Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — H1 FY2023 Earnings Presentation
38 slides from Telkom Sa Soc's earnings presentation, November 2022
Slide 1: Interim Results Presentation
Telkom SA SOC Ltd Interim Results Presentation For the six months ended 30 September 2022 Interim Results Presentation 2022 1
Slide 2: Group salient features
Group salient features Operating revenue Capex marginally down up 2.2% to by 0.7% to R3 689 million R21 150 million HEPS down 51.9% to 137.2 cents per share Free EBITDA cash flow down 17.3% with down 124.9% EBITDA margin at to negative 23.4% BEPS R1 887 million Net debt down 52.5% to EBITDA to 131.6
Slide 3: New technologies driving growth
New technologies driving growth 10.9% Highest Mobile Connectivity rate IT subscriber in the country at Growth Increase growth 46.2% in productive portfolio 550 Leading 919 Broadband petabytes fibre petabytes 26 5 of data network New In-Building Growth 25.8%* towers Solutions Growth in IoT solutions
Slide 4: Transitioning revenues
Transitioning revenues 22.8% 10.8% 13.7% 7.6% NGN revenue Growth in Growth in Growth in IT revenues NGN growth continuing revenue customers 34.8% 25.1% 17.6% 12.9% Decline in Decline in Decline in Decline in fixed line legacy & voice legacy voice & Openserve legacy legacy revenue revenue data revenu
Slide 5: Financial Overview
Financial Overview 2 Interim Results Presentation 2022 5
Slide 6: Group financial performance
Group financial performance 0.7% Revenue 51.9% HEPS R21.2bn 137.2 cps 17.3% EBITDA 0.5x Net debt to EBITDA R4.9bn 1.7x EBITDA margin Negative Free Cash Flow 4.7ppts 23.4% R1.9bn Interim Results Presentation 2022 6
Slide 7: Group revenue holding
Group revenue holding Revenue by stream H1 FY22 Interconnection Decline in revenue mainly Rbn driven by: H1 FY23 Subscriptions Usage • Continued decline 0.7% 0.3% of legacy revenue • Replacing high margin business with lower margin 2.3% 21,5 21,4 4.2% business 21,3 21,2 • Impact of repositioning of
Slide 8: EBITDA impacted by increased expenses
EBITDA impacted by increased expenses EBITDA analysis EBITDA margin Major contributors: Rm H1 FY21 Replacing higher margin legacy revenues with 17.3% H1 FY22 5.5ppts lower margin NGN revenues 28,1% H1 FY23 Mobile product mix 27,6% 3 0 , % • Continued growth in post-paid mobile sales • IFRS15 impact
Slide 9: Strategy to grow mobile post-paid sales having short term impact on mobile costs
Strategy to grow mobile post-paid sales having short term impact on mobile costs Direct expenses Mobile cost efficiency ratios Rm 10.2% Rbn (R568m) Cost of handsets is higher as a result of the Direct expenses change mix from pre-paid to post-paid sales Mobile revenue 117 while the cost to serve eff
Slide 10: Capital allocation prioritises growth
Capital allocation prioritises growth Sources of Capital • Operational cashflow • Debt issuance - adequate debt capacity • Value unlock proceeds • Opportunistic property disposal Uses of Capital Total • Re-balance balance sheet and gearing Optimal Shareholder • Prioritise growth to ensure sustainabi
Slide 11: Capex
Capex Capex spend and intensity Capex investments allocation Rm % Fibre homes passed and connected 6% 6% 3% 4% Capex spend 5% 5% H1 FY23 H1 FY22 H1 FY21 Capex intensity 34% Fibre to 960 801 707 399 458 791 45% the home 40% Homes 443 469 331 735 247 019 3 689 3 610 connected Active fibre 46.2 46.9 53
Slide 12: Cash flow performance
Cash flow performance Free cash flow (FCF) movement Rm H1 FY23 H1 FY22 % Decline in FCF mainly driven by: Cash receipts from customers before working capital impact 21 220 21 062 0.8 • Decrease in profitability Movement in net working capital (860) 167 (615.0) • Delay in cash flows due to continued
