Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — H1 FY2005 Earnings Presentation
31 slides from Telkom Sa Soc's earnings presentation, September 2004
Slide 1: Telkom SA Limited Group Interim Results
Telkom SA Limited Group Interim Results for the 6 months ended September 30, 2004 Inspiring a nation to touch tomorrow 1
Slide 2: Cautionary language concerning forward looking statements
Cautionary language concerning 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”
Slide 3: Section 1: Group highlights
Section 1 Group highlights Ble |~| ++ 8 i s0u, i /¢ & : 2 x W 6 se oO
Slide 4: Group interim financial highlights
Group interim financial highlights 7% growth in group operating revenue 40% group EBITDA margin 19% growth in group Operating free cash flow Maintained high level of operating profit In ZAR millions operating free 3,904 3,927 60% growth in HEPS cash flow in to 537 cents first six months 27% reductio
Slide 5: Clear strategic goals
Clear strategic goals 1. Customer centric approach 2. Driving operational excellence 5
Slide 6: Section 2: Operational highlights
Section 2 Operational highlights
Slide 7: Operation Jika
Operation “Jika” Net growth in fixed-access lines In thousands 49 9 -30 -32 • Increased credit limits -50 • Property deals • Tele-selling H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 • Discounted connection campaigns • Free relocation 7
Slide 8: New product bundles
New product bundles Xtratime400 – discounted local Xtratime200 – discounted long distance Surfmore Anytime – reduced price for internet minutes R1.50 ILD special – Reduced per minute calls to US and UK for Nov 2004 8
Slide 9: Keeping prices competitive
Keeping prices competitive Proposed tariff adjustments for 2005 % change for Jan 2005 • 2.2% overall increase 5.5% 6.3% in 2004 0.2% 0.0% • 0.2% overall increase filed for 2005, below -10.0% government’s target range for inflation -28.0% • Still a need to Overall ILD DLD Data Local Subs rebalance in
Slide 10: Successfully moving minutes to ADSL
Successfully moving minutes to ADSL Movement in traffic minutes • Local traffic growth as a result of In millions growth in internet dial-up traffic • Successfully slowed fixed-to- Increase in local 209 207 minutes excl minutes mobile minute loss through moved to ADSL 118 (24) (14) “Cellsaver” (78)
Slide 11: Accelerating broadband adoption
Accelerating broadband adoption 57% growth in internet customers 14% growth in ISDN 36,716 ADSL Internet customers customers In thousands 175 24 month ADSL 111 contract with free modem HomeDSL 384, Sep-03 Sep-04 cheaper product 11
Slide 12: Preferred partner for business market
Preferred partner for business market 13% growth in fixed-line data revenues 36% growth in Managed data managed data network sites network sites 7,979 10,849 VPN Supreme launched as Sep-03 Sep-04 IP/MPLS solution 12
Slide 13: A next generation network
A next generation network Focus on broadband connectivity – WiMAX trial with Intel Customer visibility of their service performance VoIP switching already used for international voice Softswitch in national network in 2005 13
Slide 14: Improved, efficient service delivery
Improved, efficient service delivery Simplification of customer contact centres 96% of customers paying on time compared to 91% in 2001 Bad debts below 1% of revenue 23% of customer service branches rebranded - TelkomDirect 14
Slide 15: Strong mobile SA customers growth
Strong mobile SA customers growth 2.7 million gross connections in the 6 months SA mobile customers 33% growth to 11.3 million In thousands 11,346 customers 9,725 56% estimated market share 8,522 Lowest contract churn ever at 8.6% ARPU decline 8% to R165 Sep-03 Mar-04 Sep-04 15
Slide 16: Over 2 million customers outside of South Africa
