Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Telkom — Merger or Acquisition (November 2008)
26 slides from Telkom Sa Soc's merger presentation, Nov 6, 2008
Slide 1: The Vodacom Transaction: Unlocking value for shareholders
The Vodacom Transaction Unlocking value for shareholders
Slide 2: Forward looking statement
Forward looking statement Shareholders in certain jurisdictions outside of South Africa may not be entitled to receive any Vodacom shares that Telkom unbundles if such receipt would require registration or approval under local securities laws. A mechanism is intended to be put in place so that share
Slide 3: Key terms of the Vodacom transaction
Key terms of the Vodacom transaction Three inter-conditional components: 15% stake to be sold to Vodafone Remaining 35% to be listed on the JSE and distributed to Telkom shareholders in South Africa and other eligible jurisdictions by way of an unbundling 50% of post tax (CGT) proceeds declared as s
Slide 4: Key terms (continued): Conditions
Key terms (continued) Conditions Telkom shareholder approvals: 50% for the disposal of 15% of Vodacom to Vodafone 75% for the unbundling of the remaining 35% of Vodacom to Telkom shareholders (Section 228 of Companies Act) 50% for the declaration of the special dividend Regulatory approvals includin
Slide 5: Key terms (continued): Use of proceeds
Key terms (continued) Use of proceeds Telkom to retain 50% of the proceeds to fund its repositioning post Vodacom The remainder of the proceeds will be returned to shareholders as a special dividend (less STC payable thereon) Vodacom minority shareholder protection Vodacom will be used as Vodafone's
Slide 6: Vodacom ownership structure post transaction
PIC SA Govt Vodacom Group Other TKG shareholders or public Vodacom SA BEE Vodacom ownership structure post transaction End of misaligned shareholder strategies Telkom shareholders gain direct equity exposure to Vodacom Vodafone 65% 4.6% 13.8% 16.6% Vodacom International ca 6% 94% 100%
Slide 7: Expected timing
Expected timing End February 2009 Circulars mailed to shareholders Mid March 2009 Shareholders vote in special general meeting April 2009 Regulatory approvals expected: ICASA Competition authorities May/June 2009 Transaction closing Receipt of proceeds Special dividend declared Listing and unbundlin
Slide 8: Transaction rationale
Transaction rationale Value unlock Remove strategic limitations Attractive cash consideration for 15% of Vodacom Telkom to retain 50% of proceeds, remainder distributed to shareholders (net of STC) Potential re-rating of under valued fixed-line business Direct equity exposure to South Africa's leadi
Slide 9: Strategic limitations removed - Telkom free to compete
Able to provide mobile services in South Africa and across Africa Is expected to realise the power and benefits of a fully integrated strategy Free from geographic limitations Telkom can now offer fully converged services Strategic limitations removed - Telkom free to compete Customers want to commu
Slide 10: Enhanced ability to compete
Enhanced ability to compete Maximise core fixed-line value Top line growth Margin Capex Strengthened ability to defend and grow revenue base Focus on converged fixed, mobile and data services opportunities Use of wireless (mobile) solutions to improve margins Telkom's strength remains its network Ac
Slide 11: Unaudited pro forma Telkom financials
Unaudited pro forma Telkom financials After Before Comments Revenues 08 (ZARbn) 34.5 56.3 EBITDA 08 (ZARbn) 12.4 20.6 Total gross debt (ZARbn) 15.2 18.4 Total cash (ZARbn) 10.9 1.7 Net debt (ZARbn) 4.4 16.6 Removal of 50% of Vodacom consolidated revenues EBITDA from fixed-line and other businesses a
Slide 12: Unaudited pro forma capital structure and use of proceeds
Unaudited pro forma capital structure and use of proceeds Total net debt 08 R16.6bn EBITDA 08 R20.6bn Net debt/EBITDA 0.8x Before Total net debt1 R4.4bn EBITDA 08 R12.4bn Net debt1/EBITDA 0.4x After Capital structure 1 Assuming 50% of Vodacom sale proceeds are retained by Telkom Pro forma, with 50%
Slide 13: Current financial market turmoil: Impact on Telkom
Current financial market turmoil Impact on Telkom Currently, local funding market remains available to Telkom, but 40% of Telkom's capex is foreign currency denominated Rand has depreciated more than 30% since August 2008 Management paying close attention to capex and future investments
