Slide 1: Clear connection: Telkom SA Limited Analyst presentation
Clear connection Telkom SA Limited Analyst presentation
Slide 2: Cautionary statement on forward looking statements
Cautionary statement on forward looking statements All of the statements included in this presentation, as well as oral statements that may be made by us or by officers, directors or employees acting on behalf of us, that are not statements of historical facts constitute or are based on forward-look
Slide 3: Agenda
Agenda Strategy Overview Customer Service - Telkom today Multi-Links Africa Online Tea Telkom Media Fixed Mobile Strategy Lunch
Slide 4: Strategy overview
Strategy overview Reuben September
Slide 5: Our core strategy is to defend and grow profitable revenue
Our core strategy is to defend and grow profitable revenue The core strategy remains on track
Slide 6: Defend strategy
Build customer loyalty (service provider of choice) Build customer retention (resistance to switch) Convert to annuity revenue Defend Defend strategy
Slide 7: Growth strategy
Growth strategy • An imperative to replace declining revenue due to: – Market share losses to competitors – Fixed‑to‑mobile substitution – Pricing pressures – Economic pressures on ARPU’s • Growth strategies aimed at exploiting opportunities identified in external environmental analysis: – Fixed-mob
Slide 8: Three axis approach
Three axis approach Fixed / mobile capability Geographic reach Converged services (voice, data, video & Internet) What does each axis represent? Growth initiatives • Become an integrated service provider across the fixed & mobile value chain • Position entity as a competitive converged solutions ser
Slide 9: Broadband & converged services - Product innovation
Value-added telecoms Interactive entertainment IT support services Home management Communications Managed services Equipment Applications High Speed Access Fibre, SHDSL, ADSL, WiMax, Ethernet, 3G Consumer Enterprise – Own the home via a home gateway – Deliver rich content via the Do Broadband portal
Slide 10: Areas of transformation and enabling strategies
Business acumen ‘From short-term silos to long-term enterprise focus’ Organisation & people ‘From complacency to high performance’ Areas of transformation Customer centricity ‘From product to customer centric’ Network evolution ‘From legacy voice to IP converged’ Enabling strategies
Slide 11: Customer Service
Customer Service Motlatsi Nzeku
Slide 12: Customer service - current challenges
Radical approach needed Radical approach needed * • Deteriorating service levels Customer service - current challenges
Slide 13: Photo examples of typical theft
Photo examples of typical theft
Slide 14: More photo examples of theft
… more photo examples of theft
Slide 15: Leveraging industry capability and scale is key
Leveraging industry capability and scale is key Customer service - taking on the challenge 2008/9
Slide 16: Creating public awareness and engaging relevant stakeholders
Creating public awareness and engaging relevant stakeholders Public and media communication • Public and SMME interactions • Media interactions – 3 rd March 2008: Cape Talk 567 / KFM – 3 rd March 2008: SAFM – 3 rd March 2008: Jacaranda FM – 3 rd March 2008: Heart Radio (Western Cape based) – 4 th Ma
Slide 17: What Drives Our Wireless Deployment
What Drives Our Wireless Deployment • Spectrum availability, assignment and cost • Competitive environment • Technology maturity and general availability • Services capability - - Nomadic Voice, ….. Portable data • Old and vulnerable technology replacement options – cost effectiveness - old, vulnera
Slide 18: Customer service - taking on the challenge 2008/9
• Improved customer communication • Optimised forecasting model for the purpose of improved network planning • Differentiated customer segmentation and treatment • Unified and automated service provisioning and assurance Customer service - taking on the challenge 2008/9 • Lobbying authorities to dec
Slide 19: International subsidiaries
International subsidiaries Thami Msimango
Slide 20: Multi-Links
Multi-Links Justin Ramayia
Slide 21: Nigeria presents excellent growth opportunities
Nigeria presents excellent growth opportunities Nigerian market
Slide 22: Multi-Links to target voice and data solutions for corporates
Multi-Links to target voice and data solutions for corporates CDMA market share
Slide 23: Multi-Links: Nigerian licence
Multi-Links: Nigerian licence • Multi-Links holds a Unified Access Service Licence – Provide mobile, fixed-wireless and fixed-wireline telecommunication services – For the conveyance of voice, data and video – Use of an International Gateway – Lease from or provide transmission capacity to any autho
Slide 24: CDMA benefits
CDMA benefits • Voice - CDMA delivers higher Erlang capacity • Data capacity vastly superior - higher throughputs and better uplink speeds • CDMA 2000 1x base stations offer up to 3 times more capacity • Offers superior soft handover when roaming • Can re-use frequencies in the same cell • Offers ve
Slide 25: A network with integrity
A network with integrity • Reliability • Technology Pioneer • Innovation and Leadership • Extremely loyal customer base - 2.4% churn per annum • Entrance of Telkom has given major credibility • Growing excitement about the provision of fixed-line data services
Slide 26: Marketing strategy
Marketing strategy • Strong drive to invest in brand equity and brand visibility • Specific product and price promotions • Visibility and continuous communication is key to the Nigerian market • Niche value proposition focusing on communities and families • GSM operators tend to target the youth • A
