NUMERICABLE EXANE 13112013 35 .pdf



Nom original: NUMERICABLE_EXANE_13112013_35.pdfTitre: Will they grow old together?

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EQUITIES

TELECOM OPERATORS

NUMERICABLE

NEUTRAL
EUR26.9  TARGET PRICE EUR26 (DOWNSIDE 3%)

Will they grow old together?
13 NOVEMBER 2013
Antoine Pradayrol
(+44) 207 039 9489

antoine.pradayrol@exanebnpparibas.com
Kohulan Paramaguru
(+44) 203 430 8546
Mathieu Robilliard
(+44) 203 430 8524
Michael Williams
(+44) 207 039 9446

telecoms@exanebnpparibas.com
Specialist sales
William Beavington
(+44) 207 039 9411

Numericable is trading at 8.8x 2014e EBITDA and 17x EBITA, in line with its European cable
peers, already partly pricing an M&A deal.
A strategic marriage…
A merger with SFR would make strategic sense and create significant value for both companies we estimate the potential combined synergies at c.EUR2.9bn. Failed in 2012 on valuation grounds,
a deal is much more likely following the listing of Numericable and the potential de-merger of SFR.
Given this higher likelihood, the share price has logically started to integrate the value of this
option, but the shares could still offer some upside.
…but the bride and bridegroom have not said “I do”, yet
Even though Numericable would be nice to have, it isn’t a must-have for SFR, which already has a
solid presence in fixed-line. In addition, there is no other bidder that could seriously compete with
SFR regarding potential synergies (e.g. synergies with Bouygues of only c.EUR1bn). We would
therefore not expect the full potential option value to be integrated into Numericable’s share price.
Left on the shelf, the fiancée loses part of her charm
The superfast broadband opportunity in France is real and Numericable has an edge. But given the
French market context (dominance of over-the-air pay-TV, strong DSL-based triple-play,
competitors pushing quad-play and advertising 1Gbps speeds), we find management’s net
additions target over 2014-2016 to be ambitious. Moreover, with its mature customer base and one
third of its EBITDA coming from B2B and Wholesale, visibility is lower than average. We forecast
revenue and EBITDA CAGR of 3.0% and 5.1% over 2013-16e.
Nuptials might be a while away - adjusting for probabilities, we see a Neutral risk reward
Compared to our stand-alone DCF valuation (EUR17–22/share), the stock already integrates
EUR5-10/share (19-37%) related to M&A, but could offer further 26% upside (to EUR34) in case of
a fair split of the total synergies (50-50). On the other hand, we remain cautious on the group’s
stand-alone trends and see 35% downside (to EUR17) if a deal became unlikely. Assuming a 50%
probability of the deal, we initiate with a Neutral rating and a EUR26 target price.
Price (12 November 2013)
Market cap (EURbn)
Free float (EURbn)
EV (EURbn)
3m avg volume (EURm)
Reuters / Bloomberg
Country / Sub Sector
Financials
EPS, Adjusted (EUR)
EPS, IBES (EUR)
Net dividend (EUR)

Please refer to important disclosures
at the end of this report

Sales (EURm)
EBITA, Adj. (EURm)
Net profit, Adj.(EURm)
ROCE (%)
Net Debt/EBITDA, Adj. (x)

EUR26.9
3.3
3.3
5.7
30.9
NUM.PA / NUM FP
France / Altnets and Cable
12/13e

12/14e

12/15e

12/16e

0.95
0.00

1.04
0.52

1.12
0.56

1.29
0.64

1,315
299
110
6.6
4.6

1,357
335
128
6.7
4.2

1,397
341
139
6.7
4.0

1,436
360
160
7.4
3.8

Source: Exane BNPP (estimates), Thomson Reuters (consensus)

Performance(1)
Absolute(%)
Rel. Telco Operators(%)
Rel. MSCI SMID(%)

Valuation metrics
P/E (x)
Net yield (%)
FCF yield (%)
EV/Sales (x)
EV/EBITDA (x)
EV/EBITA (x)
EV/CE (x)

(1) In listing currency, with dividend reinvested

1w
NC
NC
NC

1m
NC
NC
NC

3m
NC
NC
NC

12m
NC
NC
NC

12/13e

12/14e

12/15e

12/16e

28.3
0.0
2.4
4.3
9.5
19.0
2.0

26.0
1.9
1.5
4.2
8.8
16.9
1.9

24.1
2.1
3.0
4.0
8.6
16.5
1.9

20.9
2.4
3.7
3.9
8.1
15.6
1.8

Price at 12 Nov. 13 / 12m Target Price

NUMERICABLE (Neutral)

EUR26.9 / EUR26 -3%
Reuters / Bloomberg: NUM.PA / NUM FP
Com pany Highlights
EURm
Enterprise value
5,679
Market capitalisation
3,335
Free float
3,335
3m average volume
31
Perform ance (*)
1m
3m
12m
Absolute
NC
NC
NC
Rel. Sector
NC
NC
NC
Rel. MSCI SMID
NC
NC
NC
12m Hi/Lo (EUR) : 28.5 -6% / 24.8 +9%
CAGR
2011/2013
2013/2017
EPS restated (**)
39%
10%
CFPS
(6%)
6%

Altnets and Cable | Telecom Operators - France

Analyst: Antoine Pradayrol (+44) 207 039 9489
29.0

27.5
26.5
Target  Price
25.5

24.5
23.6
Price

Relative to MS CI SMID

PER SHARE DATA (EUR)

Dec. 10

Dec. 11

Dec. 12

26.9
Dec. 13e

26.9
Dec. 14e

26.9
Dec. 15e

26.9
Dec. 16e

26.9
Dec. 17e

No of shares year end, basic, (m)
Avg no of shares, diluted, excl. treasury stocks (m)
EPS, company definition
EPS restated, fully diluted
% change
CFPS
Book value (BVPS) (a)
Net dividend
STOCKMARKET RATIOS

113.772
113.772
0.51
0.28
NC
3.18
(5.0)
0.00
Dec. 10

113.772
113.772
1.71
0.49
78.6%
3.65
(3.3)
0.00
Dec. 11

123.934
113.772
0.75
0.78
58.0%
3.61
(2.3)
0.00
Dec. 12

123.934
115.248
0.69
0.95
22.2%
3.25
0.3
0.00
Dec. 13e

123.934
123.934
1.04
1.04
8.9%
3.59
1.4
0.52
Dec. 14e

123.934
123.934
1.12
1.12
8.0%
3.76
2.0
0.56
Dec. 15e

123.934
123.934
1.29
1.29
15.2%
4.03
2.7
0.64
Dec. 16e

123.934
123.934
1.41
1.41
9.8%
4.14
3.5
0.00
Dec. 17e

28.3x
158%
8.3x
2.4%
77.27x
0.0%
0.0%
4.32x
9.5x
19.0x
21.8x
2.0x
5,679

26.0x
177%
7.5x
1.5%
19.45x
1.9%
50.0%
4.16x
8.8x
16.9x
23.3x
1.9x
5,650

24.1x

20.9x

19.0x

7.2x
3.0%
13.56x
2.1%
50.0%
4.03x
8.6x
16.5x
19.4x
1.9x
5,634

6.7x
3.7%
9.91x
2.4%
50.0%
3.90x
8.1x
15.6x
18.1x
1.8x
5,602

6.5x
4.9%
7.72x
0.0%
0.0%
3.76x
7.9x
14.7x
15.7x
1.8x
5,538

3,335
2,723
120

3,335
2,683
120

3,335
2,656
120

3,335
2,536
120
1
454
Dec. 17e

P / E (P/ EPS restated)
P / E relative to MSCI SMID
P / CF
FCF yield
P / BVPS
Net yield
Payout
EV / Sales
EV / Restated EBITDA
EV / Restated EBITA
EV / OpFCF
EV / Capital employed (incl. gross goodw ill)
ENTERPRISE VALUE (EURm )
Market cap
+ Adjusted net debt
+ Other liabilities and commitments
+ Revalued minority interests
- Revalued investments
P & L HIGHLIGHTS (EURm )

0
Dec. 10

0
Dec. 11

0
Dec. 12

500
Dec. 13e

488
Dec. 14e

477
Dec. 15e

3,335
2,611
120
1
465
Dec. 16e

1,209
518
(305)
213
208
(178)
0
31
(4)
0

1,307
550
(295)
256
269
(186)
(0)
126
(13)
(0)

1,302
594
(292)
303
299
(211)
(0)
0
(2)
(0)

1,315
595
(296)
299
297
(205)
(0)
0
(13)
(0)

1,357
641
(307)
335
335
(164)
0
0
(42)
0

1,397
659
(317)
341
341
(158)
0
0
(44)
0

1,436
690
(330)
360
360
(156)
0
0
(44)
0

1,472
705
(328)
377
377
(155)
0
0
(47)
0

58
31
Dec. 10

195
56
Dec. 11

85
88
Dec. 12

80
110
Dec. 13e

128
128
Dec. 14e

139
139
Dec. 15e

160
160
Dec. 16e

175
175
Dec. 17e

EBITDA (reported)
EBITDA adjustm ent (b)
Other items
Change in WCR
Operating cash flow
Capex
Operating free cash flow (OpFCF)
Net f inancial items + tax paid
Free cash flow
Net f inancial investments & acquisitions
Other
Capital increase (decrease)
Dividends paid
Increase (decrease) in net financial debt
Cash flow , group share
BALANCE SHEET HIGHLIGHTS (EURm )

514
5
17
14
549
(239)
310
(173)
137
(53)
15
0
0
(99)
362
Dec. 10

563
(13)
33
5
589
(243)
346
(167)
179
5
114
0
0
(298)
415
Dec. 11

591
4
(28)
(32)
534
(286)
248
(155)
93
0
(62)
0
0
(31)
410
Dec. 12

593
2
(40)
19
574
(314)
260
(180)
80
2
(23)
251
0
(310)
375
Dec. 13e

641
0
(4)
(32)
605
(363)
243
(192)
51
0
(10)
0
0
(40)
445
Dec. 14e

659
0
(4)
8
662
(372)
290
(189)
101
0
(10)
0
(64)
(27)
466
Dec. 15e

690
0
(4)
(5)
681
(371)
310
(186)
124
0
(10)
0
(69)
(45)
500
Dec. 16e

705
0
(5)
8
709
(357)
352
(187)
165
0
(10)
0
(80)
(75)
513
Dec. 17e

Net operating assets
WCR
Restated capital em ployed, incl. gross goodw ill
Shareholders' funds, group share
Minorities
Provisions/ Other liabilities
Net f inancial debt (cash)
FINANCIAL RATIOS (%)

3,176
(293)
2,884
(567)
(0)
371
3,362
Dec. 10

3,153
(300)
2,853
(372)
(0)
173
3,064
Dec. 11

3,175
(262)
2,913
(287)
0
178
3,033
Dec. 12

3,188
(281)
2,907
43
0
151
2,723
Dec. 13e

3,243
(249)
2,995
171
0
151
2,683
Dec. 14e

3,299
(256)
3,042
246
0
151
2,656
Dec. 15e

3,339
(251)
3,088
336
0
151
2,611
Dec. 16e

3,368
(260)
3,108
432
0
151
2,536
Dec. 17e

NC

8.1%
1.1%
20.1%
78.6%
10.8%
42.1%
19.6%
16.2%
14.9%
18.6%
26.5%
(23.0%)
80.2%
NS
NC
3.0x
5.6x
15.6%
5.7%
8.1%

(0.3%)
1.0%
18.2%
58.0%
10.9%
45.6%
23.2%
2.8%
6.5%
21.9%
19.1%
(20.1%)
86.6%
NS
NC
2.8x
5.1x
17.1%
6.6%
7.6%

0.9%
3.2%
(1.1%)
23.8%
11.6%
45.3%
22.8%
13.7%
6.1%
23.9%
19.8%
(21.4%)
85.3%
253.8%
6295%
2.9x
4.6x
17.0%
6.6%
7.0%

3.2%
2.9%
11.9%
17.2%
11.5%
47.3%
24.7%
24.7%
9.5%
26.7%
17.9%
(18.3%)
89.1%
74.8%
1564%
3.9x
4.2x
16.6%
6.7%
7.0%

Sales
Restated EBITDA (b)
Depreciation
Restated EBITA (b) (**)
Reported operating profit (loss)
Net f inancial income (charges)
Aff iliates
Other
Tax
Minorities
Goodw ill amortisation
Net attributable profit reported
Net attributable profit restated (c)
CASH FLOW HIGHLIGHTS (EURm )

Sales (% change)
Organic sales grow th
Restated EBITA (% change) (**)
Restated attributable net profit (% change) (**)
Personnel costs / Sales
Restated EBITDA margin
Restated EBITA margin
Tax rate
Net margin
Capex / Sales
OpFCF / Sales
WCR / Sales
Capital employed (excl. gdw ./intangibles) / Sales
ROE
Gearing
EBITDA / Financial charges
Adjusted financial debt / EBITDA
ROCE, excl. gdw ./intangibles
ROCE, incl. gross goodw ill
WACC

2.9%
2.8%
2.6%
2.8%
2.6%
2.1%
2.0%
5.3%
4.8%
8.0%
15.2%
9.8%
11.4%
11.3%
11.2%
47.2%
48.1%
47.9%
24.5%
25.1%
25.6%
24.3%
21.4%
21.1%
9.9%
11.1%
11.9%
26.7%
25.8%
24.2%
20.7%
21.6%
23.9%
(18.4%)
(17.5%)
(17.6%)
90.0%
90.8%
89.9%
56.4%
47.5%
40.6%
1080%
776%
587%
4.2x
4.4x
4.6x
4.0x
3.8x
3.6x
16.3%
17.6%
18.2%
6.7%
7.4%
7.8%
7.0%
7.0%
7.0%
Latest Model update: 13 Nov. 13
(a) Intangibles: EUR1,784.87m, or EUR14 per share.
(b) adjusted for capital gains/losses, impairment charges, exceptional restructuring charges, capitalized R&D, pension charge replaced by service cost
(c) adj.for capital gains losses, imp.charges, capitalized R&D, am. of intangibles from M&A, exceptional restructuring, (*) In listing currency, w ith div. reinvested, (**) also adjusted for am. of intangibles f rom M&A, or for am. of gw ill for pre IFRS year

Exane BNP Paribas Research

NS
NC
10.5%
42.9%
17.6%
12.8%
4.8%
19.8%
25.6%
(24.2%)
86.7%
NS
NC
2.9x
6.5x
13.0%
4.7%
7.8%

Numericable

13 November 2013

page 2

Contents

Will they grow old together?_________________________________ 4
Valuation: M&A the key swing factor __________________________ 7
Recent newsflow ________________________________________ 13
What is Numericable? ____________________________________ 14
B2C: potential growth or growth potential? ____________________ 21
B2B and wholesale ______________________________________ 39
Option value ____________________________________________ 43
Appendices ____________________________________________ 46
Funding analysis ________________________________________ 48
Company profile and financial highlights ______________________ 52

Exane BNP Paribas Research

Numericable

13 November 2013

page 3

Back to contents

Will they grow old together?
We initiate on Numericable with a Neutral rating and EUR26/share target price.
We believe that a merger with SFR is already more than half discounted in the share
price – hence further significant upside requires a deal to materialise in 2014 and
Numericable shareholders to get a large share of the synergies (bull case up to
EUR34/share).
On the other hand, we are cautious on the group’s ability to meet its operational and
financial targets over the next three years. This is arguably a side debate as long as
M&A is the focus, but if a deal became unlikely, the stock could fall to EUR18/share
(stand-alone bear case DCF).
Overall, the timing for the IPO has been perfect, with Numericable benefiting from a
scarcity premium in the European cable sector and offering what investors are looking
for i.e. core European stories with some growth and M&A spice.
At the current level, we see a neutral risk/reward.

