Slide 1: Telkom SA Limited Group Annual Results for the year ended March 31, 2008
Telkom SA Limited Group Annual Results for the year ended March 31, 2008 June 9, 2008 Changing the way we do business
Slide 2: Cautionary statement on forward looking statements
Cautionary statement on forward looking statements All of the statements included in this document, 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, including but not limited to financial tar
Slide 3: Overview
Reuben September Overview
Slide 4: Financial summary
Financial summary • Group operating revenue increased by 9.0% to R56.3 billion • Group EBITDA increased by 4.2% to R20.6 billion • Net debt to equity increased to 49.9% from 31.3% at March 31, 2007 • Cash generated from operations increased by 3.6% to R21.1 billion • HEPS decreased by 4.0% to 1634.5
Slide 5: Strategy overview - defend and grow
Changing the way we do business Fixed Mobile Strategy overview - defend and grow Geographic Data • Core strategy remains defend and grow • Telkom continues to move up the value added data services chain • We continue to pursue acquisition opportunities in fast growing emerging markets • We aim to es
Slide 6: Defensive strategies are successful
Defensive strategies are successful Traditional voice • Annuity revenue increased 14.1% to R6.9 billion • Telkom Closer packages increased 63.3% to 471,742 • Supreme call packages increased 121.4% to 12,777 • Term & Volume discount plans of R3.4 billion signed in FY2008 • Continue converting revenue
Slide 7: Offering value to remain competitive
Offering value to remain competitive Pricing initiatives • Offering value-based calling plans • Rebalancing tariffs to reduce arbitrage opportunities • Driving the penetration of bundles to increase annuity based revenues
Slide 8: Data continues to grow in importance
Data continues to grow in importance Data • Data revenues climbed 10.9% to R8.3 billion • Focus on innovative products such as VPN Lite • Ethos of innovation and speed to market being fostered Data connectivity Rbn4.5 4.5% Mobile leased lines Rbn1.9 11.1% Internet access Rbn1.2 29.1% Managed network
Slide 9: Moving up the value added services data chain
Moving up the value added services data chain Data centre business • Increase Telkom’s share of the ICT revenue pie • Stimulate use of bandwidth over our network • Towards one-stop solutions as IT and telecommunications converge • Regulators insisting that data is properly protected • Improving effi
Slide 10: Targeting ADSL penetration of 15% - 20% of fixed-access lines by FY 2010/11
Targeting ADSL penetration of 15% - 20% of fixed-access lines by FY 2010/11 Broadband and converged services • ADSL footprint now covering 92% of the network • Coverage in township areas - 69% • ADSL subscribers grown 61.2% to 412,190 • Do Broadband packages increased by 245.6% to 119,288 • Wholesal
Slide 11: Strong operational performance
Strong operational performance Results to March 31, 2008 • Revenue of R845.4 million • Profit after tax - R49.0 million • ARPU for 11 months ended March 31, 2008 - $32 • Subscribers at March 31, 2008 - 813,392 • Subscribers at May 31, 2008 - 1,000,251
Slide 12: Fast becoming a serious competitor in Nigeria
Fast becoming a serious competitor in Nigeria
Slide 13: Ability to deliver complex data products to corporates growing
Ability to deliver complex data products to corporates growing • • Planned capex expenditure – Further Metro Ethernet rings to be build in Abuja, Lagos, Kano, Kaduna and Delta – Six NGN nodes to be built during FY 2009 • Aggressively pursuing opportunities in the growing markets of Nigeria
Slide 14: Multi-Links will be substantial contributor to Telkom
Multi-Links will be substantial contributor to Telkom • Targeted EBITDA margin range 17% - 22% at March 31, 2009 • Targeted base station growth 2009 - 1,150 • Targeted fibre deployment 2009 - 2,000km • Targeted customer growth 2009 - 3.5 million
Slide 15: Small company with big opportunities
Small company with big opportunities Ghana Namibia Swaziland Zimbabwe Uganda Tanzania Cote D’Ivoire Kenya
