NASDAQ NM / TASE - symbol: IGLD
Eli Holtzman, CEODoron Turgeman, CFOQ3 2006
Internet GoldInternet GoldLeading Israeli communications Leading Israeli communications
and Interactive media Groupand Interactive media Group
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Forward-Looking Statement
The statements contained herein that are not purely historical are forward-looking
statements. These forward-looking statements, and
especially those regarding the 012 merger, involve risks and uncertainties and actual
results could differ materially from the results discussed in these statements.
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History Founded in 1996 by Eurocom Communications Ltd. and Eli Holtzman Within about three years became leading ISP in the Israeli market Went public on NASDAQ in August 1999 and TASE on May 2005
Current business 100% owns two subs: Smile.Communications Ltd. and Smile.Media
Ltd. Smile.Communications – specializes in Internet services & Int’l
telephony Smile.Media – specializes in e-Advertising, e-Commerce and paid
content ~ 720 Full-Time Employees
Internet Gold – Golden Lines - About Us…
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Committed to growth…2007 - crossing the 250 M$ revenue line
2006– Build-out of International
VoIP Telephony services
– Expansion of InternetAdvertising
– Expansion of BusinessServices
– 012 acquisition to be completed and operations to be consolidated - Q4/06
2007– 1st full year of the merged
operation
– Continued growth expected in all lines of business (under both ‘smile’ and ‘012’ brands)
Primary drivers:
in us $ millions
284
92
41 50 67
0
50
100
150
200
250
300
2003 2004 2005 2006 2007Goal *
Organic CAGR = +20%
M&A CAGR = +47%
* post-merger
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Israel’s telecommunications market
Cellular, $2.7
Multi-Channel TV, $0.7
ILD, $0.4
Fixed line & data, $1.2
Internet, $0.3
Source: Israeli MoC
2005 total – US$ 5.3 B
In US$ Billion
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2006/07: Leveraging Strong Positioning
Access Services
Major market share in a stable market
Stronger emphasis on biz sector
VoIP/VOB/TDM Telephony
Two strong brands to drive growth in market share
Start commercial penetration of domestic VoB
Online Advertising
We expect our advertising revenues will grow as media budgets continue to shift to the Internet
Efficient merger
1 + 1 = 3…
Significant savings on opex / capex
Efficient management of the two brands
Conservative estimation of 11-14M $/yr savings
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1 + 1 = 3
Multiple Synergies between the two companies
Global data networks Roaming services Call centers Fixed domestic
telephony Pre/post paid cards TDM platform
Value Added Services Biz services
Hi level integration
Hi level data security
Dealer network e-Media & e-
Commerce
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Rationale for the 012 acquisition
Revenues 71.8 155 226.8 261
EBIT 6.2 19 25.2 39-42***
EBITDA 12.7 33 45.7 61-65***
Employees 749 1,290 2,039 Synergy
Total
*Q4/2005 + Q1-3/2006
* Based on IGLD estimate
*** Communications’ EBIT / EBITDA goals for 2007 exclude one time expenses relating to the merger. These goals assumes full synergy of merger to be achieved Q2/07
F/Y - 2007**
** company’s goals for the 1st full year of merged communications operations
SC
L
communications activities onlyIn US$ millions
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Leveraging state of the art telephony infrastructure
To drive further growth
Most sophisticated VoIP platform World class TDM platform Auxiliary platforms (anti-fraud / billing / CRM etc.)
ILD – growth driver for the communications industryInternational voice traffic from Israel - up 10.3% in 2005 vs. 2004
- up 12% in H1/06 vs. H1/05 International voice revenues for H1 2006 up 3% vs. H1 2005
(Source: Israeli MoC)
+ = cash generators
ILD, $0.4
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State-of-the-art telephony infrastructure
Solid investment in class 5 fixed telephony No further significant investments required Auxiliary platforms (anti-fraud / billing / CRM etc.)
Fixed telephony Total fixed telephony market in Israel - US$ 1.2B in 2005
012 currently have only ~ 13k subscribers’ lines Our goal ~ 5% market share of this significant segment within 3-4
years Future marketing to rely on existing customer base of ~ 800 k
subscribers
072 / 075 - additional growth driver
Fixed line &
data, $1.2
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2006/2007: Growth of Online Advertising
continues
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67
10
12
0
2
4
6
8
10
12
14
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2002 2003 2004 2005 2006*
Source: PWC IAB Internet Advertising Report, Sept. ‘05
US Internet Advertising CAGR = +21%
Source: Market surveys & IGLD estimates
Israel Internet Advertising CAGR = +38%
& company's estimates
85
50
36
2212
65
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007
*
* Q3/06 - Media market affected by war conditions
in US$ billions
in US$ millions
estimated
Israel’s broadband penetration is among the highest in the world~70% of Israeli households have Internet access ~ 95% are connected via broadband!>40% of users are online >10 hours per week. 2.7M users per day!
Israel’s online ad budgets are low compared to exposure –ad budgets always follows ratingInternet Advertising in Israel is currently > 6-7% of overall media spending (~ $900M in 05’) - growing fast
SEARCH - additional growth potential: US search revenues - 40% of total e-Adv. much higher than in Israeli market
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Smile.Media – Content & Portal
Brands
Property IGLD’s ownership Description
msn-Israel
50.1% SML(49.9% MS Corp.)