What is Numericable?
The Numericable group is the result of the merger of the B2C cable operator
Numericable (9.9m total homes passed, 1.7m individual customers) and the B2B fibrerich specialist Completel.
In 2012, the group generated revenue of EUR1.3bn, up +1.1% (organic), EBITDA of
EUR594m (Exane adjusted), representing a margin of 45.6%, and cash capex of
EUR285m (22% of revenue). The B2C segment accounted for 63% of revenues, B2B
for 25% and wholesale for 12%. At the end of 2013e, after the IPO, the group’s
leverage will remain significant, with net debt of EUR2.7bn, equivalent to 4.4x EBITDA.
Over the next three years (2013-2016e), we model: 1) revenue CAGR of 3.0% versus
the group’s target range of 2-5%; 2) EBITDA CAGR of 5.2%, pointing to 48% margin by
2016e (Numericable format) versus the group’s target of 50%; and 3) EBITDA-Capex
up 2.4% per year (given the group’s step-up in capex expected over 2014-2016
compared to 2013).

Not your usual cable story
Numericable is in a specific situation regarding its core cable business, with:
– A lower penetration: the ratio of individual customers to homes connected stands
at c.17% as of September 2013, versus a range of 53-73% for peers, on our estimates.
This reflects the historically low penetration of pay-TV over cable in France and the
strength of DSL operators in triple-play.
– Maturity of the existing customer base. Most of Numericable’s customers have
already moved to triple-play: 2.5x RGU/subscriber, the highest ratio in the peer group.
– Visibility and cost of growth: a low penetration means a large opportunity to grab
new customers. But Numericable will find it harder than peers to realise its growth
potential, as it must come from the acquisition of new customers rather than through
the conversion of existing TV customers to triple-play (capex to sales ratio expected to
be above 25% over the next few years versus 21% on average for peers).

Exane BNP Paribas Research

Numericable

13 November 2013

page 4

Back to contents

Another difference with European peers is that a third of Numericable’s business stems
from B2B and wholesale. There is a clear market share opportunity in B2B in France,
so it could add revenue and EBITDA growth, but visibility is low, in our view.
Figure 1: Numericable has low penetration and high RGU per subscriber

40%

1.8

30%

1.6

20%

1.4

10%

1.2

0%

1.0

2011

NC

TNET
2012

2013

2011

2012

KDH

2.0

KBW+UM

2.2

50%

LG

60%

TNET

2.4

Ziggo

70%

LG

2.6

KDH

2.8

80%

Ziggo

90%

VMED

RGU per subscriber

NC

Penetration (customers / homes passed)

2013e

Source: Exane BNP Paribas estimates

The superfast broadband opportunity
The market’s move to superfast broadband is an opportunity for Numericable, which
already has 5.0m homes passed with superfast broadband and targets 8.5m by 2016, a
footprint that puts it ahead of competition in the “superfast” segment which is finally
taking off in France.
This is a key component of Numericable’s current commercial push, which has started
to deliver better customer growth over the past three quarters. However, we find the
group’s target of 200-250k net additions over 2014-2016 ambitious:
– Unlike most cable peers, Numericable operates in a five-player market and its telco
competitors are rolling out FTTH, which enables them to now advertise 1Gbps speeds
(vs. 200Mbps for cable);
– The French market is very much about quad-play (c.50% of broadband customers).
Unlike its four competitors, Numericable does not have a mobile infrastructure;
– The group’s commercial offers are in our view attractive (in addition to broadband
speed, they are well positioned in terms of value for money, box and TV delivery) but
changing the historical customer perception will take time, at best.

M&A option value is the key swing factor
Operational trends should however be overshadowed by the M&A factor.
A merger between SFR and Numericable was tried in 2012 but failed on valuation
grounds. The listing of Numericable and the likely de-merger of SFR from Vivendi
would deliver objective market valuations for both assets and hence could enable the
companies to find a deal.
Such a merger would make strategic sense and create significant value: we estimate
the NPV of potential synergies at c.EUR2.9bn (to be shared between SFR and
Numericable) – based on long term annual savings of c.EUR400m (opex+capex) i.e.
c.4% of the combined cost base (consistent with recent benchmark on similar deals).

Exane BNP Paribas Research

Numericable

13 November 2013

page 5

Back to contents

Given the likelihood of such a deal, it is logical that the share price integrates these
potential synergies at least partially.
However, for SFR, Numericable would be nice to have but not a must-have (it already
has a solid presence in fixed-line) and there is no other bidder which could seriously
compete with SFR regarding potential synergies (e.g. synergies with Bouygues
Telecom of only c.EUR1bn). We would therefore not expect the full potential option
value to be integrated in the Numericable share price.
Figure 2: Synergies summary
Vodafone / CWW

Vodafone / KDH

SFR / Numericable

Bouygues Tel / Numericable

Currency
Long term opex + capex savings
Target year
Combined opex + capex base
% saving

GBPm
175
Year 3
4,105
4.3%

EURm
300
Year 3-4
8,793
3.4%

EURm
407
Year 3
9,644
4.2%

EURm
139
Year 3
5,332
2.6%

NPV of synergies
% of target's EV

1,095
84%

3,000
28%

2,894
54%

988
18%

Source: Exane BNP Paribas estimates

Our target price assumes a 50% probability of Numericable getting 50% of the
EUR2.9bn synergies – i.e. an upside of EUR725m or EUR6/share on our stand-alone
valuation. Our bear case assumes no deal and our bull case integrates that the deal
happens and Numericable gets its full 50% share of the synergies.

Main risks
In addition to the stock’s sensitivity to M&A scenarios, Numericable is mainly subject to
industry-specific risks, the key ones being in our view:
– A faster than expected rollout and customer take-up of fibre to the home in France,
which would reduce the company’s competitive network advantage versus telcos,
which are currently mainly operating on DSL technology;
– A further increase in the importance of quadruple-play in the market. This could
undermine Numericable’s ability to gain and/or retain customers given its weaker
presence in mobile compared to its competitors (MVNO versus four network operators);
– A rapid success of over-the-top audiovisual content providers (such as Amazon,
Apple or Netflix), which could lower customers’ willingness to pay for TV packages such
as those provided by Numericable. However, this seems unlikely to us given the
complex regulatory framework applicable to pay-TV in France (e.g. we do not expect
Netflix to make a rapid entry into France).
The group’s performance is also dependent on relations with third parties, notably
content and set-top boxes providers, and with large non-retail clients. We believe that
visibility on revenues from the B2B and Wholesale divisions is lower than in B2C (in
total, they contributed to 33% of 2012 combined EBITDA).
Given its financial leverage and its high-yield credit rating, the group’s results and cash
generation potential are exposed to changes in debt market conditions.
Finally, Numericable has (limited) exposure to specific regulatory issues (see Off
balance sheet liabilities, page 10).

Exane BNP Paribas Research

Numericable

13 November 2013

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Valuation: M&A the key swing factor
We are setting our target price at EUR26/share, showing no upside on the share price,
a valuation which in our view reflects: 1) a realistic operational scenario – slightly below
the group’s guidance in terms of customer net additions and EBITDA growth over the
next three years, leading to a stand-alone DCF valuation equivalent to EUR20/share;
plus 2) a 50% probability of Numericable merging with SFR and receiving half of the
estimated EUR2.9bn NPV of synergies.
Valuing Numericable is not an intuitive exercise for several reasons:
1) Compared to other European cable operators, visibility on its revenue growth
outlook is lower in our view, because growth is to be driven essentially by acquisition of
new customers rather than by up-selling triple-play to existing cable TV customers;
2) “Option value” of a potential merger with SFR, the number two Telco in France, is
large compared to the business’s stand-alone valuation – hence the market’s
perception of whether a deal with SFR is likely can virtually double the equity value;
3) With equity value representing only 55-60% of the enterprise value, the sensitivity
of the equity is mechanically high.
Given these uncertainties, we come up with a wide bear/bull valuation range of EUR1734/share, showing downside risk of 35% versus upside potential of 26%:
– The low end corresponds to a stand-alone DCF valuation assuming significant
failure in terms of customer net additions over the coming years compared to the
group’s target. It implies 7.0x 2014e EV/EBITDA.
– The high end corresponds to a bull-case DCF valuation (assuming that the group
reaches the high end of its net additions target range), to which we have added the full
‘option value’ associated with a potential deal with SFR. The resulting EV of EUR6.5bn
is equivalent to 10.1x 2014e EBITDA.
Figure 3: Numericable valuation summary
DCF-based valuation range

EV/EBITDA multiples vs. peer group
10.5

40.0
+28%

35.0
30.0

10.0
9.5

-2%

EUR/share

25.0
9.0
20.0

-34%
8.5

15.0
8.0

10.0

7.5

5.0

Liberty G.
0.0
Bear, stand-alone

Core, 50%

Bull, 100%

2013e

Numericable

Telenet

Ziggo
2014e

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

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Numericable is trading broadly in line compared to its peer group – except for Ziggo,
which trades at a significant premium to the rest of the group. Compared to Liberty
Global or Telenet, we see more ‘option value’ potential in Numericable, but on the other
hand, we are more cautious on Numericable’s organic growth potential.

Valuation range based on DCF: operational and option value
We have used DCF as our primary valuation methodology, complemented by multiplebased analysis (see below). We have valued two main components:
– Numericable as a stand-alone group, depending on operational scenarios, leading
to a fair EV between EUR4.5bn and EUR5.1bn depending on the group’s commercial
success in the coming years, with a core scenario pointing to EUR4.8bn;
– The option value related to a potential merger with SFR. We have valued potential
merger synergies at EUR2.9bn (@100%), using a DCF (NPV of long-term savings less
integration costs) – see pages 44-45. Assuming that this value would be split 50/50
between SFR and Numericable, we get a boost of up to EUR1.45bn for Numericable.
The table below shows the full valuation range depending on the combination of
operational and M&A scenarios.
Figure 4: Numericable full valuation range
EURm

Stand-alone
Low-end

DCF of core business
NC share of potential SFR merger
synergies NPV
Probability priced-in
Option value contribution
EV
2014e net debt
Other liabilities
NPV of tax credits
Equity value 2014e
Implied EV/EBITDA 2013e
Implied EV/EBITDA 2014e
2014e equity value per share (TP)

With 50% option value

Core High-end

Low-end

With 100% option value

Core High-end

Low-end

Core High-end

4,492

4,798

5,057

4,492

4,798

5,057

4,492

4,798

5,057

1,447
0%
0
4,492

1,447
0%
0
4,798

1,447
0%
0
5,057

1,447
50%
724
5,216

1,447
50%
724
5,522

1,447
50%
724
5,780

1,447
100%
1,447
5,939

1,447
100%
1,447
6,246

1,447
100%
1,447
6,504

-2,683
-120
467
2,157

-2,683
-120
478
2,473

-2,683
-120
486
2,740

-2,683
-120
467
2,880

-2,683
-120
478
3,197

-2,683
-120
486
3,464

-2,683
-120
467
3,604

-2,683
-120
478
3,920

-2,683
-120
486
4,187

7.5
7.0

8.1
7.5

8.5
7.9

8.8
8.1

9.3
8.6

9.7
9.0

10.0
9.3

10.5
9.7

10.9
10.1

17.4

20.0

22.1

23.2

25.8

27.9

29.1

31.6

33.8

Source: Exane BNP Paribas estimates

Operational scenarios
The table below summarises the key elements of our different operational scenarios for
Numericable, the key parameter being the commercial success in the B2C market:
– In the bull case, 250k customer net additions over 2014-2016 (the high end of the
group’s target range on this parameter), leading to 3.8% revenue CAGR and 3.4%
CAGR in EBITDA-capex, resulting in a DCF-derived EV of EUR5.1bn, equivalent to
7.9x 2014e EV/EBITDA;
– In the bear case, 100k customer net additions over the same period, leading to
2.0% revenue CAGR (the low end of the group’s target range of 2-5% on this
parameter) and 1.0% CAGR in EBITDA-capex, resulting in a DCF-derived EV of
EUR4.5bn, equivalent to 7.0x 2014e EBITDA;
– Finally, in the core scenario, 180k customer net additions leading to 3.0% revenue CAGR
and 2.3% CAGR in EBITDA-capex, resulting in an EV of EUR4.8bn (7.5x 2014e EBITDA).

Exane BNP Paribas Research

Numericable

13 November 2013

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Figure 5: Sensitivity of our DCF to key operating assumptions
2013e

Bear

Core

Bull

78
242
19%

100
28
192
16%

180
55
223
19%

250
78
250
21%

47.1%
24.1%
22.9%

2.1%
2.0%
4.2%
1.0%
48.8%
26.4%
22.4%

3.7%
3.0%
5.1%
2.3%
48.7%
26.1%
22.6%

4.9%
3.8%
6.0%
3.4%
48.6%
25.8%
22.8%

4,492
7.5
7.0

4,793
8.1
7.5

5,057
8.5
7.9

2014-2016e "individual subscribers" cumulative net adds (000)
Implied 2014-2016e "internet RGU" net adds per year (000)
Average gross additions per year (000)
Implied market share on gross additions on NC footprint
2013-2016e CAGR
B2C revenue
Group revenue
Group adjusted EBITDA (NC format)
Group adjusted EBITDA-cash capex (NC format)
2016e EBITDA margin
2016e capex/sales
2016e EBITDA-Capex/sales
DCF-based EV (stand-alone)
Implied 2013e EV/EBITDA
Implied 2014e EV/EBITDA
Source: Exane BNP Paribas estimates

WACC of 6.9% and growth rate of 1.5%
In our DCF, we have used a WACC of 6.9% and perpetual growth rate of 1.5% (from
2020). For Numericable, we have used a beta of 1.1x leading to a cost of equity of
9.0%, a corporate risk spread of 4.0% leading to a cost of debt of 3.9% after tax, and a
normalised debt ratio of 40%.
Figure 6: WACC calculation
Numericable
Risk free rate
Equity risk Premium
Beta

1.7%
6.6%
1.12

Cost of Capital

9.0%

Tax rate
Corporate risk spread

36.1%
4.0%

Cost of Debt

3.6%

Debt ratio - normalised

40%

WACC

6.9%

Source: Exane BNP Paribas estimates

The table below shows the sensitivity of our stand-alone DCF valuation (EV) in our core
scenario, depending on the WACC and growth rate used.
Figure 7: Sensitivity of DCF valuation to WACC and perpetual growth rate

Growth

6.4%

WACC
6.9%

7.4%

7.9%

0.00%
0.75%

4,284
4,723

3,960
4,326

3,681
3,989

3,438
3,700

1.50%
2.25%
3.00%

5,297

4,793

4,375

4,023

6,081
7,212

5,412
6,271

4,875
5,545

4,433
4,969

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

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Other assets
At the end of 2012, the Numericable group had net operating losses of EUR2.3bn, and
following the corporate restructuring leading to the IPO, we estimate that it will still be in
the position to use EUR2.06bn to offset future taxable profits.
Using the theoretical tax rate of 36.1% (and 40.1% for 2014 and 2015 following the
recent announcement of a temporary increase in the corporate tax rate in France), we
get a DCF valuation of future tax savings of EUR477 in our core scenario (range of
EUR467m to EUR486m depending on the operational scenario), which impacts how
quickly Numericable can use its NOLs and hence their NPV).
NB: in France, a recent law has reduced companies’ potential annual tax savings to
50% of the theoretical tax they would have to pay. Integrating this, we estimate that it
will take Numericable 13 years to fully utilise its NOLs.
Net debt and other liabilities
Our net debt is determined by subtracting the cash and cash equivalents from the total
amount of financial liabilities, which include: the financial liabilities under Senior Facility
Agreements, the perpetual subordinated notes, the financial liabilities under finance
leases, the other financial liabilities, the interest derivatives, the deposits received from
customers, as well as the bank overdraft.
We have taken into account the capital increase realised as part of the IPO process,
reducing net debt to c.EUR2.7bn at the end of 2013e.
We have also added EUR120m to the group’s 2013e net debt to reflect other liabilities:
c.EUR87m owed to capex suppliers as opposed to suppliers in the normal course of
business and therefore considered in all our valuation models as a liability rather than
an element of working capital; EUR25m of provisions for tax contingencies and
provisions for retirement benefits and litigation with employees (tax deductible).
Off balance sheet liabilities
We have not included any liability relating to the investigation by the European
Commission regarding the sale of certain network infrastructure by local authorities to
Numericable between 2003 and 2006. The EC alleges this could have amounted to
Numericable benefiting from a state aid – and this may or may not lead it to impose
financial consequences on Numericable. The EC decision is unlikely to be made in the
coming months but rather in the coming years.
However, we believe that the related risk is very small. Indeed, this issue relates to only
a very small number of homes passed (c.200k), which are outside of the 8.5m homes
that Numericable has upgraded to triple-play, and where it only has a very low number
of customers: we estimate c.10k.
Numericable indicates that it does not face a risk of dispossession, so it seems that the
risk is rather financial compensation or fine. However, we believe that the potential
amount at stake would be small. Indeed, assuming analogue TV ARPU of c.EUR20,
the customers in the areas concerned can be estimated to generate c.EUR2.4m of
annual revenues, a very small figure compared to the overall size of the group.

