Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — H1 FY2019 Earnings Presentation
52 slides from Telkom Sa Soc's earnings presentation, November 2018
Slide 1: Interim Results Presentation
TELKOM INTERIM RESULTS PRESENTATION 2018 | TELKOM SA SOC LIMITED Interim Results Presentation for the six months ended 30 September 2018
Slide 2: Tough trading environment
TELKOM INTERIM RESULTS PRESENTATION 2018 | 2 Tough trading environment Macro-economic Competitive conditions environment Negative GDP growth Fixed mobile substitution Consumers under pressure Niche fibre players Exchange rate volatility Capital investment Regulatory uncertainty persists Conflict bet
Slide 3: Key focus areas
01 TELKOM INTERIM RESULTS PRESENTATION 2018 | 3 Key focus areas > Business performance > Financial performance > Outlook > Q&A Business Performance
Slide 4: Competitive performance despite tough environment
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 4 Competitive performance despite tough environment Operating Adjusted Capital revenue EBITDA* investment up 5.2% up 2.9% R3.3bn R20.8bn R5.3bn Free cash Adjusted Interim flow HEPS# Dividend up 118.6% up 10.3% down 5.1% R179m 328.6
Slide 5: Strategic focus areas for each business unit
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 5 Strategic focus areas for each business unit > Accelerate > Drive new > Modernise the > Optimise and > Stabilise the mobile growth profitable network grow the Mast & business > Drive high-speed revenue streams > Commercialise Tow
Slide 6: Key strategic focus areas
01 | BUSINESS PERFORMANCE TELKOM INTERIM INTERIM RESULTS RESULTS PRESENTATION PRESENTATION2018 2018 || 6 Key strategic focus areas > Mobile growth > High-speed broadband > Network expansion > Content and VAS
Slide 7: Accelerated growth in mobile
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 7 Accelerated growth in mobile Subscriber growth Pre-paid Post-paid Mobile service revenue Data Voice 6 545 3 579 1 667 910 4 364 2 327 3 213 ‘000 1 329 Rm 1 594 614 976 50.0% 2 237 3 035 4 878 53.8% 555 1 713 2 669 1 039 (H1 2019)
Slide 8: High-speed broadband driving growth
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 8 High-speed broadband driving growth Consumer broadband Mobile broadband Data only Smartphone users subscribers 1 575 subscribers 4 752 1 469 1 373 2 849 2 276 3 790 ‘000 962 7.2% 670 788 66.8% 1 605 2 061 (H1 2019) 670 788 962 (H
Slide 9: Data-led propositions
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 9 Data-led propositions > 41% of postpaid customers on > FWA/MiFi customers grew 23% > In excess of 60% of base utilising FreeMe > Launched first Unlimited LTE the uncapped products > FreeMe ARPU uplift offering, including VoLTE an
Slide 10: Drive adjacencies via content
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 10 Drive adjacencies via content > 1st Google and Netflix certified Set Top Box in SA > Most attractive entertainment data bundles > Launched Telkom LIT platform > VS Sport channel launched on Telkom LIT
Slide 11: TELKOM INTERIM RESULTS PRESENTATION 2018 |
TELKOM INTERIM RESULTS PRESENTATION 2018 | 11
Slide 12: Integration completed
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 12 Integration completed Streamline Portfolio the business review > Leadership changes > Merged South African entities to form “One BCX” > Two delivery centres – Telco and IT solutions > Some of the African subsidiaries are > Strea
Slide 13: Challenging operating environment
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 13 Challenging operating environment Revenue by vertical segments 10 685 -4.3% 10 222 319 21.3% 387 Public sector remains Enterprise revenue 2 843 -6.2% 2 667 under pressure holding > 32% of revenue > 40% of revenue 3 952 -0.7% 3 9
Slide 14: Key strategic focus areas
TELKOM INTERIM RESULTS PRESENTATION 2018 | 14 Key strategic focus areas > Modernise the network > Commercialise the network > Transforming service delivery
Slide 15: Network strategy
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 15 Network strategy Analytics Platforms Services IaaS, SaaS B/OSS Domain APIs End-to-End SDN Service Orchestration Last mile access Access Edge DC Aggregation and Core Core DC Network Domain Fibre/ME LTE/LTE-A/5G Satellite & Microw
Slide 16: Our optical footprint
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 16 Our optical footprint 6.6% 7.7% 30.8% 10.5% Fibre deployed Fibre to the cabinet Fibre to the home Fibre to the premises > 161 000 km 2 286 595 393 101 2.6 million
Slide 17: Connectivity gateway
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 17 Connectivity gateway Fixed line broadband data consumption1 25.1% Ethernet Fibre to the base Homes 488 based stations connected 390 33 011 6 877 139 839 businesses connected base stations PETABYTES 290 Connectivity rate of 59.5%
