Iliad IPO Execution Overview

1
Iliad IPO Execution Overview
2
Who is Iliad ?

• A story of Growth and Profitability

3
Leading independent ISP/Telecom group in France

• 3 complementary sectors, 1 network
• Focus on residential customers

100
100
100
Internet
Other activities
Telephony
4
Strengthening of Frees Leadership Position

• Free 2nd largest broadband ISP
• Best value for money offer
• 908,000 ADSL subs as of Sep. 30, 2004
• 140,000 new subscribers in 3Q 2004
• 20 of ADSL net adds in 2004
• 1 operator in local loop unbundling
• Continuous increase of unbundled users ratio
• 355,000 unbundled users as of June 30, 2004

ADSL Market Shares in France
Wanadoo
Other
FREE
Source France Télécom 30/09/2004
5
At the forefront of technological innovation

• Triple-play Freebox DSLAM and modem developed
  in-house
• Higher download higher bandwidth (up to 15 Mbs
  download)
• Voice over DSL (August 2003)
• 1 VoDSL operator on national scale
• TV over ADSL (December 2003)
• Content Agreements
• Over 200,000 regular viewers

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A demonstrated recordof profitable growth

• Revenues CAGR 90 from 2001-2003
• Net income positive since 2001
• Operating costs and capex under constant review
• No debt

7
Why an IPO in 2004?

• Iliad was a privately owned company since 1991
• Raise capital for ADSL and network extension at
  minimum dilution
• Institutionalize Iliad in the French
  telecommunications landscape
• Provide exit to Goldman Sachs and value to
  managers
• IPO rationale has to be simple / easy to explain

8
Key Steps of the IPO Process
Roadshow January 21, 2004
Presentations of Iliad to investment banks
Kick off meeting
Pricing January 29, 2004
Investment banks beauty contest
First day of trading January 30, 2004
First half 2003 results audit
AMF VisaDecember 15, 2003

• 2003

• 2004

December
September
July
April
March
January
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Investment Banking Presentations (March 2003)

• Introduce Iliad to investment banking community
  (8 banks) to
• Provide bankers with extensive documentation
• Non disclosure agreement
• 2001 and 2002 consolidated accounts
• Powerpoint presentation of the Company
• Press review
• NO business plan at this stage
• Allow for further meetings / QA sessions

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The Pitch (April 2003)

• Key topics to be discussed for Iliad pitch
• Bank team
• Equity story / investor concerns
• Valuation methodology
• Timing
• Syndicate structure
• Fees
• Analyst coverage
• Roadshow
• Lock-up period

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Focus on Equity Story and Valuation Methods

• Second beauty contest amongst 3 out of 8 banks

Investment Bank Equity Story Valuation
Société Générale Integrated Telco Strong Fundamentals Network Ownership Growth sector Management Multiples 530 mil. to 850 mil.
Cazenove Profitable growth Only one investing in Unbundling Organic growth Cash cow from dial up Management Sum of Parts 450 mil. to 550 mil.
Credit Agricole Iliad is a challenger Network ownership Innovation Marketing powerhouse DCF 450 mil.

• Fees ranging from 3.75 to 5.00

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The Winning Pitch

• Société Générale designed that simple chart that
  perfectly summarized our transioning business
  model

MARGE ACTUELLE 27.5
Phase 1 stratégie de gain de pdm chute des
marges
Phase 4 Maintien de pdm accélération du
dégroupage hausse des marges
IPO
Phase 2 Poursuite de la stratégie de gain de
pdm début du dégroupage ralentissement de la
chute des marges
Phase 3 Maintien de pdm mise en oeuvre du
dégroupage hausse des marges

• This page gave SG the lead position in the beauty
  contest

13
Other Parties Selection (June 2003)

• Issuers counsel
• Has to sign off on document (Prospectus)
• Has to render opinion
• Has to enjoy working all night
• Has to be cheap can cost up to 1.0 million
• Communications agency
• Know-how
• Roadshow organisation

