Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Vodacom Group (Proprietary) — FY2005 Earnings Presentation
43 slides from Telkom Sa Soc's earnings presentation, Jun 6, 2005
Slide 1: Driving the future of communication
Driving the future of communication Vodacom Group (Proprietary) Limited For the year ended March 31, 2005 June 6, 2005
Slide 2: Content
Content Alan Knott-Craig Chief Executive Officer Operational highlights Leon Crouse Chief Financial Officer Financial review
Slide 3: Operational highlights
Operational highlights Alan Knott-Craig Chief Executive Officer
Slide 4: Group highlights
Group highlights Total customers Revenue EBITDA 15.5 million R27.3 billion R9.6 billion 38.0% 19.5% 23.6% EBITDA margin Net profit Dividends 35.1% R3.9 billion R3.4 billion 1.1%pts 27.2% 61.9% Launch of South Africa’s first 3G network Signing of Vodafone strategic alliance Launch of BlackBerry®
Slide 5: Vodacom South Africa tariffs
Vodacom South Africa tariffs Vodago prepaid on-net Vodago off-peak 4U on-net R2.55/min R1.40/min R3.25/min 10.5% 10.0% 9.7% Data SMS Average outgoing prepaid tariff R0.60/MB Effective R0.33/sms R2.09/min 94.0% 58.8% 9.5%
Slide 6: Consistent delivery on strategy
Consistent delivery on strategy Revenue growth Margin management • Market penetration and leadership • Leveraging economies of scale • Vodafone strategic alliance • Integration of service provider • The continuous introduction of channel enhances control of new high-utility services customer base 3G
Slide 7: Strategic matters
Strategic matters • Deregulation and liberalisation • Continued consolidation of service providers in South Africa Control 78.3% of contract customers Control 98.4% of prepaid customers • Restructuring of Vodacom South Africa • ICT BEE Charter • 3G and data Vodafone strategic alliance Launch of Sout
Slide 8: BEE – an economic imperative in South Africa
BEE – an economic imperative in South Africa • Employment equity 67.0% of workforce in Vodacom South Africa from designated groups, excluding white women • Procurement 75.3% of total commercial spend with BEE companies • Enterprise development 25,224 community services phones, in excess of the 22,00
Slide 9: South Africa – market share 56%
South Africa – market share 56% Population 47.4 million, penetration 48.5% % 2004 2005 change • Total customers 9.7 million 12.8 million 32.0% • Revenue R21,350 million R25,041 million 17.3% • EBITDA R7,536 million R9,002 million 19.5% • ARPU R177 R163 7.9% • Customers per employee 2,527 3,097 22.5%
Slide 10: South Africa – impressive market growth
South Africa – impressive market growth 23.0 25 18.1 20 Customers (millions) 13.9 12.8 15 10.8 10.2 9.7 8.4 10 7.9 6.6 6.0 5.1 5 0 2002 2003 2004 2005 Other operators Vodacom Total
Slide 11: Strong Vodacom South Africa operational indicators
Strong Vodacom South Africa operational indicators Vodacom South Africa gross connections • Gross connections up 7,000 6,180 23.6% to a new high 6,000 4,998 of 6.2 million 5,000 Thousands 4,000 3,495 • Customers up 32.0% 2,990 3,038 3,000 to 12.8 million 2,000 • Total traffic increased 1,000 by 22.1
Slide 12: Improved South Africa churn and inactive customers
Improved South Africa churn and inactive customers Vodacom South Africa churn history • Contract churn at all-time 41.3 45 low of 9.1% 40 34.0 35 30.1 30.3 • Prepaid churn decreased 30 24.8 36.6 25 30.4 to 30.3% % 23.3 27.2 27.1 20 15 18.7 • Contract inactive customers at 1.5% 10 14.5 11.9 5 10.1 9.
