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ECI Telecom in Brazil Aviel Tenenbaum Executive Vice President, GS&M Brazil: Technological Innovation & investment Opportunities December 15, 2008 Tel Aviv ECI Snapshot Global provider of equipment infrastructure solutions and services for telecom operators with focus on Transport and Broadband Access solutions for bandwidthintensive applications (3rd. Quad play, IPTV) Strong, entrenched positions with major carriers in emerging markets and in developed ones Established in 1961. HQ in Israel, went public in 1982 and became private in 2007 Development centers in Israel, U.S., India and China, employing more than 1,000 R&D engineers 2008 revenues of over US$700 million, booking run rate approaching US$1B Installed base of over US$7 billions worldwide 2 Confidential , not for distribution The 2007 Acquisition On September 2007 ECI was acquired by the Swarth Group and the London-based Ashmore Group in a transaction valued at $1.25 billion. Following the acquisition, the company made a very successful turnaround, including: Structure Reorganization - simplifying, reducing redundancies, increasing efficiencies - cost savings of $30 million annually; Outsourcing the manufacturing to Flextronics, the world leader outsourcing group ($40 bln annual sales) to allow ECI focusing on its core competencies; Expanding product offering – CESR, GPON Expanding to new territories – inc. Brazil and Africa (more than 10% of ECI’s orders in the first year) Considering M&A opportunities A Global Player Global Headquarters Regional Headquarters R&D Locations Sales Offices ECI has over 400 customers in approximately 70 countries ECI service its customers mainly through its direct sales force 2,500 employees worldwide,1,500 employees in Israel Confidential , not for distribution 4 Strong Presence in Mature & High-Growth Markets CAGR CAGR (Svyaz Invest) (MGTS) 17% 6% 29% 11% 2007 Sales Breakdown Confidential , not for distribution 5 2008 – Going to a Record Year 2008 is becoming a record year for ECI: Major wins in India, Latin America, North America, Africa Russia and Europe Launching of new products (CESR – awarded the Best Product of the Year, more than 10 new customers in first 4 months) Order intake in 2008 of over US$800M, more than 25% growth compared to 2007 and a current run rate approaching US$1B Revenues more than $700M, over 10% growth YoY Services revenues of more than $100M Current backlog of $270 million – double YoY. Increased profitability 2009 forecast – continuous growth ECI in Brazil Brazil Vibrant, stabilized economy Democracy Transparency and fair laws & regulations High-growth economy 8th largest GDP in the world: $1.3T(2007) Growth rate of 4% Lowest inflation among BRIC countries (4.5%) Telecom growth target Population of over 185M Potential for communications: broadband and wireless Telecom Highlights: Fixed Line Subs: 50M, Wireless 100M, Data: 12M, Cable TV 4M Confidential , not for distribution Potential Utilities customers Confidential , not for distribution 9 ECI’s Growth Strategy Emerging Markets Substime in India (M) Fast growth ofand mobile subscriber’s Simplicity availability of contentbase and applications everywhere, atMobile any Data services and broadband access 300 250 expansions 200 150 Strong and efficient fit of ECI’s solutions to 150 76 support such needs 100 48 50 11 261 233 28 0 2002 2003 2004 2005 2006 2007 2008* * 31-march-2008 Developed Markets Traffic continues to grow: Streaming media Mobile data applications and access bitrates Any Service…Any Device…Everywhere…Anytime Confidential , not for distribution 10 Brazil is Part of ECI’s Growth Strategy Expertise of working in the BRIC markets Experience of growing with Tier 1 operators as well as with high growth 2nd Tiers Good fit product offering – wireless backhaul, Governmental and Defense, next generation networks Financing capabilities and packages Confidential , not for distribution 11 ECI Experience in Brazil ■ Understanding of local market and business ■ requirements is vital ■ Learning curve – 7 years ■ Competitive dynamics ■ Regulatory issues ■ Unique and tailored solutions Local presence a must ■ Relationship – Relationship – Relationship ■ Local team and management (including support) ■ Technological innovation ■ Commitment to market and growth ■ From Vendor - customer to Partnerships Confidential , not for distribution 12 Looking Ahead ■ ECI view Brazil as it base for Latin America expansion and regional support hub, to further support our growth (doubling LATAM business YoY) ■ Our focus in Brazil is to expand both with 2nd. tier as well as incumbent operators ■ Brazil’s operators can enjoy technology leapfrog with ECI ■ Considering local manufacturing and partnerships Confidential , not for distribution 13 Thank you! [email protected]