Vodacom Group Limited · JSE:VOD
Vodacom — FY2003 Earnings Presentation
29 slides from Vodacom's earnings presentation, Jun 18, 2003
Slide 1: Vodacom Group Annual Results
Vodacom Group Annual Results 18th June 2003
Slide 2: Outline
Outline • Strategic Highlights • Group Financial Review 2
Slide 3: Disclaimer
This presentation has been prepared and published by Vodacom Group (Proprietary) Limited. Vodacom Group (Proprietary) Limited is a private company and as such is not required by the Companies Act of 61 of 1973, as amended, to publish its results. Vodacom Group (Proprietary) Limited makes no guarante
Slide 4: Strategic Highlights
Strategic Highlights Alan Knott-Craig Group Chief Executive Officer
Slide 5: Delivering on our strategy for growth
Delivering on our strategy for growth Short to medium term Continued South African growth potential • Leveraging SA position supported by carefully managed expansion for long term growth Medium to Potential returns from other African operations long term Underpinned by Æ Strong and experienced manag
Slide 6: Group highlights
Group highlights Strong customer Revenue growth 8.6 m 26.0% Strong Revenue revenue growth R19.8 bn 22.5% Operating Revenue profit R4.3 bn 19.6% Customers/employee Revenue 1,963 24.5% Capex to revenue Revenue 17.2% reduction of 9.3% points Innovative products Revenue “MyLife” At year end there were 7
Slide 7: Vodacom South Africa (Market share 57%)
Vodacom South Africa (Market share 57%) Total South African mobile market • Potential for further growth (thousands of customers) Æ 1800 Mhz spectrum issued Æ 4 Million free SIMs to be supplied over next 5 years 13,852 Æ Estimate the SA market at 19 million CAGR 43% 10,789 • Cell C expected to erode
Slide 8: Strong SA operational indicators
Strong SA operational indicators • Gross connections up 15.0% to a Vodacom SA customers and gross new high of 3.5 million connections (thousands) 7,874 Æ 84.6% of closing base is prepaid 6,557 Æ 18.2% of closing base is inactive 5,108 3,495 3,069 2,990 3,038 • Churn trends 1,884 Æ Contract churn at
Slide 9: Vodacom Tanzania (Market share 53%)
Vodacom Tanzania (Market share 53%) Customers (thousands) and ARPU • Customer growth of 96.1% (US$) Æ 98.4% prepaid 31 Æ 2,055 public phones 447 27 • ARPU decline of 18.5% to $22 228 22 82 2001 2002 2003 • Market overview Customers ARPU Æ Market leader with 53% market share, Celtel recently aggressi
Slide 10: Vodacom Congo (Market share 44%)
Vodacom Congo (Market share 44%) • Official launch May 2002 Customers (thousands) Ç 1,074% 248 • Strong customer growth Æ 95.7% prepaid Æ 6,828 public phones 21 • ARPU of $20 2002 2003 • Market overview Market analysis 6% Æ We have more than doubled the market size in 11 months since launch Æ Estima
Slide 11: Vodacom Lesotho (Market share 80%)
Vodacom Lesotho (Market share 80%) • Customer growth of 35% Customers (thousands) and ARPU (R) Æ 93.8% prepaid 144 77 Æ True prepaid service was installed in 2002 57 104 22 • ARPU decline of 28% to R104 2001 2002 2003 Customers ARPU • Market overview Market analysis Æ Launch of a second operator dur
Slide 12: Slowing capital expenditure
Slowing capital expenditure • South Africa Group capex spend (Rm) Æ Quality network with national GPRS 4,279 coverage 36.2% 3,399 3,184 Æ Limited 1800 network installed in Gauteng and Western Cape 2,032 Æ Cumulative capex R16.6 bn 17.2% 26.5% 24.0% • Tanzania Æ 6% of land area and 25% of 2000 2001 2
Slide 13: Financial Review
Financial Review Leon Crouse Group Finance Director
Slide 14: Financial Highlights
Financial Highlights Current year Previous year EBITDA margin Revenue 33.9% 35.3% Operating profit margin Revenue 21.9% 22.4% Free cash flow Revenue R1.9 bn (R0.1bn) Net debt to equity Revenue 33.6% 65.5% ROA1 Revenue 18.0% 17.5% At year end all our African operations were profitable at the operatin
Slide 15: Group revenue analysis
Group revenue analysis Total revenue (Rm) Revenue analysis (Rm) (1.9%) (2.7%) Revenue Ç Ç Ç 2.7% 1.9% excl. handsets 35.4% 29.3% 20.6% (10.1%) 11.5% Ç Ç Ç 38.7% 21.7% 22.5% 19,779 16,151 13,276 26.8% (26.6%) 9,572 57.1% (58.7%) Airtime Interconnection Equipment sales International airtime Other sale
Slide 16: Group revenue analysis (Rm)
