Mtn Group Limited · JSE:MTN
Mtn — H1 2011 Earnings Presentation
44 slides from Mtn's earnings presentation, August 2011
Slide 1: MTN Group Limited Interim results for the six months ended 30 June 2011
MTN Group Limited Interim results for the six months ended 30 June 2011
Slide 2: Agenda
Agenda Strategic and operational overview Sifiso Dabengwa Group President and CEO Financial overview Nazir Patel Group Chief Financial Officer Looking ahead Sifiso Dabengwa Group President and CEO
Slide 3: Strategic and operational overview
Strategic and operational overview Sifiso Dabengwa Group President and CEO
Slide 4: MTN vision
MTN vision To be the leader in telecommunications in emerging markets Leverage existing Convergence and Consolidation and footprint and intellectual operational evolution diversification capacity Increased competitiveness Hub and Procurement Skills Value Best practice Diversification Brand cluster s
Slide 5: Group highlights
Group highlights Group subscribers EBITDA margin Approximate FCF Up 7,5% to Up 1,3% points to Up 23,7% to 152,3 million 44,6*% ZAR 19,494 million Adjusted HEPS Interim dividend Dividend payout Up 7.2% to per share of ratio 470.1 cents 273 cents Increased to 65% *Including R445m profit on sale of fir
Slide 6: Strategic considerations
Strategic considerations Revenue growth • Market share remains a priority • Penetration levels still offer growth opportunity • Further leverage data service opportunities, currently 12,3% of total revenue • Distribution of smartphones and other data devices • Focus on local content partnerships • B
Slide 7: Macro considerations
Macro considerations Exposure to currencies other than reporting currency • Continued rand strength dampened H1 results as 68% of revenue is non-rand • Some local currency (naira, cedi and rial) weakness exacerbated FX impact • Constant currency revenue growth up 9,4% • Constant currency EBITDA grow
Slide 8: Regulatory sector considerations
Regulatory sector considerations SIM registration status at 30 June 2011 • South African deadline 30 Jun 2011; 340 842 suspended • Nigerian deadline 28 Sep 2011; 50% of the base registered • Ghanaian deadline 30 Sep 2011 – deadline extended from 31 Jul 2011 - 90% registered Mobile money licences • L
Slide 9: Operational considerations
Operational considerations I N T E R N A L E X T E R N A L Quality service Brand Efficient preference distribution Customer Experience Products and value added Segmentation services Experienced people
Slide 10: Characteristics of the period under review
Characteristics of the period under review Increased competition • Market share • Voice and data tariffs declining rapidly • Significant increase in incoming traffic • Billed minutes increasing Political instability • Operations kept functioning (Côte d’Ivoire, Yemen and Syria) Growth in data servic
Slide 11: South Africa
South Africa Market sizing 57.0m Launched Jun 1994 Market share 35% Population 50.6m Penetration 112% Shareholding 100% (2016) Subscribers 5,1% • Prepaid growth - MTN Zone Mahala (’000)/ARPU(R) 18,842 19,799 • Classical postpaid growth migrating to 16,067 15,477 16,244 hybrid packages 13,044 152 • D
Slide 12: South Africa (cont)
South Africa (cont) Opex • Successful reduction in commission and ZAR (million) 23,634 22,739 distribution costs 12,314 • Lower marketing and advertising costs 11,764 4,1% 11,782 • Maintenance costs stable while quality of service retained 10,975 11,320 11,782 • Higher upgrade costs for handsets H2
Slide 13: Nigeria
Nigeria Market sizing 118.2m Launched Aug 2001 Market share 49% Population 155m Penetration 53% Shareholding 76%* (2016) Subscribers (‘000) 40,540 • Slow response to Q2 pricing competition 38,669 /ARPU ($) resulted in loss of market share, being 30,827 4,8% addressed • Lower gross connections due to
Slide 14: Nigeria (cont)
Nigeria (cont) Opex • Well managed cost base NGN (million) 255,971 244,704 • Network operating costs up 17,9% as 7,1% frequency, lease and fuel cost escalate as 128,340 132,743 136,889 network expanded • Deploying hybrid power systems 111,961 127,631 136,889 • Marketing expenses down 4,9% • Reductio
Slide 15: Ghana
Ghana Launched Nov 1996 Market share 53% Population 25m Market sizing 20.4m (2016) Penetration 74% Shareholding 98% Subscribers (‘000) • Maintained market share despite /ARPU ($) 9,6% aggressive competition 9,562 8,721 8,001 • Increased off-net traffic MTN • Stable tariff Subscribers 7,2 7,0 ('000)
Slide 16: Ghana (cont)
Ghana (cont) Opex • Opex up 19% excluding profit from sale of Cedi (million) first 400 sites (Cedi 102 million) 616 • Network operating costs up 51,9% due to 537 price hike in rent and utilities 305 288 269 • Selling, distribution and marketing costs down 1% 311 • Interconnect costs up due to tariff
Slide 17: Iran
Iran Launched Aug 2006 Market share 44% Population 74m Market sizing 86.1m (2016) Penetration 99% Shareholding 49% Subscribers (‘000) • Maintained market share /ARPU ($) 32,182 29,743 • Maintained on-net traffic 23,260 8,2% • Stable tariff MTN Subscribers 7,8 • Usage stimulated by promo’s 7,8 7,9 ('
Slide 18: Iran (cont)
Iran (cont) Opex • Cost containment initiatives in various Rial bn 15,469 areas 12,023 • Well managed distribution costs 8,269 9,096 6,421 • Lower costs offset high price hikes in electricity and fuel costs due to withdrawal 26,5% 7,193 9,096 of government subsidies 5,602 Dec-09 Dec-10 Jun-11 H2 H1
Slide 19: Syria
Syria Launched Jun 2002 Market share 45% Population 23m Market sizing 11.4m (2016) Penetration 45% Shareholding 75% Subscribers (‘000) • Political unrest impacting the economy, /ARPU ($) customer behaviour and business 5,123 efficiency 4,898 4,249 • Conservative marketing and promotions MTN 17,8 16,
Slide 20: Syria (cont)
Syria (cont) Opex • Lower commissions due to lower revenue SYP (million) 33,202 31,681 • Network operating costs down 17,004 • Selling, distribution and marketing costs 15,435 17,274 down • General expenses down marginally 14,407 16,198 15,435 4,7% H2 H1 Dec-09 Dec-10 Jun-11 EBITDA margin % 19.7 23.