Slide 13: Balance sheet gearing within acceptable limits
Balance sheet gearing within acceptable limits Rm H1 FY23 FY22 % Bank balance Cash balances 2 499 3 239 (23.0) R2.5bn Interest bearing debt 13 113 11 932 (9.9) Opening balance 11 932 10 866 (9.8) Net funding raised/(repaid) 1 135 (193) (688.1) Spectrum funding - 1 150 100.0 Other 46 109 57.8 Adequat
Slide 14: Financial framework to drive sustainable growth
Financial framework to drive sustainable growth Medium term guidance H1 FY23 Inputs Drivers FY2023 – FY2025 (CAGR) Actual Outputs New revenue streams Low to mid single digit (Fibre, Mobile & IT businesses) (0.7%) Revenue growth Sustainable cost management program Low to mid single digit (roaming, ch
Slide 15: Outlook
Outlook 3 Interim Results Presentation 2022 15
Slide 16: Accelerate NGN growth and manage costs
Accelerate NGN growth and manage costs Continued growth in Fibre roll-out continues Product sales to drive Additions to productive subscribers • Broadband subscriber growth portfolio • Drive mobile broadband growth driven by • IT business expected to • Incremental towers/IBS’s • Expand channels, con
Slide 17: Future ready – 5G roll out
Future ready – 5G roll out Telkom Mobile launches 5G network BCX • >160 active 5G sites throughout the country • Co-build with Telkom Mobile • Immediate focus is providing superfast 5G fixed • 5G smart solutions for Enterprise wireless access solutions Market • 5G network supported by high-speed fib
Slide 18: Our Strategic Priorities
Our Strategic Priorities Strengthen our Strategic Strategic core businesses themes initiatives Core • Invest in infrastructure to drive 5G Focus and • Broadband leadership – fixed and mobile capitalise Businesses • Manage migration from legacy to next generation on our strength drive growth • Drive
Slide 19: Affirming our valuation
Affirming our valuation BCX Telkom Consumer • Focus on IT high growth areas • ISP to support legacy • Improve EBIDTA migration, reduce costs & 100% owned Division improve EBITDA subsidiary • 5G rollout adds momentum Swiftnet • Affirm and realise value of Openserve masts and tower business • Commerci
Slide 20: In summary
In summary Phased 5G roll out for Continue future to invest growth in data-led technologies and NGN partnerships technologies Core to drive Value business growth Actively managing unlock fundamental gained sound costs momentum growing Mobile Reorganising subscriber base structure to drive and fibre
Slide 21: Q&A Thank you
Q&A Thank you Interim Results Presentation 2022 21
Slide 22: Annexures Business Unit performance
Telkom SA SOC Ltd Annexures Business Unit performance Interim Results Presentation 2022 22
Slide 23: Growth in mobile subscribers
Growth in mobile 10.9% subscribers Increase in 4.5G 18.1% integrated sites Interim Results Presentation 2022 23
Slide 24: Solid performance against strong prior year
Solid performance against strong prior year Subscriber growth ARPU Mobile service revenue Mobile EBITDA/margin ‘000 Post-paid R Post-paid Rm Voice Rm Mobile EBITDA Pre-paid Pre-paid Data Margin 18 024 16 259 8 783 2 473 8 847 28.8% 2 862 2 272 8 282 29.9% 13 687 112.6 2 563 22.5% 92.4 2 466 87.8 2 6
Slide 25: Broadband traffic continued growing
Broadband traffic continued growing Mobile data revenue Total mobile broadband subscribers Mobile broadband traffic Post-paid Rm ‘000 Petabytes Pre-paid 3.7% 14.1% 6 374 6 317 6 010 11 035 2 639 2 520 550 2 602 10 642 9 644 482 479 3 797 3 735 0.9% 3 408 H1 FY21 H1 FY22 H1 FY23 H1 FY21 H1 FY22 H1 FY
Slide 26: Consumer: Ongoing network investment
Consumer: Ongoing network investment Mobile sites integrated 4.5G integrated sites Site backhaul Fibre Ratio 6.9% 18.1% 73% 7 384 5ppt 6 669 71% 6 910 5 646 3 966 6 159 66% H1 FY21 H1 FY22 H1 FY23 H1 FY21 H1 FY22 H1 FY23 H1 FY21 H1 FY22 H1 FY23 Interim Results Presentation 2022 26
