ITS Lyon Congress 2011 SS 23: EGNOS and Galileo for intelligent mobility GNSS for Innovative Road Applications Business Plan Analysis Paolo Cerini (Bain & Company) Business Model: EETS Service Provider role Service/product flows EGNOS/GALILEO OPERATING COMPANY OPERATING COMPANY GNSS SERVICE PROVIDER Guaranteed service Service fee Economic flows TOLL CHARGER 1, 2…N Toll Collected % Fee on toll collected CONTENT PROVIDER Payment for usage TELCO Payment for usage EETS PAN-EUROPEAN SERVICE PROVIDER Service bundle Add-on Service Toll Collected Fee per bundle END USER/CUSTOMER (Private + Business) Fee per Add-on INFRASTRUCURE OWNER PUBLIC INSTITUTIONS 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 2 Offer Structure AddOn •Smart OBU without GUI •EFC •E-CALL •EFC •E-CALL •Wireless GUI •Wireless GUI •Fleet Management/ Tracking and Tracing •Theft management •Traffic info system •Navigation services/ active re-routing •Theft management •Traffic info system •Navigation services/ active re-routing Services •Smart OBU without GUI HW Basic Package Private Services HW Business • 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) 3 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 Business Segment Potential Circulating trucks in Europe Private Segment Potential Circulating cars in Europe 4 Market Penetration Commercial Strategy • 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 3 Area 2 Area 4 Area 1 Area 5 - 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 5 Revenues Generation Potential Business + Private Segment Business Segment Private Segment Price Price Market Share Market Penetration Market Penetration Total Potential Market (Mln) Total Market Penetration (%) 6 Revenues streams evolution Business + Private (2015-2030) Revenues streams break down User-fee Business Add-on VAS Business User-fee Private Add-on VAS Private Motorway % fee Urban % fee Launch of GINA Offer for private segment • End-user fees remain the most important revenues stream accounting for ~65% of total revenues • Private segment revenues up to 30% of total revenues 7 Cost Structure evolution Business + Private (2015-2030) • 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) 8 EBIT at steady-state condition Business + Private (2030) EBIT build-up in 2030 Variable Costs Fixed costs • 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 9 Free cash flow analysis Business + Private Operative Free cash flow Launch of GINA Offer for private segment • Operative Free Cash flow positive after 6 years from start-up • Cumulative FCF positive from 2025 (10 years after start-up) 10 Sensitivity analysis Business + Private segments NPV* EBITDA @2030 EBIT @2030 485 M€ 257 M€ 212 M€ @2021 729 M€ 309 M€ 264 M€ @2019 1.167 M€ 412 M€ 367 M€ @2018 1.606 M€ 531 M€ 486 M€ @2018 Low Penetration (-30 % penetr.) 32 M€ 147 M€ 102 M€ @2022 Worst case (-20 % penetr.; -10% price) 29 B€ 161 M€ 116 M€ @ 2022 Base Case Base case plus (+10 % penetr.; +5% price) Best case (-30% Comm. cost Best case plus (-30% Comm. cost; free OBU from 2021) * Discounted at 8% WACC; Economic Conditions 2012 Positive FCF 11 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 12 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 13