Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — FY2018 Earnings Presentation
48 slides from Telkom Sa Soc's earnings presentation, 2018
Slide 1: Group Annual Results 2018
Group Annual Results 2018 | 1 Telkom SA SOC Limited Group Annual Results for the year ended 31 March 2018
Slide 2: Tough trading environment
01 | Business Performance Group Annual Results 2018 | 2 Tough trading environment Macro-economic Competitive Political & Policy conditions environment Uncertainty Low GDP growth Enquiries in market structure Cost to communicate Low business confidence Consolidation in the market ICT policy & spectru
Slide 3: Business Performance
Group Annual Results 2018 | 3 01 Business Performance
Slide 4: Solid performance
01 | Business Performance Group Annual Results 2018 | 4 Solid performance Operating EBITDA Headline earnings Capex to Annual revenue margin per share revenue dividend of R41.0 bn 25.7% 597.0c 19.3% 355.0 cents
Slide 5: Investment strategy bearing fruit
01 | Business Performance Group Annual Results 2018 | 5 Investment strategy bearing fruit Aggressive growth Strong growth Growth in future Leadership Strong in the mobile in fibre and revenue streams renewed balance sheet business data albeit from a lower ecosystems base
Slide 6: Sharpening our focus: Group
01 | Business Performance Group Annual Results 2018 | 6 Sharpening our focus GROUP
Slide 7: Key focus areas
Key focus areas > Mobile growth > High speed broadband growth > Content and VAS
Slide 8: Driving growth through mobile
01 | Business Performance Group Annual Results 2018 | 8 Driving growth through mobile Subscriber growth Mobile broadband subscribers 30.2% Data only Smartphone users 55.7% 3 627 Pre-paid Post-paid 5 208 3 999 2 329 1 478 2 707 1 891 2 753 ‘000 ‘000 1 227 794 1 605 3 730 1 361 1 912 2 772 530 724 874
Slide 9: Migration to new technologies
03 | Financial overview Group Annual Results 2018 | 9 Migration to new technologies High speed broadband customers Speeds 1 173 0 20 40 60 80 100 120 36.4% 62 Fibre 860 27 620 518 LTE 176 3 77 125 72 139 VDSL 468 532 454 ADSL FY2016 FY2017 FY2018 ADSL VDSL LTE Fibre
Slide 10: Next Generation Products
01 | Business Performance Group Annual Results 2018 | 10 Next Generation Products • 30% of postpaid customer on • LTE postpaid customers grew • 10Mbps base up 25% FreeMe 54.9% • Fixed broadband ARPU up • ARPU uplift from migration • Expansion of our fixed 20.5% to FreeMe wireless LTE smart offerings
Slide 11: Content is king
01 | Business Performance Group Annual Results 2018 | 11 Content is king • LIT Video and LIT Music unique users grown substantially since inception in Sep 2017 ► >200k LIT Music unique users ► >160k LIT Video unique users • LIT TV – video capable broadband services ► Approximately 20 000 LIT TV boxe
Slide 12: Key focus areas
Group Annual Results 2018 | 12 Key focus areas > Modernise the network > Commercialise the network > Transforming service delivery
Slide 13: Investing in data & broadband ecosystem
01 | Business Performance Group Annual Results 2018 | 13 Investing in data & broadband ecosystem Access SDN DC SDN L2/L3 SDN DC SDN LTE/ LTE-A/5G ME ME VDSL/ FTTH POTN POTN Edge Metro L2/L3 Core Core Fibre/ME Cloud Cloud ME ME Satellite Microwave High speed and reliability | Unlimited bandwidth| Nea
Slide 14: The Fibre Footprint Passed over 2.5 million premises
01 | Business Performance Group Annual Results 2018 | 14 The Fibre Footprint Passed over 2.5 million premises Fibre network of Fibre to the home Fibre to the cabinet > 157 400 km 356 684 2 237 057 deployed to date 62.3% 12.3%
Slide 15: Gaining traction
01 | Business Performance Group Annual Results 2018 | 15 Gaining traction Fixed line broadband data consumption1 34.3% Fibre to the business Fibre to the base stations 89 818 6 791 end points terminating base stations 828 70.3% 14.6% 617 Petabytes 461 Homes connected 109 336 connectivity rate of FY2
Slide 16: Broadband evolution
01 | Business Performance Group Annual Results 2018 | 16 Broadband evolution Data solutions Evolution Broadband connection evolution Traditional technology Traditional Broadband 12.4% Connections Services 31.0% 145 186 132 340 577 279 115 900 417 519 288 243 FY2016 FY2017 FY2018 FY2016 FY2017 FY2018
Slide 17: Ramping up service
01 | Business Performance Group Annual Results 2018 | 17 Ramping up service 24% 16% ~3 000 reduction Increase in Frontline customer Re-dispatch Interaction interactions rate NPS every day
Slide 18: Key focus areas
