Vodacom Group Limited · JSE:VOD
Vodacom — FY2009 Earnings Presentation
47 slides from Vodacom's earnings presentation, Mar 31, 2009
Slide 1: Annual Financial Results 31 March 2009
VODACOM GROUP LIMITED ON Annual Financial Results 31 March 2009 vodacom
Slide 2: Disclaimers
Di l i Disclaimers Disclaimer Forward Looking Statements The following presentations are being made only to, and are only directed at, These presentations contain “forward-looking statements” with respect to the persons to whom such p p presentations may y lawfullyy be communicated ((“relevant Group
Slide 3: Overview
Overview 3 Annual Results 31 March 2009
Slide 4: Group highlights
G Group highlights hi hli ht Million R billion 39.6 55.2 34.0 48.2 16.5% 14.5% growth in group mobile customers growth in group revenue Overview 9.8 R billion 18.2 R billion 9.1 16.5 10.5% R9.1bn growth in group EBITDA group operating free cash flow FY 2008 FY 2009 4 Annual Results 31 March 2009
Slide 5: Key developments
K d Key developments l t BBBEE transaction completed in October 2008 – 6.25% of Vodacom SA sold to strategic partners, black partners, black public and employees Acquisition of Gateway in December 2008 – New market entry points – physical presence in 14 African countries Restructured balance s
Slide 6: Delivery against strategic objectives
D li Delivery against i t strategic t t i objectives bj ti Grow core mobile business – Highest level ever of gross connections in South Africa – Maintained market leadership positions Leadership in broadband – 80% increase in broadband customers to 720 000 – 5 million unique q mobile internet us
Slide 7: Operational review South Africa
Operational review South Africa 7 Annual Results 31 March 2009
Slide 8: South African performance
S South th Af African i performance f Vodacom SA revenue grew by 10.8%, and despite the BBBEE transaction expenses and the investment in Vodacom Business, EBITDA margins were relatively stable Revenue EBITDA R billion R billio 47 5 47.5 16.2 16 2 on 42.9 14.8 South African opera 10 8% 10.8% 9 7% 9.7
Slide 9: Market developments
M Market k tddevelopments l t Slowing S o g GDP G growth go t SARB recently cut the repo rate by 100bps to 8.5% on Economic back of subdued domestic growth and easing of inflation South S th Africa Af i expects t 200K nett jjob b llosses thi this year, unemployment at 23.2% South African opera
Slide 10: Leading market share in mobile voice
L di market Leading k t share h in i mobile bil voice i Vodacom SA customer base grew 11.3% adding 2.8 million additional customers to reach 27.6 million. Vodacom maintained its leadership position with 53% share of customers and revenue1 Vodacom mobile customers Market share of mobile customers A a
Slide 11: Robust activity in the South African market
R Robust b t activity ti it iin th the S South th Af African i market k t Gross connections reach record levels of Gross connections more than 13 million Thousand H2 H1 13 064 12 040 8% increase in handsets sold 7,371 7 371 ds 6,195 Increased distribution points by more 5,845 5,693 South Afric
Slide 12: More affordable products driving usage
M More affordable ff d bl products d t d driving i i usage O t i traffic Outgoing t ffi increased i d 8.2% 8 2% O t i traffic Outgoing t ffi Millions of minutes Total ARPU increased 3.9% to R133 H2 H1 16 582 15 323 Prepaid ARPU increased 9.7% to R68 8,607 7,916 7 916 − Yebo4Less − Lower denomi
Slide 13: Strong growth in data revenue driven by broadband
St th iin d Strong growth t revenue d data i driven b by b db d broadband 97 8% growth in data traffic to 3 175 Tbytes 97.8% Data revenue R million 27.9% growth in data revenue growth H2 H1 5 973 − 69.3% 69 3% increase in connectivity and usage 4 670 3,182 3 182 revenue to R2.9 billion 2,723 L
Slide 14: Progressing converged ICT solutions
P Progressing i converged d ICT solutions l ti Consumer Business On-line services Comprehensive portfolio developed – Vodafone live! now has 2.8 million unique – 28 products users Recruited resources Mobile advertising – Top talent recruited South African opera – Campaigns p g for over 130 u
Slide 15: Continued capital investment to support growth
C Continued ti d capital it l iinvestment t t tto supportt growth th C it l expenditure Capital dit i d 8.8% increased 8 8% Capital expenditure Radio access network investment H2 H1 R million − Improving coverage and cost efficiencies Capex/revenue 9.9 (%) 9.7 Continued network expansion 4 627