Slide 18: Data eco-system transformation
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 18 Data eco-system transformation Data solutions evolution Broadband connection evolution Traditional technology Traditional broadband 139 154 506 900 124 496 CONNECTIONS 108 246 399 047 SERVICES 289 828 13.1% 27.4% (H1 2019) (H1 2
Slide 19: Elevating service delivery
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 19 Elevating service delivery 27% 48.2 87% reduction in NPS achieved Field staff migrated to re-dispatch rate Digital platform
Slide 20: Key strategic focus areas
TELKOM INTERIM RESULTS PRESENTATION 2018 | 20 Key strategic focus areas > Optimise and grow the Mast & Tower portfolio > Commercialise the property portfolio > Enhance building operation efficiencies
Slide 21: Mast and Towers: Portfolio overview
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 21 Mast and Towers: Portfolio overview Portfolio snapshot External co-location revenue by geography (% revenue) 6 500 Masts and Towers 25% 19% EC GP WC 12% LP KZN 25% 9% 1 300 with active co-location Other 9% Customer segmentation
Slide 22: Mast and Towers performance
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 22 Mast and Towers performance External revenue growth External co-location tenancy growth (Rm) (# of tenants) 21.7% 6.2% 2 651 314 258 2 495 H1 2018 H1 2019 H1 2018 H1 2019
Slide 23: Property portfolio
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 23 Property portfolio Regional spread Property use Development pipeline by gross lettable area by gross lettable area spread (40 projects) Property portfolio summary Total 38% 43% 36% 6% No. of properties 1 332 10% 23% GLA (m2) 1 2
Slide 24: Unlocking value
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 24 Unlocking value Optimising Commercialising Optimising M&T portfolio Property portfolio Building operations > Commercialisation of towers > Portfolio categorisation > Space utilisation and > New tower build program > Portfolio de
Slide 25: TELKOM INTERIM RESULTS PRESENTATION 2018 |
TELKOM INTERIM RESULTS PRESENTATION 2018 | 25
Slide 26: Stabilise the business
01 | BUSINESS PERFORMANCE TELKOM INTERIM RESULTS PRESENTATION 2018 | 26 Stabilise the business Focus areas Cost optimisation Internet platform • A number of workstreams • Rationalise and optimise costs • Internet Yellow Pages platform established to stabilise the has been redesigned, optimised • Mai
Slide 27: Human and Social Capital
02 TELKOM INTERIM RESULTS PRESENTATION 2018 | 27 Human and Social Capital
Slide 28: Investing in our talent
02 | HUMAN AND SOCIAL CAPITAL TELKOM INTERIM RESULTS PRESENTATION 2018 | 28 Investing in our talent Significant safety • 8% improvement in total recordable injury rate improvements • 14% improvement in lost time injury rate • 65% improvement in days lost • Training & development spend of R137 millio
Slide 29: Growing skills, enabling ICT entrepreneur
02 | HUMAN AND SOCIAL CAPITAL TELKOM INTERIM RESULTS PRESENTATION 2018 | 29 Growing skills, enabling ICT entrepreneur Skills - To address the skills shortage in the ICT sector FutureMakers - Enterprise and Supplier Development Fund WeThinkCode & Data Science Academy R394 million invested into Future
Slide 30: Financial Overview
03 TELKOM INTERIM INTERIM RESULTS RESULTS PRESENTATION PRESENTATION2018 2018 || 30 Financial Overview
Slide 31: Key themes
TELKOM INTERIM RESULTS PRESENTATION 2018 | 31 Key themes Investment strategy Mobile business driving bearing fruit Group revenue Ongoing capital investment Mobile business continued on new technologies with its growth trajectory underpins the strong driving group revenue growth in group revenue grow
Slide 32: Group performance
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 32 Group performance H1 Rm FY2019 H1 FY2018 % Operating Revenue1 20 847 19 818 5.2 Net operating revenue 16 386 15 760 4.0 Operating expenses (excl. depreciation) 11 258 10 819 (4.1) EBITDA2 5 320 5 170 2.9 Headline earnings per shar
Slide 33: New revenue streams driving growth
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 33 New revenue streams driving growth Revenue movement Rm 5.2% 17 4 (832) R1 029m 149 122 1 569 20 847 19 818 H1 FY2018 Mobile* Fixed CPE Information Fixed data Other# Fixed voice and H1 FY2019 technology interconnection *Mobile serv
Slide 34: Key investment areas showing growth
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 34 Key investment areas showing growth Rm Fixed data 0.3% 12.4% 53.8% 3.3% 6 698 17.5% 1.5% 5 866 56.3% 3 579 3 652 3 774 2 327 2 509 2 071 1 324 1 516 1 494 847 Mobile service revenue Information technology Fixed voice Traditional d
Slide 35: Cost increase supporting growth
