Slide 1: Group Provisional Annual Results
Telkom SA SOC Limited Group Provisional Annual Results for the year ended 31 March 2017
Slide 2: Introduction
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Slide 3: Tough trading environment
Introduction 3 Tough trading environment Economic Competitive Regulatory Environment landscape environment > Limited GDP growth > Increased number of fibre players > Spectrum > Sovereign rating downgrade > Competition in the wholesale space > ICT Policy > Consumers under pressure > Consolidation in
Slide 4: Key actions laid groundwork for growth
Introduction 4 Key actions laid groundwork for growth Key issues to address Key actions taken > Cost and capital efficiencies > Stabilise organisation, clear turnaround strategy > Sustainability of Telkom Mobile > Sustainable cost efficiency; disciplined capital allocation > Uncertain regulatory and
Slide 5: New fit for purpose operating model
Introduction 5 New fit for purpose operating model Group
Slide 6: Critical enablers of the new operating model
Introduction 6 Critical enablers of the new operating model Relentless focus on cost Capability and talent Performance culture Systems and processes > Set-up systems and > Instil a relentless focus on > Place the right individuals > Create culture of processes to enable driving down costs in the rig
Slide 7: Business performance
$F Business performance
Slide 8: Group financial highlights
Business performance 8 Group financial highlights Mobile EBITDA Operating service revenue up revenue up margin 9.8% 38.4% 26.7%* Annual Capex HEPS up dividend up to revenue 12.4%* 56.3% 21.1% *The figures exclude voluntary early retirement and severance package cost of R66 million and the related ta
Slide 9: Performance against focus strategic areas
Business performance 9 Performance against focus strategic areas > Modernise the network > Cloud computing > Mobile growth through data > Mobile Ad Exchange > Commercialise the > Unified communications > High speed broadband > Expanding Omni-channel network growth offerings > Big data analytics > Se
Slide 10: Key focus areas
Key focus areas Modernise network Commercialise the network Transforming service delivery
Slide 11: Modernise the network – fibre deployment
Business performance 11 Modernise the network – Passed over 2.2 million premises fibre deployment Fibre network of > 149 000 km Fibre to the home Fibre to the cabinet deployed to date 219 825 1 991 449 up 169.7% up 37.2%
Slide 12: Modernise the network – POTN deployment
Business performance 12 Modernise the network – One of the 1st commercial deployments POTN* deployment in the world > Simplified operations through common interworking platforms > Improved cost for high bandwidths > Increased efficiency through multi-layer utilisation by delayering the network *Pack
Slide 13: Commercialise the network – increased network consumption
Business performance 13 Commercialise the network – increased network consumption Fixed line broadband1 33.8% 700 Fibre to the business Fibre to the base stations 600 500 52 755 5 928 end points terminating base stations 400 Petabytes 300 632 472 200 340 100 Fibre to the home 0 FY2015 FY2016 FY2017
Slide 14: Transforming service delivery
Business performance 14 Transforming service delivery Digitalise and automate Continuously improve Optimise service delivery business processes customer experience and cost efficiency > Introduction of digital technician > “Right First Time” approach > Improve dispatching > Photo quality App and new
Slide 15: Key focus areas
Key focus areas Cloud computing Unified communications Converged communications Big data analytics Internet of Things Security
Slide 16: BCX integration benefits and financial profile
Business performance 16 Benefits of the integration Financial profile – 31 March 2017 People > New Exco > One sales force team R14.0 Total revenue billion Resources > Unmatched data centres capabilities > Strong fixed network 15.1% EBITDA margin > Group IT to be managed by BCX Product offering > Off
Slide 17: Delivered against key focus areas
Business performance 17 Delivered against key focus areas Cloud Unified Big Data Computing Communications (UC) Analytics > Launched Enterprise Business > Migrated customers onto NGN such as > A business unit was set-up Critical Cloud fibre, VoIP > Big data platforms deployed for data > Enhanced BCXC
