Slide 1: Provisional Results Presentation for the year ended 31 March 2009
1 Telkom SA Limited Provisional Results Presentation for the year ended 31 March 2009
Slide 2: Forward looking statement
making it happen - taking Telkom forward 2 Forward looking statement Many of the statements included in this announcement, as well as oral statements that may be made by Telkom and Vodacom, or by officers, directors or employees acting on their behalf related to the subject matter hereof, constitute
Slide 3: Overview
3 Overview Reuben September
Slide 4: Presentation Overview
making it happen - taking Telkom forward 4 Presentation Overview Defend and grow strategies on track Attending to challenges - customer service, capital efficiency, legacy systems, Multi-Links, Africa Online, integrating M-Web Africa Exploit opportunities created by conclusion of Vodacom transaction
Slide 5: Group financial features - continuing operations
making it happen - taking Telkom forward 5 Dividends 2009 6.6 2010 3.75 Group financial features - continuing operations Operating Revenue EBITDA HEPS 2008 33611 13203 1028.9 2009 35940 11668 557 (11.6)% 6.9% (45.9)% ZAR Rm Rm Cents Vodacom transaction - special dividend R19.00 (43.2)%
Slide 6: Defend and grow strategy - notable successes
making it happen - taking Telkom forward 6 Defend and grow strategy - notable successes Annuity revenue up 6.8% to R7.4 billion, subscription based calling plan revenue increased by 20.5% to R1.3 billion Closer subscribers up 27.6% to 575,812 Supreme Call packages increased 14.4% and PC bundles incr
Slide 7: Initiatives to grow and win back traffic
making it happen - taking Telkom forward 7 Initiatives to grow and win back traffic Exploit opportunities created by licensing regime, convergence technologies and the freedom to compete fully Utilise fixed-mobile convergence to win back revenue Leverage NGN to aggressively grow high quality broadba
Slide 8: Initiatives to grow and win back traffic
making it happen - taking Telkom forward 8 Initiatives to grow and win back traffic Exploit the scale benefits offered by gated communities and other highly populated residential areas Leverage the investment in broadband network by offering third party content Accelerate and further improve service
Slide 9: Data - continued strong growth of 12.1%
making it happen - taking Telkom forward 9 Data - continued strong growth of 12.1% Data connectivity Mobile Leased lines Internet access Managed network, including VPN services East 0.109 0.005 0.296 0.223 % revenue increase Size (Rm) High value services 891 1,525 1,858 4,951 Basic services Data - k
Slide 10: Cost efficiency and cash flow
making it happen - taking Telkom forward 10 Cost efficiency and cash flow Cost management remains a key driver for Telkom's performance Transformation initiative (Telkom Renaissance): Reorganise to implement strategy Clear accountability Focus on effectiveness and efficiency Roll out wireless networ
Slide 11: Multi-Links - Financial performance
making it happen - taking Telkom forward 11 Multi-Links - Financial performance Strong revenue growth Loss Group Revenue increased 124.9% to R1,900 million Subscribers increased 209.3% to 2.5 million Operating expenses increased 175.1% to R2,422 million Aggressive acquisition of customers High perce
Slide 12: Multi-Links - Operational statistics
making it happen - taking Telkom forward 12 Multi-Links - Operational statistics Strong subscriber growth Network investment ARPU Subscriber base increased 209.3% to 2,516,109 by March 31, 2009 Data currently contributes 17% to revenue ARPU declines from US$32 to US$9 at March 31, 2009 due to: CDMA
Slide 13: Multi-Links - Focus areas
making it happen - taking Telkom forward 13 Multi-Links - Focus areas Extensive fibre network a distinct competitive advantage Increased focus on wholesale, corporate and SMME markets Grow revenue of fixed-wireless and mobile customers through brand awareness and promotion; Expand broadband internet
