Slide 1: Safaricom Limited FY14 Presentation
Safaricom Limited FY14 Presentation 12th May 2014
Slide 2: Disclaimer
2 Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentations may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or its contents. This presentation does no
Slide 3: Contents
3 Contents FY14 Highlights FY14 Financial Review Strategic Focus and Guidance
Slide 4: FY14 Highlights
4 FY14 Highlights • Strong commercial and financial performance across all segments and metrics • Continued investment and innovation in network and services • Capex investment of Kshs 27.8bn, up 12% o Significant improvements in voice and data service quality based on our ongoing Best Network in Ke
Slide 5: Strong financial performance
5 Strong financial performance TOTAL REVENUE +16% to Kshs 144.7bn VOICE SERVICE REVENUE +12% to Kshs 86.3bn NON-VOICE SERVICE REVENUE +28% to Kshs 52.1bn (SMS, BROADBAND & M-PESA) EBITDA +24% to Kshs 60.9bn NET PROFIT AFTER TAX +31% to Kshs 23.0bn FREE CASH FLOW +56% to Kshs 22.7bn PROPOSED DIVIDEND
Slide 6: Contents
6 Contents FY14 Highlights FY14 Financial Review Strategic Focus and Guidance
Slide 7: Delivering on strategy: Strong financial results
7 Delivering on strategy: Strong financial results Total revenue EBITDA Net income Free cash flow Kshs. Billion Kshs. Billion Kshs. Billion Kshs. Billion +16.4% +23.8% +31.2% +56.4% 144.67 60.94 23.02 22.69 124.29 49.24 17.54 14.51 FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14 More customers 16.4% growth
Slide 8: Strong revenue growth in the period
8 Strong revenue growth in the period FY14 Total revenue Kshs. Billion 16.4% • 16.4% growth in total revenue 144.67 124.29 • 11.1% growth in customer base to 21.6m 107.00 customers (19.4m in FY13) 94.83 • Voice service revenue growth of 11.6% and non-voice service revenue growth of 27.8% FY11 FY12 F
Slide 9: Service revenue: Growth across all segments
9 Service revenue: Growth across all segments 140.00 2.57 9.31 120.00 2.11 6.62 26.56 1.37 100.00 21.84 Fixed service revenue 5.22 13.62 0.84 4.54 16.87 Mobile data revenue 80.00 10.15 11.78 7.77 M-PESA revenue 7.54 60.00 SMS revenue 40.00 86.30 Voice revenue 77.33 63.50 68.96 20.00 - FY11 FY12 FY13
Slide 10: Lowest retail prices & MTR rate in sub-Saharan Africa
10 Lowest retail prices & MTR rate in sub-Saharan Africa Country Prepay Retail MTR Country Prepay Retail MTR Price per Minute Price per Minute (US c) (US c) (US c) (US c) Kenya $0.04 $0.013 Congo $0.16 $0.040 Angola $0.04 Burkina Faso $0.16 $0.099 Ghana $0.05 $0.014 Botswana $0.16 $0.033 Rwanda $0.0
Slide 11: Voice: Sustained growth momentum
11 Voice: Sustained growth momentum Voice service revenue • 11.6% growth in voice service revenue Kshs. Billion 11.6% • Improved prepay airtime distribution 86.30 77.33 68.96 o Top-up cards distributed to over 258,303 63.50 retail outlets and 40 own retail shops o 34.0% of airtime top-ups directly t
Slide 12: Strong growth in non-voice service revenue
12 Strong growth in non-voice service revenue Non-voice service revenue 27.8% • Non-voice service revenue grew 27.8% - Now Kshs. Billion 36% of total revenue 52.07 40.72 • Driven by increased customers and usage 31.24 • Revenue growth of: 24.70 • SMS +34.2% • Mobile data +40.6% • Fixed service +21.8
Slide 13: M-PESA: Driving financial inclusion