Slide 18: Delivered against key focus areas (continued)
Business performance 18 Delivered against key focus areas (continued) Internet of Things Security > Continued growth within the IoT industrial > Fastnet Payment Card Industry and retail ecosystems Security Standard v3.2 certification > Products delivered focussed on the > ISO 27001 certification man
Slide 19: Digital Technology Organisation through collaboration, innovation and service
Business performance 19 Digital Technology Organisation through collaboration, innovation and service focused Customer Relationship Customer First Program strengthened Management system to effectively to drive: manage: > customer insights > Pipeline and opportunities > capability to manage customer
Slide 20: Key focus areas
Key focus areas > Mobile growth through data-led propositions > High speed broadband growth - LTE & fibre > Digital services > Content and VAS
Slide 21: Solid execution by mobile business
Business performance 21 Solid execution by mobile business 38.4% 47.7% Service revenue Customer growth (‘000) 5 000 4 000 3 498 Pre-paid Post-paid 3 999 4 000 3 000 2 528 2 707 1 227 3 000 2 187 1 815 R’m 2 000 794 2 000 579 1 000 2 772 1 000 1 608 1 912 0 0 FY2015 FY2016 FY2017 FY2015 FY2016 FY2017
Slide 22: Mobile broadband and high speed broadband
Business performance 22 Mobile broadband High speed broadband 49.6% Broadband revenue > Uptake of Fixed Broadband: 2 500 2 356 2 000 • Significant demand for fibre 1 575 1 500 • Migration from ADSL/VDSL to fibre R’m 988 1 000 • Fixed broadband uncapped strategy 500 yielding results 0 FY2015 FY2016 F
Slide 23: Ongoing improvement to customer experience
Business performance 23 Ongoing improvement to customer experience System upgrades Store initiatives Call centres > Reduced time to capture, > Queue management > Improved first time process & vetting system resolutions > Paperless applications > Customer call back > Reduced call volumes support > Di
Slide 24: Key focus areas
Key focus areas Mobile Ad Exchange Expanding Omni-channel offerings Establish e-commerce market place Expand partnership to OTT
Slide 25: Establish e-commerce marketplaces
Business performance 25 Establish e-commerce marketplaces > 200% growth in traffic > Launched web and mobile apps (iOS & Android) in January 2017 > 663 117 leads generated > Agile delivery of business critical features on a monthly basis > 1 000 000 consumers reached > 8x leads generated per service
Slide 26: Mobile Ad Exchange and OTT partnership
Business performance 26 Mobile Ad Exchange OTT partnership New Partners 34% > 997 deployed for projects Growth in Google Revenues > 1 000 registered > In negotiations for deployment of 1 Private Network
Slide 27: Expanding Omni-channel offerings
Business performance 27 Expanding Omni-channel offerings Customer and Process Improvements 15% 100 days Improvement in NPS From concept to go-live > 118 000 quotes sent to business > 4 000 appointments sent to business > 50 000 consumers serviced in digital queue 75 000 new Businesses Added
Slide 28: Human and social capital
— Human and social capital
Slide 29: HR - Focusing on attracting and growing talent
Human and social capital 29 HR - Focusing on attracting and growing talent Performance based incentives Recruitment Leadership & development > Performance Pays – up to 12% > Bright Young Minds > Talent management & succession > Performance Management > WeThinkCode > Female Leadership
Slide 30: CSR - Empowering youth through education and entrepreneurship
Human and social capital 30 CSR - Empowering youth through education and entrepreneurship Foundation – FutureMakers – Main focus is on education Enterprise and Supplier Development Fund R85 million R234 million allocated to education invested into the FutureMakers Fund 9 770 40 black owned businesse
Slide 31: Financial overview
Financial overview
Slide 32: Developments in FY2017
Financial overview 32 Developments in FY2017 BCX inclusion for the full year and the Mobile Mobile EBITDA profitability BCX integration of Enterprise with BCX Accelerated Introduction of interim dividend 120% growth in capex Dividend capex and dividend policy deployment to priority areas deployment
Slide 33: Earnings excluding VERPs and VSPs
