% |
1 054,4 |
871,1 |
-17,4% |
On the back of these firm trends, the Group has reiterated its growth targets for 2008, i.e. growth in excess of 20% in Mass Market revenues and of between 5% and 10% in Enterprises revenues.
Organic growth(1) of 10% in the fourth quarter.
During the fourth quarter of 2007, the Mass Market and Enterprises divisions, the Group’s two main growth engines, continued to power the growth in revenues, which amounted to €911 million, up 20% compared with the fourth quarter of 2006. Fourth quarter’s growth was similar to third quarter’s, even though the acquisition of AOL (consolidated from 1 November 2006) impacted only one month of the fourth quarter compared with three months during the third quarter. The Group’s organic growth(1) during the fourth quarter of 2007 amounted to 10.3%, compared with a growth during the fourth quarter of 2006 of 5.7% excluding the impact of the AOL acquisition. The sharp acceleration since the beginning of 2006 has thus continued.
|
Revenue growth |
Q1 2006 |
Q2 2006 |
Q3 2006 |
Q4 2006 |
Q1 2007 |
Q2 2007 |
Q3 2007 |
Q4 2007 |
|
Group |
+2,4% |
+4,5% |
+6,2% |
+8,0% |
+10,3% |
+11,4% |
+20,4% |
+19,8% |
| - Mass Market |
+13,5% |
+11,8% |
+12,5% |
+33,8% |
+45,8% |
+52,6% |
+97,5% |
+64,1% |
|
- Enterprises |
+10,5% |
+5,4% |
+6,1% |
+5,6% |
+5,5% |
+7,4% |
+7,7% |
+7,6% |
|
- Wholesale |
-10,7% |
-1,3% |
+2,0% |
-8,3% |
-12,9% |
-16,6% |
-25,0% |
-14,4% |
|
Organic growth (1) |
Q4 2006 |
Q4 2007 |
| Group |
+5,7% |
+10,3% |
| - Mass Market |
+14,1% |
+27,1% |
| - Enterprises |
+5,6% |
+7,6% |
| - Wholesale |
-0,3% |
-6,9% |
The Mass Market division, which produced very strong growth, now contributes close to half the Group’s revenues.
During the fourth quarter of 2007, the Mass Market division generated revenues of €428 million, i.e. 47% of the Group’s total revenues. Growth ran at 64%, and organic growth(1) reached 27%, which is almost double the pace recorded during the fourth quarter of 2006. This acceleration was driven predominantly by the dynamism of the broadband business, which now contributes 80% of Mass Market revenues.
With 3,224,000 broadband clients at 31 December 2007, Neuf Cegetel expanded its client base by over one million subscribers in 2007 (of which some 450,000 excluding Club Internet), after adding one million in 2006 (of which some 500,000 excluding AOL). The Group has thus increased its broadband market share (ADSL, cable and FTTx) to 21%(2) from 17% a year ago. The Neuf brand, which gets all of the Group’s advertising budget and innovations, won 21%(2) of the growth of the market in 2007, with about 600,000 new broadband customers added (without counting clients migrated from the Cegetel, AOL and Club Internet brands). During the final quarter of 2007, the Neuf brand won 128,000 new broadband subscribers. Taking into consideration the churn on the other brands, the Group added 101,000 subscribers in total.
The fourth quarter was also marked by the migration of over 500,000 Cegetel and AOL clients to the Neuf brand, which now holds 80% of the Group’s broadband clients, up from 57% at 30 June 2007. Previously dragged down by the lower unbundling rates of the acquired client bases, the proportion of unbundled clients in the client base also moved higher again to reach 66% at year-end 2007. In the final quarter of 2007, 70% of new clients were unbundled.
Migrations to the Neuf brand and the higher proportion of unbundled subscribers continued to improve the profile of the broadband client base. The Neuf brand’s churn rate continued to head lower, reaching 13% during the second half of 2007 compared with 14% during the first half of 2007. ARPU exceeded €36 excluding taxes across the entire client base during the fourth quarter of 2007, exceeding the target of €35 excluding taxes.
The increase of over €4 excluding taxes in broadband ARPU compared with the fourth quarter of 2006 was also for a part attributable to the innovation policy pursued by the Group. During the second half of 2007, the Group successfully launched two new services. By the end of December, Neuf Music, the Group’s unlimited legal music download service, had generated 5 million downloads. Less than four months after their launch, the generalist Neuf TV Sélection and Neuf TV Grand Spectacle pay-TV packages, which are available for a monthly fee starting from €10.90 including taxes per month, had won around 10% of the eligible clients (Neuf Cegetel had more than 750,000 TV subscribers at year-end 2007).
As in the third quarter of 2007, the Group stabilised its switched voice revenues (scope excluding Club Internet’s and AOL’s narrowband subscribers). This good performance was notably attributable to the development of revenues generated by the Neuf Mobile offer, which now boasts close to 300,000 clients. The range of TwinTM convergence handsets was further enhanced in late August 2007 with the addition of the HTC S 710, the first Mass Market GSM/WiFi handset running Windows Mobile 6.0, and that of the HTC Touch and the Motorola A910i in early 2008. During the final quarter of 2007, the TwinTM packages accounted for over 30% of the growth in the number of Neuf Mobile contracts sold.
