Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — H1 2006 Earnings Presentation
40 slides from Telkom Sa Soc's earnings presentation, Nov 14, 2005
Slide 1: Telkom Group Interim Results for the six months ended September 30, 2005
Telkom Group Interim Results for the six months ended Telkom Group InterimSeptember Results 30, 2005 for the six months ended September 30, 2005 14 Novem ber 2005 14 November 2005
Slide 2: Cautionary statement on forward looking statements
Cautionary statem ent on forw ard looking statem ents All statements contained herein, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of the Telkom Group, that are not statements of historical fact constitute “forward-looking statements ” wi
Slide 3: Chief officers
Chief officers Chief Executive Officer Papi Molotsane Chief Operating Chief Financial Chief Corporate Officer Officer Affairs Officer Reuben September Kaushik Patel Mandla Ngcobo Telkom Group Interim Results September 2005
Slide 4: Group Highlights
Slide 5: Financial achievements
Financial achievements • 9.9% growth in Group operating revenue • 44.5% Group EBITDA margin 35% increase in headline earnings per share to 775.9 • 37.3% growth in Group operating profit cents per share • 46.3% growth in basic earnings per share R1.5 Billion Share buy back • total dividend of 900 cen
Slide 6: Group net profit drivers
Group net profit drivers ZAR million R1,247bn 491 388 398 85 4,281 896 153 628 3,034 Net Profit Fixed Line Fixed Line Fixed Line Fixed Line Fixed Line Fixed Line Total Mobile Net Profit Sept'04 Tax Revenue Other Opex Investment Finance Sept'05 Income Income Charges Telkom Group Interim Results Septe
Slide 7: Delivering on strategic objectives
Delivering on strategic objectives Customer growth and retention • 32% growth in managed data network sites Fixed-line • 42% growth in total mobile customers operating • 161% growth in ADSL services profit up 29% Operational excellence • 22% improvement in fixed lines per employee • 8% reduction in
Slide 8: Regulatory developments
Regulatory developments • Unbundling of the local loop Pricing colloquium • Cost based access to international cables • Self-provision by VANS • The removal of ADSL caps Tariff • Final regulation approved by Minister in August 2005 regulation • Productivity factor increased from 1.5% to 3.5% • Tarif
Slide 9: Fixed-Line Business
Fixed-Line Business Telkom Group Interim Results September 2005
Slide 10: Expanding services and improving efficiencies
Expanding services and improving efficiencies • 17.5% growth in fixed-line data revenue • Increased broadband adoption • Tariff rebalancing • Fixed-line EBITDA margin of 46.7% • Fixed-line employee expenses reduced by 9.6% • 8.1% reduction in vehicle fleet Telkom Group Interim Results September 2005
Slide 11: Improved service levels
Improved service levels Fulfilment (Installations) • Under pressure due to high demand for certain products • Using external resources to compliment high demand areas • Self install option for ADSL planned • Implementation of operating support system Assurance (Repair) • Investment to increase resil
Slide 12: Strong data and ADSL growth
Strong data and ADSL growth • 32% growth in managed data network sites to 14,316 18% growth in data rev enue • 161% growth in ADSL services to ZAR million 95,290 • 31% growth in mobile leased 3,230 facilities 2,748 2,443 • 73% growth in wholesale internet leased lines (64kbit/s) to 15,600 2003 2004
Slide 13: Increasing broadband penetration
Increasing broadband penetration The ADSL challenge in South Africa •Long local loop length •Copper quality Price reductions Home DSL512 monthly rental The ADSL solution Aug-05 •Plans to introduce self install option R477 Mar-05 •Improve affordability through increased speed and R599 Jan-05 price op
Slide 14: Increasing PC penetration in South Africa
