Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — FY2005 Earnings Presentation
39 slides from Telkom Sa Soc's earnings presentation, June 2005
Slide 1: Telkom SA Limited Annual Results March 2005
Telkom SA Limited Annual Results March 2005 [1]
Slide 2: Cautionary statement on forward looking statements
Cautionary statement on forward looking statements 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” within
Slide 3: Chief officers
Chief officers Chief Executive Chief Financial Chief Sales & Chief Technical Officer Officer Marketing Officer Officer Sizwe Nxasana Kaushik Patel Nombulelo Moholi Reuben September Telkom SA Limited Annual Results March 2005 [3]
Slide 4: Telkom SA Limited Annual Results March 2005
Telkom SA Limited Annual Results March 2005 [4]
Slide 5: Financial achievements
Financial achievements • 7% growth in group operating revenue • 41% group EBITDA margin • 21% growth in group operating profit 48% increase in headline • 53% growth in basic earnings earnings per share per share to 1,274 cents per share • 350% increase in total dividend to 900 cents per 12% increase
Slide 6: Group net profit drivers
Group net profit drivers In ZAR million R2,215bn Profit growth driven by reduced 518 6,807 fixed-line finance R224m due to price impact charges, savings 820 in fixed-line opex 418 growth in mobile business and 1,373 growth in fixed- 4,592 914 line revenue Net profit Fixed-line Fixed-line Fixed-line
Slide 7: Delivering on strategic targets
Delivering on strategic targets Customer growth and retention A world-class • 32% growth in managed data network sites communications • 49% growth in internet customers company • 38% growth in mobile customers • 188% growth in ADSL customers Operational excellence • 12% improvement in fixed lines pe
Slide 8: Increasing competitive market place
Increasing competitive market place • In September 2004, Minister granted Licencing SNO the SNO licence • In Feb 2005, Minister announced VSNL as 26% strategic equity partner • Mobile operators may self provide leased links 1 Feb 2005 • VANS and PTN can resell liberalisation telecommunications facil
Slide 9: Regulatory developments
Regulatory developments Facilities leasing • Draft guidelines published in Jan 2005 and • Proposal for facilities and interconnect rates to be set based on LRIC interconnection • Consultative process not concluded • VANS regulation published in May VANS 2005 • Addresses applications process and regu
Slide 10: Finalising BEE charter for sector
Finalising BEE charter for sector Telkom ranked Category Weighting Target most empowered company 2nd Equity ownership 20% 30% (20% of free float and consecutive year government holding excluded) or amongst the top R7.5bn cap 185 JSE Management 10% 60% black, of which 50% black companies women Employ
Slide 11: Telkom SA Limited Annual Results March 2005
Telkom SA Limited Annual Results March 2005 [11]
Slide 12: A more competitive fixed-line business
A more competitive fixed-line business • 16% growth in fixed-line data revenue • Accelerated ADSL rollout plans • Significant price reductions • EBITDA margin of 41% • 11% reduction in headcount • 12% reduction in vehicle fleet Telkom SA Limited Annual Results March 2005 [12]
Slide 13: Some growth in fixed-line customer base
Some growth in fixed-line customer base Fixed access lines ISDN channels Line contribution March 31, 2005 In thousands (external lines) In thousands Payphones 4% ISDN 1.0% 9.8% 15% 720 4,726 4,709 4,680 656 563 Prepaid 18% Postpaid 63% 2003 2004 2005 21% reduction 2003 2004 2005 in fixed access line
Slide 14: Successfully moving minutes to ADSL
Successfully moving minutes to ADSL Local traffic revenue Local minutes In ZAR million In millions (3%) (6%) 5,910 20,547 20,396 5,746 5,616 19,314 2003 2004 2005 2003 2004 2005 Local minutes (excl ADSL impact) In millions 4.5% 22,411 21,446 20,396 Excluding ADSL impact local minutes increased 4.5%