Slide 14: Multi-Links - Focus areas (continued)
making it happen - taking Telkom forward 14 Multi-Links - Focus areas (continued) Opex is driven by establishment of distribution channels, customer acquisition, maintenance and marketing costs Reducing handset subsidies Migrating to an all IP network benefitting from cost effective network manageme
Slide 15: Multi-Links - Targets
making it happen - taking Telkom forward 15 Multi-Links - Targets Targets for 2009/10 Subscriber growth target - net 305,000 EVDO target - 40,000 ARPU target - US$10 Corporate data subscribers - 1,800 Additional 1,000km of fibre planned for 2009/10 National fibre network to connect all major cities
Slide 16: International Subsidiary footprint
making it happen - taking Telkom forward 16 International Subsidiary footprint Libya Tunisia Algeria Morocco Western Sahara Guinea Bissau Maurita nia Egypt Chad Niger Eritrea Sudan Central African Republic Nigeria Mali Senegal Liberia Togo Cameroon Ethiopia Somalia Djibouti Gambia Sierra Leone Guine
Slide 17: MWeb Africa and Africa Online integration
making it happen - taking Telkom forward 17 MWeb Africa and Africa Online integration Consolidate satellite bandwidth capacity Merge MWeb and Africa Online's VSAT businesses Consolidate data centre infrastructures Expand wireless Broadband reach and use VSAT for international backbone Focus on corpo
Slide 18: Enterprise Customers
making it happen - taking Telkom forward 18 Enterprise Customers Using our Multi-Links/AFOL/MWeb presence across Africa as a launching pad AT&T leverage Strategic alliances provide competitive advantage Building the muscle to serve multi-nationals in Africa Combining our presence with partners
Slide 19: Mobile Strategy
making it happen - taking Telkom forward 19 Mobile Strategy Initial rollout of W-CDMA focused on: Theft, breakages and incidents prone areas Customers waiting for service Areas without copper infrastructure Focus on cost efficiency and customer service Currently have 141 sites in major metropolitan
Slide 20: Mobile - way forward
making it happen - taking Telkom forward 20 Mobile - way forward Comprehensive mobile and converged product roadmap being developed Product mix, price elasticity, segmentation Being tested through market research Business case scenarios being developed. Final version dependent on Finalisation of mar
Slide 21: Data Centre Operations
making it happen - taking Telkom forward 21 Data Centre Operations Current capacity of 7,500m2 Nearing completion of a further 2,200m2 - R400m Adding a further 5,000m2, dependent on market study Approach to the market Leverage strong enterprise customer relationships Utility model and pay-on-demand
Slide 22: Telkom is a major player in the connectivity and managed network space
Telkom is a major player in the connectivity and managed network space Telkom is currently managing over R2.5bn worth of IT assets Telkom has developed key partnerships to grow credibility in the market Expertise recognised by many clients; enterprise customers in SA and FIFA Telkom can rely on a nu
Slide 23: Confederations Cup & World Cup 2010
making it happen - taking Telkom forward 23 Confederations Cup & World Cup 2010 We are ready to make South Africa proud Seph Blatter Video
Slide 24: Reorganising Telkom - distinct business units
making it happen - taking Telkom forward 24 Reorganising Telkom - distinct business units ....adapt to changes in our environment e.g., Vodacom transaction, credit crunch ....be ready for more competition by being more customer centric and cost efficient .....be equipped for international expansion
Slide 25: Elements of Telkom Renaissance
making it happen - taking Telkom forward 25 Elements of Telkom Renaissance Remodelling Re-engineering Revitalisation Reorganisation Value-added Activity New Horizons Clear Accountability Excited Employees/Customers Renaissance = Transformation Defend market share New Revenue New businesses Compete a
