Vodafone Group Public Limited Company · LSE:VOD
Vodafone Group Public — Vodafone Group — Investor Day (December 2006)
67 slides from Vodafone Group Public's investor day presentation, Dec 6, 2006
Slide 1: Vodafone Group Plc EMAPA Analyst & Investor Day
Vodafone Group Plc EMAPA Analyst & Investor Day Arun Sarin, Chief Executive 6 December 2006 Disclaimer The following presentations are being made only to, and are directed at, persons to whom such presentations may lawfully be communicated (“relevant persons”). Any person who is not a relevant perso
Slide 2: Outline of the day
Outline of the day Opening remarks Arun Sarin, Chief Executive EMAPA overview Paul Donovan, CEO EMAPA Vodafone Turkey Attila Vitai, CEO Andrew Davies, CFO Vodafone Romania Liliana Solomon, CEO Karsten Wildberger, CFO Vodacom Pieter Uys, COO Leon Crouse, CFO Vodafone Egypt Ian Gray, CEO Martin Moorho
Slide 3: Focus on regional performance H1 06/07
Focus on regional performance H1 06/07 Proportionate Contribution to Proportionate mobile organic proportionate mobile organic EBITDA margin EBITDA revenue growth change Europe 54.7% 0.6% (1.0)pp EMAPA 41.9% 13.7% 1.3pp EMAPA subsidiaries and JVs 11.3% 18.6% 0.4pp US 20.1% 18.2% 1.6pp Other associat
Slide 4: Increased exposure to high growth markets
Increased exposure to high growth markets Vodafone Czech Republic Vodafone Romania Bharti Oskar acquired Mobifon stake increase Bharti stake in May 05 in May 05 acquisition in Nov/Dec 05 0% 100% 20% 100% 0% 10% Vodacom Vodafone Turkey Vodafone Egypt Vodacom stake increase Telsim acquired Vodafone Eg
Slide 5: Analyst and Investor Day EMAPA Region
Key messages Investing in future growth High performing organisations Country specific business models Two way value transfer between emerging markets and Vodafone Group 9 Analyst and Investor Day – EMAPA Analyst and Investor Day EMAPA Region Paul Donovan, EMAPA CEO 6 December 2006 5
Slide 6: The EMAPA strategy
Contents 1. Introduction to EMAPA 2. Executing our strategy in emerging markets 3. How are we doing? 4. Today’s presentations 11 Analyst and Investor Day – EMAPA The EMAPA strategy Priorities Areas of emphasis • Deliver high performance in controlled • Performance management businesses • Maximise sh
Slide 7: The EMAPA region – overview
The EMAPA region – overview Proportionate revenue growth H1 FY06/07 Adjusted Group operating profit 20% 18.6% 18.2% Associates 27.3% 15% 13.7% 10% Europe/ EMAPA 37.5% 6.0% Other 5% 62.5% Subs/JVs 0% 10.2% Group mobile EMAPA EMAPA US subs/JVs Eastern Europe Middle East, Africa and Asia Pacific • Voda
Slide 8: Underdeveloped fixed line and broadband; common themes
Underdeveloped fixed line and broadband Fixed line penetration % of population DSL penetration % of population (%) (%) 80 14 66 12 70 65 12 60 52 10 50 45 8 40 6 6 5 30 4 20 13 2 10 2 1 0 0 US Europe Pacific Eastern ME, US Europe Pacific Eastern ME, Europe Africa & Europe Africa & Asia Asia Signific
Slide 9: Executing our strategy
Contents 1. Introduction to EMAPA 2. Executing our strategy in emerging markets 3. How are we doing? 4. Today’s presentations 17 Analyst and Investor Day – EMAPA Executing our strategy Today Tomorrow • Invest to accelerate penetration and • Future sources of growth usage – total communications – pay
Slide 10: Emerging Markets Board and core initiatives
Emerging Markets Board Senior representation from companies linked to Vodafone in emerging markets • SUBSIDIARIES • AFFILIATES • PARTNERS – Romania – Bharti – Telecom Malaysia – Egypt – China Mobile – Mobiltel – Turkey – Vodacom – America Movil – Safaricom Drive benefits from bringing together the w
Slide 11: Benefits from being part of Vodafone
Benefits from being part of Vodafone Further benefits obtainable from leveraging Group scale 1.2m connections in H1 FY06/07 through account negotiation at Multinational companies Group level(1) Benefit from a wide range of products (Vodafone live!, Vodafone Vodafone products Mobile Connect datacard,