Slide 13: Lower South Africa prepaid ARPU and stable contract ARPU
Lower South Africa prepaid ARPU and stable contract ARPU Vodacom South Africa ARPU • Prepaid ARPU decreased 634 700 629 624 13.3% to R78 600 493 560 • Contract ARPU decreased 500 400 Rand 1.6% to R624 300 208 182 183 177 163 200 • Blended ARPU decreased 100 7.9% to R163 0 98 93 90 90 78 Higher prepa
Slide 14: Potential for further growth in South Africa
Potential for further growth in South Africa Vodacom South Africa market share • Potential for further growth 80 Continued data focus with Vodafone strategic 70 alliance, 3G and Vodafone Live! % South Africa market estimated at 60 61 61 31 million customers 57 56 50 54 • Vodacom is strategically pla
Slide 15: Tanzania – market share 59%
Tanzania – market share 59% Population 35.9 million, penetration 5.1% % 2004 2005 change • Total customers 684,000 1,201,000 75.6% • Revenue R897 million R959 million 6.9% • EBITDA R278 million R345 million 24.1% • ARPU R128 R81 36.7% • Customers per employee 2,165 3,532 63.2% • Capex additions R351
Slide 16: Democratic Republic of Congo (DRC) – market share 47%
Democratic Republic of Congo (DRC) – market share 47% Population 58.3 million, penetration 3.5% % 2004 2005 change • Total customers 670,000 1,032,000 54.0% • Revenue R933 million R1,075 million 15.2% • EBITDA R190 million R252 million 32.6% • ARPU R150 R98 34.7% • Customers per employee 2,006 1,958
Slide 17: Lesotho – market share 80%
Lesotho – market share 80% Population 1.8 million, penetration 7.4% % 2004 2005 change • Total customers 80,000 147,000 83.8% • Revenue R119 million R137 million 15.1% • EBITDA R27 million R48 million 77.8% • ARPU R125 R92 26.4% • Customers per employee 1,176 2,333 98.3% • Capex additions R7 million
Slide 18: Mozambique – market share 33%
Mozambique – market share 33% Population 17.5 million, penetration 4.2% % 2004 2005 change • Total customers 58,000 265,000 356.9% • Revenue R13 million R103 million 692.3% • EBITDA (R71 million) (R111 million) 56.3% • ARPU R110 R52 52.7% • Customers per employee 1,349 2,431 80.2% • Capex additions
Slide 19: Financial review
Financial review Leon Crouse Chief Financial Officer
Slide 20: Group results
Group results % R million 2003 2004 2005 change Revenue 19,410 22,855 27,315 19.5 Operating expenses excluding depreciation, amortisation and impairment (12,707) (15,088) (17,718) 17.4 EBITDA 6,703 7,767 9,597 23.6 Depreciation, amortisation and impairment (2,376) (2,532) (3,112) 22.9 Profit from op
Slide 21: Group revenue analysis
Group revenue analysis By country % R million 2003 2004 2005 change South Africa 18,175 21,350 25,041 17.3 Tanzania 880 897 959 6.9 DRC 259 476 1,075 – Mozambique – 13 103 – Lesotho 96 119 137 15.1 19,410 22,855 27,315 19.5 Revenue driven by strong customer growth Assuming 2004 average exchange rate
Slide 22: Group revenue analysis
Group revenue analysis By revenue type Revenue analysis – 2004 Revenue analysis – 2005 R22,855 million R27,315 million 2.9% 1.6% 1.0% 3.2% 10.0% 9.8% 21.7% 25.3% 55.7% 59.4% 4.9% 4.5% Airtime Data revenue Airtime Data revenue Interconnection Equipment sales Interconnection Equipment sales Internatio
Slide 23: Data revenue growth
Data revenue growth By country 1,246 1,400 1,200 943 1,000 R millions 800 581 600 400 200 91 71 74 21 5 2 0 2003 2004 2005 South Africa Tanzania Other South Africa data revenue up 32.1% Tanzania data revenue down 18.7% due to tariff reductions
Slide 24: Group EBITDA analysis
Group EBITDA analysis By country % R million 2003 2004 2005 change South Africa 6,423 7,536 9,002 19.5 Tanzania 333 278 345 24.1 DRC (49) 97 252 – Mozambique – (71) (111) – Lesotho 26 27 48 77.8 Holding companies (30) (100) 61 – Vodacom Group 6,703 7,767 9,597 23.6 EBITDA margin (%) 34.5 34.0 35.1 1
Slide 25: EBITDA growth and margin analysis
EBITDA growth and margin analysis EBITDA • Strong EBITDA performance 12,000 Increased 23.6% to R9.6 billion 9,597 10,000 EBITDA margin increased 1.1%pts to 35.1% 7,767 8,000 R millions 6,703 • South Africa EBITDA 6,000 5,691 4,189 Increased 19.5% to R9.0 billion 4,000 EBITDA margin increased 0.6%pts
Slide 26: Group operating expenses
Group operating expenses By expense type Operating expense analysis 2004 Operating expense analysis 2005 R17,620 million R20,830 million 7.5% 7.0% 7.5% 7.9% 14.4% 14.9% 53.6% 52.7% 17.0% 17.5% Other direct network operating costs Other direct network operating costs Payments to other operators Payme
Slide 27: Operating expenses and operating expenses as a % of revenue
Operating expenses and operating expenses as a % of revenue Operating expenses • Acceptable growth in other direct network costs, despite 25,000 20,830 High levels of connections 20,000 17,620 First time full consolidation of DRC, Mozambique 15,083 R millions and Smart companies 15,000 12,534 10,675
Slide 28: Mozambique impairment
