Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — Investor Day (May 2019)
105 slides from Telkom Sa Soc's investor day presentation, May 29, 2019
Slide 1: Capital Markets Day
Telkom SA SOC Ltd Capital Markets Day 29 MAY 2019 Telkom Capital Markets Day 2019 1
Slide 2: Agenda
Agenda Speaker Time Speaker Time Introduction Sipho Maseko 8:30 – 9:00 Alphonzo 13:30 – 14:30 Samuels Serame 9:00 – 10:00 Taukobong Lesiba 14:30 – 15:30 Jonas Maloba 10:00 – 11:00 Bogoshi Break 15:30 – 16:00 Break 11:00 – 11:30 Tsholo 16:00 – 16:20 Lunga Molefe 11:30 –12:30 Siyo Sipho 16:20 – 16:30
Slide 3: Sipho Maseko, Group CEO
Sipho Maseko Group CEO Telkom Capital Markets Day 2019 3
Slide 4: Our journey: Turnaround Transform Grow
Our journey Turnaround Transform Grow Telkom Capital Markets Day 2019 4
Slide 5: Recapping
Recapping Internal factors External factors • Declining revenue and high cost • Declining fixed voice & fixed-mobile structure substitution • Over-reliance on fixed voice • Self-provisioning by wholesale customers • Uncertain regulatory & policy environment • High debt levels and weak cash flow • Re
Slide 6: Our turnaround
Our turnaround Challenges Management response • Invested in new technologies and managed voice decline • Declining fixed voice revenue and self provisioning by mobile players • Wholesale pricing intervention • High cost structure, poor balance sheet and weak • Multi year cost efficiency programme &
Slide 7: Transformative initiatives
Transformative initiatives Repositioning of Openserve Acquisition of BCX Our vehicle for data and broadband IT revenue streams to diversify and investment offset declining fixed voice revenue in the Enterprise business Accelerated Mobile business Separated Mast & Tower and such as LTE through effici
Slide 8: Repositioning of Openserve
Repositioning of Openserve Strategic Action Outcome intent steps taken • Modernise network • Review pricing strategy • Leading connectivity • Create trust with • Invested in NextGen provider customer base technology & Fiber roll-out • Largest fibre footprint • Grow OLO customers • Cost efficiency pr
Slide 9: BCX acquisition to diversify
BCX acquisition to diversify Strategic Action Outcome intent steps taken • Position ICT converged • Backward integration of • Reduced voice dependency solutions Enterprise into BCX • Optimised product • Diversify revenue mix • Renewed BCX leadership offerings • Invest in future skill base • Revised
Slide 10: Reposition Consumer business
Reposition Consumer business Strategic Action Outcome intent steps taken • De-risk Mobile business • Launched data led • Broadband led value • Grow data usage prepositions propositions • Improve customer value • Offered Fixed Wireless • Increased mobile market propositions products share • Improve c
Slide 11: Focus on property portfolio
Focus on property portfolio Strategic Action Outcome intent steps taken • Diversify portfolio • Established focused • Increased revenue streams • More efficient use of property business - Gyro from Mast and Tower portfolio building capacity & space • Consolidated the portfolio • Optimised building o
Slide 12: New revenue streams – foundation for growth
New revenue streams – foundation for growth FY2013 FY2019 Telkom Capital Markets Day 2019 12
Slide 13: Diversified portfolio – set for growth
Diversified portfolio – set for growth • Accelerate mobile • Grow • Modernise the • Optimise and • Establish dedicated growth connectivity network grow the mast & SMB business unit • Drive high-speed • Improve IT • Commercialise tower portfolio • Aggressive on new broadband services the network • Co
Slide 14: Serame Taukobong, CEO
Serame Taukobong CEO Telkom Capital Markets Day 2019 14
Slide 15: Mobile subscribers
Mobile Revenue growth 11 000 000 58% Broadband Subscriber Growth 8.4% March 2019 Mobile Broadband Market share subscribers 21% Mobile Revenue Market share 11% Telkom Capital Markets Day 2019 15
Slide 16: Technology evolution – change in revenue streams
Technology evolution – resulted in change in terms of revenue streams Fixed vs Mobile Service Revenue % Mix Fixed vs Mobile: Voice vs Data Revenue % Mix Rm Rm R 1 630 R7 873 R938 R4 878 R5 917 R692 FY15 FY15 R2 121 R5 601 R8 155 R7 722 R2 241 R2 995 Fixed voice SR Fixed data SR Fixed SR Mobile Voice