Increasing PC penetration in South Africa Package includes • Mecer PC or notebook • Telkom Surfmore 4,297 sold f rom launch to 31 • TelkomInternet October 2005 • 36 month contract Benefits High Specifications bundles most popular • Annuity Income Bronze Silver Gold 5% • Long term consumer contracts
Slide 15: Value adding ICT solutions provider
Value adding ICT solutions provider Success in winning network outsourcing contracts • Providing integrated solutions • Tailor made solutions • Manage and operate netw orking services throughout South Africa • Partnering Telkom Group Interim Results September 2005
Slide 16: Reducing cost of business in SA
Reducing cost of business in SA Average tariff adjustments for September 2005 3% reduction instead of allowed 8.4% 6.0% 0.0% increase of 0.1% -3.0% -10.0% -5.0% -10.9% Overall ILD DLD Local Connection Rental Data Telkom Group Interim Results September 2005
Slide 17: Increase in international outgoing traffic
Increase in international outgoing traffic ILD revenue ILD minutes In ZAR million In millions 28% reduction on average in (22.3%) 23% international long 656 620 distance tarif f s f rom 246 January 1, 2005 482 214 200 Sep-03 Sep-04 Sep-05 Sep-03 Sep-04 Sep-05 Telkom Group Interim Results September 2
Slide 18: Price reductions in long distance calls
Price reductions in long distance calls DLD revenue DLD minutes In ZAR million In millions 10% reduction in domestic long distance tarif f s f rom (10.2%) (0%) September 1, 2005 2,335 2,257 2,258 1,911 1,856 1,667 Domestic long distance call rate 80 cents per min Sep-03 Sep-04 Sep-05 Sep-03 Sep-04 S
Slide 19: Investing for new services
Investing for new services Capex for customer grow th • ADSL serv ices • New line growth – e.g. gated communities • Data connectiv ity and business sy stems R1.83 billion • Links f or the mobile operator 3G rollouts Fixed line (excluding subs) Capex to evolv e the netw ork capital expenditure • Ev o
Slide 20: Mobile Business
Mobile Business
Slide 21: Strong performance from the mobile segment
Strong performance from the mobile segment • 23% growth in mobile operating revenue to R8.1 billion 41.8% growth in total customers In thousands • 32.9% growth in EBITDA to R2.8 19,122 billion 13,487 9,592 • 34.4% EBITDA margin 2003 2004 2005 • 66.8% growth in operating profit to R2.1 billion Telkom
Slide 22: Leading mobile operator in SA
Leading mobile operator in SA Customers Gross connections In thousands In thousands 39% 56% 15,773 4,181 27.7 million 11,346 2,681 Estimated mobile 8,522 2,248 customers in SA Sep-03 Sep-04 Sep-05 Cell C Sep-03 Sep-04 Sep-05 10% ARPU Churn In ZAR % 179 MTN 39 165 33% 147 20 17 Vodacom 57% Sep-03 Sep
Slide 23: Successful launch of 3G service in SA
Successful launch of 3G service in SA SMSs transmitted In billions 36% 1.5 52.6% growth 1.1 in data revenue to R447 million Sep-04 Sep-05 Number of Active users on network 102,404 18,662 6,737 BlackBerry® 3G data cards Vodafone Live! Telkom Group Interim Results September 2005
Slide 24: Strong mobile growth outside SA borders
Strong mobile growth outside SA borders Customers In thousands 56% 3,349 2,141 1,606 541 458 1,236 336 1,070 171 952 903 164 122 71 0 Total Tanzania DRC Mozambique Lesotho Se p-03 Se p-04 Se p-05 ARPU per month In ZAR 3.3 million 182 mobile customers 136 119 111 outside of South 91 91 89 77 73 Af ri
Slide 25: Group Financials
Group Financials
Slide 26: Group profitability
Group profitability ZAR million Sept’04 Sept’05 % Operating revenue 21,338 23,456 9.9 Other income 133 287 115.8 45% EBITDA margin Operating expenses (15,997) (16,226) 1.4 44.5 40.6 40.6 Operating profit 5,474 7,517 37.3 Investment income 134 217 61.9 Finance charges (935) (745) (20.3) Mar-05 Sep-04
Slide 27: Segment contribution
