Telkom Sa Soc Ltd. · JSE:TKG
Telkom Sa Soc — H1 FY2018 Earnings Presentation
44 slides from Telkom Sa Soc's earnings presentation, November 2017
Slide 1: Group Interim Results for the six months ended 30 September 2017
Telkom SA SOC Limited Group Interim Results for the six months ended 30 September 2017
Slide 2: Business performance
Business performance
Slide 3: Challenging operating environment
Business performance 3 Challenging operating environment Macro-economic Competitive Regulatory conditions environment landscape Limited GDP growth Consolidation in the market Cost to communicate Consumers under pressure Pricing pressures ICT policy & spectrum uncertainty Low business confidence Incr
Slide 4: Resilient business performance
Business performance 4 Resilient business performance Operating EBITDA Headline earnings Capex to Interim revenue margin per share revenue dividend of R20.1 bn 25.9% 303.9c 19.8% 118.1c
Slide 5: Gearing for growth
Business performance 5 Gearing for growth GROUP
Slide 6: Key focus areas
Key focus areas Modernise the network Commercialise the network Transforming service delivery
Slide 7: Modernise the network - Fibre
Business performance 7 Modernise the network - Fibre Passed over 2.4 million premises Fibre network of Fibre to the home Fibre to the cabinet > 151 000 km 300 506 2 123 523 deployed to date 107.9% 16.2%
Slide 8: Modernise the network - POTN G.Fast
Business performance 8 Modernise the network - POTN G.Fast 100 Gbps Scalable to 1 Tbps Core Site DP National Transport Network Fibre FTTdp* 100 Gbps Central FTTdp* DP Local Transport Network Scalable Office BNGs to 1 Tbps ME ME Copper ME Aggregation Network ME ME ME ME FTTH CO FTTC Enterprise Carrie
Slide 9: Commercialise the network
Business performance 9 Commercialise the network Fixed line broadband data consumption1 34.7% Fibre to the business Fibre to the base stations 400 68 330 6 183 350 end points terminating base stations 300 250 62.0% 10.3% Petabytes 200 390 150 290 100 210 Homes connected 50 73 710 connectivity rate o
Slide 10: Enhanced customer experience
Business performance 10 Enhanced customer experience 5% Improved customer feedback on each ~1 600 Improved Performance interaction Technicians Pays outs reduction utilising digital Re-dispatch rate platforms Digital ready Technicians Improved dispatch methodology through 23% Improved good jobs Incre
Slide 11: Key focus areas
• Key focus areas Unified communications Cloud computing Big data analytics Industrial IoT (IIoT) Cyber Security
Slide 12: Remarkable capabilities
Business performance 12 Remarkable capabilities Scale Centres of Unified presence Excellence Communications • Unrivalled, converged data, • Over 2 000 software • Unique capabilities give BCX voice and technology engineers and developers the ability to drive a range of solutions, delivered across • A
Slide 13: Progress against key focus areas
Business performance 13 Progress against key focus areas Cloud Big Data Industrial Security Computing Analytics IoT • Virtustream offering • The BCX Insights team • Delivering a wide • A new cyber security Unified Communications live has expanded range of industry capability is being built • SAP HEC
Slide 14: With customers at the heart of solutions
Business performance 14 With customers at the heart of solutions Customer Relationship Management • Specialist ‘vertical’ • P&L and Service customer Delivery accountability engagement teams with customer for all major sectors engagement teams
Slide 15: Key focus areas
Key focus areas Mobile growth High speed broadband growth Content and VAS
Slide 16: Solid execution by mobile business
Business performance 16 Solid execution by mobile business Service revenue Subscriber growth (‘000) 35.9% 43.2% 5,000 2,500 Pre-paid Post-paid 4 365 4,000 2,000 3 212 1,329 3,000 1,500 2 257 975 Rm 1,000 2,282 2,000 681 1,594 3,035 500 1,165 1,000 2,237 1,576 0 0 H1 FY2016 H1 FY2017 H1 FY2018 H1 FY2
