MTN Group Limited · JSE:MTN
MTN — FY2011 Earnings Presentation
46 slides from MTN's earnings presentation, March 2012
Slide 1: MTN Group Limited Final results for the year ended 31 December 2011
MTN Group Limited Fi l results Final lt for the year ended 31 December 2011
Slide 2: Agenda
Agenda Strategic and operational overview Sifiso Dabengwa Group President and CEO Financial overview Nazir Patel Group Chief Financial Officer Looking ahead Sifiso Dabengwa Group President and CEO 2
Slide 3: Strategic and operational overview
Strategic and operational overview Sifiso Dabengwa Group President and CEO
Slide 4: MTN vision
MTN vision Revenue Convergence and operational evolution Expenditure M&A Leverage existing scale Consolidation and and intellectual capacity diversification Returns to shareholders 4
Slide 5: Strategic considerations: Shareholder return strategy
Strategic considerations Shareholder return strategy gy Dividends Buybacks • Using both ordinary dividends and buybacks MTN is able to return cash to shareholders a part of a sustained returns strategy • Dividend payout ratio increased to 70% • During 2011, R927,3 million of MTN shares were bought b
Slide 6: Strategic considerations: Customer experience
Strategic considerations Customer experience p Quality I service L N Brand A preference T Efficient distribution N E R Customer R Experience E N Products T A and Segmentation value X added L services E Experienced people 6
Slide 7: Strategic considerations: Revenue growth and service delivery
Strategic considerations Revenue g growth and service delivery y Voice Data and related services ICT evolution • Airtime and subscription is • Data and sms is 12.8% of • Infrastructure investments 66% of total revenue total revenue in progress incl cable and • Lower MTR rates • Mobile money 6m subs
Slide 8: Strategic considerations: Cost optimisation
Strategic considerations Cost optimisation p Cost optimisation initiatives • Procurement transformation project • Good progress on equipment prices • A more centralised model to be established in H112 • Growth of IT shared services initiative • SEA IT hub operational – Uganda and Zambia • Further in
Slide 9: Strategic considerations: M&A outlook and priorities
Strategic considerations M&A outlook and priorities p In country Expanding footprint Transformational • Changes in local • Priority Africa & ME • Execution risk ownership –including • Bolt on stand alone • Limited number of localisation and increased remains i a strategic t t i potential t ti l oppo
Slide 10: Group highlights
Group highlights Group subscribers *Revenue **EBITDA margin Up 16.2% to Up 9.7% to Up 3.4% points to 164,5 million R121,884 million 44.9% Adjusted HEPS Final dividend Dividend payout ratio Up 43.2% to per share of Up 5% points to 1070.0 cents 476 cents 70% * Constant currency, restated using 2010 av
Slide 11: Key themes for the period under review
Key for the period under review Competitive landscape • Tariff competition impacting traffic on 0 14 0.14 0 18 0.18 0.16 0.12 0.14 networks and revenue 0.1 0.08 0.12 0.1 • Effective tariff down in Nigeria, Ghana, 0.08 Uganda and South Africa 0.06 0.04 0.06 • Relatively stable tariffs in Iran 0.04 0.