Exane BNP Paribas Research

Numericable

13 November 2013

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Peer group multiples
We believe that Numericable’s relevant peer group is composed of the remaining
European cable operators i.e. Telenet, Ziggo and Liberty Global (even though listed in
the US, the group’s main assets are in Europe) – see Figure 8 below.
Generally, we would favour EV/OpFCF (EBITDA-Capex-Tax) as the best multiple to
compare cable operators, as it is the most representative of their cash generation
potential. However, in the case of Numericable, we consider EV/EBITDA to be the
multiple that makes sense because the group’s capex is temporarily high for the next
three years as it accelerates the rollout of its superfast broadband capabilities across
its footprint – see Figure 20 page 19.
Cable peers at all time highs, reflecting M&A
The chart below shows the evolution of European cable operators’ EV/EBITDA
multiples since 2009, illustrating the progressive rerating of the sub-sector.
This was initially driven by the groups’ superior growth (especially in a no-growth telco
sector), but in 2012 and 2013, the multiple expansion reflected an increasing M&A
premium – with increasing rumours and progressive official confirmation of Vodafone’s
interest for Kabel Deutschland, culminating in a bid at EUR87/share in June 2013,
equivalent to EV/EBITDA of 10.9x on 2013e and 9.7x on 2014e.
The average sub-sector EV/EBITDA multiple was 7.6x in 2012, 8.7x YTD in 2013, and
now stands at 9.7x, with Ziggo at 10.2x, Liberty Global at 9.6x and Telenet at 9.7x.
Figure 8: Historical EV/EBITDA multiples of European cable peers
12.0
11.0
10.0
EV/EBITDA

9.0
8.0
7.0
6.0
5.0
4.0

KDH

LBTY

TNET

ZIGGO

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Oct-11

Jan-12

Jul-11

Apr-11

Jan-11

Jul-10

Oct-10

Apr-10

Jan-10

Jul-09

Oct-09

Apr-09

Jan-09

3.0

Average

Source: Exane BNP Paribas estimates

Compared to its peer group, Numericable is trading broadly in line – except for Ziggo
which trades at a significant premium to the rest of the group. Compared to Liberty Global
or Telenet, we see more ‘option value’ potential in Numericable, but on the other hand,
we are more cautious on Numericable’s organic growth potential – see page 19.

Exane BNP Paribas Research

Numericable

13 November 2013

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Figure 9: Peer group multiples
Share price
Liberty Global
Telenet
Ziggo

80.5
40.5
31.5

Median sector
Numericable

26.9

Dividend yield
2013e
2014e

FCF Yield (a)
2013e
2014e

EV/EBITDA (a)
2013e
2014e

EV/OpFCF post tax
2013e
2014e

EV/EBIT (b)
2013e
2014e

0.0%
10.9%
6.0%

0.0%
10.9%
7.1%

2.7%
4.9%
10.3%

5.9%
4.8%
6.9%

9.6
9.7
10.2

8.9
9.5
10.0

24.8
25.0
22.2

22.2
26.1
20.1

24.3
17.3
14.9

19.4
17.1
14.7

6.0%

7.1%

4.9%

5.9%

9.7

9.5

24.8

22.2

17.3

17.1

0.0%

0.0%

2.5%

1.5%

9.6

8.8

31.4

33.7

19.0

16.9

th

Source: Exane BNP Paribas estimates, market data as of 12 Nov. 2013 (at close)

KDH take-out multiples would lead to EUR32-33/share
For our valuation range, we have not used the recent Vodafone/Kabel Deutschland
take-out multiples of 10.9x 2013e EV/EBITDA and 9.7x 2014e EV/EBITDA. If we were
to apply these multiples we would get a Numericable EV of EUR6.2bn-6.5bn and equity
value of EUR3.9bn-4.1bn, equivalent to EUR32-33/share.
However, we believe that this particular case is not applicable to the Numericable
situation at least for two reasons: 1) Numericable’s growth profile is more modest than
that of KDH (3% versus 5%+ revenue CAGR), and 2) SFR is not in a competitive
bidding process to acquire Numericable, as it is the only potential acquirer in the
position to generate a very high level of synergies – see pages 44-45.

Exane BNP Paribas Research

Numericable

13 November 2013

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Recent newsflow
On 25th October, Numericable released its prospectus with its results for the Q3 2013.
We updated our numbers for the quarter and revised our estimates accordingly (see
table below). Overall, Q3 net adds were slightly lower than expected due to a higher
churn (19.3% versus 17.8% in our estimates). Nevertheless, the B2C segment revenue
growth was in-line with our expectations and accelerating when compared the last
quarters (4.6% vs 3.9% in Q2 and 4.5% in Q1). The B2B and Wholesale revenue
growth disappointed (-7.7% and -1.4% respectively) but should show better trends from
2014.
Figure 10: P&L – Changes to our estimates following the integration of the Q3 results
EURm

2013e

New estimates
2014e

2015e

869
312
198
-65

901
318
198
-61

1,315
409
83
101
593
45.1%
619
47.1%
595
45.3%
297
299
-205
-13
80
110

1,356
437
103
102
642
47.3%
652
48.1%
642
47.3%
335
335
-164
-42
129
129

B2C
B2B
Wholesale
Intragroup eliminations
Total Revenue
B2C
B2B
Wholesale
Total EBITDA
EBITDA margin
ADJ EBITDA as defined by NC
Adj. EBITDA margin
Adjusted EBITDA, Exane format
Exane adjusted EBITDA margin
EBIT
Adj. EBIT, Exane format
Net financial expense
Taxes
Net profit for the Group
Adj. Net profit, Exane format

Changes in estimates (%)
2013e
2014e

2015e

934
324
197
-61

0.1%
-3.7%
-7.4%
-3.3%

0.7%
-4.0%
-8.9%
-7.0%

0.5%
-4.3%
-8.4%
-6.6%

1,395
448
108
101
657
47.1%
667
47.8%
657
47.1%
340
340
-158
-44
138
138

-1.8%
0.9%
-16.5%
4.2%
-1.4%
0.4%
-0.7%
1.2%
-1.4%
0.4%
-1.2%
-1.2%
-6.7%
51.3%
9.0%
6.6%

-1.6%
2.2%
-6.3%
2.5%
0.8%
2.4%
0.8%
2.4%
0.8%
2.4%
3.1%
3.1%
-9.7%
12.4%
21.7%
21.7%

-1.7%
1.8%
-6.5%
3.0%
0.5%
2.2%
0.5%
2.2%
0.5%
2.2%
2.6%
2.6%
-10.0%
10.9%
18.8%
18.8%

Source: Exane BNP Paribas estimates

On 23rd October, Orange released its Q3 13 results as . The read-across from Orange’s
operational performance in France was neutral for Numericable, in our view, with:
– Good broadband net additions (+71k) reflecting an improving market share
estimated at 27% (versus 16% in Q1 and 20% in Q2). Assuming that Orange’s
estimate of its share of net additions is right, this points to market-wide net additions of
260-265k net additions in Q3, rebounding from the Q2 lows (150k, -40% y/y) and
consistent with our expectations, but still down 15-20% y/y;
– A continuing strong attraction of quadruple-play, with 42% of Orange’s broadband
customers on its Open offer at the end of Q3 13, up from 38% in Q2;
– Orange leading the FTTH market, with an estimated two thirds market share of
FTTH net additions, but with a still slow FTTH take-up (Orange FTTH net additions
equivalent to 4% of its broadband customer base per year).
Other French operators i.e. Bouygues, Vivendi and Iliad have yet to report their Q3
results, and so does Numericable.
On the legal front, Numericable has been sued by Bouygues Telecom, which is
reportedly claiming EUR53m in damages with respect to the white-label contract
entered into with the company in 2009. Bouygues is claiming EUR17.3 million in precontractual fraud (provision of erroneous information prior to the contract agreement),
EUR33.3 million due to a breach of contract and EUR2.4 million due to ‘image harm’.
We do not expect these accusations, which have been denied by Numericable, to have
a significant impact on the group.

Exane BNP Paribas Research

Numericable

13 November 2013

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What is Numericable?
History and profile
Numericable traces its roots to consolidation in the French cable market – starting in
2005, when the holding company Ypso acquired TDF Cable, NC Numericable and
France Telecom Cable. Having then expanded its operations to the B2B market by
acquiring Completel in 2007, Numericable Group is currently the only major cable
operator in France.
The group aims to benefit from the increasing penetration of superfast broadband in
France. In B2C, Numericable has 8.5m triple-play enabled homes passed (out of a total
of 9.9m homes passed), representing a coverage of c.30% of French households.
Anticipating the needs for more bandwidth, the company has been gradually upgrading
its network to superfast broadband (to 5.0m homes currently). Numericable’s network
presents a clear speed advantage against DSL operators. Its network advantage is
also significant in its B2B operations.
The Numericable group operates in three different segments:
– B2C, under the Numericable brand. It provides TV, fixed telephony, broadband and
mobile services to consumers. This division accounted for 63% of 2012 revenues;
– B2B, under the Completel brand, providing small, medium and large companies and
administrations with a various range of voice and data services; the segment
accounted for 25% of 2012 revenues;
– Wholesale, aiming at monetizing network capacity on an opportunistic basis and
accounting for 12% of 2012 revenues.
Figure 11: Numericable Group – Divisional split
P&L - EURm

2010

2011

2012

2013e

2014e

2015e

2016e

B2C
B2B
Wholesale
Intragroup eliminations
Total Revenue
Change y/y

837
253
160
-41
1,209

835
331
201
-61
1,307
8.1%

833
325
212
-66
1,302
-0.3%

869
312
198
-65
1,315
0.9%

901
318
198
-61
1,356
3.1%

934
324
197
-61
1,395
2.9%

968
331
197
-61
1,435
2.9%

3.7%
1.9%
-0.1%

397
58
59
514

398
74
91
563

395
100
96
591

409
83
101
593

437
103
102
642

448
108
101
657

476
112
101
689

5.2%
10.7%
-0.1%
5.1%

47.5%
22.8%
36.7%
42.5%

47.7%
22.3%
45.2%
43.1%

47.5%
30.7%
45.2%
45.4%

47.1%
26.4%
51.3%
45.1%

48.5%
32.4%
51.3%
47.3%

48.0%
33.2%
51.3%
47.1%

49.2%
33.8%
51.3%
48.0%

B2C
B2B
Wholesale
Reported EBITDA
B2C margin
B2B margin
Wholesale margin
EBITDA margin

CAGR 2013e-16e

3.0%

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

Exane BNP Paribas Research

Numericable

13 November 2013

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Main financials
In December 2012, the company reported total combined revenues of EUR1.3bn (+1.1%
organic growth year-on-year), adjusted combined EBITDA of EUR594m (Exane format,
+8.0% y/y, 45.6% margin) and adjusted net profit of EUR88m (Exane format, +5.1% y/y).
Figure 12: Numericable Group - Main P&L lines
EURm

2010

2011

2012

2013e

2014e

2015e

2016e

Total revenue
yoy growth
Organic yoy growth
Total operating cost
Adjusted EBITDA, Exane format
Organic yoy growth
% EBITDA margin
D&A
Adj. EBIT, Exane format
% EBIT margin
Net financial expense
Taxes
Effective tax rate
Associates
Earnings from discontinued operations
Minority interest
Adj. Net profit, Exane format

1,209

1,307
8.1%
1.5%
-804
550
4.0%
42.1%
-295
256
20%
-186
-13
16%
-0.3
126
-0.2
56

1,302
-0.3%
1.1%
-778
594
8.0%
45.6%
-292
303
23%
-211
-2
3%
-0.2
0
0.0
88

1,315
0.9%

1,356
3.1%

1,395
2.9%

1,435
2.9%

-786
595

-775
642

-799
657

-807
689

45.3%
-296
299
23%
-205
-13
14%
-0.1
0
-0.1
110

47.3%
-306
335
25%
-164
-42
25%
0.0
0
0.0
129

47.1%
-317
340
24%
-158
-44
24%
0.0
0
0.0
138

48.0%
-330
359
25%
-156
-43
21%
0.0
0
0.0
159

-736
518
42.9%
-305
213
18%
-178
-4
13%
0.4
31
0.2
31

CAGR 2013e-16e
3.0%

5.0%

6.3%

13.3%

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

With net debt of more than EUR3.0bn in 2012 and an average net debt-to-EBITDA ratio
of 5.5x for the past three years, the company used to be highly geared.
Nevertheless, the Group will use around two thirds of the IPO net proceeds to reduce
its leverage. According to our estimates, this would lead to a net debt of EUR2.7bn at
year end 2013 - corresponding to a net debt to EBITDA ratio of 4.4x –and a slight
decrease of the interests paid for 2013 and beyond.
The debt used to carry high interest rates and this weighed on the company’s
profitability. Nevertheless, Numericable has been able to deliver a positive and growing
net profit, with a very low level of taxes paid.
Numericable has invested more than EUR750m over the past three years, representing
average capex/sales of more than 20%.