Slide 16: TMSC will provide total management solutions
TMSC will provide total management solutions Telkom Management Services Company • Opportunities in sub-Saharan Africa for reputable operator to provide management services • Target market - - – State owned incumbent operators – Numerous new entrants in ICT industry • Telkom has first hand experience
Slide 17: Binding proposals subject to requisite shareholder approval
Binding proposals subject to requisite shareholder approval Potential corporate action announced on June 2, 2008 • Proposal received from Vodafone: – Vodafone would acquire a portion of Telkom’s stake in Vodacom; and – Telkom would unbundle its remaining shareholding in Vodacom to Telkom shareholder
Slide 18: Getting ready to compete aggressively
Getting ready to compete aggressively Fixed mobile and mobile data network • W-CDMA, capable of full mobility, to be deployed in selective areas • Huawei approved as exclusive vendor - scale benefits with Multi-Links • Alleviate losses and service impacts of theft, breakages and incidences • Replaci
Slide 19: Telkom fulfilling commitment to dramatically increase bandwidth
Telkom fulfilling commitment to dramatically increase bandwidth Key NGN and capacity achievements • 84 Metro Ethernet nodes deployed • Dense Wave Division Multiplexing System deployed between Gauteng and Durban - - significant increase in transport bandwidth capability • Automatic self-healing rerou
Slide 20: No need to own resources in order to use them
No need to own resources in order to use them Capability management • Redesign of Telkom’s operations model to address rapidly changing technology, speed of technology deployment and fluctuating demand in the most cost efficient manner • Includes outsourcing, out-tasking, consolidation and in-taskin
Slide 21: Moving towards a nimble, efficient organisation
Moving towards a nimble, efficient organisation Capability management (cont.) • Capability management is in progress – Commenced with issuing closed request for proposals for the provisioning of professional services – Information sharing with unions started in July 2007, consultation in April 2008
Slide 22: Vital to enhance customer service
Vital to enhance customer service Customer service quality improvement initiatives Call Centre Operations - improving customer service • Restructured all call centres under one structure • Active traffic load distribution among call centres • Selected single supplier of temporary staff – Standardise
Slide 23: Customer centricity starting to bear fruit
Customer centricity starting to bear fruit Customer service quality improvement initiatives Focus on improving customer service • Various initiatives in the Call Centres and Field Operations resulted in: – Faults dropped from peak in February by 47% – Reduction of theft by 15% from January – Custome
Slide 24: Fast resolution of Telkom Media issue
Fast resolution of Telkom Media issue • On March 31, 2008 Telkom announced its intention to substantially reduce its shareholding in Telkom Media • A potential investor has been identified • A definite proposal is expected to be received end June 2008 • Expansion of content rich services is crucial
Slide 25: Financial overview
Financial overview Deon Fredericks
Slide 26: Business environment changing - margin pressure continues
Business environment changing - margin pressure continues Group income statement ZAR million % Operating revenue 51,619 56,285 9.0 Other income 39.1 Operating expenses (37,533) (42,337) 12.8 Operating profit 14,470 14,482 0.1 Investment income 16.2 EBITDA 19,786 20,612 4.2 Finance charges (1,125) (1
Slide 27: Balance sheet remains strong
Balance sheet remains strong Group balance sheet ZAR million % Non-current assets 48,770 57,763 18.4 Current assets 10,376 12,609 21.5 Total assets 59,146 70,372 19.0 Capital & reserves 32,008 33,337 4.2 Non-current liabilities 8,554 15,104 76.6 Current liabilities 18,584 21,931 18.0 Total equity &
Slide 28: Investing for future revenue growth