Over 2 million customers outside of South Africa Tanzania • 76% growth in customers to 952,000 Democratic Republic of Congo • 58% est market share • 97% growth in customers to 903,000 • 48% est market share Lesotho Mozambique • 72% growth in customers • 164,000 customers to 122,000 • 24% est market
Slide 17: Section 3: Financial overview
Section 3 Financial overview
Slide 18: Segment contribution overview
Segment contribution overview 6 months ended September 30, 2004, after segment eliminations Operating revenue Operating profit Net profit Net debt Mobile Mobile Mobile 8% Mobile 11% 17% 28% Fixed Fixed Fixed Fixed 72% 83% 89% 92% 18
Slide 19: Solid group revenue growth
Solid group revenue growth Group operating revenue Fixed-line revenue growth In ZAR millions In ZAR millions (Sep-04 movement on Sep-03) 7.4% 378 305 145 94 60 2.5% 21,520 20,036 Data growth driven by volumes not tariffs 15,355 15,733 20.8% -226 6,755 5,590 Total Interconnect Data Subs Directories T
Slide 20: Cutting out the costs in fixed-line
Cutting out the costs in fixed-line Group operating expenses Fixed-line operating expenses In ZAR millions In ZAR millions (Sep-04 movement on Sep-03) 3.9% 145 3.5% -94 -81 -74 15,859 16,476 -7 -316 12,369 11,942 25.1% -427 5,502 4,399 D&A SG&A operators Employee Total Operating Services expenses re
Slide 21: Continued margin expansion
Continued margin expansion Fixed-line Group EBITDA – 8% growth in EBITDA to 39.6 40.3 R6,574 million 8,670 – 2% expansion in EBITDA 7,943 margin to 41.8% Mobile – 13% growth in EBITDA to R2,096 million Sep-03 Sep-04 – 2% decline in mobile EBITDA EBITDA (ZAR million) EBITDA margin (%) margin to 31.0%
Slide 22: Investing capital for growth
Investing capital for growth Group capital expenditure Fixed-line capital expenditure In ZAR millions September 30, 2004 5% 23% 2,075 1,763 1,369 56% 1,199 16% 706 564 Fixed-line Mobile Group Baseline (growth) Network Evolution Sep-03 Sep-04 Efficiencies Other 22
Slide 23: 27% decrease in group net debt
27% decrease in group net debt Group net debt Group interest expense In ZAR millions In ZAR millions 85.5 17,085 1,311 54.9 898 12,424 Sep-03 Sep-04 Sep-03 Sep-04 Group net debt Net debt to equity (%) 23
Slide 24: Maintained high level of free cash flow
Maintained high level of free cash flow Maintained high level of Group operating free cash flow operating free cash flow In ZAR millions of R3,9 billion 3,904 3,927 – Despite higher cash taxes and capex R2.3 billion debt repaid R1.7 billion on share Sep-03 Sep-04 repurchase R3.1 billion cash on hand
Slide 25: Section 4: Outlook
Section 4 Outlook Ble |~| ++ 8
Slide 26: The regulatory environment
The regulatory environment Regulatory financial statements submitted to ICASA in September 2004 on historical cost basis SNO licence granted ICASA commenced Telkom tariff review Clarity on September 2004 policy announcements expected Finalisation of ICT BEE charter – 2004/2005 26
Slide 27: Strategic focus in liberalised market
Strategic focus in liberalised market Accelerate broadband Customer centric 1 and managed networks Competitive pricing Product bundles Customer service Operational excellence 2 IP network evolution Field force efficiencies 27
Slide 28: Creating a sustainable market place
Creating a sustainable market place A 9% increase in employee training expenditure to R198 million in first 6 months A 21% increase in BEE procurement spend of R2.3 billion, Over R230 million or 60% of total spend equity value created for current Khulisa 28 shareholders
Slide 29: Outlook for March 2005
Outlook for March 2005 Guidance unchanged – EBITDA margin • At least 1% improvement on adjusted base of 38% – Capex to revenue • Between 12% -15% – Net debt to equity • Between 50% - 70% 29
Slide 30: Investor Relations
Investor Relations telkomir@telkom.co.za Tel: +27 12 311 5720 Fax: +27 12 311 5721
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