Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — H1 FY2006 Earnings Presentation
40 slides from Telkom Sa Soc's earnings presentation, Nov 23, 2005
Slide 1: Telkom Group Interim Results
Telkom Group Interim Results for the six months ended September 30, 2005 14 November 2005
Slide 2: Forward-looking statements
All statements contained herein, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of the Telkom Group, that are not statements of historical fact constitute “forward-looking statements” within the meaning of the US Private Securities Litigatio
Slide 3: Chief officers
Chief Operating Officer Reuben September Chief Financial Officer Kaushik Patel Chief Corporate Affairs Officer Mandla Ngcobo Chief officers Chief Executive Officer Papi Molotsane
Slide 4: Group Highlights
Group Highlights
Slide 5: Financial achievements
Financial achievements 9.9% growth in Group operating revenue 44.5% Group EBITDA margin 37.3% growth in Group operating profit 46.3% growth in basic earnings per share total dividend of 900 cents per share paid on 8 July 2005 35% increase in headline earnings per share to 775.9 cents per share R1.5
Slide 6: Group net profit drivers
R1,247bn Group net profit drivers ZAR million
Slide 7: Delivering on strategic objectives
Delivering on strategic objectives Fixed line operating profit up 29% Customer growth and retention 32% growth in managed data network sites 42% growth in total mobile customers 161% growth in ADSL services Operational excellence 22% improvement in fixed lines per employee 8% reduction in vehicle fl
Slide 8: Regulatory developments
VANS regulations Tariff regulation Electronic Communications Bill (Convergence Bill) Mobile prices S27 enquiry Pricing colloquium Regulatory developments VANS regulation published in May 2005 Final regulation approved by Minister in August 2005 Productivity factor increased from 1.5% to 3.5% Tariffs
Slide 9: Fixed Line Business
Fixed Line Business
Slide 10: Expanding services and improving efficiencies
Expanding services and improving efficiencies 17.5% growth in fixed-line data revenue Increased broadband adoption Tariff rebalancing Fixed-line EBITDA margin of 46.7% Fixed-line employee expenses reduced by 9.6% 8.1% reduction in vehicle fleet
Slide 11: Improved service levels
Improved service levels Fulfilment (Installations) Under pressure due to high demand for certain products Using external resources to compliment high demand areas Self install option for ADSL planned Implementation of operating support system Assurance (Repair) Investment to increase resilience resu
Slide 12: Strong data and ADSL growth
Strong data and ADSL growth 32% growth in managed data network sites to 14,316 161% growth in ADSL services to 95,290 31% growth in mobile leased facilities 73% growth in wholesale internet leased lines (64kbit/s) to 15,600 18% growth in data revenue ZAR million
Slide 13: Increasing broadband penetration
Increasing broadband penetration DSL 192 and DSL 384 for R270 and R359 per month, respectively (effective August 1, 2005) Price reductions The ADSL challenge in South Africa Long local loop length Copper quality The ADSL solution Plans to introduce self install option Improve affordability through i
Slide 14: Increasing PC penetration in South Africa
Increasing PC penetration in South Africa Package includes Mecer PC or notebook Telkom Surfmore TelkomInternet 36 month contract Benefits Annuity Income Long term consumer contracts Multiple products 4,297 sold from launch to 31 October 2005 High Specifications bundles most popular
Slide 15: Value adding ICT solutions provider
Value adding ICT solutions provider Providing integrated solutions Tailor made solutions Manage and operate networking services throughout South Africa Partnering Success in winning network outsourcing contracts
Slide 16: Reducing cost of business in SA
Reducing cost of business in SA Average tariff adjustments for September 2005 3% reduction instead of allowed increase of 0.1%
Slide 17: Increase in international outgoing traffic
23% (22.3%) Increase in international outgoing traffic 28% reduction on average in international long distance tariffs from January 1, 2005 ILD revenue In ZAR million ILD minutes In millions
Slide 18: Price reductions in long distance calls
(0%) (10.2%) Price reductions in long distance calls DLD revenue In ZAR million DLD minutes In millions 10% reduction in domestic long distance tariffs from September 1, 2005 Domestic long distance call rate 80 cents per min
Slide 19: Investing for new services
Investing for new services Capex for customer growth ADSL services New line growth – e.g. gated communities Data connectivity and business systems Links for the mobile operator 3G rollouts Capex to evolve the network Evolving transport network to high speed and improved reliability Softswitch deploy