Slide 26: New Structure
making it happen - taking Telkom forward 26 New Structure Telkom Group Corp Governance & Regulatory Affairs Strategy and M & A Finance & Performance Management Human Resources & Talent Management Executive Support Office Telkom SA Telkom Int Support Whole- sale & network Consu- mer1 Enter- prise1 Ni
Slide 27: Financial Overview
Financial Overview Peter Nelson
Slide 28: Group income statement
making it happen - taking Telkom forward 28 Group income statement ZAR million 2008 2009 % Operating revenue 33,611 35,940 6.9 Other income 472 343 (27.3) Operating expenses (25,014) (29,895) 19.5 Operating profit 9,069 6,388 (29.6) Investment income 168 181 7.7 EBITDA 13,203 11,668 (11.6) Finance c
Slide 29: Group income statement - net profit
making it happen - taking Telkom forward 29 Group income statement Net profit 2008 Net profit 2009 Multi-Links (R3,805 million) 7,975 4,170 ZAR million 2,095 19 Fixed-line 929 Vodacom 800 Other Turn-around strategy for Multi-Links the key focus
Slide 30: Once off items impacting group result
making it happen - taking Telkom forward 30 ZAR millions Total operations Total operations Continued operations Continued operations 2008 2009 2008 2009 Profit as reported 7,975 4,170 4,911 2,040 Impairment of Africa Online 12 39 12 39 Impairment of Multi-Links 462 462 Impairment of Telkom Media 217
Slide 31: Finance charges and fair value movements
making it happen - taking Telkom forward 31 Finance charges and fair value movements ZAR millions 2008 2009 % Interest expense 1,543 1,732 12.2 Local loans 1,701 1,728 1.6 Foreign loans 18 167 827.8 Finance charges capitalised (174) (163) 6.3 Foreign exchange losses and fair value movements 13 1,111
Slide 32: Group balance sheet
making it happen - taking Telkom forward 32 2007 2008 2009 East 22.7 18.3 9.7 Group balance sheet ZAR million 2008 2009 % Non-current assets 57,763 51,009 (11.7) Current assets 12,609 11,287 (10.5) Disposal group held for sale - 23,483 - Total assets 70,372 85,779 21.9 Capital & reserves 33,337 37,1
Slide 33: Group cash flow
making it happen - taking Telkom forward 33 Group cash flow ZAR millions 2008 2009 % Cash generated from operations 16,335 14,768 (9.6) Dividend paid (5,732) (3,336) (41.8) Cash generated from operating activities 10,603 11,432 7.8 Investing activities (14,106) (17,005) 20.6 Financing activities 2,9
Slide 34: Group Investments
making it happen - taking Telkom forward 34 Group Investments ZAR million Fixed-line impairment 2008 Fixed-line impairment 2009 Fixed-line carrying value 2009 Group impairment 2008 Group impairment 2009 Trudon - - 167 - - Swiftnet - - 34 - - Telkom Media 217 254 - 217 - Africa Online 12 85 275 12 39
Slide 35: Fixed-line income statement
making it happen - taking Telkom forward 35 Fixed-line income statement ZAR million 2008 2009 % Operating revenue 32,572 33,659 3.3 Other income 497 524 5.4 Operating expenses (24,962) (29,849) 19.6 Operating profit 8,107 4,334 (46.5) Investment income 3,975 2,807 (29.4) EBITDA 11,839 8,692 (26.6) F
Slide 36: Fixed-line revenue
making it happen - taking Telkom forward 36 Fixed-line revenue Total Subscriptions & connections Traffic Interconnect Data 2008 32572 6330 15950 1757 8308 2009 33659 6614 15323 2084 9310 ZAR million 3.3% 4.5% 18.6% 12.1% (3.9)% Winning traffic back & growing data is key
Slide 37: Fixed-line traffic
making it happen - taking Telkom forward 37 Fixed-line traffic Local Long distance Fixed-to-mobile International outgoing Calling plans 2008 11317 3870 4169 678 2997 2009 8822 3631 4126 656 3546 Local Long distance Fixed-to-mobile International outgoing Calling plans 2008 4076 2252 7557 986 1079 200
Slide 38: Fixed-line annuity revenue