Slide 27: Integrated OSS and BSS systems in planning phase
Integrated OSS and BSS systems in planning phase Customer service • Quality and customer service are increasingly becoming key requirements for both the regulator and customers • The call centre is being planned around customer and product segmentation to maintain minimum turn-around times • A focus
Slide 28: Aggressive network build-out and marketing campaigns
Aggressive network build-out and marketing campaigns Details 2007/08 2008/09 2009/10 CDMA Subscribers 812,000 3,500,000 4,200,000 EV/DO 225,000 270,000 Data Leased Line 1,000 Corporate Internet Wholesale Internet Total blended subscribers 812,001 3,725,428 4,471,214 Subscriber targets
Slide 29: Growth into the data market
Growth into the data market • Strong potential to grow fixed-line corporate data business • Data market in Nigeria is virtually green- fields • Self provisioning via satellite and microwave is prominent • Few service providers - not too contested • National connectivity is extremely expensive and pr
Slide 30: Growth into the data market
Growth into the data market • Multi-Links to focus on the following data connectivity solutions : – National VPN services – Metropolitan VPN services – Corporate Internet access – IPLC services – Wholesale bandwidth leased lines • Building a landing station in 2008/09 financial year • Building a nat
Slide 31: Coverage map
Coverage map Existing (Q1 2008) Benin City Ore Ijebu-Ode Shagamu Owo Bida ABUJA Akwanga Jos Dutse Kano Katsina Sokoto Makurdi Enugu Abakiliki Calabar Kaduna Umuahia Owerri Yola 153km 436km 133km 190km 155km 303km 364km 254km 293km 800km 482km 405km 262km Yenagoa • Planned: 3,100km fibre during 2008/
Slide 32: Demand driving capex spend
Demand driving capex spend Capex per year 2007/08 2008/09 2009/10 Fibre in kms 1,418 3,100 2,000 Base Stations 1,000 Capacity for Voice (ports) 1 812,000 3,200,000 1,600,000 NGN Nodes 1. Includes data connectivity (Narrowband) Capex focus • Currently have 267 base stations • Capex programme on track
Slide 33: Financial targets
Financial targets • Revenue targets - US$1.5 billion by 2010/11 • EBITDA margin : – currently below 20% – next 3 years in excess of 20% • ARPU - currently above US$30, envisaged decline of 15% per year for the next 3 years • Average cost of borrowing - approximately 10% • Pioneer tax status ended on
Slide 34: Africa Online
Africa Online John Joseph
Slide 35: Africa Online - at a glance
Africa Online - at a glance ● Powerful well recognised brand - obvious choice to many ● Pioneer in affordable broadband technology (InfiNet) in 3 markets, Kenya, Ghana and Tanzania ● AFOL operating in the corporate and consumer markets in countries (AFOL Kenya only focus on consumer market) ● JV wit
Slide 36: Pan African ICT provider
24x7 Customer Service Customer Base Corporate Solutions Growing African Footprint Pan-African solutions for multi-national blue chip clients including AIG, Toyota, Firestone, Mantrac-CAT, SITA, Galileo, Coca-Cola, Oxfam, CARE International and the International Monetary Fund (IMF) We offer a wide ra
Slide 37: Africa Online
Africa Online • Focusing on aggressive wireless broadband infrastructure roll-out • Intends to grow presence from 9 - 15 countries within 3 years • Capitalising on synergies with Telkom • Driving broadband VSAT services to corporates and multi-nationals • Has strategic partnerships with 5 major carr
Slide 38: Towards Pan African ICT Provider: tactical plan
Medium term: § Reduce churn through improved customer service § Improve ‘wallet share’ through better targeting § Drive more new services, with reduced time to revenue § Drive solutions Short-term: § Efficient Processes • Asset management • Bandwidth management • Improve QoS • Realise new revenues I
Slide 39: AFOL - Achievements 2007/2008
AFOL - - Achievements 2007/2008 • Major growth in Pan African multi-national segment • Introduced wireless broadband in Tanzania • Expanded wireless coverage in Kenya and Ghana • Developed channel strategy for the mass market • Negotiated interconnection agreements in East African markets • New prod
Slide 40: Growth Pillar 1: Telkom & AFOL synergies
TSA VSAT services on the continent and co-operation agreement Telkom Internet “white label” products International voice termination • Migrate Telkom’s existing 171 international VSAT services to AFOL • SAIX services for targeted markets - Swaziland, Namibia and Zimbabwe • Enhance VSAT services for
Slide 41: Growth Pillar 2: Market expansion
Develop new products Hosting and application services New acquisitions • Fax to e-mail service • VPN Services (MPLS) • Space stream access service with VPN offering • Packaging and bundling • Digital design, development & hosting of corporate & brand specific websites, e-commerce sites, campaign lan
Slide 42: Growth Pillar 3: Grow corporate & multi-national market
Pan African business growth opportunities Develop VoIP services and bundling • Finalise partnership agreements with strategic partners – SITA, VANCO, Equant, Expereo, SITA expansion agreement, BT, Carril International • Affiliate recruitment and management • Formalise affiliate agreements to increas
Slide 43: Growth Pillar 4: Growth of wireless broadband Internet access
