Slide 1: Safaricom Limited FY16 Results Presentation
Safaricom Limited FY 16 Results Presentation 11 May 2016 1
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 FY 16 Highlights FY 16 Financial Review Strategic Focus and Guidance
Slide 4: FY 16 Highlights
4 FY 16 Highlights • Maintained leading position as Kenya’s most admired brand, with an overall brand equity score of 89%* and a Net Promoter Score of 66%** • Rolled out a new Regional Sales and Operations structure • Continued investment in network, IT infrastructure and innovation • Significant im
Slide 5: What we have achieved…Cont'd
5 What we have achieved…Cont’d • Launched segmented way of marketing to drive customer centricity in our propositions development • Invested in the customer by optimizing the customer Customer First experience journey o “Hakikisha” (M-PESA name checking) o Free M-PESA E-statements to customers o Inc
Slide 6: What we have achieved…Cont'd
6 What we have achieved…Cont’d Mobile Data • Grew 30 day active data users to 14.1m up 21.5% • Mobile data penetration now at 53.1% of total base • Smartphone users have increased to 7.8m up 128% Relevant • More affordable data plans, usage up 112% Products • Entry level 3G smart phone now below US$
Slide 7: What we have achieved…Cont'd
7 What we have achieved…Cont’d Deepening Financial Inclusion • Continued M-PESA growth, with 30 day active users at 16.6m, up 19.8% Relevant Products • Grew international money transfers to Kshs 13.1bn, up 64% • Continued growth of cashless payments • Increased uptake of our savings and loans produc
Slide 8: What we have achieved…Cont'd
8 What we have achieved…Cont’d Partner of choice for business • Continued focus as a partner of choice for business Supporting Innovations Relevant • Funding the next big innovations through our Spark Products Fund • Simplifying access to APIs to boost local development • MTIBA: Partnership deliveri
Slide 9: What we have achieved…Cont'd
9 What we have achieved…Cont’d Regional Focus • Implemented regional operations structure with six regions rolled out • Localization of company strategy with tailor made regional promotions and offers Operational Excellence Best Network For You • Bringing M-PESA Home: allowing for stability and grow
Slide 10: Strong financial performance
10 Strong financial performance SERVICE REVENUE +14% to Kshs 177.8bn NON-VOICE SERVICE REVENUE +26% to Kshs 86.9bn EBITDA +17% to Kshs 83.1bn NET INCOME +19% to Kshs 38.1bn FREE CASH FLOW +10% to Kshs 30.4bn PROPOSED DIVIDEND PER SHARE +19% to Kshs 0.76
Slide 11: Contents
11 Contents FY 16 Highlights FY 16 Financial Review Strategic Focus and Guidance
Slide 12: Delivering on strategy: Strong financial results
12 Delivering on strategy: Strong financial results Service revenue EBITDA Net income Free cash flow Kshs. Billion Kshs. Billion Kshs. Billion Kshs. Billion +13.8% +16.7% +19.6% 10.3% 177. 78 83.0 7 156.25 71.1 38.1 9 0 31.8 30.36 7 27.52 FY 15 FY 16 FY 15 FY 16 FY 15 FY 16 FY 15 FY 16 More subscrib
Slide 13: Service revenue: Sustained strong growth
13 Service revenue: Sustained strong growth FY 16 Service revenue 13.8% Kshs. Billion • 13.8% growth in service revenue 177.78 • 7.8% growth in customer base to 25.16m customers, despite removing 1.7m customers 156.25 from the count 138.36 • Voice service revenue growth of 3.9% and non- 118.06 voice