Slide 15: Price reductions in long distance
Price reductions in long distance DLD revenue DLD minutes In ZAR million In millions 10% reduction in domestic long (5.1%) (3.5%) distance tariffs from 1 Jan 2005 4,728 3,770 4,616 4,453 3,579 3,562 2003 2004 2005 2003 2004 2005 Domestic long distance call rate 89 cents per min Telkom SA Limited Ann
Slide 16: Competitive international rates
Competitive international rates ILD revenue ILD minutes In ZAR million In millions 28% reduction (13.5%) on average in (2.8%) 1,312 1,284 international long 439 1,135 distance tariffs from 427 415 1 Jan 2005 2003 2004 2005 2003 2004 2005 US/UK/Australia call rate R1.70 per min on circuit switching a
Slide 17: Strong data, internet and ADSL growth
Strong data, internet and ADSL growth • 32% growth in managed 16% growth in data revenue data network sites to ZAR million 11,961 5,808 5,023 • 49% growth in internet 4,425 customers to 225,280, of which 10% are broadband 2003 2004 2005 • 188% growth in ADSL customers to 58,532 • Launched WIFI Telko
Slide 18: Managing the reduction in ADSL prices
Managing the reduction in ADSL prices The ADSL challenge Business DSL512 Residential DSL512 • Distance limitation In ZAR In ZAR • Copper quality • Cost of the 40% reduction 30% reduction infrastructure requires high 800 density 680 699 599 • Cost and time taken to 477 477 provisioning 2004 Mar-05 Au
Slide 19: Investing for new services
Investing for new services Capex for customer growth • ADSL services R4.1 billion • New line growth – e.g. gated communities Fixed-line capital • Data connectivity and business systems expenditure • Links for the mobile operator 3G rollouts Evolution 18% Capex to evolve the network Efficiencies • Ev
Slide 20: Telkom SA Limited Annual Results March 2005
Telkom SA Limited Annual Results March 2005 [20]
Slide 21: Strong performance from Vodacom
Strong performance from Vodacom 38% growth • 20% growth in operating in total customers In thousands revenue to R27.3 billion 15,483 • 24% growth in EBITDA to 11,217 R9.6 billion 8,647 • 35.1% EBITDA margin • 24% growth in operating 2003 2004 2005 profit • 27% growth in net profit • Dividends paid o
Slide 22: Leading mobile operator in SA
Leading mobile operator in SA Customers Gross connections 23 million In thousands In thousands Estimated mobile 32% 24% customers in SA 12,838 Cell C 6,180 9% 9,725 Market share at 31 March 2005 4,998 7,874 3,495 MTN 35% 2003 2004 2005 2003 2004 2005 ARPU Churn Vodacom In ZAR % 56% 183 177 37 163 30
Slide 23: Successful launch of 3G service in SA
Successful launch of 3G service in SA SMS’s transmitted •Launched first 3G network in In billions SA 2.4 •Launch of Vodafone Live! 29% growth in data revenue 2.0 services to R1.3 bn GPRS users In thousands 580 2004 2005 R400 million capital MMS users expenditure on In thousands 487 3G base 100 stati
Slide 24: Strong mobile growth outside SA borders
Strong mobile growth outside SA borders Customers In thousands 77% 2,645 1,492 1,201 248 1,032 265 147 773 684 670 447 58 78 80 0 Total Tanzania 2003 DRC 2004 2005 Mozambique Lesotho 2.6 million ARPU per month mobile customers In ZAR outside of South Africa 217 200 150 128 125 110 104 98 92 81 52 Ta
Slide 25: Telkom SA Limited Annual Results March 2005
Telkom SA Limited Annual Results March 2005 [25]
Slide 26: Increasing group profitability
Increasing group profitability ZAR million 2004 2005 % 41% EBITDA margin Operating revenue 40,484 43,117 6.5 40.7 40.6 Other income 255 280 9.8 35.3 Operating expenses (31,494) (32,175) 2.2 Operating profit 9,245 11,222 21.4 Investment income 322 350 8.7 2003 2004 2005 Finance charges (3,264) (1,695