Slide 17: Consumer and Small Business performance
Consumer and Small Business performance Subscriber growth *55% Mobile service revenue ‘000 9 681 Rm 8 155 *53% *48% *Smartphone 5 151 5 208 3 498 3 999 85.9% 58.3% Data Pre-paid Voice Post-paid Other Mobile broadband traffic **0.2% Blended ARPU Petabytes R 89 98 100 **0.3% **0.8% **2G traffic 1.7% P
Slide 18: Sustainable, data driven revenue growth
Sustainable, data driven revenue growth Data Revenue (ZAR'000) 4% 13% 61% FY2018 FY2019 FY2018 FY2019 FY2018 FY2019 6% 2% 5% 3% FY2018 FY2019 FY2018 FY2019 FY2018 FY2019 FY2018 FY2019 FY2018 FY2019 FY2018 FY2019 Telkom Capital Markets Day 2019 18
Slide 19: Market overview
Market overview Telkom Capital Markets Day 2019 19
Slide 20: Connectivity market opportunity
Connectivity market opportunity Digital technologies and the foundational need for connectivity are already causing an unprecedented rate of growth in broadband SA is coming off a low base; significant growth of broadband expected towards 2022… Internet Penetration Average Speeds (Bandwidth) Network
Slide 21: Built to deliver future network expectations
Built to deliver future network expectations Future network operator imperatives Current position • Data first strategy • Capitalise on growing demand for data • Embrace OTT providers • Voice as an OTT (i.e. Free WhatsApp Calling) • Data cost efficient (cost/Mb) network • All IP network (RAN, Backha
Slide 22: Customer value proposition approach
Customer value proposition approach Telkom Capital Markets Day 2019 22
Slide 23: Enhanced customer insights driving market driven propositions
Enhanced customer insights driving market driven propositions 6 Youth Breaking out macro segments Stretched family focus Comfortable family living Wealthy achievers Survivors Telkom Capital Markets Day 2019 23
Slide 24: Smart data analytics informing segment
Smart data analytics informing segment Comfortable family living 3.4M | 8H | R19,3K | 44 | M-H Key from Population Median Ave Personal Average Digital left to right size LSM income age savviness Telkom Capital Markets Day 2019 24
Slide 25: Comfortable family living
Comfortable family living Core needs Seek convenience and control with high digital savviness Mobile and home connectivity solutions Connect to the internet through fixed-line and mobile Open to using smartphone to scan and pay for items Telkom Capital Markets Day 2019 25
Slide 26: Comfortable family living – CVP approach
Comfortable family living – 360 CVP approach Mobile 01 07 Digitalisation 02 06 Broadband Network 03 05 04 Handsets & Sales & Devices Distribution Content & Gaming Telkom Capital Markets Day 2019 26
Slide 27: Fixed-line as the springboard to high speed connectivity
Fixed-line as the springboard to high speed connectivity Migrate copper voice only customer to new FLLA default data inclusive products Leadership in Home Broadband DSL/ISP Fibre/LTE Migrate Mobile voice customers to data-led FreeMe propositions IT & Improved Sales & Drive Content, VAS and smart dev
Slide 28: From dial tone to the super value connected home
From dial tone to the super value connected home Consumer broadband subscribers ‘000 1 657 1 529 FWA/MiFi 1 408 Fixed high speeds Voice DSL/ Mobile VDSL Fibre Mobile 4.5G All IP Network (VDSL + Fibre) Dial-up ISP 2G/3G Massive • VolP Fixed BB lower speeds Internet Mimo • Home / Mobile (ADSL) Converg
Slide 29: FREEme – THE smartphone package
FREEme – THE smartphone package FreeMe Bundles Sales Monthly – FY2019 163% Tarifica Score™ Report for March 2019: • Telkom’s FreeMe plans earned Top Overall Value Plan FreeMe Base Growth (Post-paid & Hybrid) – FY2019 Awards in all of the post-paid “SIM Only” user profiles 1 000 000 • 80of the Top Va
Slide 30: Creating a one-stop digital media rich content platform
Creating a one-stop digital media rich content platform Content, Gaming, VAS and smart devices key drivers to data led strategy and demand driving broadband adoption through… Partnerships with Best-in-class Launched LIT content IPTV platform and App with aggregated content providers and unique conte
