Slide 1: A Culture of Mobility
A CULTURE OF MOBILITY Vodacom Group (Proprietary) Limited for the year ended March 31, 2006 June 5, 2006
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 For the year ended March 31, 2006 vs. prior year Total customers Revenue Profit from operations 23.5 million R34.0 billion R8.9 billion 51.9% 24.6% 36.9% Profit from operations Net profit after tax Dividends margin 26.0% R5.1 billion R4.5 billion 2.3% pts 32.0% 32.4% High gross conn
Slide 5: Vodacom South Africa tariff reductions
Vodacom South Africa tariff reductions Contract packages: Happy hours (Monday to Friday: 5pm – 8pm) Business 13.4% - 21.6% Talk packages 16.8% - 29.1% Weekender & Family 17.2% - 35.2%
Slide 6: Vodacom South Africa tariff reductions (continued)
Vodacom South Africa tariff reductions (continued) Prepaid packages Vodago & Smartstep Happy hours 41.6% - 51.3% 4U Prepaid Peak On-net 8.0% Peak Off-net 16.9% Happy hours 54.2% Data packages • From 03/04 to 04/05 up to ±90% reduction in data tariffs • Currently in-bundle data ranging from R0.47 to
Slide 7: Consistent delivery on strategy
Consistent delivery on strategy Revenue growth Margin management • Market penetration • Leveraging economies of scale • Market share • Optimising efficiencies • The continuous introduction of • Productivity up 38.9% to 4,308 new high-utility services customers per employee • High speed mobile data -
Slide 8: Vodacom South Africa customer registration
Vodacom South Africa customer registration • Proposed requirement Obligation to register new and historic customers will become effective on June 30, 2006 in terms of the Regulation of Interception of Communications and Provision of Communication- related Information Act (“RICA”) • Proposed RICA req
Slide 9: Mobile TV
Mobile TV • Convergence of broadcasting and telecoms • Access to content very important • Mobile TV technologies 3G (± 13,000 customers watched Zuma verdict on their Vodacom cellphones) MBMS DVB-H • Launched 3G Mobile TV in December 2005 • Trial DVB-H, together with Multichoice
Slide 10: South Africa – market share 58%
South Africa – market share 58% Population 46.9 million, penetration 70.6% % 2005 2006 change • Total customers 12.8 million 19.2 million 49.3% • Revenue R25,041 million R31,069 million 24.1% • Profit from operations R6,618 million R8,602 million 30.0% • ARPU R163 R139 14.7% • Customers per employee
Slide 11: Strong South Africa operational indicators
Strong South Africa operational indicators • Gross connections up South Africa gross connections 9,140 47.9% year on year to a record high of 9.1 million 6,180 Thousand • Customers up 49.3% year on 4,998 year to 19.2 million 3,038 3,495 • Total traffic increased by 20.0% year on year to 17.1 billion
Slide 12: South Africa market share and growth potential
South Africa market estimated at 43 million by 2011 South Africa market share • Vodacom strategically placed for continued market leadership Lowest cost operator Extensive distribution % Market share defence 61 57 58 56 Key market and focus 54 Strong recognised brand Established management team 2002
Slide 13: Improved South Africa churn
Improved South Africa churn • Contract churn slightly higher at South Africa churn 10.0% 41.3 34.0 • Prepaid churn decreased 30.1 36.6 30.3 to 18.8% % 30.4 27.2 27.1 18.8 • Contract inactive customers 17.7 increased from 1.5% in 14.5 11.9 10.1 10.0 March 2005 to 2.4% 9.1 • Prepaid inactive customers
Slide 14: Lower South Africa ARPU
Lower South Africa ARPU South Africa ARPU per month • Prepaid ARPU decreased 629 634 624 11.5% year on year to R69 560 572 • Contract ARPU decreased 8.3% year on year to R572 Rand • Total ARPU decreased 182 183 177 163 139 14.7% year on year to R139 Lower incoming revenue per customer 93 90 90 78 69
Slide 15: 3G and Vodafone live!