Develop wholesale market Increase broadband penetration • IP transit services (cable) - Ghana and Cote D’Ivoire • Virtual ISP model for broadband services • Accelerated network roll-out of wireless broadband in Kenya, Ghana and Tanzania. New markets: Uganda and Zimbabwe • New channel strategy implem
Slide 44: Subscriber targets
2007/08 2008/09 2009/10 Dial-up & wireless 15,560 34,643 67,439 Unbundled Local Loop & ADSL Dedicated Corporate Links 1,063 1,456 Broadband VSAT Total 16,790 36,959 70,394 • Aggressive deployment of wireless broadband base stations • Develop more effective and efficient mass market channels • Corpor
Slide 45: Financial targets
Financial targets • Revenue slightly under US$20 million in 2007/08 financial year • Revenue target - US$70 million by 2009/10 • EBITDA margin - aiming for 18% by 2009/10 • Cash flow positive in 2009/10 financial year • Expected Capex spend of US$11.6 million in 2007/08 • Targeted Capex spend of US$
Slide 46: Telkom Media
Telkom Media Reuben September
Slide 47: Contents
Contents • Initial investment rationale • Current content landscape • Telkom Media’s business plan • Why reduce shareholding? • Current status and next steps
Slide 48: Initial investment rationale
Initial Investment rationale • Strategic value in owning content – security – price – quality • Emerging “triple play” market requirement for quality content • Expected only one IPTV broadcast licence – Require licence to offer “triple play” products • Diversify revenue streams • Supply content into
Slide 49: Content landscape
Content landscape • Regulatory clarity – Only IPTV requires a broadcasting licence – Video-on-demand does not • Recent content market developments – Improved ability to purchase content » reduced strategic importance of owning content » No need to “subsidise” content costs • The absence of IPTV prod
Slide 50: Telkom Media's business plan
Telkom Media’s business plan • Telkom Media’s business model sound – target market LSM 5-8 – differentiate on content and price • Media companies have long pay-back periods • In depth review of business plan by Telkom – supported by independent 3 rd party • Telkom accepted the business plan – realis
Slide 51: Why reduce shareholding?
Why reduce shareholding? • Number of initiatives competing for limited funds – shorter pay-back periods than Telkom Media • Fixed-line businesses (the world over) need to focus on their strengths in face of increased competition – Telkom’s interest in content: to support and strengthen the fixed-lin
Slide 52: Current status and next steps
Current status and next steps • Process to reduce shareholding currently underway • Telkom’s aim is to keep the smallest possible stake • Size of stake informed by : − Retention value of having IPTV products vs value of investment − To a lesser extent access to content − To secure access to attracti
Slide 53: Fixed mobile strategy
Fixed mobile strategy Reuben September
Slide 54: Fixed mobile strategy - Telkom's position
Fixed mobile strategy - Telkom’s position • Key considerations • Focussing on fixed line strengths • Oger offer • Building our own mobile capabilities • Vodacom
Slide 55: Fixed Mobile strategic considerations
Fixed Mobile strategic considerations Key issues informing Telkom’s positioning: • The Telkom Group is significantly over-exposed to the South African economy and currency risk • Telkom is acutely aware of growth opportunities in emerging markets, both in Africa and beyond • The South African voice
Slide 56: Transforming our fixed line operations
Transforming our fixed line operations • Leading international fixed line operators continue to grow in highly competitive environments by: – remaining focussed on their existing strengths – continuously transforming their fixed line business model to increase its value proposition to customers • Te
Slide 57: Rejection of the Oger offer
Rejection of the Oger offer • Oger’s non-binding offer has been considered • Telkom board and management concluded that the offer is not in the best interest of shareholders
Slide 58: Building own fixed wireless and mobile data network
Building own fixed wireless and mobile data network The decision has been made to selectively build a fixed wireless and mobile data network. The assigning of GSM spectrum to Telkom provides the necessary impetus to this initiative. The rationale for the decision include: • Improves Telkom’s competi
Slide 59: Building own fixed wireless and mobile data network (cont.)
Building own fixed wireless and mobile data network (cont.) • The depth and pace of penetration levels will be based on viabilities taking into account: – existing co-location synergies – network sharing and roaming arrangements with MOs – revenue share arrangements with suppliers
Slide 60: A selective build programme focussing on rural areas and data
A selective build programme, focussing on rural areas, niche high ARPU and data opportunities makes strategic sense. Mobile capabilities compliment Telkom’s fixed line offering Building own fixed wireless and mobile data network (cont.) This route provides a more viable alternative to marginal fixed
Slide 61: Leveraging the value created in Vodacom to expand globally
Leveraging the value created in Vodacom to expand globally remains an important consideration Vodacom • Telkom’s 50% stake in Vodacom remains a valuable asset • Disposal of Vodacom will be considered but only if compelling strategic rationale convinces us to do so – all alternatives measured against
Slide 62: Investor Relations contact
Investor Relations Nicola White Tel: +27 12 311 5720 Fax: +27 12 311 5721 e-mail: whitenh@telkom.co.za