Slide 1: Telkom SA Limited Group annual results – March 2005
Slide 2: Forward-looking statements disclaimer
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 the meaning of the US Private Securities Litigation
Slide 3: Chief officers
Chief officers Chief Executive Officer Sizwe Nxasana Chief Financial Officer Kaushik Patel Chief Technical Officer Reuben September Chief Sales & Marketing Officer Nombulelo Moholi
Slide 4: Group highlights
Slide 5: Financial achievements
Financial achievements 7% growth in group operating revenue 41% group EBITDA margin 21% growth in group operating profit 53% growth in basic earnings per share 350% increase in total dividend to 900 cents per share 48% increase in headline earnings per share to 1,274 cents per share 12% increase in
Slide 6: Group net profit drivers
R2,215bn Group net profit drivers Profit growth driven by reduced fixed-line finance charges, savings in fixed-line opex growth in mobile business and growth in fixed- line revenue R224m due to price impact * Finance charges net of investment income In ZAR million
Slide 7: Delivering on strategic targets
Delivering on strategic targets A world-class communications company Customer growth and retention 32% growth in managed data network sites 49% growth in internet customers 38% growth in mobile customers 188% growth in ADSL customers Operational excellence 12% improvement in fixed lines per employee
Slide 8: Increasing competitive market place
Licencing SNO 1 Feb 2005 liberalisation USALS Increasing competitive market place In September 2004, Minister granted the SNO licence In Feb 2005, Minister announced VSNL as 26% strategic equity partner Mobile operators may self provide leased links VANS and PTN can resell telecommunications facilit
Slide 9: Regulatory developments
Facilities leasing and interconnection VANS regulations Tariff regulation Convergence Bill Regulatory developments Draft guidelines published in Jan 2005 Proposal for facilities and interconnect rates to be set based on LRIC Consultative process not concluded VANS regulation published in May 2005 Ad
Slide 10: Finalising BEE charter for sector
Target Weighting Category Finalising BEE charter for sector Telkom ranked most empowered company 2 nd consecutive year amongst the top 185 JSE companies 70% of procurement 20% Preferential procurement 1.5% PBT 12% Access to ICT 5% of procurement 11% Enterprise development 2% of payroll 17% Skills de
Slide 11: Fixed line business
Fixed line business
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
Slide 13: Some growth in fixed-line customer base
9.8% 1.0% Some growth in fixed-line customer base 21% reduction in fixed access line disconnections Fixed access lines In thousands (external lines) ISDN channels In thousands Line contribution March 31, 2005
Slide 14: Successfully moving minutes to ADSL
(6%) (3%) 4.5% Excluding ADSL impact local minutes increased 4.5% Successfully moving minutes to ADSL Local traffic revenue In ZAR million Local minutes In millions Local minutes (excl ADSL impact) In millions Local call rate 40 cents per min
Slide 15: Price reductions in long distance
(3.5%) (5.1%) Price reductions in long distance DLD revenue In ZAR million DLD minutes In millions 10% reduction in domestic long distance tariffs from 1 Jan 2005 Domestic long distance call rate 89 cents per min
Slide 16: Competitive international rates
(2.8%) (13.5%) Competitive international rates 28% reduction on average in international long distance tariffs from 1 Jan 2005 ILD revenue In ZAR million ILD minutes In millions US/UK/Australia call rate R1.70 per min on circuit switching and R1.20 per min for VOIP
Slide 17: Strong data, internet and ADSL growth
Strong data, internet and ADSL growth 32% growth in managed data network sites to 11,961 49% growth in internet customers to 225,280, of which 10% are broadband 188% growth in ADSL customers to 58,532 Launched WIFI Telkom T-Zones commercially 16% growth in data revenue ZAR million
Slide 18: Managing the reduction in ADSL prices
40% reduction 30% reduction Managing the reduction in ADSL prices The ADSL challenge • Distance limitation • Copper quality • Cost of the infrastructure requires high density • Cost and time taken to provisioning Business DSL512 In ZAR Residential DSL512 In ZAR DSL192 and DSL 384 for R270 and R359 p
Slide 19: Investing for new services