Slide 14: Service revenue: Growth across all segments
14 Service revenue: Growth across all segments CAGR +14.6%
Slide 15: Voice: Resilient growth
15 Voice: Resilient growth Voice Revenue • 3.9% growth in voice service revenue Kshs. Billion 3.9% • 7.8% growth in total customers 90.85 87.41 • 42.3% of airtime top-ups directly through 84.32 M-PESA • 252,000 retailers actively sell Safaricom top-up 75.84 cards • 22.9% increase in emergency top up
Slide 16: Strong growth in non-voice service revenue
16 Strong growth in non-voice service revenue Non - Voice Revenue 26.3% Kshs. Billion 86.94 • Non-voice service revenue grew 26.3%, now 49% of service revenue 68.84 • Revenue growth of: o M-PESA +27.2% 54.04 o Mobile data +42.7% 42.21 o SMS +10.6% o Fixed service +22.0% o Other service revenue +21.1
Slide 17: M-PESA: Growing revenue & financial inclusion
17 M-PESA: Growing revenue & financial inclusion M-PESA Revenue Kshs. Billion 27.2% 41.50 • 27.2% growth in M-PESA revenue, driven by: o 19.8% increase in 30 day active users to 16.6m o 7.43 chargeable transactions per 30 day active users 32.63 (16% growth) 26.56 • Total M-PESA transactional value a
Slide 18: M-PESA: Value transacted – Kshs 5.29tn in FY16
18 M-PESA: Value transacted – Kshs 5.29tn in FY16 27% CAGR Kshs billion •CAGR FY ’12 - ’FY16’ 6,000 5,294 4,181 5,000 1,048 78% 3,321 4,000 580 2,636 22% 1,342 336 1,129 3,000 2,061 198 929 1,335 18% 2,000 105 751 1,151 603 979 842 1,000 686 24% 1,569 1,319 845 1,077 666 - FY 12 FY 13 FY 14 FY 15 FY
Slide 19: Data: Customers, usage & devices driving growth
19 Data: Customers, usage & devices driving growth Mobile Data & Fixed Service Revenue Kshs. Billion 39.1% • Mobile data revenue growth of 42.7% driven by: 24.97 o 21.5% growth in 30 day active mobile data users to 14.08m – now 53% of our customer base 17.95 o 77% increase in mobile data usage per c
Slide 20: SMS: Active users, attractive bundles driving growth
20 SMS: Active users, attractive bundles driving growth SMS Revenue Kshs. Billion 10.6% • 10.6% growth in SMS revenue, driven by; 17.33 15.63 o 14.0% growth in 30 day active SMS users to 15.23m 13.62 o 24.1% growth in active SMS bundle users to 4.96m 10.15 o Growth in Premium rated services (Lottery
Slide 21: Growth in usage: Driven by M-PESA and Data
21 Growth in usage: Driven by M-PESA and Data Voice SMS M-PESA Mobile Data Service ARPU Kshs. Kshs. Kshs. Kshs. Kshs. -7.0% -1.7% +6.2% +18.2% +1.9% 598 587 328 305 222 209 130 59 58 110 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 ARPU decline due to SMS ARPU near 19% growth in 77% increase in
Slide 22: Direct costs control improves contribution margin
22 Direct costs control improves contribution margin FY 16 Direct costs FY 16 Direct costs breakdown Kshs. Billion Kshs. Billion +10.0% 186.63 62.30 (14.69) 56.71 51.96 47.2 (10.78) (9.79) (7.52) (6.43) (6.12) 124.33 (5.57) (1.41) FY 13 FY 14 FY 15 FY 16 • 10.0% growth in direct costs, lower than th
Slide 23: Cost management through operational excellence
23 Cost management through operational excellence FY 16 OPEX Kshs. Billion • Maintained Opex as a % of revenue despite a 9.8% depreciation of the KES against the USD in the financial year 45 24.0% 22.4% 22.0% 22.1% 22.1% 40 22.0% • Continued with cost optimization across the 20.0% operations; 35 41.
