Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — H1 2007 Earnings Presentation
44 slides from Telkom Sa Soc's earnings presentation, Dec 4, 2006
Slide 1: Group Interim Results for the six months ended September 30, 2006
Exhibit 99.4 delivering on long-term value creation . Group Interim Results for the six months ended September 30, 2006 Telkom SA Limited
Slide 2: Agenda
Agenda Papi Molotsane: Papi Molotsane: Kaushik Patel: Financial performance Fixed-line operational highlights Mobile performance Group financials The way forward
Slide 3: Cautionary statement on forward looking statements
Cautionary statement on forward looking statements All of the statements included in this presentation, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of us, that are not statements of historical facts constitute or are based on forward-look
Slide 4: Vision and strategy
Enhancing customer satisfaction through customer centricity Retaining revenue and generating growth Engaging Telkom’s people to maintain competitive advantage Evolving to a NGN in order to support profitable growth through prudent cost management Repositioning Telkom stakeholder management to create
Slide 5: Financial performance
Financial performance Papi Molotsane
Slide 6: Financial Performance
Financial Performance Group operating revenue 7.3 % to R25.2 billion EBITDA margin to 40.7% from 44.5% in September 2005 Operating profit 0.8% to R7.7 billion Net debt to equity to 41.6% from 23.2% in March 2006 EBITDA 2.0% to R10.2 billion HEPS 10.6% to 874.7 cents per share
Slide 7: Fixed-line operational highlights
Fixed-line operational highlights
Slide 8: Traffic volumes impacted by broadband migration and fixed to mobile substitution
Traffic volumes have been negatively impacted by the migration to broadband, increased data services volumes and fixed to mobile substitution Millions of minutes 7.7% (0.5%) 1.8% (11.5%) Fixed-line traffic (6.7%)
Slide 9: Traffic (continued)
Traffic (continued) (1.8) Payphones 3.8 ISDN (2.2) 1,572 1,608 Post-paid residential 1.5 1,424 1,403 Post-paid Business (7.2) Prepaid lines % 2006 2005 Thousands Total fixed access lines 1 Interconnection traffic (6.3) International 4.7 1,170 1,117 Mobile-to-fixed % 2006 2005 Millions Total intercon
Slide 10: Strong data growth
No 1 in Broadband market - Joint No 1 in Internet subscribers Strong data growth Managed data network sites 38.9% growth in managed data network sites 99.6% growth in ADSL subscribers to 190,172 1 15.8% growth in 64 kbit/sec equivalent circuits 602,771 14.8% growth in internet subscribers to 300,570
Slide 11: Strategic intent
Strategic intent Flat rate plan to combat the negative minute of use trend in the consumer market Reduce arbitrage opportunities between local and long distance rates and reduce gap between Standard and CallMore rates Revenue retention Improved value proposition to limit market share loss while cont
Slide 12: Telkom Closer
Telkom Closer Product highlights Launched in February 2006 Subscribers at 206,436 at end September 2006 Prepaid customers migrating to postpaid in order to take up value offering and ADSL Growth of 189.5% in 6 months
Slide 13: Enhanced PC Bundles introduced in September 2006
Enhanced PC Bundles introduced in September 2006 Telkom Closer discount-calling plan Notebook for mobility and Internet access Multiple choice of bundles Increased PC penetration to 13% from 12% in September 2005 Increased network utilisation Sold 884 enhanced PC bundles Product highlights (continue
Slide 14: Telkom Supreme Call and VPN Supreme
Telkom Supreme Call Realised Telkom Benefits VPN Supreme Increased annuity revenue Improved competitive position Reduce arbitrage between local and long-distance Enhanced business bundles Launched one for SMEs - May 2006 Saving on local, long distance, internet dial-up, fixed to mobile and internati
Slide 15: Our IP VPN extended coverage spans over 700 cities globally
Our IP VPN extended coverage spans across 70 countries and over 700 cities globally Americas 223+ cities Asia Pacific 186+ cities 353+ cities Mid-East, Africa Product and services: Retail business Data and converged IP services: Global IP VPN
Slide 16: Indirect customer interface Telkom PD Connect
Indirect customer interface Telkom PD Connect Other product developments Strategic alliance between Telkom and the property developers Geared towards gated communities, multi- tenanted complexes and business developments Bundled voice, data and video services Indirect sales channels through Woolwort
Slide 17: Update: Broadband market
Update Broadband market Accelerated fibre roll-out to shorten copper loop lengths Self install option for ADSL has just been customised for SA and roll-out is beginning Accelerated broadband access technology roll-out of IMAX for wireline solution and WiMAX for wireless solution
Slide 18: Increase in value proposition; WiMAX to complement ADSL
Increase in value proposition WiMAX customer connection to be launched to complement ADSL ADSL market Up to 4 Mbps trial launched - September 2006 Increase value proposition to customers as 4 Mbps is offered at the same price as DSL 1024 Sales increase on DSL 1024 from average 360 per week to 660 pe
Slide 19: Customer centricity
Analyse transactional data Touch Point observations Review market research Conduct staff interviews Analysing the problem Implementation planning & monitoring activities Action plan Customer centricity Detailed implementation planning Team establishment and capability development Established program
Slide 20: Current deployment of NGN
Business and consumer Broadband connectivity (IMAX Platform) Business Broadband connectivity (Metro Ethernet NG-SDH 1 ) Business and consumer nomadic connectivity (WiFi & WiMAX) Current deployment of NGN A platform for converged multimedia services to support the South African business bandwidth req