Slide 27: Segment contribution
Segment contribution Segment contribution (after inter-segmental eliminations) March 31, 2005 Operating revenue Operating profit Net profit Mobile Mobile Mobile 17% 22% 28% Fixed Fixed Fixed 72% 78% 83% Telkom SA Limited Annual Results March 2005 [27]
Slide 28: Growth in fixed-line revenue impacted by cannibalisation and lower tariffs
Growth in fixed-line revenue impacted by cannibalisation and lower tariffs Fixed-line revenue (before inter-segmental eliminations) In ZAR million 1.6% 31,414 30,906 (3.0%) 18,313 17,762 (5.5%) 15.6% 5.8% 8.1% 1,643 1,552 5,808 5,024 5,316 5,023 976 903 Total Subscription Traffic Interconnect Data D
Slide 29: Reduced operating expenses
Reduced operating expenses Fixed-line operating expenses (before inter-segmental eliminations) In ZAR million (3.3%) Increase due to R961m workforce 24,510 23,690 reduction expense, excluding workforce reduction expenses decreased 2% 8.0% (2.8%) 15.3% (10.3%) (20.9%) Decrease due to (14.0%) extendin
Slide 30: Fixed-line profitability
Fixed-line profitability ZAR million 2004 2005 % Operating profit 6,626 7,979 20.4 Operating profit margin (%) 21.4 25.4 EBITDA 12,609 12,711 0.8 EBITDA margin 40.8 40.5 Telkom SA Limited Annual Results March 2005 [30]
Slide 31: Increasing mobile profitability
Increasing mobile profitability Mobile revenue Mobile operating expense In ZAR million In ZAR million 19.5% 18.3% 10,448 13,657 8,834 11,428 7,576 9,705 35% EBITDA margin 2003 2004 2005 2003 2004 2005 Before inter-segmental eliminations Telkom SA Limited Annual Results March 2005 [31]
Slide 32: Strengthened group balance sheet
Strengthened group balance sheet In ZAR million 2004 2005 % 26% net debt to equity Non-current assets 42,841 42,672 (0.4) 108 Current assets 10,322 14,910 44.8 60 Total assets 53,163 57,582 8.3 26 2003 2004 2005 Capital and reserves 22,572 27,073 19.9 Non-current liabilities 16,420 13,546 17.5 20% r
Slide 33: Capital investment to support growth
Capital investment to support growth Capital expenditure Maintained In ZAR million capital 10% 2004 2005 expenditure to 5,850 revenue within 5,307 guidance range 3,862 4,103 of 12% - 15% 1,445 1,747 Fixed-line Mobile Total Capex to revenue % 2004 2005 13.6 13.1 13.1 12.8 12.5 12.6 Fixed-line Mobile
Slide 34: Increased group cash flow level
Increased group cash flow level 12% increase in operating free cash flow to R10 ZAR million 2004 2005 % billion Cash generated from 14,432 16,340 13.2 operations Higher capital expenditure and Dividend paid (548) (629) 14.8 increase in investment in retirement funding Operating activities 13,884 15,
Slide 35: Strong growth in shareholder returns
Strong growth in shareholder returns Level of dividend ensures that net debt to equity remains within Dividends per share targeted level In ZAR cents of 50%-70% 350% 900 8% dividend yield 500 400 8.1 200 110 90 Annual Special Total 2004 2005 1.8 2004 2005 Based on share price of R111.80 on 31 May 20
Slide 36: Telkom SA Limited Annual Results March 2005
Telkom SA Limited Annual Results March 2005 [36]
Slide 37: Future strategic direction
Future strategic direction Our vision is to be a leading communications Transform company traditional business `Move to IP based network `Aggressive rollout of ADSL `Offer converged IP services Growth engines `VAN/ISP/IT services `Wholesale services `Mobility `Outside SA Telkom SA Limited Annual Res
Slide 38: Financial outlook for March 2006
Financial outlook for March 2006 • 2005 EBITDA target was to achieve 39%, 41% achieved • EBITDA margin in 2006 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 cl
Slide 39: Investor relations
Investor relations [email protected] Tel: +27 12 311 5720 Fax: +27 12 311 5721 Telkom SA Limited Annual Results March 2005 [39]