Segment contribution September 30, 2005 Mobile Mobile Mobile 19% 31% 23% Fixed- line Fixed- Fixed- 69% line line 77% 81% OPERATING REVENUE OPERATING PROFIT PROFIT FOR THE PERIOD after inter-segmental eliminations Telkom Group Interim Results September 2005
Slide 28: Fixed line operating revenue
Fixed line operating revenue Fixed-line operating revenue (before inter-segmental eliminations) ZAR million 4.3% Strong 16,407 15,733 data growth impacted by lower (0.7%) tariffs 8,995 8,936 0.8% 17.5% 9.4% 7.4% 3,230 2,804 2,748 2,611 837 844 593 542 Total Subscription & Traffic Interconnect Data D
Slide 29: Fixed line operating expenses
Fixed line operating expenses Fixed-line operating expenses (before inter-segmental eliminations) ZAR million (3.2%) Lower employ ee 11,643 11,273 costs with cost discipline maintained across all categories (9.6%) (1.0%) 6.0% (5.6%) (7.1%) (4.9%) 3,475 1,452 1,437 3,143 3,129 2,953 1,001 945 2,367 2
Slide 30: Fixed line profitability
Fixed line profitability ZAR million Sept’04 Sept’05 % Operating profit 4,207 5,404 28.5 Operating profit margin (%) 26.7 32.9 EBITDA 6,574 7,656 16.5 EBITDA margin (%) 41.8 46.7 46.7 32.9 Consistently 41.8 strong 26.7 EBITDA (%) operating EBIT (%) performance Se p-04 Se p-05 Sep-04 Sep-05 Telkom Gr
Slide 31: Mobile profitability
Mobile profitability ZAR million 23.0% 12.6% 26% operating prof it margin 5,995 8,088 6,573 5,322 34% EBITDA margin Sep-04 Sep-05 Sep-04 Sep-05 Mobile operating revenue Mobile operating expense (Before inter-segmental eliminations) Telkom Group Interim Results September 2005
Slide 32: Strengthened group balance sheet
Strengthened group balance sheet ZAR million Sept’04 Sept’05 % Non-current assets 41,261 42,868 3.9 44% net debt Current assets 11,390 10,517 (7.7) to equity 53.5 44.1 Total assets 52,651 53,385 1.4 25.9 Capital and reserves 23,344 25,132 7.7 Mar-05 Sep-04 Sep-05 Non-current liabilities 13,061 14,13
Slide 33: Capital investment
Capital investment Capital expenditure 49.2% In ZAR millions Sep-04 Sep-05 3,096 2,075 1,858 1,369 1,238 706 Maintained Fixed-line Mobile Total capital expenditure to revenue within Capex to revenue guidance range % of 12% - 15% Sep-04 Sep-05 15.3 13.2 11.3 10.7 8.7 9.7 Fixed-line M obile Group Telk
Slide 34: Group cash flow
Group cash flow ZAR million Sept’04 Sept’05 % Cash generated from operations 7,504 8,625 14.9 Dividend paid (607) (4,848) (698.7) Cash from operating activities 5,595 875 (84.4) Investing activities (2,275) (3,078) (35.3) Financing activities (3,988) 859 121.5 Net decrease in cash (668) (1,344) (101
Slide 35: Our Future
Our Future Telkom Group Interim Results September 2005
Slide 36: Our Vision
Our Vision is to be a leading customer and employee centred ICT solutions provider Telkom Group Interim Results September 2005
Slide 37: Shifts in strategic emphasis
Shifts in strategic emphasis • Enhancing customer satisfaction through customer centricity • Retaining revenue and generating growth Driving shareholder returns • Evolving the network to a next generation network in a order to support profitable grow th through prudent cost management • Engage our e
Slide 38: Delivering shareholder value
Delivering shareholder value Customer centricity Stakeholder Customer service excellence relations Full spectrum of ICT solutions Honest and transparent Converged solutions services Mutually beneficial Good corporate citizen Growth engines Enabled Broadband acceleration Data services through our Tri
Slide 39: Financial outlook for March 2006
Financial outlook for March 2006 • 2006 EBITDA margin target is to achieve 40% and above • EBITDA margin is expected to be impacted by the introduction of competition, price reductions in data services and more aggressive rollout of IP network • Capital expenditure in 2006 is expected to be closer t
Slide 40: Investor relations
Investor relations [email protected] Tel: +27 12 311 5720 Fax: +27 12 311 5721 Telkom Group Interim Results September 2005