Slide 14: Investors will have direct exposure to Vodacom
Investors will have direct exposure to Vodacom Pursue international growth Vodafone synergies Vodacom to be the expansion vehicle for Vodafone in sub-Saharan Africa (excluding North Africa, Ghana and Kenya) Simplified investment decision making process Single controlling shareholder Continued access
Slide 15: Vodacom - an attractive investment
Vodacom - an attractive investment Highlights Key financials (ZARbn) Group shareholder returns (after tax) Subscriber growth (m) Revenue EBITDA Line 6 Line 7 Line 8 Line 9 Line 10 Line 11 Line 12 Line 13 Line 14 Line 15 Line 16 2004 22.855 7.767 2005 27.315 9.597 2006 34.043 11.809 2007 41.146 14.22
Slide 16: A positive outcome for all
A positive outcome for all Listed on JSE Vehicle for Vodafone's sub- Saharan African expansion African mobile player headquartered in SA Benefiting from Vodafone products and innovations Vodacom Shareholders realise value and gain exposure to two strengthened assets Significant Foreign Direct Invest
Slide 17: Telkom Post Vodacom
1 OS se iigFelkom Post Vodacom
Slide 18: Same strategy - enhanced ability to execute
Fixed - Mobile Converged and managed data services Geographic expansion Selectively capitalise on mobile opportunities Ability to expand freely Invest and focus on data Same strategy - enhanced ability to execute Telkom will be free to grow and compete
Slide 19: Expand infrastructure capabilities, mobile network and acquisitions
Expand infrastructure capabilities including NGN and domestic data centre Selectively build mobile network Pursue growth through acquisitions Telkom to retain 50% of the proceeds to enhance competitive positioning Telkom A B C Backbone provider for all mobile networks - Telkom uniquely positioned
Slide 20: Acceleration of network expansion including NGN
Acceleration of Network expansion including NGN Strategy and rationale Increasing demand for capacity, new data and converged products Legacy network increasingly expensive to maintain, competitors rolling out NGN Significant switch in focus from pure cost-saving to include a sustainable revenue-gen
Slide 21: Aggressive move up the value-added ICT chain
Aggressive move up the value-added ICT chain Data centre and enhanced data management capabilities aimed at: Synergies/bundling of network services with IT and hosting capabilities Corporates and multinationals in Africa demand international connectivity and data solutions Remote IT management, host
Slide 22: Selectively building mobile network
Selectively building mobile network SA mobile voice market highly competitive and nearing saturation, but untapped growth in fixed-mobile convergence and mobile data potential pricing benefits as intra-group interconnection costs can be eliminated mobile capabilities important to secure opportunitie
Slide 23: Selectively building mobile network (continued)
Targeting corporate customers, high-end residential and high theft / maintenance areas Leverage from existing network and channels Use wireless access where most cost efficient Will seek network sharing and roaming agreements with mobile operators Selectively building mobile network (continued) B St
Slide 24: Selectively building mobile and wireless network (cont)
Selectively building mobile and wireless network (cont) B Adding mobility to Telkom's bundle of services creates significant value Benefits Lower churn through convergence and less fixed-mobile substitution Telkom to benefit from increased efficiency in rural areas Regulatory obligations such as pay
Slide 25: Pursuing growth opportunities through acquisitions
Pursuing growth opportunities through acquisitions C Increase the current international and ICT footprint : Acquire African fixed/mobile capabilities Acquire IT capabilities Capabilities Preference for controlling stakes in strategic investments Acquisitions based upon strict return criteria, balanc
Slide 26: To evolve into the leading ICT player in Africa
To evolve from South Africa's leading fixed-line business to the leading ICT player in Africa The sale of Vodacom will enable Telkom to realise its vision