Group revenue analysis (Rm) 2002 2003 % change South Africa 15,410 18,544 20.31 Tanzania 657 880 33.9 Congo 14 259 1,750.0 Lesotho 70 96 37.1 Vodacom Group 16,151 19,779 22.5 2002 2003 Other African operations Revenue contribution 4.6% 6.2% 1 Growth excluding equipment sales is 18.1% 16 African cont
Slide 17: SA data revenue
SA data revenue • Revenue from data services makes Data revenue (Rm) up 3% of total revenue • Strong penetration of SMS use Ç Ç 50.4% 45.3% Æ Contract 73% 581 Æ Prepaid 42% • SMS usage increased 64.7% to 1.5 billion for the year 400 • Stimulated by new tariff packages such as 4U 266 • Impact of MyLi
Slide 18: Group operating expenses
Group operating expenses Total operating expenses (Rm) Operating expenses analysis (Rm) 7.7% (7.6%) 6.6% (9.1%) Ç Ç Ç 48.8% 16.9% 23.3% 15,449 15.4% (16.5%) 12,530 10,723 7,208 14.4% 55.9% (11.0%) (55.8%) Other direct network operating costs Payments to other operators Depreciation and amortisation
Slide 19: Operating profit/(loss) analysis (Rm)
Operating profit/(loss) analysis (Rm) 2002 2003 % change South Africa 3,627 4,290 18.3 Tanzania 134 187 39.6 Congo (20) (117) (485.0) Lesotho 12 4 (66.7) Holding companies (132) (34) 25.8 Vodacom Group 3,621 4,330 19.6 2002 2003 Other African operations Revenue contribution 2.2% (0.1%) Other African
Slide 20: EBITDA analysis (Rm)
EBITDA analysis (Rm) 2002 2003 % change Vodacom South Africa 5,567 6,423 15.4 Vodacom Tanzania 231 334 44.6 Vodacom Congo (12) (49) (308.3) Vodacom Lesotho 31 26 (16.1) Holding companies (126) (30) 23.8 Vodacom Group 5,691 6,704 17.8 2002 2003 Other African operations Revenue contribution 3.6% 3.5%
Slide 21: Factors that affect the trends
Factors that affect the trends • More conservative accounting Handset sales (Rm) policies than our peers Ç È Ç 60.2% 20.3% 39.2% • Change in traffic mix negatively 2,042 2,264 1,627 affected operating profit 1,275 • Fluctuating, low margin handset 2000 2001 2002 2003 sales affect revenue and margins
Slide 22: Results impacted by currency fluctuations
Results impacted by currency fluctuations Adjusted profit after tax (Rm) • Non-recurring sale of non-core assets Ç Ç Ç 22.0% 34.6% 27.0% 2,667 • A more rule based approach to 2,101 accounting has been adopted 1,280 1,561 Æ IAS39 2000 2001 2002 2003 Æ Effect of currency revaluation Excluding after ta
Slide 23: Profitability and margins
Profitability and margins Margins (%) Adjusted Margins (%) 36.2% 35.3% 34.8% 34.9% 33.9% 33.9% 33.2% 31.6% 24.7% 23.3% 22.4% 21.9% 22.1% 21.9% 20.8% 19.2% 14.7% 13.7% 13.4% 13.5% 13.0% 11.2% 11.8% 9.9% 2000 2001 2002 2003 2000 2001 2002 2003 EBITDA margin Adjusted EBITDA margin Operating profit marg
Slide 24: Increasing efficiencies
Increasing efficiencies • Improving efficiencies SA customers per employee Æ Customers per employee ratio at highest level Ç Ç Ç 64.2% 36.5% 18.7% Æ Driving capex to revenue ratio down 2,017 1,699 Æ Indirect costs contained 1,245 758 2000 2001 2002 2003 • Lower costs Other African customers per Æ Ne
Slide 25: Strong cashflows and balance sheet
Strong cashflows and balance sheet Operating cash flow (Rm) Net debt to EBITDA (%) È È È Ç Ç Ç 93.9% 30.8% 0.2% 28.7% 46.6% 32.7% 8.6% 63.1% 62.9% 34.2% 6,721 6,188 2000 2001 2002 2003 Net debt includes interest and non-interest bearing debt, shareholder loans, bank overdraft net of cash and cash eq
Slide 26: Net debt composition and maturity
Net debt composition and maturity 2004 2005 2006 2007 2008 >2009 Total SA finance leases 13.5 28.3 49.6 77.6 111.8 604.1 884.9 Vodacom Tanzania 65.9 84.6 108.7 111.7 58.7 165.7 595.3 Vodacom Congo 206.7 335.7 - - - - 542.4 SA shareholders loans 920.0 - - - - - 920.0 Net bank and cash (647.5) (647.5)
Slide 27: Net debt profile
Net debt profile • We aim to secure non-recourse Net debt profile financing for all other African operations 21.8% 21.9% • In South Africa our net debt comprises almost entirely of finance lease liabilities and shareholders loans • As we only proportionately 17.8 consolidate Vodacom Congo, 49% of th
Slide 28: Shareholder distributions
Shareholder distributions • Repaying R920m shareholder Shareholder distributions (Rm) loans at June 30, 2003 Ç Ç Ç 215.8% 16.6% 3.2% • Paying an interim dividend in September 2003 • Principle of approximately 3 times cover to decrease in the future 600 600 480 202 158 168 144 2000 2001 2002 2003 Int
Slide 29: Questions?
Questions?