14
Kick-off Meeting (September 2003)

• IPO scheduled for April 2004
• 4 main processes have to run quasi-simultaneously
  
• Management due diligence
• Financials / business plan
• IPO Structure
• Equity Story
• Leading to the drafting of the prospectus

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Timing is Everything Grasping the Opportunity

• Accelerate timetable to be the first IPO in
  France for 2 years
• and first Telco / ISP IPO in Europe for 3 years
• SG lukewarm about acceleration
• Tight documentation schedule
• IPO based on half year 2003 and 3Q2003 accounts
  rather than full year 2003
• Analyst research over the christmas season

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Grasping the Opportunity
10 nov. - 14 nov.
17 nov. - 21 nov.
24 nov. - 28 nov.
15 déc. - 19 déc.
16 déc. - 19 déc.
22 déc. - 26 déc.
13 oct. - 17 oct.
27 oct. - 31 oct.
8 déc. - 12 déc.
13 jan. - 17 jan.
19 jan. - 23 jan.
26 jan. - 30 jan.
20 oct. - 24 oct
6 oct. - 10 oct.
3 nov. - 7 nov.
2 fév. - 6 fév.
1 déc. - 5 déc.
6 jan. - 10 jan.
29 dec - 2 jan
Semaine
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
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Offre de marché
4 s rédaction
4 semaines d'examen
Travaux de préparation en amont
Warm-up
rech.
RL
recherche
par la COB
Publication de la
Publication des
Disponibilité de
Dépôt à la COB
Publication du
note d'opération
notes d'analystes
document de base
du doc. de base
T3 2003
Vacances
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The Prospectus

• A long and iterative process

1. Management due diligence (questions see
   appendix)
2. First draft by the issuers counsel

1. Subsequent drafts with investment bankers,
   issuers counsel and underwriters counsel

Always drive the process to make sure the
messages are clear and that it is in  plain
english  Pay attention to risk factors.
Investors actually read it !!
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Dealing with the Market Authorities (AMF)

• Autorité des Marchés Financiers (AMF) equivalent
  to US SEC
• Listing is conditional to AMF approval (Visa)
• Draft prospectus submitted on Friday Nov 14
• Additional documents submitted concomittantly
• 100 questions from AMF to be answered promptly in
  order to highlight companys transparency and
  good understanding of accounting and business
  issues

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Valuing Iliad Companys Perspective

• Have an opinion on how you value your own company
  ?
• Understanding managements benchmark and
  comparables environment
• French mid-cap companies
• Focus on Freenet and eBiscom
• Understanding management / owners attitude
  towards dilution
• Define the use of proceeds !
• Valuation was key as Iliad was reopening the
  French and European Technology market

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Valuing Iliad Market Perspective
Revenues
EBITDA
422
110
378
295
78
50
EBITDA from Internet (mn)
EBITDA from Telephony (mn)
Others (mn)
Iliad EBITDA margin
Restatements
2004e
2005e
EBITDA restatement
Iliad EBITDA
78
110

• Given the differences in accounting
  methodsregarding subscriber acquisition costs,
  we have restated Iliads EBITDA by substracting
  from Iliads EBITDA the costs related to ADSL
  initial access ( FAS )
• We have not restated DSLAMs and modemsaccounting
  methods as these assets remain in Iliads
  possession

Iliad ISP EBITDA
55
85
Capex linked to FAS
26
20
Iliad EBITDA restated
52
90
Iliad ISP EBITDA restated
29
65
21
Valuing Iliad Market Perspective
All valuation data exclude any IPO discount,
which will be based on market conditions at the
time of offering
IPO discount
Two approaches
Global valuation and SOTP valuation
Global valuation

• European ISPs focused on residential customers
  (excl . Portals and US ISPs)
• First Tier with European leaders T-Online and
  Wanadoo ISP (20-30 discount for leadership
  premium)
• Second Tier with e.Biscom Freenet, TIM, Tiscali
  and United Internet
• Wanadoo ISP multiples obtained by substracting
  Directory EV
• SOTP
• Same ISPs
• Fixed-Line operators Jazztel, Kingston and Tele2