Hebrew language portal Messenger, Hotmail Israel & MSN Search Israel
start 100% General portal & Search engine
nirshamim 100% Academic portal
zahav.ru 100% Russian language portal
V-games 100% Games content portal
seret 51% Cinema portal
yahala 51% Arab-language portal
TheMoney 75% Lead-generation financial
portal
tipo 52% Children’s portal
netex Search engine & directory
goop Exclusive marketing rights Youth portal
GPG e-Advertising network
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Leading e-Commerce Brands
Property IGLD’s % Description
P1000 100%
One of Israel’s top 4 e-Commerce sites
Outlet for >100 of Israel’s largest consumer product suppliers
Growing revenues, positive EBIT Low-risk commission model with
fulfillment directly from suppliers
msn shops 50.1%
e-Commerce ventures between MSN-Israel and retailers
dbook 50% Leading Bookstore
getprice 51% Israel’s #2 price comparison site
Paid content
marketing rights
Online magazines, newsletters, recruitment & jobs search and other content services
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3.0 3.7 4.0
13.5 15.417.8 18.1
20.5
3.2 4.0
16.718.4
21.5 22.124.5
Q3 05 Q4 05 Q1 06 Q2 06 Q3 06
Smile.media Smile.communications
Revenues
0.6 0.9 0.8
0.6 1.0
1.32.1
0.70.7
1.8
2.6
2.2
1.61.3
2.8
03 05 Q4 05 Q1 06 Q2 06 Q3 06
Smile.media Smile.communications
US$ in millions
EBIT
Quarterly Growth
US& in millions
Two pure-play subsidiaries
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10 1233 40 55
76
261
168 23
284
41 5067
92
2003 2004 2005 2006* 2007**
Media Communications
Revenues
2 2 35 4 5 8
40
5
45
5 6 7 11
2003 2004 2005 2006* 2007**
Media Communications
US in millionsEBIT
Two pure-play subsidiaries
Annual Growth* company’s goals
** Ebitda goal for 2007 ~ US$ M68 / estimate for finance exp. ~ US$ M10
** Post merger
IGLD’s estimate for 2006/07, excludes one time expenses relating to the merger
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Balance sheet overview
Total Cash 60.7
Current assets 84
Total assets 119.5
Current liabilities 22.9
Total liabilities 78
Working capital 61.1
Total shareholders’ equity 41.3
in US$ millions
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ComparablesInteresting market opportunity…
KCSA to send new slide
as of Nov. 7, 2006 Q2/ Q3 2006
Company Internet Gold Sify Pacific Thestreet.com Sina.ComTicker IGLD Sify PCNTF TSCM SINAShare price $7.87 $9.08 $9.77 $8.61 $27.93
CommunicationsRevenues (M$) 20.4 26.5 27.9Operating Income (M$) 2.1 2.4 1.5Market cap (M$) N/A N/A 132.1 N/A N/Aprice to revenues multiple N/ A N/ A 1.2 N/ A N/ Aprice to EBIT multiple N/ A N/ A 22.4 N/ A N/ A
MediaRevenues (M$) 4.0 2.2 13.0 53.7Operating Income (M$) 0.6 0.1 2.6 7.6Market cap (M$) N/A N/A N/A 235.3 1,497.3price to revenues multiple N/ A N/ A N/ A 4.5 7.0price to EBIT multiple N/ A N/ A N/ A 22.8 49.0
TotalRevenues (M$) 24.5 28.7 27.9 13.0 53.7Operating Income (M$) 2.7 2.5 1.5 2.6 7.6Market cap (M$) 145.1 384.9 132.1 235.3 1,497.3price to revenues multiple 1.5 3.4 1.2 4.5 7.0price to EBIT multiple 13.4 38.5 22.4 22.8 49.0
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Goal: to become Israel’s Leading Full
Suite Alternative Service
Provider
Technology Value added services
VoB & business integration
VoWi-Fi / Wi-MAX
IP seamless mobility
IPTV
e-Commerce & paid content
International Long Distance (ILD) & Internet Access
Portals & e-Advertising
20091997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081996
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Strong Shareholders / Dedicated Management
Public ~ 31%
Eurocom Communications ~ 69% Focused, communications-oriented controlling parent group Leading Israeli private communications group representing
exclusively Nokia, Panasonic, GE and more Also holds equity in radio stations, DBS TV service provider,
satellite communications, cellular and more
Closely-knit, results-oriented management team Most all level of management grows from within Experienced upper level management
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Investment highlights
Leading Communications Group
Today: controls 1/3 of its markets with a continuously growing market share
Tomorrow: entering new markets
Positioned to lead rapidly growing media markets
Owns over 18 portals & e-Commerce sites
High rate of market growth
Working from strong cash generating platform
All activities in both companies are major cash generators
Merger anticipated to save ~ US$ 11-14M in exp/inv
No difficulty in servicing loan (fin. exp. ~15% of Ebitda)
Proven management & ownership
Both company's management teams, working together with Eurocom (as controlling shareholder), have proven capable of carrying out aggressive growth / leadership strategies
Thank you!