Slide 24: Strong growth in EBITDA
24 Strong growth in EBITDA H1/ H2 EBITDA Kshs. Billion +17.4 % YoY Growth 44.23 38.84 37.70 33.50 32.00 28.90 26.90 22.30 H1 FY 13 H2 FY 13 H1 FY 14 H2 FY 14 H1 FY 15 H2 FY 15 H1 FY 16 H2 FY 16 • 16.7% growth in FY16 EBITDA to Kshs 83.07bn • FY 16 underlying EBITDA margin improvement of 0.9ppt to 44
Slide 25: Improved cash generation funding Capex
25 Improved cash generation funding Capex FY 16 Free Cash Flow & Net cash position FY 16 Capex Kshs. Billion 35.00 20.6% 22.0% 83.07 17.2% 20.0% 19.2% 20.0% 30.00 (33.34) 18.0% 25.00 33.70 16.0% (15.65) 32.13 20.00 27.78 14.0% (4.23) 30.36 24.88 0.51 15.00 12.0% 10.00 10.0% FY 13 FY 14 FY 15 FY 16 E
Slide 26: Network at a glance
26 Network at a glance 95% 2G Population Coverage 78% Broadband Coverage 20M Active Voice customers 3,800 2G Sites Fiber 14M Active Data customers 2,517 3G Sites 3,236 km 467 4G Sites 34% sites HD Voice on 2G & 3G 193 WiMAX sites 16 towns 100G optimized Packet Core 56 VSAT sites 1,138 Buildings 50%
Slide 27: Independent Benchmark | Leadership in Voice and Data
Independent Benchmark| Leadership in Voice and Data 27 600 P3 Score I April 2016 Safaricom P3 Score Trend 500 550 527 400 500 +33% Data, 295 300 Data, 144 450 395 200 Data, 76 400 100 Voice, 232 Voice, 222 350 Voice, 162 0 300 Safaricom Competitor X Competitor Y Apr-15 Apr-16 o 2nd year in a row “P3
Slide 28: Key Financials: Kshs bn
28 Key Financials: Kshs bn FY16 FY15 GROWTH H2 FY16 H2 FY15 GROWTH Voice - Outgoing 83.66 81.19 3.0% 42.03 40.46 3.9% Voice - Incoming 7.14 6.18 15.5% 3.63 3.28 10.7% MPesa revenue 41.50 32.63 27.2% 22.15 17.03 30.0% Messaging revenue 17.33 15.63 10.6% 9.30 8.46 9.9% Mobile data revenue 21.15 14.82
Slide 29: Contents
29 Contents FY 16 Highlights FY 16 Financial Review Strategic Focus and Guidance
Slide 30: Future Outlook
Future Outlook 30
Slide 31: Priorities going forward…cont'd
31 Priorities going forward…cont’d • Accelerate acquisition and retention of subscribers • Create a customized experience for all our customers Customer First • Increase access to customer service points • Reduce calls to call center • Leverage Big Data insights • Empower our customers to manage the
Slide 32: Priorities going forward…cont'd
32 Priorities going forward…cont’d Mobile Data • Accelerate 3G and 4G smartphone penetration • Grow our base of active data users • Continue to drive affordability via bundle propositions Relevant • Provide relevant content to increase usage in line Products with customer demand • Deliver home inter
Slide 33: Priorities going forward…cont'd
33 Priorities going forward…cont’d Driving Financial Inclusion • Deepen M-PESA penetration and usage • Grow our Lipa Na M-PESA merchants and increase Relevant activity level on the platform Products • Partnerships with banks to deliver more real time Merchant settlements • Fuel the expansion of busi
Slide 34: Priorities going forward…cont'd
34 Priorities going forward…cont’d Partner of Choice for Business • Investment in fibre infrastructure to expand data footprint and provide better connectivity to business • Invest in SMEs by partnering for success through co- Relevant creation of solutions to meet their business needs Products • De
Slide 35: Priorities going forward…cont'd
35 Priorities going forward…cont’d Customer Service • Expand our customer service points countrywide • Increase capacity at call centers Operational • Introduce voice bio-metric to fast track resolution Excellence Best Network For You • Increased accountability through network guarantees • Democrati
Slide 36: FY 17 Guidance
36 FY 17 Guidance EBITDA for FY 17 Expected to be in the range of Kshs 89bn - 92bn Capital Expenditure for FY 17 Expected to be in the range of Kshs 32bn - 33bn
Slide 37: FY 16 Highlights
37 FY 16 Highlights • Maintained leading position as Kenya’s most admired brand, with an overall brand equity score of 89%* and a Net Promoter Score of 66%** • Rolled out a new Regional Sales and Operations structure • Continued investment in network, IT infrastructure and innovation • Significant i
Slide 38: Safaricom Limited
Safaricom Limited FY 16 Results Presentation 11 May 2016
Slide 39: Appendices
Appendices 39
Slide 40: Industry Performance: Dec 2015 vs Dec 2014
42 Industry Performance: Dec 2015 vs Dec 2014 Parameter Safaricom Airtel and YU Orange Finserve Dec '2015 Dec '2014 % Dec '2015 Dec '2014 % Dec '2015 Dec '2014 % Dec '2015 Market Share by Subscribers (%) 64.70 67.40 -2.7ppt 19.20 22.60 -3.4ppt 12.40 10.00 +2.4ppt 3.70 Mobile Subscribers (mn) 24.41 2
Slide 41: Update on accounting for the Police Network Project
43 Update on accounting for the Police Network Project Income Statement - Projected (Kshs m) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Total Fixed data revenue - 906 906 906 604 3,323 Service Revenue - 906 906 906 604 - 3,323 Total revenue - 906 906 906 604 - 3,323 Other income 9,280 773 10,053 Cont