Exane BNP Paribas Research

Numericable

13 November 2013

page 15

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Figure 13: A net profit affected by a high level of debt
2012 Adj. EBITDA (Exane adjustments) to Net Profit breakdown (EURm)
800
700
594

-292

600
500
400

-211

303
300
200

-2

0

0

88

Taxes

A sso ciates

M ino rity
interest

Net pro fit

100
0
A dj.
EB ITDA

D&A

EB IT

Net
financial
expense

Source: Numericable and Exane BNP Paribas estimates for adjustments

Our forecasts
Expecting solid revenue and EBITDA growth, mainly driven by the B2C segment
While the company guides for a gradually accelerating growth rate of 2% to 5% for
revenues over 2013-2016, our own forecasts point to a CAGR of 3.0%. At the EBITDA
level, we model 5.1% CAGR (on the Exane-adjusted EBITDA), with the margin
expanding from 45% in 2012 to 48% in 2016e (on a reported basis and on an Exaneadjusted basis). This corresponds to 48.7% in 2016e on the Numericable-adjusted
basis and is slightly below the group’s target of 50%.
We model that this growth will be driven by the B2C segment, in terms of both revenue
and EBITDA. According to our forecasts, this segment will account for c.70% of
EBITDA growth in the coming three years.
Figure 14: Historic and short-term revenue growth contribution – 2011-2013e
EURm
1,360
1,350

37

-12

1,340

-14

1,330
1,319
1,320
1,310

1,307

-3

2011

B2C

10

1,308

Wholesale

2012

-7

1,300
1,290
B2B

B2C

B2B

Wholesale

2013e

Source: Numericable for, 2011, 2012 data, Exane BNP Paribas estimates for 2013

Exane BNP Paribas Research

Numericable

13 November 2013

page 16

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Figure 15: Medium-term revenue growth contribution – 2013e-2016e
EURm
1,360
1,350

37

-12

1,340

-14

1,330
1,319
1,320
1,310

1,307

-3

2011

B2C

10

1,308

Wholesale

2012

-7

1,300
1,290
B2B

B2C

B2B

Wholesale

2013e

Source: Exane BNP Paribas estimates

We expect margin expansion to be mainly driven by: 1) scale in B2C (margin up at 49%
in 2016e from 47% in 2013e – see page 22) and 2) a mix effect in B2B (higher-margin
data revenues up, lower-margin voice revenues down – see pages 39-40).
Expecting three more years of high capex
The company is committed to continued heavy investment – with capex to sales of
c.26% over 2014-2016e – in network upgrades (EUR200-250m over the next three
years), maintenance and customer acquisition (c.EUR200 per gross addition including
the box – see pages 37-38).
Figure 16: A strong cash generation mainly used for investments
From Net profit to net cash generation in 2013e (EURm)
700
172

600
500

-6

19

-1

555

-309

291

400

0

300
200

-3

-161
82

80

100
Free Cash Flow

Interests paid

Investment in affiliates

Decrease(-increase) in
financial assets/loans

Net capex

CF from continuing operations

Others

WCR change

Reconciliation taxes paid /
P&L charge

Net financial expense

D&A

Net profit 2013e

0

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 17

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Figure 17: Numericable Group – Cash Flow Statement and Leverage Ratio
EURm

2010

2011

2012

2013e

2014e

2015e

2016e

CAGR 2013e-16e

Net profit
D&A
Net financial expense
Reconciliation taxes paid / P&L charge
Change in working capital
Others
Cash flow from continuing operations
Net capex
Decrease(-increase) in financial assets/loans
Investment in affiliates
Interests paid
Free Cash Flow
Capital increase
Issuance (repayment) of debt
Dividends paid
Net cash flow from discontinued operations
Net increase/decrease in cash

27
315
223
0
14
-34
545
-231
-3
-58
-169
84
0
-100
0
15
-1

69
313
204
1
5
-16
577
-238
0
0
-155
184
0
-335
0
156
6

85
288
184
-1
-32
7
531
-282
-3
0
-152
93
0
-126
0
0
-33

80
291
172
-6
19
-1
555
-309
0
-3
-161
82
251
-355
0
0
-22

129
306
160
0
-33
0
562
-362
0
0
-150
51
0
0
0
0
51

138
317
154
0
9
0
618
-373
0
0
-144
101
0
0
-64
0
36

159
330
152
0
-5
0
637
-371
0
0
-143
123
0
0
-69
0
54

25.9%

3,362
6.2

3,064
5.4

3,033
4.9

2,723
4.4

2,683
4.1

2,656
4.0

2,612
3.7

Net debt
Average net debt to EBITDA

4.7%
6.3%

14.4%

-235.5%
-1.4%

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

Exane BNP Paribas Research

Numericable

13 November 2013

page 18

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Compare and contrast with European cable peers
When compared to other European cable operators, Numericable does not appear as
the best growth story, but is fairly placed between Ziggo and Telenet. Indeed, Kabel
Deutschland, which shows higher growth rates, is a less relevant peer as it is in the
process of being bought out by Vodafone.
Figure 18: Numericable’s revenue and EBITDA CAGR versus cable peers
CAGR 2012-2014e

Revenue

EBITDA

2.6%
8.5%
33.5%
8.6%
7.8%
4.5%
2.0%
6.4%

2.8%
11.3%
29.7%
6.8%
10.8%
6.7%
3.9%
7.6%

Ziggo
Kabel Deutschland
Liberty Global Group*
Telenet
Germany
Virgin Media
Numericable**
Average peers
* Liberty Global growth is as reported, not organic
** EBITDA CAGR based on Exane-adjusted EBITDA
Source: Exane BNP Paribas estimates

In terms of EBITDA margin, the Numericable group margin is below its peers’ average,
but is affected by the B2B division – which has an EBITDA margin of 31% (2012).
Figure 19: A lower EBITDA margin affected by the B2B division
Adjusted EBITDA margin %
Ziggo
Kabel Deutschland
Liberty Global Group
Telenet
Germany
Virgin Media
Numericable
Average peers

2011

2012

2013e

2014e

56%
44%
47%
53%
59%
40%
42%
50%

57%
45%
47%
52%
57%
40%
46%
50%

57%
45%
45%
51%
59%
41%
45%
51%

57%
47%
44%
51%
60%
42%
47%
52%

Source: Exane BNP Paribas estimates

In terms of capex, Numericable is clearly above its peers with a capex/sales ratio of
22% in 2012, which may be partly explained by its lower-than-average penetration rate
(see page 21). The group’s capex/sales ratio is expected to increase further in 2013e
and again in 2014e, given the group’s superfast broadband rollout plan.
Figure 20: A higher than average capex intensity in the next few years

Ziggo
Kabel Deutschland
Liberty Global Group
Telenet
Germany
Virgin Media
Numericable
Average peers

2010

2011

Capex/sales %
2012

2013e

2014e

13%
22%
20%
24%
16%
20%
19%

16%
22%
20%
34%
16%
19%
22%

18%
23%
18%
24%
19%
22%
21%

19%
26%
18%
21%
21%
17%
24%
21%

18%
31%
18%
20%
21%
17%
27%
21%

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 19

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Finally, as mentioned earlier, the company has historically been highly geared.
However, it should come closer to peer group leverage ratios, assuming that the IPO
process includes the planned capital increase (see below).
Figure 21: A relatively high leverage

Ziggo
Kabel Deutschland
Liberty Global Group
Telenet
Virgin Media
Numericable
Average peers

2010

Net Debt / EBITDA
2011
2012
2013e

4.5x
4.3x
4.6x
3.4x
3.6x
6.2x
4.0x

3.9x
3.7x
5.1x
3.6x
3.4x
5.4x
3.7x

3.3x
3.4x
5.2x
3.8x
3.4x
4.9x
3.5x

3.4x
3.3x
6.2x
4.3x
3.1x
4.4x
3.5x

2014e Moody's
3.6x
3.0x
5.1x
4.4x
3.0x
4.1x
3.5x

Ba1
Ba2
Ba3
A3
Ba3

Debt Rating
Outlook S+P
Stable
+
Stable
Stable
Stable

BB
BBABB-

Outlook
+
Stable
Stable
Stable

Source: Exane BNP Paribas estimates

IPO and shareholders
Pre-IPO, the Group was owned by a holding company called Ypso, controlled by the
funds Cinven (37.5%), Carlyle (37.5%) and Altice (24.1%) and in which the
management also owns a 1% stake.
Through the IPO, Altice raised its stake to 30% of the capital, while Carlyle and Cinven
reduced it to respectively 25.7% and 17.7%. The management kept its stake at 1%.

Management
The management team notably includes:
– CEO – Eric Denoyer, who joined the Group in 2004, held the positions of Head of
Wholesale and Deputy CEO of Completel before being appointed CEO in 2011;
– CFO – Thierry Lemaître, who previously held the role of CFO at Wanadoo, has
been CFO of the group since May 2010;
– CTO – Philippe Le May, former Engineering Director at UPC France and Network
Access Architect at SFR/Cegetel, has held the position of CTO since 2008.
The Board of Directors will be composed of 10 members including the President, three
independent members appointed by the Company and the rest selected by the three
current shareholders as long as they keep a minimum stake in the Group: three by
Altice as long as its stake remains greater than 27%, one by Cinven as long as its
stake remains greater than 5% and two by Carlyle, as long as its stake remains greater
than 15%.
Remuneration will be based on group performance targets for executive members and
a mix of group and individual targets for managers reporting to executives. No
indication concerning precise targets has been provided.

Dividend policy
In the course of the last five years, neither Completel nor Numericable have paid any
dividend. Looking forward, management has said it is “fully committed to shareholders
returns” and might consider a first dividend in 2015 in respect of full year 2014.
However, any dividend payment will be subject to the terms of the Senior Facilities
Agreement and the Senior Secured Notes. Notably, the leverage ratio should remain
below 4.0x (post payment of the dividend).
In our forecasts, we model dividend payments representing 50% of the previous year’s
net profit, starting in 2015.

Exane BNP Paribas Research

Numericable

13 November 2013

page 20

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B2C: potential growth or growth potential?
Not the typical European cable position
Numericable’s position is quite different from that of European peers in terms of:
– Penetration: the ratio of number of customers / homes passed stands at c.17%,
versus a range of 53-73% for peers. This reflects the historically low penetration of payTV over cable in France (Canal+ over the air and then DTH have been strong
competitors) as well as the success of DSL operators in triple-play (triple-play was first
introduced by Iliad and then pushed early by all telcos, unlike in some other markets).
– Maturity of the existing customer base, as measured by the number of revenue
generating units (RGU) per subscriber and/or by ARPU. Numericable reaches 2.5x
RGU/sub. i.e., as high as VMED in the UK but no other operator is as high – and
German cable is still far below 2x. In other words, most of Numericable’s customers are
already triple-play customers.
Figure 22: Numericable has low penetration and high RGU per subscriber

40%

1.8

30%

1.6

20%

1.4

10%

1.2

0%

1.0

2011

NC

TNET
2012

2013

2011

2012

KDH

2.0

KBW+UM

2.2

50%

LG

60%

TNET

2.4

Ziggo

70%

LG

2.6

KDH

2.8

80%

Ziggo

90%

VMED

RGU per subscriber

NC

Penetration (customers / homes passed)

2013e

Source: Exane BNP Paribas estimates

Numericable’s low penetration means that it has a large opportunity to grab new
customers, since more than 80% of its homes passed do not subscribe at all to one of
its services.
However, in our view, Numericable’s overall situation is more difficult than that of peers:
– Its growth opportunity is less easy to capture and hence offers less visibility than
that of peers, as it must be driven by the acquisition of new customers rather than by
the conversion of existing TV customers to triple-play.
– Given the fixed nature of a part of the cost base (in particular the network), the
lower penetration could mean that structurally, Numericable’s profitability would remain
lower (in particular, its capex/sales could be structurally higher).

Exane BNP Paribas Research

Numericable

13 November 2013

page 21

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Revenue growth to be mainly driven by customer acquisitions
Based on our calculations, digital revenues in B2C were flat in 2011, declined by 1.6%
y/y in H1 12 but started to grow in H2 12 (+1.0%). They accelerated in H1 13: +4.2%
y/y, corresponding to EUR17m more revenues, driven by:
– “digital revenues”, the core business, i.e. revenues from end-customers with digital
TV of which most have migrated to triple-play: up EUR14m y/y;
– “white label” i.e. customers of Bouygues Telecom’s “bbox fibre” offer on the
Numericable network (see overleaf), for which Bouygues Telecom pays wholesale fees
to Numericable: up EUR10m y/y.
The impact was, however, partly offset by a EUR6m decline from “analogue” and “bulk”
revenues (services to housing associations and multiple-dwelling unit managers).
Figure 23: Our estimates for the B2C division
EURm

2010

2011

2012

2013e

2014e

2015e

2016e

CAGR 2013e-16e

9,798
8,299
4,171

9,833
8,368
4,285

9,875
8,428
4,788

9,975
8,534
5,209

10,025
8,584
6,209

10,075
8,634
7,369

10,125
8,684
8,529

0.5%
0.6%
17.9%

1,378
1,275
103
195
1848

1,444
1,238
206
133
1837

1,525
1,228
297
103
1829

1,628
1,279
349
84
1797

1,722
1,321
401
60
1765

1,808
1,355
452
36
1733

1,880
1,376
504
12
1701

4.9%
2.5%
13.1%
-47.7%
-1.8%

Total individual users

1,573

1,577

1,628

1,712

1,782

1,844

1,892

3.4%

Total RGU

3,078

3,110

3,207

3,410

3,572

3,822

3,996

5.4%

2.1

2.3

2.4

2.5

2.6

2.7

2.9

14.9%
18.4%
16.9%

17.1%
25.2%
18.1%

19.0%
18.3%
17.2%

17.7%
16.9%
15.5%

18.0%
18.0%
15.0%

18.0%
18.0%
15.0%

18.0%
18.0%
15.0%

43.6
39.0

43.9
40.3

44.3
40.7

45.5
41.8

45.4
41.7

46.0
42.3

47.1
43.3

1.2%
1.2%

Financials (EURm)
Digital revenues
Analogue revenues
Bulk revenues
White label revenues

665
70
75
27

660
51
70
54

650
37
70
75

679
29
69
93

708
23
68
103

739
15
67
113

772
7
65
123

4.4%
-36.9%
-1.6%
9.9%

Total B2C revenue

837

835

833

869

901

934

968

3.7%

Y-o-y revenue growth (%)
Digital revenue growth
Analogue revenues
Bulk revenues
White label revenues

-1%
-26%
-7%
101%

-2%
-28%
0%
40%

4%
-22%
-2%
24%

4%
-21%
-1%
10%

4%
-35%
-2%
10%

4%
-51%
-2%
9%

Total B2C revenue growth

-0.2%

-0.3%

4.4%

3.7%

3.7%

3.6%

-356
-57
-299
-75
-21
-17
30
-439

-385
-74
-311
-74
-19
-5
46
-437

-386
-73
-313
-78
-20
-6
52
-437

-399
-86
-312
-86
-21
-1
46
-460

-402
-83
-319
-87
-22
0
47
-464

-424
-95
-328
-89
-22
0
49
-486

-429
-88
-341
-91
-23
0
51
-492

397
47.5%

398
47.7%

395
47.5%

409
47.1%

437
48.5%

448
48.0%

476
49.2%

Footprint (000)
Homes connected
Triple-play enabled
DOCSIS3.0 enabled
Customers (000)
Total digital TV users
Digital individual subscribers
White label end-users
Analogue TV individual subs
Bulk subscribers

RGUs per individual user
Churn - individual subs.
Stand-alone TV
Analogue TV
Triple-play
ARPU (EUR/month)
Estimated total digital ARPU
ARPU as reported by the company

Cost of sales
of which SAC
of which other cost of sales
Personnel cost
Taxes
Provisions
Other income
Total operating cost
B2C EBITDA
% margin

5.2%

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

Exane BNP Paribas Research

Numericable

13 November 2013

page 22

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The return to growth in the number of individual customers and the white label
contribution are the key reasons for the revenue turnaround in B2C.
We expect Numericable to continue delivering on these growth drivers in the coming
years. Over 2014–16, we model B2C revenue CAGR of 3.7%, driven mainly by “digital
revenues” (+4.4% CAGR), reflecting customer growth (+3.4% CAGR on digital
individual subscribers), limited ARPU growth (+1.2% CAGR), plus growth in mobile
revenue (although the latter is not a significant contributor to EBITDA – see below).
White label: financially sound
A specific feature of Numericable’s business model is that the network is leveraged
on a wholesale basis with a wide range of ‘white label’ partners. Having previously
entered contracts with Darty and Auchan, the group today has only one partner i.e.
Bouygues Telecom.
This activity has grown from 7% of B2C ‘individual digital customers’ in 2010 to 20% in
2013 (Exane BNP Paribas estimate). Assuming that there will not be any other partner
than Bouygues, we forecast that this percentage will reach 27% in 2016e.
In terms of revenue, it has grown from 3% of the B2C division in 2010 to 11% in 2013e.
In the coming years, even though we expect fewer net additions on white label
customers than on the direct customers, we expect this small business to keep on
contributing positively to the whole segment.
The business model is financially attractive for Numericable as the company incurs no
acquisition cost and the recurring revenue generates a high margin.
Strategically, wholesaling the superior cable network could be viewed as an issue i.e.
giving up the group’s strategic advantage. In fact, given the size of Bouygues
Telecom’s business on Numericable, we do not think that it has any material impact on
Numericable’s ability to differentiate itself in the market.