Financial overview 33 Earnings excluding VERPs and VSPs FY2017 FY2016 % Profit for the year 3 854 2 321 66.0 VERP/VSP cost 66 2 193 (97.0) Tax on VERP/VSP cost (13) (517) 97.5 Profit for the year excluding VERPs and VSPs 3 907 3 997 (2.3) Headline earnings per share excluding VERPs 731.4 650.9 12.4
Slide 34: Key financial indicators excluding VERPs and VSPs
Financial overview 34 Key financial indicators excluding VERPs and VSPs FY2017 FY2016 % Operating revenue 40 970 37 325 9.8 Net revenue 31 854 29 521 7.9 Operating expenses 21 647 19 833 (9.1) EBITDA 10 941 10 969 (0.3) Capital investments 8 654 6 040 43.3 Free cash flow (137) 3 900 (103.5)
Slide 35: Creating a diversified revenue base
Financial overview 35 Creating a diversified revenue base Voice usage and 4% 4% 19% interconnection 12% 22% 18% Subscriptions Customer premises equipment FY2017 Data FY2016 20% Information technology 31% 22% 30% Other 9% 9%
Slide 36: Solid growth in future revenue streams
Financial overview 36 Solid growth in future revenue streams Net revenue movement 199 R’m (1 449) R2 333 m 1 526 7.9% (1 067) 3 124 29 521 31 854 FY2016 Net revenue Information technology 1 Mobile Other Cost of sales Voice and interconnection FY2017 Net revenue 1. IT business revenue of R767 million
Slide 37: Growth in priority areas
Financial overview 37 Growth in priority areas 4.4% Data lines Subscribers 635 736 677 527 707 379 FY2015 FY2016 FY2017 Fibre 387.6% Subscribers 8 129 39 640 - FY2015 FY2016 FY2017
Slide 38: Growth in priority areas (continued)
Financial overview 38 Growth in priority areas (continued) Metro-Ethernet 38.3% Mobile broadband 44.6% Subscribers Subscribers ‘000 3 346 4 721 6 531 1 330 1 824 2 638 FY2015 FY2016 FY2017 FY2015 FY2016 FY2017 Broadband traffic volumes Mobile data traffic volumes 33.8% Terabytes Terabytes 129.9% 37
Slide 39: Good performance in new growth areas
Financial overview 39 Good performance in new growth areas ~ 1.1% R’m 6.9% Fixed data 14 450 13 553 70.5% ~ 38.4% 4.4% 0.6% 7 554 7.0% 4 430 3 498 3 353 3 501 3 139 3 119 3 410 3 171 2 528 Information technology 1 Mobile service revenue Next generation and fibre Other fixed data1 Legacy data Fixed v
Slide 40: EBITDA
Financial overview 40 EBITDA Normalised EBITDA movement R’m R28 m 0.3% 151 (1 441) 2 333 (547) (524) Excluding gains on sale of assets EBITDA increased 4.5% 10 969 10 941 FY2016 EBITDA Net revenue Other SG&A1 Other income Employee expenses 2 FY2017 EBITDA 1. The increase in selling, general and admi
Slide 41: Increased capital expenditure in priority areas
Financial overview 41 Increased capital expenditure in priority areas FY2017 FY2016 % Fibre 1 2 392 1 310 82.6 Mobile 1 936 660 193.3 OSS/BSS programme 741 544 36.2 Network rehabilitation/sustainment 567 674 (15.9) Service on demand 1 251 1 540 (18.8) Core network 962 273 252.4 1. Includes access an
Slide 42: Strong cash position – Platform to support growth
Financial overview 42 Strong cash position – Platform to support growth FY2017 FY2016 % Cash sources Opening cash balance 2 542 3 642 (30.2) Cash flow from operating activities 5 542 6 701 (17.3) Significant cash applications Dividend paid (2 171) (1 402) (54.9) BCX acquisition - (2 654) - VERPs and
Slide 43: Guidance
Financial overview 43 Guidance FY2017 FY2017 FY2018 guidance Actual guidance Net revenue Modest growth 7.9% N/A Operating revenue Mid-single digits EBITDA margin 23% - 25% 26.5% * 23% - 25% Capex to revenue 15% - 18% 21.1% 17% - 20% Net debt to EBITDA ≤1 0.5 ≤1 Mobile EBITDA breakeven Achiev
Slide 44: Conclusion
Financial overview 44 Conclusion > Second year of solid financial > Entering growth phase of our > We are prepared results transformation • Measured and focused > Shareholders handsomely capital expenditure a rewarded = Total shareholder > Challenging environment good platform for return = 38% • Low
Slide 45: Outlook
Outlook
Slide 46: An ‘extreme makeover’ to thrive in the changing landscape
Outlook 46 An ‘extreme makeover’ to thrive in the changing landscape In a changing landscape … … We are responding with an ‘extreme makeover’ > Shifting consumer demographics > Increasingly competitive > Modernise the > Mobile growth > Cloud computing > Mobile Ad > Unlock value industry network thro
Slide 47: Thank you
Questions Tomorrow starts today