Group Annual Results 2018 | 18 Key focus areas > Unified communications > Cloud computing > Big data analytics > Industrial IoT (IIoT) > Cyber Security
Slide 19: The migration journey
01 | Business Performance Group Annual Results 2018 | 19 The migration journey 2015 2016 2017 2018 August November April • Merged 6 entities to form – Telkom Group – Telkom – Telkom Group “One BCX” acquires BCX Enterprise IT integrated integrated into • Disposed 4 small BCX into BCX BCX subsidiaries
Slide 20: Less public sector sales
01 | Business Performance Group Annual Results 2018 | 20 Less public sector sales Public sector Large & Medium size FY2017 Enterprise > 35% of BCX revenue is from public -R1bn FY2018 sector > Large & Medium size entities -0.4 BCX Elims represents 37% and 26% of BCX BCX Elims -0.3 > R1.6 billion decl
Slide 21: Driving Efficiencies
01 | Business Performance Group Annual Results 2018 | 21 Driving Efficiencies Process optimisation People Procurement > Business process > Talent management – > Centralised procurement re-engineering to appropriate capability to function to take advantage of the simplify the business deliver on stra
Slide 22: Growing new revenue streams
01 | Business Performance Group Annual Results 2018 | 22 Growing new revenue streams Social impact BCX Smart BCX Insight BCX Secure > BCX Smart business unit formed > BCX Insight business unit formed in > BCX Secure business unit formed > Integrated Industrial and Commercial IoT the prior year > Cyb
Slide 23: Key focus areas
Group Annual Results 2018 | 23 Key focus areas > Commercialise the property portfolio > Optimise and grow the Mast & Tower portfolio > Enhance building operation efficiencies
Slide 24: Unlocking value
01 | Business Performance Group Annual Results 2018 | 24 Unlocking value Optimising Commercialising Optimising M&T Portfolio Property Portfolio Building Operations • 6 500 towers across • 40 properties selected for Phase • >1 400 properties under South Africa 1 development pipeline management • 1 30
Slide 25: M&T Commercialisation
01 | Business Performance Group Annual Results 2018 | 25 M&T Commercialisation External Revenue Growth External Co-Location Tenancy Growth (R’ million) (# of tenants) 9.0% 9.0% 496 539 2 362 2 581 FY2017 FY2018 FY2017 FY2018
Slide 26: Key focus areas
Group Annual Results 2018 | 26 Key focus areas > Stabilise the Business > Optimise and rationalise traditional costs > Rebuild iYP to create an eMarketplace > Reposition, refresh and evolve the brand
Slide 27: Organisational recovery and Rebranding
01 | Business performance Group Annual Results 2018 | 27 Organisational recovery Rebranding • Strengthened the Risk, Governance and • Trudon rebranded to Yellow Pages Control environment ＞ Yellow Pages remains a trusted brand with • Established a Special Task Team to recovery of heritage of servicin
Slide 28: Market context
01 | Business performance Group Annual Results 2018 | 28 Market context • Flat economic growth. • Changing structure of the GDP key contributors Broader context with financial services contributing 20%. • Economic downgrade • Regulation lagging Digital and eCommerce. Market • Digital Skills scarcity
Slide 29: The Transformation Journey
01 | Business performance Group Annual Results 2018 | 29 The Transformation Journey Leads and Data Owned OTT Simplified Consolidated Platforms Products Experience Design pYP iYP tYP aYP WebCard WebSite Location Media Print Desktop Mobile MEDIA eCommerce • Improve Quality of Service • Increase Sales
Slide 30: The future – Yellow Marketplaces
01 | Business performance Group Annual Results 2018 | 30 The future – Yellow Marketplaces Consumer Yellowpages.co.za Engage, Connect, Experience design SME Mobile site Mobile App Security/Credentials/Integration Layer Directory Data Financial eCommerce Platform Payment Services CRM Systems B2B Proce
Slide 31: Human and Social Capital
Group Annual Results 2018 | 31 02 Human and Social Capital
Slide 32: Investing in our talent
02 | Human and social capital Group Annual Results 2018 | 32 Investing in our talent • Succession plans for 94% of all senior managers Effective talent • 58% of permanent placement from internal talent management • Migrating skills for future competitiveness Training & • Training & development spend
Slide 33: Growing skills, enabling ICT entrepreneur