Slide 27: Revenue % from NGN
66.5% 10.8% Revenue % from NGN NGN revenue growth FTTH 46.2% connectivity rate Fibre access as % of fixed line broadband 72.6% access connections Interim Results Presentation 2022 27
Slide 28: De-risking financial dependency
De-risking financial dependency Revenue NGN & Other Revenue1 Legacy & Voice Revenue2 EBITDA/EBITDA margin Rm Rm Rm Rm 4.3% 10.8% 25.1% 16.2% 6 846 33,5% 6 720 29,3% 4 323 28,2% 3 334 6 434 3 000 30, 0% 2 820 2 249 2 500 3 901 20, 0% 1 931 1 884 2 000 2 111 10, 0% 3 512 1 500 0, 0% 1 000 - 10,0% 500
Slide 29: Evolution of new generation revenue
Evolution of new generation revenue Carrier Revenue Enterprise Revenue Broadband Revenue Voice Revenue Interconnect Rm Rm Rm Rm Usage Legacy 9.1% 2.8% 5.6% Subscription NGN 2 203 25.3% 894 7% 2 078 17% 11% 2 032 1 502 818 8% 1 918 1 423 796 1 392 16% 12% 13% 1 732 31% 20% 18% 14% 1 533 18% 26% -29.1
Slide 30: Accelerated investment in fibre
Accelerated investment in fibre Homes Passed with Fibre Fibre Homes Connected Enterprise1 Carrier1 Connectivity Rate Business Circuits Circuits 35.8% 33.7% 2.8% 6.1% 53,8% 46,2% 46,9% 19 937 960 801 18 794 40 861 700 000 40 113 39 758 16 657 40, 0% 600 000 443 469 707 399 500 000 20, 0% 331 735 458
Slide 31: Fixed broadband evolution
Fixed broadband evolution Fixed line broadband data consumption Fixed line broadband services Fixed line broadband connections Petabytes Subscribers Below 10Mbps Access Connections (‘000) Legacy Access 10Mbps and higher Fibre Access 919 13.6% 694 3.2% 619 809 600 16% 27% 723 46% 27% 64% 46% 84% 73%
Slide 32: Revenue marginally up to R7.0 bn
Revenue 0.8% marginally up to R7.0 bn Total expenses 0.8% marginally down to R6.2 bn Interim Results Presentation 2022 32
Slide 33: Financial performance stabilised
Financial performance stabilised Revenue EBITDA & margin Total Expenses Rm 0.8% Rm 0.6% Rm Sales commission, incentive, logistical Increase costs, payment to 6 498 other operators 6 129 6 177 Decrease Selling general and Total administration 940 207 1 094 Employee expenses 458 243 964 189 1 345 837
Slide 34: IT produced solid results in difficult economic conditions
IT produced solid results in difficult economic conditions Revenue Annuity Satisfactory growth H1 FY22 57% Existing Rm Hardware and Software revenue [66%: H1 FY22| Rm H1 FY23 67%: H1 FY21] Application ratio 43% New 25.7% Solution [34%: H1 FY22| IT services 33%: H1 FY21] 9.3% 3 801 3 667 2.9% 93 3 34
Slide 35: Converged communications nearing stabilisation
Converged communications nearing stabilisation Revenue Next-generation revenue Unified Communications decline Rm CPE and Sundry Data access Legacy Rm CPE revenue Next-generation Voice Data 2 096 Total 1 997 3 749 538 3 596 Voice 1 809 455 3 195 619 29% 37% 51% 1 561 1 546 1 497 1 584 1 354 -1.5% -13
Slide 36: New towers built
New towers 26 built Increase in productive 2.9% portfolio Interim Results Presentation 2022 36
Slide 37: Satisfactory earnings performance
Satisfactory earnings performance Revenue EBITD/EBITDA margin** Capex Net debt Rm Rm Rm Rm 2.1% 13.7% 38.0% 5.2% 78,9% 77,1% 69,5% 5 5 0 8 0 , % 150 674 122 660 7 0 , % 116 628 5 0 6 0 , % 4 5 0 5 0 , % 93 4 0 532 4 0 , % 484 3 5 0 54 3 0 , % 459 3 0 2 0 , % 2 5 0 1 0 , % 0 2 0 0 ,0 % H1 FY21 H1 FY2
Slide 38: Commercialised productive portfolio
Commercialised productive portfolio Tower portfolio (all site types) Productive portfolio growth (# of sites) (# of sites) Towers decommissioned in productive +135 portfolio were supporting legacy 3 945 Openserve equipment (and are not 6 218 capable of supporting MNOs) -361 3 834 -24 5 992 +135 1 3