Slide 12: India and China
India and China India China • 1.1bn population(1) • 1.3bn population(1) • 11% mobile penetration(2) • 33% mobile penetration(2) Bharti – No.1 player(3) China Mobile – No.1 player(3) • Customers 27m • Customers 287m • Mobile revenue growth 68% • Revenue growth 19% • EBITDA margin 34.8% • EBITDA margi
Slide 13: EMAPA results – H1 FY06/07
EMAPA results – H1 FY06/07 Eastern Middle East, Other Total Adjusted operating profit Pacific US Europe Africa, Asia Associates EMAPA £m 118 339 66 1,015 390 1,928 % of Group total 2.3% 6.6% 1.2% 19.7% 7.6% 37.5% Organic growth % 21.2% 38.4% 26.4% 33.7% 0.3% 26.1% EMAPA continues to perform strongly
Slide 14: Contents; Outline of the day
Contents 1. Introduction to EMAPA 2. Executing our strategy in emerging markets 3. How are we doing? 4. Today’s presentations 27 Analyst and Investor Day – EMAPA Outline of the day EMAPA overview Paul Donovan, CEO EMAPA Vodafone Turkey Attila Vitai, CEO Andrew Davies, CFO Vodafone Romania Liliana So
Slide 15: Vodafone Turkey
Analyst and Investor Day EMAPA Region Attila Vitai, Chief Executive Officer, Vodafone Turkey 6 December 2006 Contents 1. Market environment 2. Execution plan 3. Financial overview 4. Summary 30 Analyst and Investor Day – Vodafone Turkey 15
Slide 16: Turkey – a large and growing country
Turkey – a large and growing country Population Population growth growth Population Population aged aged under under 25 25 Population 10 (m) R 05– CAG 80 1.3% 76.9 75.9 47% 75.0 76 74.1 25 and under 73.2 72.3 71.4 72 69.6 70.4 Over 25 68.7 68 53% 64 2001 2003 2005 2007E 2009E • A large population th
Slide 17: Telecommunications and mobile market structure
Telecommunications market structure Penetration Penetration growth growth • Rapid mobile growth to date (%) – duplicate SIMs suggest real penetration 100 54%–57% 80 67 60 48 – penetration expected to increase by >20% 60 40 33 in the medium term 40 26 20 27 27 27 27 26 26 • Stagnating fixed line pene
Slide 18: Market share by segment; competitive landscape
Market share by segment Customer Customer share share of of consumer consumer market market Customer share Customer share of of business business market market 15% 5% 10% 25% 61% 85% Vodafone Turkey Turkcell Avea Vodafone Turkey Turkcell Avea • Youth segments comprise in excess of 50% • Turkcell dom
Slide 19: Regulatory environment; Turkish market opportunity
An evolving regulatory environment • Telecommunications Authority (“TA”) is reducing termination rates to similar levels as Termination the rest of Europe Rates • ‘Glide path’ to symmetry with Turkcell agreed to approx €0.08/min by FY08/09 • Taxes on mobile sector highest in the world at 51% of tota
Slide 20: Status on acquisition
Contents 1. Market environment 2. Execution plan 3. Financial overview 4. Summary 39 Analyst and Investor Day – Vodafone Turkey Status on acquisition • 93% population coverage vs. 97% for Turkcell Operator brand Poor network preference(1) • Poor network quality coverage & – busy hour congestion in e
Slide 21: Fixing the basics; network investment
Fixing the basics • Network optimisation in tourist areas and major cities – busy hour congestion improved by more than 60% – network unavailability improved by 25% Already – dropped call rate improved by 30% achieved • Commenced rebalancing of prepaid tariffs • Customer service stabilised Before Af
Slide 22: Building a robust IT environment; consumer focus
Building a robust IT environment Billing and IT • Existing billing platforms are functional and scalable Platforms • Significant investments in CRM capacity and capability, and data warehousing • Investment in data centre resiliency and building a second site to ensure business Data Centres continui
Slide 23: Business focus – leveraging Group capabilities