A market historically dominated by telcos…
With c.86% penetration of households, the French broadband market is one of the
most developed in Europe (average 73%). Growth is slowing progressively but it
remains faster than average: customers up 4.5% y/y in Q2 13 versus Europe +3.5%.
The market is still dominated by Orange in terms of total customers (41% share), but
for many years, the ‘winners’ have been alternative carriers operating on unbundled
DSL lines, in particular Iliad (Free), SFR and more recently Bouygues Telecom: over
the past two and half years (Q1 11-Q2 13), altnets have garnered 70% of net additions
versus 26% for Orange and 4% for Numericable (retail) – see Figure 24 below. Iliad
has now reached 23% market share, SFR 21% and Bouygues Telecom 8%.
Numericable’s 1m cable broadband customers represent a 4% market share. Including
Bouygues Telecom’s customers on the Numericable network (white label), cable has
5.5% market share.
Given Numericable’s limited coverage (9.9m homes of which 8.5m are triple-play
enabled), cable only addresses 30% of the French broadband market and we estimate
its actual market share in its coverage area at 16–17% (assuming a penetration rate in
line with the national average).

Exane BNP Paribas Research

Numericable

13 November 2013

page 23

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Figure 24: A market historically in favour of altnets (Iliad, SFR, Bouygues Telecom)
Quarterly broadband net additions (000)

Share of broadband customers, Q2 13

500

Others
2%

Numericable
5%

450

Bouygues
8%

400
350
300

Orange
41%

250
200

Iliad
23%

150
100
50
0
Q1
11

Q2
11

Q3
11

Altnets

Q4
11

Q1
12

Q2
12

Orange

Q3
12

Q4
12

Q1
13

Q2
13

SFR
21%

Numericable

Source: Exane BNP Paribas estimates

…and satellite (DTH)…
In pay-TV, the French market has historically been dominated by the premium offer
from satellite-based operators (DTH). As shown in the left-hand side of the chart below,
more than half of all customers watch TV through IPTV via DSL operators (we model
that, on average, 62% of DSL-based broadband customers watch TV through their
operator’s box), but this only represents a small share of pay-TV revenues. In contrast,
DTH (satellite) and DTT (digital terrestrial television) account for only 22% of pay-TV
direct customers but more than 70% of revenues in 2012 (essentially driven by DTH).
This leaves Numericable with an estimated 6% market share of TV customers and c.11%
of revenues in 2012. That said, we expect Numericable’s individual customer numbers to
return to growth and this should enable Numericable to participate in the pay-TV market
growth (+4% pa over the last three years and +4.4% in 2013e, on our estimates).
Figure 25: Satellite-based offers (DTH) have historically taken the lion’s share of pay-TV revenues
Pay-TV customers breakdown by distribution platform

Market value by distribution platform (EURm)
6,000
+4.0% CAGR

Satellites and
DTT
22%

Orange
26%

5,000
4,000
3,000

Cable
6%

2,000

Bouygues
8%

SFR
13%
Iliad
25%

1,000
0
FY 10

FY11

Canal Plus and BeIN Sport

FY12
Numericable

FY13e
DSL operators

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 24

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…but Numericable has shown signs of accelerating commercial momentum
As shown in the charts below, Numericable’s commercial momentum has improved in
the recent quarters, both on the direct side (Numericable brand) and on the white label
side (Bouygues Telecom’s bbox fibre offer).
In the last three quarters (Q4 12, Q1 13 and Q2 13), cable got 18% market share on
net additions (of which 7% on the Numericable brand) versus 8% in the preceding three
quarters (Q1 12, Q2 12 and Q3 12), of which 1% for the Numericable brand.
This enabled accelerating growth in Numericable’s customer base (“total individual
users”): +6% y/y in Q3 13 versus +2% y/y in Q3 12. As shown in the chart left below,
the decline in basic TV customers is now more than offset by the growth in multipleplay and white label customers (taken together).
Figure 26: Cable showing signs of accelerating commercial momentum
Numericable quarterly customer net additions (000)

Cable market share of broadband net additions

70

25%

60
50

20%

40
30

15%

20
10

10%

0
-10

5%

-20
-30

0%

-40
Q2
11

Q3
11

Multiple-play

Q4
11

Q1
12

Q2
12

Q3
12

Q4
12

TV & other

Q1
13

Q2
13

Q3
13

White label

(5%)
Q4 11

Q1 12

Q2 12

Numericable retail

Q3 12

Q4 12

Q1 13

Q2 13

White label & other

Source: Exane BNP Paribas estimates

We believe that this recent trend was driven mainly by:
– an accelerating take-up of superfast broadband in the French market. Superfast is
still tiny in France (7% of the broadband customer base as per the regulators’ definition
- broadband speed of 30Mbps and upwards), but superfast broadband net adds
represented 43% of broadband net adds in Q2 13, up from 35% in Q4 12 and 37% in
Q1 13 and from less than 20% in Q1 12, Q2 12 and Q3 12. This accelerating trend, that
we expect to continue, should benefit Numericable (see below);
– Numericable’s launch of its new box (‘LaBox’) during Q3 12 and has accordingly
increased its commercial efforts. The right chart below shows the clear correlation between
LaBox placements and Numericable’s internet gross additions in the past quarters.

Exane BNP Paribas Research

Numericable

13 November 2013

page 25

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Figure 27: Two drivers of improved Numericable net additions: superfast broadband and LaBox
Superfast broadband in broadband net additions (000)

LaBox placements vs. Internet gross additions (000)

400

70

350

60

300

50

250

40

200
30
150
20

100

10

50

0

0
Q4 11

Q1 12

Q2 12

Q3 12

ADSL & others

Q4 12

Q1 13

Q2 13

Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Internet gross adds

Superfast broadband

LaBox placed

Source: Exane BNP Paribas estimates

Numericable’s net adds guidance seems aggressive
Numericable’s target is to increase its ‘individual user’ base by 200k–250k between
2014 and 2016, starting from 1.7m at the end of 2013e (based on our estimates).
Given the operator’s limited triple-play footprint (8.5m homes i.e. 30%) and higher than
average churn (15.5% on multiple-play in 2013e, assumed to decrease to 15% from
2014e, versus 13% for the market on our estimates), the group’s target may not be
easy to reach.
We base our core scenario on 180k net additions over the period, but we also look at
bull and bear case scenarios with, respectively, 250k and 100k net additions.
Figure 28: Summary of our scenarios on Numericable net additions over 2014-2016e
2014-2016e "individual subscribers" cumulative net adds (000)
Implied 2014-2016e "internet RGU" net adds per year (000)
Average gross additions per year (000)
Implied market share on gross additions on NC footprint
2013-2016e CAGR
B2C revenue
Group revenue

2012

2013e

35
198
15.6%

78
242
18.7%

Bear
100
28
192
16%

Core
180
55
223
19%

Bull
250
78
250
21%

2.1%
2.0%

3.7%
3.0%

4.9%
3.8%

Source: Exane BNP Paribas estimates

As shown in the table above, our core scenario assumes that Numericable (retail
brand) would get 19% market share of gross additions in its triple-play footprint over the
period. This compares with 18.7% estimated in 2013 (and 15.6% in 2012) and with a
natural market share of 20% in a five player market; the bull case assumes 21% and
the bear case 16%.
Indeed, to achieve 180k ‘individual user’ net additions over the period, we estimate that
Numericable needs to grow its direct internet customer base by c.200k (given the
expected decline in TV-only customers, partly offset by the expected growth in white
label customers).

Exane BNP Paribas Research

Numericable

13 November 2013

page 26

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This is equivalent to 55k broadband net additions per year and, given the expected
churn (168k per year), implies average broadband gross additions of 223k per year on
the Numericable brand – see Figure 28 above. This implies a sustained acceleration
compared with the 230k gross adds estimated for 2013 and 200k in 2012.
High churn, partly structural
A key element here is churn. Although it has improved significantly, Numericable’s
churn on stand-alone TV and analogue TV customers was still 18% in H1 13 and the
churn on triple-play customers was still 15.5% (compared to 17.7% in Q2 12).
Churn should remain high on single-play but we believe that Numericable can reduce
the triple-play churn slightly. The Group is indeed putting specific measures in place
such as its “Plan 100 jours” which aims at minimising customer churn in the first three
months of a customer’s life.
In any case, the operator’s churn is structurally higher due to its smaller footprint:
people leaving the coverage area. In particular, when comparing Numericable’s
footprint with the total number of households present in the large cities where the
company operates, we observe that Numericable does not cover every household in
these large cities. The company estimates that this structural churn represents a
mechanical uplift of c.4ppt of churn compared with nationwide players.
Our forecast of a 15% triple-play churn from 2014 therefore reflects a good underlying
performance compared to peers. In particular, the relative weakness of Numericable in
mobile in a market increasingly moving to quadruple play could undermine its ability to
further attract and retain customers – see page 37.
The key question is therefore whether the group’s share of gross additions can improve
significantly in the coming years – driven by accelerating take-up of superfast
broadband, Numericable’s expanding superfast broadband footprint and a general
improvement in the operator’s commercial performance (image, distribution, etc.).

Exane BNP Paribas Research

Numericable

13 November 2013

page 27

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Figure 29: French broadband market model
2012

2013e

2014e

2015e

2016e

FTTH footprint (Orange)
NC triple-play footprint
NC superfast footprint

1,669
8,428
4,788

2,481
8,534
5,209

3,741
8,584
6,209

5,000
8,634
7,369

6,260
8,684
8,529

% of households covered
Orange FTTH
NC - total
NC - superfast

6%
30%
17%

9%
30%
18%

13%
30%
22%

18%
30%
26%

22%
30%
30%

23,959
22,276
1,282
985
297
400

24,886
23,127
1,411
1,063
349
348

25,682
23,859
1,519
1,118
401
304

26,196
24,327
1,632
1,180
452
237

26,518
24,616
1,732
1,228
504
170

27%

27%

24%

22%

20%

1,213
1,096
126

928
851
129

796
732
108

514
468
113

321
289
100

544
496
107

35

78

56

61

48

55

91
-9

52
-52

52
-44

52
-67

52
-68

52
-59

13.2%
13.0%
17.2%
13.0%

13.1%
13.0%
15.5%
13.0%

13.1%
13.0%
15.0%
13.0%

13.1%
13.0%
15.0%
13.0%

13.1%
13.0%
15.0%
13.0%

3,006
2,753
199

3,147
2,896
199

3,263
3,007
212

3,369
3,102
228

3,438
3,163
245

3,357
3,090
228

163

153

159

168

177

168

35

46

52

60

68

60

4,218
3,850
325

4,074
3,747
328

4,059
3,739
319

3,883
3,569
341

3,760
3,452
345

3,901
3,587
335

Numericable

198

230

215

229

225

223

White label

126

98

104

112

120

112

Broadband customers
Telcos
Cable
Numericable
White label
Others
Cable penetration of homes passed
Net adds
Telcos
Cable
Numericable
White label
Others
Churn
Telcos
Cable
Others
Churned users
Telcos
Cable
Numericable
White label
Gross additions
Telcos
Cable

NC share of gross adds
in NC triple-play footprint

2014-16e avg

25.6%

26.6%

26.0%

28.9%

30.2%

28.3%

Numericable

15.6%

18.7%

17.5%

19.4%

19.7%

18.8%

White label

10.0%

7.9%

8.5%

9.5%

10.5%

9.5%

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 28

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The superfast broadband opportunity
Superfast broadband penetration is less advanced in France than in many other
European markets: 7% at Q2 13. This is way behind, for example, Belgium and the
Netherlands (50%+), but is also lower than in larger countries such as the UK and
Germany (10%+). In our view, this is due to 1) the very good speeds offered by
ADSL2+ in France (up to 22Mbps) and 2) to the relative historical weakness of cable.
However, the situation is changing. In our view, a growing number of French
households consider and will consider ADSL speeds as too slow. A key driver for this is
the number of ‘screens’ per household. According to Mediametrie/GfK, the average
French household has 6.3 screens in 2013 compared to 5 in 2011 and 4 in 2009 –
driven by the rapid adoption of smartphones and tablets.
Not every household already uses 80Mbps today (see chart below), but it is easy to
see how the 22Mbps maximum speed offered by ADSL2+ is rapidly becoming
insufficient for a significant number of families – and in reality, customers get less than
22Mbps, since the average access speed in France measured by Akamai is 5.2Mbps.
Figure 30: Example of the broadband requirements of a multi-screen household

Source: Numericable (2012 Investor Day presentation)

Numericable quotes a study by IDC which estimates that the number of superfast
broadband customers in France will increase from 1.8m today to 7.5m by 2017. This
corresponds to an average of 1.2m–1.3m customers migrating to superfast broadband
every year until 2017.
Numericable is ahead of the pack in superfast broadband, with 58% market share of
this (small) segment – plus 18% for Bouygues offer on the cable network – compared
with 14% for Orange and lower shares for Iliad and SFR.
The move to superfast benefits Numericable: unsurprisingly, the cable operator has
much better internet net additions in areas where its network is upgraded to superfast,
compared to other areas – see right chart below.

Exane BNP Paribas Research

Numericable

13 November 2013

page 29

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Figure 31: Superfast broadband: a positive trend for Numericable
Superfast broadband customers (000) and market shares

Internet RGU net additions by type of area (000)
30

Other FTTH,
191, 11%

25
20
15

Orange
FTTH, 239,
14%

10
5
0
(5)

NC retail,
1,015, 57%

(10)
(15)

Byg Tel on
NC, 320,
18%

(20)
Q2 12

Q3 12

Non-upgraded areas

Q4 12

Q1 13

Q2 13

Upgraded areas

Source: Exane BNP Paribas estimates

Numericable’s superfast broadband coverage to stay ahead for years …
Among its 9.9m homes passed, Numericable has 8.5m which are triple-play enabled (speed
of 30Mbps+) and 5.0m which it calls ‘fibre homes’ i.e. passed with broadband speeds of
100-200Mbps. Numericable plans to expand this 5.0m to 8.5m by 2016e, targeting to
deliver 250k homes passed per quarter after a short ramp up phase. This means that its
superfast broadband coverage will grow from 18% in 2013e to 30% in 2016e.
Amongst telco competitors, the most advanced FTTH rollout is that of Orange, which
we expect to reach c2.5m homes connectable by the end of 2013e, i.e. 9% coverage,
with a forecast of c.5m by 2015e (18%) – on c.11m homes passed ( 1). Other telcos
(Iliad, SFR, Bouygues) have more limited coverage than Orange in high density areas
but will piggy-back on Orange’s capex in the lower density ones, hence their coverage
will track that of Orange over the coming years. We therefore expect that over the
coming years, Numericable will maintain a much larger superfast broadband coverage
than its telco competitors.
However, in the very long term, Orange’s ambition is for 17m homes passed with FTTH
by 2020, which we estimate should correspond to more than 9m homes connectable.
This means that at some point, Numericable’s coverage advantage will be overcome –
but we believe that it is unlikely to be before 2018.
Like all cable stories, Numericable benefits from a clear advantage in terms of cost of
superfast broadband rollout: it highlights that its capex is approximately EUR50 per
household upgraded versus a range of EUR400-2,000 per FTTH home connectable
depending on the region (see our recent Liberty Global report for more details on this:
When biggest is best).
But compared to cable peers, Numericable has “deeper” fibre, i.e. the number of
homes per node (reflecting how many different customers will have to share broadband
connectivity) is lower than for many peers – see right chart below – putting it in a good
position to face rising demand for bandwidth in the coming years. The operator has
invested ~EUR1.4bn in its network over 2008-2012 (Numericable group).

