Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — H1 FY2024 Earnings Presentation
52 slides from Telkom Sa Soc's earnings presentation, November 2023
Slide 1: Group Interim Results Presentation
Seamlessly connecting our customers to a better life Telkom SA SOC Ltd Group Interim Results Presentation For the six months ended 30 September 2023
Slide 2: Execution & results
Seamlessly connecting our 1 customers to a better life Execution & results Interim Results Presentation 2023 2
Slide 3: A milestone in our strategic journey
A milestone in our strategic Over the last journey six months we’ve been executing on our aspiration to position Telkom as an InfraCo that is the backbone of SA’s digital Today future built we are starting on our unrivalled to see the early assets. results of this strategy. Interim Results Presentat
Slide 4: The early results of our strategy in motion
The early results of our strategy in motion Strong operational Improved financial Delivering on strategic performance performance imperatives • Mobile and fixed data traffic up • Mobile and Openserve fixed • Exclusivity with preferred bidder - +23% and +18% respectively data revenue up +10% and for
Slide 5: Group highlights - total operations
Group highlights - total operations Group Free revenue cash flow up by 2.5% to HEPS improved 74.9% R21.8 million to negative up 46.7% R474 million to 195.0 cents per share EBITDA Net debt up 1.7% with Basic to EBITDA EBITDA margin at 23.1% EPS at 1.8x up 52.1% to 200.2 cents per share Interim Result
Slide 6: Business Overview
Seamlessly connecting our 2 customers to a better life Business Overview Interim Results Presentation 2023 6
Slide 7: Mobile highlights
Seamlessly connecting our customers to a better life 10.3% Mobile data revenue increase 14.6% EBITDA growth 22.9% Mobile data traffic growth Fibre revenue 31.2% growth Interim Results Presentation 2023 7
Slide 8: Continued Mobile improvement in the face of headwinds
Continued Mobile improvement in the face of headwinds Mobile Operating Revenue Mobile Data revenue Mobile EBITDA/EBITDA margin Rm Rm Rm 3.5% 10.3% 1.9% 1 569 231 11 092 28.8% 1 671 259 10 713 1 396 416 10 659 22.5% 6 964 22.2% 6 374 6 317 2 641 2 520 2 639 3 066 9 293 8 847 8 783 2 457 2 412 4 323 3
Slide 9: Mobile broadband traffic continues to grow
Mobile broadband traffic continues to grow Broadband subscribers Broadband traffic Mobile sites 4.5G integrated sites ‘000 Petabytes integrated 10.5% 22.9% 4.1% 2.0% 12 195 7 684 6 804 6 669 676 5 646 7 384 550 11 035 482 10 642 6 910 H1 FY22 FY23 FY24 H1 FY22 FY23 FY24 H1 FY22 FY23 FY24 H1 FY22 FY2
Slide 10: High 4G device penetration and growing 5G base
High 4G device penetration and growing 5G base 4G terminals 82% • 89% of customers are 4G and 5G • 40% of voice customers on Voice over LTE (VoLTE) 2G terminals 5G terminals • No legacy 2G network, all 2G 2% 7% terminals use roaming • >100% growth of active 5G sites to 413 sites 3G terminals 9% Inte
Slide 11: NGN highlights
Seamlessly connecting our customers to a better life NGN 74.4% revenue Up from 67.2% contribution NGN revenue 6.9% growth 31.8% EBITDA Margin Up from 29.3% Highest market connectivity 46.8% rate Interim Results Presentation 2023 11
Slide 12: Impressive NGN revenue growth at 7%
Impressive NGN revenue growth at 7% Revenue NGN Revenue1 Revenue Contribution split EBITDA & EBITDA margin Rm Rm Rm 2.7% 6.9% 5.6% 33,5% 6 720 31,8% 29,3% 6 434 4 778 26% 6 261 33% 3 500 43% 30, 0% 4 453 3 000 20, 0% 2 249 1 990 1 884 4 059 2 500 10, 0% 0, 0% 2 000 74% - 10,0% 67% 1 500 57% - 20,0%
Slide 13: Connect-led strategy continues to deliver market leading connectivity rate – 47%
Connect-led strategy continues to deliver market leading connectivity rate – 47% Homes Passed with Fibre Fibre Homes Connected Fixed line broadband data Fixed line broadband consumption services Petabytes Subscribers 20.6% 22.4% 17.6% 13% 1 158 761 25% 1 081 41% 542 598 960 801 919 700 000 443 469 8
Slide 14: Modernisation of network transforming service delivery