Business focus – leveraging Group capabilities Business proposition Network coverage and performance parity of 2G network with other Vodafone Improved network operating companies to be complete within 2 years Rebuilding sales Expanded shop network along with direct sales team for SME and telesales c
Slide 24: Vodafone Turkey financial overview
Contents 1. Market environment 2. Execution plan 3. Financial overview 4. Summary 47 Analyst and Investor Day – Vodafone Turkey Analyst and Investor Day EMAPA Region Andrew Davies, CFO, Vodafone Turkey 6 December 2006 24
Slide 25: Telsim historic financial performance
Telsim – historic financial performance Customers Customers Revenue Revenue (m) (YTL m) 10 9.6 1,600 1,407 8 6.5 1,200 971 965 936 6 5.5 5.1 4.8 739 800 4 400 2 0 0 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 ARPU ARPU EBITDA EBITDA (YTL) (YTL m) 200 186 250 175 167 17
Slide 26: EBITDA analysis; cost structure
EBITDA analysis EBITDA(1) EBITDA(1) • +4.4pp increase in EBITDA margin YoY to 22.7% in period to 30 Sept 06 YTL (m) – ARPU uplift 200 182 – strong visitor traffic mix from increased number of roamers – cost control as costs grew 9% less than 160 + 73% revenue growth 120 105 • Margins for FY 06/07 ex
Slide 27: Indirect tax analysis; cash flow
Indirect tax analysis Tax as % of P&L impact as Basis of tax customer spend % of revenue Customer VAT 18% of invoiced amount 12.5% N/A bill Proportional SCT(1) 25% of invoiced amount 17.5% N/A Fixed SCT(1) 24 YTL per acquisition 4.2% 6.0% 10 YTL per acquisition 1.8% 2.6% Indirect Wireless licence fe
Slide 28: Vodafone Turkey – performing ahead of expectations
Vodafone Turkey – performing ahead of expectations Acquisition Acquisition Plan Plan – – Dec Dec 05 05 Updated Updated plan plan – – Dec Dec 06 06 • 5 year revenue CAGR of 20% in US$ • 5 year revenue CAGR of 20% in US$ • EBITDA margin • EBITDA margin – high single digits for FY06/07 – high teens for
Slide 29: Vodafone Turkey – winning through a targeted strategy
Vodafone Turkey – winning through a targeted strategy 1 2 3 Invest in network and IT Focus on higher value Build the best infrastructure, and youth and business telecoms brand people segments No.1 for customer satisfaction Deliver exceptional revenue and revenue market share growth 57 Analyst and In
Slide 30: Romania is a large, growing economy
Contents 1. Market environment 2. Vodafone Romania performance 3. Strategic objectives 4. Summary 59 Analyst and Investor Day – Vodafone Romania Romania is a large, growing economy Country facts High growth and lower inflation • Similar size land mass to the UK Real GDP Inflation growth (%) rate (%)
Slide 31: Romanian telecom market; mobile five player market
The Romanian telecom market is worth US$3.9bn Romanian telecom market Opportunities and challenges (US$) 70% 110% • Multiple mobile SIMs: ~1.2 000s 6,000 CAGR – real penetration around 60% 8% 5,000 8% • Low fixed line penetration of 20% 19% 19% – mobile can win disproportionate share 0.2% 4,000 6% •
Slide 32: Outbound mobile price levels; regulatory environment
Outbound mobile price levels and usage Outbound MOU and average price per outbound min (US$ cent) (US$ (Mins) cents) 0.25 88 90 0.20 85 0.15 80 75 0.23 0.10 75 0.13 0.05 70 0.00 65 Romania Western Europe Price per minute MOU Monthly blended ARPU in US$ 16 37 Romania has a relatively low price level
Slide 33: Very strong customer growth
Contents 1. Market environment 2. Vodafone Romania performance 3. Strategic objectives 4. Summary 65 Analyst and Investor Day – Vodafone Romania Very strong customer growth Customer base Market share of net additions Contract Contract (000s) 100% +23% 7.9% 9.5% 2,600 15.9% 2,406 80% 2,400 2,243 47.3
Slide 34: MOU growth offsetting price declines
MOU growth offsetting price declines Contract ARPU Prepaid ARPU (US$) (US$) 35 8 30.6 30.2 7.0 30 28.2 7 6.7 6.5 25 6 20 5 15 4 H1 FY05/06 H2 FY05/06 H1 FY06/07 H1 FY05/06 H2 FY05/06 H1 FY06/07 • Contract ARPU stable despite increasing • Prepaid ARPU growth due to increasing competition MOU and high