1

Orange FTTH homes passed correspond to areas with fibre in the street; homes connectable correspond to areas with fibre rolled out vertically into
the buildings.

Exane BNP Paribas Research

Numericable

13 November 2013

page 30

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Figure 32: Numericable’s superfast broadband advantage
Footprint as a % of households

Numericable has ‘deeper fibre’ than cable peers

35%

NC

30%

% two way
netwo rks

25%

85%

Z iggo

100%

T e le ne t

KD H

100%

83%

A ccess capacity 862M Hz 862M Hz 550M Hz

20%
15%
10%

M ainly
614M Hz

<100 hp*

43%

-

-

-

100-500 hp*

16%

-

-

-

>500 hp*

41%

100%

100%

100%

5%
0%
2012
Orange FTTH

2013e

2014e

2015e

NC - superfast

2016e
NC - total

* % of DOCSIS3.0 network which has less than 100 homes passed per node, 100-500 homes passed per node, >500 homes passed per node
Source: Exane BNP Paribas estimates (left hand side), Numericable (right hand side)

…but FTTH competitors talk up the speed
Cable operators’ DOCSIS3.0 technology enables speeds of up 400Mbps in a relatively
straightforward way – and amongst Numericable CPEs (customer premise equipment
,i.e. boxes), 34% are DOCSIS3.0 hence ready for 400Mbps. 14% use DOCSIS2.0
technology enabling up to 30Mbps and 51% DOCSIS2.0B enabling up to 100Mbps.
Long term, we see a technology path that will enable up to 1Gbps on cable networks
(see our above mentioned Liberty Global report). Although requiring further upgrades to
the network and boxes, we believe that such an upgrade will be feasible at a much
lower cost than upgrading a telco’s copper network to FTTH. However, this is still in
development phase and would require incremental investments compared to our
current Numericable forecasts.
In the meantime, unlike most cable peers e.g. in the UK, Germany or Belgium,
Numericable will be facing competition from FTTH rather than from FTTC/VDSL. These
FTTH operators will have a smaller coverage than Numericable (see above) but
potentially faster speeds.
Indeed, the “speed claim” has just started, with Iliad and SFR having now officially
announced that their FTTH offer will be up to 1Gbps for the same price as ADSL. In
particular, Iliad has said that its Freebox Revolution box is already ready for such speeds.
As such, in areas where FTTH is rolled out, Numericable’s superfast broadband claim
will be inferior to that of FTTH operators. We are not saying that any household will
need a speed of 1Gbps any time soon – but this will make Numericable’s message that
it has the best speed more difficult to push.
At the end of Q1 13, of the 2.4m homes passed by FTTH, only 529k are not
overlapping with Numericable’s network – which is logical as both types of networks
are and will be primarily concentrated in cities – hence the face-to-face between
Numericable and FTTH operators will only grow.

Exane BNP Paribas Research

Numericable

13 November 2013

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VDSL essentially a sideshow in France
VDSL2 is arriving in France this winter (from Q4 13), but unlike in many other countries,
we believe it will be no game changer:
– Only 15-20% of lines will benefit, because VDSL2 is not coupled with FTTC i.e.
copper lines are not shortened. This means that only the lines that are naturally shorter
than 1km will see a significant speed boost from VDSL2. In cable areas, only 8% of the
lines are expected to benefit from higher speeds, according to Numericable;
– Far from all customers have a box that is VDSL2 ready: this is notably the case of
Freebox Revolution customers (>50% of Iliad’s customer base) and Orange Livebox
Play customers (the new box was launched in Q1 13 so the installed base remains
small). Others will have to change their box, which will take time.

Can Numericable execute on the opportunity?
Does Numericable have the right commercial approach to leverage its superfast
broadband footprint advantage as quickly as possible? We believe that in addition to
offering faster speed than ADSL, Numericable offers are generally attractive, positioned
for good value for money (but generally not at a discount to competition), with a good
box and strong TV (although no exclusive premium content).
On the other hand, Numericable’s direct distribution (own shops) remains much more
limited than that of Orange, SFR or Bouygues, and, in a market moving to quad-play,
its lack of credibility in mobile (even though it has a MVNO-based offer) may not help.
According to surveys carried out by the independent institute Ysthad on the
Numericable brand, 75% of people surveyed said that the brand “inspires confidence”
in H1 13, up from 58% in 2010. This is useful as it gives an indication on the absolute
improvement of the Numericable brand perception, but it does not give a relative
indication compared to the operator’s competitors.
The Google Trends chart overleaf clearly shows that internet searches in France for
“LaBox Numericable” are far lower than searches for equivalent key words relating to
the operator’s competitors.
In addition, part of Numericable’s sales force is dedicated to the conversion of the bulk
subscribers into individual customers. So far, one third (c.500k) have subscribed to
individual digital offers. As these bulk subscribers already know Numericable, they may
represent an easier source of gross additions in the short term, but a limited one in the
long term.
Price positioning: value for money
Numericable has offers ranging from EUR25/month to EUR77/month and beyond –
depending on the type of TV content included, the broadband speed, the inclusion (or
not) of unlimited calls to mobiles, etc.
As shown in the table below, Numericable’s offers are not comparing like-for-like with
those of telcos. Numericable’s main offer (Power) costs EUR45/month, which is more
than competitors similarly priced offers (price points ranging from EUR38 to EUR43 per
month) but reflects faster speeds (compared to xDSL offers) and the quality of TV.

Exane BNP Paribas Research

Numericable

13 November 2013

page 32

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Figure 33: Google Trends showing a relative low interest for LaBox

Average

2005

Freebox free

2007

2009

Labox numericable

2011

Livebox Orange

2013
Bbox bouygues

Comparing four searches: “Livebox Orange”, “bbox Bouygues”, “Freebox Free”, ”Labox Numericable”
Source: Google

Figure 34: Main triple-play offers in France (Oct. 2013)
Connection Type

Fixed line calls

Download Speed

TV
Channels

Total
EUR/month

Livebox Zen
Livebox Play
Livebox Zen
Livebox Play

ADSL
ADSL
Fibre
Fibre

Int'l Landline
Fr Mobile + Int'l Landline
Int'l Landline
Fr Mobile + Int'l Landline

20 Mb/s
20 Mb/s
100 Mb/s
200Mb/s

160
160
160
160

36.9
42.9
36.9
42.9

SFR

SFR Box
SFR Fibre

ADSL
Fibre

Int'l Landline
Fr Mobile + Int'l Landline

20 Mb/s
300 Mb/s

170
170

33.0
41.0

Bouygues

Bbox
Bbox Sensation
Bbox Sensation Fibre

ADSL
ADSL
Cable

Int'l Landline
Fr Mobile + Int'l Landline
Fr Mobile + Int'l Landline

20 Mb/s
20 Mb/s
200Mb/s

165
170
145

31.9
37.9
37.9

Free

Freebox Crystal
Freebox Revolution

ADSL
Fibre

Int'l Landline
Fr Mobile + Int'l Landline

28 Mb/s
1Gb/s

197
197

32.0
38.0

Numericable

Start
Power (LaBox)

Cable
Cable

Fr Mobile + Int'l Landline
Fr Mobile + Int'l Landline

100 Mb/s
200Mb/s

200
240

35.0
45.0

Operator

Offer

Orange

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 33

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LaBox: technically advanced but not a ‘positive differentiator’
A key element of competition in the French broadband/triple-play market is the very
visible fight on “boxes”.
Boxes are home gateways, which can be physically made of one or two boxes, and
which perform the following functions: modem (i.e. connection to the DSL, cable or
FTTH line), WiFi (and other types of) connectivity, TV tuner(s), digital recording (hard
drive), DVD/blue ray player, ‘home server’ (NAS) and in some cases even gaming
console (ability to run apps).
The latest round of innovation was led by Iliad, with its “Freebox Revolution” launched in
December 2011, followed by Bouygues Telecom with its “Bbox Sensation” and Numericable
with its “LaBox” (both were progressively rolled out in 2012, with a full commercial impact in
H2 12) and finally Orange with its “Livebox Play” in February 2013. SFR launched a new box
in H2 11 (“SFR Evolution”) but it is not as advanced as the others mentioned.
Our view is that good boxes are not strong positive differentiators (i.e. a box in itself is
not enough for an operator to gain significant market share – if only because over time
hardware and even software differentiation can be caught up with), but they are musthaves (i.e. operators with old/inadequate boxes can suffer):
– The most notable impact was that of Iliad’s “Revolution”, which led to a strong
rebound of Iliad’s share of net additions, but it is difficult to disentangle the impact of
the box itself from that of the new bundle associated with it. Indeed, Iliad’s “Revolution”
box was launched with a EUR38/month bundle which, for the first time in France,
included unlimited calls to mobiles – and we believe that this was a significant
contributor to the product’s early success.
– On the other hand, not having an advanced enough box can be a handicap. In our
view, Orange and SFR suffered during 2012 from not having a new box when most of
their key competitors did.
We believe that “LaBox” fits the bill i.e. it is very advanced indeed – but this is the “must
have” that Numericable needs to be relevant in the market rather than something which
will mechanically lead to cable gaining market share.
The chart below compares the key features of LaBox versus other boxes in the market,
showing notably its superiority points e.g. size of the hard drive (500GB) and full
support of internet (open internet access, social networks, HTML5, etc.).
The capex per box is c.EUR200, compared to EUR250-275 for Orange’s Livebox Play,
Bouygues’s Bbox Sensation and Iliad’s Freebox Revolution.
In Numericable’s reported capex, this cost per box is netted by the EUR75 deposit
(EUR63 ex. VAT) paid by the customer on reception of the box.

Exane BNP Paribas Research

Numericable

13 November 2013

page 34

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Figure 35: Comparison of set-top box characteristics

HD

Source: Numericable

Content access a slight positive…
Given its historical position as TV distributor, Numericable has a very comprehensive
offering in terms of TV channels. In addition, the group concluded a specific agreement
with Canal+, the main premium TV content in France, which is distributed through its
own DTH service, through cable and through all telcos (DSL and FTTH).
Canal+ notably has most of the French Premier League football rights plus a large
number of premium movies and series, both global (major US studios and TV
channels) and French (exclusive series, new movies, etc.).
Unlike its triple-play competitors, Numericable is able to offer direct access to part of
this key premium content (80 channels). It means that Numericable’s customers do not
need to have a separate subscription to CanalSat to access this content.
Numericable can integrate Canal content into its bundles as a single subscription,
whilst with telcos, customers have to subscribe to both the operator’s triple-play service
(which includes no Canal-specific content) and to Canal+’s offer (telcos act as
distributors and retain a monthly fee, but the customer’s relationship is with Canal).
…but distribution a slight negative
Numericable is developing its network of shops, but it is starting from a low base
compared to competitors: 141 own shops at this stage versus 1,000+ for Orange and
500-800 for SFR and Bouygues Telecom (estimates after probable closures as part of
the ongoing cost cutting of the three telcos). A significant share of sales is done via
‘distance channels’ i.e. telesales (25%) and online (28%), but the smaller network of
own shops could remain a slight negative.

Exane BNP Paribas Research

Numericable

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Expecting solid ARPU
Numericable’s ARPU is relatively high already (EUR41 as reported by the company, a
figure which notably excludes connection fees; we estimate it to be EUR46 based on
total digital revenues divided by the average number of individual digital customers). It
has been growing over the past few years, notably driven by the rising proportion of
triple-play customers in the base (2.5x RGU/subscriber).
We nevertheless expect it to continue growing slightly (+1.2% 2013-2016e CAGR)
because 1) this is Numericable’s approach to the market (management has said it
wants to make “no compromise on price”), 2) the market context is favourable, and
3) the operator will continue to try and sell additional products to existing customers,
e.g. more TV content, video on demand, etc. and to upsell customers to higher-end
products (e.g. moving customers which do not have LaBox to offers with LaBox, which
are more expensive).
French triple-play pricing is solid
We believe that the French broadband market has long passed its trough in terms of
pricing. In the past two years, operators have been able to pass on the VAT increase(s)
to customers and to introduce new bundles at higher price points (e.g. Freebox
Revolution at EUR38/month versus lower-end Freebox bundle at EUR32/month). They
have been offering additional features in return for a higher price (e.g. unlimited calls to
mobile included in the bundle, new feature-rich boxes — see below, etc.).
Bouygues Telecom had historically been the most disruptive in terms of broadband
pricing, with the introduction of the aggressive quad-play bundles ‘ideo’ in 2009 — as it
had nothing to lose and wanted to penetrate the broadband market from scratch.
However, the operator is now focused on restoring its FCF after Iliad’s mobile entry.
SFR has had aggressive promotions throughout 2013, trying to rekindle net adds after
a dismal 2012 (2% market share of net additions). Visibility is low on the operator’s
strategy at this stage, but we believe that it has no interest in cutting broadband prices
sharply given its large broadband customer base and its own need to restore FCF.
The broadband ARPU of Orange and Iliad have been growing. We expect this to
continue with the shift to superfast broadband.
Gross additions focused on higher end offers
Numericable has shown that 75% of its gross additions are in offers of EUR45 or more
— as these are what it promotes and which allows access to the operator’s new box
(called “LaBox”) — and only 25% are at the EUR25 and EUR35 price points.
As such, since 2011, the ARPU of acquired customers has remained consistently
slightly higher than that of the overall customer base (EUR42 versus EUR41 in Q4 12,
Q1 13 and Q2 13). This number came down to EUR39.1 in Q3 13 but this is explained
by seasonal patterns (a lot of students subscriptions).

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Numericable

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Mobile: Numericable has an offer but penetration is very low
All four key competitors are fixed-mobile integrated operators and, following the initial
impulsion of Bouygues Telecom in 2009 (ideo) and Orange soon after (Open), a very
significant part of the market has moved to quad-play. We estimate that overall,
approximately half of Orange, SFR, Bouygues and Iliad broadband customers have
fixed-mobile bundles/discounts - based on figures released by Orange (42% of its
broadband customers as of Q3 13) and estimates for other operators (>40% for SFR,
>80% for Bouygues Telecom); Iliad’s mobile launch has also been riding on this trend
(half of Free Mobile’s customers are Freebox customers).
In this context, Numericable has launched a comprehensive range of SIM-only mobile
packages at competitive prices. A growing share of its gross additions is taking mobile,
as it has now included a (basic) mobile offering in its Power package. However, as of
Q3, its mobile customer base (183k) represented a penetration of only 14% of its digital
subscriber base.
We believe that Numericable’s mobile move is mainly defensive i.e. it wants to prevent
customers from leaving it just because it has no mobile offer, but it is unclear whether
this will really work over the long term in a very competitive mobile market.
In any case, the mobile contribution to EBITDA should remain negligible as we believe
that the MVNO margins on Numericable’s aggressive retail prices are virtually zero.