Slide 17: Broadband strategy paying off
Business performance 17 Broadband strategy paying off Mobile broadband revenue 59.8% 2,000 1,500 Rm 1,000 1,627 500 711 1,018 0 H1 FY2016 H1 FY2017 H1 FY2018 Mobile broadband subscribers 25.2% Data only Smartphone users Home Unlimited Uncapped 2 849 3,000 • Increase in new-to-franchise customers 2,5
Slide 18: Content contributes to broadband growth
Business performance 18 Content contributes to broadband growth • # of professional league • Partnerships with gamers on the platform SuperSport, Logitech • LIT Music and Video • LIT Streaming underpinned increased 4x and Orlando Pirates – geared towards by Google Android in the past six months • Pa
Slide 19: Ongoing improvement to customer experience
Business performance 19 Ongoing improvement to customer experience Systems Store Call centres improvements initiatives initiatives • Online self-help for fixed and • Queue management • Improved first time resolutions mobile system implemented • 81% Mobile up from 78% to • 50% less clicks and • Custo
Slide 20: Customer experience initiatives bearing fruits
Business performance 20 Customer experience initiatives bearing fruits • Telkom Mobile moved from the 5th • Telkom Mobile moved position to 3rd position from 3rd position to Best innovation in 2nd position the Broadcast • Telkom ISP moved up two positons to Broadband • Best Mobile Broadband Provider
Slide 21: Key focus areas
Key focus areas Commercialise the property portfolio Extract value from excess building capacity Smart building solutions
Slide 22: Who is Gyro
Business performance 22 Who is Gyro Mast & Towers Property Management Services Property Development • 6 500 towers across • >1 400 properties under • 20 million square metres of land South Africa management • Co-location leases on existing • Integrated Property Management • 39 Telkom properties for
Slide 23: Progress against key focus areas
Business performance 23 Progress against key focus areas Commercialisation of Extract value from excess Enable smart building properties building capacity solution • Increased tenancy ratio on existing • Implementing marketing plan • Identified electricity usage with the purpose of reducing towers b
Slide 24: Key focus areas
Key focus areas Establish e-commerce marketplaces Expanding Omni-channel offerings Expand partnership to OTT
Slide 25: Establish e-commerce marketplaces
Business performance 25 Establish e-commerce marketplaces • 300% growth in traffic • 276 300 transactions generated over the • Over 10 000 downloads past 6 months • Bookings, quotes and invoicing functionality launched • 220% increase in unique users • Over 3.1 million page views
Slide 26: Omni-channel and OTT partnership
Business performance 26 Omni-channel OTT partnership 8% 1 890 141 439 Growth in Active Webcards Google revenue quotes sent to business 7 776 Analytics 5 000 product appointments sent launched Active to business customers
Slide 27: Human and social capital
‘=s Aes f s ——+ a ~ Human and social capital
Slide 28: Empowering youth through education, digital skills and entrepreneurship
Human and social capital 28 Empowering youth through education, digital skills and entrepreneurship R278 million >R130 million WeThinkCode invested into FutureMakers Allocated to Education >60 2 year training course +2 500 10 700 Data Science small business benefitted from FutureMakers learners bene
Slide 29: Financial overview
Financial overview
Slide 30: Financial overview
Financial overview 30 Overview Revenue Cost Prioritised capex Mobile pressures efficiencies deployment Continue successful Revenues under Continue with our Multi Reprioritised all capital execution of our pressure due to a year cost efficiencies investments with focus on mobile strategy tough econom