Slide 35: Revenue leadership; EBITDA growth and margin
On track to attain revenue leadership Service revenue of Vodafone vs. Orange 54% 53% 52% 51% 50% $24m $7m 49% 48% 47% 46% 45% 44% Q3 FY04/05 Q4 FY04/05 Q1 FY05/06 Q2 FY05/06 Q3 FY05/06 Q4 FY05/06 Q1 FY06/07 Q2 FY06/07 Orange Vodafone Source: Company and public data 69 Analyst and Investor Day – Voda
Slide 36: Managing operating expenses
Managing operating expenses • Macroeconomic factors leading to cost increases – salaries and wages Drivers for – rental expenses – in particular for cell sites increasing costs – utility costs • Cost savings through global procurement – handsets and network equipment Cost reduction • Outsourcing opp
Slide 37: Strategic objectives; building a strong Vodafone brand
Strategic objectives Continue to Deliver Leverage the lead the exceptional Usage Vodafone business Cost growth stimulation in brand market – reduction through best core business in Romania Mobile Plus distribution strategy Best network and leader in innovation To become the provider of choice for cu
Slide 38: Leadership in distribution; stimulating usage
Leadership in distribution Strategy Channel share of gross contract additions • Increase number of own shops from 35 (%) 100 to more than 80 16 • Strengthen direct sales force and telesales 29 80 • Enhance indirect dealer network with over 80% of all channels being exclusive 60 48 • Consistent CRM a
Slide 39: Leading the business market; Mobile Plus strategy
Vodafone is leading the business market Customer base share 2004 Customer base share 2006 Drivers • >30% of service revenues from business • Strong and well trained Other Other direct sales force 15.4% 18.7% Vodafone Vodafone • Innovation leader 40.0% 43.2% • Great success through Orange Orange inte
Slide 40: Growing data market; capitalising on Vodafone Group
Growing data market in business and consumer Strategy Non-voice revenue • 250,000 Vodafone live! customers (US$m) • Consumer data market is emerging 60 • Strong business market opportunity 50 – growth in Mobile Connect data cards 40 – BlackBerry® from Vodafone devices 30 56 – HSDPA 52 20 34 10 0 H1
Slide 41: Best Romanian mobile network; summary
Vodafone has the best Romanian mobile network • 96% 2G pop coverage • The only operator with 2G coverage in all Bucharest subway stations • First to launch 3G with 30% 3G pop coverage and 3G service in 23 cities – more than 250,000 users – more than 16% voice traffic in the 3G cities – more than 70%
Slide 42: Vodacom Group
Analyst and Investor Day EMAPA Region Pieter Uys, Chief Operating Officer, Vodacom Group 6 December 2006 Contents 1. Vodacom overview 2. South Africa 3. Other African Operations 4. Summary 84 Analyst and Investor Day – Vodacom 42
Slide 43: Vodacom operational structure; group highlights H1 FY06/07
Vodacom Group operational structure Sub heading in black Arial Bold 20pt Vodafone Telkom Contribution 50% 50% to Vodacom Group revenue(1) Vodacom Group South Africa 90.3% 100% Tanzania 4.0% 65% Democratic Republic of Congo (DRC) 4.6% 51% Lesotho 0.5% 88% Mozambique 0.6% 98% (1) For H1 FY06/07 85 Ana
Slide 44: Customer growth; group revenue and EBITDA
Significant year on year customer growth 30 • Strong growth in gross connections – 11.8m in FY05/06 25 – 7.3m in H1 FY06/07 5.6 • Last five years average annual growth 4.3 20 was 34% p.a. • In South Africa penetration has grown 15 2.7 from 43% to 72% over last two years – slow down expected in the f
Slide 45: Capital expenditure; cash flow, balance sheet and returns
Capital expenditure South Africa • Significant investment in new technologies Capex to revenue (%) 20 16.1 (3G/HSDPA) 15.1 12.6 12.8 • Increasing 2G and 3G capacity 10 14.1 14.2 11.1 • South Africa comprises approximately 80% 7.7 of Vodacom Group capex in H1 FY06/07 0 FY03/04 FY04/05 FY05/06 H1 FY06