Mozambique impairment • IAS 36 – impairment of assets Requires impairment testing for cash-generating units All African operations were tested • Impair to the higher of Value in use (NPV of expected future pre-tax cash flows) Fair value less costs to sell (selling price less selling costs) • Mozambi
Slide 29: Group profit from operations analysis
Group profit from operations analysis % R million 2003 2004 2005 change South Africa 4,295 5,282 6,625 25.4 Tanzania 178 135 183 35.6 DRC (117) 10 50 – Mozambique – (88) (454) – Lesotho 4 1 25 – Holding companies (33) (105) 56 – Vodacom Group 4,327 5,235 6,485 23.9 Profit from operations margin (%)
Slide 30: Profit from operations growth and margin analysis
Profit from operations growth and margin analysis Profit from operations • Profit growth of 23.9% to R6.5 billion • South Africa 7,000 6,485 Exceptional growth of 32.0% in customers 6,000 5,235 Reduced interconnect margin 5,000 4,327 R millions 4,000 3,621 • Tanzania 2,553 3,000 75.6% growth in cust
Slide 31: Factors affecting trends and margins
Factors affecting trends and margins Equipment sales • Gross South Africa customer 4,000 connections of 6.2 million 3,500 18.1% Prepaid customer connections of 5.6 million, 3,000 20.1% 2,687 16.5% R millions an increase of 20.6% 2,500 20.3% 2,275 2,042 1,895 Contract customer connections of 0.6 mill
Slide 32: Factors affecting trends and margins (continued)
Factors affecting trends and margins (continued) Total South Africa traffic • Change in South Africa traffic mix 22.1% Outgoing traffic increased 29.0% to 10.0 billion 20,000 17.3% minutes 18.1% 15,014 Millions of minutes 15,000 18.9% 12,297 Incoming traffic increased 10.2% to 5.0 billion 10,486 10,
Slide 33: Improved efficiencies
Improved efficiencies Customers per employee • Consolidated customers per 3,532 employee 3,097 2,527 2,431 4,000 2,333 2,165 2,006 1,958 Increased 27.4% to 3,101 based on 4,993 1,349 3,000 1,176 Group employees 2,000 1,000 Increased 22.7% to 2,986 (including 191 0 DRC Lesotho South Africa outsourced
Slide 34: Strong cash generation
Strong cash generation Cash generated from operations • Cash generated from operations 14,000 31.8% increased 31.8% to R10.0 billion 12,000 10,012 13.0% 10,000 • Taxation paid increased 87.5% to 8.6% R millions 32.7% 7,597 8,000 6,188 6,721 R2.7 billion 6,000 4,664 Increased profits 4,000 Phasing of
Slide 35: Capex additions and capex composition
Capex additions and capex composition Capex additions R2,891 million – 2004 Capex additions R3,494 million – 2005 0.4% 3.3% 0.9% 16.5% 9.6% 6.7% 13.7% 57.3% 12.1% 79.5% South Africa South Africa Tanzania Tanzania DRC (51% ) DRC (100% ) Mozambique Mozambique Lesotho and holding companies Lesotho and
Slide 36: Net debt maturity profile
Net debt maturity profile Total R million 2006 2007 2008 2009 2010 >2011 2005 2004 South Africa finance leases 51 79 114 194 98 322 858 886 Tanzania 92 104 89 – 84 – 369 426 DRC 238 1,129 – – – – 1,367 745 Lesotho 4 – – – – – 4 4 Other 1 – – – – – 1 – Debt excluding bank overdrafts 386 1,312 203 194
Slide 37: Debt composition
Debt composition Gross debt composition Gross debt composition including bank overdrafts – 2004 including bank overdrafts – 2005 R2,833 million R4,416 million 15.0% 6.5% 27.0% 39.7% 34.4% 27.0% 31.0% 19.4% Foreign denominated, ring-fenced Foreign denominated, ring-fenced Foreign denominated, not rin
Slide 38: Shareholder distributions
Shareholder distributions Dividends and interest on shareholder loans • Dividends of R3.4 billion, one of the largest dividends in South African 4 000 history 61.9% 3 500 Interim dividend paid of R1.6 billion Final dividend declared of R1.8 billion 3 000 • Shareholder loans repaid in 2004 2 500 179.
Slide 39: Questions?
Questions?
Slide 40: Disclaimer
Disclaimer • This presentation has been prepared and published by Vodacom Group (Proprietary) Limited. • Vodacom Group (Proprietary) Limited is a private company and as such is not required by the Companies Act 61 of 1973, as amended, to publish its results. • Vodacom Group (Proprietary) Limited mak
Slide 41: Group income statements
Group income statements Extracts for the years ended March 31 % R million 2003 2004 2005 change Revenue 19,410 22,855 27,315 19.5 Operating expenses excluding depreciation, amortisation and impairment (12,707) (15,088) (17,718) 17.4 EBITDA 6,703 7,767 9,597 23.6 Depreciation, amortisation and impair
Slide 42: Group balance sheets
Group balance sheets Extracts as at March 31 % R million 2003 2004 2005 change ASSETS Non-current assets 12,024 12,865 13,904 8.1 Current assets 4,972 7,287 8,662 18.9 Total assets 16,996 20,152 22,566 12.0 EQUITY AND LIABILITIES Capital and reserves 6,910 7,665 7,954 3.8 Non-current liabilities 2,6
Slide 43: Group cash flow statements
Group cash flow statements Extracts for the years ended March 31 % R million 2003 2004 2005 change Cash generated from operations 6,721 7,597 10,012 31.8 Net cash flows from operating activities 4,342 4,790 4,150 (13.4) Net cash flows utilised in investing activities (3,243) (3,000) (3,374) 12.5 Net
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