13 M-PESA: Driving financial inclusion • 21.6% growth in M-PESA revenue, driven by: M-PESA revenue Kshs. Billion 21.6% • 15.4% increase in 30 day active users to 12.2m 26.56 • 13.0% increase in registered customers to 19.3m 21.84 • Kshs 101.3bn of real time payments per month* 16.87 • Person to Pers
Slide 14: SMS: Attractive bundles and promos driving growth
14 SMS: Attractive bundles and promos driving growth • 34.2% growth in SMS revenue, driven by; SMS revenue Kshs. Billion 34.2% 13.62 • Affordable SMS bundles, 66% growth in SMS bundle revenue to Kshs 2.5bn 10.15 7.77 • 129% growth in SMS usage per customer 7.54 while average price per SMS declined b
Slide 15: Data: Customers, usage & devices driving growth
15 Data: Customers, usage & devices driving growth Mobile data & Fixed service revenue • Mobile data revenue growth of 40.6% driven by: Kshs. Billion • 34.1% growth in 30 day active mobile data 36.1% 11.88 users to 9.56m – now 44% of our customer base 8.73 • 16.1% increase in mobile data usage per 6
Slide 16: Sustained ARPU growth
16 Sustained ARPU growth Voice SMS M-PESA Mobile Data Service ARPU Kshs. Kshs. Kshs. Kshs. Kshs. +3.3% +25% +3.8% -3.3% +10.1% 558 55 184 191 90 507 337 348 87 44 FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14 FY13 FY14 11.0% growth in Increased 15.4% growth in 16.1% increase in 10.1% increase customers an
Slide 17: Direct cost control improves contribution margin
17 Direct cost control improves contribution margin FY Direct costs FY14 Direct costs breakdown Kshs. Billion Kshs. Billion 144.67 (10.68) (9.56) 52.0 (7.96) 44.0 47.2 38.0 (6.46) (5.57) (5.40) (5.36) 92.71 (0.97) FY11 FY12 FY13 FY14 • 10.2% increase in direct costs, lower than the 16.4% increase in
Slide 18: Continued focus on cost control initiatives
18 Continued focus on cost control initiatives FY OPEX Kshs. Billion 35 23.8% 25.5% • Operating costs as a % of total revenue 22.3% 22.4% 22.0% declined to 22.0% 30 20.5% • 14.0% increase in operating costs versus a 25 16.4% increase in total revenue 15.5% 20 • Operating cost saving initiatives focu
Slide 19: Strong growth in EBITDA
19 Strong growth in EBITDA EBITDA Kshs. Billion 35 32.0 30 28.9 26.9 25 22.7 22.3 20 18.8 16.9 14.8 15 10 5 0 H1 FY11 H2 FY11 H1 FY12 H2 FY12 H1 FY13 H2 FY13 H1FY14 H2 FY14 • 23.8% growth in FY14 EBITDA to Kshs 60.9bn • FY14 EBITDA margin improves by 2.5 ppt to 42.1%
Slide 20: Largest & Fastest Network in Kenya
20 Largest & Fastest Network in Kenya FY CAPEX Base stations Kshs. Billion 3140 29 27.0% 30.0% 2905 28 24.0% 2690 25.0% 2501 27 20.0% 19.2% 26 20.0% 1847 25 1604 15.0% 1439 24 27.78 1140 23 25.74 10.0% 25.48 24.88 22 5.0% 193 187 203 203 21 20 0.0% FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 CAPEX CAPEX
Slide 21: Improved cash generation
21 Improved cash generation FY Free Cash Flow FY Net Cash Kshs. Billion Kshs. Billion 60.94 17.62 (0.35) (11.25) (12.00) (0.61) 5.01 (27.78) 22.69 1.13 EBITDA Interest Tax paid Capex Working Free cash Cash at bank Corporate Bank Net cash paid capital flow bond borrowings • 56% growth in Free Cash Fl
Slide 22: Key Financials
Key Financials: FY 14 FY 13 GROWTH H2 FY14 H2 FY13 GROWTH Voice revenue 86.30 77.33 11.6% 44.34 40.07 10.7% Messaging revenue 13.62 10.15 34.2% 7.28 5.88 23.8% Mobile data revenue 9.31 6.62 40.6% 5.08 3.50 45.1% Fixed service revenue 2.57 2.11 21.8% 1.35 1.10 22.7% M-Pesa revenue 26.56 21.84 21.6% 1
Slide 23: Contents
23 Contents FY14 Highlights FY14 Financial Review Strategic Focus and Guidance
Slide 24: Strategy Overview