Modernisation of network transforming service delivery Net Promoter Score (NPS) Kilometres Travelled Assurance 13% 29.9% visits down 30% 3.5 million 72.1 with improved network quality Less kilometres Continued excellence in travelled Net Promoter Score (NPS) Access Network Availability Transport Net
Slide 15: IT business highlights
Seamlessly connecting our customers to a better life 10.3% Growth in IT Business revenue Growth in IT 23.4% hardware & software revenue Interim Results Presentation 2023 15
Slide 16: IT revenue growth offset legacy Converged Communications revenue declines
IT revenue growth offset legacy Converged Communications revenue declines Revenue EBITDA & EBITDA margin Rm Rm 0.7% 12.9% 837 842 6 996 7 043 6 939 733 2 851 3 195 3 596 12,1% 4 192 3 801 12,0% 10,4% 3 343 IT Business Converged Comms H1 FY22 FY23 FY24 H1 FY22 FY23 FY24 lnterim Results Presentation 2
Slide 17: IT business performance driven by IT services and related hardware and software growth
IT business performance driven by IT services and related hardware and software growth IT Business revenue Next-generation IT offerings Converged Communications Rm Rm revenue 10.3% 4.1% Rm 10.8% 4 192 538 3 596 1 919 1 843 3 801 455 3 195 1 764 485 2 851 3 343 930 872 827 1 497 1 386 1 309 Enterpris
Slide 18: Swiftnet highlights
Seamlessly connecting our customers to a better life EBITDA margin 74.8% Productive portfolio 4 008 Interim Results Presentation 2023 18
Slide 19: Disposal of Swiftnet - transaction rationale
Disposal of Swiftnet - transaction rationale Masts & Towers not strategic for InfraCo • Transaction allows Telkom to focus on its core business whilst still allowing for company access to towers through market related commercial arrangements • Telkom able to retain upside through FTTT and small cell
Slide 20: Earnings growth at strong margins
Earnings growth at strong margins Revenue EBITDA & EBITDA margin Productive portfolio growth Rm Rm (# of sites) 1.2% 6.3% 4 008 78,9% 674 660 74,8% 652 +57 3 945 69,5% +51 -45 5 5 0 8 0 , % 153 193 240 -20,6% 7 0 , % 5 0 6 0 , % 4 5 0 5 0 , % 4 0 532 4 0 , % 3 5 0 499 459 488 467 434 3 0 , % +6,8% T
Slide 21: Financial overview
Seamlessly connecting our 3 customers to a better life Financial overview Interim Results Presentation 2023 21
Slide 22: Group financial performance
Group financial performance Total operations Revenue BEPS 2.5% 52.1% R21.8bn 200.2 cps EBITDA HEPS 1.7% 46.7% R5.0bn 195.0 cps 0.2 EBITDA margin Net debt to EBITDA ppts 0.1x 23.1% 1.8x Profit after tax Adjusted Free Cash Flow (FCF)* 52.3% 130.4% R1.0bn R0.6bn * Excluding R1 051 million restructuring
Slide 23: Group revenue supported by growth in new generation revenue
Group revenue supported by growth in new generation revenue Total operations H1 FY23 H1 FY24 Interconnection Subscriptions Usage Revenue by stream Rbn 8.1% 2.5% R1.3bn 4.1% 17,2 21,8 21,2 15,9 11,0 10,6 14.1% 11.2% 23.2% 21.2% 22.8% 12.9% (R0.8bn) 5,3 3,5 4,5 3,1 2,7 2,2 2.3 1,8 1.8 1,4 1,4 1,2 0.1
Slide 24: EBITDA stable
EBITDA stable EBITDA analysis Total operations Rm EBITDA Margin H1 FY22 H1 FY23 H1 FY24 EBITDA largely impacted by: 1.7% 0.2 ppts • Total data revenue growth of R779 million; • IT hardware and software growth of R315 million; 5 978 79,0% 78,8% • Total voice and line rental revenue decline of R668 mi
Slide 25: Impact of growing mobile post-paid sales on mobile costs normalising
Impact of growing mobile post-paid sales on mobile costs normalising Direct expenses Mobile revenue Costs to serve* Direct expenses Mobile cost efficiency ratios Rm 3.6% Rbn (R223m) 6 335 43.3% 6 112 125 86 12 11,0 11,0 10,6 41,4% 1 2 ,0 2 9 ,5 % 1 0 , 2 9 ,0 % 39,6% 29,0% 8 ,0 2 8 ,5 % 4,4 4,8 6 ,0
Slide 26: Capex – Continue to adequately invest in growth areas
Capex – Continue to adequately invest in growth areas Capex spend and intensity Capex investments allocation Rm H1 FY24 Network expansion H1 FY24 H1 FY23 H1 FY22 2% Capex spend 3% Fibre to the home 1 158 761 960 801 707 399 5% Capex to revenue (%) Homes connected 542 598 443 469 331 735 38% Active f