3G and Vodafone live! 3G Vodafone mobile connect cards • Over 32 thousand increase 37.8 in 3G Vodafone mobile connect cards from March 25.3 2005 to 38 thousand Thousands 18.7 • Over 179 thousand 3G active 10.5 handsets 6.7 Apr-05 Jun-05 Sep-05 Dec-05 M ar-06 Vodafone live! users • Over 351 thousand
Slide 16: Tanzania – market share 58%
Tanzania – market share 58% Population 39.2 million, penetration 9.2% % 2005 2006 change • Total customers 1,201,000 2,091,000 74.1% • Revenue R959 million R1,312 million 36.8% • Profit from operations R183 million R263 million 43.7% • ARPU R81 R67 17.3% • Customers per employee 3,532 4,774 35.2% •
Slide 17: Democratic Republic of Congo (DRC) – market share 48%
Democratic Republic of Congo (DRC) – market share 48% Population 59.5 million, penetration 5.5% % 2005 2006 change • Total customers 1,032,000 1,571,000 52.2% • Revenue R1,075 million R1,334 million 24.1% • Profit from operations R50 million R117 million 134.0% • ARPU R98 R86 12.2% • Customers per e
Slide 18: Lesotho – market share 80%
Lesotho – market share 80% Population 2.0 million, penetration 12.9% % 2005 2006 change • Total customers 147,000 206,000 40.1% • Revenue R137 million R170 million 24.1% • Profit from operations R25 million R51 million 104.0% • ARPU R92 R78 15.2% • Customers per employee 2,333 3,071 31.6% • Capex pe
Slide 19: Mozambique – market share 30%
Mozambique – market share 30% Population 19.4 million, penetration 8.4% % 2005 2006 change • Total customers 265,000 490,000 84.9% • Revenue R103 million R 158 million 53.4% • Loss from operations (R454 million) (R144 million) 68.3% • ARPU R52 R36 30.8% • Customers per employee 2,431 2,885 18.7% • C
Slide 20: Financial review
Financial review Leon Crouse Chief Financial Officer
Slide 21: Accounting changes
Accounting changes For the year ended March 31, 2006 Balance Profit from R million sheet operations Prior year adjustments (before taxation): IAS 17: Leases (retained earnings) 93.5 IAS 38: Intangible assets: cost (at March 31,2005) 2,123.3 : accumulated depreciation (1,419.8) Current year adjustmen
Slide 22: Group income statements
Group income statements Extracts for the years ended March 31, % R million 2004 2005 2006 change Revenue 22,855 27,315 34,043 24.6% Operating expenses excluding depreciation, amortisation and impairment (15,098) (17,725) (22,234) (25.4%) EBITDA 7,757 9,590 11,809 23.1% Depreciation and amortisation
Slide 23: Group revenue by country
Group revenue By country % R million 2004 2005 2006 change South Africa 21,350 25,041 31,069 24.1% Tanzania 897 959 1,312 36.8% DRC 476 1,075 1,334 24.1% Lesotho 119 137 170 24.1% Mozambique 13 103 158 53.4% 22,855 27,315 34,043 24.6% Revenue driven by strong customer growth Other African operations
Slide 24: Group revenue composition
Group revenue Revenue composition % R million 2004 2005 2006 change Airtime, connection & access 12,738 16,191 20,085 24.1% Data revenue 1,039 1,340 2,038 52.1% Interconnection 5,785 5,924 6,697 13.0% Equipment sales 2,275 2,687 3,986 48.3% International airtime 659 887 971 9.5% Other sales & servic
Slide 25: Group revenue by revenue type
Group revenue By revenue type Revenue analysis – 2005 Revenue analysis – 2006 R27,315 million R34,043 million 3.2% 1.0% 2.9% 0.8% 9.8% 11.7% 21.7% 19.7% 59.4% 58.9% 4.9% 6.0% Airtime, connection and access Data revenue Interconnection Equipment sales International airtime Other sales and services Ai
Slide 26: Group revenue (excluding equipment sales)
Group revenue (excluding equipment sales) By revenue type Revenue analysis – 2005 Revenue analysis – 2006 R24,628 million (excluding equipment sales) R30,057 million (excluding equipment sales) 3.6% 1.2% 3.2% 0.9% 22.3% 24.1% 5.4% 6.8% 65.7% 66.8% Airtime, connection and access Data revenue Intercon
Slide 27: Data revenue growth 51.4%
Data revenue growth 51.4% year on year By country 1,886 1,246 R million 943 45.9% 120.0% year on year on year year 91 74 108 5 20 44 2004 2005 2006 South Africa Tanzania Other South Africa data revenue up 51.4%, due to customer growth and new technologies (3G, HSDPA, Vodafone live!, BlackBerry®, Mob
Slide 28: EBITDA growth and margin analysis
EBITDA growth and margin analysis 23.1% year on year EBITDA • Strong EBITDA performance 11,809 Increased 23.1% year on year to R11.8 billion 9,590 EBITDA margin decreased 0.4% points year on 7,757 R million year to 34.7% 6,703 5,691 EBITDA margin 39.9%, when excluding cellular phone and equipment sa
Slide 29: Group operating expenses by type
Group operating expenses By expense type Operating expense analysis – 2005 Operating expense analysis – 2006 R20,837 million R 25,177 million 7.0% 7.5% 7.9% 8.1% 14.9% 11.7% 52.7% 54.3% 17.5% 18.4% Direct network operating costs Payments to other operators Depreciation, amortisation and impairment S