Slide 12: South Africa
South Africa Launched Jun 1994 Market share 34.1% Population 50.9m Market sizing 80m (2014) Penetration 120% Shareholding 100% Subscribers S b ib 16.9% (’000)/ARPU(ZAR) 18,842 22,033 • Strong prepaid growth 16,067 18,199 15,477 • Postpaid hybrid up 32.6% 13,044 , 152 • S bl market Stable k share h 1
Slide 13: South Africa (cont)
South Africa (cont) Expenses ZAR (million) 5,8% 23 634 23,634 25,006 • Tight g t cost control co t o on o network et o operating ope at g 22,739 costs 12,314 13,224 • Reduction in professional and consulting 11,764 fees • Insourcing of some IS costs H2 10,975 11,320 11,782 • Interconnect cost down 6
Slide 14: Nigeria
Nigeria Market sizing 107.4m Launched Aug 2001 Market share 50% Population 157m Penetration 54% Shareholding 79%* (2014) Subscribers S b ibe (‘000) 7.7% 7 7% /ARPU ($) 38,669 41,641 • Market growth slower due to SIM reg 30,827 requirements • Stablised market share in H2 at 50% 11,9 10,6 9,7 MTN • No
Slide 15: Nigeria (cont)
Nigeria (cont) Expenses NGN (million) 13.2% 289 908 289, • Increase c ease of o 25%5% in average a e age diesel d ese price p ce 255,971 244,704 • Deploying hybrid power systems 132,743 128,340 153,019 • Rent and utilities up 17.8% • Transmission costs down 5.1% following 127,631 136,889 the commenc
Slide 16: Ghana
Ghana Launched Nov 1996 Market share 52% Population 25m Market sizing 25.3m (2014) Penetration 78% Shareholding 98% Subscribers S b ib (‘000) 16.5% /ARPU ($) 10,156 8,721 • Sound performance in competitive market 8,001 • Attractive bonus promotions MTN • Marginal M i l lloss iin market k share h Sub
Slide 17: Ghana (cont)
Ghana (cont) Expenses Cedi (million) 11.6% 790 • Transmission a s ss o costs up 52.9% 5 9% 537 616 • Rent and utilities up 46.5% 419 305 • Distribution and commission up 8.1% 288 • Interconnect costs up 64.0% due to tariff 371 trends in the market 249 311 H2 • Expenses down 37.1% incl profit from sa
Slide 18: Iran
Iran Launched Oct 2006 Market share 45% Population 74.6m Market sizing 99.3 (2014) Penetration 103% Shareholding 49% Subscribers S b ib (‘000) 16.6% /ARPU ($) 34,681 29,743 • Increased market share 23,260 • Seasonal promo’s MTN • Improved I d distribution di ib i h h ATM’s through ATM’ Subscribers (
Slide 19: Iran (cont)
Iran (cont) Expenses (100%) Rial bn 23.6% 19,120 • Well e maintained a ta ed cost base 15,469 • Lower distribution and commission unit 12,023 10,024 costs due to continued push of logical 8,269 airtime 6 421 6,421 • Higher rent and utilities due to high price H2 7,193 9,096 hikes in electricity and
Slide 20: Syria
Syria Launched Jun 2002 Market share 45% Population 22.5m Market sizing 17.6m (2014) Penetration 58% Shareholding 75% Subscribers S b ib (‘000) /ARPU ($) 16.7% 5,716 • Political unrest impacting business 4,249 4,898 environment • Total rev generating minutes up 1.4% 1 4% MTN Subscribers 17,8 16,4 13
Slide 21: Syria (cont)
Syria (cont) Expenses 3% SYP (million) 33,202 , 31,681 32,202 • Distribution st but o and a d commission co ss o costs down do 52.7% due to lower sales 17,274 17,004 16,767 • Tighter cost management 14,407 16,198 15,435 H2 H1 Dec-09 Dec-10 Dec-11 EBITDA margin 19.7 23.5 26.2 % Capex 748 ZAR (million
Slide 22: Financial overview
Financial overview Nazir Patel Group Chief Financial Officer
Slide 23: Financial highlights (adjusted)