On the strength of these positive trends, the Group is reiterating its target of increasing its Mass Market revenues by over 20% in 2008.
As in the third quarter, the Enterprises division posted growth in the top half of the forecast range of 5 to 10%.
The Enterprises division posted fourth-quarter 2007 revenues of €270 million, up by close to 8%.
After recording a growth of 12% during the first nine months of 2007, data revenues increased by over 15% during the fourth quarter, reflecting the positive momentum in new client access links connected. At the end of December 2007, 173,000 business access links were connected to Neuf Cegetel’s network, representing an increase of 34,000 on the figure at 31 December 2006. The slowdown in the decrease of the average revenue per site already seen in previous quarters continued during the fourth quarter.
The strong growth in the number of data links connected reflects the commercial success of the Group’s IP-based offers. VoIP offers in particular accounted for close to 40% of new data links during the quarter. Editions Atlas, Nocibé and Vilmorin were among the numerous new accounts won by the Group thanks to its 9 Office VoIP offer. The Group also continued to expand its market share in IP VPNs, as illustrated by the addition of accounts such as MAAF, Pages Jaunes, France Loisirs and Lidl, which signed up to the 9 Ipnet offer.
In parallel to the acceleration in VoIP sales, the switched voice business again remained almost stable during the fourth quarter of 2007, reflecting the competitiveness of the Group’s offers and market share gains, notably in special number offers.
On the strength of these trends, the Group is reiterating for 2008 its growth target for the Enterprises division’s revenues of between 5% and 10%.
Trends in the Wholesale division are stabilizing.
Wholesale revenues came to €213 million during the fourth quarter of 2007, representing a fall of 14%. Around half this decline was linked to the discontinuation of wholesale sales to AOL and Club Internet following the Group’s acquisition of these ISPs.
Excluding this impact, the decrease in revenues was of the same order of magnitude as that of the first nine months of the year. It was predominantly attributable to the contraction in the switched voice business for the same reasons and to the same extent as in the previous quarters (increasing volumes from mobile and international operators not enough to compensate for the decline of dial up Internet, the end of mobile gateways and the impact of the anticipated renegotiation of the contract with SFR).
As expected, the target stated by the Group in September of a stable commercial margin during the second half compared with the first half of 2007 was achieved.
Further profitable growth.
Thanks to the solid growth achieved during the third and fourth quarters of 2007, fuelled by the most profitable activities, and allowing an increasingly effective absorption of fixed costs, the Group’s adjusted EBITDA(3) continued its steady progression towards the target of 25% of revenues by the end of 2008. It reached close to 22.5% of sales in the second half of 2007 after a performance of 21.0% in the first half. Operating cash flow(4) throughout the fourth quarter was twice the run-rate recorded at the beginning of 2006, enabling the Group to reiterate its principal target of generating around €450 million in operating cash flow(4) in 2008.
Neuf Cegetel’s detailed financial results will be published on 11 March.
Notes and definitions
All the financial data are prepared in accordance with IFRS. Data for the financial year ended 31 December 2007 are estimates and have not yet been audited. The financial statements for 2007 are due to be approved by the Board of Directors on 20 February 2008.
Number of clients: total number of clients having subscribed to one of the Group’s services minus the number of clients for which a contract termination has been registered.
ARPU: average revenue per unit, calculated by dividing revenues for the relevant period by the weighted average number of clients over the same period.
Churn: measurement of the loss of clients through termination of their contract during a period as a proportion of the total number of clients during the same period.
(1) Q4 2007 organic growth: growth generated in a perimeter excluding Club Internet, and including AOL over the three-month period of Q4 2006.
(2) Neuf Cegetel estimate based on the data published by France Telecom on 6 February 2008.
(3) EBITDA: operating income before depreciation, impairment, amortisation of employee benefits (cost of non-monetary compensation in connection with stock options), income from associates, and other revenues. Adjusted EBITDA: EBITDA before restructuring costs. Commercial margin: gross margin on production costs less sales and marketing expenses.
(4) Operating cash flow: Adjusted EBITDA less acquisitions of property, plant and equipment, and intangible assets (capital expenditure).
Download the press release: 
Adobe Acrobat
About the Neuf Cegetel group
Neuf Cegetel is the leading alternative operator in France. The group operates its own national network infrastructure, comprising 45,000 kilometres of optical fibres, and has invested heavily in the rollout of its DSL access network. This means that Neuf Cegetel is in a position to produce its own broadband services, control their costs and quality and sell them directly to 70% of the target population. Neuf Cegetel has a presence in all segments of the market, providing a wide range of services to residential customers, corporate and telecoms and Internet service providers. Neuf Cegetel, whose two key shareholders are the Louis Dreyfus and SFR groups, reported revenues of 3,348 million euros in 2007. www.groupeneufcegetel.fr
Press contact
Nicolas Chatin / presse@neufcegetel.info
Investor relation
Pierre-Antoine Machelon, Nathalie Bricault / investorrelation@neufcegetel.info