Slide 31: Technology supporting the growth
Technology supporting the growth Spectrum Network Expansion Spectrum Telkom MNO Site Growth 2300Mhz 60Mhz - 2100Mhz 30Mhz 30Mhz 78% 1800Mhz 24Mhz 24Mhz LTE 4.5 900Mhz - 22Mhz 73% LTE Total 114Mhz 76Mhz FY2017 FY2019 FY2021 4.5G • Target 90% network on 4.5G sites LTE-Advanced • Highest LTE ratio in t
Slide 32: Roaming agreement to supplement Telkom coverage
Roaming agreement to supplement Telkom coverage Roaming & Infrastructure Sharing ü Significant roaming cost savings/roaming rates Telkom customers are best positioned to ü Data & voice traffic growing year on year have access to Telkom’s network coverage ü Roaming traffic % decline – Telkom network
Slide 33: Digitalization underpinned by big data analytics
Digitalization underpinned by big data analytics Big Data analytics Market-led approach • Using Big Data analytics and machine learning • Market-led approach through segmentation and deep customer insights • Over a R1.1 billion Mo’nice revenue • Personalised offers available to over 9m mobile subscr
Slide 34: Customer experience: Service is the new Selling
Customer experience: “Service is the new Selling” Improve Customer Experience Digitalization Big data analytics Friendly Network Easy Systems Customer 360 Competent Coverage 2019 Industry NPS Performance Quick Customer Reliable Reliable satisfaction (FCR) Service behaviours Fundamentals First call r
Slide 35: Telkom sales and distribution footprint
Telkom sales and distribution footprint Telkom Coverage % 84.2% Telkom Coverage % 60.5% Prepaid starter pack SA Max Coverage % 86.4% Prepaid starter SA Max Coverage % 69.5% footprint: pack footprint: Formal Informal Airtime and Telkom Coverage % SA Max Coverage % 62.3% 70.8% Airtime and Digital Telk
Slide 36: Consumer digital channels
Consumer digital channels Telkom Capital Markets Day 2019 36
Slide 37: Delivering seamless and holistic value proposition
Delivering seamless and holistic value proposition Mobile Digitalisation Disruptive data-led value propositions such as 01 07 Utilisation of digital elements to improve FreeMe, FreeMe Family and Data on the Go business efficiencies 06 02 Network Broadband Ubiquitous data centric IP network End-to-en
Slide 38: Closing remarks
Closing remarks Differentiated data-led strategy spurred on by a targeted segmented approach couched by our network assets – this creates a springboard to achieve scale in mass market ü Customer at the centre of every decision ü World class resilient network Current ü Continuing to be market leaders
Slide 39: Jonas Bogoshi, CEO
Jonas Bogoshi CEO Telkom Capital Markets Day 2019 39
Slide 40: BCX playing a role in the lives of South Africans
BCX playing a role in the lives of South Africans Deepen Democracy Fuel The Economy Paying South Africa’s Sorting Your Workforce Medication Provisioning and managing Services 60% of South Process 1/3 of Enabling prescriptions of ICT for 284 Centres Africa’s fuel stations South Africa’s payslips and
Slide 41: BCX capabilities and footprint
2 500+ Bank Branches & 5 500 ATM’s Support 68 000+ Unified Software defined Legacy app Tech agnostic 45 000 MDNS 574 000+ internet retail/fuel POS communications networks modernisation access sites sites connected Support top 5 largest retailers Cloud & Cloud Cyber security Big data & analytics Advanc
Slide 42: How BCX stands out from the market
How BCX stands out from the market Unique Capabilities The BCX client Delivering Solutions offering Industry Focused Understanding Unparalleled Deep World class Innovative customers business understanding Industry-specific infrastructure & solutions imperatives of the market knowledge applications Te
Slide 43: Accolades
Accolades • Networking Partner of theYear • Local Award for Highest Revenue Generation • IBM Beacon Award for Most Innovative Client Solution on IBM Mainframe • 2018 Commvault Partner ofthe Year Award 2013 - 2018 2019 2017 • 7 partner awards • 2 partner awards • Service Capability Development • Part
Slide 44: SA Enterprise ICT market share
SA Enterprise ICT market BCX Market Share 13% BCX Market Share 30% 5 yr CAGR 8.4% 5 yr CAGR 0.2% Telco spend IT spend Source: BMIT analysis Telkom Capital Markets Day 2019 44