Slide 31: Key financial indicators
Financial overview 31 Key financial indicators H1 FY2018 H1 FY2017 % Operating revenue 20 109 20 237 (0.6) Net revenue 15 791 15 928 (0.9) Operating expenses (excl. depreciation) 10 819 11 028 1.9 EBITDA 5 201 5 301 (1.9) Capital investments 3 974 3 639 9.2 Cash generated from operations 3 928 4 099
Slide 32: Impressive growth of future revenue
Financial overview 32 Impressive growth of future revenue Mobile service revenue Fixed service revenue 6.1% Rm Rm 43.2% 12 354 11 596 1 594 2 282 H1 FY2017 H1 FY2018 H1 FY2017 H1 FY2018 Information technology and other Data revenue Rm Rm 0.9% 9.7% 6 289 6 232 5 932 6 507 H1 FY2017 H1 FY2018 H1 FY201
Slide 33: Success of mobile strategy
Financial overview 33 Success of mobile strategy Net revenue movement Rm 61 (111) (123) 760 R137 m (724) 0.9% 15 928 15 791 H1 FY2017 Net Mobile Other Cost of sales Information Voice and H1 FY2018 Net revenue technology interconnection revenue
Slide 34: Growth in priority areas
Financial overview 34 Growth in priority areas Data lines Lines 1.1% 693 135 700 417 656 103 H1 FY2016 H1 FY2017 H1 FY2018 Fibre Customer lines 296.0% 18 614 2 891 73 710 H1 FY2016 H1 FY2017 H1 FY2018
Slide 35: Growth in priority areas (continued)
Financial overview 35 Growth in priority areas (continued) Metro-Ethernet Mobile broadband Lines 42.8% Subscribers ‘000 25.2% 20 666 11 309 14 470 2 276 2 849 1 575 H1 FY2016 H1 FY2017 H1 FY2018 H1 FY2016 H1 FY2017 H1 FY2018 Broadband traffic volumes Mobile data traffic volumes Petabytes 34.7% Petab
Slide 36: Cost efficiencies yielding results
Financial overview 36 Cost efficiencies yielding results EBITDA movement Rm 63 (45) (137) 191 R100 m 1.9% (172) 5 301 5 201 H1 FY2017 EBITDA SG&A Service fees Operating leases Net revenue Other income H1 FY2018 EBITDA
Slide 37: Efficient deployment of capital
Financial overview 37 Efficient deployment of capital H1 FY2018 H1 FY2017 % Fibre 1 177 929 26.7 Mobile 1 185 758 56.3 OSS/BSS programme 213 325 (34.5) Network rehabilitation/sustainment 145 192 (24.5) Service on demand 622 658 (5.5) Core network 295 392 (24.7)
Slide 38: Strong cash position – Platform to support growth
Financial overview 38 Strong cash position – Platform to support growth H1 FY2018 H1 FY2017 % Cash sources Opening cash balance 1 519 2 542 (40.2) Cash flow from operating activities 3 011 3 266 (7.8) Net loans raised 2 436 - 100.0 Significant cash applications Cash paid on capital expenditure (3 97
Slide 39: Guidance
Financial overview 39 Guidance FY2018 FY2018 H1 FY2018 Revised guidance Actual guidance Operating revenue Mid-single digits (0.6%) x Flat EBITDA margin 23% - 25% 25.9% 23% - 25% Capex to revenue 17% - 20% 19.8% 17% - 20% Net debt to EBITDA ≤1 0.7 ≤1 Interim dividend of 118 cents per share
Slide 40: Outlook
Outlook
Slide 41: Response to challenges
Outlook 41 Response to challenges Macro economic Competitive Regulatory conditions landscape environment • Weak economic environment • Pricing pressures • Cost to communicate • Currency volatility • Increasing OTT players • Spectrum and ICT policy • Consumer under pressure uncertainty • Exercise dis
Slide 42: Prioritising strategic initiatives
Outlook 42 Prioritising strategic initiatives Business Legacy Product portfolio review review portfolio review • BCX initiated in the period • Openserve review network • Consumer review product under review technology for portfolio • identify core and non-core • upgrading and • discontinuing legacy
Slide 43: Strategic focus areas for each business unit
Outlook 43 Strategic focus areas for each business unit • Modernise the • Mobile growth • Unified • Expanding • Commercialise network through data-led communications Omni-channel the property • Commercialise propositions • Cloud computing offerings portfolio the network • High speed • Big data analy
Slide 44: Thank you
Thank you Questions