24 Strategy Overview • Best network in Kenya • Grow mobile and fixed data • Partner of choice for business • Deepen financial inclusion • Grow, retain and reward our loyal customer base • Grow youth appeal • High performing innovative organization
Slide 25: Deliver the Best Network in Kenya
25 Deliver the Best Network in Kenya What we have achieved: • Expanding coverage reach: 91% of population coverage by 2G network while 3G coverage is up to 61% • Mobile Broadband: high speed 3G data sites (42Mbps) increased to 51% • Successful LTE trials in 10 sites within Nairobi and Mombasa. 70Mbp
Slide 26: Sustained network improvement & expansion
26 Sustained network improvement & expansion Top priorities: • Complete the additional 640km of own fibre in key towns outside Nairobi • Deploy fibre to 900 commercial buildings in key metro areas in Kenya (Nairobi, Nakuru, Mombasa and Kisumu) • Increase the number of 3G sites of which 75% will be u
Slide 27: Grow Mobile Data
27 Grow Mobile Data What we have achieved: • Increased data customers by 34% to 9.6m • Increased the number of 3G devices on the network to 3.1m, of which 1.9m are smartphones by breaking price barrier jointly with handset manufacturers. • Increased total usage by 74% through content usage stimulati
Slide 28: Grow Fixed Data
28 Grow Fixed Data What we have achieved: • Fixed service revenue grew by 22% to Kshs 2.6bn • Number of fixed customer accounts grew by 4% • Fixed Voice connections increased by 24% • Launched unified communication services for the SME segment of our business • Re-launched our „Software as a Service
Slide 29: Deepen financial inclusion using M-PESA
29 Deepen financial inclusion using M-PESA What we have achieved: • Increased M-PESA outlets by 15,478 in the year, now at 81,025 • Launched Lipa na M-PESA: 122,000 merchants acquired; 24,137 are now active • Increased cashless FMCG distributors to 158 with a total of 1,271 distribution points • M-S
Slide 30: Retain market leadership
30 Retain market leadership Subscriber market share-Dec 2013 Voice traffic market share-Dec 2013 8.5% 2.6% 7.9% 7.2% 11.3% 16.5% 67.9% 78.2% Safaricom Airtel Orange Yu-Essar Safaricom Airtel Orange Yu-Essar Mobile data market share-Dec 2013 SMS market share-Dec 2013 7.3% 5.2% 0.4% 0.6% 3.4% 95.8% 14
Slide 31: Grow youth appeal
31 Grow youth appeal What we have achieved: Youthfulness attribute – by segment • Increase in youth appeal with overall brand 84% youthfulness growing to 83% from 69% since 70% 82% March 2013. 70% 82% 67% • Engagement with youth through activities and 67% 83% propositions: 83% 69% • Vuma online (WiF
Slide 32: Encourage further innovation
32 Encourage further innovation What we have launched in the last 12 months: • Lipa na M-PESA (cashless payments for goods & services) • Cashless FMCG distribution using M-PESA • Lipa Kodi (rental payments to landlords) • Chattitude and 10+10 for 10 (data bundles) • Vuma Online (WiFi in public trans
Slide 33: FY15 Guidance
33 FY15 Guidance Free Cash Flow: Expected to be in the range of Kshs 25bn - Kshs 26.5bn Free Cash Flow excludes the impact of any future M&A, license renewal fees, and spectrum purchases
Slide 34: FY14 Highlights
34 FY14 Highlights • Strong commercial and financial performance across all segments and metrics • Continued investment and innovation in network and services • Capex investment of Kshs 27.8bn, up 12% o Significant improvements in voice and data service quality based on our ongoing Best Network in K
Slide 35: Q&A
Q&A