Comparable companies
Even if EV/EBITA could be a better proxy, we
retained EV/Sales and EV/EBITDA since these are
Relevant multiples

• The multiples brokers focus on
• More adapted to high-growth business
• Consistent with what is used for Telecom stocks
  at large

• 2003 to 2005 with a stronger focus on 2004 and
  2005

Relevant period
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Valuing Iliad Market Perspective
Market Cap M
Ent. ValueM
-
EV/Sales
EV/EBITDA
03E
04E
05E
03E
04E
05E
Tier 1
T-Online
13,291
9,324
4.75x
4.09x
3.56x
27.6x
20.9x
15.4x
(1)
Wanadoo ISP
6,577
4,713
2.74x
2.24x
1.91x
Ns
33.5x
19.4x
(2)
Wanadoo
9,674
7,810
2.94x
2.53x
2.25x
27.3x
16.9x
12.6x
Average (with a 20 discount)
3.00x
2.53x
2.19x
22.1x
21.8x
13.9x
Average (with a 30 discount)
2.62x
2.22x
1.91x
19.3x
19.0x
12.2x
Tier 2
Telecom Italia Media
1,191
1,168
1.93x
1.67x
1.51x
Ns
20.1x
12.8x
Tiscali
2,151
2,327
2.58x
2.16x
1.93x
33.4x
16.8x
12.2x
e.Biscom
2,201
2,559
4.99x
3.91x
3.09x
27.3x
13.5x
8.3x
Freenet
926
835
2.13x
1.41x
1.24x
11.8x
8.4x
6.2x
United Internet
1,130
1,113
2.72x
2.34x
2.04x
13.8x
11.4x
9.9x
Average (extrema excluded)
2.48x
2.06x
1.83x
20.6x
13.9x
10.1x
Retained average
2.64x
2.21x
1.94x
20.6x
17.2x
11.6x
Market capitalisation 1 month average, as of
27-Nov-03
Source SG, Brokers' consensus, Bloomberg,
Datastream, Fininfo
(1) based on an Enterprise value of the Directory
business of 3,098 M, see appendices for detailed
calculation
(2) For information purpose only
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Valuing Iliad Market Perspective
EV/Sales 03
780
EV/Sales 04
840
EV/Sales 05
820
Linear regression
840
1,030
EV/EBITDA 03
EV/EBITDA 04
1,340
890
EV/EBITDA 04 restated
EV/EBITDA 05
1,270
1,040
EV/EBITDA 05
(1)
840
1,040
Range
600
700
800
900
1,000
1,100
1,200
1,300
1,400
Retained averages
Source SG Cowen, Brokers
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Managing the Press
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Pre-Marketing Period

• A concept created by Goldman Sachs for large
  privatisations
• Designed to get management a clear understanding
  of investors issues and to give the underwriter
  a clear idea on price

• Pros
• Frees market share
• Sound strategy with unbundling
• No debt
• Network ownership
• Cost structure
• Management

• Cons
• Why an IPO
• Size of deal
• Very competitive environment
• Accounting treatment

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IPO Terms
Offering Structure 6.000.000 shares Price
Range 14.00 to 16.30 Greenshoe Lock up
Exchange Global Coordinator Joint Lead
Manager Syndicate

• 5.000.000 capital increase
• 1.000.000 from Goldman Sachs

• 667 mil. To 776 mil. Pre-money

• 828.000 new shares
• 6 months
• Euronext Premier Marché
• Société Générale
• Cazenove
• Oddo

