ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road...

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ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road Applications Paolo Cerini (Bain & Company) Business Plan Analysis

Transcript of ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road...

ITS Lyon Congress 2011SS 23: EGNOS and Galileo for intelligent mobility

GNSS for Innovative Road Applications

Paolo Cerini (Bain & Company)

Business Plan Analysis

2

Business Model:EETS Service Provider role

EGNOS/GALILEO OPERATING COMPANY

EETS PAN-EUROPEAN SERVICE PROVIDER

OPERATING COMPANY

GNSS SERVICE PROVIDER

Guaranteed service

END USER/CUSTOMER(Private + Business)

Servicebundle

Service fee

Fee per bundle

TOLL CHARGER1, 2…N

CONTENTPROVIDER

TELCO

% Fee on toll collected

Toll Collected

Payment for usage

Payment for usage

INFRASTRUCURE OWNER

PUBLIC INSTITUTIONS

Service/product flows

Economic flows

Fee per Add-on

Add-onService

TollCollected

The EETS Service Provider has a key role as it is the link between all the players along the Value Chain and it is

involved in all economic and service exchanges

3

Offer Structure

PrivateBusiness

BasicPackage

Add-On

H WS

erv

ice

s• Smart OBU without GUI• Smart OBU without GUI

• Wireless GUI• Wireless GUI

• EFC• E-CALL

• EFC• E-CALL

• Fleet Management/Tracking and Tracing

• Theft management• Traffic info system• Navigation services/ active re-routing

H WS

erv

ices

• GINA Service Provider offer has been structured as a basic package with a set of add-on services (VAS) that can be purchased separately

• Two customer segments have been identified: Business (i.e. commercial vehicles) and Private (i.e. passenger cars)

• Theft management• Traffic info system• Navigation services/ active re-routing

4

Addressable end-user market

• Analysis perimeter: all the countries belonging to EU27.

• Business Case has analysed last available data relevant to the European market of cars, buses, light commercial vehicles, light, medium and heavy trucks, using CAGR of last 4 years to project data

0

100

200

300M

2010

244

2015

258

2020

270

2025

283

2030

299

0

10

20

30

40

50M

2010

36

2015

38

2020

41

2025

44

2030

48

Business Segment PotentialCirculating trucks in Europe

Private Segment PotentialCirculating cars in Europe

5

Market PenetrationCommercial Strategy

- Area 1- Central-Southern EU: Germany, France, Italy, Spain, Portugal and Austria

- Area 2 -Benelux & Great Britain:Netherlands, Belgium, Luxemburg, UK, Ireland

- Area 3 - Northern Europe:Denmark, Sweden, Finland, Latvia, Estonia and Lithuania

- Area 4 - Eastern Europe:Poland, Czech Rep., Slovakia, Slovenia, Hungary, Romania and Bulgaria

- Area 5 - Mediterranean Island:Greece, Malta, Cipro

• In order to define a progressive penetration plan, five geo-clusters have been defined using the following criteria:

- Geo-adjacency and Trans European Network (TEN-T) priority axis- Actual Road Charging scheme- Upcoming Road Charging projects

Area 2

Area 1

Area 3

Area 4

Area 5

6

Revenues Generation Potential Business + Private Segment

Business Segment Private Segment

5

10

€15

12,0

11,2

10,5

10,0

9,5

9,2

8,9

8,5

2015 2017 2019 2021 2023 2025 2027 2029

0

10

20

30

40

50M

0

10

20

30%

2015

38

2020

41

2025

44

2030

48

19% 36% 42%6%EETS Penetration

2,3 4,7 6,10,7# GINA Users ( Mln )

2,0

3,0

4,0

€5,0

4,0

3,7

3,5

3,3

3,2

3,1

3,0

2018 2020 2022 2024 2026 2028 2030

0

100

200

300M

0

2

4

6

8

10%

2015

258

2020

271

2025

284

2030

299

3,6% 6,3% 7,3%EETS Penetration

2,9 5,3 6,5# GINA Users ( Mln )

Player 3

15%

Player 2

20%

Other

players

35%

GINA 30%

Price

Market Penetration

Price

Market Penetration

MarketShare

Total PotentialMarket (Mln)

Total MarketPenetration (%)

7

Revenues streams evolution Business + Private (2015-2030)