Slide 46: South Africa overview
Contents 1. Vodacom overview 2. South Africa 3. Other African Operations 4. Summary 91 Analyst and Investor Day – Vodacom Overview Macro economic environment Penetration (%) • Population 47.4m 80 72 • Estimated mobile penetration 72.2% 58 60 • Estimated fixed penetration 9.9% 43 40 • GDP (2005) $540
Slide 47: Market leadership since launch; H1 FY06/07 highlights
Market leadership since launch Estimated mobile/fixed customers Mobile market share (%) (%) 100 80 19.5 14.6 12.1 56 57 59 80 60 60 34 33 33 85.4 87.9 40 40 80.5 20 10 10 8 20 0 0 Sep 04 Sep 05 Sep 06 Sep 04 Sep 05 Sep 06 Mobile Fixed Vodacom MTN Cell C Vodacom ARPU (R) 800 637 588 528 600 400 165 1
Slide 48: Strategic operational direction; technological leader
Strategic operational direction – leading the market Leveraging Vodafone Areas of focus Group • Technological leadership • Speed to market • Innovative products and • Intellectual property re. tariffs new data products – both voice and data • Benchmarking • Strength in the distribution • Products an
Slide 49: Innovative products and tariffs – voice and data
Innovative products and tariffs – voice Happy hour tariffs Hybrid contracts Loyalty programmes • Peak traffic at 8pm • Contract managed on • Contract: Onyx/Platinum prepaid platform • Half rate from 5–8pm • Credit card for contract • Ideal for converting prepaid • Applicable to contract and customer
Slide 50: Distribution and support channels; brand leadership
Extensive distribution and support channels Distribution channels Support channels • Vodaworld cellular mall – • Dedicated data stores biggest contract connection – IT support centre • Vodacare stores • >250 branded franchised – walk-in customer care centre store points • >10,000 outlets • Strong re
Slide 51: Regulation and BEE
Regulation and BEE Regulation Black Economic Empowerment (BEE) • New licence regime • BEE is a business imperative in South – splits network service and application provider Africa licences • Self-governing system regarding business – facilitates MVNO access to market and suppliers • Customer regist
Slide 52: Other African Operations – current situation and overview
Other African Operations – current situation Future expansion Strong platform Operating challenges opportunities • No. 1 player in 3 of 4 • Tough environments to • Low population penetration markets operate in markets – political landscape • Outperforming • Value creation through expectations on key
Slide 53: Other African Operations – strategy for success
Other African Operations overview Lesotho Mozambique • Population 2.0m • Population 19.7m • Estimated mobile penetration 14.7% • Estimated mobile penetration 10.7% • GDP (2005) $5.0bn • GDP (2005) $26.2bn • GDP growth rate (2005) 1.2% • GDP growth rate (2005) 7.5% • 2 mobile players; Vodacom est. 80
Slide 54: Summary; Vodafone Egypt
Summary – driving continued success Customer care Revenue growth and customer loyalty Data – continued investment in technology African expansion opportunities 107 Analyst and Investor Day – Vodacom Analyst and Investor Day EMAPA Region Ian Gray, Chief Executive Officer, Vodafone Egypt 6 December 20
Slide 55: Egypt – good macroeconomic environment
Contents 1. Egypt 2. Vodafone Egypt 3. Strategy 4. Summary 109 Analyst and Investor Day – Vodafone Egypt Egypt – good macroeconomic environment Demographic facts Literacy 58% of population Population 77.5m (1.8% p.a. growth) Population distribution 50% aged 20 or less US$953 (US$4,400 GDP per capita
Slide 56: Mobile outgrowing fixed; two player market
Mobile continues to outgrow fixed Egyptian telecom market overview Fixed vs. mobile revenue • Fast growing mobile market (% ) – 21% penetration; 27% YoY growth(1) 100 – 99% population coverage (8% of land mass) 90 – mostly prepaid; SIM only with no handset 80 43 48 subsidies 54 70 56 – low blended m