Slide 27: Strong FCF improvement from underlying business
Strong FCF improvement from underlying business Free cash flow (FCF) movement H1 FY24 vs H1 FY23 H1 H2 H1 Rm H1 FY24 H2 FY23 H1 FY23 % Cash burn rate FY24 FY23 FY23 Cash receipts from customers before working capital impact 22 687 22 202 21 220 6.9 Closing cash balance 3 585 3 469 2 499 Movement in
Slide 28: Cash generated from operations
Cash generated from operations Cash generated from operations movements Rm R872m 95.8% R2 728m 626 365 246 1 051 261 339 Decrease in contract assets 54 5 575 412 Decrease in trade and other receivables 4 524 2 847 H1 FY23 Profit before tax Net finance charges Non-cash items Increase in cash Improvem
Slide 29: Strong balance sheet with enough headroom to finance growth
Strong balance sheet with enough headroom to finance growth Total operations H1 FY24 H1 H1 vs FY23 Credit Loan H1 H1 Rm FY24 FY23 FY23 % matrix covenants FY24 FY23 FY23 Cash balances 3 585 3 469 2 499 3.3 Net debt to Not exceed 1.8x 1.8x 1.7x Interest bearing debt 14 804 14 356 13 113 (3.1) EBITDA 3
Slide 30: Financial framework to drive sustainable growth
Financial framework to drive sustainable growth Medium term guidance FY2023 – H1 FY24 Inputs Drivers Outputs FY2025 (CAGR) Actual * New revenue streams Low to mid single digit 2.5% (Fibre, Mobile & IT businesses) Revenue growth Sustainable cost management program Annual (staff optimisation, roaming,
Slide 31: Outlook & Strategic Actions
Seamlessly connecting our 4 customers to a better life Outlook & Strategic Actions Interim Results Presentation 2023 31
Slide 32: Outlook
Outlook Challenging economic Guidance unchanged environment • Data consumption drives growth • Marginal GDP growth – 0.6% (Q2 2023) • Prioritising cash generation • Inflationary headwinds • Ongoing opex rationalisation • Added cost of load shedding • Capex - prioritising growth areas and • Weaker Ra
Slide 33: Strategic action priorities
Strategic action priorities ONE TWO THREE Short-term Mid-term Long-term Focus Focus Focus is on is to is to RELEASING IMPROVE TRANSFORM cash the return the way in on assets which Telkom has ... through disposal of been operating in non-core assets and ... through a deliberate recent years OPEX ratio
Slide 34: Transforming to value creation for shareholders
Transforming to value creation for shareholders • At final stages of disposal • Market sounding exercises concluded process for Swiftnet • Focused on repositioning Telkom as InfraCo • Telkom entered into exclusivity with a preferred bidder • Future growth plans in place for assets • Accordingly, Swi
Slide 35: Delivering value through OneTelkom as an InfraCo
Delivering value through OneTelkom as an InfraCo • Focused on building, owning and maintaining the passive infrastructure enabling connectivity Drive capital efficiency • Provides mission critical digital infrastructure - fibre network, data centres, satellite, marine and cables to core customer bas
Slide 36: Transforming into the Telkom of Tomorrow
Transforming into the Telkom of Tomorrow Telkom’s transformation to InfraCo Journey to Culture refresh & Consolidate core end of 2025 leadership alignment assets into InfraCo Disposal of Journey to Consolidate Telkom of non-core 2025 assets Tomorrow assets Interim Results Presentation 2023 36
Slide 37: Q&A Thank you
Seamlessly connecting our customers to a better life Q&A Thank you Interim Results Presentation 2023 37
Slide 38: Annexures
Seamlessly connecting our 5 customers to a better life Telkom SA SOC Ltd Annexures Strategy Internal Confidential Use Interim Results Presentation 2023 38
Slide 39: Telkom's true competitive advantage
Telkom’s true competitive advantage Multiple digital ecosystems supported by one backbone Fibre +170,000 km of fibre InfraCo will deliver efficient (Fixed network) 1.2 million homes passed and cost-effective solutions (across BUs) to customers, while leveraging our key Mobile +7 500 4.5G integrated
Slide 40: Seamlessly connecting South Africa to a better life