Slide 30: Group operating expenses
Group operating expenses 20.8% year on year Operating expenses • Depreciation, amortisation and impairment 25,177 Decreased with 5.4% year on year to R2.9 billion 20,837 17,630 • Staff expenses R million 15,083 Increased 23.5% to R2.0 billion 12,534 Total headcount increased by 9.3% to 5,459 • Cost
Slide 31: Group profit from operations
Group profit from operations By country % R million 2004 2005 2006 change South Africa 5,272 6,618 8,602 30.0% Tanzania 135 183 263 43.7% DRC 10 50 117 134.0% Lesotho 1 25 51 104.0% Mozambique (88) (454) (144) 68.3% Holding companies (105) 56 (23) n/a 5,225 6,478 8,866 36.9% Profit from operations m
Slide 32: Profit from operations and margin
Profit from operations and margin • Profit growth of 36.9% year on year to Profit from operations R8.9 billion 8,866 • South Africa (30.0% year on year growth to 6,478 R8.6 billion) R million 5,225 Exceptional customer growth of 49.3% 4,327 Operating expenses increased 22.7% vs. revenue 3,621 growth
Slide 33: Factors affecting trends and margins
Factors affecting trends and margins 48.3% year on year Equipment sales revenue • Low margin equipment sales 3,986 58.3% year on year increase in equipment sale volumes to 3.8 million units 2,687 • South Africa net interconnect R million 2,275 revenue decreased 4.8% year on 1,627 1,895 year to R1.9
Slide 34: Factors affecting trends and margins (continued)
Factors affecting trends and margins (continued) 20.0% year on year Total South Africa traffic • South Africa traffic mix Outgoing traffic increased 23.0% year on year to 17,066 14,218 11.4 billion minutes Minutes (million) 12,172 Incoming traffic increased 14.5% year on year to 5.7 billion minutes
Slide 35: South Africa ARPU per month
South Africa ARPU per month Customer mix impact on total and contract ARPU South Africa total ARPU per month • Total ARPU decreased by 14.7% from R163 to R139 per month year on year (5.2%) (9.5%) (14.7%) ARPU Impact of customer mix on ARPU Average revenue South Africa contract ARPU per month • Contr
Slide 36: Productivity measures
Productivity measures • Consolidated customers Customers per employee 4,774 per employee 4,619 Increased 38.9% year on year to 4,308 based 3,247 3,532 3,279 on 5,459 employees 3,071 2,885 2,333 2,431 • Consolidated gross capex as a % of 1,958 revenue increased to 15.1% from 12.8% for the same period
Slide 37: Strong cash generation
Strong cash generation • EBITDA increase of R2.2 billion Cash generated from operations 11,090 • Cash generated from operations 10,012 increased 10.8% to R11.1 billion 7,597 R million • Increase in capex spend of R1.5 billion to R4.8 billion • Phasing of working capital • Free cash flow decreased 20
Slide 38: Capex additions and composition
Capex additions and composition Including software Capex gross additions – 2005 Capex gross additions – 2006 R3,494 million R5,138 million 3.3% 0.9% 2.4% 0.8% 9.6% 5.3% 6.2% 6.7% 79.5% 85.3% South Africa Tanzania DRC Mozambique Lesotho and holding companies Capex as a % of revenue at 15.1% vs. prior
Slide 39: Net debt maturity profile
Net debt maturity profile March 31, Total Total R million 2007 2008 2009 2010 2011 >2012 2006 2005 South Africa – finance leases 79 114 192 99 162 162 808 858 Tanzania 184 - - - - 91 275 369 DRC 1,343 - - - - - 1,343 1,361 Lesotho 4 - - - - - 4 4 Other 39 - - - - - 39 7 Debt excluding bank overdraft
Slide 40: Debt composition
Debt composition Gross debt composition Gross debt composition including bank overdrafts – 2005 including bank overdrafts – 2006 R4,416 million R3,855 million 40.9% 43.5% 59.1% 56.5% Foreign denominated ZAR denominated Net debt to equity ratio 8.2% (2005: 5.4%) Foreign denominated ring-fenced of R18
Slide 41: Shareholder distributions
Shareholder distributions 32.4% Excluding interest on shareholders’ loans year on year 61.9% year on year 2,800 R million 1,800 1,500 1,600 1,700 600 2004 2005 2006 Interim dividend Final dividend The level of future dividend payments is dependent on the extent of investment activities
Slide 42: Questions?
vodacom Questions?
Slide 43: Group balance sheets
Group balance sheets Extracts at March 31, % R million 2004 2005 2006 change ASSETS Non-current assets 12,851 13,889 16,079 15.8% Current assets 7,323 8,706 8,689 (0.2%) Total assets 20,174 22,595 24,768 9.6% EQUITY AND LIABILITIES Capital and reserves 7,604 7,888 8,672 9.9% Non-current liabilities
Slide 44: Group cash flow statements
Group cash flow statements Extracts for the years ended March 31, % R million 2004 2005 2006 change Cash generated from operations 7,597 10,012 11,090 10.8% Net cash flows from operating activities 4,790 4,150 4,501 8.5% Net cash flows utilised in investing (3,000) (3,374) (4,791) (42.0%) activities
Slide 45: 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