Slide 16: Operational review International
Operational review International 16 Annual Results 31 March 2009
Slide 17: International performance
IInternational t ti l performance f Vodacom international revenue grew by 29.9% supported by customer growth of 30.7%. EBITDA margins impacted by the DRC. Margins in all the other operations improved Revenue EBITDA R billion R billion Inte ernational opera 29.9% 18.7% growth growth ations Revenue an
Slide 18: Market developments
M Market k tddevelopments l t DRC economy adversely impacted by mine closures Tanzania GDP growth slowing Economic Inte ernational opera Price competition in Tanzania and DRC Competition ations Subscriber registration Regulatory Excise duty introduced in the DRC and Tanzania End of tax c
Slide 19: Strong growth in international mobile customers
St Strong growth th iin iinternational t ti l mobile bil customers t International customer base grew 30.7% adding 2.8 million additional customers to reach 12.0 million. Maintained leadership position in three countries and fast approaching the leader in Mozambique Vodacom mobile customers 30.7%
Slide 20: More affordable products to respond to market conditions
M More affordable ff d bl products d t tto respond d tto market k t conditions diti T Tanzania i and d DRC ARPU − DRC and Tanzania local currency ARPU Rand declined by 14.3% and 20.7% − Various bonus airtime and on-net call promotions introduced − Vodacom Tanzania launched Yebo4Less Inte ser ice o
Slide 21: Capital investment to support expansion
C Capital it l iinvestment t t tto supportt expansion i C it l expenditure Capital dit increased i d 58.4% 58 4% Capital expenditure − 34.4% of revenue R million Increased network coverage − 214 new base stations in Tanzania − 60 new base stations in Mozambique Inte Investment in data networks
Slide 22: Operational review Gateway
Operational review Gateway 22 Annual Results 31 March 2009
Slide 23: Key Gateway developments
K G Key Gateway t developments d l t Increased customer reach and network – Expanded offices in Kenya and opened in Uganda New product launches to address market demand – Af i IPJetDirect Africa IPJ Di – highly hi hl efficient ffi i mobile bil IInternet offering ff i ffor carriers i – AfricaConn
Slide 24: Carrier services performance impacted by global slowdown
C Carrier i services i performance f iimpacted t dbby global l b l slowdown l d Traffic volumes continue to increase and steady carrier data growth. Overall margins impacted by market conditions Revenue Gross profit US$ million US$ million m m G Gateway 14.3% 2.0% operatio growth growth ons Inbound
Slide 25: Business services growth remained robust
B Business i services i growth th remained i d robust b t Revenue increase driven by significant growth in services to Nigerian banks and oil companies Revenue 37.4% growth in business services revenue to US$55.9m US$ million Business services gross profit margin of 45.3% in 12 months to March 2
Slide 26: Financial review
Financial review 26 Annual Results 31 March 2009
Slide 27: Factors impacting results
F t Factors impacting i ti results lt Vodacom SA BBBEE transaction – BBBEE transaction expenses of R95 million included in EBITDA – BBBEE charge of R1.4 billion (non-tax deductible) reflected below EBITDA Acquisition A i iti off Gateway G t – Completed on 30 December 2008, results included for 3
Slide 28: Group income statement
G Group income i statement t t t R million FY 2009 FY 2008 % change Revenue 55 187 48 178 14.5 EBITDA 18 196 16 463 10.5 Adjusted operating profit 13 387 12 491 7.2 BBBEE charge 1 382 - - Financial review Operating profit 12 005 12 491 (3.9) Net finance charges (1 749) (424) - Loss from associate (1
Slide 29: Group headline earnings per share
G Group headline h dli earnings i per share h Headline earnings per share impacted by the BBBEE charge of R1.4 billion, higher finance charges and increased depreciation from higher capital invested (57) Cents per share 116 (89) 12 528 510 (93) Financial review 417 w 2008 HEPS EBITDA growth Increase
Slide 30: Group revenue
Group revenue Revenue growth of 14.5% driven by a 16.5% increase in the customer base to 39.6 million. Revenue contribution from the international operations increased from 11.2% to 12.7% Group revenue growth Group revenue composition R million % (40) Ç 14.5% Ç 29.9% 808 55 187 Ç 10.8% 1,610 1.5 (0.
