Slide 1: Group Annual Results for the year ended 31 March 2015
Group Annual Results For the year ended 31 March 2015
Slide 2: Overview
Group Annual Results for the year ended 31 March 2015 2 Overview Sipho Maseko: Group Chief Executive Officer
Slide 3: FY15 Highlights: Achievements
Group Annual Results for the year ended 31 March 2015 3 FY 15 Highlights Achievements Total dividend of Free cash flow 245cps generated, increased significantly to EBITDA, excluding one-off items, improved Net revenue up R3,9 billion 15.1% 3.1% to R9 billion to R26 billion Group net debt Operating c
Slide 4: FY15 Highlights: Challenges
Group Annual Results for the year ended 31 March 2015 4 FY 15 Highlights Challenges Fixed voice usage revenue declined by Fixed-line voice and 13.5% Leased lines interconnection revenue revenue decreased declined by 11.9% 22.0% to R8,3 billion Increased Competition * Excluding retrenchment expenses,
Slide 5: Our multi-year strategy is on track
Group Annual Results for the year ended 31 March 2015 5 Our multi-year strategy is on track • The leadership team is stable and in place • Mobile has been de-risked • Customer experience improvement gaining traction • Sustainable multi-year cost efficiency programme • Exiting our non-core activities
Slide 6: Regaining our customer's trust
Group Annual Results for the year ended 31 March 2015 6 Regaining our customer’s trust • Good progress in Customer Experience rating (NPS) Winner of the MyBroadband Fixed and Mobile broadband provider of choice • Brand Reputation has shown significant improvement • Improved Ask Afrika Orange Index r
Slide 7: Business Performance
Group Annual Results for the year ended 31 March 2015 7 Business Performance Sipho Maseko: Group Chief Executive Officer
Slide 8: Consumer
Consumer | (os , Telkom
Slide 9: We have de-risked Mobile
Group Annual Results for the year ended 31 March 2015 9 We have de-risked Mobile All metrics in Mobile continue to show robust improvements • Mobile EBITDA improved by 48.7% • Mobile data revenue increased 50.6% to R988 million • Active Mobile subscribers increased 21.2% to over 2 million – blended
Slide 10: Fixed Consumer gaining traction
Group Annual Results for the year ended 31 March 2015 10 Fixed Consumer gaining traction Enhanced value propositions bring about improvements in fixed business • Residential DSL subscribers increased 7.4% • Growth in fixed line data revenues • Net revenue increased by 12% • Internet subscribers grew
Slide 11: Well positioned for new customer trends
Group Annual Results for the year ended 31 March 2015 11 Well positioned for new customer trends Mobile voice & data traffic orders • More than 21% of Prepaid 350 mobile customers prefer integrated data products 300 250 • Customers moving from 3G to 200 LTE use on average 36% more data 150 • Custome
Slide 12: Relevance of true convergence
Group Annual Results for the year ended 31 March 2015 12 Relevance of true convergence Convergence inevitable to provide competitive service offering • Mitigates voice usage deterioration • Offers bundled and bespoke solutions • Leverage off shared resources – Call centre – Direct stores – End-to-en
Slide 13: Business
Business \o-~ Telkom
Slide 14: Business revenue slowdown
Group Annual Results for the year ended 31 March 2015 14 Business revenue slowdown Slowdown in data connectivity revenues, with a marked decline in voice usage • Data connectivity revenues R81 million lower • Metro-Ethernet revenues increased 39.8% • Managed data network services revenue increased 1
Slide 15: Business Convergence KPIs
Group Annual Results for the year ended 31 March 2015 15 Business Convergence KPIs Cumulative performance 2014 vs 2015 16 Thousands 14 12 10 8 6 4 2 0 Actual Total Sales Total Customers Total Services Thousands
Slide 16: Strengthening the core: BCX transaction
Group Annual Results for the year ended 31 March 2015 16 Strengthening the core Awaiting the outcome of the Competition Tribunal on the BCX transaction • The deal with BCX will support growth by expanding our business into ICT services • Once approved by Competition Tribunal, integration will be swi
Slide 17: Wholesale & Networks
Wholesale & Networks NS iO: Telkom
Slide 18: Wholesale & Networks
Group Annual Results for the year ended 31 March 2015 18 Wholesale & Networks Continued self-provisioning put leased line revenues under pressure • Revenue from leased line facilities declined 22.0% • Increased competition in fibre products and offerings FTTH • Good traction with • Wholesale unit pr
Slide 19: Increased broadband penetration
Group Annual Results for the year ended 31 March 2015 19 Increased broadband penetration • 20Mbps, 40Mbps and 100Mbps PRETORIA Wholesale fibre broadband access in JOHANNESBURG selected areas • First to market in terms of LTE-A roll out DURBAN • Ports activated via MSAN access grew 103% CAPE TOWN • C
Slide 20: Driving higher utilisation of the network
Group Annual Results for the year ended 31 March 2015 20 Driving higher utilisation of the network Building a more efficient network • Competitive pricing to stimulate demand • Build portfolio of value-added services • Optimise the network • Increase speeds and capability
Slide 21: Financial Overview
Group Annual Results for the year ended 31 March 2015 21 Financial Overview Deon Fredericks: Chief Financial Officer
Slide 22: Normalised earnings