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A Full Roadshow Schedule
Paris
Amsterdam
UK - Scotland
UK - Scotland
One on one
One on ones
One on ones
ABN Amro AM
Natexis AM
Henderson Investors
SGAM
Hermes
AXA IM
T. Rowe Price International
CDC FP
JP Morgan Fleming
GLG Partners
AAGF AM
Frankfurt
BNP Paribas AM
Capital International
CIC AM
Schroders IM
Sogeposte
One on ones
Gartmore IM
Crédit Agricole AM - CLAM
ADAM
Marshall Wace
CDC Ixis AM
Union Invest
Threadneedle
Fidelity
DEAM
Group meetings
Lazard AM
DEKA
FEDERIS GESTION D'ACTIFS
Cominvest
Scottish Widows
GENERALI FINANCES
Metzler
BFT
FIDELITY INVESTMENTS
Group meetings
BGPI
FINANCES SA
Group meeting
LCF ROTHSCHILD AM
FINANCIERE ARBEVEL
ADELPHI CAPITAL LIMITED
LEGG MASON
LAZARD FRERES GESTION
FORTIS BANK
FRANKFURT TRUST
AMG GENERALI
ANCHORAGE CAPITAL
LONDON MERCANTILE
GEFIP
BARINGS
LONGVIEW PARTNERS
FORTIS INVESTMENTS
INTERNATIONAL CAPITAL MARKETS
BADEN WURTTENBERGISCHE
GROUPAMA AM
HR GESTION
MERCURIUS CM
BLENHAM INVESTMENT
MARBLE BAR AM
CAZENOVE
MMA FINANCE
HSBC AM
METZLER INVEST
BRADSHAW AM
MERRILL LYNCH
ACA EQUITY PARTNERS
CPR AM
HSBC PRIVATE BANK
VALUE MANAGEMENT
BUTTONWOOD
MFC
DEUTSCHE POSTBANK
ACBERTROS
ICGESTION
WEISSENHORN UND PARTNER
CAXTON
MICOUD
DRESDNER BANK AG
ACM-SOCAPI
ING PRIVATE BANKING
CAZENOVE FUND MANAGEMENT
MOORE CAPITAL
CFA
MORGAN STANLEY
AVIVA GESTION D'ACTIFS
LAZARD FRERES BANQUE
AXA
MUTUALITE FRANCAISE
CLAYVARD
MORLEY
BANQUE D'ORSAY
NEXTRADIO
DALTON STRATEGIC PARTNERS
MPC
BANQUE PRIVEE SAINT DOMINIQUE
NSMD
DB ADVISORS
OCH-ZIFF CAPITAL
Zurich
BNP PARIBAS
OBC GESTION
ECCLESIASTICAL INSURANCE
ODEY
BOISSY GESTION
OFIVALMO
EGERTON CAPITAL
OMAM
One on ones
FC
PARK PLACE
BOUSSARD GAVAUDAN GESTION
SANPAOLO AM
Julius Baer AM
CAZENOVE
SANPAOLO AM
FEROX
POLAR CAPITAL
Credit Suisse AM
CCR ACTIONS
SGAM
FIRST STATE
RATHBONE UNIT TRUST MANAGEMENT
CDC IXIS AM
SMA GESTION
GAM (UK) LIMITED
REARBOURNE TECHNOLOGY
Group meetings
CIE FINANCIERE ED. DE ROTHSCHILD
TRUSTEAM FINANCE
GIBBS CAPITAL
SAVOY INVEST
COGEFI
CLAM
GOLDMAN SACHS AM
SGAM
HBK
SPS
COPERNIC SA - IONIS
EQUIGEST
CPR AM
ETOILE GESTION
HIGHBRIDGE CM
THEODORE GILISSEN
HSBC
TURA CAPITAL
IW
WEST MORELAND
J O HAMBRO CM
JUPITER
JM FINN
KIO
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Key Success Factors

• The IPO timing was perfectly in synch with
  industrial developement
• Over 500.000 ADSL subs
• Clear success of Freebox
• Margin Rebound

• Lots of upside still ahead for new shareholders
• Doubling of ADSL subscribers over next 24 months
• TV and telephone offer

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Life After the IPO
160
140
120
100
80
60
40
Base 100
au 29-01-04
20
29-janv-04
29-févr-04
29-mars-04
29-avr-04
29-mai-04
29-juin-04
29-juil-04
29-août-04
29-sept-04
29-oct-04
ILIAD
FRANCE TELECOM
E.BISCOM
FREENET
SBF 120