Slide 45: Our position in the market
Our position in the market Fixed voice Fixed data Internet Mobile Hardware Software IT services CAGR (5Y) -3% 4% 2% 3% 2% 11% 9% BCX market share 80% 42% 15% 4% 12% 11% 13% Competitors • Liquid • Internet • Internet • MTN • Dimension • Dimension • EOH • ECN Solutions Solutions • Vodacom Data Data •
Slide 46: The industries we serve
The industries we serve Financial Mining Retail Manufacturing Health Government Market size R28bn R8.1bn R18.7bn R9.9bn R3.9bn R29.1bn 5yr CAGR 9.4% 6.3% 9.1% 6.3% 3% 9.5% Telco:IT Split 34:66 25:75 30:70 39:61 20:80 22:78 Source: BMIT analysis Telkom Capital Markets Day 2019 46
Slide 47: Operating environment
Operating environment Industry margins Cost to serve </> Market challenges Client churn Client demands Telkom Capital Markets Day 2019 47
Slide 48: Managing voice to enable cross-sell and up-sell
Managing voice to enable to cross-sell and up-sell Our core issues Our interventions Results Customers Pricing Address declining spending less interventions voice revenues on voice Win Back Voice customers Upsell New offerings IT Customer rate quality Cross Sell Data services services of our voice s
Slide 49: Upsell IT services
Upsell IT services Exit Non-Core Businesses and Lead with Cloud – Drive Hybrid Cloud Geographies Adoption Optimize Product Portfolio and Digitize Expand own IP Products and Services Offerings Accelerate IT Services Revenue Growth Invest in Ecosystems for Scale and and Margin Expansion Access to Inno
Slide 50: Our focus – Big Bet solutions
Our focus – Big Bet solutions Converged Cyber Communication 1 3 Security Our Big Bet Solutions Cloud Digital Services 2 4 Edge Industry 5 Applications Telkom Capital Markets Day 2019 50
Slide 51: Converged communication
1 Converged communication Market size R31bn Our plan • Defend voice • Drive data growth • Accelerate OTT (Connected Workplace & Security) Telkom Capital Markets Day 2019 51
Slide 52: Cloud services
2 Cloud services Market size R5bn Growth 26% CAGR (5 years) Our plan • Horizon 1 - Core • Horizon 2 - Adjacencies • Horizon 3 - Disruptive Telkom Capital Markets Day 2019 52
Slide 53: Cyber security
3 Cyber security Growth 16% CAGR (5 years) Our key opportunities • Security Consulting • Managed Security Services • Managed Detection & Response (SaaS) • Security Operations Centre Telkom Capital Markets Day 2019 53
Slide 54: Digital edge
4 Digital edge Growth 15% CAGR (5 years) Our key opportunities • Robotics Process Automation • Automated Intelligent Service Management • AI, Machine Learning Telkom Capital Markets Day 2019 54
Slide 55: Industry solutions
5 Industry solutions Bespoke Application Market size R3,7bn Bespoke Application Growth 54% CAGR (5 years) Focus industries • Financial (5Y CAGR – 9.4%) • Retail (5Y CAGR – 9.1%) • Mining (5Y CAGR – 6.3%) • Health (5Y CAGR - 3%) • Government (5Y CAGR – 9.5%) Telkom Capital Markets Day 2019 55
Slide 56: Conclusion
Conclusion Accelerate revenue growth and drive Digitise offerings and touchpoints to margin expansion enhance customer experience Rebase cost structure and drive Leverage and invest in ecosystems for efficiencies scale and access and innovation Continue to improve capital efficiency Attract and buil
Slide 57: Lunga Siyo, CEO
Lunga Siyo CEO Telkom Capital Markets Day 2019 57
Slide 58: Formation of Small & Medium Business
Formation of Small & Medium Business SMB Rationale Opportunity • Carving out of BCX and • Underserviced segment • Capture lost market share Consumer customer segments • High churn due to churn • YellowPages (known as • Revenues have not • Venture into adjacent Trudon) to be managed as diversified ou
Slide 59: Overview of the SMB segment
Overview of the SMB segment 444 917 R5.7 R2.1 customer base billion billion 340 000 Consumer 80% Fixed voice and data 36.8% 78 417 Yellow Pages 10% Marketing Services EBITDA margin 26 500 BCX 10% Mobile voice and data Telkom Capital Markets Day 2019 59
Slide 60: Key challenges facing SMEs in SA