Group Annual Results for the year ended 31 March 2015 22 Normalised earnings F2015 F2014 Profit for the year 2 889 3 590 - Profit on PRML (2 169) - VERP/VSP and retrenchment 591 - Tax on VERP/VSP and retrenchment expenses (165) Tax benefit on PRML (546) (246) Normalised Profit 2 769 1 175 Normalised
Slide 23: Financial highlights
Group Annual Results for the year ended 31 March 2015 23 Financial highlights Revenues have continued to stabilise in a tough operating environment • EBITDA increased 15.1% - Margin of 28.3% • Operating costs decreased 1.2% in nominal terms − Staff efficiency program − Benefits of PRML − Effective m
Slide 24: FY15 Results
Group Annual Results for the year ended 31 March 2015 24 FY15 Results March Rm 2015 2014 % Operating revenue 31 675 31 288 1.2 Net revenue 25 958 25 167 3.1 Operating expenses 17 679 17 900 1.2 EBITDA 8 978 7 798 15.1 Depreciation and impairments 5 478 5 891 7.0 Capital investments 5 164 6 413 19.5
Slide 25: Quality of earnings
Group Annual Results for the year ended 31 March 2015 25 Quality of earnings March Rm 2015 2014 % Profit for the year 2 889 3 590 19.5 Net FTR/MTR impact after tax (522) (244) 113.9 Gain on sale of assets (257) (77) 233.8 Severance package costs 591 - - Asset impairment - 392 - Profit of the sinking
Slide 26: De-risking the Business: Growth in Mobile & Data
Group Annual Results for the year ended 31 March 2015 26 De-risking the Business: Growth in Mobile & Data, stabilisation of voice rentals Contribution to group revenue (%) Other 2% Voice usage & Interconnection 26% 33% Revenue at Data risk declined Contributes 26% (2014: 30%) of Group revenue 3% 25%
Slide 27: Fixed voice usage continued to decline
Group Annual Results for the year ended 31 March 2015 27 Fixed voice usage continued to decline 3.7% 17 745 17 082 2014 2015 13.5% 2.5% 7 934 7 812 8 005 6 867 46.0% 1.0% 491 717 1 508 1 493 Total voice and Fixed Voice usage Fixed voice subscriptions Mobile voice and Interconnection interconnection
Slide 28: Data volumes improved
Group Annual Results for the year ended 31 March 2015 28 Data volumes improved ADSL Subscribers 7.9% 1 005 286 931 858 873 395 2013* 2014* 2015* * Restated to include internal lines Managed data network sites Traffic volumes in TBytes (revenue in R million) 32.0% 13.8% 32 804 1 046 24 850 1 005 16 3
Slide 29: Continued focus on costs
Group Annual Results for the year ended 31 March 2015 29 Continued focus on costs 1.2% 17 900 17 679 2014 2015 3.6% 9 091 8 763 0.3% 4 699 4 712 3.5% 3 103 3 212 1.5% 1 007 992 Total operating expenses Employee expenses SG&A Service fees Operating leases (excl depreciation) Rmillion
Slide 30: Commercially driven approach to capital expenditure
Group Annual Results for the year ended 31 March 2015 30 Commercially driven approach to capital expenditure Rm 2015 2014 % Total capital expenditure 5 164 6 566 21.4 Group capital expenditure excl mobile 4 683 5 198 9.9 Converting access network in IP (NGN) 1 504 2 439 38.3 Maintaining/enhancing ex
Slide 31: Normalised cash flow from operations
Group Annual Results for the year ended 31 March 2015 31 Normalised cash flow from operations Rm 2015 2014 % Cash flow from operating activities 6 347 6 490 2.2 Competition Commission payments 291 291 - Package cost paid 325 710 54.2 Payment to insurer of PRML 1 950 878 122.1 Tax refund received - (
Slide 32: Performance against guidance
Group Annual Results for the year ended 31 March 2015 32 Performance against guidance Guided Achieved Stabilise Net Revenue +3.1% to grow EBITDA margin 26%-27% 26.5%* Capex to Revenue 14%-17% 16.3% Net Debt to EBITDA ≤1 0.02 * Including VSPs/VERPs and retrenchment cost of R591 million
Slide 33: FY2016 Guidance
Group Annual Results for the year ended 31 March 2015 33 FY2016 Guidance The guidance excludes the impact of the conclusion of the MTN and BCX transactions F2015 A F2016 Net Revenue +3.1% Stabilise EBITDA margin 26.5%* 26%-27% Capex to Revenue 16.3% 15%-18% Net Debt to EBITDA 0.02 ≤1 Mobile EBITDA (
Slide 34: Reinstating the dividend
Group Annual Results for the year ended 31 March 2015 34 Reinstating the dividend Our dividend policy: • Dividends are considered on an annual basis based on the financial performance of the Group, operating environment, growth opportunities, as well as debt and cash flow levels. • The total dividen
Slide 35: Financial health for strategic flexibility
Group Annual Results for the year ended 31 March 2015 35 Financial health for strategic flexibility Our strong and healthy financial position provides us with flexibility and choice • Mobile has been de-risked • Embedded a culture of efficiently deploying capital • Continued the strengthening of our
Slide 36: Prospects
Group Annual Results for the year ended 31 March 2015 36 Prospects Sipho Maseko: Group Chief Executive Officer
Slide 37: First phase of turnaround successful, more still to be achieved
Group Annual Results for the year ended 31 March 2015 37 First phase of turnaround successful, more still to be achieved What we have accomplished Going forward • Stabilised revenues • Strengthen customer value proposition • Dividend re-instated • Review operational business model • De-risked mobile
Slide 38: Operating model optimisation
Group Annual Results for the year ended 31 March 2015 38 Operating model optimisation Three stand-alone business units: Benefits of separating the business: • A Consumer business focussing • Removes complexity, simpler strategies on leading in home connectivity and leading to better efficiencies ser
Slide 39: Questions
Questions www.telkom.co.za/ir