0

500

1.000

€1.500M

2015

58

94

2016

48

120

175

2017

72

174

256

2018

15

88

52

221

401

2019

17

98

98

247

491

2020

19

110

119

269

558

2021

22

53

152

148

336

713

2022

25

60

168

169

393

817

2023

27

69

187

184

427

895

2024

29

77

207

198

463

976

2025

82

228

205

502

1.051

2026

88

241

209

530

1.102

2027

94

254

213

550

1.148

2028

100

268

218

572

1.196

2029

107

281

224

593

1.244

2030

113

294

229

614

1.291

30% 29% 29% 29% 29% 29% 28%21% 28% 31% 30% 30% 30%

% Private segment

Revenues on Total

Revenues

Revenues streams break down

Launch of GINA Offer for private

segment

User-fee Business Add-on VAS Business Motorway % fee Urban % fee

User-fee Private Add-on VAS Private

• End-user fees remain the most important revenues stream accounting for ~65% of total revenues

• Private segment revenues up to 30% of total revenues

8

Cost Structure evolutionBusiness + Private (2015-2030)

0

250

500

750

1.000

€1.250M

2015

28

31

30

46

176

2016

40

45

43

206

2018

86

113

91

56

36

451

2020

99

144

116

51

50

46

545

2022

132

194

171

57

74

45

726

2024

149

42

231

208

57

88

43

840

2026

160

47

256

239

57

99

923

2028

172

51

277

265

57

108

45

1.002

2030

185

55

300

292

57

116

45

1.079

28%

27%

17%

5%

5%

11%

4%

%

• The cost structure remains approximately constant along the Business Plan horizon

• Cost structure at steady-state condition (2030) amounts to ~ 1080 M€

• Telecom costs are the largest cost items, for ~55% of total costs (including VAS)

9

EBIT at steady-state conditionBusiness + Private (2030)

0

500

1.000

€1.500M

Revenues

1.291

Telco

-300

VAS

Costs

-292

OBU

-185

Assistance

Costs

-55

-57

EGNOS

service

-19

Lost

Revenues

-10

SG&A

-116

EBITDA

257

D&A

-45

EBIT

212

100% 20% -3% 16%-23% -23% -14% -4% -4% -1% -1% -9%% su Revenues 100% 20% -3% 16%-23% -23% -14% -4% -4% -1% -1% -9%% su Revenues

OPEX

• Steady-State (2030) EBIT is around 16% of total revenues

• Telco costs are the largest cost item accounting for about 46% of total revenues, followed by OBU costs accounting for about 14% of total revenues

EBIT build-up in 2030

Variable Costs

Fixed costs

10

Free cash flow analysisBusiness + Private

-100

0

100

€200M

2013

-26

2014

-62

2015

-77

2016

-39

2017

-57

2018

-41

2019

-8

2020

-12

2021

24

2022

60

2023

73

2024

85

2025

97

2026

108

2027

113

2028

121

2029

127

2030

132

-115 -38 -298 -239 -165 -81 16 124 237 359 486 618-27 -76 -117 -129 -145 -161Cumulative

• Operative Free Cash flow positive after 6 years from start-up

• Cumulative FCF positive from 2025 (10 years after start-up)

Operative Free cash flow

Launch of GINA Offer for private

segment

11

Sensitivity analysisBusiness + Private segments

485 M€ 212 M€ @2021

729 M€ 264 M€ @2019

32 M€ 102 M€ @2022

257 M€

309 M€

147 M€

Base Case

NPV*

Base case plus(+10 % penetr.; +5%

price)

Low Penetration(-30 % penetr.)

Worst case(-20 % penetr.;

-10% price)

EBIT @2030

EBITDA @2030

Best case(-30% Comm. cost

Best case plus(-30% Comm. cost; free

OBU from 2021)

* Discounted at 8% WACC; Economic Conditions 2012

1.167 M€ 367 M€ @2018412 M€

1.606 M€ 486 M€ @2018531 M€

Positive FCF

29 B€ 116 M€ @ 2022161 M€

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Conclusions

• Significant business opportunity with a good profitability in the long term (EBITDA at regime condition about 20% of Revenues) with two major issues:

Long break-even period that requires a significant start-up financial stress (cumulative FCF positive after 10 years)

High Sensitivity to price change

• Monthly end-user fees are by far the most important source of revenues: toll chargers % fee have a very limited impact

• Largest cost items are Telco costs followed by OBU related costs:

Likely to decrease (best case scenarios very probable)

Alliance with Technology and Telco providers is key

• Value Added Services represent a good opportunity to enlarge the business beyond toll collection service

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Next Speps

• Customization of the general Business Plan conducted so far for a specific potential service provider

• Detailed analysis with Service Providers of specific Value Added Services to be offered as a bundle or on demand