Key challenges facing SME’s in SA Lack of access Access to labour to markets (recruitment, labour law compliance and adequately trained staff) Access to finance (access and credit) Lack of access to government Access to affordable (red tape, accessing support, infrastructure accession information) T
Slide 61: Market view and opportunities
Market view and opportunities Fixed Voice Internet Mobile IT eCommerce Market Size R5.3bn R3.6bn R19bn R37bn R14bn Our Market 85% 34% 3.7% 2.9% 2.1% Share Mobile Data IT Services 25% CAGR 11% CAGR 7.1% CAGR Competitors Online retailers General retailers Financial services Source: Africa Analysis 201
Slide 62: Fixed business as a springboard for growth
Fixed business as a springboard for growth Proactively manage Set up operating model fixed voice churn and organisational structures Needs based Enhance channel capability solutions for SME to service the customers Improve customer Build a digital experience platform Telkom Capital Markets Day 2019
Slide 63: Our ambition: platform-led digital ecosystem
Digital Our platform-led ecosystem ambition Telkom Capital Markets Day 2019 63
Slide 64: A digital based platform offering to fuel SMB growth
A digital based platform offering to fuel SMB growth Scalability and margin improves as we transition from connections to transactions. Services eMarket Place Services Revenue Transaction Revenue Core Adjacent Connectivity IT Marketing FS eMarket Procurement • Voice • Infrastructure • Listings • SME
Slide 65: RoboAdvisor
RoboAdvisor Telkom Capital Markets Day 2019 65
Slide 66: Telkom Capital Markets Day 2019
Telkom Capital Markets Day 2019 66
Slide 67: Telkom Capital Markets Day 2019
Telkom Capital Markets Day 2019 67
Slide 68: How success will be measured
How success will be measured Revenue # of Digital # of SME’s in (Core and adjacencies) Platform users the Platform Customer experience • End customers • Adoption improvement • B2B users • Utilization • Transactions Telkom Capital Markets Day 2019 68
Slide 69: Alphonzo Samuels, CEO
Alphonzo Samuels CEO Telkom Capital Markets Day 2019 69
Slide 70: Leading connectivity provider
Leading connectivity provider Managed Services Fixed Broadband Provider Wholesale and of the year – MyBroadband Services Network 2018 awards Management Licenced Operators South Africa’s largest fibre network footprint of Consumer Enterprise Carrier Global ~163 800km’s • Leader in fixed • Strong mark
Slide 71: Serving the industry
Serving the industry Consumer Enterprise • Drive high speed fixed Broadband connectivity • Utilisation of fibre and microwave networks to improve speed and • Enable ISPs to deliver value to customers cost to connect through our IP enabled network • Bringing the Ethernet network closer to the custome
Slide 72: Leading the market in end-to-end network superiority
Leading the market in end-to-end network superiority Customer Products Access network to Local connectivity National connectivity & Services customers and clients between smaller towns between major centres Backhaul Aggregation Core Connectivity Network Network Access Network Aggregation Network Cor
Slide 73: Unprecedented rate of growth in broadband
Unprecedented rate of growth in broadband SA is coming off a low base; significant growth of broadband expected towards 2022… Internet Penetration Average Speeds (Bandwidth) Networked Devices and Connections Average Traffic per Capita per Month per Capita (Usage) 59.7% 3.6 45.3% 75.4 Mbps 49.8 Gb 39
Slide 74: Network analogy
Network analogy N1 (NTN) Pretoria 5th Ave (ATN) Summit Rd (ATN) M9 (LTN) Rivonia Rd Grayston Rd (ATN) Eversdal Rd (ATN) R302 (LTN) Bellville Legend NTN National Transport Network LTN Local Transport Network N1 (NTN) Bloemhof Rd (ATN) Old Oak Rd (ATN) Cape Town ATN Access Transport Network Telkom Cap
Slide 75: Our planning canvas
Our planning canvas Customer Products Access network to Local connectivity National connectivity Systems and & Services customers and clients between smaller towns between major centres Applications • FTTx • xDSL • Voice • FLLA • LTE & LTE-A Backhaul Aggregation Core • Mobile Voice Network Network •
Slide 76: Network traffic evolution
Network traffic evolution Voice Broadband Data* *Enterprise and Carrier Ethernet data Telkom Capital Markets Day 2019 76