02 | Human and social capital Group Annual Results 2018 | 33 Growing skills, enabling ICT entrepreneur Skills - To address the skills shortage in the ICT sector FutureMakers - Enterprise and Supplier Development Fund WeThinkCode Additional 133 students to gain software R381 million engineering relat
Slide 34: Financial Overview
Group Annual Results 2018 | 34 03 Financial overview Financial Overview
Slide 35: Overview
03 | Financial overview Group Annual Results 2018 | 35 Overview Revenue Working capital growth and free cash flow Impressive growth in our Continued focus on our new revenue streams working capital management while managing has positively impacted our traditional voice free cash flow revenues Overvi
Slide 36: Solid performance in a challenging environment
03 | Financial overview Group Annual Results 2018 | 36 Solid performance in a challenging environment FY2018 FY2017 % Operating Revenue 41 018 40 970 0.1 Net revenue 32 156 31 854 0.9 Operating expenses (excl. depreciation) 22 219 21 647 (2.6) EBITDA 10 544 10 941 (3.6) Taxation 1 133 704 (60.9) Cap
Slide 37: Impressive performance from mobile
03 | Financial overview Group Annual Results 2018 | 37 Impressive performance from mobile Mobile service revenue Mobile data broadband traffic 47.2% 123.6% Petabytes Rm 5 150 192 3 498 37 2 528 86 FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 EBITDA (excluding internal costs) Blended mobile ARPU Rand 10
Slide 38: Managing decline in fixed revenue streams
03 | Financial overview Group Annual Results 2018 | 38 Managing decline in fixed revenue streams Fixed service revenue Fixed broadband traffic volumes 4.7% 34.3% Rm 25 515 24 337 23 191 Petabytes FY2016 FY2017 FY2018 Fixed voice ARPU 848 1.9% 632 472 Rand 367 368 361 FY2016 FY2017 FY2018 FY2016 FY20
Slide 39: Managing decline in fixed revenue streams (continued)
03 | Financial overview Group Annual Results 2018 | 39 Managing decline in fixed revenue streams (continued) Metro-Ethernet Fibre 175.8% 47.4% Customer lines 109 336 Circuits 16 338 24 088 12 745 8 129 39 640 FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 Sub-rate services Diginet 12.4% 7.5% Services Ser
Slide 40: Managing decline in fixed revenue streams (continued)
03 | Financial overview Group Annual Results 2018 | 40 Managing decline in fixed revenue streams (continued) Rm 4.7% Fixed service revenue 8.9% 14 546 13 245 1.6% Fixed data 47.2% 5.2% 5 620 5 326 2.3% 5 150 49.6% 3 498 1 574 3 119 3 046 1 052 Mobile service revenue Fixed voice Traditional data prod
Slide 41: New revenue streams offset pressures in voice
03 | Financial overview Group Annual Results 2018 | 41 New revenue streams offset pressures in voice Net revenue movement R302m (1 176) 0.9% 1 746 (528) 155 242 (137) 31 854 32 156 FY2017 Net Mobile Voice Fixed data Cost of sales Information Other FY2018 Net revenue technology revenue
Slide 42: EBITDA
03 | Financial overview Group Annual Results 2018 | 42 EBITDA EBITDA movement R397m 302 105 (71) (127) (185) (421) 3.6% 10 941 10 544 FY2017 Net S,G&A Operating Other Service Employee FY2018 EBITDA revenue leases income fees expenses EBITDA
Slide 43: Investing for growth
03 | Financial overview Group Annual Results 2018 | 43 Investing for growth FY2018 FY2017 % Mobile 2 319 1 936 19.8 Fibre 2 112 2 392 11.7 OSS/BSS programme 294 741 60.3 Network rehabilitation/sustainment 303 567 46.6 Service on demand 1 292 1 251 3.3 Core network 902 962 6.2
Slide 44: Cash position to support growth
03 | Financial overview Group Annual Results 2018 | 44 Cash position to support growth FY2018 FY2017 % Cash sources Opening cash balance 1 519 2 542 (40.2) Cash flow from operating activities 8 274 7 713 7.3 Net loans raised 2 995 892 235.6 Significant cash applications Cash paid on capital expendit
Slide 45: Guidance
03 | Financial overview Group Annual Results 2018 | 45 Guidance FY2018 FY2018 FY2019 – FY2021 guidance Actual guidance Operating revenue Flat 0.1 Mid-single digits EBITDA margin 23% - 25% 25.7% 24% - 27% Capex to revenue 17% - 20% 19.3% 16% - 20% Net debt to EBITDA ≤1 0.6 ≤1 Annual dividend of 355 c
Slide 46: Outlook
Group Annual Results 2018 | 46 04 Outlook
Slide 47: Strategic focus areas for each business unit
04 | Outlook Group Annual Results 2018 | 47 Strategic focus areas for each business unit • Modernise the • Mobile growth • Unified • Stabilise the Business • Commercialise the network through data-led communications • Optimise and property portfolio • Commercialise the propositions • Cloud computing
Slide 48: Thank you
Group Annual Results 2018 | 48 Questions? telkomir@Telkom.co.za Thank you