Slide 21: Capital expenditure unpacked
Capital expenditure unpacked H1 spend as % of revised guidance Committed as % of revised guidance 69 70 61 40 32 30 27 12 South Africa Nigeria Ghana Iran Guidance (ZARm) 3 920 7 767 1 227 1 377 (49%) 21
Slide 22: Financial overview
Financial overview Nazir Patel Group Chief Financial Officer
Slide 23: Financial highlights
Financial highlights Strong free cash flow growth – low capex Group summary: 2009-2011 Reported Organic • Strong underlying organic (ZAR m) ’10-’11 ’10-’11 growth in key markets • ZAR strength dampened reported results +1% 57,269 -2% Rev • Avg ZAR/USD R6.80 vs R7.52 56,542 +1% +9% 55,989 PY • Higher
Slide 24: Key accounting considerations
Key accounting considerations Change in ownership • Zambia shareholding reduced from 90.0% to 86.0% - Apr 11, consolidating 98.7% • Ghana tower sale - 1st phase completed May 11, 2nd phase completed Aug 11, and final phase to be completed by year end (MTN share in TowerCo 49%) Events after reporting
Slide 25: FX Trends (average rate)
FX Trends (average rate) ZAR strength severely impacting results USD: Local Currency ZAR Cedi Rial Naira Δ ‘10 -‘11 10 103 10 253 10 474 9 830 9 872 -4% 9 477 151 151 154 147 149 -2% 119 1.38 1.42 1.43 1.44 1.51 -6% 1.06 9.06 8.32 +10% 8.13 7.52 7.34 6.80 YTD - 08 H1 - 09 YTD - 09 H1 - 10 YTD - 10 H
Slide 26: Revenue
Revenue Strong organic growth impacted by strong ZAR Revenue Revenue breakdown (ZAR m) (ZAR m) 114,684 +9% 494 61,263 4,721 111,947 348 1,261 1,008 -8% 54,678 58,695 2,163 56,542 56,542 55,989 LC ZAR NIG 13% 0% RSA 6% 6% IRA 28% 12% 57,269 55,989 GHA 12% -4% 2009 2010 2011 2010 NIG RSA IRA GHA Other
Slide 27: Revenue
Revenue Strong underlying local currency growth Revenue Reported % share of • ZAR airtime and subscription (ZAR m) ’10 – ’11 total Revenue revenue decreased by 3% +1% • LC RSA airtime and subscription 56,542 revenue increased by 5%, 55,989 -9% 3% Nigeria by 7% and Iran by 26% 1,334 Other 1,463 Cellu
Slide 28: Interconnect
Interconnect 100% 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% Group interconnect • MTR changes in RSA (ZAR m) • RSA peak and off-peak rate dropped; Cost Revenue • Peak 89 cents to 73 cents 6 months • Off-peak 77 cents to 65 cents ended Jun 11 -5,684 8,630 • Group Interconnect revenue increased by 4% • RS
Slide 29: OpEx
OpEx Cost optimisation OpEx Reported % share of • Direct network operating (ZAR m) ’10 – ’11 total opex +1% costs 31,740 31,340 • Increased electricity cost in RSA, Ghana and Iran (subsidies withdrawn) 8,320 8,755 Direct network -5% 28% • Higher bandwidth usage operating costs drove transmission cos
Slide 30: EBITDA
EBITDA Strong organic EBITDA growth EBITDA EBITDA breakdown (ZAR m) (ZAR m) +14% 556 16 27,635 2,433 50,511 568 46,063 546 -10% 1,700 25,202 26,262 21,551 24,249 25,202 LC ZAR 43.3% 44.6% NIG +17% +4% 42.8% RSA +9% +9% IRA +31% +14% 24,512 24,249 GHA* +2% -12% 2009 2010 2011 2010 NIG RSA IRA GHA Oth
Slide 31: EBITDA margin
EBITDA margin Margin expansion in Nigeria, Iran and RSA EBITDA margin reconciliation • Nigeria (%) • Margin increased 2pts to 63% due to reduced marketing spend and commissions • RSA +1.8 pts 0.1 45.1% 0.5 • Margin up from 34% to 35% on higher 0.7 revenue and lower marketing spend and 44.6%* commiss
Slide 32: CapEx
CapEx Capex reduction in most operations CapEx CapEx breakdown (ZAR m) (ZAR m) -26% 31,248 8,496 173 278 421 1,241 15,744 628 6,311 603 19,466 5,708 -7% 10,970 27% LC ZAR NIG -7% -18% 15,504 RSA +27% +27% 15% 5,708 IRA -47% -54% 8,496 GHA -89% -90% 10% 2009 2010 2011 2010 NIG RSA IRA GHA Other 2011C