Slide 77: All access technologies depends on fixed
Efficiency All access Full IP technologies Data PS 4G (LTE) LTE-A 1 Gb/s 5G 2020 depends on 3.5G 2010 Spectral efficiency HSPA Environment Architecture friendly 3G (UMTS) 42 Mb/s Efficiency Digital “fixed” 2003 300 Mb/s Capacity 2.5G Multi-media Cost effectiveness GPRS 2 Mb/s Intelligence Analogue 1
Slide 78: All access technologies depends on fixed
All access Fixed: Backhaul and Transmission technologies 5G: depends on 100 000s of nodes “fixed” 4G: Backhaul per site: ~1 000 Mbps 10 000s of nodes Transmission per Backhaul per site: 100 000: ~300 Mbps ~100 000 Gbps 3G: Transmission per 10 000: ~3 000 Gbps 100s of nodes Backhaul per site: ~60 Mbp
Slide 79: All access technologies depends on fixed
All access technologies depends on “fixed” 4G and 5G eco-system: fixed access technology with wireless at the end Edge BBU Aggregation Core Cloud Pool Fibre / MW Front Hauling Transmission scalability is key: • POTN is the only technology to support scale X500 for 4G, and X 33 towards 5G • POTN is o
Slide 80: Current reality - fibre eco-system
Current reality - fibre eco-system With 163 800 km fibre deployed nationally… NGN Connectivity R 69 391 FTTx Connectivity Rate ARPU Ethernet Business Services Connected R 4 071 R 352 Fibre to Base Stations Carrier connectivity equals 17x Enterprise connectivity and 197x Consumer Connectivity Telkom
Slide 81: Key focus areas
Key focus areas We are investing in.. Ongoing Tactical Focus Exponential Modernise the Network Data Growth • Expansion of the NGA network • POTN, SDN and NFV for scale • OSS/BSS transformation 25% 19% 28% Superior improvement improvement reduction in fault Transform Service Delivery Customer Service
Slide 82: Lesiba Maloba, CEO
Lesiba Maloba CEO Telkom Capital Markets Day 2019 82
Slide 83: Gyro – Operating since 2017
Gyro – Operating since 2017 Mast and Tower Asset Management Property Management • Tower commercialisation • Portfolio strategy • Leasing • Portfolio growth • Property development • Facilities Management • Operational Space demand Telkom Capital Markets Day 2019 83
Slide 84: Main Objective: Unlock value and optimise occupancy costs
Main Objective: Unlock value and optimise occupancy costs Optimise the Mast and Tower Commercialise the Optimise building costs and portfolio (6 500 towers) Property portfolio (1 332 sites) operation efficiencies • Optimise revenue for the Prime multi- • Segment portfolio into core operations, • Opt
Slide 85: M&T and property portfolio
M&T and property portfolio M&T portfolio Property portfolio • Portfolio made up of 6 500 towers spread Portfolio summary Telkom Properties across South Africa - 1 380 towers have multiple tenancy No. Properties 1 332 revenue – 88% of revenue is from MNO’s - 2 200 towers are well located and capable
Slide 86: Mast and Tower
Mast and Tower Kimberly concrete tower George MW (George) Monopole concept Rooftop concept (Mosselbay) 132m 105m (Kyalami) Accommodates 3 MNOs 15 meters - accommodates 3 MNOs Telkom Capital Markets Day 2019 86
Slide 87: Mast and Tower
Mast and Tower Illustration of Typical Tower Site1 The demand for Communication Towers Tower Ownership in South Africa2 High sites for mobile operators to install their equipment/ (% of number of towers) total: 30 000 est. antenna to deliver voice and data services to their customers Antennas Telco
Slide 88: Mast and Tower: Total portfolio
Mast and Tower: Total portfolio (6 500 towers) Portfolio Segmentation Total Tower Revenue % number of towers % of revenue (R780m) Tower Type Tower Height % number of towers % number of towers Hillbrow Tower Prime Portfolio: 1 380 multi-tenant towers (Johannesburg, Gauteng) Growth Portfolio: 2 200 MN
Slide 89: Mast and Tower: Productive portfolio
Mast and Tower: Productive portfolio1 (R8-10bn value) Geographic Split Valuation2 % number of towers (3 580 towers) Tower Type Revenue Distribution % number of towers (3 580 towers) (R759m) Pilansberg Mast (North West) 1. Productive Portfolio: Combination of Prime and Growth Portfolio. 2. EBITDA bas
Slide 90: Mast and Tower: Prime portfolio