Seamlessly connecting South Africa to a better life An essential enabler and catalyst for growth The importance of • Without essential digital infrastructure, there is no digital infrastructure effective digital economy was illustrated during • Digital infrastructure is potent economic accelerator l
Slide 41: NGN data-led strategy drives our investment case
NGN data-led strategy drives our investment case High demand sector with growing addressable market Services and products over the medium to long-term Ability to access entire market with • High data consumption diverse tailored products and • Growing population base services Leading digital infrast
Slide 42: ESG highlights
ESG highlights 34% female representation at management/ leadership roles and 33% overall in our permanent 54% workforce 460 250 SMMEs with presence of target annual on our Yep digital 4.2% reduction in carbon marketplace aimed at emissions achieved due growing and enhancing to decarbonisation reach
Slide 43: Business Unit performance
Seamlessly connecting our customers to a better life Business Unit performance Interim Results Presentation 2023 43
Slide 44: Mobile highlights
Seamlessly connecting our customers to a better life 10.3% Mobile data revenue increase 14.6% EBITDA growth 22.9% Mobile data traffic growth Fibre revenue 31.2% growth Internal Confidential Use Interim Results Presentation 2023 44
Slide 45: NGN technologies driving growth
NGN technologies driving growth Operating Revenue Fixed-line NGN vs legacy split Mobile service revenue EBITDA/EBITDA margin Rm Rm Rm 1.4% 5.8% 14.6% 12 960 1 655 237 12 984 12 805 19.4% 9 293 8 847 8 783 15.4% 2 130 171 1 891 201 13.6% 25% 2 329 39% 14ppt 15ppt 2 473 2 466 54% 2 515 11 092 10 713 1
Slide 46: Good performance from Mobile despite marginal growth of customer base
Good performance from Mobile despite marginal growth of customer base Subscriber growth ARPU ‘000 R 1.5% 3.7% 2 966 18 286 2 862 18 024 2 563 16 259 217 206 182 92 88 15 320 15 162 85 13 696 Post-paid Post-paid Pre-paid 67 64 64 Pre-paid Blended H1 FY22 FY23 FY24 H1 FY22 FY23 FY24 Interim Results Pr
Slide 47: NGN highlights
Seamlessly connecting our customers to a better life NGN 74.4% revenue Up from 67.2% contribution NGN revenue 6.9% growth 31.8% EBITDA Margin Up from 29.3% Highest market connectivity 46.8% rate Internal Confidential Use Interim Results Presentation 2023 47
Slide 48: Evolution of new generation revenue
Evolution of new generation revenue Carrier Revenue Enterprise Revenue Broadband Revenue Voice Revenue Rm Rm Rm Rm 4.0% 3.4% 20.3% 26.9% 2 032 3% 2 146 2 092 1 648 818 805 796 17% 11% 1 918 1 502 18% 13% 1 517 1 423 4% 10% 16% 20% 26% 8% 1 107 18% -42.9% -28.3% -18.7% -21.2% -36.7% -38.2% 30% 22% 14
Slide 49: Connect-led strategy delivers highest connectivity rate – 46.8%
Connect-led strategy delivers highest connectivity rate – 46.8% Homes Passed with Fibre Fibre Homes Connected Enterprise1 Carrier1 Connectivity Rate Business Circuits Circuits 20.6% 22.4% 3.9% 1 158 761 19 946 19 937 46,8% 18 794 46,9% 42 444 46,2% 40 861 39 758 960 801 700 000 40, 0% 600 000 707 39
Slide 50: Fixed broadband evolution
Fixed broadband evolution Fixed line broadband data Fixed line broadband Fixed line broadband consumption services connections Petabytes Subscribers Access 17.6% connections 6.4% (‘000) 13% 25% 1 081 15% 659 619 41% 600 919 809 27% 46% 87% 75% 85% 59% 73% 54% Below 20Mbps Legacy Access 20Mbps and hi
Slide 51: Fibre on demand strategy aligned to future 5G enablement
Fibre on demand strategy aligned to future 5G enablement Openserve Pole and fibre to deploy low latency small cells Partnership with 5G operators to leverage the Openserve PON XGS-PON network and fibre for 5G rollout Enterprise PON Consumer SMB enabled node Potential to reduce backhaul cost Broadban
Slide 52: Property sale and disposals
Seamlessly connecting our customers to a better life Property sale R35m proceeds realised Property disposals R304m concluded for Gyro and Telkom properties Property development opportunities at investment partnership stage Interim Results Presentation 2023 52