Slide 21: Current deployment of NGN (continued)
Enabling business operations (NGOSS) Rapid and flexible converged service creation (Soft-switching platform) Transport of converged services (IP-Net) Current deployment of NGN (continued) Unified and standard support systems to manage converged services and applications A platform to support NG voic
Slide 22: Regulatory updates: Electronic Communications Act
Electronic Communications Act (ECA) Interconnection and facilities leasing Regulatory updates Came into effect on July 19, 2006 with the following impact on Telkom License to be converted to network license and service license All existing license rights will be preserved Impact on price controls, t
Slide 23: Regulatory updates
Regulatory updates Since June 2006 Requires service providers to obtain and keep customer details Telkom is in consultation with the Office of Interception Centres and DOC to adopt this in the first quarter of 2007 Block portability is currently implementable; individual geographic number portabilit
Slide 24: Mobile performance
Mobile performance
Slide 25: Strong performance from the mobile segment
Strong performance from the mobile segment 34.7% increase in total customers to 25.8 million 20.3% growth in mobile operating revenue to R9.7 billion 61.5% growth in data revenue 33.8% EBITDA margin sustained despite declining ARPU’s 27.5% increase in customers per employee to 4,883 in SA Market sha
Slide 26: Mobile operational highlights – South Africa
Mobile operational highlights – South Africa 27.0% 28.1% 147.1% (15.6%) (millions) (ZAR per month) (%) (millions)
Slide 27: Strong mobile growth outside SA borders
Strong mobile growth outside SA borders Customers In thousands ARPU In ZAR
Slide 28: Group financials
Group financials Kaushik Patel
Slide 29: Group profitability
10,225 868.1 4,574 (2,844) (437) 170 7,685 (17,675) 213 25,147 Sep 06 Group profitability (2.0) 10,429 EBITDA 7.5 807.4 Basic earnings per share (cents) 4.9 4,359 Profit for the year 3.8 (2,739) Taxation (41.3) (744) Finance charges (21.7) Investment income 0.8 7,625 Operating profit 9.7 (16,109) Op
Slide 30: Segment contribution
Segment contribution September 30, 2006 after inter-segmental eliminations Operating revenue Operating profit Profit attributable to equity holders
Slide 31: Data revenue up 13.5%
Data revenue up 13.5% Fixed-line revenue 0.7% (5.5%) 7.5% (7.5%) 13.5% 3.5% ZAR million Before inter-segmental eliminations
Slide 32: Traffic revenue
Traffic revenue ZAR million (7.8%) (14.1%) (0.9%) 2.3% The above items have been impacted by: Local: F-M substitution, ADSL take up and bundled products Long-distance: product bundles (e.g. Closer), tariff reduction and VoIP (especially inter-branch) Fixed-to-mobile: substitution and wider discount
Slide 33: Fixed-line operating expenses
Increase mainly due to higher employee expenses ZAR million Fixed-line operating expenses 3.1% (18.8%) (1.0%) 11.8% 12.8% 5.2% 14.9% Before inter-segmental eliminations
Slide 34: Fixed-line profitability
42.0 6,936 31.5% 5,202 Sep 06 Fixed-line profitability (9.9) 46.6 EBITDA margin (%) (9.3) 7,647 EBITDA (6.3) 33.6% Operating profit margin (%) (5.6) 5,512 Operating profit % Sep 05 ZAR million Operating profit margin %
Slide 35: Mobile profitability
Maintaining EBITDA margin through revenue growth Mobile profitability Mobile operating revenue ZAR million Mobile operating expenses 20.3% 21.3% ZAR million
Slide 36: Group balance sheet
11,659 55,351 15,203 12,148 28,000 55,351 10,269 45,082 Sep 06 6.6 10,935 Net debt 3.5 53,503 Total equity and liabilities 4.8 14,510 Current liabilities (16.0) 14,470 Non-current liabilities 14.2 24,523 Capital and reserves 3.5 53,503 Total assets (3.3) 10,624 Current assets 5.1 42,879 Non-current
Slide 37: Group cash flow
1,396 153 (4,147) (817) (4,102) 772 (4,726) 9,046 Sep 06 Group cash flow (47.2) 2,645 Free cash flow (83.9) Cash at end of period (208.6) (1,344) Net decrease in cash (195.1) Financing activities 33.3 (3,078) Investing activities (11.8) Cash from operating activities (2.5%) (4,848) Dividend paid 4.9
Slide 38: Capital expenditure slightly below 2007 guidance
Capital expenditure slightly below 2007 guidance Capital investment Capital expenditure In ZAR million Capex to revenue % 35.3% 26.5%
Slide 39: Financial outlook
EBITDA margin at March 2007 expected to be at the higher end of, or slightly above the guidance levels due to slower start-up of Neotel market share losses and non-implementation of FAC, NP and CPS Fixed-line capital expenditure in 2007 is expected to be 18% - 22% of revenue as we invest for capacit
Slide 40: The way forward
The way forward Papi Molotsane
Slide 41: BCX and other considerations
BCX Other considerations Expansion opportunities Continuous focus on telephony and convergence opportunities The offer price constitutes R9 per share plus a payment by BCX of a special dividend of 25 cents per share Competition Commission has agreed to refer the matter to the Competition Tribunal by
Slide 42: Telkom Media
Telkom Media A combination of telecommunication; broadband and media taking Telkom into the converged future Provides up-selling opportunities with content & Value Added Services Addressing competition and commoditisation of voice Diversifying revenue streams Basic package: positioned for price sens
Slide 43: NGN future
NGN future The drivers are cost reduction and new products and services for revenue generation To achieve this the following are necessary: a single, IP-centric network the separation of the service and service control layer from the network to allow rapid deployment of new services the capability o
Slide 44: Thank you
Thank you Investor Relations: Nicola White Tel: +27 12 311 5720 Fax: +27 12 311 5721 E-Mail: [email protected]