Expecting margin expansion, driven by operational gearing
The B2C EBITDA margin was 47.5% in 2012, and we expect a slightly lower margin in
2013 (47.1%) reflecting the operator’s commercial push and higher personnel costs. In
the coming years, we expect the margin to rise again, to 49.2% in 2016e, driven by a
reduction in the weight of commercial costs (from 9.9% of sales in 2013e to 9.1% in
2016e), a general scale effect (150bp benefit over the period) and a fall in personnel
costs as a proportion of revenues (40bp benefit over the period) – see Figure 23.
High cost of growth, but still a good payback
Numericable’s improved net additions performance since 2011 has been supported by
intensifying commercial efforts. In both 2011 and 2012, it spent EUR73m-74m in B2C
subscriber acquisition costs versus EUR57m in 2010 — and we model EUR86m in 2013e.
Figure 36: The cost of growth
Evolution of the opex part of subscriber acquisition costs
14%

400
380

EUR per gross add

12%

340

11%

320
300

10%

280

9%

260

8%

240

% of B2C digital revenue

13%

360

7%

220
200

6%
2010

2011

H1 12

Unit SAC (EUR)

H2 12

H1 13
% of digital revenue

Source: Numericable, Exane BNP Paribas estimates

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Numericable

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We estimate that this is equivalent to EUR345 per gross addition in both 2011 and
2012 — and this is only the opex part, i.e. it excludes the cost of the box (EUR135 for a
new LaBox) and installation (at least EUR65), which are both in capex. We therefore
estimate the total cost of connecting a triple-play customer at c.EUR550.
Given the ARPU and gross margin generated on digital B2C customers, we estimate
that the monthly gross profit per triple-play customer reaches c.EUR27-29 per month
(see chart below). We therefore estimate that the total cost of acquisition (opex+capex)
will be repaid by the customer after c.19 months. The churn on triple-play (15.5% in
H1 13) is equivalent to an average lifetime per customer of 6.5 years, so a 19-month
payback still implies significant value creation.
Figure 37: Estimated ARPU and gross profit per month (before SAC)
EUR/month
50
45
40
35
30
25
20
15
2010
Estimated ARPU

2011

2012

2013e

Gross profit per month

Source: Numericable for historical gross profit, Exane BNP Paribas estimates for the rest

Exane BNP Paribas Research

Numericable

13 November 2013

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B2B and wholesale
What is Completel?
In September 2007, Ypso’s two main shareholders acquired Completel, a French B2B
telecom operator created in 1998, with the aim of developing fiber in large cities. By
2008, Numericable and Completel fully pooled their activities to operate on a unique
common network. The Group then expanded its B2B activities with the acquisition of
two smaller French operators (B3G in 2009 and Altitude Telecom 2010) and is currently
in talks to acquire a third one called LTI Telecom.
Today, the group operates in the B2B market under the brand of Completel and
provides French businesses with all their fixed telecom needs. They report two different
sources of revenue:
– Voice services, which include voice going through data (VoIP) and IP Centrex (no
need to purchase PBX switching systems);
– Data services, which include IP VPN, LAN to LAN, Internet, security, hosting and
cloud computing.
In 2012, the B2B segment accounted for 24.8% of the group’s combined revenues.

What to expect?
While voice revenues have substantially declined these last three years mainly due to
MTR cuts and substitution by mobile, the higher margin data services are expected to
drive both revenue and gross profit growth.
We forecast accordingly a 13% CAGR 2013-16e decline in voice revenues, offset by a
8.8% increase in data revenues, leading to total revenue CAGR of +1.9% for the B2B
segment. Meanwhile, we estimate that the segment’s EBITDA margin should increase
from 31% in 2012 to 34% in 2016e.
Figure 38: Profit growth being driven by an improving revenue mix
B2B segment – main financials (EURm)
400

40%

350

35%

300

30%

250

25%

200

20%

150

15%

100

10%

50

5%

0

0%
2010
Revenues

2011

2012
Gross profit

2013e

2014e
EBITDA

2015e

2016e
EBITDA margin

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

Exane BNP Paribas Research

Numericable

13 November 2013

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Figure 39: Details of our B2B estimates
EURm

2010

2011

2012

2013e

2014e

2015e

2016e

CAGR 2013e-2016e

Revenues
Voice (traditional and VoIP)
Data
Total B2B revenues

155
98
253

152
179
331

134
191
325

114
199
312

99
218
318

86
238
324

75
256
331

-13.0%
8.8%
1.9%

y/y revenue change (%)
Voice (traditional and VoIP)
Data
Total B2B (%)

-

-1.9%
82.3%*
30.7%

-12.0%
6.5%
-2.0%

-15.0%
4.2%
-3.7%

-13.0%
10.0%
1.6%

-13.0%
9.0%
2.1%

-13.0%
7.5%
2.1%

54
49
103

53
81
135

47
99
146

40
107
147

35
118
153

30
129
159

26
138
164

Gross margin
Voice
Data
Total B2B

35%
50%
40.7%

35%
45%
40.6%

35%
52%
45.0%

35%
54%
47.1%

35%
54%
48.1%

35%
54%
49.0%

35%
54%
49.7%

B2B EBITDA
%margin

58
22.8%

74
22.3%

100
30.7%

83
26.4%

103
32.4%

108
33.2%

112
33.8%

Gross profit
Voice
Data
Total B2B

-13.0%
8.8%
3.8%

10.7%

* Exane BNP Paribas estimate
Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

A growing market…
Like in many European markets, the French B2B market is largely dominated by the
incumbent, Orange, with a market share of c.70%.
With 600 large corporate clients (>1,000 employees) and 12,000 mid-market clients,
representing a 7% market share in 2012, Completel is according to the group the
second-largest B2B alternative operator behind SFR (12%). It also competes with Colt
(3% of the market) and to a smaller extent (mid-market only) with Bouygues Telecom.
The group’s strategy is premised on the increasing consumption of data and the
accompanying growing need for high speed broadband. This has notably enabled
Completel to double its market share from 4% in 2007 to 8% in 2012 in the large
corporate segment. However, this trend towards faster broadband requirements is not
only true for large corporate clients but also increasingly so for small and medium-sized
businesses. These smaller businesses now represent the main growth target of the
group. Its market share in this market segment is still estimated at 4%.
Figure 40: Opportunity to respond to the increase in demand for data
Projected B2B market value by type of services, France (EURbn)
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2012
Vo ice

2013

2014
Data

2015
Ho sting & Clo ud

Source: Company estimates based on various sources

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…addressed by a superior combined network
To address these new market opportunities, the group is tapping on its combined
cable/fibre/DSL network. Since the fusion of Numericable’s and Completel’s activities in
2008, their networks have been managed as a unified whole, making Completel the
first alternative FTTO (fibre to the office) network in France.
Completel now operates 80 MANs (Metropolitan Area Network), serves 10,000 sites
through its fibre network and more than 80,000 sites through its DSL network. The
Group has entered into long-term irrevocable contracts with Orange and with local
public authorities to get full coverage of the territory.
Figure 41: #1 alternative national FTTO* network according to the Group
Completel’s own fiber and DSL network - 2012

* FTTO = fibre to the office
Source: Company’s website

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Wholesale
The third segment of the group is Wholesale, which resulted from the combination of
Numericable’s and Completel’s respective wholesale businesses. The group provides
voice, data and optic fibre infrastructure services to more than 200 national and
international telecom operators.
Numericable sees wholesale as an attractive way to monetize its extra network
capacity on an opportunistic basis. In this market, the group competes only with
Orange, the market leader in data, and SFR, the market leader in voice. The group
estimates its wholesale market share at 10-20%.
While we have low visibility on this division’s revenues, Numericable has no reason to
give up this high margin and low capex activity. In 2012, the wholesale segment
accounted for 11.8% of the Group’s revenues and reported a 45.2% EBITDA margin.
Figure 42: An opportunistic high margin business
Wholesale segment – main financials (EURm)
100%

250

90%
200

80%
70%

150

60%
50%

100

40%
30%

50

20%
10%

0

0%
2010

2011

Revenues

2012

2013e

Gross profit

2014e

2015e

EBITDA

2016e
EBITDA margin %

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

Figure 43: Estimates for the Wholesale division
URm
evenues
ross profit
BITDA
BITDA margin %

2010

2011

2012

2013e

2014e

2015e

2016e

CAGR 2013e-2016e

160
67
59
36.7%

201
101
91
45.2%

212
108
96
45.2%

198
113
101
51.3%

198
113
102
51.3%

197
113
101
51.3%

197
112
101
51.3%

-0.1%
-0.1%
-0.1%

Source: Numericable for 2010, 2011, 2012 data, Exane BNP Paribas estimates for 2013 and beyond

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Option value
Since the end of 2012, it has been widely reported that SFR and Numericable — or
more accurately their shareholders — have been discussing a possible merger
between the two companies. The press has reported that both management teams
were convinced of the rationale for such a deal but the shareholders have not managed
to find an agreement due to differences over valuations.
The potential listing of Numericable, which would give a valuation reference for
Numericable, as well as the potential de-merger of SFR from Vivendi (an option
officially explored by the group and which could be decided in early 2014), which would
also deliver an objective market valuation of SFR, could help the two companies
significantly in reaching an agreement.
SFR can absolutely survive without Numericable (and vice versa) — in particular we
note that, unlike Vodafone Spain for instance, SFR is not currently losing market share
because of its inability to compete in quad-play. As such, it does not need to urgently
plug a quad-play hole.
Still, we believe that such a merger would make strategic sense and create significant
value: we estimate the NPV of potential synergies at c.EUR2.9bn — see below.
Investors are therefore likely to be willing to at least partially integrate Numericable’s
share of the potential synergies into the group’s valuation (see page 8).

Fixed-mobile convergence: an old idea that still has legs
Fixed-mobile convergence has been talked about for more than ten years, and has
already led to significant acquisitions by mobile operators: Neuf Cegetel by SFR in
France in December 2007; CWW by Vodafone in early 2012, and Kabel Deutschland
by Vodafone in June 2013.
We believe that such deals make perfect strategic sense. For mobile-centric operators
such as Vodafone or SFR, the rationale includes the potential for large cost synergies,
the willingness to buy growth and the need to address the quad-play market. The quadplay argument does not hold in the case of SFR, which is already very active in quadplay as are all telcos in France, but the first two arguments are applicable to
SFR/Numericable.
– Cost synergies would stem from network integration, as SFR can benefit from using
Numericable’s superfast broadband networks: savings on unbundling fees (we estimate
that SFR pays EUR550m per year in such fees to Orange), savings on access network
wholesale costs (when connecting B2B customers — especially since Numericable
includes the fibre-rich network of Completel in business areas), and on fibre capex (for
the connection of corporate customers and for mobile backhaul links). G&A savings
can also be achieved, as in any merger.
– Buying growth: SFR revenues are declining significantly due to the impact of Free
Mobile on mobile prices in France. Numericable is not growing as fast as Kabel
Deutschland was, but it is growing. Even though management would probably not
admit that it is acquiring an asset to boost the group’s top line, the reality is that
acquiring a growing cable operator would improve SFR’s organic top-line trend and can
therefore help improve investor perception.

Exane BNP Paribas Research

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13 November 2013

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We believe that a deal with SFR would also make sense to Numericable because it
would accelerate the usage of its network (in both the B2C and B2B markets):
Numericable’s network is its strength, but its underutilisation due to its low market
share is its weakness. A combination with SFR would dramatically increase its scale.
In addition, SFR’s image, although slightly weakened since Free Mobile’s launch in
early 2012, remains strong in France. An SFR-branded cable-based triple-play product
would probably sell better than an equivalent product with the Numericable brand (the
success of the Bouygues Telecom-branded ‘bbox fibre’ offer, based on the
Numericable network, is a good example).

Synergies with SFR potentially worth EUR2.9bn
The table below shows that in the two recent Vodafone acquisitions, synergies are
expected to represent c.4% of the combined opex and capex base of the two merged
entities, and the value of synergies justified a very large portion of the acquisition price.
Figure 44: Synergies summary
Vodafone / CWW

Vodafone / KDH

SFR / Numericable

Bouygues Tel / Numericable

Currency
Long term opex + capex savings
Target year
Combined opex + capex base
% saving

GBPm
175
Year 3
4,105
4.3%

EURm
300
Year 3-4
8,793
3.4%

EURm
407
Year 3
9,644
4.2%

EURm
139
Year 3
5,332
2.6%

NPV of synergies
% of target's EV

1,095
84%

3,000
28%

2,894
54%

988
18%

Source: Exane BNP Paribas estimates

The table also shows the results of our synergies calculations for two possible deals
involving Numericable: a merger with SFR or with Bouygues Telecom, which reaches
respectively EUR2.9bn (based on a run rate of savings of EUR407m) and EUR1.0bn
(based on a run rate of savings of EUR139m).
There are two main reasons for the much larger estimated synergies in the case of
SFR compared to Bouygues Telecom:
– SFR has a larger residential broadband customer base (5.2m versus 1.9m) so the
savings that can be achieved by migrating a part of the altnet’s customer base to the
Numericable network are much larger in the case of SFR;
– SFR has a strong presence in the enterprise fixed-line market whilst Bouygues
Telecom does not. Completel’s rich fibre network can enable SFR to save on the cost
of connecting its corporate clients, an area of saving that does not exist in the case of
Bouygues Telecom.

Exane BNP Paribas Research

Numericable

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The table below shows how we have calculated the synergies between SFR and
Numericable, including the above-mentioned opex savings plus savings on G&A costs
and FTTH capex avoidance.
Figure 45: Details of potential Numericable / SFR synergies
EURm

2011

2012

2013e

2014e

2015e

2016e

13-16e CAGR

13,490
12,183
1,307
0

12,590
11,288
1,302
0

11,493
10,178
1,315
0

10,860
9,503
1,357
0

10,626
9,229
1,397
0

10,498
9,062
1,436
0

-3.0%
-3.8%
3.0%

Mobile revenues
SFR
Numericable
Synergies

8,456
8,452
4
0

7,528
7,516
12
0

6,413
6,388
25
0

5,797
5,765
32
0

5,561
5,522
38
0

5,414
5,369
45
0

-5.5%
-5.6%
21.2%

Fixed-line revenues
SFR
Numericable
Synergies

5,034
3,731
1,303
0

5,063
3,772
1,291
0

5,080
3,790
1,290
0

5,062
3,737
1,325
0

5,065
3,707
1,358
0

5,084
3,693
1,391
0

0.0%
-0.9%
2.6%

-9,232
-8,476
-756
0

-8,682
-7,974
-708
0

-8,082
-7,363
-719
0

-7,677
-6,961
-716
0

-7,503
-6,925
-738
161

-7,248
-6,824
-746
322

-3.6%
-2.5%
1.2%

of which ULL for residential ADSL
% of residential revenues
Synergies

-538
-23%
0

-531
-23%
0

-552
-24%
0

-565
-25%
0

-570
-25%
86

-571
-26%
171

of which access cost for SFR enterprise
% of enterprise & other revenues
Synergies

-337
-25%
0

-358
-25%
0

-370
-25%
0

-365
-25%
0

-366
-25%
55

-367
-25%
110

-1,541
-1,400
-141
0

-1,292
-1,150
-142
0

-1,089
-937
-153
0

-820
-665
-156
0

-923
-784
-159
20

-905
-784
-162
40

-6.0%
-5.8%
2.0%

4,257
3,707
550
0

3,908
3,314
594
0

3,411
2,816
595
0

3,183
2,541
641
0

3,123
2,304
659
161

3,250
2,238
690
322

-1.6%
-7.4%
5.0%

-1,902
-1,659
-243
0

-1,867
-1,581
-286
0

-1,918
-1,601
-317
0

-1,924
-1,601
-366
43

-1,792
-1,501
-375
85

-1,700
-1,411
-374
85

-3.9%
-4.1%
5.7%

-150
0

-130
0

-170
0

-170
43

-170
85

-170
85

-11,134

-10,549

-10,000

-9,644

-9,540

-9,355

2,356
2,048
308
0
0.0%

2,042
1,733
309
0
0.0%

1,493
1,214
278
0
0.0%

1,258
940
276
43
-0.4%

1,332
803
283
246
-2.6%

1,550
827
316
407
-4.3%

-407

-407

0

5,165

5,291
0
300
0

5,337
15%
300
240

5,342
30%
300
481

0
0
0

-233
0
-233

-103
1
-96

260
2
225

Revenue
SFR
Numericable
Synergies

Opex
SFR
Numericable
Synergies

of which SG&A and others
SFR
Numericable
Synergies
Adjusted EBITDA
SFR
Numericable
Synergies
Capex
SFR
Numericable
Synergies
of which FTTH
Synergies
Combined opex+capex pre-synergies
OpFCF
SFR
Numericable
Synergies
% savings on combined base
Integration costs
of which ULL migration
of which others