Financial highlights (adjusted) Strong organic and free cash flow growth Group summary: 2009 -2011 Reported Organic • ZAR strength impacted (ZAR m) ’10-’11 ’10-’11 reported results • Weaker avg ZAR/USD in H2 (R7,51) vs H1 (R6,80) +3% +6% 121,884 Rev +6% +10% • EBITDA grew 6% YOY mainly 111 947 111,9
Slide 24: Key accounting considerations
Key accounting considerations Change in ownership • Nigeria shareholding increased from 76 76.08% 08% to 78.83% 78 83% - Aug 11 (settlement of IFC put option - USD 358m) • Ghana tower sale - 1st phase - May 11, 2nd phase - Aug 11, and final phase - Dec 11 (ZAR 1,185m) • Rwanda shareholding increased
Slide 25: FX trends (average rate)
FX trends (average rate) Positive impact of H2 ZAR cross rate on reported results lt USD: Local currency ZAR Cedi Rial Naira ‘10 -‘11 10,474 10,739 10,614 10,103 , 10,387 10,253 -4% 154.0 157.6 155.8 150.7 151.6 151.2 -3% 1.43 1.44 1.44 1.51 1.58 1.55 -8% 7.52 7.17 7.34 6.80 7.51 7.17 +2% H1-10 H2-1
Slide 26: Revenue
Revenue Organic growth impacted by strong ZAR Revenue Revenue breakdown (ZAR m) (ZAR m) 121,884 +10% 1,773 125,766 3,882 111,947 114,684 845 2,442 -4% 121,884 2,775 65,342 , 54 678 54,678 58 695 58,695 3 247 3,247 114,684 LC ZAR NIG 10% 4% RSA 8% 8% 57,269 55,989 56,542 IRA 26% 20% GHA 15% 5% 2009 2
Slide 27: Revenue: Strong data growth
Revenue Strong data growth Revenue Reported % share Data revenue (ZAR m) ’10 – ’11 of total +6% revenue 121,884 2,873 Other +2% 2% 4% 7% Cellular phones 4% RSA 5,030 114,684 and accessories +37% 4% Business Solutions , 2,818 13% Nigeria 3,678 8,096 Data +30% 7% 57% Iran Syria 6,206 15% Other 7,501 S
Slide 28: Operating expenditure
Operating expenditure Opex • Direct network operating costs (ZAR m) Reported % share -6% ’10 – ’11 of total • Increase in number of sites 68,318 opex • Electricity costs up in RSA, 64,173 Ghana and Iran • Higher transmission cost in RSA Direct network 18,782 operating costs -12% 27% • Nigeria diesel
Slide 29: EBITDA
EBITDA Strong organic EBITDA growth EBITDA EBITDA breakdown (ZAR m) (ZAR m) 53,566 563 55,292 1,726 50,511 +9% 1,159 8 -3% 46,063 1,403 53,566 28,364 1,648 26 262 26,262 21,551 50,511 44.0% 43.9% LC ZAR 41.1% G NIG +7%% +2%% 24,512 24,249 25,202 RSA +12% +12% IRA +31% +24% GHA* -1% -13% 2009 2010 20
Slide 30: EBITDA margin
EBITDA margin Margin expansion in RSA EBITDA margin reconciliation Nigeria (%) • EBITDA margin decreased by 1.2pts to 61 7% due to impact of tariff reductions 61.7% flat and 25% increase in average diesel 0.1 0.3 price RSA 44 0% 44.0% 03 0.3 0.4 • Margin up 1.2pts to 35.2%. Increased 0.1 44.0% 0.1 4
Slide 31: Capex
Capex 2011 spend lower Capex Capex breakdown (ZAR m) (ZAR m) 31,248 31 248 -7% 1,848 197 466 2,239 19,466 15,744 774 18,032 315 17,717 -2% 19 466 19,466 17,717 10,970 27.9% 12,009 LC ZAR NIG +41% +35% 15,504 17.0% RSA +5% +5% 14.5% 8,496 IRA -27% -30% 5,708 GHA -70% -73% 2009 2010 2011 Oth 2010 NIG
Slide 32: AFCF (EBITDA less capex)
AFCF (EBITDA less capex) Strong free cash flow growth EBITDA - capex EBITDA - capex breakdown (ZAR m) (ZAR m) 35,849 1,337 37,260 1,411 +20% 2,248 -5% 31,045 35,849 16,355 1,625 15,292 1,206 31,045 201 14,815 29.4% LC ZAR 5,807 5 807 27.1% NIG -2% 2% -7% 7% 19,494 RSA +15% +15% 13.2% 15,753 IRA +76%
Slide 33: Net debt
Net debt Group in net cash position (ZAR m) Repayment schedule (ZAR bn) Gross debt 34,016 20% 96 9.6 93 9.3 8.0 1% 40% 4.9 2.2 39% 2012 2013 2014 2015 >2015 Holdco’s and RSA Nigeria Iran Syria Rest • Gross cash • Balances up 27%, 27% mainly in Nigeria and Syria G Gross cash h 45 833* 45,833* 13% • I