Slide 20: sor
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Slide 21: Strong performance from the mobile segment
Strong performance from the mobile segment 41.8% growth in total customers 23% growth in mobile operating revenue to R8.1 billion 32.9% growth in EBITDA to R2.8 billion 34.4% EBITDA margin 66.8% growth in operating profit to R2.1 billion In thousands
Slide 22: Leading mobile operator in SA
39% 56% Leading mobile operator in SA 27.7 million Estimated mobile customers in SA Customers In thousands ARPU In ZAR Gross connections In thousands Churn % Estimated market share at 30 September 2005
Slide 23: Successful launch of 3G service in SA
36% Successful launch of 3G service in SA 52.6% growth in data revenue to R447 million SMSs transmitted In billions Active users on network
Slide 24: Strong mobile growth outside SA borders
56% Strong mobile growth outside SA borders 3.3 million mobile customers outside of South Africa Customers In thousands ARPU per month In ZAR
Slide 25: Group Financials
Group Financials
Slide 26: Group profitability
Group profitability 61.9 Investment income 115.8 Other income 46.3 792.7 541.8 Basic earnings per share (cents) 20.4 10,438 8,668 EBITDA 41.1 4,281 3,034 Net profit 65.2 (2,708) (1,639) Taxation (20.3) (745) (935) Finance charges 37.3 7,517 5,474 Operating profit 1.4 (16,226) (15,997) Operating expe
Slide 27: Segment contribution
Segment contribution September 30, 2005 OPERATING REVENUE OPERATING PROFIT PROFIT FOR THE PERIOD after inter-segmental eliminations
Slide 28: Fixed line operating revenue
4.3% 7.4% (0.7%) 17.5% 9.4% 0.8% Fixed line operating revenue Fixed-line operating revenue (before inter-segmental eliminations) ZAR million Strong data growth impacted by lower tariffs
Slide 29: Fixed line operating expenses
(3.2%) 6.0% (4.9%) (7.1%) (5.6%) (1.0%) (9.6%) Fixed line operating expenses Fixed-line operating expenses (before inter-segmental eliminations) ZAR million Lower employee costs with cost discipline maintained across all categories
Slide 30: Fixed line profitability
Fixed line profitability 46.7 41.8 EBITDA margin (%) 16.5 7,656 6,574 EBITDA 32.9 26.7 Operating profit margin (%) 28.5 5,404 4,207 Operating profit % Sept’05 Sept’04 ZAR million Consistently strong operating performance
Slide 31: Mobile profitability
23.0% 12.6% Mobile profitability Mobile operating revenue ZAR million Mobile operating expense 34% EBITDA margin 26% operating profit margin (Before inter-segmental eliminations)
Slide 32: Strengthened group balance sheet
Strengthened group balance sheet ZAR million 1.4 53,385 52,651 Total equity and liabilities (13.1) 14,116 16,246 Current liabilities (11.6) 10,935 12,362 Net debt 8.2 14,137 13,061 Non-current liabilities 7.7 25,132 23,344 Capital and reserves 1.4 53,385 52,651 Total assets (7.7) 10,517 11,390 Curre
Slide 33: Capital investment
49.2% Capital investment Capital expenditure In ZAR millions Capex to revenue % Maintained capital expenditure to revenue within guidance range of 12% - 15%
Slide 34: Group cash flow
Group cash flow ZAR million (54.8) (32.6) 2,645 2,105 3,927 Cash at end of period Free cash flow (101.2) (1,344) (668) Net decrease in cash 121.5 (3,988) Financing activities (35.3) (3,078) (2,275) Investing activities (84.4) 5,595 Cash from operating activities (698.7) (4,848) (607) Dividend paid 1
Slide 35: Our Future
Our Future
Slide 36: Our Vision
Our Vision is to be a leading customer and employee centred ICT solutions provider
Slide 37: Shifts in strategic emphasis
Shifts in strategic emphasis Enhancing customer satisfaction through customer centricity Retaining revenue and generating growth Evolving the network to a next generation network in a order to support profitable growth through prudent cost management Engage our employees Reposition Telkom stakeholde
Slide 38: Customer centricity and growth engines
Customer centricity Customer service excellence Full spectrum of ICT solutions Converged solutions services Growth engines Broadband acceleration Data services Triple play services Cellular & Fixed Mobility Outside SA Stakeholder relations Delivering shareholder value Honest and transparent Mutually
Slide 39: Financial outlook for March 2006
Financial outlook for March 2006 2006 EBITDA margin target is to achieve 40% and above EBITDA margin is expected to be impacted by the introduction of competition, price reductions in data services and more aggressive rollout of IP network Capital expenditure in 2006 is expected to be closer to the
Slide 40: Investor relations
Investor relations t elkomir@telkom.co.za Tel: +27 12 311 5720 Fax: +27 12 311 5721