Investing for new services Capex for customer growth ADSL services New line growth – e.g. gated communities Data connectivity and business systems Links for the mobile operator 3G rollouts Capex to evolve the network Evolving transport network to high speed and improved reliability Softwitch deploye
Slide 20: Mobile business
Slide 21: Strong performance from Vodacom
Strong performance from Vodacom 38% growth in total customers 20% growth in operating revenue to R27.3 billion 24% growth in EBITDA to R9.6 billion 35.1% EBITDA margin 24% growth in operating profit 27% growth in net profit Dividends paid of R3.4 billion In thousands 100% of Vodacom, Telkom consolid
Slide 22: Leading mobile operator in SA
32% 24% Leading mobile operator in SA 23 million Estimated mobile customers in SA Customers In thousands ARPU In ZAR Gross connections In thousands Churn %
Slide 23: Successful launch of 3G service in SA
Successful launch of 3G service in SA R400 million capital expenditure on 487 3G base stations 29% growth in data revenue to R1.3 bn SMS’s transmitted In billions GPRS users In thousands MMS users In thousands Launched first 3G network in SA Launch of Vodafone Live! services 10,853 active 3G users o
Slide 24: Strong mobile growth outside SA borders
77% Strong mobile growth outside SA borders 2.6 million mobile customers outside of South Africa Customers In thousands ARPU per month In ZAR
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Slide 26: Increasing group profitability
Increasing group profitability 8.7 Investment income 9.8 Other income 52.3 1,239 Basic earnings per share (cents) 6.2 17,510 16,493 EBITDA 47.6 6,807 4,592 Net profit 79.4 (3,070) (1,711) Taxation (48.1) (1,695) (3,264) Finance charges 21.4 11,222 9,245 Operating profit 2.2 (32,175) (31,494) Operati
Slide 27: Segment contribution
Segment contribution Operating revenue Operating profit Net profit Segment contribution (after inter-segmental eliminations) March 31, 2005
Slide 28: Growth in fixed-line revenue impacted by cannibalisation and lower tariffs
1.6% 5.8% (3.0%) (5.5%) 15.6% 8.1% Growth in fixed-line revenue impacted by cannibalisation and lower tariffs Fixed-line revenue (before inter-segmental eliminations) In ZAR million
Slide 29: Reduced operating expenses
(3.3%) 8.0% (2.8%) 15.3% (10.3%) (14.0%) (20.9%) Reduced operating expenses Fixed-line operating expenses (before inter-segmental eliminations) In ZAR million Increase due to R961m workforce reduction expense, excluding workforce reduction expenses decreased 2% Decrease due to extending useful lives
Slide 30: Fixed-line profitability
Fixed-line profitability 40.5 40.8 EBITDA margin 0.8 12,711 12,609 EBITDA 25.4 21.4 Operating profit margin (%) 20.4 7,979 6,626 Operating profit % 2005 2004 ZAR million
Slide 31: Increasing mobile profitability
19.5% 18.3% Increasing mobile profitability 35% EBITDA margin Mobile revenue In ZAR million Mobile operating expense In ZAR million Before inter-segmental eliminations
Slide 32: Strengthened group balance sheet
8.3 57,582 53,162 Total equity and liabilities 19.7 16,963 14,171 Current liabilities (48.1) 6,941 13,362 Net debt 17.5 13,546 16,420 Non-current liabilities 19.9 27,073 22,572 Capital and reserves 8.3 57,582 53,163 Total assets 44.8 14,910 10,322 Current assets (0.4) 42,672 42,841 Non-current asset
Slide 33: Capital expenditure
10% Capital expenditure In ZAR million Capex to revenue % Maintained capital expenditure to revenue within guidance range of 12% - 15% Capital investment to support growth
Slide 34: Increased group cash flow level
17.7 2,301 2,796 Cash at end of year (124.8 ) (492) 1,980 Net decrease in cash 52.7 (9,897) (6,481) Financing activities 16.3 (6,306) (5,423) Investing activities 13.2 15,711 13,884 Operating activities 14.8 (629) (548) Dividend paid 13.2 16,340 14,432 Cash generated from operations % 2005 2004 ZAR
Slide 35: Strong growth in shareholder returns
350% Strong growth in shareholder returns Dividends per share In ZAR cents Level of dividend ensures that net debt to equity remains within targeted level of 50%-70% 8% dividend yield Based on share price of R111.80 on 31 May 2005
Slide 36: Outlook
Slide 37: Future strategic direction
Transform 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 Future strategic direction Our vision is to be a leading communications company
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 closer t
Slide 39: Investor relations
Investor relations t elkomir@telkom.co.za Tel: +27 12 311 5720 Fax: +27 12 311 5721