making it happen - taking Telkom forward 38 Fixed-line annuity revenue ZAR million 2008 2009 % Line rental 4,731 4,929 4.2 Calling plans / packages 1,079 1,300 20.5 CPE rental 755 797 5.6 Value added services 330 338 2.4 International other 22 23 4.5 Total 6,917 7,387 6.8 Note: Annuity revenue inclu
Slide 39: Fixed-line revenue (continued)
making it happen - taking Telkom forward 39 Fixed-line revenue (continued) Interconnection ZAR millions 2008 2009 % Mobile 838 916 9.3 Fixed domestic 28 111 296.4 International 891 1,057 18.6 Interconnection revenue 1,757 2,084 18.6 2008 2009 East 3895 4088 Data ZAR millions 2008 2009 % Leased lines
Slide 40: Fixed-line operating expenses
making it happen - taking Telkom forward 40 Fixed-line operating expenses ZAR million 2008 2009 % Employee expenses 7,397 7,999 8.1 Payments to other operators 6,902 7,536 9.2 SG&A 3,899 6,582 68.8 Service fees 2,413 2,761 14.4 Operating leases 619 613 (1.0) Depreciation, amortisation, impairment an
Slide 41: Fixed-line capex - Major items of expenditure
making it happen - taking Telkom forward 41 Fixed-line capex - Major items of expenditure ZAR millions 2008 2009 % Access network 740 587 (20.7) Legacy 700 452 (35.4) NGN 2,305 2,181 (5.4) Fiber 978 757 (22.6) International 31 240 674.2 Information Operations 627 431 (31.3) Customer premises equipme
Slide 42: Telkom SA: Focus on return on investment
making it happen - taking Telkom forward 42 Telkom SA: Focus on return on investment Base business (Voice, data and broadband) R26.9 billion Data Centre Operations R1.4 billion Sustain Voice services Grow bundled services Grow Data and Broadband services Provide Mobile and Converged services Provide
Slide 43: Company balance sheet
making it happen - taking Telkom forward 43 Company balance sheet ZAR millions 2008 2009 % Non-current assets 43,360 50,796 17.1 Current assets 8,763 10,090 15.51 Disposal group held for sale - 34 - Total assets 52,123 60,920 16.9 2007 2008 2009 East 0.7 1.1 1.8 Capital & reserves 26,693 29,086 9.0
Slide 44: Company cash flow
making it happen - taking Telkom forward 44 Company cash flow ZAR millions 2008 2009 % Cash generated from operations before dividend 14,030 13,382 (4.6) Dividend paid (5,858) (3,434) (41.4) Cash generated from operating activities 8,172 9,948 21.7 Investing activities (9,994) (12,129) (21.4) Financ
Slide 45: Other continuing operations
making it happen - taking Telkom forward 45 Other continuing operations Trudon Multi-Links Africa Online 2008 530 942 118 2009 593 2422 208 Trudon Multi-Links Africa Online 2008 930 845 110 2009 1020 1900 194 Operating revenue Operating expenditure 9.7% 76.3% 157.1% 124.9% 76.4% ZAR millions 11.9% 2
Slide 46: Other continuing operations (continued)
making it happen - taking Telkom forward 46 Other continuing operations (continued) 2008 2009 Trudon 44 51 2008 2009 Africa Onlin 46 63 2008 2009 East 17252 18441 Capital expenditure1 ZAR million 6.9% 2008 2009 Multi-Links 813392 2516109 Customer numbers ZAR in millions 209.3% Multi-Links Africa Onl
Slide 47: Funding profile as at March 31, 2009
making it happen - taking Telkom forward 47 Funding profile as at March 31, 2009 (including maturities) Rm 2009 Maturing in 2009 calendar year CP Bills R5,059 Maturing 2010 calendar year PP02 R430 PP03 R1,350 CP Bills R500 Term Loans R2,000 Maturing after 2010 Syndicated loans (maturing in 2011 and
Slide 48: Treasury activity
making it happen - taking Telkom forward 48 Treasury activity Mar 08 Apr 08 Dec 08 Jan 09 Issued 1.06 2.1 Repaid -4.6 -1.6 -1 -1 Repaid 3 Drawn 1.6 1.16 Issued Repaid Commercial paper R11.0 bn issued (2008 - R18.8 bn issued) Commercial paper R9.8 bn repaid (2008 - R15.8 bn repaid) Plan in place to h
Slide 49: Guidance for 2009/2010
making it happen - taking Telkom forward 49 49 Guidance for 2009/2010 It is difficult in the current climate to make any revenue and earnings forecasts Capex expected to range between 20% and 23% of revenue Net debt/EBITDA of 1.4x Committed to delivering sustainable returns to shareholders