Investing for future revenue growth Group cash flow ZAR millions % Cash generated from operations 20,520 21,256 3.6 Dividend paid (4,784) (5,732) 19.8 Cash generated from operating activities 9,356 10,603 13.3 Investing activities 10,412 (14,106) 35.5 Financing activities (2,920) 2,943 (200.8) Net i
Slide 29: Fixed line remains the major contributor
Fixed line remains the major contributor 38% 56% 40% 36% Segmental contribution after inter-segmental eliminations Operating revenue Operating profit EBITDA Mobile Fixed-Line Other 1% 3% 3%
Slide 30: Excluding Telkom Media provision - EBITDA margin 37%
Excluding Telkom Media provision - EBITDA margin 37% Fixed-line income statement ZAR million % Operating revenue 32,346 32,572 0.7 Other income 48.8 Operating expenses (24,083) (24,962) 3.6 Operating profit 8,597 8,107 (5.7) Investment income 3,041 3,975 30.7 EBITDA 12,179 12,058 (1.0) Finance charg
Slide 31: Fixed-line operating profit drivers
(R490 million) Fixed-line operating profit drivers ZAR million
Slide 32: Strong data revenue growth
7.2% (4.7%) 0.7% 0.7% 10.9% Strong data revenue growth Fixed-line revenue ZAR million
Slide 33: Traditional traffic declines, calling plans show strong growth
(1.2%) (15.6%) (17.6%) (0.2%) (18.6)% 13.6% (0.6%) Traditional traffic declines, calling plans show strong growth 98.7% 1.6% Fixed-line traffic ZAR millions Millions of minutes
Slide 34: Recurring revenue continues to grow
Recurring revenue continues to grow Fixed-line annuity revenue ZAR millions % Line rental 4,503 4,731 5.1 Calling plans/packages 1,079 98.7 CPE rental 10.7 Value added services 4.8 International other 10.0 Total 6,063 6,917 14.1 • Annuity revenue includes all subscription revenue. It does not includ
Slide 35: Fixed-line revenue (continued)
4.1% 61.2% Fixed-line revenue (continued) ZAR millions % Mobile 2.7 Fixed domestic - International 8.3 Interconnection revenue 1,639 1,757 7.2 ZAR millions % Leased lines 5,825 6,460 10.9 Mobile leased facilities 1,664 1,848 11.1 Data revenue 7,489 8,308 10.9 Interconnection Data Millions of minutes
Slide 36: Operating expenses well contained in high inflationary environment
3.6% Operating expenses well contained in high inflationary environment Fixed-line operating expenses ZAR millions % Employee expenses 7,096 7,397 4.2 Payments to other operators 6,461 6,902 6.8 SG&A 3,975 3,899 (1.9) Services rendered 2,206 2,413 9.4 Operating leases (18.8) Depreciation, amortisati
Slide 37: Telkom continues to build for the future
Telkom continues to build for the future Fixed-line capex ZAR millions % Baseline expansion 4,352 5,188 19.2 Sustainment (33.4) Efficiencies & improvements 1,141 (26.3) Support (10.0) Regulatory (79.9) Total 6,598 6,794 3.0
Slide 38: Investment in support of the strategy
Investment in support of the strategy • Capex Plan of R30bn over 5 years from FY 2006 - FY 2010 • As at the end of the 2007/08 financial year R18,4bn (61%) of the R30bn has been invested • An additional R2bn is planned for the last 2 years of the program • The main drivers of the additional R2bn inv
Slide 39: Mobile financial highlights: strong revenue growth
17.1% 17.8% (4.0)% 15.0% Strong revenue growth Mobile financial highlights Operating revenue Operating profit ZAR million ZAR million ZAR million ZAR million 100% Vodacom (50% consolidated) 1. Including intangibles
Slide 40: Leading the South African mobile market
7.9% 10.9% 25.2% ARPU remains stable Leading the South African mobile market Customers ARPU 1 Churn Thousands Thousands ZAR % 1. Blended ARPU
Slide 41: Strong subscriber growth in African countries
28% 30% 30% 25% 42% Strong subscriber growth in African countries Performance in other African countries ARPU 1 ZAR 1. Blended ARPU
Slide 42: Guidance for the next 3 financial years
Constant revenue growth: CAGR to range between 5% - 10% EBITDA margin to range between 32% and 36% - expect to see improvement within the range towards the end of the 2011 financial year Targeting net debt to EBITDA 1.3x Guidance for the next 3 financial years Fixed-line and other Capex to range bet
Slide 43: Thank you
Thank you Investor Relations Nicola White Tel: +27 12 311 5720 Fax: +27 12 311 5721 E-mail: whitenh@telkom.co.za Telkom SA Limited