Slide 57: Promising outlook with rapid mobile growth
Promising outlook with rapid mobile market growth Drivers for hitting the “S” Curve Total mobile market penetration Reported Mobile • Macro-economic environment customers (m) penetration (%) – economy improving since 2004 20 25 21 16 18 20 • Mass market appeal – mobile moving to mass market 12 15 “n
Slide 58: Vodafone Egypt is growing rapidly and outperforming
Vodafone Egypt is growing rapidly Revenue EBITDA (LEbn) (LEbn) (%) 8.0 EBITDA EBITDA margin 4.0 95 6.0 3.0 38% CAGR 44% CAGR 75 4.0 2.0 55 2.0 1.0 0.0 0.0 35 FY01/02 FY02/03 FY03/04 FY04/05 FY05/06 FY01/02 FY02/03 FY03/04 FY04/05 FY05/06 Revenue components H1 FY06/07(1) YoY% growth H1 FY06/07 Outbou
Slide 59: Prepaid growth with reduction in minute rate
Growth in prepaid with reduction in minute rate Prepaid vs. contract closing customer split(1) Outbound minute rate evolution Customers (m) (LE) 8.0 2.0 6.0 1.5 4.0 1.0 2.0 0.5 0.0 0.0 Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006 Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006 Prepaid Contract • Low ou
Slide 60: New tariffs; balance transfer success story
New tariffs have helped deliver growth Prepaid subscriber base split(1) (m) 10 Super Dardasha Others 8 6.9 7.1 7.3 6.3 6.5 6 4 69% 2 0 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Recharge Recharge cards cards before before & & after after “Super “Super Dardasha” Dardasha” +13% by value 0.5m 0.3m 2.3m 1.5m Be
Slide 61: Customer satisfaction; cost management
Vodafone Egypt outperforms on customer satisfaction Vodafone Egypt vs. Mobinil (%) (%) 100 100 94 90 90 90 87 79 80 80 70 70 60 60 Voice quality Network availability (%) (%) 100 90 100 94 91 90 82 90 80 80 70 70 60 60 Call continuity Sending/receiving SMS Vodafone Egypt Mobinil 11% Source: Network S
Slide 62: Group benefits; healthy cash flows
Being part of Vodafone Group offers many benefits Benefits from Vodafone Group … • Brand • Buying power • Market intelligence (product innovation, technical support, market trends) • Resource • People development … and in return from Vodafone Egypt • Australian call centre • Professional IT services
Slide 63: Unrelenting focus on six key areas
Unrelenting focus and attention on six key areas 1 Consistency 2 Image and quality 3 Small price premium 4 Managing market competitiveness 5 Values based culture 6 Best team 125 Analyst and Investor Day – Vodafone Egypt Contents 1. Egypt 2. Vodafone Egypt 3. Strategy 4. Summary 126 Analyst and Inves
Slide 64: Future strategy; 3G licence costs and benefits
Future strategy has continuity and evolution 1 Consistency 2 Image and quality 3 3G and Mobile Plus strategy Increased focus on costs against 4 increasingly competitive market 5 Values based culture 6 Best team 127 Analyst and Investor Day – Vodafone Egypt 3G licence – Vodafone Egypt’s costs and ben
Slide 65: Mobile Plus strategy and Telecom Egypt partnership
Mobile Plus strategy and Telecom Egypt partnership • Development of • Use of Raya Telecom in • Partner with TE Data for Vodafone brand for total domestic corporate and SME and SOHO “fixed communications MNC segments for & wireless” based solutions – a Service complex and bespoke solutions Integratio
Slide 66: Summary – Vodafone Egypt
Summary Vodafone Egypt’s future is built on solid foundations • Egypt has proven to be a great market with strong growth potential • Vodafone Egypt has delivered strong growth and high margins • New entrant will inevitably impact competitive environment • 3G will provide opportunity to exploit marke
Slide 67: Key messages
Key messages Strong local management teams Effective strategies for emerging markets Investment aligned to growth Value transfer to and from Group EMAPA – high performing organisation 133 Analyst and Investor Day – EMAPA FORWARD LOOKING STATEMENTS This presentation contains “forward-looking statemen