Slide 33: CapEx guidance
CapEx guidance Significant capex reduction vs prior year (ZAR m) 6 months 6 months ended ended Authorised Revised Jun 11 Jun 10 Dec 11 Dec 11 South and East Africa 1 905 1 571 5 676 5 427 South Africa 1 292 1 014 3 920 3 920 Other operations 613 557 1 756 1 507 West and Central Africa 2 620 5 282 10
Slide 34: EBITDA - CapEx
EBITDA - CapEx Strong free cash flow growth EBITDA - CapEx EBITDA - CapEx breakdown (ZAR m) 31,045 (ZAR m) +35% 642 21,323 1,829 1,798 19,494 -11% 989 15,292 1,873 268 19,494 15,753 14,815 34.5% LC ZAR NIG +25% +11% 5,807 28.1% RSA +6% +6% IRA NM NM 15,753 15.7% GHA NM NM 9,008 2009 2010 2011 2010 N
Slide 35: Interest and tax
Interest and tax Lower interest charge and increase in effective tax rate Net finance 6 months 6 months 6 months • Net interest paid lower due to interest cost ended ended ended income in Mauritius (ZAR m) Jun 11 Jun 10 Jun 09 • Net forex losses reduced due to forex Net interest paid 775 1 085 982 g
Slide 36: AHEPS
AHEPS Increased Adjusted Headline Earnings per share AHEPS • Adjusted EPS increased by 7.2% to 470.1 (ZAR cents) cents YOY 909 • Profit on disposal of non-current assets 754 mainly due to Ghana tower sale, profit of 470 ZAR 445m 390 470 • Reversal of put option in respect of subsidiaries 439 364 • N
Slide 37: Net debt
Net debt Group in net cash position ZAR m Repayment schedule Gross debt 30,937 (ZAR m) 12000 18% 10000 9.6 2% 8.2 8.1 46% 8000 7.4 7.0 6.3 6000 5.3 5.3 5.0 4.0 34% 4000 2000 0 2011 2012 2013 2014 >2014 Holdco's and SA Nigeria Iran Ghana Syria Rest Pre Jun 11 Post Jun 11 Gross cash 40,822* • Gross de
Slide 38: Income statement
Income statement ZAR m 6 months ended 6 months ended Variance % Jun 11 Jun 10 Revenue 56 542 55 989 1 EBITDA 25 202 24 249 4 EBITDA Margin % 44.6% 43.3% 1.3pts Depreciation 6 293 6 273 - Amortisation 1 142 1 070 (7) Profit from operations 17 767 16 906 5 Net finance cost 587 2 198 (73) Share of resu
Slide 39: Statement of financial position
Statement of financial position ZAR m * Incl in other current Jun 11 Dec 10 assets are bonds of ZAR 190m, treasury bills Non-current assets 99 505 99 727 of ZAR 6,004m and foreign currency deposits Property, plant and equipment 63 224 63 361 of ZAR 1,025m which have been incl in the net Goodwill and
Slide 40: Statement of cash flows
Statement of cash flows ZAR m 6 months 6 months ended ended Jun 11 Jun 10 Variance % Cash generated by operations 23 608 24 075 (2) Net interest paid (921) (1 866) 51 Taxation paid (3 391) (3 406) - Dividends paid (6 576) (3 534) (86) Cash inflows from operating activities 12 720 15 269 (17) Acquisi
Slide 41: Looking ahead
Looking ahead Sifiso Dabengwa Group President and CEO
Slide 42: Looking forward
Looking forward Strategic considerations • Leverage revenue and cost optimisation opportunities • Evolve the business model to support ICT convergence • Leadership and market share remains a priority Rollout • Increase short term pace of network investments and rollout • Upgrade and optimise network
Slide 43: Subscriber guidance 2011
Subscriber guidance 2011 Net additions guidance Net additions guidance for 2011 for 2011 ‘000 (Old) ‘000(New) South Africa 2,000 2,000 Nigeria 4,400 4,400 Ghana 900 1,300 Iran 4,200 4,200 Syria 500 500 Rest 6,435 7,700 18,435 20,100
Slide 44: Notice
Notice The information contained in this document has not been verified independently. No representation or warranty express or implied is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Opinions and