Slide 34: Interest and tax
Interest and tax Lower interest charge and increase in effective tax rate Net finance costs 2011 2010 2009 • Net interest paid lower due to interest (ZAR m) income in Mauritius N iinterest paid Net id 1 454 1,454 1 925 1,925 2 201 2,201 • Net forex losses reduced due to forex gains in Dubai Net fore
Slide 35: AHEPS
AHEPS Increased adjusted headline earnings per share AHEPS Contribution to AHEPS (ZAR cents) 1,070 20% 8% 20% 909 34% 754 4% 600 4% 470 390 439 470 364 13% 42% 2009 2010 2011 South Africa Nigeria Ghana Other H1 H2 ZAR cents 2011 2010 Variance Basic earnings per share 1,119.5 938.4 19.3% Net profit o
Slide 36: Income statement
Income statement ( (EBITDA excl Ghana tower p profit 2011 and Zakhele 2010) ) ZAR m 2011 2010 Variance Revenue 121,884 114,684 6% EBITDA 53,566 50,511 6% Depreciation, amortisation and impairment (15,490) (15,401) (1%) Operating profit 38,076 35,110 8% Net finance costs (1,582) (4,094) 61% Share of
Slide 37: Income statement (reported)
Income statement (reported) ZAR m 2011 2010 Variance Revenue 121,884 , 114,684 , 6% Other income 1,458 - 100% EBITDA 54,750 47,538 15% Depreciation, amortisation and impairment (15,490) (15,401) (1%) Operating profit 39,260 32,137 22% Net finance costs (1,582) (4,094) 61% Share of results in associa
Slide 38: Statement of financial position
Statement of financial position ZAR m 2011 2010 p y, p Property, plant & equipment q p 71,610 , 63,361 , Intangible assets 34,540 30,266 Other non-current assets 7,637 6,100 Current assets 66,801 54,234 Non-current assets held for sale 820 825 Total assets 181,408 154,786 Total equity 92,699 74,074
Slide 39: Statement of cash flows
Statement of cash flows ZAR m 2011 2010 Variance Cash generated from operations 50,369 50,536 0% Dividends paid (11,722) (6,313) (86%) Net interest paid (1,359) (1,467) 7% Tax paid (9,414) (8,028) (17%) Net cash from operating activities 27,874 34,728 (20%) A Acquisition i iti off property, t plant
Slide 40: Looking ahead
Looking ahead Sifiso Dabengwa Group President and CEO
Slide 41: Looking forward
Looking forward Operational • Customer experience • Evolve the business model to support ICT • Cost optimisation • Leadership and market share remains a priority Rollout • Increase short term pace of network investments and rollout • Upgrade and optimise networks to maintain quality and meet increas
Slide 42: New organisational structure
New organisational structure Group President • Structure more reflective of and CEO contribution • Optimisation at Group level Finance Strategy & M&A Technical Commercial HR & Corporate Business Risk Affairs Management Iran Uganda Syria Chief Operations CEO South Africa CEO Nigeria Ghana Cote d’Ivoi
Slide 43: Capex guidance
Capex guidance 2010 2011 H1 2011 H2 2011 Authorised (ZAR m) Actual Actual Actual Actual 2012 South Africa 3,908 1,292 2,813 4,105 4,599 Nigeria 4,700 2,068 4,263 6,331 *10,500 Ghana 3,092 137 714 851 1,128 Iran 1,661 413 755 1,168 1,306 Syria 410 86 363 449 869 Other operations 5,695 1,712 3,101 4,8
Slide 44: Guidance 2012
Guidance 2012 Net additions guidance for 2012 000 ‘000 South Africa 2,900 Nigeria 4,000 Ghana 950 Iran 4,000 Syria 450 Rest 8,000 , 20,300 44
Slide 45: Thank you
Thank you
Slide 46: Notice
Notice The information contained in this document has not been verified independently. No representation or warranty express or implied is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Opinions and