Mast and Tower: Prime portfolio (1 380 towers) Revenue by customer segment Average revenue per Tower Type Average Rental by Tower Height % number of towers (R655m) R / tower / month R / tower / tenant / month 1 Tower Height Average revenue per tower height Average tenancy ratio per Tower Height % nu
Slide 91: Mast and Tower: Growth portfolio
Mast and Tower: Growth portfolio (2 200 towers) Tower Type Current Tenancy Profile MNO Readiness over the next 3 years % of number of towers % of number of towers cumulative number of towers Tower Height MNO Tenancy Readiness Indicative Demand to take up tenancy % of number of towers % of number of
Slide 92: Mast and Tower: Non-MNO portfolio
Mast and Tower: Non-MNO portfolio (2 900 towers) Tower Type Distribution Tower profile (% of number of towers) total: 2 900 • Below 20m heights • Used for old wireless technology to deliver fixed voice in remote areas • Not strong enough to accommodate MNO equipment • Generally lack access to grid p
Slide 93: Mast and Tower: Positioning for growth
Mast and Tower: Positioning for growth MNO infrastructure challenges Gyro value proposition New Build pipeline Network Coverage: Expansive portfolio with healthy pipeline: % of number of towers - total: 1 100 Increase in geographic coverage for data services • ~3 600 towers that can support mobile t
Slide 94: Properties
Properties Foreshore (CT) Booysen (JHB) Rosebank (JHB) – Exchange building – Center for learning – Exchange building Telkom Capital Markets Day 2019 94
Slide 95: Properties: Total portfolio
Properties: Total portfolio (R6.6bn) Land Size (1 970ha; 1 332 sites) Property Value Regional spread Property use Regional spread Property use 88% of portfolio Special land (68%): • 1262 operational sites • ETE sites identified for situated in major Klipheuwel (889 ha) – • 67 development sites decom
Slide 96: Properties: Development value unlock
Properties: Development value unlock Rezoning value add Development project elements 40% 69% 50% 25% Current value 67% Post rezoning value add Development value add 25% 28% 28% 5% 3% Capex value Post development value add Telkom Capital Markets Day 2019 96
Slide 97: Own more land, they don't make any more!
Own more land, they don’t make any more! Telkom Capital Markets Day 2019 97
Slide 98: Tsholo Molefe, GCFO
Tsholo Molefe GCFO Telkom Capital Markets Day 2019 98
Slide 99: Sustainable financial framework
Sustainable financial framework 1. Defend and 2. Sustainable cost 3. Disciplined Capital 4. Free Cash grow management Allocation Framework Flow Decelerate decline Effectively manage and Framework that supports our • Optimise net working in legacy business: contain cost escalation: sustainable value
Slide 100: Sustainable cost management
Sustainable cost management Transformation management Drive change through strong PMO Total cost to revenue ratio reduce from 75% to 73% over the next 3 years Limit cost escalation to External Processes & IT & Network Cost to serve below inflation spend organization landscape methodologies Tracking
Slide 101: Disciplined capital allocation – FY2019
Disciplined capital allocation – FY2019 Cash management Rm 7 552 (2 162) (1 846) 6 071 (5 422) 2 527 717 62 1 428 3 *Includes the cash payment of R566 million relating to voluntary early retirement packages (VERP), voluntary severance packages (VSP) and section 189 costs. ** Includes net funding rai
Slide 102: Capital allocation framework
Capital allocation framework 1 Inputs Annual Strategic Planning/Investment Strategy 4 Outputs Sources Operational cashflow and cash release intiatives Debt Alternative 2 of Capital Issuance Funding Solutions Total Optimal Maintain a strong balance sheet Performance Shareholder Returns Maintenace & Di
Slide 103: Positive free cash flow
Positive free cash flow Working capital Cash release Key initiatives management opportunities Receivables Supply chain financing Optimise invoicing cycle Handsets receivables financing Inventory Disposal of non-core assets Improve inventory cycle Capital expenditure Maximise capex returns Telkom Capit
Slide 104: Conclusion
Conclusion Telkom Capital Markets Day 2019 104
Slide 105: Thank you
Telkom SA SOC Ltd Thank you telkomir@telkom.co.za Telkom Capital Markets Day 2019 105