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 35 Cost increase supporting growth Rm Direct expenses Operating expenses 4.1% 9.9% 5.7% (R842m) 21 (73) 135 113 356 290 15 719 14 877 H1 FY2018 Cost of sales Payments to S,G&A Operating leases Service fees Employee H1 FY2019 other op
Slide 36: EBITDA growth despite increased costs
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 36 EBITDA growth despite increased costs EBITDA movement Rm 2.9% (21) R150m 626 73 (37) (135) (356) 5 170 5 320 H1 FY2018 Net Employee Service Other Operating leases S,G&A H1 FY2019 EBITDA revenue expenses* fees income EBITDA *Exclud
Slide 37: Headline earnings reflects operational growth
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 37 Headline earnings reflects operational growth Rm 7.2% 6.0% 202 13.8% 86 (20) (6) 1 635 1 433 1 373 Reported basic Write-offs Profit on sale of Tax impact Reported VERP/VSP impact Adjusted earnings assets headline headline earnings
Slide 38: Investing for growth
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 38 Investing for growth H1 FY2019 H1 FY2018 % Mobile 1 352 1 185 14.1 Fibre 598 1 177 (49.2) Core network 383 295 29.8 OSS/BSS programme 134 213 (37.1) Network rehabilitation/sustainment 81 145 (44.1) Service on demand 560 622 (10.0)
Slide 39: Funding our investment strategy
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 39 Funding our investment strategy H1 H1 H1 FY2019 FY2018 % FY2019 FY2018 % Cash balances 2 314 2 698 (14.2) Finance charges 568 358 (58.7) Interest-bearing debt 10 143 9 412 7.8 Investment income (120) (64) 87.5 Net debt 7 829 6 714
Slide 40: Improved free cash flow
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 40 Improved free cash flow Free cash flow movement Rm 118.6% R1 142m 179 750 (82) ( 963) 226 70 178 H1 FY2018 Cash generated Interest Taxation paid Finance charges Capital H1 FY2019 FCF from operations received paid expenditure FCF
Slide 41: Progress against guidance
03 | FINANCIAL OVERVIEW TELKOM INTERIM RESULTS PRESENTATION 2018 | 41 Progress against guidance FY2019 – FY2021 H1 FY2019 guidance Actual Operating revenue Mid-single digit 5.2% EBITDA margin 24% - 27% 25.5% Capex to revenue 16% - 20% 15.7% Net debt to EBITDA ≤1 0.7
Slide 42: Outlook
TELKOM INTERIM RESULTS PRESENTATION 2018 | 42 Outlook
Slide 43: Strategic focus areas for the next 18 months
02 | HUMAN AND SOCIAL CAPITAL TELKOM INTERIM RESULTS PRESENTATION 2018 | 43 Strategic focus areas for the next 18 months • Spectrum outcome Regulatory • Promote competition environment • Promote investment • Accelerate growth Mobile business • Accelerate network footprint acceleration and migration
Slide 44: Acceleration of the Mobile business
04 | OUTLOOK TELKOM INTERIM INTERIM RESULTS RESULTS PRESENTATION PRESENTATION2018 2018 || 44 Acceleration of the Mobile business
Slide 45: Data driven growth
04 | OUTLOOK TELKOM INTERIM RESULTS PRESENTATION 2018 | 45 Data driven growth Sustainable Growth Broader Network Differentiated Services > Market share growth > Rich content - Postpaid value growth (local and international) - Prepaid market share penetration > Gaming > Increased sales distribution >
Slide 46: 4G driven network expansion and roaming evolution
04 | OUTLOOK TELKOM INTERIM RESULTS PRESENTATION 2018 | 46 4G driven network expansion and roaming evolution Our network – Ongoing investment on our mobile network Roaming - Ability to accelerate the network deployment Mobile sites integrated Facilities leasing agreement up 27.2% to 4 383 with highe
Slide 47: Customer experience: Serving is the New Selling
04 | OUTLOOK TELKOM INTERIM RESULTS PRESENTATION 2018 | 47 Customer experience: “Serving is the New Selling” Initiatives driving customer experience improvement Robotic Value Culture process Chain automation
Slide 48: Key focus areas
TELKOM INTERIM RESULTS PRESENTATION 2018 | 48 Key focus areas > Drive new profitable revenue streams > Grow connectivity > Improve profitability of IT service > Reduce cost to serve
Slide 49: Operating model
04 | OUTLOOK TELKOM INTERIM RESULTS PRESENTATION 2018 | 49 Operating model
Slide 50: Key focus areas
04 | OUTLOOK TELKOM INTERIM RESULTS PRESENTATION 2018 | 50 Key focus areas Drive new profitable Grow Improve IT services Reduce cost to revenue streams connectivity profitability serve > Grow Cloud revenue > Accelerate ME rollout > Streamline product > Cost containment portfolio > Drive Industry > M
Slide 51: In conclusion
04 | OUTLOOK TELKOM INTERIM RESULTS PRESENTATION 2018 | 51 In conclusion Principles of the next 5 years Evolve products Shareholder and value solutions Customer Behaviour Strengthen the team satisfaction
Slide 52: Thank you
INTERIM RESULTS PRESENTATION 2018 | 52 Questions? telkomir@telkom.co.za Thank you