Slide 31: Group EBITDA
G Group EBITDA EBITDA growth of 10.5% driven by revenue growth, offset by the BBBEE transaction expenses of R95 million, the investment in Vodacom Business and deterioration in DRC profitability R million FY 2009 % change EBITDA margins South Africa 16 222 9.7 International 1 835 18.7 Tanzania 1 049
Slide 32: Group finance charges
G Group finance fi charges h Net finance charges increased due to increased borrowings, higher effective cost of borrowings, foreign exchange loss of R408 million for Gateway, offset by the gain on revaluation of DRC put option R million FY 2009 FY 2008 Movement Finance income 108 72 36 Finance expe
Slide 33: Group taxation expense
G Group ttaxation ti expense G Group taxation i expense M t i l ititems iin ttax reconciliation Material ili ti R million % FY 2009 FY 2008 Normal tax rate 28.0 29.0 Disallowed expenditure 2.5 1.0 BBBEE charge 3.8 - Financial review STC 5.1 5.0 Other 01 0.1 (0 9) (0.9) w Effective tax rate 39.5 34.1
Slide 34: Group operating cash flow
G Group operating ti cash h fl flow Strong cash flow generation offset by once-off movements in working capital at year end Cash flow generated from operations Movements in working capital R million R million FY 2009 FY 2008 16,334 16,351 Trade debtors (1 371) (985) 13,866 Deferred cost 217 (55) Fin
Slide 35: Group summarised balance sheet
G Group summarised i d balance b l sheet h t Balance sheet impacted by the Gateway acquisition, BBBEE transaction and the raising of new debt. The balance sheet remains strong, with the net debt to EBITDA at 1.0x at 31 March 2009 R million FY 2009 FY 2008 Movement Assets PPE 21 844 19 120 2 724 Good
Slide 36: Group analysis of net debt
G Group analysis l i off nett debt d bt Debt was raised to restructure the balance sheet, support higher capital expenditure and to acquire Gateway. 93% of debt is at a floating rate and R3.0 billion is denominated in foreign currencies R million FY 2009 FY 2008 Debt maturity profile Cash and cash R
Slide 37: Shareholder distributions
Sh h ld distributions Shareholder di t ib ti Vodacom’s strong cash flow and balance sheet will provide the flexibility both to invest prudently in strategic growth opportunities and to return cash to shareholders on a sustainable basis Dividends Dividend policy R million For the financial year end
Slide 38: Conclusion
Conclusion 38 Annual Results 31 March 2009
Slide 39: Outlook and priorities
O Outlook tl k and d priorities i iti Outlook Management priorities South African customer expected to Market leadership in all countries of remain under pressure operation – Lower interest rate, inflation and fuel prices should provide relief Lead in broadband and mobile internet – Negative i
Slide 40: Supplementary information
Supplementary information 40 Annual Results 31 March 2009
Slide 41: Revenue analysis – South Africa
R Revenue analysis l i – South S th Africa Af i Revenue growth of 10.8% to R47.5 billion supported by 11.3% growth in customer base and growth in data revenue Airtime and access revenue increased 9.2% South Africa revenue composition – Growth in customers and 8.2% 8 2% growth in R million outgoing
Slide 42: Expense analysis – South Africa
E Expense analysis l i – South S th Africa Af i Operating expenses increased by 11.7% largely due to the increase in selling and distribution costs, the BBBEE transaction expense and the increase in the amortisation of intangibles Direct network operating cost increased 11.4% South Africa expense
Slide 43: Revenue analysis – International
R Revenue analysis l i – International I t ti l Revenue growth of 29.9% supported by 30.7% growth in customer base to 12.0 million and favourable local currency movements Airtime and access revenue increased 30.3% International revenue composition – Growth in the customer base R million Data rev
Slide 44: Expense analysis – International
E Expense analysis l i – International I t ti l Operating expenses increased by 38.6% largely due to the growth in the international business Direct network operating cost increased 31.2% International operating expense composition – Increase in network operational expenses R million relating to t
Slide 45: Country data
C Country t d data t So th Africa South Tan ania Tanzania DRC Mo ambiq e Mozambique Lesotho Population (million) 48.7 41.0 68.7 21.7 2.1 Mobile p penetration (%) ( ) 108 30 16 17 30 Number of operators 3 5 5 2 2 Market position 1 1 1 2 1 Market share (%) 53 46 37 44 80 Ownership (%) 93.75 65 51 85 8
Slide 46: Definitions
D fi iti Definitions ARPU ARPU is calculated byy dividing g the average g monthlyy revenue (recurring ( g mobile)) byy the average g monthly y total reported p customer base during the period. ARPU excludes revenues from equipment sales and other sales and services. With effect from 1 April 2008, AR
Slide 47: Vodacom Corporate Park contact details
Vodacom Corporate Park 082 Vodacom Boulevard Ath Floor West Voda Valley Midrand | 1685 Tel: 011 653 5579 www.vodacom.com