-815
-481
-334

SFR ULL customers
% migrated
Cost per migration
Cumulative cost of migration

5,028

1.3%
-12.0%
4.3%

OpFCF impact, net of integration
DCF
Taxed OpFCF impact
WACC
Growth
Exit multiple
NPV

7.5%
0.0%
13.3
2,894

3,464
2
2,998

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

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13 November 2013

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Appendices
Figure 46: P&L of the combined Group
EURm

2010

2011

2012

B2C
B2B
Wholesale
Intragroup eliminations
Total Revenue
organic
B2C
B2B
Wholesale
Revenue y/y growth

837
253
160
-41
1,209
1269

835
331
201
-61
1,307
1288
-0.2%
30.7%
25.8%
8.1%

833
325
212
-66
1,302
1302
-0.3%
-2.0%
5.2%
-0.3%

869
312
198
-65
1,315
1315
4.4%
-3.7%
-6.5%
0.9%

902
318
198
-61
1,357
1357
3.8%
1.6%
0.2%
3.2%

936
324
197
-61
1,397
1397
3.7%
2.1%
-0.3%
2.9%

969
331
197
-61
1,436
1436
3.5%
2.1%
-0.2%
2.8%

B2C
B2B
Wholesale
Total operating cost
as a % of revenue

-439
-196
-101
-736
60.9%

-437
-257
-110
-804
61.5%

-437
-225
-116
-778
59.7%

-460
-230
-96
-786
59.8%

-465
-215
-96
-776
57.2%

-486
-217
-96
-799
57.2%

-492
-219
-96
-807
56.2%

-558
-127
-30
-17
37

-622
-141
-28
-8
55

-602
-142
-32
-8
72

-601
-153
-34
-1
67

-586
-156
-34
0
68

-605
-159
-35
0
69

-609
-162
-36
0
71

B2C
B2B
Wholesale
Total EBITDA
EBITDA margin
Adjustments
ADJ EBITDA as defined by NC
Adj. EBITDA margin

397
58
59
514
42.5%
25
539
44.6%

398
74
91
563
43.1%
9
572
43.8%

395
100
96
591
45.4%
29
619
47.6%

409
83
101
593
45.1%
25
619
47.1%

437
103
102
641
47.3%
10
651
48.0%

450
108
101
659
47.2%
10
669
47.9%

477
112
101
690
48.1%
10
700
48.8%

One-offs in EBITDA
Adjusted EBITDA, Exane format
Exane adjusted EBITDA margin
organic
D&A
as a % of revenues
EBIT
Adj. EBIT, Exane format

5
518
42.9%
529
-305
25.3%
208
213

-13
550
42.1%
550
-295
22.5%
269
256

4
594
45.6%
594
-292
22.4%
299
303

2
595
45.3%

0
641
47.3%

0
659
47.2%

0
690
48.1%

-296
22.5%
297
299

-307
22.6%
335
335

-317
22.7%
341
341

-330
23.0%
360
360

1
-175
-4
-178

1
-177
-10
-186

4
-183
-33
-211

7
-172
-40
-205

1
-160
-5
-164

1
-154
-5
-158

1
-152
-5
-156

PBT

30

83

88

92

170

183

203

PBT for tax calculation

30

83

88

117

210

221

241

-4
13%
36.1%

-13
16%
36.1%

-2
3%
36.1%

-13
14%
36.1%

-42
25%
40.1%

-44
24%
40.1%

-44
21%
36.1%

Associates

0.4

-0.3

-0.2

0

0

0

0

Profit from continuing operations

27

69

85

80

128

139

160

Earnings from discontinued operations

31

126

0

0

0

0

0

Net profit

58

195

85

80

128

139

160

Minority interest

0.2

-0.2

0.0

0

0

0

0

Net profit for the Group
Adj. Net profit, Exane format

58
31

195
56

85
88

80
110

128
128

139
139

160
160

o/w cost of sales
o/w personel cost
o/w taxes
o/w provisions
o/w other income

Financial income
Interest cost
Other financial charges
Net financial expense

Taxes
Effective tax rate
Corporate tax rate

2013e

2014e

2015e

2016e

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 46

Back to contents

Figure 47: Cash Flow Statement of the combined Group
2010

2011

2012

Net profit
Associates
D&A
Gain/Loss on disposal/acquisition
Other non-cash items
Net financial expense
Reconciliation taxes paid / P&L charge
Change in working capital
Cash flow from continuing operations

EURm

27
-0.4
315
3.1
-36
223
0.0
14
545

69
0.3
313
4.1
-20
204
1.1
5
577

85
0.2
288
3.6
3
184
-0.9
-32
531

80
0
291
-1
0
172
-6
19
555

128
0
307
0
0
160
0
-32
563

139
0
317
0
0
154
0
8
618

160
0
330
0
0
152
0
-5
637

Acquisitions of PPE
Disposals
Decrease(-increase) in financial assets/loans
Investment in affiliates
Subsidies
Cash flow from investing operations

-247
8
-3
-58
7
-292

-251
5
0
0
9
-238

-300
4
-3
0
14
-285

-324
5
0
-3
11
-312

-373
0
0
0
11
-363

-383
0
0
0
11
-372

-381
0
0
0
11
-371

Capital increase
Debt issuance
Debt payments
Interests paid
Dividends paid
Cash flow from financing operations

0
55
-155
-169
0
-269

0
0
-335
-155
0
-490

0
831
-957
-152
0
-278

251
7
-362
-161
0
-265

0
0
0
-150
0
-150

0
0
0
-144
-64
-209

0
0
0
-143
-69
-212

-16

-150

-33

-22

51

37

55

Net cash flow from discontinued operations

15

156

0

0

0

0

0

Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period

-1
36
35

6
35
41

-33
41
8

-22
8
-14

51
-14
37

37
37
74

55
74
129

247
84

335
184

334
93

307
82

289
51

296
101

329
124

EURm

2010

2011

2012

2013e

2014e

2015e

2016e

ASSETS
Goodwill
Intangible assets
Tangible assets
Investments in associates
Other non current assets
Deferred tax assets
Total non current assets
Inventories
Receivables
Other current assets
Tax receivables
Cash and cash equivalents
Total current assets
Assets held for sale
TOTAL ASSETS

1,459
377
1,341
4
7
0
3,188
34
357
0
0
31
422
271
3,880

1,459
346
1,349
4
8
0
3,165
39
363
0
0
41
443
0
3,607

1,459
326
1,390
3
7
0
3,185
46
417
4
0
8
475
0
3,660

1,462
283
1,480
3
8
0
3,235
43
422
3
3
-14
457
0
3,692

1,462
283
1,546
3
8
0
3,302
42
412
3
3
37
497
0
3,799

1,462
283
1,612
3
8
0
3,368
44
424
3
3
74
547
0
3,915

1,462
283
1,663
3
8
0
3,419
44
436
3
3
129
614
0
4,033

EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Minority interests
Total Equity
Non current financial liabilities
Non current provisions
Deferred tax liabilites
Other non-current liabilities
Total non current liabilities
Current financial liabilities
Current provisions
Payables and other current liabilities
Tax liabilities
Total current liabilities
Liabilities held for sale
TOTAL EQUITY AND LIABILITIES

-567
-0.3
-567
3,175
48
0
110
3,333
219
1
684
0
903
211
3,669

-372
-0.1
-372
2,913
63
0
101
3,077
192
9
699
3
903
0
3,607

-287
0.0
-287
2,926
64
0
111
3,102
115
2
726
3
846
0
3,660

43
0.0
43
2,651
62
0
111
2,824
59
8
760
7
834
0
3,701

172
0.0
172
2,651
62
0
111
2,824
69
19
718
7
812
0
3,808

246
0.0
246
2,651
62
0
111
2,824
79
29
739
7
854
0
3,924

337
0.0
337
2,651
62
0
111
2,824
89
40
746
7
882
0
4,042

Net cash flow from continuing operations

Adjusted EBITDA (NC format) - Cash capex
Free Cash Flow

2013e

2014e

2015e

2016e

Source: Exane BNP Paribas estimates

Figure 48: Balance Sheet of the combined Group

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 47

Back to contents

Funding Analysis

NUMERICABLE
Gro ss cash po sitio n at 31Dec. 12
E UR m
FCF
Gro ss debt reimbursements ¹

8
D e c . 13

D e c . 14

D e c . 15

D e c . 16

D e c . 17

80

51

101

124

165

(42)

(26)

(63)

(102)

(1,247)

0

0

(64)

(69)

(80)

46

25

(26)

(47)

(1,162)

46

71

45

(3)

( 1,16 4 )

New funds (debt, capital, divestment)
Other cash o utflo ws (acquisitio ns etc)
Dividend base case
Share buybacks
S UR P LUS / ( S H O R T F A LL)
A nnual
C um ula t iv e
A nnual if div is 0 fro m Dec. 13

na

25

38

22

(1,082)

C um ula t iv e if div is 0 fro m Dec. 13

na

71

10 9

13 1

( 9 5 1)

89

89

89

89

89

A v a ila ble c re dit line s

No co venant details available
¹ Gro ss debt reimbursement po st Dec.17: EUR1,283m
The Gro up has regularly refinanced its debt and in 2012 issued two debt securities in o rder to extend its maturity
pro file. Senio r Facility A greements have been signed by the Gro up's two ho lding co mpanies Ypso and A ltice
B 2B and co ntained the fo llo wing co venants:
- Net Leverage Ratio : shall remain under specific thresho lds: 5.5 to 3.5 fo r Ypso , 2.95 to 2.7 fo r A ltice B 2B ;
- Debt service co ver ratio : shall no t be less than 1.0x fo r Ypso , 1.2x fo r A ltice B 2B ;
- Net Interest Co verage Ratio : shall no t be less than between 2.15 and 2.85 fo r Ypso , 4.0 fo r A ltice B 2B .
(Co mment updated o n 13 No v. 13)

Source: Exane BNP Paribas estimates

Exane BNP Paribas Research

Numericable

13 November 2013

page 48

Analyst Certification
I hereby certify that all of the views expressed in this report accurately reflect my personal and independent views about the subject theme(s), company or companies,
and its or their securities. Antoine Pradayrol, Exane Ltd. No part of the research analyst's compensation was, is, or will be, directly, or indirectly, related to the specific
recommendations or views expressed by the research analyst in this research report.
This document contains material that has been prepared by the Exane entity, or entities, identified in the Analyst Certification above. Exane SA is regulated by the
Autorité des Marchés Financiers (AMF). Exane Limited is authorised and regulated by the Financial Conduct Authority (FCA).

Rating definitions
Stock Rating (vs Sector)
Outperform: The stock is expected to outperform the industry large-cap coverage universe over a 12-month investment horizon.
Neutral: The stock is expected to perform in line with the industry large-cap coverage universe over a 12-month investment horizon.
Underperform: The stock is expected to underperform the industry large-cap coverage universe over a 12-month investment horizon.
Under review: The rating of the stock has been placed under review for following important news. Any possible change will be confirmed as soon as possible.
Sector Rating (vs Market)
Outperform: The sector is expected to outperform the STOXX Europe 50 over a 12-month investment horizon.
Neutral: The sector is expected to perform in line with the STOXX Europe 50 over a 12-month investment horizon.
Underperform: The sector is expected to underperform the STOXX Europe 50 over a 12-month investment horizon.
Key ideas
BUY: The stock is expected to deliver an absolute return in excess of 30% over the next two years. Exane BNP Paribas’ Key Ideas Buy List comprises selected stocks that
meet this criterion.

Distribution of Exane BNP Paribas’ equity recommendations
As at 07/10/2013 Exane BNP Paribas covered 627 stocks. The stocks that, for regulatory reasons, are not accorded a rating by Exane BNP Paribas are excluded
from these statistics. For regulatory reasons, our ratings of Outperform, Neutral and Underperform correspond respectively to Buy, Hold and Sell; the underlying
signification is, however, different as our ratings are relative to the sector.
39,4% of stocks covered by Exane BNP Paribas were rated Outperform. During the last 12 months, Exane acted as distributor for BNP Paribas on the 2% of stocks
with this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 8% of the
companies accorded this rating*.
40,2% of stocks covered by Exane BNP Paribas were rated Neutral. During the last 12 months, Exane acted as distributor for BNP Paribas on the 1% of stocks with
this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 6% of the companies
accorded this rating*.
20,4% of stocks covered by Exane BNP Paribas were rated Underperform. During the last 12 months, Exane acted as distributor for BNP Paribas on the 2% of stocks
with this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 4% of the
companies accorded this rating*.
* Exane is independent from BNP Paribas. Nevertheless, in order to maintain absolute transparency, we include in this category transactions carried out by BNP
Paribas independently from Exane. For the purpose of clarity, we have excluded fixed income transactions carried out by BNP Paribas.

Exane BNP Paribas Research

Numericable

13 November 2013

page 49

Commitment of transparency on potential conflicts of interest
Complete disclosures, please see www.exane.com/compliance

Exane
Pursuant to Directive 2003/125/CE and NASD Rule 2711(h)
Questions
1.

Answers

Investment banking and/or Distribution

- Has Exane managed or co-managed in the past 12 months a public offering of securities for the subject company/ies?

NO

- Has Exane been acting as distributor for BNP Paribas, when BNP Paribas managed or co-managed in the past 12 months a public offering
of securities for the subject company/ies

NO

- Has Exane received compensation for investment banking services from the subject company/ies in the past 12 months or expects to
receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months?
2.

Liquidity provider agreement and market-making

- At the date of distribution of this report, does Exane act as a market maker or has Exane signed a liquidity provider agreement with the
subject company/ies?
3.

- Does Exane own a stable shareholding in the subject company, above the legal threshold defined in article L 233-7 of the French
Commercial Code?

NO

NO

Disclosure to Company

- Has a copy of this report; with the target price and/or rating removed, been presented to the subject company/ies prior to its distribution, for
the sole purpose of verifying the accuracy of factual statements?
- Have the conclusions of this report been amended following disclosure to the company/ies and prior to its distribution?
7.

NO

Significant equity stake

- Does Exane own 1% or more of any class of common equity securities of the subject company/ies as of the end of the month immediately
preceding the date of publication of the research report or the end of the second most recent month if the publication date is less than
10 calendar days after the end of the most recent month?

6.

NO

Analyst's personal interest

- Does the research analyst principally responsible for the preparation of this report own a financial interest in the subject company/ies?
5.

NO

Corporate links

- Does the research analyst principally responsible for the preparation of this report or a member of his/her household serve as an officer,
director or advisory board member of the subject company/ies.
4.

NO

NO

NO

Additional material conflicts

- Is Exane aware of any additional material conflicts of interest with regard to the distribution of the research?

NO

Source: Exane

BNP Paribas
Exane is independent of BNP Paribas (BNPP) and the agreement between the two companies is structured to guarantee the independence of Exane's research,
published under the brand name “Exane BNP Paribas“. Nevertheless, to respect a principle of transparency, we separately identify potential conflicts of interest with
BNPP regarding the company/(ies) covered by this research document.
Potential conflicts of interest: None.
Source: BNP Paribas

Exane BNP Paribas Research

Numericable

13 November 2013

page 50


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